VALMONT INDUSTRIES INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Valmont Industries, Inc. (the “Company”, “Valmont”, “we”, “us”, or “our”), headquartered in Omaha, Nebraska, is a global leader that provides vital infrastructure and advances agricultural productivity while driving innovation through technology. Forward-Looking Statements Management’s discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which the Company operates, as well as management’s perceptions of historical trends, current conditions, expected future developments, and other factors believed to be appropriate under the circumstances. These statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Company’s control), and assumptions. Management believes that these forward-looking statements are based on reasonable assumptions. Many factors could affect the Company’s actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include, among other things, risk factors described from time to time in the Company’s reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. This discussion should be read in conjunction with the financial statements and notes thereto, and the management’s discussion and analysis included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. 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. Executive Overview Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ ​ ​ March 30, April 1, ​ Percent ​ Dollars in millions, except per share amounts ​ 2024 ​ 2023 Change Consolidated ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 977.8 ​ $ 1,062.5 (8.0) % Gross profit ​ ​ 306.3 ​ 308.6 (0.8) % as a percent of net sales ​ ​ 31.3 % 29.0 % ​ Selling, general, and administrative expenses ​ ​ 174.7 ​ 190.1 (8.1) % as a percent of net sales ​ ​ 17.9 % 17.9 % ​ Operating income ​ ​ 131.6 ​ 118.5 11.0 % as a percent of net sales ​ ​ 13.5 % 11.1 % ​ Net interest expense ​ ​ 14.4 ​ 12.3 17.7 % Effective tax rate ​ ​ 25.3 % 30.3 % ​ Net earnings attributable to Valmont Industries, Inc. ​ ​ 87.8 ​ ​ 74.5 17.8 % Diluted earnings per share ​ $ 4.32 ​ $ 3.47 24.5 % Infrastructure ​ ​ ​ ​ ​ ​ Net sales ​ $ 720.7 ​ $ 732.2 (1.6) % Gross profit ​ 217.7 ​ ​ 200.5 8.6 % Selling, general, and administrative expenses ​ 99.8 ​ ​ 106.1 (6.0) % Operating income ​ 117.9 ​ 94.4 24.9 % Agriculture ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 257.1 ​ $ 330.3 (22.2) % Gross profit ​ 88.6 ​ ​ 108.1 (18.1) % Selling, general, and administrative expenses ​ 47.6 ​ ​ 54.8 (13.1) % Operating income ​ 41.0 ​ 53.3 (23.2) % Corporate ​ ​ ​ ​ ​ Selling, general, and administrative expenses ​ $ 27.3 ​ $ 29.2 (6.6) % Operating loss ​ (27.3) ​ (29.2) (6.6) % ​ ​ ​ 21 Table of Contents Overview, Including Items Impacting Comparability On a consolidated basis, net sales decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, with lower sales in both the Agriculture and Infrastructure segments. Steel prices for both hot rolled coil and plate have remained volatile over the past two fiscal years, especially in North America. Certain Transmission, Distribution, and Substation (“TD&S”) product line customers’ sales contracts include a contractual pricing mechanism, which adjusts to the changes in the cost of steel. Deflation in the cost of steel and its impact on average selling prices was more than offset by a favorable product mix and an increase in volume resulting in TD&S net sales increasing 3.3% during the first quarter of fiscal 2024, as compared to the same period of fiscal 2023. Strategic pricing initiatives across all Infrastructure segment product lines and a decrease in the average steel costs recognized in cost of goods sold resulted in the improved gross profit margin for the Infrastructure segment in the first quarter of fiscal 2024, as compared to the same period 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 provided for a reduction in force through a voluntary early retirement program and other headcount reduction actions, which were completed by the end of fiscal 2023. The Board of Directors authorized the incurrence of cash charges up to $36.0 million in connection with the Realignment Program of which $35.2 million were incurred in fiscal 2023 which included severance and other employee benefit costs totaling approximately $17.3 million within the Infrastructure segment, $9.1 million within the Agriculture segment, and $8.8 million within Corporate expense. 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 2023, the Company divested Torrent Engineering and Equipment, an integrator of prepackaged pump stations in Indiana, included in the Agriculture segment. In the first quarter of fiscal 2023, selling, general, and administrative expenses (“SG&A”) in the Agriculture segment included amortization of identified intangible assets of $1.6 million and stock-based compensation expense of $2.0 million from the Prospera subsidiary acquired in fiscal 2021. Prospera intangible asset amortization and stock-based compensation expense was $0.1 million and $0.8 million, respectively, for the first quarter of fiscal 2024. 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. Gross Profit, SG&A, and Operating Income On a consolidated basis, gross profit decreased slightly in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to lower sales volumes primarily in the Agriculture segment. Gross profit as a percentage of sales increased in the first quarter of 2024, as compared to the same period of fiscal 2023, due to more favorable input costs and higher average selling prices primarily in the Infrastructure segment attributed to a favorable project mix. Consolidated SG&A decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily driven by decreased compensation costs largely attributable to the Realignment Program in fiscal 2023. Consolidated operating income for the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, was impacted by the lower SG&A as a result of the Realignment Program partially offset by decreased gross profit. Net Interest Expense Consolidated interest expense increased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily due to additional borrowings on the revolving line of credit along with higher interest rates. 22 Table of Contents Other Income / Expenses (including Gain on Deferred Compensation Investments) Amounts in “Gain on deferred compensation investments” included changes in the market value of deferred compensation assets which were offset by an equal opposite amount included in SG&A for the corresponding change in the valuation of deferred compensation liabilities. Other items included in “Other income (expenses)” for the first quarter of fiscal 2024 were pension costs of $0.2 million compared to pension costs of $0.1 million in the same period of fiscal 2023. Income Tax Expense Our effective income tax rate in the first quarter of fiscal 2024 was 25.3% as compared to 30.3% in the same period of fiscal 2023. The change in the effective tax rate was primarily the result of changes in the geographic mix of earnings. Loss (Earnings) Attributable to Redeemable Noncontrolling Interests Loss (earnings) attributable to redeemable noncontrolling interests reflected the operating results of the subsidiaries the Company does not own 100%. Infrastructure Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ ​ ​ ​ ​ ​ ​ March 30, ​ April 1, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change Transmission, Distribution, and Substation ​ $ 325.2 ​ $ 314.9 $ 10.3 3.3 % Lighting and Transportation ​ ​ 222.1 ​ ​ 229.1 ​ (7.0) (3.1) % Coatings ​ ​ 87.1 ​ ​ 90.1 ​ (3.0) (3.4) % Telecommunications ​ ​ 54.0 ​ ​ 68.1 ​ (14.1) (20.8) % Solar ​ ​ 35.2 ​ ​ 33.9 ​ 1.3 3.9 % Total sales ​ $ 723.6 ​ $ 736.1 ​ $ (12.5) (1.7) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 117.9 ​ $ 94.4 ​ $ 23.5 24.9 % Infrastructure segment sales decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to decreased sales volumes in the Telecommunications, Coatings, and Lighting and Transportation product lines, partially offset by increased average selling prices across all product lines and increased sales volumes in the Transmission, Distribution, and Substation and Solar product lines. Infrastructure segment sales decreased in North America in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, while increasing slightly in International markets. International sales were impacted by unfavorable currency translation effects of $3.0 million for the first quarter of fiscal 2024 as compared to the same period of fiscal 2023. Transmission, Distribution, and Substation product line sales increased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to increased average selling prices and increased sales volumes. Lighting and Transportation sales decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to decreased sales volumes along with unfavorable currency translation effects totaling approximately $2.0 million. Coatings sales decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to decreased volumes partially offset by slightly increased average selling prices. The decrease was also impacted by unfavorable currency translation effects totaling approximately $1.0 million. Telecommunications sales decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily due to decreased sales volumes partially offset by increased 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 of our products are expected to grow. Solar sales increased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to increased sales volumes. 23 Table of Contents Infrastructure gross profit and gross profit margin increased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to a favorable product mix contributing to increased average selling prices and deliberate actions to improve overall costs of goods sold. These items, partially offset by decreased sales volumes primarily in the Telecommunications product line, resulted in an overall increase in the amount of gross profit. Infrastructure SG&A decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily due to decreased compensation costs primarily as a result of the Realignment Program along with decreased bad debt reserve charges that included approximately $2.7 million related to a Telecommunications customer that became insolvent in fiscal 2023. Infrastructure operating income increased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, as decreased sales volumes were more than offset by gross profit improvements along with decreased SG&A. Agriculture Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ ​ ​ ​ ​ ​ ​ March 30, ​ April 1, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change North America ​ $ 159.9 ​ $ 182.9 $ (23.0) (12.6) % International ​ ​ 98.8 ​ ​ 149.3 ​ (50.5) (33.8) % Total sales ​ $ 258.7 ​ $ 332.2 ​ $ (73.5) (22.1) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 41.0 ​ $ 53.3 ​ $ (12.3) (23.2) % Agriculture segment sales decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily due to decreased sales volumes and slightly lower average selling prices of irrigation equipment. In North America, the decrease in Agriculture sales for the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, was impacted by growers’ decisions to delay capital investments due to general economic uncertainty and a number of macroeconomic factors including higher interest rates and continued inflationary pressures. The first quarter of fiscal 2023 also comparatively benefited from the ongoing delivery of elevated backlog. International sales decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to decreased project sales in the Europe, Middle East, and Africa region and decreased sales in Brazil due to muted farmer sentiment attributed to lower agricultural commodity prices, partially offset by incremental sales from the HR Products acquisition totaling $10.1 million. Sales of Technology Products and Services decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023. 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 the 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, w e also actively track changes in soybean and other crop prices and projected farm input costs to evaluate grower sentiment. Irrigation Equipment and Parts sales in North America are expected to remain below prior-year levels for the remainder of 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 segment gross profit decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily due to decreased sales volumes. Agriculture segment SG&A decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily due to decreased compensation costs, largely attributable to the Realignment Program, along with lower intangible asset amortization expense as a result of the third quarter of fiscal 2023 impairment of certain Prospera amortizing proprietary technology. Agriculture operating income decreased in the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, primarily due to decreased sales volumes partially offset by decreased SG&A. 24 Table of Contents Corporate Corporate SG&A decreased for the first quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to decreased compensation and incentive costs primarily as a result of the Realignment Program in 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 generally 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 (stable outlook) by Moody’s Investors Service, Inc., BBB- (stable outlook) by Fitch Ratings, Inc., and BBB+ (stable outlook) by S&P Global Ratings. We expect to maintain a ratio of debt to invested capital which will support our current investment-grade debt rating. In May 2014, the Board of Directors authorized the purchase of up to $500.0 million of the Company’s outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately negotiated transactions. The Board of Directors authorized an additional $250.0 million of share purchases in February 2015 and again in October 2018, and authorized an additional $400.0 million of share repurchases in February 2023. These authorizations have no expiration date. The purchases 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 March 30, 2024, we have acquired approximately 8.0 million shares for approximately $1,263.9 million under this share repurchase program. In November 2023, we entered into an accelerated purchase agreement to repurchase $120.0 million of our outstanding common stock (“November 2023 ASR”) with CitiBank, N.A. as counterparty. The November 2023 ASR was entered into under our previously announced share repurchase program described above. The Company pre-paid $120.0 million in the fourth quarter of fiscal 2023 and received an initial delivery of 438,917 shares of common stock. The agreement was settled with the delivery of an additional 96,224 shares of common stock in the first quarter of fiscal 2024. The total number of shares ultimately delivered under the November 2023 ASR, and therefore the average purchase price paid per share of $224.24, was determined based on the volume-weighted average market price of our common stock during the term of the agreement, less a discount. Supplier Finance Program We have a supplier finance program agreement with a financial institution that 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, or payment timing, or impact our liquidity, and we have no economic interest in a supplier’s decision to participate. As of March 30, 2024 and December 30, 2023, our accounts payable on our Condensed Consolidated Balance Sheets included $37.2 million and $41.9 million, respectively, of our payment obligations under this program. Sources of Financing Our debt financing as of March 30, 2024 consisted primarily of senior unsecured notes and borrowings on our revolving credit facility. 25 Table of Contents Senior Unsecured Notes Our senior unsecured notes as of March 30, 2024 were: ● $450.0 million face value ($433.7 million carrying value) notes that bear interest at 5.00% per annum and are due in October 2044, and ● $305.0 million face value ($295.2 million carrying value) 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. Revolving Credit Facility 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 one-, three- or six-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 March 30, 2024 and December 30, 2023, we had outstanding borrowings of $377.5 million and $377.9 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 March 30, 2024, we had the ability to borrow $422.3 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 $38.9 million, $36.9 million of which were unused as of March 30, 2024. 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. 26 Table of Contents 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 $50.0 million (but not exceeding $500.0 million) to (b) earnings before interest, taxes, depreciation, and amortization, adjusted for non-cash stock-based compensation and non-cash charges or gains that are non-recurring in nature, subject to certain limitations (“Adjusted EBITDA”). The leverage ratio is permitted to increase from 3.50 to 3.75 for the four consecutive fiscal quarters after certain material acquisitions. 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 the acceleration of the obligations thereunder and the exercise of other enforcement remedies upon the occurrence of customary events of default (subject to customary grace periods, as applicable). As of March 30, 2024, we were in compliance with all covenants related to these debt agreements. The calculations of Adjusted EBITDA 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 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 for fiscal 2024 and beyond. We had cash balances of $169.2 million as of March 30, 2024 with approximately $134.8 million held in our non-U.S. subsidiaries. If we distributed our foreign cash balances, certain taxes would be applicable. As of March 30, 2024, we had a liability for foreign withholding taxes and U.S. state income taxes of $1.8 million and $0.8 million, respectively. Cash Flows The following table includes a summary of our cash flow information for the thirteen weeks ended March 30, 2024 and April 1, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ March 30, ​ April 1, Dollars in thousands 2024 2023 Net cash flows from operating activities ​ $ 23,332 ​ $ 21,199 Net cash flows from investing activities ​ (18,639) ​ (21,789) Net cash flows from financing activities ​ (34,834) ​ (13,009) Operating Cash Flows and Working Capital – Cash provided by operating activities totaled $23.3 million in the first quarter of fiscal 2024, as compared to $21.2 million in the same period of fiscal 2023. The change in operating cash flows was primarily the result of the increase in net earnings, partially offset by payments of severance and other employee benefit costs related to the Realignment Program totaling $9.8 million in the first quarter of fiscal 2024. Investing Cash Flows – Cash used in investing activities totaled $18.6 million in the first quarter of fiscal 2024, as compared to $21.8 million in the same period of fiscal 2023. Investing activities in the first quarter of fiscal 2024 primarily included capital spending of $15.0 million. Investing activities in the first quarter of fiscal 2023 primarily included capital spending of $22.4 million. We expect our capital expenditures to be in the range of $110.0 million to $125.0 million for fiscal 2024. 27 Table of Contents Financing Cash Flows – Cash used in financing activities totaled $34.8 million in the first quarter of fiscal 2024, as compared to $13.0 million in the same period of fiscal 2023. Our total interest-bearing debt was $1,136.4 million as of March 30, 2024 and $1,138.1 million as of December 30, 2023. Financing activities in the first quarter of fiscal 2024 primarily consisted of borrowings on the revolving credit agreement and short-term notes of $4.0 million offset by principal payments on our long-term debt and short-term borrowings of $5.3 million, dividends paid of $12.1 million, the purchase of redeemable noncontrolling interests of $17.7 million, and the net activity from stock option and incentive plans of $5.7 million. Financing activities in the first quarter of fiscal 2023 primarily consisted of borrowings on the revolving credit agreement and short-term notes of $136.1 million offset by principal payments on our long-term debt and short-term borrowings of $16.6 million, dividends paid of $11.7 million, the purchase of treasury shares of $111.1 million, and the net activity from stock option and incentive plans of $9.0 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 the sale of the subsidiary guarantor, or the 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 of the Guarantors. The financial information of the Issuer and the Guarantors is presented on a combined basis with intercompany balances and transactions between the Issuer and the Guarantors eliminated. The Issuer’s or the Guarantors’ amounts due from, amounts due to, and transactions with non-guarantor subsidiaries are separately disclosed. Combined financial information for the thirteen weeks ended March 30, 2024 and April 1, 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ March 30, ​ April 1, Dollars in thousands 2024 ​ 2023 Net sales ​ $ 682,162 ​ $ 715,471 Gross profit ​ 209,640 ​ 191,495 Operating income ​ 92,578 ​ 71,832 Net earnings ​ 59,469 ​ 20,211 Net earnings attributable to Valmont Industries, Inc. ​ 59,469 ​ 20,043 Combined financial information as of March 30, 2024 and December 30, 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ March 30, ​ December 30, Dollars in thousands ​ 2024 2023 Current assets ​ $ 806,521 ​ $ 777,539 Non-current assets ​ 845,561 ​ 872,016 Current liabilities ​ 332,091 ​ 361,211 Non-current liabilities ​ 1,445,201 ​ 1,436,131 Redeemable noncontrolling interests ​ — ​ 10,518 Included in non-current assets is a due from non-guarantor subsidiaries receivable of $110,747 and $136,904 as of March 30, 2024 and December 30, 2023, respectively. Included in non-current liabilities is a due to non-guarantor subsidiaries payable of $221,387 and $216,633 as of March 30, 2024 and December 30, 2023, 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 credit agreements allow us to add estimated EBITDA from acquired businesses for periods in which we did not own the acquired businesses. The bank credit agreements also outline adjustments for non-cash stock-based compensation and non-cash charges or gains that are non-recurring in nature, subject to certain limitations, to be included in the calculation of Adjusted EBITDA. If this financial covenant is violated, we may incur additional financing costs or be required to pay the debt before its maturity date. Adjusted EBITDA is a non- 28 Table of Contents 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 four fiscal quarters ended March 30, 2024 was as follows: ​ ​ ​ ​ ​ Four Fiscal ​ ​ Quarters Ended ​ ​ March 30, Dollars in thousands ​ 2024 Net cash flows provided by operating activities ​ $ 308,908 Interest expense ​ 59,924 Income tax expense ​ 88,266 Impairment of long-lived assets ​ (140,844) Deferred income tax benefit ​ 15,791 Redeemable noncontrolling interests ​ 3,136 Defined benefit pension plan cost ​ (346) Contribution to defined benefit pension plan ​ 18,800 Changes in assets and liabilities, net of acquisitions ​ 92,662 Other ​ 575 EBITDA ​ $ 446,872 Impairment of long-lived assets ​ 140,844 Realignment charges ​ ​ 35,210 Proforma acquisition adjustment ​ ​ 2,389 Adjusted EBITDA ​ $ 625,315 ​ ​ ​ ​ ​ ​ Four Fiscal ​ ​ Quarters Ended ​ ​ March 30, Dollars in thousands ​ 2024 Net earnings attributable to Valmont Industries, Inc. ​ $ 164,131 Interest expense ​ 59,924 Income tax expense ​ 88,266 Depreciation and amortization expense ​ 96,838 Stock-based compensation ​ 37,713 EBITDA ​ ​ 446,872 Impairment of long-lived assets ​ ​ 140,844 Realignment charges ​ ​ 35,210 Proforma acquisition adjustment ​ ​ 2,389 Adjusted EBITDA ​ $ 625,315 Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. Leverage Ratio – The leverage ratio is calculated as the sum of interest-bearing debt minus unrestricted cash in excess of $50.0 million (but not exceeding $500.0 million) divided by Adjusted EBITDA. The leverage ratio is one of the key financial ratios in the covenants under our major debt agreements and the ratio cannot exceed 3.50 (or 3.75 after certain material acquisitions), calculated on a rolling four fiscal quarter basis. If those covenants are violated, we may incur additional financing costs or be required to pay the debt before its maturity date. The 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. 29 Table of Contents The calculation of the leverage ratio as of March 30, 2024, was as follows: ​ ​ ​ ​ ​ March 30, Dollars in thousands ​ 2024 Interest-bearing debt, excluding origination fees and discounts of $26,138 ​ $ 1,136,431 Less: Cash and cash equivalents in excess of $50,000 ​ 119,195 Net indebtedness ​ $ 1,017,236 Adjusted EBITDA ​ 625,315 Leverage ratio ​ 1.63 The leverage ratio, as presented, may not be comparable to similarly titled measures of other companies. Financial Obligations and Commitments There were no material changes in the Company’s financial obligations and commitments during the thirteen weeks ended March 30, 2024. For additional information on the Company’s financial obligations and commitments, refer to the “Cash Uses” section in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. Critical Accounting Estimates There were no material changes in the Company’s critical accounting estimates during the thirteen weeks ended March 30, 2024. For additional information on the Company’s critical accounting policies, refer to the “Critical Accounting Policies” section in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no material changes in the Company’s market risk during the thirteen weeks ended March 30, 2024. For additional information on the Company’s market risk, refer to Part II, Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.