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 following table and elsewhere are presented net of intersegment sales. See Note 8 of our Condensed Consolidated Financial Statements for additional information on segment sales and intersegment sales. 23 Table of Contents Executive Overview Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ ​ Thirty-nine weeks ended ​ ​ ​ ​ September September ​ Percent ​ ​ September September ​ Percent ​ Dollars in millions, except per-share amounts ​ 28, 2024 ​ 30, 2023 Change ​ 28, 2024 ​ 30, 2023 Change Consolidated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,020.2 ​ $ 1,050.3 (2.9) % ​ $ 3,037.7 ​ $ 3,159.1 (3.8) % Gross profit ​ ​ 301.7 ​ 315.1 (4.3) % ​ 928.2 ​ 953.1 (2.6) % as a percentage of net sales ​ ​ 29.6 % 30.0 % ​ ​ 30.6 % 30.2 % ​ Selling, general, and administrative expenses ​ ​ 176.0 ​ 194.3 (9.4) % ​ 523.6 ​ ​ 580.1 (9.7) % as a percentage of net sales ​ ​ 17.2 % 18.5 % ​ ​ 17.2 % 18.4 % ​ Impairment of goodwill and other intangible assets ​ ​ — ​ ​ 140.8 ​ NM ​ ​ ​ — ​ ​ 140.8 ​ NM ​ Realignment charges ​ ​ — ​ ​ 4.2 ​ NM ​ ​ ​ — ​ ​ 4.2 ​ NM ​ Operating income (loss) ​ ​ 125.7 ​ (24.2) NM ​ ​ 404.6 ​ 228.0 77.4 % as a percentage of net sales ​ ​ 12.3 % (2.3) % ​ ​ 13.3 % 7.2 % ​ Net interest expense ​ ​ 12.2 ​ 10.3 18.9 % ​ 41.0 ​ 36.9 11.1 % Effective tax rate ​ ​ 26.5 % (44.6) % ​ ​ 25.0 % 41.4 % ​ Net earnings (loss) attrib. to Valmont Industries, Inc. ​ ​ 83.1 ​ ​ (49.0) NM ​ ​ ​ 270.6 ​ ​ 114.9 135.5 % Diluted earnings (loss) per share ​ $ 4.11 ​ $ (2.34) NM ​ ​ $ 13.34 ​ $ 5.40 147.0 % Infrastructure ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 756.4 ​ $ 753.6 0.4 % ​ $ 2,237.5 ​ $ 2,253.9 (0.7) % Gross profit ​ 223.4 ​ ​ 214.8 4.0 % ​ 673.4 ​ 640.1 5.2 % Selling, general, and administrative expenses ​ 99.7 ​ ​ 106.7 (6.7) % ​ 298.3 ​ 321.7 (7.3) % Impairment of goodwill and other intangible assets ​ ​ — ​ ​ 3.6 ​ NM ​ ​ ​ — ​ 3.6 ​ NM ​ Realignment charges ​ ​ — ​ ​ 1.1 ​ NM ​ ​ ​ — ​ 1.1 ​ NM ​ Operating income ​ 123.7 ​ 103.4 19.6 % ​ 375.1 ​ 313.7 19.6 % Agriculture ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 263.8 ​ $ 296.7 (11.1) % ​ $ 800.2 ​ $ 905.1 (11.6) % Gross profit ​ 78.3 ​ ​ 100.3 (21.9) % ​ 254.8 ​ 313.0 (18.6) % Selling, general, and administrative expenses ​ 49.5 ​ ​ 61.9 (19.9) % ​ 145.0 ​ 172.0 (15.6) % Impairment of goodwill and other intangible assets ​ ​ — ​ ​ 137.2 ​ NM ​ ​ ​ — ​ ​ 137.2 ​ NM ​ Realignment charges ​ ​ — ​ ​ 0.9 ​ NM ​ ​ ​ — ​ ​ 0.9 ​ NM ​ Operating income (loss) ​ 28.9 ​ (99.7) NM ​ ​ 109.8 ​ 2.9 3,682.3 % Corporate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general, and administrative expenses ​ $ 26.8 ​ $ 25.7 4.3 % ​ $ 80.3 ​ $ 86.4 (7.0) % Realignment charges ​ ​ — ​ ​ 2.2 ​ NM ​ ​ ​ — ​ ​ 2.2 ​ NM ​ Operating loss ​ (26.8) ​ (27.9) (4.0) % ​ (80.3) ​ (88.6) (9.3) % ​ ​ NM = not meaningful Figures above may be impacted by rounding Overview, Including Items Impacting Comparability On a consolidated basis, net sales decreased in the third quarter of fiscal 2024, as compared to the same period of fiscal 2023, with slightly higher net sales in the Infrastructure segment offset by lower net sales in the Agriculture segment. On a consolidated basis, net sales decreased in the first three quarters 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 third 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 three quarters 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 were 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. This 24 Table of Contents 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 third quarter and first three quarters 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 third quarter and first three quarters of fiscal 2023, SG&A in the Agriculture segment included amortization of identified intangible assets of $1.6 million and $4.9 million, respectively, and stock-based compensation expense of $1.5 million and $5.8 million, respectively, from the Prospera subsidiary acquired in fiscal 2021. Prospera intangible asset amortization was $0.1 million and $0.3 million, respectively, and stock-based compensation expense was $1.3 million and $3.4 million, respectively, for the third quarter and first three quarters of fiscal 2024. Consolidated operating income for the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, was impacted by the impairment of certain goodwill and other intangible assets totaling $140.8 million in fiscal 2023 and 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 increased in the third quarter and first three quarters of fiscal 2024, as compared to the same period of fiscal 2023, due to the increase in average outstanding borrowings on the revolving line of credit along with higher average interest rates. Income Tax Expense Our effective income tax rate in the third quarter and first three quarters of fiscal 2024 was 26.5% and 25.0%, respectively, as compared to (44.6)% and 41.4% in the same periods of fiscal 2023. The change in the effective tax rate was primarily the result of the impairment of goodwill in the third quarter of fiscal 2023, for which there was no related tax benefit. Infrastructure Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ ​ ​ ​ ​ ​ ​ September 28, ​ September 30, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change Transmission, Distribution, and Substation ​ $ 342.4 ​ $ 298.0 $ 44.4 14.9 % Lighting and Transportation ​ ​ 229.2 ​ ​ 252.6 ​ (23.4) (9.3) % Coatings ​ ​ 88.0 ​ ​ 89.0 ​ (1.0) (1.0) % Telecommunications ​ ​ 64.3 ​ ​ 59.6 ​ 4.7 7.8 % Solar ​ ​ 34.6 ​ ​ 55.9 ​ (21.3) (38.1) % Total sales ​ $ 758.5 ​ $ 755.1 ​ $ 3.4 0.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 123.7 ​ $ 103.4 ​ $ 20.3 19.6 % ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-nine weeks ended ​ ​ ​ ​ ​ ​ ​ ​ September 28, ​ September 30, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change Transmission, Distribution, and Substation ​ $ 990.7 ​ $ 927.1 $ 63.6 6.9 % Lighting and Transportation ​ ​ 694.9 ​ ​ 727.9 ​ (33.0) (4.5) % Coatings ​ ​ 266.7 ​ ​ 270.2 ​ (3.5) (1.3) % Telecommunications ​ ​ 176.6 ​ ​ 195.5 ​ (18.9) (9.6) % Solar ​ ​ 116.0 ​ ​ 141.1 ​ (25.1) (17.8) % Total sales ​ $ 2,244.9 ​ $ 2,261.8 ​ $ (16.9) (0.7) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 375.1 ​ $ 313.7 ​ $ 61.4 19.6 % Infrastructure segment sales were similar in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023. In the third quarter of fiscal 2024, a 4.8% increase in sales in North America was offset by a 13.1% decrease in sales in international markets, primarily attributed to a large international Solar utility-scale project in fiscal 2023 that did not recur in fiscal 2024. Transmission, Distribution, and Substation sales increased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, due to a favorable project mix and higher volumes of distribution and substation products. These increases occurred amid strong utility market demand, driven by ongoing investments in the global energy transition and grid hardening. Lighting and Transportation sales decreased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, due to lower sales volumes driven by lighting market softness, the strategic exit from lower margin products, and transportation project timing. Coatings sales decreased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, due to lower sales volumes within international markets more than offsetting increased average selling prices. Telecommunications sales increased in the third quarter of fiscal 2024 and decreased in the first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023. The product line saw higher sales volumes in the third quarter of fiscal 2024 driven by increased carrier spending amid a stabilizing North American market environment while the first three quarters of fiscal 2024 were impacted by lower sales volumes as a result of a softer global market environment in the first half of fiscal 2024. Solar sales decreased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, due to significantly lower sales volumes. This was the result of the non-recurrence of a large utility-scale project that occurred in fiscal 2023 and the second quarter of fiscal 2024 strategic decision to exit certain low-margin projects. Infrastructure gross profit and gross profit margin increased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, as a favorable mix and pricing discipline contributed to increased average selling prices that more than offset the impact of steel index deflation. Infrastructure SG&A decreased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, primarily due to decreased compensation costs as a result of the Realignment Program. Infrastructure operating income increased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, primarily due to gross profit improvements along with decreased SG&A. In addition, we incurred severance costs totaling $1.1 million within the Infrastructure segment during the third quarter of fiscal 2023 related to the Realignment Program. 26 Table of Contents Agriculture Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ ​ ​ ​ ​ ​ ​ September 28, ​ September 30, Dollar Percent Dollars in millions 2024 2023 Change Change North America ​ $ 120.0 ​ $ 126.8 $ (6.8) (5.4) % International ​ ​ 145.3 ​ ​ 171.7 ​ (26.4) (15.3) % Total sales ​ $ 265.3 ​ $ 298.5 ​ $ (33.2) (11.1) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income (loss) ​ $ 28.9 ​ $ (99.7) ​ $ 128.6 NM ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-nine weeks ended ​ ​ ​ ​ ​ ​ ​ ​ September 28, ​ September 30, ​ Dollar ​ Percent Dollars in millions 2024 2023 Change Change North America ​ $ 441.2 ​ $ 450.7 $ (9.5) (2.1) % International ​ ​ 364.5 ​ ​ 459.9 ​ (95.4) (20.7) % Total sales ​ $ 805.7 ​ $ 910.6 ​ $ (104.9) (11.5) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 109.8 ​ $ 2.9 ​ $ 106.9 3,682.3 % In North America, Agriculture segment sales decreased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, driven by slightly lower irrigation equipment sales volumes. An increase in replacement sales due to severe weather events in fiscal 2024 was offset by continued market softness amid lower grain prices. Average irrigation selling prices were similar to fiscal 2023. In international markets, Agriculture segment sales decreased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, due to significantly lower sales in Brazil, driven by normalizing backlog levels and lower grain prices impacting growers’ buying behavior. This decline was partially offset by sales growth in the Europe, Middle East, and Africa (“EMEA”) region along with incremental sales from the HR Products acquisition in fiscal 2023. Sales of Technology Products and Services decreased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, due to lower hardware sales volumes. 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 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 third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, primarily due to decreased sales volumes in North America and Brazil and decreased average selling prices in Brazil, partially offset by increased sales volumes in EMEA. Agriculture segment SG&A decreased in the third quarter and first three quarters 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 segment operating income increased in the third quarter and first three quarters of fiscal 2024, as compared to the same periods of fiscal 2023, primarily due to the impairment of certain goodwill and other intangible assets in the third quarter of fiscal 2023 totaling approximately $137.2 million along with reduced SG&A, partially offset by the impact of lower sales volumes and a higher mix of project sales. In addition, we incurred severance costs totaling $0.9 million within the Agriculture segment during the third quarter of fiscal 2023 related to the Realignment Program. 27 Table of Contents Corporate Corporate SG&A increased in the third quarter of fiscal 2024, as compared to the same period of fiscal 2023, due to increased insurance costs and incremental expense from changes in the valuation of deferred compensation plan liabilities. Charges related to changes in deferred compensation plan liabilities are offset by an opposite change in an equal amount included in “Other income (expenses)” for the change in deferred compensation plan assets. These increases were partially offset by decreased compensation costs primarily as a result of the Realignment Program in fiscal 2023. Corporate SG&A decreased in the first three quarters of fiscal 2024, as compared to the same period of fiscal 2023, due to decreased compensation costs primarily as a result of the Realignment Program in fiscal 2023. In addition, we incurred severance and other employee benefit costs totaling $2.2 million within Corporate expense in the third quarter of fiscal 2023 related to the Realignment Program. Liquidity and Capital Resources Capital Allocation Philosophy We have historically funded our growth, capital spending, and acquisitions through 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 the next 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 September 28, 2024, we have acquired approximately 8.2 million shares for approximately $1,319.0 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 September 28, 2024 and December 30, 2023, our accounts payable on our Condensed Consolidated Balance Sheets included $40.8 million and $41.9 million, respectively, of our payment obligations under this program. Sources of Financing Our debt financing as of September 28, 2024 consisted primarily of senior unsecured notes and borrowings on our revolving credit facility. 28 Table of Contents Senior Unsecured Notes Our senior unsecured notes as of September 28, 2024 were: ● $450.0 million face value ($433.9 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. 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 September 28, 2024 and December 30, 2023, we had outstanding borrowings of $168.0 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 September 28, 2024, we had the ability to borrow $631.8 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 $38.6 million, $37.3 million of which were unused as of September 28, 2024. Our senior unsecured notes and revolving credit facility each contain cross-default provisions that 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. 29 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 facility 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 facility 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 September 28, 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 $200.5 million as of September 28, 2024 with approximately $155.8 million held in our non-U.S. subsidiaries. If we distributed our foreign cash balances, certain taxes would be applicable. As of September 28, 2024, we had a liability for foreign withholding taxes and U.S. state income taxes of $1.7 million and $0.6 million, respectively. Cash Flows The following table includes a summary of our cash flow information for the thirty-nine weeks ended September 28, 2024 and September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-nine weeks ended ​ ​ September 28, ​ September 30, Dollars in thousands 2024 2023 Net cash flows from operating activities ​ $ 379,264 ​ $ 190,868 Net cash flows from investing activities ​ (55,099) ​ (89,266) Net cash flows from financing activities ​ (325,877) ​ (111,491) Operating Cash Flows and Working Capital – Cash provided by operating activities totaled $379.3 million in the first three quarters of fiscal 2024, as compared to $190.9 million in the same period of fiscal 2023. The change in operating cash flows was primarily the result of favorable changes in working capital mainly driven by increased customer receipts including a $69.0 million order down payment received in the third quarter of fiscal 2024. This was partially offset by severance payments related to the Realignment Program totaling $11.8 million in the first three quarters of fiscal 2024. Investing Cash Flows – Cash used in investing activities totaled $55.1 million in the first three quarters of fiscal 2024, as compared to $89.3 million in the same period of fiscal 2023. Investing activities in the first three quarters of fiscal 2024 primarily included capital spending of $53.8 million. Investing activities in the first three quarters of fiscal 2023 primarily included capital spending of $71.2 million and the acquisition of HR Products, net of cash acquired, of $31.8 million, partially offset by proceeds from a divestiture, net of cash divested, of $6.4 million and proceeds from property 30 Table of Contents damage insurance claims of $6.8 million. We expect our capital expenditures to be in the range of $85.0 million to $95.0 million for fiscal 2024. Financing Cash Flows – Cash used in financing activities totaled $325.9 million in the first three quarters of fiscal 2024, as compared to $111.5 million in the same period of fiscal 2023. Our total interest-bearing debt was $925.8 million as of September 28, 2024 and $1,138.1 million as of December 30, 2023. Financing activities in the first three quarters of fiscal 2024 primarily consisted of borrowings on the revolving credit facility and short-term notes of $37.4 million offset by principal payments on our long-term debt and short-term borrowings of $249.9 million, dividends paid of $36.3 million, the repurchase of common stock of $55.1 million, the purchases of redeemable noncontrolling interests of $17.7 million, and the net activity from stock option and incentive plans, including the associated withholding payments, of $3.9 million. Financing activities in the first three quarters of fiscal 2023 primarily consisted of borrowings on the revolving credit facility and short-term notes of $239.7 million, offset by principal repayments on our long-term debt and short-term borrowings of $136.6 million, dividends paid of $37.0 million, the repurchase of common stock of $166.7 million, and the net activity from stock option and incentive plans, including the associated withholding payments, 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 thirty-nine weeks ended September 28, 2024 and September 30, 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen weeks ended ​ Thirty-nine weeks ended ​ ​ September 28, ​ September 30, ​ September 28, ​ September 30, Dollars in thousands 2024 ​ 2023 ​ 2024 ​ 2023 Net sales ​ $ 683,626 ​ $ 649,187 ​ $ 2,066,805 ​ $ 2,050,436 Gross profit ​ 200,042 ​ 170,638 ​ 624,246 ​ 572,443 Operating income ​ 83,740 ​ 50,986 ​ 277,824 ​ 208,993 Net earnings ​ 52,830 ​ 36,121 ​ 174,052 ​ 109,277 Net earnings attributable to Valmont Industries, Inc. ​ 52,830 ​ 35,687 ​ 174,052 ​ 108,227 Combined financial information as of September 28, 2024 and December 30, 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ September 28, ​ December 30, Dollars in thousands ​ 2024 2023 Current assets ​ $ 835,959 ​ $ 777,539 Non-current assets ​ 843,598 ​ 872,016 Current liabilities ​ 404,563 ​ 361,211 Non-current liabilities ​ 1,298,408 ​ 1,436,131 Redeemable noncontrolling interests ​ — ​ 10,518 Included in non-current assets is a due from non-guarantor subsidiaries receivable of $98,314 and $136,904 as of September 28, 2024 and December 30, 2023, respectively. Included in non-current liabilities is a due to non-guarantor subsidiaries payable of $256,781 and $216,633 as of September 28, 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 31 Table of Contents 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. The calculation of Adjusted EBITDA for the four fiscal quarters ended September 28, 2024 was as follows: ​ ​ ​ ​ ​ Four Fiscal ​ ​ Quarters Ended ​ ​ September 28, Dollars in thousands ​ 2024 Net cash flows from operating activities ​ $ 495,171 Interest expense ​ 61,694 Income tax expense ​ 101,662 Deferred income taxes ​ 22,046 Redeemable noncontrolling interests ​ 295 Net periodic pension cost ​ (545) Contribution to defined benefit pension plan ​ 21,625 Changes in assets and liabilities ​ (103,454) Other ​ (2,006) EBITDA ​ $ 596,488 Realignment charges ​ ​ 31,030 Adjusted EBITDA ​ $ 627,518 ​ ​ ​ ​ ​ ​ Four Fiscal ​ ​ Quarters Ended ​ ​ September 28, Dollars in thousands ​ 2024 Net earnings attributable to Valmont Industries, Inc. ​ $ 306,568 Interest expense ​ 61,695 Income tax expense ​ 101,661 Depreciation and amortization ​ 94,490 Stock-based compensation ​ 32,074 EBITDA ​ $ 596,488 Realignment charges ​ ​ 31,030 Adjusted EBITDA ​ $ 627,518 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. 32 Table of Contents The calculation of the leverage ratio as of September 28, 2024, was as follows: ​ ​ ​ ​ ​ September 28, Dollars in thousands ​ 2024 Interest-bearing debt, excluding origination fees and discounts of $25,790 ​ $ 925,831 Less: Cash and cash equivalents in excess of $50,000 ​ 150,477 Net indebtedness ​ $ 775,354 Adjusted EBITDA ​ 627,518 Leverage ratio ​ 1.24 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 thirty-nine weeks ended September 28, 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 The following accounting policies involve judgments and estimates used in preparation of the Condensed Consolidated Financial Statements. A substantial amount of management judgment is used in preparing financial statements. We must make estimates on a number of items, such as impairments of long-lived assets, income taxes, revenue recognition for the product lines recognized over time, inventory obsolescence, and pension benefits. We base our estimates on our experience and on other assumptions that we believe are reasonable under the circumstances. Further, we re-evaluate our estimates from time to time and as circumstances change. Actual results may differ under different assumptions or conditions. The selection and application of our critical accounting policies are discussed annually with our audit committee. Other than the below, there were no changes in our critical accounting policies as described on pages 34 to 38 on Form 10-K for the fiscal year ended December 30, 2023 during the thirteen weeks ended September 28, 2024. Impairment of Goodwill and Other Intangible Assets We annually evaluate our reporting units for goodwill impairment during the third fiscal quarter, which usually coincides with our strategic planning process. We estimated the value of all fourteen of the reporting units identified for the fiscal 2024 goodwill impairment analysis utilizing a discounted cash flow model. The discounted cash flow model uses projected after-tax cash flows from operations (less capital expenditures) discounted to present value. We perform sensitivity analyses to determine what the impact of changes in key assumptions, including discount rates and cash flow forecasts, may have on the valuation of the reporting units. For the fiscal 2024 annual impairment test, none of our reporting units had an estimated fair value of less than its respective carrying value. Most of our reporting units serve markets which are cyclical, and their sales and profitability may fluctuate from year to year. For our Solar and International Irrigation reporting units, with a combined goodwill of approximately $130 million, the amount of cushion or excess fair value above their carrying value determined in our annual impairment test was less than 15%. We believe these reporting units generate positive cash flows in excess of their current carrying value, and we will continue to monitor their prospects for growth and continuous improvement. We continue to monitor changes in the global economy that could impact the future operating results of our reporting units. If such adverse conditions arise, we will test impacted reporting units for impairment prior to the annual test. In the evaluation of our reporting units, we look at the long-term prospects for the reporting unit and recognize that current performance may not be the best indicator of future prospects or value, which requires management judgment, most specifically around future cash flow projections. Our indefinite-lived intangible assets consist of trade names. We assess the values of these assets apart from goodwill as part of the annual impairment testing. We use the relief-from-royalty method to evaluate our trade names, under which the value of a trade name is determined based on a royalty that could be charged to a third party for using the trade name in question. The royalty, which is based on a reasonable rate applied against estimated future sales, is tax-effected and 33 Table of Contents discounted to present value. Based on our fiscal 2024 annual testing, none of our trade names had an estimated fair value of less than its respective carrying value. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no material changes in the Company’s market risk during the thirty-nine weeks ended September 28, 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.