Valmont Industries - 10-Q quarterly report FY2019 Q3

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

Form 10-Q

(Mark One)

☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2019

☐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	Symbol	Name of 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

21,525,585

Outstanding shares of common stock as of October 25, 2019

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 and thirty-nine weeks
	ended September 28, 2019 and September 29, 2018	3
	Condensed Consolidated Statements of Comprehensive Income for the thirteen
	and thirty-nine weeks ended September 28, 2019 and September 29, 2018	4
	Condensed Consolidated Balance Sheets as of September 28, 2019 and December 29,
	2018	5
	Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended
	September 28, 2019 and September 29, 2018	6
	Condensed Consolidated Statements of Shareholders' Equity for the thirteen and
	thirty-nine weeks ended September 28, 2019 and September 29, 2018	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(Unaudited)



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

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)



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

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)



	September 28, 2019			December 29, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	327,200		$	313,210
Receivables, net	501,215			483,963
Inventories	377,300			383,566
Contract asset - costs and profits in excess of billings	120,376			112,525
Prepaid expenses and other assets	50,420			42,800
Refundable income taxes	11,893			4,576
Total current assets	1,388,404			1,340,640
Property, plant and equipment, at cost	1,233,762			1,160,865
Less accumulated depreciation and amortization	685,394			646,873
Net property, plant and equipment	548,368			513,992
Goodwill	421,679			385,207
Other intangible assets, net	177,734			175,956
Other assets	189,257			114,479
Total assets	$	2,725,442		$	2,530,274

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	745		$	779
Notes payable to banks	19,324			10,678
Accounts payable	197,535			218,115
Accrued employee compensation and benefits	78,540			79,291
Accrued expenses	226,715			91,942
Dividends payable	8,088			8,230
Total current liabilities	530,947			409,035
Deferred income taxes	43,778			43,489
Long-term debt, excluding current installments	764,524			741,822
Defined benefit pension liability	121,282			143,904
Operating lease liabilities	78,790			—
Deferred compensation	43,837			46,107
Other noncurrent liabilities	11,113			10,394
Shareholders’ equity:
Common stock of $1 par value -
Authorized 75,000,000 shares; 27,900,000 issued	27,900			27,900
Retained earnings	2,119,843			2,027,596
Accumulated other comprehensive loss	(316,717		)	(303,185		)
Treasury stock	(744,335		)	(692,549		)
Total Valmont Industries, Inc. shareholders’ equity	1,086,691			1,059,762
Noncontrolling interest in consolidated subsidiaries	44,480			75,761
Total shareholders’ equity	1,131,171			1,135,523
Total liabilities and shareholders’ equity	$	2,725,442		$	2,530,274

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)



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

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)



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

See accompanying notes to the condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)



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

See accompanying notes to condensed consolidated financial statements.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed Consolidated Financial Statements

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

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2018. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December 29, 2018 with the exception of the lease accounting policy which changed from adopting Accounting Standards Update ("ASU") 2016-02 and is discussed in footnote 9. The results of operations for the period ended September 28, 2019 are not necessarily indicative of the operating results for the full year.

Inventories

Approximately 38% and 37% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method or market as of September 28, 2019 and December 29, 2018. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately $48,080 and $53,619 at September 28, 2019 and December 29, 2018, respectively.

Inventories consisted of the following:



	September 28, 2019		December 29, 2018
Raw materials and purchased parts	$	172,064	$	190,115
Work-in-process	34,696		35,566
Finished goods and manufactured goods	218,620		211,504
Subtotal	425,380		437,185
Less: LIFO reserve	48,080		53,619
	$	377,300	$	383,566

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

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



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

Pension Benefits

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

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



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

Stock Plans

The Company maintains stock‑based compensation plans approved by the shareholders, which provide that the Human Resource Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and bonuses of common stock. At September 28, 2019, 1,403,051 shares of common stock remained available for issuance under the plans.

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

The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options and restricted stock for the thirteen and thirty-nine weeks ended September 28, 2019 and September 29, 2018, respectively, were as follows:

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



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

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.

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 $35,144 ($37,516 at December 29, 2018) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification ("ASC") 320, Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time. The Company's ownership of shares in Delta EMD Pty. Ltd. (JSE:DTA) is also classified as trading securities. The shares are valued at $80 and $2,508 as of September 28, 2019 and December 29, 2018, 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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



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



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

Long-Lived Assets

The Company's other non-financial assets include goodwill and other intangible assets, which are classified as Level 3 items. These assets are measured at fair value on a non-recurring basis as part of annual impairment testing. Note 5 to these condensed consolidated financial statements contain additional information related to goodwill and intangible asset impairments.

Comprehensive Income

Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Accumulated other comprehensive income (loss) consisted of the following at September 28, 2019 and December 29, 2018:



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

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

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

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

Segment and Product Line Revenue Recognition

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

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

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

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



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



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

Both steel and concrete utility customers are generally invoiced upon shipment or delivery of the goods to the customer's specified location and there are normally no 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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

Recently Adopted Accounting Pronouncements

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

(2) ACQUISITIONS

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

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

(2) ACQUISITIONS (Continued)

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

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

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

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



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(2) ACQUISITIONS (Continued)

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



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

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



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

Acquisitions of Noncontrolling Interests

In April 2019, the Company acquired the remaining 4.8% of Valmont SM that it did not own for $4,763. In March 2018, the Company acquired the remaining 10% of Valmont Industria e Commercio Ltda. that it did not own for $5,510. As these transactions were for the acquisition of all 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 Consolidated Statements of Cash Flows.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(3) DIVESTITURE

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

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




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

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(4) RESTRUCTURING ACTIVITIES

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

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



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

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

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



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

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

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



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(5) GOODWILL AND INTANGIBLE ASSETS

Amortized Intangible Assets

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



	September 28, 2019
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	236,029	$	143,306	13 years
Patents & Proprietary Technology	22,936		5,945		14 years
Other	7,494		6,886		5 years
	$	266,459	$	156,137



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

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



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

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



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

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)

(5) GOODWILL AND INTANGIBLE ASSETS (Continued)

Non-amortized intangible assets

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



	September 28, 2019		December 29, 2018		Year Acquired
Newmark	$	11,111	$	11,111	2004
Webforge	8,587		8,872		2010
Convert Italia S.p.A	8,203		8,580		2018
Valmont SM	7,799		8,155		2014
Ingal EPS/Ingal Civil Products	7,001		7,233		2010
Walpar	3,500		4,300		2018
Shakespeare	4,000		4,000		2014
Other	17,211		16,472
	$	67,412	$	68,723

In its determination of these intangible assets as indefinite‑lived, the Company considered such factors as its expected future use of the intangible asset, legal, regulatory, technological and competitive factors that may impact the useful life or value of the intangible asset and the expected costs to maintain the value of the intangible asset. The Company expects that these intangible assets will maintain their value indefinitely. Accordingly, these assets are not amortized.

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

Goodwill

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



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(5) GOODWILL AND INTANGIBLE ASSETS (Continued)

The Company’s annual impairment test of goodwill was performed during the third quarter of 2019, using the discounted cash flow method. The estimated fair value of all of our reporting units exceeded their respective carrying value, so no goodwill was impaired. The access systems reporting unit with $43,400 of goodwill, is the reporting unit that did not have a substantial excess of estimated fair value over its carrying value. The model assumes geographic expansion of its architectural product lines which realized recent organic growth in its existing market. If architectural systems sales do not increase, the Company will be required to perform an interim test of goodwill. 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. In the third quarter of 2018, the Company recognized a goodwill impairment totaling $14,355, which represented all of the goodwill of the offshore and other complex steel reporting unit.

(6) CASH FLOW SUPPLEMENTARY INFORMATION

The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the thirty-nine weeks ended September 28, 2019 and September 29, 2018 were as follows:



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

At September 28, 2019 and September 29, 2018, there were 177,153 and 190,021 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)

(8) HEDGING ACTIVITIES

The Company manages interest rate risk, commodity price risk, and foreign currency risk related to foreign currency denominated transactions and investments in foreign subsidiaries. Depending on the circumstances, the Company may manage these risks by utilizing derivative financial instruments. Some derivative financial instruments are marked to market and recorded in the Company's consolidated statements of earnings, while others may be accounted for as fair value, cash flow, or net investment hedges. Derivative financial instruments have credit and market risk. The Company manages these risks of derivative instruments by monitoring limits as to the types and degree of risk that can be taken, and by entering into transactions with counterparties who are recognized, stable multinational banks.

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



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

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



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

Cash Flow Hedges

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) HEDGING ACTIVITIES (Continued)

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

Net Investment Hedges

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

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

In the second quarter of 2019, the Company entered into two new fixed-for-fixed cross currency swaps (“CCS”), swapping U.S. dollar principal and interest payments on a portion of its 5.00% senior unsecured notes due 2044 for Danish krone (DKK) and Euro denominated payments. The CCS were entered into in order to mitigate foreign currency risk on the Company's Euro and DKK investments and to reduce interest expense. Interest is exchanged twice per year on April 1 and October 1.

Key terms of the two CCS are as follows:



Currency	Notional Amount		Termination Date	Swapped Interest Rate	Set Settlement Amount
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)

(9) LEASES

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

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

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



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

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

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(9) LEASES (Continued)

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



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

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

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



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

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



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(10) 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 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, and generation applications, renewable energy generation equipment, and substations;

COATINGS: This segment consists of galvanizing, painting, and anodizing services; and

IRRIGATION: This segment consists of the manufacture of agricultural irrigation equipment, parts, services, 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. This includes the manufacture of forged steel grinding media for the mining industry and is reported in the "Other" category until its divestiture in 2018.

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(10) BUSINESS SEGMENTS (Continued)

Summary by Business



	Thirteen weeks ended						Thirty-nine weeks ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
SALES:
Engineered Support Structures segment:
Lighting, Traffic, and Highway Safety Products	$	191,262		$	183,184		$	530,021		$	522,558
Communication Products	48,391			35,985			138,710			109,690
Access Systems	28,405			32,355			88,363			94,941
Engineered Support Structures segment	268,058			251,524			757,094			727,189
Utility Support Structures segment:
Steel	153,433			161,847			460,309			471,947
Concrete	28,011			27,715			88,415			81,562
Engineered Solar Tracker Solutions	3,418			6,090			43,642			6,090
Offshore and Other Complex Steel Structures	20,096			22,617			66,343			66,251
Utility Support Structures segment	204,958			218,269			658,709			625,850
Coatings segment	92,957			90,433			278,142			266,952
Irrigation segment:
North America	82,840			78,168			294,127			301,887
International	61,340			62,007			158,054			189,177
Irrigation segment	144,180			140,175			452,181			491,064
Other	—			—			—			23,080
Total	710,153			700,401			2,146,126			2,134,135
INTERSEGMENT SALES:
Engineered Support Structures segment	1,564			3,093			5,066			16,801
Utility Support Structures segment	762			326			2,246			1,517
Coatings segment	16,035			15,886			49,900			49,408
Irrigation segment	1,452			2,404			5,564			6,628
Total	19,813			21,709			62,776			74,354
NET SALES:
Engineered Support Structures segment	266,494			248,431			752,028			710,388
Utility Support Structures segment	204,196			217,943			656,463			624,333
Coatings segment	76,922			74,547			228,242			217,544
Irrigation segment	142,728			137,771			446,617			484,436
Other	—			—			—			23,080
Total	$	690,340		$	678,692		$	2,083,350		$	2,059,781

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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION

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

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Thirteen weeks ended September 28, 2019



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Thirty-nine weeks ended September 28, 2019



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Thirteen weeks ended September 29, 2018



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Thirty-nine weeks ended September 29, 2018



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Thirteen weeks ended September 28, 2019



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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Thirty-nine weeks ended September 28, 2019



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Thirteen weeks ended September 29, 2018



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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Thirty-nine weeks ended September 29, 2018



	Parent			Guarantors		Non- Guarantors			Eliminations			Total
Net earnings	$	76,689		$	70,748	$	26,926		$	(92,212	)	$	82,151
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized translation gain (loss)	—			2,122		(52,903		)	—			(50,781		)
Realized loss on divestiture of grinding media business recorded in earnings	—			—		9,203			—			9,203
Gain (loss) on hedging activities	834			—		—			—			834
Equity in other comprehensive income	(44,366		)	—		—			44,366			—
Other comprehensive income (loss)	(43,532		)	2,122		(43,700		)	44,366			(40,744		)
Comprehensive income (loss)	33,157			72,870		(16,774		)	(47,846		)	41,407
Comprehensive income attributable to noncontrolling interests	—			—		(8,250		)	—			(8,250		)
Comprehensive income (loss) attributable to Valmont Industries, Inc.	$	33,157		$	72,870	$	(25,024	)	$	(47,846	)	$	33,157

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED BALANCE SHEETS

September 28, 2019



	Parent			Guarantors		Non- Guarantors			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	179,765		$	1,963	$	145,472		$	—		$	327,200
Receivables, net	161,260			79,077		260,878			—			501,215
Inventories	125,240			46,133		208,869			(2,942		)	377,300
Contract asset - costs and profits in excess of billings	58,713			35,195		26,468			—			120,376
Prepaid expenses and other assets	15,569			4,866		29,985			—			50,420
Refundable income taxes	11,893			—		—			—			11,893
Total current assets	552,440			167,234		671,672			(2,942		)	1,388,404
Property, plant and equipment, at cost	614,979			199,176		419,607			—			1,233,762
Less accumulated depreciation and amortization	411,808			100,692		172,894			—			685,394
Net property, plant and equipment	203,171			98,484		246,713			—			548,368
Goodwill	20,108			140,095		261,476			—			421,679
Other intangible assets	36			46,758		130,940			—			177,734
Investment in subsidiaries and intercompany accounts	1,333,420			1,138,854		840,925			(3,313,199		)	—
Other assets	78,721			4,859		105,677			—			189,257
Total assets	$	2,187,896		$	1,596,284	$	2,257,403		$	(3,316,141	)	$	2,725,442
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	—		$	—	$	745		$	—		$	745
Notes payable to banks	—			—		19,324			—			19,324
Accounts payable	64,256			18,681		114,598			—			197,535
Accrued employee compensation and benefits	41,371			5,994		31,175			—			78,540
Accrued expenses	162,640			13,024		51,051			—			226,715
Dividends payable	8,088			—		—			—			8,088
Total current liabilities	276,355			37,699		216,893			—			530,947
Deferred income taxes	16,645			—		27,133			—			43,778
Long-term debt, excluding current installments	734,417			119,716		30,107			(119,716		)	764,524
Defined benefit pension liability	—			—		121,282			—			121,282
Other noncurrent liabilities	73,788			3,622		56,330			—			133,740
Shareholders’ equity:
Common stock of $1 par value	27,900			457,950		648,957			(1,106,907		)	27,900
Additional paid-in capital	—			162,906		1,107,536			(1,270,442		)	—
Retained earnings	2,119,843			733,109		416,932			(1,150,041		)	2,119,843
Accumulated other comprehensive income (loss)	(316,717		)	81,282		(412,247		)	330,965			(316,717		)
Treasury stock	(744,335		)	—		—			—			(744,335		)
Total Valmont Industries, Inc. shareholders’ equity	1,086,691			1,435,247		1,761,178			(3,196,425		)	1,086,691
Noncontrolling interest in consolidated subsidiaries	—			—		44,480			—			44,480
Total shareholders’ equity	1,086,691			1,435,247		1,805,658			(3,196,425		)	1,131,171
Total liabilities and shareholders’ equity	$	2,187,896		$	1,596,284	$	2,257,403		$	(3,316,141	)	$	2,725,442

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED BALANCE SHEETS

December 29, 2018



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Thirty-nine weeks ended September 28, 2019



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

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Thirty-nine weeks ended September 29, 2018



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

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

Management’s discussion and analysis contains forward‑looking 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, risk factors described from time to time in the Company’s reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments.

This discussion should be read in conjunction with the financial statements and notes thereto, and the management's discussion and analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2018. Segment net sales in the table below and elsewhere are presented net of intersegment sales. See Note 10 of our condensed consolidated financial statements for additional information on segment sales and intersegment sales.

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



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

NM=Not meaningful

Overview

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



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



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

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

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

The Company acquired the following businesses during 2018 and 2019:


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


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


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


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


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


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


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


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

The Company divested of its grinding media business, which was reported in Other, during the second quarter of 2018.

Restructuring Plan

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



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

Year-to-date	$	10.8	$	8.0	$	2.8	$	—



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

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

Currency Translation

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



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

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

Gross Profit, SG&A, and Operating Income

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

SG&A expenses decreased in the third quarter and first three quarters of 2019, as compared to the same periods in 2018. The decrease was due to impairment of the goodwill and trade name of the Offshore business in the third quarter of 2018 of $15.8 million and restructuring costs incurred in the third quarter and first three quarters of 2018 totaling $2.3 million and $6.9 million, respectively. These decreases were partially offset by SG&A expenses from acquired businesses and higher deferred compensation expense (offset by an increase of the same amount in other income).

In the third quarter and first three quarters of 2019, as compared to the same periods in 2018, operating income was higher in the ESS and Utility segments and lower in the Irrigation and Coatings segments. The overall increase in operating income in the third quarter and first three quarters of 2019 is primarily attributable to the Offshore goodwill and tradename impairment and restructuring costs incurred in 2018 and a lower cost structure resulting from those activities in 2019.

Net Interest Expense and Debt

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

Other Income/Expenses

The change in other income/expenses in the third quarter of 2019, as compared to 2018, was due to the change in valuation of deferred compensation assets which resulted in less other income of $0.7 million. On a year-to-date basis, deferred compensation assets resulted in additional other income of $3.6 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

Our effective income tax rate in the third quarter and first three quarters of 2019 was 24.5% and 24.7%, compared to 56.5% and 30.5% in the third quarter and first three quarters of 2018. The decrease in effective tax rate results from the impairment of goodwill and trade name of the Offshore business that are not tax deductible and restructuring activities recognized in 2018.

Earnings attributable to noncontrolling interests was lower in the third quarter and first three quarters of 2019, as compared to 2018, due to lower earnings of certain less than 100%-owned subsidiaries.

Cash Flows from Operations

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

ESS segment

The increase in sales in the third quarter and first three quarters of 2019, as compared with the same periods in 2018, was due to sales volume increase, higher sales prices, and recent acquisitions. The sales increase was partially offset by $5.8 million and $24.8 million of unfavorable currency translation effects, respectively.

Global lighting and traffic, and highway safety product sales in the third quarter and first three quarters of 2019 was higher by $8.1 million and $7.5 million, as compared to the same periods in fiscal 2018. In the third quarter and first three quarters of 2019, as compared to the same periods in 2018, sales pricing improved in North America across commercial and transportation markets and volume increased. Lower sales volumes mainly due to the ceasing of operations in Morocco and unfavorable currency translation effects contributed to lower sales in Europe. Highway safety product sales volumes decreased in the third quarter and first three quarters of 2019, as compared to 2018, due primarily to a slowdown in government spending in Australia and India.

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

contribution from the acquisition of Larson Camouflage and Connect-It. In Asia-Pacific, sales volumes decreased due to lower demand in China and Australia.

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

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

Utility segment

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

Offshore and other complex structures sales decreased in the third quarter 2019, as compared to 2018, due to lower volumes and unfavorable currency translation effects. Sales were flat on a year-to-date basis due to higher volumes that were offset by less favorable sales pricing and currency translation effects.

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

Coatings segment

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

SG&A expense was higher in the third quarter and first three quarters of 2019, as compared to 2018, due to SG&A expenses of recent acquisitions and approximately $3.0 million of one-time expenses associated with a legal settlement in the second quarter of 2019. Operating income was lower in the third quarter and first three quarters of 2019, compared to the same periods in 2018, due to volume decreases globally and non-recurring legal expenses. The decrease was partially offset by contributions from the acquisition of United and CSP Coatings and improved sales pricing.

Irrigation segment

The increase in Irrigation segment net sales in the third quarter of 2019, as compared to 2018, is primarily due to sales volume increases in North America. On a year-to-date basis, the decrease in Irrigation segment net sales is due to lower sales volumes in North America and international markets and unfavorable currency translation effects, partially offset by improved sales pricing. Continued low commodity prices and uncertainty around trade disputes with China caused growers to

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

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

Other

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

LIFO expense

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

Net corporate expense

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

Liquidity and Capital Resources

Cash Flows

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

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

Financing Cash Flows-Our total interest‑bearing debt was $784.6 million at September 28, 2019 and $753.3 at December 29, 2018. Financing cash flows changed from an outflow of $136.7 million in the first three quarters of 2018 to an outflow of $82.7 million for the first three quarters of 2019. The decrease in financing cash outflows in the first three quarters of 2019, as compared to 2018, was due to higher net borrowings and lower purchases of treasury shares under our share repurchase program in 2019.

Financing and Capital

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

for approximately $16.8 million under our share repurchase program during the third quarter of 2019. As of September 28, 2019, we have approximately $212.2 million open under this authorization to repurchase shares in the future.

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

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


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


•	$305 million face value ($297.5 million carrying value) of unsecured notes that bear interest at 5.25% per annum and are due in October 2054.


•	We are allowed to repurchase the notes at specified prepayment premiums. Both tranches of these notes are guaranteed by certain of our subsidiaries.

At September 28, 2019 and December 29, 2018, we had $28.4 million and $5.7 million outstanding borrowings under our revolving credit agreement, respectively. The revolving credit agreement contains certain financial covenants that may limit our additional borrowing capability under the agreement. At September 28, 2019, we had the ability to borrow $557.0 million under this facility, after consideration of standby letters of credit of $14.6 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling $131.3 million, $112.0 million of which was unused at September 28, 2019.

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



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

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

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



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



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

Our businesses are cyclical, but we have diversity in our markets from a product, customer and a geographical standpoint. We have demonstrated the ability to effectively manage through business cycles and maintain liquidity. We have consistently generated operating cash flows in excess of our capital expenditures. Based on our available credit facilities, recent issuance of senior unsecured notes and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs.

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

Financial Obligations and Financial Commitments

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

Off Balance Sheet Arrangements

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

Critical Accounting Policies

There were no changes in our critical accounting policies as described on pages 37-40 in our Form 10-K for the fiscal year ended December 29, 2018 during the nine months ended September 28, 2019.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

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 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities



Period	Total Number of Shares Purchased	Average Price paid per share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Maximum Number of Shares that may yet be Purchased under the Program (1)
June 30, 2019 to July 27, 2019	30,430	$	127.78	37,375	$	225,128,000
July 28, 2019 to August 31, 2019	56,178	132.28		153,791	217,697,000
September 1, 2019 to September 28, 2019	40,126	137.14		45,157	212,194,000
Total	126,734	$	132.74	236,323	$	212,194,000

(1) On May 13, 2014, we announced a new capital allocation philosophy which included a share repurchase program. Specifically, the Board of Directors authorized the purchase of up to $500 million of the Company's outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. On February 24, 2015 and again on October 31, 2018, the Board of Directors authorized an additional purchase of up to $250 million of the Company's outstanding common stock with no stated expiration date. As of September 28, 2019, we have acquired 5,864,872 shares for approximately $787.8 million under this share repurchase program.

Item 6. Exhibits


(a)	Exhibits



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

SIGNATURES

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



	VALMONT INDUSTRIES, INC. (Registrant)
	/s/ MARK C. JAKSICH
	Mark C. Jaksich Executive Vice President and Chief Financial Officer

Dated this 31st day of October, 2019.

Valmont Industries - 10-Q quarterly report FY2019 Q3

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