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 ~~June 27,~~September 26, 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) 963-1000

(Registrant’s telephone number, including area code)

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

________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock $1.00 par value

VMI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 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

~~21,361,581~~21,252,810

Outstanding shares of common stock as of ~~July 23,~~October 22, 2020

VALMONT INDUSTRIES, INC.

INDEX TO FORM 10-Q

Page No.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited):

Item 1.

Financial Statements (unaudited):

Condensed Consolidated Statements of Earnings for the thirteen and twenty-six

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

weeks ended June 27, 2020 and June 29, 2019

weeks ended September 26, 2020 and September 28, 2019

Condensed Consolidated Statements of Comprehensive Income for the thirteen

and twenty-six weeks ended June 27, 2020 and June 29, 2019

and thirty-nine weeks ended September 26, 2020 and September 28, 2019

Condensed Consolidated Balance Sheets as of June 27, 2020 and December 28,

Condensed Consolidated Balance Sheets as of September 26, 2020 and December 28,

2019

Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended

Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended

June 27, 2020 and June 29, 2019

September 26, 2020 and September 28, 2019

Condensed Consolidated Statements of Shareholders' Equity for the thirteen and

twenty-six weeks ended June 27, 2020 and June 29, 2019

thirty-nine weeks ended September 26, 2020 and September 28, 2019

Notes to Condensed Consolidated Financial Statements

Item 2.

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

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Item 4.

Controls and Procedures

PART II. OTHER INFORMATION

Item 1A.

Risk Factors

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Exhibits

Item 6.

Exhibits

Signatures

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						Twenty-six weeks ended							Thirteen weeks ended				Thirty-nine weeks ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Product sales	Product sales	$	617,587	$	609,516	$	1,216,496	$	1,224,480	Product sales	$	657,703	$	605,439	$	1,874,199	$	1,829,919
Services sales	Services sales	71,221		91,355		146,512		168,530		Services sales	76,267		84,901		222,779		253,431
Net sales	Net sales	688,808		700,871		1,363,008		1,393,010		Net sales	733,970		690,340		2,096,978		2,083,350
Product cost of sales	Product cost of sales	458,995		463,329		897,783		938,226		Product cost of sales	494,812		460,549		1,392,595		1,398,775
Services cost of sales	Services cost of sales	45,876		59,366		95,039		111,981		Services cost of sales	48,411		56,504		143,450		168,485
Total cost of sales	Total cost of sales	504,871		522,695		992,822		1,050,207		Total cost of sales	543,223		517,053		1,536,045		1,567,260
Gross profit	Gross profit	183,937		178,176		370,186		342,803		Gross profit	190,747		173,287		560,933		516,090
Selling, general and administrative expenses	Selling, general and administrative expenses	123,859		116,702		243,213		226,727		Selling, general and administrative expenses	129,268		112,223		372,481		338,950
Impairment of goodwill and intangible assets		16,638		—		16,638		—
Impairment of goodwill and trade names										Impairment of goodwill and trade names	0		0		16,638		0
Operating income	Operating income	43,440		61,474		110,335		116,076		Operating income	61,479		61,064		171,814		177,140
Other income (expenses):	Other income (expenses):									Other income (expenses):
Interest expense	Interest expense	(10,098)		(10,117)		(20,112)		(19,995)		Interest expense	(10,454)		(9,976)		(30,566)		(29,971)
Interest income	Interest income	458		1,036		1,501		1,846		Interest income	430		969		1,931		2,815
Gain on investments (unrealized)	Gain on investments (unrealized)	2,510		1,520		202		4,352		Gain on investments (unrealized)	900		402		1,102		4,754

Other	Other	(694)		156		1,116		1,170		Other	233		768		1,349		1,938
		(7,824)		(7,405)		(17,293)		(12,627)			(8,891)		(7,837)		(26,184)		(20,464)
Earnings before income taxes	Earnings before income taxes	35,616		54,069		93,042		103,449		Earnings before income taxes	52,588		53,227		145,630		156,676
Income tax expense:
Income tax expense (benefit):										Income tax expense (benefit):
Current	Current	21,645		17,353		27,954		19,993		Current	14,968		11,675		42,922		31,668
Deferred	Deferred	(9,043)		(3,952)		(866)		5,710		Deferred	(2,884)		1,388		(3,750)		7,098
		12,602		13,401		27,088		25,703			12,084		13,063		39,172		38,766
Earnings before equity in earnings of nonconsolidated subsidiaries	Earnings before equity in earnings of nonconsolidated subsidiaries	23,014		40,668		65,954		77,746		Earnings before equity in earnings of nonconsolidated subsidiaries	40,504		40,164		106,458		117,910
Equity in loss of nonconsolidated subsidiaries	Equity in loss of nonconsolidated subsidiaries	(260)		—		(479)		—		Equity in loss of nonconsolidated subsidiaries	(276)		0		(755)		0
Net earnings	Net earnings	22,754		40,668		65,475		77,746		Net earnings	40,228		40,164		105,703		117,910
Less: loss (earnings) attributable to noncontrolling interests		(147)		(949)		61		(1,923)
Less: earnings attributable to noncontrolling interests										Less: earnings attributable to noncontrolling interests	(886)		(2,119)		(825)		(4,042)
Net earnings attributable to Valmont Industries, Inc.	Net earnings attributable to Valmont Industries, Inc.	$	22,607	$	39,719	$	65,536	$	75,823	Net earnings attributable to Valmont Industries, Inc.	$	39,342	$	38,045	$	104,878	$	113,868
Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.06	$	1.83	$	3.06	$	3.48	Basic	$	1.85	$	1.76	$	4.91	$	5.24
Diluted	Diluted	$	1.06	$	1.82	$	3.05	$	3.46	Diluted	$	1.84	$	1.75	$	4.89	$	5.22

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						Twenty-six Weeks Ended							Thirteen Weeks Ended				Thirty-nine Weeks Ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net earnings	Net earnings	22,754		40,668		65,475		77,746		Net earnings	40,228		40,164		105,703		117,910
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Unrealized translation gain (loss)	Unrealized translation gain (loss)	18,888		1,049		(30,493)		3,315		Unrealized translation gain (loss)	14,391		(23,781)		(16,102)		(20,466)

Gain (loss) on hedging activities:	Gain (loss) on hedging activities:									Gain (loss) on hedging activities:
Net investment hedges	Net investment hedges	(1,427)		711		7,284		780		Net investment hedges	0		2,580		7,284		3,360
Cash flow hedges	Cash flow hedges	(73)		—		370		—		Cash flow hedges	(26)		0		344		0

Amortization cost included in interest expense	Amortization cost included in interest expense	(16)		(16)		(32)		(32)		Amortization cost included in interest expense	(16)		(16)		(48)		(48)

Commodity hedges	Commodity hedges	—		(2,109)		—		(2,109)		Commodity hedges	0		(21)		0		(2,130)

Realized gain on commodity hedges recorded in earnings										Realized gain on commodity hedges recorded in earnings	0		1,329		0		1,329
Cross currency swaps	Cross currency swaps	(2,007)		(3,933)		4,295		(1,672)		Cross currency swaps	(3,725)		5,443		570		3,771

Other comprehensive income (loss)	Other comprehensive income (loss)	15,365		(4,298)		(18,576)		282		Other comprehensive income (loss)	10,624		(14,466)		(7,952)		(14,184)
Comprehensive income	Comprehensive income	38,119		36,370		46,899		78,028		Comprehensive income	50,852		25,698		97,751		103,726
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	(130)		(983)		(427)		(2,092)		Comprehensive income attributable to noncontrolling interests	(1,358)		(1,297)		(1,785)		(3,390)
Comprehensive income attributable to Valmont Industries, Inc.	Comprehensive income attributable to Valmont Industries, Inc.	$	37,989	$	35,387	$	46,472	$	75,936	Comprehensive income attributable to Valmont Industries, Inc.	$	49,494	$	24,401	$	95,966	$	100,336

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)


		June 27, 2020		December 28, 2019			September 26, 2020		December 28, 2019
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	353,348	$	353,542	Cash and cash equivalents	$	443,055	$	353,542
Receivables, net	Receivables, net	500,838		480,000		Receivables, net	502,004		480,000
Inventories	Inventories	449,516		418,370		Inventories	448,088		418,370
Contract asset - costs and profits in excess of billings		125,004		141,322
Contract assets						Contract assets	113,254		141,322
Prepaid expenses and other assets	Prepaid expenses and other assets	51,113		32,043		Prepaid expenses and other assets	51,745		32,043
Refundable income taxes	Refundable income taxes	—		6,947		Refundable income taxes	0		6,947
Total current assets	Total current assets	1,479,819		1,432,224		Total current assets	1,558,146		1,432,224
Property, plant and equipment, at cost	Property, plant and equipment, at cost	1,269,231		1,245,261		Property, plant and equipment, at cost	1,295,639		1,245,261
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	705,448		687,132		Less accumulated depreciation and amortization	722,286		687,132
Net property, plant and equipment	Net property, plant and equipment	563,783		558,129		Net property, plant and equipment	573,353		558,129

Goodwill	Goodwill	417,668		428,864		Goodwill	421,947		428,864
Other intangible assets, net	Other intangible assets, net	169,744		175,742		Other intangible assets, net	167,681		175,742
Other assets	Other assets	200,828		212,257		Other assets	202,783		212,257
Total assets	Total assets	$	2,831,842	$	2,807,216	Total assets	$	2,923,910	$	2,807,216

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current installments of long-term debt	Current installments of long-term debt	$	2,587	$	760	Current installments of long-term debt	$	1,922	$	760
Notes payable to banks	Notes payable to banks	14,577		21,774		Notes payable to banks	14,227		21,774
Accounts payable	Accounts payable	241,294		197,957		Accounts payable	269,113		197,957
Accrued employee compensation and benefits	Accrued employee compensation and benefits	91,857		83,528		Accrued employee compensation and benefits	114,310		83,528
Contract liability - billings in excess of costs and earnings		138,820		117,945
Contract liabilities						Contract liabilities	116,470		117,945
Other accrued expenses	Other accrued expenses	89,093		83,736		Other accrued expenses	97,539		83,736
Income taxes payable	Income taxes payable	16,984		—		Income taxes payable	724		0

Dividends payable	Dividends payable	9,613		8,079		Dividends payable	9,614		8,079
Total current liabilities	Total current liabilities	604,825		513,779		Total current liabilities	623,919		513,779
Deferred income taxes	Deferred income taxes	49,906		58,906		Deferred income taxes	51,280		58,906
Long-term debt, excluding current installments	Long-term debt, excluding current installments	778,283		764,944		Long-term debt, excluding current installments	779,788		764,944
Defined benefit pension liability	Defined benefit pension liability	111,525		140,007		Defined benefit pension liability	113,380		140,007
Operating lease liabilities	Operating lease liabilities	79,799		85,817		Operating lease liabilities	77,705		85,817
Deferred compensation	Deferred compensation	45,736		45,114		Deferred compensation	42,587		45,114
Other noncurrent liabilities	Other noncurrent liabilities	9,066		8,904		Other noncurrent liabilities	45,587		8,904
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:

Common stock of $1 par value -	Common stock of $1 par value -					Common stock of $1 par value -
Authorized 75,000,000 shares; 27,900,000 issued	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
Additional paid in capital						Additional paid in capital	8,493		0
Retained earnings	Retained earnings	2,194,916		2,173,802		Retained earnings	2,219,182		2,173,802
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(332,486)		(313,422)		Accumulated other comprehensive loss	(322,334)		(313,422)
Treasury stock	Treasury stock	(763,495)		(743,942)		Treasury stock	(770,802)		(743,942)
Total Valmont Industries, Inc. shareholders’ equity	Total Valmont Industries, Inc. shareholders’ equity	1,126,835		1,144,338		Total Valmont Industries, Inc. shareholders’ equity	1,162,439		1,144,338
Noncontrolling interest in consolidated subsidiaries	Noncontrolling interest in consolidated subsidiaries	25,867		45,407		Noncontrolling interest in consolidated subsidiaries	27,225		45,407
Total shareholders’ equity	Total shareholders’ equity	1,152,702		1,189,745		Total shareholders’ equity	1,189,664		1,189,745
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	2,831,842	$	2,807,216	Total liabilities and shareholders’ equity	$	2,923,910	$	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)


		Twenty-six weeks ended							Thirty-nine weeks ended
		June 27, 2020		June 29, 2019			September 26, 2020			September 28, 2019
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	65,475	$	77,746	Net earnings	$	105,703		$	117,910
Adjustments to reconcile net earnings to net cash flows from operations:	Adjustments to reconcile net earnings to net cash flows from operations:					Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization	Depreciation and amortization	40,584		40,583		Depreciation and amortization	61,523			60,424
Noncash loss on trading securities		34		28
Noncash loss (gain) on trading securities						Noncash loss (gain) on trading securities	39			(48)
Impairment of property, plant and equipment	Impairment of property, plant and equipment	2,258		—		Impairment of property, plant and equipment	2,811			0
Impairment of goodwill & intangible assets	Impairment of goodwill & intangible assets	16,638		—		Impairment of goodwill & intangible assets	16,638			0

Stock-based compensation	Stock-based compensation	5,671		6,370		Stock-based compensation	8,736			8,889

Defined benefit pension plan benefit	Defined benefit pension plan benefit	(3,547)		(259)		Defined benefit pension plan benefit	(5,401)			(382)
Contribution to defined benefit pension plan	Contribution to defined benefit pension plan	(17,138)		(13,682)		Contribution to defined benefit pension plan	(17,398)			(17,426)
(Gain) loss on sale of property, plant and equipment		86		(278)
Gain on sale of property, plant and equipment						Gain on sale of property, plant and equipment	(60)			(465)
Equity in loss in nonconsolidated subsidiaries	Equity in loss in nonconsolidated subsidiaries	479		—		Equity in loss in nonconsolidated subsidiaries	755			0
Deferred income taxes	Deferred income taxes	(866)		5,710		Deferred income taxes	(3,750)			7,098
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Receivables	Receivables	(28,896)		(19,633)		Receivables	(26,298)			(21,117)
Inventories	Inventories	(39,313)		(16,308)		Inventories	(32,992)			9,502
Prepaid expenses and other assets	Prepaid expenses and other assets	(13,984)		(13,367)		Prepaid expenses and other assets	(19,157)			(14,451)
Contract asset - costs and profits in excess of billings		16,147		(11,400)
Contract assets						Contract assets	28,597			(7,850)
Accounts payable	Accounts payable	39,775		7,973		Accounts payable	63,627			(19,256)
Accrued expenses	Accrued expenses	42,197		62,467		Accrued expenses	61,122			10,928

Contract liabilities						Contract liabilities	(1,475)			118,973
Other noncurrent liabilities	Other noncurrent liabilities	(1,210)		(5,582)		Other noncurrent liabilities	20,982			(4,563)
Income taxes refundable		26,354		(6,931)
Income taxes payable/refundable						Income taxes payable/refundable	9,044			(8,936)
Net cash flows from operating activities	Net cash flows from operating activities	150,744		113,437		Net cash flows from operating activities	273,046			239,230
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(48,165)		(49,310)		Purchase of property, plant and equipment	(70,960)			(71,981)
Proceeds from sale of assets	Proceeds from sale of assets	169		466		Proceeds from sale of assets	911			1,325
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(15,862)		(81,841)		Acquisitions, net of cash acquired	(15,862)			(81,841)

Settlement of net investment hedges	Settlement of net investment hedges	11,983		11,184		Settlement of net investment hedges	11,983			11,184
Other, net	Other, net	(1,137)		3,893		Other, net	2,543			2,117
Net cash flows from investing activities	Net cash flows from investing activities	(53,012)		(115,608)		Net cash flows from investing activities	(71,385)			(139,196)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from short-term agreements	Proceeds from short-term agreements	3,006		14,994		Proceeds from short-term agreements	4,251			14,392
Payments on short-term agreements	Payments on short-term agreements	(9,261)		(5,108)		Payments on short-term agreements	(10,713)			(5,108)
Proceeds from long-term borrowings	Proceeds from long-term borrowings	88,872		31,000		Proceeds from long-term borrowings	88,872			31,000
Principal payments on long-term borrowings	Principal payments on long-term borrowings	(75,568)		(10,386)		Principal payments on long-term borrowings	(76,417)			(10,578)

Dividends paid	Dividends paid	(17,704)		(16,425)		Dividends paid	(27,316)			(24,554)
Dividends to noncontrolling interest	Dividends to noncontrolling interest	(5,642)		(4,459)		Dividends to noncontrolling interest	(5,642)			(6,549)
Purchase of noncontrolling interest	Purchase of noncontrolling interest	(55,916)		(27,845)		Purchase of noncontrolling interest	(55,916)			(27,845)
Purchase of treasury shares	Purchase of treasury shares	(20,481)		(38,350)		Purchase of treasury shares	(28,006)			(55,172)
Proceeds from exercises under stock plans	Proceeds from exercises under stock plans	724		1,744		Proceeds from exercises under stock plans	980			3,211
Purchase of common treasury shares—stock plan exercises	Purchase of common treasury shares—stock plan exercises	(5)		(827)		Purchase of common treasury shares—stock plan exercises	(77)			(1,456)
Net cash flows from financing activities	Net cash flows from financing activities	(91,975)		(55,662)		Net cash flows from financing activities	(109,984)			(82,659)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(5,951)		1,567		Effect of exchange rate changes on cash and cash equivalents	(2,164)			(3,385)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(194)		(56,266)		Net change in cash and cash equivalents	89,513			13,990
Cash, cash equivalents, and restricted cash—beginning of year	Cash, cash equivalents, and restricted cash—beginning of year	353,542		313,210		Cash, cash equivalents, and restricted cash—beginning of year	353,542			313,210
Cash, cash equivalents, and restricted cash—end of period	Cash, cash equivalents, and restricted cash—end of period	$	353,348	$	256,944	Cash, cash equivalents, and restricted cash—end of period	$	443,055		$	327,200

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			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 3/30/2019 (1)		$	27,900	$	—	$	2,089,276	$	(298,740)	$	(700,333)	$	52,950	$	1,171,053
Balance at 6/29/2019 (1)																Balance at 6/29/2019 (1)	$	27,900	$	0	$	2,123,754	$	(303,072)	$	(728,680)	$	45,272	$	1,165,174
Net earnings	Net earnings	—		—		39,719		—		—		949		40,668		Net earnings	—		—		38,045		—		—		2,119		40,164
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		(4,332)		—		34		(4,298)		Other comprehensive income (loss)	—		—		—		(13,645)		—		(821)		(14,466)
Cash dividends declared ($0.375 per share)	Cash dividends declared ($0.375 per share)	—		—		(8,126)		—		—		—		(8,126)		Cash dividends declared ($0.375 per share)	—		—		(8,085)		—		—		—		(8,085)
Dividends to noncontrolling interests	Dividends to noncontrolling interests	—		—		—		—		—		(3,621)		(3,621)		Dividends to noncontrolling interests	—		—		—		—		—		(2,090)		(2,090)
Purchase of noncontrolling interest		—		277		—		—		—		(5,040)		(4,763)

Purchase of treasury shares; 236,323 shares acquired		—		—		—		—		(28,929)		—		(28,929)
Stock plan exercises; 645 shares acquired		—		—		—		—		(80)		—		(80)
Stock options exercised; 2,642 shares issued		—		(2,575)		2,885		—		260		—		570

Purchase of treasury shares; 126,734 shares acquired																Purchase of treasury shares; 126,734 shares acquired	—		—		—		—		(16,822)		—		(16,822)
Stock plan exercises; 4,403 shares acquired																Stock plan exercises; 4,403 shares acquired	—		—		—		—		(629)		—		(629)
Stock options exercised; 12,586 shares issued																Stock options exercised; 12,586 shares issued	—		(2,514)		2,190		—		1,791		—		1,467

Stock option expense	Stock option expense	—		728		—		—		—		—		728		Stock option expense	—		600		—		—		—		—		600
Stock awards; 2,692 shares issued		—		1,570		—		—		402		—		1,972
Balance at 6/29/2019 (1)		$	27,900	$	—	$	2,123,754	$	(303,072)	$	(728,680)	$	45,272	$	1,165,174
Balance at March 28, 2020		$	27,900	$	—	$	2,171,329	$	(347,868)	$	(763,950)	$	22,719	1,110,130
Stock awards; 223 shares issued																Stock awards; 223 shares issued	—		1,914		—		—		5		—		1,919
Balance at 9/28/2019 (1)																Balance at 9/28/2019 (1)	$	27,900	$	0	$	2,155,904	$	(316,717)	$	(744,335)	$	44,480	$	1,167,232
Balance at June 27, 2020																Balance at June 27, 2020	$	27,900	$	0	$	2,194,916	$	(332,486)	$	(763,495)	$	25,867	1,152,702
Net earnings	Net earnings	—		—		22,607		—		—		147		22,754		Net earnings	—		—		39,342		—		—		886		40,228
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		15,382		—		(17)		15,365		Other comprehensive income (loss)	—		—		—		10,152		—		472		10,624
Cash dividends declared ($0.45 per share)	Cash dividends declared ($0.45 per share)	—		—		(9,598)		—		—		—		(9,598)		Cash dividends declared ($0.45 per share)	—		—		(9,614)		—		—		—		(9,614)
Dividends to noncontrolling interests		—		—		—		—		—		(300)		(300)
Purchase of noncontrolling interest		—		—		8,025		—		—		(207)		7,818

Addition of noncontrolling interest		—		—		—		—		—		3,525		3,525

Stock plan exercises; 14 shares acquired		—		—		—		—		(2)		—		(2)
Stock options exercised; 318 shares issued		—		(2,206)		2,553		—		317		—		664

Purchase of treasury shares; 60,645 shares acquired																Purchase of treasury shares; 60,645 shares acquired	—		—		—		—		(7,525)		—		(7,525)
Stock plan exercises; 580 shares acquired																Stock plan exercises; 580 shares acquired	—		—		—		—		(72)		—		(72)
Stock options exercised; 2,616 shares issued																Stock options exercised; 2,616 shares issued	—		5,461		(5,462)		—		257		—		256

Stock option expense	Stock option expense	—		612		—		—		—		—		612		Stock option expense	—		686		—		—		—		—		686
Stock awards; 6,204 shares issued		—		1,594		—		—		140		—		1,734
Balance at June 27, 2020		$	27,900	$	—	$	2,194,916	$	(332,486)	$	(763,495)	$	25,867	$	1,152,702
Stock awards; 253 shares issued																Stock awards; 253 shares issued	—		2,346		—		—		33		—		2,379
Balance at September 26, 2020																Balance at September 26, 2020	$	27,900	$	8,493	$	2,219,182	$	(322,334)	$	(770,802)	$	27,225	$	1,189,664

(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			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)	Balance at 12/29/2018 (1)	$	27,900	$	—	$	2,067,811	$	(303,185)	$	(692,549)	$	75,761	$	1,175,738	Balance at 12/29/2018 (1)	$	27,900	$	0	$	2,067,811	$	(303,185)	$	(692,549)	$	75,761	$	1,175,738
Net earnings	Net earnings	—		—		75,823		—		—		1,923		77,746		Net earnings	—		—		113,868		—		—		4,042		117,910
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		113		—		169		282		Other comprehensive income (loss)	—		—		—		(13,532)		—		(652)		(14,184)
Cash dividends declared ($0.75 per share)		—		—		(16,339)		—		—		—		(16,339)
Cash dividends declared ($1.125 per share)																Cash dividends declared ($1.125 per share)	—		—		(24,424)		—		—		—		(24,424)
Dividends to noncontrolling interests	Dividends to noncontrolling interests	—		—		—		—		—		(4,459)		(4,459)		Dividends to noncontrolling interests	—		—		—		—		—		(6,549)		(6,549)
Impact of ASC 842 adoption	Impact of ASC 842 adoption	—		—		(8,886)		—		—		—		(8,886)		Impact of ASC 842 adoption	—		—		(8,886)		—		—		—		(8,886)

Purchase of noncontrolling interest	Purchase of noncontrolling interest	—		277		—		—		—		(28,122)		(27,845)		Purchase of noncontrolling interest	—		277		—		—		—		(28,122)		(27,845)
Purchase of treasury shares; 306,729 shares acquired		—		—		—		—		(38,350)		—		(38,350)
Stock plan exercises; 6,096 shares acquired		—		—		—		—		(827)		—		(827)
Stock options exercised; 15,637 shares issued		—		(5,242)		5,345		—		1,641		—		1,744
Purchase of treasury shares; 433,463 shares acquired																Purchase of treasury shares; 433,463 shares acquired	—		—		—		—		(55,172)		—		(55,172)
Stock plan exercises; 10,499 shares acquired																Stock plan exercises; 10,499 shares acquired	—		—		—		—		(1,456)		—		(1,456)
Stock options exercised; 28,493 shares issued																Stock options exercised; 28,493 shares issued	—		(7,756)		7,535		—		3,432		—		3,211

Stock option expense	Stock option expense	—		1,456		—		—		—		—		1,456		Stock option expense	—		2,056		—		—		—		—		2,056
Stock awards; 10,327 shares issued		—		3,509		—		—		1,405		—		4,914
Balance at 6/29/2019 (1)		$	27,900	$	—	$	2,123,754	$	(303,072)	$	(728,680)	$	45,272	$	1,165,174
Stock awards; 10,550 shares issued																Stock awards; 10,550 shares issued	—		5,423		—		—		1,410		—		6,833
Balance at 9/28/2019 (1)																Balance at 9/28/2019 (1)	$	27,900	$	0	$	2,155,904	$	(316,717)	$	(744,335)	$	44,480	$	1,167,232
Balance at 12/28/2019 (1)	Balance at 12/28/2019 (1)	$	27,900	$	—	$	2,173,802	$	(313,422)	$	(743,942)	$	45,407	$	1,189,745	Balance at 12/28/2019 (1)	$	27,900	$	0	$	2,173,802	$	(313,422)	$	(743,942)	$	45,407	$	1,189,745
Net earnings	Net earnings	—		—		65,536		—		—		(61)		65,475		Net earnings	—		—		104,878		—		—		825		105,703
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		(19,064)		—		488		(18,576)		Other comprehensive income (loss)	—		—		—		(8,912)		—		960		(7,952)
Cash dividends declared ($0.90 per share)		—		—		(19,223)		—		—		—		(19,223)
Cash dividends declared ($1.35 per share)																Cash dividends declared ($1.35 per share)	—		—		(28,837)		—		—		—		(28,837)
Dividends to noncontrolling interests	Dividends to noncontrolling interests	—		—		—		—		—		(5,642)		(5,642)		Dividends to noncontrolling interests	—		—		—		—		—		(5,642)		(5,642)
Purchase of noncontrolling interest	Purchase of noncontrolling interest	—		—		(30,661)		—		—		(19,450)		(50,111)		Purchase of noncontrolling interest	—		0		(30,661)		—		—		(19,450)		(50,111)

Addition of noncontrolling interest	Addition of noncontrolling interest	—		—		—		—		—		5,125		5,125		Addition of noncontrolling interest	—		—		—		—		—		5,125		5,125
Purchase of treasury shares; 190,491 shares acquired		—		—		—		—		(20,481)		—		(20,481)
Stock plan exercises; 37 shares acquired		—		—		—		—		(5)		—		(5)
Stock options exercised; 1,484 shares issued		—		(5,217)		5,462		—		479		—		724
Purchase of treasury shares; 251,136 shares acquired																Purchase of treasury shares; 251,136 shares acquired	—		—		—		—		(28,006)		—		(28,006)
Stock plan exercises; 617 shares acquired																Stock plan exercises; 617 shares acquired	—		—		—		—		(77)		—		(77)
Stock options exercised; 4,100 shares issued																Stock options exercised; 4,100 shares issued	—		244		—		—		736		—		980

Stock option expense	Stock option expense	—		1,223		—		—		—		—		1,223		Stock option expense	—		1,909		—		—		—		—		1,909
Stock awards; 8,704 shares issued		—		3,994		—		—		454		—		4,448
Balance at June 27, 2020		$	27,900	$	—	$	2,194,916	$	(332,486)	$	(763,495)	$	25,867	$	1,152,702
Stock awards; 8,957 shares issued																Stock awards; 8,957 shares issued	—		6,340		—		—		487		—		6,827
Balance at 9/26/2020 (1)																Balance at 9/26/2020 (1)	$	27,900	$	8,493	$	2,219,182	$	(322,334)	$	(770,802)	$	27,225	$	1,189,664

See accompanying notes to the 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 ~~June 27,~~September 26, 2020, the Condensed Consolidated Statements of Earnings, Comprehensive Income, and Shareholders' Equity for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019, and the Condensed Consolidated Statements of Cash Flows for the ~~twenty-six~~thirty-nine week periods then ended 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 ~~June 27,~~September 26, 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 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 28, 2019 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. In addition, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) and early 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 further at the end of footnote 1. The results of operations for the period ended ~~June 27,~~September 26, 2020 are not necessarily indicative of the operating results for the full year.

Inventories

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.

Inventories consisted of the following:


		June 27, 2020		December 28, 2019			September 26, 2020		December 28, 2019
Raw materials and purchased parts	Raw materials and purchased parts	$	167,626	$	158,314	Raw materials and purchased parts	$	153,708	$	158,314
Work-in-process	Work-in-process	32,535		38,088		Work-in-process	25,335		38,088
Finished goods and manufactured goods	Finished goods and manufactured goods	249,355		221,968		Finished goods and manufactured goods	269,045		221,968
		449,516		418,370			448,088		418,370

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)

The impact of the change from LIFO to FIFO on the Company’s Condensed Consolidated Statements of Earnings and Comprehensive Income for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~June 29,~~September 28, 2019 is as follows:


		Thirteen weeks ended				Twenty-six weeks ended					Thirteen weeks ended			Thirty-nine weeks ended
(in 000's, except earnings per share)	(in 000's, except earnings per share)	As Previously Reported	Retrospectively Adjusted	Adjustment	As Previously Reported	Retrospectively Adjusted	Adjustment	(in 000's, except earnings per share)	As Previously Reported	Retrospectively Adjusted	Adjustment	As Previously Reported	Retrospectively Adjusted	Adjustment
Cost of sales	Cost of sales	520,457	522,695	2,238	1,047,467	1,050,207	2,740	Cost of sales	514,254	517,053	2,799	1,561,721	1,567,260	5,539
Operating income	Operating income	63,712	61,474	(2,238)	118,816	116,076	(2,740)	Operating income	63,863	61,064	(2,799)	182,679	177,140	(5,539)
Income tax expense	Income tax expense	13,961	13,401	(560)	26,388	25,703	(685)	Income tax expense	13,763	13,063	(700)	40,151	38,766	(1,385)
Net earnings attributed to Valmont Industries, Inc	Net earnings attributed to Valmont Industries, Inc	41,397	39,719	(1,679)	77,878	75,823	(2,055)	Net earnings attributed to Valmont Industries, Inc	40,144	38,045	(2,099)	118,022	113,868	(4,154)
Comprehensive (loss) income	Comprehensive (loss) income	38,048	36,370	(1,679)	80,083	78,028	(2,055)	Comprehensive (loss) income	27,797	25,698	(2,099)	107,880	103,726	(4,154)
Net earnings per diluted share	Net earnings per diluted share	1.90	1.82	(0.08)	3.56	3.46	(0.10)	Net earnings per diluted share	1.85	1.75	(0.10)	5.41	5.22	(0.19)

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 ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019, were as follows:


		Thirteen weeks ended						Twenty-six weeks ended							Thirteen weeks ended				Thirty-nine weeks ended
		2020		2019		2020		2019			2020		2019		2020		2019
United States	United States	$	54,237	$	45,031	$	107,737	$	86,780	United States	$	33,610	$	42,098	$	141,347	$	128,878
Foreign	Foreign	(18,621)		9,038		(14,695)		16,669		Foreign	18,978		11,129		4,283		27,798
		$	35,616	$	54,069	$	93,042	$	103,449		$	52,588	$	53,227	$	145,630	$	156,676

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

experience as well as current facts and circumstances. An actuarial analysis is used to measure the expense and liability associated with pension benefits.

The components of the net periodic pension (benefit) expense for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019 were as follows:


		Thirteen weeks ended						Twenty-six weeks ended							Thirteen weeks ended				Thirty-nine weeks ended
Net periodic (benefit) expense:	Net periodic (benefit) expense:	2020		2019		2020		2019		Net periodic (benefit) expense:	2020		2019		2020		2019
Interest cost	Interest cost	$	3,160	$	4,182	$	6,284	$	8,527	Interest cost	$	3,285	$	4,075	$	9,569	$	12,602
Expected return on plan assets	Expected return on plan assets	(5,664)		(4,943)		(11,262)		(10,078)		Expected return on plan assets	(5,887)		(4,815)		(17,149)		(14,893)
Amortization of actuarial loss	Amortization of actuarial loss	720		634		1,431		1,292		Amortization of actuarial loss	748		617		2,179		1,909
Net periodic (benefit) expense	Net periodic (benefit) expense	$	(1,784)	$	(127)	$	(3,547)	$	(259)	Net periodic (benefit) expense	$	(1,854)	$	(123)	$	(5,401)	$	(382)

Stock Plans

The Company maintains 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 ~~June 27,~~September 26, 2020, ~~1,187,679~~1,189,407 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 ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019, respectively, were as follows:


		Thirteen weeks ended						Twenty-six weeks ended							Thirteen weeks ended				Thirty-nine weeks ended
		2020		2019		2020		2019			2020		2019		2020		2019
Compensation expense	Compensation expense	$	2,346	$	2,700	$	5,671	$	6,370	Compensation expense	$	3,065	$	2,519	$	8,736	$	8,889
Income tax benefits	Income tax benefits	587		675		1,418		1,593		Income tax benefits	766		630		2,184		2,222

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 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 at ~~June 27,~~September 26, 2020 of ~~$37,035~~$33,709 ($36,290 at December 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 ~~$170~~$172 and $210 as of ~~June 27,~~September 26, 2020 and December 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:													Fair Value Measurement Using:
		Carrying Value June 27, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Carrying Value September 26, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Trading Securities	Trading Securities	$	37,205	$	37,205	$	—	$	—	Trading Securities	$	33,881	$	33,881	$	0	$	0
Derivative financial instruments, net	Derivative financial instruments, net	7,268		—		7,268		—		Derivative financial instruments, net	3,548		0		3,548		0


				Fair Value Measurement Using:													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)			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:	Assets:									Assets:
Trading Securities	Trading Securities	$	36,500	$	36,500	$	—	$	—	Trading Securities	$	36,500	$	36,500	$	0	$	0
Derivative financial instruments, net	Derivative financial instruments, net	3,247		—		3,247		—		Derivative financial instruments, net	3,247		0		3,247		0

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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 4 to these condensed consolidated financial statements contain additional information related to goodwill and intangible asset impairments recognized in fiscal 2020.

Comprehensive Income (Loss)

Comprehensive income (loss) 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 ~~June 27,~~September 26, 2020 and December 28, 2019:


		Foreign Currency Translation Adjustments		Gain on Hedging Activities		Defined Benefit Pension Plan		Accumulated Other Comprehensive Loss			Foreign Currency Translation Adjustments		Gain on Hedging Activities		Defined Benefit Pension Plan		Accumulated Other Comprehensive Loss
Balance at December 28, 2019	Balance at December 28, 2019	$	(232,575)	$	14,076	$	(94,923)	$	(313,422)	Balance at December 28, 2019	$	(232,575)	$	14,076	$	(94,923)	$	(313,422)
Current-period comprehensive income (loss)	Current-period comprehensive income (loss)	(30,981)		11,917		—		(19,064)		Current-period comprehensive income (loss)	(17,062)		8,150		0		(8,912)

Balance at June 27, 2020		$	(263,556)	$	25,993	$	(94,923)	$	(332,486)
Balance at September 26, 2020										Balance at September 26, 2020	$	(249,637)	$	22,226	$	(94,923)	$	(322,334)

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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Segment and Product Line Revenue Recognition

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 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 ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019 is as follows:

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)


		Point in Time		Over Time		Point in Time		Over Time			Point in Time		Over Time		Point in Time		Over Time
		Thirteen weeks ended June 27, 2020		Thirteen weeks ended June 27, 2020		Twenty-six weeks ended June 27, 2020		Twenty-six weeks ended June 27, 2020			Thirteen weeks ended September 26, 2020		Thirteen weeks ended September 26, 2020		Thirty-nine weeks ended September 26, 2020		Thirty-nine weeks ended September 26, 2020
Utility Support Structures	Utility Support Structures	$	4,619	$	223,854	$	13,543	$	437,878	Utility Support Structures	$	43,287	$	229,192	$	56,830	$	667,070
Engineered Support Structures	Engineered Support Structures	236,827		12,046		452,706		23,533		Engineered Support Structures	244,785		10,160		697,491		33,693
Coatings	Coatings	62,667		—		131,257		—		Coatings	68,698		0		199,955		0
Irrigation	Irrigation	144,988		3,807		296,730		7,361		Irrigation	133,999		3,849		430,729		11,210

Total	Total	$	449,101	$	239,707	$	894,236	$	468,772	Total	$	490,769	$	243,201	$	1,385,005	$	711,973


		Point in Time		Over Time		Point in Time		Over Time			Point in Time		Over Time		Point in Time		Over Time
		Thirteen weeks ended June 29, 2019		Thirteen weeks ended June 29, 2019		Twenty-six weeks ended June 29, 2019		Twenty-six weeks ended June 29, 2019			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	Utility Support Structures	$	9,932	$	199,077	$	40,224	$	412,043	Utility Support Structures	$	3,418	$	200,778	$	43,642	$	612,821
Engineered Support Structures	Engineered Support Structures	244,604		12,961		461,074		24,460		Engineered Support Structures	252,501		13,993		713,574		38,454
Coatings	Coatings	81,089		—		151,320		—		Coatings	76,922		0		228,242		0
Irrigation	Irrigation	149,956		3,252		297,814		6,075		Irrigation	139,093		3,635		436,907		9,710

Total	Total	$	485,581	$	215,290	$	950,432	$	442,578	Total	$	471,934	$	218,406	$	1,422,365	$	660,985

The Company's contract asset as of ~~June 27,~~September 26, 2020 and ~~December~~December 28, 2019 was ~~$125,004~~$113,254 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 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 ~~June 27,~~September 26, 2020 and December 28, 2019, the contract ~~liability~~liabilities for revenue recognized over time was ~~$138,820~~$153,619 and $117,945, respectively. At September 2020, $116,470 is recorded as contract liabilities and $37,149 is recorded as other noncurrent liabilities on the condensed consolidated balance sheets. During the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020, the Company recognized ~~$21,037~~$16,333 and $~~39,277~~55,610 of revenue that was included in the liability as of December 28, 2019. In the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~June 29,~~September 28, 2019, the Company recognized ~~$897~~$314 and ~~$1,928~~$2,242 of revenue that was included in the liability as of December 29, 2018. The revenue recognized was due to applying advance payments received for ~~projects~~performance obligations 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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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

On May 29, 2020, the Company acquired 55% of Energia Solar do Brasil ("Solbras") for $4,308. Approximately $646 of the purchase price is contingent on seller representations and warranties that will be settled within 12 months of the acquisition date. Solbras is a leading provider of solar energy solutions for agriculture. In the preliminary purchase price allocation, goodwill of $3,341 and customer relationships of $3,718 were recorded and the remainder is net working capital. Goodwill is not deductible for tax purposes and the customer relationship will be amortized over 8 years. The acquisition of Solbras, located in Brazil, allows the Company to expand its product offerings in the Irrigation segment to include not only pivots, but also a sustainable and low-cost energy source to provide electricity to the units. The Company expects to finalize the purchase price allocation in the fourth quarter of 2020. Proforma disclosures were omitted as this business does not have a significant impact on the Company's financial results.

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 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 finalized the purchase price allocation in the fourth quarter of 2019.

On February 11, 2019, the Company acquired the outstanding shares of United Galvanizing ("United"), a provider of coatings services with an agreed upon purchase price of $28,000, with $2,000 being contingent on seller representations and warranties that was settled in the first quarter of 2020 for $1,522. 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 with an agreed upon purchase price of $34,562, with 10% being held back for seller representations and warranties that was settled in the first quarter of 2020 for $3,481.

Acquisitions of Noncontrolling Interests

In February 2020, the Company acquired the remaining 49% of AgSense that it did not own for $43,983, which includes a holdback payment of $2,200 that was made in the second quarter of 2020. The Company finalized the accounting for owning 100% of AgSense in the second quarter of 2020 which resulted in the recognition of a deferred tax asset of approximately $7,700. In the first quarter of 2020, 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.

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) RESTRUCTURING ACTIVITIES

~~During 2020, the~~The Company ~~executed~~is executing a restructuring program focused on certain regional restructuring activities (the "2020 Plan") ~~primarily in the ESS, Utility, and Coatings~~of up to $20,000 expected to occur across all segments to reduce employment levels (including a U.S. specific early retirement program for administrative employees) and exit under-performing locations.

The following pre-tax expenses were recognized during the ~~second~~third quarter of 2020:


		ESS		Utility		Coatings		Corporate		Total			ESS		Utility		Coatings		Corporate		Total
Severance	Severance	$	399	$	—	$	135	$	—	$	534	Severance	$	0	$	0	$	289	$	0	$	289
Other cash restructuring expenses	Other cash restructuring expenses	48		803		32		—		883		Other cash restructuring expenses	0		267		564		0		831
Asset impairments	Asset impairments	—		2,258		—		—		2,258		Asset impairments	0		312		241		0		553
Total cost of sales	Total cost of sales	447		3,061		167		—		3,675		Total cost of sales	0		579		1,094		0		1,673

Severance	Severance	242		613		55		221		1,131		Severance	0		0		30		0		30
Other cash restructuring expenses	Other cash restructuring expenses	773		—		0		—		773		Other cash restructuring expenses	902		0		160		145		1,207

Total selling, general and administrative expenses	Total selling, general and administrative expenses	1,015		613		55		221		1,904		Total selling, general and administrative expenses	902		0		190		145		1,237
Consolidated total	Consolidated total	$	1,462	$	3,674	$	222	$	221	$	5,579	Consolidated total	$	902	$	579	$	1,284	$	145	$	2,910

In the first nine-months of 2020, the Company recognized the following pre-tax restructuring expenses:


	ESS		Utility		Coatings		Corporate		Total
Severance	$	399	$	0	$	424	$	0	$	823
Other cash restructuring expenses	48		1,070		596		0		1,714
Asset impairments	0		2,570		241		0		2,811
Total cost of sales	447		3,640		1,261		0		5,348

Severance	242		613		85		221		1,161
Other cash restructuring expenses	1,675		0		160		145		1,980

Total selling, general and administrative expenses	1,917		613		245		366		3,141
Consolidated total	$	2,364	$	4,253	$	1,506	$	366	$	8,489

Liabilities recorded for the restructuring plans were as follows:


		Recognized Restructuring Expense		Costs Paid or Otherwise Settled		Balance at June 27, 2020			Recognized Restructuring Expense		Costs Paid or Otherwise Settled		Balance at September 26, 2020
Severance	Severance	$	1,665	$	854	$	811	Severance	$	1,984	$	1,984	$	0
Other cash restructuring expenses	Other cash restructuring expenses	1,656		853		803		Other cash restructuring expenses	3,694		2,891		803
Total	Total	$	3,321	$	1,707	$	1,614	Total	$	5,678	$	4,875	$	803

~~(4) GOODWILL AND INTANGIBLE ASSETS~~

~~Amortized Intangible Assets~~

~~The components of amortized intangible assets at June 27, 2020 and December 28, 2019 were as follows:~~

June 27, 2020
Gross
Carrying
Amount Accumulated
Amortization Weighted
Average
Life
Customer Relationships $ 230,235 $ 142,425 13 years
Patents & Proprietary Technology 24,484 7,190 14 years
Other 7,362 6,604 4 years
$ 262,081 $ 156,219

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(4) GOODWILL AND INTANGIBLE ASSETS

Amortized Intangible Assets

The components of amortized intangible assets at September 26, 2020 and December 28, 2019 were as follows:


	September 26, 2020
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	232,511	$	148,198	13 years

Patents & Proprietary Technology	25,240		7,699		14 years
Other	7,492		6,553		4 years
	$	265,243	$	162,450


	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 ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019, respectively was as follows:


Thirteen weeks ended	Thirteen weeks ended					Twenty-six weeks ended						Thirteen weeks ended			Thirty-nine weeks ended
2020	2020	2019		2020		2019		2020	2019		2020		2019
$	4,511	$	4,632	$	9,103	$	9,022	4,518	$	4,484	$	13,621	$	13,506

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


		Estimated Amortization Expense			Estimated Amortization Expense
2020	2020	$	17,214	2020	$	17,687
2021	2021	14,838		2021	15,005
2022	2022	12,959		2022	13,027
2023	2023	11,116		2023	11,086
2024	2024	9,389		2024	9,446

The useful lives assigned to 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.

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 June 27, 2020 and December 28, 2019 are as follows:~~

June 27,
2020 December 28,
2019 Year Acquired
Newmark $ 11,111 $ 11,111 2004
Webforge 7,250 9,143 2010
Convert Italia S.p.A 8,412 8,378 2018
Valmont SM 8,010 7,966 2014
Ingal EPS/Ingal Civil Products 7,029 7,454 2010
Walpar 3,500 3,500 2018
Shakespeare 4,000 4,000 2014
Other 14,570 17,555
$ 63,882 $ 69,107

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Intangible assets with indefinite lives are not amortized and consist solely of trade names. The carrying value of trade names at September 26, 2020 and December 28, 2019 are as follows:


	September 26, 2020		December 28, 2019		Year Acquired
Newmark	$	11,111	$	11,111	2004
Webforge	7,489		9,143		2010
Convert Italia S.p.A	8,721		8,378		2018
Valmont SM	8,317		7,966		2014
Ingal EPS/Ingal Civil Products	7,261		7,454		2010
Walpar	3,500		3,500		2018
Shakespeare	4,000		4,000		2014
Other	14,489		17,555
	$	64,888	$	69,107

In its determination of these intangible assets as 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.~~2020. The values of each trade name was determined using the relief-from-royalty method. Based on this evaluation, 0 trade names were determined to be impaired. In conjunction with an interim second quarter 2020 goodwill impairment test, impairment indicators were noted for the Webforge and Locker trade names requiring an interim impairment test. As a result, an impairment charge of approximately $3,900 was recognized against these 2 trade names in fiscal 2020.

Goodwill

The carrying amount of goodwill by segment as of ~~June 27,~~September 26, 2020 and December 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 — 5,127 6,227
Asset impairment (12,575) — — — (12,575)
Foreign currency translation (4,301) 141 (790) 102 (4,848)
Balance at June 27, 2020 $ 193,088 $ 117,480 $ 76,735 $ 30,365 $ 417,668


	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)		0		(49,247)
Balance at December 28, 2019	209,964		116,239		77,525		25,136		428,864
Acquisitions	0		1,100		0		5,038		6,138
Asset impairment	(12,575)		0		0		0		(12,575)

Foreign currency translation	(1,605)		1,629		(409)		(95)		(480)
Balance at September 26, 2020	$	195,784	$	118,968	$	77,116	$	30,079	$	421,947

The Company’s annual impairment test of goodwill was performed during the third quarter of ~~2019,~~2020, using primarily the discounted cash flow method. The estimated fair value of all of our reporting units exceeded their respective carrying value, so 0 goodwill was impaired.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

In April 2020, the price of a barrel of oil began a large decline and various economic forecasts show the lower price of oil will continue into the next few years. This lower price for oil and a revised assessment of the Australian market performed in conjunction with the executed restructuring activities required the Company to re-assess the financial projections for the ~~access systems~~Access Systems reporting unit. This resulted in lower projected net sales, operating income, and cash flows for this reporting unit, resulting in the need for an interim impairment test. The results of the test showed that the reporting unit's carrying value was higher than its estimated fair value. Accordingly, the Company recorded a $12,575 impairment of access system's goodwill in the second quarter of 2020.

(5) 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 ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019 were as follows:


		2020		2019			2020		2019
Interest	Interest	$	19,690	$	19,411	Interest	$	20,298	$	19,440
Income taxes	Income taxes	3,887		24,529		Income taxes	35,803		39,850

~~VALMONT INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

(6) 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			Basic EPS		Dilutive Effect of Stock Options		Diluted EPS
Thirteen weeks ended June 27, 2020:
Thirteen weeks ended September 26, 2020:								Thirteen weeks ended September 26, 2020:
Net earnings attributable to Valmont Industries, Inc.	Net earnings attributable to Valmont Industries, Inc.	$	22,607	$	—	$	22,607	Net earnings attributable to Valmont Industries, Inc.	$	39,342	$	0	$	39,342
Weighted average shares outstanding (000's)	Weighted average shares outstanding (000's)	21,312		81		21,393		Weighted average shares outstanding (000's)	21,309		107		21,416
Per share amount	Per share amount	$	1.06	$	—	$	1.06	Per share amount	$	1.85	$	(0.01)	$	1.84
Thirteen weeks ended June 29, 2019:
Thirteen weeks ended September 28, 2019:								Thirteen weeks ended September 28, 2019:
Net earnings attributable to Valmont Industries, Inc.	Net earnings attributable to Valmont Industries, Inc.	$39,719		$	—	$	39,719	Net earnings attributable to Valmont Industries, Inc.	$	38,045	$	0	$	38,045
Weighted average shares outstanding (000's)	Weighted average shares outstanding (000's)	21,734		97		21,831		Weighted average shares outstanding (000's)	21,556		128		21,684
Per share amount	Per share amount	$	1.83	$	(0.01)	$	1.82	Per share amount	$	1.76	$	(0.01)	$	1.75
Twenty-six weeks ended June 27, 2020
Thirty-nine weeks ended September 26, 2020								Thirty-nine weeks ended September 26, 2020
Net earnings attributable to Valmont Industries, Inc.	Net earnings attributable to Valmont Industries, Inc.	$	65,536	$	—	$	65,536	Net earnings attributable to Valmont Industries, Inc.	$	104,878	$	0	$	104,878
Weighted average shares outstanding (000's)	Weighted average shares outstanding (000's)	21,383		88		21,471		Weighted average shares outstanding (000's)	21,358		95		21,453
Per share amount	Per share amount	$	3.06	$	(0.01)	$	3.05	Per share amount	$	4.91	$	(0.02)	$	4.89
Twenty-six weeks ended June 29, 2019:
Thirty-nine weeks ended September 28, 2019:								Thirty-nine weeks ended September 28, 2019:
Net earnings attributable to Valmont Industries, Inc.	Net earnings attributable to Valmont Industries, Inc.	$	75,823	$	—	$	75,823	Net earnings attributable to Valmont Industries, Inc.	$	113,868	$	0	$	113,868
Weighted average shares outstanding (000's)	Weighted average shares outstanding (000's)	21,810		87		21,897		Weighted average shares outstanding (000's)	21,725		101		21,826
Per share amount	Per share amount	$	3.48	$	(0.02)	$	3.46	Per share amount	$	5.24	$	(0.02)	$	5.22

At ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019, there were ~~296,490~~296,966 and ~~297,170~~177,153 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)

(7) DERIVATIVE FINANCIAL INSTRUMENTS

The Company manages interest rate risk, commodity price risk, and foreign currency risk related to foreign currency denominated transactions and investments in foreign subsidiaries. Depending on the circumstances, the Company may manage these risks by utilizing derivative financial instruments. Some derivative financial instruments are marked to market and recorded in the Company's 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 ~~June 27,~~September 26, 2020 and December 28, 2019 are as follows:


Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:	Balance sheet location	June 27, 2020		December 28, 2019		Derivatives designated as hedging instruments:	Balance sheet location	September 26, 2020		December 28, 2019

Foreign currency forward contracts	Foreign currency forward contracts	Prepaid expenses and other assets	$	425	$	2,119	Foreign currency forward contracts	Prepaid expenses and other assets	$	1,021	$	2,119

Cross currency swap contracts	Cross currency swap contracts	Prepaid expenses and other assets	6,843		1,128		Cross currency swap contracts	Prepaid expenses and other assets	2,527		1,128

			$	7,268	$	3,247			$	3,548	$	3,247

Gains (losses) on derivatives recognized in the condensed consolidated statements of earnings for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019 are as follows:


			Thirteen weeks ended						Twenty-six weeks ended								Thirteen weeks ended				Thirty-nine weeks ended
		Statements of earnings location	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			Statements of earnings location	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Commodity forward contracts	Commodity forward contracts	Product cost of sales	$	—	$	(96)	$	—	$	(96)	Commodity forward contracts	Product cost of sales	$	0	$	(1,329)	$	0	$	(1,425)
Foreign currency forward contracts	Foreign currency forward contracts	Other income (expenses)	$	(93)	$	152	30		704		Foreign currency forward contracts	Other income	116		123		146		827
Foreign currency forward contracts	Foreign currency forward contracts	Product sales	99		—		152		—		Foreign currency forward contracts	Product sales	1,017		0		1,169		0
Interest rate hedge amortization	Interest rate hedge amortization	Interest expense	(16)		(16)		(32)		(32)		Interest rate hedge amortization	Interest expense	(16)		(16)		(48)		(48)
Cross currency swap contracts	Cross currency swap contracts	Interest expense	719		674		1,462		1,327		Cross currency swap contracts	Interest expense	649		769		2,111		2,096
			$	709	$	714	$	1,612	$	1,903			$	1,766	$	(453)	$	3,378	$	1,450

Cash Flow Hedges

In 2019, 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. 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. 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 May 2020, a Brazilian subsidiary with a Real functional currency entered into foreign currency forward contracts to mitigate foreign currency risk related to a customer order with components purchased in Euros. The forward contract, which qualifies as a cash flow hedge, has a final maturity date of December 2020 and a notional amount to buy 4,500 euros in exchange for a stated amount of Brazilian Real. 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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

In the second quarter of 2020, the Company early settled their Australian dollar denominated forward currency contracts and received proceeds of $11,983. In the second quarter of 2019, all existing net investment hedges were early settled and the Company received proceeds of $11,184. The proceeds/gain from these settlements will remain in Other Comprehensive Income (OCI) until either the sale or substantially complete liquidation of the related subsidiaries.

In the second quarter of 2019, the Company entered into 2 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
Danish Krone (DKK)	$	50,000	April 1, 2024	2.68%	DKK 333,625
Euro	$	80,000	April 1, 2024	2.825%	€71,550

The Company designated the full notional amount of the ~~two~~2 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)~~

(8) BUSINESS SEGMENTS

The Company has 4 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 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 renewable energy generation equipment;

COATINGS: This segment consists of galvanizing, painting, and anodizing 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.

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

2221

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Summary by Business


		Thirteen weeks ended						Twenty-six weeks ended							Thirteen weeks ended				Thirty-nine weeks ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
SALES:	SALES:									SALES:
Engineered Support Structures segment:	Engineered Support Structures segment:									Engineered Support Structures segment:
Lighting, Traffic, and Highway Safety Products	Lighting, Traffic, and Highway Safety Products	$	181,027	$	181,575	$	353,014	$	338,759	Lighting, Traffic, and Highway Safety Products	$	181,571	$	191,262	$	534,585	$	530,021
Communication Products	Communication Products	50,886		47,454		89,082		90,319		Communication Products	50,677		48,391		139,759		138,710
Access Systems	Access Systems	21,472		29,719		42,031		59,958		Access Systems	23,408		28,405		65,439		88,363
Engineered Support Structures segment	Engineered Support Structures segment	253,385		258,748		484,127		489,036		Engineered Support Structures segment	255,656		268,058		739,783		757,094
Utility Support Structures segment:	Utility Support Structures segment:									Utility Support Structures segment:
Steel	Steel	159,817		147,116		326,348		306,876		Steel	156,082		153,433		482,430		460,309
Concrete	Concrete	45,653		30,560		81,438		60,404		Concrete	39,215		28,011		120,653		88,415
Engineered Solar Tracker Solutions	Engineered Solar Tracker Solutions	4,619		9,932		13,543		40,224		Engineered Solar Tracker Solutions	43,287		3,418		56,830		43,642
Offshore and Other Complex Steel Structures	Offshore and Other Complex Steel Structures	21,235		22,221		35,456		46,247		Offshore and Other Complex Steel Structures	35,809		20,096		71,265		66,343
Utility Support Structures segment	Utility Support Structures segment	231,324		209,829		456,785		453,751		Utility Support Structures segment	274,393		204,958		731,178		658,709
Coatings segment	Coatings segment	80,005		98,406		168,090		185,185		Coatings segment	87,886		92,957		255,976		278,142
Irrigation segment:	Irrigation segment:					—				Irrigation segment:
North America	North America	99,034		102,810		205,594		211,287		North America	75,803		82,840		281,397		294,127
International	International	51,605		52,375		101,765		96,714		International	63,406		61,340		165,171		158,054
Irrigation segment	Irrigation segment	150,639		155,185		307,359		308,001		Irrigation segment	139,209		144,180		446,568		452,181

Total	Total	715,353		722,168		1,416,361		1,435,973		Total	757,144		710,153		2,173,505		2,146,126
INTERSEGMENT SALES:	INTERSEGMENT SALES:									INTERSEGMENT SALES:
Engineered Support Structures segment	Engineered Support Structures segment	4,512		1,183		7,888		3,502		Engineered Support Structures segment	711		1,564		8,599		5,066
Utility Support Structures segment	Utility Support Structures segment	2,851		820		5,364		1,484		Utility Support Structures segment	1,914		762		7,278		2,246
Coatings segment	Coatings segment	17,338		17,317		36,833		33,865		Coatings segment	19,188		16,035		56,021		49,900
Irrigation segment	Irrigation segment	1,844		1,977		3,268		4,112		Irrigation segment	1,361		1,452		4,629		5,564

Total	Total	26,545		21,297		53,353		42,963		Total	23,174		19,813		76,527		62,776
NET SALES:	NET SALES:									NET SALES:
Engineered Support Structures segment	Engineered Support Structures segment	248,873		257,565		476,239		485,534		Engineered Support Structures segment	254,945		266,494		731,184		752,028
Utility Support Structures segment	Utility Support Structures segment	228,473		209,009		451,421		452,267		Utility Support Structures segment	272,479		204,196		723,900		656,463
Coatings segment	Coatings segment	62,667		81,089		131,257		151,320		Coatings segment	68,698		76,922		199,955		228,242
Irrigation segment	Irrigation segment	148,795		153,208		304,091		303,889		Irrigation segment	137,848		142,728		441,939		446,617

Total	Total	$	688,808	$	700,871	$	1,363,008	$	1,393,010	Total	$	733,970	$	690,340	$	2,096,978	$	2,083,350

OPERATING INCOME:	OPERATING INCOME:									OPERATING INCOME:
Engineered Support Structures segment	Engineered Support Structures segment	$	4,818	$	20,882	$	20,749	$	33,327	Engineered Support Structures segment	$	25,434	$	21,825	$	46,183	$	55,152
Utility Support Structures segment	Utility Support Structures segment	21,650		16,033		49,374		41,081		Utility Support Structures segment	25,881		20,362		75,255		61,443
Coatings segment	Coatings segment	10,148		15,032		21,202		25,172		Coatings segment	12,416		13,865		33,618		39,037
Irrigation segment	Irrigation segment	22,351		21,530		46,014		41,664		Irrigation segment	14,687		18,204		60,701		59,868

Corporate	Corporate	(15,527)		(12,003)		(27,004)		(25,168)		Corporate	(16,939)		(13,192)		(43,943)		(38,360)
Total	Total	$	43,440	$	61,474	$	110,335	$	116,076	Total	$	61,479	$	61,064	$	171,814	$	177,140

2322

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

Management’s discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These 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 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 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 28, 2019. Segment net sales in the table below and elsewhere are presented net of intersegment sales. See Note 8 of our condensed consolidated financial statements for additional information on segment sales and intersegment sales.

2423

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


		Thirteen weeks ended														Twenty-six weeks ended														Thirteen weeks ended					Thirty-nine weeks ended
		June 27, 2020			June 29, 2019			% Incr. (Decr.)		June 27, 2020			June 29, 2019			% Incr. (Decr.)			September 26, 2020			September 28, 2019			% Incr. (Decr.)		September 26, 2020			September 28, 2019			% Incr. (Decr.)
Consolidated	Consolidated																	Consolidated
Net sales	Net sales	$	688.8		$	700.9		(1.7)	%	$	1,363.0		$	1,393.0		(2.2)	%	Net sales	$	734.0		$	690.3		6.3	%	$	2,097.0		$	2,083.4		0.7	%
Gross profit	Gross profit	183.9			178.2			3.2	%	370.2			342.8			8.0	%	Gross profit	190.7			173.3			10.0	%	560.9			516.1			8.7	%
as a percent of sales	as a percent of sales	26.7		%	25.4		%			27.2		%	24.6		%			as a percent of sales	26.0		%	25.1		%			26.7		%	24.8		%
SG&A expense (1)	SG&A expense (1)	140.5			116.7			20.4	%	259.9			$	226.7		14.6	%	SG&A expense (1)	129.3			112.2			15.2	%	389.1			$	339.0		14.8	%
as a percent of sales	as a percent of sales	20.4		%	16.7		%			19.1		%	16.3		%			as a percent of sales	17.6		%	16.3		%			18.6		%	16.3		%
Operating income	Operating income	43.4			61.5			(29.4)	%	110.3			116.1			(5.0)	%	Operating income	61.5			61.1			0.7	%	171.8			177.1			(3.0)	%
as a percent of sales	as a percent of sales	6.3		%	8.8		%			8.1		%	8.3		%			as a percent of sales	8.4		%	8.9		%			8.2		%	8.5		%
Net interest expense	Net interest expense	9.6			9.1			5.5	%	18.6			18.1			2.8	%	Net interest expense	10.0			9.0			11.1	%	28.6			27.2			5.1	%

Effective tax rate	Effective tax rate	35.4		%	24.8		%			29.1		%	24.9		%			Effective tax rate	23.0		%	24.5		%			26.9		%	24.7		%
Net earnings	Net earnings	$	22.6		$	39.7		(43.1)	%	$	65.5		$	75.8		(13.6)	%	Net earnings	$	39.3		$	38.0		3.4	%	$	104.9		$	113.9		(7.9)	%
Diluted earnings per share	Diluted earnings per share	$	1.06		$	1.82		(41.8)	%	$	3.05		$	3.46		(11.8)	%	Diluted earnings per share	$	1.84		$	1.75		5.1	%	$	4.89		$	5.22		(6.3)	%
Engineered Support Structures (ESS)	Engineered Support Structures (ESS)																	Engineered Support Structures (ESS)
Net sales	Net sales	$	248.8		$	257.5		(3.4)	%	$	476.2		$	485.5		(1.9)	%	Net sales	$	255.0		$	266.5		(4.3)	%	$	731.2		$	752.0		(2.8)	%
Gross profit	Gross profit	68.4			63.5			7.7	%	130.1			115.4			12.7	%	Gross profit	71.3			62.4			14.3	%	201.4			177.8			13.3	%
SG&A expense	SG&A expense	63.6			42.7			48.9	%	109.4			82.1			33.3	%	SG&A expense	45.8			40.5			13.1	%	155.2			122.6			26.6	%
Operating income	Operating income	4.8			20.8			(76.9)	%	20.7			33.3			(37.8)	%	Operating income	25.5			21.9			16.4	%	46.2			55.2			(16.3)	%
Utility Support Structures (Utility)	Utility Support Structures (Utility)																	Utility Support Structures (Utility)
Net sales	Net sales	$	228.5		$	209.1		9.3	%	$	451.4		$	452.3		(0.2)	%	Net sales	$	272.5		$	204.2		33.4	%	$	723.9		$	656.5		10.3	%
Gross profit	Gross profit	47.9			40.9			17.1	%	101.5			89.6			13.3	%	Gross profit	54.7			44.0			24.3	%	156.1			133.6			16.8	%
SG&A expense	SG&A expense	26.2			24.9			5.2	%	52.1			48.5			7.4	%	SG&A expense	28.8			23.7			21.5	%	80.8			72.2			11.9	%
Operating income	Operating income	21.7			16.0			35.6	%	49.4			41.1			20.2	%	Operating income	25.9			20.3			27.6	%	75.3			61.4			22.6	%
Coatings	Coatings																	Coatings
Net sales	Net sales	$	62.7		$	81.1		(22.7)	%	$	131.3		$	151.3		(13.2)	%	Net sales	$	68.7		$	76.9		(10.7)	%	$	200.0		$	228.3		(12.4)	%
Gross profit	Gross profit	19.8			27.1			(26.9)	%	41.6			47.7			(12.8)	%	Gross profit	22.6			24.0			(5.8)	%	64.2			71.7			(10.5)	%
SG&A expense	SG&A expense	9.7			12.0			(19.2)	%	20.4			22.5			(9.3)	%	SG&A expense	10.2			10.1			1.0	%	30.6			32.7			(6.4)	%
Operating income	Operating income	10.1			15.1			(33.1)	%	21.2			25.2			(15.9)	%	Operating income	12.4			13.9			(10.8)	%	33.6			39.0			(13.8)	%
Irrigation	Irrigation																	Irrigation
Net sales	Net sales	$	148.8		$	153.2		(2.9)	%	$	304.1		$	303.9		0.1	%	Net sales	$	137.8		$	142.7		(3.4)	%	$	441.9		$	446.6		(1.1)	%
Gross profit	Gross profit	47.8			46.7			2.4	%	97.0			90.1			7.7	%	Gross profit	42.2			42.9			(1.6)	%	139.2			133.0			4.7	%
SG&A expense	SG&A expense	25.5			25.1			1.6	%	51.0			48.4			5.4	%	SG&A expense	27.5			24.7			11.3	%	78.5			73.1			7.4	%
Operating income	Operating income	22.3			21.6			3.2	%	46.0			41.7			10.3	%	Operating income	14.7			18.2			(19.2)	%	60.7			59.9			1.3	%

Net corporate expense	Net corporate expense																	Net corporate expense
SG&A	SG&A	$	15.5		$	12.0		29.2	%	$	27.0		$	25.2		7.1	%	SG&A	$	17.0		$	13.2		28.8	%	$	44.0		$	38.4		14.6	%
Operating loss	Operating loss	(15.5)			(12.0)			(29.2)	%	(27.0)			(25.2)			(7.1)	%	Operating loss	(17.0)			(13.2)			(28.8)	%	(44.0)			(38.4)			(14.6)	%

(1) The ~~second quarter and first half of~~thirty-nine weeks ended September 26, 2020 ~~include~~includes impairment of goodwill and intangible assets.

2524

Overview

On a consolidated basis, net sales were ~~lower~~higher in the ~~second~~third quarter and first three quarters of 2020, as compared to the same periods in 2019, due to higher sales in the Utility segment that was partially offset by lower sales in ESS, Coatings, and Irrigation segments that were partially offset by increased sales for the Utility segment. Excluding the effect from foreign currency translation, second quarter 2020 sales for ESS and Irrigation were similar to 2019. In the first half of 2020, as compared to 2019, sales decreased due to lower sales in the ESS and Coatings segments. The change in net sales in the ~~second~~third quarter and first ~~half~~three quarters of fiscal 2020, as compared with the same periods in 2019, is as follows:


		Second quarter																			Third quarter
		Total		ESS		Utility		Coatings		Irrigation			Total		ESS		Utility		Coatings		Irrigation
Sales - 2019	Sales - 2019	$	700.9	$	257.5	$	209.1	$	81.1	$	153.2	Sales - 2019	$	690.3	$	266.5	$	204.2	$	76.9	$	142.7
Volume	Volume	(2.1)		(5.8)		14.3		(13.9)		3.3		Volume	60.0		(17.2)		83.2		(8.9)		2.9
Pricing/mix	Pricing/mix	0.8		2.0		3.6		(2.8)		(2.0)		Pricing/mix	(16.8)		2.5		(17.2)		—		(2.1)
Acquisition/(divestiture)	Acquisition/(divestiture)	2.9		1.2		1.8		—		(0.1)		Acquisition/(divestiture)	2.3		—		1.7		—		0.6
Currency translation	Currency translation	(13.7)		(6.1)		(0.3)		(1.7)		(5.6)		Currency translation	(1.8)		3.2		0.6		0.7		(6.3)
Sales - 2020	Sales - 2020	$	688.8	$	248.8	$	228.5	$	62.7	$	148.8	Sales - 2020	$	734.0	$	255.0	$	272.5	$	68.7	$	137.8


		Year-to-date																			Year-to-date
		Total		ESS		Utility		Coatings		Irrigation			Total		ESS		Utility		Coatings		Irrigation
Sales - 2019	Sales - 2019	$	1393.0	$	485.5	$	452.3	$	151.3	$	303.9	Sales - 2019	$	2083.4	$	752.0	$	656.5	$	228.3	$	446.6
Volume	Volume	(9.0)		(3.6)		(7.0)		(13.3)		14.9		Volume	50.9		(20.8)		76.2		(22.3)		17.8
Pricing/mix	Pricing/mix	0.6		3.2		5.3		(3.6)		(4.3)		Pricing/mix	(16.2)		5.7		(11.9)		(3.6)		(6.4)
Acquisition/(divestiture)	Acquisition/(divestiture)	2.3		2.6		1.8		—		(2.1)		Acquisition/(divestiture)	4.6		2.6		3.5		—		(1.5)
Currency translation	Currency translation	(23.9)		(11.5)		(1.0)		(3.1)		(8.3)		Currency translation	(25.7)		(8.3)		(0.4)		(2.4)		(14.6)
Sales - 2020	Sales - 2020	$	1,363.0	$	476.2	$	451.4	$	131.3	$	304.1	Sales - 2020	$	2,097.0	$	731.2	$	723.9	$	200.0	$	441.9

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 ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, contributing to lower cost of sales and improved gross profit.

The Company acquired the following businesses:

•~~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).

•Energia Solar Do Brasil ("Solbras") in the second quarter of 2020, a leading provider of solar energy solutions for agriculture (Irrigation).

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. All our manufacturing facilities are open and fully operational as of September 26, 2020. Our manufacturing facilities in Argentina, France, Malaysia, New Zealand, Philippines, and South Africa were temporarily closed ~~late in~~for part of of the first ~~quarter~~half of 2020 due to government ~~mandates, have all resumed~~

~~operations. All our manufacturing facilities are open and fully operational as of July 28, 2020.~~mandates. We continue to monitor incidence of COVID-19 on a continuous basis, particularly in areas reporting recent increases in infection. To protect the

safety, health and well-being of employees, customers, suppliers and communities, CDC and WHO guidelines are being followed in all facilities.

We generated ~~positive~~strong cash flows from operating activities during the first ~~half~~three quarters of 2020 and expect ~~positive~~ cash flows from operating activities, net of capital expenditures, to be in excess of net earnings 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 $80 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 business disruption, primarily in the Coatings and Irrigation segments. Consolidated operating income and specifically operating margin in the third quarter of 2020, is expected to be lower than the same period of 2019 as a result of the lower sales in these two segments. The ultimate magnitude of COVID-19, including the extent of its 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 response to the pandemic.

Currency Translation

In the ~~second~~third quarter and first ~~half~~three quarters of 2020, we realized a decrease in operating profit, as compared with 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		Utility		Coatings		Irrigation		Corporate			Total		ESS		Utility		Coatings		Irrigation		Corporate
Second quarter		$	(0.6)	$	(0.4)	$	0.2	$	(0.1)	$	(0.3)	$	—
Third quarter														Third quarter	$	(1.4)	$	—	$	(0.2)	$	0.1	$	(1.3)	$	—

Year-to-date	Year-to-date	$	(1.2)	$	(0.6)	$	0.2	$	(0.3)	$	(0.6)	$	0.1	Year-to-date	$	(2.7)	$	(0.6)	$	—	$	(0.2)	$	(1.9)	$	—

Gross Profit, SG&A, and Operating Income

At a consolidated level, gross profit as a percent of sales was higher in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared with the same periods in 2019, due to lower raw material costs across the Company, improved selling prices across our infrastructure businesses, and improved volumes for the Irrigation segment and associated operating leverage of fixed costs. ~~Gross~~In the third quarter of 2020 as compared to 2019, gross profit was higher for ESS and Utility but lower for Coatings and Irrigation. On a year-to-date basis, gross profit improved for ~~all operating~~the ESS, Utility, and Irrigation segments ~~with the exception of~~in 2020, but was lower for Coatings ~~that had~~due to lower sales volumes.

SG&A expenses increased in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to the same periods in 2019. The increase was due to recording a partial impairment of goodwill and tradename for the Access Systems business, higher compensation related costs including sales commissions for the North American infrastructure businesses, higher incentives due to improved operations, and ~~salary merit increases.~~restructuring activities. These increases were partially offset by lower travel costs, foreign currency translation effects, and reduced SG&A deferred compensation expense in the first ~~half~~three quarters of 2020 (offset by an increase of the same amount in other expense).

In the ~~second~~third quarter ~~and first half~~ of 2020, as compared to the ~~same periods in~~third quarter of 2019, operating income was higher in the Utility and ~~Irrigation~~ESS segments and lower for the ~~ESS~~Irrigation and Coatings segments. The overall ~~decrease~~increase in operating income in the ~~second~~third quarter can be attributed to higher utility sales volumes and an approximate $7.0 million loss recognized on certain access systems projects in 2019 that did not recur. Operating income decreased in the first ~~half~~three quarters of 2020 ~~can be attributed~~as compared to the same period in 2019, due to the goodwill and tradename impairment for the Access Systems business, certain restructuring activities, and lower volumes for the Coatings ~~business.~~businesses. The decrease was partially offset by lower raw material costs ~~improved sales pricing for the infrastructure businesses,~~ and improved sales volumes in the Irrigation ~~segment.~~and Utility segments.

Net Interest Expense and Debt

Net interest expense in the ~~second~~third quarter and first ~~half~~three quarters of 2020 was ~~similar to~~higher than the same periods in 2019. Interest income was lower in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, due to lower interest rates.

Other Income/Expenses

The change in other income/expenses in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, was due to the change in valuation of deferred compensation assets which resulted in additional other income of ~~$1.0~~$0.5 million and reduced other income of ~~$4.2~~$3.7 million, respectively. This amount is shown as ~~Gain~~"Gain on investments (unrealized)" on the condensed consolidated statements of earnings. 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 that was less favorable in 2020.

Income Tax Expense

Our effective income tax rate in the ~~second~~third quarter and first ~~half~~three quarters of 2020 was ~~35.4%~~23.0% and ~~29.1%~~26.9%, compared to ~~24.8%~~24.5% and ~~24.9%~~24.7% in the ~~second~~third quarter and first ~~half~~three quarters of 2019. ~~The~~On a year-to-date basis, the increase in the effective tax rate is a result of the partial impairment of goodwill and tradename for the Access Systems business that is not fully tax deductible. An increase in the U.K. corporate tax rate effective in the third quarter of 2020 provided a one time deferred tax benefit of $1.5 million reducing the effective tax rate.

Earnings attributable to noncontrolling interests was lower in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019. The decrease can be attributed to the acquisition of 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 ~~$150.7~~$273.0 million in the first ~~half~~three quarters of fiscal 2020, as compared with ~~$113.4~~$239.2 million provided by operations in the first ~~half~~three quarters of 2019. The increase in operating cash flow in the first ~~half~~three quarters of 2020, as compared with 2019, was due to improved working capital management. ~~The lower working~~Working capital is higher primarily ~~attributed~~due to an increase in ~~accounts payable and a larger contract liability for customer billings in excess of costs and earnings.~~cash balances.

ESS segment

Net sales were lower in the ~~second~~third quarter and first ~~half~~three quarters of 2020 as compared to 2019, primarily driven by ~~unfavorable foreign currency translation effects of $6.1 million and $11.5 million, respectively.~~lower sales volumes. Lighting, traffic, and highway safety product sales and access systems sales volumes were ~~relatively flat~~lower in the ~~second~~third quarter of 2020 as compared to 2019, while communication product sales volumes were ~~higher and sales volumes of access systems were lower.~~higher. In the first ~~half~~three quarters of 2020, sales were higher for the lighting, traffic, and highway safety ~~product business~~and communication products businesses and lower for ~~communication products and~~ access systems.

Global lighting, traffic, and highway safety product sales in the ~~second~~third quarter and first ~~half~~three quarters of 2020 was modestly lower by ~~$0.5~~$9.7 million and higher by ~~$14.3~~$4.6 million, as compared to the same periods in fiscal 2019. Sales volumes ~~improved~~decreased in North America in the third quarter of 2020, attributable to higher shipments in the third quarter of 2019 resulting from the recovery from a flood event in early 2019 at one of our facilities. On a year-to-date basis, sales volumes in North America increased due to a strong ~~backlog~~backlogs in transportation ~~markets, while sales volumes were down slightly in commercial~~ markets. Europe sales volumes were lower in the third quarter and first three quarters due to the ceasing of operations in Morocco, the temporary plant ~~shutdowns~~shutdown and continued slower markets in France ~~and India~~ due to COVID-19, and unfavorable foreign currency translation effects. ~~In addition, COVID-19 contributed to tempered demand for other locations that contributed to the decrease in sales.~~ Lighting, traffic, and highway safety product sales in the Asia-Pacific region decreased in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, due primarily to ~~temporary shutdowns~~continued market weakness in India ~~due~~attributed to COVID-19.

Communication product line sales were higher by ~~$3.4~~$2.3 million and $1.1 million in the ~~second~~third quarter and ~~lower by $1.2 million in the~~ first ~~half~~three quarters of 2020, as compared with ~~2019. In North America, communication structure sales volumes increased~~the same periods in ~~the second quarter of 2020 due to improved demand and the acquisition of Connect-It.~~2019. Communication product sales in Europe improved due to ~~new project work~~an increase in volume in the U.K. and Asia-Pacific sales volumes increased marginally. In North America, communication product sales volumes decreased ~~primarily~~in the third quarter and first three quarters of 2020 due to lower ~~market activity in China.~~demand for communication components.

Access Systems product line net sales decreased in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, by ~~$8.2~~$5.0 million and ~~$17.9~~$22.9 million. ~~Sales volumes declines were driven by Australia engineering construction spending that remained subdued negatively impacting all~~The product ~~lines. The business also~~line exited ~~the~~selling detention center systems and portions of the industrial product line ~~that~~which contributed to the sales ~~declined~~decline along with unfavorable foreign currency translation effects. For the first half of 2020, subdued construction spending in Australia also contributed to a decrease in sales volume.

Gross profit was higher in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, due to lower cost of raw materials across the segment and ~~sales volume improvements~~an approximate $7.0 million loss recognized on certain access systems projects in the ~~U.S. lighting and traffic businesses.~~third quarter of 2019 that did not recur. SG&A spending was higher in the ~~second~~third quarter ~~and first half~~ of 2020 versus 2019 due to ~~recording a partial goodwill and tradename impairment for the~~

~~Access Systems business of $16.6 million and~~ higher sales commissions and incentives due to improved operations in North America. For the first three quarters of 2020, SG&A also increased due to recording a partial goodwill and tradename impairment for the Access Systems business of $16.6 million, Operating income decreased in the first three quarters of 2020 due to the goodwill and tradename impairment of the Access Systems business, partially offset by lower raw material costs for all businesses and ~~sales volume improvements~~a loss recorded on certain access systems projects in ~~North America.~~third quarter of 2019.

Utility segment

In the Utility segment, sales increased in the ~~second~~third quarter and first three quarters of 2020, as compared with 2019, due to large project work for the international solar tracking solutions product line and improved sales volumes for steel and concrete structures in North ~~America and an improved sales mix. Sales for the first half of 2020 were comparable to 2019.~~America. 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 but that did not result~~order. This resulted in a ~~meaningful~~ decrease to the average selling prices for our steel utility structures product line for the third quarter and first ~~half~~three quarters of 2020, as compared with 2019.

Offshore and ~~Solar~~solar tracking solutions sales ~~decreased~~increased in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, due to ~~lower~~a large increase in sales volumes ~~and unfavorable currency translation effects.~~in the third quarter. The ~~decrease~~increase for both businesses can be attributed to large projects in the ~~prior year that did not recur.~~third quarter of 2020.

Gross profit increased in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, due to ~~an improved~~higher sales ~~mix, higher sale~~ volumes and its associated operating leverage of fixed ~~costs, as well as lower costs of steel while average selling prices were similar to prior year.~~costs. In addition, the business incurred approximately $3.0 million of inspection costs during 2019 to finalize the requirements from a 2015 commercial ~~settlement that did not recur in 2020.~~settlement. Partially offsetting that 2019 charge was a ~~$2.2~~$2.8 million impairment of a facility in 2020 that is classified as an asset held for sale. SG&A expense was higher in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared with 2019, due to higher incentives due to improved operating results in North America and ~~$0.6~~a $2.7 million ~~of restructuring expenses incurred~~allowance recognized in third quarter 2020 against an international accounts receivable. The increase in operating income for the ~~offshore and other complex steel structures' product line. Operating income increased~~third quarter 2020, as compared with 2019, is primarily due to ~~an improved mix of product line sales and~~ higher sales volumes. The improvement in operating income margin in 2020 versus 2019 is also attributed to disciplined product pricing; gross profit margins increased as lower raw material costs was slightly more than the effect on net sales from lower average selling prices.

Coatings segment

Coatings segment sales decreased in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to the same periods in 2019, due to lower volumes in North America and Asia, reduced sales pricing attributed to lower zinc costs, and unfavorable foreign currency translation. Sales volumes decreased in North America in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, due primarily to decreased industrial production attributed largely to the ~~slowdown caused by~~economic impacts from COVID-19. In Asia-Pacific region, sales volumes improved in Australia, ~~but was~~which were more than offset by decreased volumes in Asia that were impacted by ~~sites temporarily closed during second quarter 2020 due to~~the continued slowdown caused by the economic impacts from COVID-19. Sales pricing also declined in Asia-Pacific due to lower zinc costs and customer mix.

SG&A expense was flat for the third quarter and lower in the ~~second quarter and~~ first ~~half~~three quarters of 2020, as compared to 2019, due to one-time expenses associated with a legal settlement in 2019. Operating income was lower in the ~~second~~third quarter and first ~~half~~three quarters of 2020, compared to the same periods in 2019, due to sales volume decreases in North America and Asia and the associated operating deleverage of fixed costs. ~~The decrease was partially offset by a one-time expenses associated with a legal settlement in 2019.~~

Irrigation segment

The decrease in Irrigation segment net sales in the ~~second~~third quarter and first three quarters of 2020, as compared to 2019, is primarily due to unfavorable foreign currency translation effects (primarily Brazil real) that were partially offset by sales volume improvements in ~~both North America and~~ international markets. Brazil, Australia, and Argentina drove the sales volume improvements for international irrigation ~~that were~~along with the acquisition of Solbras, which was partially offset by unfavorable currency translation effects from a weaker Brazil real and South African rand. ~~Sales volumes increased in~~In North America, ~~primarily due to increased service part sales resulting from drier weather conditions in 2020. Sales increased~~ slightly ~~in the first half of 2020 as compared to 2019, due to~~ higher sales volumes ~~in North America and international markets that were~~for systems was more than offset by ~~unfavorable foreign currency translation effects and lower~~decrease in sales ~~pricing in our tubing business. Sales~~volumes of other products, including industrial tubing. For the first three quarters of 2020, sales of technology-related products and services continue to increase, as growers ~~are increasing~~continued adoption of technology to reduce costs and enhance profitability.

SG&A was higher in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019, due to higher product development expenses. Operating income for the segment decreased in the third quarter due to higher product development expenses and unfavorable currency translation effects. Operating income increased in the ~~second quarter and~~ first ~~half~~three quarters of 2020 over ~~the same periods in~~ 2019, as a result of lower raw material costs and higher sales volumes in international markets.

Net corporate expense

Corporate SG&A expense was higher in the ~~second~~third quarter and first ~~half~~three quarters of 2020, as compared to 2019. The increase the ~~second~~third quarter is attributed to ~~a change in valuation of deferred compensation assets which resulted in higher expense of $1.0 million. In addition, there were~~ higher incentive accruals related to improved business performance. The increase in the first ~~half~~three quarters of 2020 is due to higher incentive expense, partially offset by the change in valuation of deferred compensation assets which

resulted in lower expense of ~~$4.2~~$3.7 million. The 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 ~~$875.0~~$934.2 million at ~~June 27,~~September 26, 2020, as compared to $918.4 million at December 28, 2019. The ~~decrease~~increase in net working capital in 2020 is attributed to an increase in ~~accounts payable of $43.3 million and contract liability for customer billings in excess of costs and earnings of $20.9 million.~~cash balances. Cash flow provided by operations was ~~$150.7~~$273.0 million in the first ~~half~~three quarters of 2020, as compared with ~~$113.4~~$239.2 million in the first ~~half~~three quarters of 2019. The increase in operating cash flows in ~~the first half of~~ 2020, as compared to 2019, was primarily the result of improved working capital management.

Investing Cash Flows-Capital spending in the ~~second quarter~~first three quarters of fiscal 2020 was ~~$48.2~~$71.0 million, as compared to ~~$49.3~~$72.0 million for the same period in 2019. The decrease in investing cash outflows in the ~~second~~first three quarters quarter of 2020, as compared to 2019, can be attributed to a reduction in cash paid for acquisitions. We expect our capital expenditures to be between $85.0 million and $95.0 million for fiscal 2020.

Financing Cash Flows-Our total interest-bearing debt was ~~$795.4~~$795.9 million at ~~June 27,~~September 26, 2020 and $787.5 million at December 28, 2019. Financing cash ~~flows changed from an outflow of $55.7~~outflows were $110.0 million and $82.7 million in the first ~~half~~three quarters of 2020 and 2019, ~~to an outflow of $92.0 million for the first half of 2020.~~respectively. The increase in financing cash outflows in the first ~~half~~three quarters of 2020, as compared to 2019, was due to the higher amounts paid to purchase noncontrolling ~~interests.~~interests and lower net borrowings.

Guarantor Summarized Financial Information

We are providing the following information in compliance with Rule 3-10 and Rule 13-01 of Regulation S-X with respect to our two tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of the Company’s current and future direct and indirect domestic and foreign 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 and ~~twenty-six~~thirty-nine weeks ended ~~June 27,~~September 26, 2020 and ~~June 29,~~September 28, 2019


		Thirteen weeks ended						Twenty-six weeks ended							Thirteen weeks ended				Thirty-nine weeks ended
Dollars in thousands	Dollars in thousands	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019		Dollars in thousands	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net sales	Net sales	$	470,667	$	446,568	$	938,347	$	880,575	Net sales	$	438,947	$	433,533	$	1,377,294	$	1,314,108
Gross Profit	Gross Profit	134,963		116,537		270,198		226,107		Gross Profit	115,116		114,538		385,314		340,645
Operating income	Operating income	55,471		47,883		114,605		92,497		Operating income	35,261		44,846		149,866		137,343
Net earnings	Net earnings	37,150		29,393		73,475		58,266		Net earnings	13,760		24,083		87,235		82,349
Net earnings attributable to Valmont Industries, Inc.	Net earnings attributable to Valmont Industries, Inc.	37,165		29,393		73,490		58,266		Net earnings attributable to Valmont Industries, Inc.	13,759		24,083		87,249		82,349

Supplemental Combined Parent and Guarantors Financial Information

~~June 27,~~September 26, 2020 and December 28, 2019


Dollars in thousands	Dollars in thousands	June 27, 2020		December 28, 2019		Dollars in thousands	September 26, 2020		December 28, 2019
Current assets	Current assets	$	804,098	$	728,457	Current assets	$	777,934	$	728,457
Noncurrent assets	Noncurrent assets	370,145		354,173		Noncurrent assets	374,796		354,173
Current liabilities	Current liabilities	344,983		312,984		Current liabilities	295,544		312,984
Noncurrent liabilities	Noncurrent liabilities	1,083,920		1,076,491		Noncurrent liabilities	1,121,280		1,076,491
Noncontrolling interest in consolidated subsidiaries	Noncontrolling interest in consolidated subsidiaries	1,585		—		Noncontrolling interest in consolidated subsidiaries	1,585		—

Included in noncurrent assets is a due from non-guarantor subsidiaries receivable of ~~$68,508~~$83,977 and $54,915 at ~~June 27,~~September 26, 2020 and December 28, 2019. Included in noncurrent liabilities is a due to non-guarantor subsidiaries payable of ~~$246,920~~$262,680 and $249,056 at ~~June 27,~~September 26, 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. Share repurchases were temporarily suspended at the end of the first quarter of 2020 until September 2020 as a precaution to preserve liquidity. We acquired ~~190,491~~251,136 treasury shares for approximately ~~$20.5~~$28.0 million under our share repurchase program during the first ~~half~~three quarters of 2020. As of ~~June 27,~~September 26, 2020, we have approximately ~~$184.0~~$176.4 million open under this authorization to repurchase shares in the future. ~~We suspended repurchase of shares at the end of the first quarter 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 ~~June 27,~~September 26, 2020 is primarily long-term debt consisting of:

•$450 million face value ($436.5 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 ($297.6 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 ~~June 27,~~September 26, 2020 and December 28, 2019, we had ~~$40.4~~$41.9 million and $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 ~~June 27,~~September 26, 2020, we had the ability to borrow ~~$544.5~~$542.6 million under this facility, after consideration of standby letters of credit of ~~$15.1~~$15.5 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling ~~$132.3~~$134.2 million, ~~$117.8~~$120.0 million of which was unused at ~~June 27,~~September 26, 2020.

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.

At ~~June 27,~~September 26, 2020, we were in compliance with all covenants related to the debt agreements. The key covenant calculations at ~~June 27,~~September 26, 2020 were as follows (in 000's):


Interest-bearing debt	$	~~795,447~~795,937
Adjusted EBITDA-last four quarters	~~339,824~~344,627
Leverage ratio	~~2.34~~2.31

Adjusted EBITDA-last four quarters	$	~~339,824~~344,627
Interest expense-last four quarters	~~40,270~~40,748
Interest earned ratio	~~8.44~~8.46

The calculation of Adjusted EBITDA-last four quarters ~~(June 30,~~(October 29, 2019 through ~~June 27,~~September 26, 2020) is as follows. The last four quarters information ended ~~June 27,~~September 26, 2020 is calculated by taking the full fiscal year ended December 28, 2019, subtracting the first ~~two~~three quarters ended ~~June 27,~~September 28, 2019, and adding the first ~~two~~three quarters ended ~~June 27,~~September 26, 2020.


Net cash flows from operations	$	~~344,921~~341,430
Interest expense	~~40,270~~40,748
Income tax expense	~~51,591~~50,613
Impairment of property, plant and equipment	~~(2,258)~~(2,811)
Impairment of goodwill and intangible assets	(16,638)
Change in investment	~~163~~85
Deferred income tax benefit	~~2,637~~6,908
Noncontrolling interest	~~(3,713)~~(2,481)
Stock-based compensation	~~(10,888)~~(11,434)
Pension plan expense	~~3,801~~5,532
Contribution to pension plan	~~21,917~~18,433
Changes in assets and liabilities	~~(115,865)~~(112,236)
Other	~~1,669~~1,351
EBITDA	~~317,607~~319,500
Cash restructuring expenses	~~3,321~~5,678

Impairment of goodwill and intangible assets	16,638
Impairment of property, plant and equipment	~~2,258~~2,811

Adjusted EBITDA	$	~~339,824~~344,627


Net earnings attributable to Valmont Industries, Inc.	$	~~143,482~~144,778
Interest expense	~~40,270~~40,748
Income tax expense	~~51,591~~50,613
Depreciation and amortization expense	~~82,264~~83,361
EBITDA	~~317,607~~319,500
Cash restructuring expenses	~~3,321~~5,678

Impairment of goodwill and intangible assets	16,638
Impairment of property, plant, and equipment	~~2,258~~2,811
Adjusted EBITDA	$	~~339,824~~344,627

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.

We have cash balances of ~~$353.3~~$443.1 million at ~~June 27,~~September 26, 2020, approximately ~~$169.7~~$221.7 million is held in our non-U.S. subsidiaries. If we distributed our foreign cash balances certain taxes would be applicable. At ~~June 27,~~September 26, 2020, we have a liability for foreign withholding taxes and U.S. state income taxes of $3.3 million and ~~$0.7~~$0.8 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 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 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 28, 2019 during the ~~three~~nine months ended ~~June 27,~~September 26, 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 ~~June 27,~~September 26, 2020. For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year ended December 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.

3433

PART II. OTHER INFORMATION

ITEM 1A – Risk Factors

There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A in each of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019 and Quarterly Report on Form 10-Q for the quarter ended March 28, 2020.

3534

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)~~

~~March 29, 2020 to April 25, 2020~~

—

~~183,969,000~~

~~April 26, 2020 to May 30, 2020~~

—

~~183,969,000~~

~~May 31, 2020 to June 27, 2020~~

—

~~183,969,000~~

~~Total~~

—

~~183,969,000~~


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)
June 28, 2020 to July 25, 2020	—	$	—	—	$	176,445,000
July 26, 2020 to August 29, 2020	—	—		—	176,445,000
August 30, 2020 to September 26, 2020	60,645	124.08		60,645	176,445,000
Total	60,645	$	124.08	60,645	$	176,445,000

(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 ~~June 27,~~September 26, 2020, we have acquired ~~6,112,945~~6,173,590 shares for approximately ~~$816.0~~$823.6 million under this share repurchase program.

3635

Item 6. Exhibits

(a) Exhibits


Exhibit No.						Description
22.1						List of Issuer and Guarantor Subsidiaries. This document was filed as Exhibit 22.1 to the Company's Quarterly Report on Form 10-Q (Commission file number 001-31429) for the quarter ended March 28, 2020 and is incorporated herein by this reference.
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 ~~June 27,~~September 26, 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)

* Filed herewith

3736

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/ AVNER M. APPLBAUM
			Avner M. Applbaum Executive Vice President and Chief Financial Officer

Dated this ~~28th~~27th day of ~~July,~~October, 2020.

3837