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 21, 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 April 21, 2021 announcing its financial results for its fiscal year ended March 27, 2021. The press release, along with the presentation to be used during its earnings call on April 22, 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 April 21, 2021 |
| 99.2 | Presentation Slides for earnings call on April 22, 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: April 21, 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: | April 21, 2021 |
Valmont Reports First Quarter 2021 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 first quarter ended March 27, 2021.
First Quarter 2021 Highlights (all metrics compared to First Quarter 2020 unless otherwise noted)
•Net Sales of $774.9 million increased 14.9% led primarily by significantly higher sales in Irrigation and Utility Support Structures
•Operating Income increased 15.4% to $77.2 million, or 10.0% of sales compared to $66.9 million or 9.9% of sales last year, despite significant inflationary pressures
•Diluted Earnings per Share (EPS) improved to $2.57 compared to $1.99, an increase of 29.1%
•Record global backlog of more than $1.3 billion, reflecting strong market demand
◦Utility Support Structures global backlog increased 27.0% during the quarter to a record $717.0 million, including receipt of two additional purchase orders totaling approximately $220 million for the large 500kV project in the Southeast U.S.
◦Irrigation global backlog increased to approximately $350.0 million during the quarter
•Generated operating cash flow of $33.2 million; cash and cash equivalents at end of first quarter were $391.5 million
•Repurchased 50,147 shares of company stock for $11.1 million, at an average price of $221.98 per share
•Announced an 11% quarterly dividend increase, from $0.45 to $0.50 ($1.80 to $2.00 annualized)
•Recognized a favorable tax rate of 21.9% primarily due to a non-recurring incremental tax benefit attributed to employee stock option exercises
•Released the Valmont 2021 Sustainability Report, highlighting commitments to environmental, social and governance (ESG) principles along with key metrics and 2025 environmental goals:
◦19% reduction in Scope I carbon intensity of Company vehicles
◦12% additional reduction in normalized global electricity usage
◦10% reduction in Scope I/II carbon intensity
•Commissioned a 1MW solar installation at the Company's largest manufacturing facility in Valley, Nebraska, utilizing the Company's proprietary solar tracker technology to supply approximately 6.0% of the site's electricity demand
Key Financial Metrics
| First Quarter 2021 | |||||||
|---|---|---|---|---|---|---|---|
| (000's except per share amounts) | 03/27/2021 1Q 2021 | 03/28/2020<br>1Q 2020 | vs. 1Q 2020 | ||||
| Net Sales | $ | 774,886 | $ | 674,200 | 14.9% | ||
| Operating Income | 77,211 | 66,895 | 15.4% | ||||
| Operating Income as a % of Net Sales | 10.0 | % | 9.9 | % | |||
| Net Earnings | 55,014 | 42,929 | 28.2% | ||||
| Diluted Earnings Per Share | $ | 2.57 | $ | 1.99 | 29.1% | ||
| Average Shares Outstanding | 21,429 | 21,549 |
"We achieved solid sales and earnings growth across the majority of our businesses this quarter through proactively implementing pricing actions starting in fourth quarter 2020, which helped largely offset steep inflationary pressures,” said Stephen G. Kaniewski, President and Chief Executive Officer. “Sales growth was led by significantly higher sales in the Irrigation segment including a 34.0% increase in technology products year-over-year, as higher agricultural commodity prices are driving positive farmer sentiment, and deliveries of the large, multi-year project for Egypt continued during the quarter. Higher volumes in the Utility Support Structures segment were driven by strong underlying demand, including in renewable energy markets, and we were pleased to be awarded two additional purchase orders for the large 500kV project in the Southeast U.S. In Engineered Support Structures, higher sales of wireless communication products helped partially offset anticipated lower transportation market volumes, and the Coatings segment continues to improve with general economic trends. We generated positive free cash flow despite unprecedented raw material inflation, driven by our continued focus on working capital management and solid earnings growth."
First Quarter 2021 Segment Review
Infrastructure
Utility Support Structures Segment (32.7% of Sales)
Steel, concrete and composite structures for utility markets, including transmission, distribution, substations, and renewable energy generation equipment and drone inspection services
Sales of $253.1 million grew 12.3% year-over-year, led by higher volumes from increasing demand for renewable energy generation and utilities' continued investments in grid resiliency.
Operating Income was $21.7 million or 8.6% of sales compared to $27.7 million, or 12.3% of sales in 2020. Higher volumes and improved operational performance were more than offset by the impact of rapid raw material cost inflation that could not be fully recovered through pricing actions and a higher mix of global generation products.
Engineered Support Structures Segment (28.7% 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 $222.3 million decreased 3.6% year-over-year, as lower volumes in transportation markets were partially offset by favorable pricing, higher sales of wireless communication products and components, and $8.6 million of favorable currency impacts.
Lighting and traffic sales of $153.9 million decreased 10.5% year-over-year. Lower volumes, primarily due to COVID-19 impacts on project timing and delays in approving the FAST Act extension, were partially offset by favorable pricing in all regions.
Wireless communication structures and components sales of $46.1 million increased 20.6% year-over-year. Increasing capital investments from wireless carriers and favorable pricing led to the sales growth.
Access Systems sales of $22.3 million increased 8.8% year-over-year, primarily due to favorable currency impacts.
Operating Income was $19.9 million or 9.0% of sales compared to $15.9 million or 6.9% of sales in 2020. Profitability improvement was driven by favorable pricing, a more favorable mix of products and lower SG&A expense.
Coatings Segment (12.0% of Sales)
Galvanizing, painting and anodizing services to preserve and protect metal products
Sales of $93.3 million increased 5.9% year-over-year, as favorable pricing and higher internal volumes were partially offset by lower external volumes in North America due to disruptions from COVID-19 and winter weather on end customers.
Operating Income was $12.9 million or 13.8% of sales compared to $11.1 million or 12.5% of sales in 2020. Profitability improvement was led by favorable pricing and operational efficiencies, partially offset by a $0.8 million non-recurring, natural gas expense due to impacts of the Texas winter weather event during the quarter.
Agriculture
Irrigation Segment (29.6% 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 $229.7 million increased 46.5% year-over-year, due to higher volumes across most markets, particularly in the Middle East, and higher technology sales, partially offset by $6.1 million of unfavorable currency impacts.
North American sales of $122.8 million increased 15.2% compared to 2020, due to higher volumes across all irrigation product lines, and higher industrial tubing sales.
International sales of $106.9 million more than doubled year-over-year and increased more than 125.0% in local currencies. Sales growth was led by higher volumes including continued deliveries of the large multi-year Egypt project, strong demand in Brazil, improved product mix and sales from recent acquisitions.
Operating Income was $38.7 million, or 16.9% of sales compared to $23.7 million, or 15.1% of sales in 2020. Profitability growth was driven by higher volumes and improved operational efficiency, partially offset by higher R&D expense of approximately $2.0 million for technology growth investments.
Strength of Global Supply Chain and Continuation of COVID-19 Safety Protocols
Since the start of the pandemic, the Company has been taking measured and deliberate steps to strengthen its global supply chain. Through its strong relationships with many strategic suppliers, Valmont has been able to continue procuring raw materials and components critical to its operations, particularly steel. Other supply constraints have been largely mitigated by effectively utilizing the
Company's global footprint. Further, current constraints at global seaports have not significantly disrupted its operations. Additionally, Valmont continues to follow CDC, WHO and local guidelines during the pandemic to protect the safety, health and well-being of employees, customers, suppliers and communities.
Balance Sheet, Liquidity and Capital Allocation
The Company continues to generate good cash flows through strong earnings and a focus on working capital management, including inventory optimization. At end of the first quarter, cash and cash equivalents were $391.5 million. Valmont purchased $11.1 million of company stock in the first quarter, and $136.8 million remains on the current authorization, with no expiration. Recognizing its strong balance sheet and confidence in generating good cash flows in the future, the Company in February announced an 11.0% increase to its quarterly dividend. During the quarter, Moody's reaffirmed the Company’s Baa3/Stable credit rating and Valmont remains committed to maintaining its Investment Grade rating.
Second-Quarter 2021 Financial Outlook and Reaffirming Full-Year Key Assumptions While certain aspects of the pandemic's impact on global economic factors and pace of economic recovery remain somewhat uncertain, the Company will continue to provide a greater level of transparency, including key assumptions and indications for second quarter 2021, to help the financial community understand short-term impacts and expectations. The Company is also reaffirming key assumptions and indications for full-year 2021.
2Q 2021 Financial Outlook
•2Q Net Sales estimated to be $805.0 - $830.0 million, an increase of 17.0% - 20.0% vs. prior year
•2Q Operating Profit Margin estimated to be 9.5% - 10.5%
•Tax rate between 23.0% - 24.0%
Reaffirming 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 negatively impacting gross profit margins in the first half of 2021
•Diluted Earnings per Share estimated to be $9.00 - $9.70
•Second half 2021 tax rate between 24.0% - 25.0%; no tax law changes
•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
Kaniewski added, "We've had a strong start to the year, and are very encouraged by the tailwinds across many of our global markets. We entered the second quarter with a new record global backlog of more than $1.3 billion, including more than $700 million in the Utility Support Structures segment, providing a good line of sight for us into 2022. In the Engineered Support Structures segment the need for critical infrastructure investment globally gives us confidence in the long-term market growth trends, and we are benefiting from increasing 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, as evidenced by our global backlog of more than $350 million. Across the portfolio, we continue to execute pricing strategies to recover the impact of unprecedented raw material cost increases and leverage the strength of our global supply chain. Additionally, our balance sheet is strong and gives us flexibility to execute our long-term strategic plan. Our strategy remains focused on long-term growth, with an organizational emphasis on ESG principles, Return on Invested Capital, Operational Excellence and strengthening our organization for the future. As always, the safety and well-being of our employees remains our number one imperative, while we continue to execute and drive growth and performance."
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 22, 2021 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 2021 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 13713719. The replay will be available through 10:59 p.m. CDT on April 29, 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.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 27-Mar-21 | 28-Mar-20 | |||
| Net sales | $ | 774,886 | $ | 674,200 |
| Cost of sales | 570,332 | 487,951 | ||
| Gross profit | 204,554 | 186,249 | ||
| Selling, general and administrative expenses | 127,343 | 119,354 | ||
| Operating income | 77,211 | 66,895 | ||
| Other income (expense) | ||||
| Interest expense | (9,999) | (10,014) | ||
| Interest income | 311 | 1,043 | ||
| Loss on investments (unrealized) | (109) | (2,308) | ||
| Other | 3,449 | 1,810 | ||
| Other income (expense), net | (6,348) | (9,469) | ||
| Earnings before income taxes | 70,863 | 57,426 | ||
| Income tax expense | 15,502 | 14,486 | ||
| Equity in (loss) of nonconsolidated subsidiaries | (360) | (219) | ||
| Net earnings | 55,001 | 42,721 | ||
| Less: (Earnings) attributable to non-controlling interests | 13 | 208 | ||
| Net earnings attributable to Valmont Industries, Inc. | $ | 55,014 | $ | 42,929 |
| Average shares outstanding (000's) - Basic | 21,179 | 21,453 | ||
| Earnings per share - Basic | $ | 2.60 | $ | 2.00 |
| Average shares outstanding (000's) - Diluted | 21,429 | 21,549 | ||
| Earnings per share - Diluted | $ | 2.57 | $ | 1.99 |
| Cash dividends per share | $ | 0.500 | $ | 0.450 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 27-Mar-21 | 28-Mar-20 | |||
| Net sales | ||||
| Utility Support Structures | $ | 253,133 | $ | 225,461 |
| Engineered Support Structures | 222,327 | 230,742 | ||
| Coatings | 93,288 | 88,085 | ||
| Infrastructure products | 568,748 | 544,288 | ||
| Irrigation | 229,664 | 156,720 | ||
| Less: Intersegment sales | (23,526) | (26,808) | ||
| Total | $ | 774,886 | $ | 674,200 |
| Operating Income | ||||
| Utility Support Structures | $ | 21,652 | $ | 27,724 |
| Engineered Support Structures | 19,925 | 15,931 | ||
| Coatings | 12,872 | 11,054 | ||
| Infrastructure products | 54,449 | 54,709 | ||
| Irrigation | 38,748 | 23,663 | ||
| Corporate | (15,986) | (11,477) | ||
| Total | $ | 77,211 | $ | 66,895 |
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)
| 27-Mar-21 | 26-Dec-20 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 391,458 | $ | 400,726 |
| Accounts receivable, net | 491,383 | 511,714 | ||
| Inventories | 512,924 | 448,941 | ||
| Contract asset - costs and profits in excess of billings | 117,539 | 123,495 | ||
| Prepaid expenses and other assets | 89,522 | 59,804 | ||
| Refundable income taxes | 4,810 | 9,945 | ||
| Total current assets | 1,607,636 | 1,554,625 | ||
| Property, plant and equipment, net | 605,354 | 597,727 | ||
| Goodwill and other assets | 795,086 | 800,808 | ||
| $ | 3,008,076 | $ | 2,953,160 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Current installments of long-term debt | $ | 5,147 | $ | 2,748 |
| Notes payable to banks | 38,182 | 35,147 | ||
| Accounts payable | 289,110 | 268,099 | ||
| Accrued expenses | 186,177 | 227,735 | ||
| Contract liability - billings in excess of costs and earnings | 150,068 | 130,018 | ||
| Dividend payable | 10,625 | 9,556 | ||
| Total current liabilities | 679,309 | 673,303 | ||
| Long-term debt, excluding current installments | 729,589 | 728,431 | ||
| Other long-term liabilities | 349,076 | 343,590 | ||
| Shareholders' equity | 1,250,102 | 1,207,836 | ||
| $ | 3,008,076 | $ | 2,953,160 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 27-Mar-21 | 28-Mar-20 | |||
| Cash flows from operating activities | ||||
| Net Earnings | $ | 55,001 | $ | 42,721 |
| Depreciation and amortization | 21,031 | 20,343 | ||
| Contribution to defined benefit pension plan | (964) | (17,039) | ||
| Change in working capital | (54,500) | 9,255 | ||
| Other | 12,585 | 7,072 | ||
| Net cash flows from operating activities | 33,153 | 62,352 | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant, and equipment | (27,565) | (23,580) | ||
| Acquisitions | — | (8,804) | ||
| Other | (1,743) | (752) | ||
| Net cash flows from investing activities | (29,308) | (33,136) | ||
| Cash flows from financing activities | ||||
| Proceeds from long-term borrowings | 4,181 | 10,000 | ||
| Proceeds (payments) from short-term borrowings | 3,975 | (1,442) | ||
| Principal payments on long-term borrowings | (712) | (188) | ||
| Purchase of treasury shares | (11,131) | (20,481) | ||
| Purchase of noncontrolling interest | — | (53,534) | ||
| Dividends paid | (9,556) | (8,079) | ||
| Other | 2,593 | (5,285) | ||
| Net cash flows from financing activities | (10,650) | (79,009) | ||
| Effect of exchange rates on cash and cash equivalents | (2,463) | (9,104) | ||
| Net change in cash and cash equivalents | (9,268) | (58,897) | ||
| Cash and cash equivalents - beginning of year | 400,726 | 353,542 | ||
| Cash and cash equivalents - end of period | $ | 391,458 | $ | 294,645 |
vmi2021q1presentation
© 2021 Valmont® Industries, Inc. Valmont Industries, Inc. First Quarter Earnings Presentation April 22, 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. April 22, 20212 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation
| Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 20213 STEVE KANIEWSKI PRESIDENT & CHIEF EXECUTIVE OFFICER
1Q 2021 Segment Sales and Segment Summaries April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation4 Solid First Quarter Pricing and Operational Performance • Higher volumes from increasing demand for renewable energy and utilities’ continued investments in grid resiliency • Favorable pricing, growth in wireless communication sales, and favorable currency impacts more than offset by anticipated lower transportation market volumes, as delays in the FAST Act approval during 2020, and COVID-19 impacts continued to affect timing of road and construction projects • Strong wireless communication structures and components demand led by carriers increasing capital spend in support of 5G buildouts • Favorable pricing and higher internal volumes partially offset by lower external volumes in North America due to disruptions from COVID-19 and winter weather on end customers • Global: higher volumes across most markets, particularly in the Middle East, and higher technology sales, partially offset by unfavorable currency impacts • North America: Higher volumes across all product lines and higher industrial tubing sales • Int’l: Continued deliveries of large multi-year Egypt project, strong demand in Brazil, improved product mix and sales from recent acquisitions SEGMENT SUMMARIES TOTAL 1Q 2021 SALES: $774.9M $253.1M $222.3M $93.3M $229.7M Utility Support Structures Engineered Support Structures Coatings Irrigation N.A.: $122.8M | International: $106.9M 32.7% of Sales 28.7% of Sales 12.0% of Sales 29.6% of Sales
Update on American Jobs Plan • Announced in March 2021 by President Biden with an estimated value >$2.0T • Multi-year stimulus package allocates − $620B to modernize roads, bridges and highways − $100B to electrical grid investments − $100B to high-speed broadband investments • Areas of increased emphasis − Upgrading aging infrastructure (i.e., roads and highways) − Reducing traffic congestion and carbon emissions − Hardening electrical grid − Increasing access to wireless connectivity nationwide • Result: longer-term funding stability will lead to a positive impact on infrastructure businesses 5 Timing of Benefits Uncertain but Remain Optimistic with Administration’s Direction April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation
Engraining ESG in Our DNA • Published Annual Sustainability Report in March 2021 • Announced 2025 Sustainability Goals − Carbon Intensity − Global Electricity − Global Combustion Fuel − Water Standards • Earth Day celebration: commemorating installation of 1-megawatt solar field at Valley, NE campus − Largest, privately-owned, behind-the-grid solar field in Nebraska − Covers 4+ acres – provides Valley campus with 6% of electrical needs − Reinforces and strengthens our commitment to innovate with sustainability in mind 6 More to Come on ESG Initiatives at Upcoming Virtual Investor Day April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation
AVNER APPLBAUM EVP & CHIEF FINANCIAL OFFICER | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 20217
1Q 2021 Financial Summary April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation8 Sales Operating Income Diluted EPS 14.9% 15.4% 29.1% • Significantly higher sales in Irrigation and Utility Support Structures • Record global backlog of more than $1.3B, reflecting strong market demand • Operating income growth driven by: ‒ Improved operational efficiency in all segments ‒ Higher volumes in Utility Support Structures and Irrigation • Higher operating income and a favorable tax rate of 21.9%, which was primarily due to a one-time incremental tax benefit associated with employee stock option exercises $M, except for per share amounts $774.9 $674.2 2021 2020 $66.9 $77.2 $2.57 $1.99 2021 2020
Sales Operating Income 13.3% (21.9%) 1Q 2021 Results | Utility Support Structures 9 ($M) Key Statistics 2020 Sales1 $ 222.9 Volume 31.5 Pricing/Mix (5.7) Acquisitions/Divestiture 2.2 Currency Translation 1.8 2021 Sales1 $ 252.7 $252.7 $222.9 2021 2020 $21.7 $27.7 2021 2020 COMMENTARY • Higher volumes from strong underlying demand, including in renewable energy markets and utilities' continued investments in grid resiliency • Awarded two additional purchase orders for the large 500kV project in the Southeast U.S. • Global backlog increased 27.0% during the quarter to a record $717.0M • Headwinds from the impact of rapid raw material cost inflation that could not be fully recovered through pricing actions and a higher mix of global generation products 1 Net sales after intersegment eliminations. April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation
Sales Operating Income (2.3%) 25.1% 1Q 2021 Results | Engineered Support Structures April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation10 ($M) Key Statistics 2020 Sales1 $ 227.4 Volume (19.2) Pricing/Mix 5.4 Acquisitions/Divestiture - Currency Translation 8.6 2021 Sales1 $ 222.2 $222.2 $227.4 2021 2020 $19.9 $15.9 2021 2020 COMMENTARY • Higher wireless communication product sales and $8.6M of favorable currency impacts helped partially offset lower transportation market volume • Lighting and traffic sales decreased 10.5% YoY; lower volumes, primarily due to COVID-19 impacts on project timing and delays in approving the FAST Act extension, were partially offset by favorable pricing • Wireless communication structures and components sales grew 20.6% compared to last year from increasing capital investments from wireless carriers and favorable pricing • Access Systems sales increased 8.8% compared to last year, primarily due to favorable currency impacts 1 Net sales after intersegment eliminations.
Sales Operating Income 4.4% 16.4% 1Q 2021 Results | Coatings April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation11 ($M) Key Statistics 2020 Sales1 $ 68.6 Volume (3.4) Pricing/Mix 3.1 Acquisitions/Divestiture - Currency Translation 3.3 2021 Sales1 $ 71.6 $71.6 $68.6 2021 2020 $12.9 $11.1 2021 2020 COMMENTARY • Segment continues to improve with general economic trends • Favorable pricing offset lower external volumes due to COVID impacts on end markets, and a one-time natural gas expense of ~$800K related to the February winter weather event in Texas 1 Net sales after intersegment eliminations.
Sales Operating Income 15.6% 113.1% 63.7% 1Q 2021 Results | Irrigation April 22, 202112 ($M) Key Statistics 2020 Sales1 $ 155.3 Volume 58.9 Pricing/Mix 15.5 Acquisitions/Divestiture 4.8 Currency Translation (6.1) 2021 Sales1 $ 228.4 $23.7 2021 20202021 2020 $121.5 $106.9 $105.1 $50.2 North America International COMMENTARY • Higher agricultural commodity prices are driving positive farmer sentiment • 34% increase in sales of technology products YoY • Global backlog increased to ~$350.0M during the quarter • Higher volumes across all irrigation product lines and higher industrial tubing sales • Record sales in Brazil in local currency and deliveries of large, multi-year Egypt project continued during the quarter 1 Net sales after intersegment eliminations. $38.7 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation
1Q 2021 Cash Flow Highlights April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation13 Solid Operating CF Driven by Higher Operating Income and Strategic Working Capital Management ($M) YTD 3/27/2021 Net Cash Flows from Operating Activities $ 33.2 Net Cash Flows from Investing Activities (29.3) Net Cash Flows from Financing Activities (10.7) Net Cash Flows from Operating Activities $ 33.2 Purchase of Property, Plant & Equipment (27.6) Free Cash Flows $ 5.6 1Q Cash Flow | FCF Reconciliation Cash and Debt Highlights $391.5M ($197.1M ex-U.S.) Cash at 3/27/2021 $729.6M Total Long-term Debt at 3/27/2021
Balanced Approach to Capital Allocation April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation14 $28 $0 $11 $10 Capital Expenditures Acquisitions Share Repurchases Dividends 2021 YTD Capital Deployment: $49M Capital Expenditures • 2021 CapEx expected to be $110M - $120M • Investments to support strategic growth initiatives and Industry 4.0 advanced manufacturing Acquisitions • Strategic fit + market expansion • Returns exceeding cost of capital within 3 years Share Repurchases • Opportunistic approach, supported by FCF • Repurchased 50,147 shares at an average price of $221.98 per share • $137M remains on current authorization as of 3/27/21 Dividends • 11% dividend increase announced February 2021 • Payout ratio target: 15% of earnings • Current payout: ~22% 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 April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation15 Cash $391.5M Total Debt (Long-term) $729.6M Shareholders’ Equity $1,250.1M Total Debt to Adj. EBITDA1 2.1x Net Debt to Adj. EBITDA1 1.0x Available Credit under Revolving Credit Facility2 $585.4M Cash $391.5M Total Available Liquidity $976.9M AS OF MARCH 27, 2021 ► Long-term debt of $729.6M, 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 − Moody’s reaffirmed Baa3/Stable credit rating during Q1 − Purchased $11.1M of company stock in Q1, and $136.8M remains on current authorization − Announced 11% increase to quarterly dividend in February 1 See slide 33 for calculation of Adjusted EBITDA and Leverage Ratio. 2 $600M Total Revolver less borrowings and Standby LC”s of $15M.
2Q 2021 / Full Year 2021 Outlook and Key Assumptions 16 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 2Q21 OUTLOOK1 KEY ASSUMPTIONS • Favorable foreign currency translation impact of ~2% of Net Sales • In Utility Support Structures, significant raw material cost inflation negatively impacting gross profit margins in 1H21 • Expect 2H21 tax rate between 24.0% - 25.0%; no tax law changes • CapEx 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 $805M – $830M Net Sales, an increase of 17% - 20% YoY 1 Exclusive of potential future restructuring activities 9.5% – 10.5% Operating Profit Margin 23.0% – 24.0% Tax Rate 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 April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation17 Consistent Solid Cash Flow Generation Expected USS • Strong backlog provides good visibility • Expect quality of earnings to improve beginning in 2Q • Contractual increases in selling prices will begin offsetting steel cost inflation; expect a meaningful improvement in gross profit margins to accelerate in the 2H21 as higher steel cost indices are reflected in selling prices ESS • Expect some short-term softness in transportation markets, as projects have been delayed due to 2020 FAST Act extension approvals and continued COVID-19 impacts, especially in France and India • Expect sales to grow 15% - 20%, in line with market expectations, as carriers’ investments in 5G are expected to accelerate throughout 2021 COATINGS • End-market demand correlates closely to industrial production levels • Expect modest sequential growth as economy continues to improve, and benefit from government stimulus initiatives in certain international markets, including Australia IRRIGATION • Expect favorable comparisons based on estimated timing of large Egypt project deliveries, strong net farm income driving positive farmer sentiment, and a robust Brazilian market
Fundamental Market Drivers Remain Resilient 18 No Change Anticipated in the Near- and Long-term | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 COATINGS IRRIGATION • Closely following 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 grain 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 • Announced PivoTrac acquisition, a Texas-based ag technology company with products focused on telemetry and control − Strengthens footprint in Texas panhandle − Adds 9,000+ connections to portfolio − Technology will integrate well with AgSense Platform • Short-term market softness in transportation • Solid long-term market trends for road construction and single-family housing ‒ Critical need for infrastructure investment provides very good economic stimulus for nations • Expect continued growth in wireless communication products to accelerate in 2021 ‒ Carriers’ investments support work and school-at-home and macro buildouts in suburban and rural communities, aligning with favorable trends in residential construction • Record backlog demonstrates ongoing demand and necessity for renewables, grid hardening and expanding ESG focus within utility industry • Awarded third and fourth purchase orders of ~$220M for the large projects in the Southeast U.S. extending the backlog through beginning of 2023 with that project • Well-positioned to be a preferred strategic partner with utilities and developers for their renewable energy goals ESSUSS
Execution focus and benefit of positive market tailwinds across businesses have led to a great start to 2021 – expected to extend into 2022 Expect solid operating performance and strong EPS accretion in 2021; managing through current inflationary environment very well through proactive pricing actions and strength of global supply chain Remain focused on profitable growth and ROIC improvement, while keeping employees and communities safe; investing in our business for growth Summary 19 More to Come at Upcoming Virtual Investor Day on May 20, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 01 02 03
Q&A 20 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021
APPENDIX 21 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021
1Q 2021 Financial Summary 22 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 Net Sales 2021 2020 Change Engineered Support Structures $ 222.3 $ 230.7 (3.6%) Utility Support Structures 253.1 225.5 12.3% Coatings 93.3 88.1 5.9% Irrigation 229.7 156.7 46.5% Intersegment Sales (23.5) (26.8) NM Net Sales $ 774.9 $ 674.2 14.9% Operating Income $ 77.2 $ 66.9 15.4% Net Income $ 55.0 $ 42.9 28.2% Diluted Earnings Per Share (EPS) $ 2.57 $ 1.99 29.1% $M, except for per share amounts .
Steel Material Index Trends 2020-2021 YTD 23 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 The steel material index has increased 131.1% from its lowest point (515.0) in 2020 to the current 1190.0 level recorded this week. Source: FastMarketsAMM.
State Transportation Investment Funding Measures 24 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 • State legislators in 32 states introduced 113 transportation funding measures in the first two months of 2021 • Funding Approved in 2021 Sessions: $16,500,008,000 • 31 one-time funding bills. 17 reoccurring revenue bills • 20 bills to increase gas tax and 17 to raise fees on electric vehicles Source: Transportation Investment Advocacy Center
State Transportation Investment Funding Measures by Type 25 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 Source: Transportation Investment Advocacy Center
5G Adoption Forecast and Capex Spend Post-COVID 26 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 2021 Source: GSM Association
U.S. Net Farm Income April 22, 202127 Source: USDA Farm Income Data, Updated February 5, 2021Farm Income Data, Updated February 5, 2021. 10 11 13 12 14 22 46 25 83 71 49 64 68 61 75 86 0 20 40 60 80 100 120 140 2014 2015 2016 2017 2018 2019 2020F 2021F Net Farm Income w/ Government Payments Dir. Gov't Payments NFI, less Gov't Payments 93 76 62 82 ($ B ) 82 83 121 111 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation
U.S. Commodity Price Trends and Forecast April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation28 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 US CORN - $/bu $6.00 $7.00 $8.00 $9.00 $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 US SOYBEANS - $/bu • 7-month Commodity run driven by supply & demand • COVID whipsaw driving short supplies in both feed stocks (grains) and protein cold-storage • World markets (China) are driving significantly higher demand for US grain exports Since August 1st 2020 • Corn up +85% • Soybeans up +60% • Cotton up +30% • Wheat up +30%
US Commodity Price Trends, July 2020 – Apr 2021 29 April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation Source: Investing.com.
U.S. Net Cash Farm Income by Year April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation30 Source: USDA, American Farm Bureau Federation
2011-2020 Historical Free Cash Flow1 April 22, 2021 | Valmont Industries, Inc. | 1Q 2021 Earnings Presentation31 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 32 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 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 33 | Valmont Industries, Inc. | 1Q 2021 Earnings PresentationApril 22, 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 27-Mar-21 Net earnings attributable to Valmont Industries, Inc. $ 152,779 Interest expense 41,061 Income tax expense 50,631 Depreciation and amortization expense 83,581 EBITDA 328,052 Cash restructuring expenses 18,955 Impairment of goodwill and intangible assets 16,638 Impairment of property, plant, and equipment 3,751 Adjusted EBITDA $ 367,396 Debt $ 772,918 Leverage Ratio 2.10 Debt $ 772,918 Cash 391,458 Net Debt 381,460 Leverage Ratio 1.04 ($000s)