# Valmont Industries Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Valmont Industries Inc](/companies/vmi.md) (CIK 102729)
- Form: 10-Q
- Filed: 2023-11-06
- Accepted by EDGAR: Nov 6, 2023, 17:17 ET
- Period: 2023-09-30
- Accession: 0000102729-23-000058
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/102729/000010272923000058/vmi-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/102729/000010272923000058/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-02 to 2023-09-30 | $1.05bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.16bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-02 to 2023-09-30 | $735.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.21bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-02 to 2023-09-30 | $315.1m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $953.1m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-02 to 2023-09-30 | $194.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $580.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-02 to 2023-09-30 | −$24.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $228.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-02 to 2023-09-30 | $13.5m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $41.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-02 to 2023-09-30 | $15.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $79.2m | us-gaap:IncomeTaxExpenseBenefit |
| Diluted EPS | 3 months, 2023-07-02 to 2023-09-30 | −$2.34 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $5.40 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-02 to 2023-09-30 | −$2.34 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $5.45 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-02 to 2023-09-30 | 20,951 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 21,290 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $190.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $71.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $37.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $166.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $172.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.81bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $3.49bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $724.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $1.93bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $977.3m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $941.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $1.50bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,398 characters.

Valmont Industries, Inc. (the “Company”, “Valmont”, “we”, “us”, “our”), headquartered in Omaha, Nebraska, is a global leader that provides vital infrastructure and advances agricultural productivity while driving innovation through technology.

Management’s discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which the Company operates, as well as management’s perceptions of historical trends, current conditions, expected future developments, and other factors believed to be appropriate under the circumstances. These statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Company’s control), and assumptions. Management believes that these forward-looking statements are based on reasonable assumptions. Many factors could affect the Company’s actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include, among other things, risk factors described from time to time in the Company’s reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, geopolitical risks, and actions and policy changes of domestic and foreign governments.

This discussion should be read in conjunction with the financial statements and notes thereto, and the management’s discussion and analysis included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Segment net sales in the table below and elsewhere are presented net of intersegment sales. See Note 9 of our Condensed Consolidated Financial Statements for additional information on segment sales and intersegment sales.

### Results of Operations

*Dollars in millions, except per share amounts*

| ​ ​ ​ Consolidated | ​ ​ ​ ​ ​ | ​ ​ ​ Thirteen weeks ended September ​ 30, 2023 ​ ​ ​ | ​ ​ ​ ​ September ​ 24, 2022 ​ ​ ​ | ​ ​ ​ Percent ​ Change ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Thirty-nine weeks ended September ​ 30, 2023 ​ ​ ​ | ​ ​ ​ ​ September ​ 24, 2022 ​ ​ ​ | ​ ​ ​ Percent ​ Change ​ ​ |
| --- | --- | --- | --- | --- | --- | ---: | ---: | --- |
| Net sales | ​ | $1,050.3 ​ | $1,097.4 | (4.3)% | ​ | $3,159.1 ​ | $3,213.7 | (1.7)% |
| Gross profit | ​ | ​ 315.1 ​ | 285.5 | 10.4% | ​ | 953.1 ​ | 827.2 | 15.2% |
| as a percent of net sales | ​ | ​ 30.0% | 26.0% | ​ | ​ | 30.2% | 25.7% | ​ |
| Selling, general, and administrative expenses | ​ | ​ 194.3 ​ | 175.5 | 10.7% | ​ | 580.1 ​ | ​ 503.7 | 15.2% |
| as a percent of net sales | ​ | ​ 18.5% | 16.0% | ​ | ​ | 18.4% | 15.7% | ​ |
| Impairment of long-lived assets | ​ | ​ 140.8 ​ | ​ — ​ | NM ​ | ​ | ​ 140.8 ​ | ​ — ​ | NM ​ |
| Realignment charges | ​ | ​ 4.2 ​ | ​ — ​ | NM ​ | ​ | ​ 4.2 ​ | ​ — ​ | NM ​ |
| Operating income (loss) | ​ | ​ (24.2) ​ | 110.0 | NM ​ | ​ | 228.0 ​ | 323.5 | (29.5)% |
| as a percent of net sales | ​ | ​ (2.3)% | 10.0% | ​ | ​ | 7.2% | 10.1% | ​ |
| Net interest expense | ​ | ​ 10.3 ​ | 11.1 | (7.5)% | ​ | 36.9 ​ | 33.3 | 10.8% |
| Effective tax rate | ​ | ​ (44.6)% | 27.6% | ​ | ​ | 41.4% | 27.3% | ​ |
| Net earnings (loss) attrib. to Valmont Industries, Inc. | ​ | ​ (49.0) ​ | ​ 72.1 | NM ​ | ​ | ​ 114.9 ​ | ​ 210.5 | (45.4)% |
| Diluted earnings (loss) per share | ​ | $(2.34) ​ | $3.34 | NM ​ | ​ | $5.40 ​ | $9.77 | (44.7)% |
| Infrastructure | ​ | ​ ​ | ​ ​ | ​ | ​ | ​ ​ | ​ | ​ |
| Net sales | ​ | $753.6 ​ | $750.4 | 0.4% | ​ | $2,253.9 ​ | $2,144.7 | 5.1% |
| Gross profit | ​ | 214.8 ​ | ​ 188.6 | 13.9% | ​ | 640.1 ​ | 534.6 | 19.7% |
| Selling, general, and administrative expenses | ​ | 106.7 ​ | ​ 96.1 | 11.0% | ​ | 321.7 ​ | 279.7 | 15.0% |
| Impairment of long-lived assets | ​ | ​ 3.6 ​ | ​ — ​ | NM ​ | ​ | ​ 3.6 ​ | — ​ | NM ​ |
| Realignment charges | ​ | ​ 1.1 ​ | ​ — ​ | NM ​ | ​ | ​ 1.1 ​ | — ​ | NM ​ |
| Operating income | ​ | 103.4 ​ | 92.5 | 11.8% | ​ | 313.7 ​ | 254.9 | 23.1% |
| Agriculture | ​ | ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ ​ | ​ ​ | ​ |
| Net sales | ​ | $296.7 ​ | $324.1 | (8.5)% | ​ | $905.2 ​ | $1,002.1 | (9.7)% |
| Gross profit | ​ | 100.3 ​ | ​ 94.6 | 6.0% | ​ | 313.0 ​ | 287.4 | 8.9% |
| Selling, general, and administrative expenses | ​ | 61.9 ​ | ​ 51.3 | 20.7% | ​ | 172.0 ​ | 148.6 | 15.7% |
| Impairment of long-lived assets | ​ | ​ 137.2 ​ | ​ — ​ | NM ​ | ​ | ​ 137.2 ​ | ​ — ​ | NM ​ |
| Realignment charges | ​ | ​ 0.9 ​ | ​ — ​ | NM ​ | ​ | ​ 0.9 ​ | ​ — ​ | NM ​ |
| Operating income (loss) | ​ | (99.7) ​ | 43.3 | NM ​ | ​ | 2.9 ​ | 138.8 | (97.9)% |
| Other | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ |
| Net sales | ​ | $— ​ | $22.9 ​ | NM ​ | ​ | $— ​ | $66.9 ​ | NM ​ |
| Gross profit | ​ | ​ — ​ | ​ 2.3 ​ | NM ​ | ​ | ​ — ​ | ​ 5.2 ​ | NM ​ |
| Selling, general, and administrative expenses | ​ | ​ — ​ | ​ 1.2 ​ | NM ​ | ​ | ​ — ​ | ​ 4.4 ​ | NM ​ |
| Operating income | ​ | ​ — ​ | ​ 1.1 ​ | NM ​ | ​ | ​ — ​ | ​ 0.8 ​ | NM ​ |
| Corporate | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ |
| Selling, general, and administrative expenses | ​ | $25.7 ​ | $26.9 | (4.5)% | ​ | $86.4 ​ | $71.0 | 21.7% |
| Realignment charges | ​ | ​ 2.2 ​ | ​ — ​ | NM ​ | ​ | ​ 2.2 ​ | ​ — ​ | NM ​ |
| Operating loss | ​ | (27.9) ​ | (26.9) | 4.0% | ​ | (88.6) ​ | (71.0) | 24.8% |

#### NM = not meaningful

### Overview, Including Items Impacting Comparability

On a consolidated basis, net sales decreased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, with lower sales in the Agriculture segment partially offset by higher sales in the Infrastructure segment. The third quarter and first three quarters of fiscal 2023 were also impacted by the decrease in sales in the Other segment due to the divestiture of the offshore wind energy structures business in the fourth quarter of fiscal 2022.

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 overall decreases in volumes in both the Infrastructure and Agriculture segments on a consolidated basis for the third quarter and first three quarters of fiscal 2023.

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 provides for a reduction in force through a voluntary early retirement program and other headcount reduction actions, which are expected to be completed by the end of fiscal 2023. The Board of Directors has authorized the incurrence of cash charges up to $36.0 million in connection with the Realignment Program. Severance and other employee benefit costs are expected to total up to approximately $16.0 million within the Infrastructure segment, $10.0 million within the Agriculture segment, and $10.0 million within Corporate expense, including charges recognized during the third quarter of fiscal 2023.

In the third quarter of fiscal 2023, the Company acquired HR Products, a leading wholesale supplier of irrigation parts in Australia, included in the Agriculture segment.

In the second quarter of fiscal 2022, the Company acquired approximately 51% of ConcealFab, a telecommunications technology company that offers 5G infrastructure and passive intermodulation mitigation solutions in Colorado, included in the Infrastructure segment.

In the second quarter of fiscal 2023, the Company divested Torrent Engineering and Equipment, an integrator of prepackaged pump stations in Indiana, included in the Agriculture segment.

In the fourth quarter of fiscal 2022, the Company divested Valmont SM, an offshore wind energy structures business in Denmark, included in the Other segment.

Non-cash items of note impacting comparability of results from net earnings (loss) in the third quarter of fiscal 2023 included:

- charges of $140.8 million ($136.5 million after-tax) related to the impairment of long-lived assets, namely goodwill, and
- charges of $4.2 million ($3.1 million after-tax) related to realignment activities.

Non-cash items of note impacting comparability of results from net earnings in the first three quarters of fiscal 2023 included:

- charges of $140.8 million ($136.5 million after-tax) related to the impairment of long-lived assets,
- charges of $4.2 million ($3.1 million after-tax) related to realignment activities,
- charges of $3.3 million ($2.5 million after-tax) related to amortization of identified intangible assets, and
- charges of $4.3 million ($3.9 million after-tax) related to stock-based compensation expense for the employees from the Prospera subsidiary acquired in the second quarter of fiscal 2021.

Non-cash items of note impacting comparability of results from net earnings in the third quarter and first three quarters of fiscal 2022 included amortization of identified intangible assets of $1.6 million ($1.3 million after-tax) and $4.9 million ($3.8 million after-tax), respectively, and stock-based compensation expense for the employees from the Prospera subsidiary acquired in the second quarter of fiscal 2021, totaling $2.5 million ($1.9 million after-tax) and $7.5 million ($6.6 million after-tax), respectively. These items were recognized with selling, general, and administrative expenses (“SG&A”) in the Agriculture segment.

### Macroeconomic Impacts on Financial Results and Liquidity

We continue to monitor several macroeconomic trends 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 United States (“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, essentially our 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 9 to our Condensed Consolidated Financial Statements for additional information.

### Backlog

The consolidated backlog of unshipped orders as of September 30, 2023 was approximately $1.5 billion as compared to approximately $1.7 billion as of December 31, 2022. The decrease is attributed to the Agriculture segment, while Infrastructure backlog remains comparable to prior year end.

### Gross Profit, SG&A, and Operating Income (Loss)

On a consolidated basis, gross profit and gross profit as a percentage of net sales increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022. Gross profit mainly increased due to more favorable input costs more than offsetting lower sales volumes in both the Infrastructure and Agriculture segments.

Consolidated SG&A increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022. The increase in the third quarter of fiscal 2023, as compared to the same period of fiscal 2022, was primarily driven by increased compensation costs. The increase in the first three quarters of fiscal 2023, as compared to the same period of fiscal 2022, was due to increased compensation costs as well as incremental expenses related to the June 2022 acquisition of ConcealFab and higher bad debt reserve charges including approximately $2.7 million related to a Telecommunications customer that became insolvent.

Consolidated operating income (loss) for the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, was impacted by the impairment of certain goodwill and intangible assets totaling $140.8 million primarily within the Agriculture Technology reporting unit as well as higher SG&A partially offset by increased gross profit.

### Net Interest Expense

Consolidated interest expense increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to additional borrowings on the revolving line of credit along with increasing interest rates.

### Other Income / Expenses (including Gain (loss) on Investments - Unrealized)

Amounts in “Gain (loss) on investments - unrealized" include changes in the market value of deferred compensation assets which are offset by an equal opposite amount included SG&A for the corresponding change in the valuation of deferred compensation liabilities. Other items included in “Other income (expenses)” are pension expense and a gain related to the sale of Torrent Engineering and Equipment in the second quarter of fiscal 2023 totaling approximately $3.0 million. Pension expense for the third quarter and first three quarters of fiscal 2023 was $0.1 million and $0.2 million, respectively, compared to a pension benefit of $2.4 million and $7.6 million in the same periods of fiscal 2022, respectively.

### Income Tax Expense

Our effective income tax rate in the third quarter and first three quarters of fiscal 2023 was (44.6)% and 41.4%, respectively, as compared to 27.6% and 27.3% in the same periods of fiscal 2022. The change in the effective tax rate reflects the impacts of the impairment of goodwill, for which there is no related tax deduction, and a valuation allowance adjustment in a small foreign operation. Partially offsetting these items are tax benefits from research and development expenses and favorable legislation regarding usage of foreign tax credits generated in Brazil.

### Loss (Earnings) Attributable to Noncontrolling Interests

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

### Infrastructure Segment

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ ​ | ​ ​ Thirteen weeks ended September 30, 2023 ​ | ​ ​ | ​ ​ September 24, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: |
| Transmission, Distribution, and Substation | ​ | $298.0 | ​ | $304.8 |  | $(6.8) |  | (2.2)% |
| Lighting and Transportation | ​ | ​ 252.6 | ​ | ​ 241.6 |  | ​ 11.0 |  | 4.6% |
| Coatings | ​ | ​ 89.0 | ​ | ​ 92.0 |  | ​ (3.0) |  | (3.3)% |
| Telecommunications | ​ | ​ 59.6 | ​ | ​ 92.8 |  | ​ (33.2) |  | (35.8)% |
| Solar | ​ | ​ 55.9 | ​ | ​ 24.3 |  | ​ 31.6 |  | 129.9% |
| Total | ​ | $755.1 | ​ | $755.5 | ​ | $(0.4) |  | (0.1)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income | ​ | $103.4 | ​ | $92.5 | ​ | $10.9 |  | 11.8% |

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ ​ | ​ ​ Thirty-nine weeks ended September 30, 2023 ​ | ​ ​ | ​ ​ September 24, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: |
| Transmission, Distribution, and Substation | ​ | $927.1 | ​ | $882.2 |  | $44.9 |  | 5.1% |
| Lighting and Transportation | ​ | ​ 727.9 | ​ | ​ 701.0 |  | ​ 26.9 |  | 3.8% |
| Coatings | ​ | ​ 270.2 | ​ | ​ 264.3 |  | ​ 5.9 |  | 2.2% |
| Telecommunications | ​ | ​ 195.5 | ​ | ​ 232.8 |  | ​ (37.3) |  | (16.0)% |
| Solar | ​ | ​ 141.1 | ​ | ​ 76.8 |  | ​ 64.3 |  | 83.7% |
| Total | ​ | $2,261.8 | ​ | $2,157.1 | ​ | $104.7 |  | 4.9% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income | ​ | $313.7 | ​ | $254.9 | ​ | $58.8 |  | 23.1% |

Infrastructure sales decreased slightly in the third quarter and cumulatively increased the first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022. The decrease in the third quarter of fiscal 2023, as compared to the same period of fiscal 2022, was due to lower average selling prices tied to the reduced cost of steel in the quarter primarily related to the Transmission, Distribution, and Substation product line, partially offset by increased volumes overall. The increase in the first three quarters of fiscal 2023, as compared to the same period of fiscal 2022, was due to overall higher average sales prices and volumes. International sales were impacted by unfavorable currency translation effects of $1.8 million and $21.0 million for the third quarter and first three quarters of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.

Transmission, Distribution, and Substation sales decreased in the third quarter and increased in the first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022. The decrease in the third quarter of fiscal 2023, as compared to the same period of fiscal 2022, was due to lower average selling prices resulting from contractual pricing mechanisms tied to the price of steel, partially offset by higher sales volumes. The increase in the first three quarters of fiscal 2023, as compared to the same period of fiscal 2022, was due to higher average selling prices and higher sales volumes.

Lighting and Transportation sales increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, due to higher sales volume and higher average sales prices. The first three quarters of fiscal 2023, as compared to the same period of fiscal 2022, were also negatively impacted by unfavorable currency translation effects totaling approximately $10.4 million.

Telecommunications sales decreased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to decreased sales volumes. The decrease in the first three quarters of fiscal 2023, as compared to the same period of fiscal 2022, was partially offset by increased sales from the second quarter of fiscal 2022 acquisition of ConcealFab along with higher average selling prices. 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 globally accelerates, sales for our products are expected to grow.

Coatings sales decreased in the third quarter and increased in the first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022. The decrease in the third quarter of fiscal 2023, as compared to the same period of fiscal 2022, was due to lower volumes partially offset by higher average selling prices. The increase in the first three quarters of fiscal 2023, as compared to the same period of fiscal 2022, was due to higher average selling prices partially offset by lower volumes along with an unfavorable currency translation effect totaling approximately $6.3 million.

Solar sales increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, due to increased sales volumes.

Infrastructure gross profit and gross profit margin increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022. The increase for the third quarter of fiscal 2023, as compared to the same period of fiscal 2022 was due to deflation in the cost of steel in the quarter more than offsetting the decrease in the average selling prices primarily related to the Transmission, Distribution and Substation product line. The increase in the first three quarters of fiscal 2023, as compared to the same period of fiscal 2022, was due to the reduction in the cost of steel and pricing initiatives.

Infrastructure SG&A increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022. The increase in the third quarter of fiscal 2023, as compared to fiscal 2022, was primarily due to higher employment and research and development costs. The increase in the first three quarters of fiscal 2023, as compared to fiscal 2022, was due to higher employment costs, incremental SG&A from the June 2022 acquisition of ConcealFab totaling $5.4 million, increased bad debt reserve charges including approximately $2.7 million related to a Telecommunications customer that became insolvent, and higher research and development costs.

We expect to incur severance and other employee benefit costs totaling up to $16.0 million within the Infrastructure segment in fiscal 2023 related to the Realignment Program noted above. Of this amount, $1.1 million was recognized during the third quarter of fiscal 2023.

Infrastructure operating income increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to gross profit improvements more than offsetting increased SG&A.

### Agriculture Segment

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ | ​ ​ Thirteen weeks ended September 30, 2023 ​ | ​ ​ | ​ ​ September 24, 2022 ​ | ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| North America | ​ | $126.8 | ​ | $178.6 |  | $(51.8) |  | (29.0)% |
| International | ​ | ​ 171.7 | ​ | ​ 148.6 |  | ​ 23.1 |  | 15.5% |
| Total | ​ | $298.5 | ​ | $327.2 | ​ | $(28.7) |  | (8.8)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income (Loss) | ​ | $(99.7) | ​ | $43.3 | ​ | $(143.0) |  | NM ​ |

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ ​ | ​ ​ Thirty-nine weeks ended September 30, 2023 ​ | ​ ​ | ​ ​ September 24, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| North America | ​ | $450.7 | ​ | $564.4 |  | $(113.7) |  | (20.1)% |
| International | ​ | ​ 459.9 | ​ | ​ 447.2 |  | ​ 12.7 |  | 2.8% |
| Total | ​ | $910.6 | ​ | $1,011.6 | ​ | $(101.0) |  | (10.0)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income | ​ | $2.9 | ​ | $138.8 | ​ | $(135.9) |  | (97.9)% |

Agriculture sales decreased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to lower sales volumes of irrigation equipment. In North America, the decrease in Agriculture sales for the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, was impacted by 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. The third quarter and the first three quarters of fiscal 2022 also comparatively benefited from the ongoing delivery of elevated backlog throughout most of 2022. International Agriculture sales increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, due to increased sales in Argentina and Brazil, and increased project sales in the Europe, Middle East, and Africa region. Sales of technology-related products and services were similar to last year.

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 annually by the U.S.

Department of Agriculture. 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 for the remainder of fiscal 2023 and into fiscal 2024. The previous three years benefited from record levels of disaster relief and pandemic related stimulus for farmers in North America which contributed to higher demand.

Agriculture gross profit increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, due to deflation in the cost of steel and other favorable changes in input costs more than offsetting the impact of lower volumes.

Agriculture SG&A increased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to higher employment costs.

We expect to incur severance and other employee benefit costs totaling up to $10.0 million within the Agriculture segment in fiscal 2023 related to the Realignment Program noted above. Of this amount, $0.9 million was recognized during the third quarter of fiscal 2023.

Agriculture operating income (loss) decreased in the third quarter and first three quarters of fiscal 2023, as compared to the same periods of 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 the decreased sales volumes partially offset by gross profit improvements.

### Other

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

### Corporate

Corporate SG&A for the third quarter of fiscal 2023 was comparable to the third quarter of fiscal 2022 and increased for the first three quarters of fiscal 2023, as compared to the same period of fiscal 2022. The increase in the first three quarters of fiscal 2023, as compared to fiscal 2022, was due to increased compensation costs 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 expect to incur severance and other employee benefit costs totaling up to $10.0 million within Corporate expense in fiscal 2023 related to the Realignment Program noted above. Of this amount, $2.2 million was recognized during the third quarter of fiscal 2023.

### Liquidity and Capital Resources

### Capital Allocation Philosophy

We have historically funded our growth, capital spending, and acquisitions through a combination of operating cash flows and debt financing. The following are the capital allocation priorities for cash generated:

- working capital and capital expenditure investments necessary for future sales growth;
- dividends on common stock in the range of 15% of the prior fiscal year’s fully diluted net earnings;
- acquisitions; and
- return of capital to shareholders through share repurchases.

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 in February 2015 and again in October 2018, and authorized an additional $400 million of share repurchases in February 2023. These authorizations have no expiration date. The purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any repurchases and may discontinue the program at any time. As of September 30, 2023, we have acquired approximately 7.2 million shares for approximately $1,085.3 million under this share repurchase program.

On February 28, 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 September 30, 2023 and December 31, 2022, our accounts payable on our Condensed Consolidated Balance Sheets included $48.6 million and $48.9 million, respectively, of our payment obligations under this program.

### Sources of Financing

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

- $450.0 million face value ($433.4 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 ($295.1 million carrying value) of senior unsecured notes that bear interest at 5.25% per annum and are due in October 2054.

We are allowed to repurchase the notes subject to the payment of a make-whole premium. Both tranches of these notes are guaranteed by certain of our subsidiaries.

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. We may increase the credit facility by up to an additional $300.0 million at any time, subject to lenders increasing the amount of their commitments. The Company and our wholly-owned subsidiaries, Valmont Industries Holland B.V. and Valmont Group Pty. Ltd., are authorized borrowers under the credit facility. The obligations arising under the revolving credit facility are guaranteed by the Company and its wholly-owned subsidiaries, Valmont Telecommunications, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc., and Valmont Queensland Pty. Ltd.

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

(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

- the prime lending rate,
- the overnight bank rate plus 50 basis points, and
- 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 S&P Global Ratings and Moody’s Investors Service, Inc.; or

(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 September 30, 2023 and December 31, 2022, we had outstanding borrowings of $247.3 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 September 30, 2023, we had the ability to borrow $552.7 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 $38.2 million; $34.5 million of which were unused as of September 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.

The revolving credit facility requires maintenance of a financial leverage ratio, measured as of the last day of each of our fiscal quarters, of 3.50 or less. 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) 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.

The revolving credit agreement also contains customary affirmative and negative covenants or credit facilities of this type, including, among others, limitations on us and our subsidiaries with respect to indebtedness, liens, mergers and acquisitions, investments, dispositions of assets, restricted payments, transactions with affiliates and prepayments of indebtedness. The revolving credit agreement also provides for acceleration of the obligations thereunder and exercise of other enforcement remedies upon the occurrence of customary events of default (subject to customary grace periods, as applicable).

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

The calculation of Adjusted EBITDA for the last four fiscal quarters and the leverage ratio are presented in the tables below in Selected Financial Measures.

### Cash Uses

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.

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

We have cash balances of $172.6 million as of September 30, 2023 with approximately $142.2 million held in our non-U.S. subsidiaries. If we distributed our foreign cash balances, certain taxes would be applicable. As of September 30, 2023, we have a liability for foreign withholding taxes and U.S. state income taxes of $1.5 million and $0.9 million, respectively.

### Cash Flows

The following table includes a summary of our cash flow information for the thirty-nine weeks ended September 30, 2023 and September 24, 2022:

*Dollars in thousands*

| ​ ​ ​ | ​ ​ ​ | ​ ​ Thirty-nine weeks ended September 30, 2023 | ​ ​ | ​ ​ September 24, 2022 |
| --- | --- | ---: | --- | ---: |
| Net cash flows provided by operating activities | ​ | $190,868 | ​ | $183,726 |
| Net cash flows used in investing activities | ​ | (89,266) | ​ | (106,446) |
| Net cash flows used in financing activities | ​ | (111,491) | ​ | (79,143) |

*Operating Cash Flows and Working Capital –* Cash provided by operating activities totaled $190.9 million for the first three quarters of fiscal 2023, as compared to $183.7 million for the first three quarters of fiscal 2022. The increase in operating cash flows reflects increased gross profits and overall favorable changes in net working capital, partially offset by increases in tax and interest payments of $27.3 million and $7.2 million, respectively.

*Investing Cash Flows –* Cash used in investing activities totaled $89.3 million in the first three quarters of fiscal 2023, as compared to $106.4 million in the first three quarters of fiscal 2022. Investing activities in the first three quarters of fiscal 2023 primarily included capital spending of $71.2 million and the acquisition of HR Products, net of cash acquired, of $31.8 million partially offset by proceeds from a divestiture, net of cash divested, of $6.4 million and proceeds from property damage insurance claims of $6.8 million. Investing activities in the first three quarters of fiscal 2022 primarily included capital spending of $67.1 million and the acquisition of ConcealFab for $39.3 million. We expect our capital expenditures to be in the range of $100 million to $110 million for fiscal 2023.

*Financing Cash Flows –* Cash used in financing activities totaled $111.5 million in the first three quarters of fiscal 2023, as compared to $79.1 million in the first three quarters of fiscal 2022. Our total interest-bearing debt was $981.8 million as of September 30, 2023 and $878.0 million as of December 31, 2022. The financing cash used in the first three quarters of fiscal 2023 was primarily the result of borrowings on the revolving credit agreement and short-term notes of $239.7 million, offset by principal payments on our long-term debt and short-term borrowings of $136.6 million, dividends paid of $37.0 million, the purchase of treasury shares of $166.7 million, and $10.2 million of net activity from stock option and incentive plans, including the associated withholding tax payments. The financing cash used in the first three quarters of fiscal 2022 was primarily the result of borrowings on the revolving credit agreement and short-term notes of $239.6 million offset by principal payments on our long-term debt and short-term borrowings of $263.5 million, dividends paid of $34.1 million, the purchase of treasury shares of $20.5 million, and the purchase of 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”). The Parent is the Issuer of the notes and consolidates all Guarantors.

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

Combined financial information for the thirteen and thirty-nine weeks ended September 30, 2023 and September 24, 2022 was as follows:

*Dollars in thousands*

| ​ ​ ​ | ​ ​ | ​ ​ Thirteen weeks ended September 30, 2023 | ​ ​ ​ | ​ ​ September 24, 2022 | ​ ​ ​ ​ | ​ ​ Thirty-nine weeks ended September 30, 2023 | ​ ​ ​ | ​ ​ September 24, 2022 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net sales | ​ | $649,187 | ​ | $716,429 | ​ | $2,050,436 | ​ | $2,112,678 |
| Gross profit | ​ | 170,638 | ​ | 165,323 | ​ | 572,443 | ​ | 510,591 |
| Operating income | ​ | 50,986 | ​ | 59,496 | ​ | 208,993 | ​ | 201,633 |
| Net earnings | ​ | 36,121 | ​ | 35,791 | ​ | 109,277 | ​ | 124,128 |
| Net earnings attributable to Valmont Industries, Inc. | ​ | 35,687 | ​ | 33,708 | ​ | 108,227 | ​ | 124,233 |

Combined financial information as of September 30, 2023 and September 24, 2022 was as follows:

*Dollars in thousands*

| ​ ​ | ​ ​ | ​ ​ September 30, 2023 | ​ ​ | ​ ​ December 31, 2022 |
| --- | --- | ---: | --- | ---: |
| Current assets | ​ | $758,169 | ​ | $769,263 |
| Non-current assets | ​ | 861,393 | ​ | 925,088 |
| Current liabilities | ​ | 339,945 | ​ | 459,961 |
| Non-current liabilities | ​ | 1,288,727 | ​ | 1,189,548 |
| Noncontrolling interest in consolidated subsidiaries | ​ | 2,662 | ​ | 1,612 |

Included in non-current assets is a due from non-guarantor subsidiaries receivable of $135,847 and $205,424 as of September 30, 2023 and December 31, 2022, respectively. Included in non-current liabilities is a due to non-guarantor subsidiaries payable of $195,821 and $200,522 as of September 30, 2023 and December 31, 2022, respectively.

### Selected Financial Measures

We are including the following financial measures for the Company.

*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. The bank agreements 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-generally accepted accounting principles (“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 for the last four fiscal quarters (September 25, 2022 to September 30, 2023) was as follows:

*Dollars in thousands*

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Four Fiscal Quarters Ended September 30, 2023 |
| --- | --- | ---: |
| Net earnings attributable to Valmont Industries, Inc. | ​ | $155,220 |
| Interest expense | ​ | 54,750 |
| Income tax expense | ​ | 107,395 |
| Depreciation and amortization expense | ​ | 98,002 |
| Stock based compensation | ​ | 40,662 |
| Loss on divestiture of offshore wind energy structures business | ​ | 33,273 |
| Impairment of long-lived assets | ​ | ​ 140,844 |
| Realignment charges | ​ | ​ 4,180 |
| Proforma acquisition EBITDA | ​ | ​ 7,883 |
| Adjusted EBITDA | ​ | $642,209 |

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 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 3.50 (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 as of September 30, 2023, was as follows:

*Dollars in thousands*

| ​ ​ | ​ ​ | ​ ​ September 30, 2023 |
| --- | --- | ---: |
| Interest-bearing debt, excluding origination fees and discounts of $26,481 | ​ | $1,008,321 |
| Less: cash and cash equivalents in excess of $50,000 | ​ | 122,566 |
| Net indebtedness | ​ | $885,755 |
| Adjusted EBITDA | ​ | 642,209 |
| Leverage ratio | ​ | 1.38 |

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

### Financial Obligations and Financial Commitments

There have been no material changes to our financial obligations and financial commitments as described on page 33 on Form 10-K for the fiscal year ended December 31, 2022.

### Critical Accounting Policies

The following accounting policies involve judgments and estimates used in preparation of the Condensed Consolidated Financial Statements. There is a substantial amount of management judgment used in preparing financial statements. We must make estimates on a number of items, such as impairments of long-lived assets, income taxes, revenue recognition for the product lines recognized over time, inventory obsolescence, and pension benefits. 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. Actual results may differ under different assumptions or conditions. The selection and application of our critical accounting policies are discussed annually with our audit committee.

Other than the below, there were no changes in our critical accounting policies as described on pages 38 to 41 on Form 10-K for the fiscal year ended December 31, 2022 during the thirteen weeks ended September 30, 2023.

### Impairment of Long-Lived Assets

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 are the recent 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 date of our last 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, then 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 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 three of our reporting units, Europe, Middle East & Africa Structures, Asia Pacific Highway Safety and Asia Pacific Access Systems, the amount of cushion or excess fair value above carrying value was less than 5%. 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. We assess the values of these assets apart from goodwill as part of the annual impairment testing. We use the relief-from-royalty method to evaluate our trade names, under which the value of a trade name is determined based on a royalty that could be charged to a third party for using the trade name in question. The royalty, which is based on a reasonable rate applied against estimated future sales, is tax-effected and discounted to present value. 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.

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.

## Market risk

As filed, 236 characters.

There were no material changes in the Company’s market risk during the thirteen weeks ended September 30, 2023. For additional information, refer to the section "Risk Management" on Form 10-K for the fiscal year ended December 31, 2022.

## Controls and procedures

As filed, 1,299 characters.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934 is (1) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

No changes in the Company’s internal control over financial reporting occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 291 characters.

There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Filed Nov 6, 2023.
Source: SEC EDGAR, the filing index for accession 0000102729-23-000058. Last ingested by Listed: Oct 27, 2026, 11:43 ET. No prices; not investment advice.