SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
____________ toCommission file number 1-31429
Valmont Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 47-0351813 |
(State or Other Jurisdiction of | (I.R.S. Employer |
15000 Valmont Plaza, | |
Omaha,Nebraska | 68154 |
(Address of Principal Executive Offices) | (Zip Code) |
(402) 963-1000
(Registrant’s telephone number, including area code)
(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 Sections 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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”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
21,056,220
Outstanding shares of common stock asat April 20, 2023
INDEX TO FORM 10-Q
| | Page No. | |
| PART I. FINANCIAL INFORMATION | | |
| | ||
| Condensed Consolidated Statements of Earnings for the thirteen weeks ended | | 3 |
| Condensed Consolidated Statements of Comprehensive Income for the thirteen | | 4 |
| Condensed Consolidated Balance Sheets as of April 1, 2023 and | | 5 |
| Condensed Consolidated Statements of Cash Flows for the thirteen weeks | | 6 |
| Condensed Consolidated Statements of Shareholders’ Equity for the thirteen | | 7 |
| | 8 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 25 | |
| 36 | ||
| 36 | ||
| | | |
| PART II. OTHER INFORMATION | | |
| 37 | ||
| 37 | ||
| 38 | ||
| 39 | ||
| 40 |
2
Page No. | ||
PART I. FINANCIAL INFORMATION | ||
Financial Statements (unaudited): | ||
Condensed Consolidated Statements of Earnings for the thirteen and thirty-nine weeks | ||
ended September 30, 2017 and September 24, 2016 | ||
and thirty-nine weeks ended September 30, 2017 and September 24, 2016 | ||
Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, | ||
2016 | ||
Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended | ||
September 30, 2017 and September 24, 2016 | ||
Condensed Consolidated Statements of Shareholders' Equity for the thirty-nine | ||
weeks ended September 30, 2017 and September 24, 2016 | ||
Notes to Condensed Consolidated Financial Statements | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. OTHER INFORMATION | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 6. | ||
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | ||||||||||||
Product sales | $ | 602,080 | $ | 544,828 | $ | 1,807,539 | $ | 1,648,530 | |||||||
Services sales | 78,699 | 65,419 | 223,450 | 198,571 | |||||||||||
Net sales | 680,779 | 610,247 | 2,030,989 | 1,847,101 | |||||||||||
Product cost of sales | 462,854 | 409,003 | 1,366,875 | 1,220,567 | |||||||||||
Services cost of sales | 54,331 | 46,221 | 152,635 | 135,425 | |||||||||||
Total cost of sales | 517,185 | 455,224 | 1,519,510 | 1,355,992 | |||||||||||
Gross profit | 163,594 | 155,023 | 511,479 | 491,109 | |||||||||||
Selling, general and administrative expenses | 103,671 | 101,783 | 308,764 | 303,698 | |||||||||||
Operating income | 59,923 | 53,240 | 202,715 | 187,411 | |||||||||||
Other income (expenses): | |||||||||||||||
Interest expense | (11,190 | ) | (11,100 | ) | (33,312 | ) | (33,276 | ) | |||||||
Interest income | 1,311 | 771 | 3,205 | 2,289 | |||||||||||
Other | 517 | 878 | 1,684 | 452 | |||||||||||
(9,362 | ) | (9,451 | ) | (28,423 | ) | (30,535 | ) | ||||||||
Earnings before income taxes | 50,561 | 43,789 | 174,292 | 156,876 | |||||||||||
Income tax expense: | |||||||||||||||
Current | 21,163 | 18,017 | 50,264 | 51,276 | |||||||||||
Deferred | (7,268 | ) | (3,749 | ) | 79 | (1,534 | ) | ||||||||
13,895 | 14,268 | 50,343 | 49,742 | ||||||||||||
Net earnings | 36,666 | 29,521 | 123,949 | 107,134 | |||||||||||
Less: Earnings attributable to noncontrolling interests | (1,458 | ) | (1,348 | ) | (4,098 | ) | (3,966 | ) | |||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 35,208 | $ | 28,173 | 119,851 | 103,168 | |||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.56 | $ | 1.25 | $ | 5.33 | $ | 4.56 | |||||||
Diluted | $ | 1.55 | $ | 1.24 | $ | 5.28 | $ | 4.54 | |||||||
Cash dividends declared per share | $ | 0.375 | $ | 0.375 | $ | 1.125 | $ | 1.125 | |||||||
Weighted average number of shares of common stock outstanding - Basic (000 omitted) | 22,527 | 22,505 | 22,505 | 22,602 | |||||||||||
Weighted average number of shares of common stock outstanding - Diluted (000 omitted) | 22,751 | 22,659 | 22,717 | 22,741 |
| | | | | | |
| | Thirteen weeks ended | ||||
| | April 1, | | March 26, | ||
| | 2023 |
| 2022 | ||
Product sales | | $ | 958,008 | | $ | 890,870 |
Services sales | |
| 104,473 | |
| 89,950 |
Net sales | |
| 1,062,481 | |
| 980,820 |
Product cost of sales | |
| 681,790 | |
| 673,170 |
Services cost of sales | |
| 72,106 | |
| 58,464 |
Total cost of sales | |
| 753,896 | |
| 731,634 |
Gross profit | |
| 308,585 | |
| 249,186 |
Selling, general, and administrative expenses | |
| 190,119 | |
| 154,344 |
Operating income | |
| 118,466 | |
| 94,842 |
Other income (expenses): | |
| | |
| |
Interest expense | |
| (13,105) | |
| (11,263) |
Interest income | |
| 830 | |
| 227 |
Gain (loss) on investments - unrealized | |
| 1,194 | |
| (1,063) |
Other | |
| (2,376) | |
| 3,642 |
| |
| (13,457) | |
| (8,457) |
Earnings before income taxes | |
| 105,009 | |
| 86,385 |
Income tax expense: | |
|
| |
|
|
Current | |
| 24,356 | |
| 22,413 |
Deferred | |
| 7,487 | |
| 708 |
| |
| 31,843 | |
| 23,121 |
Earnings before equity in loss of nonconsolidated subsidiaries | |
| 73,166 | |
| 63,264 |
Equity in loss of nonconsolidated subsidiaries | |
| (821) | | | (358) |
Net earnings | |
| 72,345 | |
| 62,906 |
Less: Loss (earnings) attributable to noncontrolling interests | |
| 2,195 | |
| (595) |
Net earnings attributable to Valmont Industries, Inc. | | $ | 74,540 | | $ | 62,311 |
Earnings per share: | |
| | |
|
|
Basic | | $ | 3.50 | | $ | 2.93 |
Diluted | | $ | 3.47 | | $ | 2.90 |
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | ||||||||||||
Net earnings | $ | 36,666 | $ | 29,521 | $ | 123,949 | $ | 107,134 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||
Unrealized translation gain (loss) | 19,530 | 770 | 60,471 | (1,938 | ) | ||||||||||
Gain/(loss) on hedging activities: | |||||||||||||||
Net investment hedge | (740 | ) | 1,972 | (1,816 | ) | 4,897 | |||||||||
Amortization cost included in interest expense | 19 | 18 | 56 | 56 | |||||||||||
Other comprehensive income (loss) | 18,809 | 2,760 | 58,711 | 3,015 | |||||||||||
Comprehensive income | 55,475 | 32,281 | 182,660 | 110,149 | |||||||||||
Comprehensive loss (income) attributable to noncontrolling interests | (2,570 | ) | (1,618 | ) | (4,552 | ) | (5,732 | ) | |||||||
Comprehensive income attributable to Valmont Industries, Inc. | $ | 52,905 | $ | 30,663 | $ | 178,108 | $ | 104,417 |
| | | | | | |
| | Thirteen weeks ended | ||||
| | April 1, | | March 26, | ||
| | 2023 |
| 2022 | ||
Net earnings | | $ | 72,345 | | $ | 62,906 |
Other comprehensive income, net of tax: | |
|
| |
|
|
Foreign currency translation adjustments: | |
|
| |
|
|
Unrealized translation gains | |
| 8,189 | |
| 11,062 |
Hedging activities: | |
|
| |
|
|
Unrealized gain (loss) on commodity hedges | |
| (1,476) | |
| 20,560 |
Realized (gain) loss on commodity hedges recorded in earnings | |
| 2,872 | |
| (2,043) |
Unrealized gain (loss) on cross currency swaps | | | (591) | | | 1,811 |
Amortization cost included in interest expense | |
| (16) | |
| (16) |
| | | 789 | | | 20,312 |
Net gain on defined benefit pension plan | |
| 91 | |
| 686 |
Other comprehensive income | |
| 9,069 | |
| 32,060 |
Comprehensive income | |
| 81,414 | |
| 94,966 |
Comprehensive (income) loss attributable to noncontrolling interests | |
| 1,902 | |
| (1,688) |
Comprehensive income attributable to Valmont Industries, Inc. | | $ | 83,316 | | $ | 93,278 |
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 493,490 | $ | 399,948 | |||
Receivables, net | 492,842 | 439,342 | |||||
Inventories | 403,234 | 350,028 | |||||
Prepaid expenses, restricted cash, and other assets | 50,064 | 57,297 | |||||
Refundable income taxes | 8,493 | 6,601 | |||||
Total current assets | 1,448,123 | 1,253,216 | |||||
Property, plant and equipment, at cost | 1,169,854 | 1,105,736 | |||||
Less accumulated depreciation and amortization | 647,430 | 587,401 | |||||
Net property, plant and equipment | 522,424 | 518,335 | |||||
Goodwill | 336,754 | 321,110 | |||||
Other intangible assets, net | 142,090 | 144,378 | |||||
Other assets | 160,780 | 154,692 | |||||
Total assets | $ | 2,610,171 | $ | 2,391,731 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Current installments of long-term debt | $ | 949 | $ | 851 | |||
Notes payable to banks | 197 | 746 | |||||
Accounts payable | 216,104 | 177,488 | |||||
Accrued employee compensation and benefits | 81,494 | 72,404 | |||||
Accrued expenses | 106,238 | 89,914 | |||||
Dividends payable | 8,478 | 8,445 | |||||
Total current liabilities | 413,460 | 349,848 | |||||
Deferred income taxes | 28,183 | 35,803 | |||||
Long-term debt, excluding current installments | 754,202 | 754,795 | |||||
Defined benefit pension liability | 199,562 | 209,470 | |||||
Deferred compensation | 48,612 | 44,319 | |||||
Other noncurrent liabilities | 13,557 | 14,910 | |||||
Shareholders’ equity: | |||||||
Preferred stock of $1 par value - | |||||||
Authorized 500,000 shares; none issued | — | — | |||||
Common stock of $1 par value - | |||||||
Authorized 75,000,000 shares; 27,900,000 issued | 27,900 | 27,900 | |||||
Retained earnings | 1,974,601 | 1,874,722 | |||||
Accumulated other comprehensive loss | (288,102 | ) | (346,359 | ) | |||
Treasury stock | (601,565 | ) | (612,781 | ) | |||
Total Valmont Industries, Inc. shareholders’ equity | 1,112,834 | 943,482 | |||||
Noncontrolling interest in consolidated subsidiaries | 39,761 | 39,104 | |||||
Total shareholders’ equity | 1,152,595 | 982,586 | |||||
Total liabilities and shareholders’ equity | $ | 2,610,171 | $ | 2,391,731 |
| | | | | | |
|
| April 1, | | December 31, | ||
| | 2023 |
| 2022 | ||
ASSETS | | | | | | |
Current assets: | | |
|
| |
|
Cash and cash equivalents | | $ | 172,948 | | $ | 185,406 |
Receivables, net | |
| 650,041 | |
| 604,181 |
Inventories | |
| 725,360 | |
| 728,762 |
Contract assets | |
| 159,785 | |
| 174,539 |
Prepaid expenses and other assets | |
| 107,365 | |
| 87,697 |
Total current assets | |
| 1,815,499 | |
| 1,780,585 |
Property, plant, and equipment, at cost | |
| 1,448,466 | |
| 1,433,151 |
Less accumulated depreciation and amortization | |
| 849,618 | |
| 837,573 |
Net property, plant, and equipment | |
| 598,848 | |
| 595,578 |
Goodwill | |
| 741,735 | |
| 739,861 |
Other intangible assets, net | |
| 172,300 | |
| 176,615 |
Defined pension benefit asset | | | 41,744 | |
| 24,216 |
Other assets | |
| 234,366 | |
| 240,141 |
Total assets | | $ | 3,604,492 | | $ | 3,556,996 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | |
| |
Current liabilities: | |
|
| |
|
|
Current installments of long-term debt | | $ | 1,165 | | $ | 1,194 |
Notes payable to banks | |
| 11,436 | |
| 5,846 |
Accounts payable | |
| 368,576 | |
| 360,312 |
Accrued employee compensation and benefits | |
| 80,362 | |
| 124,355 |
Contract liabilities | |
| 156,333 | |
| 172,915 |
Other accrued expenses | |
| 130,750 | |
| 123,965 |
Income taxes payable | | | 20,093 | | | 3,664 |
Dividends payable | |
| 12,634 | |
| 11,742 |
Total current liabilities | |
| 781,349 | |
| 803,993 |
Deferred income taxes | |
| 45,422 | |
| 41,091 |
Long-term debt, excluding current installments | |
| 985,636 | |
| 870,935 |
Operating lease liabilities | |
| 151,219 | |
| 155,469 |
Deferred compensation | |
| 33,885 | |
| 30,316 |
Other noncurrent liabilities | |
| 8,581 | |
| 13,480 |
Shareholders’ equity: | |
|
| |
|
|
Common stock of $1 par value - | |
| | |
| |
Authorized 75,000,000 shares; 27,900,000 issued | |
| 27,900 | |
| 27,900 |
Retained earnings | |
| 2,635,628 | |
| 2,593,039 |
Accumulated other comprehensive loss | |
| (266,133) | |
| (274,909) |
Treasury stock | |
| (857,296) | |
| (765,183) |
Total Valmont Industries, Inc. shareholders’ equity | |
| 1,540,099 | |
| 1,580,847 |
Noncontrolling interest in consolidated subsidiaries | |
| 58,301 | |
| 60,865 |
Total shareholders’ equity | | | 1,598,400 | | | 1,641,712 |
Total liabilities and shareholders’ equity | | $ | 3,604,492 | | $ | 3,556,996 |
See accompanying notes to condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Thirty-nine Weeks Ended | |||||||
September 30, 2017 | September 24, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 123,949 | $ | 107,134 | |||
Adjustments to reconcile net earnings to net cash flows from operations: | |||||||
Depreciation and amortization | 63,500 | 61,242 | |||||
Noncash loss on trading securities | 395 | 973 | |||||
Impairment of assets - restructuring activities | — | 618 | |||||
Stock-based compensation | 7,300 | 6,572 | |||||
Change in fair value of contingent consideration | — | (3,527 | ) | ||||
Defined benefit pension plan expense | 481 | 1,486 | |||||
Contribution to defined benefit pension plan | (26,064 | ) | (712 | ) | |||
Change in restricted cash - pension plan trust | 12,568 | (13,652 | ) | ||||
(Gain)/loss on sale of property, plant and equipment | (732 | ) | 250 | ||||
Deferred income taxes | 79 | (1,534 | ) | ||||
Changes in assets and liabilities: | |||||||
Receivables | (39,584 | ) | 16,436 | ||||
Inventories | (41,545 | ) | (34,413 | ) | |||
Prepaid expenses and other assets | (11,636 | ) | (10,624 | ) | |||
Accounts payable | 28,895 | (11,338 | ) | ||||
Accrued expenses | 20,157 | 3,272 | |||||
Other noncurrent liabilities | (1,627 | ) | 240 | ||||
Income taxes refundable | (1,732 | ) | 4,831 | ||||
Net cash flows from operating activities | 134,404 | 127,254 | |||||
Cash flows from investing activities: | |||||||
Purchase of property, plant and equipment | (39,898 | ) | (42,233 | ) | |||
Proceeds from sale of assets | 1,575 | 3,938 | |||||
Acquisitions, net of cash acquired | (5,362 | ) | — | ||||
Proceeds from settlement of net investment hedge | 5,123 | — | |||||
Other, net | (3,462 | ) | (2,824 | ) | |||
Net cash flows from investing activities | (42,024 | ) | (41,119 | ) | |||
Cash flows from financing activities: | |||||||
Net borrowings under short-term agreements | (549 | ) | (128 | ) | |||
Principal payments on long-term borrowings | (658 | ) | (1,563 | ) | |||
Dividends paid | (25,386 | ) | (25,604 | ) | |||
Dividends to noncontrolling interest | (3,895 | ) | (2,527 | ) | |||
Purchase of noncontrolling interest | — | (11,009 | ) | ||||
Purchase of treasury shares | — | (46,581 | ) | ||||
Proceeds from exercises under stock plans | 12,446 | 6,509 | |||||
Purchase of common treasury shares—stock plan exercises | (3,929 | ) | (1,453 | ) | |||
Net cash flows from financing activities | (21,971 | ) | (82,356 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 23,133 | (3,478 | ) | ||||
Net change in cash and cash equivalents | 93,542 | 301 | |||||
Cash and cash equivalents—beginning of year | 399,948 | 349,074 | |||||
Cash and cash equivalents—end of period | $ | 493,490 | $ | 349,375 |
| | | | | | |
|
| Thirteen weeks ended | ||||
| | April 1, | | March 26, | ||
| | 2023 |
| 2022 | ||
Cash flows from operating activities: | | |
|
| |
|
Net earnings | | $ | 72,345 | | $ | 62,906 |
Adjustments to reconcile net earnings to net cash flows from operations: | |
| | |
| |
Depreciation and amortization | |
| 24,558 | |
| 23,884 |
Contribution to defined benefit pension plan | |
| (15,259) | |
| — |
Stock-based compensation | |
| 8,689 | |
| 9,463 |
Defined benefit pension plan expense (benefit) | | | 61 | | | (2,705) |
Loss on sale of property, plant, and equipment | |
| 51 | |
| 4 |
Equity in loss in nonconsolidated subsidiaries | |
| 821 | |
| 358 |
Deferred income taxes | |
| 7,487 | |
| 708 |
Changes in assets and liabilities: | |
| | |
| |
Receivables | |
| (42,175) | |
| (36,643) |
Inventories | |
| 9,052 | |
| (68,236) |
Prepaid expenses and other assets (current and non-current) | |
| (25,153) | |
| (4,452) |
Contract assets | |
| 14,695 | |
| (19,486) |
Accounts payable | |
| 4,127 | |
| 49,006 |
Accrued expenses | |
| (36,551) | |
| (34,186) |
Contract liabilities | |
| (22,559) | |
| 4,308 |
Other noncurrent liabilities | |
| 5,652 | |
| 14 |
Income taxes payable / refundable | |
| 15,358 | |
| 17,760 |
Net cash flows provided by operating activities | |
| 21,199 | |
| 2,703 |
Cash flows from investing activities: | |
| | |
| |
Purchase of property, plant, and equipment | |
| (22,361) | |
| (27,095) |
Proceeds from sale of assets | |
| 1,021 | |
| 2 |
Other, net | | | (449) | | | (2,007) |
Net cash flows used in investing activities | |
| (21,789) | |
| (29,100) |
Cash flows from financing activities: | |
| | |
| |
Proceeds from short-term borrowings | |
| 11,090 | |
| — |
Payments on short-term borrowings | |
| (5,788) | |
| (5,562) |
Proceeds from long-term borrowings | |
| 125,000 | |
| 97,000 |
Principal payments on long-term borrowings | |
| (10,796) | |
| (82,529) |
Dividends paid | |
| (11,742) | |
| (10,616) |
Dividends to noncontrolling interest | |
| (654) | |
| — |
Purchase of treasury shares | |
| (111,115) | |
| — |
Proceeds from exercises under stock plans | |
| 5,018 | |
| 713 |
Purchase of common treasury shares—stock plan exercises | |
| (14,022) | |
| (2,527) |
Net cash flows used in financing activities | |
| (13,009) | |
| (3,521) |
Effect of exchange rate changes on cash and cash equivalents | |
| 1,141 | |
| 2,386 |
Net change in cash and cash equivalents | |
| (12,458) | |
| (27,532) |
Cash and cash equivalents—beginning of year | |
| 185,406 | |
| 177,232 |
Cash and cash equivalents—end of period | | $ | 172,948 | | $ | 149,700 |
See accompanying notes to condensed consolidated financial statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)
Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) | Treasury stock | Noncontrolling interest in consolidated subsidiaries | Total shareholders’ equity | |||||||||||||||||||||
Balance at December 26, 2015 | $ | 27,900 | $ | — | $ | 1,729,679 | $ | (267,218 | ) | $ | (571,920 | ) | $ | 46,770 | $ | 965,211 | |||||||||||
Net earnings | — | — | 103,168 | — | — | 3,966 | 107,134 | ||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 1,249 | — | 1,766 | 3,015 | ||||||||||||||||||||
Cash dividends declared | — | — | �� | (25,482 | ) | — | — | — | (25,482 | ) | |||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | (2,527 | ) | (2,527 | ) | ||||||||||||||||||
Purchase of noncontrolling interests | — | (137 | ) | — | — | — | (10,872 | ) | (11,009 | ) | |||||||||||||||||
Purchase of treasury shares; 384,622 shares acquired | — | — | — | — | (46,581 | ) | — | (46,581 | ) | ||||||||||||||||||
Stock plan exercises; 10,747 shares acquired | — | — | — | — | (1,453 | ) | — | (1,453 | ) | ||||||||||||||||||
Stock options exercised; 68,631 shares issued | — | (6,435 | ) | 4,582 | — | 8,362 | — | 6,509 | |||||||||||||||||||
Stock option expense | — | 4,358 | — | — | — | — | 4,358 | ||||||||||||||||||||
Stock awards; 6,725 shares issued | — | 2,214 | — | — | 912 | — | 3,126 | ||||||||||||||||||||
Balance at September 24, 2016 | $ | 27,900 | $ | — | $ | 1,811,947 | $ | (265,969 | ) | $ | (610,680 | ) | $ | 39,103 | $ | 1,002,301 | |||||||||||
Balance at December 31, 2016 | $ | 27,900 | $ | — | $ | 1,874,722 | $ | (346,359 | ) | $ | (612,781 | ) | $ | 39,104 | $ | 982,586 | |||||||||||
Net earnings | — | — | 119,851 | — | — | 4,098 | 123,949 | ||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 58,257 | — | 454 | 58,711 | ||||||||||||||||||||
Cash dividends declared | — | — | (25,417 | ) | — | — | — | (25,417 | ) | ||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | (3,895 | ) | (3,895 | ) | ||||||||||||||||||
Stock plan exercises; 24,672 shares acquired | — | — | — | — | (3,929 | ) | — | (3,929 | ) | ||||||||||||||||||
Stock options exercised; 106,351 shares issued | — | (7,300 | ) | 5,445 | — | 14,301 | — | 12,446 | |||||||||||||||||||
Stock option expense | — | 3,868 | — | — | — | — | 3,868 | ||||||||||||||||||||
Stock awards; 6,034 shares issued | — | 3,432 | — | — | 844 | — | 4,276 | ||||||||||||||||||||
Balance at September 30, 2017 | $ | 27,900 | $ | — | $ | 1,974,601 | $ | (288,102 | ) | $ | (601,565 | ) | $ | 39,761 | $ | 1,152,595 |
| | | | | | | | | | | | | | | | | | | | | |
|
| | |
| | |
| | |
| Accumulated |
| | |
| Noncontrolling |
| | | ||
| | | | | Additional | | | | | other | | | | | interest in | | Total | ||||
| | Common | | paid-in | | Retained | | comprehensive | | Treasury | | consolidated | | shareholders’ | |||||||
|
| stock |
| capital |
| earnings |
| income (loss) |
| stock |
| subsidiaries |
| equity | |||||||
Balance at December 25, 2021 | | $ | 27,900 | | $ | 1,479 | | $ | 2,394,307 | | $ | (263,127) | | $ | (773,712) | | $ | 26,750 | | $ | 1,413,597 |
Net earnings | |
| — | |
| — | |
| 62,311 | |
| — | |
| — | |
| 595 | |
| 62,906 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 30,967 | |
| — | |
| 1,093 | |
| 32,060 |
Cash dividends declared ($0.55 per share) | |
| — | |
| — | |
| (11,721) | |
| — | |
| — | |
| — | |
| (11,721) |
Stock plan exercises; 11,695 shares acquired | |
| — | |
| — | |
| — | |
| — | |
| (2,527) | |
| — | |
| (2,527) |
Stock options exercised; 5,616 shares issued | |
| — | |
| (536) | |
| — | |
| — | |
| 1,249 | |
| — | |
| 713 |
Stock option expense | |
| — | |
| 716 | |
| — | |
| — | |
| — | |
| — | |
| 716 |
Stock awards; 37,748 shares issued | |
| — | |
| 3,592 | |
| — | |
| — | |
| 5,155 | |
| — | |
| 8,747 |
Balance at March 26, 2022 | | $ | 27,900 | | $ | 5,251 | | $ | 2,444,897 | | $ | (232,160) | | $ | (769,835) | | $ | 28,438 | | $ | 1,504,491 |
Balance at December 31, 2022 | | $ | 27,900 | | $ | — | | $ | 2,593,039 | | $ | (274,909) | | $ | (765,183) | | $ | 60,865 | | | 1,641,712 |
Net earnings (loss) | |
| — | |
| — | |
| 74,540 | |
| — | |
| — | |
| (2,195) | |
| 72,345 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 8,776 | |
| — | |
| 293 | |
| 9,069 |
Cash dividends declared ($0.60 per share) | |
| — | |
| — | |
| (12,634) | |
| — | |
| — | |
| — | |
| (12,634) |
Dividends to noncontrolling interests | | | — | | | — | | | — | | | — | | | — | | | (662) | | | (662) |
Purchase of treasury shares; 356,887 shares acquired | |
| — | |
| — | |
| — | |
| — | |
| (111,115) | |
| — | |
| (111,115) |
Stock plan exercises; 44,908 shares acquired | |
| — | |
| — | |
| — | |
| — | |
| (14,022) | |
| — | |
| (14,022) |
Stock options exercised; 31,602 shares issued | | | — | | | 971 | | | (19,317) | | | — | | | 23,364 | | | — | | | 5,018 |
Stock option expense | | | — | | | 855 | | | — | | | — | | | — | | | — | | | 855 |
Stock awards; 76,731 shares issued | |
| — | |
| (1,826) | |
| — | |
| — | |
| 9,660 | |
| — | |
| 7,834 |
Balance at April 1, 2023 | | $ | 27,900 | | $ | — | | $ | 2,635,628 | | $ | (266,133) | | $ | (857,296) | | $ | 58,301 | | $ | 1,598,400 |
See accompanying notes to the condensed consolidated financial statements.
7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Financial Statements
The Condensed Consolidated Balance Sheet
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'sCompany’s Annual Report on Form 10-K for the fiscal year ended
Inventories
Inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market.net realizable value. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately $40,886 and $38,047 at September 30, 2017 and
Inventories consisted of the following:
| | | | | | |
| | April 1, | | December 31, | ||
| | 2023 |
| 2022 | ||
Raw materials and purchased parts | | $ | 258,300 | | $ | 258,814 |
Work-in-process | |
| 46,250 | |
| 44,453 |
Finished goods and manufactured goods | |
| 420,810 | |
| 425,495 |
| | $ | 725,360 | | $ | 728,762 |
Income Taxes
Earnings before income taxes and equity in loss of nonconsolidated subsidiaries for the thirteen weeks ended April 1, 2023 and March 26, 2022 were as follows:
| | | | | | |
|
| Thirteen weeks ended | ||||
| | 2023 |
| 2022 | ||
United States | | $ | 31,858 | | $ | 60,816 |
Foreign | |
| 73,151 | |
| 25,569 |
| | $ | 105,009 | | $ | 86,385 |
8
September 30, 2017 | December 31, 2016 | ||||||
Raw materials and purchased parts | $ | 175,222 | $ | 143,659 | |||
Work-in-process | 35,126 | 27,291 | |||||
Finished goods and manufactured goods | 233,772 | 217,125 | |||||
Subtotal | 444,120 | 388,075 | |||||
Less: LIFO reserve | 40,886 | 38,047 | |||||
$ | 403,234 | $ | 350,028 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
United States | $ | 28,886 | $ | 21,550 | $ | 115,082 | $ | 105,390 | |||||||
Foreign | 21,675 | 22,239 | 59,210 | 51,486 | |||||||||||
$ | 50,561 | $ | 43,789 | $ | 174,292 | $ | 156,876 |
Pension Benefits
The Company incurs expenses in connection with the Delta Pension Plan ("DPP"(“DPP”). The DPP was acquired as part of the Delta plcPLC acquisition in fiscal 2010 and has no members that are active employees. In order to measure expense and the related benefit obligation, various assumptions are made including discount rates used to value the obligation, expected return on plan assets used to fund these expenses, and 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 expense and liability associated with pension benefits.
The components of the net periodic pension (benefit) expense for the thirteen and thirty-nine weeks ended September 30, 2017April 1, 2023 and September 24, 2016March 26, 2022 were as follows:
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
Net periodic (benefit) expense: | 2017 | 2016 | 2017 | 2016 | |||||||||||
Interest cost | $ | 4,676 | $ | 6,092 | $ | 13,475 | $ | 19,134 | |||||||
Expected return on plan assets | (5,277 | ) | (5,565 | ) | (15,208 | ) | (17,648 | ) | |||||||
Amortization of actuarial loss | 768 | — | 2,214 | — | |||||||||||
Net periodic expense | $ | 167 | $ | 527 | $ | 481 | $ | 1,486 |
| | | | | | |
| | Thirteen weeks ended | ||||
| | 2023 |
| 2022 | ||
Interest cost | | $ | 5,256 | | $ | 3,365 |
Expected return on plan assets | |
| (5,317) | |
| (6,202) |
Amortization of prior service cost | |
| 122 | |
| 132 |
Net periodic (benefit) expense | | $ | 61 | | $ | (2,705) |
Stock Plans
The Company maintains stock‑basedstock-based compensation plans approved by the shareholders, which provide that the Human Resource Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vestedrestricted stock awards, restricted stock units, and bonuses of common stock. At
Under the plans, the exercise price of each option equals the closing market price at the date of the grant. Options vest beginning on the first anniversary of the grant date in equal amounts over three to six years or on the grant’s fifth anniversary of the grant.
The Company'sCompany’s compensation expense (included in selling, general, and administrative expenses) and associated income tax benefits related to stock options and restricted stock for the
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Compensation expense | $ | 1,290 | $ | 1,399 | $ | 3,868 | $ | 4,358 | |||||||
Income tax benefits | 496 | 539 | 1,489 | 1,678 |
| | | | | | |
| | Thirteen weeks ended | ||||
| | 2023 |
| 2022 | ||
Compensation expense | | $ | 8,689 | | $ | 9,463 |
Income tax benefits | |
| 2,172 | |
| 2,366 |
Fair Value
The Company applies the provisions of Accounting Standards Codification 820,
Fair Value Measurements (“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
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 – CONTINUED
ASC 820 establishes a three‑levelthree-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 market prices in active markets for identical assets or liabilities. |
● | Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. |
● | Level 3: Unobservable inputs that are not corroborated by market data. |
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Trading Securities: The assets and liabilities recorded formajority of the Company’s trading securities represent the investments held in the Valmont Deferred Compensation Plan (the “DCP”). The assets of $39,283the DCP at April 1, 2023 of $28,452 ($35,78425,008 at December 31, 2016)2022) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification 320,
Derivative Financial Instruments: The fair value of foreign currency and commodity forward contracts and cross currency contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.
Mutual Funds: The Company has short-term investments in various mutual funds.
Marketable Securities: The Company's marketable securities consist of short-term investments in certificates of deposit.
| | | | | | | | | | | | |
| | | | | Fair Value Measurement Using: | |||||||
| | |
| Quoted Prices in |
| Significant Other |
| Significant | ||||
| | | | | Active Markets | | Observable | | Unobservable | |||
| | Carrying Value | | for Identical | | Inputs | | Inputs | ||||
| | April 1, 2023 | | Assets (Level 1) | | (Level 2) | | (Level 3) | ||||
Assets: | | | | | | | | | | | | |
Trading securities | | $ | 28,452 | | $ | 28,452 | | $ | — | | $ | — |
Derivative financial instruments, net | | | 2,793 | | | — | | | 2,793 | | | — |
Cash and cash equivalents - mutual funds | | | 1,534 | | | 1,534 | | | — | | | — |
Cash and cash equivalents - marketable securities | | | 142 | | | — | | | 142 | | | — |
10
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | |
| | | | | Fair Value Measurement Using: | |||||||
| | |
| Quoted Prices in |
| Significant Other |
| Significant | ||||
| | Carrying Value | | Active Markets | | Observable | | Unobservable | ||||
| | December 31, | | for Identical | | Inputs | | Inputs | ||||
| | 2022 | | Assets (Level 1) | | (Level 2) | | (Level 3) | ||||
Assets: | | | | | | | | | | | | |
Trading securities | | $ | 25,008 | | $ | 25,008 | | $ | — | | $ | — |
Derivative financial instruments, net | | | 1,404 | | | — | | | 1,404 | | | — |
Cash and cash equivalents - mutual funds | | | 7,205 | | | 7,205 | | | — | | | — |
Cash and cash equivalents - marketable securities | | | 136 | | | — | | | 136 | | | — |
Long-Lived Assets
The Company's ownership of shares in Delta EMD Pty. Ltd. (JSE:DTA) is alsoCompany’s other non-financial assets include goodwill and other intangible assets, which are classified as trading securities. Level 3 items. These assets are measured at fair value on a non-recurring basis as part of annual impairment testing.
Leases
The sharesCompany’s operating leases right-of-use assets and corresponding lease obligations are valued at $1,779included in “Other assets” and $2,016 as of September 30, 2017 and December 31, 2016,“Operating lease liabilities”, respectively, which isin the estimated fair value. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.
Fair Value Measurement Using: | |||||||||||||||
Carrying Value September 30, 2017 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Trading Securities | $ | 41,062 | $ | 41,062 | $ | — | $ | — |
Fair Value Measurement Using: | |||||||||||||||
Carrying Value December 31, 2016 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Trading Securities | $ | 37,800 | $ | 37,800 | $ | — | $ | — |
Comprehensive Income
Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity, and changes in prior service cost and net actuarial gains/lossesgains (losses) from a pension plan. Results of operations for 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) consisted of the following at September 30, 2017April 1, 2023 and December 31, 2016:2022:
| | | | | | | | | | | | |
|
| Foreign |
| | |
| | |
| Accumulated | ||
| | Currency | | | | Defined | | Other | ||||
| | Translation | | Hedging | | Benefit | | Comprehensive | ||||
| | Adjustments | | Activities | | Pension Plan | | Income (Loss) | ||||
Balance at December 31, 2022 | | $ | (260,799) | | $ | 20,099 | | $ | (34,209) | | $ | (274,909) |
Current period comprehensive income | |
| 7,896 | |
| 789 | |
| 91 | |
| 8,776 |
Balance at April 1, 2023 | | $ | (252,903) | | $ | 20,888 | | $ | (34,118) | | $ | (266,133) |
Revenue Recognition
The Company determines the appropriate revenue recognition model for our 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 and technology products and services product lines.
11
Foreign Currency Translation Adjustments | Gain/(Loss) on Hedging Activities | Defined Benefit Pension Plan | Accumulated Other Comprehensive Loss | ||||||||||||
Balance at December 31, 2016 | $ | (251,228 | ) | $ | 7,978 | $ | (103,109 | ) | $ | (346,359 | ) | ||||
Current-period comprehensive income (loss) | 60,017 | (1,760 | ) | — | 58,257 | ||||||||||
Balance at September 30, 2017 | $ | (191,211 | ) | $ | 6,218 | $ | (103,109 | ) | $ | (288,102 | ) |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Customer acceptance provisions exist only in the second quarterdesign stage of 2016,our products (on a limited basis, the Company entered into a one-year foreign currency forward contract which qualified as a net investment hedge, in ordermay agree to mitigate foreign currency risk on a portion of our investments denominated in British pounds. The forward contract had a notional amount to sell British poundsother acceptance terms), and receive $44,000, and matured in May 2017. The realized gain of
Shipping and handling costs associated with sales are recorded as cost of goods sold. 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 structures ("TD&S") product line, the solar product line, and the telecommunication structures product line, the Company’s inventory is interchangeable for a variety of each segment’s customers. The Company has elected to not 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 twelve months of transfer of control of goods or services.
The Company’s contract assets at April 1, 2023 and December 31, 2022 totaled $159,785 and $174,539, respectively.
While most of the Infrastructure segment customers are generally invoiced upon shipment or delivery of the goods to the customer’s specified location, certain customers are also evaluating the necessary changes to its internal control processes to recognize revenue over time using an inputs based model after adoption. Basedinvoiced by advanced billings or progress billings. At April 1, 2023 and December 31, 2022, total contract liabilities were $156,483 and $178,531, respectively. At April 1, 2023, $156,333 was recorded as “Contract liabilities” and $150 was recorded as “Other noncurrent liabilities” on the current statusCondensed Consolidated Balance Sheets. Additional details are as follows:
● | During the thirteen weeks ended April 1, 2023, and March 26, 2022, the Company recognized $58,939 and $28,023 of revenue that was included in the total contract liability at December 31, 2022 and December 25, 2021, respectively. The revenue recognized was due to applying advance payments received for performance obligations completed during the period. |
● | At April 1, 2023, the Company had $150 of remaining performance obligations on contracts with an original expected duration of one year or more and expects to complete the remaining performance obligations on these contracts within the next 12 to 24 months. |
12
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Segment and Product Line Revenue Recognition
Infrastructure Segment
Steel and concrete utility structures within the FASB issued ASU 2016-15,
For the structures sold for periodslighting and fiscal years beginning after December 15, 2019. Early adoptiontransportation and for the majority of telecommunication products, revenue is permitted for interimrecognized upon shipment or annual goodwill impairment tests performeddelivery of goods to the customer depending on testing dates after January 1, 2017. The Company adopted this standard in the third quarter of 2017contract terms, which is the same periodpoint in time that the customer is billed. There are also large regional customers who 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 it performsa 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 annual goodwill impairment testing.
Agriculture Segment
Revenue recognition from the manufacture of Net Periodic Benefit Cost Related to Defined Benefit Plans,
Disaggregation of revenue by product line is disclosed in the first quarter“Business Segments & Related Revenue Information” footnote.
13
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Recently Adopted Accounting Pronouncements
In September 2022, the FASB issued Accounting Standards Update No. 2022-04, Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”), which requires all buyers that use supplier finance programs to enhance the transparency of such programs to allow financial statement users to understand the effect on working capital, liquidity, and cash flows. The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing, and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary. Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet, and a rollforward of the obligation during the annual period. The guidance is effective in the first quarter of 2023, except for the rollforward, which is effective in 2024. The Company adopted the new standard in the first quarter of 2023, as well as early adopted the amendment on rollforward information. The new guidance had no effect on the Company’s results of operations as the changes are primarily disclosure related, as shown below.
During 2019, the Company purchased Aircon Guardrails Private Limited ("Aircon")entered into an agreement with a third-party financial institution to facilitate a supplier finance program which 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 supplier to the financial institution. The financial institution pays the supplier on the invoice due date for $5,362any 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 cash netprovided by operating activities in the Condensed Consolidated Statements of Cash Flows. Included in Accounts Payable in the Condensed Consolidated Balance Sheets at April 1, 2023 and December 31, 2022 were $58,134 and $48,880 of outstanding payment obligations, respectively, that were sold to the financial institution under the Company’s supplier finance program.
| | | |
Confirmed obligations outstanding at December 31, 2022 | | $ | 48,880 |
Invoices confirmed during the period | | | 74,781 |
Confirmed invoices paid during the period | |
| (65,527) |
Confirmed obligations outstanding at April 1, 2023 | | $ | 58,134 |
14
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(2) ACQUISITIONS
Acquisitions of Businesses
On June 1, 2022, the Company acquired approximately 51% of ConcealFab for $39,287 in cash (net of cash acquired, plus assumed liabilities. Aircon produces highway safety systems including guardrails, structural metal products,acquired) and solar structural products in India with annual salessubject to working capital adjustments. Approximately $1,850 of approximately $10,000. In the preliminary purchase price allocation, goodwillwas contingent on seller representations and warranties that will be settled within 18 months of $3,327the acquisition date. ConcealFab is located in Colorado Springs, Colorado, and $2,109 of customer relationshipsits operations are reported in the Infrastructure segment. The acquisition was made to allow the Company to incorporate innovative 5G infrastructure and other intangible assets were recorded.passive intermodulation mitigation solutions into our advanced infrastructure portfolio. Goodwill is not deductible for tax purposes. This business is included in the Engineered Support Structures segmentThe amount allocated to goodwill was primarily attributable to anticipated synergies and was acquired to expand the Company's geographic presence in the Asia-Pacific region.other intangibles that do not qualify for separate recognition. The Company expects to finalizefinalized the purchase price allocation in the fourthfirst quarter of 2017. 2023.
The following table summarizes the fair values of the assets acquired and liabilities assumed of ConcealFab at the date of acquisition:
| | | |
|
| As of June 1, | |
| | 2022 | |
Current assets | | $ | 21,133 |
Customer relationships | |
| 26,200 |
Trade name | |
| 5,000 |
Property, plant, and equipment | |
| 3,813 |
Other assets | |
| 9,108 |
Goodwill | |
| 42,465 |
Total fair value of assets acquired | | $ | 107,719 |
Current liabilities | |
| 6,658 |
Long-term debt | |
| 2,038 |
Operating lease liabilities | |
| 7,812 |
Deferred income taxes | |
| 5,464 |
Other noncurrent liabilities | |
| 12 |
Total fair value of liabilities assumed | | $ | 21,984 |
Noncontrolling interest in consolidated subsidiaries | |
| 41,693 |
Net assets acquired | | $ | 44,042 |
Proforma disclosures were omitted for this acquisition as this businessit does not have a significant impact on the Company'sCompany’s financial results.
Acquisition-related costs incurred for the above acquisition were insignificant for all years presented.
Acquisitions of Noncontrolling Interests
On August 10, 2022, the Company acquired the remaining 30%9% of IGC Galvanizing Industries (M) Sdn Bhd that it did not ownConvert Italy S.p.A. for $5,841. In June 2016,$3,046. As this transaction was for the Company acquired 5.2%acquisition of the remaining 10% of Valmont SM that it did not own for $5,168. As these transactions were for acquisitions of part or all of the remaining shares of consolidated subsidiariessubsidiary with no change in control, they wereit was recorded within shareholders'shareholders’ equity and as a financing cash flow in the Condensed Consolidated Statements of Cash Flows.
On May 10, 2022, the Company incurred pre-tax restructuring chargesacquired the remaining 20% of $4,581 as it completedValmont West Coast Engineering Ltd. for $4,292. As this transaction was for the 2015 Plan.
15
Balance at December 31, 2016 | Recognized Restructuring Expense | Costs Paid or Otherwise Settled | Balance at September 30, 2017 | |||||||||||||
Severance | $ | 1,597 | $ | — | $ | (1,597 | ) | $ | — | |||||||
Other cash restructuring expenses | 4,581 | — | (3,377 | ) | 1,204 | |||||||||||
Total | $ | 6,178 | $ | — | $ | (4,974 | ) | $ | 1,204 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(3) DIVESTITURES
On November 30, 2022, the Company completed the sale of Valmont SM, the offshore wind energy structures business in Denmark, reported in the Other segment. The business was sold because it did not align with the long-term strategic plans for the Company. The offshore wind energy structures business’ historical annual sales, operating profit, and net assets are not significant for discontinued operations presentation. The offshore wind energy structures business had an operating loss of $809 for the thirteen weeks ended March 26, 2022.
At closing, in the fourth quarter of 2022, the Company received Danish Krone 90,000 (U.S. $12,570) with an additional Danish Krone 28,000 (U.S. $4,027) held in an escrow account subject to normal closing conditions before it will be released to the Company.The pre-tax loss recorded during the fourth quarter of 2022 from the divestiture was reported in “Other income (expenses)” in the Consolidated Statements of Earnings on the Form 10-K. The loss was comprised of the proceeds and an asset recognized for the escrow funds not yet released from buyer, less deal-related costs and the net assets of the business.
(4) GOODWILL AND INTANGIBLE ASSETS
Amortized Intangible Assets
The components of amortized intangible assets at
September 30, 2017 | |||||||||
Gross Carrying Amount | Accumulated Amortization | Weighted Average Life | |||||||
Customer Relationships | $ | 200,269 | $ | 126,845 | 13 years | ||||
Proprietary Software & Database | 3,687 | 3,111 | 8 years | ||||||
Patents & Proprietary Technology | 6,633 | 3,859 | 11 years | ||||||
Other | 4,807 | 4,032 | 3 years | ||||||
$ | 215,396 | $ | 137,847 |
December 31, 2016 | |||||||||
Gross Carrying Amount | Accumulated Amortization | Weighted Average Life | |||||||
Customer Relationships | $ | 191,316 | $ | 111,342 | 13 years | ||||
Proprietary Software & Database | 3,616 | 3,056 | 8 years | ||||||
Patents & Proprietary Technology | 6,434 | 3,420 | 11 years | ||||||
Other | 3,713 | 3,668 | 3 years | ||||||
$ | 205,079 | $ | 121,486 |
| | | | | | | | |
| | April 1, 2023 | ||||||
| | Gross | | | | | Weighted | |
| | Carrying | | Accumulated | | Average | ||
|
| Amount |
| Amortization |
| Life | ||
Customer Relationships | | $ | 223,388 | | $ | 149,136 | | 13 years |
Patents & Proprietary Technology | |
| 58,687 | |
| 23,350 |
| 9 years |
Trade Name | |
| 2,850 | |
| 746 |
| 7 years |
Other | |
| 2,647 | |
| 2,289 |
| 5 years |
| | $ | 287,572 | | $ | 175,521 | | |
| | | | | | | | |
| | December 31, 2022 | ||||||
| | Gross | | | | | Weighted | |
| | Carrying | | Accumulated | | Average | ||
| | Amount |
| Amortization |
| Life | ||
Customer Relationships | | $ | 222,716 | | $ | 145,502 | | 13 years |
Patents & Proprietary Technology | |
| 58,404 | |
| 21,291 |
| 9 years |
Trade Name | |
| 2,850 | |
| 645 |
| 7 years |
Other | |
| 2,462 | |
| 2,164 |
| 5 years |
| | $ | 286,432 | | $ | 169,602 | | |
Amortization expense for intangible assets for the
thirteen | | | | | | |
| | Thirteen weeks ended | ||||
|
| 2023 |
| 2022 | ||
Amortization expense | | $ | 5,190 | | $ | 5,849 |
16
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||
2017 | 2016 | 2017 | 2016 | |||||||
4,025 | 3,964 | 11,792 | 12,037 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(4) GOODWILL AND INTANGIBLE ASSETS – CONTINUED
Estimated annual amortization expense related to finite‑livedfinite-lived intangible assets is as follows:
Estimated Amortization Expense | |||
2017 | $ | 15,823 | |
2018 | 14,492 | ||
2019 | 13,718 | ||
2020 | 12,608 | ||
2021 | 10,474 |
| | | |
|
| Estimated | |
| | Amortization | |
| | Expense | |
Remainder of 2023 | | $ | 15,804 |
2024 | |
| 19,028 |
2025 | |
| 17,348 |
2026 | |
| 12,834 |
2027 | | | 9,653 |
2028 | |
| 8,837 |
The useful lives assigned to finite‑livedfinite-lived intangible assets included consideration of factors such as the Company’s past and expected experience related to customer retention rates, the remaining legal or contractual life of the underlying arrangement that resulted in the recognition of the intangible asset, and the Company’s expected use of the intangible asset.
Non-Amortized Intangible Assets
Intangible assets with indefinite lives are not amortized.amortized and consist solely of trade names. The carrying valuesvalue of trade names at
September 30, 2017 | December 31, 2016 | Year Acquired | |||||||
Webforge | $ | 9,362 | $ | 8,624 | 2010 | ||||
Valmont SM | 9,839 | 8,765 | 2014 | ||||||
Newmark | 11,111 | 11,111 | 2004 | ||||||
Ingal EPS/Ingal Civil Products | 7,633 | 7,032 | 2010 | ||||||
Donhad | 5,758 | 5,305 | 2010 | ||||||
Shakespeare | 4,000 | 4,000 | 2014 | ||||||
Industrial Galvanizers | 2,390 | 2,201 | 2010 | ||||||
Other | 14,448 | 13,747 | |||||||
$ | 64,541 | $ | 60,785 |
| | | | | | | | |
|
| April 1, |
| December 31, |
| Year | ||
| | 2023 | | 2022 | | Acquired | ||
Newmark | | $ | 11,111 | | $ | 11,111 |
| 2004 |
Convert Italia S.p.A. | |
| 8,131 | |
| 8,024 |
| 2018 |
Webforge | | | 7,248 | | | 7,107 | | 2010 |
Ingal EPS / Ingal Civil Products | |
| 7,027 | |
| 6,891 |
| 2010 |
ConcealFab | |
| 5,000 | |
| 5,000 |
| 2022 |
Shakespeare | |
| 4,000 | |
| 4,000 |
| 2014 |
Walpar | |
| 3,500 | |
| 3,500 |
| 2018 |
Other | |
| 14,232 | |
| 14,152 |
| Various |
| | $ | 60,249 | | $ | 59,785 | | |
In its determination of these intangible assets as indefinite‑lived,indefinite-lived, the Company considered such factors as its expected future use of the intangible asset, legal, regulatory, technological, and competitive factors that may impact the useful life or value of the intangible asset, and the expected costs to maintain the value of the intangible asset. The Company expects that these intangible assets will maintain their value indefinitely. Accordingly, these assets are not amortized.
The Company’s trade names were tested for impairment in the third quarter of 2017.at August 27, 2022. The values of each trade name waswere determined using the relief-from-royalty method. Based on this evaluation, no trade names were determined to be impaired.
17
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(4) GOODWILL AND INTANGIBLE ASSETS – CONTINUED
Goodwill
The carrying amount of goodwill by segment as of September 30, 2017at April 1, 2023 and December 31, 20162022 was as follows:
Engineered Support Structures Segment | Energy & Mining Segment | Utility Support Structures Segment | Coatings Segment | Irrigation Segment | Total | |||||||||||||||||||
Balance at December 31, 2016 | $ | 94,314 | $ | 72,212 | $ | 75,404 | $ | 59,569 | $ | 19,611 | $ | 321,110 | ||||||||||||
Foreign currency translation | 4,568 | 6,704 | — | 951 | 94 | 12,317 | ||||||||||||||||||
Acquisitions | 3,327 | — | — | — | — | 3,327 | ||||||||||||||||||
Balance at September 30, 2017 | $ | 102,209 | $ | 78,916 | $ | 75,404 | $ | 60,520 | $ | 19,705 | $ | 336,754 |
| | | | | | | | | |
|
| Infrastructure |
| Agriculture |
| | | ||
| | Segment | | Segment | | Total | |||
Gross Balance December 31, 2022 | | $ | 473,551 | | $ | 313,777 | | $ | 787,328 |
Accumulated impairment losses | |
| (47,467) | |
| — | |
| (47,467) |
Balance at December 31, 2022 | |
| 426,084 | |
| 313,777 | | | 739,861 |
Foreign currency translation | |
| 1,704 | |
| 170 | |
| 1,874 |
Balance at April 1, 2023 | | $ | 427,788 | | $ | 313,947 | | $ | 741,735 |
| | | | | | | | | |
| | Infrastructure |
| Agriculture |
| | | ||
| | Segment | | Segment | | Total | |||
Gross Balance April 1, 2023 | | $ | 475,255 | | $ | 313,947 | | $ | 789,202 |
Accumulated impairment losses | | | (47,467) | | | — | | | (47,467) |
Balance at April 1, 2023 | | $ | 427,788 | | $ | 313,947 | | $ | 741,735 |
The Company’s annual impairment test of goodwill was performed during the third quarter of 2017,at August 27, 2022, using primarily the discounted cash flow method. As a resultThe estimated fair value of that testing, the Company determined that its goodwill was not impaired, as the valuation of theall our reporting units exceeded their respective carrying values. The Company's offshore and other complex steel structures reporting unit with $14,645 ofvalue, so no goodwill is the reporting unit with the smallest cushion between its estimated fair value and its carrying value. Sales and profitability amounts for the first nine months of 2017 approximated the amounts in the 2016 annual impairment model. The 2017 model assumes continued expansion into other highly engineered steel product offerings, such as utility support structures, where the reporting unit completed profitable projects in the past. The Company will continue to monitor the outlook for wind energy in Europe and oil and natural gas prices, which will affect the sales demand assumptions in the five year model for this reporting unit. If demand for off and onshore structures for wind energy changes significantly, the Company will perform an interim impairment test for goodwill. The Company also tracks changes in the global economy that could impact future operating results of any of its reporting units.
The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the thirty-ninethirteen weeks ended September 30, 2017April 1, 2023 and
| | | | | | |
|
| Thirteen weeks ended | ||||
| | 2023 |
| 2022 | ||
Interest | | $ | 3,331 | | $ | 1,613 |
Income taxes | |
| 7,838 | |
| 6,699 |
18
2017 | 2016 | ||||||
Interest | $ | 22,732 | $ | 24,036 | |||
Income taxes | 52,823 | 47,954 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a reconciliation between Basicbasic and Diluteddiluted earnings per share (EPS)(“EPS”):
Basic EPS | Dilutive Effect of Stock Options | Diluted EPS | |||||||||
Thirteen weeks ended September 30, 2017: | |||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 35,208 | $ | — | $ | 35,208 | |||||
Shares outstanding (000 omitted) | 22,527 | 224 | 22,751 | ||||||||
Per share amount | $ | 1.56 | $ | (0.01 | ) | $ | 1.55 | ||||
Thirteen weeks ended September 24, 2016: | |||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 28,173 | $ | — | $ | 28,173 | |||||
Shares outstanding (000 omitted) | 22,505 | 154 | 22,659 | ||||||||
Per share amount | $ | 1.25 | $ | (0.01 | ) | $ | 1.24 | ||||
Thirty-nine weeks ended September 30, 2017: | |||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 119,851 | $ | — | $ | 119,851 | |||||
Shares outstanding (000 omitted) | 22,505 | 212 | 22,717 | ||||||||
Per share amount | $ | 5.33 | $ | (0.05 | ) | $ | 5.28 | ||||
Thirty-nine weeks ended September 24, 2016: | |||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 103,168 | $ | — | $ | 103,168 | |||||
Shares outstanding (000 omitted) | 22,602 | 139 | 22,741 | ||||||||
Per share amount | $ | 4.56 | $ | (0.02 | ) | $ | 4.54 |
| | | | | | | | | |
|
| | |
| Dilutive |
| | ||
| | | | | Effect of | | | ||
| | | | | Various Stock | | Diluted | ||
| | Basic EPS | | Awards | | EPS | |||
Thirteen weeks ended April 1, 2023: | | | | | | | | | |
Net earnings attributable to Valmont Industries, Inc. | | $ | 74,540 | | $ | — | | $ | 74,540 |
Weighted average shares outstanding (000’s) | |
| 21,269 | |
| 243 | |
| 21,512 |
Per share amount | | $ | 3.50 | | $ | (0.03) | | $ | 3.47 |
Thirteen weeks ended March 26, 2022: | |
| | |
| | |
|
|
Net earnings attributable to Valmont Industries, Inc. | | $ | 62,311 | | $ | — | | $ | 62,311 |
Weighted average shares outstanding (000’s) | |
| 21,279 | |
| 213 | |
| 21,492 |
Per share amount | | $ | 2.93 | | $ | (0.03) | | $ | 2.90 |
At September 24, 2016,April 1, 2023 and March 26, 2022, there were 378,56640,564 and 47,223 outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share.
(7) DERIVATIVE FINANCIAL INSTRUMENTS
The Company manages interest rate risk, commodity price risk, and foreign currency risk related to foreign currency denominated transactions and investments in foreign subsidiaries. Depending on the circumstances, the Company may manage these risks by utilizing derivative financial instruments. Some derivative financial instruments are marked to market and recorded in the Company’s Condensed Consolidated Statements of Earnings, while others may be accounted for as fair value, cash flow, or net investment hedges. Derivative financial instruments have credit and market risk. The Company manages these risks of derivative instruments by monitoring limits as to the types and degree of risk that can be taken and by entering into transactions with counterparties who are recognized, stable multinational banks. Any gains or losses from net investment hedge activities remain in accumulated other comprehensive income (“AOCI”) until either the sale or substantially complete liquidation of the related subsidiaries.
Fair value of derivative instruments at April 1, 2023 and December 31, 2022 are as follows:
| | | | | | | | |
| | | | April 1, | | December 31, | ||
Derivatives designated as hedging instruments: |
| Balance sheet location | | 2023 | | 2022 | ||
Commodity forward contracts | | Other accrued expenses | | $ | (1,971) | | $ | (3,854) |
Foreign currency forward contracts |
| Prepaid expenses and other assets | | | 142 |
| | 83 |
Cross currency swap contracts |
| Prepaid expenses and other assets | | | 4,747 |
| | 5,385 |
Cross currency swap contracts |
| Other accrued expenses | | | (125) |
| | (210) |
| | | | $ | 2,793 | | $ | 1,404 |
19
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Gains (losses) on derivatives recognized in the preparationCondensed Consolidated Statements of Earnings for the thirteen weeks ended April 1, 2023 and March 26, 2022 are as follows:
| | | | | | | | |
|
| | | Thirteen weeks ended | ||||
| | | | April 1, | | March 26, | ||
Derivatives designated as hedging instruments: | | Statement of earnings location | | 2023 |
| 2022 | ||
Commodity forward contracts | | Product cost of sales | | $ | (3,985) | | $ | 2,043 |
Foreign currency forward contracts | | Other income | | | 97 |
| | 151 |
Interest rate hedge amortization | | Interest expense | | | (16) |
| | (16) |
Cross currency swap contracts | | Interest expense | | | 446 |
| | 774 |
| | | | $ | (3,458) | | $ | 2,952 |
Cash Flow Hedges
The Company enters into steel hot rolled coil (“HRC”) commodity forward contracts that qualify as a cash flow hedge of the segment information are the same as those used for the consolidated financial statements as disclosedvariability in Note 1, except that the segment assets and income reflect the FIFO basis of accounting for inventory. Certain inventories are accounted for using the LIFO basis in the consolidated financial statements. Incash flows attributable to future steel purchases. During the first quarter of 2017,2023, the Company changedentered into additional steel HRC forward contracts that qualify as a cash flow hedge of the variability in cash flows attributable to future steel purchases. The forward contracts had a notional amount of $15,760 for the total purchase of 18,500 short tons. At April 1, 2023, the forward contracts had a notional amount of $15,760 for the total purchase of 18,500 short tons from September 2023 to March 2024. The gain (loss) realized upon settlement will be recorded in “Product cost of sales” in the Condensed Consolidated Statements of Earnings over average inventory turns.
The Company enters into natural gas commodity forward contracts that qualify as a cash flow hedge of the variability in cash flows attributable to future natural gas purchases. During the first quarter of 2023, the Company entered into additional natural gas commodity forward contracts that also qualify as a cash flow hedge. The forward contracts had a notional amount of $1,206 for the total purchase of 299,000 mmBtu from July 2023 to March 2025. At April 1, 2023, the forward contracts had a notional amount of $5,772 for the total purchase of 1,179,000 mmBtu from April 2023 to March 2025. The gain (loss) realized upon settlement will be recorded in “Product cost of sales” in the Condensed Consolidated Statements of Earnings in the period consumed.
During the first quarter of 2023, the Company entered into diesel fuel commodity forward contracts that qualify as a cash flow hedge of the variability in cash flows attributable to future diesel fuel purchases. The forward contracts had a notional amount of $755 for the total purchase of 1,890,000 gallons from July 2023 to March 2024. The gain (loss) realized upon settlement will be recorded in “Product cost of sales” in the Condensed Consolidated Statements of Earnings in the period consumed.
During the first quarter of 2023, a subsidiary with a Euro functional currency entered into a foreign currency forward contract to mitigate foreign currency risk related to a large customer order denominated in U.S. dollars. The forward contract, which qualifies as a fair value hedge, matures in April 2023 and has a notional amount to sell $1,800 in exchange for a stated amount of Euros.
20
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(7) DERIVATIVE FINANCIAL INSTRUMENTS – CONTINUED
Net Investment Hedges
In 2019, the Company entered into two fixed-for-fixed cross currency swaps (“CCS”), swapping U.S. dollar principal and interest payments on a portion of its 5.00% senior unsecured notes due in 2044 for Danish krone (“DKK”) and Euro denominated payments. The CCS were entered into in order to mitigate foreign currency risk on the Company’s Euro and DKK investments and to reduce interest expense. Interest is exchanged twice per year on April 1 and October 1.
The Company designated the initial full notional amount of the two CCS ($130,000) as a hedge of the net investment in certain Danish and European subsidiaries under the spot method, with all changes in the fair value of the CCS that are included in the assessment of effectiveness (changes due to spot foreign exchange rates) recorded as cumulative foreign currency translation within AOCI. Net interest receipts will be recorded as a reduction of interest expense over the life of the CCS.
During the second half of 2022, the Company settled the DKK CCS and received proceeds of $3,532. Due to the sale of the offshore wind energy structures business in the fourth quarter of 2022, the Company reclassified the cumulative net investment hedge gain of $4,827 ($3,620 after tax) from OCI to “Loss from divestiture of offshore wind energy structures business” in the Consolidated Statements of Earnings at December 31, 2022 in the Form 10-K.
Key terms of the Euro CCS are as follows:
| | | | | | | | | | |
|
| Notional | | | | Swapped | | Set Settlement | ||
Currency | | Amount | | Termination Date | | Interest Rate | | Amount | ||
Euro | | $ | 80,000 | | April 1, 2024 |
| 2.825% | | € | 71,550 |
(8) BUSINESS SEGMENTS & RELATED REVENUE INFORMATION
The Company has two reportable segments based on its management structure. Each segment operating incomeis global in nature with a manager responsible for segment operational performance and the allocation of capital within the segment. Net corporate expense is net of certain service-related expenses that are allocated to separate outbusiness units generally on the LIFO expense (benefit). Prior year financial information has been updated to reflect this change.
Reportable segments are as follows:
INFRASTRUCTURE: This segment consists of the manufacture and distribution of products and solutions to serve the infrastructure markets of utility, solar, lighting and transportation, and telecommunications, and coatings services to preserve metal products.
AGRICULTURE: This segment consists of the manufacture of engineered metal
In addition to these two reportable segments, the Company had a business and related activities in 2022 that are not more than 10% of consolidated sales, operating income, or assets. This comprised the offshore wind energy structures business and was reported in the Other segment until its divestiture in fourth quarter 2022.
The Company evaluates the performance of its businessreportable segments based upon operating income and return on invested capital. The Company does not allocate LIFO expense,Company’s operating income for segment purposes excludes unallocated corporate general and administrative expenses, interest expense, non-operating income and deductions, or income taxes to its business segments.taxes.
21
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Summary by Business
| | | | | | |
|
| Thirteen weeks ended | ||||
| | April 1, |
| March 26, | ||
| | 2023 | | 2022 | ||
SALES: | | | | | | |
Infrastructure | | $ | 736,106 | | $ | 662,072 |
Agriculture | |
| 332,163 | |
| 306,580 |
Other | | | — | | | 18,654 |
Total | |
| 1,068,269 | |
| 987,306 |
INTERSEGMENT SALES: | |
|
| |
| |
Infrastructure | |
| (3,966) | |
| (3,101) |
Agriculture | |
| (1,822) | |
| (3,385) |
Total | |
| (5,788) | |
| (6,486) |
NET SALES: | |
|
| |
|
|
Infrastructure | |
| 732,140 | |
| 658,971 |
Agriculture | |
| 330,341 | |
| 303,195 |
Other | | | — | |
| 18,654 |
Total | | $ | 1,062,481 | | $ | 980,820 |
| | | | | | |
OPERATING INCOME (LOSS): | |
|
| |
|
|
Infrastructure | | $ | 94,352 | | $ | 78,316 |
Agriculture | |
| 53,323 | |
| 37,475 |
Other | | | — | |
| (809) |
Corporate | |
| (29,209) | |
| (20,140) |
Total | | $ | 118,466 | | $ | 94,842 |
22
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | ||||||||||||
SALES: | |||||||||||||||
Engineered Support Structures segment: | |||||||||||||||
Lighting, Traffic, and Roadway Products | $ | 175,184 | $ | 159,089 | $ | 498,034 | $ | 468,582 | |||||||
Communication Products | 46,324 | 44,095 | 121,613 | 115,489 | |||||||||||
Engineered Support Structures segment | 221,508 | 203,184 | 619,647 | 584,071 | |||||||||||
Energy and Mining segment: | |||||||||||||||
Offshore and Other Complex Steel Structures | 25,046 | 27,330 | 75,372 | 76,207 | |||||||||||
Grinding Media | 19,800 | 20,681 | 60,466 | 61,189 | |||||||||||
Access Systems | 34,909 | 33,541 | 99,096 | 97,297 | |||||||||||
Energy and Mining segment | 79,755 | 81,552 | 234,934 | 234,693 | |||||||||||
Utility Support Structures segment: | |||||||||||||||
Steel | 160,948 | 131,085 | 471,072 | 379,157 | |||||||||||
Concrete | 18,811 | 19,582 | 67,921 | 67,275 | |||||||||||
Utility Support Structures segment | 179,759 | 150,667 | 538,993 | 446,432 | |||||||||||
Coatings segment | 82,593 | 70,082 | 235,842 | 213,961 | |||||||||||
Irrigation segment | 147,428 | 127,809 | 502,939 | 438,575 | |||||||||||
Total | 711,043 | 633,294 | 2,132,355 | 1,917,732 | |||||||||||
INTERSEGMENT SALES: | |||||||||||||||
Engineered Support Structures segment | 11,736 | 10,076 | 48,399 | 29,202 | |||||||||||
Energy & Mining segment | 6 | 319 | 6 | 3,386 | |||||||||||
Utility Support Structures segment | 1,231 | 276 | 2,448 | 538 | |||||||||||
Coatings segment | 14,913 | 10,079 | 44,230 | 31,778 | |||||||||||
Irrigation segment | 2,378 | 2,297 | 6,283 | 5,727 | |||||||||||
Total | 30,264 | 23,047 | 101,366 | 70,631 | |||||||||||
NET SALES: | |||||||||||||||
Engineered Support Structures segment | 209,772 | 193,108 | 571,248 | 554,869 | |||||||||||
Energy & Mining segment | 79,749 | 81,233 | 234,928 | 231,307 | |||||||||||
Utility Support Structures segment | 178,528 | 150,391 | 536,545 | 445,894 | |||||||||||
Coatings segment | 67,680 | 60,003 | 191,612 | 182,183 | |||||||||||
Irrigation segment | 145,050 | 125,512 | 496,656 | 432,848 | |||||||||||
Total | $ | 680,779 | $ | 610,247 | $ | 2,030,989 | $ | 1,847,101 | |||||||
OPERATING INCOME: | |||||||||||||||
Engineered Support Structures segment | $ | 16,226 | $ | 20,323 | $ | 45,683 | $ | 53,615 | |||||||
Energy & Mining segment | 1,417 | 3,941 | 9,195 | 9,184 | |||||||||||
Utility Support Structures segment | 22,108 | 16,195 | 65,005 | 48,201 | |||||||||||
Coatings segment | 14,577 | 11,696 | 36,091 | 37,132 | |||||||||||
Irrigation segment | 18,235 | 15,308 | 83,196 | 75,216 | |||||||||||
Adjustment to LIFO inventory valuation method | (1,626 | ) | (2,066 | ) | (2,839 | ) | (3,192 | ) | |||||||
Corporate | (11,014 | ) | (12,157 | ) | (33,616 | ) | (32,745 | ) | |||||||
Total | $ | 59,923 | $ | 53,240 | $ | 202,715 | $ | 187,411 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(8) BUSINESS SEGMENTS & RELATED REVENUE INFORMATION – CONTINUED
| | | | | | | | | | | | | | | |
|
| Thirteen weeks ended April 1, 2023 | |||||||||||||
| | Infrastructure |
| Agriculture |
| Other | | Intersegment Sales |
| Consolidated | |||||
Geographical market: | | |
|
| |
|
| |
| | |
|
| |
|
North America | | $ | 584,083 | | $ | 182,869 | | $ | — | | $ | (5,374) | | $ | 761,578 |
International | |
| 152,023 | |
| 149,294 | |
| — | |
| (414) | |
| 300,903 |
Total | | $ | 736,106 | | $ | 332,163 | | $ | — | | $ | (5,788) | | $ | 1,062,481 |
| | | | | | | | | | | | | | | |
Product line: | |
|
| |
|
| |
|
| |
|
| |
|
|
Transmission, Distribution, and Substation | | $ | 314,820 | | $ | — | | $ | — | | $ | — | | $ | 314,820 |
Lighting and Transportation | |
| 229,136 | |
| — | |
| — | |
| — | |
| 229,136 |
Coatings | |
| 90,114 | |
| — | |
| — | |
| (3,552) | |
| 86,562 |
Telecommunications | |
| 68,137 | |
| — | |
| — | |
| — | |
| 68,137 |
Solar | |
| 33,899 | |
| — | |
| — | |
| (414) | |
| 33,485 |
Irrigation Equipment and Parts, excluding Technology | |
| — | |
| 299,181 | |
| — | |
| (1,822) | |
| 297,359 |
Technology Products and Services | |
| — | |
| 32,982 | |
| — | |
| — | |
| 32,982 |
Total | | $ | 736,106 | | $ | 332,163 | | $ | — | | $ | (5,788) | | $ | 1,062,481 |
| | | | | | | | | | | | | | | |
|
| Thirteen weeks ended March 26, 2022 | |||||||||||||
| | Infrastructure |
| Agriculture |
| Other | | Intersegment Sales |
| Consolidated | |||||
Geographical market: | | |
|
| |
|
| |
| | |
|
| |
|
North America | | $ | 505,980 | | $ | 182,255 | | $ | — | | $ | (6,486) | | $ | 681,749 |
International | |
| 156,092 | |
| 124,325 | |
| 18,654 | |
| — | |
| 299,071 |
Total | | $ | 662,072 | | $ | 306,580 | | $ | 18,654 | | $ | (6,486) | | $ | 980,820 |
| | | | | | | | | | | | | | | |
Product line: | |
|
| |
|
| |
|
| |
|
| |
|
|
Transmission, Distribution, and Substation | | $ | 281,600 | | $ | — | | $ | — | | $ | — | | $ | 281,600 |
Lighting and Transportation | |
| 212,767 | |
| — | |
| — | |
| — | |
| 212,767 |
Coatings | |
| 81,976 | |
| — | |
| — | |
| (3,101) | |
| 78,875 |
Telecommunications | |
| 61,396 | |
| — | |
| — | |
| — | |
| 61,396 |
Solar | |
| 24,333 | |
| — | |
| 18,654 | |
| — | |
| 42,987 |
Irrigation Equipment and Parts, excluding Technology | |
| — | |
| 278,034 | |
| — | |
| (3,385) | |
| 274,649 |
Technology Products and Services | |
| — | |
| 28,546 | |
| — | |
| — | |
| 28,546 |
Total | | $ | 662,072 | | $ | 306,580 | | $ | 18,654 | | $ | (6,486) | | $ | 980,820 |
23
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net sales | $ | 284,538 | $ | 113,243 | $ | 343,818 | $ | (60,820 | ) | $ | 680,779 | ||||||||
Cost of sales | 216,039 | 88,757 | 272,959 | (60,570 | ) | 517,185 | |||||||||||||
Gross profit | 68,499 | 24,486 | 70,859 | (250 | ) | 163,594 | |||||||||||||
Selling, general and administrative expenses | 46,451 | 12,046 | 45,174 | — | 103,671 | ||||||||||||||
Operating income | 22,048 | 12,440 | 25,685 | (250 | ) | 59,923 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (10,884 | ) | (3,989 | ) | (306 | ) | 3,989 | (11,190 | ) | ||||||||||
Interest income | 268 | 9 | 5,023 | (3,989 | ) | 1,311 | |||||||||||||
Other | 1,379 | 11 | (873 | ) | — | 517 | |||||||||||||
(9,237 | ) | (3,969 | ) | 3,844 | — | (9,362 | ) | ||||||||||||
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 12,811 | 8,471 | 29,529 | (250 | ) | 50,561 | |||||||||||||
Income tax expense (benefit): | |||||||||||||||||||
Current | 9,030 | 3,082 | 9,059 | (8 | ) | 21,163 | |||||||||||||
Deferred | (3,474 | ) | — | (3,794 | ) | — | (7,268 | ) | |||||||||||
5,556 | 3,082 | 5,265 | (8 | ) | 13,895 | ||||||||||||||
Earnings before equity in earnings of nonconsolidated subsidiaries | 7,255 | 5,389 | 24,264 | (242 | ) | 36,666 | |||||||||||||
Equity in earnings of nonconsolidated subsidiaries | 27,953 | 9,965 | — | (37,918 | ) | — | |||||||||||||
Net earnings | 35,208 | 15,354 | 24,264 | (38,160 | ) | 36,666 | |||||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (1,458 | ) | — | (1,458 | ) | ||||||||||||
Net earnings attributable to Valmont Industries, Inc | $ | 35,208 | $ | 15,354 | $ | 22,806 | $ | (38,160 | ) | $ | 35,208 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A breakdown by segment of revenue recognized over time and at a point in time for the Thirty-nine Weeks Ended September 30, 2017
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net sales | $ | 893,988 | $ | 352,827 | $ | 967,130 | $ | (182,956 | ) | $ | 2,030,989 | ||||||||
Cost of sales | 666,060 | 271,620 | 764,607 | (182,777 | ) | 1,519,510 | |||||||||||||
Gross profit | 227,928 | 81,207 | 202,523 | (179 | ) | 511,479 | |||||||||||||
Selling, general and administrative expenses | 143,590 | 35,555 | 129,619 | — | 308,764 | ||||||||||||||
Operating income | 84,338 | 45,652 | 72,904 | (179 | ) | 202,715 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (32,672 | ) | (10,040 | ) | (640 | ) | 10,040 | (33,312 | ) | ||||||||||
Interest income | 563 | 33 | 12,649 | (10,040 | ) | 3,205 | |||||||||||||
Other | 3,900 | 42 | (2,258 | ) | — | 1,684 | |||||||||||||
(28,209 | ) | (9,965 | ) | 9,751 | — | (28,423 | ) | ||||||||||||
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 56,129 | 35,687 | 82,655 | (179 | ) | 174,292 | |||||||||||||
Income tax expense (benefit): | |||||||||||||||||||
Current | 19,487 | 13,184 | 17,612 | (19 | ) | 50,264 | |||||||||||||
Deferred | 2,065 | — | (1,986 | ) | — | 79 | |||||||||||||
21,552 | 13,184 | 15,626 | (19 | ) | 50,343 | ||||||||||||||
Earnings before equity in earnings of nonconsolidated subsidiaries | 34,577 | 22,503 | 67,029 | (160 | ) | 123,949 | |||||||||||||
Equity in earnings of nonconsolidated subsidiaries | 85,274 | 15,281 | — | (100,555 | ) | — | |||||||||||||
Net earnings | 119,851 | 37,784 | 67,029 | (100,715 | ) | 123,949 | |||||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (4,098 | ) | — | (4,098 | ) | ||||||||||||
Net earnings attributable to Valmont Industries, Inc | $ | 119,851 | $ | 37,784 | $ | 62,931 | $ | (100,715 | ) | $ | 119,851 |
| | | | | | | | | |
| | Point in Time | | Over Time | | Total | |||
| | Thirteen | | Thirteen | | Thirteen | |||
| | weeks ended | | weeks ended | | weeks ended | |||
|
| April 1, 2023 |
| April 1, 2023 |
| April 1, 2023 | |||
Infrastructure | | $ | 411,217 | | $ | 320,923 | | $ | 732,140 |
Agriculture | |
| 324,206 | | | 6,135 | |
| 330,341 |
Total | | $ | 735,423 | | $ | 327,058 | | $ | 1,062,481 |
| | | | | | | | | |
|
| Point in Time |
| Over Time |
| Total | |||
| | Thirteen | | Thirteen | | Thirteen | |||
| | weeks ended | | weeks ended | | weeks ended | |||
| | March 26, 2022 | | March 26, 2022 | | March 26, 2022 | |||
Infrastructure | | $ | 369,190 | | $ | 289,781 | | $ | 658,971 |
Agriculture | |
| 297,606 | | | 5,589 | |
| 303,195 |
Other | | | — | | | 18,654 | |
| 18,654 |
Total | | $ | 666,796 | | $ | 314,024 | | $ | 980,820 |
24 2016
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net sales | $ | 261,928 | $ | 89,305 | $ | 300,648 | $ | (41,634 | ) | $ | 610,247 | ||||||||
Cost of sales | 199,957 | 66,401 | 230,561 | (41,695 | ) | 455,224 | |||||||||||||
Gross profit | 61,971 | 22,904 | 70,087 | 61 | 155,023 | ||||||||||||||
Selling, general and administrative expenses | 46,183 | 11,073 | 44,527 | — | 101,783 | ||||||||||||||
Operating income | 15,788 | 11,831 | 25,560 | 61 | 53,240 | ||||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (10,920 | ) | (6 | ) | (174 | ) | — | (11,100 | ) | ||||||||||
Interest income | 68 | 12 | 691 | — | 771 | ||||||||||||||
Other | 1,370 | 12 | (504 | ) | — | 878 | |||||||||||||
(9,482 | ) | 18 | 13 | — | (9,451 | ) | |||||||||||||
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 6,306 | 11,849 | 25,573 | 61 | 43,789 | ||||||||||||||
Income tax expense (benefit): | |||||||||||||||||||
Current | 6,112 | 5,095 | 6,762 | 48 | 18,017 | ||||||||||||||
Deferred | (5,321 | ) | — | 1,572 | — | (3,749 | ) | ||||||||||||
791 | 5,095 | 8,334 | 48 | 14,268 | |||||||||||||||
Earnings before equity in earnings of nonconsolidated subsidiaries | 5,515 | 6,754 | 17,239 | 13 | 29,521 | ||||||||||||||
Equity in earnings of nonconsolidated subsidiaries | 22,658 | — | — | (22,658 | ) | — | |||||||||||||
Net earnings | 28,173 | 6,754 | 17,239 | (22,645 | ) | 29,521 | |||||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (1,348 | ) | — | (1,348 | ) | ||||||||||||
Net earnings attributable to Valmont Industries, Inc | $ | 28,173 | $ | 6,754 | $ | 15,891 | $ | (22,645 | ) | $ | 28,173 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net sales | $ | 837,137 | $ | 277,990 | $ | 873,673 | $ | (141,699 | ) | $ | 1,847,101 | ||||||||
Cost of sales | 619,493 | 205,497 | 671,202 | (140,200 | ) | 1,355,992 | |||||||||||||
Gross profit | 217,644 | 72,493 | 202,471 | (1,499 | ) | 491,109 | |||||||||||||
Selling, general and administrative expenses | 133,207 | 33,583 | 136,908 | — | 303,698 | ||||||||||||||
Operating income | 84,437 | 38,910 | 65,563 | (1,499 | ) | 187,411 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (32,768 | ) | (9 | ) | (499 | ) | — | (33,276 | ) | ||||||||||
Interest income | 181 | 51 | 2,057 | — | 2,289 | ||||||||||||||
Other | 1,694 | 39 | (1,281 | ) | — | 452 | |||||||||||||
(30,893 | ) | 81 | 277 | — | (30,535 | ) | |||||||||||||
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 53,544 | 38,991 | 65,840 | (1,499 | ) | 156,876 | |||||||||||||
Income tax expense (benefit): | |||||||||||||||||||
Current | 22,086 | 13,909 | 15,762 | (481 | ) | 51,276 | |||||||||||||
Deferred | (1,834 | ) | — | 300 | — | (1,534 | ) | ||||||||||||
20,252 | 13,909 | 16,062 | (481 | ) | 49,742 | ||||||||||||||
Earnings before equity in earnings of nonconsolidated subsidiaries | 33,292 | 25,082 | 49,778 | (1,018 | ) | 107,134 | |||||||||||||
Equity in earnings of nonconsolidated subsidiaries | 69,876 | 7,859 | — | (77,735 | ) | — | |||||||||||||
Net earnings | 103,168 | 32,941 | 49,778 | (78,753 | ) | 107,134 | |||||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (3,966 | ) | — | (3,966 | ) | ||||||||||||
Net earnings attributable to Valmont Industries, Inc | $ | 103,168 | $ | 32,941 | $ | 45,812 | $ | (78,753 | ) | $ | 103,168 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net earnings | $ | 35,208 | $ | 15,354 | $ | 24,264 | $ | (38,160 | ) | $ | 36,666 | ||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||||
Unrealized translation gain (loss) | — | (3,613 | ) | 23,143 | — | 19,530 | |||||||||||||
Unrealized gain/(loss) on hedging activities: | |||||||||||||||||||
Net investment hedge | (740 | ) | — | — | — | (740 | ) | ||||||||||||
Amortization cost included in interest expense | 19 | — | — | — | 19 | ||||||||||||||
Equity in other comprehensive income | 18,418 | — | — | (18,418 | ) | — | |||||||||||||
Other comprehensive income (loss) | 17,697 | (3,613 | ) | 23,143 | (18,418 | ) | 18,809 | ||||||||||||
Comprehensive income (loss) | 52,905 | 11,741 | 47,407 | (56,578 | ) | 55,475 | |||||||||||||
Comprehensive income attributable to noncontrolling interests | — | — | (2,570 | ) | — | (2,570 | ) | ||||||||||||
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 52,905 | $ | 11,741 | $ | 44,837 | $ | (56,578 | ) | $ | 52,905 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net earnings | $ | 119,851 | $ | 37,784 | $ | 67,029 | $ | (100,715 | ) | $ | 123,949 | ||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||||
Unrealized translation gain (loss) | — | 64,411 | (3,940 | ) | — | 60,471 | |||||||||||||
Unrealized gain/(loss) on hedging activities: | |||||||||||||||||||
Net investment hedge | (1,816 | ) | — | — | (1,816 | ) | |||||||||||||
Amortization cost included in interest expense | 56 | — | — | — | 56 | ||||||||||||||
Equity in other comprehensive income | 60,017 | — | — | (60,017 | ) | — | |||||||||||||
Other comprehensive income (loss) | 58,257 | 64,411 | (3,940 | ) | (60,017 | ) | 58,711 | ||||||||||||
Comprehensive income (loss) | 178,108 | 102,195 | 63,089 | (160,732 | ) | 182,660 | |||||||||||||
Comprehensive income attributable to noncontrolling interests | — | — | (4,552 | ) | — | (4,552 | ) | ||||||||||||
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 178,108 | $ | 102,195 | $ | 58,537 | $ | (160,732 | ) | $ | 178,108 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net earnings | $ | 28,173 | $ | 6,754 | $ | 17,239 | $ | (22,645 | ) | $ | 29,521 | ||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||||
Unrealized translation gain (loss) | — | (114 | ) | 884 | — | 770 | |||||||||||||
Unrealized gain/(loss) on hedging activities: | |||||||||||||||||||
Net investment hedge | 1,972 | — | — | — | 1,972 | ||||||||||||||
Amortization cost included in interest expense | 18 | — | — | — | 18 | ||||||||||||||
Equity in other comprehensive income | 500 | — | — | (500 | ) | — | |||||||||||||
Other comprehensive income (loss) | 2,490 | (114 | ) | 884 | (500 | ) | 2,760 | ||||||||||||
Comprehensive income (loss) | 30,663 | 6,640 | 18,123 | (23,145 | ) | 32,281 | |||||||||||||
Comprehensive income attributable to noncontrolling interests | — | — | (1,618 | ) | — | (1,618 | ) | ||||||||||||
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 30,663 | $ | 6,640 | $ | 16,505 | $ | (23,145 | ) | $ | 30,663 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Net earnings | $ | 103,168 | $ | 32,941 | $ | 49,778 | $ | (78,753 | ) | $ | 107,134 | ||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||||
Unrealized translation gain (loss) | — | (263 | ) | (1,675 | ) | — | (1,938 | ) | |||||||||||
Unrealized gain/(loss) on hedging activities: | |||||||||||||||||||
Net Investment Hedge | 4,897 | — | — | — | 4,897 | ||||||||||||||
Amortization cost included in interest expense | 56 | — | — | — | 56 | ||||||||||||||
Equity in other comprehensive income | (3,704 | ) | — | — | 3,704 | — | |||||||||||||
Other comprehensive income (loss) | 1,249 | (263 | ) | (1,675 | ) | 3,704 | 3,015 | ||||||||||||
Comprehensive income (loss) | 104,417 | 32,678 | 48,103 | (75,049 | ) | 110,149 | |||||||||||||
Comprehensive income attributable to noncontrolling interests | — | — | (5,732 | ) | — | (5,732 | ) | ||||||||||||
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 104,417 | $ | 32,678 | $ | 42,371 | $ | (75,049 | ) | $ | 104,417 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 118,499 | $ | 4,167 | $ | 370,824 | $ | — | $ | 493,490 | |||||||||
Receivables, net | 152,290 | 69,781 | 270,771 | — | 492,842 | ||||||||||||||
Inventories | 141,774 | 46,747 | 219,046 | (4,333 | ) | 403,234 | |||||||||||||
Prepaid expenses, restricted cash, and other assets | 8,903 | 1,023 | 40,138 | — | 50,064 | ||||||||||||||
Refundable income taxes | 8,493 | — | — | — | 8,493 | ||||||||||||||
Total current assets | 429,959 | 121,718 | 900,779 | (4,333 | ) | 1,448,123 | |||||||||||||
Property, plant and equipment, at cost | 558,484 | 158,087 | 453,283 | — | 1,169,854 | ||||||||||||||
Less accumulated depreciation and amortization | 369,620 | 82,708 | 195,102 | — | 647,430 | ||||||||||||||
Net property, plant and equipment | 188,864 | 75,379 | 258,181 | — | 522,424 | ||||||||||||||
Goodwill | 20,108 | 110,562 | 206,084 | — | 336,754 | ||||||||||||||
Other intangible assets | 144 | 32,204 | 109,742 | — | 142,090 | ||||||||||||||
Investment in subsidiaries and intercompany accounts | 1,392,533 | 1,180,732 | 1,029,831 | (3,603,096 | ) | — | |||||||||||||
Other assets | 47,613 | — | 113,167 | — | 160,780 | ||||||||||||||
Total assets | $ | 2,079,221 | $ | 1,520,595 | $ | 2,617,784 | $ | (3,607,429 | ) | $ | 2,610,171 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Current installments of long-term debt | $ | — | $ | — | $ | 949 | $ | — | $ | 949 | |||||||||
Notes payable to banks | — | — | 197 | — | 197 | ||||||||||||||
Accounts payable | 59,467 | 8,032 | 148,605 | — | 216,104 | ||||||||||||||
Accrued employee compensation and benefits | 40,760 | 8,293 | 32,441 | — | 81,494 | ||||||||||||||
Accrued expenses | 44,896 | 9,222 | 52,120 | — | 106,238 | ||||||||||||||
Dividends payable | 8,478 | — | — | — | 8,478 | ||||||||||||||
Total current liabilities | 153,601 | 25,547 | 234,312 | — | 413,460 | ||||||||||||||
Deferred income taxes | 15,617 | — | 12,566 | — | 28,183 | ||||||||||||||
Long-term debt, excluding current installments | 750,933 | 185,674 | 10,060 | (192,465 | ) | 754,202 | |||||||||||||
Defined benefit pension liability | — | — | 199,562 | — | 199,562 | ||||||||||||||
Deferred compensation | 43,077 | — | 5,535 | — | 48,612 | ||||||||||||||
Other noncurrent liabilities | 3,159 | 5 | 10,393 | — | 13,557 | ||||||||||||||
Shareholders’ equity: | |||||||||||||||||||
Common stock of $1 par value | 27,900 | 457,950 | 648,682 | (1,106,632 | ) | 27,900 | |||||||||||||
Additional paid-in capital | — | 166,789 | 1,107,536 | (1,274,325 | ) | — | |||||||||||||
Retained earnings | 1,974,601 | 684,532 | 636,283 | (1,320,815 | ) | 1,974,601 | |||||||||||||
Accumulated other comprehensive income (loss) | (288,102 | ) | 98 | (286,906 | ) | 286,808 | (288,102 | ) | |||||||||||
Treasury stock | (601,565 | ) | — | — | — | (601,565 | ) | ||||||||||||
Total Valmont Industries, Inc. shareholders’ equity | 1,112,834 | 1,309,369 | 2,105,595 | (3,414,964 | ) | 1,112,834 | |||||||||||||
Noncontrolling interest in consolidated subsidiaries | — | — | 39,761 | — | 39,761 | ||||||||||||||
Total shareholders’ equity | 1,112,834 | 1,309,369 | 2,145,356 | (3,414,964 | ) | 1,152,595 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 2,079,221 | $ | 1,520,595 | $ | 2,617,784 | $ | (3,607,429 | ) | $ | 2,610,171 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 67,225 | $ | 6,071 | $ | 326,652 | $ | — | $ | 399,948 | |||||||||
Receivables, net | 134,351 | 60,522 | 244,469 | — | 439,342 | ||||||||||||||
Inventories | 126,669 | 45,457 | 182,056 | (4,154 | ) | 350,028 | |||||||||||||
Prepaid expenses | 13,271 | 880 | 43,146 | — | 57,297 | ||||||||||||||
Refundable income taxes | 6,601 | — | — | — | 6,601 | ||||||||||||||
Total current assets | 348,117 | 112,930 | 796,323 | (4,154 | ) | 1,253,216 | |||||||||||||
Property, plant and equipment, at cost | 547,076 | 153,596 | 405,064 | — | 1,105,736 | ||||||||||||||
Less accumulated depreciation and amortization | 352,960 | 76,776 | 157,665 | — | 587,401 | ||||||||||||||
Net property, plant and equipment | 194,116 | 76,820 | 247,399 | — | 518,335 | ||||||||||||||
Goodwill | 20,108 | 110,561 | 190,441 | — | 321,110 | ||||||||||||||
Other intangible assets | 184 | 35,953 | 108,241 | — | 144,378 | ||||||||||||||
Investment in subsidiaries and intercompany accounts | 1,279,413 | 901,758 | 1,089,369 | (3,270,540 | ) | — | |||||||||||||
Other assets | 43,880 | — | 110,812 | — | 154,692 | ||||||||||||||
Total assets | $ | 1,885,818 | $ | 1,238,022 | $ | 2,542,585 | $ | (3,274,694 | ) | $ | 2,391,731 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Current installments of long-term debt | $ | — | $ | — | $ | 851 | $ | — | $ | 851 | |||||||||
Notes payable to banks | — | — | 746 | — | 746 | ||||||||||||||
Accounts payable | 52,272 | 15,732 | 109,484 | — | 177,488 | ||||||||||||||
Accrued employee compensation and benefits | 34,508 | 7,243 | 30,653 | — | 72,404 | ||||||||||||||
Accrued expenses | 30,261 | 15,242 | 44,411 | — | 89,914 | ||||||||||||||
Dividends payable | 8,445 | — | — | — | 8,445 | ||||||||||||||
Total current liabilities | 125,486 | 38,217 | 186,145 | — | 349,848 | ||||||||||||||
Deferred income taxes | 22,481 | — | 13,322 | — | 35,803 | ||||||||||||||
Long-term debt, excluding current installments | 751,251 | — | 3,544 | — | 754,795 | ||||||||||||||
Defined benefit pension liability | — | — | 209,470 | — | 209,470 | ||||||||||||||
Deferred compensation | 39,476 | — | 4,843 | — | 44,319 | ||||||||||||||
Other noncurrent liabilities | 3,642 | 5 | 11,263 | — | 14,910 | ||||||||||||||
Shareholders’ equity: | |||||||||||||||||||
Common stock of $1 par value | 27,900 | 457,950 | 648,683 | (1,106,633 | ) | 27,900 | |||||||||||||
Additional paid-in capital | — | 159,414 | 1,107,536 | (1,266,950 | ) | — | |||||||||||||
Retained earnings | 1,874,722 | 646,749 | 603,338 | (1,250,087 | ) | 1,874,722 | |||||||||||||
Accumulated other comprehensive income | (346,359 | ) | (64,313 | ) | (284,663 | ) | 348,976 | (346,359 | ) | ||||||||||
Treasury stock | (612,781 | ) | — | — | — | (612,781 | ) | ||||||||||||
Total Valmont Industries, Inc. shareholders’ equity | 943,482 | 1,199,800 | 2,074,894 | (3,274,694 | ) | 943,482 | |||||||||||||
Noncontrolling interest in consolidated subsidiaries | — | — | 39,104 | — | 39,104 | ||||||||||||||
Total shareholders’ equity | 943,482 | 1,199,800 | 2,113,998 | (3,274,694 | ) | 982,586 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 1,885,818 | $ | 1,238,022 | $ | 2,542,585 | $ | (3,274,694 | ) | $ | 2,391,731 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net earnings | $ | 119,851 | $ | 37,784 | $ | 67,029 | $ | (100,715 | ) | $ | 123,949 | ||||||||
Adjustments to reconcile net earnings to net cash flows from operations: | |||||||||||||||||||
Depreciation and amortization | 19,600 | 11,130 | 32,770 | — | 63,500 | ||||||||||||||
Noncash loss on trading securities | — | — | 395 | — | 395 | ||||||||||||||
Stock-based compensation | 7,300 | — | — | — | 7,300 | ||||||||||||||
Defined benefit pension plan expense | — | — | 481 | — | 481 | ||||||||||||||
Contribution to defined benefit pension plan | — | — | (26,064 | ) | — | (26,064 | ) | ||||||||||||
Decrease in restricted cash - pension plan trust | — | — | 12,568 | — | 12,568 | ||||||||||||||
Loss (gain) on sale of property, plant and equipment | (725 | ) | 59 | (66 | ) | — | (732 | ) | |||||||||||
Equity in earnings in nonconsolidated subsidiaries | (85,274 | ) | (15,281 | ) | — | 100,555 | — | ||||||||||||
Deferred income taxes | 2,065 | — | (1,986 | ) | — | 79 | |||||||||||||
Changes in assets and liabilities: | |||||||||||||||||||
Receivables | (16,190 | ) | (9,259 | ) | (14,135 | ) | — | (39,584 | ) | ||||||||||
Inventories | (15,105 | ) | (1,290 | ) | (25,329 | ) | 179 | (41,545 | ) | ||||||||||
Prepaid expenses and other assets | (2,501 | ) | (144 | ) | (8,991 | ) | — | (11,636 | ) | ||||||||||
Accounts payable | 7,196 | (7,700 | ) | 29,399 | — | 28,895 | |||||||||||||
Accrued expenses | 20,887 | (4,971 | ) | 4,241 | — | 20,157 | |||||||||||||
Other noncurrent liabilities | (381 | ) | — | (1,246 | ) | — | (1,627 | ) | |||||||||||
Income taxes payable (refundable) | (11,403 | ) | 802 | 8,869 | — | (1,732 | ) | ||||||||||||
Net cash flows from operating activities | 45,320 | 11,130 | 77,935 | 19 | 134,404 | ||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of property, plant and equipment | (14,046 | ) | (5,952 | ) | (19,900 | ) | — | (39,898 | ) | ||||||||||
Proceeds from sale of assets | 745 | (48 | ) | 878 | — | 1,575 | |||||||||||||
Acquisitions, net of cash acquired | — | — | (5,362 | ) | — | (5,362 | ) | ||||||||||||
Proceeds from settlement of net investment hedge | 5,123 | — | — | — | 5,123 | ||||||||||||||
Other, net | 15,714 | (8,985 | ) | (10,172 | ) | (19 | ) | (3,462 | ) | ||||||||||
Net cash flows from investing activities | 7,536 | (14,985 | ) | (34,556 | ) | (19 | ) | (42,024 | ) | ||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Net borrowings under short-term agreements | — | — | (549 | ) | — | (549 | ) | ||||||||||||
Principal payments on long-term borrowings | — | (658 | ) | — | (658 | ) | |||||||||||||
Dividends paid | (25,386 | ) | — | — | — | (25,386 | ) | ||||||||||||
Dividends to noncontrolling interest | — | (3,895 | ) | — | (3,895 | ) | |||||||||||||
Intercompany dividends | 22,662 | — | (22,662 | ) | — | — | |||||||||||||
Intercompany interest on long-term note | — | (5,669 | ) | 5,669 | — | — | |||||||||||||
Intercompany capital contribution | (7,375 | ) | 7,375 | — | — | — | |||||||||||||
Proceeds from exercises under stock plans | 12,446 | — | — | — | 12,446 | ||||||||||||||
Purchase of common treasury shares - stock plan exercises | (3,929 | ) | — | — | — | (3,929 | ) | ||||||||||||
Net cash flows from financing activities | (1,582 | ) | 1,706 | (22,095 | ) | — | (21,971 | ) | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | 245 | 22,888 | — | 23,133 | ||||||||||||||
Net change in cash and cash equivalents | 51,274 | (1,904 | ) | 44,172 | — | 93,542 | |||||||||||||
Cash and cash equivalents—beginning of year | 67,225 | 6,071 | 326,652 | — | 399,948 | ||||||||||||||
Cash and cash equivalents—end of period | $ | 118,499 | $ | 4,167 | $ | 370,824 | $ | — | $ | 493,490 |
Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net earnings | $ | 103,168 | $ | 32,941 | $ | 49,778 | $ | (78,753 | ) | $ | 107,134 | ||||||||
Adjustments to reconcile net earnings to net cash flows from operations: | |||||||||||||||||||
Depreciation and amortization | 20,482 | 9,897 | 30,863 | — | 61,242 | ||||||||||||||
Noncash loss on trading securities | — | — | 973 | — | 973 | ||||||||||||||
Impairment of assets - restructuring activities | — | — | 618 | — | 618 | ||||||||||||||
Stock-based compensation | 6,572 | — | — | — | 6,572 | ||||||||||||||
Change in fair value of contingent consideration | — | — | (3,527 | ) | — | (3,527 | ) | ||||||||||||
Defined benefit pension plan expense | — | — | 1,486 | — | 1,486 | ||||||||||||||
Contribution to defined benefit pension plan | — | — | (712 | ) | — | (712 | ) | ||||||||||||
Increase in restricted cash - pension plan trust | — | — | (13,652 | ) | — | (13,652 | ) | ||||||||||||
Loss (gain) on sale of property, plant and equipment | 2 | 117 | 131 | — | 250 | ||||||||||||||
Equity in earnings in nonconsolidated subsidiaries | (69,876 | ) | (7,859 | ) | — | 77,735 | — | ||||||||||||
Deferred income taxes | (1,834 | ) | — | 300 | — | (1,534 | ) | ||||||||||||
Changes in assets and liabilities: | |||||||||||||||||||
Receivables | (10,501 | ) | 14,969 | 11,968 | — | 16,436 | |||||||||||||
Inventories | (11,847 | ) | (5,024 | ) | (19,041 | ) | 1,499 | (34,413 | ) | ||||||||||
Prepaid expenses | (4,526 | ) | 76 | (6,174 | ) | — | (10,624 | ) | |||||||||||
Accounts payable | (16,605 | ) | 2,530 | 2,737 | — | (11,338 | ) | ||||||||||||
Accrued expenses | 11,179 | (7,218 | ) | (689 | ) | — | 3,272 | ||||||||||||
Other noncurrent liabilities | (252 | ) | 5 | 487 | — | 240 | |||||||||||||
Income taxes payable (refundable) | 19,132 | (16,444 | ) | 2,143 | — | 4,831 | |||||||||||||
Net cash flows from operating activities | 45,094 | 23,990 | 57,689 | 481 | 127,254 | ||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of property, plant and equipment | (5,699 | ) | (17,944 | ) | (18,590 | ) | — | (42,233 | ) | ||||||||||
Proceeds from sale of assets | 36 | 84 | 3,818 | — | 3,938 | ||||||||||||||
Other, net | 13,070 | (4,488 | ) | (10,925 | ) | (481 | ) | (2,824 | ) | ||||||||||
Net cash flows from investing activities | 7,407 | (22,348 | ) | (25,697 | ) | (481 | ) | (41,119 | ) | ||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Net borrowings under short-term agreements | — | — | (128 | ) | — | (128 | ) | ||||||||||||
Principal payments on long-term borrowings | (215 | ) | — | (1,348 | ) | — | (1,563 | ) | |||||||||||
Dividends paid | (25,604 | ) | — | — | — | (25,604 | ) | ||||||||||||
Dividends to noncontrolling interest | — | — | (2,527 | ) | — | (2,527 | ) | ||||||||||||
Purchase of noncontrolling interest | (137 | ) | — | (10,872 | ) | — | (11,009 | ) | |||||||||||
Proceeds from exercises under stock plans | 6,509 | — | — | — | 6,509 | ||||||||||||||
Purchase of treasury shares | (46,581 | ) | — | — | — | (46,581 | ) | ||||||||||||
Purchase of common treasury shares - stock plan exercises | (1,453 | ) | — | — | — | (1,453 | ) | ||||||||||||
Net cash flows from financing activities | (67,481 | ) | — | (14,875 | ) | — | (82,356 | ) | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | 168 | (3,646 | ) | — | (3,478 | ) | ||||||||||||
Net change in cash and cash equivalents | (14,980 | ) | 1,810 | 13,471 | — | 301 | |||||||||||||
Cash and cash equivalents—beginning of year | 62,281 | 4,008 | 282,785 | — | 349,074 | ||||||||||||||
Cash and cash equivalents—end of period | $ | 47,301 | $ | 5,818 | $ | 296,256 | $ | — | $ | 349,375 |
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis contains forward‑lookingforward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward‑lookingforward-looking statements are based on assumptions that management has made in light of experience in the industries in which the Company operates, as well as management’s perceptions of historical trends, current conditions, expected future developments, and other factors believed to be appropriate under the circumstances. These statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Company’s control), and assumptions. Management believes that these forward‑lookingforward-looking statements are based on reasonable assumptions. Many factors could affect the Company’s actual financial results and cause them to differ materially from those anticipated in the forward‑lookingforward-looking statements. These factors include, among other things, risk factors described from time to time in the Company’s reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, geopolitical risks, and actions and policy changes of domestic and foreign governments.
This discussion should be read in conjunction with the financial statements and notes thereto, and the management'smanagement’s discussion and analysis included in the Company'sCompany’s Annual Report on Form 10-K for the fiscal year ended
25
Results of Operations
(Dollars in millions, except per share amounts)
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||
September 30, 2017 | September 24, 2016 | % Incr. (Decr.) | September 30, 2017 | September 24, 2016 | % Incr. (Decr.) | ||||||||||||||||
Consolidated | |||||||||||||||||||||
Net sales | $ | 680.8 | $ | 610.2 | 11.6 | % | $ | 2,031.0 | $ | 1,847.1 | 10.0 | % | |||||||||
Gross profit | 163.6 | 155.0 | 5.5 | % | 511.5 | 491.1 | 4.2 | % | |||||||||||||
as a percent of sales | 24.0 | % | 25.4 | % | 25.2 | % | 26.6 | % | |||||||||||||
SG&A expense | 103.7 | 101.8 | 1.9 | % | 308.8 | 303.7 | 1.7 | % | |||||||||||||
as a percent of sales | 15.2 | % | 16.7 | % | 15.2 | % | 16.4 | % | |||||||||||||
Operating income | 59.9 | 53.2 | 12.6 | % | 202.7 | 187.4 | 8.2 | % | |||||||||||||
as a percent of sales | 8.8 | % | 8.7 | % | 10.0 | % | 10.1 | % | |||||||||||||
Net interest expense | 9.9 | 10.3 | (3.9 | )% | 30.1 | 31.0 | (2.9 | )% | |||||||||||||
Effective tax rate | 27.5 | % | 32.6 | % | 28.9 | % | 31.7 | % | |||||||||||||
Net earnings | $ | 35.2 | $ | 28.2 | 24.8 | % | $ | 119.9 | $ | 103.2 | 16.2 | % | |||||||||
Diluted earnings per share | $ | 1.55 | $ | 1.24 | 25.0 | % | $ | 5.28 | $ | 4.54 | 16.3 | % | |||||||||
Engineered Support Structures (ESS) | |||||||||||||||||||||
Net sales | $ | 209.8 | $ | 193.1 | 8.6 | % | $ | 571.3 | $ | 554.9 | 3.0 | % | |||||||||
Gross profit | 50.9 | 54.3 | (6.3 | )% | 145.2 | 156.9 | (7.5 | )% | |||||||||||||
SG&A expense | 34.6 | 34.0 | 1.8 | % | 99.5 | 103.3 | (3.7 | )% | |||||||||||||
Operating income | 16.3 | 20.3 | (19.7 | )% | 45.7 | 53.6 | (14.7 | )% | |||||||||||||
Energy and Mining (E&M) | |||||||||||||||||||||
Net sales | $ | 79.7 | $ | 81.2 | (1.8 | )% | $ | 234.9 | $ | 231.3 | 1.6 | % | |||||||||
Gross profit | 12.5 | 14.8 | (15.5 | )% | 41.6 | 41.6 | — | % | |||||||||||||
SG&A expense | 11.1 | 10.9 | 1.8 | % | 32.4 | 32.5 | (0.3 | )% | |||||||||||||
Operating income | 1.4 | 3.9 | (64.1 | )% | 9.2 | 9.1 | 1.1 | % | |||||||||||||
Utility Support Structures (Utility) | |||||||||||||||||||||
Net sales | $ | 178.5 | $ | 150.4 | 18.7 | % | $ | 536.5 | $ | 445.9 | 20.3 | % | |||||||||
Gross profit | 39.4 | 31.8 | 23.9 | % | 115.4 | 94.2 | 22.5 | % | |||||||||||||
SG&A expense | 17.3 | 15.6 | 10.9 | % | 50.4 | 46.0 | 9.6 | % | |||||||||||||
Operating income | 22.1 | 16.2 | 36.4 | % | 65.0 | 48.2 | 34.9 | % | |||||||||||||
Coatings | |||||||||||||||||||||
Net sales | $ | 67.7 | $ | 60.0 | 12.8 | % | $ | 191.6 | $ | 182.2 | 5.2 | % | |||||||||
Gross profit | 20.3 | 17.9 | 13.4 | % | 58.5 | 59.1 | (1.0 | )% | |||||||||||||
SG&A expense | 5.8 | 6.2 | (6.5 | )% | 22.5 | 22.0 | 2.3 | % | |||||||||||||
Operating income | 14.5 | 11.7 | 23.9 | % | 36.0 | 37.1 | (3.0 | )% | |||||||||||||
Irrigation | |||||||||||||||||||||
Net sales | $ | 145.1 | $ | 125.5 | 15.6 | % | $ | 496.7 | $ | 432.8 | 14.8 | % | |||||||||
Gross profit | 42.1 | 38.1 | 10.5 | % | 153.6 | 141.4 | 8.6 | % | |||||||||||||
SG&A expense | 23.9 | 22.7 | 5.3 | % | 70.4 | 66.1 | 6.5 | % | |||||||||||||
Operating income | 18.2 | 15.4 | 18.2 | % | 83.2 | 75.3 | 10.5 | % | |||||||||||||
Adjustment to LIFO inventory valuation method | |||||||||||||||||||||
Gross profit | $ | (1.6 | ) | $ | (2.1 | ) | NM | $ | (2.8 | ) | $ | (3.2 | ) | NM | |||||||
Operating income | (1.6 | ) | (2.1 | ) | NM | (2.8 | ) | (3.2 | ) | NM | |||||||||||
Net corporate expense | |||||||||||||||||||||
Gross profit | $ | — | $ | 0.3 | NM | $ | — | $ | 1.1 | NM | |||||||||||
SG&A expense | 11.0 | 12.4 | (11.3 | )% | 33.6 | 33.8 | (0.6 | )% | |||||||||||||
Operating loss | (11.0 | ) | (12.1 | ) | 9.1 | % | (33.6 | ) | (32.7 | ) | (2.8 | )% |
| | | | | | | | | |
| | Thirteen weeks ended |
| ||||||
| | April 1, 2023 |
| March 26, 2022 |
| % Incr. (Decr.) |
| ||
Consolidated | | | | | | | | | |
Net sales | | $ | 1,062.5 | | $ | 980.8 |
| 8.3 | % |
Gross profit | | | 308.6 | |
| 249.1 |
| 23.8 | % |
as a percent of sales | | | 29.0 | % |
| 25.4 | % |
| |
SG&A expense | | | 190.1 | |
| 154.3 |
| 23.2 | % |
as a percent of sales | | | 17.9 | % |
| 15.7 | % |
| |
Operating income | | | 118.5 | |
| 94.8 |
| 24.9 | % |
as a percent of sales | | | 11.1 | % |
| 9.7 | % |
| |
Net interest expense | | | 12.3 | |
| 11.0 |
| 11.2 | % |
Effective tax rate | | | 30.3 | % |
| 26.8 | % |
| |
Net earnings | | | 74.5 | | | 62.3 |
| 19.6 | % |
Diluted earnings per share | | $ | 3.47 | | $ | 2.90 |
| 19.7 | % |
Infrastructure | |
|
| |
|
|
|
| |
Net sales | | $ | 732.2 | | $ | 658.9 |
| 11.1 | % |
Gross profit | |
| 200.5 | | | 166.0 |
| 20.8 | % |
SG&A expense | |
| 106.1 | | | 87.7 |
| 21.0 | % |
Operating income | |
| 94.4 | |
| 78.3 |
| 20.5 | % |
Agriculture | |
| | |
| |
|
| |
Net sales | | $ | 330.3 | | $ | 303.2 |
| 9.0 | % |
Gross profit | |
| 108.1 | | | 82.3 |
| 31.3 | % |
SG&A expense | |
| 54.8 | | | 44.9 |
| 22.0 | % |
Operating income | |
| 53.3 | |
| 37.4 |
| 42.3 | % |
Other | | | | | | | | | |
Net sales | | $ | — | | $ | 18.7 | | NM | |
Gross profit | | | — | | | 0.8 | | NM | |
SG&A expense | | | — | | | 1.6 | | NM | |
Operating loss | | | — | | | (0.8) | | NM | |
Corporate | |
| | |
| |
|
| |
SG&A expense | | $ | 29.2 | | $ | 20.1 |
| 45.3 | % |
Operating loss | |
| (29.2) | |
| (20.1) |
| 45.0 | % |
26
Overview, Including Items Impacting Comparability
On a consolidated basis, the increase in net sales were higher in the thirdfirst quarter of fiscal 2017,2023, as compared withto the thirdfirst quarter of fiscal 2016, reflected2022, with higher sales in all reportable segments except for the Energy & Mining segment. On a year-to-date basis, higher consolidated sales in 2017, as compared to 2016, reflected increases across all reportableboth reporting segments. The changes in net sales in the third quarter and first three quarters of fiscal 2017, as compared with fiscal 2016, were as follows:
Third quarter | ||||||||||||||||||
Total | ESS | E&M | Utility | Coatings | Irrigation | |||||||||||||
Sales - 2016 | $ | 610.2 | $ | 193.1 | $ | 81.2 | $ | 150.4 | $ | 60.0 | $ | 125.5 | ||||||
Volume | 29.7 | 15.9 | (6.9 | ) | 1.6 | 1.5 | 17.6 | |||||||||||
Pricing/mix | 31.7 | (3.5 | ) | 2.0 | 26.5 | 5.6 | 1.1 | |||||||||||
Acquisitions | 1.6 | 1.6 | — | — | — | — | ||||||||||||
Currency translation | 7.6 | 2.7 | 3.4 | — | 0.6 | 0.9 | ||||||||||||
Sales - 2017 | $ | 680.8 | $ | 209.8 | $ | 79.7 | $ | 178.5 | $ | 67.7 | $ | 145.1 |
Year-to-date | ||||||||||||||||||
Total | ESS | E&M | Utility | Coatings | Irrigation | |||||||||||||
Sales - 2016 | $ | 1,847.1 | $ | 554.9 | $ | 231.3 | $ | 445.9 | $ | 182.2 | $ | 432.8 | ||||||
Volume | 110.4 | 20.4 | (4.9 | ) | 48.2 | (5.6 | ) | 52.3 | ||||||||||
Pricing/mix | 63.1 | (2.2 | ) | 5.1 | 42.4 | 14.5 | 3.3 | |||||||||||
Acquisitions | 1.6 | 1.6 | — | — | — | — | ||||||||||||
Currency translation | 8.8 | (3.4 | ) | 3.4 | — | 0.5 | 8.3 | |||||||||||
Sales - 2017 | $ | 2,031.0 | $ | 571.3 | $ | 234.9 | $ | 536.5 | $ | 191.6 | $ | 496.7 |
Steel prices for both hot rolled coil and plate were highervolatile over the past two years, especially in North America and ChinaAmerica. An increase in the thirdaverage cost of consumed steel drove higher consolidated net sales and cost of sales in the first quarter and first three quarters of 2017,2023, as compared to the same periodsfirst quarter of 2022. Gross profit margin improved in 2016, resulting in higher averagethe first quarter of 2023, as compared to the first quarter of 2022, as customer pricing mechanisms and product selling price practices allowed for the recovery of cost of material. We expect that average selling prices will increase over time to offsetmaterial inflation for both the decrease in gross profit realized from the higher cost of steel for the Company.
The Company acquired a highway business in India ("Aircon")ConcealFab in the thirdsecond quarter of 20172022, a telecommunications technology company that offers 5G infrastructure and passive intermodulation mitigation solutions, which is included in the Infrastructure segment.
The Company divested of its offshore wind energy structures business in the fourth quarter of 2022, which resulted in a pre-tax loss of approximately $33.3 million. The offshore wind energy structures business is included in the Other segment until its divestiture in 2022 and the loss was recorded in “Other income (expenses)” in the Consolidated Statements of Earnings at December 31, 2022.
Non-cash items of note impacting the comparability of results from net earnings for the first quarter of 2023 included amortization of identified intangible assets of $1.6 million ($1.3 million after-tax) and stock-based compensation expense of $2.0 million ($1.8 million after-tax) for the employees from the Prospera subsidiary acquired in the second quarter of 2021 (recognized within SG&A for the Agriculture segment).
Non-cash items of note impacting the comparability of results from net earnings for the first quarter of 2022 included amortization of identified intangible assets of $1.6 million ($1.2 million after-tax) and stock-based compensation expense of $2.5 million ($2.3 million after-tax) for the employees from the Prospera subsidiary acquired in the second quarter of 2021 (recognized within SG&A for the Agriculture segment).
Macroeconomic Impacts on Financial Results and Liquidity
We continue to monitor several macroeconomic and geopolitical trends that impacted our ESS segment.
Reportable Segments
In July 2016,addition to the two reportable segments, the Company identifiedhad a restructuring planbusiness and related activities in Australia/New Zealand (the "2016 Plan") focused primarily on closing2022 that are not more than 10% of consolidated sales, operating income, or assets. This comprised the offshore wind energy structures business and consolidating locations within the Energy and Mining and Coatings segments. The Company incurred pre-tax expenses from the 2016 Plan of $2.1 millionwas reported in the thirdOther segment until its divestiture in fourth quarter 2022. All prior period information has been recast to reflect this change in reportable segments. See Note 8 to our Condensed Consolidated Financial Statements for additional information.
Backlog
The consolidated backlog of unshipped orders at April 1, 2023 was approximately $1.6 billion compared with approximately $1.7 billion at December 31, 2022.
Currency Translation
In the first quarter of 2016. The Energy and Mining segment incurred approximately $1.6 million, the Coatings segment incurred approximately $0.3 million, and Corporate incurred approximately $0.2 million of restructuring expenses during the third quarter of 2016.
| | | | | | | | | | | | | |
|
| | Total |
| Infrastructure |
| Agriculture |
| Corporate | ||||
First quarter | | | $ | (0.7) | | $ | (0.5) | | $ | (0.3) | | $ | 0.1 |
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Total | ESS | E&M | Utility | Coatings | Irrigation | Corporate | |||||||||||||||
Third quarter | $ | 0.4 | $ | 0.2 | $ | 0.1 | $ | — | $ | 0.1 | $ | — | $ | — | |||||||
Year-to-date | $ | 1.3 | $ | 0.1 | $ | 0.1 | $ | — | $ | (0.1 | ) | $ | 1.2 | $ | — |
Gross Profit, SG&A, and Operating Income
At a consolidated level, the reduction in gross margin (gross profit as a percent of sales)sales was higher in the thirdfirst quarter and first three quarters of 2017,2023, as compared with the same periods in 2016, was primarilyfirst quarter of 2022, and the amount of gross profit increased due to the higher raw materialaverage selling prices across mostall product lines more than offsetting higher costs of our businesses. Grossgoods sold across the Company. Amounts of gross profit increased for both reportable segments.
The increase in SG&A expense in the thirdfirst quarter and first three quarters of 2017,2023, as compared to the same periods in 2016,first quarter of 2022, was due to increased sales volumes in most operating segments. The Irrigation and Utility segments realizedthe incremental SG&A of $3.2 million from the June 2022 acquisition of ConcealFab, as well as higher salaries as a result of merit increases, in the third quarter and first three quarters of 2017, while ESS and Energy & Mining realized a decrease in gross profit primarily due to sales pricing that did not fully recover higher raw material costs and an unfavorable sales mix. The Coatings segment realized higher gross profit in the third quarter, but lower gross profit in the first three quarters of 2017 as compared to the same periods in fiscal 2016.
The increase in consolidated operating income in the thirdfirst quarter and first three quarters of 2017,2023, as compared to the same periodsfirst quarter of 2022, was primarily due to the increase in 2016, is primarily attributableaverage selling prices more than offsetting higher costs of goods sold. This was partially offset by the increase in SG&A period over period.
Net Interest Expense
Interest expense increased in the first quarter of 2023, as compared to the first quarter of 2022, due to increased sales volumes inborrowing on the Utility and Irrigation segments.
Other Income / Expenses (including Gain (loss) on hand to invest.
The change in other income/expenseexpenses in the thirdfirst quarter and first three quarters of 2017,2023, as compared withto the first quarter of 2022, was primarily due to a pension expense of $0.1 million in the first quarter of 2023, as opposed to a pension benefit of $2.7 million in the first quarter of 2022. These changes were partially offset by the change in the valuation of deferred compensation assets, shown as "Gain (loss) on investments - unrealized" on the Condensed Consolidated Statements of Earnings, which resulted in higher other income of $2.3 million. The change related to deferred compensation assets is offset by an expense of the same periodsamount in 2016,SG&A expense.
Income Tax Expense
Our effective income tax rate in the first quarter of 2023 was 30.3% compared to 26.8% in the first quarter of 2022. The increase in the effective tax rate was primarily due to a change in valuation of deferred compensation assets. This change resulted in lower other income in the third quarter of $0.4 million but increased other income for the first three quarters of $1.7 million. This amount is offset by the same amount in SG&A expense. The change in the market value of the Company's shares held of Delta EMD was a $0.6 million smaller loss on a year-to-date basis when comparing 2017geographical earnings.
Loss (Earnings) Attributable to 2016. The remaining change was due to foreign currency transaction gains or losses.
Loss (earnings) attributable to noncontrolling interests was consistentwere lower in the thirdfirst quarter and first three quarters of 2017,2023, as compared to the same periods in 2016.
Cash Flows from Operations
Our cash flows provided by operations was $134.4were $21.2 million in the first three quartersquarter of fiscal 2017,2023, as compared with $127.3$2.7 million provided by operations in the first three quartersquarter of 2016.2022. The increase in operating cash flow in the first three quarters of fiscal 2017, as compared with 2016, was primarily the result of improvedthe increase in net earnings mostlyand continued focus on overall working capital levels, partially offset by higher net working capital tieda significant increase in the contribution to increased sales volumes.the defined benefit pension plan of approximately $15 million.
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Infrastructure Segment
| | | | | | | | | | | | |
| | Thirteen weeks ended | ||||||||||
| | | | | | | | Dollar | | |
| |
Infrastructure |
| Q1 2023 |
| Q1 2022 |
| Change |
| % Change | ||||
Sales, gross of intercompany eliminations: | | |
|
| |
|
| |
|
|
| |
Transmission, Distribution, and Substation | | $ | 314.9 | | $ | 281.6 |
| $ | 33.3 |
| 11.8 | % |
Lighting & Transportation | | | 229.1 | | | 212.8 |
| | 16.3 |
| 7.7 | % |
Coatings | | | 90.1 | | | 82.0 |
| | 8.1 |
| 9.9 | % |
Telecommunications | | | 68.1 | | | 61.4 |
| | 6.7 |
| 11.0 | % |
Solar | | | 33.9 | | | 24.3 |
| | 9.6 |
| 39.3 | % |
Total | | $ | 736.1 | | $ | 662.1 | | $ | 74.0 |
| 11.2 | % |
| | | | | | | | | | | | |
Operating Income | | $ | 94.4 | | $ | 78.3 | | $ | 16.1 |
| 20.5 | % |
Net sales in the thirdfirst quarter and first three quarters of fiscal 2017,2023, as compared with the same periods of 2016, was due to improved roadway product sales volumes and higher communication product line sales volumes.
Transmission, distribution, and substation sales increased in the first three quarters of 2017, as compared to 2016, due primarily to lower commissions owed on communication product line sales, reduced incentives due to decreased operating performance, and currency translation effects.
Lighting and transportation sales increased during the first three quartersquarter of 2017,2023, as compared to 2016, improvedthe first quarter of 2022, due to an increase in sales demandvolume, primarily in North America. Higher average selling prices also drove higher sales in the first quarter of 2023.
Telecommunication sales increased in the first quarter of 2023, as compared with first quarter of 2022, due primarily to approximately $8 million of sales from the second quarter 2022 acquisition of ConcealFab. Sales volumes were slightly lower in North America resultedand average selling prices were generally consistent in the first quarter 2023, as compared to the first quarter 2022.
Coatings sales increased in the first quarter of 2023, as compared with the first quarter of 2022, due to higher average selling prices.
Solar sales increased in the first quarter of 2023, as compared with the first quarter of 2022, due to increased sales volumesvolumes.
Gross profit and gross profit margin were higher in tonsthe first quarter of 2023, as compared to the first quarter of 2022. The customer contractual pricing mechanisms and selling price management initiatives led to an increase in average selling prices above the rate of inflation. SG&A was higher in the first quarter of 2023, as compared to the first quarter of 2022, primarily due to higher employment costs mostly attributed to inflationary wage increases, incremental SG&A of $3.2 million from the June 2022 acquisition of ConcealFab, and a bad debt reserve charge of approximately $2.7 million related to a telecommunications customer that became insolvent. The increase in operating income for steel utility structuresthe first quarter of 2023, as compared with the first quarter of 2022, is also contributeddue to the increase in sales. Sales volumesaverage selling prices and profits from the increase in tons for concrete utility structures were also highersales volumes. The operating income margin increased to 12.9% in the thirdfirst quarter of 2023, from 11.9% in the first quarter of 2022, due to better leverage of fixed costs, including SG&A, in the first quarter of 2023.
29
Agriculture Segment
| | | | | | | | | | | | |
| | Thirteen weeks ended | ||||||||||
|
| | |
| | |
| Dollar |
| |
| |
Agriculture |
| Q1 2023 |
| Q1 2022 |
| Change |
| % Change | ||||
Sales, gross of intercompany eliminations: | | |
|
| |
|
| |
|
|
| |
North America | | $ | 182.9 | | $ | 182.3 |
| $ | 0.6 |
| 0.3 | % |
International | | | 149.3 | | | 124.3 |
| | 25.0 |
| 20.1 | % |
Total | | $ | 332.2 | | $ | 306.6 | | $ | 25.6 |
| 8.3 | % |
| | | | | | | | | | | | |
Operating Income | | $ | 53.3 | | $ | 37.5 | | $ | 15.8 |
| 42.3 | % |
The increase in Agriculture segment net sales in the first quarter of 2023, as compared to first quarter of 2022, was primarily due to much higher average selling prices of irrigation equipment globally. In North America, lower sales volumes for irrigation systems and parts in the first three quartersquarter of 2017,2023, as compared to the same periods in 2016. International utility structures sales decreased in 2017first quarter of 2022, were driven by general economic uncertainty due to lower volumes.
The increase in gross profit in the first three quartersquarter of 2017,2023, as compared to the same periodsfirst quarter of 2022, was primarily attributed to the meaningfully higher average selling prices which more than offset the amount of inflation within cost of goods sold. SG&A was higher in 2016,the first quarter of 2023, as compared to the first quarter of 2022, primarily due to improved pricing and sales mix.higher employment costs, mostly attributed to inflationary wage increases. Operating income for the segment was higher in the first quarter of 2023, as compared to the first quarter of 2022, due primarily to the 5.6% increase in gross profit margin mostly attributed to higher average selling prices.
Other
In November 2022, the Company completed the sale of Valmont SM, an offshore wind energy structures business with operations in Denmark.
Corporate
Corporate SG&A expense was higher in the thirdfirst quarter and first three quarters of 2017, as compared with the same periods in 2016, due to higher incentive expense and commission expense attributed to the increased sales volumes. Operating income increased in the third quarter and first three quarters of 2017, as compared with 2016, due to the increased sales volumes and improved sales pricing.
Liquidity and Capital Resources
Capital Allocation Philosophy
We have historically funded our growth, capital spending, and Operating Cash Flows
● | working capital and capital expenditure investments necessary for future sales growth; |
● | dividends on common stock in the range of 20% of the prior year’s fully diluted net earnings; |
● | acquisitions; and |
● | return of capital to shareholders through share repurchases. |
30
We intend to 2016, was primarily the result of higher net earnings tiedmanage our capital structure to increased sales volumesmaintain our investment grade debt rating. Our most recent ratings were Baa3 by Moody’s Investors Services, Inc., BBB- by Fitch Ratings, and pricing that was mostly offsetBBB+ by Standard and Poor’s Rating Services. We would be willing to allow our debt rating to fall to BBB- to finance a corresponding increase in working capital.
The Board of approximately $82.4 millionDirectors in the first three quarters of fiscal 2016 to a use of $22.0 million in the first three quarters of fiscal 2017. The reduction of financing cash outflows in the first three quarters of 2017, as compared to 2016, was due to the Company purchasing $46.6 million of treasury shares under our share repurchase program andMay 2014 authorized the purchase of certain noncontrolling interests totaling $11.0up to $500 million in 2016.
On February 28, 2023, the Company announced that the Board of Directors approved an increase to repurchase sharesthe quarterly cash dividend on the common stock to $0.60 per share, or a rate of $2.40 per share on an annualized basis, an increase of 9% from the prior quarterly cash dividend of $0.55 per share.
Supplier Finance Program
We have a supplier finance program agreement with a financial institution which allows qualifying suppliers, at their election and on terms they negotiate directly with the financial institution, to sell their receivables from the Company. A supplier’s voluntary participation in the future.
Sources of Financing
Our debt financing at September 30, 2017 isApril 1, 2023 consisted primarily long-termof long‑term debt consistingand borrowings on our revolving credit facility. Our long‑term debt at April 1, 2023, principally consisted of:
● | $450 million face value ($433.2 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044. |
● | $305 million face value ($295.0 million carrying value) of senior unsecured notes that bear interest at 5.25% per annum and are due in October 2054. |
We are allowed to repurchase the notes at specified prepayment premiums. All threesubject to the payment of a make-whole premium. Both tranches of these notes are guaranteed by certain of our subsidiaries.
Our revolving credit facility with JP Morgan Chase Bank, N.A., as Administrative Agent, and the other lenders party thereto. thereto, has a maturity date of October 18, 2026.
The revolving credit facility provides for $600$800 million of committed unsecured revolving credit loans.loans with available borrowings thereunder to $400 million in foreign currencies. We may increase the credit facility by up to an additional $200$300 million at any time, subject to lenders increasing the amount of their commitments. OurThe Company and our wholly-owned subsidiaries, Valmont Industries Holland B.V. and Valmont Group Pty. Ltd., along with the Company, are authorized borrowers under the credit facility. The obligations arising under the revolving credit facility are guaranteed by the Company and its wholly-owned subsidiaries PiRod,Valmont Telecommunications, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc., and Valmont Queensland Pty. Ltd.
The interest rate on our borrowings will be, at our option, either:
(a) | term SOFR (based on a 1-, 3- or 6-month interest period, as selected by the Company) plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior, unsecured, long-term debt published by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc.; |
31
(b) | the higher of |
● | the prime lending rate, |
● | the overnight bank rate plus 50 basis points, and |
● | term SOFR (based on a one-month interest period) plus 100 basis points, |
plus, in each case, 0 to 62.5 basis points, depending on the credit rating of our senior, unsecured, long-term debt published by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc.; or
(c) | daily simple SOFR plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior, unsecured, long-term debt published by Standard & Poor’s Rating Services and Mood’s Investors Service, Inc. |
A commitment fee is also required under the revolving credit facility which are adopted in the amended and restated credit agreement, include:
At September 30, 2017April 1, 2023 and December 31, 2016,2022, we had no outstanding borrowings of $255.7 million and $140.5 million, respectively, under ourthe revolving credit agreement.facility. The revolving credit agreementfacility has a maturity date of October 18, 2026 and contains certaina financial covenantscovenant that may limit our additional borrowing capability under the agreement. At September 30, 2017,April 1, 2023, we had the ability to borrow $585.2$544.1 million under this facility, after consideration of standby letters of credit of $14.8$0.2 million associated with certain insurance obligations and international sales commitments.obligations. We also maintain certain short-termshort‑term bank lines of credit totaling $113.0 million, $112.8$38.2 million; $26.7 million of which was unused at September 30, 2017.
Our senior, unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness.
The revolving credit facility requires maintenance of a financial leverage ratio, measured as of the last day of each of our fiscal quarters, of 3.50:1 or less. The leverage ratio is the ratio of: (a) interest-bearing debt minus unrestricted cash in excess of $50 million (but not exceeding $500 million); to (b) adjusted EBITDA. The debt agreements contain covenants that require usprovide a modification of the definition of “EBITDA” to maintain certain coverage ratiosadd-back any non-cash stock-based compensation in any trailing twelve month period and may limit us with respect to certain business activities, including capital expenditures. The debt agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired business. The debt agreements also provide for an adjustment to EBITDA, subject to certain limitations, for non-cash charges or gains that are non-recurring in nature. For 2017,The leverage ratio is permitted to increase from 3.50:1 to 3:75:1 for the four consecutive fiscal quarters after certain material acquisitions.
The revolving credit agreement also contains customary affirmative and negative covenants or credit facilities of this type, including, among others, limitations on us and our covenant calculations do not include any estimated EBITDA from acquired businesses.
At September 30, 2017,April 1, 2023, we were in compliance with all covenants related to thethese debt agreements. The key covenant calculations at September 30, 2017 were as follows:
Interest-bearing debt | $ | 755,348 | |
Adjusted EBITDA-last four quarters | 345,590 | ||
Leverage ratio | 2.19 | ||
Adjusted EBITDA-last four quarters | $ | 345,590 | |
Interest expense-last four quarters | 44,445 | ||
Interest earned ratio | 7.78 |
The calculation of Adjusted EBITDA-lastEBITDA for the last four quarters (September 25, 2016 through September 30, 2017) is as follows:
Net cash flows from operations | $ | 226,318 | |
Interest expense | 44,445 | ||
Income tax expense | 42,666 | ||
Impairment of property, plant and equipment | (481 | ) | |
Loss on investment | (8 | ) | |
Change in fair value of contingent consideration | (285 | ) | |
Deferred income tax benefit | 22,072 | ||
Noncontrolling interest | (5,292 | ) | |
Stock-based compensation | (10,659 | ) | |
Increase in restricted cash - pension plan trust | (12,568 | ) | |
Pension plan expense | (865 | ) | |
Contribution to pension plan | 26,840 | ||
Changes in assets and liabilities | 29,167 | ||
Other | 350 | ||
EBITDA | 361,700 | ||
Reversal of contingent liability | (16,591 | ) | |
Impairment of property, plant and equipment | 481 | ||
Adjusted EBITDA | $ | 345,590 |
Net earnings attributable to Valmont Industries, Inc. | $ | 189,915 | |
Interest expense | 44,445 | ||
Income tax expense | 42,666 | ||
Depreciation and amortization expense | 84,674 | ||
EBITDA | 361,700 | ||
Reversal of contingent liability | (16,591 | ) | |
Impairment of property, plant, and equipment | 481 | ||
Adjusted EBITDA | $ | 345,590 |
Cash Uses
Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on our debt, payments of taxes, contributions to pension plan, and, if market conditions warrant, occasional investments in, or acquisitions of, business ventures. In addition, we regularly evaluate our ability to pay dividends or repurchase stock, all consistent with the terms of our debt agreements.
Our businesses are cyclical, but we have diversity in our markets, from a product, customer, and a geographical standpoint. We have demonstrated the ability to effectively manage through business cycles and maintain liquidity. We have
32
consistently generated operating cash flows in excess of our capital expenditures. Based on our available credit facilities, recent issuance of senior unsecured notes, and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs.
We have not made any provision for U.S. income taxes in our financial statements on approximately $437.8 million of undistributed earnings of our foreign subsidiaries, as we intend to reinvest those earnings. Of our cash balances of $493.5$172.9 million at September 30, 2017,April 1, 2023 and approximately $370.5$132.8 million is held in entities outside the United States.our non-U.S. subsidiaries. If we need to repatriatedistributed our foreign cash balances, to the United States to meet our cash needs, incomecertain taxes would be paid to the extent that those cash repatriations were undistributed earnings of ourapplicable. At April 1, 2023, we have a liability for foreign subsidiaries. The determination of the additionalwithholding taxes and U.S. federal and state income taxes of $2.2 million and $0.9 million, respectively.
Cash Flows
The following table includes a summary of our cash flow information for the thirteen weeks ended April 1, 2023 and March 26, 2022:
| | | | | | |
| | Thirteen weeks ended | ||||
Dollars in thousands |
| 2023 |
| 2022 | ||
Cash flow data: | | | | | | |
Net cash flows provided by operating activities | | $ | 21,199 | | $ | 2,703 |
Net cash flows used in investing activities | |
| (21,789) | |
| (29,100) |
Net cash flows used in financing activities | |
| (13,009) | |
| (3,521) |
Operating Cash Flows and Working Capital – Cash provided by operating activities totaled $21.2 million in the first quarter of 2023, as compared with $2.7 million in the first quarter of 2022. The increase in operating cash flows in the first quarter of 2023, as compared with the first quarter of 2022, was primarily the result of the increase in net earnings partially offset by a significant increase in the contribution to the defined benefit pension plan. Net working capital was $1,034.2 million at April 1, 2023, as compared to $976.6 million at December 31, 2022. The increase in net working capital in the first quarter of 2023, is attributed to an increase in accounts receivables and prepaid expenses and other assets, partially offset by an increase in accounts payable and other accrued expenses.
Investing Cash Flows – Cash used in investing activities totaled $21.8 million in the first quarter of 2023, as compared to $29.1 million in the first quarter of 2022. Investing activities in the first quarter of 2023 primarily included capital spending of $22.4 million. For the first quarter of 2022, investing activities primarily included capital spending of $27.1 million. We expect our capital expenditures to be in the range of $105 million to $125 million for fiscal 2023.
Financing Cash Flows – Cash used in financing activities totaled $13.1 million in the first quarter of 2023, compared to $3.5 million in the first quarter of 2022. Our total interest-bearing debt was $998.2 million at April 1, 2023 and $878.0 million at December 31, 2022. The financing cash used in the first quarter of 2023 was primarily the result of borrowings on the revolving credit agreement and short-term notes of $136.1 million, offset by principal payments on our long-term debt and short-term borrowings of $16.6 million, dividends paid of $11.7 million, the purchase of treasury shares of $111.1 million, and the net activity resulting from shares purchased for award exercises related to our stock plan of $9.0 million. The financing cash used in the first quarter of 2022 was primarily the result of borrowings on the revolving credit agreement of $97.0 million, principal payments on our long-term debt and short-term borrowings of $88.1 million, and dividends paid of $10.6 million.
Guarantor Summarized Financial Information
We are providing the following information in compliance with Rule 3-10 and Rule 13-01 of Regulation S-X with respect to our two tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully, and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of the Company’s current and future direct and indirect domestic and foreign withholding taxes havesubsidiaries (collectively the “Guarantors”). The Parent is the Issuer of the notes and consolidates all Guarantors.
The financial information of Issuer and Guarantors is presented on a combined basis with intercompany balances and transactions between Issuer and Guarantors eliminated. The Issuer’s or Guarantors’ amounts due from, amounts due to, and transactions with non-guarantor subsidiaries are separately disclosed.
33
Combined financial information is as follows:
Supplemental Combined Parent and Guarantors Financial Information
For the thirteen weeks ended April 1, 2023 and March 26, 2022
| | | | | | |
|
| Thirteen weeks ended | ||||
Dollars in thousands |
| April 1, 2023 |
| March 26, 2022 | ||
Net sales | | $ | 715,471 | | $ | 661,749 |
Gross profit | |
| 191,495 | |
| 164,359 |
Operating income | |
| 71,832 | |
| 69,093 |
Net earnings | |
| 20,211 | |
| 41,808 |
Net earnings attributable to Valmont Industries, Inc. | |
| 20,043 | |
| 41,816 |
Supplemental Combined Parent and Guarantors Financial Information
April 1, 2023 and December 31, 2022
| | | | | | |
Dollars in thousands |
| April 1, 2023 |
| December 31, 2022 | ||
Current assets | | $ | 772,693 | | $ | 769,263 |
Noncurrent assets | |
| 899,133 | |
| 925,088 |
Current liabilities | |
| 406,542 | |
| 459,961 |
Noncurrent liabilities | |
| 1,294,484 | |
| 1,189,548 |
Noncontrolling interest in consolidated subsidiaries | |
| 1,780 | |
| 1,612 |
Included in noncurrent assets is a due from non-guarantor subsidiaries receivable of $180,604 and $205,424 at April 1, 2023 and December 31, 2022. Included in noncurrent liabilities is a due to non-guarantor subsidiaries payable of $177,268 and $200,522 at April 1, 2023 and December 31, 2022.
34
Selected Financial Measures
We are including the following financial measures for the Company.
Adjusted EBITDA – Earnings before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”) is one of our key financial ratios in that it is the basis for determining our maximum borrowing capacity at any one time. Our bank credit agreements contain a financial covenant that our total interest‑bearing debt not been provided,exceed 3.50x Adjusted EBITDA (or 3.75x Adjusted EBITDA after certain material acquisitions) for the most recent four quarters. These bank credit agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired businesses. The bank credit agreements also provide for an adjustment to EBITDA, subject to certain specified limitations, for non-cash charges or gains that are non-recurring in nature. If this financial covenant is violated, we may incur additional financing costs or be required to pay the debt before its maturity date. Adjusted EBITDA is a non-GAAP measure and, accordingly, should not be considered in isolation or as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity. The calculation of Adjusted EBITDA for the last four quarters (March 27, 2022 to April 1, 2023) is as follows:
| | | |
|
| Last Four Quarters | |
Dollars in thousands | | Q1 2023 | |
Net cash flows from operations | | $ | 344,761 |
Interest expense | |
| 49,376 |
Income tax expense | |
| 117,409 |
Loss on divestiture of offshore wind energy structures business | |
| (33,273) |
Deferred income tax (expense) benefit | |
| (5,554) |
Noncontrolling interest | |
| (598) |
Pension plan expense | |
| 7,321 |
Contribution to pension plan | |
| 32,414 |
Changes in assets and liabilities, net of acquisitions | |
| 58,634 |
Other | |
| (1,696) |
EBITDA | | $ | 568,794 |
Loss on divestiture of offshore wind energy structures business | |
| 33,273 |
Adjusted EBITDA | | $ | 602,067 |
| | | |
|
| Last Four Quarters | |
| | Q1 2023 | |
Net earnings attributable to Valmont Industries, Inc. | | $ | 263,092 |
Interest expense | |
| 49,376 |
Income tax expense | |
| 117,409 |
Stock based compensation | |
| 41,076 |
Depreciation and amortization expense | |
| 97,841 |
EBITDA | | $ | 568,794 |
Loss on divestiture of offshore wind energy structures business | |
| 33,273 |
Adjusted EBITDA | | $ | 602,067 |
EBITDA and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. In October 2021, our revolving credit facility was amended to allow the Company to add-back any non-cash stock-based compensation in any trailing twelve month period and allow for an adjustment to EBITDA, subject to certain limitations, for non-cash charges or gains that are non-recurring in nature.
Leverage Ratio – Leverage ratio is calculated as the determinationsum of interest-bearing debt minus unrestricted cash in excess of $50 million (but not exceeding $500 million) divided by Adjusted EBITDA. The leverage ratio is one of the key financial ratios in the covenants under our major debt agreements and the ratio cannot exceed 3.5 (or 3.75x after certain material acquisitions) for any reporting period (four quarters). If those covenants are violated, we may incur additional financing costs or be required to pay the debt before its maturity date. Leverage ratio is a non-GAAP measure and, accordingly, should not practicable.be considered in isolation or as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity.
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The calculation of this ratio at April 1, 2023 is as follows:
| | | |
Dollars in thousands |
| 2023 | |
Interest-bearing debt, excluding origination fees and discounts of $26,818 | | $ | 1,025,055 |
Less: Cash and cash equivalents in excess of $50 million | |
| 122,948 |
Net indebtedness | | $ | 902,107 |
Adjusted EBITDA | |
| 602,067 |
Leverage Ratio | |
| 1.50 |
Leverage ratio, as presented, may not be comparable to similarly titled measures of other companies.
Financial Obligations and Financial Commitments
There have been no material changes to our financial obligations and financial commitments as described on page 3633 in our Form 10-K for the fiscal year ended December 31, 2016.
Critical Accounting Policies
There have beenwere no changes in our off balance sheet arrangementscritical accounting policies as described on page 37pages 38 to 41 in our Form 10-K for the fiscal year ended December 31, 2016.
There were no material changes in the company'sCompany’s market risk during the quarter ended
The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934 is (1) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.
No changes in the Company'sCompany’s internal control over financial reporting occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
Item 1A. Risk Factors
There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A in each of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
| | | | | | | | | | |
| | | | | | | Total Number of | | | |
| | | | | | | Shares Purchased | | Approximate Dollar | |
| | | | | | | as Part of | | Value of Maximum | |
| | Total Number | | | | | Publicly | | Number of | |
| | of | | | | Announced Plans | | Shares that may yet | ||
| | Shares | | Average Price | | or | | be Purchased under the | ||
Period |
| Purchased |
| paid per share |
| Programs |
| Program (1) | ||
January 1, 2023 to January 28, 2023 |
| — | | $ | — |
| — | | $ | 481,419,000 |
January 29, 2023 to March 4, 2023 |
| 157,878 | |
| 318.49 |
| 157,878 | |
| 431,137,000 |
March 5, 2023 to April 1, 2023 |
| 199,009 | |
| 305.68 |
| 199,009 | |
| 370,304,000 |
Total |
| 356,887 | | $ | 311.35 |
| 356,887 | | $ | 370,304,000 |
(1) | On May 13, 2014, we announced a new capital allocation philosophy which covered both the quarterly dividend rate as well as a share repurchase program. The Board of Directors at that time authorized the purchase of up to $500 million 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. On February 24, 2015 and again on October 31, 2018, the Board of Directors authorized an additional purchase of up to $250 million of the Company’s outstanding common stock with no stated expiration date. On February 27, 2023, the Board of Directors increased the amount remaining under the program by an additional $400 million, with no stated expiration date, bringing total authorization to $1.4 billion. At April 1, 2023, we have acquired 6,969,905 shares for approximately $1,029.7 million under this share repurchase program. |
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Period | Total Number of Shares Purchased | Average Price paid per share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Maximum Number of Shares that may yet be Purchased under the Program (1) | ||||||||||
July 2, 2017 to July 29, 2017 | — | $ | — | — | $ | 132,172,000 | ||||||||
July 30, 2017 to September 2, 2017 | — | — | — | 132,172,000 | ||||||||||
September 3, 2017 to September 30, 2017 | — | — | — | 132,172,000 | ||||||||||
Total | — | $ | — | — | $ | 132,172,000 |
Item 5. Other Information
Submission of Matters to a new capital allocation philosophyVote of Security Holders
Valmont’s annual meeting of stockholders was held on April 24, 2023. The stockholders elected three directors to serve three-terms, approved, on an advisory basis, a resolution approving Valmont’s named executive officer compensation, voted, on an advisory basis, on the frequency of future advisory votes on executive compensation, and ratified the appointment of Deloitte & Touche LLP as independent auditors for fiscal 2023. For the annual meeting there were 21,350,819 shares outstanding and eligible to vote of which included a share repurchase program. Specifically, 19,753,749 were present at the meeting in person or by proxy. The tabulation for each matter voted upon at the meeting was as follows:
Election of Directors:
| | | | | | |
| | For | | Withheld | | Broker Non-Votes |
Mogens C. Bay | | 17,151,468 | | 1,375,171 | | 1,227,110 |
Ritu Favre | | 17,745,563 | | 781,076 | | 1,227,110 |
Richard A. Lanoha | | 16,900,239 | | 1,626,400 | | 1,227,110 |
Advisory vote on executive compensation:
| | | | | | |
For | | | | | | 17,956,291 |
Against | | | | | | 526,618 |
Abstain | | | | | | 43,730 |
Broker non-votes | | | | | | 1,227,110 |
Advisory vote on frequency of future advisory votes on executive compensation:
| | | | | | |
1 year | | | | | | 17,913,036 |
2 years | | | | | | 4,259 |
3 years | | | | | | 541,525 |
Abstain | | | | | | 67,819 |
Broker non-votes | | | | | | 1,227,110 |
The Board of Directors authorizedhas determined that Valmont will hold advisory votes on executive compensation on a one-year basis.
Proposal to ratify the purchaseappointment of up to $500 millionDeloitte & Touche LLP as independent auditors for fiscal 2023:
| | | | | | |
For | | | | | | 19,103,082 |
Against | | | | | | 605,586 |
Abstain | | | | | | 45,081 |
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Item 6. Exhibits
(a) | Exhibits |
Exhibit No. | Description | |
22.1 | | |
31.1* | | |
Section 302 Certificate of Chief Executive Officer | ||
31.2* | | |
32.1* | | Section 906 Certifications of Chief Executive Officer and Chief Financial Officer |
101 | | The following financial information from |
104 | | Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and by the undersigned hereunto duly authorized.
| |
VALMONT INDUSTRIES, INC. | |
| (Registrant) |
| |
| /s/ AVNER M. APPLBAUM |
| Avner M. Applbaum |
| Executive Vice President and Chief Financial Officer |
| |
| |
Dated this
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