# Valmont Industries Inc: Form 10-Q for the period ended Jul 1, 2023

- Company: [Valmont Industries Inc](/companies/vmi.md) (CIK 102729)
- Form: 10-Q
- Filed: 2023-08-01
- Accepted by EDGAR: Aug 1, 2023, 16:46 ET
- Period: 2023-07-01
- Accession: 0000102729-23-000046
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/102729/000010272923000046/vmi-20230701x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/102729/000010272923000046/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-07-01.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-02 to 2023-07-01 | $1.05bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-07-01 | $2.11bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-02 to 2023-07-01 | $716.9m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2023-01-01 to 2023-07-01 | $1.47bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-04-02 to 2023-07-01 | $329.4m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-01-01 to 2023-07-01 | $638.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-04-02 to 2023-07-01 | $195.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-01-01 to 2023-07-01 | $385.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-02 to 2023-07-01 | $133.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-07-01 | $252.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-02 to 2023-07-01 | $14.9m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-07-01 | $28.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-02 to 2023-07-01 | $31.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-07-01 | $63.8m | us-gaap:IncomeTaxExpenseBenefit |
| Diluted EPS | 3 months, 2023-04-02 to 2023-07-01 | $4.21 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-07-01 | $7.67 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-02 to 2023-07-01 | $4.25 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-07-01 | $7.75 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-02 to 2023-07-01 | 21,229 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-07-01 | 21,370 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-07-01 | $109.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-07-01 | $45.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2023-01-01 to 2023-07-01 | $24.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2023-01-01 to 2023-07-01 | $135.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-07-01 | $166.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-07-01 | $1.80bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-07-01 | $3.62bn | us-gaap:Assets |
| Current liabilities | at 2023-07-01 | $749.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-07-01 | $1.95bn | us-gaap:Liabilities |
| Long-term debt | at 2023-07-01 | $952.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-07-01 | $1.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-07-01 | $1.61bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,613 characters.

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

This discussion should be read in conjunction with the financial statements and notes thereto, and the management’s discussion and analysis included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Segment net sales in the table below and elsewhere are presented net of intersegment sales. See Note 8 of our Condensed Consolidated Financial Statements for additional information on segment sales and intersegment sales.

### Results of Operations

*Dollars in millions, except per share amounts*

| ​ ​ Consolidated | ​ ​ ​ ​ | ​ ​ ​ Thirteen weeks ended July 1, 2023 ​ ​ ​ | ​ ​ ​ ​ June 25, 2022 ​ ​ ​ | ​ ​ ​ Percent Change ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Twenty-six weeks ended July 1, 2023 ​ ​ ​ | ​ ​ ​ ​ June 25, 2022 ​ ​ ​ | ​ ​ ​ Percent Change ​ ​ |
| --- | --- | --- | ---: | ---: | --- | ---: | ---: | ---: |
| Net sales | ​ | $1,046.3 ​ | $1,135.5 | (7.9)% | ​ | $2,108.8 ​ | $2,116.4 | (0.4)% |
| Gross profit | ​ | ​ 329.4 ​ | 292.6 | 12.6% | ​ | 638.0 ​ | 541.8 | 17.8% |
| as a percent of sales | ​ | ​ 31.5% | 25.8% | ​ | ​ | 30.3% | 25.6% | ​ |
| Selling, general, and administrative expenses | ​ | ​ 195.7 ​ | 173.9 | 12.5% | ​ | 385.8 ​ | ​ 328.2 | 17.6% |
| as a percent of sales | ​ | ​ 18.7% | 15.3% | ​ | ​ | 18.3% | 15.5% | ​ |
| Operating income | ​ | ​ 133.7 ​ | 118.7 | 12.6% | ​ | 252.2 ​ | 213.6 | 18.1% |
| as a percent of sales | ​ | ​ 12.8% | 10.5% | ​ | ​ | 12.0% | 10.1% | ​ |
| Net interest expense | ​ | ​ 14.4 ​ | 11.1 | 29.3% | ​ | 26.6 ​ | 22.1 | 20.4% |
| Effective tax rate | ​ | ​ 26.4% | 27.6% | ​ | ​ | 28.2% | 27.2% | ​ |
| Net earnings attributable to Valmont Industries, Inc. | ​ | ​ 89.4 ​ | ​ 76.1 | 17.4% | ​ | ​ 163.9 ​ | ​ 138.4 | 18.4% |
| Diluted earnings per share | ​ | $4.21 ​ | $3.53 | 19.3% | ​ | $7.67 ​ | $6.43 | 19.3% |
| Infrastructure | ​ | ​ ​ | ​ ​ | ​ | ​ | ​ ​ | ​ | ​ |
| Net sales | ​ | $768.2 ​ | $735.3 | 4.5% | ​ | $1,500.3 ​ | $1,394.3 | 7.6% |
| Gross profit | ​ | 224.8 ​ | ​ 180.0 | 24.9% | ​ | 425.3 ​ | 346.1 | 22.9% |
| Selling, general, and administrative expenses | ​ | 108.9 ​ | ​ 95.9 | 13.6% | ​ | 215.0 ​ | 183.6 | 17.1% |
| Operating income | ​ | 115.9 ​ | 84.1 | 37.8% | ​ | 210.3 ​ | 162.5 | 29.4% |
| Agriculture | ​ | ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ ​ | ​ ​ | ​ |
| Net sales | ​ | $278.1 ​ | $374.8 | (25.8)% | ​ | $608.5 ​ | $678.0 | (10.3)% |
| Gross profit | ​ | 104.6 ​ | ​ 110.5 | (5.3)% | ​ | 212.7 ​ | 192.8 | 10.3% |
| Selling, general, and administrative expenses | ​ | 55.3 ​ | ​ 52.4 | 5.5% | ​ | 110.1 ​ | 97.3 | 13.2% |
| Operating income | ​ | 49.3 ​ | 58.1 | (15.2)% | ​ | 102.6 ​ | 95.5 | 7.4% |
| Other | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ |
| Net sales | ​ | $— ​ | $25.4 ​ | NM ​ | ​ | $— ​ | $44.1 ​ | NM ​ |
| Gross profit | ​ | ​ — ​ | ​ 2.1 ​ | NM ​ | ​ | ​ — ​ | ​ 2.9 ​ | NM ​ |
| Selling, general, and administrative expenses | ​ | ​ — ​ | ​ 1.6 ​ | NM ​ | ​ | ​ — ​ | ​ 3.2 ​ | NM ​ |
| Operating income (loss) | ​ | ​ — ​ | ​ 0.5 ​ | NM ​ | ​ | ​ — ​ | ​ (0.3) ​ | NM ​ |
| Corporate | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ |
| Selling, general, and administrative expenses | ​ | $31.5 ​ | $24.0 | 31.3% | ​ | $60.7 ​ | $44.1 | 37.6% |
| Operating loss | ​ | (31.5) ​ | (24.0) | 31.3% | ​ | (60.7) ​ | (44.1) | 37.6% |

### Overview, Including Items Impacting Comparability

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

Steel prices for both hot rolled coil and plate have remained volatile over the past two fiscal years, especially in North America. Decreases in the average cost of consumed steel combined with recent customer pricing strategy mechanisms more than offset overall decreases in volumes in both the Infrastructure and Agriculture segments on a consolidated basis for the second quarter and first half of fiscal 2023.

In July 2023, subsequent to the second quarter of fiscal 2023, the Company entered into a definitive agreement to acquire HR Products, a leading wholesale supplier of irrigation parts in Australia, for approximately $60 million Australian dollars ($40 million United States (“U.S.”) dollars), subject to working capital adjustments. The transaction is expected to close in the third quarter of fiscal 2023 and will be funded with cash on-hand. Its operations will be reported in the Agriculture segment.

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

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

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

Non-cash items of note impacting the comparability of results from net earnings for the second quarter and first half of fiscal 2023 included amortization of identified intangible assets of $1.6 million ($1.3 million after-tax) and $3.3 million ($2.5 million after-tax), respectively, and stock-based compensation expense for the employees from the Prospera subsidiary acquired in the second quarter of fiscal 2021, totaling $2.3 million ($2.1 million after-tax) and $4.3 million ($3.9 million after-tax), respectively. These items were recognized within selling, general, and administrative expenses (“SG&A”) in the Agriculture segment.

Non-cash items of note impacting the comparability of results from net earnings for the second quarter and first half of fiscal 2022 included amortization of identified intangible assets of $1.6 million ($1.3 million after-tax) and $3.3 million ($2.5 million after-tax), respectively, and stock-based compensation expense for the employees from the Prospera subsidiary acquired in the second quarter of fiscal 2021, totaling $2.5 million ($2.3 million after-tax) and $5.0 million ($4.6 million after-tax), respectively. These items were recognized within SG&A in the Agriculture segment.

### Macroeconomic Impacts on Financial Results and Liquidity

We continue to monitor several macroeconomic and geopolitical trends that impacted our business, including inflationary cost pressures, supply chain disruptions, changes in foreign currency exchange rates against the U.S. dollar, rising interest rates, the ongoing Russia-Ukraine conflict, changing conditions from the COVID-19 pandemic, and labor shortages.

### Reportable Segments

In addition to the two reportable segments, the Company had a business and related activities in fiscal 2022 that were not more than 10% of consolidated sales, operating income, or assets. This comprised the offshore wind energy structures business and was reported in the Other segment until its divestiture in the fourth quarter of fiscal 2022. All prior period information has been recast to reflect this change in reportable segments. See Note 8 to our Condensed Consolidated Financial Statements for additional information.

### Backlog

The consolidated backlog of unshipped orders as of July 1, 2023 was approximately $1.5 billion compared with approximately $1.7 billion as of December 31, 2022.

### Currency Translation

In the second quarter and first half of fiscal 2023, we realized an increase in consolidated operating income, as compared with the same periods of fiscal 2022, despite negative currency translation effects. The breakdown of this effect by segment for the second quarter and the first half of 2023 was as follows:

*Dollars in millions*

| ​ | ​ | ​ ​ Total | ​ | ​ ​ Infrastructure | ​ | ​ ​ Agriculture | ​ ​ | ​ ​ Corporate |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Second quarter | ​ | $(1.2) | ​ | $(0.9) | ​ | $(0.4) | ​ | $0.1 |
| Year-to-date | ​ | ​ (2.0) | ​ | ​ (1.4) | ​ | ​ (0.7) | ​ | ​ 0.1 |

### Gross Profit, SG&A, and Operating Income

At a consolidated level, gross profit and gross profit as a percentage of sales were higher in the second quarter and first half of fiscal 2023, as compared with the same periods of fiscal 2022. Gross profit mainly increased due to higher average selling prices and more favorable input costs more than offsetting lower sales volumes for the second quarter. Gross profit for the Infrastructure segment was higher in both the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022. Gross profit for the Agriculture segment was lower in the second quarter of fiscal 2023, as compared to the second quarter of fiscal 2022, primarily due to the impact of the lower sales volumes.

The increase in consolidated SG&A in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, was primarily driven by increased compensation costs as a result of inflationary wage increases as well as incremental expenses related to the June 2022 acquisition of ConcealFab. In addition, the Company incurred additional bad debt reserve charges during the first half of fiscal 2023, as compared to the first half of 2022, including approximately $2.7 million related to a Telecommunications customer that became insolvent.

The increase in consolidated operating income in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, was primarily due to the increase in gross profit partially offset by the increase in SG&A.

### Net Interest Expense

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

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

Amounts in “Gain (loss) on investments - unrealized" include changes in the market value of deferred compensation assets which are offset by an equal opposite amount included SG&A for the corresponding change in the valuation of deferred compensation liabilities. Other items included in other income / expenses are pension expense and a $3.0 million gain related to the sale of Torrent Engineering and Equipment in the second quarter of fiscal 2023. Pension expense for the second quarter of fiscal 2023 was $0.1 million compared to a benefit of $2.5 million for the second quarter of fiscal 2022. Pension expense for the first half of fiscal 2023 totaled $0.1 million compared to a benefit of $5.2 million for the first half of fiscal 2022.

### Income Tax Expense

Our effective income tax rate in the second quarter and first half of fiscal 2023 was 26.4% and 28.2%, respectively, compared to 27.6% and 27.2% in the same periods of fiscal 2022. The change in the effective tax rate was primarily due to a change in geographic mix of earnings.

### Loss (Earnings) Attributable to Noncontrolling Interests

Loss (earnings) attributable to noncontrolling interests were lower in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, reflecting the operating results of the subsidiaries the Company does not own 100%.

### Cash Flows from Operating Activities

Our cash flows provided by operating activities were $109.5 million in the first half of fiscal 2023, as compared with $68.0 million in the first half of fiscal 2022. The increase was primarily the result of the increase in net earnings and changes in working capital levels.

### Infrastructure Segment

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ ​ | ​ ​ Thirteen weeks ended July 1, 2023 ​ | ​ ​ | ​ ​ June 25, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: |
| Transmission, Distribution, and Substation | ​ | $314.4 | ​ | $295.8 |  | $18.6 |  | 6.2% |
| Lighting and Transportation | ​ | ​ 246.1 | ​ | ​ 246.7 |  | ​ (0.6) |  | (0.2)% |
| Coatings | ​ | ​ 91.1 | ​ | ​ 90.3 |  | ​ 0.8 |  | 0.9% |
| Telecommunications | ​ | ​ 67.7 | ​ | ​ 78.5 |  | ​ (10.8) |  | (13.8)% |
| Solar | ​ | ​ 51.3 | ​ | ​ 28.2 |  | ​ 23.1 |  | 82.1% |
| Total | ​ | $770.6 | ​ | $739.5 | ​ | $31.1 |  | 4.2% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income | ​ | $115.9 | ​ | $84.1 | ​ | $31.8 |  | 37.8% |

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ ​ | ​ ​ Twenty-six weeks ended July 1, 2023 ​ | ​ ​ | ​ ​ June 25, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: |
| Transmission, Distribution, and Substation | ​ | $629.1 | ​ | $577.4 |  | $51.7 |  | 9.0% |
| Lighting and Transportation | ​ | ​ 475.3 | ​ | ​ 459.4 |  | ​ 15.9 |  | 3.5% |
| Coatings | ​ | ​ 181.2 | ​ | ​ 172.3 |  | ​ 8.9 |  | 5.2% |
| Telecommunications | ​ | ​ 135.9 | ​ | ​ 139.9 |  | ​ (4.0) |  | (2.9)% |
| Solar | ​ | ​ 85.2 | ​ | ​ 52.6 |  | ​ 32.6 |  | 62.0% |
| Total | ​ | $1,506.7 | ​ | $1,401.6 | ​ | $105.1 |  | 7.5% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income | ​ | $210.3 | ​ | $162.5 | ​ | $47.8 |  | 29.4% |

Net sales in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, were higher by approximately $32.9 million and $106.0 million, respectively. This was primarily driven by increased average selling prices. Net sales for the first half of fiscal 2023 were also impacted by higher volumes compared to the first half of fiscal 2022. Increased volumes for the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, were partially offset by decreased volumes for the second quarter of fiscal 2023, as compared to the second quarter of fiscal 2022, primarily related to Telecommunications. International sales were impacted by unfavorable currency translation effects of $8.4 million and $19.2 million for the second quarter and first half of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.

Transmission, Distribution, and Substation sales increased in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to higher average selling prices and higher sales volumes.

Lighting and Transportation sales were primarily flat in the second quarter and increased in the first half of fiscal 2023, as compared to the same periods of fiscal 2022. Sales for the second quarter of fiscal 2023, as compared to the same period of fiscal 2022, were impacted by a decrease in volume, offset by higher average sales prices. The increase for the first half of fiscal 2023, as compared to the first half of 2022, was driven by the benefit of comparatively higher volumes in the first quarter of fiscal 2023, as well as increased average selling prices in both quarters. The first quarter and first half of fiscal 2023 were also negatively impacted by unfavorable currency translation effects totaling approximately $4.2 million and $10.0 million, respectively, as compared to the same periods of fiscal 2022.

Telecommunications sales decreased in the second quarter and first half of fiscal 2023, as compared with the same periods of fiscal 2022, due primarily to decreased sales volumes. This was partially offset by increased sales from the second quarter of fiscal 2022 acquisition of ConcealFab along with higher average selling prices.

Coatings sales increased in the second quarter and first half of fiscal 2023, as compared with the same periods of fiscal 2022, due to higher average selling prices.

Solar sales increased in the second quarter and first half of fiscal 2023, as compared with the same periods of fiscal 2022, due to increased sales volumes.

Gross profit and gross profit margin were higher in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022. The customer contractual pricing mechanisms and selling price management initiatives led to an increase in average selling prices and improved profit margins. SG&A was higher in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to higher employment costs mostly attributed to inflationary wage increases, incremental SG&A from the June 2022 acquisition of ConcealFab totaling $2.2 million and $5.4 for the second quarter and first half of 2023, as compared to the same periods of fiscal 2022, respectively, and increased bad debt reserve charges including approximately $2.7 million related to a Telecommunications customer that became insolvent. The increase in operating income for the second quarter and first half of fiscal 2023, as compared with the same periods of fiscal 2022, is also due to the increase in average selling prices and gross profit improvements.

### Agriculture Segment

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ | ​ ​ Thirteen weeks ended July 1, 2023 ​ | ​ ​ | ​ ​ June 25, 2022 ​ | ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| North America | ​ | $140.9 | ​ | $203.5 |  | $(62.6) |  | (30.7)% |
| International | ​ | ​ 139.0 | ​ | ​ 174.3 |  | ​ (35.3) |  | (20.3)% |
| Total | ​ | $279.9 | ​ | $377.8 | ​ | $(97.9) |  | (25.9)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income | ​ | $49.3 | ​ | $58.1 | ​ | $(8.8) |  | (15.2)% |

*Dollars in millions*

| ​ ​ ​ Sales, gross of intercompany eliminations: | ​ ​ ​ ​ | ​ ​ Twenty-six weeks ended July 1, 2023 ​ | ​ ​ | ​ ​ June 25, 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ Dollar Change ​ | ​ ​ ​ | ​ ​ ​ ​ Percent Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| North America | ​ | $323.9 | ​ | $385.7 |  | $(61.8) |  | (16.0)% |
| International | ​ | ​ 288.2 | ​ | ​ 298.6 |  | ​ (10.4) |  | (3.5)% |
| Total | ​ | $612.1 | ​ | $684.3 | ​ | $(72.2) |  | (10.6)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating Income | ​ | $102.6 | ​ | $95.5 | ​ | $7.1 |  | 7.4% |

Agriculture segment net sales decreased for the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022. The benefit of higher average selling prices of irrigation equipment was more than offset by lower volumes. In North America, the decrease in sales for the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, was impacted by growers’ decisions to delay capital investments this season due to general economic uncertainty and a number of macroeconomic factors including higher interest rates, continued inflationary pressures, and recessionary fears. The second quarter and first half of fiscal 2022 also comparatively benefited from the ongoing delivery of record fiscal 2021 year-end backlog. International sales decreased in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022. Increased sales volumes in Brazil were more than offset by lower sales volumes in the Europe, Middle East, and Africa region, partially due to the timing of project sales. Sales of technology-related products and services decreased due to lower irrigation equipment volumes.

Gross profit decreased in the second quarter and increased in the first half of fiscal 2023, as compared to the same periods of fiscal 2022. This was primarily attributed to higher average selling prices which was reduced by decreased volumes in the second quarter of fiscal 2023. SG&A was higher in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022, primarily due to higher employment costs, mostly attributed to inflationary wage increases. Operating income was lower in the second quarter and higher in the first half of fiscal 2023, as compared to the same periods of fiscal 2022. This was due primarily to the reduction in volume experienced in the second quarter of fiscal 2023.

### Other

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

### Corporate

Corporate SG&A was higher in the second quarter and first half of fiscal 2023, as compared to the same periods of fiscal 2022. The increase is primarily due to inflationary wage and incentive increases, incremental expense from changes in the valuation of deferred compensation plan liabilities, and increased expense from our trade accounts receivable sale program attributed to higher interest rates. 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.

### Liquidity and Capital Resources

### Capital Allocation Philosophy

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

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

We intend to manage our capital structure to maintain our investment grade debt rating. Our most recent ratings were Baa3 by Moody’s Investors Service, Inc., BBB- by Fitch Ratings, Inc., and BBB+ by S&P Global Ratings. We would be willing to allow our debt rating to fall to BBB- to finance a special acquisition or other opportunity. We expect to maintain a ratio of debt to invested capital which will support our current investment grade debt rating.

The Board of Directors in May 2014 authorized the purchase of up to $500 million of the Company’s outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. The Board of Directors authorized an additional $250 million of share purchases in February 2015 and again in October 2018, and authorized an additional $400 million of share repurchases in February 2023. These authorizations have no expiration date. The purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any repurchases and may discontinue the program at any time. As of July 1, 2023, we have acquired approximately 7.1 million shares for approximately $1,053.7 million under this share repurchase program.

On February 28, 2023, the Company announced that the Board of Directors approved an increase to the quarterly cash dividend on the common stock to $0.60 per share, or a rate of $2.40 per share on an annualized basis, an increase of 9% from the prior quarterly cash dividend of $0.55 per share.

### Supplier Finance Program

We have a supplier finance program agreement with a financial institution which allows qualifying suppliers, at their election and on terms they negotiate directly with the financial institution, to sell their receivables from the Company. A supplier’s voluntary participation in the program does not change our payment terms, amounts paid, payment timing, or impact our liquidity, and we have no economic interest in a supplier’s decision to participate. As of July 1, 2023 and December 31, 2022, our accounts payable on our Condensed Consolidated Balance Sheets included $42.5 million and $48.9 million, respectively, of our payment obligations under this program.

### Sources of Financing

Our debt financing as of July 1, 2023 consisted primarily of long‑term debt and borrowings on our revolving credit facility. Our long‑term debt as of July 1, 2023 principally consisted of:

- $450 million face value ($433.3 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044.
- $305 million face value ($295.1 million carrying value) of senior unsecured notes that bear interest at 5.25% per annum and are due in October 2054.

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

Our revolving credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent, and the other lenders party thereto, has a maturity date of October 18, 2026.

The revolving credit facility provides for $800 million of committed unsecured revolving credit loans with available borrowings thereunder to $400 million in foreign currencies. We may increase the credit facility by up to an additional $300 million at any time, subject to lenders increasing the amount of their commitments. The Company and our wholly-owned subsidiaries, Valmont Industries Holland B.V. and Valmont Group Pty. Ltd., are authorized borrowers under the credit facility. The obligations arising under the revolving credit facility are guaranteed by the Company and its wholly-owned subsidiaries Valmont Telecommunications, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc., and Valmont Queensland Pty. Ltd.

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

(a) term Secured Overnight Financing Rate (“SOFR”) (based on a 1-, 3- or 6-month interest period, as selected by the Company) plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior unsecured long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc.;

(b) the higher of

- the prime lending rate,
- the overnight bank rate plus 50 basis points, and
- term SOFR (based on a one-month interest period) plus 100 basis points,

plus, in each case, 0 to 62.5 basis points, depending on the credit rating of our senior, unsecured, long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc.; or

(c) daily simple SOFR plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of the Company’s senior unsecured long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc.

A commitment fee is also required under the revolving credit facility which accrues at 10 to 25 basis points, depending on the credit rating of our senior unsecured long-term debt published by S&P Global Ratings and Moody’s Investors Service, Inc., on the average daily unused portion of the commitments under the revolving credit agreement.

As of July 1, 2023 and December 31, 2022, we had outstanding borrowings of $222.7 million and $140.5 million, respectively, under the revolving credit facility. The revolving credit facility has a maturity date of October 18, 2026 and contains a financial covenant that may limit our additional borrowing capability under the agreement. As of July 1, 2023, we had the ability to borrow $577.1 million under this facility, after consideration of standby letters of credit of $0.2 million associated with certain insurance obligations. We also maintain certain short‑term bank lines of credit totaling $38.2 million; $36.5 million of which was unused as of July 1, 2023.

Our senior, unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness.

The revolving credit facility requires maintenance of a financial leverage ratio, measured as of the last day of each of our fiscal quarters, of 3.50 or less. The leverage ratio is the ratio of: (a) interest-bearing debt minus unrestricted cash in excess of $50 million (but not exceeding $500 million) to (b) earnings before interest, taxes, depreciation, and amortization, adjusted for non-cash stock-based compensation and non-cash charges or gains that are non-recurring in nature, subject to certain limitations (“Adjusted EBITDA”). The leverage ratio is permitted to increase from 3.50 to 3.75 for the four consecutive fiscal quarters after certain material acquisitions.

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

As of July 1, 2023, we were in compliance with all covenants related to these debt agreements.

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

### Cash Uses

Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on our debt, payments of taxes, contributions to pension plan, and, if market conditions warrant, occasional investments in, or acquisitions of, business ventures. In addition, we regularly evaluate our ability to pay dividends or repurchase stock, all consistent with the terms of our debt agreements.

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

We have cash balances of $166.9 million as of July 1, 2023 with approximately $139.3 million held in our non-U.S. subsidiaries. If we distributed our foreign cash balances, certain taxes would be applicable. As of July 1, 2023, we have a liability for foreign withholding taxes and U.S. state income taxes of $2.1 million and $0.9 million, respectively.

### Cash Flows

The following table includes a summary of our cash flow information for the twenty-six weeks ended July 1, 2023 and June 25, 2022:

*Dollars in thousands*

| ​ ​ ​ | ​ ​ ​ | ​ ​ Twenty-six weeks ended July 1, 2023 | ​ ​ | ​ ​ June 25, 2022 |
| --- | --- | ---: | --- | ---: |
| Net cash flows provided by operating activities | ​ | $109,546 | ​ | $68,019 |
| Net cash flows used in investing activities | ​ | (34,046) | ​ | (87,811) |
| Net cash flows (used in) provided by financing activities | ​ | (94,154) | ​ | 570 |

*Operating Cash Flows and Working Capital –* Cash provided by operating activities totaled $109.5 million in the first half of fiscal 2023, as compared with $68.0 million in the first half of fiscal 2022. The increase in operating cash flows in the first half of fiscal 2023, as compared with the first half of fiscal 2022, was primarily the result of the increase in operating income along with overall favorable changes in net working capital, partially offset by $12.6 million and $5.2 million increases in tax and interest payments, respectively, for the first half of fiscal 2023, as compared to the first half of fiscal 2022.

*Investing Cash Flows –* Cash used in investing activities totaled $34.0 million in the first half of fiscal 2023, as compared to $87.8 million in the first half of fiscal 2022. 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. Investing activities in the first half of fiscal 2022 primarily included capital spending of $49.7 million and the acquisition of ConcealFab for $39.3 million. We expect our capital expenditures to be in the range of $105 million to $115 million for fiscal 2023.

*Financing Cash Flows –* Cash used in financing activities totaled $94.2 million in the first half of fiscal 2023, compared to cash provided by financing activities of $0.6 million in the first half of fiscal 2022. Our total interest-bearing debt was $955.4 million as of July 1, 2023 and $878.0 million as of December 31, 2022. The financing cash used in the first half of fiscal 2023 was primarily the result of borrowings on the revolving credit agreement and short-term notes of $179.9 million, offset by principal payments on our 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 $10.2 million of net activity from stock options and incentive plans, including the associated withholding tax payments. The financing cash provided in the first half of fiscal 2022 was primarily the result of borrowings on the revolving credit agreement of $201.5 million, mostly offset by principal payments on our long-term debt and short-term borrowings of $166.1 million, dividends paid of $22.3 million, the purchase of treasury shares of $9.8 million, and the purchase of a noncontrolling interest of $4.3 million.

### Guarantor Summarized Financial Information

We are providing the following information in compliance with Rule 3-10 and Rule 13-01 of Regulation S-X with respect to our two tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully, and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of the Company’s current and future direct and indirect domestic and foreign subsidiaries (collectively the “Guarantors”). The Parent is the Issuer of the notes and consolidates all Guarantors.

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

Combined financial information is as follows:

### Supplemental Combined Parent and Guarantors Financial Information

### For the thirteen and twenty-six weeks ended July 1, 2023 and June 25, 2022

*Dollars in thousands*

| ​ ​ | ​ | ​ ​ Thirteen weeks ended July 1, 2023 | ​ | ​ ​ June 25, 2022 | ​ ​ | ​ ​ Twenty-six weeks ended July 1, 2023 | ​ | ​ ​ June 25, 2022 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net sales | ​ | $685,778 | ​ | $734,500 | ​ | $1,401,249 | ​ | $1,396,249 |
| Gross profit | ​ | 210,310 | ​ | 180,909 | ​ | 401,805 | ​ | 345,268 |
| Operating income | ​ | 86,175 | ​ | 73,044 | ​ | 158,007 | ​ | 142,137 |
| Net earnings | ​ | 52,945 | ​ | 46,029 | ​ | 73,156 | ​ | 88,337 |
| Net earnings attributable to Valmont Industries, Inc. | ​ | 52,497 | ​ | 46,582 | ​ | 72,540 | ​ | 90,525 |

### Supplemental Combined Parent and Guarantors Financial Information

### July 1, 2023 and December 31, 2022

*Dollars in thousands*

| ​ | ​ | ​ ​ July 1, 2023 | ​ | ​ ​ December 31, 2022 |
| --- | --- | ---: | --- | ---: |
| Current assets | ​ | $739,152 | ​ | $769,263 |
| Non-current assets | ​ | 884,346 | ​ | 925,088 |
| Current liabilities | ​ | 359,226 | ​ | 459,961 |
| Non-current liabilities | ​ | 1,264,797 | ​ | 1,189,548 |
| Noncontrolling interest in consolidated subsidiaries | ​ | 2,228 | ​ | 1,612 |

Included in non-current assets is a due from non-guarantor subsidiaries receivable of $157,484 and $205,424 as of July 1, 2023 and December 31, 2022, respectively. Included in non-current liabilities is a due to non-guarantor subsidiaries payable of $180,632 and $200,522 as of July 1, 2023 and December 31, 2022, respectively.

### Selected Financial Measures

We are including the following financial measures for the Company.

*Adjusted EBITDA –* Adjusted EBITDA is one of our key financial ratios in that it is the basis for determining our maximum borrowing capacity at any one time. Our bank credit agreements contain a financial covenant that our total interest‑bearing debt not exceed 3.50 times Adjusted EBITDA (or 3.75 times Adjusted EBITDA after certain material acquisitions), calculated on a rolling four fiscal quarter basis. The bank agreements outline adjustments for non-cash stock-based compensation and non-cash charges or gains that are non-recurring in nature, subject to certain limitations, to be included in the calculation of Adjusted EBITDA. If this financial covenant is violated, we may incur additional financing costs or be required to pay the debt before its maturity date. Adjusted EBITDA is a non-GAAP measure and, accordingly, should not be considered in isolation or as a substitute for net earnings, cash flows from operations, or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity.

The calculation of Adjusted EBITDA for the last four fiscal quarters (June 26, 2022 to July 1, 2023) is as follows:

*Dollars in thousands*

| ​ ​ ​ | ​ ​ ​ | ​ ​ Four Fiscal Quarters Ended July 1, 2023 |
| --- | --- | ---: |
| Net earnings attributable to Valmont Industries, Inc. | ​ | $276,360 |
| Interest expense | ​ | 52,907 |
| Income tax expense | ​ | 119,757 |
| Depreciation and amortization expense | ​ | 97,947 |
| Stock based compensation | ​ | 42,123 |
| Loss on divestiture of offshore wind energy structures business | ​ | 33,273 |
| Adjusted EBITDA | ​ | $622,367 |

Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

*Leverage Ratio –* Leverage ratio is calculated as the sum of interest-bearing debt minus unrestricted cash in excess of $50 million (but not exceeding $500 million) divided by Adjusted EBITDA. The leverage ratio is one of the key financial ratios in the covenants under our major debt agreements and the ratio cannot exceed 3.50 (or 3.75 after certain material acquisitions), calculated on a rolling four fiscal quarter basis. If those covenants are violated, we may incur additional financing costs or be required to pay the debt before its maturity date. Leverage ratio is a non-GAAP measure and, accordingly, should not be considered in isolation or as a substitute for net earnings, cash flows from operations, or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity.

The calculation of this ratio as of July 1, 2023, is as follows:

*Dollars in thousands*

| ​ | ​ | ​ ​ July 1, 2023 |
| --- | --- | ---: |
| Interest-bearing debt, excluding origination fees and discounts of $26,650 | ​ | $982,060 |
| Less: cash and cash equivalents in excess of $50 million | ​ | 116,907 |
| Net indebtedness | ​ | $865,153 |
| Adjusted EBITDA | ​ | 622,367 |
| Leverage ratio | ​ | 1.39 |

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

### Financial Obligations and Financial Commitments

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

### Critical Accounting Policies

There were no changes in our critical accounting policies as described on pages 38 to 41 on Form 10-K for the fiscal year ended December 31, 2022 during the thirteen weeks ended July 1, 2023.

## Market risk

As filed, 230 characters.

There were no material changes in the Company’s market risk during the thirteen weeks ended July 1, 2023. For additional information, refer to the section "Risk Management" on Form 10-K for the fiscal year ended December 31, 2022.

## Controls and procedures

As filed, 1,299 characters.

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

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

## Risk factors

As filed, 299 characters.

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

Filed Aug 1, 2023.
Source: SEC EDGAR, the filing index for accession 0000102729-23-000046. Last ingested by Listed: Oct 27, 2026, 11:43 ET. No prices; not investment advice.