VMI 10-Q Quarterly Report March 28, 2020

VALMONT INDUSTRIES INC

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vmi-20200328

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 March 28, 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

21,356,577

Outstanding shares of common stock as of April 23, 2020

VALMONT INDUSTRIES, INC.

INDEX TO FORM 10-Q


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

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(Unaudited)


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

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


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

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


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

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

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



Cross currency swaps	6,302		2,261



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

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)


	March 28, 2020		December 28, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	294,645	$	353,542
Receivables, net	492,785		480,000
Inventories	416,613		418,370
Contract asset - costs and profits in excess of billings	144,777		141,322
Prepaid expenses and other assets	63,306		32,043
Refundable income taxes	2,300		6,947
Total current assets	1,414,426		1,432,224
Property, plant and equipment, at cost	1,237,895		1,245,261
Less accumulated depreciation and amortization	683,914		687,132
Net property, plant and equipment	553,981		558,129

Goodwill	422,514		428,864
Other intangible assets, net	173,006		175,742
Other assets	193,652		212,257
Total assets	$	2,757,579	$	2,807,216

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	757	$	760
Notes payable to banks	19,719		21,774
Accounts payable	209,132		197,957
Accrued employee compensation and benefits	70,731		83,528
Contract liability - billings in excess of costs and earnings	151,034		117,945
Other accrued expenses	100,213		83,736


Dividends payable	9,625		8,079
Total current liabilities	561,211		513,779
Deferred income taxes	65,053		58,906
Long-term debt, excluding current installments	776,139		764,944
Defined benefit pension liability	114,359		140,007
Operating lease liabilities	78,694		85,817
Deferred compensation	42,894		45,114
Other noncurrent liabilities	9,099		8,904
Shareholders’ equity:


Common stock of $ 1 par value -
Authorized 75,000,000 shares; 27,900,000 issued	27,900		27,900
Retained earnings	2,171,329		2,173,802
Accumulated other comprehensive loss	( 347,868 )		( 313,422 )
Treasury stock	( 763,950 )		( 743,942 )
Total Valmont Industries, Inc. shareholders’ equity	1,087,411		1,144,338
Noncontrolling interest in consolidated subsidiaries	22,719		45,407
Total shareholders’ equity	1,110,130		1,189,745
Total liabilities and shareholders’ equity	$	2,757,579	$	2,807,216

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


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



Stock-based compensation	3,325		3,670

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

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


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


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

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Treasury stock		Noncontrolling interest in consolidated subsidiaries		Total shareholders’ equity
Balance at 12/29/2018 (1)	$	27,900	$	—	$	2,067,811	$	( 303,185 )	$	( 692,549 )	$	75,761	$	1,175,738
Net earnings	—		—		36,104		—		—		974		37,078
Other comprehensive income (loss)	—		—		—		4,445		—		135		4,580
Cash dividends declared ($ 0.375 per share)	—		—		( 8,213 )		—		—		—		( 8,213 )
Dividends to noncontrolling interests	—		—		—		—		—		( 838 )		( 838 )
Purchase of noncontrolling interest	—		—		—		—		—		( 23,082 )		( 23,082 )
Impact of ASU 842 adoption	—		—		( 8,886 )		—		—		—		( 8,886 )


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

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


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

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

(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

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 March 28, 2020, the Condensed Consolidated Statements of Earnings, Comprehensive Income, Cash Flows, and Shareholders' Equity for the thirteen weeks ended March 28, 2020 and March 30, 2019, have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of March 28, 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 March 28, 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:


	March 28, 2020		December 28, 2019
Raw materials and purchased parts	$	163,809	$	158,314
Work-in-process	33,919		38,088
Finished goods and manufactured goods	218,885		221,968
Subtotal	416,613		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 is as follows:


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

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


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

Income Taxes

Earnings before income taxes for the thirteen weeks ended March 28, 2020 and March 30, 2019, were as follows:


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

Pension Benefits

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The components of the net periodic pension (benefit) expense for the thirteen weeks ended March 28, 2020 and March 30, 2019 were as follows:


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

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 March 28, 2020, 1,205,205 shares of common stock remained available for issuance under the plans.

Under the plans, the exercise price of each option equals the closing market price at the date of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three years to six years or on the grant's fifth anniversary. Expiration of grants is seven years from the date of grant. Restricted stock units and awards generally vest in equal installments over three years beginning on the first anniversary of the grant.

The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options and restricted stock for the thirteen weeks ended March 28, 2020 and March 30, 2019, respectively, were as follows:


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

Fair Value

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan of $ 34,619 ($ 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 $ 167 and $ 210 as of March 28, 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:
	Carrying Value March 28, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading Securities	$	34,786	$	34,786	$	—	$	—
Derivative financial instruments, net	24,625		—		24,625		—


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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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 3 to these condensed consolidated financial statements contain additional information related to goodwill and intangible asset impairments.

Comprehensive Income

Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Accumulated other comprehensive income (loss) consisted of the following at March 28, 2020 and December 28, 2019:


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

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

Revenue Recognition

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

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

Shipping and handling costs associated with sales are recorded as cost of goods sold. The Company elected to use the practical expedient of treating freight as a fulfillment obligation instead of a separate performance obligation and ratably recognize freight expense as the structure is being manufactured, when the revenue from the associated customer contract is being recognized over time. With the exception of the Utility segment and the wireless communication structures product line, the Company’s inventory is interchangeable for a variety of each segment’s customers. The Company elected the practical expedient to not disclose the partially satisfied performance obligation at the end of the period when the contract has an original expected duration of one year or less. In addition, the Company elected the practical expedient to not adjust the amount of consideration to be received in a contract for any significant financing component if payment is expected within twelve months of transfer of control of goods or services; the Company expects all consideration to be received in one year or less at contract inception.

Segment and Product Line Revenue Recognition

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

The global ESS segment revenues are derived from the manufacture and distribution of engineered metal, composite structures and components for lighting and traffic and roadway safety, engineered access systems, and wireless communication. For the lighting and traffic and roadway safety product lines, revenue is recognized upon shipment or delivery of goods to the customer depending on contract terms, which is the same point in time that the customer is billed. For Access Systems, revenue is generally recognized upon delivery of goods to the customer which is the same point in time that the customer is billed. The wireless communication product line has large regional customers who have unique product 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 weeks ended March 28, 2020 and March 30, 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
	Thirteen weeks ended March 28, 2020		Thirteen weeks ended March 28, 2020		Thirteen weeks ended March 30, 2019		Thirteen weeks ended March 30, 2019
Utility Support Structures	$	8,924	$	214,024	$	30,292	$	212,966
Engineered Support Structures	215,879		11,487		218,980		8,989
Coatings	68,590		—		70,231		—
Irrigation	151,742		3,554		147,858		2,823

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

The Company's contract asset as of March 28, 2020 and December 28, 2019 was $ 144,777 and $ 141,322 , respectively. Both steel and concrete utility customers are generally invoiced upon shipment or delivery of the goods to the customer's specified location with few customers that make up-front or progress payments. The offshore and complex steel structures business invoices customers a number of ways including advanced billings, progress billings, and billings upon shipment.

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

Recently Adopted Accounting Pronouncements and Guarantors Disclosures

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

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

(2) ACQUISITIONS

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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 for $ 26,000 in cash. The agreed upon purchase price was $ 28,000 , with $ 2,000 being contingent on seller representations and warranties that was settled in the first quarter of 2020 for $ 1,522 . The acquisition of United, located in Houston, Texas further expands the Company's galvanizing footprint in North America and is reported in the Coatings segment. The fair values assigned were $ 12,374 for goodwill, $ 3,170 for customer relationships, trade name of $ 894 , $ 10,987 for property, plant, and equipment, and the remainder is net working capital. Goodwill is not deductible for tax purposes and the customer relationship will be amortized over 10 years. The trade name has an indefinite life. The Company finalized the purchase price allocation in the fourth quarter of 2019.

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

The proforma effect of these acquisitions on the thirteen weeks ended March 30, 2019 is as follows:


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

Acquisitions of Noncontrolling Interests

In February 2020, the Company acquired the remaining 49 % of AgSense that it did not own for $ 44,284 , which includes an estimated future payment of $ 2,500 subject to finalization of the buyout calculation that is expected to settle in the second quarter of 2020. In addition, the Company acquired 16 % of the remaining 25 % that it did not own of Convert Italia for a cash payment of $ 11,750 . The purchase agreement also settled the escrow funds which the Company had paid at date of acquisition. In April 2019, the Company acquired the remaining 4.8 % of Valmont SM that it did not own for $ 4,763 . 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) GOODWILL AND INTANGIBLE ASSETS

Amortized Intangible Assets

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


	March 28, 2020
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	224,920	$	137,988	13 years

Patents & Proprietary Technology	23,867		6,718		13 years
Other	7,879		6,498		4 years
	$	256,666	$	151,204


	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 weeks ended March 28, 2020 and March 30, 2019, respectively was as follows:


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

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


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

The useful lives assigned to finite-lived intangible assets included consideration of factors such as the Company’s past and expected experience related to customer retention rates, the remaining legal or contractual life of the underlying arrangement that resulted in the recognition of the intangible asset and the Company’s expected use of the intangible asset.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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 March 28, 2020 and December 28, 2019 are as follows:


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

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. The values of each trade name was determined using the relief-from-royalty method. Based on this evaluation, no trade names were determined to be impaired.

Goodwill

The carrying amount of goodwill by segment as of March 28, 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		—		—		1,100


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

The Company’s annual impairment test of goodwill was performed during the third quarter of 2019, using the discounted cash flow method. The estimated fair value of all of our reporting units exceeded their respective carrying value, so no goodwill was impaired. The access systems reporting unit with $ 42,300 of goodwill, is the reporting unit that did not have a substantial excess of estimated fair value over its carrying value during the 2019 annual impairment test. The model assumed geographic expansion of its architectural product lines, which realized recent organic growth in its existing market. If the Company determines it is more likely than not that forecasted operating income and operating cash flow amounts will

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

(4) CASH FLOW SUPPLEMENTARY INFORMATION

The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the thirteen weeks ended March 28, 2020 and March 30, 2019 were as follows:


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

(5) EARNINGS PER SHARE

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


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

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(6) DERIVATIVE FINANCIAL INSTRUMENTS

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 March 28, 2020 and December 28, 2019 are as follows:


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


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

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

		$	24,625	$	3,247

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


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

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

Cash Flow Hedges

In 2019, 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 March 2020, a subsidiary with a Euro functional currency entered into foreign currency forward contracts to mitigate foreign currency risk related to a large customer order denominated in U.S. dollars. The forward contract, which qualifies as a cash flow hedge, has a final maturity date of June 2021 and a notional amount to sell $ 27,500 in exchange for a stated amount of Euros.

Net Investment Hedges

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

In the second quarter of 2019, the Company entered into two 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 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)

(7) BUSINESS SEGMENTS

The Company has four reportable segments based on its management structure. Each segment is global in nature with a manager responsible for segment operational performance and the allocation of capital within the segment. Net corporate expense is net of certain service-related 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.

In addition to these four reportable segments, the Company had other businesses and activities that individually are not more than 10 % of consolidated sales, operating income or assets.

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.

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

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

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

Total	$	674,200	$	692,139

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


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

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 10 of our condensed consolidated financial statements for additional information on segment sales and intersegment sales.

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


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

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








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

Overview

On a consolidated basis, net sales were lower in the first quarter of 2020, as compared to 2019, due to lower sales in the ESS, Utility, and Coatings segments offset by higher sales for the Irrigation segment. The change in net sales in the first quarter of fiscal 2020, as compared with the first fiscal quarter of 2019, is as follows:


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

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 first quarter of 2020, as compared to 2019, contributing to lower cost of sales and improved gross profit.

The Company acquired the following businesses:

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

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

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

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

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

COVID-19 Impact on Financial Results and Liquidity

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

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

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

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

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

expected to see a decrease are Coatings and Irrigation. Operating income and specifically operating margin, is expected to be lower than the same period of 2019 as a result of the lower sales. The 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 first quarter 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
First quarter	$	(0.7)	$	(0.3)	$	—	$	(0.2)	$	(0.3)	$	0.1

Gross Profit, SG&A, and Operating Income

At a consolidated level, gross margin (gross profit as a percent of sales) was higher in the first quarter of 2020, as compared with the same period 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 margin improved for all operating segments.

SG&A expenses increased in the first quarter of 2020, as compared to the same period in 2019. The increase was due to higher compensation related costs, including sales commissions for the North American infrastructure businesses, higher incentives due to improved operations, and salary merit increases. These increases were partially offset by lower SG&A deferred compensation expense (offset by an increase of the same amount in other expense).

In the first quarter of 2020, as compared to the same periods in 2019, operating income was higher in all reporting segments. The overall increase in operating income in the first quarter can be attributed to lower raw material costs, improved sales pricing for the infrastructure businesses, and improved sales volumes in the Irrigation segment.

Net Interest Expense and Debt

Net interest expense in the first quarter of 2020 was consistent with the first quarter of 2019. Interest income was higher in the first quarter of 2020, as compared to 2019, due to having more cash on hand to invest.

Other Income/Expenses

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

Income Tax Expense

The Company's income tax rate in the first quarter of 2020 was consistent with the same period in 2019. Our effective income tax rate in the first quarter of 2020 was 25.2%, compared to 24.9% in the first quarter of 2019.

Earnings attributable to noncontrolling interests was lower in the first quarter 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 $62.4 million in the first quarter of fiscal 2020, as compared with $7.9 million provided by operations in the first quarter of 2019. The increase in operating cash flow in the first quarter of 2020, as compared with 2019, was due to improved working capital management. The lower working capital is primarily attributed to a larger contract liability for customer billings in excess of costs and earnings.

ESS segment

Net sales were consistent in the first quarter 2020 and 2019. Lighting, traffic, and highway sales improved due to increased volumes, which were offset by lower sales volumes for access systems and communication products and unfavorable foreign currency translation effects.

Global lighting and traffic, and highway safety product sales in the first quarter of 2020 was higher by $14.8 million, as compared to the same period in fiscal 2019. Sales volumes improved in North America across commercial and transportation markets, in addition to some improvements in pricing. Lower sales volumes due to the ceasing of operations in Morocco, the plant shutdown in France due to COVID-19, and unfavorable foreign currency translation effects contributed to lower sales in Europe. Highway safety product sales volumes decreased in the first quarter of 2020, as compared to 2019, due primarily to fewer projects in India.

Communication product line sales were lower by $4.7 million in the first quarter of 2020, as compared with 2019. In North America, component and structure sales volumes decreased in the first quarter of 2020 due to lower demand from the network expansion by providers. The decrease in volumes was partially offset by the acquisition of Connect-It. In Asia-Pacific, sales volumes decreased approximately $2 million due to government mandated plant closures in China due to COVID-19.

Access Systems product line net sales decreased in the first quarter of 2020, as compared to 2019, by $9.7 million. Sales volumes declined due to fewer large projects and unfavorable foreign currency translation for the Australia business.

Gross profit, as a percentage of sales, and operating income for the segment were higher in the first quarter of 2020, as compared to 2019, due to lower raw material pricing across the segment and sales volume improvements in the U.S. lighting and traffic businesses. SG&A spending was higher in the first quarter of 2020 due to higher sales commissions and incentives due to improved operations in North America. Operating income improved due to lower raw material pricing for all businesses and sales volume improvements in North America.

Utility segment

In the Utility segment, sales decreased in the first quarter of 2020, as compared with 2019, due to lower volumes in our engineered solar tracker solutions (Solar) and Offshore and other complex steel structures (Offshore) business. Sales volumes for steel and concrete structures in North America were higher in the first quarter of 2020, while sales pricing slightly increased. A number of our sales contracts in North America contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order.

Offshore and Solar sales decreased in the first quarter of 2020, as compared to 2019, due to lower volumes and unfavorable currency translation effects. The decrease for both businesses can be attributed to large projects in the prior year that did not recur.

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

Coatings segment

Coatings segment sales decreased in the first quarter of 2020, as compared to the same period in 2019, due to unfavorable currency translation effect and slightly lower average sales pricing in Asia Pacific, attributed to the lower cost of zinc. Sales volumes increased modestly in North America in the first quarter of 2020, as compared to 2019. In Asia-Pacific

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

SG&A expense was consistent in the first quarter of 2020, as compared to 2019. Operating income was higher in the first quarter 2020, compared to the same period in 2019, due to sales volume increases in North America and Australia and lower raw material pricing. The increase was partially offset by lower volumes and associated operating deleverage of fixed costs for the India businesses.

Irrigation segment

The increase in Irrigation segment net sales in the first quarter of 2020, as compared to 2019, is primarily due to sales volume increases in international markets. Brazil and the Middle East drove the sales volume improvements that were partially offset by unfavorable currency translation effects from a weaker Brazil real and South African rand. Sales volumes increased in North America, primarily due to increased service part sales that were lower in 2019 due to the floods. Sales of technology-related products and services continue to grow, as growers are increasing adoption of technology to reduce costs and enhance profitability.

SG&A was higher in the first quarter of 2020, as compared to 2019, due to higher product development expenses. Operating income for the segment increased in the first quarter of 2020 over the same period 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 lower in the first quarter of 2020, as compared to the first quarter of 2019, due to a change in valuation of deferred compensation assets which resulted in lower expense of $5.1 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 $853.2 million at March 28, 2020, as compared to $918.4 million at December 28, 2019. The decrease in net working capital in 2020 is attributed to an increase in contract liability for customer billings in excess of costs and earnings of $33.1 million. Cash flow provided by operations was $62.4 million in the first quarter of 2020, as compared with $7.9 million in first quarter of 2019. The increase in operating cash flows in the first quarter of 2020, as compared to 2019, was primarily the result of improved working capital management.

Investing Cash Flows -Capital spending in the first quarter of fiscal 2020 was $23.6 million, as compared to $21.1 million for the same period in 2019. The decrease in investing cash outflows in the first quarter of 2020, as compared to 2019, can be attributed to a reduction in cash paid for acquisitions.

Financing Cash Flows -Our total interest-bearing debt was $796.6 million at March 28, 2020 and $787.5 million at December 28, 2019. Financing cash flows changed from an outflow of $32.0 million in the first quarter of 2019 to an outflow of $80.9 million for the first quarter of 2020. The increase in financing cash outflows in the first quarter of 2020, as compared to 2019, was due to the higher purchase price of noncontrolling interests and repurchases of company shares.

Guarantor Summarized Financial Information

We are providing the following information in compliance with Rule 3-10 and Rule 13-01 of Regulation S-X with respect to our two tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of the Company’s current and future direct and indirect domestic and foreign subsidiaries (collectively the “Guarantors”). The Parent is the Issuer of the notes and consolidates all Guarantors.

The financial information of Issuer and Guarantors is presented on a combined basis with intercompany balances and transactions between Issuer and Guarantors eliminated. The Issuer’s or Guarantors' amounts due from, amounts due to, and transactions with non-guarantor subsidiaries are separately disclosed.

Combined financial information is as follows:

Supplemental Combined Parent and Guarantors Financial Information

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


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

Supplemental Combined Parent and Guarantors Financial Information

March 28, 2020 and December 28, 2019


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

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

Financing and Capital

The Board of Directors authorized the purchase of $250 million of the Company's shares without an expiration date in October 2018. The share purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any share repurchases under the share repurchase program and we may discontinue the share repurchase program at any time. We acquired 190,491 treasury shares for approximately $20.5 million under our share repurchase program during the first quarter of 2020. As of March 28, 2020, we have approximately $184.0 million open under this authorization to repurchase shares in the future. We have suspended repurchase of shares to preserve financial liquidity until the COVID-19 impact is clearer.

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

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

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

• $305 million face value ($297.6 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 March 28, 2020 and December 28, 2019, we had $40.1 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 March 28, 2020, we had the ability to borrow $544.6 million under this facility, after consideration of standby letters of credit of $15.3 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling $129.2 million, $109.5 million of which was unused at March 28, 2020. At the beginning of the second quarter of 2020, the Company drew down $75.0 million on its revolving credit facility to ensure sufficient liquidity related to COVID-19 uncertainty.

Our senior unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness.

The debt agreements contain covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities, including capital expenditures. The debt agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired business. The debt agreements also provide for an adjustment to EBITDA, subject to certain limitations, for non-cash charges or gains that are non-recurring in nature.

Our key debt covenants are as follows:

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

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

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


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

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

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


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


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




Adjusted EBITDA	$	335,625


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



Adjusted EBITDA	$	335,625

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 $294.6 million at March 28, 2020, approximately $145.9 million is held in our non-U.S. subsidiaries. If we distributed our foreign cash balances certain taxes would be applicable. At March 28, 2020, we have a liability for foreign withholding taxes and U.S. state income taxes of $3.4 million and $0.6 million, respectively.

Financial Obligations and Financial Commitments

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

PART II. OTHER INFORMATION

ITEM 1A – Risk Factors

Other than the addition of the text below, there have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019.

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

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

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

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

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

PART II. OTHER INFORMATION

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

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased		Average Price paid per share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Maximum Number of Shares that may yet be Purchased under the Program (1)
December 29, 2019 to January 25, 2020		—		$	—		—		$	204,451,000
January 26, 2020 to February 29, 2020		65,151		122.00			65,151		196,503,000
March 1, 2020 to March 28, 2020		125,340		99.99			125,340		183,969,000
Total		190,491		$	107.52		190,491		$	183,969,000

(1) On May 13, 2014, we announced a new capital allocation philosophy which included a share repurchase program. Specifically , the Board of Directors authorized the purchase of up to $500 million of the Company's outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. On February 24, 2015 and again on October 31, 2018, the Board of Directors authorized an additional purchase of up to $250 million of the Company's outstanding common stock with no stated expiration date. As of March 28, 2020, we have acquired 6,112,945 shares for approximately $816.0 million under this share repurchase program.

Item 5. Other Information

Submission of Matters to a Vote of Security Holders

Valmont's annual meeting of stockholders was held on April 28, 2020. The stockholders elected four directors to serve three-year terms, approved, on an advisory basis, a resolution approving Valmont's named executive officer compensation, and ratified the appointment of Deloitte & Touche LLP as independent auditors for fiscal 2020. For the annual meeting there were 21,523,917 shares outstanding and eligible to vote of which 19,607,591were present at the meeting in person or by proxy. The tabulation for each matter voted upon at the meeting was as follows:

Election of Directors:


	For	Withheld	Broker Non-Votes
Mogens C. Bay	17,530,369	887,822	1,189,400
Walter Scott, Jr.	17,483,019	935,172	1,189,400
Clark T. Randt, Jr.	15,076,665	3,341,526	1,189,400
Richard A. Lanoha	17,862,658	555,533	1,189,400

Advisory vote on executive compensation:


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

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


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

Item 6. Exhibits

(a) Exhibits


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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and by the undersigned hereunto duly authorized.


			VALMONT INDUSTRIES, INC. (Registrant)
			/s/ AVNER M. APPLBAUM
			Avner M. Applbaum Executive Vice President and Chief Financial Officer

Dated this 29th day of April, 2020.

TABLE OF CONTENTS

Part I. Financial Information Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1A Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 5. Other Information Item 6. Exhibits

Exhibits

18 Preferability Letter - LIFO Change 22.1 List of Issuer and Guarantor Subsidiaries 31.1 Section302 Certificate of Chief Executive Officer 31.2 Section302 Certificate of Chief Financial Officer 32.1 Section906 Certifications of Chief Executive Officer and Chief Financial Officer

VMI 10-Q Quarter ended March 28, 2020

Exhibits