8-K
VALMONT INDUSTRIES INC (VMI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
February 17, 2021
Date of Report (date of earliest event reported)
Valmont Industries, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | |||
|---|---|---|---|
| (State or other jurisdiction of incorporation) | |||
| 1-31429 | 47-0351813 | ||
| (Commission File Number) | (I.R.S. Employer Identification No.) | ||
| One Valmont Plaza | 68154 | ||
| Omaha | NE | ||
| (Address of Principal Executive Offices) | (Zip Code) |
(402) 963-1000
Registrant's telephone number, including area code
__________________________________________________________________________________
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $1.00 par value | VMI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Item 2.02. Results of Operations and Financial Condition.
Valmont Industries, Inc. issued a press release on February 17, 2021 announcing its financial results for its fiscal year ended December 26, 2020. The press release, along with the presentation to be used during its earnings call on February 18, 2021, are furnished with this Form 8-K as Exhibit 99.1 and Exhibit 99.2, respectively.
The information in this Item 2.02 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated February 17, 2021 |
| 99.2 | Presentation Slides for earnings call on February 18, 2021 |
| 104 | Cover Page Interactive File (the cover page XBRL tags are embedded in the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Valmont Industries, Inc. | ||
|---|---|---|
| Date: February 17, 2021 | ||
| By: | /s/ AVNER M. APPLBAUM | |
| Name: Avner M. Applbaum | ||
| Title: Executive Vice President and Chief Financial Officer |
Document
| FOR IMMEDIATE RELEASE | ||
|---|---|---|
| Contact: | Renee Campbell | |
| Phone: | +1 402.963.1057 | |
| Date: | February 17, 2021 |
Valmont Reports Fourth Quarter and Full Year 2020 Results
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure development and irrigation equipment and services for agriculture, today reported financial results for the fourth quarter and fiscal year ended December 26, 2020.
Fourth Quarter 2020 Highlights (all metrics compared to Fourth Quarter 2019 unless otherwise noted)
•Net Sales of $798.4 million increased 16.8% led primarily by significantly higher sales in Irrigation and Utility Support Structures
•Operating Income of $54.1 million, or 6.8% of sales ($68.8 million or 8.6% of sales adjusted1) compared to $50.8 million or 7.4% of sales last year
•Diluted Earnings per Share (EPS) improved to $1.68 ($2.20 adjusted1) compared to $1.51; GAAP EPS includes a ($0.38) impact related to the Voluntary One-Time Early Retirement Benefit Program
•Repurchased 190,000 shares of company stock in the fourth quarter for $28.5 million, at an average price of $149.93 per share
•Recognized a more favorable tax rate primarily due to a one-time benefit of a recently-enacted U.S. tax regulation, resulting in an EPS benefit of $0.05 per diluted share
•Record year-end backlog of more than $1.1 billion, reflecting strong market demand
•Commenced shipments for the recently-awarded, multi-year $240.0 million supply agreement to provide irrigation products and services for the Egypt market
•Completed the acquisition of the remaining 40% stake of Torrent® Engineering and Equipment in the Irrigation segment
1 Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
Full Year 2020 Highlights (all metrics compared to Full Year 2019 unless otherwise noted)
•Net Sales of $2.9 billion increased 4.6%
◦Significantly higher sales in the Utility Support Structures and Irrigation segments were partially offset by lower sales in the Engineered Support Structures and Coatings segments due to COVID-19 impacts; excluding $22.2 million of unfavorable currency impacts, sales grew 5.4%
•Operating Income of $226.0 million, or 7.8% of sales ($268.5 million or 9.3% of sales adjusted1) compared to $227.9 million or 8.2% of sales last year; profitability was similar to last year on a GAAP basis, and increased $40.6 million, or 17.8% on an adjusted basis
◦Profitability improvement was led by higher volumes in Utility Support Structures and Irrigation, and favorable pricing in Engineered Support Structures
◦Operational performance improved in all segments except Coatings, where end-market demand was negatively impacted by COVID-19
•Diluted Earnings per Share of $6.57 ($8.18 adjusted1) compared to $6.73; EPS decreased $0.16, or 2.4% on a GAAP basis and increased $1.45, or 21.5% on an adjusted basis
•Generated strong operating cash flow of $316.3 million, driven by higher receipts of customer advance payments and other working capital management initiatives; strong liquidity led to a reinstatement of share repurchases in September, with year-end 2020 cash and cash equivalents of $400.7 million
•Capital expenditures were $107.0 million, including $42.0 million for strategic investments, which included capacity expansions in existing North American operations, a greenfield expansion in Pittsburgh, PA in the Coatings segment, and technology investments to support global market growth
•Deployed $75.3 million of cash for strategic acquisitions, including $15.9 million inclusive of two acquisitions in the Irrigation segment: Solbras and PrecisionKingTM, and $59.4 million for the remaining stakes in AgSense® and Torrent® Engineering and Equipment
•Returned $93.4 million of capital to shareholders through share repurchases of $56.5 million and dividends of $36.9 million
•Advanced ESG to be a top strategic imperative, including formation of a CEO-led ESG Taskforce, elevating our tagline of 'Conserving Resources. Improving Life®.'
1 Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
Key Financial Metrics
| Fourth Quarter 2020 | GAAP | Adjusted1 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/26/2020 4Q 2020 | 12/28/2019<br>4Q 2019 | vs. 4Q 2019 | 12/26/2020 4Q 2020 | 12/28/2019<br>4Q 2019 | vs. 4Q 2019 | ||||||||||
| Net Sales | $ | 798,377 | $ | 683,626 | 16.8% | $ | 798,377 | $ | 683,626 | 16.8% | |||||
| Operating Income | 54,139 | 50,765 | 6.6% | 68,799 | 50,765 | 35.5% | |||||||||
| Operating Income as a % of Net Sales | 6.8 | % | 7.4 | % | 8.6 | % | 7.4 | % | |||||||
| Net Earnings | 35,815 | 32,540 | 10.1% | 46,856 | 32,540 | 44.0% | |||||||||
| Diluted Earnings Per Share | $ | 1.68 | $ | 1.51 | 11.3% | $ | 2.20 | $ | 1.51 | 45.7% | |||||
| Average Shares Outstanding | 21,342 | 21,596 | |||||||||||||
| Full Year 2020 | GAAP | Adjusted1 | |||||||||||||
| 12/26/2020 FY2020 | 12/28/2019<br>FY 2019 | vs. FY 2019 | 12/26/2020 FY 2020 | 12/28/2019<br>FY 2019 | vs. FY 2019 | ||||||||||
| Net Sales | $ | 2,895,355 | $ | 2,766,976 | 4.6% | $ | 2,895,355 | $ | 2,766,976 | 4.6% | |||||
| Operating Income | 225,953 | 227,905 | (0.9)% | 268,462 | 227,905 | 17.8% | |||||||||
| Operating Income as a % of Net Sales | 7.8 | % | 8.2 | % | 9.3 | % | 8.2 | % | |||||||
| Net Earnings | 140,693 | 146,408 | (3.9)% | 175,302 | 146,408 | 19.7% | |||||||||
| Diluted Earnings Per Share | $ | 6.57 | $ | 6.73 | (2.4)% | $ | 8.18 | $ | 6.73 | 21.5% | |||||
| Average Shares Outstanding | 21,425 | 21,769 |
"We achieved strong sales and earnings growth this quarter as we remained highly focused on execution and pricing across the portfolio, despite an extraordinary macroeconomic environment,” said Stephen G. Kaniewski, President and Chief Executive Officer. “Sales growth was driven by strong demand in the Utility Support Structures segment, including significantly higher sales of renewable energy products. Additionally, our Irrigation segment delivered strong growth in sales and operating income driven by improved farmer sentiment from higher agricultural commodity prices and first deliveries of the large, multi-year project for the Egypt market during the quarter. Performance in the both the Engineered Support Structures and Coatings segments continued to improve. We recognized another quarter of solid operating cash flows, driven by our strategic priorities for working capital management."
Kaniewski continued, “As we reflect on 2020, I want to thank our entire Valmont team of 10,000 global associates. Their hard work and dedication enabled us to achieve solid sales, operating profit, and earnings growth, as well as significant cash flow, demonstrating their agility to execute our strategy for long-term profitable growth, even in an unprecedented environment. The safety of our employees and commitments to our customers remain our top priorities. I'm very proud of our global team's continued resilience in safely navigating COVID-19 while supporting critical infrastructure sectors and food security around the world. As we approach our 75th year as a company, we have elevated ESG to permeate throughout our entire business. Our long-standing tagline of 'Conserving Resources. Improving Life.®' fully encompasses our purpose as a Company, and demonstrates our commitment to helping advance a more resilient and sustainable world.”
1 Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
Fourth Quarter 2020 Segment Review
Infrastructure
Utility Support Structures Segment (33.9% of Sales)
Steel, concrete and composite structures for utility markets, including transmission, distribution, substations, and renewable energy generation equipment
Sales of $271.0 million grew 16.9% year-over-year, led by higher volumes from strategic capacity additions in existing North American operations, and higher sales of global generation products. Volume increases were partially offset by the negative sales impact of lower steel costs when compared to last year.
Operating Income was $25.6 million or 9.4% of sales ($28.0 million adjusted1 or 10.3% of sales) compared to $26.3 million, or 11.4% of sales in 2019. While higher volumes and improved operational performance led to higher profits, quality of earnings was negatively impacted by a higher sales mix of offshore and other complex steel structures.
Engineered Support Structures Segment (32.1% of Sales)
Poles, towers and components for the lighting, traffic and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products
Sales of $256.1 million were similar to last year, as lower volumes, primarily in international markets, were offset by $6.6 million of favorable currency impacts and favorable pricing.
Lighting and traffic sales of $182.6 million increased 2.1% year-over-year, primarily due to favorable pricing across all markets.
Wireless communication structures and components sales of $50.4 million were similar to last year's record fourth-quarter sales. Higher volumes in Europe and favorable pricing in all regions were offset by slightly lower volumes in North American markets.
Access Systems sales of $23.0 million decreased 12.2% year-over-year as expected, due to lower volumes from strategically exiting product lines.
Operating Income was $19.2 million or 7.5% of sales ($24.4 million adjusted1 or 9.5% of sales), compared to $10.5 million or 4.1% of sales in 2019. Profitability improvement was driven by favorable pricing and the non-recurrence of one-time losses in the Access Systems business in fourth quarter 2019.
Coatings Segment (11.2% of Sales)
Galvanizing, painting and anodizing services to preserve and protect metal products
Sales of $89.3 million were similar to last year, as higher internal and international market volumes were offset by lower external volumes in North America due to disruptions from COVID-19 on end customers.
Operating Income was $9.4 million or 10.5% of sales ($11.8 million adjusted1 or 13.2% of sales), compared to $12.0 million or 13.4% of sales in 2019. Favorable pricing and operational efficiency improvements were offset by lower volumes.
1 Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
Agriculture
Irrigation Segment (25.0% of Sales)
Irrigation equipment, center pivots and linears for agricultural markets, including, parts, services, and tubular products, and advanced technology solutions for water management and precision agriculture
Global sales of $199.3 million increased 49.8% year-over-year, due to higher volumes across all markets, particularly in the Middle East, partially offset by $6.3 million of unfavorable currency impacts primarily from the depreciation of the Brazilian Real.
North American sales of $97.1 million increased 14.8% compared to 2019, due to higher volumes across all irrigation product lines, and higher industrial tubing sales.
International sales of $102.2 million more than doubled year-over-year and increased more than 120.0% in local currencies. Sales growth was led by initial deliveries of the large multi-year Egypt project, higher volumes in South American and European markets, including continued strong demand in Brazil, and sales from recent acquisitions.
Operating Income was $22.3 million, or 11.2% of sales ($25.3 million adjusted1 or 12.7% of sales), compared to $11.8 million, or 8.9% of sales in 2019. Profitability growth was driven by higher volumes and improved operational efficiency, partially offset by higher SG&A expense, including $1.4 million of incremental R&D expense for technology growth investments.
Continuation of Enhanced COVID-19 Safety Protocols
To protect the safety, health and well-being of employees, customers, suppliers and communities, Valmont continues to follow CDC, WHO and local guidelines in all its facilities. The Company monitors health advisories on a continuous basis, and continues to take deliberate steps to protect all stakeholders and minimize the operational and financial impacts on the business during the pandemic. During the fourth quarter, Valmont did not experience any significant disruptions in its operations or supply chain.
Balance Sheet, Liquidity and Capital Allocation
The Company continues to generate strong cash flows through a focus on working capital management, including strategic customer payment initiatives and improvements in inventory turns. Cash and cash equivalents were $400.7 million at end of the fourth quarter. Valmont purchased $28.5 million of company stock in the fourth quarter, and $148.0 million remains on the current authorization, with no expiration. During the quarter, Fitch reaffirmed the Company’s BBB-/Stable credit rating. Valmont remains committed to maintaining its Investment Grade rating. The Company generated free cash flow of 1.5 times net earnings, exceeding its long-term financial goal for the year.
Voluntary One-Time Early Retirement Benefit Program
Earlier in the year, Valmont initiated a one-time, voluntary Early Retirement Program. Approximately 6.0% of the U.S. administrative workforce chose the program, resulting in pre-tax charges of $10.9 million ($8.2 million after-tax) which are included in GAAP fourth quarter segment results. The impact to GAAP EPS was ($0.38) with an expected payback of 24 months.
First-Quarter and Full Year 2021 Financial Outlook and Key Assumptions While certain aspects of the pandemic's impact on global economic factors and pace of economic recovery remain uncertain, the Company will continue to provide a greater level of transparency, including key assumptions and indications for first quarter 2021, to help the financial community understand short-term impacts and expectations. The Company is also providing certain key assumptions and indications for full-year 2021.
1 Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
While improving visibility has enabled management to reinstate guidance for 2021, a wider than historical range has been provided for some metrics, to account for an operating environment that remains dynamic. Additionally, the Company is providing Irrigation segment sales estimates due to expected significantly higher sales led by the large project for Egypt, continued strong net farm income levels and positive farmer sentiment, and a robust Brazilian market.
1Q 2021 Financial Outlook
•1Q Net Sales estimated to be $740.0 - $765.0 million, an increase of 10.0% - 13.0% vs. prior year
•1Q Operating Profit Margin estimated to be 9.0% - 10.0%
•1Q Irrigation segment sales estimated to be $235.0 - $245.0 million, an increase of 50.0% - 56.0% vs. prior year
Full Year 2021 Financial Outlook and Key Assumptions
•Net Sales estimated to increase 9.0% - 14.0% vs. prior year
•Favorable foreign currency translation impact of approximately 2.0% of Net Sales
•Irrigation segment sales estimated to significantly increase 27.0% - 30.0% vs. prior year
•In Utility Support Structures, significant raw material cost inflation will negatively impact gross profit margins in the first half of 2021
•Diluted Earnings per Share estimated to be $9.00 - $9.70
•Tax rate between 24.0% - 25.0%
•Capital expenditures to be in the range of $110 - $120 million to support strategic growth initiatives and Industry 4.0 advanced manufacturing initiatives
•No closures of large manufacturing facilities, workforce disruptions, or significant supply chain interruptions due to COVID-19
Further, the Company has made the decision to divest the Access Systems product line. During 2021, Valmont will continue to strategically evaluate certain product lines and geographic market presence across its businesses. If needed, adjustments to the 2021 financial outlook will be provided in future quarters.
Kaniewski added, "As we turn our focus to 2021, the safety and well-being of our employees remains our number one imperative, while we continue to execute and drive growth and performance. We are entering the year with a record backlog of more than $1.1 billion, and expect to benefit from market tailwinds across many of our global markets this year. Backlog in the Utility Support Structures segment remains at elevated levels, which is providing a good line of sight for us well into the year. Additionally, during first quarter we were awarded the third purchase order of approximately $70 million for the large project in the southeast U.S., providing good momentum as we start the year. In the Engineered Support Structures segment, we expect growing demand in wireless communications markets as 5G build-outs continue to ramp. Our Coatings business is trending in-line with improving industrial production levels. In Irrigation, the large, multi-year project for Egypt and favorable market trends globally are providing strong momentum, and improved net farm income is leading to positive grower sentiment. Across the portfolio, we have already implemented pricing strategies to recover the impact of unprecedented raw material cost increases. Additionally, our strong balance sheet and cash flows give us flexibility to execute our long-term strategic plan. Our strategy remains focused on long-term growth, and an organizational emphasis on ESG principles, Return on Invested Capital, Operational Excellence
1 Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
and strengthening our organization for the future. We look forward to delivering another year of strong returns to our shareholders in 2021."
A live audio discussion with Stephen G. Kaniewski, President and Chief Executive Officer, and Avner M. Applbaum, Executive Vice President and Chief Financial Officer, will be accessible by telephone on Thursday, February 18, 2021 at 8:00 a.m. CST by dialing 1-877-407-6184 or 1-201-389-0877 (no Conference ID needed), or via webcast by pointing browsers to this link: Valmont Industries 4Q 2020 and Full Year Earnings Conference Call. A slide presentation will simultaneously be available for download on the Investors page at valmont.com. A replay of the event can be accessed two hours after the call at the above link or by telephone at 1-877-660-6853 or 1-201-612-7415. Please use conference identification number 13713718. The replay will be available through 10:59 p.m. CST on February 25, 2021.
About Valmont Industries, Inc.
Valmont is a global leader, designing and manufacturing engineered products and services that support global infrastructure development and agricultural productivity. Its products for infrastructure serve highway, transportation, wireless communication, electric transmission, and industrial construction and energy markets. Its irrigation equipment and services for large-scale agriculture improve farm productivity while conserving fresh water resources. In addition, Valmont provides coatings services that protect against corrosion and improve the service life of steel and other metal products. For more information, visit valmont.com.
Concerning Forward-Looking Statements
This release 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 Valmont 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. As you read and consider this release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond Valmont’s control) and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont’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 economic effects on the Company’s business and that of its customers and suppliers, risk factors described from time to time in Valmont’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 material, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in this press release is made as of the date of this press release and the Company does not undertake to update any forward-looking statement.
1 Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(unaudited)
| Fourth Quarter | Year-to-Date | |||||||
|---|---|---|---|---|---|---|---|---|
| 13 Weeks Ended | Year Ended | |||||||
| 26-Dec-20 | 28-Dec-19 | 26-Dec-20 | 28-Dec-19 | |||||
| Net sales | $ | 798,377 | $ | 683,626 | $ | 2,895,355 | $ | 2,766,976 |
| Cost of sales | 593,796 | 517,035 | 2,129,841 | 2,084,295 | ||||
| Gross profit | 204,581 | 166,591 | 765,514 | 682,681 | ||||
| Selling, general and administrative expenses | 150,442 | 115,826 | 522,923 | 454,776 | ||||
| Impairment of goodwill and intangible assets | — | — | 16,638 | — | ||||
| Operating income | 54,139 | 50,765 | 225,953 | 227,905 | ||||
| Other income (expense) | ||||||||
| Interest expense | (10,509) | (10,182) | (41,075) | (40,153) | ||||
| Interest income | 443 | 1,127 | 2,374 | 3,942 | ||||
| Gain on investments (unrealized) | 1,341 | 1,206 | 2,443 | 5,960 | ||||
| Other | 1,724 | 266 | 3,073 | 2,204 | ||||
| Other income (expense), net | (7,001) | (7,583) | (33,185) | (28,047) | ||||
| Earnings before income taxes | 47,138 | 43,182 | 192,768 | 199,858 | ||||
| Income tax expense | 10,443 | 8,987 | 49,615 | 47,753 | ||||
| Equity in (loss) of nonconsolidated subsidiaries | (249) | — | (1,004) | — | ||||
| Net earnings | 36,446 | 34,195 | 142,149 | 152,105 | ||||
| Less: (Earnings) attributable to non-controlling interests | (631) | (1,655) | (1,456) | (5,697) | ||||
| Net earnings attributable to Valmont Industries, Inc. | $ | 35,815 | $ | 32,540 | $ | 140,693 | $ | 146,408 |
| Average shares outstanding (000's) - Basic | 21,184 | 21,462 | 21,315 | 21,659 | ||||
| Earnings per share - Basic | $ | 1.69 | $ | 1.52 | $ | 6.60 | $ | 6.76 |
| Average shares outstanding (000's) - Diluted | 21,342 | 21,596 | 21,425 | 21,769 | ||||
| Earnings per share - Diluted | $ | 1.68 | $ | 1.51 | $ | 6.57 | $ | 6.73 |
| Cash dividends per share | $ | 0.450 | $ | 0.375 | $ | 1.800 | $ | 1.500 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
| Fourth Quarter | Year-to-Date | |||||||
|---|---|---|---|---|---|---|---|---|
| 13 Weeks Ended | Year Ended | |||||||
| 26-Dec-20 | 28-Dec-19 | 26-Dec-20 | 28-Dec-19 | |||||
| Net sales | ||||||||
| Utility Support Structures | $ | 271,031 | $ | 231,871 | $ | 1,002,209 | $ | 890,580 |
| Engineered Support Structures | 256,057 | 255,196 | 995,840 | 1,012,290 | ||||
| Coatings | 89,336 | 89,693 | 345,312 | 367,835 | ||||
| Infrastructure products | 616,424 | 576,760 | 2,343,361 | 2,270,705 | ||||
| Irrigation | 199,263 | 133,015 | 645,831 | 585,196 | ||||
| Less: Intersegment sales | (17,310) | (26,149) | (93,837) | (88,925) | ||||
| Total | $ | 798,377 | $ | 683,626 | $ | 2,895,355 | $ | 2,766,976 |
| Operating Income | ||||||||
| Utility Support Structures | $ | 25,600 | $ | 26,345 | $ | 100,855 | $ | 87,788 |
| Engineered Support Structures | 19,159 | 10,475 | 65,342 | 65,627 | ||||
| Coatings | 9,357 | 11,971 | 42,975 | 51,008 | ||||
| Infrastructure products | 54,116 | 48,791 | 209,172 | 204,423 | ||||
| Irrigation | 22,345 | 11,819 | 83,046 | 71,687 | ||||
| Corporate | (22,322) | (9,845) | (66,265) | (48,205) | ||||
| Total | $ | 54,139 | $ | 50,765 | $ | 225,953 | $ | 227,905 |
The backlog of orders for the principal products manufactured and marketed was $1,139.1 million at the end of the 2020 fiscal year and $924.1 million at the end of the 2019 fiscal year. An order is reported in our backlog upon receipt of a purchase order from the customer or execution of a sales order contract. We anticipate that most of the 2020 backlog of orders will be filled during fiscal year 2021 . At year-end, the segments with backlog were as follows (dollar amounts in millions):
| 12/26/2020 | 12/28/2019 | |||
|---|---|---|---|---|
| Engineered Support Structures | $ | 247.1 | $ | 254.0 |
| Utility Support Structures | 563.3 | 615.0 | ||
| Irrigation | 328.3 | 55.0 | ||
| Coatings | 0.4 | 0.1 | ||
| $ | 1,139.1 | $ | 924.1 |
Valmont has aggregated its business segments into four global reportable segments as follows.
Utility Support Structures: This segment consists of the manufacture of engineered steel and concrete structures for utility markets, including transmission, distribution, and substation products, and renewable energy generation equipment.
Engineered Support Structures: This segment consists of the manufacture and distribution of engineered poles, towers, and components for lighting, transportation, and wireless communication markets, including integrated structure solutions for smart cities, and engineered access systems.
Coatings: This segment consists of global galvanizing, painting and anodizing services to preserve and protect metal products.
Irrigation: This segment consists of the global manufacture of agricultural irrigation equipment, parts, services, tubular products, and advanced technology solutions for water management and precision agriculture.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
| 26-Dec-20 | 28-Dec-19 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 400,726 | $ | 353,542 |
| Accounts receivable, net | 517,607 | 480,000 | ||
| Inventories | 448,941 | 418,370 | ||
| Contract asset - costs and profits in excess of billings | 123,495 | 141,322 | ||
| Prepaid expenses and other assets | 59,804 | 32,043 | ||
| Refundable income taxes | 9,945 | 6,947 | ||
| Total current assets | 1,560,518 | 1,432,224 | ||
| Property, plant and equipment, net | 597,727 | 558,129 | ||
| Goodwill and other assets | 800,808 | 816,863 | ||
| $ | 2,959,053 | $ | 2,807,216 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Current installments of long-term debt | $ | 2,748 | $ | 760 |
| Notes payable to banks | 35,147 | 21,774 | ||
| Accounts payable | 268,099 | 197,957 | ||
| Accrued expenses | 227,735 | 167,264 | ||
| Contract liability - billings in excess of costs and earnings | 135,911 | 117,945 | ||
| Dividend payable | 9,556 | 8,079 | ||
| Total current liabilities | 679,196 | 513,779 | ||
| Long-term debt, excluding current installments | 728,431 | 764,944 | ||
| Other long-term liabilities | 343,590 | 338,748 | ||
| Shareholders' equity | 1,207,836 | 1,189,745 | ||
| $ | 2,959,053 | $ | 2,807,216 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| YTD | YTD | |||
|---|---|---|---|---|
| 26-Dec-20 | 28-Dec-19 | |||
| Cash flows from operating activities | ||||
| Net Earnings | $ | 142,149 | $ | 152,105 |
| Depreciation and amortization | 82,892 | 82,264 | ||
| Impairment of long-lived assets | 20,389 | — | ||
| Contribution to defined benefit pension plan | (35,399) | (18,461) | ||
| Change in working capital | 52,282 | 80,651 | ||
| Other | 53,981 | 11,055 | ||
| Net cash flows from operating activities | 316,294 | 307,614 | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant, and equipment | (106,700) | (97,425) | ||
| Acquisitions | (15,862) | (81,841) | ||
| Other | 18,533 | 11,116 | ||
| Net cash flows from investing activities | (104,029) | (168,150) | ||
| Cash flows from financing activities | ||||
| Proceeds from long-term borrowings | 88,872 | 31,000 | ||
| Proceeds (payments) from short-term borrowings | 13,044 | 11,327 | ||
| Principal payments on long-term borrowings | (121,665) | (10,768) | ||
| Purchase of treasury shares | (56,491) | (62,915) | ||
| Purchase of noncontrolling interest | (59,416) | (27,845) | ||
| Dividends paid | (36,930) | (32,642) | ||
| Other | (1,170) | (7,107) | ||
| Net cash flows from financing activities | (173,756) | (98,950) | ||
| Effect of exchange rates on cash and cash equivalents | 8,675 | (182) | ||
| Net change in cash and cash equivalents | 47,184 | 40,332 | ||
| Cash and cash equivalents - beginning of year | 353,542 | 313,210 | ||
| Cash and cash equivalents - end of period | $ | 400,726 | $ | 353,542 |
| 26-Dec-20 | 28-Dec-19 | |||
| --- | --- | --- | --- | --- |
| Cash flow from operations | $ | 316,294 | $ | 307,614 |
| Purchase of property, plant, and equipment | (106,700) | (97,425) | ||
| Free Cash flows | $ | 209,594 | $ | 210,189 |
| Net earnings | $ | 140,693 | 146,408 | |
| Free cash flow conversion - Net earnings | 1.5 | 1.4 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
(Dollars in thousands, except per share amounts)
(unaudited)
The non-GAAP tables below disclose the impact on (a) diluted earnings per share of (1) impairment of goodwill, and tradenames, (2) restructuring costs and non-recurring asset impairments (b) operating income from these expenses, and (c) segment operating income for these items. Amounts may be impacted by rounding. We believe it is useful when considering company performance for the non-GAAP adjusted net earnings and operating income to be taken into consideration by management and investors with the related reported GAAP measures.
| Thirteen weeks ended December 26, 2020 | Diluted | Year ended December 26, 2020 | Diluted | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| earnings per | earnings per | |||||||||
| share | share | |||||||||
| Net earnings attributable to Valmont Industries, Inc. - as reported | $ | 35,815 | $ | 1.68 | $ | 140,693 | $ | 6.57 | ||
| Impairment of goodwill and intangible assets, pre-tax | — | — | 16,638 | 0.78 | ||||||
| Restructuring and asset impairment costs - pre-tax | 14,660 | 0.69 | 25,871 | 1.21 | ||||||
| Total Adjustments | 14,660 | 0.69 | 42,509 | 1.98 | ||||||
| Tax effect of adjustments * | (3,619) | (0.17) | (6,372) | (0.30) | ||||||
| UK tax rate change | — | — | (1,528) | (0.07) | ||||||
| Net earnings attributable to Valmont Industries, Inc. - Adjusted | $ | 46,856 | $ | 2.20 | $ | 175,302 | $ | 8.18 | ||
| Average shares outstanding (000’s) - Diluted | 21,342 | 21,425 |
* The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction.
| Thirteen weeks ended December 26, 2020 | Year ended December 26, 2020 | |||||
|---|---|---|---|---|---|---|
| Operating Income Reconciliation | ||||||
| Operating income - as reported | $ | 54,139 | $ | 225,953 | ||
| Impairment of goodwill and tradename | — | 16,638 | ||||
| Restructuring and asset impairment costs | 14,660 | 25,871 | ||||
| Adjusted Operating Income | $ | 68,799 | $ | 268,462 | ||
| Net Sales - as reported | 798,377 | 2,895,355 | ||||
| Operating Income as a % of Sales | 6.8 | % | 7.8 | % | ||
| Adjusted Operating Income as a % of Sales | 8.6 | % | 9.3 | % |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION (CONTINUED)
| For the fourth quarter ended December 26, 2020 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Engineered | Utility | |||||||||||||
| Support | Support | |||||||||||||
| Segment Operating Income Reconciliation | Structures | Structures | Coatings | Irrigation | Corporate | |||||||||
| Operating income - as reported | $ | 19,159 | $ | 25,600 | $ | 9,357 | $ | 22,345 | $ | (22,322) | ||||
| Restructuring and related asset impairment costs | 5,220 | 2,388 | 2,445 | 2,968 | 1,639 | |||||||||
| Adjusted Operating Income | $ | 24,379 | $ | 27,988 | $ | 11,802 | $ | 25,313 | $ | (20,683) | ||||
| Net sales | $ | 256,057 | $ | 271,031 | $ | 89,336 | $ | 199,263 | — | |||||
| Operating Income as a % of Sales | 7.5 | % | 9.4 | % | 10.5 | % | 11.2 | % | NM | |||||
| Adjusted Operating Income as a % of Sales | 9.5 | % | 10.3 | % | 13.2 | % | 12.7 | % | NM | |||||
| For the year ended December 26, 2020 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Engineered | Utility | |||||||||||||
| Support | Support | |||||||||||||
| Segment Operating Income Reconciliation | Structures | Structures | Coatings | Irrigation | Corporate | |||||||||
| Operating income - as reported | $ | 65,342 | $ | 100,855 | $ | 42,975 | $ | 83,046 | $ | (66,265) | ||||
| Impairment of goodwill and tradename | 16,638 | — | — | — | — | |||||||||
| Restructuring and related asset impairment costs | 7,584 | 9,363 | 3,951 | 2,968 | 2,005 | |||||||||
| Adjusted Operating Income | $ | 89,564 | $ | 110,218 | $ | 46,926 | $ | 86,014 | $ | (64,260) | ||||
| Net sales | $ | 995,840 | $ | 1,002,209 | $ | 345,312 | $ | 645,831 | — | |||||
| Operating Income as a % of Sales | 6.6 | % | 10.1 | % | 12.4 | % | 12.9 | % | NM | |||||
| Adjusted Operating Income as a % of Sales | 9.0 | % | 11.0 | % | 13.6 | % | 13.3 | % | NM |
vmipresentation2020q4
© 2021 Valmont® Industries, Inc. Valmont Industries, Inc. Fourth Quarter and Full Year 2020 Earnings Presentation February 18, 2021
Disclosure Regarding Forward-Looking Statements These slides contain (and the accompanying oral discussion will contain) “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries including the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific economic effects on the Company’s business and that of its customers and suppliers, competitor responses to the Company’s products and services, the overall market acceptance of such products and services, the integration of acquisitions and other factors disclosed in the Company’s periodic reports filed with the Securities and Exchange Commission. Consequently, such forward-looking statements should be regarded as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation2
| Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 20213 STEVE KANIEWSKI PRESIDENT & CHIEF EXECUTIVE OFFICER
4Q 2020 Segment Sales and Segment Summaries February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation4 Solid Fourth Quarter Pricing and Operational Performance • Significantly higher sales of global generation products • Utilities’ continued investment in a more resilient grid • Favorable pricing & FX impacts offset by lower volumes, mostly due to lower int’l sales as COVID-19 affected end-market demand • Continued investments in road & construction projects led to higher North American transportation product sales • Continued strong demand & favorable pricing in all regions led to similar YoY wireless communication sales • Sequential improvement as demand recovers from earlier COVID-19 disruptions • Demand continues to closely follow industrial production trends • North American sales led by improved farmer sentiment; recent increases in ag commodity prices leading to multi-year highs • Int’l sales led by higher sales in Middle East, European & South American markets • Positive momentum on multi-year Egypt project • Completed acquisition of Torrent® Engineering and Equipment (remaining 40% stake) SEGMENT SUMMARIES TOTAL 4Q 2020 SALES: $798.4M $271.0M $256.1M $89.3M $199.3M Utility Support Structures Engineered Support Structures Coatings Irrigation N.A.: $97.1M | International: $102.2M 33.9% of Sales 32.1% of Sales 11.2% of Sales 25.0% of Sales
Full Year 2020 Segment Sales and Segment Summaries February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation5 Delivered Strong Financial and Operational Results in 2020 SEGMENT SUMMARIES TOTAL FY 2020 SALES: $2,895.4M $1,002.2M $995.8M $345.3M $645.8M Utility Support Structures Engineered Support Structures Coatings Irrigation N.A.: $378.4M | International: $267.4M 34.6% of Sales 34.4% of Sales 11.9% of Sales 22.3% of Sales • Continued robust demand driven by renewables and grid resiliency • Higher sales of global generation products • Benefitted from pricing actions & improved operational performance throughout year • In North America, strong demand in transportation markets & increasing number of site buildouts ahead of 5G rollouts, offset lower international end-market demand from COVID-19 • Access Systems sales down 23% YoY due to strategic decision to exit certain product lines • Sales down 6.1% for the year but improved sequentially in 2H20; tracking in line with industrial production levels • Began as sixth consecutive year of off-cycle in North America – low grain prices & food supply disruptions from COVID-19 affected demand earlier in the year • Demand strengthened during 2H20 leading to a strong finish • Very strong demand in Brazil led to record sales, growing 32% YoY in local currency • Global advanced technology solutions grew ~20% YoY to $67.0M
Significant Progress Made in Key Areas During 2020 6 Delivering Strong Operating Performance and Generating Significant Shareholder Value | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 • Elevated commitment to ESG throughout organization – more to come in 2021 • Accelerated innovation through new products and services ‒ Spun concrete distribution poles ‒ Small cell solutions ‒ Valley 365 platform technology advancements • All segments benefited from disciplined pricing strategies throughout the year • Secured largest irrigation order in company’s history to supply $240M of products, services and technology solutions to the Egypt market • Generated $200M+ in FCF through a continued intense focus on working capital management • Quickly responded to inflationary pressures in late 2020 by implementing price increases in all four segments and implemented additional increases in early 2021
Recently Announced Collaboration with the Republic of Kazakhstan to Develop First In-Country Center-Pivot Manufacturing Facility • Kazakhstan is rapidly embracing agriculture as a key contributor to its economy with a national plan to more than double the number of irrigated acres over the next decade • Growing regional demand coupled with excellent infrastructure will allow us to quickly and efficiently serve the greater market • Multi-year agreement with our JV partner, Kusto Group to − Take advantage of the region’s growing agricultural potential − Help enhance mechanized precision agriculture − Create a network of farms that will accelerate efforts to address food security, resource conservation and increasing export demand • Committed to build a local facility with an annual production capacity of up to 1,000 pivots – break ground in 2H21 with production ramping by 2024 7 Remain Committed to ‘Conserving Resources. Improving Life®’ February 18, 2021 “Given the major increases in the importance of the issue of food security in the context of the ongoing and potential future pandemics, it is instrumental that we speed up our efforts in realizing this potential. This is why we so deeply value the role Valmont Industries is willing to play in this process by bringing their production capacity, human capital, and best practices here.” Askar Mamin, Prime Minister of Kazakhstan | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
AVNER APPLBAUM EVP & CHIEF FINANCIAL OFFICER | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 20218
4Q 2020 Financial Summary February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation9 Sales Operating Income Diluted EPS 16.8% 6.6% | 35.5%1 11.3% | 45.7%1 • Net Sales growth led primarily by significantly higher sales in Irrigation and Utility Support Structures • Operating income growth driven by ‒ Improved operational efficiency in all segments ‒ Higher volumes in Utility Support Structures and Irrigation ‒ Non-recurrence of last year’s losses in the Access Systems product line • EPS growth driven by higher net earnings, a non- recurrence of losses in Access Systems, and a more favorable tax rate • GAAP EPS includes a ($0.38) impact related to the Voluntary One-Time Early Retirement Benefit Program • More favorable tax rate primarily due to a one-time benefit of a recently-enacted U.S. tax regulation, resulting in an EPS benefit of $0.05 per diluted share $M, except for per share amounts $798.4 $683.6 2020 2019 $54.1 $68.8 $50.8 2020 2020 Adj. 2019 $1.68 $2.20 $1.51 2020 2020 Adj. 2019 1 1 1 Results adjusted to reflect impact of non-cash impairment of goodwill and/or certain restructuring expense recognition. See reconciliation of GAAP results to adjusted results at end of document.
Sales Operating Income 16.9% (2.8%) | 6.2%2 4Q 2020 Results | Utility Support Structures 10 ($M) Key Statistics 2019 Sales1 $ 229.1 Volume 69.0 Pricing/Mix (24.5) Acquisitions/Divestiture 2.7 Currency Translation 1.9 2020 Sales1 $ 278.2 $278.2 $229.1 2020 2019 $25.6 $28.0 $26.3 2020 2020 Adj. 2019 2 COMMENTARY • Sales growth led by higher volumes from strategic capacity additions in existing North American operations and higher sales of global generation products • Volume increases were partially offset by negative sales impact of lower steel costs compared to prior year • While higher volumes and improved operational performance led to higher profits, quality of earnings was negatively impacted by higher mix of offshore and other complex steel structures 1 Net sales after intersegment eliminations. 2 Results adjusted to reflect impact of non-cash impairment of goodwill and/or certain restructuring expense recognition. See reconciliation of GAAP results to adjusted results at end of document. February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Sales Operating Income 0.9% 82.9% | 132.7%2 4Q 2020 Results | Engineered Support Structures February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation11 ($M) Key Statistics 2019 Sales1 $ 250.0 Volume (8.7) Pricing/Mix 4.4 Acquisitions/Divestiture - Currency Translation 6.6 2020 Sales1 $ 252.3 $252.3 $250.0 2020 2019 $19.2 $24.4 $10.5 2020 2020 Adj. 2019 2 COMMENTARY • Sales were similar to last year, as lower volumes, primarily in international markets, were offset by $6.6M of favorable currency impacts and favorable pricing • Lighting and traffic sales of $182.6M increased 2.1% YoY primarily due to favorable pricing across all markets • Wireless communication structures and components sales of $50.4M were similar to last year’s record Q4 sales; higher volumes in Europe and favorable pricing in all regions were offset by slightly lower volumes in North American markets • Access Systems sales of $23.0M decreased 12.2% YoY as expected due to lower volumes from strategically exiting product lines • Profitability improvement was driven by favorable pricing and the non-recurrence of one-time losses in the Access Systems business in 4Q19 1 Net sales after intersegment eliminations. 2 Results adjusted to reflect impact of non-cash impairment of goodwill and/or certain restructuring expense recognition. See reconciliation of GAAP results to adjusted results at end of document.
Sales Operating Income (3.8%) (21.8%) | (1.4%)2 4Q 2020 Results | Coatings February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation12 ($M) Key Statistics 2019 Sales1 $ 72.4 Volume (4.5) Pricing/Mix 0.4 Acquisitions/Divestiture - Currency Translation 1.3 2020 Sales1 $ 69.6 $69.6 $72.4 2020 2019 $9.4 $11.8 $12.0 2020 2020 Adj. 2019 2 COMMENTARY • Sales were similar to last year as higher internal and international market volumes were offset by lower external volumes in North America due to the pandemic’s disruptions on end customers • Favorable pricing and operational efficiency improvements were offset by lower external volumes in North America 1 Net sales after intersegment eliminations. 2 Results adjusted to reflect impact of non-cash impairment of goodwill and/or certain restructuring expense recognition. See reconciliation of GAAP results to adjusted results at end of document.
Sales Operating Income 15.0% 110.7% 89.1% | 114.2%2 4Q 2020 Results | Irrigation February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation13 ($M) Key Statistics 2019 Sales1 $ 132.0 Volume 70.7 Pricing/Mix (1.6) Acquisitions/Divestiture 3.4 Currency Translation (6.3) 2020 Sales1 $ 198.2 $22.3 $25.3 $11.8 2020 2020 Adj. 20192020 2019 $96.0 $102.2 $83.5 $48.5 North America International COMMENTARY • Global sales increased 49.8% YoY due to higher volumes across all markets, particularly in the Middle East, partially offset by $6.3M of unfavorable currency impacts primarily from the depreciation of the Brazilian Real ‒ North American sales grew due to higher volumes across all irrigation product lines and higher industrial tubing sales ‒ International sales more than doubled YoY, which was led by first deliveries of the large multi-year Egypt product, higher volume in South American and European markets, including continued strong demand in Brazil, and sales from recent acquisitions • Profitability growth driven by higher volumes and improved operational efficiency, partially offset by higher SG&A expense, including $1.4M of incremental R&D expense for technology growth investments 1 Net sales after intersegment eliminations. 2 Results adjusted to reflect impact of non-cash impairment of goodwill and/or certain restructuring expense recognition. See reconciliation of GAAP results to adjusted results at end of document. 2
Full Year 2020 Cash Flow Highlights February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation14 Strong Operating CF Driven by Higher Operating Income and Strategic Working Capital Management ($M) FY 12/26/2020 Net Cash Flows from Operating Activities $ 316.3 Net Cash Flows from Investing Activities (104.0) Net Cash Flows from Financing Activities (173.8) Net Cash Flows from Operating Activities $ 316.3 Purchase of Property, Plant & Equipment (106.7) Free Cash Flows $ 209.6 Full Year Cash Flow | FCF Reconciliation Cash and Debt Highlights $400.7M ($208.6M ex-U.S.) Cash at 12/26/2020 $728.4M Total Long-Term Debt at 12/26/2020
Balanced Approach to Capital Allocation February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation15 $107 $16 $59 $56 $37 Capital Expenditures Acquisitions Purchase of NCI Share Repurchases Dividends FY20 Capital Deployment: $275M ($M) Capital Expenditures • Working capital investment to support investments in people, technology and systems • 2020 CapEx of $107M, including ~$42M for strategic growth initiatives Acquisitions • Strategic fit + market expansion • Returns exceeding cost of capital within 3 years Purchase of NCI • Amount includes $59M purchase of non-controlling interest of AgSense, Convert Italia, and Torrent Share Repurchases • Opportunistic approach, supported by FCF • Resumed share repurchases on September 10, 2020 • $148M remains on current authorization as of 12/26/20 Dividends • 20% dividend increase announced February 2020 • Payout ratio target: 15% of earnings • Current payout: ~24% G ro w in g O ur B us in es s R et ur ni ng C as h to S ha re ho ld er s
Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation16 Cash $400.7M Total Debt (Long-Term) $728.4M Shareholders’ Equity $1,207.8M Total Debt to Adj. EBITDA1 2.2x Net Debt to Adj. EBITDA1 1.0x Available Credit under Revolving Credit Facility2 $585.4M Cash $400.7M Total Available Liquidity ~$986.1M AS OF DECEMBER 26, 2020 ► Long-term debt of $728.4M, mostly fixed-rate, with long-dated maturities to 2044 and 2054 ► Capital allocation strategy has not changed, and the primary focus is to maintain liquidity to support operations and maintain investment grade credit rating − 2020E CapEx was $107M including $42M for strategic growth opportunities − Fitch reaffirmed BBB-/Stable credit rating during fourth quarter − Generated FCF of $210M in 2020 − Share repurchases resumed in September 2020 1 See slide 38 for calculation of Adjusted EBITDA and Leverage Ratio. 2 $600M Total Revolver less borrowings and Standby LC”s of $15M.
1Q 2021 / Full Year 2021 Outlook and Key Assumptions 17 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 1Q21 OUTLOOK1 KEY ASSUMPTIONS • Favorable foreign currency translation impact of ~2% of Net Sales • In Utility Support Structures, significant raw material cost inflation will negatively impact gross profit margins in 1H21 • Expect tax rate between 24% - 25% • Capital expenditures to be in the range of $110M - $120M to support strategic growth initiatives and Industry 4.0 advanced manufacturing initiatives • No closures of large manufacturing facilities, workforce disruptions, or significant supply chain interruptions due to COVID-19 $740M – $765M Net Sales, an increase of 10% - 13% YoY 1 Excludes potential future restructuring activities. See reconciliation of GAAP outlook to adjusted outlook at end of document. 9% – 10% Operating Profit Margin $235M – $245M Irrigation Segment Sales, an increase of 50% - 56% YoY 9% – 14% Increase in Net Sales YoY $9.00 – $9.70 Diluted EPS 27% – 30% Increase in Irrigation Segment Sales YoY FY21 OUTLOOK1
2021 Segment Market Trends and Potential Risks February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation18 Consistent Solid Cash Flow Generation Expected USS • Strong backlog provides good visibility • Aggressively raising prices due to rapidly escalating raw material costs; pricing actions in response to rapid inflation take 1 to 2 quarters to recover • Expect unfavorable gross profit margin comparisons in 1H21, but expect full-year gross profit contribution to be favorable YoY when higher steel cost indices are reflected in selling prices ESS • Entered year with solid backlog • Anticipate short-term softness in transportation markets due to COVID-19 impacts on state/local tax revenues & delays in FAST Act extension • Expect wireless communication products & components demand to remain strong; anticipate carriers’ 5G investments to accelerate throughout 2021; sales expected to grow ~15% • Decision made to divest Access Systems product line as part of ongoing strategic portfolio review COATINGS • End-market demand correlates closely to industrial production levels; expect modest sequential growth as economy continues to improve IRRIGATION • Providing additional details on expected sales growth based on estimated timing of deliveries of the large Egypt project, strong net farm income driving positive farmer sentiment, & robust Brazilian market • Expect full year sales to increase of 27% - 30% YoY
Fundamental Market Drivers Remain Resilient 19 No Change Anticipated in the Near- and Long-term | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 COATINGS IRRIGATION • Business closely follows industrial production trends and general economic activity • Global preservation of critical infrastructure over the long-term • Increased number of economies actively fighting costs of corrosion will drive need to extend life of steel products globally over the long-term • Fits well within ESG principles • Net farm income improvements have improved growth sentiment, and tighter ending stocks have driven corn and soybean prices to 6 and 7-year highs • Improved demand along with strength across international markets and the large-scale, multi-year project in Egypt is providing a good line of sight for 2021 • Year-end global backlog of $328 million, an increase of 5 times YoY • Technology investments remain a priority ‒ Expanded Valley Insights anomaly detection solution into more regions across North America – 5M acres monitored in 2020, leading to twice as many growers using the solution vs. 2019, is expected to double again in 2021 • Short-term market softness in transportation as delays in last year’s FAST Act renewal begin to flow through state budgets ‒ If passed, upside growth expected ~ 9 – 12 months after enactment • Solid long-term market trends for transportation and wireless communication structures and components ‒ Critical need for infrastructure investment provides very good economic stimulus for nations • Expect growth in wireless communication products to accelerate in 2021 given record purchase price of 5G spectrum auction in U.S. ‒ Carriers’ investments support work and school-at-home and macro buildouts in suburban and rural communities, aligning with favorable trends in residential construction • Elevated and robust backlog demonstrates ongoing demand; necessity for renewables and grid hardening • Awarded third purchase order of ~$70M for the large project in the Southeast U.S. in 1Q 2021 • Well-positioned to be a preferred strategic partner with utilities and developers for their renewable energy goals • Expanding ESG focus is providing market opportunities for this industry ESSUSS
Continuing to Elevate our ESG Commitment 20 Publishing Annual Sustainability Report in March 2021 Advanced ESG to be a top strategic imperative, including formation of a CEO-led ESG Taskforce, elevating our tagline of 'Conserving Resources. Improving Life®.' • ESG Taskforce analyzed demand drivers across business portfolio and discovered products and solutions are closely aligned to key ESG principles and themes – ~90% of Valmont’s Net Sales support various ESG efforts • USS: ~90% of sales are tied to ESG, including 45% to renewable energy initiatives and another 45% to grid resiliency and critical reliability efforts as the world continues to transition to a clean energy economy • ESS: ~90% of sales are tied to ESG ‒ Products improve traffic flow in roads and cities and promote public safety through lighting solutions ‒ Wireless communication products support market need for a more connected world • Coatings: ~100% of sales help preserve and extend the life of metals up to 3x longer ‒ Zinc and steel both 100% recyclable ‒ Hot-dip galvanizing is a proven corrosion-protection system, with one of the lowest carbon footprints of any coatings application • Irrigation: ~100% of sales are tied to sustainability and conservation ‒ Warming climate drives need for more efficient use of fresh water ‒ Need to produce more food for a growing global population using more sustainable farming techniques • Corporate sustainability efforts well exceeded expectations ‒ 14% reduction in normalized electricity consumption, well ahead of 8% goal ‒ Reduced Scope 2 carbon footprint by ~10k metric tons in 2020 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021
Expect solid operating performance and strong EPS accretion in 2021 as well as sales growth exceeding our stated long-term financial goal Focused on profitable growth and ROIC improvement, while keeping employees and communities safe and investing in the business for growth; strategic framework remains intact Strong performance in 2020 is a testament to our team’s ability to remain flexible and committed to delivering solid results and long-term shareholder value Summary 21 More to Come at Upcoming Virtual Investor Day in May 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 01 02 03
Q&A 22 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021
APPENDIX 23 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021
Full Year 2020 Financial Summary February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation24 Sales Operating Income Diluted EPS 4.6% (0.9)% | 17.8%1 (2.4)% | 21.5%1 • Significantly higher sales in the Utility Support Structures and Irrigation segments were partially offset by lower sales in the Engineered Support Structures and Coatings segments due to COVID- 19 impacts • Excluding $22.2M of unfavorable currency impacts, sales grew 5.4% • Profitability improvement was led by higher volumes in Utility Support Structures and Irrigation, and favorable pricing in Engineered Support Structures • Operational performance improved in all segments except Coatings, where end-market demand was negatively impacted by COVID-19 • EPS decreased $0.16, or 2.4% on a GAAP basis and increased $1.45, or 21.5% on an adjusted basis $M, except for per share amounts $2,895.4 $2,767.0 2020 2019 $6.57 $8.18 $6.73 2020 2020 Adj. 2019 1 1$226.0 $268.5 227.9 2020 2020 Adj. 2019 1 Results adjusted to reflect impact of non-cash impairment of goodwill and/or certain restructuring expense recognition. See reconciliation of GAAP results to adjusted results at end of document.
Fourth Quarter and Full Year 2020 Financial Summary 25 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 Net Sales 2020 2019 Change FY 2020 FY 2019 Change Engineered Support Structures $ 256.1 $ 255.2 0.3% $ 995.8 $ 1,012.3 (1.6%) Utility Support Structures 271.0 231.9 16.9% 1,002.2 890.6 12.5% Coatings 89.3 89.7 (0.4%) 345.3 367.8 (6.1%) Irrigation 199.3 133.0 49.8% 645.8 585.2 10.4% Intersegment Sales (17.3) (26.2) NM (93.7) (88.9) NM Net Sales $ 798.4 $ 683.6 16.8% $ 2,895.4 $ 2,767.0 4.6% Operating Income $ 54.1 $ 50.8 6.6% $ 226.0 $ 227.9 (0.9%) Adjusted Operating Income1 $ 68.8 $ 50.8 35.5% $ 268.5 $ 227.9 17.8% Net Income (loss) $ 35.8 $ 32.5 10.1% $ 140.7 $ 146.4 (3.9%) Adjusted Net Income1 $ 46.9 $ 32.5 44.0% $ 175.3 $ 146.4 19.7% Diluted Earnings (loss) Per Share (EPS) $ 1.68 $ 1.51 11.3% $ 6.57 $ 6.73 (2.4%) Adjusted Diluted (EPS)1 $ 2.20 $ 1.51 45.7% $ 8.18 $ 6.73 21.5% $M, except for per share amounts 1 Please see Reg G reconciliation of non-GAAP financial measures to GAAP measures at end of the document.
Steel Material Index Trends 2020-2021 YTD 26 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 Credit: FastMarketsAMM
State Transportation Investment Funding Measures 27 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 • Six states approved 13 transportation investment measures in 2020 • Highlights: − 38 bills have advanced beyond one chamber, while 133 bills are still in the introductory stage. − 13 states introduced legislation to increase their motor fuel tax, eight of which included a component to adjust or convert to a variable-rate formula. − One-time funding has been the most popular legislation (68 bills, primarily in Arizona and Minnesota), followed by local funding and recurring sales measures (24 and 25 bills, respectively). − Road usage charge legislation has been proposed in six states, and new or increased electric vehicle fees have been proposed in five states. − Approved measures include bonds in Connecticut, Michigan and Minnesota, and a state gas tax increase in Virginia. • Funding Approved in 2020 Legislative Session: $5,098,012,304 • Also, voters in 19 states Nov. 3 approved 94 percent of state and local ballot initiatives that will provide an additional $14 billion in one-time and recurring sales for transportation improvements Source: Transportation Investment Advocacy Center
State Transportation Investment Funding Measures 28 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 State Name Change in 2020 Gas Tax (cents/gallon) Effective Date Kentucky 10.0$ Proposal Pending New Jersey 9.3$ 10/1/2020 Alaska 8.0$ Proposal Pending Arizona 6.0$ Proposal Pending Massachusetts 5.0$ Proposal Pending Virginia 5.0$ 7/1/2020 Georgia 4.0$ 1/1/2020 Nebraska 3.9$ 7/1/2020 California 3.2$ 7/1/2020 Wyoming 3.0$ Proposal Pending Alabama 2.0$ 10/1/2020 Oregon 2.0$ 1/1/2020 South Carolina 2.0$ 7/1/2020 Utah 1.1$ 1/1/2020 Florida 1.0$ 1/1/2020 Indiana 1.0$ 7/1/2020 Illinois 0.7$ 7/1/2020 Washington 0.6$ Proposal Pending North Carolina (0.1)$ 1/1/2020 Iowa (0.5)$ 7/1/2020 Maryland (0.7)$ 7/1/2020 Source: IHS Markit
5G Adoption Forecast and Capex Spend Post-COVID 29 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 Source: GSM Association
U.S. Level of Farm Subsidies October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation30 113 82 71 49 64 68 61 73 84 11 10 11 13 12 14 22 46 11 0 20 40 60 80 100 120 140 2013 2014 2015 2016 2017 2018 2019 2020 2021e $ B IL LI O N S U.S. GOV'T CONTRIBUTION TO NFI Net Farm Income (NFI) Government Assistance Source: American Farm Bureau Federation
US Commodity Price Trends, July 2020 – Feb 2021 31 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 Source: Investing.com
U.S. Corn for Fuel Ethanol, Feed, and Other Use February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation32 5.43 5.61 5.38 4.85 0 2 4 6 8 10 12 14 D om es tic U se (B ill io n B us he ls ) Year Used for Ethanol Feed and Residual Use Produced for Other Uses Source: afdc.energy.gov/data – data from Tables 4 & 31, OCT2020. Years run from September through August. Exports not included in above values.
U.S. Net Cash Farm Income by Year February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation33 Source: USDA, American Farm Bureau Federation
2011-2020 Historical Free Cash Flow1 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation34 10 Year Average FCF is $154M; Last 5 Years Has Averaged $151M 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net cash flows from operating activities $ 149.7 $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 Net cash flows from investing activities (84.1) (136.7) (131.7) (256.9) (48.2) (53.0) (49.6) (155.4) (168.1) (104.0) Net cash flows from financing activities (45.9) (16.4) (37.4) (136.8) (32.0) (95.2) (220.0) (162.1) (98.9) (173.8) Net cash flows from operating activities $ 149.7 $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 Purchase of plant, property, and equipment (83.1) (97.1) (106.8) (73.0) (45.5) (57.9) (55.3) (72.0) (97.4) (106.7) Free Cash flows 66.6 100.0 289.7 101.1 226.8 174.9 77.8 81.0 210.2 209.6 Net earnings attributed to Valmont Industries, Inc. $ 228.3 $ 234.1 $ 278.5 $ 183.9 $ 40.1 $ 173.2 $ 116.2 $ 94.4 $ 153.8 $ 140.7 Adjusted net earnings attributed to Valmont Industries, Inc.1 $ 162.3 N/A $ 295.1 $ 187.7 $ 131.7 $ 137.6 $ 158.4 $ 123.0 N/A 163.8 Free Cash Flow Conversion - GAAP 0.29 0.43 1.04 0.55 5.66 1.01 0.67 0.86 1.37 1.49 Free Cash Flow Conversion - Adjusted 0.41 N/A 0.98 0.53 1.71 1.27 0.49 0.66 N/A 1.28 1) Reconciliation of Net Earnings to Adjusted Figures Net earnings attributed to Valmont Industries, Inc. $ 228.3 $ 234.1 $ 278.5 $ 183.9 $ 40.1 $ 173.2 $ 116.2 $ 94.4 $ 153.8 $ 140.7 Change in valuation allowance against deferred tax assets (66.0) — — — 7.1 (20.7) 41.9 — — — Impairment of long-lived assets — — 12.2 — 61.8 1.1 — 28.6 — 23.1 Reversal of contingent liability — — — — — (16.6) — — — — Other non-recurring expenses (non-cash) 18. 8.1 — — — — — Deconsolidation of Delta EMD, after-tax and NCI — — 4.4 — — — — — — — Noncash loss from Delta EMD shares — — — 3.8 4.6 0.6 0.2 — — — Adjusted net earnings attributed to Valmont Industries, Inc. $ 162.3 $ 234.1 $ 295.1 $ 187.7 $ 131.7 $ 137.6 $ 158.4 $ 123.0 $ 153.8 $ 163.8 ($M) 1 Adjusted earnings for purposes of calculating FCF conversion may not agree to the adjusted net earnings. The difference is due to cash restructuring, debt refinancing, or other non-recurring expenses which were settled in cash in the year of occurrence.
Years of rapid raw material cost inflation GAAP 0.29X 0.43X 1.04X 0.55X 5.66X 1.01X 0.67X 0.86X 1.37X 1.49X Adj. 0.41X N/A 0.98X 0.53X 1.71X 1.27X 0.49X 0.66X N/A 1.28X 2011 – 2020 Free Cash Flow1 ($M) 67 100 290 101 227 175 78 81 210 210 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 10-yr Avg. $154M GAAP 1.34X Adj. 0.91X Historical FCF Conversion by Year1 Strong Free Cash Flow throughout the Cycle 35 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 1 We use the non-GAAP measure of FCF, which we define as GAAP net cash flows from operating activities reduced by capex. We believe that FCF is a useful performance measure for management and useful to investors as the basis for comparing our performance with other companies. Our measure of FCF may not be directly comparable to similar measures used by other companies.
Calculation of Adjusted EBITDA and Leverage Ratio 36 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our Debt/Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four quarters. See “Leverage Ratio “ below. YTD 26-Dec-20 Net earnings attributable to Valmont Industries, Inc. $ 140,693 Interest expense 41,075 Income tax expense 49,615 Depreciation and amortization expense 82,892 EBITDA 314,275 Cash restructuring expenses 18,955 Impairment of goodwill and intangible assets 16,638 Impairment of property, plant, and equipment 3,751 Adjusted EBITDA $ 353,619 Debt $ 766,326 Leverage Ratio 2.17 Debt $ 766,326 Cash 400,726 Net Debt 365,600 Leverage Ratio 1.03 ($000s)
2018-2019 Financials Retrospectively Adjusted from LIFO to FIFO Change 37 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 Valmont Industries, Inc. Retrospectively Adjusted from LIFO to FIFO Change First Quarter 2019 Second Quarter 2019 Third Quarter 2019 Fourth Quarter 2019 Fiscal Year 2019 As Previously Retrospectively As Previously Retrospectively As Previously Retrospectively As Previously Retrospectively As Previously Retrospectively (in 000's, except earnings per share) Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Cost of sales 527,010 527,512 520,457 522,695 514,254 517,053 512,759 517,035 2,074,480 2,084,295 Operating income 55,104 54,602 63,712 61,474 63,863 61,064 55,041 50,765 237,720 227,905 Income tax expense 12,427 12,302 13,961 13,402 13,763 13,063 10,056 8,987 50,207 47,753 Net earnings attributed to Valmont Industries, Inc. 36,481 36,104 41,397 39,719 40,144 38,045 35,747 32,540 153,769 146,408 Net earnings per diluted share $ 1.66 $ 1.64 $ 1.90 $ 1.82 $ 1.85 $ 1.75 $ 1.66 $ 1.51 $ 7.06 6.73 First Quarter 2018 Second Quarter 2018 Third Quarter 2018 Fourth Quarter 2018 Fiscal Year 2018 As Previously Retrospectively As Previously Retrospectively As Previously Retrospectively As Previously Retrospectively As Previously Retrospectively Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Cost of sales 529,444 528,363 507,406 505,755 514,352 511,572 547,662 543,282 2,098,864 2,088,972 Operating income 63,960 65,041 63,670 65,321 38,360 41,140 36,290 40,670 202,280 212,172 Income tax expense 12,532 12,802 14,405 14,818 9,091 9,786 7,107 8,202 43,135 45,608 Net earnings attributed to Valmont Industries, Inc. 39,281 40,092 32,960 34,198 4,448 6,533 17,662 20,947 94,351 101,770 Net earnings per diluted share $ 1.72 $ 1.76 $ 1.46 $ 1.51 $ 0.20 $ 0.29 $ 0.80 $ 0.95 $ 4.20 $ 4.53
Summary of Effect of Significant Non-Recurring Items on Reported Results 38 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021
Summary of Effect of Significant Non-Recurring Items on Reported Results 39 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 ($000s)
Summary of Effect of Significant Non-Recurring Items on Reported Results 40 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings PresentationFebruary 18, 2021 Whole Corporation (Q4) • Severance of $10.9 million for early retirement program (across all segments) Engineered Support Structures (Q4) • Cash restructuring expenses to reduce administrative headcounts in India. Utility Support Structures (Q4) • Cash restructuring expenses to reduce headcounts in the offshore and other complex steel product line. ($000s)