UNITED STATES

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 ~~September~~March 28, ~~2019~~2020

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ____________ to

Commission file number 1-31429

Valmont Industries, Inc.

(Exact name of registrant as specified in its charter)



Delaware			47-0351813
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
One Valmont Plaza,
Omaha,	Nebraska	68154-5215
(Address of Principal Executive Offices)			(Zip Code)

(~~402~~) (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

~~Symbol~~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 x No o

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non‑accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐

No x

~~21,525,585~~21,356,577

Outstanding shares of common stock as of ~~October 25, 2019~~April 23, 2020

VALMONT INDUSTRIES, INC.

INDEX TO FORM 10-Q


		Page No.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Statements of Earnings for the thirteen weeks ended
	March 28, 2020 and March 30, 2019	3
	Condensed Consolidated Statements of Comprehensive Income for the thirteen
	weeks ended March 28, 2020 and March 30, 2019	4
	Condensed Consolidated Balance Sheets as of March 28, 2020 and December 28,
	2019	5
	Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended
	March 28, 2020 and March 30, 2019	6
	Condensed Consolidated Statements of Shareholders' Equity for the thirteen weeks
	ended March 28, 2020 and March 30, 2019	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

	PART II. OTHER INFORMATION
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
Signatures			37

Page No.
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements (unaudited):

Condensed Consolidated Statements of Earnings for the thirteen and thirty-nine weeks

ended September 28, 2019 and September 29, 2018
3

Condensed Consolidated Statements of Comprehensive Income for the thirteen

and thirty-nine weeks ended September 28, 2019 and September 29, 2018
4
Condensed Consolidated Balance Sheets as of September 28, 2019 and December 29,
2018
5
Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended

September 28, 2019 and September 29, 2018

6
Condensed Consolidated Statements of Shareholders' Equity for the thirteen and
thirty-nine weeks ended September 28, 2019 and September 29, 2018
7
Notes to Condensed Consolidated Financial Statements
8
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
40
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
49
Item 4.
Controls and Procedures
49

PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
50
Item 6.
Exhibits
50
Signatures
52

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(Unaudited)


	Thirteen weeks ended
	March 28, 2020		March 30, 2019
Product sales	$	598,909	$	614,964
Services sales	75,291		77,175
Net sales	674,200		692,139
Product cost of sales	438,788		474,897
Services cost of sales	49,163		52,615
Total cost of sales	487,951		527,512
Gross profit	186,249		164,627
Selling, general and administrative expenses	119,354		110,025

Operating income	66,895		54,602
Other income (expenses):
Interest expense	(10,014)		(9,878)
Interest income	1,043		810
Gain (loss) on investments (unrealized)	(2,308)		2,832


Other	1,810		1,014
	(9,469)		(5,222)
Earnings before income taxes	57,426		49,380
Income tax expense:
Current	6,309		2,640
Deferred	8,177		9,662
	14,486		12,302
Earnings before equity in earnings of nonconsolidated subsidiaries	42,940		37,078
Equity in earnings (loss) of nonconsolidated subsidiaries	(219)		—
Net earnings	42,721		37,078
Less: loss (earnings) attributable to noncontrolling interests	208		(974)
Net earnings attributable to Valmont Industries, Inc.	$	42,929	$	36,104
Earnings per share:
Basic	$	2.00	$	1.65
Diluted	$	1.99	$	1.64

Thirteen weeks ended Thirty-nine weeks ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Product sales $ 605,439
$ 597,469
$ 1,829,919
$ 1,816,597
Services sales 84,901
81,223
253,431
243,184
Net sales 690,340
678,692
2,083,350
2,059,781
Product cost of sales 457,750
460,547
1,393,236
1,389,832
Services cost of sales 56,504
53,805
168,485
161,370
Total cost of sales 514,254
514,352
1,561,721
1,551,202
Gross profit 176,086
164,340
521,629
508,579
Selling, general and administrative expenses 112,223
110,200
338,950
326,809
Impairment of goodwill and intangible assets —
15,780
—
15,780
Operating income 63,863
38,360
182,679
165,990
Other income (expenses):
Interest expense (9,976 ) (10,954 ) (29,971 ) (33,819 )
Interest income 969
1,000
2,815
3,713
Gain on investments (unrealized) 402
1,068
4,754
1,146
Costs associated with refinancing of debt —
(14,820 ) —
(14,820 )
Loss from divestiture of grinding media business —
—
—
(6,084 )
Other 768
1,428
1,938
2,053
(7,837 ) (22,278 ) (20,464 ) (47,811 )
Earnings before income taxes 56,026
16,082
162,215
118,179
Income tax expense (benefit):
Current 12,375
10,777
33,053
35,214
Deferred 1,388
(1,686 ) 7,098
814
13,763
9,091
40,151
36,028
Net earnings 42,263
6,991
122,064
82,151
Less: Earnings attributable to noncontrolling interests (2,119 ) (2,543 ) (4,042 ) (5,462 )
Net earnings attributable to Valmont Industries, Inc. $ 40,144
$ 4,448
$ 118,022
$ 76,689
Earnings per share:
Basic $ 1.86
$ 0.20
$ 5.43
$ 3.42
Diluted $ 1.85
$ 0.20
$ 5.41
$ 3.40

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


	Thirteen Weeks Ended
	March 28, 2020		March 30, 2019
Net earnings	42,721		37,078
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized translation gain (loss)	(49,381)		2,266

Gain (loss) on hedging activities:
Net investment hedges	8,711		69
Cash flow hedges	443		—

Amortization cost included in interest expense	(16)		(16)



Cross currency swaps	6,302		2,261



Other comprehensive income (loss)	(33,941)		4,580
Comprehensive income	8,780		41,658
Comprehensive income attributable to noncontrolling interests	(297)		(1,109)
Comprehensive income attributable to Valmont Industries, Inc.	$	8,483	$	40,549

Thirteen Weeks Ended Thirty-nine Weeks Ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
Net earnings 42,263
6,991
122,064
82,151
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized translation gain (loss) (23,781 ) (10,632 ) (20,466 ) (50,781 )
     Realized loss on divestiture of grinding media business recorded in earnings —
—
—
9,203
         Gain (loss) on hedging activities:
      Net investment hedges 2,580
1,223
3,360
2,830
Realized loss on net investment hedge for grinding media business recorded in earnings —
—
—
1,215
Amortization cost included in interest expense (16 ) 395
(48 ) 439
     Deferred loss on interest rate hedges —
—
—
(2,467 )
     Commodity hedges (21 ) 226
(2,130 ) 1,571
     Realized gain (loss) on commodity hedges recorded in earnings 1,329
(717 ) 1,329
(717 )
     Cross currency swaps 5,443
(2,037 ) 3,771
(2,037 )
Other comprehensive income (14,466 ) (11,542 ) (14,184 ) (40,744 )
Comprehensive income 27,797
(4,551 ) 107,880
41,407
Comprehensive income attributable to noncontrolling interests (1,297 ) (2,389 ) (3,390 ) (8,250 )
Comprehensive income attributable to Valmont Industries, Inc. $ 26,500
$ (6,940 ) $ 104,490
$ 33,157

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)


	September 28, 2019			December 29, 2018				March 28, 2020		December 28, 2019
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	327,200		$	313,210		Cash and cash equivalents	$	294,645	$	353,542
Receivables, net	501,215			483,963			Receivables, net	492,785		480,000
Inventories	377,300			383,566			Inventories	416,613		418,370
Contract asset - costs and profits in excess of billings	120,376			112,525			Contract asset - costs and profits in excess of billings	144,777		141,322
Prepaid expenses and other assets	50,420			42,800			Prepaid expenses and other assets	63,306		32,043
Refundable income taxes	11,893			4,576			Refundable income taxes	2,300		6,947
Total current assets	1,388,404			1,340,640			Total current assets	1,414,426		1,432,224
Property, plant and equipment, at cost	1,233,762			1,160,865			Property, plant and equipment, at cost	1,237,895		1,245,261
Less accumulated depreciation and amortization	685,394			646,873			Less accumulated depreciation and amortization	683,914		687,132
Net property, plant and equipment	548,368			513,992			Net property, plant and equipment	553,981		558,129

Goodwill	421,679			385,207			Goodwill	422,514		428,864
Other intangible assets, net	177,734			175,956			Other intangible assets, net	173,006		175,742
Other assets	189,257			114,479			Other assets	193,652		212,257
Total assets	$	2,725,442		$	2,530,274		Total assets	$	2,757,579	$	2,807,216

LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Current installments of long-term debt	$	745		$	779		Current installments of long-term debt	$	757	$	760
Notes payable to banks	19,324			10,678			Notes payable to banks	19,719		21,774
Accounts payable	197,535			218,115			Accounts payable	209,132		197,957
Accrued employee compensation and benefits	78,540			79,291			Accrued employee compensation and benefits	70,731		83,528
Accrued expenses	226,715			91,942
Contract liability - billings in excess of costs and earnings							Contract liability - billings in excess of costs and earnings	151,034		117,945
Other accrued expenses							Other accrued expenses	100,213		83,736

Dividends payable	8,088			8,230			Dividends payable	9,625		8,079
Total current liabilities	530,947			409,035			Total current liabilities	561,211		513,779
Deferred income taxes	43,778			43,489			Deferred income taxes	65,053		58,906
Long-term debt, excluding current installments	764,524			741,822			Long-term debt, excluding current installments	776,139		764,944
Defined benefit pension liability	121,282			143,904			Defined benefit pension liability	114,359		140,007
Operating lease liabilities	78,790			—			Operating lease liabilities	78,694		85,817
Deferred compensation	43,837			46,107			Deferred compensation	42,894		45,114
Other noncurrent liabilities	11,113			10,394			Other noncurrent liabilities	9,099		8,904
Shareholders’ equity:							Shareholders’ equity:

Common stock of $1 par value -							Common stock of $1 par value -
Authorized 75,000,000 shares; 27,900,000 issued	27,900			27,900			Authorized 75,000,000 shares; 27,900,000 issued	27,900		27,900
Retained earnings	2,119,843			2,027,596			Retained earnings	2,171,329		2,173,802
Accumulated other comprehensive loss	(316,717		)	(303,185		)	Accumulated other comprehensive loss	(347,868)		(313,422)
Treasury stock	(744,335		)	(692,549		)	Treasury stock	(763,950)		(743,942)
Total Valmont Industries, Inc. shareholders’ equity	1,086,691			1,059,762			Total Valmont Industries, Inc. shareholders’ equity	1,087,411		1,144,338
Noncontrolling interest in consolidated subsidiaries	44,480			75,761			Noncontrolling interest in consolidated subsidiaries	22,719		45,407
Total shareholders’ equity	1,131,171			1,135,523			Total shareholders’ equity	1,110,130		1,189,745
Total liabilities and shareholders’ equity	$	2,725,442		$	2,530,274		Total liabilities and shareholders’ equity	$	2,757,579	$	2,807,216

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Thirteen weeks ended
	March 28, 2020		March 30, 2019
Cash flows from operating activities:
Net earnings	$	42,721	$	37,078
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization	20,343		20,253
Noncash loss on trading securities	32		87



Stock-based compensation	3,325		3,670

Defined benefit pension plan benefit	(1,763)		(132)
Contribution to defined benefit pension plan	(17,039)		(13,943)
(Gain) loss on sale of property, plant and equipment	53		(227)
Equity in loss in nonconsolidated subsidiaries	219		—
Deferred income taxes	8,177		9,662
Changes in assets and liabilities:
Receivables	(27,116)		(25,424)
Inventories	(8,674)		(7,239)
Prepaid expenses and other assets	(10,149)		(7,310)
Contract asset - costs and profits in excess of billings	(3,933)		(7,361)
Accounts payable	13,880		(704)
Accrued expenses	38,805		4,585

Other noncurrent liabilities	(2,971)		(234)
Income taxes refundable	6,442		(4,848)
Net cash flows from operating activities	62,352		7,913
Cash flows from investing activities:
Purchase of property, plant and equipment	(23,580)		(21,109)
Proceeds from sale of assets	684		422
Acquisitions, net of cash acquired	(8,804)		(57,106)


Other, net	(1,436)		(1,667)
Net cash flows from investing activities	(33,136)		(79,460)
Cash flows from financing activities:
Proceeds from short-term agreements	3,751		9,327
Payments on short-term agreements	(5,193)		—
Proceeds from long-term borrowings	10,000		10,000
Principal payments on long-term borrowings	(188)		(10,194)


Dividends paid	(8,079)		(8,213)
Dividends to noncontrolling interest	(5,342)		(838)
Purchase of noncontrolling interest	(53,534)		(23,082)
Purchase of treasury shares	(20,481)		(9,421)
Proceeds from exercises under stock plans	60		1,174
Purchase of common treasury shares—stock plan exercises	(3)		(747)
Net cash flows from financing activities	(79,009)		(31,994)
Effect of exchange rate changes on cash and cash equivalents	(9,104)		1,568
Net change in cash and cash equivalents	(58,897)		(101,973)
Cash, cash equivalents, and restricted cash—beginning of year	353,542		313,210
Cash, cash equivalents, and restricted cash—end of period	$	294,645	$	211,237

Thirty-nine weeks ended
September 28,
2019 September 29,
2018
Cash flows from operating activities:
Net earnings $ 122,064
$ 82,151
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization 60,424
62,018
Noncash loss on trading securities (48 ) (62 )
Impairment of property, plant and equipment —
4,197
Impairment of goodwill & intangible assets —
15,780
Loss on divestiture of grinding media business —
6,084
Stock-based compensation 8,889
8,076
Defined benefit pension plan benefit (382 ) (1,713 )
Contribution to defined benefit pension plan (17,426 ) (1,555 )
Gain on sale of property, plant and equipment (465 ) (353 )
Deferred income taxes 7,098
814
Changes in assets and liabilities:
Receivables (21,117 ) (612 )
Inventories 5,348
(33,004 )
Prepaid expenses and other assets (14,451 ) (18,486 )
Contract asset - costs and profits in excess of billings (7,850 ) (33,029 )
Accounts payable (19,256 ) (19,069 )
Accrued expenses 129,901
7,288
Other noncurrent liabilities (4,563 ) (1,249 )
Income taxes refundable (8,936 ) (9,223 )
Net cash flows from operating activities 239,230
68,053
Cash flows from investing activities:
Purchase of property, plant and equipment (71,981 ) (48,919 )
Proceeds from sale of assets 1,325
64,786
Acquisitions, net of cash acquired (81,841 ) (125,309 )
Settlement of net investment hedges 11,184
(1,621 )
Other, net 2,117
(2,371 )
Net cash flows from investing activities (139,196 ) (113,434 )
Cash flows from financing activities:
Proceeds from short-term agreements 9,284
3,217
Proceeds from long-term borrowings 31,000
236,936
Principal payments on long-term borrowings (10,578 ) (252,952 )
Settlement of financial derivatives —
(2,467 )
Debt issuance costs —
(2,322 )
Dividends paid (24,554 ) (25,415 )
Dividends to noncontrolling interest (6,549 ) (5,737 )
Purchase of noncontrolling interest (27,845 ) (5,510 )
Purchase of treasury shares (55,172 ) (86,919 )
Proceeds from exercises under stock plans 3,211
6,376
Purchase of common treasury shares—stock plan exercises (1,456 ) (1,914 )
Net cash flows from financing activities (82,659 ) (136,707 )
Effect of exchange rate changes on cash and cash equivalents (3,385 ) (15,095 )
Net change in cash and cash equivalents 13,990
(197,183 )
Cash, cash equivalents, and restricted cash—beginning of year 313,210
492,805
Cash, cash equivalents, and restricted cash—end of period $ 327,200
$ 295,622

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

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 12/29/2018 (1)	$	27,900	$	—	$	2,067,811	$	(303,185)	$	(692,549)	$	75,761	$	1,175,738
Net earnings	—		—		36,104		—		—		974		37,078
Other comprehensive income (loss)	—		—		—		4,445		—		135		4,580
Cash dividends declared ($0.375 per share)	—		—		(8,213)		—		—		—		(8,213)
Dividends to noncontrolling interests	—		—		—		—		—		(838)		(838)
Purchase of noncontrolling interest	—		—		—		—		—		(23,082)		(23,082)
Impact of ASU 842 adoption	—		—		(8,886)		—		—		—		(8,886)


Purchase of treasury shares; 70,406 shares acquired	—		—		—		—		(9,421)		—		(9,421)
Stock plan exercises; 5,451 shares acquired	—		—		—		—		(747)		—		(747)
Stock options exercised; 12,995 shares issued	—		(2,667)		2,460		—		1,381		—		1,174

Stock option expense	—		728		—		—		—		—		728
Stock awards; 7,635 shares issued	—		1,939		—		—		1,003		—		2,942
Balance at 3/30/2019 (1)	$	27,900	$	—	$	2,089,276	$	(298,740)	$	(700,333)	$	52,950	$	1,171,053
Balance at 12/28/2019 (1)	$	27,900	$	—	$	2,173,802	$	(313,422)	$	(743,942)	$	45,407	1,189,745
Net earnings	—		—		42,929		—		—		(208)		42,721
Other comprehensive income (loss)	—		—		—		(34,446)		—		505		(33,941)
Cash dividends declared ($0.45 per share)	—		—		(9,625)		—		—		—		(9,625)
Dividends to noncontrolling interests	—		—		—		—		—		(5,342)		(5,342)
Purchase of noncontrolling interest	—		—		(38,686)		—		—		(19,243)		(57,929)


Addition of noncontrolling interest	—		—		—		—		—		1,600		1,600
Purchase of treasury shares; 190,491 shares acquired	—		—		—		—		(20,481)		—		(20,481)
Stock plan exercises; 23 shares acquired	—		—		—		—		(3)		—		(3)
Stock options exercised; 1,166 shares issued	—		(3,011)		2,909		—		162		—		60

Stock option expense	—		611		—		—		—		—		611
Stock awards; 2,500 shares issued	—		2,400		—		—		314		—		2,714
Balance at March 28, 2020	$	27,900	$	—	$	2,171,329	$	(347,868)	$	(763,950)	$	22,719	$	1,110,130

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 June 30, 2018 $ 27,900
$ —
$ 2,023,919
$ (311,166 ) $ (628,487 ) $ 37,658
$ 1,149,824
Net earnings —
—
4,448
—
—
2,543
$ 6,991
Other comprehensive income (loss) —
—
—
(11,388 ) —
(154 ) $ (11,542 )
Cash dividends declared ($0.375 per share) —
—
(8,311 ) —
—
—
$ (8,311 )
Dividends to noncontrolling interests —
—
—
—
—
(885 ) $ (885 )
Addition of noncontrolling interest —
—
—
—
—
37,369
$ 37,369
Purchase of treasury shares; 309,198 shares acquired —
—
—
—
(42,920 ) —
$ (42,920 )
Stock plan exercises; 1,033 shares acquired —
—
—
—
(145 ) —
$ (145 )
Stock options exercised; 6,191 shares issued —
(2,713 ) 2,482
—
896
—
$ 665
Stock option expense —
987
—
—
—
—
$ 987
Stock awards; 82 shares issued —
1,726
—
—
(11 ) —
$ 1,715
Balance at September 29, 2018 $ 27,900
$ —
$ 2,022,538
$ (322,554 ) $ (670,667 ) $ 76,531
$ 1,133,748
Balance at June 29, 2019 $ 27,900
$ —
$ 2,085,594
$ (303,072 ) $ (728,680 ) $ 45,272
$ 1,127,014
Net earnings —
—
40,144
—
—
2,119
$ 42,263
Other comprehensive income (loss) —
—
—
(13,645 ) —
(821 ) $ (14,466 )
Cash dividends declared ($0.375 per share) —
—
(8,085 ) —
—
—
$ (8,085 )
Dividends to noncontrolling interests —
—
—
—
—
(2,090 ) $ (2,090 )
Purchase of treasury shares; 126,734 shares acquired —
—
—
—
(16,822 ) —
$ (16,822 )
Stock plan exercises; 4,403 shares acquired —
—
—
—
(629 ) —
$ (629 )
Stock options exercised; 12,856 shares issued —
(2,514 ) 2,190
—
1,791
—
$ 1,467
Stock option expense —
600
—
—
—
—
$ 600
Stock awards; 223 shares issued —
1,914
—
—
5
—
$ 1,919
Balance at September 28, 2019 $ 27,900
$ —
$ 2,119,843
$ (316,717 ) $ (744,335 ) $ 44,480
$ 1,131,171

(1) The retained earnings balance has been revised from the amounts previously reported as a result of the change in inventory valuation method from LIFO to FIFO. Refer to Note 1 for additional information.

See accompanying notes to the condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

~~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 30, 2017 $ 27,900
$ —
$ 1,954,344
$ (279,022 ) $ (590,386 ) $ 38,959
$ 1,151,795
Net earnings —
—
76,689
—
—
5,462
82,151
Other comprehensive income (loss) —
—
—
(43,532 ) —
2,788
(40,744 )
Cash dividends declared ($1.125 per share) —
—
(25,204 ) —
—
—
(25,204 )
Dividends to noncontrolling interests —
—
—
—
—
(5,737 ) (5,737 )
Cumulative impact of ASC 606 adoption —
—
9,771
—
—
—
9,771
Impact of ASU 2016-16 adoption —
—
1,038
—
—
—
1,038
Addition of noncontrolling interest —
—
—
—
—
40,569
40,569
Purchase of noncontrolling interest —
—
—
—
—
(5,510 ) (5,510 )
Purchase of treasury shares; 614,454 shares acquired —
—
—
—
(86,919 ) —
(86,919 )
Stock plan exercises; 12,971 shares acquired —
—
—
—
(1,914 ) —
(1,914 )
Stock options exercised; 52,404 shares issued —
(7,172 ) 5,900
—
7,648
—
6,376
Stock option expense —
3,138
—
—
—
—
3,138
Stock awards; 7,774 shares issued —
4,034
—
—
904
—
4,938
Balance at September 29, 2018 $ 27,900
$ —
$ 2,022,538
$ (322,554 ) $ (670,667 ) $ 76,531
$ 1,133,748
Balance at December 29, 2018 $ 27,900
$ —
$ 2,027,596
$ (303,185 ) $ (692,549 ) $ 75,761
$ 1,135,523
Net earnings —
—
118,022
—
—
4,042
122,064
Other comprehensive income (loss) —
—
—
(13,532 ) —
(652 ) (14,184 )
Cash dividends declared ($1.125 per share) —
—
(24,424 ) —
—
—
(24,424 )
Dividends to noncontrolling interests —
—
—
—
—
(6,549 ) (6,549 )
Purchase of noncontrolling interest —
277
—
—
—
(28,122 ) (27,845 )
Impact of ASC 842 adoption —
—
(8,886 ) —
—
—
(8,886 )
Purchase of treasury shares; 433,463 shares acquired —
—
—
—
(55,172 ) —
(55,172 )
Stock plan exercises; 10,499 shares acquired —
—
—
—
(1,456 ) —
(1,456 )
Stock options exercised; 28,493 shares issued —
(7,756 ) 7,535
—
3,432
—
3,211
Stock option expense —
2,056
—
—
—
—
2,056
Stock awards; 10,550 shares issued —
5,423
—
—
1,410
—
6,833
Balance at September 28, 2019 $ 27,900
$ —
$ 2,119,843
$ (316,717 ) $ (744,335 ) $ 44,480
$ 1,131,171

~~See accompanying notes to condensed consolidated financial statements.~~

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed Consolidated Financial Statements

The Condensed Consolidated Balance Sheet as of ~~September~~March 28, ~~2019~~,2020, the Condensed Consolidated Statements of Earnings, Comprehensive Income, Cash Flows, and Shareholders' Equity for the thirteen ~~and thirty-nine~~ weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018, and the Condensed Consolidated Statements of Cash Flows for the thirty-nine week periods then ended~~March 30, 2019, have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of ~~September~~March 28, ~~2019~~2020 and for all periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December ~~29, 2018~~28, 2019 with the exception of the ~~lease~~change in method of accounting ~~policy which changed from adopting Accounting Standards Update ("ASU") 2016-02~~ for certain inventory, previously accounted for on the LIFO basis, so that now all inventory is valued on the FIFO basis. In addition, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326)and isearly adopted Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities as released by the Securities and Exchange Commission that are discussed infurther at the end of footnote 9.1. The results of operations for the period ended ~~September~~March 28, ~~2019~~2020 are not necessarily indicative of the operating results for the full year.

Inventories

~~Approximately 38% and 37% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method or market as of September 28, 2019 and December 29, 2018. All other inventory~~Inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. 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 $48,080 and $53,619 at September 28, 2019 and December 29, 2018, respectively.~~

Inventories consisted of the following:


	September 28, 2019		December 29, 2018			March 28, 2020		December 28, 2019
Raw materials and purchased parts	$	172,064	$	190,115	Raw materials and purchased parts	$	163,809	$	158,314
Work-in-process	34,696		35,566		Work-in-process	33,919		38,088
Finished goods and manufactured goods	218,620		211,504		Finished goods and manufactured goods	218,885		221,968
Subtotal	425,380		437,185		Subtotal	416,613		418,370
Less: LIFO reserve	48,080		53,619
	$	377,300	$	383,566

Effective December 29, 2019, the first day of fiscal 2020, the Company changed its method of accounting for certain of its inventory, previously accounted for on the LIFO basis, so that now all inventory is valued on the FIFO basis. The Company believes this change is preferable as it provides a better matching of costs with the physical flow of goods, more accurately reflects the current value of inventory presented on the Company’s Condensed Consolidated Balance Sheets, and standardizes the Company’s inventory valuation methodology.

In accordance with ASC 250, Accounting Changes and Error Corrections, this change in method of accounting for certain inventories has been retrospectively applied to the earliest period presented. As a result of the retrospective change, the cumulative effect to retained earnings as of December 29, 2018 and December 28, 2019 was an increase of $40,215 and $32,854, respectively. This change did not affect the Company's previously reported cash flows from operating, investing, or financing activities.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~The impact of the change from LIFO to FIFO on the Company’s Condensed Consolidated Statements of Earnings and Comprehensive Income is as follows:


	First Quarter 2019
(in 000's, except earnings per share)	As Previously Reported	Retrospectively Adjusted	Adjustment
Cost of sales	527,010	527,512	502
Operating income	55,104	54,602	(502)
Income tax expense	12,427	12,302	(125)
Net earnings attributed to Valmont Industries, Inc	36,481	36,104	(377)
Comprehensive (loss) income	42,035	41,658	(377)
Net earnings per diluted share	1.66	1.64	(0.02)

The Company applied this change retrospectively to the earliest period presented. The resulting impact to the Condensed Consolidated Balance Sheet as of December 28, 2019 is as follows:


	December 28, 2019
Consolidated Balance Sheet	As Previously Reported	Adjustment	Retrospectively Adjusted
Inventory	374,565	43,805	418,370
Deferred income tax liability	47,955	10,951	58,906
Retained earnings	2,140,948	32,854	2,173,802

Income Taxes

Earnings before income taxes for the thirteen ~~and thirty-nine~~ weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018,~~March 30, 2019, were as follows:


	Thirteen weeks ended
	2020		2019
United States	$	53,500	$	41,749
Foreign	3,926		7,631
	$	57,426	$	49,380

Thirteen weeks ended Thirty-nine weeks ended
2019 2018 2019 2018
United States $ 44,897
$ 15,596
$ 134,417
$ 99,697
Foreign 11,129
486
27,798
18,482
$ 56,026
$ 16,082
$ 162,215
$ 118,179

Pension Benefits

The Company incurs expenses in connection with the Delta Pension Plan ("DPP"). The DPP was acquired as part of the Delta plc acquisition in fiscal 2010 and has no members 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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The components of the net periodic pension (benefit) expense for the thirteen ~~and thirty-nine~~ weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019 were as follows:


	Thirteen weeks ended
Net periodic (benefit) expense:	2020		2019
Interest cost	$	3,124	$	4,345
Expected return on plan assets	(5,598)		(5,135)
Amortization of actuarial loss	711		658
Net periodic (benefit) expense	$	(1,763)	$	(132)

Thirteen weeks ended Thirty-nine weeks ended
Net periodic (benefit) expense: 2019 2018 2019 2018
Interest cost $ 4,075
$ 4,400
$ 12,602
$ 13,602
Expected return on plan assets (4,815 ) (5,704 ) (14,893 ) (17,633 )
Amortization of actuarial loss 617
750
1,909
2,318
Net periodic expense (benefit) $ (123 ) $ (554 ) $ (382 ) $ (1,713 )

Stock Plans

The Company maintains ~~stock‑based~~stock-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, restricted stock awards, restricted stock units, and bonuses of common stock. At ~~September~~March 28, ~~2019, 1,403,051~~2020, 1,205,205 shares of common stock remained available for issuance under the plans.

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 in equal amounts over three years to six years or on the grant's fifth anniversary. Expiration of grants is seven years from the date of grant. Restricted stock units and awards generally vest in equal installments over three years beginning on the first anniversary of the grant.

The Company'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 ~~and thirty-nine~~ weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018,~~March 30, 2019, respectively, were as follows:

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

Thirteen weeks ended Thirty-nine weeks ended
2019 2018 2019 2018
Compensation expense $ 2,519
$ 2,702
$ 8,889
$ 8,076
Income tax benefits 630
676
2,222
2,019


	Thirteen weeks ended
	2020		2019
Compensation expense	$	3,325	$	3,670
Income tax benefits	831		918

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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

Level 1: Quoted 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. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan of ~~$35,144~~$34,619 ($~~37,516~~36,290 at December ~~29, 2018)~~28, 2019) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification ("ASC") 320, Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time. The Company's ownership of shares in Delta EMD Pty. Ltd. (JSE:DTA) is also classified as trading securities. The shares are valued at ~~$80~~$167 and ~~$2,508~~$210 as of ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018,~~28, 2019, respectively, which is the estimated fair value. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.

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.


			Fair Value Measurement Using:
	Carrying Value March 28, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading Securities	$	34,786	$	34,786	$	—	$	—
Derivative financial instruments, net	24,625		—		24,625		—


			Fair Value Measurement Using:
	Carrying Value December 28, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading Securities	$	36,500	$	36,500	$	—	$	—
Derivative financial instruments, net	3,247		—		3,247		—

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

Fair Value Measurement Using:
Carrying Value September 28, 2019 Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets:
Trading Securities $ 35,224
$ 35,224
$ —
$ —
Derivative financial instruments, net 9,408
—
9,408
—

Fair Value Measurement Using:
Carrying Value December 29, 2018 Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets:
Trading Securities $ 40,024
$ 40,024
$ —
$ —
Derivative financial instruments, net 9,147
—
9,147
—

Long-Lived Assets

The Company's other non-financial assets include goodwill and other intangible assets, which are classified as Level 3 items. These assets are measured at fair value on a non-recurring basis as part of annual impairment testing. Note 53 to these condensed consolidated financial statements contain additional information related to goodwill and intangible asset impairments.

Comprehensive Income

Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/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~~March 28, ~~2019~~2020 and December ~~29, 2018:~~28, 2019:

Foreign Currency Translation Adjustments Gain/(Loss) on Hedging Activities Defined Benefit Pension Plan Accumulated Other Comprehensive Loss
Balance at December 29, 2018 $ (230,261 ) $ 11,171
$ (84,095 ) $ (303,185 )
Current-period comprehensive income (loss) (19,814 ) 6,282
—
(13,532 )
Balance at September 28, 2019 $ (250,075 ) $ 17,453
$ (84,095 ) $ (316,717 )


	Foreign Currency Translation Adjustments		Gain/(Loss) on Hedging Activities		Defined Benefit Pension Plan		Accumulated Other Comprehensive Loss
Balance at December 28, 2019	$	(232,575)	$	14,076	$	(94,923)	$	(313,422)
Current-period comprehensive income (loss)	(49,886)		15,440		—		(34,446)

Balance at March 28, 2020	$	(282,461)	$	29,516	$	(94,923)	$	(347,868)

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

Revenue Recognition

The Company determines the appropriate revenue recognition 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 when the performance obligation is related to the manufacturing of goods. Contract revenues are classified as service when the performance obligation is the performance of a service. Service revenue is primarily related to the Coatings segment.

Customer acceptance provisions exist only in the design stage of our products and acceptance of the design by the customer is required before the project is manufactured and delivered to the customer. The Company is not entitled to any compensation solely based on design of the product and does not recognize revenue associated with the design stage. There is one performance obligation for revenue recognition. No general rights of return exist for customers once the product has been delivered and the Company establishes provisions for estimated warranties. The Company does not sell extended warranties for any of its products.

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 Utility segment and the wireless communication structures product line, the Company’s inventory is interchangeable for a variety of each segment’s customers. The Company elected the practical expedient 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 elected the practical expedient to 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 expects all consideration to be received in one year or less at contract inception.

Segment and Product Line Revenue Recognition

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The global Utility segment revenues are derived from manufactured steel and concrete structures for the North America utility industry and offshore and other complex structures used in energy generation and distribution outside of the United States. Steel and concrete utility structures are engineered to customer specifications resulting in limited ability to sell the structure to a different customer if an order is canceled after production commences. The continuous transfer of control to the customer is evidenced either by contractual termination clauses or by our rights to payment for work performed to-date plus a reasonable profit as the products do not have an alternative use to the Company. Since control is transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment. For our steel and concrete utility and wireless communication structure product lines, we generally recognize revenue on an inputs basis, using total production hours incurred to-date for each order as a percentage of total hours estimated to produce the order. The completion percentage is applied to the order’s total revenue and total estimated costs to determine reported revenue, cost of goods sold and gross profit. Production of an order, once started, is typically completed within three months. Revenue from the offshore and other complex structures business is also recognized using an inputs method, based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. External sales agents are used in certain sales of steel and concrete structures; the Company has chosen to use the practical expedient to expense estimated commissions owed to third parties by recognizing them proportionately as the goods are manufactured.

The global ESS segment revenues are derived from the manufacture and distribution of engineered metal, composite structures and components for lighting and traffic and roadway safety, engineered access systems, and wireless communication. For the lighting and traffic and roadway safety product lines, revenue is recognized upon shipment or delivery of goods to the customer depending on contract terms, which is the same point in time that the customer is billed. For Access Systems, revenue is generally recognized upon delivery of goods to the customer which is the same point in time that the customer is billed. The wireless communication product line has large regional customers who have unique product

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

specifications for communication structures. When the customer contract includes a cancellation clause that would require them to pay for work completed plus a reasonable margin if an order was canceled, revenue is recognized over time based on hours worked as a percent of total estimated hours to complete production. For the remaining wireless communication product line customers which do not provide a contractual right to bill for work completed on a canceled order, revenue is recognized upon shipment or delivery of the goods to the customer which is the same point in time that the customer is billed.

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

The global Irrigation segment revenues are derived from the manufacture of agricultural irrigation equipment and related parts and services for the agricultural industry and tubular products for industrial customers. Revenue recognition for the irrigation segment is generally upon shipment of the goods to the customer which is the same point in time that the customer is billed. The remote monitoring subscription services are primarily billed annually and revenue is recognized on a straight-line basis over the subsequent twelve months.

Disaggregation of revenue by product line is disclosed in the Segment footnote. A breakdown by segment of revenue recognized over time and at a point in time for the thirteen ~~and thirty-nine~~ weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019 is as follows:

Point in Time Over Time Point in Time Over Time
Thirteen weeks ended September 28, 2019 Thirteen weeks ended September 28, 2019 Thirty-nine weeks ended September 28, 2019 Thirty-nine weeks ended September 28, 2019
Utility Support Structures $ 3,418
$ 200,778
$ 43,642
$ 612,821
Engineered Support Structures 252,501
13,993
713,574
38,454
Coatings 76,922
—
228,242
—
Irrigation 139,093
3,635
436,907
9,710
Total $ 471,934
$ 218,406
$ 1,422,365
$ 660,985

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

Point in Time Over Time Point in Time Over Time
Thirteen weeks ended September 29, 2018 Thirteen weeks ended September 29, 2018 Thirty-nine weeks ended September 29, 2018 Thirty-nine weeks ended September 29, 2018
Utility Support Structures $ 6,090
$ 211,853
$ 6,090
$ 618,243
Engineered Support Structures 235,948
12,483
680,863
29,525
Coatings 74,547
—
217,544
—
Irrigation 134,710
3,061
475,744
8,692
Other —
—
23,080
—
Total $ 451,295
$ 227,397
$ 1,403,321
$ 656,460

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)


	Point in Time		Over Time		Point in Time		Over Time
	Thirteen weeks ended March 28, 2020		Thirteen weeks ended March 28, 2020		Thirteen weeks ended March 30, 2019		Thirteen weeks ended March 30, 2019
Utility Support Structures	$	8,924	$	214,024	$	30,292	$	212,966
Engineered Support Structures	215,879		11,487		218,980		8,989
Coatings	68,590		—		70,231		—
Irrigation	151,742		3,554		147,858		2,823

Total	$	445,135	$	229,065	$	467,361	$	224,778

The Company's contract asset as of March 28, 2020 and December 28, 2019 was $144,777 and $141,322, respectively. Both steel and concrete utility customers are generally invoiced upon shipment or delivery of the goods to the customer's specified location ~~and there are normally no~~with few customers that make up-front or progress payments. The offshore and complex steel structures business invoices customers a number of ways including advanced billings, progress billings, and billings upon shipment.

At March 28, 2020 and December 28, 2019, the contract liability for revenue recognized over time was $151,034 and $117,945, respectively. During the thirteen weeks ended March 28, 2020 and March 30, 2019, the Company recognized $18,240 and $1,030 of revenue that was included in the liability as of December 28, 2019 and December 29, 2018. The revenue recognized was due to applying advance payments received for projects completed during the period.

Recently Adopted Accounting Pronouncements and Guarantors Disclosures

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update was intended to provide financial statement users with more decision-useful information about the expected credit losses. The Company adopted this ASU in the first quarter of 2020. The adoption of the ASU No. 2016-13 did not have a significant impact on the condensed consolidated financial statements.

The Company early adopted Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities rules as released by the Securities and Exchange Commission on March 2, 2020, which simplify the disclosure requirements related to the Company’s registered debt securities, guaranteed by certain of its subsidiaries, under Rule 3-10 and Rule 13-01 of Regulation S-X. The final rules permit the simplified disclosures to be provided either in a footnote to the Company’s consolidated financial statements or in management’s discussion and analysis of financial condition and results of operations. The Company has elected to provide the simplified disclosure within Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(2) ACQUISITIONS

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

At September 28, 2019 and December 29, 2018, the contract liability for revenue recognized over time was $123,878 and $4,906, respectively. The contract liability is included in Accrued Expenses on the condensed consolidated balance sheets.

During the thirteen and thirty-nine weeks ended September 28, 2019, the Company recognized $314 and $2,242 of revenue that was included in the liability as of December 29, 2018. In the thirteen and thirty-nine weeks ended September 29, 2018, the Company recognized $0 and $4,456 of revenue that was included in the liability as of December 30, 2017. The revenue recognized was due to applying advance payments received for projects completed during the period.

~~Recently Adopted Accounting Pronouncements~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~, which provides revised guidance on leases requiring lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The Company implemented a lease management tool to support the new reporting requirements and adopted the ASU on the first day of fiscal 2019. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet for all classes of underlying assets. The Company elected to not recast its comparative periods in transition (the "Comparatives Under 840 Option") as allowed under ASU 2018-11. The new standard did not have an impact in the condensed consolidated statements of earnings; footnote 9 provides the impact on the condensed consolidated balance sheet including the transition adoption adjustment recorded to retained earnings.

~~(2) ACQUISITIONS~~

On May 13, 2019, the Company acquired the assets of Connect-It Wireless, Inc. ("Connect-It") for $6,034 in cash. Connect-It operates in Florida and is a manufacturer and distributor of wireless site components and safety products. In the ~~preliminary~~ purchase price allocation, goodwill of $3,299 and customer relationships of $828 were recorded and the remainder is net working capital. A portion of the goodwill is deductible for tax purposes. Connect-It is included in the ESS segment and was acquired to expand the Company's wireless component distribution network. The Company ~~expects~~finalized the purchase price allocation ~~to be finalized~~ in the fourth quarter of ~~2019, after all management reviews have been completed.~~2019.

On February 11, 2019, the Company acquired the outstanding shares of United Galvanizing ("United"), a provider of coatings services for $26,000 in cash. The agreed upon purchase price was $28,000, with $2,000 being contingent on seller representations and warranties that ~~will be~~was settled ~~within 12 months~~in the first quarter of ~~the acquisition date.~~2020 for $1,522. The acquisition of United, located in Houston, Texas further expands the Company's galvanizing footprint in North America and ~~will be~~is reported in the Coatings segment. The ~~preliminary~~ fair values assigned were ~~$11,715~~$12,374 for goodwill, ~~$4,034~~$3,170 for customer relationships, trade name of $894, ~~$11,016~~$10,987 for property, plant, and equipment, and the remainder is net working capital. Goodwill is not deductible for tax purposes and the customer relationship will be amortized over 10 years. The trade name has an indefinite life. The Company ~~expects~~finalized the purchase price allocation ~~to be finalized~~ in the fourth quarter of ~~2019, once the contingent payment is settled and management reviews are complete.~~2019.

~~(2) ACQUISITIONS (Continued)~~

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

On December 31, 2018, the Company acquired the assets of Larson Camouflage ("Larson"), an industry leading provider of architectural and camouflage concealment solutions for the wireless telecommunication market for $31,106 in cash. The agreed upon purchase price was $34,562, with 10% being held back for seller representations and warranties ~~and will be~~that was settled ~~within 12 months~~in the first quarter of ~~the acquisition date.~~2020 for $3,481. Larson was acquired to grow our product offerings in the wireless communication market and ~~will be~~is reported in the ESS segment. The ~~preliminary~~ fair values assigned were ~~$17,050~~$16,223 for customer relationships, ~~$14,519~~$15,346 for goodwill, $1,151 for property, plant, and equipment and the remainder is net working capital. Goodwill is deductible for tax purposes and the customer relationships will be amortized over 12 years. The ~~Company expects the purchase price allocation to be finalized in the fourth quarter of 2019, once the hold back payment is settled and management reviews are complete.~~

On October 18, 2018, the Company acquired CSP Coatings Systems of Auckland, New Zealand, a provider of a wide range of coatings services for $17,711 in cash. The acquisition further strengthens the Company's Asia-Pacific market position and is reported in the Coatings segment. The fair values assigned were $7,373 to property, plant, and equipment, $3,113 for customer relationships, $5,120 for goodwill, with the remainder net working capital. Goodwill is not deductible for tax purposes and the customer relationships will be amortized over 10 years. The purchase price allocation was finalized in the ~~second~~fourth quarter of 2019.

On August 3, 2018, the Company purchased approximately 72% of the outstanding shares of Walpar, LLC ("Walpar") for $57,805 in cash. Walpar is an industry leader in the design, engineering and manufacturing of overhead sign structures for the North America transportation market. Walpar is located in Birmingham, Alabama and its operations are reported in the ESS segment. The transaction was funded with cash on hand. The acquisition of Walpar was completed to expand the Company's product offering in the sign structure market. Customer relationships are amortized over 12 years and the trade name has an indefinite life. Goodwill is not deductible for tax purposes.

In January 2019, the 28% non-controlling interest shares of Walpar, LLC were acquired for $23,082. During the third quarter, the Company finalized its purchase price allocation including its assessment of the value of intangibles on the opening balance sheet. As a result of updated cash flow projections it was determined that a $3,500 reduction in customer relationships, along with an offsetting increase in goodwill less deferred tax, was necessary to adjust the preliminary allocation of fair value to assets acquired and liabilities assumed. The following table summarizes the fair values of the assets acquired and liabilities assumed of Walpar as of the date of acquisition:

At August 3, 2018
Current assets $ 13,210
Customer relationships 28,500
Trade name 3,500
Goodwill 45,453
     Total fair value of assets acquired $ 90,663
Current liabilities 2,197
Deferred taxes 7,579
     Total fair value of liabilities assumed $ 9,776
Non-controlling interest 23,082
     Net assets acquired $ 57,805

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

On August 3, 2018, the Company acquired 75% of the outstanding shares of Convert Italia SpA ("Convert") for $43,504 in cash. In the second quarter of 2019, the Company paid the former owners approximately $18,700 additional purchase price which was reflected in the contingent consideration liability on the fair value of assets and liabilities assumed on acquisition. Convert is a designer and provider of engineered solar tracker solutions that is headquartered in Italy, with offices in Brazil and Argentina. The Company acquired Convert to grow market adjacencies in the Utility Support Structures segment.

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(2) ACQUISITIONS (Continued)~~

Patents and proprietary technology will be amortized over 15 years and the trade name has an indefinite life. Goodwill is not deductible for tax purposes. The fair value measurement process and purchase price allocation was finalized in the third quarter of 2019. The following table summarizes the fair values of the assets acquired and liabilities assumed of Convert as of the date of acquisition:

At August 3, 2018
Current assets $ 18,349
Other assets 3,166
Patent and Proprietary Technology 16,554
Trade name 8,701
Goodwill 42,169
     Total fair value of assets acquired $ 88,939
Current liabilities 5,376
Contingent consideration liability 19,497
Deferred taxes 6,061
     Total fair value of liabilities assumed $ 30,934
Non-controlling interest 14,501
     Net assets acquired $ 43,504

The Company's condensed consolidated statements of earnings for the thirteen and thirty-nine weeks ended September 28, 2019 included net sales of $26,999 and $94,975 resulting from these acquisitions. In aggregate, these acquisitions did not contribute net earnings to the Company's consolidated 2019 results. The proforma effect of these acquisitions on the thirteen ~~and thirty-nine~~ weeks ofended March 30, 2019 ~~and 2018~~ is as follows:


						Thirteen weeks ended March 30, 2019
Net sales						$694,558
Net earnings						36,342
Earnings per share-diluted						1.65

Thirteen weeks ended September 28, 2019 Thirteen weeks ended September 29, 2018 Thirty-nine weeks ended September 28, 2019
Thirty-nine weeks ended September 29, 2018

Net sales $ 690,340
$ 698,306
$ 2,088,524
$ 2,129,968
Net earnings 40,144
5,002
118,555
80,842
Earnings per share-diluted 1.85
0.22
5.43
3.58

Acquisitions of Noncontrolling Interests

In February 2020, the Company acquired the remaining 49% of AgSense that it did not own for $44,284, which includes an estimated future payment of $2,500 subject to finalization of the buyout calculation that is expected to settle in the second quarter of 2020. In addition, the Company acquired 16% of the remaining 25% that it did not own of Convert Italia for a cash payment of $11,750. The purchase agreement also settled the escrow funds which the Company had paid at date of acquisition. In April 2019, the Company acquired the remaining 4.8% of Valmont SM that it did not own for $4,763. ~~In March 2018, the Company acquired the remaining 10% of Valmont Industria e Commercio Ltda. that it did not own for $5,510.~~ As these transactions were for the acquisition of all or part of the remaining shares of a consolidated subsidiary with no change in control, they were recorded within shareholders' equity and as a financing activity in the Condensed Consolidated Statements of Cash Flows.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(3) DIVESTITURE~~

On April 30, 2018, the Company completed the sale of Donhad, its grinding media business in Australia, reported in the Other segment. The business was sold because it did not fit the long-term strategic plans for the Company. The grinding media business historical annual sales, operating profit, and net assets are not significant for discontinued operations presentation. The grinding media business had an operating loss of $0 and $913 for the thirteen and thirty-nine weeks ended September 29, 2018. The Company received Australian $82,500 (U.S. $62,518) in proceeds from the sale.

The pre-tax loss recorded during the second quarter of 2018 from the divestiture is reported in other income (expense). The loss is comprised of the proceeds from buyer, less deal-related costs, less the net assets of the business which resulted in a gain of $4,334. Offsetting this amount is a $(10,418) realized loss on foreign exchange translation adjustments and net investment hedges previously reported in shareholders' equity.

Pre-tax gain from divestiture, before recognition of currency translation loss $ 4,334
Recognition of cumulative currency translation loss and hedges (out of OCI) (10,418 )
Net pre-tax loss from divestiture of the grinding media business $ (6,084 )

The transaction did not result in a taxable capital gain as the cash proceeds were less than the tax carrying value of the business. There is an insignificant tax benefit from the tax deductibility of deal related expenses.

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(4) RESTRUCTURING ACTIVITIES~~

During 2018, the Company executed certain regional restructuring activities (the "2018 Plan") primarily in the ESS and Utility segments to transform its operational business model including exiting certain local markets. During the full year of 2018, the Company incurred $18,380 of cost of sales and $15,651 of selling, general, and administrative expense for the 2018 Plan. In connection with exiting certain local markets as a result of the 2018 Plan, the Company also recorded $7,944 of impairments of current and other assets during fiscal 2018, primarily inventory.

~~The following pre-tax expense were recognized during the third quarter of 2018:~~

ESS Utility Corporate Total
Severance $ 1,706
$ —
$ —
$ 1,706
Other cash restructuring expenses 326
497
—
823
Asset impairments/net loss on disposals 1,406
—
—
1,406
   Total cost of sales 3,438
497
—
3,935

Severance 1,757
—
—
1,757
Other cash restructuring expenses 551
—
—
551
Asset impairments/net loss on disposals —
—
—
—
  Total selling, general and administrative expenses 2,308
—
—
2,308
      Consolidated total $ 5,746
$ 497
$ —
$ 6,243

~~In the first three quarters of 2018, the Company recognized the following pre-tax restructuring expenses:~~

ESS Utility Corporate Total
Severance $ 3,732
$ 515
$ —
$ 4,247
Other cash restructuring expenses 478
2,228
—
2,706
Asset impairments/net loss on disposals 3,812
—
—
$ 3,812
   Total cost of sales 8,022
2,743
—
10,765

Severance 5,268
—
—
$ 5,268
Other cash restructuring expenses 1,118
—
126
1,244
Asset impairments/net loss on disposals 385
—
—
385
  Total selling, general and administrative expenses 6,771
—
126
6,897
      Consolidated total $ 14,793
$ 2,743
$ 126
$ 17,662

~~Liabilities recorded for the restructuring plans and changes therein for the first three quarters of 2019 were as follows:~~

Balance at December 29, 2018 Recognized Restructuring Expense Costs Paid or Otherwise Settled Balance at September 28, 2019
Severance $ 6,594
$ —
$ (6,237 ) $ 357
Other cash restructuring expenses 3,462
—
(2,982 ) 480
Total $ 10,056
$ —
$ (9,219 ) $ 837

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(5)~~(3) GOODWILL AND INTANGIBLE ASSETS

Amortized Intangible Assets

The components of amortized intangible assets at ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018~~28, 2019 were as follows:


	September 28, 2019						March 28, 2020
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life		Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	236,029	$	143,306	13 years	Customer Relationships	$	224,920	$	137,988	13 years

Patents & Proprietary Technology	22,936		5,945		14 years	Patents & Proprietary Technology	23,867		6,718		13 years
Other	7,494		6,886		5 years	Other	7,879		6,498		4 years
	$	266,459	$	156,137			$	256,666	$	151,204

December 29, 2018
Gross
Carrying
Amount Accumulated
Amortization Weighted
Average
Life
Customer Relationships $ 219,508
$ 132,180
13 years
Patents & Proprietary Technology 23,662
4,837
14 years
Other 7,971
6,891
5 years
$ 251,141
$ 143,908


	December 28, 2019
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	237,626	$	149,720	13 years

Patents & Proprietary Technology	24,068		6,358		14 years
Other	8,054		7,035		5 years
	$	269,748	$	163,113

Amortization expense for intangible assets for the thirteen ~~and thirty-nine~~ weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018,~~March 30, 2019, respectively was as follows:

Thirteen weeks ended Thirty-nine weeks ended
2019 2018 2019 2018
$ 4,484
$ 3,721
$ 13,506
$ 11,176


Thirteen weeks ended
2020		2019
$	4,593	$	4,390

Estimated annual amortization expense related to ~~finite‑lived~~finite-lived intangible assets is as follows:

Estimated
Amortization
Expense
2019 $ 17,687
2020 17,821
2021 15,523
2022 13,286
2023 11,594


	Estimated Amortization Expense
2020	$	17,446
2021	15,516
2022	13,462
2023	11,830
2024	9,923

The useful lives assigned to ~~finite‑lived~~finite-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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(5) GOODWILL AND INTANGIBLE ASSETS (Continued)~~

Non-amortized intangible assets

Intangible assets with indefinite lives are not amortized and consist solely of trade names. The carrying value of trade names at ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018~~28, 2019 are as follows:


	March 28, 2020		December 28, 2019		Year Acquired
Newmark	$	11,111	$	11,111	2004
Webforge	8,704		9,143		2010
Convert Italia S.p.A	8,352		8,378		2018
Valmont SM	7,929		7,966		2014
Ingal EPS/Ingal Civil Products	7,096		7,454		2010
Walpar	3,500		3,500		2018
Shakespeare	4,000		4,000		2014
Other	16,852		17,555
	$	67,544	$	69,107

September 28,
2019 December 29,
2018 Year Acquired
Newmark $ 11,111
$ 11,111
2004
Webforge 8,587
8,872
2010
Convert Italia S.p.A 8,203
8,580
2018
Valmont SM 7,799
8,155
2014
Ingal EPS/Ingal Civil Products 7,001
7,233
2010
Walpar 3,500
4,300
2018
Shakespeare 4,000
4,000
2014
Other 17,211
16,472

$ 67,412
$ 68,723

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 2019. The values of each trade name was determined using the relief-from-royalty method. Based on this evaluation, no trade names were determined to be impaired. ~~The Company recorded a charge of $1,425 in the third quarter of 2018 for the offshore and other complex steel structures (Valmont SM) trade name.~~

Goodwill

The carrying amount of goodwill by segment as of ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018~~28, 2019 was as follows:


	Engineered Support Structures Segment		Utility Support Structures Segment		Coatings Segment		Irrigation Segment		Total
Gross Balance December 28, 2019	$	228,634	$	130,594	$	93,747	$	25,136	$	478,111
Accumulated impairment losses	(18,670)		(14,355)		(16,222)		—		(49,247)
Balance at December 28, 2019	209,964		116,239		77,525		25,136		428,864
Acquisitions	—		1,100		—		—		1,100


Foreign currency translation	(6,144)		(139)		(1,287)		120		(7,450)
Balance at March 28, 2020	$	203,820	$	117,200	$	76,238	$	25,256	$	422,514

Engineered
Support
Structures
Segment Utility
Support
Structures
Segment Coatings
Segment Irrigation
Segment Total
Gross Balance December 29, 2018 $ 204,735
$ 123,618
$ 80,937
$ 25,164
$ 434,454
Accumulated impairment losses (18,670 ) (14,355 ) (16,222 ) —
(49,247 )
Balance at December 29, 2018 186,065
109,263
64,715
25,164
385,207
Acquisitions 21,043
7,889
11,715
—
40,647
Foreign currency translation (2,652 ) (1,758 ) (133 ) 368
(4,175 )
Balance at September 28, 2019 $ 204,456
$ 115,394
$ 76,297
$ 25,532
$ 421,679

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(5) GOODWILL AND INTANGIBLE ASSETS (Continued)~~

The Company’s annual impairment test of goodwill was performed during the third quarter of 2019, using the discounted cash flow method. The estimated fair value of all of our reporting units exceeded their respective carrying value, so no0 goodwill was impaired. The access systems reporting unit with ~~$43,400~~$42,300 of goodwill, is the reporting unit that did not have a substantial excess of estimated fair value over its carrying ~~value.~~value during the 2019 annual impairment test. The model ~~assumes~~assumed geographic expansion of its architectural product lines, which realized recent organic growth in its existing market. If ~~architectural systems sales do not increase,~~ the Company determines it is more likely than not that forecasted operating income and operating cash flow amounts will

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

be ~~required to perform~~not be realized, an interim test of ~~goodwill.~~goodwill recoverability would be required. A hypothetical 1.0% change in the discount rate would increase/decrease the fair value of this reporting unit by approximately $15,000, which approximates the cushion between the estimated fair value and carrying value of this reporting unit. InThe Company continues to monitor changes in the ~~third quarter~~global economy, including the impact from COVID-19, that could impact future operating results of ~~2018,~~its reporting units. If such conditions arise, the Company ~~recognized~~will test a ~~goodwill~~given reporting unit for impairment ~~totaling $14,355, which represented all of~~prior to the ~~goodwill of the offshore and other complex steel reporting unit.~~ annual test.

~~(6)~~(4) CASH FLOW SUPPLEMENTARY INFORMATION

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-nine~~thirteen weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019 were as follows:

2019 2018
Interest $ 19,440
$ 23,624
Income taxes 39,850
36,855


	2020		2019
Interest	$	179	$	586
Income taxes	1,590		2,852

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(7)~~(5) EARNINGS PER SHARE

The following table provides a reconciliation between Basic and Diluted earnings per share (EPS):


	Basic EPS		Dilutive Effect of Stock Options		Diluted EPS
Thirteen weeks ended March 28, 2020:
Net earnings attributable to Valmont Industries, Inc.	$	42,929	$	—	$	42,929
Weighted average shares outstanding (000's)	21,453		96		21,549
Per share amount	$	2.00	$	(0.01)	$	1.99
Thirteen weeks ended March 30, 2019:
Net earnings attributable to Valmont Industries, Inc.	$36,104		$	—	$	36,104
Weighted average shares outstanding (000's)	21,886		78		21,964
Per share amount	$	1.65	$	(0.01)	$	1.64

Basic EPS Dilutive
Effect of
Stock
Options Diluted EPS
Thirteen weeks ended September 28, 2019:
Net earnings attributable to Valmont Industries, Inc. $ 40,144
$ —
$ 40,144
Weighted average shares outstanding (000's) 21,556
128
21,684
Per share amount $ 1.86
$ 0.01
$ 1.85
Thirteen weeks ended September 29, 2018:
Net earnings attributable to Valmont Industries, Inc. $ 4,448
$ —
$ 4,448
Weighted average shares outstanding (000's) 22,215
137
22,352
Per share amount $ 0.20
$ —
$ 0.20
Thirty-nine weeks ended September 28, 2019
Net earnings attributable to Valmont Industries, Inc. $ 118,022
$ —
$ 118,022
Weighted average shares outstanding (000's) 21,725
101
21,826
Per share amount $ 5.43
$ (0.02 ) $ 5.41
Thirty-nine weeks ended September 29, 2018:
Net earnings attributable to Valmont Industries, Inc. $ 76,689
$ —
$ 76,689
Weighted average shares outstanding (000's) 22,421
153
22,574
Per share amount $ 3.42
$ (0.02 ) $ 3.40

At ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018,~~March 30, 2019, there were ~~177,153~~302,899 and ~~190,021~~297,412 outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share, respectively.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(6) DERIVATIVE FINANCIAL INSTRUMENTS

~~(8) HEDGING ACTIVITIES~~

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 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.

Fair value of derivative instruments at ~~September~~March 28, ~~2019~~2020 and December ~~29, 2018~~28, 2019 are as follows:

Derivatives designated as hedging instruments: Balance sheet location September 28, 2019 December 29, 2018
Commodity forward contracts Prepaid expenses and other assets $ —
$ (285 )
Foreign currency forward contracts Prepaid expenses and other assets 4,936
8,357
Cross currency swap contracts Prepaid expenses and other assets 4,472
1,075
$ 9,408
$ 9,147


Derivatives designated as hedging instruments:	Balance sheet location	March 28, 2020		December 28, 2019


Foreign currency forward contracts	Prepaid expenses and other assets	$	14,351	$	2,119

Cross currency swap contracts	Prepaid expenses and other assets	10,274		1,128

		$	24,625	$	3,247

Gains (losses) on derivatives recognized in the condensed consolidated statements of earnings for the thirteen ~~and thirty-nine~~ weeks ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019 are as follows:

Thirteen weeks ended Thirty-nine weeks ended
Statements of earnings location September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018
Commodity forward contracts Product cost of sales $ (1,329 ) $ 717
$ (1,425 ) $ 717
Foreign currency forward contracts Other income (expenses) 123
230
827
230
Foreign currency forward contracts Loss from divestiture of grinding media business $ —
—
—
(1,215 )
Interest rate hedges Interest expense (16 ) (395 ) (48 ) (439 )
Cross currency swap contracts Interest expense 769
206
2,096
206
$ (453 ) $ 758
$ 1,450
$ (501 )


		Thirteen weeks ended
	Statements of earnings location	March 28, 2020		March 30, 2019

Foreign currency forward contracts	Other income (expenses)	$	123	$	552
Foreign currency forward contracts	Product sales	53		—
Interest rate hedge amortization	Interest expense	(16)		—
Cross currency swap contracts	Interest expense	743		653
		$	903	$	1,205

Cash Flow Hedges

In 2019, ~~and 2018,~~ the Company entered into steel hot rolled coil (HRC) forward contracts that qualified as a cash flow hedge of the variability in cash flows attributable to future steel purchases. ~~In 2019, the~~The forward contracts had a notional amount of $12,128 for the purchase of 3,500 short tons for each month from May 2019 to September 2019. In 2018, the forward contracts entered into had a notional amount of $8,469 for the purchase of 3,500 short tons for each month from July 2018 to September 2018 and a notional amount of $15,563 for the purchase of 6,500 short tons for each month from October 2018 to December 2018. The gain/(loss) realized upon settlement is recorded in product cost of sales in the condensed consolidated statements of earnings over average inventory turns. The forward contracts were closed out in the third quarter of 2019.

In March 2020, a subsidiary with a Euro functional currency entered into foreign currency forward contracts to mitigate foreign currency risk related to a large customer order denominated in U.S. dollars. The forward contract, which qualifies as a cash flow hedge, has a final maturity date of June 2021 and a notional amount to sell $27,500 in exchange for a stated amount of Euros.

Net Investment Hedges

In the second quarter of 2019, all existing net investment hedges were early settled and the Company received proceeds of $11,184, which will remain in Other Comprehensive Income (OCI) until either the sale or substantially complete liquidation of the related subsidiaries.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(8) HEDGING ACTIVITIES (Continued)~~

On June 19, 2018, the Company issued and sold $200,000 aggregate principal amount of the Company’s 5.00% senior notes due 2044 and $55,000 aggregate principal amount of the Company’s 5.25% senior notes due 2054. During the second quarter of 2018, the Company executed contracts to hedge the risk of potential fluctuations in the treasury rates on the 2044 Notes and 2054 Notes which would change the amount of net proceeds received from the debt offering. These contracts had a combined notional amount of $175,000. On June 8, 2018, these contracts were settled with the Company paying $2,467 to the counterparties which was recorded in Other Comprehensive Income ("OCI") and will be amortized as an increase to interest expense over the term of the debt. Due to the retirement of the 2020 bonds in July 2018, the Company wrote off the remaining $411 unamortized loss on the related cash flow hedge.

~~Net Investment Hedges~~

In the second quarter of 2019, all net investment hedges incepted in 2018 were early settled and the Company received proceeds of $11,184, which will remain in OCI until either the sale or substantially complete liquidation of the related subsidiaries.

In the second quarter of 2019, the Company entered into a new foreign currency forward contract to mitigate foreign currency risk of the Company's investment in its Australian dollar denominated businesses. The forward contract, which qualifies as a net investment hedge, has a maturity date of April 2021 and a notional amount to sell Australian dollars to receive $100,000. The Australian dollar forward contract effectiveness was assessed under the spot method with forward points excluded totaling $881, which the Company has elected to amortize in other income (expense) in the condensed consolidated statements of earnings using the straight-line method over the remaining term of the contract.

In the second quarter of 2019, the Company entered into two ~~new~~ 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 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.

Key terms of the two CCS are as follows:


Currency	Notional Amount		Termination Date	Swapped Interest Rate	Set Settlement Amount	Currency	Notional Amount		Termination Date	Swapped Interest Rate	Set Settlement Amount
Danish Krone, DKK	$	50,000	April 1, 2024	2.68%	DKK 333,625
Danish Krone (DKK)						Danish Krone (DKK)	$	50,000	April 1, 2024	2.68%	DKK 333,625
Euro	$	80,000	April 1, 2024	2.825%	€71,550	Euro	$	80,000	April 1, 2024	2.825%	€71,550

The Company designated the 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) are recorded as cumulative foreign currency translation within OCI, and will remain in OCI until either the sale or substantially complete liquidation of the related subsidiaries. Net interest receipts will be recorded as a reduction of interest expense over the life of the CCS.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(9) LEASES~~

The Company has operating leases for plant locations, corporate offices, sales offices, and certain equipment. Outstanding leases at September 28, 2019 have remaining lease terms of one year to fifteen years, some of which include options to extend leases for up to five years. The Company does not have any financing leases. The Company elected practical expedients not to reassess whether existing contracts are or contain leases, to not reassess the lease classification of any existing leases, to not reassess initial direct costs for any existing leases, to use hindsight in determining the lease term and in assessing impairment of the right-of-use asset, and to not separate lease and non-lease components for all classes of underlying assets.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, accrued expenses, and operating lease liabilities in our condensed consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make future lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company used its incremental borrowing rate based on information available at the date of adoption in determining the present value of future lease payments. The operating lease ROU asset also includes any lease payments made and excludes any lease incentives and impairments. Some of the Company's facility leases include options to extend the lease when it is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

~~Lease cost and other information related to the Company's operating leases are as follows:~~

Thirteen weeks ended September 28, 2019 Thirty-nine weeks ended September 28, 2019
Operating lease cost $ 5,002
$ 15,471
Short-term lease cost $ 650
$ 1,919
Total lease cost $ 5,652
$ 17,390

Operating cash outflows from operating leases $ 5,499
$ 16,966
ROU assets obtained in exchange for lease obligations $ 626
$ 3,057
Weighted average remaining lease term 10 years
10 years
Weighted average discount rate 3.9 % 3.9 %

As part of the adoption of ASC 842, the Company evaluated at the historical and projected cash flow generation of the operations at each of its long-term leased facilities. One of those facilities, a galvanizing operation in Melbourne, Australia, will not generate sufficient cash flows on an undiscounted cash flow basis to recover the carrying value of the right of use asset. The Company then estimated a value for this operation using a discounted cash flow model. The result was an impairment of the right-of-use lease asset of approximately $12,063. The after-tax balance of $8,444 was recorded as a reduction to retained earnings for the transition adjustment of adoption.

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(9) LEASES (Continued)~~

~~Supplemental balance sheet information related to operating leases for the third quarter of 2019 is as follows:~~

Classification September 28, 2019
Operating lease assets Other assets $ 80,715

Operating lease short-term liabilities Accrued expenses 14,634
Operating lease long-term liabilities Operating lease liabilities 78,790
Total lease liabilities $ 93,424

~~Minimum lease payments under operating leases expiring subsequent to September 28, 2019 are as follows:~~

Fiscal year ending:
2019 (excluding the nine months ended September 28, 2019) $ 4,738
2020 17,397
2021 14,154
2022 11,508
2023 8,684
Subsequent 57,574
Total minimum lease payments $ 114,055
Less: Interest $ 20,631
Present value of minimum lease payments $ 93,424

The below table as of December 29, 2018 is carried forward, including certain amounts that were historically included in the table as a result of the historical lease term conclusions but were not included in the initial ROU asset and lease liability measurement as of December 30, 2018 due to the Company's election of the hindsight practical expedient. The Company also determined one of its leases with escalating rent payments should be expensed using the straight-line method over a longer term and the result was an additional reduction to retained earnings of $442 for a transition adjustment. Minimum lease payments for operating leases under ASC 840 expiring subsequent to December 29, 2018 are as follows:

Fiscal year ending:
2019 $ 18,757
2020 16,830
2021 13,992
2022 11,932
2023 8,866
Subsequent 76,438
Total minimum lease payments $ 146,815

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(10)~~(7) BUSINESS SEGMENTS

The Company has four reportable segments based on its management structure. Each segment is 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~~service-related expenses that are allocated to business units generally on the basis of employee headcounts.

Reportable segments are as follows:

ENGINEERED SUPPORT STRUCTURES: This segment consists of the manufacture and distribution of engineered metal and composite poles, towers, and components for global lighting, traffic, and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products;

UTILITY SUPPORT STRUCTURES: This segment consists of the manufacture of engineered steel and concrete structures for the global utility transmission, distribution, substations, and ~~generation applications,~~ renewable energy generation ~~equipment, and substations;~~equipment;

COATINGS: This segment consists of galvanizing, painting, and anodizing ~~services;~~services to preserve and protect metal products; and

IRRIGATION: This segment consists of the manufacture of agricultural irrigation equipment, parts, services and tubular products, water management solutions, and technology for precision agriculture.

In addition to these 4 reportable segments, the Company had other businesses and activities that individually are not more than 10% of consolidated sales, operating income or assets. ~~This includes the manufacture of forged steel grinding media for the mining industry and is reported in the "Other" category until its divestiture in 2018.~~

The Company evaluates the performance of its business segments based upon operating income and invested capital. The Company does not allocate ~~LIFO expense,~~ interest expense, non-operating income and deductions, or income taxes to its business segments.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(10) BUSINESS SEGMENTS (Continued)~~

Summary by Business


	Thirteen weeks ended
	March 28, 2020		March 30, 2019
SALES:
Engineered Support Structures segment:
Lighting, Traffic, and Highway Safety Products	$	171,987	$	157,184
Communication Products	38,196		42,865
Access Systems	20,559		30,239
Engineered Support Structures segment	230,742		230,288
Utility Support Structures segment:
Steel	166,531		159,760
Concrete	35,785		29,844
Engineered Solar Tracker Solutions	8,924		30,292
Offshore and Other Complex Steel Structures	14,221		24,026
Utility Support Structures segment	225,461		243,922
Coatings segment	88,085		86,779
Irrigation segment:
North America	106,560		108,477
International	50,160		44,339
Irrigation segment	156,720		152,816

Total	701,008		713,805
INTERSEGMENT SALES:
Engineered Support Structures segment	3,376		2,319
Utility Support Structures segment	2,513		664
Coatings segment	19,495		16,548
Irrigation segment	1,424		2,135

Total	26,808		21,666
NET SALES:
Engineered Support Structures segment	227,366		227,969
Utility Support Structures segment	222,948		243,258
Coatings segment	68,590		70,231
Irrigation segment	155,296		150,681

Total	$	674,200	$	692,139

OPERATING INCOME:
Engineered Support Structures segment	$	15,931	$	12,445
Utility Support Structures segment	27,724		25,048
Coatings segment	11,054		10,140
Irrigation segment	23,663		20,134


Corporate	(11,477)		(13,165)
Total	$	66,895	$	54,602

Thirteen weeks ended Thirty-nine weeks ended
September 28,
2019 September 29,
2018 September 28,
2019 September 29,
2018
SALES:
Engineered Support Structures segment:
Lighting, Traffic, and Highway Safety Products $ 191,262
$ 183,184
$ 530,021
$ 522,558
    Communication Products 48,391
35,985
138,710
109,690
Access Systems 28,405
32,355
88,363
94,941
Engineered Support Structures segment 268,058
251,524
757,094
727,189
Utility Support Structures segment:
Steel 153,433
161,847
460,309
471,947
Concrete 28,011
27,715
88,415
81,562
Engineered Solar Tracker Solutions 3,418
6,090
43,642
6,090
Offshore and Other Complex Steel Structures 20,096
22,617
66,343
66,251
Utility Support Structures segment 204,958
218,269
658,709
625,850
Coatings segment 92,957
90,433
278,142
266,952
Irrigation segment:

    North America 82,840
78,168
294,127
301,887
    International 61,340
62,007
158,054
189,177
        Irrigation segment 144,180
140,175
452,181
491,064
Other —
—
—
23,080
Total 710,153
700,401
2,146,126
2,134,135
INTERSEGMENT SALES:
Engineered Support Structures segment 1,564
3,093
5,066
16,801
Utility Support Structures segment 762
326
2,246
1,517
Coatings segment 16,035
15,886
49,900
49,408
Irrigation segment 1,452
2,404
5,564
6,628
Total 19,813
21,709
62,776
74,354
NET SALES:
Engineered Support Structures segment 266,494
248,431
752,028
710,388
Utility Support Structures segment 204,196
217,943
656,463
624,333
Coatings segment 76,922
74,547
228,242
217,544
Irrigation segment 142,728
137,771
446,617
484,436
Other —
—
—
23,080
Total $ 690,340
$ 678,692
$ 2,083,350
$ 2,059,781

OPERATING INCOME:
Engineered Support Structures segment $ 21,825
$ 16,499
$ 55,152
$ 36,411
Utility Support Structures segment 20,362
2,090
61,443
46,298
Coatings segment 13,865
14,373
39,037
41,108
Irrigation segment 18,204
21,302
59,868
82,917
Other —
—
—
(913 )
Adjustment to LIFO inventory valuation method 2,799
(2,780 ) 5,539
(5,512 )
Corporate (13,192 ) (13,124 ) (38,360 ) (34,319 )
Total $ 63,863
$ 38,360
$ 182,679
$ 165,990

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION~~

The Company has 2 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 subsidiaries (collectively the “Guarantors”), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the “Non-Guarantors”). All Guarantors are 100% owned by the parent company.

~~Consolidated financial information for the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS~~

~~For the Thirteen weeks ended September 28, 2019~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net sales $ 302,461
$ 135,392
$ 310,676
$ (58,189 ) $ 690,340
Cost of sales 223,949
96,566
251,561
(57,822 ) 514,254
Gross profit 78,512
38,826
59,115
(367 ) 176,086
Selling, general and administrative expenses 67,366
2,325
42,532
—
112,223
Operating income 11,146
36,501
16,583
(367 ) 63,863
Other income (expense):
Interest expense (9,471 ) (2,544 ) (504 ) 2,543
(9,976 )
Interest income 607
2
2,903
(2,543 ) 969
Other 849
12
309
—
1,170
(8,015 ) (2,530 ) 2,708
—
(7,837 )
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries 3,131
33,971
19,291
(367 ) 56,026
Income tax expense (benefit) 2,084
8,834
2,930
(85 ) 13,763
Earnings before equity in earnings of nonconsolidated subsidiaries 1,047
25,137
16,361
(282 ) 42,263
Equity in earnings of nonconsolidated subsidiaries 39,097
2,017
—
(41,114 ) —
Net earnings 40,144
27,154
16,361
(41,396 ) 42,263
Less: Earnings attributable to noncontrolling interests —
—
(2,119 ) —
(2,119 )
Net earnings attributable to Valmont Industries, Inc. $ 40,144
$ 27,154
$ 14,242
$ (41,396 ) $ 40,144

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS~~

~~For the Thirty-nine weeks ended September 28, 2019~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net sales $ 915,436
$ 413,050
$ 939,484
$ (184,620 ) $ 2,083,350
Cost of sales 675,093
307,209
763,499
(184,080 ) 1,561,721
Gross profit 240,343
105,841
175,985
(540 ) 521,629
Selling, general and administrative expenses 175,000
28,301
135,649
—
338,950
Operating income 65,343
77,540
40,336
(540 ) 182,679
Other income (expense):
Interest expense (28,638 ) (8,583 ) (1,333 ) 8,583
(29,971 )
Interest income 1,060
32
10,306
(8,583 ) 2,815
Other 6,264
33
395
—
6,692
(21,314 ) (8,518 ) 9,368
—
(20,464 )
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries 44,029
69,022
49,704
(540 ) 162,215
Income tax expense (benefit) 9,856
16,691
13,680
(76 ) 40,151
Earnings before equity in earnings of nonconsolidated subsidiaries 34,173
52,331
36,024
(464 ) 122,064
Equity in earnings of nonconsolidated subsidiaries 83,849
8,843
—
(92,692 ) —
Net earnings 118,022
61,174
36,024
(93,156 ) 122,064
Less: Earnings attributable to noncontrolling interests —
—
(4,042 ) —
(4,042 )
Net earnings attributable to Valmont Industries, Inc. $ 118,022
$ 61,174
$ 31,982
$ (93,156 ) $ 118,022

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS~~

~~For the Thirteen weeks ended September 29, 2018~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net sales $ 293,070
$ 132,059
$ 319,129
$ (65,566 ) $ 678,692
Cost of sales 227,467
100,130
252,353
(65,598 ) 514,352
Gross profit 65,603
31,929
66,776
32
164,340
Selling, general and administrative expenses 51,159
12,908
61,913
—
125,980
Operating income 14,444
19,021
4,863
32
38,360
Other income (expense):
Interest expense (10,511 ) (3,600 ) (443 ) 3,600
(10,954 )
Interest income 174
47
4,379
(3,600 ) 1,000
Other (13,765 ) 15
1,426
—
(12,324 )
(24,102 ) (3,538 ) 5,362
—
(22,278 )
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries (9,658 ) 15,483
10,225
32
16,082
Income tax expense (benefit) (4,497 ) 4,732
8,882
(26 ) 9,091
Earnings before equity in earnings of nonconsolidated subsidiaries (5,161 ) 10,751
1,343
58
6,991
Equity in earnings of nonconsolidated subsidiaries 9,609
4,041
—
(13,650 ) —
Net earnings 4,448
14,792
1,343
(13,592 ) 6,991
Less: Earnings attributable to noncontrolling interests —
—
(2,543 ) —
(2,543 )
Net earnings attributable to Valmont Industries, Inc. $ 4,448
$ 14,792
$ (1,200 ) $ (13,592 ) $ 4,448

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS~~

~~For the Thirty-nine weeks ended September 29, 2018~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net sales $ 906,978
$ 386,793
$ 966,764
$ (200,754 ) $ 2,059,781
Cost of sales 683,740
293,238
776,254
(202,030 ) 1,551,202
Gross profit 223,238
93,555
190,510
1,276
508,579
Selling, general and administrative expenses 147,949
37,360
157,280
—
342,589
Operating income 75,289
56,195
33,230
1,276
165,990
Other income (expense):
Interest expense (32,788 ) (11,229 ) (1,031 ) 11,229
(33,819 )
Interest income 655
62
14,225
(11,229 ) 3,713
Other (15,773 ) 41
(1,973 ) —
(17,705 )
(47,906 ) (11,126 ) 11,221
—
(47,811 )
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries 27,383
45,069
44,451
1,276
118,179
Income tax expense (benefit) 6,181
12,260
17,525
62
36,028
Earnings before equity in earnings of nonconsolidated subsidiaries 21,202
32,809
26,926
1,214
82,151
Equity in earnings of nonconsolidated subsidiaries 55,487
37,939
—
(93,426 ) —
Net earnings 76,689
70,748
26,926
(92,212 ) 82,151
Less: Earnings attributable to noncontrolling interests —
—
(5,462 ) —
(5,462 )
Net earnings attributable to Valmont Industries, Inc. $ 76,689
$ 70,748
$ 21,464
$ (92,212 ) $ 76,689

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~For the Thirteen weeks ended September 28, 2019~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net earnings $ 40,144
$ 27,154
$ 16,361
$ (41,396 ) $ 42,263
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized translation gain (loss) —
4,512
(28,293 ) —
(23,781 )
Gain (loss) on hedging activities 9,315
—
—
—
9,315
Equity in other comprehensive income (22,959 ) —
—
22,959
—
Other comprehensive income (loss) (13,644 ) 4,512
(28,293 ) 22,959
(14,466 )
Comprehensive income (loss) 26,500
31,666
(11,932 ) (18,437 ) 27,797
Comprehensive income attributable to noncontrolling interests —
—
(1,297 ) —
(1,297 )
Comprehensive income (loss) attributable to Valmont Industries, Inc. $ 26,500
$ 31,666
$ (13,229 ) $ (18,437 ) $ 26,500

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~For the Thirty-nine weeks ended September 28, 2019~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net earnings $ 118,022
$ 61,174
$ 36,024
$ (93,156 ) $ 122,064
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized translation gain (loss) —
291
(20,757 ) —
(20,466 )
Gain (loss) on hedging activities 6,282
—
—
—
6,282
Equity in other comprehensive income (19,814 ) —
—
19,814
—
Other comprehensive income (loss) (13,532 ) 291
(20,757 ) 19,814
(14,184 )
Comprehensive income (loss) 104,490
61,465
15,267
(73,342 ) 107,880
Comprehensive income attributable to noncontrolling interests —
—
(3,390 ) —
(3,390 )
Comprehensive income (loss) attributable to Valmont Industries, Inc. $ 104,490
$ 61,465
$ 11,877
$ (73,342 ) $ 104,490

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~For the Thirteen weeks ended September 29, 2018~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net earnings $ 4,448
$ 14,792
$ 1,343
$ (13,592 ) $ 6,991
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
        Unrealized translation gain (loss) —
4,289
(14,921 ) —
(10,632 )
        Realized loss on divestiture of grinding media
            business recorded in earnings
—
—
—
—
—
Gain (loss) on hedging activities (910 ) —
—
—
(910 )
Equity in other comprehensive income (10,478 ) —
—
10,478
—
Other comprehensive income (loss) (11,388 ) 4,289
(14,921 ) 10,478
(11,542 )
Comprehensive income (loss) (6,940 ) 19,081
(13,578 ) (3,114 ) (4,551 )
Comprehensive income attributable to noncontrolling interests —
—
(2,389 ) —
(2,389 )
Comprehensive income (loss) attributable to Valmont Industries, Inc. $ (6,940 ) $ 19,081
$ (15,967 ) $ (3,114 ) $ (6,940 )

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~For the Thirty-nine weeks ended September 29, 2018~~

Parent Guarantors Non-
Guarantors Eliminations Total
Net earnings $ 76,689
$ 70,748
$ 26,926
$ (92,212 ) $ 82,151
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
        Unrealized translation gain (loss) —
2,122
(52,903 ) —
(50,781 )
        Realized loss on divestiture of grinding media
            business recorded in earnings

—
—
9,203
—
9,203
Gain (loss) on hedging activities 834
—
—
—
834
Equity in other comprehensive income (44,366 ) —
—
44,366
—
Other comprehensive income (loss) (43,532 ) 2,122
(43,700 ) 44,366
(40,744 )
Comprehensive income (loss) 33,157
72,870
(16,774 ) (47,846 ) 41,407
Comprehensive income attributable to noncontrolling interests —
—
(8,250 ) —
(8,250 )
Comprehensive income (loss) attributable to Valmont Industries, Inc. $ 33,157
$ 72,870
$ (25,024 ) $ (47,846 ) $ 33,157

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~September 28, 2019~~

Parent Guarantors Non-
Guarantors Eliminations Total
ASSETS
Current assets:
Cash and cash equivalents $ 179,765
$ 1,963
$ 145,472
$ —
$ 327,200
Receivables, net 161,260
79,077
260,878
—
501,215
Inventories 125,240
46,133
208,869
(2,942 ) 377,300
Contract asset - costs and profits in excess of billings 58,713
35,195
26,468
—
120,376
Prepaid expenses and other assets 15,569
4,866
29,985
—
50,420
Refundable income taxes 11,893
—
—
—
11,893
Total current assets 552,440
167,234
671,672
(2,942 ) 1,388,404
Property, plant and equipment, at cost 614,979
199,176
419,607
—
1,233,762
Less accumulated depreciation and amortization 411,808
100,692
172,894
—
685,394
Net property, plant and equipment 203,171
98,484
246,713
—
548,368
Goodwill 20,108
140,095
261,476
—
421,679
Other intangible assets 36
46,758
130,940
—
177,734
Investment in subsidiaries and intercompany accounts 1,333,420
1,138,854
840,925
(3,313,199 ) —
Other assets 78,721
4,859
105,677
—
189,257
Total assets $ 2,187,896
$ 1,596,284
$ 2,257,403
$ (3,316,141 ) $ 2,725,442
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt $ —
$ —
$ 745
$ —
$ 745
Notes payable to banks —
—
19,324
—
19,324
Accounts payable 64,256
18,681
114,598
—
197,535
Accrued employee compensation and benefits 41,371
5,994
31,175
—
78,540
Accrued expenses 162,640
13,024
51,051
—
226,715
Dividends payable 8,088
—
—
—
8,088
Total current liabilities 276,355
37,699
216,893
—
530,947
Deferred income taxes 16,645
—
27,133
—
43,778
Long-term debt, excluding current installments 734,417
119,716
30,107
(119,716 ) 764,524
Defined benefit pension liability —
—
121,282
—
121,282
Other noncurrent liabilities 73,788
3,622
56,330
—
133,740
Shareholders’ equity:

Common stock of $1 par value 27,900
457,950
648,957
(1,106,907 ) 27,900
Additional paid-in capital —
162,906
1,107,536
(1,270,442 ) —
Retained earnings 2,119,843
733,109
416,932
(1,150,041 ) 2,119,843
Accumulated other comprehensive income (loss) (316,717 ) 81,282
(412,247 ) 330,965
(316,717 )
Treasury stock (744,335 ) —
—
—
(744,335 )
Total Valmont Industries, Inc. shareholders’ equity 1,086,691
1,435,247
1,761,178
(3,196,425 ) 1,086,691
Noncontrolling interest in consolidated subsidiaries —
—
44,480
—
44,480
Total shareholders’ equity 1,086,691
1,435,247
1,805,658
(3,196,425 ) 1,131,171
Total liabilities and shareholders’ equity $ 2,187,896
$ 1,596,284
$ 2,257,403
$ (3,316,141 ) $ 2,725,442

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~December 29, 2018~~

Parent Guarantors Non-
Guarantors Eliminations Total
ASSETS
Current assets:
Cash and cash equivalents $ 104,256
$ 5,518
$ 203,436
$ —
$ 313,210
Receivables, net 134,943
75,204
273,816
—
483,963
Inventories 138,158
37,019
210,791
(2,402 ) 383,566
Contract asset - costs and profits in excess of billings 50,271
35,200
27,054
—
112,525
Prepaid expenses and other assets 21,858
746
20,196
—
42,800
Refundable income taxes 4,576
—
—
—
4,576
Total current assets 454,062
153,687
735,293
(2,402 ) 1,340,640
Property, plant and equipment, at cost 579,046
172,050
409,769
—
1,160,865
Less accumulated depreciation and amortization 390,438
93,374
163,061
—
646,873
Net property, plant and equipment 188,608
78,676
246,708
—
513,992
Goodwill 20,108
110,562
254,537
—
385,207
Other intangible assets 76
27,452
148,428
—
175,956
Investment in subsidiaries and intercompany accounts 1,286,545
1,161,612
932,982
(3,381,139 ) —
Other assets 47,674
—
66,805
—
114,479
Total assets $ 1,997,073
$ 1,531,989
$ 2,384,753
$ (3,383,541 ) $ 2,530,274
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt $ —
$ —
$ 779
$ —
$ 779
Notes payable to banks —
—
10,678
—
10,678
Accounts payable 68,304
21,081
128,730
—
218,115
Accrued employee compensation and benefits 41,418
7,186
30,687
—
79,291
Accrued expenses 25,936
10,132
55,874
—
91,942
Dividends payable 8,230
—
—
—
8,230
Total current liabilities 143,888
38,399
226,748
—
409,035
Deferred income taxes 14,376
—
29,113
—
43,489
Long-term debt, excluding current installments 733,964
166,729
7,858
(166,729 ) 741,822
Defined benefit pension liability —
—
143,904
—
143,904
Other noncurrent liabilities 45,083
620
10,798
—
56,501
Shareholders’ equity:
Common stock of $1 par value 27,900
457,950
648,682
(1,106,632 ) 27,900
Additional paid-in capital —
162,906
1,107,536
(1,270,442 ) —
Retained earnings 2,027,596
624,394
467,699
(1,092,093 ) 2,027,596
Accumulated other comprehensive income (303,185 ) 80,991
(333,346 ) 252,355
(303,185 )
Treasury stock (692,549 ) —
—
—
(692,549 )
Total Valmont Industries, Inc. shareholders’ equity 1,059,762
1,326,241
1,890,571
(3,216,812 ) 1,059,762
Noncontrolling interest in consolidated subsidiaries —
—
75,761
—
75,761
Total shareholders’ equity 1,059,762
1,326,241
1,966,332
(3,216,812 ) 1,135,523
Total liabilities and shareholders’ equity $ 1,997,073
$ 1,531,989
$ 2,384,753
$ (3,383,541 ) $ 2,530,274

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~For the Thirty-nine weeks ended September 28, 2019~~

Parent Guarantors Non-
Guarantors Eliminations Total
Cash flows from operating activities:
Net earnings $ 118,022
$ 61,174
$ 36,024
$ (93,156 ) $ 122,064
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization 19,891
10,201
30,332
—
60,424
Noncash gain on trading securities —
—
(48 ) —
(48 )
Stock-based compensation 8,889
—
—
—
8,889
Defined benefit pension plan benefit —
—
(382 ) —
(382 )
Contribution to defined benefit pension plan —
—
(17,426 ) —
(17,426 )
Loss (gain) on sale of property, plant and equipment 103
81
(649 ) —
(465 )
Equity in earnings in nonconsolidated subsidiaries (83,849 ) (8,843 ) —
92,692
—
Deferred income taxes 3,869
—
3,229
—
7,098
Changes in assets and liabilities:
Net working capital 94,054
(15,715 ) (6,305 ) 541
72,575
Other noncurrent liabilities 1,005
(5,461 ) (107 ) —
(4,563 )
Income taxes payable (refundable) (4,488 ) (2,229 ) (2,219 ) —
(8,936 )
Net cash flows from operating activities 157,496
39,208
42,449
77
239,230
Cash flows from investing activities:
Purchase of property, plant and equipment (33,321 ) (12,462 ) (26,198 ) —
(71,981 )
Proceeds from sale of assets 35
26
1,264
—
1,325
Acquisitions, net of cash acquired —
(63,141 ) (18,700 ) —
(81,841 )
Settlement of net investment hedge 11,184
—
—
—
11,184
Other, net (30,475 ) 27,878
4,791
(77 ) 2,117
Net cash flows from investing activities (52,577 ) (47,699 ) (38,843 ) (77 ) (139,196 )
Cash flows from financing activities:
Proceeds from short-term agreements —
—
9,284
—
9,284
Proceeds from long-term borrowings 31,000
—
—
—
31,000
Principal payments on long-term borrowings (10,000 ) —
(578 ) —
(10,578 )
Principal payments on long-term intercompany note —
(42,574 ) 42,574
—
—
Dividends paid (24,554 ) —
—
—
(24,554 )
Dividends to noncontrolling interest —
—
(6,549 ) —
(6,549 )
Intercompany dividends 63,650
47,541
(111,191 ) —
—
Purchase of noncontrolling interest (22,805 ) —
(5,040 ) —
(27,845 )
Intercompany capital contribution (13,284 ) —
13,284
—
—
Purchase of treasury shares (55,172 ) —
—
—
(55,172 )
Proceeds from exercises under stock plans 3,211
—
—
—
3,211
Purchase of common treasury shares - stock plan exercises (1,456 ) —
—
—
(1,456 )
Net cash flows from financing activities (29,410 ) 4,967
(58,216 ) —
(82,659 )
Effect of exchange rate changes on cash and cash equivalents —
(31 ) (3,354 ) —
(3,385 )
Net change in cash and cash equivalents 75,509
(3,555 ) (57,964 ) —
13,990
Cash and cash equivalents—beginning of year 104,256
5,518
203,436
—
313,210
Cash and cash equivalents—end of period $ 179,765
$ 1,963
$ 145,472
$ —
$ 327,200

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~For the Thirty-nine weeks ended September 29, 2018~~

Parent Guarantors Non-
Guarantors Eliminations Total
Cash flows from operating activities:
Net earnings $ 76,689
$ 70,748
$ 26,926
$ (92,212 ) $ 82,151
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization 19,498
10,564
31,956
—
62,018
Noncash loss on trading securities —
—
(62 ) —
(62 )
Impairment of property, plant and equipment —
—
4,197
—
4,197
Impairment of Goodwill & Intangibles —
—
15,780
—
15,780
  Loss on divestiture of grinding media business 2,518
—
3,566
—
6,084
  Stock-based compensation 8,076
—
—
—
8,076
Defined benefit pension plan expense —
—
(1,713 ) —
(1,713 )
Contribution to defined benefit pension plan —
—
(1,555 ) —
(1,555 )
Loss (gain) on sale of property, plant and equipment 7
(27 ) (333 ) —
(353 )
Equity in earnings in nonconsolidated subsidiaries (55,487 ) (37,939 ) —
93,426
—
Deferred income taxes 729
1,791
(1,706 ) —
814
Changes in assets and liabilities:
Net working capital (28,948 ) (40,255 ) (26,432 ) (1,277 ) (96,912 )
Other noncurrent liabilities (762 ) 387
(874 ) —
(1,249 )
Income taxes payable (refundable) (23,256 ) (1,066 ) 15,099
—
(9,223 )
Net cash flows from operating activities (936 ) 4,203
64,849
(63 ) 68,053
Cash flows from investing activities:
Purchase of property, plant and equipment (16,940 ) (9,546 ) (22,433 ) —
(48,919 )
Proceeds from sale of assets 39
232
64,515
—
64,786
Acquisitions, net of cash acquired (57,805 ) —
(67,504 ) —
(125,309 )
Settlement of net investment hedge (1,621 ) —
—
—
(1,621 )
Other, net 28,299
(3,683 ) (27,050 ) 63
(2,371 )
Net cash flows from investing activities (48,028 ) (12,997 ) (52,472 ) 63
(113,434 )
Cash flows from financing activities:
     Payments under short-term agreements —
—
3,217
—
3,217
Proceeds from long-term borrowings 236,936
—
—
—
236,936
Principal payments on long-term borrowings (252,219 ) —
(733 ) —
(252,952 )
Settlement of financial derivative (2,467 ) —
—
—
(2,467 )
Debt issuance costs (2,322 ) —
—
—
(2,322 )
Dividends paid (25,415 ) —
—
—
(25,415 )
Dividends to noncontrolling interest —
—
(5,737 ) —
(5,737 )
Intercompany dividends 123,363
11,296
(134,659 ) —
—
Purchase of noncontrolling interest —
—
(5,510 ) —
(5,510 )
Purchase of treasury shares (86,919 ) —
—
—
(86,919 )
Intercompany capital contribution (3,492 ) 3,492
—
—
—
Proceeds from exercises under stock plans 6,376
—
—
—
6,376
Purchase of common treasury shares - stock plan exercises (1,914 ) —
—
—
(1,914 )
Net cash flows from financing activities (8,073 ) 14,788
(143,422 ) —
(136,707 )
Effect of exchange rate changes on cash and cash equivalents —
(670 ) (14,425 ) —
(15,095 )
Net change in cash and cash equivalents (57,037 ) 5,324
(145,470 ) —
(197,183 )
Cash and cash equivalents—beginning of year 83,329
5,304
404,172
—
492,805
Cash and cash equivalents—end of period $ 26,292
$ 10,628
$ 258,702
$ —
$ 295,622

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis contains ~~forward‑looking~~forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These ~~forward‑looking~~forward-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‑looking~~forward-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‑looking~~forward-looking statements. These factors include, among other things, the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific effects on the Company's business and that of its customers and suppliers, 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, 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's discussion and analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019. Segment net sales in the table below and elsewhere are presented net of intersegment sales. See Note 10 of our condensed consolidated financial statements for additional information on segment sales and intersegment sales.

Results of Operations (Dollars in millions, except per share amounts)

Thirteen weeks ended Thirty-nine weeks ended
September 28, 2019 September 29, 2018 % Incr. (Decr.) September 28, 2019 September 29, 2018 % Incr. (Decr.)
Consolidated
Net sales $ 690.3
$ 678.7
1.7 % $ 2,083.4
$ 2,059.8
1.1 %
Gross profit 176.1
164.3
7.2 % 521.6
508.6
2.6 %
as a percent of sales
25.5 % 24.2 % 25.0 % 24.7 %
SG&A expense 112.2
126.0
(11.0 )% 339.0
$ 342.6
(1.1 )%
as a percent of sales
16.3 % 18.6 % 16.3 % 16.6 %
Operating income 63.9
38.4
66.4 % 182.7
166.0
10.1 %
as a percent of sales
9.3 % 5.7 % 8.8 % 8.1 %
Net interest expense 9.0
10.0
(10.0 )% 27.2
30.1
(9.6 )%
Effective tax rate 24.6 % 56.5 % 24.8 % 30.5 %
Net earnings $ 40.1
$ 4.4
811.4 % $ 118.0
$ 76.7
53.8 %
Diluted earnings per share $ 1.85
$ 0.20
825.0 % $ 5.41
$ 3.40
59.1 %
Engineered Support Structures (ESS)
Net sales $ 266.5
$ 248.4
7.3 % $ 752.0
$ 710.4
5.9 %
Gross profit 62.4
58.3
7.0 % 177.8
164.5
8.1 %
SG&A expense 40.5
41.8
(3.1 )% 122.6
128.1
(4.3 )%
Operating income 21.9
16.5
32.7 % 55.2
36.4
51.6 %
Utility Support Structures (Utility)
Net sales $ 204.2
$ 218.0
(6.3 )% $ 656.5
$ 624.4
5.1 %
Gross profit 44.0
41.1
7.1 % 133.6
127.0
5.2 %
SG&A expense 23.7
39.0
(39.2 )% 72.2
80.7
(10.5 )%
Operating income 20.3
2.1
866.7 % 61.4
46.3
32.6 %
Coatings
Net sales $ 76.9
$ 74.5
3.2 % $ 228.3
$ 217.5
5.0 %
Gross profit 24.0
23.8
0.8 % 71.7
68.6
4.5 %
SG&A expense 10.1
9.4
7.4 % 32.7
27.5
18.9 %
Operating income 13.9
14.4
(3.5 )% 39.0
41.1
(5.1 )%
Irrigation
Net sales $ 142.7
$ 137.8
3.6 % $ 446.6
$ 484.4
(7.8 )%
Gross profit 42.9
44.0
(2.5 )% 133.0
153.2
(13.2 )%
SG&A expense 24.7
22.7
8.8 % 73.1
70.3
4.0 %
Operating income 18.2
21.3
(14.6 )% 59.9
82.9
(27.7 )%
Other
Net sales $ —
$ —
NM $ —
$ 23.1
(100.0 )%
Gross profit —
—
NM —
0.8
(100.0 )%
SG&A expense —
—
NM —
1.7
(100.0 )%
Operating income —
—
NM —
(0.9 ) (100.0 )%
Adjustment to LIFO inventory valuation method
Gross profit $ 2.8
$ (2.8 ) NM $ 5.5
$ (5.5 ) NM
Operating income 2.8
(2.8 ) NM 5.5
(5.5 ) NM
Net corporate expense
SG&A expense $ 13.2
$ 13.1
0.8 % $ 38.4
$ 34.3
12.0 %
Operating loss (13.2 ) (13.1 ) (0.8 )% (38.4 ) (34.3 ) (12.0 )%

~~NM=Not meaningful~~


	Thirteen weeks ended
	March 28, 2020			March 30, 2019			% Incr. (Decr.)
Consolidated
Net sales	$	674.2		$	692.1		(2.6)	%
Gross profit	186.2			164.6			13.1	%
as a percent of sales	27.6		%	23.8		%
SG&A expense	119.3			110.0			8.5	%
as a percent of sales	17.7		%	15.9		%
Operating income	66.9			54.6			22.5	%
as a percent of sales	9.9		%	7.9		%
Net interest expense	9.0			9.1			(1.1)	%

Effective tax rate	25.2		%	24.9		%
Net earnings	$	42.9		$	36.1		18.8	%
Diluted earnings per share	$	1.99		$	1.64		21.3	%
Engineered Support Structures (ESS)
Net sales	$	227.4		$	228.0		(0.3)	%
Gross profit	61.7			51.9			18.9	%
SG&A expense	45.8			39.4			16.2	%
Operating income	15.9			12.5			27.2	%
Utility Support Structures (Utility)
Net sales	$	222.9		$	243.2		(8.3)	%
Gross profit	53.5			48.7			9.9	%
SG&A expense	25.8			23.6			9.3	%
Operating income	27.7			25.1			10.4	%
Coatings
Net sales	$	68.6		$	70.2		(2.3)	%
Gross profit	21.8			20.6			5.8	%
SG&A expense	10.7			10.5			1.9	%
Operating income	11.1			10.1			9.9	%
Irrigation
Net sales	$	155.3		$	150.7		3.1	%
Gross profit	49.2			43.4			13.4	%
SG&A expense	25.5			23.3			9.4	%
Operating income	23.7			20.1			17.9	%








Net corporate expense
SG&A	$	11.5		$	13.2		(12.9)	%
Operating loss	(11.5)			(13.2)		��	12.9	%

Overview

On a consolidated basis, net sales were ~~higher~~lower in the ~~third~~first quarter of ~~2019,~~2020, as compared to ~~2018,~~2019, due to ~~higher sales in the ESS, Coatings, and Irrigation segments and~~ lower ~~sales for the Utility segment. Net sales were higher in the first three quarters of 2019, as compared with the same period in 2018, due to higher~~ sales in the ESS, Utility, and Coatings segments ~~that were~~ offset by ~~lower~~higher sales infor the Irrigation ~~and Other segments.~~segment. The change in net sales in the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019,~~2020, as compared with the ~~same periods in~~first fiscal ~~2018,~~quarter of 2019, is as follows:


	First quarter
	Total		ESS		Utility		Coatings		Irrigation
Sales - 2019	$	692.1	$	228.0	$	243.2	$	70.2	$	150.7
Volume	(6.9)		2.2		(21.3)		0.6		11.6
Pricing/mix	(0.2)		1.2		1.7		(0.8)		(2.3)
Acquisition/(divestiture)	(0.6)		1.4		—		—		(2.0)
Currency translation	(10.2)		(5.4)		(0.7)		(1.4)		(2.7)
Sales - 2020	$	674.2	$	227.4	$	222.9	$	68.6	$	155.3

Third quarter
Total ESS Utility Coatings Irrigation Other
Sales - 2018 $ 678.7
$ 248.4
$ 218.0
$ 74.5
$ 137.8
$ —
Volume (9.8 ) 15.0
(27.7 ) (6.1 ) 9.0
—
Pricing/mix 12.6
0.5
12.8
2.8
(3.5 ) —
Acquisition/(divestiture) 17.4
8.4
2.1
6.9
—
—
Currency translation (8.6 ) (5.8 ) (1.0 ) (1.2 ) (0.6 ) —
Sales - 2019 $ 690.3
$ 266.5
$ 204.2
$ 76.9
$ 142.7
$ —

Year-to-date
Total ESS Utility Coatings Irrigation Other
Sales - 2018 $ 2,059.8
$ 710.4
$ 624.4
$ 217.5
$ 484.4
$ 23.1
Volume (77.4 ) 28.0
(48.0 ) (18.7 ) (38.7 ) —
Pricing/mix 70.5
18.1
40.1
9.4
2.9
—
Acquisition/(divestiture) 70.4
20.3
43.9
25.1
4.2
(23.1 )
Currency translation (39.9 ) (24.8 ) (3.9 ) (5.0 ) (6.2 ) —
Sales - 2019 $ 2,083.4
$ 752.0
$ 656.5
$ 228.3
$ 446.6
$ —

Volume effects are estimated based on a physical production or sales measure. Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the product sold. Accordingly, pricing and mix changes do not necessarily result in operating income changes.

Average steel prices for both hot rolled coil and plate were lower in North America and China in the ~~third~~first quarter of ~~2019,~~2020, as compared to ~~2018,~~2019, contributing to lower cost of sales and improved gross profit.

The Company acquired the following ~~businesses during 2018 and 2019:~~businesses:

~~A majority ownership stake in Torrent Engineering and Equipment ("Torrent") in the first quarter of 2018 (Irrigation).~~

~~Derit Infrastructure Pvt. Ltd. ("Derit") in the third quarter of 2018, which operates a lattice steel manufacturing facility located in India (Utility and Coatings).~~

~~A majority ownership stake in Convert Italia SpA ("Convert") in the third quarter of 2018, a provider of engineered solar tracker solutions (Utility).~~

~~Walpar in the third quarter of 2018, a domestic manufacturer of overhead sign structures (ESS).~~

~~CSP Coating Systems ("CSP Coatings") in the fourth quarter of 2018, a coatings provider in New Zealand (Coatings).~~

•Larson Camouflage ("Larson") in the first quarter of 2019, an industry leading provider of architectural and camouflage concealment solutions for the wireless telecommunication market (ESS).

•United Galvanizing ("United") in the first quarter of 2019, a domestic coatings provider (Coatings).

•Connect-It Wireless, Inc. ("Connect-It") in the second quarter of 2019, a domestic communication components business (ESS).

•In the first quarter of 2020, we acquired the remaining 49% of AgSense that the Company did not own(Irrigation).

•In the first quarter of 2020, we acquired 16% of the remaining 25% of Convert Italia that the Company did not own (Utility).

COVID-19 Impact on Financial Results and Liquidity

We are considered an essential business because of the products and services that serve critical infrastructure sectors as defined by many governments around the world. Our manufacturing facilities in Argentina, France, India, Malaysia, New Zealand, Philippines, and South Africa are closed as of April 28, 2020 due to government mandates but are expected to re-open during May 2020. All others facilities remain open and fully operational. To protect the safety, health and well-being of employees, customers, suppliers and communities, CDC and WHO guidelines are being followed to ensure employee safety in all facilities. We estimate approximately $4.0 million of net sales were not recognized during first quarter of 2020 due to the impacts of facility closures from COVID-19.

We generated positive cash flows from operating activities during the first quarter of 2020 and expect positive cash flows from operating activities for the full fiscal 2020 year. Our main focus is to maintain liquidity to support the working capital needs of our operations and maintain our investment grade credit rating.

•Our capital spending for the 2020 fiscal year has been reduced from the previously announced approximately $100 million to $125 million to approximately $75 to $90 million.

•We have suspended repurchase of shares to preserve financial liquidity until the COVID-19 impact is clearer.

As a result of the evolving impact of COVID-19 on the global economy, we anticipate and are planning for slowdown in customer demand and increased business disruption, primarily beginning in the second quarter. As a result, we expect second quarter net sales in 2020 to be lower than 2019 by approximately $50 million; the primary reportable segments

expected to see a decrease are Coatings and Irrigation. Operating income and specifically operating margin, is expected to be lower than the same period of 2019 as a result of the lower sales. The ~~Company divested~~ultimate magnitude of COVID-19, including the extent of its ~~grinding media business, which was reported~~impact on the Company’s financial and operational results, cash balances and available borrowings on our line of credit, will be determined by the length of time the pandemic continues, its effect on the demand for the Company’s products and services and supply chain, as well as the effect of governmental regulations imposed in ~~Other, during~~response to the ~~second quarter of 2018.~~pandemic.

~~Restructuring Plan~~

In February 2018, the Company announced a restructuring plan related to certain operations in 2018, primarily in the ESS and Utility segments, through consolidation and other cost-reduction activities (the "2018 Plan"). The Company incurred pre-tax expenses from the 2018 Plan of $6.2 million and $17.7 million in the third quarter and first three quarters of 2018. The decrease in the third quarter and first three quarters of 2018 gross profit and operating income due to restructuring expense by segment is as follows:

Gross Profit Total ESS Utility Corporate
Third quarter $ 3.9
$ 3.4
$ 0.5
$ —

Year-to-date $ 10.8
$ 8.0
$ 2.8
$ —

Operating Income Total ESS Utility Corporate
Third quarter $ 6.2
$ 5.7
$ 0.5
$ —

Year-to-date $ 17.7
$ 14.8
$ 2.8
$ 0.1

Currency Translation

In the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, we realized a decrease in operating profit, as compared with ~~2018,~~2019, due in part to currency translation effects associated with a stronger U.S. dollar against most foreign currencies. The breakdown of this effect by segment was as follows:

Total ESS Coatings Irrigation Corporate
Third quarter $ (0.7 ) $ (0.5 ) $ (0.1 ) $ (0.1 ) $ —

Year-to-date $ (2.2 ) $ (1.2 ) $ (0.4 ) $ (0.7 ) $ 0.1



	Total		ESS		Utility		Coatings		Irrigation		Corporate
First quarter	$	(0.7)	$	(0.3)	$	—	$	(0.2)	$	(0.3)	$	0.1

Gross Profit, SG&A, and Operating Income

At a consolidated level, gross margin (gross profit as a percent of sales) was higher in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared with the same ~~periods~~period in ~~2018 attributed~~2019, due to lower raw material costs across the Company, ~~and~~ improved selling prices across our infrastructure ~~businesses. In the third quarter~~businesses, and ~~first three quarters of 2019, gross profit increased for the ESS, Utility, and Coatings segments and decreased~~improved volumes for the Irrigation ~~segment. On a year-to-date basis, lower sales volumes~~segment and associated operating ~~deleverage~~leverage of fixed ~~costs led to the decline~~costs. Gross margin improved for ~~the Irrigation segment.~~all operating segments.

SG&A expenses ~~decreased~~increased in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared to the same ~~periods~~period in ~~2018.~~2019. The ~~decrease~~increase was due to ~~impairment of~~higher compensation related costs, including sales commissions for the ~~goodwill~~North American infrastructure businesses, higher incentives due to improved operations, and trade name of the Offshore business in the third quarter of 2018 of $15.8 million and restructuring costs incurred in the third quarter and first three quarters of 2018 totaling $2.3 million and $6.9 million, respectively.salary merit increases. These ~~decreases~~increases were partially offset by lower SG&A ~~expenses from acquired businesses and higher~~ deferred compensation expense (offset by an increase of the same amount in other ~~income)~~expense).

In the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared to the same periods in ~~2018,~~2019, operating income was higher in ~~the ESS and Utility segments and lower in the Irrigation and Coatings~~all reporting segments. The overall increase in operating income in the ~~third~~first quarter can be attributed to lower raw material costs, improved sales pricing for the infrastructure businesses, and ~~first three quarters of 2019 is primarily attributable to~~improved sales volumes in the ~~Offshore goodwill and tradename impairment and restructuring costs incurred in 2018 and a lower cost structure resulting from those activities in 2019.~~Irrigation segment.

Net Interest Expense and Debt

Net interest expense in the ~~third~~first quarter ~~and~~of 2020 was consistent with the first ~~three quarters~~quarter of ~~2019,~~2019. Interest income was higher in the first quarter of 2020, as compared to 2018, was lower due to a refinancing related to retiring $250.2 million senior unsecured notes due 2020 at 6.625% in the third quarter of 2018 and issuing new senior unsecured notes of $200.0 million due 2044 and $55.0 million due 2054 at 5.0% and 5.25%, respectively. Costs associated with the refinancing of debt in the third quarter of 2018 totaled $14.8 million. In addition, the Company entered into certain cross currency swaps in 2018, which effectively swaps the Company's U.S. denominated debt for euro and Danish kroner debt at lower interest rates that resulted in lower interest expense. Interest income was lower in the first three quarters of 2019, ~~as compared to 2018,~~ due to having ~~less~~more cash on hand to invest.

Other Income/Expenses

The change in other income/expenses in the ~~third~~first quarter of ~~2019,~~2020, as compared to ~~2018,~~2019, was due to the change in valuation of deferred compensation assets which resulted in less other income of ~~$0.7 million. On a year-to-date basis, deferred compensation assets resulted in additional other income of $3.6~~$5.1 million. The change related to deferred compensation assets are offset by an opposite change of the same amount in SG&A expense. The remaining change was due to fluctuations in foreign currency transaction gains/losses.

Income Tax Expense

The Company's income tax rate in the first quarter of 2020 was consistent with the same period in 2019. Our effective income tax rate in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019~~2020 was ~~24.5% and 24.7%~~25.2%, compared to ~~56.5% and 30.5%~~24.9% in the ~~third~~first quarter ~~and first three quarters~~ of ~~2018. The decrease in effective tax rate results from the impairment of goodwill and trade name of the Offshore business that are not tax deductible and restructuring activities recognized in 2018.~~2019.

Earnings attributable to noncontrolling interests was lower in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared to ~~2018, due~~2019. The decrease can be attributed to ~~lower earnings~~the acquisition of ~~certain less than 100%-owned subsidiaries.~~the remaining noncontrolling interests of AgSense and partial acquisition of the noncontrolling interest of Convert in the first quarter of 2020.

Cash Flows from Operations

Our cash flows provided by operations was ~~$239.2~~$62.4 million in the first ~~three quarters~~quarter of fiscal ~~2019,~~2020, as compared with ~~$68.1~~$7.9 million provided by operations in the first ~~three quarters~~quarter of ~~2018.~~2019. The increase in operating cash flow in the first ~~three quarters~~quarter of ~~2019,~~2020, as compared with ~~2018,~~2019, was due to improved working capital management. The lower working capital is primarily attributed to a larger contract liability for customer billings in excess of costs and earnings (accrued expenses). This was partially offset by the 2019 Delta pension plan contribution (the 2018 annual payment was contributed early in December 2017) which is a use of cash flows from operations.earnings.

ESS segment

~~The increase in~~ Net sales were consistent in the ~~third~~first quarter 2020 and ~~first three quarters of 2019, as compared with the same periods in 2018, was~~2019. Lighting, traffic, and highway sales improved due to ~~sales volume increase, higher sales prices, and recent acquisitions. The sales increase was partially~~increased volumes, which were offset by ~~$5.8 million~~lower sales volumes for access systems and ~~$24.8 million of~~communication products and unfavorable foreign currency translation ~~effects, respectively.~~effects.

Global lighting and traffic, and highway safety product sales in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019~~2020 was higher by ~~$8.1 million and $7.5~~$14.8 million, as compared to the same ~~periods~~period in fiscal ~~2018. In the third quarter and first three quarters of 2019, as compared to the same periods in 2018, sales pricing~~2019. Sales volumes improved in North America across commercial and transportation markets, ~~and volume increased.~~in addition to some improvements in pricing. Lower sales volumes ~~mainly~~ due to the ceasing of operations in Morocco, the plant shutdown in France due to COVID-19, and unfavorable foreign currency translation effects contributed to lower sales in Europe. Highway safety product sales volumes decreased in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared to ~~2018,~~2019, due primarily to ~~a slowdown~~fewer projects in ~~government spending in Australia and~~ India.

Communication product line sales were ~~higher~~lower by ~~$12.4 million and $29.0~~$4.7 million in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared with ~~2018.~~2019. In North America, component and structure sales volumes ~~increased~~decreased in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019~~2020 due to ~~higher~~lower demand from the network expansion by ~~providers and the sales~~

~~contribution from~~providers. The decrease in volumes was partially offset by the acquisition of ~~Larson Camouflage and~~ Connect-It. In Asia-Pacific, sales volumes decreased approximately $2 million due to ~~lower demand~~government mandated plant closures in China ~~and Australia.~~due to COVID-19.

Access Systems product line net sales decreased in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared to ~~2018,~~2019, by ~~$4.0 million and $6.6 million, respectively.~~$9.7 million. Sales ~~volume declines~~volumes declined due to fewer large projects and unfavorable foreign currency translation for the Australia ~~business drove the decrease in sales.~~business.

Gross profit, as a percentage of sales, and operating income for the segment were higher in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared to ~~2018,~~2019, due to lower raw material pricing across the segment and sales volume improvements in the U.S. lighting and traffic businesses. SG&A spending was higher in the first quarter of 2020 due to higher sales commissions and incentives due to improved operations in North America. Operating income improved due to lower raw material pricing for all businesses and sales ~~pricing, restructuring costs incurred in 2018, and recent acquisitions. These~~volume improvements in profitability were partially offset in the third quarter of 2019 by an approximately $7 million loss recognized on certain access systems projects. SG&A spending was lower in the third quarter and first three quarters of 2019 due to foreign currency translation effects, restructuring costs incurred in 2018 and benefits realized in 2019 related to those activities. The SG&A expenses from acquisitions completed in the previous twelve months partially offset the decrease in SG&A in 2019. In the third quarter and first three quarters of 2018, the segment incurred $3.4 million and $8.0 million of restructuring costs within product cost of sales and $2.3 million and $6.8 million within SG&A expenses, respectively.North America.

Utility segment

In the Utility segment, sales decreased in the ~~third~~first quarter of ~~2019,~~2020, as compared with ~~2018,~~2019, due to lower volumes in our engineered solar tracker solutions (Solar) and ~~currency translation effects that~~Offshore and other complex steel structures (Offshore) business. Sales volumes for steel and concrete structures in North America were ~~partially offset by an increase~~higher in ~~average~~the first quarter of 2020, while sales ~~prices. Most~~pricing slightly increased. A number of our sales contracts in North America contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order. Specific to North America, the average sales price increase was partially offset by lower sales volumes for steel utility structures; concrete utility structure sales volumes were higher in the third quarter and first three quarters of 2019, as compared to the same periods in 2018 due to good demand. The 2018 acquisitions of Convert and Derit contributed $43.9 million of sales increases in the first three quarters of 2019, as compared with 2018.

Offshore and ~~other complex structures~~Solar sales decreased in the ~~third~~first quarter ~~2019,~~of 2020, as compared to ~~2018,~~2019, due to lower volumes and unfavorable currency translation effects. ~~Sales were flat on a year-to-date basis due~~The decrease for both businesses can be attributed to ~~higher volumes~~large projects in the prior year that ~~were offset by less favorable sales pricing and currency translation effects.~~did not recur.

Gross profit increased in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019,~~2020, as compared to ~~2018,~~2019, due to ~~recent acquisitions~~lower costs of steel and ~~improved sales mix~~higher volumes and ~~pricing~~associated operating leverage of fixed costs for the North America utility business. The increase in gross profit for the first three quarters of 2019, as compared to 2018, was partially offset by $3.0 million of second quarter 2019 inspection costs to finalize the requirements from a 2015 commercial settlement. SG&A expense was lower in the third quarter and first three quarters of 2019, as compared with 2018, due to the 2018 goodwill and trade name impairment of the Offshore business of $15.8 million, expenses of Derit and Convert and higher sales commissions. Excluding the goodwill and trade name impairment and inspection costs, operating income increased in the third quarter and first three quarters of 2019 due to improved sales mix and pricing in North America and restructuring activities undertaken in 2018.

~~Coatings segment~~

Coatings segment sales increased in the third quarter and first three quarters of 2019, as compared to the same periods in 2018, due to higher sales prices and recent acquisitions. Sales volume demand decreased in North America in the third quarter and first three quarters of 2019, as compared to 2018, but was more than offset by price actions and revenue contributions from the United acquisition. In the Asia-Pacific region, the acquisition of Derit and CSP Coatings and price increases to recover zinc cost increases drove improved sales in the third quarter and first three quarters of 2019.

businesses. SG&A expense was higher in the ~~third~~first quarter of 2020, as compared with 2019, due to higher sales commissions and incentives due to improved operating results. Operating income increased due to improved sales volumes and operations in North America and lower raw material costs, partially offset by a slower start to the year for the Offshore and Solar businesses .

Coatings segment

Coatings segment sales decreased in the first ~~three quarters~~quarter of ~~2019,~~2020, as compared to ~~2018,~~the same period in 2019, due to ~~SG&A expenses~~unfavorable currency translation effect and slightly lower average sales pricing in Asia Pacific, attributed to the lower cost of ~~recent acquisitions and approximately $3.0 million of one-time expenses associated with a legal settlement~~zinc. Sales volumes increased modestly in North America in the ~~second~~first quarter of 2020, as compared to 2019. In Asia-Pacific

region, sales volumes improved in Australia and New Zealand, but was more than offset by decreased volumes in India and unfavorable foreign currency translation effects.

SG&A expense was consistent in the first quarter of 2020, as compared to 2019. Operating income was ~~lower~~higher in the ~~third~~first quarter ~~and first three quarters of 2019,~~2020, compared to the same ~~periods~~period in ~~2018,~~2019, due to sales volume ~~decreases globally~~increases in North America and ~~non-recurring legal expenses.~~Australia and lower raw material pricing. The ~~decrease~~increase was partially offset by ~~contributions from~~lower volumes and associated operating deleverage of fixed costs for the ~~acquisition of United and CSP Coatings and improved sales pricing.~~India businesses.

Irrigation segment

The increase in Irrigation segment net sales in the ~~third~~first quarter of ~~2019,~~2020, as compared to ~~2018,~~2019, is primarily due to sales volume increases in ~~North America. On a year-to-date basis,~~international markets. Brazil and the ~~decrease in Irrigation segment net~~Middle East drove the sales ~~is due to lower sales volumes in North America and international markets and~~volume improvements that were partially offset by unfavorable currency translation effects ~~partially offset by improved~~from a weaker Brazil real and South African rand. Sales volumes increased in North America, primarily due to increased service part sales ~~pricing. Continued low commodity prices and uncertainty around trade disputes with China caused growers~~that were lower in 2019 due to

~~delay irrigation purchases. However, sales~~ the floods. Sales of technology-related products and services continue to grow, as growers are increasing adoption of technology to reduce costs and enhance profitability. International sales volumes of irrigation and service parts decreased in the third quarter and first three quarters of 2019, as compared to the same periods in 2018, due to reduced volumes and unfavorable currency translation effects.

SG&A was higher in the ~~third~~first quarter ~~and the first three quarters~~ of ~~2019,~~2020, as compared to ~~2018,~~2019, due to ~~2018 acquisitions and~~ higher product development expenses. Operating income for the segment ~~decreased~~increased in the ~~third~~first quarter ~~and first three quarters~~ of ~~2019~~2020 over the same ~~periods~~period in ~~2018, due to~~2019, as a result of lower ~~tubing~~raw material costs and ~~international irrigation~~higher sales volumes ~~and associated operating deleverage of fixed factory and~~in international markets.

Net corporate expense

Corporate SG&A ~~costs.~~

~~Other~~

~~At the end of April 2018, the Company completed the sale of Donhad, a mining consumable business with operations in Australia. There are no remaining businesses recorded within Other.~~

~~LIFO~~ expense

~~Unit costs of raw materialsin the U.S. decreased~~ was lower in the first ~~three quarters~~quarter of ~~2019,~~2020, as compared to the ~~end of 2018, resulting in a LIFO benefit during 2019. In the~~ first ~~three quarters of 2018, unit costs of raw materials in the U.S. increased, as compared to the end of 2017, resulting in LIFO expense in 2018.~~

~~Net corporate expense~~

~~Corporate SG&A expense in the third~~ quarter of 2019, ~~approximated the amount recognized in the same quarter of 2018. Corporate SG&A expense was higher in the first three quarters of 2019, as compared to the same period in 2018,~~ due to ~~$3.6 million of increased appreciation~~a change in valuation of deferred compensation ~~plan assets.~~assets which resulted in lower expense of $5.1 million. The ~~increase~~change in deferred compensation plan assets is offset by the same amount in other income/expenses.

Liquidity and Capital Resources

Cash Flows

Working Capital and Operating Cash Flows-Net working capital was ~~$857.5~~$853.2 million at ~~September~~March 28, ~~2019,~~2020, as compared to ~~$931.6~~$918.4 million at December ~~29, 2018.~~28, 2019. The decrease in net working capital in ~~2019~~2020 is attributed to ~~higher accrued expenses primarily due to a higher balance~~an increase in contract liability for customer billings in excess of costs and ~~earnings.~~earnings of $33.1 million. Cash flow provided by operations was ~~$239.2~~$62.4 million in the first ~~three quarters~~quarter of ~~2019,~~2020, as compared with ~~$68.1~~$7.9 million in first ~~three quarters~~quarter of ~~2018.~~2019. The increase in operating cash flows in the first ~~three quarters~~quarter of ~~2019,~~2020, as compared to ~~2018,~~2019, was primarily the result of improved working capital ~~management this year.~~management.

Investing Cash Flows-Capital spending in the first ~~three quarters~~quarter of fiscal ~~2019~~2020 was ~~$72.0~~$23.6 million, as compared to ~~$48.9~~$21.1 million for the same period in ~~2018.~~2019. The ~~increase~~decrease in investing cash outflows in the first ~~three quarters~~quarter of ~~2019,~~2020, as compared to ~~2018,~~2019, can be attributed to ~~lower proceeds from the sale of assets due to the sale of our mining consumable business~~a reduction in ~~2018. Capital spending projects in 2019 and 2018 related to certain facility expansions and investments in machinery and equipment across all businesses. We expect our capital spending~~cash paid for ~~the 2019 fiscal year to be approximately $90 to $100 million.~~acquisitions.

Financing Cash Flows-Our total ~~interest‑bearing~~interest-bearing debt was ~~$784.6~~$796.6 million at ~~September~~March 28, ~~2019~~2020 and ~~$753.3~~$787.5 million at December ~~29, 2018.~~28, 2019. Financing cash flows changed from an outflow of ~~$136.7~~$32.0 million in the first ~~three quarters~~quarter of ~~2018~~2019 to an outflow of ~~$82.7~~$80.9 million for the first ~~three quarters~~quarter of ~~2019.~~2020. The ~~decrease~~increase in financing cash outflows in the first ~~three quarters~~quarter of ~~2019,~~2020, as compared to ~~2018,~~2019, was due to the higher ~~net borrowings~~purchase price of noncontrolling interests and ~~lower purchases~~repurchases of ~~treasury shares under~~company shares.

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 ~~share repurchase program~~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 subsidiaries (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.

Combined financial information is as follows:

Supplemental Combined Parent and Guarantors Financial Information

For the Thirteen weeks ended March 28, 2020 and Thirteen weeks ended March 30, 2019


	Thirteen weeks ended
Dollars in thousands	March 28,2020		March 30, 2019
Net sales	$	467,680	$	434,007
Gross Profit	135,235		109,570
Operating income	59,134		44,614
Net earnings	36,325		28,873
Net earnings attributable to Valmont Industries, Inc.	36,325		28,873

Supplemental Combined Parent and Guarantors Financial Information

March 28, 2020 and December 28, 2019


Dollars in thousands	March 28,2020		December 28, 2019
Current assets	$	775,428	$	728,457
Noncurrent assets	358,663		354,173
Current liabilities	356,658		312,984
Noncurrent liabilities	1,070,925		1,076,491
Noncontrolling interest in consolidated subsidiaries	1,600		—

Included in noncurrent assets is a due from non-guarantor subsidiaries receivable of $59,462 and $54,915 at March 28, 2020 and December 28, 2019. Included in noncurrent liabilities is a due to non-guarantor subsidiaries payable of $227,340 and $249,056 at March 28, 2020 and December 28, 2019.

Financing and Capital

The Board of Directors authorized the purchase of $250 million of the Company's shares without an expiration date in October 2018. The share purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any share repurchases under the share repurchase program and we may discontinue the share repurchase program at any time. We acquired ~~126,734~~190,491 treasury shares

for approximately ~~$16.8~~$20.5 million under our share repurchase program during the ~~third~~first quarter of ~~2019.~~2020. As of ~~September~~March 28, ~~2019,~~2020, we have approximately ~~$212.2~~$184.0 million open under this authorization to repurchase shares in the future. We have suspended repurchase of shares to preserve financial liquidity until the COVID-19 impact is clearer.

Our capital allocation philosophy announcement included our intention to manage our capital structure to maintain our investment grade debt rating. Our most recent ratings were Baa3 by Moody's Investors Services, Inc., BBB- rating by Fitch Rating Services, and BBB+ rating by Standard and Poor's Rating Services. We expect to maintain a leverage ratio which will support our current investment grade debt rating.

Our debt financing at ~~September~~March 28, ~~2019~~2020 is primarily long-term debt consisting of:

•$450 million face value ($~~436.3~~436.4 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044.

•$305 million face value ($~~297.5~~297.6 million carrying value) of 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. Both tranches of these notes are guaranteed by certain of our subsidiaries.

At ~~September~~March 28, 2020 and December 28, 2019, ~~and December 29, 2018,~~ we had ~~$28.4~~$40.1 million and ~~$5.7~~$29.0 million outstanding borrowings under our revolving credit agreement, respectively. The revolving credit agreement contains certain financial covenants that may limit our additional borrowing capability under the agreement. At ~~September~~March 28, ~~2019,~~2020, we had the ability to borrow ~~$557.0~~$544.6 million under this facility, after consideration of standby letters of credit of ~~$14.6~~$15.3 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling ~~$131.3~~$129.2 million, ~~$112.0~~$109.5 million of which was unused at ~~September~~March 28, ~~2019.~~2020. At the beginning of the second quarter of 2020, the Company drew down $75.0 million on its revolving credit facility to ensure sufficient liquidity related to COVID-19 uncertainty.

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 debt agreements contain covenants that require us to maintain certain coverage ratios 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.

Our key debt covenants are as follows:


•	•Leverage ratio - Interest-bearing debt is not to exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four quarters; and


•	~~Interest earned ratio -~~ ~~Adjusted EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period.~~

•Interest earned ratio - Adjusted EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period.

At ~~September~~March 28, ~~2019,~~2020, we were in compliance with all covenants related to the debt agreements. The key covenant calculations at ~~September~~March 28, ~~2019~~2020 were as follows (in 000's):


Interest-bearing debt	$	796,615
Adjusted EBITDA-last four quarters	335,625
Leverage ratio	2.37

Adjusted EBITDA-last four quarters	$	335,625
Interest expense-last four quarters	40,289
Interest earned ratio	8.33

Interest-bearing debt $ 784,593
Adjusted EBITDA-last four quarters 327,014
Leverage ratio 2.40

Adjusted EBITDA-last four quarters $ 327,014
Interest expense-last four quarters 40,389
Interest earned ratio 8.10

The calculation of Adjusted EBITDA-last four quarters ~~(September 30, 2018~~(March 31, 2019 through ~~September~~March 28, ~~2019)~~2020) is as follows. The last four quarters information ended ~~September~~March 28, ~~2019~~2020 is calculated by taking the full fiscal year ended December ~~29, 2018,~~28, 2019, subtracting the first ~~three quarters~~quarter ended ~~September 29, 2018,~~March 30, 2019, and adding the first ~~three quarters~~quarter ended ~~September~~March 28, ~~2019.~~2020.


Net cash flows from operations	$	362,053
Interest expense	40,289
Income tax expense	52,390


Gain on investment	227
Deferred income tax benefit	(2,455)
Noncontrolling interest	(4,515)
Stock-based compensation	(11,242)
Pension plan expense	2,144
Contribution to pension plan	21,557
Changes in assets and liabilities	(126,836)
Other	2,013
EBITDA	335,625
Adjustments	—




Adjusted EBITDA	$	335,625

Net cash flows from operations $ 324,185
Interest expense 40,389
Income tax expense 47,258
Impairment of property, plant and equipment (803 )
Gain on investment 48
Deferred income tax benefit (4,625 )
Noncontrolling interest (4,534 )
Stock-based compensation (11,205 )
Pension plan expense 920
Contribution to pension plan 17,408
Changes in assets and liabilities (104,815 )
Other 338
EBITDA 304,564
Cash restructuring expenses 15,566
EBITDA from acquisitions (months not owned) 2,411
Impairment of property, plant and equipment 4,473
Adjusted EBITDA $ 327,014


Net earnings attributable to Valmont Industries, Inc.	$	160,593
Interest expense	40,289
Income tax expense	52,390
Depreciation and amortization expense	82,353
EBITDA	335,625
Adjustments	—



Adjusted EBITDA	$	335,625

Net earnings attributable to Valmont Industries, Inc. $ 135,684
Interest expense 40,389
Income tax expense 47,258
Depreciation and amortization expense 81,233
EBITDA 304,564
Cash restructuring expenses 15,566
EBITDA from acquisitions (months not owned) 2,411
Impairment of property, plant, and equipment 4,473
Adjusted EBITDA $ 327,014

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 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.

At the end of the third quarter of 2019, the unremitted foreign earnings were approximately $312.3 million as a result of dividends that were paid. While the tax on these foreign earnings resulted in the reduction of the excess of the amount for financial reporting over the tax basis in our foreign subsidiaries, an actual repatriation from our non-U.S. subsidiaries may still be subject to foreign withholding taxes and U.S. state income taxes. Our earnings in our non-U.S. subsidiaries are not indefinitely reinvested. Of our We have cash balances of ~~$327.2~~$294.6 million at ~~September~~March 28, ~~2019,~~2020, approximately ~~$139.0~~$145.9 million is held in our non-U.S. subsidiaries. ~~We recorded deferred income~~If we distributed our foreign cash balances certain taxes would be applicable. At March 28, 2020, we have a liability for foreign withholding taxes and U.S. state income taxes of ~~$3.3~~$3.4 million and $0.6 million, respectively.

Financial Obligations and Financial Commitments

There have been no material changes to our financial obligations and financial commitments as described on page 34-35 in our Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019.

Off Balance Sheet Arrangements

There have been no material changes in our off balance sheet arrangements as described on page 35 in our Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019.

Critical Accounting Policies

There were no changes in our critical accounting policies as described on pages 37-40 in our Form 10-K for the fiscal year ended December ~~29, 2018~~28, 2019 during the ~~nine~~three months ended ~~September~~March 28, ~~2019.~~2020, with the exception of the change in method of accounting for certain inventory, previously accounted for on the LIFO basis, so that now all inventory is valued on the FIFO basis.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in the company's market risk during the quarter ended ~~September~~March 28, ~~2019.~~2020. For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year ended December ~~29, 2018.~~28, 2019.

Item 4. Controls and Procedures

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'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's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A – Risk Factors

Other than the addition of the text below, 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019.

COVID-19 has impacted and is expected to continue to impact our business, including the supply chain, product demand, logistics, and facility operations and the duration, unknown at this time, of the challenges associated with the virus may result in significant adverse effects on our business, financial condition and results of operations.

On March 11, 2020 the World Health Organization declared COVID-19 outbreak a pandemic, and the virus continues to significantly impact all geographical areas in which we operate. A myriad of international, national and local measures have been implemented by governments and businesses to address the virus and slow its outbreak, including shelter in place orders and similar restrictions, restrictions on business operations, closure of borders and other measures having negative economic effects.

Our businesses support critical infrastructure sectors as defined by the Department of Homeland Security (CISA.gov) and similar global agencies. These sectors are deemed vital, such that their incapacitation would have a debilitating effect on security, national economic security, national public health or safety or any combination thereof.

COVID-19 has impacted and is anticipated to continue to impact our business, including the normal operations of our facilities, overall demand for our products, changes to supply chain availability and costs, logistics delays, including temporary closures as may be mandated or otherwise made necessary by governmental authorities, and any additional carryover of economic effects. As of April 28, 2020, certain of our facilities have temporarily ceased operations due to the effects of COVID-19. These include operations in Argentina, India, Malaysia, New Zealand, Philippines, and South Africa. A majority of our facilities are currently operational, including all of our North American facilities, but we believe the future impact of COVID-19 will vary across our diversified portfolio in the second quarter of 2020 and beyond. We believe all of our business segments will be impacted, and relatively more so in our ESS, Coatings, and Irrigation segments. All of our operations may be affected by COVID-19 isolation measures. We have implemented domestic and international travel restrictions for our employees, and thousands of our employees are expected to continue to work remotely through the height of this pandemic.

The duration of the virus outbreak continues to be evaluated by governments and experts and as a consequence we cannot at this time determine the overall ultimate impact on the Company. The extent of the impact will depend on future developments, which are highly uncertain and cannot be predicted. The duration, unknown at this time, of the challenges associated with the virus may result in significant adverse effects on our business, financial condition, and results of operations.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

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)
June 30, 2019 to July 27, 2019 30,430
$ 127.78
37,375
$ 225,128,000
July 28, 2019 to August 31, 2019 56,178
132.28
153,791
217,697,000
September 1, 2019 to September 28, 2019 40,126
137.14
45,157
212,194,000
Total 126,734
$ 132.74
236,323
$ 212,194,000


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)
December 29, 2019 to January 25, 2020		—		$	—		—		$	204,451,000
January 26, 2020 to February 29, 2020		65,151		122.00			65,151		196,503,000
March 1, 2020 to March 28, 2020		125,340		99.99			125,340		183,969,000
Total		190,491		$	107.52		190,491		$	183,969,000

(1) On May 13, 2014, we announced a new capital allocation philosophy which included a share repurchase program. Specifically, the Board of Directors 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. As of ~~September~~March 28, ~~2019,~~2020, we have acquired ~~5,864,872~~6,112,945 shares for approximately ~~$787.8~~$816.0 million under this share repurchase program.

Item 5. Other Information

Submission of Matters to a Vote of Security Holders

Valmont's annual meeting of stockholders was held on April 28, 2020. The stockholders elected four directors to serve three-year terms, approved, on an advisory basis, a resolution approving Valmont's named executive officer compensation, and ratified the appointment of Deloitte & Touche LLP as independent auditors for fiscal 2020. For the annual meeting there were 21,523,917 shares outstanding and eligible to vote of which 19,607,591were 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	17,530,369	887,822	1,189,400
Walter Scott, Jr.	17,483,019	935,172	1,189,400
Clark T. Randt, Jr.	15,076,665	3,341,526	1,189,400
Richard A. Lanoha	17,862,658	555,533	1,189,400

Advisory vote on executive compensation:


For			17,781,283
Against			563,034
Abstain			73,874
Broker non-votes			1,189,400

Proposal to ratify the appointment of Deloitte & Touche LLP as independent auditors for fiscal 2020:


For			19,207,861
Against			339,180
Abstain			60,550

Item 6. Exhibits

(a) Exhibits


~~(a)~~	~~Exhibits~~



Exhibit No.						Description
~~31.1~~18						Preferability Letter - LIFO Change
22.1						List of Issuer and Guarantor Subsidiaries
31.1						Section 302 Certificate of Chief Executive Officer
31.2						Section 302 Certificate of Chief Financial Officer
32.1						Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
101						The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 28, ~~2019,~~2020, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information.
104						Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

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/ ~~MARK C. JAKSICH~~AVNER M. APPLBAUM
			~~Mark C. Jaksich~~Avner M. Applbaum Executive Vice President and Chief Financial Officer

Dated this ~~31st~~29th day of ~~October, 2019~~April, 2020.



	Thirteen weeks ended						Thirty-nine weeks ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Product sales	$	605,439		$	597,469		$	1,829,919		$	1,816,597
Services sales	84,901			81,223			253,431			243,184
Net sales	690,340			678,692			2,083,350			2,059,781
Product cost of sales	457,750			460,547			1,393,236			1,389,832
Services cost of sales	56,504			53,805			168,485			161,370
Total cost of sales	514,254			514,352			1,561,721			1,551,202
Gross profit	176,086			164,340			521,629			508,579
Selling, general and administrative expenses	112,223			110,200			338,950			326,809
Impairment of goodwill and intangible assets	—			15,780			—			15,780
Operating income	63,863			38,360			182,679			165,990
Other income (expenses):
Interest expense	(9,976		)	(10,954		)	(29,971		)	(33,819		)
Interest income	969			1,000			2,815			3,713
Gain on investments (unrealized)	402			1,068			4,754			1,146
Costs associated with refinancing of debt	—			(14,820		)	—			(14,820		)
Loss from divestiture of grinding media business	—			—			—			(6,084		)
Other	768			1,428			1,938			2,053
	(7,837		)	(22,278		)	(20,464		)	(47,811		)
Earnings before income taxes	56,026			16,082			162,215			118,179
Income tax expense (benefit):
Current	12,375			10,777			33,053			35,214
Deferred	1,388			(1,686		)	7,098			814
	13,763			9,091			40,151			36,028
Net earnings	42,263			6,991			122,064			82,151
Less: Earnings attributable to noncontrolling interests	(2,119		)	(2,543		)	(4,042		)	(5,462		)
Net earnings attributable to Valmont Industries, Inc.	$	40,144		$	4,448		$	118,022		$	76,689
Earnings per share:
Basic	$	1.86		$	0.20		$	5.43		$	3.42
Diluted	$	1.85		$	0.20		$	5.41		$	3.40



			Fair Value Measurement Using:
	Carrying Value September 28, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading Securities	$	35,224	$	35,224	$	—	$	—
Derivative financial instruments, net	9,408		—		9,408		—



			Fair Value Measurement Using:
	Carrying Value December 29, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading Securities	$	40,024	$	40,024	$	—	$	—
Derivative financial instruments, net	9,147		—		9,147		—



	At August 3, 2018
Current assets	$	13,210
Customer relationships	28,500
Trade name	3,500
Goodwill	45,453
Total fair value of assets acquired	$	90,663
Current liabilities	2,197
Deferred taxes	7,579
Total fair value of liabilities assumed	$	9,776
Non-controlling interest	23,082
Net assets acquired	$	57,805



	At August 3, 2018
Current assets	$	18,349
Other assets	3,166
Patent and Proprietary Technology	16,554
Trade name	8,701
Goodwill	42,169
Total fair value of assets acquired	$	88,939
Current liabilities	5,376
Contingent consideration liability	19,497
Deferred taxes	6,061
Total fair value of liabilities assumed	$	30,934
Non-controlling interest	14,501
Net assets acquired	$	43,504



	Thirteen weeks ended September 28, 2019		Thirteen weeks ended September 29, 2018		Thirty-nine weeks ended September 28, 2019		Thirty-nine weeks ended September 29, 2018
Net sales	$	690,340	$	698,306	$	2,088,524	$	2,129,968
Net earnings	40,144		5,002		118,555		80,842
Earnings per share-diluted	1.85		0.22		5.43		3.58




Pre-tax gain from divestiture, before recognition of currency translation loss	$	4,334
Recognition of cumulative currency translation loss and hedges (out of OCI)	(10,418		)
Net pre-tax loss from divestiture of the grinding media business	$	(6,084	)



	Balance at December 29, 2018		Recognized Restructuring Expense		Costs Paid or Otherwise Settled			Balance at September 28, 2019
Severance	$	6,594	$	—	$	(6,237	)	$	357
Other cash restructuring expenses	3,462		—		(2,982		)	480
Total	$	10,056	$	—	$	(9,219	)	$	837



	December 29, 2018
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	219,508	$	132,180	13 years
Patents & Proprietary Technology	23,662		4,837		14 years
Other	7,971		6,891		5 years
	$	251,141	$	143,908



	Estimated Amortization Expense
2019	$	17,687
2020	17,821
2021	15,523
2022	13,286
2023	11,594



	Thirteen weeks ended September 28, 2019			Thirty-nine weeks ended September 28, 2019
Operating lease cost	$	5,002		$	15,471
Short-term lease cost	$	650		$	1,919
Total lease cost	$	5,652		$	17,390

Operating cash outflows from operating leases	$	5,499		$	16,966
ROU assets obtained in exchange for lease obligations	$	626		$	3,057
Weighted average remaining lease term	10 years			10 years
Weighted average discount rate	3.9		%	3.9		%



	Classification	September 28, 2019
Operating lease assets	Other assets	$	80,715

Operating lease short-term liabilities	Accrued expenses	14,634
Operating lease long-term liabilities	Operating lease liabilities	78,790
Total lease liabilities		$	93,424



Fiscal year ending:
2019 (excluding the nine months ended September 28, 2019)	$	4,738
2020	17,397
2021	14,154
2022	11,508
2023	8,684
Subsequent	57,574
Total minimum lease payments	$	114,055
Less: Interest	$	20,631
Present value of minimum lease payments	$	93,424



Fiscal year ending:
2019	$	18,757
2020	16,830
2021	13,992
2022	11,932
2023	8,866
Subsequent	76,438
Total minimum lease payments	$	146,815



	Parent			Guarantors			Non- Guarantors			Eliminations			Total
Net sales	$	302,461		$	135,392		$	310,676		$	(58,189	)	$	690,340
Cost of sales	223,949			96,566			251,561			(57,822		)	514,254
Gross profit	78,512			38,826			59,115			(367		)	176,086
Selling, general and administrative expenses	67,366			2,325			42,532			—			112,223
Operating income	11,146			36,501			16,583			(367		)	63,863
Other income (expense):
Interest expense	(9,471		)	(2,544		)	(504		)	2,543			(9,976		)
Interest income	607			2			2,903			(2,543		)	969
Other	849			12			309			—			1,170
	(8,015		)	(2,530		)	2,708			—			(7,837		)
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries	3,131			33,971			19,291			(367		)	56,026
Income tax expense (benefit)	2,084			8,834			2,930			(85		)	13,763
Earnings before equity in earnings of nonconsolidated subsidiaries	1,047			25,137			16,361			(282		)	42,263
Equity in earnings of nonconsolidated subsidiaries	39,097			2,017			—			(41,114		)	—
Net earnings	40,144			27,154			16,361			(41,396		)	42,263
Less: Earnings attributable to noncontrolling interests	—			—			(2,119		)	—			(2,119		)
Net earnings attributable to Valmont Industries, Inc.	$	40,144		$	27,154		$	14,242		$	(41,396	)	$	40,144



	Third quarter
	Total			ESS			Utility			Coatings			Irrigation			Other
Sales - 2018	$	678.7		$	248.4		$	218.0		$	74.5		$	137.8		$	—
Volume	(9.8		)	15.0			(27.7		)	(6.1		)	9.0			—
Pricing/mix	12.6			0.5			12.8			2.8			(3.5		)	—
Acquisition/(divestiture)	17.4			8.4			2.1			6.9			—			—
Currency translation	(8.6		)	(5.8		)	(1.0		)	(1.2		)	(0.6		)	—
Sales - 2019	$	690.3		$	266.5		$	204.2		$	76.9		$	142.7		$	—



	Year-to-date
	Total			ESS			Utility			Coatings			Irrigation			Other
Sales - 2018	$	2,059.8		$	710.4		$	624.4		$	217.5		$	484.4		$	23.1
Volume	(77.4		)	28.0			(48.0		)	(18.7		)	(38.7		)	—
Pricing/mix	70.5			18.1			40.1			9.4			2.9			—
Acquisition/(divestiture)	70.4			20.3			43.9			25.1			4.2			(23.1		)
Currency translation	(39.9		)	(24.8		)	(3.9		)	(5.0		)	(6.2		)	—
Sales - 2019	$	2,083.4		$	752.0		$	656.5		$	228.3		$	446.6		$	—



Interest-bearing debt	$	784,593
Adjusted EBITDA-last four quarters	327,014
Leverage ratio	2.40

Adjusted EBITDA-last four quarters	$	327,014
Interest expense-last four quarters	40,389
Interest earned ratio	8.10



Net cash flows from operations	$	324,185
Interest expense	40,389
Income tax expense	47,258
Impairment of property, plant and equipment	(803		)
Gain on investment	48
Deferred income tax benefit	(4,625		)
Noncontrolling interest	(4,534		)
Stock-based compensation	(11,205		)
Pension plan expense	920
Contribution to pension plan	17,408
Changes in assets and liabilities	(104,815		)
Other	338
EBITDA	304,564
Cash restructuring expenses	15,566
EBITDA from acquisitions (months not owned)	2,411
Impairment of property, plant and equipment	4,473
Adjusted EBITDA	$	327,014



Net earnings attributable to Valmont Industries, Inc.	$	135,684
Interest expense	40,389
Income tax expense	47,258
Depreciation and amortization expense	81,233
EBITDA	304,564
Cash restructuring expenses	15,566
EBITDA from acquisitions (months not owned)	2,411
Impairment of property, plant, and equipment	4,473
Adjusted EBITDA	$	327,014