10-Q 1 vmi-20240330x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 1-31429

Valmont Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware

47-0351813

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

15000 Valmont Plaza,

Omaha, Nebraska

68154

(Address of principal executive offices)

(Zip Code)

(402) 963-1000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

  

Trading Symbol(s)

  

Name of each exchange on which registered

Common Stock, $1.00 par value

VMI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non‑accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 3, 2024, there were 20,191,600 shares of the registrant’s common stock outstanding.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

   

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited):

Condensed Consolidated Statements of Earnings for the thirteen weeks ended March 30, 2024 and April 1, 2023

3

Condensed Consolidated Statements of Comprehensive Income for the thirteen weeks ended March 30, 2024 and April 1, 2023

4

Condensed Consolidated Balance Sheets as of March 30, 2024 and December 30, 2023

5

Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended March 30, 2024 and April 1, 2023

6

Condensed Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interests for the thirteen weeks ended March 30, 2024 and April 1, 2023

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART IIOTHER INFORMATION

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

32

Item 6.

Exhibits

32

Signatures

33

2

PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(Unaudited)

Thirteen weeks ended

March 30,

April 1,

2024

    

2023

Product sales

$

874,678

$

958,008

Service sales

 

103,150

 

104,473

Net sales

 

977,828

 

1,062,481

Product cost of sales

 

605,215

 

681,790

Service cost of sales

 

66,397

 

72,106

Total cost of sales

 

671,612

 

753,896

Gross profit

 

306,216

 

308,585

Selling, general, and administrative expenses

 

174,663

 

190,119

Operating income

 

131,553

 

118,466

Other income (expenses):

 

 

Interest expense

 

(16,221)

 

(13,105)

Interest income

 

1,779

 

830

Gain on deferred compensation investments

 

1,431

 

1,194

Other

 

(105)

 

(2,376)

Total other income (expenses)

 

(13,116)

 

(13,457)

Earnings before income taxes and equity in loss of nonconsolidated subsidiaries

 

118,437

 

105,009

Income tax expense:

 

  

 

  

Current

 

19,644

 

24,356

Deferred

 

10,344

 

7,487

Total income tax expense

 

29,988

 

31,843

Earnings before equity in loss of nonconsolidated subsidiaries

 

88,449

 

73,166

Equity in loss of nonconsolidated subsidiaries

 

(20)

(821)

Net earnings

 

88,429

 

72,345

Loss (earnings) attributable to redeemable noncontrolling interests

 

(607)

 

2,195

Net earnings attributable to Valmont Industries, Inc.

$

87,822

$

74,540

Net earnings attributable to Valmont Industries, Inc. per share:

 

 

  

Basic

$

4.35

$

3.50

Diluted

$

4.32

$

3.47

See accompanying Notes to Condensed Consolidated Financial Statements.

3

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

Thirteen weeks ended

March 30,

April 1,

2024

    

2023

Net earnings

$

88,429

$

72,345

Other comprehensive income (loss), net of tax:

 

  

 

  

Foreign currency translation adjustments:

 

  

 

  

Unrealized translation gain (loss)

 

(21,418)

 

8,189

Hedging activities:

 

  

 

  

Unrealized loss on commodity hedges

 

(561)

 

(1,476)

Realized loss (gain) on commodity hedges recorded in earnings

 

(717)

 

2,872

Unrealized gain (loss) on cross currency swaps

195

(591)

Amortization cost included in interest expense

 

(12)

 

(16)

Total hedging activities

(1,095)

789

Net gain on defined benefit pension plan

 

381

 

91

Total other comprehensive income (loss), net of tax

 

(22,132)

 

9,069

Comprehensive income

 

66,297

 

81,414

Comprehensive loss (income) attributable to redeemable noncontrolling interests

 

(450)

 

1,902

Comprehensive income attributable to Valmont Industries, Inc.

$

65,847

$

83,316

See accompanying Notes to Condensed Consolidated Financial Statements.

4

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value)

(Unaudited)

    

March 30,

December 30,

2024

    

2023

ASSETS

Current assets:

  

 

  

Cash and cash equivalents

$

169,195

$

203,041

Receivables, net

 

659,036

 

657,960

Inventories

 

668,743

 

658,428

Contract assets

 

191,483

 

175,721

Prepaid expenses and other current assets

 

91,114

 

92,479

Total current assets

 

1,779,571

 

1,787,629

Property, plant, and equipment, at cost

 

1,517,281

 

1,513,239

Less accumulated depreciation

 

(908,878)

 

(895,845)

Property, plant, and equipment, net

 

608,403

 

617,394

Goodwill

 

629,888

 

632,964

Other intangible assets, net

 

145,839

 

150,687

Defined pension benefit asset

33,433

 

15,404

Other non-current assets

 

268,247

 

273,370

Total assets

$

3,465,381

$

3,477,448

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS,
AND SHAREHOLDERS’ EQUITY

Current liabilities:

 

  

 

  

Current installments of long-term debt

$

620

$

719

Notes payable to banks

 

2,029

 

3,205

Accounts payable

 

327,414

 

358,311

Accrued employee compensation and benefits

 

89,100

 

130,861

Contract liabilities

 

84,041

 

70,978

Other accrued expenses

 

149,222

 

146,903

Income taxes payable

10,295

Dividends payable

 

12,113

 

12,125

Total current liabilities

 

674,834

 

723,102

Deferred income taxes

 

26,508

 

21,205

Long-term debt, excluding current installments

 

1,107,644

 

1,107,885

Operating lease liabilities

 

157,279

 

162,743

Deferred compensation

 

33,148

 

32,623

Other non-current liabilities

 

11,697

 

12,818

Total liabilities

2,011,110

2,060,376

Redeemable noncontrolling interests

 

44,980

 

62,792

Shareholders’ equity:

 

  

 

  

Common stock of $1 par value, authorized 75,000,000 shares; issued 27,900,000

 

27,900

 

27,900

Additional paid-in capital

 

5,668

 

Retained earnings

 

2,719,315

 

2,643,606

Accumulated other comprehensive loss

 

(295,211)

 

(273,236)

Treasury stock

 

(1,048,381)

 

(1,043,990)

Total shareholders’ equity

1,409,291

1,354,280

Total liabilities, redeemable noncontrolling interests, and shareholders’ equity

$

3,465,381

$

3,477,448

See accompanying Notes to Condensed Consolidated Financial Statements.

5

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

    

Thirteen weeks ended

March 30,

April 1,

2024

    

2023

Cash flows from operating activities:

  

 

  

Net earnings

$

88,429

$

72,345

Adjustments to reconcile net earnings to net cash flows from operations:

 

 

Depreciation and amortization

 

23,536

 

24,558

Contribution to defined benefit pension plan

 

(16,714)

 

(15,259)

Stock-based compensation

 

7,183

 

8,689

Net periodic pension cost

158

61

Loss on sale of property, plant, and equipment

 

31

 

51

Equity in loss of nonconsolidated subsidiaries

 

20

 

821

Deferred income taxes

 

10,344

 

7,487

Changes in assets and liabilities:

 

 

Receivables

 

(8,699)

 

(42,175)

Inventories

 

(16,972)

 

9,052

Contract assets

 

(15,836)

 

14,695

Prepaid expenses and other assets (current and non-current)

 

(3,595)

 

(25,153)

Accounts payable

 

(27,561)

 

4,127

Contract liabilities

 

13,773

 

(22,559)

Accrued expenses

 

(38,465)

 

(36,551)

Income taxes payable / refundable

 

8,431

 

15,358

Other non-current liabilities

 

(731)

 

5,652

Net cash flows from operating activities

 

23,332

 

21,199

Cash flows from investing activities:

 

 

Purchase of property, plant, and equipment

 

(15,010)

 

(22,361)

Proceeds from sale of assets

 

140

 

1,021

Other, net

(3,769)

(449)

Net cash flows from investing activities

 

(18,639)

 

(21,789)

Cash flows from financing activities:

 

 

Proceeds from short-term borrowings

 

4,015

 

11,090

Payments on short-term borrowings

 

(5,151)

 

(5,788)

Proceeds from long-term borrowings

 

10

 

125,000

Principal payments on long-term borrowings

 

(175)

 

(10,796)

Proceeds from settlement of financial derivatives

 

2,711

 

Dividends paid

 

(12,126)

 

(11,742)

Dividends to redeemable noncontrolling interests

 

(664)

 

(654)

Purchase of redeemable noncontrolling interests

 

(17,745)

 

Purchase of treasury shares

 

 

(111,115)

Proceeds from exercises under stock plans

 

1,959

 

5,018

Tax withholdings on exercises under stock plans

 

(7,668)

 

(14,022)

Net cash flows from financing activities

 

(34,834)

 

(13,009)

Effect of exchange rate changes on cash and cash equivalents

 

(3,705)

 

1,141

Net change in cash and cash equivalents

 

(33,846)

 

(12,458)

Cash and cash equivalents—beginning of period

 

203,041

 

185,406

Cash and cash equivalents—end of period

$

169,195

$

172,948

See accompanying Notes to Condensed Consolidated Financial Statements.

6

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

AND REDEEMABLE NONCONTROLLING INTERESTS

(Dollars in thousands, except per share amounts)

(Unaudited)

    

    

    

    

Accumulated

    

    

Additional

other

Total

Redeemable

Common

paid-in

Retained

comprehensive

Treasury

shareholders’

noncontrolling

stock

capital

earnings

loss

stock

equity

interests

Balance as of December 30, 2023

$

27,900

$

$

2,643,606

$

(273,236)

$

(1,043,990)

$

1,354,280

$

62,792

Net earnings

 

 

 

87,822

 

 

 

87,822

 

607

Other comprehensive loss

 

 

 

 

(21,975)

 

 

(21,975)

 

(157)

Cash dividends declared ($0.60 per share)

 

 

 

(12,113)

 

 

 

(12,113)

 

Purchase of redeemable noncontrolling interests

(147)

(147)

(17,598)

Dividends to redeemable noncontrolling interests

 

 

 

 

 

 

 

(664)

Purchase of treasury shares; 96,224 shares acquired

 

 

21,074

 

 

 

(21,124)

 

(50)

 

Stock option and incentive plans

 

(15,259)

16,733

1,474

Balance as of March 30, 2024

$

27,900

$

5,668

$

2,719,315

$

(295,211)

$

(1,048,381)

$

1,409,291

$

44,980

    

    

    

    

Accumulated

    

    

Additional

other

Total

Redeemable

Common

paid-in

Retained

comprehensive

Treasury

shareholders’

noncontrolling

    

stock

    

capital

    

earnings

    

income (loss)

    

stock

    

equity

interests

Balance as of December 31, 2022

$

27,900

$

$

2,593,039

$

(274,909)

$

(765,183)

$

1,580,847

$

60,865

Net earnings (loss)

 

 

 

74,540

 

 

 

74,540

 

(2,195)

Other comprehensive income

 

 

 

 

8,776

 

 

8,776

 

293

Cash dividends declared ($0.60 per share)

 

 

 

(12,634)

 

 

 

(12,634)

 

Dividends to redeemable noncontrolling interests

 

 

 

 

 

 

(662)

Purchase of treasury shares; 356,887 shares acquired

 

 

 

 

(111,115)

 

(111,115)

 

Stock option and incentive plans

 

(19,317)

19,002

(315)

Balance as of April 1, 2023

$

27,900

$

$

2,635,628

$

(266,133)

$

(857,296)

$

1,540,099

$

58,301

See accompanying Notes to Condensed Consolidated Financial Statements.

7

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed Consolidated Financial Statements

The Condensed Consolidated Balance Sheets as of March 30, 2024 and December 30, 2023 and the Condensed Consolidated Statements of Earnings, Comprehensive Income, Cash Flows, and Shareholders’ Equity and Redeemable Noncontrolling Interests for the thirteen weeks ended March 30, 2024 and April 1, 2023 have been prepared by Valmont Industries, Inc. (the “Company”) without audit. In the opinion of the Company’s management, all necessary adjustments, which include normal and recurring adjustments, have been made to present fairly the financial statements as of March 30, 2024 and for all periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. The results of operations for the period ended March 30, 2024 are not necessarily indicative of the operating results for the full fiscal year.

Inventories

Inventories are valued at the lower of cost, determined by the first-in, first-out method, or net realizable value. Finished and manufactured goods inventories include the costs of acquired raw materials and the related factory labor and overhead charges required to convert raw materials to finished and manufactured goods.

Inventories as of March 30, 2024 and December 30, 2023 consisted of the following:

March 30,

December 30,

2024

    

2023

Raw materials and purchased parts

$

236,434

$

217,134

Work in process

 

41,214

 

37,826

Finished and manufactured goods

 

391,095

 

403,468

Total inventories

$

668,743

$

658,428

Geographical Markets

Earnings before income taxes and equity in loss of nonconsolidated subsidiaries for the thirteen weeks ended March 30, 2024 and April 1, 2023 were as follows:

    

Thirteen weeks ended

March 30,

April 1,

2024

    

2023

United States

$

86,212

$

31,858

Foreign

 

32,225

 

73,151

Earnings before income taxes and equity in loss of nonconsolidated subsidiaries

$

118,437

$

105,009

Pension Costs

The Company incurs costs in connection with the Delta Pension Plan (“DPP”). The DPP was acquired as part of the Delta PLC acquisition in fiscal 2010 and has no members who are active employees. In order to measure the cost and the related benefit obligation, various assumptions are made including the discount rates used to value the obligation, the expected return on plan assets used to fund the costs, and the estimated future inflation rates. These assumptions are based on historical experience as well as current facts and circumstances. An actuarial analysis is used to measure the cost and liability associated with pension benefits.

8

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The components of the net periodic pension cost for the thirteen weeks ended March 30, 2024 and April 1, 2023 were as follows:

Thirteen weeks ended

March 30,

April 1,

2024

    

2023

Interest cost

$

5,242

$

5,256

Expected return on plan assets

 

(5,592)

 

(5,317)

Amortization of prior service costs

 

127

 

122

Amortization of net actuarial loss

 

381

 

Net periodic pension cost

$

158

$

61

Stock Plans

The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Human Resources Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and bonuses of common stock. As of March 30, 2024, 1,451,535 shares of common stock remained available for issuance under the plans.

Stock options granted under the plans call for the exercise price of each option to equal the closing market price as of the date of the grant. Options vest beginning on the first anniversary of the grant date in equal amounts over three years or on the grant’s fifth-anniversary date. The expiration of grants is seven to ten years from the date of the award. Restricted stock units and awards generally vest in equal installments over three or four years beginning on the first anniversary of the grant.

The Company’s stock-based compensation (included in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Earnings) and associated income tax benefits related to stock options and restricted stock awards for the thirteen weeks ended March 30, 2024 and April 1, 2023 were as follows:

Thirteen weeks ended

March 30,

April 1,

2024

    

2023

Stock-based compensation

$

7,183

$

8,689

Income tax benefits

 

1,796

 

2,172

Fair Value

The Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 apply to other accounting pronouncements that require or permit fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

9

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

ASC 820 establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.

The categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following are descriptions of the valuation methodologies used for assets and liabilities measured at fair value.

Deferred Compensation Investments: The Company’s deferred compensation investments include mutual funds invested in debt and equity securities held in the Valmont Deferred Compensation Plan. Quoted market prices are available for these securities in an active market. The investments are included in “Other non-current assets” in the Condensed Consolidated Balance Sheets.

Derivative Financial Instruments: The fair values of foreign currency, commodity, and cross currency swap derivative contracts are based on valuation models that use market observable inputs including forward and spot prices for commodities and currencies.

Mutual Funds: The Company has short-term investments in various mutual funds.

Carrying Value

Fair Value Measurement Using:

March 30, 2024

Level 1

Level 2

Level 3

Deferred compensation investments

$

27,382

$

27,382

$

$

Derivative financial instruments, net

(1,507)

(1,507)

Cash and cash equivalents—mutual funds

508

508

Carrying Value

Fair Value Measurement Using:

December 30, 2023

Level 1

Level 2

Level 3

Deferred compensation investments

$

26,803

$

26,803

$

$

Derivative financial instruments, net

2,860

2,860

Cash and cash equivalents—mutual funds

6,258

6,258

Long-Lived Assets

The Company’s other non-financial assets include goodwill and other intangible assets, which are measured at fair value on a non-recurring basis using Level 3 inputs. See Note 5 for further information.

Leases

The Company’s operating lease right-of-use assets are included in “Other non-current assets” and the corresponding lease obligations are included in “Other accrued expenses” and “Operating lease liabilities” in the Condensed Consolidated Balance Sheets.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net earnings, foreign currency translation adjustments, certain derivative-related activity, and changes in prior service costs and net actuarial losses from the pension plan. Results of operations for

10

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Accumulated other comprehensive income (loss) (“AOCI”) consisted of the following as of March 30, 2024 and December 30, 2023:

March 30,

December 30,

2024

    

2023

Foreign currency translation adjustments

$

(257,951)

$

(236,690)

Hedging activities

19,894

20,989

Defined benefit pension plan

(57,154)

(57,535)

Accumulated other comprehensive loss

$

(295,211)

$

(273,236)

Revenue Recognition

The Company determines the appropriate revenue recognition model for contracts by analyzing the type, terms, and conditions of each contract or arrangement with a customer. Contracts with customers for all businesses are fixed-price with sales tax excluded from revenue and do not include variable consideration. Discounts included in contracts with customers, typically early-pay discounts, are recorded as a reduction of net sales in the period in which the sale is recognized. Contract revenues are classified as “Product sales” when the performance obligation is related to the manufacturing and sale of goods. Contract revenues are classified as “Service sales” when the performance obligation is the performance of a service. Service revenue is primarily related to the Coatings product line and Technology Products and Services product line.

Customer acceptance provisions exist only in the design stage of our products (on a limited basis, the Company may agree to other acceptance terms), and acceptance of the design by the customer is required before manufacturing commences and the product is manufactured and delivered to the customer. The Company is generally not entitled to any compensation solely based on the design of the product and does not recognize this service as a separate performance obligation, therefore, no revenue is recognized for design services. No general rights of return exist for customers once the product has been delivered, and the Company establishes provisions for estimated warranties.

Shipping and handling costs associated with sales are recorded within cost of sales. The Company elected to use the practical expedient of treating freight as a fulfillment obligation instead of a separate performance obligation and ratably recognize freight expense as the structure is being manufactured when the revenue from the associated customer contract is being recognized over time. With the exception of the Transmission, Distribution, and Substation ("TD&S"), Solar, and Telecommunications product lines, the Company’s inventory is interchangeable for a variety of each segment’s customers. The Company has elected not to disclose the partially satisfied performance obligation at the end of the period when the contract has an original expected duration of one year or less. In addition, the Company does not adjust the amount of consideration to be received in a contract for any significant financing component if payment is expected within one year of transfer of control of goods or services.

Most of the Company’s customers are invoiced upon shipment or delivery of the goods to the customer’s specified location. As revenue is recognized over time, contract assets are recorded, and such contract assets are relieved when the customer is invoiced. As of March 30, 2024 and December 30, 2023, the Company’s contract assets totaled $191,483 and $175,721, respectively.

Certain customers are also invoiced by advanced billings or progress billings. When progress on performance obligations is less than the amount the customer has been billed, a contract liability is recognized. As of March 30, 2024 and December 30, 2023, total contract liabilities were $84,041 and $70,978, respectively, and were recorded as “Contract liabilities” in the Condensed Consolidated Balance Sheets. Additional details are as follows:

During the thirteen weeks ended March 30, 2024 and April 1, 2023, the Company recognized $34,279 and $58,939 of revenue that was included in the total contract liability as of December 30, 2023 and December 31, 2022, respectively. The revenue recognized was due to applying advance payments received for performance obligations completed during the period.

11

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

As of March 30, 2024, the Company had no material remaining performance obligations on contracts with an expected duration of one year or more.

Segment and Product Line Revenue Recognition

Infrastructure Segment

Steel and concrete structures within the TD&S and Telecommunications product lines are engineered to customer specifications resulting in limited ability to sell the structures to a different customer if an order is canceled after production commences. The continuous transfer of control to the customer is evidenced either by contractual termination clauses or by rights to payment for work performed to date plus a reasonable profit as the products do not have an alternative use to the Company. Since control is transferred over time, revenue is recognized based on the extent of progress toward completion of the performance obligation. The selection of the method to measure progress toward completion requires judgment. For the structures manufactured within the TD&S and Telecommunications product lines, the Company generally recognizes revenue on an inputs basis, using total production hours incurred to date for each order as a percentage of total hours estimated to complete the order. The completion percentage is applied to the order’s total revenue and total estimated costs to determine reported revenue, cost of sales, and gross profit. Production of an order, once started, is typically completed within three months. Depending on the product sold, revenue from the Solar product line is recognized upon shipment or delivery of goods to the customer depending on contract terms, or by using an inputs method, based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. External sales agents are used in certain TD&S product line sales and the Company has chosen to expense estimated commissions owed to third parties by recognizing them proportionately as the goods are manufactured.

For the structures sold for the Lighting and Transportation product line and for the majority of Telecommunications products, revenue is recognized upon shipment or delivery of goods to the customer depending on contract terms, which is the same point in time that the customer is billed. Some large regional customers have unique product specifications for telecommunication structures. When the customer contract includes a cancellation clause that would require them to pay for work completed plus a reasonable margin if an order was canceled, revenue is recognized over time based on hours worked as a percent of total estimated hours to complete production.

The Coatings product line revenues are derived by providing coating services to customers’ products, which include galvanizing, anodizing, and powder coating. Revenue is recognized once the service has been performed and the goods are ready to be picked up or delivered to the customer, which is the same time that the customer is billed.

Agriculture Segment

Revenue recognition from the manufacture of irrigation equipment and related parts and services (including tubular products for industrial customers) is generally upon shipment of the goods to the customer which is the same point in time that the customer is billed. The remote monitoring subscription services recognized as part of the Technology Products and Services product line are primarily billed annually and revenue is recognized on a straight-line basis over the contract period.

The disaggregation of revenue by product line is disclosed in Note 9.

Supplier Finance Program

During fiscal 2019, the Company entered into an agreement with a third-party financial institution to facilitate a supplier finance program that allows qualifying suppliers to sell their receivables from the Company to the financial institution. These participating suppliers negotiate their outstanding receivable arrangements directly with the financial institution and the Company’s rights and obligations to suppliers are not impacted. The Company has no economic interest in a supplier’s decision to enter into these agreements. Once a qualifying supplier elects to participate in the supplier finance program and reaches an agreement with a financial institution, they elect which individual Company invoices they sell to the financial institution. The Company’s obligation is to make payment in the invoice amount negotiated with participating suppliers to the financial institution on the invoice due date, regardless of whether the individual invoice is sold by the

12

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

supplier to the financial institution. The financial institution pays the supplier on the invoice due date for any invoices that were not previously sold under the supplier finance program. The invoice amounts and scheduled payment terms are not impacted by the suppliers’ decisions to sell amounts under these arrangements. The payment of these obligations is included in “Net cash flows from operating activities” in the Condensed Consolidated Statements of Cash Flows. Included in “Accounts payable” in the Condensed Consolidated Balance Sheets as of March 30, 2024 and December 30, 2023 were $37,227 and $41,916 of outstanding payment obligations, respectively, that were sold to the financial institution under the Company’s supplier finance program.

Confirmed obligations outstanding as of December 30, 2023

$

41,916

Invoices confirmed during the period

55,255

Confirmed invoices paid during the period

 

(59,944)

Confirmed obligations outstanding as of March 30, 2024

$

37,227

Redeemable Noncontrolling Interests

Subsequent to the issuance of the Company’s Consolidated Financial Statements as of and for the period ended April 1, 2023, the Company identified an error in the presentation of “Noncontrolling interests in consolidated subsidiaries” of $60,865 as of December 31, 2022 and $58,301 as of April 1, 2023 that has been corrected in the current period. Such amounts were previously reported within “Total shareholders’ equity” and have been revised in the April 1, 2023 Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interests to be presented as “Redeemable noncontrolling interests” outside of “Total shareholders’ equity”. The Company has evaluated the materiality of this error based on an analysis of quantitative and qualitative factors and concluded it was not material to the prior period financial statements, individually or in aggregate.

Noncontrolling interests with redemption features that are not solely within the Company’s control are considered redeemable noncontrolling interests. The Company has redeemable noncontrolling interests in certain entities. The seller can require the Company to purchase their remaining ownership, known as a put right, for an amount and on a date specified in the applicable operating agreement. Likewise, the Company can require the seller to sell the Company their remaining ownership based on the same amount and timing, known as a call option.

As a result of these redemption features, the Company records the noncontrolling interests as redeemable and classifies the balances in temporary equity in the Condensed Consolidated Balance Sheets initially at its acquisition-date fair value. The Company adjusts the redeemable noncontrolling interests each reporting period for the net income (loss) attributable to the noncontrolling interests and any redemption value adjustments. The redeemable noncontrolling interest is accreted to the future redemption value using the effective interest method up to the date on which the put right becomes effective. Any accretion adjustment in the current reporting period of the redeemable noncontrolling interest is offset against retained earnings and impacts earnings used in the calculation of earnings per share in the reporting period.

As of March 30, 2024 and December 30, 2023, the redeemable noncontrolling interests were $44,980 and $62,792, respectively. The ultimate amount paid for the redeemable noncontrolling interests could be significantly different because the redemption amounts depend on the future results of the operations of the businesses.

Treasury Stock

Repurchased shares are recorded as “Treasury stock” and result in a reduction of “Shareholders’ equity” in the Condensed Consolidated Balance Sheets. When treasury shares are re-issued, the Company uses the last-in, first-out method, and the difference between the repurchase cost and re-issuance price is charged or credited to “Additional paid-in capital”.

In May 2014, the Company announced a capital allocation philosophy that covered a share repurchase program. Specifically, the Board of Directors at that time authorized the purchase of up to $500,000 of the Company’s outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately negotiated transactions. In February 2015 and again in October 2018, the Board of Directors authorized an additional purchase of up to $250,000 of the Company’s outstanding common stock with no stated expiration date. In February 2023, the Board of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Directors increased the amount remaining under the program by an additional $400,000, with no stated expiration date, bringing the total authorization to $1,400,000. As of March 30, 2024, the Company has acquired 7,991,948 shares for $1,263,892 under this share repurchase program.

In November 2023, the Company entered into an accelerated purchase agreement to repurchase $120,000 of the Company’s outstanding common stock (“November 2023 ASR”) with CitiBank, N.A. as counterparty. The November 2023 ASR was entered into under the Company’s previously announced share repurchase program described above. The Company pre-paid $120,000 in the fourth quarter of fiscal 2023 and received an initial delivery of 438,917 shares of common stock. The agreement was settled with the delivery of an additional 96,224 shares of common stock in the first quarter of fiscal 2024. The total number of shares ultimately delivered under the November 2023 ASR, and therefore the average purchase price paid per share of $224.24, was determined based on the volume-weighted average market price of the Company’s common stock during the term of the agreement, less a discount.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves the disclosures about reportable segments including more detailed information about a reportable segment’s expenses. This guidance will be effective for the fiscal year ending December 28, 2024 and the interim periods thereafter, with early adoption permitted. The guidance will have no effect on the Company’s results of operations as the changes are primarily disclosure related. The Company has elected not to early adopt.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. This guidance will be effective on a prospective basis for the fiscal year ending December 27, 2025, with early adoption permitted. The guidance will have no effect on the Company’s results of operations as the changes are primarily disclosure related. The Company has elected not to early adopt.

(2) ACQUISITIONS

Acquisition of Business

On August 31, 2023, the Company acquired HR Products for $58,044 Australian dollars ($37,302 United States (“U.S.”) dollars) in cash (net of cash acquired) and subject to working capital adjustments. Of this amount, $7,200 Australian dollars ($4,626 U.S. dollars) was withheld by the Company at closing as a retention fund, to be settled in two equal payments at 12 and 24 months from the acquisition date for contingencies and disagreements. HR Products provides a broad range of irrigation products to serve the agriculture and landscaping industries and its operations are reported in the Agriculture segment. The acquisition strengthens the Company’s value proposition to customers in the key agriculture market of Australia by expanding its geographic footprint and accelerating its aftermarket parts presence. The customer relationships will be amortized over 13 years. The amount allocated to goodwill is attributable to anticipated synergies and other intangibles that do not qualify for separate recognition and is not deductible for tax purposes. The Company is currently completing its fair value assessment and expects to finalize the purchase price allocation by the third quarter of fiscal 2024.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed of HR Products as of the date of acquisition:

August 31,

2023

Current assets

$

24,153

Property, plant, and equipment

 

1,397

Goodwill

 

9,912

Customer relationships

11,503

Other non-current assets

 

3,997

Total fair value of assets acquired

50,962

Current liabilities

 

4,183

Operating lease liabilities

 

2,792

Deferred income taxes

 

3,450

Total fair value of liabilities assumed

10,425

Net assets acquired

$

40,537

Proforma disclosures were omitted for this acquisition as it does not have a significant impact on the Company’s financial results.

Acquisition-related costs incurred for the above acquisition were insignificant for all periods presented.

Acquisitions of Redeemable Noncontrolling Interests

In the first quarter of fiscal 2024, the Company acquired approximately 9% of ConcealFab for $7,227 and acquired the remaining portion of Valmont Substations, LLC for $10,518. These transactions were for the acquisitions of portions of the remaining shares of consolidated subsidiaries with no changes in control.

(3) DIVESTITURES

On April 30, 2023, the Company completed the sale of Torrent Engineering and Equipment, an integrator of prepackaged pump stations in Indiana, reported in the Agriculture segment, for net proceeds of $6,369. In the second quarter of fiscal 2023, a pre-tax gain of $2,994 was reported in “Other income (expenses)” in the Condensed Consolidated Statements of Earnings.

(4) REALIGNMENT ACTIVITIES

During the third quarter of fiscal 2023, management initiated a plan to streamline segment support across the Company and reduce costs through an organizational realignment program (the “Realignment Program”). The Realignment Program provided for a reduction in force through a voluntary early retirement program and other headcount reduction actions, which were completed as of December 30, 2023. The Board of Directors authorized the incurrence of cash charges up to $36,000 in connection with the Realignment Program.

During the fiscal year ended December 30, 2023, the Company recorded the following cumulative pre-tax expenses for the Realignment Program:

Infrastructure

Agriculture

Corporate

Total

Severance and other employee benefit costs

$

17,260

$

9,101

$

8,849

$

35,210

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Changes in liabilities recorded for the Realignment Program were as follows:

    

Balance as of

    

Recognized

    

Costs Paid or

    

Balance as of

December 30,

Realignment

Otherwise

March 30,

2023

Expense

Settled

2024

Severance and other employee benefit costs

$

12,514

 

$

$

(9,835)

$

2,679

(5) GOODWILL AND INTANGIBLE ASSETS

Goodwill

The carrying amount of goodwill by segment as of March 30, 2024 and December 30, 2023 was as follows:

    

Infrastructure

    

Agriculture

    

Total

Gross balance as of December 30, 2023

$

478,663

$

323,683

$

802,346

Accumulated impairment losses

 

(49,382)

 

(120,000)

 

(169,382)

Balance as of December 30, 2023

 

429,281

 

203,683

632,964

Acquisition measurement period adjustment

 

 

735

 

735

Foreign currency translation

 

(2,588)

 

(1,223)

 

(3,811)

Balance as of March 30, 2024

$

426,693

$

203,195

$

629,888

Infrastructure

    

Agriculture

    

Total

Gross balance as of March 30, 2024

$

476,075

$

323,195

$

799,270

Accumulated impairment losses

(49,382)

(120,000)

(169,382)

Balance as of March 30, 2024

$

426,693

$

203,195

$

629,888

Intangible Assets

The components of intangible assets as of March 30, 2024 and December 30, 2023 were as follows:

March 30, 2024

 

December 30, 2023

Gross

 

Gross

Carrying

Accumulated

 

Carrying

Accumulated

    

Amount

    

Amortization

 

Amount

    

Amortization

Amortizing intangible assets:

Customer relationships

$

232,253

$

160,181

$

233,852

$

157,873

Patents & proprietary technology

 

59,243

 

45,710

 

59,311

 

45,416

Trade names

 

2,870

1,160

 

2,870

 

1,056

Other

 

4,732