VALMONT INDUSTRIES, INC. 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, the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific effects on the Company's business and that of its customers and suppliers, risk factors described from time to time in the Company's reports to theSecurities 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 endedDecember 28, 2019 . 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. 23 --------------------------------------------------------------------------------
Results of Operations (Dollars in millions, except per share amounts)
Thirteen weeks ended Thirty-nine weeks ended
September 26, September % Incr. September 26, September 28, % Incr.
2020 28, 2019 (Decr.) 2020 2019 (Decr.)
Consolidated
Net sales $ 734.0 $ 690.3 6.3 % $ 2,097.0 $ 2,083.4 0.7 %
Gross profit 190.7 173.3 10.0 % 560.9 516.1 8.7 %
as a percent of sales 26.0 % 25.1 % 26.7 % 24.8 %
SG&A expense (1) 129.3 112.2 15.2 % 389.1 $ 339.0 14.8 %
as a percent of sales 17.6 % 16.3 % 18.6 % 16.3 %
Operating income 61.5 61.1 0.7 % 171.8 177.1 (3.0) %
as a percent of sales 8.4 % 8.9 % 8.2 % 8.5 %
Net interest expense 10.0 9.0 11.1 % 28.6 27.2 5.1 %
Effective tax rate 23.0 % 24.5 % 26.9 % 24.7 %
Net earnings $ 39.3 $ 38.0 3.4 % $ 104.9 $ 113.9 (7.9) %
Diluted earnings per share $ 1.84 $ 1.75 5.1 % $ 4.89 $ 5.22 (6.3) %
Engineered Support Structures
(ESS)
Net sales $ 255.0 $ 266.5 (4.3) % $ 731.2 $ 752.0 (2.8) %
Gross profit 71.3 62.4 14.3 % 201.4 177.8 13.3 %
SG&A expense 45.8 40.5 13.1 % 155.2 122.6 26.6 %
Operating income 25.5 21.9 16.4 % 46.2 55.2 (16.3) %
Utility Support Structures
(Utility)
Net sales $ 272.5 $ 204.2 33.4 % $ 723.9 $ 656.5 10.3 %
Gross profit 54.7 44.0 24.3 % 156.1 133.6 16.8 %
SG&A expense 28.8 23.7 21.5 % 80.8 72.2 11.9 %
Operating income 25.9 20.3 27.6 % 75.3 61.4 22.6 %
Coatings
Net sales $ 68.7 $ 76.9 (10.7) % $ 200.0 $ 228.3 (12.4) %
Gross profit 22.6 24.0 (5.8) % 64.2 71.7 (10.5) %
SG&A expense 10.2 10.1 1.0 % 30.6 32.7 (6.4) %
Operating income 12.4 13.9 (10.8) % 33.6 39.0 (13.8) %
Irrigation
Net sales $ 137.8 $ 142.7 (3.4) % $ 441.9 $ 446.6 (1.1) %
Gross profit 42.2 42.9 (1.6) % 139.2 133.0 4.7 %
SG&A expense 27.5 24.7 11.3 % 78.5 73.1 7.4 %
Operating income 14.7 18.2 (19.2) % 60.7 59.9 1.3 %
Net corporate expense
SG&A $ 17.0 $ 13.2 28.8 % $ 44.0 $ 38.4 14.6 %
Operating loss (17.0) (13.2) (28.8) % (44.0) (38.4) (14.6) %
(1) The thirty-nine weeks ended
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--------------------------------------------------------------------------------Overview
On a consolidated basis, net sales were higher in the third quarter and first
three quarters of 2020, as compared to the same periods in 2019, due to higher
sales in the Utility segment that was partially offset by lower sales in ESS,
Coatings, and Irrigation segments. The change in net sales in the third quarter
and first three quarters of fiscal 2020, as compared with the same periods in
2019, is as follows:
Third quarter
Total ESS Utility Coatings Irrigation
Sales - 2019 $ 690.3 $ 266.5 $ 204.2 $ 76.9 $ 142.7
Volume 60.0 (17.2) 83.2 (8.9) 2.9
Pricing/mix (16.8) 2.5 (17.2) - (2.1)
Acquisition/(divestiture) 2.3 - 1.7 - 0.6
Currency translation (1.8) 3.2 0.6 0.7 (6.3)
Sales - 2020 $ 734.0 $ 255.0 $ 272.5 $ 68.7 $ 137.8
Year-to-date
Total ESS Utility Coatings Irrigation
Sales - 2019 $ 2083.4 $ 752.0 $ 656.5 $ 228.3 $ 446.6
Volume 50.9 (20.8) 76.2 (22.3) 17.8
Pricing/mix (16.2) 5.7 (11.9) (3.6) (6.4)
Acquisition/(divestiture) 4.6 2.6 3.5 - (1.5)
Currency translation (25.7) (8.3) (0.4) (2.4) (14.6)
Sales - 2020 $ 2,097.0 $ 731.2 $ 723.9 $ 200.0 $ 441.9
Volume effects are estimated based on a physical production or sales measure.
Since products we sell are not uniform in nature, pricing and mix relate to a
combination of changes in sales prices and the attributes of the product sold.
Accordingly, pricing and mix changes do not necessarily result in operating
income changes.
Average steel prices for both hot rolled coil and plate were lower in
The Company acquired the following businesses:
•In the first quarter of 2020, we acquired the remaining 49% of AgSense that the
Company did not own (Irrigation).
•In the first quarter of 2020, we acquired 16% of the remaining 25% of Convert
Italia that the Company did not own (Utility).
•Energia Solar Do Brasil ("Solbras") in the second quarter of 2020, a leading
provider of solar energy solutions for agriculture (Irrigation).
COVID-19 Impact on Financial Results and Liquidity
We are considered an essential business because of the products and services that serve critical infrastructure sectors as defined by many governments around the world. All our manufacturing facilities are open and fully operational as ofSeptember 26, 2020 . Our manufacturing facilities inArgentina ,France ,Malaysia ,New Zealand ,Philippines , andSouth Africa were temporarily closed for part of of the first half of 2020 due to government mandates. We continue to monitor incidence of COVID-19 on a continuous basis, particularly in areas reporting recent increases in infection. To protect the 25 --------------------------------------------------------------------------------
safety, health and well-being of employees, customers, suppliers and
communities,
We generated strong cash flows from operating activities during the first three quarters of 2020 and expect cash flows from operating activities, net of capital expenditures, to be in excess of net earnings for the full fiscal 2020 year. Our main focus is to maintain liquidity to support the working capital needs of our operations and maintain our investment grade credit rating. The ultimate magnitude of COVID-19, including the extent of its impact on the Company's financial and operational results, cash balances and available borrowings on our line of credit, will be determined by the length of time the pandemic continues, its effect on the demand for the Company's products and services and supply chain, as well as the effect of governmental regulations imposed in response to the pandemic.
Currency Translation
In the third quarter and first three quarters of 2020, we realized a decrease in operating profit, as compared with 2019, due in part to currency translation effects associated with a strongerU.S. dollar against most foreign currencies. The breakdown of this effect by segment was as follows: Total ESS Utility Coatings Irrigation Corporate Third quarter$ (1.4) $ -$ (0.2) $ 0.1 $ (1.3) $ - Year-to-date$ (2.7) $ (0.6) $ -$ (0.2) $ (1.9) $ -
Gross Profit, SG&A, and Operating Income
At a consolidated level, gross profit as a percent of sales was higher in the third quarter and first three quarters of 2020, as compared with the same periods in 2019, due to lower raw material costs across the Company, improved selling prices across our infrastructure businesses, and improved volumes for the Irrigation segment and associated operating leverage of fixed costs. In the third quarter of 2020 as compared to 2019, gross profit was higher for ESS and Utility but lower for Coatings and Irrigation. On a year-to-date basis, gross profit improved for the ESS, Utility, and Irrigation segments in 2020, but was lower for Coatings due to lower sales volumes. SG&A expenses increased in the third quarter and first three quarters of 2020, as compared to the same periods in 2019. The increase was due to recording a partial impairment of goodwill and tradename for the Access Systems business, higher compensation related costs including sales commissions for the North American infrastructure businesses, higher incentives due to improved operations, and restructuring activities. These increases were partially offset by lower travel costs, foreign currency translation effects, and reduced SG&A deferred compensation expense in the first three quarters of 2020 (offset by an increase of the same amount in other expense). In the third quarter of 2020, as compared to the third quarter of 2019, operating income was higher in the Utility and ESS segments and lower for the Irrigation and Coatings segments. The overall increase in operating income in the third quarter can be attributed to higher utility sales volumes and an approximate$7.0 million loss recognized on certain access systems projects in 2019 that did not recur. Operating income decreased in the first three quarters of 2020 as compared to the same period in 2019, due to the goodwill and tradename impairment for the Access Systems business, certain restructuring activities, and lower volumes for the Coatings businesses. The decrease was partially offset by lower raw material costs and improved sales volumes in the Irrigation and Utility segments.
Net Interest Expense and Debt
Net interest expense in the third quarter and first three quarters of 2020 was
higher than the same periods in 2019. Interest income was lower in the third
quarter and first three quarters of 2020, as compared to 2019, due to lower
interest rates.
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Other Income/Expenses
The change in other income/expenses in the third quarter and first three quarters of 2020, as compared to 2019, was due to the change in valuation of deferred compensation assets which resulted in additional other income of$0.5 million and reduced other income of$3.7 million , respectively. This amount is shown as "Gain on investments (unrealized)" on the condensed consolidated statements of earnings. The change related to deferred compensation assets are offset by an opposite change of the same amount in SG&A expense. The remaining change was due to fluctuations in foreign currency transaction gains/losses that was less favorable in 2020. Income Tax Expense Our effective income tax rate in the third quarter and first three quarters of 2020 was 23.0% and 26.9%, compared to 24.5% and 24.7% in the third quarter and first three quarters of 2019. On a year-to-date basis, the increase in the effective tax rate is a result of the partial impairment of goodwill and tradename for the Access Systems business that is not fully tax deductible. An increase in theU.K. corporate tax rate effective in the third quarter of 2020 provided a one time deferred tax benefit of$1.5 million reducing the effective tax rate. Earnings attributable to noncontrolling interests was lower in the third quarter and first three quarters of 2020, as compared to 2019. The decrease can be attributed to the acquisition of the remaining noncontrolling interests of AgSense and partial acquisition of the noncontrolling interest of Convert in the first quarter of 2020.
Cash Flows from Operations
Our cash flows provided by operations was$273.0 million in the first three quarters of fiscal 2020, as compared with$239.2 million provided by operations in the first three quarters of 2019. The increase in operating cash flow in the first three quarters of 2020, as compared with 2019, was due to improved working capital management. Working capital is higher primarily due to an increase in cash balances.
ESS segment
Net sales were lower in the third quarter and first three quarters of 2020 as compared to 2019, primarily driven by lower sales volumes. Lighting, traffic, and highway safety product sales and access systems sales volumes were lower in the third quarter of 2020 as compared to 2019, while communication product sales volumes were higher. In the first three quarters of 2020, sales were higher for the lighting, traffic, and highway safety and communication products businesses and lower for access systems. Global lighting, traffic, and highway safety product sales in the third quarter and first three quarters of 2020 was modestly lower by$9.7 million and higher by$4.6 million , as compared to the same periods in fiscal 2019. Sales volumes decreased inNorth America in the third quarter of 2020, attributable to higher shipments in the third quarter of 2019 resulting from the recovery from a flood event in early 2019 at one of our facilities. On a year-to-date basis, sales volumes inNorth America increased due to strong backlogs in transportation markets.Europe sales volumes were lower in the third quarter and first three quarters due to the ceasing of operations inMorocco , the temporary plant shutdown and continued slower markets inFrance due to COVID-19, and unfavorable foreign currency translation effects. Lighting, traffic, and highway safety product sales in theAsia-Pacific region decreased in the third quarter and first three quarters of 2020, as compared to 2019, due primarily to continued market weakness inIndia attributed to COVID-19. Communication product line sales were higher by$2.3 million and$1.1 million in the third quarter and first three quarters of 2020, as compared with the same periods in 2019. Communication product sales inEurope improved due to an increase in volume in theU.K. andAsia-Pacific sales volumes increased marginally. InNorth America , communication product sales volumes decreased in the third quarter and first three quarters of 2020 due to lower demand for communication components. Access Systems product line net sales decreased in the third quarter and first three quarters of 2020, as compared to 2019, by$5.0 million and$22.9 million . The product line exited selling detention center systems and portions of the industrial product line which contributed to the sales decline along with unfavorable foreign currency translation effects. For the first half of 2020, subdued construction spending inAustralia also contributed to a decrease in sales volume. 27 -------------------------------------------------------------------------------- Gross profit was higher in the third quarter and first three quarters of 2020, as compared to 2019, due to lower cost of raw materials across the segment and an approximate$7.0 million loss recognized on certain access systems projects in the third quarter of 2019 that did not recur. SG&A spending was higher in the third quarter of 2020 versus 2019 due to higher sales commissions and incentives due to improved operations inNorth America . For the first three quarters of 2020, SG&A also increased due to recording a partial goodwill and tradename impairment for the Access Systems business of$16.6 million , Operating income decreased in the first three quarters of 2020 due to the goodwill and tradename impairment of the Access Systems business, partially offset by lower raw material costs for all businesses and a loss recorded on certain access systems projects in third quarter of 2019.
Utility segment
In the Utility segment, sales increased in the third quarter and first three quarters of 2020, as compared with 2019, due to large project work for the international solar tracking solutions product line and improved sales volumes for steel and concrete structures inNorth America . A number of our sales contracts inNorth America contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order. This resulted in a decrease to the average selling prices for our steel utility structures product line for the third quarter and first three quarters of 2020, as compared with 2019. Offshore and solar tracking solutions sales increased in the third quarter and first three quarters of 2020, as compared to 2019, due to a large increase in sales volumes in the third quarter. The increase for both businesses can be attributed to large projects in the third quarter of 2020. Gross profit increased in the third quarter and first three quarters of 2020, as compared to 2019, due to higher sales volumes and its associated operating leverage of fixed costs. In addition, the business incurred approximately$3.0 million of inspection costs during 2019 to finalize the requirements from a 2015 commercial settlement. Partially offsetting that 2019 charge was a$2.8 million impairment of a facility in 2020 that is classified as an asset held for sale. SG&A expense was higher in the third quarter and first three quarters of 2020, as compared with 2019, due to higher incentives due to improved operating results inNorth America and a$2.7 million allowance recognized in third quarter 2020 against an international accounts receivable. The increase in operating income for the third quarter 2020, as compared with 2019, is primarily due to higher sales volumes. The improvement in operating income margin in 2020 versus 2019 is also attributed to disciplined product pricing; gross profit margins increased as lower raw material costs was slightly more than the effect on net sales from lower average selling prices. Coatings segment Coatings segment sales decreased in the third quarter and first three quarters of 2020, as compared to the same periods in 2019, due to lower volumes inNorth America andAsia , reduced sales pricing attributed to lower zinc costs, and unfavorable foreign currency translation. Sales volumes decreased inNorth America in the third quarter and first three quarters of 2020, as compared to 2019, due primarily to decreased industrial production attributed largely to the economic impacts from COVID-19. InAsia-Pacific region , sales volumes improved inAustralia , which were more than offset by decreased volumes inAsia that were impacted by the continued slowdown caused by the economic impacts from COVID-19. Sales pricing also declined inAsia-Pacific due to lower zinc costs and customer mix. SG&A expense was flat for the third quarter and lower in the first three quarters of 2020, as compared to 2019, due to one-time expenses associated with a legal settlement in 2019. Operating income was lower in the third quarter and first three quarters of 2020, compared to the same periods in 2019, due to sales volume decreases inNorth America andAsia and the associated operating deleverage of fixed costs.
Irrigation segment
The decrease in Irrigation segment net sales in the third quarter and first three quarters of 2020, as compared to 2019, is primarily due to unfavorable foreign currency translation effects (primarilyBrazil real) that were partially offset by sales volume improvements in international markets.Brazil ,Australia , andArgentina drove the sales volume improvements for international irrigation along with the acquisition of Solbras, which was partially offset by unfavorable currency translation effects from a weakerBrazil real and South African rand. InNorth America , slightly higher sales volumes for systems was more than offset by decrease in sales volumes of other products, including industrial tubing. For the first three quarters of 2020, sales of technology-related products and services continue to increase, as growers continued adoption of technology to reduce costs and enhance profitability. 28 -------------------------------------------------------------------------------- SG&A was higher in the third quarter and first three quarters of 2020, as compared to 2019, due to higher product development expenses. Operating income for the segment decreased in the third quarter due to higher product development expenses and unfavorable currency translation effects. Operating income increased in the first three quarters of 2020 over 2019, as a result of lower raw material costs and higher sales volumes in international markets. Net corporate expense Corporate SG&A expense was higher in the third quarter and first three quarters of 2020, as compared to 2019. The increase the third quarter is attributed to higher incentive accruals related to improved business performance. The increase in the first three quarters of 2020 is due to higher incentive expense, partially offset by the change in valuation of deferred compensation assets which resulted in lower expense of$3.7 million . The change in deferred compensation plan assets is offset by the same amount in other income/expenses. Liquidity and Capital Resources Cash Flows Working Capital and Operating Cash Flows-Net working capital was$934.2 million atSeptember 26, 2020 , as compared to$918.4 million atDecember 28, 2019 . The increase in net working capital in 2020 is attributed to an increase in cash balances. Cash flow provided by operations was$273.0 million in the first three quarters of 2020, as compared with$239.2 million in the first three quarters of 2019. The increase in operating cash flows in 2020, as compared to 2019, was primarily the result of improved working capital management. Investing Cash Flows-Capital spending in the first three quarters of fiscal 2020 was$71.0 million , as compared to$72.0 million for the same period in 2019. The decrease in investing cash outflows in the first three quarters quarter of 2020, as compared to 2019, can be attributed to a reduction in cash paid for acquisitions. We expect our capital expenditures to be between$85.0 million and$95.0 million for fiscal 2020. Financing Cash Flows-Our total interest-bearing debt was$795.9 million atSeptember 26, 2020 and$787.5 million atDecember 28, 2019 . Financing cash outflows were$110.0 million and$82.7 million in the first three quarters of 2020 and 2019, respectively. The increase in financing cash outflows in the first three quarters of 2020, as compared to 2019, was due to the higher amounts paid to purchase noncontrolling interests and lower net borrowings. Guarantor Summarized Financial Information We are providing the following information in compliance with Rule 3-10 and Rule 13-01 of Regulation S-X with respect to our two tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of the Company's current and future direct and indirect domestic and foreign subsidiaries (collectively the "Guarantors"). The Parent is the Issuer of the notes and consolidates all Guarantors. The financial information of Issuer and Guarantors is presented on a combined basis with intercompany balances and transactions between Issuer and Guarantors eliminated. The Issuer's or Guarantors' amounts due from, amounts due to, and transactions with non-guarantor subsidiaries are separately disclosed.
Combined financial information is as follows:
29--------------------------------------------------------------------------------
Supplemental Combined Parent and Guarantors Financial Information
For the thirteen and thirty-nine weeks endedSeptember 26, 2020 and September 28, 2019 Thirteen weeks ended Thirty-nine weeks ended September 26, September 28, September 28, Dollars in thousands 2020 2019 September 26, 2020 2019 Net sales$ 438,947 $ 433,533 $ 1,377,294 $ 1,314,108 Gross Profit 115,116 114,538 385,314 340,645 Operating income 35,261 44,846 149,866 137,343 Net earnings 13,760 24,083 87,235 82,349 Net earnings attributable to Valmont Industries, Inc. 13,759 24,083 87,249 82,349 Supplemental Combined Parent and Guarantors Financial Information September 26, 2020 and December 28, 2019 September 26, December 28, Dollars in thousands 2020 2019 Current assets$ 777,934 $ 728,457 Noncurrent assets 374,796 354,173 Current liabilities 295,544 312,984 Noncurrent liabilities 1,121,280 1,076,491 Noncontrolling interest in consolidated subsidiaries 1,585 - Included in noncurrent assets is a due from non-guarantor subsidiaries receivable of$83,977 and$54,915 atSeptember 26, 2020 andDecember 28, 2019 . Included in noncurrent liabilities is a due to non-guarantor subsidiaries payable of$262,680 and$249,056 atSeptember 26, 2020 andDecember 28, 2019 . Financing and Capital The Board of Directors authorized the purchase of$250 million of the Company's shares without an expiration date inOctober 2018 . The share 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 share repurchases under the share repurchase program and we may discontinue the share repurchase program at any time. Share repurchases were temporarily suspended at the end of the first quarter of 2020 untilSeptember 2020 as a precaution to preserve liquidity. We acquired 251,136 treasury shares for approximately$28.0 million under our share repurchase program during the first three quarters of 2020. As ofSeptember 26, 2020 , we have approximately$176.4 million open under this authorization to repurchase shares in the future. Our capital allocation philosophy announcement included our intention to manage our capital structure to maintain our investment grade debt rating. Our most recent ratings were Baa3 byMoody's Investors Services, Inc. , BBB- rating by Fitch Rating Services, and BBB+ rating byStandard and Poor's Rating Services . We expect to maintain a leverage ratio which will support our current investment grade debt rating. 30 -------------------------------------------------------------------------------- Our debt financing atSeptember 26, 2020 is primarily long-term debt consisting of: •$450 million face value ($436.5 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due inOctober 2044 . •$305 million face value ($297.6 million carrying value) of unsecured notes that bear interest at 5.25% per annum and are due inOctober 2054 . •We are allowed to repurchase the notes at specified prepayment premiums. Both tranches of these notes are guaranteed by certain of our subsidiaries. AtSeptember 26, 2020 andDecember 28, 2019 , we had$41.9 million and$29.0 million outstanding borrowings under our revolving credit agreement, respectively. The revolving credit agreement contains certain financial covenants that may limit our additional borrowing capability under the agreement. AtSeptember 26, 2020 , we had the ability to borrow$542.6 million under this facility, after consideration of standby letters of credit of$15.5 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling$134.2 million ,$120.0 million of which was unused atSeptember 26, 2020 . Our senior unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness. The debt agreements contain covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities, including capital expenditures. The debt agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired business. The debt agreements also provide for an adjustment to EBITDA, subject to certain limitations, for non-cash charges or gains that are non-recurring in nature. Our key debt covenants are as follows: •Leverage ratio - Interest-bearing debt is not to exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four quarters; and •Interest earned ratio - Adjusted EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period. AtSeptember 26, 2020 , we were in compliance with all covenants related to the debt agreements. The key covenant calculations atSeptember 26, 2020 were as follows (in 000's): Interest-bearing debt$ 795,937 Adjusted EBITDA-last four quarters 344,627 Leverage ratio 2.31 Adjusted EBITDA-last four quarters$ 344,627 Interest expense-last four quarters 40,748 Interest earned ratio 8.46 31
-------------------------------------------------------------------------------- The calculation of Adjusted EBITDA-last four quarters (October 29, 2019 throughSeptember 26, 2020 ) is as follows. The last four quarters information endedSeptember 26, 2020 is calculated by taking the full fiscal year endedDecember 28, 2019 , subtracting the first three quarters endedSeptember 28, 2019 , and adding the first three quarters endedSeptember 26, 2020 . Net cash flows from operations$ 341,430 Interest expense 40,748 Income tax expense 50,613 Impairment of property, plant and equipment (2,811) Impairment of goodwill and intangible assets (16,638) Change in investment 85 Deferred income tax benefit 6,908 Noncontrolling interest (2,481) Stock-based compensation (11,434) Pension plan expense 5,532 Contribution to pension plan 18,433 Changes in assets and liabilities (112,236) Other 1,351 EBITDA 319,500 Cash restructuring expenses 5,678 Impairment of goodwill and intangible assets 16,638 Impairment of property, plant and equipment 2,811 Adjusted EBITDA$ 344,627 Net earnings attributable toValmont Industries, Inc. $ 144,778 Interest expense 40,748 Income tax expense 50,613 Depreciation and amortization expense 83,361 EBITDA 319,500 Cash restructuring expenses 5,678 Impairment of goodwill and intangible assets 16,638 Impairment of property, plant, and equipment 2,811 Adjusted EBITDA$ 344,627 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, recent issuance of 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$443.1 million atSeptember 26, 2020 , approximately$221.7 million is held in our non-U.S. subsidiaries. If we distributed our foreign cash balances certain taxes would be applicable. AtSeptember 26, 2020 , we have a liability for foreign withholding taxes andU.S. state income taxes of$3.3 million and$0.8 million , respectively.
Financial Obligations and Financial Commitments
There have been no material changes to our financial obligations and financial
commitments as described on page 34-35 in our Form 10-K for the fiscal year
ended
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Off Balance Sheet Arrangements There have been no material changes in our off balance sheet arrangements as described on page 35 in our Form 10-K for the fiscal year endedDecember 28, 2019 . Critical Accounting Policies There were no changes in our critical accounting policies as described on pages 37-40 in our Form 10-K for the fiscal year endedDecember 28, 2019 during the nine months endedSeptember 26, 2020 , with the exception of the change in method of accounting for certain inventory, previously accounted for on the LIFO basis, so that now all inventory is valued on the FIFO basis. Item 3. Quantitative and Qualitative Disclosures about Market Risk There were no material changes in the company's market risk during the quarter endedSeptember 26, 2020 . For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year endedDecember 28, 2019 .
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