ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward ‑ Looking Statements
Management’s discussion and analysis, along with other sections of this annual report, contain forward‑looking statements as defined by the Private Securities Litigation Reform Act of 1995. These 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, anticipated future developments, and other factors deemed to be relevant. However, these statements are not guarantees of future performance or results. They are subject to risks, uncertainties (some beyond the Company’s control), and various assumptions.
Management believes these forward‑looking statements are based on reasonable assumptions. However, many factors could cause actual financial results to differ materially from expectations. These factors include, among others, risk factors described in the Company’s reports to the SEC, as well as future economic and market conditions, industry trends, Company performance and financial results, operational efficiencies, availability and pricing of raw materials, availability and market acceptance of new products, product pricing, domestic and international competition, and actions or policy changes by domestic and foreign governments.
The following discussion and analysis provide information that management considers relevant for assessing and understanding 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 primarily discusses fiscal 2025 and fiscal 2024, including year-over-year comparisons. Discussions regarding fiscal 2023 and associated comparisons, which 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 28, 2024.
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FISCAL 2025 COMPARED WITH FISCAL 2024
Results of Operations
Fiscal Year Ended
December 27,
December 28,
Percent
Dollars in thousands, except per-share amounts
Change
Consolidated
Net sales
Gross profit
as a percentage of net sales
Selling, general, and administrative expenses
as a percentage of net sales
Impairment of long-lived assets
Realignment charges
Operating income
as a percentage of net sales
Net interest expense
Effective tax rate
Net earnings attributable to Valmont Industries, Inc.
Diluted earnings per share
Infrastructure
Net sales
Gross profit
as a percentage of net sales
Selling, general, and administrative expenses
as a percentage of net sales
Impairment of long-lived assets
Realignment charges
Operating income
as a percentage of net sales
Agriculture
Net sales
Gross profit
as a percentage of net sales
Selling, general, and administrative expenses
as a percentage of net sales
Impairment of long-lived assets
Realignment charges
Operating income
as a percentage of net sales
Corporate
Selling, general, and administrative expenses
Realignment charges
Operating loss
NM = not meaningful
Overview, Including Items Impacting Comparability
Dollars in thousands
Infrastructure
Agriculture
Total
Net sales - fiscal 2024
Volume
Pricing and mix
Divestitures
Currency translation
Net sales - fiscal 2025
On a consolidated basis, net sales increased by 0.7% in fiscal 2025, as compared to fiscal 2024, primarily driven by higher net sales in the Infrastructure segment, partially offset by lower net sales in the Agriculture segment. Growth in the Infrastructure segment was mainly attributable to improved pricing and mix, particularly within the Utility product line. This increase was partially offset by reduced net sales resulting from the divestitures of George Industries in the Coatings product line ($5.5 million) and our extractive business in the Lighting and Transportation (“L&T”) product line ($7.4 million). The decline in the Agriculture segment was driven by lower sales volumes in North America.
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Consolidated gross profit decreased by 0.1% in fiscal 2025, as compared to fiscal 2024. The decline was primarily attributable to lower sales volumes in North America within the Agriculture segment and reduced sales volumes in the L&T and Solar product lines within the Infrastructure segment. These impacts were partially offset by higher sales volumes and improved pricing in the Utility and Telecommunications products lines within the Infrastructure segment.
Consolidated selling, general, and administrative (“SG&A”) expenses increased by 0.1% in fiscal 2025, as compared to fiscal 2024, primarily due to $24.2 million of legal contingency reserves and $23.8 million of expected credit losses in Brazil. These increases were partially offset by lower compensation and incentive costs, driven in part by our strategic realignment, as well as reduced research and development costs primarily as a result from the exit of our Prospera business.
Consolidated operating income decreased by 20.8% in fiscal 2025, as compared to fiscal 2024, primarily due to the impairment of certain long-lived assets totaling $91.3 million, realignment charges of $15.4 million, and slightly higher SG&A expenses.
Net Interest Expense
Consolidated net interest expense decreased by 37.2% in fiscal 2025, as compared to fiscal 2024, due to a decrease in average outstanding borrowings on the revolving line of credit along with lower average interest rates.
Other Income / Expenses
Amounts in “Gain on deferred compensation investments” on the Consolidated Statements of Earnings reflected changes in the market value of deferred compensation investments, which were fully offset by corresponding changes in the valuation of deferred compensation liabilities recorded in SG&A. Other components of “Other income (expenses)” included pension expense of $1.1 million and $0.6 million in fiscal 2025 and 2024, respectively, and foreign currency revaluation losses of approximately $8.4 million resulting from depreciation of the Argentine peso against the U.S. dollar in fiscal 2025.
Income Tax Expense
Our effective income tax rate in fiscal 2025 and fiscal 2024 was 6.3% and 25.2%, respectively. In fiscal 2025, the reduction in the effective tax rate was the result of a tax benefit recognized for a worthless securities deduction of $73.8 million, the release of previously recorded valuation allowances on certain foreign tax credits of $13.4 million, and changes in the geographical mix of earnings. The worthless securities deduction was the result of the exit of our Prospera business.
Infrastructure Segment
Fiscal Year Ended
December 27,
December 28,
Dollar
Percent
Dollars in thousands
Change
Change
Utility
Lighting and Transportation
Coatings
Telecommunications
Solar
Total sales
Operating income
Infrastructure segment sales increased by 3.0% in fiscal 2025, as compared to fiscal 2024, driven primarily by higher sales volumes in the Utility and Telecommunications product lines, which more than offset declines in L&T and Solar product lines.
Regionally, Infrastructure segment sales grew in North America in fiscal 2025, as compared to fiscal 2024, while sales declined in international markets during the same period.
Utility product line sales increased by 10.4% in fiscal 2025, as compared to fiscal 2024, reflecting favorable market pricing and higher volumes. Demand remained strong, supported by increased electrical energy consumption and utility
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investment to expand and reinforce grid capacity, including to serve growing power demand from data centers and other load growth.
L&T product line sales decreased by 6.1% in fiscal 2025, as compared to fiscal 2024, driven by lower volumes in the Asia-Pacific region and softer market demand in North America. The decline was further impacted by the divestiture of the extractive business in the fourth quarter of fiscal 2024.
Coatings product line sales increased by 2.4% in fiscal 2025, as compared to fiscal 2024, benefiting from healthy infrastructure demand. The increase was partially offset by the divestiture of George Industries in the fourth quarter of fiscal 2024.
Telecommunications product line sales increased by 25.2% in fiscal 2025, as compared to fiscal 2024, driven by increased carrier spending in the North American market, supported by our quick-turn order strategy and alignment with carrier spending programs.
Solar product line sales decreased by 46.2% in fiscal 2025, as compared to fiscal 2024, primarily due to lower volumes resulting from our strategic decision to exit select regional markets in the second quarter of fiscal 2025.
Infrastructure segment gross profit increased by 2.4% in fiscal 2025, as compared to fiscal 2024, primarily due to higher volumes in the Utility and Telecommunications product lines, partially offset by lower Solar volumes. In connection with lower anticipated volumes, we also recorded approximately $6.9 million of inventory reserves associated with our Solar businesses in fiscal 2025.
Infrastructure segment SG&A decreased by 2.0% in fiscal 2025, as compared to fiscal 2024, driven by lower incentive costs and research and development costs, partially offset by higher expected credit losses of approximately $14.3 million, primarily within the Solar product line.
Infrastructure segment operating income decreased by 13.5% in fiscal 2025, as compared to fiscal 2024, primarily due to impairment charges of $89.4 million related to certain long-lived assets primarily in the Solar and Access Systems reporting units, realignment charges of $7.6 million, and lower volumes in the L&T and Solar product lines.
Agriculture Segment
Fiscal Year Ended
December 27,
December 28,
Dollar
Percent
Dollars in thousands
Change
Change
North America
International
Total sales
Operating income
In North America, Agriculture segment sales decreased by 11.3% in fiscal 2025, as compared to fiscal 2024, primarily due to lower irrigation equipment sales volumes, reflecting continued softness in the agriculture market. Contributing factors included lower grain prices, uncertainty surrounding trade policy, and the timing of government funding. The decrease was also impacted by lower replacement irrigation equipment sales following severe weather events in fiscal 2024.
In international markets, Agriculture segment sales increased by 0.2% in fiscal 2025, as compared to fiscal 2024, driven by sales growth in the Europe, Middle East, and Africa (“EMEA”) region. This increase was partially offset by lower sales in South America, where normalizing backlog levels, higher credit costs, and lower grain prices impacted growers’ purchasing decisions. The decline was further exacerbated by unfavorable foreign currency translation effects of $7.7 million.
The Agriculture business remains cyclical and is influenced by factors such as net farm income, commodity prices, weather volatility, geopolitical events, and farmer sentiment regarding future economic conditions. We actively monitor these variables across our key markets. In the U.S., we consider net farm income estimates published by the U.S. Department of Agriculture as a key indicator of grower purchasing capacity. In Brazil, we monitor grain prices, projected farm input costs, interest rates, and net farm income trends, which collectively influence grower liquidity, credit conditions, and purchasing
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behavior. Looking ahead, we remain focused on navigating evolving market conditions and positioning the Agriculture business for long-term growth across both domestic and international markets.
Agriculture segment gross profit decreased 6.9% in fiscal 2025, as compared to fiscal 2024, primarily due to lower sales volumes, particularly in North America and South America, which more than offset volume gains in the EMEA region. In fiscal 2025, we also increased inventory reserves by $8.5 million as a result of our slow-moving and obsolete inventory in response to continued softness within the agricultural market.
Agriculture segment SG&A increased by 9.1% in fiscal 2025, as compared to fiscal 2024, primarily due to $24.2 million of legal contingency reserves and $23.8 million of expected credit losses in Brazil, partially offset by lower compensation and incentive costs.
Agriculture segment operating income decreased by 33.4% in fiscal 2025, as compared to fiscal 2024. The decline was primarily driven by lower sales volumes in North America, charges related to the agriculture solar business totaling $5.9 million, and realignment charges of $2.9 million.
Corporate
Corporate SG&A decreased by 8.2% in fiscal 2025, as compared to fiscal 2024, primarily due to lower compensation and incentive costs. This decrease was partially offset by higher professional services fees, insurance expenses, and technology costs. In addition, during fiscal 2025, we incurred $4.9 million in realignment charges within Corporate expense.
KEY FACTORS AFFECTING FINANCIAL RESULTS
Acquisitions and Divestitures
We continue to strategically enhance our portfolio through targeted acquisitions and divestitures, demonstrating our commitment to refining our business focus and driving value within our core segments.
In the fourth quarter of fiscal 2024, we divested George Industries, a coating and anodizing company in California previously included in the Infrastructure segment, resulting in a loss of $2.8 million recorded in “Other income (expenses)” in the Consolidated Statements of Earnings.
In the fourth quarter of fiscal 2024, we divested our extractive business, which included the manufacturing and distribution of screening products for the mining and quarrying sectors in Australia and New Zealand, previously included in the Infrastructure segment, resulting in a loss of $1.7 million recorded in “Other income (expenses)” in the Consolidated Statements of Earnings.
Macroeconomic and Geopolitical Impacts on Financial Results and Liquidity
We continue to actively monitor a range of macroeconomic and geopolitical uncertainties that have affected, and may continue to affect, our business operations and financial performance. These include volatility in the global economic and trade environment, inflationary cost pressures, supply chain disruptions, foreign currency fluctuations relative to the U.S. dollar, changing interest rates, ongoing international conflicts, and labor shortages. These factors may influence our operational costs, revenue streams, and overall financial stability. As conditions evolve, we are proactively adjusting our business strategies to mitigate potential risks, maintain financial resilience, and ensure sufficient liquidity to support ongoing operations and strategic initiatives.
Backlog
As of December 27, 2025, the consolidated backlog of unshipped orders was approximately $1.7 billion, as compared to approximately $1.4 billion as of December 28, 2024. This increase is attributed to an increase in the Infrastructure segment partially offset by a decrease in the Agriculture segment.
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LIQUIDITY AND CAPITAL RESOURCES
Capital Allocation Philosophy
Our capital allocation priorities are intended to present a balanced approach to maintaining disciplined investments in organic and inorganic growth opportunities while delivering meaningful capital returns to shareholders over the next three to five years. These priorities are expected to be supported by our projected cash flow generation. We plan to allocate approximately 50% of operating cash flow to high-return growth opportunities, focused on:
capital expenditures for strategic capacity expansion, primarily in the Infrastructure segment, to maintain and increase manufacturing output and efficiency while driving innovation to better serve customers, and
acquisitions that strategically augment our competitive position, with a focus on sustainable growth and premium returns on invested capital.
We plan to allocate the remaining approximately 50% of operating cash flow to shareholder returns through the form of share repurchases and dividends.
In February 2025, the Board of Directors increased the authorized capacity under our share repurchase program by $700.0 million, bringing the total authorization to $2.1 billion, with no stated expiration date. We are not obligated to make repurchases and may discontinue the program at any time. Any purchases will be funded through available liquidity and ongoing cash flows, and will be made subject to prevailing market and economic conditions. As of December 27, 2025, we had approximately $567.0 million of remaining capacity under the share repurchase program. Since the program’s inception in May 2014, we have repurchased approximately 8.8 million shares for a total of $1.5 billion.
Subsequent to year end, on February 23, 2026, the Board of Directors approved a quarterly cash dividend on common stock of $0.77 per share, or an annualized rate of $3.08 per share, representing an increase of approximately 13%.
We remain committed to maintaining a capital structure that supports our investment-grade credit rating. As of the latest assessments, our credit ratings were Baa2 (stable outlook) by Moody’s Ratings and BBB+ (stable outlook) by S&P Global Ratings. To support these ratings, we aim to manage our debt-to-invested capital ratio within levels that reinforce our investment-grade status.
Supplier Finance Program
We have established a supplier finance program with a financial institution, allowing qualifying suppliers the option to sell their receivables from us to the financial institution under independently negotiated terms. Participation in the program is entirely voluntary for suppliers and does not affect our payment terms, amounts, timing, or liquidity. We have no economic interest in a supplier’s decision to participate. As of December 27, 2025 and December 28, 2024, our accounts payable in the Consolidated Balance Sheets included $56.3 million and $45.6 million, respectively, related to obligations under this program.
Sources of Financing
As of December 27, 2025, our available debt financing primarily included senior unsecured notes and a revolving credit facility.
Senior Unsecured Notes
As of December 27, 2025, our senior unsecured notes consisted of:
$450.0 million face value ($434.5 million carrying value) notes at an interest rate of 5.00% per annum, maturing in October 2044.
$305.0 million face value ($295.6 million carrying value) notes at an interest rate of 5.25% per annum, maturing in October 2054.
We retain the option to repurchase these notes by paying a make-whole premium. Both tranches are guaranteed by certain subsidiaries.
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Revolving Credit Facility
Our revolving credit facility, managed by JPMorgan Chase Bank, N.A., as Administrative Agent, has a maturity date of July 10, 2030. The facility provides up to $800.0 million in unsecured revolving credit, with $400.0 million available for borrowings in foreign currencies. An additional $400.0 million may be added to the facility, subject to lender commitments.
Authorized borrowers include the Company and its wholly owned subsidiaries, Valmont Industries Holland B.V. and Valmont Group Pty. Ltd. Obligations under this 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:
term Secured Overnight Financing Rate (“SOFR”), based on a one-, three-, or six-month period, and a spread of 100 to 162.5 basis points, depending on our senior unsecured long-term debt credit rating by S&P Global Ratings and Moody’s Ratings;
the higher of
the prime lending rate,
the overnight bank rate plus 50 basis points, or
term SOFR (based on a one-month period) plus 100 basis points,
plus, in each case, 0 to 62.5 basis points, depending on our credit rating; or
daily simple SOFR and a spread of 100 to 162.5 basis points, depending on our credit rating.
Additionally, a commitment fee is applied to the average daily unused portion of the facility, ranging from 9 to 20 basis points, based on our credit rating.
As of December 27, 2025, we had $65.0 million of outstanding borrowings under this facility. As of December 28, 2024, we had no outstanding borrowings under this facility. The facility includes a financial covenant that may limit additional borrowing. As of December 27, 2025, we could borrow an additional $734.8 million under the facility, after accounting for $0.2 million in standby letters of credit related to certain insurance obligations. Additionally, we maintain short‑term bank lines of credit totaling $10.1 million, all of which were unused as of December 27, 2025.
Covenants and Compliance
Both our senior unsecured notes and revolving credit facility contain cross-default provisions, which allow for the acceleration of debt if we default on other indebtedness that also permits acceleration.
The revolving credit facility requires us to maintain a financial leverage ratio of 3.50 or lower, measured as of the last day of each fiscal quarter. A temporary increase to 3.75 is permitted for the four fiscal quarters following a material acquisition. The leverage ratio is defined as the ratio of: (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-recurring non-cash charges or gains, subject to certain limitations (“Adjusted EBITDA”). Additionally, in the event of an acquisition or divestiture, Adjusted EBITDA shall be computed on a pro forma basis, reflecting the transaction as if it had occurred on the first day of the period.
Additional covenants restrict activities such as incurring indebtedness, placing liens, engaging in mergers, making investments, selling assets, paying dividends, conducting affiliate transactions, and making debt prepayments. Customary events of default may trigger the acceleration of obligations, subject to grace periods where applicable.
As of December 27, 2025, we were in compliance with all covenants related to these debt agreements. For detailed calculations of Adjusted EBITDA and the leverage ratio, please refer to the “Selected Financial Measures” section.
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Cash Uses
Our primary cash needs include working capital, capital expenditures, debt service, taxes, and pension contributions. We may also pursue strategic investments, acquisitions, stock repurchases, or dividends, subject to market conditions and debt agreement restrictions.
In fiscal 2026, our primary cash requirements will include capital expenditures, pension contributions, lease payments, and interest on outstanding debt, along with the payment of the mandatorily redeemable financial instrument related to the acquisition of the redeemable noncontrolling interest of ConcealFab, Inc. We have committed to purchasing zinc, aluminum, and steel under unconditional purchase agreements aligned with our business needs. These contracts help stabilize costs amid fluctuating demand, and we plan to use the contracted amounts within the fiscal year. We expect fiscal 2026 capital expenditures to range from $170.0 million to $200.0 million. The increase in planned expenditures is driven by infrastructure-related growth opportunities. These investments will enhance output, improve adaptability to evolving needs, and expand manufacturing capacity, efficiency, and flexibility.
The following table outlines our material cash requirements, both current and long-term, as of December 27, 2025:
Next 12
Dollars in millions
Months
Thereafter
Total
Long‑term debt
Interest 1
Pension plan contributions
Mandatorily redeemable financial instrument
Operating leases
Total contractual cash obligations
1 Interest expense amount assumes that long-term debt will be held to maturity.
Our business operates in cyclical markets, but our diverse portfolio—spanning various products, customers, and regions—has enabled us to navigate these cycles effectively while maintaining liquidity. Historically, we have consistently generated operating cash flows that exceed our capital expenditures, demonstrating our ability to manage cash effectively through economic cycles. For fiscal 2026 and beyond, we are confident in our liquidity position, supported by accessible credit facilities, capital markets, and a solid track record of positive operating cash flows.
As of December 27, 2025, we held $187.1 million in cash, including $144.0 million in non-U.S. subsidiaries. Distributions of this foreign cash would incur tax liabilities. As of December 27, 2025, we had liabilities of $2.2 million for foreign withholding taxes and $0.2 million for U.S. state income taxes.
Cash Flows
The table below summarizes our cash flow information for the fiscal years ended December 27, 2025, December 28, 2024, and December 30, 2023:
Fiscal Year Ended
December 27,
December 28,
December 30,
Dollars in thousands
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 provided by operating activities totaled $456.5 million in fiscal 2025, compared to $572.7 million in fiscal 2024. The change in operating cash flows was most notably impacted by the change in our contract liability due to the timing of large utility prepayments received in fiscal 2024 for work completed in fiscal 2025. This was offset by lower income tax payments made in fiscal 2025 relative to fiscal 2024 largely as a result of our worthless securities deduction in addition to the tax provisions in the One Big Beautiful Bill Act.
Investing Cash Flows – Cash used in investing activities totaled $142.7 million in fiscal 2025, compared to $78.9 million in fiscal 2024. Investing activities in fiscal 2025 included capital spending of $145.0 million partially offset by proceeds of sales of assets of $2.2 million and proceeds from property damage insurance claims of $1.4 million. Investing activities in fiscal 2024 included capital spending of $79.5 million partially offset by proceeds of $3.8 million from the
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divestitures of George Industries and the extractive business, net of cash divested. The increase in capital spending in fiscal 2025, as compared to fiscal 2024, was primarily to support future growth along with capacity investments for the Utility product line.
Financing Cash Flows – Cash used in financing activities totaled $298.9 million in fiscal 2025, compared to $522.6 million in fiscal 2024. Our total interest‑bearing debt was $829.5 million as of December 27, 2025 and $757.9 million as of December 28, 2024. Financing activities in fiscal 2025 included $218.6 million in borrowings on the revolving credit facility and short-term notes, offset by $156.1 million in principal payments on our long-term debt and short-term borrowings, $52.5 million in dividend payments, $198.1 million in stock repurchases, $101.8 million in purchases of redeemable noncontrolling interests, and $6.5 million in net activity from stock option and incentive plans, including related tax payments. Financing activities in fiscal 2024 included $45.1 million in borrowings on the revolving credit facility and short-term notes, offset by $424.6 million in principal payments of on our long-term debt and short-term borrowings, $48.4 million in dividend payments, $70.1 million in stock repurchases, $17.8 million in purchases of redeemable noncontrolling interests, and $6.4 million in net activity from stock option and incentive plans, including related tax payments.
Guarantor Summarized Financial Information
This information is provided in compliance with Rule 3-10 and Rule 13-01 of Regulation S-X, relating to our two tranches of senior unsecured notes. These senior notes are jointly, severally, fully, and unconditionally guaranteed—subject to certain customary release provisions, including the sale of the subsidiary guarantor or 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 serves as the Issuer of the notes and consolidates all Guarantors.
The financial information for the Issuer and Guarantors is presented on a combined basis, with intercompany balances and transactions between the Issuer and Guarantors eliminated. Any amounts due to or from the Issuer or Guarantors, as well as transactions with non-guarantor subsidiaries, are disclosed separately.
The combined financial information for the fiscal years ended December 27, 2025, December 28, 2024, and December 30, 2023 was as follows:
Fiscal Year Ended
December 27,
December 28,
December 30,
Dollars in thousands
Net sales
Gross profit
Operating income
Net earnings
Net earnings attributable to Valmont Industries, Inc.
The combined financial information as of December 27, 2025 and December 28, 2024 was as follows:
December 27,
December 28,
Dollars in thousands
Current assets
Non-current assets
Current liabilities
Non-current liabilities
As of December 27, 2025 and December 28, 2024, non-current assets included a receivable from non-guarantor subsidiaries of $83,641 and $90,938, respectively. As of December 27, 2025 and December 28, 2024, non-current liabilities included a payable to non-guarantor subsidiaries of $325,225 and $243,465, respectively.
Selected Financial Measures
Return on Invested Capital
Return on invested capital (“ROIC”) and Adjusted ROIC are key operating ratios that enable investors to assess our operating performance relative to the investment needed to generate operating profit. These measures are also utilized to determine management incentives. ROIC is calculated by dividing after-tax operating income by the average of beginning and ending invested capital. Adjusted ROIC is calculated as after-tax operating income, adjusted for certain non-recurring
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charges or gains. The adjusted figure is then divided by the average of beginning and ending invested capital to determine Adjusted ROIC. Invested capital represents total assets minus total liabilities (excluding mandatorily redeemable financial instrument, interest-bearing debt, and redeemable noncontrolling interests).
ROIC and Adjusted ROIC are non-generally accepted accounting principles (“GAAP”) measures. As such, invested capital, ROIC, and Adjusted ROIC should not be considered in isolation or as substitutes for net earnings, cash flows from operations, or other income or cash flow data prepared in accordance with GAAP, nor should they be viewed as indicators of our operating performance or liquidity. Additionally, ROIC and Adjusted ROIC, as presented, may not be directly comparable to similarly titled measures used by other companies. The following table shows how invested capital, ROIC, and Adjusted ROIC are calculated from our Consolidated Statements of Earnings and our Consolidated Balance Sheets.
The calculation of these ratios for the fiscal years ended December 27, 2025, December 28, 2024, and December 30, 2023 was as follows:
Fiscal Year Ended
December 27,
December 28,
December 30,
Dollars in thousands
Operating income
Effective tax rate
Tax effect on operating income
After-tax operating income
Average invested capital
Return on invested capital
Operating income
Impairment of long-lived assets
Realignment charges
Other non-recurring charges
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
Total assets
Less: Defined benefit pension asset
Less: Accounts payable
Less: Accrued expenses
Less: Contract liabilities
Less: Income taxes payable
Less: Dividends payable
Less: Deferred income taxes
Less: Operating lease liabilities
Less: Deferred compensation
Less: Other non-current liabilities
Total invested capital
Beginning invested capital
Average invested capital
1 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%.
2 The adjusted effective tax rate for fiscal 2025 excluded the effects of the impairment of long-lived assets of $91.3 million, the worthless securities deduction and release of foreign tax credit valuation allowances totaling $78.5 million, realignment charges of $16.1 million (of which $0.7 million was included in cost of goods sold), and other non-recurring charges including costs to fulfill contractually required payments for system licenses no longer needed and asset valuation adjustments for a joint venture agriculture solar business totaling $14.9 million (of which $0.7 million was included in cost of goods sold). The effective tax rate including these items was 6.3%.
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Adjusted EBITDA and Leverage Ratio
The leverage ratio is a key financial metric we use to assess our maximum borrowing capacity. It is defined as the ratio of (a) interest-bearing debt, minus unrestricted cash in excess of $50.0 million (but not exceeding $500.0 million), to (b) Adjusted EBITDA. In the event of an acquisition or divestiture, Adjusted EBITDA is calculated on a pro forma basis, reflecting the transaction as if it had occurred on the first day of the period.
Our revolving credit facility requires us to maintain a leverage ratio of 3.50 or lower (or 3.75 or lower following certain material acquisitions) on a rolling four-fiscal-quarter basis, measured as of the last day of each fiscal quarter. Failure to comply with this financial covenant may result in higher financing costs or early debt repayment obligations.
The leverage ratio and Adjusted EBITDA are non-GAAP measures. As presented, these measures may not be directly comparable to similarly titled measures used by other companies. They 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. Additionally, they should not be interpreted as indicators of operating performance or liquidity.
The calculation of Adjusted EBITDA for the fiscal year ended December 27, 2025 was as follows:
Fiscal Year Ended
December 27,
Dollars in thousands
Net cash flows from operating activities
Interest expense
Income tax expense
Impairment of long-lived assets
Deferred income taxes
Redeemable noncontrolling interests
Net periodic pension cost
Contribution to defined benefit pension plan
Changes in assets and liabilities
Other
Impairment of long-lived assets
Realignment charges
Non-recurring non-cash charges
Adjusted EBITDA
Fiscal Year Ended
December 27,
Dollars in thousands
Net earnings attributable to Valmont Industries, Inc.
Interest expense
Income tax expense
Depreciation and amortization
Stock-based compensation
Impairment of long-lived assets
Realignment charges
Non-recurring non-cash charges
Adjusted EBITDA
The calculation of the leverage ratio as of December 27, 2025 was as follows:
December 27,
Dollars in thousands
Interest-bearing debt, excluding origination fees and discounts of $24,892
Less: Cash and cash equivalents in excess of $50,000
Net indebtedness
Adjusted EBITDA
Leverage ratio
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MARKET RISK
Changes in Prices
We rely on certain key materials, including steel, aluminum, zinc, natural gas, and diesel fuel, which are globally traded commodities. As a result, their prices fluctuate based on factors such as supply and demand shifts and the costs of steel‑making inputs. These fluctuations can significantly impact our operating performance and cost of goods sold. Additionally, recent trade policies and tariffs could increase the cost of goods we and our suppliers purchase from Canada, China, and Mexico, potentially leading to higher manufacturing costs for Infrastructure structures.
Steel is particularly critical for our Utility product line, where it represents approximately 50% of net sales. In fiscal 2018, we began using hot-rolled steel coil derivative contracts on a limited basis to help mitigate the impact of rising steel prices on our operating income. For the fiscal year ended December 27, 2025, a hypothetical 20% change in steel prices could have impacted net sales in this product line by approximately $110.0 million, assuming a similar sales mix.
Natural gas prices have been highly volatile in recent years. To manage these risks, we employ strategies such as implementing fixed-price purchase contracts with our vendors to stabilize our purchasing costs and raising sales prices where feasible. Additionally, we use natural gas swap contracts on a limited basis to help offset the impact of rising natural gas prices on our operating income.
Risk Management
We are exposed to several principal market risks, including fluctuations in interest rates, foreign currency exchange rates, and commodity prices. To mitigate these risks, we selectively use derivative financial instruments. However, we do not use derivatives for trading purposes.
Interest Rate Risk: As of December 27, 2025, most of our interest‑bearing debt was fixed rate. We have available to us a revolving credit facility, with an outstanding balance of $65.0 million as of December 27, 2025. Our notes payable, revolving credit facility, and a minor portion of our long-term debt accrue interest at variable rates. As a result, changes in interest rates could affect our future borrowing costs.
Foreign Exchange Risk: Our exposure to transactions in currencies other than an entity’s functional currency is minimal. Consequently, potential exchange losses on future earnings, fair value, and cash flows are not material. However, we are exposed to investment risks related to our foreign operations. To manage these risks, we occasionally enter into foreign currency contracts. As of December 27, 2025, we had three outstanding fixed-for-fixed cross currency swap (“CCS”) agreements. These swaps exchange U.S. dollar principal and interest payments on a portion of our 5.00% senior unsecured notes due in fiscal 2044 for foreign-currency-denominated payments. These CCSs were initiated in fiscal 2024 and fiscal 2025 to mitigate foreign currency risk associated with our foreign-currency-denominated investments and to reduce interest expenses.
In the first quarter of fiscal 2024, we early settled a euro net investment hedge entered into during fiscal 2019, resulting in us receiving proceeds of $2.7 million.
A significant portion of our cash in non-U.S. entities is held in foreign currencies, meaning fluctuations in exchange rates will impact our cash balances when converted to U.S. dollars. A 10% fluctuation in the U.S. dollar’s value would have affected our reported cash balance by approximately $11.6 million in fiscal 2025 and $8.7 million in fiscal 2024.
To manage our investment risk in foreign operations, we either borrow in the functional currencies of those foreign entities or utilize appropriate hedging instruments, such as foreign currency swaps. The following table shows the change in the recorded value of our most significant investments as of December 27, 2025 and December 28, 2024, assuming a hypothetical 10% change in the value of the U.S. dollar.
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December 27,
December 28,
Dollars in millions
Australian dollar
Brazilian real
British pound
Canadian dollar
Chinese renminbi
Euro
Indian rupee
Commodity Risk: Hot-rolled steel coil is a key input for both of our segments except the Coatings product line. Due to steel price volatility, we use derivative financial instruments to mitigate commodity price risks, particularly for fixed-price orders. In both fiscal 2025 and fiscal 2024, we entered into forward contracts and swaps for hot-rolled steel coil that qualified as cash flow hedges. These contracts help manage variability in cash flows from future steel purchases. As of December 27, 2025, we had open forward contracts and swaps with a notional amount of $6.2 million, covering the purchase of 7,250 short tons in December 2025.
Natural gas is another significant commodity used in our manufacturing processes, particularly in our Coatings product line, where it is used to heat tanks for the hot-dipped galvanizing process. Due to the volatility of natural gas prices, we mitigate this risk through derivative financial instruments. Our policy is to hedge 0% to 75% of our U.S. natural gas needs for the next 6 to 24 months using swaps tied to New York Mercantile Exchange futures. These swaps are designed to reduce the impact of sudden and significant increases in natural gas prices on our earnings. As of December 27, 2025, we had open natural gas swaps with a notional value of $0.8 million for 210,000 MMBtu from January 2026 to December 2026.
Diesel fuel is a major cost for our contracted carriers transporting our products. Diesel fuel prices are subject to volatility, which we manage through the use of derivative financial instruments. In fiscal 2025 and fiscal 2024, we entered into diesel fuel option contracts that qualified as cash flow hedges. These contracts help stabilize cash flows amid fluctuating diesel fuel costs charged by carriers. As of December 27, 2025, we had open option contracts with a notional amount of $8.3 million for the total purchase of 4,032,000 gallons of diesel fuel from December 2025 to June 2027.
Zinc is a critical input for our Coatings product line, where it is used in the hot-dipped galvanizing process. Zinc prices can be volatile due to global supply and demand dynamics, energy costs, and commodity market speculation. To mitigate the risk of rising zinc prices and manage variability in future cash flows, in fiscal 2025 we entered into forward contracts for zinc that qualified as cash flow hedges. These contracts are intended to stabilize the cost of zinc used in our galvanizing operations. As of December 27, 2025, we had open zinc forward contracts with a notional amount of $8.8 million, covering the purchase of 2,880 metric tons of zinc from January 2026 to December 2027.
CRITICAL ACCOUNTING ESTIMATES
The accounting policies described below involve significant judgments and estimates that are used in preparing our Consolidated Financial Statements. Management exercises substantial judgment in determining these estimates, which are essential to our financial reporting. The key areas that involve such estimates include impairments of goodwill and other intangible assets, income taxes, revenue recognition for our Infrastructure product lines recognized over time, and inventory obsolescence. These estimates are based on our past experiences and other assumptions that we believe to be reasonable given the circumstances.
We continually re-evaluate these estimates as circumstances evolve, understanding that actual results may differ due to changes in assumptions or conditions. To ensure accuracy and transparency in our financial reporting, the selection and application of our critical accounting policies are reviewed annually by our Audit Committee.
Depreciation and Amortization
Our long-lived assets include property, plant, and equipment, right-of-use assets, and certain other intangible assets acquired through business acquisitions. We assign useful lives to these assets based on their nature and expected usage, with ranges typically spanning from 3 to 30 years.
Impairment of Goodwill and Other Intangible Assets
We evaluate goodwill for impairment annually during the third fiscal quarter, aligning this assessment with our strategic planning process. For the fiscal 2025 annual goodwill impairment test, we estimated the fair value of the eleven
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reporting units with recorded goodwill using a discounted cash flow model. This model factors in projected after-tax cash flows from operations, net of capital expenditures, discounted to their present value. Additionally, we perform sensitivity analyses to assess the impact of changes in key assumptions, such as discount rates and cash flow forecasts, on the valuation of the reporting units.
For the fiscal 2025 annual impairment testing, no reporting units had a fair value lower than their carrying value. However, in the second quarter of fiscal 2025, we identified triggering events that required interim goodwill impairment testing for certain reporting units within the Infrastructure segment, resulting in impairments totaling $64.9 million. For fiscal 2024, no reporting units had a fair value lower than their carrying value. For fiscal 2023, two reporting units had estimated fair values below their carrying values, resulting in impairments: $120.0 million for the Agriculture segment and $1.9 million for the Infrastructure segment.
Our reporting units are cyclical, and their sales and profitability may fluctuate from year to year. For our APAC Highway Safety and EMEA Structures reporting units, with a combined goodwill of approximately $43.6 million, the amount of cushion or excess fair value above their carrying values was less than or approximately 15% as of the most recent impairment test. In addition, our Access Systems reporting unit, with goodwill of approximately $9.5 million, had zero excess fair value over its carrying value following a goodwill impairment recorded during the second quarter of fiscal 2025. We believe these reporting units will generate positive cash flows that meet or exceed their current carrying values, and we will continue to monitor their growth prospects and opportunities for continuous improvement.
The discount rate is a key assumption in our goodwill impairment analyses, as it reflects management’s assessment of the time value of money and the risks inherent in each reporting unit’s projected cash flows. Based on the results of our fiscal 2025 annual impairment testing, the estimated fair value of each reporting unit exceeded its carrying value. Management believes that a hypothetical increase of 50 basis points in the discount rate, considered in isolation, would not have resulted in an impairment for any reporting unit as of the testing date with the exception of the Access Systems reporting unit which would have had an incremental $2.7 million impairment. However, changes in multiple assumptions simultaneously, or adverse changes in future operating performance or market conditions, could significantly impact the estimated fair values of our reporting units.
We actively monitor the global economy for potential factors that could impact the operating results of our reporting units. Should adverse conditions arise, we will conduct an impairment test for any affected reporting units prior to our annual testing. When evaluating reporting units, we focus on their long-term prospects, recognizing that current performance may not always be indicative of future value, which requires management judgment, particularly regarding cash flow projections.
Our indefinite-lived intangible assets primarily consist of trade names, which are tested separately from goodwill. We use the relief-from-royalty method to value these assets, calculating the potential royalty a third party might pay to use the trade name, which is then discounted to present value and tax-effected. For the fiscal 2025 annual impairment testing, the fair value of our trade names exceeded their carrying value. However, in the second quarter of fiscal 2025, based upon an interim triggering event, we performed a test on certain indefinite-lived trade names and two trade names’ carrying values exceeded their fair values, resulting in a $4.8 million impairment within the Infrastructure segment. For fiscal 2024, the fair value of our trade names exceeded their carrying value. For fiscal 2023, one trade name’s carrying value exceeded its fair value, resulting in a $1.7 million impairment within the Infrastructure segment.
Additionally, in the second quarter of fiscal 2025, due to identified impairment indicators, we tested the recoverability of an amortizing customer relationship intangible asset in the Agriculture segment. We determined the asset’s carrying value exceeded its total undiscounted estimated future cash flows. As a result, we recognized a $1.4 million impairment within the Agriculture segment.
Similarly, in the third quarter of fiscal 2023, due to identified impairment indicators, we tested the recoverability of an amortizing proprietary technology intangible asset related to the Prospera subsidiary, which is part of the Agriculture segment. We determined the asset’s carrying value exceeded its total undiscounted estimated future cash flows. As a result, we recognized a $17.3 million impairment within the Agriculture segment.
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost is determined using either the first-in, first-out method or the weighted average cost method, depending on inventory management practices at each location.
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We regularly assess the value of our inventory and record write-downs for slow-moving, obsolete, or excess inventory. The amount of any write-down is calculated as the difference between the inventory’s carrying value and our estimate of its net realizable value. These estimates consider, among other factors, potential future uses of the inventory, the likelihood of selling overstocked inventory, and expected selling prices.
If actual demand, market conditions, or realizability differ from our assumptions, additional inventory write-downs could be required, which could materially affect our results of operations.
Income Taxes
We maintain valuation allowances to adjust deferred tax assets to amounts that we anticipate are more likely than not to be realized. In assessing the need for these allowances, we consider anticipated future taxable income and tax-planning strategies. If we determine that a deferred tax asset is not expected to be fully realized, we increase the valuation allowance, which reduces net earnings in that period. Conversely, if we later determine that all or part of a net deferred tax asset is realizable, reducing the valuation allowance would increase net earnings for that period.
As of December 27, 2025, we had approximately $59.3 million in deferred tax assets related to tax credits and loss carryforwards, with a valuation allowance of $30.4 million, including $7.6 million for capital loss carryforwards that are unlikely to be realized. In fiscal 2025, in an effort to simplify and align legal entity structure, we were able to generate additional foreign source income that allowed us to utilize certain foreign tax credits that previously had a full valuation allowance. This resulted in a $13.4 million income tax benefit in fiscal 2025. Additional changes in circumstance surrounding deferred tax assets may require adjustments to this allowance, which could impact income tax expense and net income in future periods. Additionally, as the earnings of our non-U.S. subsidiaries (in which we own more than 50%) are not considered indefinitely reinvested, we have recorded a deferred tax liability of $2.4 million, representing taxes to be incurred upon repatriation of these earnings.
Our operations are subject to examination by tax authorities in the various countries in which we operate, with the years open to examination varying by jurisdiction. We regularly evaluate potential additional income tax assessments based on past audit experiences and our understanding of relevant tax issues. Any changes to accruals for potential tax deficiencies are included in current income tax expense. Discrepancies between our estimates and actual outcomes in this area could impact our income tax expense in a given fiscal period.
Revenue Recognition Over Time
Revenue recognition for our contracts is determined by analyzing the specific type, terms, and conditions of each contract with customers. Approximately $1.5 billion of revenue within the Infrastructure segment is recognized over time, which requires more judgment and estimation of expected costs to be incurred.
These contracts, particularly those for utility structures and telecommunication monopole structures, are engineered to meet customer specifications, making them unsuitable for alternative customers if canceled after production begins. The continuous transfer of control to the customer is evidenced by either contractual termination clauses or rights to payment for work performed to date, plus a reasonable profit, as the products do not have alternative uses to us. For these products, revenue is recognized over time based on progress toward completion of the performance obligation.
For our Utility and Telecommunications products, revenue is recognized using an input-based method, where total production hours incurred to date are measured as a percentage of the total estimated hours for the order. The completion percentage is applied to the total contract revenue and estimated costs to calculate revenue, cost of goods sold, and gross profit. Our enterprise resource planning system tracks the total incurred costs and production hours to date, along with the estimated hours to complete.
Management relies on assumptions and estimates regarding manufacturing labor, materials, overhead, and burden recovery rates at each production facility. Production typically completes within three months once it begins, with profitability on open production orders reviewed monthly.
Occasionally, Utility customer orders may require up to three years to complete, often due to the number of structures involved. If actual costs deviate significantly from initial projections, burden rates and production hours per structure may be adjusted, recalibrating revenue recognition for future periods to reflect updated production schedules. During fiscal 2025, 2024, and 2023, no significant input or estimate adjustments were made that impacted revenue
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recognition for prior fiscal years. If a loss on a performance obligation is projected, a provision for loss is recognized, regardless of production status.
