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 ​ ​ ​ Twenty-six weeks ended ​ ​ ​ ​ June 29, July 1, ​ Percent ​ ​ June 29, July 1, ​ Percent ​ Dollars in millions, except per share amounts ​ 2024 ​ 2023 Change ​ 2024 ​ 2023 Change Consolidated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,039.7 ​ $ 1,046.3 (0.6) % ​ $ 2,017.6 ​ $ 2,108.8 (4.3) % Gross profit ​ ​ 320.3 ​ 329.4 (2.8) % ​ 626.5 ​ 638.0 (1.8) % as a percent of net sales ​ ​ 30.8 % 31.5 % ​ ​ 31.1 % 30.3 % ​ Selling, general, and administrative expenses ​ ​ 173.0 ​ 195.7 (11.6) % ​ 347.6 ​ ​ 385.8 (9.9) % as a percent of net sales ​ ​ 16.6 % 18.7 % ​ ​ 17.2 % 18.3 % ​ Operating income ​ ​ 147.3 ​ 133.7 10.2 % ​ 278.9 ​ 252.2 10.6 % as a percent of net sales ​ ​ 14.2 % 12.8 % ​ ​ 13.8 % 12.0 % ​ Net interest expense ​ ​ 14.3 ​ 14.4 (0.0) % ​ 28.8 ​ 26.6 8.1 % Effective tax rate ​ ​ 23.5 % 26.4 % ​ ​ 24.4 % 28.2 % ​ Net earnings attributable to Valmont Industries, Inc. ​ ​ 99.7 ​ ​ 89.4 11.6 % ​ ​ 187.5 ​ ​ 163.9 14.4 % Diluted earnings per share ​ $ 4.91 ​ $ 4.21 16.6 % ​ $ 9.24 ​ $ 7.67 20.5 % Infrastructure ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 760.4 ​ $ 768.2 (1.0) % ​ $ 1,481.2 ​ $ 1,500.3 (1.3) % Gross profit ​ 232.3 ​ ​ 224.8 3.3 % ​ 450.0 ​ 425.3 5.8 % Selling, general, and administrative expenses ​ 98.8 ​ ​ 108.9 (9.3) % ​ 198.6 ​ 215.0 (7.6) % Operating income ​ 133.5 ​ 115.9 15.2 % ​ 251.4 ​ 210.3 19.6 % Agriculture ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 279.3 ​ $ 278.1 0.4 % ​ $ 536.4 ​ $ 608.5 (11.8) % Gross profit ​ 88.0 ​ ​ 104.6 (15.9) % ​ 176.5 ​ 212.7 (17.0) % Selling, general, and administrative expenses ​ 48.0 ​ ​ 55.3 (13.3) % ​ 95.5 ​ 110.1 (13.3) % Operating income ​ 40.0 ​ 49.3 (18.8) % ​ 81.0 ​ 102.6 (21.1) % Corporate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general, and administrative expenses ​ $ 26.2 ​ $ 31.5 (16.6) % ​ $ 53.5 ​ $ 60.7 (11.8) % Operating loss ​ (26.2) ​ (31.5) (16.6) % ​ (53.5) ​ (60.7) (11.8) % ​ ​ ​ 22 Table of Contents Overview, Including Items Impacting Comparability On a consolidated basis, net sales were similar in the second quarter of fiscal 2024, as compared to the same period of fiscal 2023, with lower net sales in the Infrastructure segment and slightly higher net sales in the Agriculture segment. On a consolidated basis, net sales decreased in the first half of fiscal 2024, as compared to the same period of fiscal 2023, with lower net sales in both the Infrastructure and Agriculture segments. On a consolidated basis, gross profit and gross profit margin decreased in the second quarter of fiscal 2024, as compared to the same period of fiscal 2023, driven by a decrease in gross profit in the Agriculture segment partially offset by an increase in gross profit in the Infrastructure segment. Gross profit decreased in the first half of fiscal 2024, as compared to the same period of fiscal 2023, while gross profit margin increased. Favorability from steel deflation, strong commercial execution, and pricing strategies in the Infrastructure segment was more than offset by lower volumes and pricing in Brazil in the Agriculture segment. 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. Consolidated selling, general, and administrative expenses (“SG&A”) decreased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, primarily driven by decreased compensation costs largely attributable to the Realignment Program in fiscal 2023. In the second quarter and first half of fiscal 2023, SG&A in the Agriculture segment included amortization of identified intangible assets of $1.6 million and $3.3 million, respectively, and stock-based compensation expense of $2.3 million and $4.3 million, respectively, from the Prospera subsidiary acquired in fiscal 2021. Prospera intangible asset amortization was $0.1 million and $0.2 million, respectively, and stock-based compensation expense was $1.3 million and $2.1 million, respectively, for the second quarter and first half of fiscal 2024. Consolidated operating income for the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, was impacted by the lower SG&A as a result of the Realignment Program partially offset by decreased gross profit. Acquisitions and Divestitures 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. 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. Net Interest Expense Consolidated net interest expense was flat in the second quarter of fiscal 2024, as compared to the same period of fiscal 2023. The increase in average outstanding borrowings on the revolving line of credit along with higher average interest rates resulted in higher consolidated net interest expense in the first half of fiscal 2024, as compared to the same period of fiscal 2023. 23 Table of Contents Income Tax Expense Our effective income tax rate in the second quarter and first half of fiscal 2024 was 23.5% and 24.4%, respectively, as compared to 26.4% and 28.2% in the same periods of fiscal 2023. The change in the effective tax rate was primarily the result of the reduction of a valuation allowance on a tax loss carryforward in a foreign subsidiary totaling approximately $3.0 million in addition to a change in the mix of foreign earnings. Infrastructure Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ ​ ​ ​ ​ ​ ​ June 29, ​ July 1, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change Transmission, Distribution, and Substation ​ $ 323.0 ​ $ 314.4 $ 8.6 2.8 % Lighting and Transportation ​ ​ 243.6 ​ ​ 246.1 ​ (2.5) (1.0) % Coatings ​ ​ 91.6 ​ ​ 91.1 ​ 0.5 0.5 % Telecommunications ​ ​ 58.4 ​ ​ 67.7 ​ (9.3) (13.8) % Solar ​ ​ 46.1 ​ ​ 51.3 ​ (5.2) (10.1) % Total sales ​ $ 762.7 ​ $ 770.6 ​ $ (7.9) (1.0) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 133.5 ​ $ 115.9 ​ $ 17.6 15.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-six weeks ended ​ ​ ​ ​ ​ ​ ​ ​ June 29, ​ July 1, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change Transmission, Distribution, and Substation ​ $ 648.3 ​ $ 629.1 $ 19.2 3.1 % Lighting and Transportation ​ ​ 465.7 ​ ​ 475.3 ​ (9.6) (2.0) % Coatings ​ ​ 178.7 ​ ​ 181.2 ​ (2.5) (1.4) % Telecommunications ​ ​ 112.4 ​ ​ 135.9 ​ (23.5) (17.3) % Solar ​ ​ 81.3 ​ ​ 85.2 ​ (3.9) (4.5) % Total sales ​ $ 1,486.4 ​ $ 1,506.7 ​ $ (20.3) (1.4) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 251.4 ​ $ 210.3 ​ $ 41.1 19.6 % Transmission, Distribution, and Substation sales increased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, due to strategic pricing initiatives and increased sales volumes . These increases occurred amid strong utility market demand, driven by ongoing investments in the global energy transition and grid hardening. However, a greater mix of distribution and substation structures and the unfavorable contractual pricing impact of steel index deflation limited overall sales growth. Lighting and Transportation sales decreased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, due to lower sales volumes along with unfavorable currency translation effects totaling approximately $3.7 million for the first half of fiscal 2024. Coatings sales increased slightly in the second quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to increased average selling prices more than offsetting decreased sales volumes. Coatings sales decreased slightly in the first half of fiscal 2024, as compared to the same period of fiscal 2023, due to lower sales volumes more than offsetting increased average selling prices. The decrease was also impacted by unfavorable currency translation effects totaling approximately $1.6 million. Telecommunications sales decreased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, due to much lower sales volumes as a result of a softer market environment. Solar sales decreased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, due to decreased sales volumes primarily driven by project timing. Infrastructure gross profit and gross profit margin increased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, due to commercial and pricing strategies contributing to increased average selling prices along with lower overall costs of goods sold from declining steel costs. 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. 24 Table of Contents Infrastructure SG&A decreased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, primarily due to decreased compensation costs primarily as a result of the Realignment Program. Infrastructure operating income increased in the second quarter and first half of fiscal 2024, as compared to the same periods 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 ​ ​ ​ ​ ​ ​ ​ June 29, ​ July 1, Dollar Percent Dollars in millions 2024 2023 Change Change North America ​ $ 161.3 ​ $ 140.9 $ 20.4 14.4 % International ​ ​ 120.4 ​ ​ 139.0 ​ (18.6) (13.4) % Total sales ​ $ 281.7 ​ $ 279.9 ​ $ 1.8 0.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 40.0 ​ $ 49.3 ​ $ (9.3) (18.8) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-six weeks ended ​ ​ ​ ​ ​ ​ ​ ​ June 29, ​ July 1, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change North America ​ $ 321.2 ​ $ 323.9 $ (2.7) (0.8) % International ​ ​ 219.2 ​ ​ 288.2 ​ (69.0) (23.9) % Total sales ​ $ 540.4 ​ $ 612.1 ​ $ (71.7) (11.7) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 81.0 ​ $ 102.6 ​ $ (21.6) (21.1) % In North America, the increase in Agriculture sales for the second quarter of fiscal 2024, as compared to the same period of fiscal 2023, was driven by a large increase in replacement sales due to severe weather impacts in the midwestern and southern U.S., partially offset by decreased average selling prices due to targeted regional pricing actions. Sales in the first half of fiscal 2024 were comparable to the same period of fiscal 2023. International sales decreased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, due to significantly lower sales in Brazil due to normalizing backlog levels and lower grain prices impacting growers’ buying behavior, partially offset by higher project sales in the Middle East and incremental sales from the HR Products acquisition. Sales of Technology Products and Services decreased in the first quarter and second half of fiscal 2024, as compared to the same periods 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 grain 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. Agriculture segment gross profit decreased in the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, primarily due to decreased sales volumes in Brazil and decreased average selling prices both in North America and internationally, partially offset by increased sales volumes in North America. Agriculture segment SG&A decreased in the second quarter and first half of fiscal 2024, as compared to the same periods 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 second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, primarily due to decreased sales volumes and pricing in Brazil partially offset by decreased SG&A. 25 Table of Contents Corporate Corporate SG&A decreased for the second quarter and first half of fiscal 2024, as compared to the same periods of fiscal 2023, due to decreased compensation 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 (positive 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, including accelerated purchase agreements. 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 June 29, 2024, we have acquired approximately 8.1 million shares for approximately $1,278.8 million under this share repurchase program. 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 June 29, 2024 and December 30, 2023, our accounts payable on our Condensed Consolidated Balance Sheets included $41.5 million and $41.9 million, respectively, of our payment obligations under this program. Sources of Financing Our debt financing as of June 29, 2024 consisted primarily of senior unsecured notes and borrowings on our revolving credit facility. Senior Unsecured Notes Our senior unsecured notes as of June 29, 2024 were: ● $450.0 million face value ($433.8 million carrying value) notes that bear interest at 5.00% per annum and are due in October 2044, and ● $305.0 million face value ($295.3 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. 26 Table of Contents 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 June 29, 2024 and December 30, 2023, we had outstanding borrowings of $287.4 million and $377.9 million, respectively, under the revolving credit facility. The revolving credit facility contains a financial covenant that may limit our additional borrowing capability under the agreement. As of June 29, 2024, we had the ability to borrow $512.4 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 $38.1 million, $36.2 million of which were unused as of June 29, 2024. Our senior unsecured notes and revolving credit facility 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 $50.0 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 27 Table of Contents of other enforcement remedies upon the occurrence of customary events of default (subject to customary grace periods, as applicable). As of June 29, 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 “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 $163.1 million as of June 29, 2024 with approximately $141.7 million held in our non-U.S. subsidiaries. If we distributed our foreign cash balances, certain taxes would be applicable. As of June 29, 2024, we had a liability for foreign withholding taxes and U.S. state income taxes of $1.6 million and $0.7 million, respectively. Cash Flows The following table includes a summary of our cash flow information for the twenty-six weeks ended June 29, 2024 and July 1, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-six weeks ended ​ ​ June 29, ​ July 1, Dollars in thousands 2024 2023 Net cash flows from operating activities ​ $ 154,143 ​ $ 109,546 Net cash flows from investing activities ​ (36,504) ​ (34,046) Net cash flows from financing activities ​ (150,875) ​ (94,154) Operating Cash Flows and Working Capital – Cash provided by operating activities totaled $154.1 million in the first half of fiscal 2024, as compared to $109.5 million in the same period of fiscal 2023. The change in operating cash flows was primarily the result of the increase in net earnings as well as the favorable impact of lower steel prices on our working capital. This was partially offset by payments of severance and other employee benefit costs related to the Realignment Program totaling $10.6 million and a reduction of our sold trade accounts receivable balance totaling $40.0 million in the first half of fiscal 2024. Investing Cash Flows – Cash used in investing activities totaled $36.5 million in the first half of fiscal 2024, as compared to $34.0 million in the same period of fiscal 2023. Investing activities in the first half of fiscal 2024 primarily included capital spending of $33.3 million. Investing activities in the first half of fiscal 2023 primarily included capital spending of $45.4 million, partially offset by proceeds from a divestiture of $6.4 million and proceeds from property damage insurance claims of $4.8 million. We expect our capital expenditures to be in the range of $95.0 million to $110.0 million for fiscal 2024. Financing Cash Flows – Cash used in financing activities totaled $150.9 million in the first half of fiscal 2024, as compared to $94.2 million in the same period of fiscal 2023. Our total interest-bearing debt was $1,046.0 million as of June 29, 2024 and $1,138.1 million as of December 30, 2023. Financing activities in the first half of fiscal 2024 primarily consisted of borrowings on the revolving credit agreement and short-term notes of $21.1 million offset by principal payments on our long-term debt and short-term borrowings of $112.7 million, dividends paid of $24.2 million, the purchase of treasury shares of $14.9 million, the purchase of redeemable noncontrolling interests of $17.7 million, and the net activity from stock option and incentive plans of $4.4 million. Financing activities in the first half of fiscal 2023 primarily consisted of borrowings on the revolving credit agreement and short-term notes of $179.9 million offset by principal payments on our 28 Table of Contents long-term debt and short-term borrowings of $103.7 million, dividends paid of $24.4 million, the purchase of treasury shares of $135.1 million, and the net activity from stock option and incentive plans of $10.2 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 and twenty-six weeks ended June 29, 2024 and July 1, 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ Twenty-six weeks ended ​ ​ June 29, ​ July 1, ​ June 29, ​ July 1, Dollars in thousands 2024 ​ 2023 ​ 2024 ​ 2023 Net sales ​ $ 701,017 ​ $ 685,778 ​ $ 1,383,179 ​ $ 1,401,249 Gross profit ​ 214,564 ​ 210,310 ​ 424,204 ​ 401,805 Operating income ​ 101,506 ​ 86,175 ​ 194,084 ​ 158,007 Net earnings ​ 61,753 ​ 52,945 ​ 121,222 ​ 73,156 Net earnings attributable to Valmont Industries, Inc. ​ 61,753 ​ 52,497 ​ 121,222 ​ 72,540 Combined financial information as of June 29, 2024 and December 30, 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ June 29, ​ December 30, Dollars in thousands ​ 2024 2023 Current assets ​ $ 812,682 ​ $ 777,539 Non-current assets ​ 845,273 ​ 872,016 Current liabilities ​ 337,910 ​ 361,211 Non-current liabilities ​ 1,371,762 ​ 1,436,131 Redeemable noncontrolling interests ​ — ​ 10,518 Included in non-current assets is a due from non-guarantor subsidiaries receivable of $104,757 and $136,904 as of June 29, 2024 and December 30, 2023, respectively. Included in non-current liabilities is a due to non-guarantor subsidiaries payable of $238,144 and $216,633 as of June 29, 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-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. 29 Table of Contents The calculation of Adjusted EBITDA for the four fiscal quarters ended June 29, 2024 was as follows: ​ ​ ​ ​ ​ Four Fiscal ​ ​ Quarters Ended ​ ​ June 29, Dollars in thousands ​ 2024 Net cash flows from operating activities ​ $ 351,372 Interest expense ​ 60,852 Income tax expense ​ 87,399 Impairment of long-lived assets ​ (140,844) Deferred income tax benefit ​ 19,830 Redeemable noncontrolling interests ​ 1,123 Defined benefit pension plan cost ​ (444) Contribution to defined benefit pension plan ​ 20,095 Changes in assets and liabilities, net of acquisitions ​ 53,681 Other ​ (1,546) EBITDA ​ $ 451,518 Impairment of long-lived assets ​ 140,844 Realignment charges ​ ​ 35,210 Proforma acquisition adjustment ​ ​ 1,130 Adjusted EBITDA ​ $ 628,702 ​ ​ ​ ​ ​ ​ Four Fiscal ​ ​ Quarters Ended ​ ​ June 29, Dollars in thousands ​ 2024 Net earnings attributable to Valmont Industries, Inc. ​ $ 174,471 Interest expense ​ 60,853 Income tax expense ​ 87,398 Depreciation and amortization expense ​ 95,325 Stock-based compensation ​ 33,471 EBITDA ​ $ 451,518 Impairment of long-lived assets ​ ​ 140,844 Realignment charges ​ ​ 35,210 Proforma acquisition adjustment ​ ​ 1,130 Adjusted EBITDA ​ $ 628,702 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. The calculation of the leverage ratio as of June 29, 2024, was as follows: ​ ​ ​ ​ ​ June 29, Dollars in thousands ​ 2024 Interest-bearing debt, excluding origination fees and discounts of $25,965 ​ $ 1,045,953 Less: Cash and cash equivalents in excess of $50,000 ​ 113,142 Net indebtedness ​ $ 932,811 Adjusted EBITDA ​ 628,702 Leverage ratio ​ 1.48 The leverage ratio, as presented, may not be comparable to similarly titled measures of other companies. 30 Table of Contents Financial Obligations and Commitments There were no material changes in the Company’s financial obligations and commitments during the twenty-six weeks ended June 29, 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 twenty-six weeks ended June 29, 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 twenty-six weeks ended June 29, 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.