What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-03-01 · 330 added, 334 removed, 217 unchanged (75% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATION.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF OPERATIONS

Forward ‑ Looking Statements

5 unchanged sentences

Many factors could affect the Company’s actual financial results and cause them to differ materially from those anticipated in the forward‑looking statements.

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

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial position.

These factors include, among other things, risk factors described from time to time in the Company’s reports to the SEC, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments.

The following discussion and analysis provide information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial position.

This discussion should be read in conjunction with the Consolidated Financial Statements and related notes.

This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.

Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Conditions and Results of Operations"

in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021.

During the first quarter of 2022, the Company’s Chief Operating Decision Maker (“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.

Change 2022 - 2021

Change 2021 - 2020

This section of the Form 10-K generally discusses fiscal 2023 items, fiscal 2022 items, and year-to-year comparisons between fiscal 2023 and fiscal 2022.

Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included on Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Fiscal Year Ended

Dollars in millions, except per share amounts

as a percent of sales

as a percent of net sales

Selling, general, and administrative expenses

as a percent of net sales

Impairment of goodwill and intangible assets

Realignment charges

Operating income

as a percent of sales

as a percent of net sales

Net interest expense

Effective tax rate

Net earnings attrib.

to Valmont Industries, Inc.

Diluted earnings per share

Infrastructure

Selling, general, and administrative expenses

Impairment of goodwill and intangible assets

Realignment charges

Operating income

Selling, general, and administrative expenses

Impairment of goodwill and intangible assets

Realignment charges

Operating income

Gross profit (loss)

Selling, general, and administrative expenses

Impairment of goodwill and intangible assets

Operating income (loss)

Net corporate expense

Selling, general, and administrative expenses

Realignment charges

Operating loss

RESULTS OF OPERATIONS

NM = not meaningful

FISCAL 2023 COMPARED WITH FISCAL 2022

The increase in net sales in 2022, as compared with 2021, was the result of higher sales in both the Infrastructure and Agriculture segments.

The decrease in net sales in fiscal 2023, as compared with fiscal 2022, was the result of lower sales in the Agriculture segment, partially offset by higher sales in the Infrastructure segment.

Fiscal 2023 included 52 weeks, while fiscal 2022 included 53 weeks.

The estimated impact on the Company's results of operations due to the extra week in fiscal 2022 was additional net sales of approximately $80.8 million and additional net earnings of approximately $5.3 million.

Dollars in millions

Infrastructure

Pricing / mix

Net sales - fiscal 2022

Pricing and mix

Currency translation

Net sales - fiscal 2023

Volume impacts are estimated based on physical production or sales measure.

Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the product sold.

Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the products sold.

Accordingly, pricing and mix changes do not necessarily result in operating income changes.

Due to supply chain disruptions and lingering impacts of the pandemic, average steel prices for both hot rolled coil and plate were volatile over the past few years, especially in North America.

While hot rolled coil steel has decreased in price, the steel consumed during 2022 within cost of sales was at a much higher average cost as compared to 2021.

Gross profit margin was higher in 2022, as compared to 2021, as customer pricing mechanisms and product selling price practices allowed for the recovery of price inflation for the Infrastructure and Agriculture reportable segments.

Steel prices for both hot rolled coil and plate have remained volatile over the past two fiscal years, especially in North America.

Decreases in the average cost of consumed steel combined with recent customer pricing strategy mechanisms more than offset the overall decrease in volumes on a consolidated basis in fiscal 2023, as compared to fiscal 2022.

During the third quarter of fiscal 2023, management initiated a plan to streamline segment support across the Company and reduce costs through an organizational realignment program (the “Realignment Program”).

The Realignment Program provided for a reduction in force through a voluntary early retirement program and other headcount reduction actions, which were completed by the end of fiscal 2023.

The Board of Directors authorized the incurrence of cash charges up to $36.0 million in connection with the Realignment Program of which $35.2 million were incurred in fiscal 2023.

Severance and other employee benefit costs totaled approximately $17.3 million within the Infrastructure segment, $9.1 million within the Agriculture segment, and $8.8 million within Corporate expense.

Items Impacting Comparability

Items of note impacting the comparability of results from net earnings for 2022 included the following:

● charges totaling $33.3 million (no associated tax benefit) related to the divestiture of the offshore wind energy structures business,

● incremental stock-based compensation expense of $5.0 million ($4.6 million after-tax) for the employees from the Prospera subsidiary acquired in 2021, and

● incremental amortization of identified intangible assets of $3.6 million ($2.4 million after-tax) associated from the Prospera subsidiary acquired in 2021.

Items of note impacting the comparability of results from net earnings for 2021 included the following:

● charges totaling pre-tax $27.9 million ($21.7 million after-tax) related to the impairment of the offshore wind energy structures business long-lived assets.

In addition, income tax expense of $5.1 million to establish a valuation allowance related to the tax assets of the associated product line, and

● charges totaling $5.5 million ($4.3 million after-tax) related to the write-off of a receivable.

The Company acquired the following businesses in 2022 and 2021:

● 51% of ConcealFab in the second quarter of 2022 for $39.3 million.

ConcealFab is a Colorado-based 5G infrastructure and passive intermodulation mitigation solutions company (Infrastructure),

● Prospera in the second quarter of 2021 for $300 million.

Prospera was a privately-held Israeli-based artificial intelligence company focused on machine learning and computer vision in agriculture (Agriculture), and

● PivoTrac in the second quarter of 2021 for $12.5 million.

PivoTrac is an agricultural technology company that offers solutions focused on remote monitoring of center pivot irrigation machines (Agriculture).

The Company divested its offshore wind energy structures business in the fourth quarter of 2022, which resulted in a loss of approximately $33.3 million (no associated tax benefit).

The offshore wind energy structures business is included in the Other segment and the loss was recorded in “Other income (expenses)” in the Consolidated Statements of Earnings.

Items of note impacting the comparability of results from net earnings for fiscal 2023 included:

● charges of $140.8 million ($136.5 million after-tax) related to the impairment of long-lived assets, namely goodwill,

● charges of $35.2 million ($26.5 million after-tax) related to the Realignment Program,

● charges of $5.6 million ($4.2 million after-tax) related to non-recurring charges related to major scope changes for two strategic projects initiated by departed senior leadership,

Items of note impacting the comparability of results from net earnings for fiscal 2022 included:

● charges of $33.3 million (no associated tax benefit) related to the divestiture of the offshore wind energy structures business,

● charges of $6.6 million ($5.1 million after-tax) related to amortization of identified intangible assets from the Prospera subsidiary, and

● charges of $9.9 million ($8.9 million after-tax) related to stock-based compensation expense for the employees from the Prospera subsidiary acquired in the second quarter of fiscal 2021.

The Company acquired the following businesses in fiscal 2023 and fiscal 2022:

● HR Products, a leading wholesale supplier of irrigation parts in Australia, in the third quarter of fiscal 2023, for $37.3 million, included in the Agriculture segment, and

● 51% of ConcealFab, a Colorado-based 5G infrastructure and passive intermodulation mitigation solutions company, in the second quarter of fiscal 2022, for $39.3 million, included in the Infrastructure segment.

The Company divested the following businesses in fiscal 2023 and fiscal 2022:

● Torrent Engineering and Equipment in the second quarter of fiscal 2023, which resulted in a gain of $3.0 million.

The integrator of prepackaged pump stations in Indiana was included in the Agriculture segment and the gain was recorded in “Other income (expenses)” in the Consolidated Statements of Earnings, and

● Valmont SM in the fourth quarter of fiscal 2022, which resulted in a loss of $33.3 million with no associated tax benefit.

The offshore wind energy structures business in Denmark was included in the Other segment and the loss was recorded in “Other income (expenses)” in the Consolidated Statements of Earnings.

Macroeconomic Impacts on Financial Results and Liquidity

We continue to monitor several macroeconomic and geopolitical trends that impacted our business, including inflationary cost pressures, supply chain disruptions, the strengthened U.S.

dollar, the ongoing Russia-Ukraine conflict, changing conditions from the COVID-19 pandemic, and labor shortages.

Change in Reportable Segments

On December 26, 2021, the Company’s CODM began to manage the business, allocate resources, and evaluate performance based on changes made to the Company’s management structure.

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

The Company reorganized from a four segment structure previously organized by product category (Utility Support Structures, Engineered Support Structures, Coatings, and Irrigation) to a two segment reporting structure organized by market dynamics (Infrastructure and Agriculture).

We continue to monitor several macroeconomic and geopolitical uncertainties that have impacted or may impact our business, including inflationary cost pressures, supply chain disruptions, changes in foreign currency exchange rates against the U.S.

dollar, rising interest rates, ongoing international armed conflicts, and labor shortages.

Reportable Segments

In addition to the two reportable segments, the Company had a business and related activities in fiscal 2022 that were not more than 10% of consolidated sales, operating income, or assets.

This business, the offshore wind energy structures business, was reported in the Other segment until its divestiture in the fourth quarter of fiscal 2022.

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

See Note 21 to our Consolidated Financial Statements for additional information.

In addition to these two reportable segments, the Company had a business and related activities that are 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.

Currency Translation

The continued strengthening of the U.S.

dollar resulted in negative foreign currency impacts for many of our businesses located in foreign jurisdictions.

In 2022, we realized an increase in operating profit, as compared with fiscal 2021, despite these overall negative currency translation effects.

The breakdown of this effect by segment was as follows:

Infrastructure

Gross Profit, SG&A, and Operating Income

At a consolidated level, gross profit as a percent of sales was higher in 2022, as compared with 2021.

Gross profit as a percent of sales was relatively flat for both the Infrastructure and Agriculture segments, as increased raw material and labor costs were offset by an increase in average selling prices.

Gross profit was higher for both the Infrastructure and Agriculture segments in 2022.

The Company saw an increase in selling, general, and administrative (“SG&A”) expense in 2022, as compared to 2021.

The increase in SG&A was due to the incremental SG&A from the Prospera acquisition in May 2021 (including intangible asset amortization, stock-based compensation, and research and development costs), higher incentives and stock-based compensation costs due to improved operations, salary merit increases, and higher travel costs.

In 2021, the Other segment recognized a pre-tax $27.9 million impairment charge of long-lived assets ($21.4 million recognized in cost of goods sold and $6.5 million in SG&A) and a $5.5 million write-off of an accounts receivable related to the offshore wind energy structures business that did not recur in 2022.

Net Interest Expense and Debt

Net interest expense in 2022 was higher than 2021 due to higher average borrowings during the year.

Interest income was also higher in 2022, as compared to 2021, due to higher interest rates.

Other Income/Expense (including Gain (loss) on investments – unrealized)

The change in other income/expenses in 2022, as compared to 2021, was primarily due to a lower pension benefit of $4.5 million and the change in the valuation of deferred compensation assets which resulted in a lower income of $5.5 million.

These decreases were offset by an increase in investment income of $2.7 million and a gain of $2.1 million related to insurance proceeds received associated with windstorm damage at one of our facilities in France.

The change related to deferred compensation assets is offset by an opposite change of the same amount in SG&A expense.

The consolidated backlog of unshipped orders was approximately $1.5 billion as of December 30, 2023 as compared to approximately $1.7 billion as of December 31, 2022.

The decrease is attributed to the Agriculture segment, while Infrastructure segment backlog remains comparable to the prior year end.

Gross Profit, Selling, General, and Administrative Expenses (“SG&A”), and Operating Income

On a consolidated basis, gross profit and gross profit as a percentage of sales increased in fiscal 2023, as compared to fiscal 2022.

Gross profit and gross profit as a percentage of sales increased for both the Infrastructure and Agriculture segments in fiscal 2023 primarily due to increased average selling prices and activities executed to improve overall costs of goods sold, partially offset by decreased volumes.

Consolidated SG&A increased in fiscal 2023, as compared to fiscal 2022, due to increased employment costs and increased professional fees, partially offset by slightly decreased incentive expenses.

Consolidated operating income in fiscal 2023, as compared to fiscal 2022, was impacted by the impairment of certain goodwill and intangible assets totaling $140.8 million primarily within the Agriculture Technology reporting unit and realignment charges totaling $35.2 million, along with higher SG&A partially offset by increased gross profit.

Net Interest Expense

Consolidated interest expense increased in fiscal 2023, as compared to fiscal 2022, primarily due to additional borrowings on the revolving line of credit along with increased interest rates.

Other Income / Expenses (including Gain (Loss) on Investments – Unrealized)

Amounts in “Gain (loss) on investments - unrealized" included changes in the market value of deferred compensation assets which were offset by an equal opposite amount included in SG&A for the corresponding change in the valuation of deferred compensation liabilities.

Other items included in “Other income (expenses)” were pension expense, a gain related to the sale of Torrent Engineering and Equipment in the second quarter of fiscal 2023 totaling approximately $3.0 million, and a loss related to Argentine peso hyperinflation totaling approximately $5.1 million.

Pension expense in fiscal 2023 was $0.2 million compared to a pension benefit of $10.1 million in fiscal 2022.

Income Tax Expense

Our effective income tax rate in 2022 and 2021 was 29.9% and 23.6%, respectively.

In 2022, the increase in the effective tax rate was the result of a change in geographical earnings and the approximately $33.3 million loss from divestiture of the offshore wind energy structures business which had no associated income tax benefit.

In 2021, the effective tax rate was impacted by a U.S.

tax benefit related to foreign taxes paid which was offset by a valuation allowance recorded against the offshore wind energy business structures’ deferred tax assets.

Earnings Attributable to Noncontrolling Interests

Earnings attributable to noncontrolling interests were higher in 2022 compared with 2021, primarily due to the new noncontrolling interest not acquired as part of the acquisition of 51% ownership of ConcealFab in the first half of 2022.

Cash Flows from Operations

Our cash flows provided by operations were $326.3 million in fiscal 2022, as compared with $65.9 million provided by operations in fiscal 2021.

The increase in operating cash flow in 2022, as compared with 2021, was primarily due to the increase in net earnings and a significant increase in working capital levels during 2021 that did not occur in 2022, partially offset by an increase of approximately $15.2 million in contributions to the defined benefit pension plan.

Our effective income tax rate in fiscal 2023 and fiscal 2022 was 38.1% and 29.9%, respectively.

In fiscal 2023, the effective tax rate was the result of goodwill impairment charges for which no tax benefits were recorded.

In fiscal 2022, the effective tax rate was the result of a change in geographical earnings and the approximately $33.3 million loss from divestiture of the offshore wind energy structures business which had no associated income tax benefit.

Loss (Earnings) Attributable to Redeemable Noncontrolling Interests

Loss (earnings) attributable to redeemable noncontrolling interests reflects the operating results of the subsidiaries the Company does not own 100%.

Two of the subsidiaries not 100% owned generated net losses in fiscal 2023 whereas these two subsidiaries generated net earnings in fiscal 2022.

Infrastructure Segment

Fifty-three and fifty-two weeks ended

Infrastructure

Sales, gross of intercompany eliminations:

Fiscal Year Ended

Dollars in millions

Transmission, Distribution, and Substation

Lighting & Transportation

Lighting and Transportation

Telecommunications

Renewable Energy

Operating income

Net sales were higher in 2022 by approximately $548.2 million as compared to 2021, primarily driven by higher average selling prices across all product lines, partially offset by $48.7 million of unfavorable foreign currency translation effects year over year.

The increase in net sales for North America in 2022 versus 2021 was substantially higher than the increase within international markets, partially attributed to the unfavorable currency translation effects (continued strengthening of the U.S.

In the TD&S product line, net sales increased in 2022, as compared with 2021, due primarily to a substantial increase in average selling prices for the steel structures product line.

A number of our sales contracts in North America contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order.

Sales volumes increased modestly in 2022 as compared to 2021.

Lighting and transportation net sales increased in 2022, as compared to 2021 from the realization of customer pricing actions.

Sales volumes increased in North America but decreased within international markets in fiscal year 2022, as compared to fiscal year 2021.

Reported international sales decreased in 2022, as compared to 2021, by approximately $32.1 million due to unfavorable foreign currency translation effects.

In the Telecommunications product line, net sales increased in 2022, as compared to 2021, due primarily to higher average selling prices and approximately $26.9 million of net sales attributed to the 2022 acquisition of ConcealFab.

Higher sales volume in 2022 for North America, primarily attributed to the 5G deployments across additional markets, was partially offset by lower sales volume within international markets.

Coatings net sales increased in 2022, as compared to 2021, due to higher average selling prices, adjusted throughout the year to reflect higher average zinc costs and production wage inflation.

Sales volume increased modestly in both North America and international markets in 2022, as compared to 2021.

Reported international sales for the Coatings product line decreased in 2022, as compared to 2021, by approximately $10.1 million due to unfavorable foreign currency translation effects.

Renewable Energy net sales doubled in 2022, as compared to 2021, almost all attributed to an increase in sales volume.

Gross profit was higher in 2022, as compared to 2021.

Contractual customer pricing mechanisms and selling price management led to a large increase in average selling prices while maintaining gross profit margins during the highly inflationary environment.

SG&A was higher in 2022, as compared to 2021, due to wage inflation, increased incentives due to improved financial performance, increased travel expense, and SG&A attributed to the recent acquisition.

Operating income increased in 2022 due the increase in net sales more than offsetting the effects of inflation and other increased expenses in both cost of sales and to SG&A.

Infrastructure segment sales increased in fiscal 2023, as compared to fiscal 2022, due to increased average selling prices across all product lines and increased volumes in TD&S and Solar, partially offset by unfavorable foreign currency translation effects and much lower volumes in Telecommunications.

Infrastructure segment sales increased in North America in fiscal 2023, as compared to fiscal 2022, while decreasing slightly internationally in the same period.

Transmission, Distribution, and Substation product line sales increased in fiscal 2023, as compared to fiscal 2022, due to increased average selling prices and increased sales volumes, partially offset by unfavorable foreign currency translation effects totaling approximately $4.0 million.

Lighting and Transportation product line sales increased in fiscal 2023, as compared to fiscal 2022, due to increased average selling prices and increased sales volumes, partially offset by an unfavorable currency translation effect totaling approximately $8.1 million.

Coatings product line sales decreased in fiscal 2023, as compared to fiscal 2022, due to decreased sales volumes along with an unfavorable currency translation effect totaling approximately $6.5 million partially offset by increased average selling prices.

Telecommunications product line sales decreased in fiscal 2023, as compared to fiscal 2022, due to decreased sales volumes partially offset by increased average selling prices and incremental sales from the second quarter of fiscal 2022 acquisition of ConcealFab totaling $12.2 million.

We expect sales for Telecommunications to remain lower until network enhancement spending of the major carriers returns to more elevated levels.

As the continued rollout and expansion of 5G wireless technology accelerates globally, sales for our products are expected to grow.

Solar product line sales increased in fiscal 2023, as compared to fiscal 2022, due to increased sales volumes primarily attributable to increased market share and throughput in the North American and European markets.

We expect Infrastructure segment sales to increase mid-single digits in fiscal 2024 from growth in the TD&S and Solar product lines attributed to the grid hardening efforts in the U.S.

and the global energy transition.

Infrastructure segment gross profit and gross profit margin increased in fiscal 2023, as compared to fiscal 2022, due to contractual customer pricing mechanisms and selling price management leading to increased average selling prices and deliberate actions to improve overall costs of goods sold.

These items, partially offset by a decrease in sales volumes in the Telecommunications product line, resulted in an overall increase in the amount of gross profit.

Infrastructure segment SG&A increased in fiscal 2023, as compared to fiscal 2022, due to increased compensation and incentive costs, increased bad debt reserve charges including approximately $2.7 million related to a Telecommunications customer that became insolvent, increased research and development expenses, and incremental SG&A from the June 2022 acquisition of ConcealFab.

We incurred severance and other employee benefit costs totaling $17.3 million within the Infrastructure segment in fiscal 2023 related to the Realignment Program.

Infrastructure segment operating income increased in fiscal 2023, as compared to fiscal 2022, due to gross profit improvements, driven by favorable pricing and deliberate actions to improve overall costs of goods sold more than offsetting increased SG&A.

Agriculture Segment

Fifty-three and fifty-two weeks ended

Sales, gross of intercompany eliminations:

Fiscal Year Ended

Dollars in millions

North America

1 unchanged sentence

Operating income

Agriculture segment net sales increased in 2022 by approximately $318.2 million as compared to 2021, primarily due to much higher average selling prices of irrigation equipment globally of approximately 22%.

In North America, higher sales volumes for irrigation systems and parts in 2022, as compared to 2021, were driven by improved agricultural commodity prices.

International irrigation experienced a slightly lower sales volume in 2022, as compared to 2021.

Overall lower project sales to Egypt for the year 2022 more than offset the sales volume increases in many foreign markets.

Partially offsetting that decrease was a sales volume increase in 2022 versus 2021 due to robust demand for irrigation equipment and agriculture solar products in Brazil.

Sales of technology-related products increased $17.2 million as growers continued their adoption of technology to reduce costs and enhance profitability.

SG&A was higher in 2022, as compared to 2021, due to higher overall compensation costs and higher incentives due to improved business performance, as well as the incremental SG&A from the Prospera subsidiary acquired in the second quarter of 2021 (including the amortization of identified intangible assets, research and development costs, and stock-compensation expense).

Operating income increased in 2022 over 2021, as improved global sales volumes and pricing more than offset increases in the cost of sales and SG&A.

In November 2022, the Company completed the sale of Valmont SM, an offshore wind energy structures business with operations in Denmark.

The Company realized an approximate $33.3 million loss on the sale that is recorded in “Other income (expenses)” in the Consolidated Statements of Earnings, subject to certain post-closing adjustments.

In 2021, the offshore wind energy structures business recognized a pre-tax $27.9 million impairment charge of long-lived assets and a $5.5 million write-off of an accounts receivable that did not recur in 2022.

Net Corporate Expense

Corporate SG&A expense was higher in 2022 as compared to 2021.

The increase can be attributed to higher incentive expenses due to improved business performance, an increase in stock compensation expense, an increase in compensation expense due to salary merit increases, as well as an increase in rent expense of $2.7 million with the new corporate headquarters lease starting in the second quarter of 2021.

The increase was partially offset by the change in valuation of deferred compensation plan assets which resulted in lower expense of $5.5 million in 2022, as compared to 2021.

The change in deferred compensation plan assets is offset by the same amount in other income/expenses.

FISCAL 2021 COMPARED WITH FISCAL 2020

Infrastructure Segment

Net sales were higher in 2021 by approximately $226.3 million as compared to 2020, primarily driven by higher average selling prices across all product lines, as well as $33.3 million of favorable foreign currency translation effects year over year.

In the TD&S product line, net sales increased approximately $139.4 million in 2021, as compared with 2020, due primarily to an increase in average selling prices for the steel structures product line, reflecting the significant inflation seen in the cost of steel during 2021.

A number of our sales contracts in North America contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order.

Lighting and transportation net sales increased by approximately $28.6 million in 2021, as compared to 2020.

Sales volumes slightly decreased in North America as declines in volumes within the transportation markets were partially offset by increased higher average selling pricing year over year.

Sales increased within international markets in fiscal year 2021, as compared to fiscal year 2020, due to favorable foreign currency translation effects of approximately $24 million, slightly higher average selling prices, and slightly lower sales volumes.

In the Telecommunication product line, net sales increased by approximately $52.3 million in 2021, as compared to 2020, due primarily to higher net sales in North America, as communication product sales volumes increased due to strong demand from 5G and other connectivity initiatives and an increase in average selling prices.

Communication product line sales within international markets increased modestly in 2021 mostly attributed to an increase in volume.

Coatings net sales increased approximately $29.5 million in 2021, as compared to 2020, due to higher average selling prices and favorable foreign currency translation.

In North America, higher average selling prices helped to counteract the higher cost of zinc that incurred throughout the year.

North America continued to see decreased industrial production attributed largely to the economic impacts from COVID-19, but not to the severity of 2020.

In Asia-Pacific region, sales volumes improved in all regions, primarily due to sales pricing increases, higher volumes, and favorable foreign currency translation.

In the Renewable Energy product line, net sales decreased approximately $23.5 million in 2021, as compared to 2020, due to a decrease in sales volumes attributed to less large projects.

Gross profit was higher by approximately $38.7 million in 2021, as compared to 2020.

Contractual customer pricing mechanisms along with selling price management led to a large increase in average selling prices which more than offset the higher costs of goods sold.

The increase in sales volume for Telecommunications product line also contributed to the increase in gross profit.

SG&A was lower in 2021, as compared to 2020, primarily due to recording a partial goodwill and tradename impairment for the Access Systems business of $16.6 million during 2020 and other restructuring costs recognized in 2020 that did not recur in 2021.

Operating income increased in 2021, as compared to 2020, due the increase in net sales and the decrease in SG&A.

Agriculture Segment

Agriculture segment net sales increased in 2021 by approximately $377.0 million, as compared to 2020, primarily due to higher sales volumes in almost all markets, as well as higher average selling prices.

Net sales also increased slightly due to the continuing increase in sales of technology-related products and services, strengthened by our acquisitions of Prospera and PivoTrac that occurred in 2021.

The sales increase for International irrigation of $215.7 million was primarily due to deliveries on the multi-year Egypt project and higher sales volumes in Brazil.

In North America, higher sales volumes for irrigation systems and parts were driven by improved agricultural commodity prices.

Average selling prices for the North American tubular product line were up substantially in 2021, versus 2020, to reflect the inflation seen in the cost of steel during 2021.

SG&A was higher in 2021, as compared to 2020, due to approximately $20.0 million of SG&A from the acquisitions of Prospera and PivoTrac, higher compensation costs, and higher incentives due to improved business performance.

These increases were somewhat offset by one-time costs associated with the early retirement program incurred in 2020.

Operating income increased in 2021 over 2020, as improved global sales volumes and pricing more than offset increases in the cost of steel.

The net sales for the offshore wind energy structures business in 2021 was comparable 2020.

Gross profit decreased in 2021, as compared to 2020, due primarily to the $21.4 million impairment of long-lived assets.

SG&A expense was higher in 2021, as compared with 2020, primarily due to $6.5 million of impairments of intangible assets and a $5.5 million write-off of an accounts receivable.

Operating income decreased in 2021 primarily due to the $27.9 million impairment of long-lived assets for the offshore wind energy structures business.

Agriculture segment sales decreased in fiscal 2023, as compared to fiscal 2022.

In North America, the decrease in sales in fiscal 2023, as compared to fiscal 2022, was primarily due to notably lower sales volumes of irrigation equipment.

This was impacted by lower net farm income, growers’ decisions to delay capital investments due to general economic uncertainty, and a number of macroeconomic factors including higher interest rates, continued inflationary pressures, and recessionary fears.

International sales growth was driven by higher project sales and incremental sales from the HR Products acquisition totaling $14.0 million partially offset by lower sales volumes in Brazil due to muted farmer sentiment attributed to lower agricultural commodity prices.

Sales of technology-related products and services in fiscal 2023 were similar to fiscal 2022.

Our Agriculture business is cyclical and is impacted by changes in net farm income, commodity prices, weather volatility, geopolitical factors, and farmer sentiment related to future economic uncertainty.

We continue to monitor potential impacts of these factors on our financial results including estimated U.S.

net farm income, as released periodically by the USDA.

In Brazil, we also actively track changes in soybean and other crop prices and projected farm input costs to evaluate grower sentiment.

Irrigation equipment and aftermarket part sales in North America are expected to remain below prior year levels in fiscal 2024.

The previous three fiscal years benefited from record levels of disaster relief and pandemic-related stimulus for farmers in North America which contributed to higher demand.

Agriculture segment gross profit increased in fiscal 2023, as compared to fiscal 2022, due to deflation in the cost of steel and other favorable changes in input costs more than offsetting the impact of lower sales volumes.

Agriculture segment SG&A increased in fiscal 2023, as compared to fiscal 2022, due to increased bad debt reserve charges, particularly in Brazil, and increased employment costs, partially offset by decreased incentive expenses.

We incurred severance and other employee benefit costs totaling $9.1 million within the Agriculture segment in fiscal 2023 related to the Realignment Program.

Agriculture segment operating income decreased in fiscal 2023, as compared to fiscal 2022, primarily due to the impairment of certain goodwill and other intangible assets in the third quarter of fiscal 2023 totaling approximately $137.2 million, along with decreased sales volumes offset by gross profit improvements.

In November 2022, we completed the sale of Valmont SM, an offshore wind energy structures business with operations in Denmark.

We realized an approximate $33.3 million loss on the sale that was recorded in “Other income (expenses)” in the Consolidated Statements of Earnings.

The final payment of $2.2 million was received in January 2024, subsequent to the fiscal year ended December 30, 2023.

Corporate SG&A increased in fiscal 2023, as compared to fiscal 2022, due to increased employment costs, increased professional fees, and incremental expense from changes in the valuation of deferred compensation plan liabilities.

Charges related to changes in deferred compensation plan liabilities are offset by an opposite change in an equal amount included in “Other income (expenses)” for the change in deferred compensation plan assets.

We incurred severance and other employee benefit costs totaling $8.8 million within Corporate expense in fiscal 2023 related to the Realignment Program.

LIQUIDITY AND CAPITAL RESOURCES

3 unchanged sentences

● working capital and capital expenditure investments necessary for future sales growth;

● dividends on common stock generally in the range of 20% of the prior year’s fully diluted net earnings;

● dividends on common stock generally in the range of 15% of the prior fiscal year’s fully diluted net earnings;

● acquisitions;

● return of capital to shareholders through share repurchases.

We also announced our intention to manage our capital structure to maintain our investment grade debt rating.

Our most recent ratings were Baa3 by Moody’s Investors Services, Inc., BBB- by Fitch Ratings, and BBB+ by Standard and Poor’s Rating Services.

We would be willing to allow our debt rating to fall to BBB- to finance a special acquisition or other

We intend to manage our capital structure to maintain our investment grade debt rating.

Our most recent ratings were Baa3 by Moody’s Investors Service, Inc., BBB- by Fitch Ratings, Inc., and BBB+ by S&P Global Ratings.

We would be willing to allow our debt rating to fall to BBB- to finance a special acquisition or other opportunity.

We expect to maintain a ratio of debt to invested capital which will support our current investment grade debt rating.

The Board of Directors in May 2014 authorized the purchase of up to $500 million of the Company’s outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions.

The Board of Directors authorized an additional $250 million of share purchases, without an expiration date in both February 2015 and again in October 2018.

In May 2014, the Board of Directors authorized the purchase of up to $500.0 million of the Company’s outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately negotiated transactions.

The Board of Directors authorized an additional $250.0 million of share repurchases in February 2015 and again in October 2018, and authorized an additional $400.0 million of share repurchases in February 2023.

These authorizations have no expiration date.

The purchases are funded from available working capital and short-term borrowings and will be made subject to market and economic conditions.

1 unchanged sentence

As of December 30, 2023, we have acquired approximately 7.9 million shares for approximately $1,263.9 million 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 million, with no stated expiration date.

In November 2023, we entered into an accelerated purchase agreement to repurchase $120.0 million of the Company’s outstanding common stock, under our previously announced share repurchase program described above.

In the fourth quarter of fiscal 2023, we pre-paid $120.0 million and received an initial delivery of a number of shares of common stock which represented 75% of the prepayment amount.

The accelerated share repurchase will be completed during the first quarter of fiscal 2024.

In February 2023, the Company announced that the Board of Directors approved an increase to the quarterly cash dividend on the common stock to $0.60 per share, or a rate of $2.40 per share on an annualized basis, an increase of 9% from the prior quarterly cash dividend of $0.55 per share.

Supplier Finance Program

We have a supplier finance program agreement with a financial institution which allows qualifying suppliers, at their election and on terms they negotiate directly with the financial institution, to sell their receivables from the Company.

A supplier’s voluntary participation in the program does not change our payment terms, amounts paid, payment timing, or impact our liquidity, and we have no economic interest in a supplier’s decision to participate.

As of December 30, 2023 and December 31, 2022, our accounts payable on our Consolidated Balance Sheets included $41.9 million and $48.9 million, respectively, of our payment obligations under this program.

Sources of Financing

Our debt financing at December 31, 2022 consisted primarily of long‑term debt and borrowings on our revolving credit facility.

Our debt financing as of December 30, 2023 consisted primarily of long‑term debt and borrowings on our revolving credit facility.

Our long‑term debt as of December 30, 2023, principally consisted of:

● $450 million face value ($433.1 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044.

● $450.0 million face value ($433.5 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044, and

● $305.0 million face value ($295.2 million carrying value) of senior unsecured notes that bear interest at 5.25% per annum and are due in October 2054.

1 unchanged sentence

Both tranches of these notes are guaranteed by certain of our subsidiaries.

Our revolving credit facility with JP Morgan Chase Bank, N.A., as Administrative Agent, and the other lenders party thereto, has a maturity date of October 18, 2026.

Our revolving credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent, and the other lenders party thereto, has a maturity date of October 18, 2026.

The revolving credit facility provides for $800.0 million of committed unsecured revolving credit loans with available borrowings thereunder to $400.0 million in foreign currencies.

5 unchanged sentences

The interest rate on our borrowings will be, at our option, either:

(a) term SOFR (based on a 1-, 3-, or 6-month interest period, as selected by the Company) plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior, unsecured, long-term debt published by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc.;

(a) term Secured Overnight Financing Rate (“SOFR”) (based on a 1-, 3-, or 6-month interest period, as selected by the Company) plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior unsecured long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc.;

(b) the higher of

2 unchanged sentences

● term SOFR (based on a one-month interest period) plus 100 basis points,

plus, in each case, 0 to 62.5 basis points, depending on the credit rating of our senior, unsecured, long-term debt published by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc.;

(c) daily simple SOFR plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior, unsecured, long-term debt published by Standard & Poor’s Rating Services and Mood’s Investors Service, Inc.

A commitment fee is also required under the revolving credit facility which accrues at 10 to 25 basis points, depending on the credit rating of our senior, unsecured long-term debt published by Standard and Poor’s Rating Services and Moody’s Investor Services, Inc., on the average daily unused portion of the commitments under the revolving credit agreement.

As of December 31, 2022, we had outstanding borrowings of $140.5 million under the revolving credit facility.

plus, in each case, 0 to 62.5 basis points, depending on the credit rating of our senior unsecured long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc.;

(c) daily simple SOFR plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior unsecured long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc.

A commitment fee is also required under the revolving credit facility which accrues at 10 to 25 basis points, depending on the credit rating of our senior unsecured long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc., on the average daily unused portion of the commitments under the revolving credit agreement.

As of December 30, 2023 and December 31, 2022, we had outstanding borrowings of $377.9 million and $140.5 million, respectively, under the revolving credit facility.

The revolving credit facility has a maturity date of October 18, 2026 and contains a financial covenant that may limit our additional borrowing capability under the agreement.

As of December 30, 2023, we had the ability to borrow $421.9 million under this facility, after consideration of standby letters of credit of $0.2 million associated with certain insurance obligations.

We also maintain certain short‑term bank lines of credit totaling $125.0 million, of which $119.2 million was unused as of December 31, 2022.

We also maintain certain short‑term bank lines of credit totaling $39.3 million, of which $36.1 million were unused as of December 30, 2023.

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

1 unchanged sentence

The leverage ratio is the ratio of:

(a) interest-bearing debt minus unrestricted cash in excess of $50 million (but not exceeding $500 million);

to (b) adjusted EBITDA.

The debt agreements provide a modification of the definition of “EBITDA” to add-back any non-cash stock-based compensation in any trailing twelve month period and allow for an adjustment to EBITDA, subject to certain limitations, for non-cash charges or gains that are non-recurring in nature.

(a) interest-bearing debt minus unrestricted cash in excess of $50.0 million (but not exceeding $500.0 million) to (b) earnings before interest, taxes, depreciation, and amortization, adjusted for non-cash stock-based compensation and non-cash charges or gains that are non-recurring in nature, subject to certain limitations (“Adjusted EBITDA”).

The leverage ratio is permitted to increase from 3.50 to 3.75 for the four consecutive fiscal quarters after certain material acquisitions.

2 unchanged sentences

As of December 30, 2023, we were in compliance with all covenants related to these debt agreements.

The calculation of Adjusted EBITDA-last four quarters and the leverage ratio are in Selected Financial Measures.

Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on our debt, payments of taxes, contributions to pension plan, and, if market conditions warrant, occasional investments in, or acquisitions of, business ventures.

The calculation of Adjusted EBITDA and the leverage ratio are presented in the tables below in Selected Financial Measures.

Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on our debt, payments of taxes, contributions to the pension plan, and, if market conditions warrant, occasional investments in, or acquisitions of, business ventures.

In addition, we regularly evaluate our ability to pay dividends or repurchase stock, all consistent with the terms of our debt agreements.

Cash requirements for fiscal 2023 are expected to consist primarily of capital expenditures, Delta pension plan contributions, operating leases, and interest on outstanding debt.

The Company also has unconditional purchase commitments that relate to purchase orders for zinc, aluminum, and steel, all of which we plan to use in 2023.

Cash requirements for fiscal 2024 are expected to consist primarily of capital expenditures, pension plan contributions, operating leases, and interest on outstanding debt.

We also have unconditional purchase commitments that relate to purchase orders for zinc, aluminum, and steel, all of which we plan to use in fiscal 2024.

We believe the quantities under contract are reasonable in light of normal fluctuations in business levels and we expect to use the commodities under contract during the contract period.

Total capital expenditures for fiscal 2023 are expected to be approximately $105 to $125 million.

The following table summarizes current and long-term material cash requirements as of December 31, 2022 (in millions of dollars):

Contractual Obligations

Total capital expenditures for fiscal 2024 are expected to be approximately $125.0 million to $140.0 million.

The following table summarizes current and long-term material cash requirements as of December 30, 2023:

Dollars in millions

Long‑term debt

Delta pension plan contributions

Pension plan contributions

Operating leases

4 unchanged sentences

We have consistently generated operating cash flows in excess of our capital expenditures.

Based on our available credit facilities, issuance of senior unsecured notes, and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs for fiscal year 2023 and beyond.

We had cash balances of $185.4 million as of December 31, 2022, approximately $147.2 million is held in our non-U.S.

Based on our available credit facilities,

access to capital markets, and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs for fiscal 2024 and beyond.

We had cash balances of $203.0 million as of December 30, 2023 with approximately $162.0 million held in our non-U.S.

subsidiaries.

2 unchanged sentences

state income taxes of $1.6 million and $0.8 million, respectively.

The following table includes a summary of our cash flow information for the fiscal years ended December 30, 2023, December 31, 2022, and December 25, 2021:

Fiscal Year Ended

Dollars in thousands

Cash flow data:

Net cash flows from operating activities

Net cash flows from investing activities

Net cash flows from financing activities

Operating Cash Flows and Working Capital – Cash generated from operating activities totaled $326.3 million in 2022 compared with $65.9 million in 2021.

Net working capital was $976.6 million as of December 31, 2022, as compared with $946.9 million as of December 25, 2021.

The increase in net working capital in 2022 was attributed to the overall increase in net sales and the related impact on contract asset and receivables, partially offset by increases in accounts payable and other accrued expenses.

Overall working capital was also affected by our use of cash to fund our capital spending and acquisition of ConcealFab as well as our various financing activities.

Investing Cash Flows – Cash used in investing activities totaled $132.1 million in 2022, compared to $417.3 million in 2021.

Investing activities in 2022 included capital spending of $93.3 million and the acquisition of a controlling ownership investment in ConcealFab for $39.3 million.

In 2021, investing activities primarily included capital spending of $107.8 million and the acquisitions of two businesses within the Agriculture segment for $312.5 million.

Financing Cash Flows – Cash used in financing activities totaled $181.9 million in 2022, compared to cash provided by financing activities of $133.5 million in 2021.

Our total interest‑bearing debt decreased to $878.0 million as of December 31, 2022, from $965.4 million on December 25, 2021.

Financing cash outflows in 2022 primarily consisted of principal payments of long-term borrowings of $336.4, offset by proceeds from long-term debt borrowings of $254.0 million, dividends paid of $45.8 million, net payments on short-term agreements of $7.6 million, the purchase of treasury shares of $40.5 million, and the purchase of noncontrolling interests of $7.3 million.

During 2021, the Company had proceeds from long-term debt borrowings of $312.5 million, offset by payments on long-term debt of $91.3 million, dividends paid of $41.4 million, net payments on short-term agreements of $20.2 million, and the purchase of treasury shares of $26.1 million.

Net cash flows provided by operating activities

Net cash flows used in investing activities

Net cash flows provided by (used in) financing activities

Operating Cash Flows and Working Capital – Cash provided by operating activities totaled $306.8 million in fiscal 2023, as compared with $326.3 million in fiscal 2022.

The decrease in operating cash flows reflects cash flows generated from higher gross profits, more than offset by increases in tax and interest payments of $10.6 million and $8.9 million, respectively, and payments of severance and other employee benefit costs related to the Realignment Program totaling $22.7 million in fiscal 2023.

Investing Cash Flows – Cash used in investing activities totaled $115.3 million in fiscal 2023, as compared to $132.1 million in fiscal 2022.

Investing activities in fiscal 2023 included capital spending of $96.8 million and the acquisition of HR Products, net of cash acquired, of $32.7 million partially offset by proceeds from the divestiture of Torrent Engineering and Equipment, net of cash divested, of $6.4 million, and proceeds from property damage insurance claims of $7.5 million.

Investing activities in fiscal 2022 included capital spending of $93.3 million and the acquisition of a controlling ownership investment in ConcealFab for $39.3 million.

Financing Cash Flows – Cash used in financing activities totaled $176.4 million in fiscal 2023, as compared to $181.9 million in fiscal 2022.

Our total interest‑bearing debt increased to $1,138.1 million as of December 30, 2023, from $878.0 million as of December 31, 2022.

The financing cash used in fiscal 2023 was primarily the result of borrowings on the revolving credit agreement and short-term notes of $400.8 million, offset by principal payments on our long-term debt and short-term borrowings of $168.8 million, dividends paid of $49.5 million, the purchase of treasury shares of $345.3 million, and $12.9 million of net activity from stock option and incentive plans, including the associated withholding tax payments.

The financing cash used in fiscal 2022 primarily consisted of principal payments of long-term borrowings of $336.4, offset by proceeds from long-term debt borrowings of $254.0 million, dividends paid of $45.8 million, net payments on short-term agreements of $7.6 million, the purchase of treasury shares of $40.5 million, and the purchase of redeemable noncontrolling interests of $7.3 million.

Guarantor Summarized Financial Information

We are providing the following information in compliance with Rule 3-10 and Rule 13-01 of Regulation S-X with respect to our two tranches of senior unsecured notes.

All of the senior notes are guaranteed, jointly, severally, fully, and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of the Company’s current and future direct and indirect domestic and foreign subsidiaries (collectively the “Guarantors”).

All of the senior notes are guaranteed, jointly, severally, fully, and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of our current and future direct and indirect domestic and foreign subsidiaries (collectively the “Guarantors”).

The Parent is the Issuer of the notes and consolidates all Guarantors.

The financial information of Issuer and Guarantors is presented on a combined basis with intercompany balances and transactions between Issuer and Guarantors eliminated.

The financial information of the Issuer and Guarantors is presented on a combined basis with intercompany balances and transactions between the Issuer and Guarantors eliminated.

The Issuer’s or Guarantors’ amounts due from, amounts due to, and transactions with non-guarantor subsidiaries are separately disclosed.

Combined financial information is as follows:

Supplemental Combined Parent and Guarantors Financial Information

For the three-year period ended December 31, 2022

Combined financial information for the fiscal years ended December 30, 2023, December 31, 2022, and December 25, 2021 was as follows:

Fiscal Year Ended

Dollars in thousands

1 unchanged sentence

Net earnings attributable to Valmont Industries, Inc.

Supplemental Combined Parent and Guarantors Financial Information

December 31, 2022 and December 25, 2021

Combined financial information as of December 30, 2023 and December 31, 2022 was as follows:

Dollars in thousands

Current assets

Noncurrent assets

Non-current assets

Current liabilities

Noncurrent liabilities

Noncontrolling interest in consolidated subsidiaries

Included in noncurrent assets is a due from non-guarantor subsidiaries receivable of $205,424 and $93,613 at December 31, 2022 and December 25, 2021.

Included in noncurrent liabilities is a due to non-guarantor subsidiaries payable of $200,522 and $236,577 at December 31, 2022 and December 25, 2021.

Non-current liabilities

Redeemable noncontrolling interests

Included in non-current assets is a due from non-guarantor subsidiaries receivable of $136,904 and $205,424 as of December 30, 2023 and December 31, 2022, respectively.

Included in non-current liabilities is a due to non-guarantor subsidiaries payable of $216,633 and $200,522 as of December 30, 2023 and December 31, 2022, respectively.

Selected Financial Measures

We are including the following financial measures for the Company.

Return on Invested Capital is a non-GAAP measure.

Accordingly, Invested Capital and Return on Invested Capital should not be considered in isolation or as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity.

The table below shows how Invested Capital and Return on Invested Capital are calculated from our income statement and balance sheet.

Return on Invested Capital is calculated as Operating Income (after-tax) divided by the average of beginning and ending Invested Capital.

Invested Capital represents total assets minus total liabilities (excluding interest-bearing debt).

Return on Invested Capital is one of our key operating ratios, as it allows investors to analyze our operating performance in light of the amount of investment required to generate our operating profit.

Return on Invested Capital is also a measurement used to determine management incentives.

Return on Invested Capital – Return on invested capital (“ROIC”) and Adjusted ROIC are some of our key operating ratios, as they allow investors to analyze our operating performance in light of the amount of investment required to generate our operating profit.

ROIC and Adjusted ROIC are also measurements used to determine management incentives.

The table below shows how invested capital, ROIC, and Adjusted ROIC are calculated from our Consolidated Statements of Earnings and our Consolidated Balance Sheets.

ROIC is calculated as after-tax operating income divided by the average of beginning and ending invested capital.

Adjusted ROIC is calculated as after-tax operating income adjusted for the impairment of long-lived assets, realignment charges, non-recurring charges associated with the major scope changes for two strategic projects initiated by departed senior leadership, intangible asset amortization and stock-based compensation related to the Prospera subsidiary acquisition, the write-off of a receivable, and acquisition diligence then divided by the average of beginning and ending invested capital.

Invested capital represents total assets minus total liabilities (excluding interest-bearing debt and redeemable noncontrolling interests).

ROIC and Adjusted ROIC are non-generally accepted accounting principles (“GAAP”) measures.

Accordingly, invested capital, ROIC, and Adjusted ROIC should not be considered in isolation or as a substitute for net earnings, cash flows from operations, or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity.

The calculation of these ratios for the fiscal years ended December 30, 2023, December 31, 2022, and December 25, 2021 was as follows:

Fiscal Year Ended

Dollars in thousands

5 unchanged sentences

Return on invested capital

Operating income

Impairment of long-lived assets

Realignment charges

Other non-recurring charges

Prospera intangible asset amortization 3

Prospera stock-based compensation 3

Write-off of a receivable

Acquisition diligence

Adjusted operating income

Adjusted effective tax rate 1,2

Tax effect on adjusted operating income

After-tax adjusted operating income

Average invested capital

Adjusted return on invested capital

Defined benefit pension asset

Accounts payable

Accrued expenses

Income Tax Payable

Defined benefit pension asset

Defined benefit pension liability

Deferred compensation

Other noncurrent liabilities

Contract liabilities

Income taxes payable

Dividends payable

Lease liability

Contract liability

Deferred tax liability

Deferred income taxes

Operating lease liabilities

Deferred compensation

Defined benefit pension liability

Other non-current liabilities

Total invested capital

Beginning of year invested capital

Beginning invested capital

Average invested capital

1 The adjusted effective tax rate for 2022 excludes the effects of the $33,273 loss from the divestiture of the offshore wind energy structures business which is not deductible for income tax purposes.

The effective tax rate including the loss on the divestiture is 29.9%.

The adjusted effective tax rate for 2020 excludes the effects of the $12,575 goodwill impairment which is not deductible for income tax purposes.

The effective tax rate in 2020 including the impairments is 25.7%.

Return on invested capital, as presented, may not be comparable to similarly titled measures of other companies.

Adjusted EBITDA .

Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is one of our key financial ratios in that it is the basis for determining our maximum borrowing capacity at any one time.

Our bank credit agreements contain a financial covenant that our total interest-bearing debt not exceed 3.50x Adjusted EBITDA (or 3.75x Adjusted EBITDA after certain material acquisitions) for the most recent four quarters.

1 The adjusted effective tax rate for fiscal 2022 excluded the effects of the $33.3 million loss from the divestiture of the offshore wind energy structures business which was not deductible for income tax purposes.

The effective tax rate including the loss on the divestiture was 29.9%.

2 The adjusted effective tax rate for fiscal 2023 excluded the effects of the impairment of long-lived assets of $140.8 million, realignment charges of $35.2 million, non-recurring charges associated with major scope changes for two strategic projects initiated by departed senior leadership of $5.6 million, loss from Argentine peso hyperinflation of $5.1 million, and non-recurring tax benefit items of $3.6 million.

The effective tax rate including these items was 38.1%.

3 The Company does not include adjustments for the Prospera non-cash expenses for fiscal 2023 or going forward as these amounts are no longer financially significant after the third quarter of fiscal 2023 impairment of long-lived assets and realignment activities completed during the fourth quarter of fiscal 2023.

ROIC and Adjusted ROIC, as presented, may not be comparable to similarly titled measures of other companies.

Adjusted EBITDA – Adjusted EBITDA is one of our key financial ratios in that it is the basis for determining our maximum borrowing capacity at any one time.

Our bank credit agreements contain a financial covenant that our total interest-bearing debt not exceed 3.50 times Adjusted EBITDA (or 3.75 times Adjusted EBITDA after certain material acquisitions), calculated on a rolling four fiscal quarter basis.

These bank credit agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired businesses.

The bank credit agreements also provide for an adjustment to EBITDA, subject to certain specified limitations, for non-cash charges or gains that are non-recurring in nature.

The bank credit agreements also outline adjustments for non-cash stock-based compensation and non-cash charges or gains that are non-recurring in nature, subject to certain limitations, to be included in the calculation of Adjusted EBITDA.

If this financial covenant is violated, we may incur additional financing costs or be required to pay the debt before its maturity date.

Adjusted EBITDA is a non-GAAP measure and, accordingly, should not be considered in isolation or as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity.

The calculation of Adjusted EBITDA is as follows:

The calculation of Adjusted EBITDA for the fiscal year ended December 30, 2023 was as follows:

Fiscal Year Ended

Dollars in thousands

Net cash flows from operations

Net cash flows provided by operating activities

Interest expense

Income tax expense

Loss on investment

Impairment of long-lived assets

Loss on divestiture of offshore wind energy structures business

Deferred income tax (expense) benefit

Noncontrolling interest

Pension plan expense

Contribution to pension plan

Deferred income tax benefit

Redeemable noncontrolling interests

Defined benefit pension plan cost

Contribution to defined benefit pension plan

Changes in assets and liabilities, net of acquisitions

Impairment of long-lived assets

Loss on divestiture of offshore wind energy structures business

Cash restructuring expenses

Realignment charges

Proforma acquisition adjustment

Adjusted EBITDA

Fiscal Year Ended

Dollars in thousands

Net earnings attributable to Valmont Industries, Inc.

1 unchanged sentence

Income tax expense

Stock based compensation

Depreciation and amortization expense

Stock-based compensation

Impairment of long-lived assets

Loss on divestiture of offshore wind energy structures business

Cash restructuring expenses

Realignment charges

Proforma acquisition adjustment

Adjusted EBITDA

1 Calculated in accordance with the terms of the credit facility as in effect on December 25, 2021.

EBITDA and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

In October 2021, our revolving credit facility was amended to allow the Company to add-back any non-cash stock-based compensation in any trailing twelve month period and allow for an adjustment to EBITDA, subject to certain limitations, for non-cash charges or gains that are non-recurring in nature.

Leverage Ratio .

Leverage ratio is calculated as the sum of interest-bearing debt minus unrestricted cash in excess of $50 million (but not exceeding $500 million);

divided by Adjusted EBITDA.

The leverage ratio is one of the key financial ratios in the covenants under our major debt agreements and the ratio cannot exceed 3.5 (or 3.75x after certain material acquisitions) for any reporting period (four quarters).

Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

Leverage Ratio – Leverage ratio is calculated as the sum of interest-bearing debt minus unrestricted cash in excess of $50.0 million (but not exceeding $500.0 million) divided by Adjusted EBITDA.

The leverage ratio is one of the key financial ratios in the covenants under our major debt agreements and the ratio cannot exceed 3.50 (or 3.75 after certain material acquisitions), calculated on a rolling four fiscal quarter basis.

If those covenants are violated, we may incur additional financing costs or be required to pay the debt before its maturity date.

Leverage ratio is a non-GAAP measure and, accordingly, should not be considered in isolation or as a substitute for net earnings, cash flows from operations, or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity.

The calculation of this ratio is as follows:

The calculation of this ratio as of December 30, 2023 was as follows:

Dollars in thousands

Interest-bearing debt

Cash and cash equivalents in excess of $50 million

Interest-bearing debt, excluding origination fees and discounts of $26,310

Cash and cash equivalents in excess of $50,000

Net indebtedness

2 unchanged sentences

Leverage ratio, as presented, may not be comparable to similarly titled measures of other companies.

1 Calculated in accordance with the terms of the credit facility as in effect on December 25, 2021.

Changes in Prices

Certain key materials we use are commodities traded in worldwide markets and are subject to fluctuations in price.

Certain key materials we use are commodities traded in worldwide markets which are subject to fluctuations in price.

The most significant materials are steel, aluminum, zinc, and natural gas.

1 unchanged sentence

The volatility in these prices was due to such factors as fluctuations in supply and demand conditions, government tariffs, and the costs of steel‑making inputs.

Steel is most significant for our TD&S product line where the cost of steel has been approximately 50% of the net sales, on average.

In 2018, we began using steel hot rolled coil derivative contracts on a limited basis to mitigate the impact of rising steel prices on operating income.

Assuming a similar sales mix, a hypothetical 20% change in the price of steel would have affected net sales in this product line by approximately $95 million for the year ended December 31, 2022.

Steel is most significant for our TD&S product line where the cost of steel has been approximately 50% of net sales, on average.

In fiscal 2018, we began using hot rolled steel coil derivative contracts on a limited basis to mitigate the impact of rising steel prices on operating income.

Assuming a similar sales mix, a hypothetical 20% change in the price of steel would have affected net sales in this product line by approximately $100.0 million for the fiscal year ended December 30, 2023.

We have also experienced volatility in natural gas prices in the past several years.

Our main strategies in managing these risks are a combination of fixed-price purchase contracts with our vendors to reduce the volatility in our purchase prices and sales price increases where possible.

We use natural gas swap contracts on a limited basis to mitigate the impact of rising gas prices on our operating income.

We use natural gas swap contracts on a limited basis to mitigate the impact of rising natural gas prices on our operating income.

Risk Management

Market Risk—The principal market risks affecting us are exposure to interest rates, foreign currency exchange rates, and commodity prices.

The principal market risks affecting us are exposure to interest rates, foreign currency exchange rates, and commodity prices.

At times, we utilize derivative financial instruments to hedge these exposures, but we do not use derivatives for trading purposes.

Interest Rates—Our interest‑bearing debt at December 31, 2022 was primarily fixed rate debt and borrowings on our revolving credit facility.

Interest Rate Risk:

Our interest‑bearing debt as of December 30, 2023 was primarily fixed-rate debt and borrowings on our revolving credit facility.

Our notes payable, revolving credit facility, and a small portion of our long-term debt accrue interest at a variable rate.

Assuming average interest rates and borrowings on variable rate debt, a hypothetical 10% change in interest rates would have affected our interest expense in 2022 and 2021 by approximately $0.8 million and $0.4 million, respectively.

Assuming average interest rates and borrowings on variable rate debt, a hypothetical 10% change in interest rates would have affected our interest expense in fiscal 2023 and fiscal 2022 by approximately $2.5 million and $0.8 million, respectively.

Likewise, we have excess cash balances on deposit in interest‑bearing accounts in financial institutions.

An increase or decrease in interest rates of ten basis points would have impacted our annual interest earnings by approximately $0.2 million in both 2022 and 2021.

Foreign Exchange—Exposures to transactions denominated in a currency other than the entity’s functional currency are not material and, therefore, the potential exchange losses in future earnings, fair value, and cash flows from these transactions are not material.

The Company is also exposed to investment risk related to foreign operations.

An increase or decrease in interest rates of ten basis points would have impacted our annual interest earnings by approximately $0.2 million and $0.2 million in fiscal 2023 and fiscal 2022, respectively.

Foreign Exchange Risk:

Exposures to transactions denominated in a currency other than an entity’s functional currency are not material and, therefore, the potential exchange losses in future earnings, fair value, and cash flows from these transactions are not material.

We are also exposed to investment risk related to foreign operations.

From time to time, as market conditions indicate, we will enter into foreign currency contracts to manage the risks associated with anticipated future transactions, current balance sheet positions, and foreign subsidiary investments that are in currencies other than the functional currencies of our businesses.

At December 31, 2022, the Company had one outstanding fixed-for-fixed cross currency swap (“CCS”), swapping U.S.

dollar principal and interest payments on a portion of its 5.00% senior unsecured notes due 2044 for Euro denominated payments.

The CCS was entered into in 2019 in order to mitigate foreign currency risk on the Company’s Euro investments and to reduce interest expense.

The notional amount of the Euro CCS is $80.0 million and matures in 2024.

In 2019, the Company entered into a fixed-for-fixed 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”) denominated payments.

The DKK CCS, which qualified as net investment hedges, were settled in 2022 with the Company receiving $3.5 million.

As of December 30, 2023, the Company had one outstanding fixed-for-fixed cross currency swap (“CCS”), swapping U.S.

dollar principal and interest payments on a portion of its 5.00% senior unsecured notes due in fiscal 2044 for Euro denominated payments.

The CCS was entered into in fiscal 2019 in order to mitigate foreign currency risk on our Euro investments and to reduce interest expense.

The notional amount of the Euro CCS is $80.0 million and matures in fiscal 2024.

In fiscal 2019, the Company entered into a fixed-for-fixed CCS, swapping U.S.

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

The DKK CCS, which qualified as a net investment hedge, was settled in fiscal 2022, with the Company receiving $3.5 million.

Much of our cash in non-U.S.

2 unchanged sentences

A hypothetical 10% change in the value of the U.S.

dollar would impact our reported cash balance by approximately $11.2 million in 2022 and $13.6 million in 2021.

dollar would impact our reported cash balance by approximately $13.2 million in fiscal 2023 and $11.2 million in fiscal 2022.

We manage our investment risk in foreign operations by borrowing in the functional currencies of the foreign entities or by utilizing hedging instruments, as discussed above, where appropriate.

The following table indicates the change in the recorded value of our most significant investments at year-end assuming a hypothetical 10% change in the value of the U.S.

(in millions)

The following table indicates the change in the recorded value of our most significant investments as of December 30, 2023 and December 31, 2022 assuming a hypothetical 10% change in the value of the U.S.

Dollars in millions

Australian dollar

Chinese renminbi

Canadian dollar

Brazilian real

Commodity risk—Steel hot rolled coil is a significant commodity input used by each of our segments in the manufacture of our products, with the exception of the Coatings product line.

Steel prices are volatile and we may utilize derivative instruments to mitigate commodity price risk on fixed price orders.

In 2021 and 2022, the Company entered into steel hot rolled coil forward contracts which qualified as a cash flow hedge of the variability in the cash flows attributable to future steel purchases.

As of December 31, 2022, we had open forward contracts with a notional amount of $9.8 million for the total purchase of 10,300 short tons from January 2023 to March 2023.

Natural gas is a significant commodity used in our factories, especially in our Coatings product line galvanizing operations, where natural gas is used to heat tanks that enable the hot-dipped galvanizing process.

Natural gas prices are volatile and we mitigate some of this volatility through the use of derivative commodity instruments.

British pound

Canadian dollar

Chinese renminbi

Commodity Risk:

Hot rolled steel coil is a significant commodity input used by each of our segments in the manufacture of our products, with the exception of the Coatings product line.

Steel prices are volatile and we may utilize derivative financial instruments to mitigate commodity price risk on fixed-price orders.

In fiscal 2023 and fiscal 2022, we entered into hot rolled steel coil forward contracts and swaps which qualified as cash flow hedges of the variability in the cash flows attributable to future steel purchases.

As of December 30, 2023, we had open forward contracts and swaps with a notional amount of $7.8 million for the total purchase of 8,500 short tons from December 2023 to April 2024.

Natural gas is a significant commodity used in our factories, especially in our Coatings product line galvanizing operations, where it is used to heat tanks that enable the hot-dipped galvanizing process.

Natural gas prices are volatile which is somewhat mitigated through the use of derivative financial instruments.

Our current policy is to manage this commodity price risk for 0 to 75% of our U.S.

natural gas requirements for the upcoming 6 to 18 months through the purchase of natural gas swaps based on NYMEX futures prices for delivery in the month being hedged.

natural gas requirements for the upcoming 6 to 24 months through the purchase of natural gas swaps based on New York Mercantile Exchange futures prices for delivery in the month being hedged.

The objective of this policy is to mitigate the impact on our earnings of sudden, significant increases in the price of natural gas.

As of December 31, 2022, we have open natural gas swaps with a notional value of $7.0 million for 1,230,000 MMBtu.

As of December 30, 2023, we had open natural gas swaps with a notional value of $4.3 million for 960,475 MMBtu from January 2024 to October 2025.

Diesel fuel is a significant commodity used by our contracted carriers who deliver our products.

Diesel fuel prices are volatile which is somewhat mitigated through the use of derivative financial instruments.

In fiscal 2023, we entered into diesel fuel option contracts that qualified as cash flow hedges of the variability of cash flows attributable to the diesel fuel costs charged by contracted carriers.

As of December 30, 2023, we had open option contracts with a notional amount of $0.5 million for the total purchase of 1,890,000 gallons from January 2024 to September 2024.

CRITICAL ACCOUNTING POLICIES

3 unchanged sentences

We base our estimates on our experience and on other assumptions that we believe are reasonable under the circumstances.

Further, we re-evaluate our

estimates from time to time and as circumstances change.

Further, we re-evaluate our estimates from time to time and as circumstances change.

Actual results may differ under different assumptions or conditions.

1 unchanged sentence

Depreciation, Amortization, and Impairment of Long-Lived Assets

Our long-lived assets consist primarily of property, plant, and equipment, right-of-use (lease) assets, and goodwill and intangible assets acquired in business acquisitions.

Our long-lived assets consist primarily of property, plant, and equipment, right-of-use assets, and goodwill and intangible assets acquired in business acquisitions.

We have assigned useful lives to our property, plant, and equipment and certain intangible assets ranging from 2 to 30 years.

A pre-tax $27.9 million impairment of the long-lived assets (customer relationship intangible asset, trade name, and property, plant, and equipment) was recognized in fiscal year 2021.

We identified thirteen reporting units for purposes of evaluating goodwill and we annually evaluate our reporting units for goodwill impairment during the third fiscal quarter, which usually coincides with our strategic planning process.

For twelve of the reporting units, we estimate the value of the reporting units using after-tax cash flows from operations (less capital expenses) discounted to present value ("discounted cash flows").

The key assumptions in the discounted cash flow analysis are the discount rate and the projected cash flows.

We also use sensitivity analysis to determine the impact of changes in discount rates and cash flow forecasts on the valuation of the reporting units.

For our solar tracking structure reporting unit, we project 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.

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

We analyze EBITDA multiples for other industrial companies with similar product lines in determining what to use in the model .

The key assumption in the market approach analysis is the selection of industrial companies with similar product lines and forecasted EBITDA.

For both the 2022 and 2021 annual impairment tests, the estimated fair value of all of our reporting units exceeded their respective carrying value, so no goodwill was impaired in 2022 or 2021.

A $12.6 million impairment of our access systems reporting unit was recognized as a result of an interim impairment test in 2020.

If our assumptions on discount rates and future cash flows change as a result of events or circumstances, and we believe these assets may have declined in value, then we may record impairment charges, resulting in lower profits .

In the fourth quarter of fiscal 2021, a pre-tax impairment of $21.4 million of property, plant, and equipment was recognized for the offshore wind energy structures business.

We annually evaluate our reporting units for goodwill impairment during the third fiscal quarter, which usually coincides with our strategic planning process.

We estimated the value of all fourteen of the reporting units identified for the fiscal 2023 goodwill impairment analysis utilizing a discounted cash flow model.

The discounted cash flow model uses projected after-tax cash flows from operations (less capital expenditures) discounted to present value.

We perform sensitivity analyses to determine what the impact of changes in key assumptions, including discount rates and cash flow forecasts, may have on the valuation of the reporting units.

For the fiscal 2023 annual impairment test, the estimated fair value of two of our reporting units was less than their respective carrying value.

As a result, a $120.0 million impairment of our Agriculture Technology reporting unit and a $1.9 million impairment of our India Structures reporting unit were recognized in the third quarter of fiscal 2023.

The primary drivers for the reduction in the estimated fair value of the Agriculture Technology reporting unit were the less favorable outlook for the North American agriculture market and lower revenue projections for the Prospera agronomy software solutions.

A higher weighted average cost of capital, primarily driven by increases in overall interest rates since the fiscal 2022 annual impairment test, and lower long-term revenue growth rate assumptions also partially contributed to the reduction in the estimated fair value of the reporting unit.

For the India Structures reporting unit, assumptions around future cash flows including working capital requirements resulted in the impairment of the goodwill.

For all reporting units, if our assumptions on discount rates and future cash flows change as a result of events or circumstances and we believe these assets may have declined in value, we may record impairment charges, resulting in lower profits.

Our reporting units are all cyclical, and their sales and profitability may fluctuate from year to year.

We continue to monitor changes in the global economy that could impact future operating results of its reporting units.

If such conditions arise, we will test a given reporting unit for impairment prior to the annual test.

We continue to monitor changes in the global economy that could impact the future operating results of our reporting units.

If such adverse conditions arise, we will test impacted reporting units for impairment prior to the annual test.

In the evaluation of our reporting units, we look at the long-term prospects for the reporting unit and recognize that current performance may not be the best indicator of future prospects or value, which requires management judgment.

For four of our reporting units, Europe, Middle East & Africa Structures, Asia Pacific Highway Safety, Asia Pacific Access Systems, and Solar Tracking Structure, the amount of cushion or excess fair value above carrying value was less than 15%.

We have identified cost-saving initiatives within these reporting units and believe they will continue to generate positive cash flows in excess of their current carrying value, however, we will continue to monitor their prospects for growth and continuous improvement.

Should our assumptions around these businesses change negatively, there could be additional triggers for another goodwill assessment in the future.

Our indefinite-lived intangible assets consist of trade names.

2 unchanged sentences

The royalty, which is based on a reasonable rate applied against estimated future sales, is tax-effected and discounted to present value.

The most significant assumptions in this evaluation include estimated future sales, the royalty rate and the after-tax discount rate.

We performed our annual impairment test of all trade names in the third quarter of 2022 and determined none were impaired.

We recognized an impairment of approximately $2 million of the Valmont SM trade name during fiscal year 2021.

Based on our fiscal 2023 annual testing, the carrying value of one trade name exceeded its estimated fair value.

An impairment of $1.7 million was recognized within the Infrastructure segment.

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, impairment charges of $2.0 million were recognized against the related trade name and $4.5 million were recognized against the related customer relationships asset.

In the third quarter of fiscal 2023, the Company tested the recoverability of a certain amortizing proprietary technology intangible asset related to Prospera included within the Agriculture Technology reporting unit due to identified impairment indicators.

The Company determined the carrying value of the asset exceeded the total undiscounted estimated future cash flows and reduced the asset to its fair value.

An impairment of $17.3 million was recognized within the Agriculture segment.

Inventories are valued at the lower of cost, determined on a first-in, first-out basis, or net realizable value.

5 unchanged sentences

Likewise, if we subsequently determine that we are able to realize all or part of a net deferred tax asset in the future, an adjustment reducing the valuation allowance would increase net earnings in the period such determination was made.

At December 31, 2022, we had approximately $67.2 million in deferred tax assets relating to tax credits and loss carryforwards, with a valuation allowance of $43.4 million, including $7.1 million in valuation allowances related to capital loss carryforwards, which are unlikely ever to be realized.

As of December 30, 2023, we had approximately $58.5 million in deferred tax assets relating to tax credits and loss carryforwards, with a valuation allowance of $42.4 million, including $2.5 million in valuation allowances related to capital loss carryforwards, which are unlikely ever to be realized.

If circumstances related to our deferred tax assets change in the future, we may be required to increase or decrease the valuation allowance on these assets, resulting in an increase or decrease in income tax expense and a reduction or increase in net income.

Also, we consider the earnings in our greater than 50% owned non-U.S.

subsidiaries to not be indefinitely reinvested and, accordingly, we have a deferred tax liability of $3.0 million related to these unremitted foreign earnings for future taxes that will be incurred when cash is repatriated.

subsidiaries to not be indefinitely re-invested and, accordingly, we have a deferred tax liability of $2.4 million related to these unremitted foreign earnings for future taxes that will be incurred when cash is repatriated.

We are subject to examination by taxing authorities in the various countries in which we operate.

4 unchanged sentences

Pension Benefits

maintains a defined benefit pension plan for qualifying employees in the United Kingdom.

maintains a defined benefit pension plan for qualifying employees in the U.K.

There are no active employees as members in the plan.

Independent actuaries assist in properly measuring the liabilities and expenses associated with accounting for pension benefits to eligible employees.

Independent actuaries assist in properly measuring the liabilities and expenses associated with accounting for pension benefits to eligible members.

In order to use actuarial methods to value the liabilities and expenses, we must make several assumptions.

4 unchanged sentences

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

Most of the assets in the pension plan are invested in corporate bonds, the expected return of which are estimated based on the yield available on AA rated corporate bonds.

Most of the assets in the pension plan are invested in corporate bonds, the expected return of which is estimated based on the yield available on AA-rated corporate bonds.

The long-term expected returns on equities are based on historic performance over the long term.

● Inflation is based on the estimated change in the consumer price index (“CPI”) or the retail price index (“RPI”), depending on the relevant plan provisions.

The discount rate used to measure the defined benefit obligation was 4.80% at December 31, 2022.

The following tables present the key assumptions in the measurement of the pension benefit for 2023 and the estimated impact relative to a change in those assumptions for 2023:

The discount rate used to measure the defined benefit obligation was 4.50% as of December 30, 2023.

The following tables present the key assumptions in the measurement of the pension cost for fiscal 2024 and the estimated impact relative to a change in those assumptions for fiscal 2024:

Discount rate

2 unchanged sentences

Inflation - RPI

Assumptions In Millions of Dollars

0.25% increase in discount rate

Dollars in millions

0.25% decrease in discount rate

0.25% decrease in expected return on plan assets

3 unchanged sentences

We have no contracts with customers, under any product line, where we could earn variable consideration.

The following provides additional information about our contracts with transmission, distribution, and substation structures (“TD&S”) and certain telecommunication structures customers, where the revenue recognition is over time, the judgments we make in accounting for those contracts, and the resulting amounts recognized in our financial statements.

The following provides additional information about our contracts with TD&S and certain Telecommunications customers where the revenue recognition is over time, the judgments we make in accounting for those contracts, and the resulting amounts recognized in our Consolidated Financial Statements.

Accounting for utility structures and telecommunication monopole contracts:

TD&S and telecommunication monopole 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.

TD&S and Telecommunications monopole 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 us.

Since control is transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation.

We also have certain telecommunication structures customers’ contracts where we do not have the right to payment for work performed.

In those instances, we recognize revenue at a point in time which is time of shipment of the structure.

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 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.

Since control is transferred over time, revenue is recognized based on the extent of progress toward completion of the performance obligation.

We also have certain Telecommunications structures customers’ contracts where we do not have the right to payment for work performed.

In those instances, we recognize revenue at a point in time which is the time of the shipment of the structure.

The selection of the method to measure progress toward completion requires judgment.

For our TD&S and Telecommunications product lines, we recognize revenue on an inputs basis, using total production hours incurred to date for each order as a percentage of total hours estimated to produce the order.

The completion percentage is applied to the order’s total revenue and total estimated costs to determine reported revenue, cost of goods sold, and gross profit.

Our enterprise resource planning (“ERP”) system captures the total costs incurred to-date and the total production hours, both incurred to-date and forecast to complete.

The recently divested offshore wind energy structures business also recognized revenue using an inputs method, based on the cost-to-cost measure of progress.

Our enterprise resource planning system captures the total costs incurred to date and the total production hours, both incurred to date and forecast to complete.

The offshore wind energy structures business, divested in the fourth quarter of fiscal 2022, also recognized revenue using an inputs method, based on the cost-to-cost measure of progress.

Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

Management must make assumptions and estimates regarding manufacturing labor hours and wages, the usage and cost of materials, and manufacturing burden / overhead recovery rates for each production facility.

Management must make assumptions and estimates regarding manufacturing labor hours and wages, the usage and cost of materials, and manufacturing burden and overhead recovery rates for each production facility.

For our steel, concrete, and wireless communication structures, production of an order, once started, is typically completed within three months.

4 unchanged sentences

This resets the timing of revenue recognition for future periods so it is better aligned with the new production schedule.

For our offshore wind energy structures business prior to its divestiture in 2022, we updated the estimates of total costs to complete each order quarterly.

Based on these updates, revenue in the current period may reflect adjustments for amounts that had been previously recognized.

During fiscal 2022, 2021, and 2020, there were no changes to inputs or estimates which resulted in adjustments to revenue for production that occurred prior to the beginning of the year.

For our offshore wind energy structures business, prior to its divestiture in the fourth quarter of fiscal 2022, we updated the estimates of total costs to complete each order quarterly.

Based on these updates, revenue in the current fiscal period may reflect adjustments for amounts that had been previously recognized.

During fiscal 2023, 2022, and 2021, there were no changes to inputs or estimates which resulted in

adjustments to revenue for production that occurred prior to the beginning of the fiscal year.

A provision for loss on the performance obligation is recognized if and when an order is projected to be at a loss, whether or not production has started.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required is included under the captioned paragraph, “MARKET RISK” on page 34 of this report.

The information required is included in the section “Market Risk” within "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this report.

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 7. Management’s Discussion and Analysis