What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-02-23 · 589 added, 748 removed, 905 unchanged (60% of the section changed)

13 unchanged sentences

We have audited the accompanying consolidated balance sheets of Valmont Industries, Inc.

and subsidiaries (the "Company") as of December 25, 2021 and December 26, 2020, the related consolidated statements of earnings, comprehensive income, cash flows, and shareholders' equity, for each of the three years in the period ended December 25, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 25, 2021 and December 26, 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2021, in conformity with the accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 25, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

and subsidiaries (the “Company”) as of December 31, 2022 and December 25, 2021, the related consolidated statements of earnings, comprehensive income, cash flows, and shareholders’ equity, for each of the fiscal years in the three-year period ended December 31, 2022, and the related notes listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and December 25, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

18 unchanged sentences

The solar tracking structure reporting unit was valued using a blend of both the discounted cash flows and a market approach.

The market valuation approach estimates the value for this reporting unit using a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA).

The market valuation

approach estimates the value for this reporting unit using a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA).

The EBITDA multiples are analyzed against other industrial companies with similar product lines.

These valuation methods require management to make significant estimates and assumptions related to projected cash flows, selection of industrial companies with similar product lines and forecasted EBITDA, and discount rates.

The estimated fair value of all reporting units exceeded their respective carrying value as of the measurement date and, therefore, no impairment was recognized.

We identified goodwill for certain reporting units as a critical audit matter because of the significant estimates and assumptions made by management to estimate fair value and the difference between the fair values and the carrying values of certain reporting units as of August 27, 2022.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to certain assumptions within the projected cash flows, selection of industrial companies within similar product lines and forecasted EBITDA, and discount rates.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to certain assumptions within the projected cash flows, selection of industrial companies with similar product lines and forecasted EBITDA, and discount rates.

How the Critical Audit Matter Was Addressed in the Audit

3 unchanged sentences

We evaluated the reasonableness of management’s projected cash flows by comparing to (1) historical results, (2) internal communications to management and the Board of Directors, (3) industry reports and (4) information included in Company press releases to analysts and investors.

• With the assistance of our fair value specialists, we evaluated the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

• With the assistance of our fair value specialists, we evaluated the industrial companies with similar product lines and forecasted EBITDA, including testing the underlying source information and mathematical accuracy of the calculations.

With the assistance of our fair value specialists, we evaluated the discount rates, by testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management .

With the assistance of our fair value specialists, we evaluated the selection of industrial companies with similar product lines and forecasted EBITDA and tested the underlying source information and mathematical accuracy of the calculations .

/s/ DELOITTE & TOUCHE LLP

Omaha, Nebraska

February 23, 2022

March 1, 2023

We have served as the Company’s auditor since 1996.

4 unchanged sentences

(Dollars in thousands, except per share amounts)

2021 2020 2019

Product sales

$ 3,159,605 $ 2,594,855 $ 2,434,190

Services sales

341,970 300,500 332,786

3,501,575 2,895,355 2,766,976

Product cost of sales

2,395,630 1,936,024 1,863,780

Services cost of sales

222,056 193,817 220,515

Total cost of sales

2,617,686 2,129,841 2,084,295

883,889 765,514 682,681

Selling, general, and administrative expenses

590,608 522,923 454,776

Impairment of goodwill and intangible assets

Operating income

286,785 225,953 227,905

Other income (expenses):

Interest expense

( 42,612 ) ( 41,075 ) ( 40,153 )

Interest income

1,192 2,374 3,942

Gain on investments - unrealized 1,920 2,443 5,960

12,798 3,073 2,204

( 26,702 ) ( 33,185 ) ( 28,047 )

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

260,083 192,768 199,858

Income tax expense (benefit):

61,343 51,012 46,267

71 ( 1,397 ) 1,486

61,414 49,615 47,753

Gain (loss) on investments - unrealized

Loss from divestiture of offshore wind energy structures business

Earnings before income taxes

Income tax expense:

Earnings before equity in earnings of nonconsolidated subsidiaries

198,669 143,153 152,105

Equity in loss of nonconsolidated subsidiaries

197,725 142,149 152,105

Earnings attributable to noncontrolling interests

( 2,095 ) ( 1,456 ) ( 5,697 )

Net earnings attributable to Valmont Industries, Inc.

$ 195,630 $ 140,693 $ 146,408

Earnings per share:

$ 9.23 $ 6.60 $ 6.76

$ 9.10 $ 6.57 $ 6.73

See accompanying notes to consolidated financial statements.

4 unchanged sentences

(Dollars in thousands)

2021 2020 2019

$ 197,725 $ 142,149 $ 152,105

Other comprehensive income (loss), net of tax:

1 unchanged sentence

Unrealized translation gains (losses)

$ ( 31,405 ) $ 21,483 $ ( 2,506 )

Realized loss on offshore wind energy structures business recorded in other expense

Gain (loss) on hedging activities:

2 unchanged sentences

Unrealized gain (loss) on cross currency swaps

Unrealized gain on net investment hedges, net of tax expense of $ 2,428 in 2020

Realized (gain) on offshore wind energy structures business cross currency swap, net of tax expense of $ 1,207 in 2022

Cash flow hedges

Realized (gain) loss on cash flow hedges recorded in earnings — ( 1,598 ) —

Realized gain on cash flow hedges recorded in earnings

Amortization cost included in interest expense

Unrealized gain on net investment hedges, net of tax expense (benefit) of $ — in 2021, $ 2,428 in 2020, $ 384 in 2019

— 7,289 1,154

227 1,474 2,905

Actuarial gain (loss) on defined benefit pension plan, net of tax expense (benefit) of $ 25,736 in 2021, $( 4,183 ) in 2020, $( 2,710 ) in 2019

76,718 ( 17,349 ) ( 10,828 )

Net gain (loss) on defined benefit pension plan, net of tax expense (benefit) of $( 606 ) in 2022, $ 25,736 in 2021, $( 4,183 ) in 2020

Other comprehensive income (loss)

45,540 5,608 ( 10,429 )

Comprehensive income

243,265 147,757 141,676

Comprehensive (income) loss attributable to noncontrolling interests ( 976 ) ( 3,428 ) ( 5,505 )

Comprehensive income attributable to noncontrolling interests

Comprehensive income attributable to Valmont Industries, Inc.

$ 242,289 $ 144,329 $ 136,171

See accompanying notes to consolidated financial statements.

7 unchanged sentences

Receivables, less allowance of $ 20,890 in 2022 and $ 18,050 in 2021

571,593 511,714

728,834 448,941

Contract asset - costs and profits in excess of billings

142,643 123,495

Contract assets

Prepaid expenses and other assets

1 unchanged sentence

Total current assets

1,712,763 1,554,625

Property, plant, and equipment, at cost

1,422,101 1,341,380

Less accumulated depreciation and amortization

823,496 743,653

Net property, plant and equipment

598,605 597,727

708,566 430,322

Other intangible assets, net

175,364 167,193

251,951 203,293

$ 3,447,249 $ 2,953,160

Defined pension benefit asset

LIABILITIES AND SHAREHOLDERS’ EQUITY

1 unchanged sentence

Current installments of long-term debt

$ 4,884 $ 2,748

Notes payable to banks

13,439 35,147

Accounts payable

347,841 268,099

Accrued employee compensation and benefits

144,559 137,939

Contract liabilities

Other accrued expenses

Income taxes payable

Dividends payable

Total current liabilities

765,856 673,303

Deferred income taxes

47,849 41,689

Long-term debt, excluding current installments

947,072 728,431

Defined benefit pension liability

Operating lease liabilities

147,759 80,202

Deferred compensation

35,373 44,519

Other noncurrent liabilities

89,207 58,657

Shareholders’ equity:

Common stock of $ 1 par value -

Authorized 75,000,000 shares;

27,900,000 issued

27,900 27,900

Additional paid-in capital

Retained earnings

2,394,307 2,245,035

Accumulated other comprehensive loss

Cost of treasury stock, common shares of 6,549,833 in 2022 and 6,619,860 in 2021

( 773,712 ) ( 781,422 )

Total Valmont Industries, Inc.

shareholders’ equity

1,386,847 1,182,062

Noncontrolling interest in consolidated subsidiaries

26,750 25,774

Total shareholders’ equity

1,413,597 1,207,836

Total liabilities and shareholders’ equity

$ 3,447,249 $ 2,953,160

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Three-year period ended December 31, 2022 (Dollars in thousands)

2021 2020 2019

Cash flows from operating activities:

$ 197,725 $ 142,149 $ 152,105

Adjustments to reconcile net earnings to net cash flows from operations:

Depreciation and amortization

92,577 82,892 82,264

Noncash loss on trading securities

Contribution to defined benefit pension plan

( 1,924 ) ( 35,399 ) ( 18,461 )

Impairment of long-lived assets

Loss on sale of offshore wind energy structures business

Stock-based compensation

28,720 14,874 11,587

Defined benefit pension plan benefit

(Gain) loss on sale of property, plant and equipment ( 961 ) 60 ( 2,513 )

Equity in earnings in nonconsolidated subsidiaries

Loss (gain) on sale of property, plant and equipment

Equity in loss in nonconsolidated subsidiaries

Deferred income taxes

71 ( 1,397 ) 1,486

Changes in assets and liabilities (net of acquisitions):

( 69,275 ) ( 24,403 ) 5,408

( 289,942 ) ( 21,888 ) 22,128

Changes in assets and liabilities:

Prepaid expenses and other assets (current and non-current)

Contract asset ( 21,579 ) 19,835 ( 29,274 )

Contract assets

Accounts payable

89,418 33,044 ( 21,410 )

Accrued expenses

30,556 52,548 ( 4,255 )

Contract liabilities

Other noncurrent liabilities

20,181 46,712 ( 1,274 )

Income taxes payable / refundable

5,560 ( 8,293 ) ( 6,944 )

Net cash flows from operating activities

65,938 316,294 307,614

Cash flows from investing activities:

Purchase of property, plant, and equipment

( 107,790 ) ( 106,700 ) ( 97,425 )

Proceeds from sale of assets

1,745 10,860 5,556

Acquisitions, net of cash acquired

( 312,500 ) ( 15,862 ) ( 81,841 )

Settlement of net investment hedge — 11,983 11,184

Proceeds from settlement of net investment hedge

Investments in nonconsolidated subsidiaries

— ( 1,283 ) ( 6,169 )

1,237 ( 3,027 ) 545

Net cash flows used in investing activities

( 417,308 ) ( 104,029 ) ( 168,150 )

Net cash flows from investing activities

Cash flows from financing activities:

Proceeds from short-term agreements 5,821 20,990 13,195

Principal payments on short-term agreements ( 26,062 ) ( 7,946 ) ( 1,868 )

Proceeds from short-term borrowings

Payments on short-term borrowings

Proceeds from long-term borrowings

312,485 88,872 31,000

Principal payments on long-term borrowings

( 91,313 ) ( 121,665 ) ( 10,768 )

Proceeds from settlement of financial derivatives

Debt issuance costs

( 2,267 ) — —

Dividends paid

( 41,412 ) ( 36,930 ) ( 32,642 )

Dividends to noncontrolling interest

— ( 5,642 ) ( 7,737 )

Purchase of noncontrolling interest

— ( 59,416 ) ( 27,845 )

Proceeds from exercises under stock plans

23,895 18,961 13,619

Purchase of noncontrolling interests

Purchase of treasury shares

( 26,100 ) ( 56,491 ) ( 62,915 )

Proceeds from exercises under stock plans

Purchase of common treasury shares—stock plan exercises

( 21,547 ) ( 14,489 ) ( 12,989 )

Net cash flows provided by (used) in financing activities 133,500 ( 173,756 ) ( 98,950 )

Net cash flows from financing activities

Effect of exchange rate changes on cash and cash equivalents

( 5,624 ) 8,675 ( 182 )

Net change in cash and cash equivalents

( 223,494 ) 47,184 40,332

Cash, cash equivalents, and restricted cash—beginning of year

400,726 353,542 313,210

Cash, cash equivalents, and restricted cash—end of year

$ 177,232 $ 400,726 $ 353,542

Cash and cash equivalents—beginning of year

Cash and cash equivalents—end of period

See accompanying notes to consolidated financial statements.

4 unchanged sentences

(Dollars in thousands, except shares and per share amounts)

stock Additional

capital Retained

earnings Accumulated

Noncontrolling

comprehensive

income (loss) Treasury

stock Noncontrolling

subsidiaries Total

shareholders’

income (loss)

Balance at December 28, 2019

Net earnings 0 0 146,408 — — 5,697 152,105

Other comprehensive income (loss)

Cash dividends declared ($ 1.80 per share)

— — ( 32,503 ) — — ( 32,503 )

Dividends to noncontrolling interests

Purchase of noncontrolling interest

Cumulative impact of ASC 606 adoption — — — — — — —

Impact of ASU 2016-16 adoption — — ( 8,886 ) — — — ( 8,886 )

Addition of noncontrolling interest

Purchase of treasury shares;

441,119 shares acquired

— — — — ( 62,915 ) — ( 62,915 )

Stock plan exercises, 88,411 shares acquired

— — — — ( 12,989 ) — ( 12,989 )

Stock options exercised;

147,014 shares issued

— ( 3,756 ) 972 — 16,403 — 13,619

Stock option expense

1 unchanged sentence

65,248 shares issued

— 707 — — 8,108 — 8,815

Balance at December 26, 2020

Net earnings — — 140,693 — — 1,456 142,149

Other comprehensive income (loss)

Cash dividends declared ($ 2.00 per share)

— — ( 38,393 ) — — — ( 38,393 )

Dividends to noncontrolling interests — — — — — ( 5,642 ) ( 5,642 )

Purchase of noncontrolling interest — — ( 31,067 ) — — ( 22,544 ) ( 53,611 )

Addition of noncontrolling interest — — — — — 5,125 5,125

Purchase of treasury shares;

111,833 shares acquired

— — — — ( 56,491 ) — ( 56,491 )

Stock plan exercises;

90,292 shares acquired

— — — — ( 14,489 ) — ( 14,489 )

Stock options exercised;

169,908 shares issued

— ( 6,335 ) — — 25,296 — 18,961

Stock option expense

1 unchanged sentence

88,395 shares issued

— 4,042 — — 8,204 — 12,246

Balance at December 25, 2021

Net earnings — — 195,630 — — 2,095 197,725

Other comprehensive income — — — 46,659 — ( 1,119 ) 45,540

Other comprehensive loss

Cash dividends declared ($ 2.20 per share)

— — ( 42,472 ) — — — ( 42,472 )

Dividends to noncontrolling interests

Addition of noncontrolling interest

Reduction of noncontrolling interest

Purchase of treasury shares;

137,612 shares acquired

— — — — ( 26,100 ) — ( 26,100 )

Stock plan exercises;

90,292 shares issued

— — — — ( 21,547 ) — ( 21,547 )

60,599 shares acquired

Stock options exercised;

121,163 shares issued

— ( 15,357 ) ( 3,886 ) — 43,138 — 23,895

Stock option expense

1 unchanged sentence

147,075 shares issued

— 13,963 — — 12,219 — 26,182

Balance at December 31, 2022

2 unchanged sentences

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three-year period ended December 31, 2022

10 unchanged sentences

The Company’s policy is to report the change in book overdrafts as an operating activity in the Consolidated Statements of Cash Flows.

The Company has four reportable segments based on its management structure.

Change in Reportable Segments

During the first quarter of 2022, the Company’s Chief Executive Officer, as the chief operating decision maker, made changes to the Company’s management structure and began to manage the business, allocate resources, and evaluate performance under the new structure.

As a result, the Company has realigned its reportable segment structure.

All prior period segment information has been recast to reflect this change in reportable segments.

Refer to Note 21 for additional information.

The Company has two reportable segments based on its management structure.

Each segment is global in nature with a manager responsible for segment operational performance and allocation of capital within the segment.

Reportable segments are as follows:

ENGINEERED SUPPORT STRUCTURES:

This segment consists of the manufacture and distribution of engineered metal and composite poles, towers, and components for 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 utility transmission, distribution, substations, and renewable energy generation equipment;

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

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

INFRASTRUCTURE:

This segment consists of the manufacture and distribution of products and solutions to serve the infrastructure markets of utility, renewable energy, lighting, transportation, and telecommunications, and coatings services to preserve metal products.

This segment consists of the manufacture of center pivot components and linear irrigation equipment for agricultural markets, including parts and tubular products, and advanced technology solutions for precision agriculture.

In addition to these two reportable segments, the Company had a business and related activities that was not more than 10% of consolidated sales, operating income, or assets.

This includes the offshore wind energy structures business and is reported in the “Other” segment until its divestiture in 2022.

The Company operates on a 52 or 53 week fiscal year with each year ending on the last Saturday in December.

Accordingly, the Company’s fiscal years ended December 25 , 2021 , December 26, 2020 and December 28, 2019 consisted of 52 weeks.

Accordingly, the Company’s fiscal year ended December 31, 2022 consisted of 53 weeks and the Company’s fiscal years ended December 25, 2021 and December 26, 2020 consisted of 52 weeks.

The estimated impact on the Company's results of operations due to the extra week in fiscal year 2022 was additional net sales of approximately $ 80,800 and additional net earnings of approximately $ 5,300 .

Accounts Receivable

Accounts receivable are reported on the balance sheet net of any allowance for doubtful accounts.

Allowances are maintained in amounts considered to be appropriate in relation to the outstanding receivables based on age of the receivable,

economic conditions and customer credit quality.

As the Company’s international business has grown, the exposure to potential losses in international markets has also increased.

These exposures can be difficult to estimate, particularly in areas of political instability, or with governments with which the Company has limited experience, or where there is a lack of transparency as to the current credit condition of governmental units.

Allowances are maintained in amounts considered to be appropriate in relation to the outstanding receivables based on age of the receivable, economic conditions and customer credit quality.

As the Company’s international business has grown, the exposure to potential losses in international

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

The following table details the balances of our allowance for doubtful receivables and changes therein:

markets has also increased.

These exposures can be difficult to estimate, particularly in areas of political instability, with governments with which the Company has limited experience, or where there is a lack of transparency as to the current credit condition of governmental units.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

The following table details the balances of the allowance for doubtful receivables and changes therein:

For periods ended:

Period Charged to Profit and Loss Currency Translation Adjustment Deductions from Reserves Balance at

December 31, 2022

3 unchanged sentences

As these accounts receivable are sold without recourse, the Company does not retain the associated risks following the transfer of such accounts receivable to the financial institutions.

Transfers of accounts receivable are accounted for as sales and, accordingly, accounts receivables sold are excluded from Accounts receivable – net on the Consolidated Balance Sheet and cash proceeds are reflected in Cash flows from operating activities on the Consolidated Statement of Cash Flows.

The difference between the carrying amount of the trade accounts receivables sold and the cash received, or discount, is recorded in Other expenses on the Consolidated Statement of Operations.

For the period ended December 31, 2021, the Company sold trade accounts receivable of $ 25.4 million.

The Company did not sell trade accounts receivable in 2020.

Transfers of accounts receivable are accounted for as sales and, accordingly, accounts receivables sold are excluded from “Receivables, less allowance” on the Consolidated Balance Sheets and cash proceeds are reflected in “Cash flows from operating activities” on the Consolidated Statements of Cash Flows.

The difference between the carrying amount of the trade accounts receivables sold and the cash received, or discount, is recorded in “Other” expenses on the Consolidated Statements of Earnings.

At December 31, 2022 and December 25, 2021, the Company sold trade accounts receivable of $ 100.0 million and $ 25.4 million, respectively.

The fees associated with trade accounts receivables sold are immaterial.

Inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market.

Inventory is valued at the lower of cost, determined on the first-in, first-out (“FIFO”) method, or net realizable value.

Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods.

7 unchanged sentences

A recognized impairment loss reduces the carrying amount of the asset to its estimated fair value.

The Company recognized a pre-tax $ 27,900 impairment of long-lived assets (property, plant, and equipment, customer relationship intangible asset, and trade name) in 2021 when it determined that its offshore and other complex steel structures reporting unit will not generate sufficient cash flows to recover the carrying values.

The Company recognized a pre-tax $ 27,900 impairment of long-lived assets (property, plant, and equipment, customer relationship intangible asset, and trade name) in 2021 when it determined that its offshore wind energy business reporting unit would not generate sufficient cash flows to recover the carrying values.

An impairment test was required in November 2021 when the Company received clarifying information on the competitive environment of this reporting unit in Europe.

Impairment losses were recorded in 2020 as facilities were closed and future plans for certain fixed assets changed in connection with the Company’s restructuring plans.

Upon adoption of ASC 842, Leases in 2019, the Company impaired the right-of-use (lease) asset for one of its galvanizing facilities in Australia as it will not generate sufficient cash flows to recover the carrying value.

Valmont Industries, Inc.

9 unchanged sentences

In these evaluations, management considers recent operating performance, expected future performance, industry conditions, and other indicators of potential impairment.

See footnote 7 for details of impairments recognized during 2021 and 2020.

See footnote 8 for details of impairments recognized during 2021.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

The Company's operating leases are included in “Other assets” and “Operating lease liabilities” in the Consolidated Balance Sheets.

The Company uses the asset and liability method to calculate deferred income taxes.

10 unchanged sentences

An actuarial analysis is used to measure the expense and liability associated with pension benefits.

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.

The Company applies the provisions of Accounting Standards Codification 820, Fair Value Measurement (“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.

Derivative Instruments

1 unchanged sentence

Where applicable, the Company may elect to account for such derivatives as either a cash flow, fair value, or net investment hedge.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income, 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

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

effect on the balance sheet dates.

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

Comprehensive Income (Loss)

Comprehensive income (loss) includes net earnings, currency translation adjustments, certain derivative-related activity, and changes in net actuarial gains / losses from a pension plan.

Results of operations for foreign subsidiaries are translated using the average exchange rates during the period.

Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates.

The components of accumulated other comprehensive income (loss) consisted of the following:

Foreign Currency Translation Adjustments Gain on Hedging Activities Defined Benefit Pension Plan Accumulated Other Comprehensive Income (Loss)

Comprehensive

Income (Loss)

Balance at December 25, 2021

Current period comprehensive income (loss)

Divestiture of offshore wind energy structures business

Balance at December 31, 2022

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.

The Company determines the appropriate revenue recognition for 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.

Contract revenues are classified as product sales when the performance obligation is related to the manufacturing of goods.

Contract revenues are classified as service sales when the performance obligation is the performance of a service.

Service revenue is primarily related to the Coatings and Technology Products and Services product lines.

Customer acceptance provisions exist primarily in the design stage of products (on a limited basis, the Company may agree to other acceptance terms), 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 this service as a separate performance obligation and, therefore, no revenue is recognized with the design stage.

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.

Shipping and handling costs associated with sales are recorded as costs 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.

On December 25, 2021, we had approximately $ 165,657 of remaining performance obligations on contracts with an original expected duration of one year or more.

We expect to recognize the majority of our remaining performance obligations on these contracts within the next 12 to 24 months.

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 from transfer of goods.

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

With the exception of the transmission, distribution, and substation structures ("TD&S") product line, the renewable energy product line, and the telecommunication structures product line, the Company’s inventory is interchangeable for a variety of each segment’s customers.

The Company has elected to not disclose the partially satisfied performance obligation at the end of the period when the contract has an original expected duration of one year or less.

In addition, the Company does not adjust the amount of consideration to be received in a contract for any significant financing component if payment is expected within twelve months of transfer of control of goods or services.

The Company’s contract assets as of December 31, 2022 and December 25, 2021 totaled $ 174,539 and $ 142,643 , respectively.

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

While most of the Infrastructure segment customers are generally invoiced upon shipment or delivery of the goods to the customer’s specified location, certain customers are also invoiced by advanced billings or progress billings.

At December 31, 2022 and December 25, 2021, total contract liabilities were $ 178,531 and $ 213,203 , respectively.

At December 31, 2022, $ 172,915 was recorded as contract liabilities and $ 5,616 was recorded as other noncurrent liabilities on the consolidated balance sheets.

Additional details are as follows:

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

● During the fiscal year ended December 31, 2022 and December 25, 2021, the Company recognized $ 96,373 and $ 105,406 of revenue that was included in the total contract liability as of December 25, 2021 and December 26, 2020, respectively.

The revenue recognized was due to applying advance payments received for performance obligations completed during the period.

● At December 31, 2022, the Company had $ 11,080 of remaining performance obligations on contracts with an original expected duration of one year or more and expects to complete the remaining performance obligations on these contracts within the next 12 to 24 months .

Segment and Product Line Revenue Recognition

Infrastructure Segment

Steel and concrete utility structures within the TD&S product lines 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 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 the TD&S and telecommunication structure product lines, the Company generally recognizes 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 monopole product line has large regional customers who have unique product specifications for these larger communication structures.

Depending on the product sold, revenue from renewable energy is recognized both upon shipment or delivery of goods to the customer depending on contract terms, or by 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 TD&S sales and the Company has chosen to expense estimated commissions owed to third parties by recognizing them proportionately as the goods are manufactured.

For the structures sold for lighting and transportation and for the majority of telecommunication products, 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.

There are also large regional customers who have unique product specifications for telecommunication structures.

When the customer contract includes a cancellation clause that would require them to pay for work completed plus a reasonable margin if an order was canceled, revenue is recognized over time based on hours worked as 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.

For wireless communication towers and components, 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.

The global Coatings segment revenues are derived by providing coating services to customers’ products, which include galvanizing, anodizing, and powder coating.

The Coatings product line revenues are derived by providing coating services to customers’ products, which include galvanizing, anodizing, and powder coating.

Revenue is recognized once the 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 revenue recognized at a point in time for the fiscal years ended December 25 , 2021 and December 26, 2020 is as follows:

Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019

Point in Time Over Time Point in Time Over Time Point in Time Over Time

Utility Support Structures $ 62,904 $ 1,058,100 $ 86,382 $ 915,756 $ 47,450 $ 838,158

Engineered Support Structures 1,026,312 38,128 940,513 43,010 952,056 50,020

Coatings 299,081 — 269,602 — 300,640 —

Irrigation 996,278 20,772 624,831 15,261 564,918 13,734

Total $ 2,384,575 $ 1,117,000 $ 1,921,328 $ 974,027 $ 1,865,064 $ 901,912

The Company's contract asset as of December 25 , 2021 and December 26, 2020 was $ 142,643 and $ 123,495 , respectively.

Both steel and concrete Utility customers in North America are generally invoiced upon shipment or delivery of the goods to the customer's specified location with few customers that make up-front or progress payments.

The Offshore and complex steel structures business invoices customers a number of ways including advanced billings, progress billings, and billings upon shipment.

Agriculture Segment

Revenue recognition from the manufacture of irrigation equipment and related parts and services (including tubular products for industrial customers) 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 recognized as part of technology services product line are primarily billed annually and revenue is recognized on a straight-line basis over the subsequent twelve months (contract terms).

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

At December 25 , 2021 and December 26, 2020, total contract liabilities were $ 213,203 and $ 170,919 , respectively.

At December 25, 2021, $ 135,746 is recorded as contract liabilities and $ 77,457 is recorded as other noncurrent liabilities on the condensed consolidated balance sheets.

During the fiscal year ended December 25 , 2021 and December 26, 2020, the Company recognized $ 105,406 and $ 74,319 of revenue that was included in the liability as of December 26, 2020 and December 28, 2019.

The revenue recognized was due to applying advance payments received for performance obligations completed during the period.

At December 25, 2021, the Company had $ 165,657 of remaining performance obligations on contracts with an original expected duration of one year or more and expects to complete the remaining performance obligations on these contracts within the next 12 to 24 months.

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

Disaggregation of revenue by product line is disclosed in the “Business Segments” footnote.

A breakdown by segment of revenue recognized over time and revenue recognized at a point in time for the fiscal years ended December 31, 2022 and December 25, 2021 is as follows:

Fiscal Year 2022

Fiscal Year 2021

Fiscal Year 2020

Infrastructure

Use of Estimates

4 unchanged sentences

Treasury Stock

Repurchased shares are recorded as “Treasury Stock” and result in a reduction of “Shareholders’ Equity.” When treasury shares are reissued, the Company uses the last-in, first-out method, and the difference between the repurchase cost and re-issuance price is charged or credited to “Additional Paid-In Capital.”

Repurchased shares are recorded as “Cost of treasury stock” and result in a reduction of “Shareholders’ equity.” When treasury shares are reissued, the Company uses the last-in, first-out method, and the difference between the repurchase cost and re-issuance price is charged or credited to “Additional paid-in capital”.

In May 2014, the Company announced a capital allocation philosophy which covered a share repurchase program.

2 unchanged sentences

As of December 31, 2022, the Company has acquired 6,613,018 shares for approximately $ 918,600 under this share repurchase program.

Subsequent to year end, on February 27, 2023, the Board of Directors increased the amount remaining under the program by an additional $ 400,000 , with no stated expiration date.

Research and Development

2 unchanged sentences

Research and development expenses were approximately $ 46,000 in 2022, $ 37,000 in 2021, and $ 21,400 in 2020.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update No.

2019-12 (ASU 2019-12), Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which simplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance to improve consistency in application of Accounting Standards Codification (ASC) 740.

The Company adopted this ASU on the first day of fiscal 2021.

The adoption of ASU No.

2019-12 did not have a significant impact on the consolidated financial statements.

Recently Issued Accounting Pronouncements (not yet adopted)

In March 2020, the FASB issued Accounting Standards Update No.

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.

2020-04 (ASU 2020-04), Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying GAAP principles to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

This guidance was able to be adopted on a prospective basis no later than December 31, 2022, with early adoption permitted.

In December 2022, the FASB issued ASU No 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 (ASU 2022-06).

ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

As the Company no longer has any LIBOR based contracts, ASU 2020-04 and ASU 2022-06 did not have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform.

This guidance can be adopted on a prospective basis no later than December 31, 2022, with early adoption permitted.

The Company does not expect ASU 2020-04 to have a material impact to our consolidated financial statements and related disclosures.

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

Recently Issued Accounting Pronouncements (Not Yet Adopted)

In September 2022, the FASB issued Accounting Standards Update No.

2022-04 (ASU 2022-04), Liabilities - Supplier Finance Programs (Topic 450-50):

Disclosure of Supplier Finance Program Obligations , which requires all buyers that use supplier finance programs to enhance the transparency of such programs to allow financial statement users to understand the effect on working capital, liquidity, and cash flows.

The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing, and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary.

Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet, and a rollforward of the obligation during the annual period.

The guidance is effective in the first quarter of 2023, except for the rollforward, which is effective in 2024.

Early adoption is permitted.

The new guidance will have no effect on the Company’s results of operations as the changes are primarily disclosure related.

The Company intends to adopt the new standard in 2023 with enhanced disclosure where required.

(2) ACQUISITIONS

Acquisitions of Businesses

On May 12, 2021, the Company acquired the outstanding shares of Prospera Technologies, Ltd.

("Prospera"), an artificial intelligence company focused on machine learning and computer vision in agriculture, for $ 300,000 in cash (net of cash acquired).

The acquisition of Prospera, located in Tel Aviv, Israel, was made to allow the Company to accelerate innovation with machine learning for agronomy and is reported in the Irrigation segment.

In the purchase price allocation, goodwill of $ 273,453 , developed technology of $ 32,900 , trade name of $ 2,850 , property, plant, and equipment of $ 1,063 , and a deferred tax liability of $ 8,223 were recorded with the remainder to net working capital.

Goodwill is no t deductible for tax purposes, the trade name will be amortized over 7 years, and the developed technology asset will be amortized over 5 years.

On June 1, 2022, the Company acquired approximately 51 % of ConcealFab for $ 39,287 in cash (net of cash acquired) and subject to working capital adjustments.

Approximately $ 1,850 of the purchase price is contingent on seller representations and warranties that will be settled within 18 months of the acquisition date.

ConcealFab is located in Colorado Springs, Colorado, and its operations are reported in the Infrastructure segment.

The acquisition was made to allow the Company to incorporate innovative 5G infrastructure and passive intermodulation mitigation solutions into the Company’s advanced infrastructure portfolio.

Goodwill is not deductible for tax purposes.

The amount allocated to goodwill was primarily attributable to anticipated synergies and other intangibles that do not qualify for separate recognition.

The Company expects to finalize the purchase price allocation early in the first quarter of 2023.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed of ConcealFab as of the date of acquisition:

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

As of June 1,

Current assets

Customer relationships

Property, plant & equipment

Total fair value of assets acquired

Current liabilities

Long-term debt

Operating lease liabilities

Deferred taxes

Other noncurrent liabilities

Total fair value of liabilities assumed

Non-controlling interest in consolidated subsidiaries

Net assets acquired

On May 12, 2021, the Company acquired the outstanding shares of Prospera Technologies, Ltd.

("Prospera"), an artificial intelligence company focused on machine learning and computer vision in agriculture, for $ 300,000 in cash (net of cash acquired).

The acquisition of Prospera, located in Tel Aviv, Israel, was made to allow the Company to accelerate innovation with machine learning for agronomy and is reported in the Agriculture segment.

Goodwill is no t deductible for tax purposes, the trade name will be amortized over seven years , and the developed technology asset will be amortized over five years .

The amount allocated to goodwill was primarily attributable to anticipated synergies and other intangibles that do no t qualify for separate recognition.

The Company finalized the purchase price allocation in the fourth quarter of 2021.

(2) ACQUISITIONS – CONTINUED

The following table summarizes the fair values of the assets acquired and liabilities assumed of Prospera as of the date of acquisition:

As of May 12,

Current assets

Developed technology

Property, plant & equipment

Total fair value of assets acquired

Current liabilities

Deferred taxes

Total fair value of liabilities assumed

Net assets acquired

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

On April 20, 2021 the Company acquired the assets of PivoTrac for $ 12,500 in cash.

The agreed upon purchase price was $ 14,000 , with $ 1,500 being held back for seller representations and warranties that will be settled within 12 months of the acquisition date.

The acquisition of PivoTrac, located in Texas, was made to allow the Company to advance its technology strategy and increase its number of connected agricultural devices and is reported in the Irrigation segment.

The preliminary fair values assigned were $ 10,800 for goodwill, $ 2,627 for customer relationships, and the remainder is net working capital.

Goodwill is no t deductible for tax purposes and the customer relationship will be amortized over 8 years.

The amount allocated to goodwill was primarily attributable to anticipated synergies and other intangibles that do not qualify for separate recognition.

The Company expects the purchase price allocation to be finalized in the second quarter of 2022.

On May 29, 2020, the Company acquired 55 % of Energia Solar do Brasil ("Solbras") for $ 4,308 .

The agreed upon purchase price was $ 14,000 , with $ 1,500 being held back for seller representations and warranties.

The fair values assigned were $ 10,800 for goodwill, $ 2,627 for customer relationships, and the remainder is net working capital.

Goodwill is no t deductible for tax purposes and the customer relationship will be amortized over eight years .

The amount allocated to goodwill was primarily attributable to anticipated synergies and other intangibles that do no t qualify for separate recognition.

The Company finalized the purchase price allocation in the second quarter of 2022.

On May 29, 2020, the Company acquired 55 % of Energia Solar do Brasil ("Solbras") for $ 4,308 .

Approximately $ 646 of the purchase price was contingent on seller representations and warranties and was settled for the full amount in the second quarter of 2021.

1 unchanged sentence

In the purchase price allocation, goodwill of $ 3,341 and customer relationships of $ 3,718 were recorded and the remainder to net working capital.

Goodwill is no t deductible for tax purposes and the customer relationship will be amortized over 8 years.

The acquisition of Solbras, located in Brazil, was made to allow the Company to expand its product offerings in the Irrigation segment to include not only pivots, but also a sustainable and low-cost energy source to provide electricity to the units.

Goodwill is no t deductible for tax purposes and the customer relationship will be amortized over eight years .

The acquisition of Solbras, located in Brazil, was made to allow the Company to expand its product offerings in the Agriculture segment to include not only pivots, but also a sustainable and low-cost energy source to provide electricity to the units.

The Company finalized the purchase price allocation in the fourth quarter of 2020.

5 unchanged sentences

The Company finalized the purchase price allocation in the fourth quarter of 2020.

On May 13, 2019, the Company acquired the assets of Connect-It Wireless, Inc.

("Connect-It") for $ 6,034 in cash.

Connect-It operates in Florida and is a manufacturer and distributor of wireless site components and safety products.

In the purchase price allocation, goodwill of $ 3,299 and customer relationships of $ 828 were recorded and the remainder to net working capital.

A portion of the goodwill is deductible for tax purposes.

The amount allocated to goodwill was primarily attributable to anticipated synergies and other intangibles that do not qualify for separate recognition.

Connect-It is included in the ESS segment and was acquired to expand the Company's wireless component distribution network.

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

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

On February 11, 2019, the Company acquired the outstanding shares of United Galvanizing ("United"), a provider of coatings services for $ 26,000 in cash.

The agreed upon purchase price was $ 28,000 , with $ 2,000 being contingent on seller representations and warranties that was settled in the first quarter of 2020 for $ 1,522 .

The acquisition of United, located in Houston, Texas further expanded the Company's galvanizing footprint in North America and is reported in the Coatings segment.

The fair values assigned were $ 12,374 for goodwill, $ 3,170 for customer relationships, trade name of $ 894 , $ 10,987 for property, plant, and equipment, and the remainder to net working capital.

Goodwill is no t deductible for tax purposes and the customer relationship will be amortized over 10 years.

The amount allocated to goodwill was primarily attributable to anticipated synergies and other intangibles that do not qualify for separate recognition.

The trade name has an indefinite life.

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

Proforma disclosures were omitted for these acquisitions as they do not have a significant impact on the Company’s financial results.

Acquisition-related costs incurred for the above acquisitions were insignificant for all years presented.

Proforma disclosures were omitted for the 2021 and 2020 acquisitions as the 2021 acquisitions of Prospera and PivoTrac and the 2020 acquisitions of Solbras and Valmont Substation do not have a significant impact on the Company's financial results.

The proforma effect of 2019 acquisitions on the 2019 Consolidated Statements of Earnings is as follows:

Fifty-two Weeks Ended December 28, 2019

Net sales $ 2,772,150

Net earnings 146,941

Earnings per share-diluted 6.75

Acquisitions of Noncontrolling Interests

In August 2022, the Company acquired the remaining 9 % of Convert Italia S.p.A.

for $ 3,046 .

As this transaction was for the acquisition of all remaining shares of consolidated subsidiary with no change in control, it was recorded within shareholders’ equity and as a financing cash flow in the Consolidated Statements of Cash Flows.

In May 2022, the Company acquired the remaining 20 % of Valmont West Coast Engineering, Ltd.

for $ 4,292 .

As this transaction was for the acquisition of all of the remaining shares of consolidated subsidiary with no change in control, it was recorded within shareholders’ equity and as a financing cash flow in the Consolidated Statements of Cash Flows.

(2) ACQUISITIONS – CONTINUED

In February 2020, the Company acquired the remaining 49 % of AgSense that it did not own for $ 43,983 , which includes a holdback payment of $ 2,200 that was made in the second quarter of 2020.

1 unchanged sentence

In December 2020, the Company acquired the remaining 40 % of Torrent Engineering and Equipment that it did not own for $ 3,500 .

In the first quarter of 2020, the Company acquired 16 % of the remaining 25 % that it did not own of Convert Italia for a cash payment of $ 11,750 .

In the first quarter of 2020, the Company acquired 16 % of the remaining 25 % that it did not own of Convert Italia S.p.A.

for a cash payment of $ 11,750 .

The purchase agreement also settled the escrow funds which the Company had paid at date of acquisition.

4 unchanged sentences

(Dollars in thousands, except per share amounts)

(3) DIVESTITURES

On November 30, 2022, the Company completed the sale of Valmont SM, the offshore wind energy structures business in Denmark, reported in the Other segment.

The business was sold because it did not align with the long-term strategic plans for the Company.

The offshore wind energy structures business’ historical annual sales, operating profit, and net assets are not significant for discontinued operations presentation.

The offshore wind energy structures business had operating income of $ 2,259 for the year ended December 31, 2022, and an operating loss of $ 40,192 (inclusive of a $ 27,900 impairment of long-lived assets) for the year ended December 25, 2021.

The Company received Danish Krone 90,000 (U.S.

$ 12,570 ) at closing with an additional Danish Krone 28,000 (U.S.

$ 4,027 ) held in an escrow account subject to normal closing conditions before it will be released to the Company.

The assets and liabilities of the offshore wind energy structures business at closing on November 30, 2022 were as follows:

Cash and cash equivalents

Receivables, net

Contract assets

Prepaid expenses and other assets

Net property, plant, and equipment

Intangible assets

Accounts payable

Contract liabilities

Accrued expenses

Deferred income taxes

Total liabilities

The pre-tax loss from divestiture is reported in “Other income (expenses)”.

The loss is comprised of the proceeds and an asset recognized for the escrow funds not yet released from buyer, less deal-related costs and the net assets of the business, which resulted in a loss of $ 12,123 .

In addition to this amount is a $ 21,150 realized loss on foreign exchange translation adjustments and net investment hedges previously reported in shareholders’ equity.

Pre-tax loss from divestitures, before recognition of currency translation loss

Recognition of cumulative currency translation loss and hedges (reclassified from OCI)

Net pre-tax loss from divestiture of offshore wind energy structures business

The transaction did not result in a taxable capital loss.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(4) RESTRUCTURING ACTIVITIES

During 2020, the Company executed certain regional restructuring activities (the "2020 Plan") primarily in the ESS and Utility segments and a U.S.

specific early retirement program covering all segments.

During 2020, the Company executed certain regional restructuring activities (the "2020 Plan") and a U.S.

specific early retirement program.

The 2020 Plan included the closure of one U.S.

Coatings facility.

galvanizing facility.

All 2020 restructuring activities were completed by December 26, 2020.

The Company recorded the following pre-tax expenses:

ESS Utility Coatings Irrigation Other/ Corporate TOTAL

Severance $ 474 $ 241 $ 424 $ — $ — $ 1,139

Infrastructure

Other cash restructuring expenses

1 unchanged sentence

Total cost of sales

Severance 4,441 2,393 2,231 2,968 1,761 13,794

Other cash restructuring expenses

2 unchanged sentences

Consolidated total

Change in the current liabilities recorded for the restructuring plans were as follows:

Balance at December 26, 2020 Recognized Restructuring Expense Costs Paid or Otherwise Settled Balance at December 25, 2021

Severance $ 12,660 $ ( 12,660 ) $ —

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

(5) CASH FLOW SUPPLEMENTARY INFORMATION

The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents.

Cash payments for interest and income taxes (net of refunds) for the fifty-two weeks ended December 25 , 2021 and December 26, 2020, and December 28, 2019 were as follows:

2021 2020 2019

$ 41,159 $ 40,209 $ 39,032

60,366 54,801 43,629

The acquisitions in 2020 and 2019 included hold back payments contingent on seller representations and warranties of $ 1,046 and $ 5,456 , respectively.

Cash payments for interest and income taxes (net of refunds) for the fifty-three weeks ended December 31, 2022 and the fifty-two weeks ended December 25, 2021 and December 26, 2020 were as follows:

The sale of the offshore wind energy structures business in 2022 included a hold back receivable contingent on normal closing conditions that is expected to be resolved in the first half of 2023.

The acquisitions in 2020 included hold back payments contingent on seller representations and warranties of $ 1,046 .

The 2020 hold back payments were released from a trust in the first half of 2021 and the 2019 hold back payments were paid in the first quarter of 2020 and are shown as an investing use of cash in the acquisitions line item of the Consolidated Statements of Cash Flows.

2 unchanged sentences

Raw materials and purchased parts

$ 278,107 $ 155,512

Work-in-process

63,628 33,632

Finished goods and manufactured goods

387,099 259,797

$ 728,834 $ 448,941

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(7) PROPERTY, PLANT, AND EQUIPMENT

1 unchanged sentence

Land and improvements

$ 112,236 $ 114,831

Buildings and improvements

413,884 373,271

Machinery and equipment

672,319 616,765

Transportation equipment

27,020 28,610

Office furniture and equipment

117,757 101,487

Construction in progress

78,885 106,416

$ 1,422,101 $ 1,341,380

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

(8) GOODWILL AND INTANGIBLE ASSETS

2 unchanged sentences

December 31, 2022

Amount Accumulated

Amortization Weighted

Customer Relationships

$ 224,597 $ 160,626 13 years

Patents & Proprietary Technology

58,699 13,955 9 years

Trade Name 2,850 183 7 years

4,534 3,959 6 years

$ 290,680 $ 178,723

December 25, 2021

Amount Accumulated

Amortization Weighted

Customer Relationships

$ 237,232 $ 155,760 13 years

Patents & Proprietary Technology

26,208 8,301 14 years

7,602 6,786 4 years

$ 271,042 $ 170,847

Amortization expense for intangible assets was $ 22,120 , $ 21,320 , and $ 18,147 for the fiscal years ended December 31, 2022, December 25, 2021, and December 26, 2020, respectively.

During the fourth quarter of fiscal 2021, an impairment test was required when the Company received clarifying information on the competitive environment of the Valmont SM business in Europe.

As a result, an impairment charge of approximately $ 4,483 was recognized against the remaining net book value of the Valmont SM customer relationship.

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

2022 $ 19,466

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.

During the fourth quarter of fiscal 2021, an impairment test was required when the Company received clarifying information on the competitive environment of the offshore wind energy structures business.

As a result, an impairment charge of approximately $ 4,483 was recognized against the remaining net book value of the related customer relationships.

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

(8) GOODWILL AND INTANGIBLE ASSETS – CONTINUED

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

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

Non-Amortized Intangible Assets

1 unchanged sentence

The carrying values of these trade names at December 31, 2022 and December 25, 2021 were as follows:

December 25 ,

2021 December 26,

2020 Year Acquired

$ 11,111 $ 11,111 2004

7,877 7,972 2010

6,082 8,720 2014

Convert Italia S.p.A.

Ingal EPS / Ingal Civil Products

7,637 7,730 2010

4,000 4,000 2014

3,500 3,500 2018

8,479 9,137 2018

14,721 14,828

$ 63,407 $ 66,998

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.

1 unchanged sentence

Accordingly, these assets are not amortized.

Indefinite-lived intangibles, although not amortized, are still subject to annual impairment assessments, and interim date assessments should events arise that suggest their value may be diminished.

The Company’s trade names were tested for impairment as of August 27, 2022.

1 unchanged sentence

Based on this evaluation, no trade names were determined to be impaired.

During the fourth quarter of fiscal 2021, an impairment test was required when the Company received clarifying information on the competitive environment of the Valmont SM business in Europe.

As a result, an impairment charge of approximately $ 2,013 was recognized against the Valmont SM trade name.

During the fourth quarter of fiscal year 2021, an impairment test was required when the Company received clarifying information on the competitive environment of the offshore wind energy structures business.

As a result, an impairment charge of approximately $ 2,013 was recognized against the related trade name.

In conjunction with an interim second quarter 2020 goodwill impairment test, impairment indicators were noted for the Webforge and Locker trade names requiring an interim impairment test.

As a result, an impairment charge of approximately $ 3,900 was recognized against these two trade names in fiscal 2020.

As a result, an impairment charge of approximately $ 3,900 was recognized against these two trade names in fiscal year 2020.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(8) GOODWILL AND INTANGIBLE ASSETS – CONTINUED

The carrying amount of goodwill by segment as of December 31, 2022 and December 25, 2021 was as follows:

Support Structures

Segment Utility

Segment Coatings

Segment Irrigation

Segment Total

Infrastructure

Gross balance at December 25, 2021

$ 232,323 $ 135,335 $ 94,309 $ 30,177 $ 492,144

Accumulated impairment losses

( 31,245 ) ( 14,355 ) ( 16,222 ) — ( 61,822 )

Balance at December 25, 2021

201,078 120,980 78,087 30,177 $ 430,322

— — — 284,253 284,253

Foreign currency translation

( 1,632 ) ( 3,256 ) ( 203 ) ( 918 ) ( 6,009 )

Balance at December 31, 2022

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

Support Structures

Segment Utility

Segment Coatings

Segment Irrigation

Segment Total

Infrastructure

Gross balance at December 26, 2020

$ 228,634 $ 130,594 $ 93,747 $ 25,136 $ 478,111

Accumulated impairment losses

( 18,670 ) ( 14,355 ) ( 16,222 ) — ( 49,247 )

Balance at December 26, 2020

209,964 116,239 77,525 25,136 428,864

— 1,100 — 5,038 6,138

( 12,575 ) — — — ( 12,575 )

Foreign currency translation

3,689 3,641 562 3 7,895

Balance at December 25, 2021

$ 201,078 $ 120,980 $ 78,087 $ 30,177 $ 430,322

The Company’s annual impairment test of goodwill was performed as of August 27, 2022, using primarily the discounted cash flow method.

The solar tracking structure reporting unit projects meaningful annual revenue growth for the foreseeable future due to strong market conditions.

Therefore, we valued this reporting unit using a blend of both the discounted cash flows and a market approach.

Therefore, the Company valued this reporting unit using a blend of both the discounted cash flows and a market approach.

The market valuation approach estimates the terminal value for this reporting unit using a multiple of earnings before interest, taxes, depreciation, and amortization (“EBITDA”).

During fiscal 2021, no goodwill impairment was recorded.

In April 2020, the price of a barrel of oil began a large decline and various economic forecasts show the lower price of oil will continue into the next few years.

This lower price for oil and a revised assessment of the Australian market performed in conjunction with the executed restructuring activities required the Company to re-assess the financial projections for the Access Systems reporting unit.

This resulted in lower projected net sales, operating income, and cash flows for this reporting unit, resulting in the need for an interim impairment test.

The results of the test showed that the reporting unit's carrying value was higher than its estimated fair value.

Accordingly, the Company recorded a $ 12,575 impairment of Access System's goodwill in the second quarter of 2020.

During fiscal year 2022, no goodwill impairment was recorded.

(9) BANK CREDIT ARRANGEMENTS

8 unchanged sentences

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries are as follows:

2021 2020 2019

United States

$ 202,051 $ 169,281 $ 166,108

58,032 23,487 33,750

$ 260,083 $ 192,768 $ 199,858

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

(10) INCOME TAXES – CONTINUED

Income tax expense (benefit) consists of:

2021 2020 2019

$ 30,031 $ 30,431 $ 27,809

8,891 8,302 5,568

20,644 12,730 13,130

59,566 51,463 46,507

1,777 ( 451 ) ( 240 )

4,587 ( 6,086 ) 47

558 ( 822 ) 160

( 5,074 ) 5,511 1,279

71 ( 1,397 ) 1,486

$ 61,414 $ 49,615 $ 47,753

The reconciliations of the statutory federal income tax rate and the effective tax rate follows:

2021 2020 2019

Statutory federal income tax rate

21.0 % 21.0 % 21.0 %

State income taxes, net of federal benefit

Carryforwards, credits and changes in valuation allowances

1.5 ( 1.6 ) ( 1.0 )

Foreign tax rate differences

( 0.1 ) ( 1.7 ) 0.3

Foreign jurisdictional tax rate differences

Changes in unrecognized tax benefits

0.7 0.2 ( 0.1 )

Goodwill and intangible impairment

( 2.4 ) 1.9 1.2

23.6 % 25.7 % 23.9 %

Fiscal 2021 includes $ 1,894 of U.S.

tax benefits related to foreign taxes paid offset by $ 5,102 of valuation allowance recorded against the Offshore and other complex steel structures deferred tax assets.

Loss on divestiture of offshore wind energy structures business

Fiscal year 2022 includes $ 8,166 of tax expense related to the divestiture of the offshore wind energy structures business for which no benefit has been recorded.

Fiscal year 2021 includes $ 1,894 of U.S.

tax benefits related to foreign taxes paid offset by $ 5,102 of valuation allowance recorded against the offshore wind energy structures business deferred tax assets.

Fiscal year 2020 includes $ 4,651 of tax expense related to non-tax deductible impairment of goodwill.

5 unchanged sentences

(Dollars in thousands, except per share amounts)

(10) INCOME TAXES – CONTINUED

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards.

2 unchanged sentences

Accrued expenses and allowances

$ 21,241 $ 17,203

Tax credits and loss carryforwards

83,690 81,912

Defined benefit pension liability

1 unchanged sentence

Accrued compensation and benefits

24,302 23,545

Lease liabilities

41,128 23,715

Deferred compensation

10,893 13,883

Gross deferred income tax assets

184,206 190,881

Valuation allowance

( 54,256 ) ( 44,451 )

Net deferred income tax assets

129,950 146,430

Deferred income tax liabilities:

Property, plant and equipment

37,686 35,701

Intangible assets

48,244 43,699

Inventory allowances

41,128 23,715

Defined benefit pension asset

Other deferred tax liabilities

Total deferred income tax liabilities

132,099 114,068

Net deferred income tax asset (liability)

1 unchanged sentence

Balance Sheet Caption

$ 45,700 $ 74,051

Deferred income taxes

4 unchanged sentences

Valuation allowances have been established for certain losses that reduce deferred tax assets to an amount that will, more likely than not, be realized.

During fiscal 2021, it was determined no longer more likely than not that the Offshore and complex steel structures reporting unit, based in Denmark, would generate future taxable income so a valuation allowance of $ 5,102 was recognized against their tax loss carryforwards.

During fiscal 2021, it was determined no longer more likely than not that the offshore wind energy structures business, based in Denmark, would generate future taxable income so a valuation allowance of $ 5,102 was recognized against their tax loss carryforwards.

During fiscal year 2022, the offshore wind energy structures business was sold.

Also in 2021, the Company recorded a valuation allowance of $ 6,472 against the tax attributes related to the acquisition of Prospera.

The deferred tax assets at December 31, 2022 that are associated with tax loss and tax credit carryforwards not reduced by valuation allowances expire in periods starting in 2023.

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

recognize the largest amount of tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority.

The following summarizes the activity related to our unrecognized tax benefits in 2021 and 2020, in thousands:

Uncertain tax positions included in other non-current liabilities are evaluated in a two-step process, whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more likely than not recognition threshold, the Company would recognize the largest amount of tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(10) INCOME TAXES – CONTINUED

The following summarizes the activity related to the unrecognized tax benefits in 2022 and 2021:

Gross unrecognized tax benefits—beginning of year

$ 1,864 $ 2,300

Gross increases—tax positions in prior period

3 unchanged sentences

Lapse of statute of limitations

( 749 ) ( 650 )

Gross unrecognized tax benefits—end of year

$ 2,664 $ 1,864

There are approximately $ 1,141 of uncertain tax positions for which reversal is reasonably possible during the next 12 months due to the closing of the statute of limitations.

1 unchanged sentence

During 2022, the Company recorded a reduction of its gross unrecognized tax benefit of $ 208 with $ 165 recorded as a reduction of income tax expense, due to the expiration of statutes of limitation in the United States.

During 2020, the Company recorded a reduction of its gross unrecognized tax benefit of $ 650 , with $ 513 recorded as a reduction of its income tax expense, due to the expiration of statutes of limitation in the United States.

During 2021, the Company recorded a reduction of its gross unrecognized tax benefit of $ 749 with $ 592 recorded as a reduction of income tax expense, due to the expiration of statutes of limitation in the United States.

In addition to these amounts, there was an aggregate of $ 172 and $ 1,758 of interest and penalties at December 31, 2022 and December 25, 2021, respectively.

7 unchanged sentences

Long-term debt is as follows:

December 25 ,

2021 December 26,

5.00 % senior unsecured notes due 2044 (a)

$ 450,000 $ 450,000

5.25 % senior unsecured notes due 2054 (b)

305,000 305,000

Unamortized discount on 5.00 % and 5.25 % senior unsecured notes (a) (b)

( 20,436 ) ( 20,799 )

Revolving credit agreement (c)

Other notes 5,684 4,483

Debt issuance costs

Long-term debt

951,956 731,179

Less current installments of long-term debt 4,884 2,748

Current installments of long-term debt

Long-term debt, excluding current installments

$ 947,072 $ 728,431

(a) The 5.00 % senior unsecured notes due 2044 include an aggregate principal amount of $ 450,000 on which interest is paid and an unamortized discount balance of $ 12,820 at December 31, 2022.

13 unchanged sentences

These notes are guaranteed by certain subsidiaries of the Company.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(11) LONG-TERM DEBT – CONTINUED

and Valmont Group Pty.

Ltd., as borrowers, entered into an amendment and restatement of our revolving credit agreement with our lenders.

Ltd., as borrowers, entered into an amendment and restatement of the revolving credit agreement with the Company’s lenders.

The maturity date of the revolving credit facility was extended to October 18, 2026.

The credit facility provides for $ 800,000 of committed unsecured revolving credit loans with available borrowings thereunder to $ 400,000 in foreign currencies.

We may increase the credit facility by up to an additional $ 300,000 at any time, subject to lenders increasing the amount of their commitments.

The Company may increase the credit facility by up to an additional $ 300,000 at any time, subject to lenders increasing the amount of their commitments.

The interest rate on the borrowings will be, at the Company’s option, either:

9 unchanged sentences

At December 31, 2022, the Company had the ability to borrow $ 659,401 under this facility, after consideration of standby letters of credit of $ 162 associated with certain insurance obligations.

We also maintain certain short-term bank lines of credit totaling $ 137,818 , $ 124,379 of w hich was unused at December 25 , 2021 .

The Company also maintains certain short-term bank lines of credit totaling $ 125,034 , of which $ 119,188 was unused at December 31, 2022.

The revolving credit facility includes a financial leverage covenant.

3 unchanged sentences

The obligations arising under the 5.00 % senior unsecured notes due 2044, the 5.25 % senior unsecured notes due 2054, and the revolving credit facility are guaranteed by the Company and its wholly owned subsidiaries Valmont Telecommunications, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc., and Valmont Queensland Pty.

(12) STOCK-BASED COMPENSATION

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 December 31, 2022, 1,722,643 shares of common stock remained available for issuance under the plans.

Shares and options issued and available are subject to changes in

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

(11) STOCK-BASED COMPENSATION

At December 25 , 2021 , 266,739 shares of common stock remained available for issuance under the plans.

Shares and options issued and available are subject to changes in capitalization.

capitalization.

The Company’s policy is to issue shares upon exercise of stock options or vesting of restricted stock units or issuance of restricted stock from treasury shares held by the Company.

5 unchanged sentences

The associated tax benefits recorded in the 2022, 2021, and 2020 fiscal years was $ 10,463 , $ 7,180 , and $ 3,719 , respectively.

(12) STOCK-BASED COMPENSATION – CONTINUED

At December 31, 2022, the amount of unrecognized stock option compensation expense, to be recognized over a weighted average period of 2.37 years, was approximately $ 6,814 .

Compensation expense for stock options was $ 3,120 in 2022, $ 2,538 in 2021, and $ 2,628 in 2020.

The Company uses a binomial option pricing model to value its stock options.

The fair value of each option grant made in 2022, 2021 and 2020 was estimated using the following assumptions:

2021 2020 2019

Expected volatility

33.01 % 33.72 % 33.13 %

Risk-free interest rate

1.26 % 0.43 % 1.69 %

Expected life from vesting date

Dividend yield

1.20 % 1.24 % 1.07 %

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

Following is a summary of the stock option activity during 2020, 2021 and 2022:

Shares Weighted

Price Weighted

Term Aggregate

Outstanding at December 28, 2019

57,648 147.31

( 119,789 ) 113.02

( 27,712 ) 137.07

Outstanding at December 26, 2020

1 unchanged sentence

Options exercisable at December 26, 2020

The weighted average per share fair value of options granted during 2019 was $ 37.85 .

Shares Weighted

Price Weighted

Term Aggregate

Outstanding at December 28, 2019 488,560 $ 133.13

66,231 168.80

( 147,014 ) 125.43

( 8,212 ) 137.49

Outstanding at December 26, 2020 399,565 $ 141.79 4.88 $ 12,103

Options vested or expected to vest at December 26, 2020 389,633 $ 141.56 4.81 11,890

Options exercisable at December 26, 2020 254,498 $ 138.64 3.38 8,510

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

The weighted average per share fair value of options granted during 2020 was $ 45.49 .

Shares Weighted

Price Weighted

Term Aggregate

Outstanding at December 26, 2020

47,223 252.89

( 169,908 ) 135.76

( 416 ) 132.84

Outstanding at December 25, 2021

7 unchanged sentences

(Dollars in thousands, except per share amounts)

(12) STOCK-BASED COMPENSATION – CONTINUED

Outstanding at December 25, 2021

Outstanding at December 31, 2022

Options vested or expected to vest at December 31, 2022

Options exercisable at December 31, 2022

The weighted average per share fair value of options granted during 2022 was $ 104.01 .

In accordance with shareholder-approved plans, the Human Resource Committee of the Board of Directors may grant stock under various stock‑based compensation arrangements, including restricted stock awards, restricted stock units, performance based restricted stock units, and stock issued in lieu of cash bonuses.

2 unchanged sentences

Restricted stock units and awards generally vest in equal installments over three years beginning on the first anniversary of the grant.

All cash-settled restricted stock units are marked-to-market and presented within other accrued expenses and noncurrent liabilities in our Consolidated Balance Sheets.

All cash-settled restricted stock units are marked-to-market and presented within other accrued expenses and noncurrent liabilities in the Consolidated Balance Sheets.

During fiscal 2022, 2021 and 2020, the Company granted restricted stock units to directors and certain management employees as follows (which are not included in the above stock plan activity tables):

2021 2020 2019

Shares granted

216,971 85,251 78,318

Restricted stock units granted

Weighted‑average per share price on grant date

$ 236.28 $ 161.73 $ 145.89

Recognized compensation expense

$ 16,147 $ 9,081 $ 8,815

During the second half of 2021, the Company granted 159,982 restricted shares, worth $ 36,916 , to certain employees of Prospera.

These restricted shares vest in equal installments over four years, and require the employees to continue employment over those four years.

During the second half of 2021, the Company granted 159,982 restricted stock units, worth $ 36,916 , to certain employees of Prospera.

These restricted stock units vest in equal installments over four years and require the employees to continue employment over those four years.

As such, the related compensation expense will be incurred over the vesting period.

At December 31, 2022 the amount of deferred stock‑based compensation granted, to be recognized over a weighted‑average period of 2.73 years, was approximately $ 50,422 .

Performance-based restricted stock units (PSU) awards consist of shares of our stock which are payable upon the determination that the Company achieve certain established performance targets and can range from 0 % to 200 % of the targeted payout based on the actual results.

PSU's granted in 2021 have a performance period of three years .

The fair value of each PSU granted is equal to the fair market value of our common stock on the date of grant.

Performance-based restricted stock units (“PSU”) awards consist of shares of the Company’s stock which are payable upon the determination that the Company achieve certain established performance targets and can range from 0 % to 200 % of the targeted payout based on the actual results.

PSUs granted in 2022 and 2021 have a performance period of three years .

The fair value of each PSU granted is equal to the fair market value of the Company’s common stock on the date of grant.

PSUs granted generally have a three years period cliff vesting schedule;

however, according to the grant agreements, if certain conditions are met, the employee (or beneficiary) will receive a prorated amount of the award based on active employment during the service period.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

During fiscal 2022, 2021 and 2020, the Company granted PSU awards as follows (which are not included in the above stock plan activity tables):

2021 2020 2019

Shares granted

41,060 35,181 31,344

Weighted‑average per share price on grant date

$ 230.40 $ 125.41 $ 136.14

Recognized compensation expense

$ 10,035 $ 3,165 $ —

Valmont Industries, Inc.

5 unchanged sentences

The following table provides a reconciliation between basic and diluted earnings per share (“EPS”):

Basic EPS Dilutive

Options Diluted EPS

Net earnings attributable to Valmont Industries, Inc.

$ 195,630 $ — $ 195,630

Weighted average shares outstanding (000’s)

21,193 300 21,493

Per share amount

$ 9.23 $ 0.13 $ 9.10

Net earnings attributable to Valmont Industries, Inc.

$ 140,693 $ — $ 140,693

Weighted average shares outstanding (000’s)

21,315 110 21,425

Per share amount

$ 6.60 $ 0.03 $ 6.57

Net earnings attributable to Valmont Industries, Inc.

$ 146,408 $ — $ 146,408

Weighted average shares outstanding (000’s)

Per share amount

Basic and diluted net earnings and earnings per share in fiscal 2021 was impacted by impairments of long-lived assets (customer relationship intangible asset, trade name, and property, plant and equipment) associated with the Offshore and other complex steel structures reporting unit of $ 21,678 after-tax ($ 1.01 per share) and a valuation allowance against the deferred tax assets of the Offshore and other complex steel structures reporting unit of $ 5,076 after-tax ($ 0.24 per share).

Basic and diluted net earnings and earnings per share in fiscal 2020 was impacted by impairments of goodwill and intangible assets in fiscal 2020 of $ 16,220 after-tax ($ 0.76 per share) and restructuring expenses of $ 17,324 after-tax ($ 0.81 per share).

Basic and diluted net earnings and earnings per share in fiscal year 2022 were impacted by a loss from the divestiture of the offshore wind energy structures’ business of $ 33,273 ( no associated tax benefit) ($ 1.54 per share).

Basic and diluted net earnings and earnings per share in fiscal year 2021 were impacted by impairments of long-lived assets (customer relationship intangible asset, trade name, and property, plant and equipment) associated with the offshore wind energy structures business of $ 21,678 after-tax ($ 1.01 per share) and a valuation allowance against the deferred tax assets of the offshore wind energy structures business of $ 5,076 after-tax ($ 0.24 per share).

Basic and diluted net earnings and earnings per share in fiscal year 2020 were impacted by impairments of goodwill and intangible assets in fiscal year 2020 of $ 16,220 after-tax ($ 0.76 per share) and restructuring expenses of $ 17,324 after-tax ($ 0.81 per share).

Earnings per share are computed independently for each of the quarters.

3 unchanged sentences

Established under Internal Revenue Code Section 401(k), the Valmont Employee Retirement Savings Plan (“VERSP”) is a defined contribution plan available to all eligible employees.

Participants can elect to contribute up to 60 % of annual pay, on a pretax and/or after-tax basis.

The Company also makes contributions to the Plan and a non-qualified deferred compensation plan for certain Company executives.

Participants can elect to contribute up to 60 % of annual pay, on a pre-tax and/or after-tax basis.

The Company also makes contributions to the VERSP and a non-qualified deferred compensation plan for certain Company executives.

The 2022, 2021, and 2020 Company contributions to these plans amounted to approximately $ 18,300 , $ 16,000 , and $ 14,800 , respectively.

The Company sponsors a fully‑funded, non-qualified deferred compensation plan for certain Company executives who otherwise would be limited in receiving company contributions into VERSP under Internal Revenue Service regulations.

The invested assets and related liabilities of these participants were $ 25,008 and $ 29,982 at December 31, 2022 and December 25, 2021, respectively.

Such amounts are included in “Other assets” and “Deferred compensation” on the Consolidated Balance Sheets.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

Amounts distributed from the Company’s non-qualified deferred compensation plan to participants under the transition rules of section 409A of the Internal Revenue Code were approximately $ 4,691 and $ 8,900 at December 31, 2022 and December 25, 2021, respectively.

11 unchanged sentences

At December 25, 2021, the carrying amount of the Company’s long-term debt was $ 951,956 with an estimated fair value of approximately $ 1,175,332 .

For financial reporting purposes, 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 is used.

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 is used.

Inputs refers broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk.

13 unchanged sentences

The fair value of foreign currency and commodity forward and cross currency contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.

Fair Value Measurement Using:

Carrying Value December 25 , 2021 Quoted Prices in

Active Markets

for Identical

Assets (Level 1) Significant Other

(Level 2) Significant

Trading securities

$ 30,076 $ 30,076 $ — $ —

Derivative financial instruments, net

$ ( 4,007 ) $ — $ ( 4,007 ) $ —

Mutual Funds:

The Company has short-term investments in various mutual funds.

Marketable Securities:

The Company’s marketable securities consist of short-term investments in certificates of deposit.

Fair Value Measurement Using:

Carrying Value December 26, 2020 Quoted Prices in

Quoted Prices in

Significant Other

Active Markets

Carrying Value

for Identical

Assets (Level 1) Significant Other

(Level 2) Significant

December 31, 2022

Assets (Level 1)

Trading securities

$ 35,327 $ 35,327 $ — $ —

Derivative financial instruments, net

$ ( 5,911 ) $ — $ ( 5,911 ) $ —

Cash and cash equivalents - mutual funds

Cash and cash equivalents - marketable securities

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

(15) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS – CONTINUED

Fair Value Measurement Using:

Quoted Prices in

Significant Other

Carrying Value

Active Markets

for Identical

Assets (Level 1)

Assets (Liabilities):

Trading securities

Derivative financial instruments, net

(16) DERIVATIVE FINANCIAL INSTRUMENTS

7 unchanged sentences

Derivatives designated as hedging instruments:

Balance sheet location December 25 , 2021 December 26, 2020

Commodity forward contracts Accrued expenses $ ( 5,802 ) $ —

Foreign currency forward contracts Prepaid expenses and other assets 149 724

Foreign currency forward contracts Accrued expenses ( 118 ) —

Cross currency swap contracts Prepaid expenses and other assets 1,764 600

Cross currency swap contracts Accrued expenses — ( 7,235 )

$ ( 4,007 ) $ ( 5,911 )

Balance sheet location

Commodity forward contracts

Accrued expenses

Foreign currency forward contracts

Prepaid expenses and other assets

Foreign currency forward contracts

Accrued expenses

Cross currency swap contracts

Prepaid expenses and other assets

Cross currency swap contracts

Accrued expenses

Gains (losses) on derivatives recognized in the Consolidated Statements of Earnings for the years ended December 31, 2022, December 25, 2021, and December 26, 2020 are as follows:

1 unchanged sentence

Statements of earnings location

Commodity forward contracts Product cost of sales

$ 25,821 $ — $ ( 2,130 )

Foreign currency forward contracts Product Sales — 1,598 —

Foreign currency forward contracts Other income (expense)

( 40 ) 187 950

Interest rate contracts Interest expense

( 64 ) ( 64 ) ( 64 )

Cross currency swap contracts Interest expense

2,780 2,738 2,823

$ 28,497 $ 4,459 $ 1,579

Commodity forward contracts

Product cost of sales

Foreign currency forward contracts

Product sales

Foreign currency forward contracts

Interest rate hedge amortization

Interest expense

Cross currency swap contracts

Loss from divestiture of wind energy structures business

Cross currency swap contracts

Interest expense

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

Cash Flow Hedges

During 2021, the Company entered into steel hot rolled coil (“HRC”) forward contracts that qualify as a cash flow hedge of the variability in cash flows attributable to future steel purchases.

The forward contracts had a notional amount of $ 93,498 for the total purchase of 86,100 short tons from May 2021 to December 2022.

The gain (loss) realized upon settlement will be recorded in product cost of sales in the condensed consolidated statements of earnings over average inventory turns.

In 2019, the Company entered into steel hot rolled coil (HRC) forward contracts which qualified as a cash flow hedge of the variability in the 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.

The gain (loss)

The forward contracts had a notional amount of $ 93,498 for the total purchase of 86,100 short tons.

During the second quarter of 2022, the Company entered into additional steel HRC forward contracts that qualify as a cash flow hedge of the variability in cash flows attributable to future steel purchases.

The forward contracts had a notional amount of $ 14,010 for the total purchase of 15,000 short tons.

As of December 31, 2022, the forward contracts had a notional amount of $ 9,766 for the total purchase of 10,300 short tons from January 2023 to March 2023.

The gain (loss) realized upon settlement will be recorded in product cost of sales in the Consolidated Statements of Earnings over average inventory turns.

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

realized upon settlement was recorded in product cost of sales in the consolidated statements of earnings over average inventory turns.

(16) DERIVATIVE FINANCIAL INSTRUMENTS – CONTINUED

During the third quarter of 2022, the Company entered into natural gas commodity forward contracts that qualify as a cash flow hedge of the variability in cash flows attributable to future natural gas purchases.

The forward contracts had a notional amount of $ 5,211 for the total purchase of 770,000 mmBtu from October 2022 to October 2023.

During the fourth quarter of 2022, the Company entered into additional natural gas commodity forward contracts that also qualify as a cash flow hedge.

The forward contracts had a notional amount of $ 3,088 for the total purchase of 620,000 mmBtu from January 2023 to October 2024.

As of December 31, 2022, the forward contracts had a notional amount of $ 7,043 for the total purchase of 1,230,000 mmBtu from January 2023 to October 2024.

The gain (loss) realized upon settlement will be recorded in “Product cost of sales” in the Consolidated Statements of Earnings in the period consumed.

During the third quarter of 2022, a subsidiary with a euro functional currency entered into a foreign currency forward contract to mitigate foreign currency risk related to a large customer order denominated in U.S.

The forward contract, which qualifies as a fair value hedge, matures in February 2023 and has a notional amount to sell $ 1,800 in exchange for a stated amount of euros.

During 2021, a Brazilian subsidiary with a real functional currency entered into foreign currency forward contracts to mitigate foreign currency risk related to a customer order with components purchased in euros.

The forward contracts, which qualify as a cash flow hedge, matured in July and September 2021 and had notional amounts to buy 3,800 euros in exchange for a stated amount of Brazilian Real.

The forward contracts, which qualified as a cash flow hedge, matured in July and September 2021 and had notional amounts to buy 3,800 euros in exchange for a stated amount of Brazilian real.

During 2021, a subsidiary with a euro functional currency entered into a foreign currency forward contract to mitigate foreign currency risk related to a large customer order denominated in U.S.

The forward contract, which qualifies as a fair value hedge, matured in December 2021 and a notional amount to sell $ 2,000 in exchange for a stated amount of Euros.

The forward contract, which qualified as a fair value hedge, matured in December 2021 and a notional amount to sell $ 2,000 in exchange for a stated amount of euros.

In 2020, a Brazilian subsidiary with a real functional currency entered into foreign currency forward contracts to mitigate foreign currency risk related to a customer order with components purchased in euros.

The forward contracts, which qualify as a cash flow hedge, matured in December 2020 and a notional amount to buy 4,500 euros in exchange for a stated amount of Brazilian Real.

The forward contracts, which qualified as a cash flow hedge, matured in December 2020 and a notional amount to buy 4,500 euros in exchange for a stated amount of Brazilian real.

In 2020, a subsidiary with a euro functional currency entered into foreign currency forward contracts to mitigate foreign currency risk related to a large customer order denominated in U.S.

The forward contracts, which qualify as a cash flow hedge, matured in June 2021 and a notional amount to sell $ 27,500 in exchange for a stated amount of Euros.

The forward contracts, which qualified as a cash flow hedge, matured in June 2021 and a notional amount to sell $ 27,500 in exchange for a stated amount of euros.

Net Investment Hedges

In the second quarter of 2020, the Company early settled its Australian dollar denominated foreign currency forward contracts and received proceeds of $ 11,983 .

In 2019, all net investment hedges incepted in 2018 were early settled and the Company received proceeds of $ 11,184 .

Amounts 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 two fixed-for-fixed cross currency swaps ("CCS"), swapping U.S.

dollar principal and interest payments on a portion of its 5.00 % senior unsecured notes due 2044 for Danish krone (“DKK”) and euro denominated payments.

1 unchanged sentence

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 Net 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.

(16) GUARANTEES

The Company’s product warranty accrual reflects management’s best estimate of probable liability under its product warranties.

Historical product claims data is used to estimate the cost of product warranties at the time revenue is recognized.

During the second half of 2022, the Company settled the DKK CCS and received proceeds of $ 3,532 .

Due to the sale of the offshore wind energy structures business in the fourth quarter of 2022, the Company reclassified the cumulative net investment hedge

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

gain of $ 4,827 ($ 3,620 after tax) from OCI to “Loss from divestiture of offshore wind energy structures business” in the Consolidated Statements of Earnings.

Key terms of the Euro CCS are as follows:

Set Settlement

Termination Date

Interest Rate

April 1, 2024

(17) GUARANTEES

The Company’s product warranty accrual reflects management’s best estimate of probable liability under its product warranties.

Historical product claims data is used to estimate the cost of product warranties at the time revenue is recognized.

Changes in the product warranty accrual, which is recorded in “Accrued expenses”, for the years ended December 31, 2022 and December 25, 2021, were as follows:

Balance, beginning of period

$ 14,787 $ 13,532

Payments made

( 6,444 ) ( 10,228 )

Change in liability for warranties issued during the period

13,534 12,287

Change in liability for pre-existing warranties

( 569 ) ( 804 )

Balance, end of period

$ 21,308 $ 14,787

(18) COMMITMENTS & CONTINGENCIES

2 unchanged sentences

Where asserted and unasserted claims are considered probable and reasonably estimable, a liability has been recorded.

We do not expect that any known lawsuits, claims, environmental costs, commitments, or contingent liabilities will have a material adverse effect on our consolidated results of operations, financial condition, or liquidity.

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

The Company does not expect that any known lawsuits, claims, environmental costs, commitments, or contingent liabilities will have a material adverse effect on the consolidated results of operations, financial condition, or liquidity.

(19) DEFINED BENEFIT RETIREMENT PLAN

Delta Ltd., a wholly-owned subsidiary of the Company, is the sponsor of the Delta Pension Plan ("Plan").

The Plan provides defined benefit retirement income to eligible employees in the United Kingdom.

9 unchanged sentences

The PBO was $ 435,711 at December 31, 2022.

The net funded status of $ 536 at December 25 , 2021 is recorded as a noncurrent liability reflecting, in part, a significant actuarial gain for the period from December 26, 2020 to December 25, 2021 attributed to an increase in the discount rate.

The net funded status of $ 24,216 at December 31, 2022 is recorded as a noncurrent asset reflecting, in part, a significant actuarial gain for the period from December 25, 2021 to December 31, 2022 attributed to an increase in the discount rate.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

Projected Benefit Obligation and Fair Value of Plan Assets —The accumulated benefit obligation (“ABO”) is the present value of benefits earned to date, assuming no future compensation growth.

As there are no active employees in the plan, the ABO is equal to the PBO for all years presented.

The underfunded ABO represents the difference between the PBO and the fair value of plan assets.

The overfunded ABO represents the difference between the PBO and the fair value of plan assets.

(19) DEFINED BENEFIT RETIREMENT PLAN – CONTINUED

Changes in the PBO and fair value of plan assets for the pension plan for the period from December 26, 2020 to December 25, 2021 were as follows:

Obligation Plan

Assets Funded

Fair Value at December 26, 2020

1 unchanged sentence

Interest cost

Prior service costs - GMP equalization 949 —

Actual return on plan assets

Benefits paid

Actuarial (gain) loss 87,855 —

Actuarial gain

Currency translation

Fair Value at December 25, 2021

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

Changes in the PBO and fair value of plan assets for the pension plan for the period from December 25, 2021 to December 31, 2022 were as follows:

Obligation Plan

Assets Funded

Fair Value at December 25, 2021

7 unchanged sentences

Actuarial gain decreased the projected benefit obligation resulted from an increase in the discount rate to 4.80 % in 2022 versus 1.90 %.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

Pre-tax amounts recognized in accumulated other comprehensive income (loss) as of December 31, 2022 and December 25, 2021 consisted of actuarial gains (losses):

Balance December 26, 2020

Actuarial gain (loss) ( 16,731 )

Prior service costs - GMP equalization ( 814 )

Currency translation gain (loss) ( 3,987 )

Balance December 26, 2020 ( 165,258 )

Actuarial gain

2 unchanged sentences

Balance December 25, 2021

Actuarial loss

Prior service costs amortization

Currency translation gain

Balance December 31, 2022

Assumptions — The weighted-average actuarial assumptions used to determine the benefit obligation at December 31, 2022 and December 25, 2021 were as follows:

Percentages 2021 2020

Discount rate

1.90 % 1.40 %

Salary increase

CPI inflation

2.70 % 2.00 %

RPI inflation

3.30 % 2.90 %

Pension expense is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets.

(19) DEFINED BENEFIT RETIREMENT PLAN – CONTINUED

Expense/(Benefit)

Pension benefit is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets.

The interest cost component is calculated using the full yield curve approach to estimate the interest cost by applying the specific spot rates along the yield curve used to determine the present value of the benefit plan obligations to relevant cash outflows for the corresponding year.

The expected long-term rate of return on plan assets is applied to the fair value of plan assets.

Differences in actual experience in relation to assumptions are not recognized in net earnings immediately, but are deferred and, if necessary, amortized as pension expense.

The components of the net periodic pension benefit for the fiscal years ended December 31, 2022 and December 25, 2021 were as follows:

Net periodic (benefit) expense:

Interest cost

Expected return on plan assets

Amortization of prior service cost

Amortization of actuarial loss

Net periodic benefit

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

The components of the net periodic pension expense for the fiscal years ended December 25 , 2021 and December 26, 2020 were as follows:

Net Periodic Benefit Cost:

Interest cost

$ 9,896 $ 12,954

Expected return on plan assets

( 27,763 ) ( 23,215 )

Amortization of prior service cost

Amortization of actuarial loss

Net periodic benefit expense (benefit)

$ ( 14,567 ) $ ( 7,311 )

Assumptions — The weighted-average actuarial assumptions used to determine expense are as follows for fiscal 2021 and 2020:

Percentages 2021 2020

Discount rate

1.15 % 2.05 %

Assumptions — The weighted-average actuarial assumptions used to determine expense are as follows for fiscal years 2022 and 2021:

Discount rate for benefit obligations

Discount rate for interest cost

Expected return on plan assets

3.96 % 4.18 %

CPI Inflation

2.00 % 2.15 %

RPI Inflation

2.90 % 3.05 %

The discount rate is based on the yields of AA-rated corporate bonds with durational periods similar to that of the pension liabilities.

The expected return on plan assets is based on our asset allocation mix and our historical return, taking into account current and expected market conditions.

The expected return of plan assets decreased from 3.96 % to 3.48 % for 2022 as the projected returns on the corporate bond plan assets is expected to decrease.

The expected return on plan assets is based on the asset allocation mix and the historical return, taking into account current and expected market conditions.

The expected return of plan assets decreased from 3.96 % to 3.48 % for 2022 as the investment composition has more liability matching versus return seeking assets.

Inflation is based on expected changes in the consumer price index or the retail price index in the U.K.

6 unchanged sentences

The following table details expected pension benefit payments for the years 2023 through 2032:

2022 $ 23,045

Years 2028 - 2032

Asset Allocation Strategy

The investment strategy for pension plan assets is to maintain a diversified portfolio consisting of

• Long-term fixed‑income securities that are investment grade or government‑backed in nature;

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

(19) DEFINED BENEFIT RETIREMENT PLAN – CONTINUED

Asset Allocation Strategy

The investment strategy for pension plan assets is to maintain a diversified portfolio consisting of

● Long-term fixed ‑ income securities that are investment grade or government ‑ backed in nature;

● Common stock mutual funds in U.K.

37 unchanged sentences

(Dollars in thousands, except per share amounts)

(19) DEFINED BENEFIT RETIREMENT PLAN – CONTINUED

At December 31, 2022 and December 25, 2021, the pension plan assets measured at fair value on a recurring basis were as follows:

December 31, 2021 Quoted Prices in

Quoted Prices in

Significant Other

Active Markets

for Identical

Inputs (Level 1) Significant Other

(Level 2) Significant

(Level 3) Total

December 31, 2022

Inputs (Level 1)

Plan assets at fair value:

8 unchanged sentences

Total plan assets

December 31, 2020 Quoted Prices in

Quoted Prices in

Significant Other

Active Markets

for Identical

Inputs (Level 1) Significant Other

(Level 2) Significant

(Level 3) Total

December 25, 2021

Inputs (Level 1)

Plan assets at fair value:

8 unchanged sentences

Total plan assets

VALMONT INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three-year period ended December 25, 2021

(Dollars in thousands, except per share amounts)

The Company has operating leases for plant locations, corporate offices, sales offices, and certain equipment.

3 unchanged sentences

The Company determines if an arrangement is a lease at inception.

Operating leases are included in other assets, accrued expenses, and lease liabilities in our consolidated balance sheets.

Operating leases are included in “Other assets”, “Other accrued expenses”, and “Operating lease liabilities” in the 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.

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

5 unchanged sentences

In recognition of this lease, an operating lease asset of $ 71,853 and an operating long-term liability of $ 71,196 was recognized.

(20) LEASES – CONTINUED

Lease cost and other information related to the Company’s operating leases at December 31, 2022 and December 25, 2021 are as follows:

Fifty-Two weeks ended December 25, 2021 Fifty-Two weeks ended December 26, 2020

Operating lease cost

1 unchanged sentence

ROU assets obtained in exchange for lease obligations

Weighted average remaining lease term 17 years 11 years

Weighted average remaining lease term

Weighted average discount rate

Operating lease cost includes approximately $ 1,600 for short-term lease costs and approximately $ 4,400 for variable lease payments in 2022.

As part of the adoption of ASC 842 in 2019, the Company evaluated the historical and projected cash flow generation of the operations at each of its long-term leased facilities.

It was determined that one of those facilities, a galvanizing operation in Melbourne, Australia, would 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.

Supplemental balance sheet information related to operating leases as of December 31, 2022 and December 25, 2021 is as follows:

Classification

Operating lease assets

Operating lease short-term liabilities

Other accrued expenses

Operating lease long-term liabilities

Operating lease liabilities

Total lease liabilities

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

Supplemental balance sheet information related to operating leases as of December 25 , 2021 and December 26, 2020 is as follows:

Classification December 25 , 2021 December 26, 2020

Operating lease assets Other assets $ 152,664 $ 77,566

Operating lease short-term liabilities Accrued expenses 16,754 14,658

Operating lease long-term liabilities Operating lease liabilities 147,759 80,202

Total lease liabilities $ 164,513 $ 94,860

Minimum lease payments under operating leases expiring subsequent to December 31, 2022 are as follows:

Fiscal year ending:

2022 $ 23,217

Total minimum lease payments

6 unchanged sentences

(21) BUSINESS SEGMENTS

The Company has four reportable segments based on its management structure.

During the first quarter of 2022, the Company’s CODM changed the Company’s management structure and began to manage the business, allocate resources, and evaluate performance based on the new structure.

As a result, the Company has realigned to a two reportable segment structure organized by market dynamics (Infrastructure and Agriculture).

Three operating segments resulted from the new management structure and two are aggregated into the Agriculture reportable segment.

The Company considers gross profit margins, nature of products sold, nature of the production processes, type and class of customer, and methods used to distribute products when assessing aggregation of operating segments.

The Infrastructure segment includes the previous reportable segments of Utility Support Structures, Engineered Support Structures, and Coatings.

All prior period segment information has been recast to reflect this change in reportable segments.

The Company has two 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.

1 unchanged sentence

Reportable segments are as follows:

ENGINEERED SUPPORT STRUCTURES:

This segment consists of the manufacture and distribution of engineered poles, towers, and components for 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, concrete and composite structures for utility markets, including transmission, distribution, substations, and renewable energy generation equipment;

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

This segment consists of the manufacture of center pivot and linear irrigation equipment for agricultural markets, including parts, services and tubular products, and advanced technology solutions for water management and precision agriculture.

INFRASTRUCTURE:

In addition to these two reportable segments, the Company had a business and related activities that is not more than 10% of consolidated sales, operating income or assets.

This includes the offshore wind energy structures business and was reported in the “Other” segment until its divestiture in 2022.

The accounting policies of the reportable segments are the same as those described in Note 1.

6 unchanged sentences

(Dollars in thousands, except per share amounts)

(21) BUSINESS SEGMENTS – CONTINUED

Summary by Business

2021 2020 2019

Utility Support Structures segment:

$ 770,104 $ 635,220 $ 630,892

165,501 160,544 122,032

Engineered Solar Tracker Solutions

62,904 86,382 47,450

Offshore and Other Complex Steel Structures

123,001 120,063 90,206

Utility Support Structures segment

1,121,510 1,002,209 890,580

Engineered Support Structures segment:

Lighting, Traffic, and Highway Safety Products 717,650 717,216 708,853

Communication Products 240,171 190,203 188,912

Access Systems 106,940 88,421 114,525

Engineered Support Structures segment 1,064,761 995,840 1,012,290

Coatings segment

386,313 345,312 367,835

Irrigation segment:

Infrastructure

INTERSEGMENT SALES:

Infrastructure

OPERATING INCOME (LOSS):

Infrastructure

Fifty-three weeks ended December 31, 2022

Infrastructure

Intersegment Sales

Geographical market:

North America

545,574 378,424 378,613

International

483,143 267,407 206,583

Irrigation segment

1,028,717 645,831 585,196

3,601,301 2,989,192 2,855,901

Product line:

Transmission, Distribution, and Substation

Lighting and Transportation

Telecommunications

Renewable Energy

Irrigation Equipment and Parts, excluding Technology

Technology Products and Services

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

(21) BUSINESS SEGMENTS – CONTINUED

Fifty-two weeks ended December 25, 2021

Infrastructure

Intersegment Sales

Utility Support Structures

Engineered Support Structures 321 12,317 10,214

87,232 75,710 67,195

11,667 5,739 6,544

99,726 93,837 88,925

Utility Support Structures segment

1,121,004 1,002,138 885,608

Engineered Support Structures segment 1,064,440 983,523 1,002,076

Coatings segment

299,081 269,602 300,640

Irrigation segment

1,017,050 640,092 578,652

$ 3,501,575 $ 2,895,355 $ 2,766,976

Geographical market:

North America

International

Product line:

Transmission, Distribution, and Substation

Lighting and Transportation

Telecommunications

Renewable Energy

Irrigation Equipment and Parts, excluding Technology

Technology Products and Services

Fifty-two weeks ended December 26, 2020

Infrastructure

Intersegment Sales

Geographical market:

North America

International

Product line:

Transmission, Distribution, and Substation

Lighting and Transportation

Telecommunications

Renewable Energy

Irrigation Equipment and Parts, excluding Technology

Technology Products and Services

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

2021 2020 2019

OPERATING INCOME (LOSS):

Utility Support Structures

$ 67,624 $ 100,855 $ 87,788

Engineered Support Structures 115,417 65,342 65,627

50,365 42,975 51,008

137,027 83,046 71,687

( 83,648 ) ( 66,265 ) ( 48,205 )

286,785 225,953 227,905

Infrastructure

Interest expense, net

( 41,420 ) ( 38,701 ) ( 36,211 )

14,718 5,516 8,164

Loss from divestiture of wind energy structures business

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

$ 260,083 $ 192,768 $ 199,858

TOTAL ASSETS:

Utility Support Structures

$ 827,083 $ 778,127 $ 742,194

Engineered Support Structures 977,334 932,565 944,428

366,026 360,594 363,070

1,027,272 465,322 347,887

249,534 416,552 409,637

$ 3,447,249 $ 2,953,160 $ 2,807,216

CAPITAL EXPENDITURES:

Utility Support Structures

36,718 34,495 26,306

Engineered Support Structures 16,578 24,447 25,344

19,178 22,132 23,610

17,509 16,740 15,644

17,807 8,886 6,521

$ 107,790 $ 106,700 $ 97,425

Valmont Industries, Inc.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

2021 2020 2019

(21) BUSINESS SEGMENTS – CONTINUED

TOTAL ASSETS:

Infrastructure

CAPITAL EXPENDITURES:

Infrastructure

DEPRECIATION AND AMORTIZATION:

Utility Support Structures

$ 24,075 $ 23,641 $ 23,779

Engineered Support Structures 24,733 25,399 26,280

16,928 15,793 15,907

17,813 12,098 10,943

9,028 5,961 5,355

$ 92,577 $ 82,892 $ 82,264

Infrastructure

Summary by Geographical Area by Location of Valmont Facilities:

2021 2020 2019

United States

$ 2,260,198 $ 1,919,136 $ 1,872,840

297,720 252,253 255,271

Brazil 200,402 103,591 77,996

123,001 120,063 90,206

620,254 500,312 470,663

$ 3,501,575 $ 2,895,355 $ 2,766,976

LONG-LIVED ASSETS:

United States

$ 1,172,552 $ 748,886 $ 753,545

173,240 179,673 193,029

Brazil 28,583 17,151 7,963

21,232 61,546 58,435

338,879 391,279 362,020

$ 1,734,486 $ 1,398,535 $ 1,374,992

Valmont Industries, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three-year period ended December 31, 2022

(Dollars in thousands, except per share amounts)

No single customer accounted for more than 10% of net sales in 2022, 2021, or 2020.

Net sales by geographical area are based on the location of the facility producing the sales and do not include sales to other operating units of the Company.

Australia accounted for approximately 9 % of the Company's net sales in 2021;

Brazil and Australia accounted for approximately 8 % and 7 % of the Company’s net sales in 2022, respectively;

no other foreign country accounted for more than 3% of the Company’s net sales.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data