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
April 22, 2020
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 April 22, 2020 announcing its financial results for its quarter ended March 28, 2020. The press release, along with the presentation to be used during its earnings call on April 23, 2020, 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 April 22, 2020 |
| 99.2 | Presentation Slides for earnings call on April 23, 2020 |
| 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: April 22, 2020 | ||
| 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: | April 22, 2020 |
Valmont Reports First Quarter 2020 Results and
Provides Key Assumptions for Remainder of 2020
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 first quarter ended March 28, 2020.
First Quarter 2020 Highlights (all metrics compared to First Quarter 2019 unless otherwise noted)
•Net Sales of $674.2 million, a decline of 2.6%; strong North American sales were more than offset by anticipated lower sales in the Utility Support Structures segment due to a $30.0 million solar tracker project in 2019 that did not repeat this year, and approximately $10 million of unfavorable currency translation impact
•Operating income grew 22.5% to $66.9 million, or 9.9% of sales compared to $54.6 million or 7.9% of sales; all segments contributed to the improvement
•Diluted Earnings per Share of $1.99 grew 21.3% compared to $1.64
•Completed previously-announced acquisition of remaining 49% stake of AgSense® in the Irrigation segment
•Utility Support Structures global backlog increased 12.0% from last quarter to a record $689.0 million, including a large transmission order for the European market
•Generated operating cash flow of $62.4 million, significantly higher than last year and strongest first quarter since 2016
•Repurchased 190,500 shares of company stock for $20.5 million at an average price of $107.52 per share, prior to halting share repurchases in March
•Announced a 20% quarterly dividend increase, from $0.375 to $0.45 ($1.50 to $1.80 annualized), the first increase since 2014
•Withdrawing 2020 financial outlook due to ongoing uncertainties around business impacts from the COVID-19 pandemic
•Providing key assumptions and indications for the second quarter and second half of 2020
Key Financial Metrics
| First Quarter 2020 | |||||
|---|---|---|---|---|---|
| 03/28/2020 1Q 2020 | 03/30/20191Q 2019 | vs. 1Q 2019 | |||
| Net Sales | 674,200 | 692,139 | (2.6)% | ||
| Operating Income | 66,895 | 22.5% | |||
| Operating Income as a % of Net Sales | 9.9 | % | 7.9 | % | |
| Net Earnings | 42,929 | 36,104 | 18.9% | ||
| Diluted Earnings Per Share | 21.3% | ||||
| Average Shares Outstanding | 21,549 | 21,964 |
All values are in US Dollars.
"We had a strong first quarter in the majority of the regions where we operate, despite COVID-19 interruptions," said Stephen G. Kaniewski, President and Chief Executive Officer. "As discussed in previous quarters, our sales and profitability improvements were primarily driven by three strategic focus areas - capacity expansions in North America to meet strong infrastructure market demand and better serve our customers, improved operational efficiencies, and pricing discipline while seeing deflation in raw material costs. We are very pleased with our results across all segments, with revenue and profitability exceeding our expectations.”
First Quarter 2020 Segment Review
Infrastructure
Engineered Support Structures Segment (34.2% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products
Sales of $230.7 million were flat with last year. Higher sales in North American markets were offset by lower sales in the Asia Pacific region, primarily in the Access Systems product line.
Lighting and traffic sales were higher compared to last year, driven by strong North American transportation market demand, partially offset by lower demand in commercial lighting markets and slightly lower international sales.
Sales of wireless communication structures and components decreased 11.0% as anticipated compared to last year, after a very strong first quarter of growth in 2019. Slower capital spending due to the delayed T. Mobile/Sprint merger led to lower sales. Government-mandated facility closures in China related to COVID-19 impacts represented $2.0 million of the sales decline.
Access Systems product sales decreased 32.0% compared to last year, led by continued weakness in Australian construction end-market demand.
Operating income was $15.9 million or 6.9% of sales compared to $12.5 million or 5.4% of sales in 2019.
Profitability improvement was led by improved operational performance and lower raw material costs, partially offset by lower volumes from Access Systems.
Utility Support Structures Segment (33.4% of Sales)
Steel and concrete structures for global utility transmission, distribution, substations, and renewable energy generation equipment
Sales of $225.5 million decreased 7.6% compared to last year, as expected, primarily due to a large solar tracker project in 2019 that did not repeat this year. Higher North American volumes were led by continued strong market demand.
Operating income was $27.7 million or 12.3% of sales compared to $25.1 million, or 10.3% of sales in 2019. Profitability improvement from higher volumes and lower raw material costs in North American markets, were partially offset by lower volumes in the international businesses.
Coatings Segment (13.1% of Sales)
Global galvanizing, painting and anodizing services to preserve and protect metal products
Sales of $88.1 million increased 1.5% versus the prior year. Higher volumes in North American markets, mostly internal, were partially offset by unfavorable currency translation impacts. Lower volumes in international markets due to government-mandated facility closures late in the quarter related to COVID-19 represented a negative impact of approximately 1.0% to sales.
Operating income was $11.1 million or 12.6% of sales, compared to $10.1 million or 11.7% of sales in 2019, due to lower zinc costs and improved operational performance.
Agriculture
Irrigation Segment (23.2% of Sales)
Agricultural irrigation equipment, parts, services and tubular products, water management solutions, and technology for precision agriculture
Global sales of $156.7 million increased 2.6% compared to last year.
North American sales of $106.6 million were down 1.8% compared to 2019. Higher volumes of systems, aftermarket parts and advanced technology solutions were more than offset by lower industrial tubing sales.
International sales of $50.1 million grew 13.1% compared to last year, despite $2.7 million of unfavorable currency translation impacts. Volumes were higher in most regions. Record first-quarter sales in local currency in Brazil, and a recovering market in Australia, led to the sales growth.
Segment operating income was $23.7 million, or 15.1% of sales, compared to $20.1 million, or 13.2% of sales in 2019. Profitability improvement from higher selling prices and improved volumes of aftermarket parts was partially offset by approximately $0.8 million of planned higher R&D expense for technology investments.
COVID-19 Business Continuity and Operations Update
On March 26, 2020, the Company provided perspectives and observations on the COVID-19 impact on the business. Valmont is considered an essential business because of the products and services that serve critical infrastructure sectors and food security, as defined by many governments around the world. In response to the situation, a cross-functional taskforce was assembled in February 2020 to monitor this evolving situation. Valmont has activated a business continuity plan that encompasses all segments and regions of operation. To protect the safety, health and well-being of employees, customers, suppliers and communities, CDC, WHO and local guidelines are being followed to ensure employee safety in all facilities. Valmont has also implemented several preventive measures while meeting the needs of its global customers. These include increased frequency of cleaning and disinfecting of facilities, social distancing practices, remote working when possible, business travel restrictions, cancellation of certain events and limitations on visitor access to facilities. Additional safety and flexibility measures in manufacturing facilities have been implemented as the Company strives to keep its factories operational.
Since the March communication, one additional manufacturing facility in South Africa has temporarily ceased operations due to preemptive government mandates. Valmont facilities currently impacted include operations in Argentina, France, India, Malaysia, New Zealand, Philippines and South Africa, but all are anticipated to resume operations by early May. All other Valmont facilities remain open and fully operational. Deliberate and proactive steps have been taken to protect all stakeholders and minimize the operational and financial impacts of COVID-19 on the business. At present, multiple sources of supply for raw materials and other critical components are in place, and Valmont is currently not experiencing any delays in its global supply chain.
Balance Sheet, Liquidity and Capital Allocation
In response to COVID-19 uncertainty, the Company is focused on actions to reduce discretionary capital and operating expenditures, adjust its cost structure, and preserve its financial flexibility and strong liquidity position. The cash balance as of April 21, 2020 was approximately $350.0 million. At the beginning of second quarter, the Company proactively drew down $75.0 million of its $600.0 million revolving credit facility to ensure sufficient liquidity. To date, the Company has not experienced any significant slowdown in customer payments or adjustments to credit terms, and has no significant long-term debt maturities until 2044.
Recognizing its strong balance sheet and confidence in generating good cash flows in the future, in February the Company announced a 20.0% increase to its quarterly dividend, the first increase since 2014. Given the decrease in the number of shares outstanding over the past several years, and lower expected minority interest dividends going forward, the effect of the dividend increase on net cash outflows is not significant. In March, the Company halted share repurchases to strengthen financial liquidity until future impacts from COVID-19 are more clear. 2020 capital expenditures are expected to now be in the range of $75.0 to $90.0 million. The previously-announced strategic capacity expansions are tracking in line with expectations, while other capital expenditures have been delayed. Valmont remains committed to maintaining its investment grade credit rating.
2020 Outlook and Key Assumptions
As demonstrated by a strong first quarter performance, the Company was on track to maintain its full year 2020 guidance metrics. As a result of the evolving impact of COVID-19 on the global economy, the Company is now anticipating and planning for slowdown in customer demand and increased business disruption, primarily beginning in the second quarter. The extent and duration of these impacts are not presently able to be quantified, and therefore future impacts are difficult to determine. For these reasons, Valmont believes it is prudent to withdraw its full year 2020 guidance.
In lieu of annual guidance and to help the financial community understand business impact and sensitivities, the Company is providing key assumptions and indications for the second quarter and second half of 2020.
Second Quarter Financial Outlook
•Net sales estimated to be between $645 million and $665 million
•Operating margins estimated to be in the range of 7.0% to 8.5% of net sales
•Irrigation segment revenue expected to be down 5.0% to 10.0% from prior year, due to recent disruptions to food supply chains, ethanol demand and unfavorable currency translation impacts
•Coatings segment revenue expected to be down 20.0% to 25.0% from prior year, as a result of recent industrial production levels and GDP trends
•Anticipate positive operating cash flows
•Assume no additional closures of large manufacturing facilities globally due to COVID-19
Second Half 2020 Key Assumptions and Perspectives
•Planning and anticipating for recessionary forces to potentially impact global demand and revenues due to volatile market demand profiles
•Anticipating lower raw material costs and assuming no significant supply chain interruptions
•Expecting lower working capital requirements associated with reduced market demand
•Balance sheet that reflects strong financial and operational position, with ample liquidity and room under debt covenants
•Prepared to execute additional cost management measures, as appropriate
•Assuming no additional closures of large manufacturing facilities globally due to COVID-19
Kaniewski continued, "I believe we are in a solid financial position to navigate the COVID-19 outbreak during this period of unprecedented volatility. As a global provider of products and services that support critical infrastructure sectors and food security, we continue to work diligently and safely to provide our customers with the essential products and solutions they need. Our balance sheet is strong, with $350.0 million in cash. We have suspended share repurchases and are taking a hard look at all discretionary spending and capital expenditures, with an emphasis on managing working capital and cash flow. While the outbreak continues to unfold, I have unwavering confidence in Valmont employees and our ability to navigate this crisis. We have a strong track record of managing through business cycles and emerging from economic downturns in a solid financial position. During this unprecedented time of market disruption and uncertainty, we will remain flexible
and take further actions as needed. The long-term, enduring market drivers for all our businesses are strong, and we remain confident in our long-term growth strategy."
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, April 23, 2020 at 8:00 a.m. CDT 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 1Q 2020 Earnings Conference Call. A slide presentation will simultaneously be available for download on the Investors page at www.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 13698671. The replay will be available through 10:59 p.m. CDT on April 30, 2020.
About Valmont Industries, Inc.
Valmont is a global leader, designing and manufacturing engineered products 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.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 28-Mar-20 | 30-Mar-19 | |||
| Net sales | $ | 674,200 | $ | 692,139 |
| Cost of sales | 487,951 | 527,512 | ||
| Gross profit | 186,249 | 164,627 | ||
| Selling, general and administrative expenses | 119,354 | 110,025 | ||
| Operating income | 66,895 | 54,602 | ||
| Other income (expense) | ||||
| Interest expense | (10,014) | (9,878) | ||
| Interest income | 1,043 | 810 | ||
| Gain (loss) on investments (unrealized) | (2,308) | 2,832 | ||
| Other | 1,810 | 1,014 | ||
| (9,469) | (5,222) | |||
| Earnings before income taxes | 57,426 | 49,380 | ||
| Income tax expense | 14,486 | 12,302 | ||
| Equity in earnings (loss) of nonconsolidated subsidiaries | (219) | — | ||
| Net earnings | 42,721 | 37,078 | ||
| Less: Loss (earnings) attributable to non-controlling interests | 208 | (974) | ||
| Net earnings attributable to Valmont Industries, Inc. | $ | 42,929 | $ | 36,104 |
| Average shares outstanding (000's) - Basic | 21,453 | 21,886 | ||
| Earnings per share - Basic | $ | 2.00 | $ | 1.65 |
| Average shares outstanding (000's) - Diluted | 21,549 | 21,964 | ||
| Earnings per share - Diluted | $ | 1.99 | $ | 1.64 |
| Cash dividends per share | $ | 0.450 | $ | 0.375 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 28-Mar-20 | 30-Mar-19 | |||
| Net sales | ||||
| Engineered Support Structures | $ | 230,742 | $ | 230,288 |
| Utility Support Structures | 225,461 | 243,922 | ||
| Coatings | 88,085 | 86,779 | ||
| Infrastructure products | 544,288 | 560,989 | ||
| Irrigation | 156,720 | 152,816 | ||
| Less: Intersegment sales | (26,808) | (21,666) | ||
| Total | $ | 674,200 | $ | 692,139 |
| Operating Income | ||||
| Engineered Support Structures | $ | 15,931 | $ | 12,445 |
| Utility Support Structures | 27,724 | 25,048 | ||
| Coatings | 11,054 | 10,140 | ||
| Infrastructure products | 54,709 | 47,633 | ||
| Irrigation | 23,663 | 20,134 | ||
| Corporate | (11,477) | (13,165) | ||
| Total | $ | 66,895 | $ | 54,602 |
Valmont has aggregated its business segments into four global reportable segments as follows.
Engineered Support Structures: This segment consists of the manufacture and distribution of engineered metal and composite poles, towers, and components for global lighting, traffic, and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products.
Utility Support Structures: This segment consists of the manufacture of engineered steel and concrete structures for global utility transmission, distribution, substations, and renewable energy generation equipment
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, water management solutions, and technology for precision agriculture.
In addition to these four reportable segments, the Company had other businesses and activities that individually are not more than 10% of consolidated sales, operating income or assets.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
| 28-Mar-20 | 28-Dec-19 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 294,645 | $ | 353,542 |
| Accounts receivable, net | 492,785 | 480,000 | ||
| Inventories | 416,613 | 418,370 | ||
| Contract asset - costs and profits in excess of billings | 144,777 | 141,322 | ||
| Prepaid expenses | 63,306 | 32,043 | ||
| Refundable income taxes | 2,300 | 6,947 | ||
| Total current assets | 1,414,426 | 1,432,224 | ||
| Property, plant and equipment, net | 553,981 | 558,129 | ||
| Goodwill and other assets | 789,172 | 816,863 | ||
| $ | 2,757,579 | $ | 2,807,216 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Current installments of long-term debt | $ | 757 | $ | 760 |
| Notes payable to banks | 19,719 | 21,774 | ||
| Accounts payable | 209,132 | 197,957 | ||
| Accrued expenses | 170,944 | 167,264 | ||
| Contract liability - billings in excess of costs and earnings | 151,034 | 117,945 | ||
| Dividend payable | 9,625 | 8,079 | ||
| Total current liabilities | 561,211 | 513,779 | ||
| Long-term debt, excluding current installments | 776,139 | 764,944 | ||
| Other long-term liabilities | 310,099 | 338,748 | ||
| Shareholders' equity | 1,110,130 | 1,189,745 | ||
| $ | 2,757,579 | $ | 2,807,216 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| YTD | YTD | |||
|---|---|---|---|---|
| 28-Mar-20 | 30-Mar-19 | |||
| Cash flows from operating activities | ||||
| Net Earnings | $ | 42,721 | $ | 37,078 |
| Depreciation and amortization | 20,343 | 20,253 | ||
| Contribution to defined benefit pension plan | (17,039) | (13,943) | ||
| Change in working capital | 2,813 | (43,453) | ||
| Other | 13,514 | 7,978 | ||
| Net cash flows from operating activities | 62,352 | 7,913 | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant, and equipment | (23,580) | (21,109) | ||
| Proceeds from sale of assets | 684 | 422 | ||
| Acquisitions | (8,804) | (57,106) | ||
| Other | (1,436) | (1,667) | ||
| Net cash flows from investing activities | (33,136) | (79,460) | ||
| Cash flows from financing activities | ||||
| Proceeds from long-term borrowings | 10,000 | 10,000 | ||
| Proceeds (payments) from short-term borrowings | (1,442) | 9,327 | ||
| Principal payments on long-term borrowings | (188) | (10,194) | ||
| Purchase of treasury shares | (20,481) | (9,421) | ||
| Purchase of noncontrolling interest | (53,534) | (23,082) | ||
| Dividends paid | (8,079) | (8,213) | ||
| Other | (5,285) | (411) | ||
| Net cash flows from financing activities | (79,009) | (31,994) | ||
| Effect of exchange rates on cash and cash equivalents | (9,104) | 1,568 | ||
| Net change in cash and cash equivalents | (58,897) | (101,973) | ||
| Cash and cash equivalents - beginning of year | 353,542 | 313,210 | ||
| Cash and cash equivalents - end of period | $ | 294,645 | $ | 211,237 |
valmontindustriesfirstqu
Valmont Industries, Inc. First Quarter Earnings Presentation April 23, 2020
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. 2 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
1Q 2020 Segment Revenue and Segment Summaries TOTAL 1Q 2020 REVENUE: $674.2M $230.7M $225.5M $88.1M $156.7M Engineered Support Utility Support Coatings Irrigation Structures Structures N.A.: $106.6M | International: $50.1M 34.2% of Sales 33.4% of Sales 13.1% of Sales 23.2% of Sales SEGMENT SUMMARIES • Continued government investments • Continued strong market demand across • Higher volumes in North American • Higher NA sales of systems, strengthened transportation market all structure types markets offset by lower volumes in aftermarket parts and technology more demand • Lower sales were anticipated, primarily international markets than offset by lower tubing sales • Lower wireless communication sales due due to a large solar tracker project in 2019 • Local government mandates led to • International sales growth of 13.1%, to slower capital spending and COVID-19 that did not repeat closure of eight facilities late in the with growth across most regions , impacts in China facilities quarter due to COVID-19 partially offset by $2.7M of unfavorable • Access Systems sales 32.0% lower vs. currency impacts 2019 Solid First Quarter Revenue Despite COVID-19 Interruptions 3 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
COVID-19 Pandemic Plan and Safety Protocols Valmont has implemented enhanced protocols in response to COVID-19, including recommendations and requirements issued by the Centers for Disease Control and Prevention (“CDC”), World Health Organization (“WHO”) and local, state and national health authorities, to protect our employees, customers, suppliers and communities https://www.valmont.com/coronavirus-communication ENHANCED PROTOCOLS IN OUR FACILITIES � Prohibited all domestic and international non-essential travel for all employees � Increased frequency of disinfecting high-touch areas and high-traffic common areas � Reinforced hand washing and infection control training � Implemented safe distancing procedures and processes in all production facilities and administrative work areas � Provided additional personal protective equipment and cleaning supplies � Implemented processes to track and isolate employees who report or show COVID-19 symptoms or exposure � Implemented actions to screen, limit or prohibit non-essential visitors to all facilities � Implemented remote work strategy for administrative teams � Engaged with legal counsel in all jurisdictions where Valmont operates to ensure compliance with local mandates � Implemented security protocols for necessary site shutdowns 4 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Key Observations Related to COVID-19 • Valmont products and solutions support critical infrastructure sectors as defined by the Department of Homeland 01 Security (CISA.gov) and similar global government agencies. − Communication: Wireless communication structures and components (ESS) − Energy: Utility transmission and distribution structures (Utility) − Food and Agriculture: Water and food production (Irrigation) − Coatings is an integral process step in the three sectors above, as well as other critical sectors as defined by CISA.gov 02• Operations may be affected by COVID-19 isolation measures. A majority of our facilities are operational, and we expect normal production based on product mix, with some additional costs from administrative disruptions. Presently, certain facilities have temporarily ceased operations due to preemptive government mandates. These include operations in Argentina, France, India, Malaysia, New Zealand, Philippines and South Africa. 03• Changes to macroeconomic factors as a result of COVID-19 − Favorable: lower costs of steel and other raw materials, energy, improved labor availability and less turnover − Unfavorable: FX translation impacts and regional economic impacts • Other challenges associated with COVID-19 may impact our business, including changes to supply chain availability and 04 costs, overall demand for Valmont products, logistics delays, the normal operations of a facility, including any temporary closures as mandated or otherwise made necessary by governmental authorities, and any additional carryover of economic effects. 5 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Future Impact of COVID-19 Varies Across Diversified Portfolio Valmont FY2019 Segment Operating Income ($M) Estimated Risk Profile Due to COVID-19 UTILITY ESS • Supports critical infrastructure sector (Energy) to help ensure • Variety of demand drivers across multiple product lines and geographies uninterrupted electricity supply and power restoration • Increased demand for wireless communication structures and • 85% of segment revenue is from North American markets where components, as they support a critical infrastructure sector utilities are indicating that construction and generation projects will Utility ESS (Communications) and emergency/first responders and @home continue $65.6 work/school mandates • Renewable energy markets could be impacted due to uncertainty of $87.8 • Long-term, lighting and traffic structures demand could be impacted by debt funding and impact on return profiles changes to transportation budgets caused by COVID-19 effects • Commercial and residential construction delays could reduce commercial market demand IRRIGATION Coatings • Mandated government closure of factories in France, India, Malaysia, • Supports critical infrastructure sector (Food and Agriculture) to meet and Philippines will impact 2Q and potentially future quarters ongoing demands of the global food supply $51.0 Irrigation • Disruptions to food supply chains and continued pressure on COATINGS commodity prices, including ethanol, could impact demand $71.7 • Global correlation to industrial production levels and general • North American market is at trough-like levels and demand remains economic indicators and are expected to be lower in the short-term highly correlated to net farm income levels • Mandated government closure of facilities in India, Malaysia, New • No additional COVID-19-related risks are expected to impact Zealand, and Philippines will impact 2Q and potentially future quarters international market demand at this time • Mandated government closure of factories in Argentina and South Africa will impact 2Q and potentially future quarters � Lower � Moderate � Increased Business Risk in All Segments Increases with Facility Shutdowns as Mandated by Government Authorities 6 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Strategic Actions to Enhance Our Operations Safety Measures Already in Place to Combat COVID-19 • Large production areas and products allow for safe distancing and limited exposure between employees • Factory automation reduces amount of contact between employees • Additional safeguards established: closed café areas, limited breakroom attendance and staggered workers Strategic Capacity Additions Update • On track to support solid backlog in USS – global backlog of $689M increased 12% since end of 2019 • Well positioned to manage volume-price paradigm given selectivity in adding capacity • Controlling costs to adjust for volume fluctuations through flexible cost structure Transformation and Restructuring Efforts • Deliberate steps taken to diversify supply chain and cut costs over past 5 years • Eliminated sub-scale plant locations • Reduced global manufacturing footprint from 100+ to 87 locations – strategic reductions in China and Australia • Consolidated IT business systems and developed regional shared service centers • Divested grinding media business Well Positioned with Our Strategic Actions and Conservative Balance Sheet 7 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
2020 First Quarter Summary $M, except for per share amounts Revenue Operating Income Diluted EPS (2.6%) +22.5% +21.3% $66.9 $1.99 $692.1 $54.6 $674.2 $1.64 2020 2019 2020 2019 2020 2019 • Strong North American sales across most • Led by 370 bps GP improvement across segments, • 2019 reflects an 18¢ per diluted share impact due businesses due to higher sales volumes, operational to effects of the Midwest flooding event in March performance in North American businesses, and 2019 • Unfavorable currency translation impacts of ~$10M lower raw material costs • Tax rate of 25.2% similar to last year • $1M impact from COVID-19 related facility closures 8 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
1Q Results | Engineered Support Structures ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 228.0 Volume 2.2 $227.4 $228.0 Pricing/Mix 1.2 $15.9 $12.5 Acquisitions/Divestiture 1.4 Currency Translation (5.4) 2020 Revenue1 $ 227.4 2020 2019 2020 2019 COMMENTARY • Solid growth of lighting & traffic sales in North America led by government infrastructure spend; slightly lower international sales • Lower wireless communication sales coming off strong growth in 1Q 2019 and slower carrier spending due to T-Mobile/Sprint merger • Sales of Access Systems products lower but profitability improved sequentially compared to 4Q 2019 • Continued sales and margin strength across North American market led to 150 bps higher operating income 1 Net sales after intersegment eliminations. 9 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
1Q Results | Utility Support Structures ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 243.2 Volume (21.3) $243.2 $27.7 $222.9 $25.1 Pricing/Mix 1.7 Acquisitions/Divestiture - Currency Translation (0.7) 2020 Revenue1 $ 222.9 2020 2019 2020 2019 COMMENTARY • Sales decreased 7.6% compared to last year, as anticipated, due to lower sales in the international businesses • In North American markets, sales were higher, driven by continued strong market demand across all structure types • Global backlog increased to $689M, up 12.0% from the end of 2019, including receipt of a large transmission order in Europe • Operating income increased 200 bps due to strong volumes and favorable pricing in North American markets 1 Net sales after intersegment eliminations. 10 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
1Q Results | Coatings ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 70.2 Volume 0.6 $68.6 $70.2 $11.1 Pricing/Mix (0.8) $10.1 Acquisitions/Divestiture - Currency Translation (1.4) 2020 Revenue1 $ 68.6 2020 2019 2020 2019 COMMENTARY • Higher volumes in North American markets were offset by lower volumes in international markets • The closure of eight facilities late in the quarter, as mandated by local governments, represented 1.0% of the sales decrease • Operating income increased 80 bps due to lower zinc costs and improved operational performance 1 Net sales after intersegment eliminations. 11 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
1Q Results | Irrigation ($M) Key Statistics Revenue Total Operating Income 2019 Revenue1 $ 150.7 Volume 11.6 $105.2 $106.4 $23.7 Pricing/Mix (2.3) $20.1 $50.1 $44.3 Acquisitions/Divestiture (2.0) Currency Translation (2.7) North America International 2020 Revenue1 $ 155.3 2020 2019 2020 2019 COMMENTARY • North American sales down 1.8%, due to higher sales of systems, aftermarket parts and advanced technology solutions, were more than offset by lower industrial tubing sales • International sales were 13.1% higher than last year, due to higher volumes across most regions, led by record local currency sales in Brazil during the quarter, and signs of a market recovery in Australia • Operating income increased 190 bps due to higher volumes, and lower raw material prices, offset by $0.8M of planned higher R&D expense for technology investments 1 Net sales after intersegment eliminations. 12 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
1Q 2020 Cash Flow Highlights 1Q Cash Flow | FCF Reconciliation Cash and Debt Highlights YTD ($M) 03/28/2020 $294.6M Net Cash Flows from Operating Activities $ 62.4 ($145.9M ex-U.S.) Net Cash Flows from Investing Activities (33.1) Cash at 03/28/2020 Net Cash Flows from Financing Activities (79.0) Net Cash Flows from Operating Activities $ 62.4 $796.6M Total Long-Term Debt at 03/28/2020 Purchase of Property, Plant & Equipment (23.6) Free Cash Flows $ 38.8 13 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Balanced Approach to Capital Allocation ($M) 1Q 2020 Capital Deployment: $61M • Working capital investment to support investments in Capital people, technology and systems Expenditures • 2020 CapEx expected to be $75 - $90M $24 • Strategic fit + market expansion $20 Business • Returns exceeding cost of capital within 3 years Growing Our Growing Acquisitions • Amount excludes $54M purchase of non-controlling interest of AgSense and Convert Italia • Opportunistic approach, supported by FCF $9 Share $8 • Halted all repurchases as of March 26, 2020 Repurchases • $184M remains on current authorization as of 03/28/20 • 20% dividend increase announced February 2020 Shareholders Dividends • Payout ratio target: 15% of earnings Capital Acquisitions Share Dividends ReturningCashto • Current payout: ~23% Expenditures Repurchases Aligned with Capital Allocation Commitments Announced in 2014 14 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty AS OF APRIL 21, 2020 Cash1 $350.0M Available Credit under Revolving 4 $470.0M Total Debt (Long-Term) 2 $796.6M Credit Facility Shareholders’ Equity2 $1,110.1M Cash 350.0M Total Debt to Adj. EBITDA3 2.4x Total Available Liquidity $820.0M Net Debt to Adj. EBITDA3 1.5x ► Long-term debt of $796.6M, mostly fixed-rate, with long-dated maturities to 2044 and 20542 ► 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 reduced from $100M - $125M to $75M - $90M − FCF expected to improve due to lower costs of energy and raw material, and possibly offset by lower revenue − Share repurchases halted out of an abundance of caution to preserve financial liquidity until COVID-19 impact is clearer − Proactively drew down $75.0 million of $600.0 million revolving credit facility in early April 1 As of April 21, 2020. 2 As of March 28, 2020. 3 See slide 30 for calculation of Adjusted EBITDA and Leverage Ratio. 4 $600M Total Revolver less borrowings and Standby LC”s of $130M. 15 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
2Q 2020 Outlook and Assumptions BACKGROUND • Strong Q1 performance – was on track to reaffirm FY2020 outlook • Given current market conditions due to COVID-19 and future market uncertainty, we are withdrawing full-year 2020 guidance • 2Q19 non-recurring items: $3M Coatings legal expense and $3M Utility customer accommodation expense 2Q20 OUTLOOK1 KEY ASSUMPTIONS • No additional closures of large facilities due to COVID-19 • Expect current site closures to resume operations in early May • Raw material prices remain stable to slightly deflationary and current supply chain reliability will continue $645M – $665M • Revenue expectations compared to 2019: Net Sales • Irrigation: 5% - 10% decline • Coatings: 20% - 25% decline • Expect positive operating cash flows – management teams highly focused on working capital management to minimize economic slowdown impacts • ~25% tax rate • Unfavorable currency translation on net sales of $10M – $12M 7.0% – 8.5% • Lower-end range of Operating Income Margin range driven by three factors: 1. International facilities impacted by COVID-19 closures would resume operations at a slower pace than expected, Operating Income Margin or market demand would be lower than expected once operations resume 2. Coatings volumes would decrease to levels lower than in prior recessions 3. Market conditions in Irrigation business would resemble the prior significant global economic downturn 1 Excludes potential future restructuring activities. 16 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
2Q 2020 Segment Market Drivers • Solid transportation market demand from continued government investments in infrastructure development (i.e., lighting and traffic) ESS • Continued solid demand for wireless communication although sales in the quarter can be impacted by timing of shipments • Lower sales in international markets compared to 2019 due to demand impacts from COVID-19 • Record global backlog of $689M, supported by increased demand across all structure types from investments in grid hardening and renewables USS • Recognizing the benefit of strategic North American capacity additions • International market demand expected to be in line with recent market trends • Expect weaker demand due to current global economic trends and lower expected industrial production levels, which are highly correlated to COATINGS segment sales • Lower sales expected due to expected weakness in ag commodity prices, including ethanol, continued low net farm income, recent food supply IRRIGATION chain disruptions and strengthening US dollar 17 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Fundamental Market Drivers ESS USS COATINGS IRRIGATION • Continued government • Our record backlog suggests • Business closely follows • Our mission-critical products investments in infrastructure ongoing demand and necessity industrial production trends and technology supports the development across lighting for grid hardening and demand for increased food and transportation markets renewables • Global preservation of critical production and security infrastructure globally • Growth in wireless • Growth supported by strong communication products and returns on equity for both • Increased number of • Long-term drivers supported by components, particularly in 5G; public and private utilities economies actively fighting • Water usage and other farm expected to accelerate given costs of corrosion will drive input optimization current working and schooling need to extend life of steel • Mitigation of increased labor home environment products globally costs • Support of growers’ conservation efforts No Change Anticipated in the Near- and Long-term 18 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Summary Our team remains positive, flexible and committed to delivering strong results despite current market 01 environment Strategic cost cutting initiatives through transformation and restructuring efforts over past five years 02 have better positioned us to withstand economic downturns 03 Ability to quickly implement cost management measures, if needed; well prepared with team in place Our global footprint is a distinct strategic and competitive advantage, which allows us to shift supply 04 and sourcing, when needed Remain committed to our elevated ESG strategy and principles with significant progress made over 05 past year and future plans in place Resiliency of Our People, Business Portfolio & Processes Gives Us Confidence to Withstand Downturns 19 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
QUESTION AND ANSWER 20 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
APPENDIX 21 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
1Q 2020 Financial Summary $M, except for per share amounts Net Sales 2020 2019 Change Engineered Support Structures $ 230.7 $ 230.3 0.2% Utility Support Structures 225.5 243.9 (7.6%) Coatings 88.1 86.8 1.5% Irrigation 156.7 152.8 2.6% Intersegment Sales (26.8) (21.7) NM Net Sales $ 674.2 $ 692.1 (2.6%) Operating Income $ 66.9 $ 54.6 22.5% Net Income $ 42.9 $ 36.1 18.9% Diluted Earnings Per Share (EPS) $ 1.99 $ 1.64 21.3% 22 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
2018-2019 Financials Retrospectively Adjusted from LIFO to FIFO Change 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 6.72 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 23 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
European and UK Construction PMI Source: IHS Markit 24 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Australia Industry Trends 2019-2020 PBI – Business Performance PCI – Construction Performance Source: Australian Industry Group 25 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
COVID-19 Impacts on Commodity Prices 26 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
U.S. Net Cash Farm Income by Year 27 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
2010-2019 Historical Free Cash Flow1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ($M) Net cash flows from operating activities $ 152.2 $ 149.7 $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 Net cash flows from investing activities (262.7) (84.1) (136.7) (131.7) (256.9) (48.2) (53.0) (49.6) (155.4) (168.1) Net cash flows from financing activities 269.7 (45.9) (16.4) (37.4) (136.8) (32.0) (95.2) (220.0) (162.1) (98.9) Net cash flows from operating activities $ 152.2 $ 149.7 $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 Purchase of plant, property, and equipment (36.1) (83.1) (97.1) (106.8) (73.0) (45.5) (57.9) (55.3) (72.0) (97.4) Free Cash flows 116.1 66.6 100.0 289.7 101.1 226.8 174.9 77.8 81.0 210.2 Net earnings attributed to Valmont Industries, Inc. $ 94.4 $ 228.3 $ 234.1 $ 278.5 $ 183.9 $ 40.1 $ 173.2 $ 116.2 $ 94.4 $ 153.8 Adjusted net earnings attributed to Valmont Industries, Inc.1 N/A $ 162.3 N/A $ 295.1 $ 187.7 $ 131.7 $ 137.6 $ 158.4 $ 123.0 N/A Free Cash Flow Conversion - GAAP 1.23 0.29 0.43 1.04 0.55 5.66 1.01 0.67 0.86 1.37 Free Cash Flow Conversion - Adjusted N/A 0.41 N/A 0.98 0.53 1.71 1.27 0.49 0.66 N/A 1) Reconciliation of Net Earnings to Adjusted Figures Net earnings attributed to Valmont Industries, Inc. $ 94.4 $ 228.3 $ 234.1 $ 278.5 $ 183.9 $ 40.1 $ 173.2 $ 116.2 $ 94.4 $ 153.8 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 — Reversal of contingent liability — — — — — — (16.6) — — — Other non-recurring expenses (non-cash) — — 18.18.1 — — 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. $ 94.4 $ 162.3 $ 234.1 $ 295.1 $ 187.7 $ 131.7 $ 137.6 $ 158.4 $ 123.0 $ 153.8 10 Year Average FCF is $144M; Last 5 Years Has Averaged $153M 1 Adjusted earnings for purposes of calculating free cash flow conversion may not agree to the adjusted net earnings. The difference is due to cash restructuring, debt refinancing, or other non-recurring expenses which were settled in cash in the year of occurrence. 28 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Strong Free Cash Flow Throughout The Cycle 1 2010 – 2019 Free Cash Flow ($M) Years of rapid raw material cost inflation 350 300 250 290 10-yr Avg. $144M 200 227 GAAP 1.31X 210 Adj. 0.91X 150 175 100 144 116 100 101 81 50 67 78 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10 Year Avg Historical FCF Conversion by Year1 GAAP 1.23X 0.29X 0.43X 1.04X 0.55X 5.66X 1.01X 0.67X 0.86X 1.37X 1.31X Adj. N/A 0.41X N/A 0.98X 0.53X 1.71X 1.27X 0.49X 0.66X N/A 0.91X 1 We use the non-GAAP measure of free cash flow, which we define as GAAP net cash flows from operating activities reduced by capital expenditures. We believe that Free Cash Flow is a useful performance measure for management and useful to investors as the basis for comparing our performance with other companies. Our measure of Free Cash Flow may not be directly comparable to similar measures used by other companies. 29 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation
Calculation of Adjusted EBITDA & Leverage Ratio 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 ($000s) 28-Mar-20 Net earnings attributable to Valmont Industries, Inc. $ 160,593 Interest expense 40,289 Income tax expense 52,390 Depreciation and amortization expense 82,353 EBITDA 335,625 Adjustments - 0 Adjusted EBITDA 335,625 Debt $ 796,615 Leverage Ratio 2.37 Debt $ 796,615 Cash 294,645 Net Debt 501,970 Leverage Ratio 1.50 30 | April 23, 2020 | Valmont Industries, Inc. | 1Q 2020 Earnings Presentation