8-K
VALMONT INDUSTRIES INC (VMI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM 8-K
CURRENT
REPORT Pursuant
to
Section 13 or 15(d) of the
Securities
Exchange Act of 1934
February 19, 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) | (IRS Employer Identification No.) |
| One Valmont Plaza | |
| --- | --- |
| Omaha, NE | 68154 |
| (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)
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 |
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):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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. ¨
Item 2.02. Results of Operations and Financial Condition.
Valmont Industries, Inc. issued a press release on February 19, 2020 announcing its financial results for the Company’s fourth quarter and fiscal year ended December 28, 2019. The press release, along with the presentation to be used during its earnings call on February 20, 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 andExhibits.
| (d) | Exhibits. |
|---|---|
| 99.1 | Press Release dated February 19, 2020. |
| 99.2 | Presentation Slides for Earnings call on February 20, 2020. |
EXHIBITS
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated February 19, 2020 |
| 99.2 | Presentation Slides for earnings call on February 20, 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: February 19, 2020 | |||
| By: | /s/ Mark Jaksich | ||
| Name: | Mark Jaksich | ||
| Title: | Executive Vice President and Chief Financial Officer |
Exhibit 99.1
FOR IMMEDIATE RELEASE
| Contact: | Renee Campbell |
|---|---|
| Phone: | +1 402.963.1057 |
| Date: | February 19, 2020 |
ValmontReports Fourth Quarter and Full Year 2019 Results
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure development and irrigation equipment and services for agriculture, today reported financial results for the fourth quarter and full year ended December 28, 2019.
Fourth Quarter 2019 Highlights (all metricscompared to fourth quarter 2018 unless otherwise noted)
| • | Net Sales of $683.6 million, a decline of 2.0%; lower sales in international markets, particularly in Access Systems and international<br>irrigation, were mostly offset by improvement across North American markets, led by Utility Support Structures |
|---|---|
| • | Operating income of $55.0 million or 8.1% of sales, compared to $36.3 million or 5.2% of sales ($66.1 million adjusted^1^or 9.5% of sales) largely due to a $7.5 million operating loss in Access Systems given the extremely weak Australia construction<br>market, and lower international irrigation sales |
| --- | --- |
| • | Diluted Earnings per Share of $1.66 compared to $0.80 ($1.87 adjusted^1^) |
| --- | --- |
| • | Finalized an agreement to acquire the remaining 49%<br> stake of AgSense® in the Irrigation segment, which is expected to close in first<br> quarter 2020 |
| --- | --- |
| • | Commenced operations at the new European Center of Excellence steel structures facility in Poland, strengthening the Company's<br>commitment to serve global markets and customers with strategic capital deployment |
| --- | --- |
^1^Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
^2^ Includes Access Systems project loss, completion of a multi-year customer accommodation in Utility Support Structures, and legal settlement fees in Coatings
^3^ Excludes additional acquisitions in 2020
Full Year 2019 Highlights (all metrics compared tofull year 2018 unless otherwise noted)
| • | Net sales were flat at $2.8 billion |
|---|---|
| ◦ | Value-based pricing strategies, sales from recent acquisitions across all segments, and record sales of wireless communication<br>structures and components, were offset by lower Utility Support Structures sales volumes due to changes in product mix and less<br>available production capacity, and lower international irrigation project sales |
| --- | --- |
| • | Operating income was $237.7 million or 8.6% of sales, compared to $202.3 million or 7.3% of sales ($269.4 million adjusted^1^<br>or 9.8% of sales) |
| --- | --- |
| ◦ | Profitability was impacted by lower international irrigation project sales, poor performance in Access Systems for the second<br>half of the year, and the impact of one-time events previously highlighted in 2019^2^ |
| --- | --- |
| • | Diluted Earnings per Share of $7.06 compared to $4.20 ($7.59 adjusted^1^) |
| --- | --- |
| • | Operating cash flow doubled to $307.6 million, the highest level since 2013 |
| --- | --- |
| • | Capital expenditures were $97.4 million, including<br>$33.0 million for strategic plant expansions and investments in Poland, United Arab Emirates and the U.S. to support global market<br>growth |
| --- | --- |
| • | Deployed $81.8 million of cash for three strategic acquisitions,<br> Larson Camouflage, United Galvanizing,<br> and Connect-It Wireless, and the final purchase payment for Convert Italia, SpA;<br> 2019 ending cash was $353.5 million |
| --- | --- |
| • | Returned $95.5 million of capital to shareholders through share repurchases of $62.9 million and dividends of $32.6 million |
| --- | --- |
- continued -
^1^Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
^2^ Includes Access Systems project loss, completion of a multi-year customer accommodation in Utility Support Structures, and legal settlement fees in Coatings
^3^ Excludes additional acquisitions in 2020
Key Financial Metrics
Fourth Quarter 2019
| GAAP | Adjusted1 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 12/28/2019 4Q 2019 | **** | 12/29/2018 4Q 2018 | **** | vs. 4Q 2018 | **** | 12/28/2019 4Q 2019 | **** | 12/29/2018 4Q 2018 | **** | vs. 4Q 2018 | **** | ||||||
| Net Sales | $ | 683,626 | $ | 697,363 | (2.0 | )% | $ | 683,626 | $ | 697,363 | (2.0 | )% | ||||||
| Operating Income | 55,041 | $ | 36,290 | 51.7 | % | 55,041 | $ | 66,123 | (16.8 | )% | ||||||||
| Operating<br> Income as a % of Net Sales | 8.1 | % | 5.2 | % | 8.1 | % | 9.5 | % | ||||||||||
| Net Earnings | 35,747 | 17,662 | 102.4 | % | 35,747 | 41,345 | (13.5 | )% | ||||||||||
| Diluted Earnings Per Share | $ | 1.66 | $ | 0.80 | 107.5 | % | $ | 1.66 | $ | 1.87 | (11.2 | )% | ||||||
| Average Shares Outstanding | 21,596 | 22,061 |
Full Year 2019
| GAAP | Adjusted1 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 12/28/2019 FY 2019 | **** | 12/29/2018 FY 2018 | **** | vs. FY 2018 | **** | 12/28/2019 FY 2019 | **** | 12/29/2018 FY 2018 | **** | vs. FY 2018 | **** | ||||||
| Net Sales | $ | 2,766,976 | $ | 2,757,144 | 0.4 | % | $ | 2,766,976 | $ | 2,757,144 | 0.4 | % | ||||||
| Operating Income | 237,720 | 202,280 | 17.5 | % | 237,720 | 269,395 | (11.8 | )% | ||||||||||
| Operating<br> Income as a % of Net Sales | 8.6 | % | 7.3 | % | 8.6 | % | 9.8 | % | ||||||||||
| Net Earnings | 153,769 | 94,351 | 62.9 | % | 153,769 | 170,369 | (9.7 | )% | ||||||||||
| Diluted Earnings Per Share | $ | 7.06 | $ | 4.20 | 68.1 | % | $ | 7.06 | $ | 7.59 | (7.0 | )% | ||||||
| Average Shares Outstanding | 21,769 | 22,446 |
"Excluding the poor results from Access Systems in Australia, our performance in the fourth quarter was in line with our expectations," said Stephen G. Kaniewski, President and Chief Executive Officer. "In Engineered Support Structures, continued strong demand in North American transportation and wireless communication markets offset approximately $9.0 million in lower Access Systems sales. Utility Support Structures recognized its most profitable quarter this year and we delivered on our fourth quarter revenue commitment, increasing sales $27.0 million compared to third quarter 2019. We were satisfied with Coatings segment results despite the slowdown in U.S. industrial production levels. North American Irrigation sales were in line with expectations, while lower project business in international irrigation markets impacted growth. As expected, we generated strong operating cash flow during the quarter."
Kaniewski continued, "As we reflect on 2019, excluding the poor performance in our Access Systems business, our teams performed well. Increased momentum in our infrastructure businesses is supported by a solid backlog in Engineered Support Structures and a record high year-end backlog in Utility Support Structures. Despite lower U.S. industrial production levels in the second half of 2019, our Coatings business delivered good results for the year. Even with the impact of muted net farm income and trade uncertainty, our North American irrigation business performed well, supported by higher sales of advanced technology solutions. Our commitment to balanced capital deployment was demonstrated through strategic capital investments and acquisitions in support of global market growth."
^1^Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
^2^ Includes Access Systems project loss, completion of a multi-year customer accommodation in Utility Support Structures, and legal settlement fees in Coatings
^3^ Excludes additional acquisitions in 2020
Fourth Quarter 2019 Segment Review
Infrastructure
Engineered Support Structures Segment (37.3% 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 highwaysafety products
Sales of $255.2 million decreased 1.7% compared to last year due to substantially lower Access Systems revenue and a 1.3% unfavorable currency impact, which offset significantly higher wireless communication sales and revenue from recent acquisitions.
Lighting and traffic sales in North America were similar to last year, driven by very strong market demand from continued state and local government spending, offset by lower commercial lighting sales. In Europe, higher revenues were offset by unfavorable currency translation. Sales of highway safety products were also lower from a slowdown in government spending in India and Australia, and lower project sales.
Record fourth quarter sales of wireless communication structures and components grew more than 25.0% compared to last year. Continued strong demand in North American markets was led by carriers' ongoing expansion of 4G networks and site preparation in advance of 5G rollouts. Sales growth was also driven by revenue from recent acquisitions.
Access Systems product sales decreased $9.4 million, or 26% compared to last year, from lower volumes and unfavorable pricing due to a significant downturn in Australia construction markets.
Operating income was $10.5 million or 4.1% of sales compared to an operating loss of $1.6 million ($20.2 million adjusted income^1^ or 7.8% of sales) in 2018. Profitability improvement from pricing discipline in North American markets was more than offset by a significant operating loss in the Access Systems business.
Utility Support Structures Segment (33.9% of Sales)
Steel and concrete structures for global utility transmission,distribution, substations, and renewable energy generation equipment
Sales of $231.9 million decreased slightly compared to last year, but increased $27.0 million, or 13.1% compared to third quarter 2019. Favorable pricing, particularly in North American markets, was offset by slightly lower production levels due to a North American plant closure in early 2019. As expected, sales of solar tracker solutions were significantly lower due to project timing delays.
^1^Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
^2^ Includes Access Systems project loss, completion of a multi-year customer accommodation in Utility Support Structures, and legal settlement fees in Coatings
^3^ Excludes additional acquisitions in 2020
Operating income was $26.3 million or 11.4% of sales compared to $18.5 million, or 7.9% of sales ($25.9 million adjusted^1^ or 11.1% of sales) in 2018. Pricing actions were offset by lower productivity and volumes, and weaker profitability in the offshore wind and solar tracker businesses due to lower sales.
Coatings Segment (13.1% of Sales)
Global galvanizing, painting and anodizing services to preserveand protect metal products
Sales of $89.7 million increased 3.8% versus the prior year, led by sales from recent acquisitions and continued pricing discipline, offset by lower volumes to external customers.
Operating income was $12.0 million or 13.4% of sales, compared to $14.2 million or 16.5% of sales ($14.6 million adjusted^1^ or 16.9% of sales) in 2018. Improved pricing was more than offset by a higher mix of internal volumes and productivity challenges from recent acquisitions.
Agriculture
Irrigation Segment (19.5% of Sales)
Agricultural irrigation equipment, parts, servicesand tubular products, water management solutions, and technology for precision agriculture
Global sales of $133.0 million decreased 6.7% compared to last year.
North American sales of $84.5 million were flat compared to 2018. Higher sales of systems, advanced technology solutions and aftermarket parts were offset by lower industrial tubing sales.
International irrigation sales of $48.5 million decreased 16.1% compared to last year. Higher sales in Brazil were offset by significantly lower project sales in the EMEA region. Sales in Australia and New Zealand markets were similar to 2018.
Irrigation technology sales for the full year, as a subset of total segment sales, increased 25.0% to $56.7 million compared to fiscal 2018, led by growers' increasing demand for integrated solutions that help reduce input costs and improve profitability.
Segment operating income was $11.8 million, or 8.9% of sales, compared to $14.8 million, or 10.4% of sales in 2018, mainly due to planned higher R&D expense for technology investments and lower international project sales.
- continued -
^1^Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
^2^ Includes Access Systems project loss, completion of a multi-year customer accommodation in Utility Support Structures, and legal settlement fees in Coatings
^3^ Excludes additional acquisitions in 2020
2020 Outlook
| 2020 Full Year Financial Outlook | |
|---|---|
| Diluted Earnings per Share | $7.30 - $8.00 |
| Revenue Growth^3^ | 4% - 7% |
| Operating Margin Change | 10 - 40 bps increase |
| Global Effective Tax Rate | ~25% |
| Capital Expenditures | $100 - 125 million |
2020 Key Assumptions
| • | Revenue Growth Primarily Organic |
|---|---|
| • | No Material Impact Expected from Foreign Exchange Translation |
| • | Raw Material and Freight Costs Expected to be Similar to 2019 |
| • | No Further Decline in Agricultural Market Fundamentals |
"We are off to a solid start in 2020," said Mr. Kaniewski. "Sales and earnings growth is being driven by our infrastructure businesses, supported by solid backlogs. In the Engineered Support Structures segment, transportation market demand from continued government investments in infrastructure development will drive growth. In the wireless communication market, capital investments for 5G deployment will be somewhat delayed due to the T-Mobile/Sprint integration; however, we anticipate spending to increase in the second half of the year, accelerating into 2021. Considering these well-known delays and our record growth in 2019, we expect wireless communication sales to approach a 10.0% growth rate in 2020. Construction end-markets in Australia remain at recessionary levels and are not expected to significantly improve this year, impacting our Access Systems business. Our Utility segment entered the year with a record global backlog of nearly $500.0 million, supported by very strong market demand from ongoing investments in grid hardening and renewable energy sources. Strategic capacity additions in our North American steel structures plants are expected to increase volumes by approximately 5.0%, mostly in the second half of the year. We expect sales in our Coatings business to be similar to 2019 assuming relatively stable global industrial production levels. In the Irrigation segment, grower sentiment appears to be stabilizing in 2020, but we are not seeing a meaningful turnaround in demand as net farm income levels remain muted. Therefore, we are now projecting segment sales to be flat to down approximately 3.0% compared to 2019. While there is uncertainty around international projects, we are seeing continued market strength in Brazil."
^1^Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
^2^ Includes Access Systems project loss, completion of a multi-year customer accommodation in Utility Support Structures, and legal settlement fees in Coatings
^3^ Excludes additional acquisitions in 2020
Kaniewski continued, "Our unwavering commitment to continuous improvement and delivering higher returns on invested capital requires us to strategically position our businesses for long-term profitable growth. As such, we are continuing to evaluate some of the more challenged product lines across all segments, including Access Systems in Australia. We look forward to sharing more details next quarter."
A live audio discussion with Stephen G. Kaniewski, President and Chief Executive Officer, and Mark C. Jaksich, Executive Vice President and Chief Financial Officer, will be accessible by telephone on Thursday, February 20, 2020 at 8:00 a.m. CST by dialing 1-877-407-6184 or 1-201-389-0877 (no Conference ID needed), or via webcast by pointing browsers to this link: Valmont Industries 4Q 2019 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 13697708. The replay will be available through 10:59 p.m. CST on February 27, 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, risk factors described from time to time in Valmont’s reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw material, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in this press release is made as of the date of this press release and the Company does not undertake to update any forward-looking statement.
^1^Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
^2^ Includes Access Systems project loss, completion of a multi-year customer accommodation in Utility Support Structures, and legal settlement fees in Coatings
^3^ Excludes additional acquisitions in 2020
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OFEARNINGS
(Dollars in thousands, except per shareamounts)
(unaudited)
| Fourth Quarter | Year-to-Date | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 13 Weeks Ended | Year Ended | |||||||||||
| 28-Dec-19 | 29-Dec-18 | 28-Dec-19 | 29-Dec-18 | |||||||||
| Net sales | $ | 683,626 | $ | 697,363 | $ | 2,766,976 | $ | 2,757,144 | ||||
| Cost of sales | 512,759 | 547,662 | 2,074,480 | 2,098,864 | ||||||||
| Gross profit | 170,867 | 149,701 | 692,496 | 658,280 | ||||||||
| Selling, general and administrative expenses | 115,826 | 113,411 | 454,776 | 456,000 | ||||||||
| Operating income | 55,041 | 36,290 | 237,720 | 202,280 | ||||||||
| Other income (expense) | ||||||||||||
| Interest expense | (10,182 | ) | (10,418 | ) | (40,153 | ) | (44,237 | ) | ||||
| Interest income | 1,127 | 955 | 3,942 | 4,668 | ||||||||
| Gain on investments (unrealized) | 1,206 | (1,985 | ) | 5,960 | (839 | ) | ||||||
| Costs associated with refinancing of debt | — | — | — | (14,820 | ) | |||||||
| Loss from divestiture of grinding media business (Donhad) | — | — | — | (6,084 | ) | |||||||
| Other | 266 | 420 | 2,204 | 2,473 | ||||||||
| (7,583 | ) | (11,028 | ) | (28,047 | ) | (58,839 | ) | |||||
| Earnings before income taxes | 47,458 | 25,262 | 209,673 | 143,441 | ||||||||
| Income tax expense | 10,056 | 7,107 | 50,207 | 43,135 | ||||||||
| Net earnings | 37,402 | 18,155 | 159,466 | 100,306 | ||||||||
| Less: Earnings attributable to non-controlling interests | (1,655 | ) | (493 | ) | (5,697 | ) | (5,955 | ) | ||||
| Net earnings attributable to Valmont Industries, Inc. | $ | 35,747 | $ | 17,662 | $ | 153,769 | $ | 94,351 | ||||
| Average shares outstanding (000's) - Basic | 21,462 | 21,961 | 21,659 | 22,306 | ||||||||
| Earnings per share - Basic | $ | 1.67 | $ | 0.80 | $ | 7.10 | $ | 4.23 | ||||
| Average shares outstanding (000's) - Diluted | 21,596 | 22,061 | 21,769 | 22,446 | ||||||||
| Earnings per share - Diluted | $ | 1.66 | $ | 0.80 | $ | 7.06 | $ | 4.20 | ||||
| Cash dividends per share | $ | 0.375 | $ | 0.375 | $ | 1.500 | $ | 1.500 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
| Fourth Quarter | Year-to-Date | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 13 Weeks Ended | Year Ended | |||||||||||
| 28-Dec-19 | 29-Dec-18 | 28-Dec-19 | 29-Dec-18 | |||||||||
| Net sales | ||||||||||||
| Engineered Support Structures | $ | 255,196 | $ | 259,691 | $ | 1,012,290 | $ | 986,880 | ||||
| Utility Support Structures | 231,871 | 233,323 | 890,580 | 859,173 | ||||||||
| Coatings | 89,693 | 86,399 | 367,835 | 353,351 | ||||||||
| Infrastructure products | 576,760 | 579,413 | 2,270,705 | 2,199,404 | ||||||||
| Irrigation | 133,015 | 142,602 | 585,196 | 633,666 | ||||||||
| Other | — | — | — | 23,080 | ||||||||
| Less: Intersegment sales | (26,149 | ) | (24,652 | ) | (88,925 | ) | (99,006 | ) | ||||
| Total | $ | 683,626 | $ | 697,363 | $ | 2,766,976 | $ | 2,757,144 | ||||
| Operating Income | ||||||||||||
| Engineered Support Structures | $ | 10,475 | $ | (1,635 | ) | $ | 65,627 | $ | 34,776 | |||
| Utility Support Structures | 26,345 | 18,468 | 87,788 | 64,766 | ||||||||
| Coatings | 11,971 | 14,217 | 51,008 | 55,325 | ||||||||
| Infrastructure products | 48,791 | 31,050 | 204,423 | 154,867 | ||||||||
| Irrigation | 11,819 | 14,805 | 71,687 | 97,722 | ||||||||
| Other | — | — | — | (913 | ) | |||||||
| Adjustment to LIFO inventory valuation method | 4,276 | (4,380 | ) | 9,815 | (9,892 | ) | ||||||
| Corporate | (9,845 | ) | (5,185 | ) | (48,205 | ) | (39,504 | ) | ||||
| Total | $ | 55,041 | $ | 36,290 | $ | 237,720 | $ | 202,280 |
The backlog of orders for the principal products manufactured and marketed was $807.1 million at the end of the 2019 fiscal year and $644.7 million at the end of the 2018 fiscal year. An order is reported in our backlog upon receipt of a purchase order from the customer or execution of a sales order contract. We anticipate that most of the 2019 backlog of orders will be filled during fiscal year 2020. At year-end, the segments with backlog were as follows (dollar amounts in millions):
| 12/28/2019 | 12/29/2018 | |||
|---|---|---|---|---|
| Engineered Support Structures | $ | 254.0 | $ | 257.4 |
| Utility Support Structures | 498.0 | 325.9 | ||
| Irrigation | 55.0 | 59.7 | ||
| Coatings | 0.1 | 1.7 | ||
| $ | 807.1 | $ | 644.7 |
Valmont has aggregated its business segments into four globalreportable segments as follows:
Engineered Support Structures: This segmentconsists of the manufacture of engineered metal and composite poles, towers, and components for global lighting, traffic, and wirelesscommunication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products.
Utility Support Structures: This segment consistsof the manufacture of engineered steel and concrete structures for global utility transmission, distribution, substations, andrenewable 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 globalmanufacture of agricultural irrigation equipment, parts, services, tubular products, water management solutions, and technologyfor precision agriculture.
In addition to these four reportable segments, the Companyhad other businesses and activities that individually are not more than 10% of consolidated sales, operating income or assets.This includes the manufacture of forged steel grinding media and is reported in the "Other" category until its divestiturein 2018.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
| 28-Dec-19 | 29-Dec-18 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 353,542 | $ | 313,210 |
| Accounts receivable, net | 480,000 | 483,963 | ||
| Inventories | 374,565 | 383,566 | ||
| Contract asset - costs and profits in excess of billings | 141,322 | 112,525 | ||
| Prepaid expenses | 32,043 | 42,800 | ||
| Refundable income taxes | 6,947 | 4,576 | ||
| Total current assets | 1,388,419 | 1,340,640 | ||
| Property, plant and equipment, net | 558,129 | 513,992 | ||
| Goodwill and other assets | 816,863 | 675,642 | ||
| $ | 2,763,411 | $ | 2,530,274 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Current installments of long-term debt | $ | 760 | $ | 779 |
| Notes payable to banks | 21,774 | 10,678 | ||
| Accounts payable | 197,957 | 218,115 | ||
| Accrued expenses | 285,209 | 171,233 | ||
| Dividend payable | 8,079 | 8,230 | ||
| Total current liabilities | 513,779 | 409,035 | ||
| Long-term debt, excluding current installments | 764,944 | 741,822 | ||
| Other long-term liabilities | 327,797 | 243,894 | ||
| Shareholders' equity | 1,156,891 | 1,135,523 | ||
| $ | 2,763,411 | $ | 2,530,274 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS
(Dollars in thousands)
(unaudited)
| YTD | YTD | |||||
|---|---|---|---|---|---|---|
| 28-Dec-19 | 29-Dec-18 | |||||
| Cash flows from operating activities | ||||||
| Net Earnings | $ | 159,466 | $ | 100,306 | ||
| Depreciation and amortization | 82,264 | 82,827 | ||||
| Impairment of long-lived assets | — | 20,780 | ||||
| Loss from divestiture of grinding media business | — | 6,084 | ||||
| Contribution to defined benefit pension plan | (18,461 | ) | (1,537 | ) | ||
| Change in working capital | 80,234 | (46,620 | ) | |||
| Other | 4,111 | (8,832 | ) | |||
| Net cash flows from operating activities | 307,614 | 153,008 | ||||
| Cash flows from investing activities | ||||||
| Purchase of property, plant, and equipment | (97,425 | ) | (71,985 | ) | ||
| Proceeds from sale of assets | 5,556 | 63,103 | ||||
| Acquisitions | (81,841 | ) | (143,020 | ) | ||
| Other | 5,560 | (3,543 | ) | |||
| Net cash flows from investing activities | (168,150 | ) | (155,445 | ) | ||
| Cash flows from financing activities | ||||||
| Proceeds from long-term borrowings | 31,000 | 251,655 | ||||
| Proceeds from short-term borrowings | 11,327 | 10,543 | ||||
| Principal payments on long-term borrowings | (10,768 | ) | (262,191 | ) | ||
| Purchase of treasury shares | (62,915 | ) | (114,805 | ) | ||
| Purchase of noncontrolling interest | (27,845 | ) | (5,510 | ) | ||
| Dividends paid | (32,642 | ) | (33,726 | ) | ||
| Other | (7,107 | ) | (8,076 | ) | ||
| Net cash flows from financing activities | (98,950 | ) | (162,110 | ) | ||
| Effect of exchange rates on cash and cash equivalents | (182 | ) | (15,048 | ) | ||
| Net change in cash and cash equivalents | 40,332 | (179,595 | ) | |||
| Cash and cash equivalents - beginning of year | 313,210 | 492,805 | ||||
| Cash and cash equivalents - end of period | $ | 353,542 | $ | 313,210 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRINGITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
(Dollars in thousands, except per shareamounts)
(unaudited)
The non-GAAP tables below disclose the impact on (a) dilutedearnings per share of (1) debt refinancing expenses (2) impairment of goodwill and tradename (3) restructuring costs (4) acquisitiondiligence expenses and (5) the loss from divestiture of Donhad, (b) operating income from these expenses, and (c) segment operatingincome for these items. Amounts may be impacted by rounding. We believe it is useful when considering company performance for thenon-GAAP adjusted net earnings and operating income to be taken into consideration by management and investors with the relatedreported GAAP measures.
| Thirteen | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| weeks ended | Diluted | Year ended | Diluted | |||||||||
| December 29, | earnings per | December 29, | earnings per | |||||||||
| 2018 | share | 2018 | share | |||||||||
| Net earnings attributable to Valmont Industries, Inc. - as reported | $ | 17,662 | $ | 0.80 | $ | 94,351 | $ | 4.20 | ||||
| Debt refinancing expenses, pre-tax | — | — | 14,820 | 0.66 | ||||||||
| Impairment of goodwill and tradename, pre-tax | (743 | ) | (0.03 | ) | 15,037 | 0.67 | ||||||
| Restructuring and related asset impairment costs - pre-tax | 24,313 | 1.10 | 41,975 | 1.87 | ||||||||
| Non-recurring costs for vendor quality issue (Utility), pre-tax | 5,000 | 0.23 | 5,000 | 0.22 | ||||||||
| Acquisition diligence costs, pre-tax | 520 | 0.02 | 4,360 | 0.19 | ||||||||
| Loss from divestiture of grinding media business, pre-tax | — | — | 6,084 | 0.27 | ||||||||
| Total Adjustments | 29,090 | 1.32 | 87,276 | 3.89 | ||||||||
| Tax effect of adjustments * | (5,407 | ) | (0.25 | ) | (10,767 | ) | (0.48 | ) | ||||
| Completion of 2017 tax reform adjustment | — | — | (491 | ) | (0.02 | ) | ||||||
| Net earnings attributable to Valmont Industries, Inc. - Adjusted | $ | 41,345 | $ | 1.87 | $ | 170,369 | $ | 7.59 | ||||
| Average shares outstanding (000’s) - Diluted | 22,061 | 22,446 |
* The tax effect of adjustments is calculated based on theincome tax rate in each applicable jurisdiction.
| Operating Income Reconciliation | Thirteen<br><br> weeks ended <br><br>December <br><br>29, 2018 | Year ended <br><br>December 29, <br><br>2018 | ||||
|---|---|---|---|---|---|---|
| Operating income - as reported | $ | 36,290 | $ | 202,280 | ||
| Impairment of goodwill and tradename | — | 15,780 | ||||
| Restructuring and related asset impairment costs | 24,313 | 41,975 | ||||
| Non-recurring costs for vendor quality issue (Utility) | 5,000 | 5,000 | ||||
| Acquisition diligence costs | 520 | 4,360 | ||||
| Adjusted Operating Income | $ | 66,123 | $ | 269,395 | ||
| Net Sales - as reported | 697,363 | 2,757,144 | ||||
| Operating Income as a % of Sales | 5.2 | % | 7.3 | % | ||
| Adjusted Operating Income as a % of Sales | 9.5 | % | 9.8 | % |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRINGITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION (CONTINUED)
Forthe fourth quarter ended December 29, 2018
| Engineered | Utility | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Support | Support | Other/ | |||||||||||||
| Segment Operating Income Reconciliation | Structures | Structures | Coatings | Irrigation | Corporate | ||||||||||
| Operating income - as reported | $ | (1,635 | ) | $ | 18,468 | $ | 14,217 | $ | 14,805 | $ | (9,565 | ) | |||
| Impairment of goodwill and tradename | — | — | — | — | — | ||||||||||
| Restructuring and related asset impairment costs | 21,723 | 2,410 | — | 180 | — | ||||||||||
| Non-recurring costs for vendor quality issue | — | 5,000 | — | — | — | ||||||||||
| Acquisition diligence costs | 113 | 21 | 386 | — | — | ||||||||||
| Adjusted Operating Income | $ | 20,201 | $ | 25,899 | $ | 14,603 | $ | 14,985 | $ | (9,565 | ) | ||||
| Net sales | 259,691 | 233,323 | 86,399 | 142,602 | — | ||||||||||
| Operating Income as a % of Sales | (0.6 | )% | 7.9 | % | 16.5 | % | 10.4 | % | NM | ||||||
| Adjusted Operating Income as a % of Sales | 7.8 | % | 11.1 | % | 16.9 | % | 10.5 | % | NM |
Exhibit 99.2
Valmont Industries, Inc. Fourth Quarter and Full Year 2019 Earnings Presentation February 20, 20203
Forward - looking Statement Disclosure 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, conditions affecting the Company’s 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 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
4 Q 2019 Segment Revenue and Segment Summaries 3 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation $255.2M Engineered Support Structures 37.3% of Sales $231.9M Utility Support Structures 33.9% of Sales $89.7M Coatings 13.1% of Sales $ 133.0M Irrigation N.A .: $84.5M | International: $48.5M 19.5% of Sales SEGMENT SUMMARIES • Strong demand from continued state/local government spending • 25.0% growth in wireless communication and components led to record 4Q sales • Significantly lower sales in Access Systems from weak Australia markets • Favorable pricing in North American markets offset by lower production levels vs. 2018 due to a plant closure • Project timing delays led to lower sales of solar tracker solutions • Sales were $27M higher compared to 3Q 2019 • Acquisition revenue and disciplined pricing drove sales growth • Demand from other Valmont segments provided good baseload in 4Q, while external volumes were lower • North American sales led by higher sales of systems, technology solutions and aftermarket parts, offset by lower tubing sales • International sales decreased 25% due to lower project sales in the EMEA region TOTAL 4Q 2019 REVENUE: $683.6M
Full Year 2019 Segment Revenue and Market Drivers Organic Growth and Acquisitions Support Long - Term Revenue Growth Targets 4 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation $1,012.3M Engineered Support Structures 36.6% of Sales $890.6M Utility Support Structures 32.2% of Sales $367.8M Coatings 13.3% of Sales $585.2M Irrigation N.A.: $378.6M | International: $206.6M 21.1% of Sales MARKET DRIVERS • Continued state and local government spending in North America markets • Carriers’ expansion of 4G networks and 5G site preparation • Acceleration to replace aging infrastructure in North America transmission markets • Shift to renewable energy sources is driving demand • External market demand generally follows industrial production levels • Demand from ESS, Utility and Irrigation segments provides steady baseload • U.S. agriculture market remains challenging; macro conditions continue to weigh on sentiment • Advanced technology growth is a green shoot TOTAL 2019 REVENUE: $ 2,767.0M
Key Initiatives to Accelerate Innovation and Technology Increasing Investments in Technology and New Product Development is Key to Long - term Growth 5 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation ESS USS COATINGS IRRIGATION • Increasing smart pole technology solutions investment • Increasing demand for small cell structures and integrated concealment solutions • Piloting beacon technology on power grid structures to help identify and remediate line conditions on a real - time basis • Utilizing drone technology to quickly assess and identify issues, reducing environmental impact and cost • GalvTrac: optimizing zinc application by integrated standard recipes and repeatable processes • Coating Connector: providing customers with real - time order status visibility with interactive capabilities to communicate specific instructions • Increasing adoption of AgSense, which has led to 95,000+ connected devices in the field • Introduction of Valley 365, a cloud - based, single sign - on platform for connected crop mgmt. • Valley Insights: partnered and launched in 2019 with Prospera Technologies; uses advanced AI to virtually detect and provide remediation for crop health issues
2019 Fourth Quarter Summary Revenue Operating Income Diluted EPS ( 2.0%) +51.7% (16.8%) +107.5% ( 11.2%) • Higher sales in North American markets across all segments offset by substantially lower sales of Access Systems products and lower International Irrigation sales • Operating income was 8.1% of sales , primarily impacted by poor performance in the Access Systems product line in Australia • EPS impacted primarily by poor Access Systems performance $M, except for per share amounts 1 Please see Reg G reconciliation of non - GAAP financial measures to GAAP measures at end of the document $683.6 $697.4 2019 2018 $55.0 $55.0 $36.3 $66.1 GAAP Adjusted 2019 2018 $1.66 $1.66 $0.80 $1.87 GAAP Adjusted 2019 2018 1 1 6 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
2019 Full Year Summary Revenue Operating Income Diluted EPS +0.4% +17.5% (11.8%) +68.1% (7.0%) • Pricing strategies, sales from recent acquisitions, and growth of wireless communication sales were offset by lower Utility volumes and lower international irrigation project sales • Operating income was 8.6% of sales, impacted by $26 million lower operating income in the Irrigation segment, and poor performance in Access Systems • EPS impacted by several one - time events during the year and very weak performance in Access Systems $M, except for per share amounts 1 Please see Reg G reconciliation of non - GAAP financial measures to GAAP measures at end of the document $2,767.0 $2,757.1 2019 2018 $237.7 $237.7 $202.3 $269.4 GAAP Adjusted 2019 2018 $7.06 $7.06 $4.20 $7.59 GAAP Adjusted 2019 2018 1 1 7 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
2019 Cash Flow Highlights 8 | February 20 , 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation ($M) YTD 12/28/19 Net Cash Flows from Operating Activities $ 307.6 Net Cash Flows from Investing Activities ( 168.2) Net Cash Flows from Financing Activities (99.0) Net Cash Flows from Operating Activities $ 307.6 Purchase of Property, Plant & Equipment (97.4) Free Cash Flows $ 210.2 2019 Full Year Cash Flow | FCF Reconciliation Cash and Debt Highlights $353.5M ($165.6M ex - U.S.) Cash at 12/28/2019 $ 787.5M Total Long - Term Debt at 12/28/2019
Capital Allocation | A Balanced Approach Aligned with Capital Allocation Commitments Announced in 2014 ($M) $97 $82 $63 $33 Capital Expenditures Acquisitions Share Repurchases Dividends 2019 Capital Deployment: $275M Capital Expenditures • Working capital investment to support investments in people, technology and systems • CapEx of $97 M in 2019 Acquisitions • Strategic fit + market expansion • Returns exceeding cost of capital within 3 years Share Repurchases • Opportunistic approach • Supported by FCF • $204M remains on current authorization as of 12/28/19 Dividends • Payout ratio target: 15% of earnings • Current payout: 21% 9 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation Growing Our Business Returning Cash to Shareholders
2020 Financial Guidance and Key Assumptions KEY ASSUMPTIONS • Revenue growth primarily organic • Raw material and freight costs expected similar to 2019 • No material impact from foreign exchange translation • No further decline in agriculture market fundamentals • ROIC ~ 10% 2020 Annual Financial Guidance and Key Metrics Diluted EPS $7.30 – $8.00 Revenue Growth 1 4% - 7% Operating Margin Improvement 10 – 40 bps Global Effective Tax Rate ~ 25.0 % Capital Expenditures $100M - $125M 1 Additional 2020 acquisitions not included in guidance 10 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
2020 Market Drivers and Outlook by Segment 11 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation ESS • Continued government investments in infrastructure development (i.e., lighting and traffic) • Continued growth of wireless communication products and components; anticipate 5G investments to accelerate in 2H20 • Accelerating the strategic evaluation of Access Systems business to determine a path to profitability and improved returns on invested capital USS • Record 2020 global backlog of ~$500M, supported by increased demand across all substrates from investments in grid hardening and renewables • Adding capacity to North American plants with associated revenue to ramp during the year COATINGS • 2020 sales expected to be similar to 2019 assuming current U.S. industrial production levels remain unchanged IRRIGATION • Expect 2020 sales to be flat to - 3 %; grower sentiment stabilizing but U.S. net farm income not expected to substantially improve • International sales growth in Brazil – strategic dealer network expansion to meet increased demand
Expect revenue growth of 4% - 7% driven by infrastructure businesses Strategically adding targeted capacity to existing NA steel structures facilities Expect Coatings business to be flat with 2019; Cautiously optimistic on Irrigation Expect raw materials and freight to remain relatively stable Continuing to perform against our stated capital allocation goals 2020 Outlook Remain Committed to our Long - Term Financial Goals 01 05 02 04 03 12 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
APPENDIX 13 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Fourth Quarter and Full Year 2019 Financial Summary Net Sales 2019 2018 Change FY 2019 FY 2018 Change Engineered Support Structures $ 25 5.2 $ 25 9 . 7 (1.7%) $ 1,012.3 $ 9 86.9 2.6% Utility Support Structures 23 1.9 2 3 3. 3 ( 0.6%) 890.6 859. 2 3.7% Coatings 8 9.7 8 6 . 4 3.8% 3 67.8 3 53.4 4.1% Irrigation 1 33.0 14 2.6 ( 6.7%) 585.2 6 33.7 ( 7.6%) Other - - NM - 23.1 NM Intersegment Sales ( 26.2) ( 2 4.7) NM ( 88.9) ( 9 9.0) NM Net Sales $ 6 83.6 $ 697.4 ( 2. 0%) $ 2,7 67.0 $ 2, 757.1 0.4 % Operating Income $ 55.0 $ 36.3 51.7% $ 2 37.7 $ 2 02.3 17.5% Adjusted Operating Income 1 $ 55.0 $ 6 6.1 (16.8%) $ 2 37.7 $ 26 9.4 (11.8%) Net Income (loss) $ 35.7 $ 17.7 102.4% $ 153.8 $ 94.4 62.9% Adjusted Net Income 1 $ 35.7 $ 41.3 (13.5%) $ 153.8 $ 1 70.4 (9.7%) Diluted Earnings (loss) Per Share (EPS) $ 1.66 $ 0.80 107.5% $ 7.06 $ 4.20 68.1% Adjusted Diluted (EPS) $ 1. 66 $ 1. 87 (11.2%) $ 7. 06 $ 7.59 (7.0%) 1 Please see Reg G reconciliation of non - GAAP financial measures to GAAP measures at end of the document. $M, except for per share amounts 14 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
2019 Diluted EPS Excluding One - Time Items 2019 Diluted Earnings per Share $ 7.06 Legal Settlements – Coatings 0.09 Customer Accommodation Settlement – Utility 0.11 Access Systems Q3 Project Loss 0.24 2019 LIFO Benefit (0.34) 2019 Diluted EPS Excluding One - Time Items $ 7.16 Benefit of AgSense Acquisition (Reduction to NCI in 2020) 0.14 2019 Adjusted Diluted Earnings per Share $ 7.30 15 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation The non - GAAP table below discloses the impact on diluted earnings per share from certain non - recurring events that occurred duri ng 2019 and the 2020 acquisition of the 49% non - controlling interest ownership of the consolidated subsidiary AgSense. We believe it is useful when considering Company performance for the non - GAAP adjusted diluted earnings per share to be taken into consideration by management and investors with the related reported GA AP diluted earnings per share.
Revenue Operating Income 4Q Results | Engineered Support Structures COMMENTARY • Record fourth quarter sales of global wireless communication structures and components grew 25.0% compared to 2018 • Sales unfavorably impacted by significantly lower Access Systems product sales from very weak markets in Australia • North America lighting and traffic product sales driven by continued state and local government spending, offset by lower commercial lighting sales • Highway safety product sales lower from government spending slowdown in India and Australia • Profitability improvement from pricing discipline in North American markets was more than offset by an operating loss in the Access Systems business Note: Please see Reg G reconciliation of non - GAAP financial measures to GAAP measures at end of the document; 1 Net sales after intersegment eliminations ($M) Key Statistics 2018 Revenue 1 $ 257.0 Volume (10.1) Pricing/Mix (0.5) Acquisitions 7.1 Currency Translation (3.5) 2019 Revenue 1 $ 250.0 $250.0 $257.0 2019 2018 $10.5 ($1.6) $20.2 2019 2018 2018 Adj. 16 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Revenue Operating Income 4Q Results | Utility Support Structures COMMENTARY • Favorable pricing in North American markets was offset by slightly lower production levels from a plant closure in 2019 • Lower solar tracker sales due to project delays • Pricing actions offset by lower productivity and volumes and weaker profitability in the offshore wind and solar tracker businesses due to lower sales Note: Please see Reg G reconciliation of non - GAAP financial measures to GAAP measures at end of the document; 1 Net sales after intersegment eliminations ($M) Key Statistics 2018 Revenue 1 $ 230.9 Volume (12.4) Pricing/Mix 11.4 Acquisitions - Currency Translation (0.8) 2019 Revenue 1 $ 229.1 $229.1 $230.9 2019 2018 $26.3 $18.5 $25.9 2019 2018 2018 Adj. 17 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Revenue Operating Income 4Q Results | Coatings COMMENTARY • Sales from recent acquisitions and continued pricing discipline was offset by lower volumes to external customers • Improved pricing was more than offset by a higher mix of internal volumes and productivity challenges from recent acqusitions Note: Please see Reg G reconciliation of non - GAAP financial measures to GAAP measures at end of the document; 1 Net sales after intersegment eliminations ($M) Key Statistics 2018 Revenue 1 $ 69.2 Volume (1.4) Pricing/Mix 2.1 Acquisitions 3.2 Currency Translation (0.7) 2019 Revenue 1 $ 72.4 $72.4 $69.2 2019 2018 $12.0 $14.2 $14.6 2019 2018 2018 Adj 18 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Revenue Total Operating Income 4Q Results | Irrigation COMMENTARY • North America sales were flat as higher sales of systems, technology and parts were offset by lower industrial tubing sales • International irrigation sales decreased 16.1% as higher sales in Brazil were offset by significantly lower project sales in EME A region • Full - year 2019 technology sales, calculated as a subset of total segment revenue, grew 25.0% to $56.7 million compared to 2018 • Operating income was lower than 2018, mainly due to planned higher R&D expense for technology investments and lower internati ona l project sales Note: Please see Reg G reconciliation of non - GAAP financial measures to GAAP measures at end of the document; 1 Net sales after intersegment eliminations ($M) Key Statistics 2018 Revenue 1 $ 140.3 Volume (6.0) Pricing/Mix (0.9) Acquisitions - Currency Translation (1.4) 2019 Revenue 1 $ 132.0 $11.8 $14.8 $15.0 2019 2018 2018 Adj. 2019 2018 $83.5 $48.5 $82.4 $57.8 North America International 19 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
New State - of - the - Art Manufacturing Facility Opens in Poland 20 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Australia Construction Market Dynamics and Drivers 21 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation Construction outlook • Total engineering construction significantly dropped from ‘18 to ‘19 • Total engineering construction segment expected to remain low in ‘20 • Total construction work done is expected to fall back to a decade low in FY20, before cycling up in 2021
2010 - 2019 Historical Free Cash Flow 1 10 Year Average FCF is $ 144M ; Last 5 Years Has Averaged $ 153M 20 10 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9 Net cash flows from operating activities $ 152.2 $ 149.7 $ 1 97 . 1 $ 396.4 $ 174 . 1 $ 272 . 3 $ 232 . 8 $ 133.1 $ 1 5 3. 0 $ 307 . 6 Net cash flows from investing activities ( 262.7 ) ( 84 . 1 ) ( 136 . 7 ) ( 13 1 .7 ) ( 256 . 9 ) ( 48 . 2 ) ( 53 . 0 ) ( 49 . 6 ) ( 155 . 4 ) ( 1 68 . 1 ) Net cash flows from financing activities 269 . 7 (45 . 9) ( 16 . 4 ) ( 37 .4 ) ( 1 3 6 . 8 ) ( 32 . 0 ) ( 95 . 2 ) ( 220 . 0 ) ( 162 . 1 ) ( 98 . 9 ) Net cash flows from operating activities $ 152 . 2 $ 149 . 7 $ 1 97 . 1 $ 3 9 6 . 4 $ 174 . 1 $ 272 . 3 $ 2 3 2. 8 $ 133.1 $ 1 5 3. 0 $ 3 07 . 6 Purchase of plant, property, and equipment ( 36 .1 ) ( 83 .1 ) ( 97 .1 ) ( 106 . 8 ) ( 73 . 0 ) ( 45.5 ) ( 57 . 9 ) ( 5 5 . 3 ) ( 72 . 0 ) ( 97 . 4 ) Free Cash flows 116 . 1 6 6. 6 100 . 0 289 . 7 101 . 1 226 . 8 174 . 9 7 7. 8 81 . 0 210 . 2 Net earnings attributed to Valmont Industries, Inc. $ 94 . 4 $ 228 . 3 $ 2 34 . 1 $ 2 78 . 5 $ 183 . 9 $ 40 . 1 $ 173 . 2 $ 1 16 .2 $ 94 . 4 $ 153 . 8 Adjusted net earnings attributed to Valmont Industries, Inc. 1 N/A $ 162.3 N/A $ 295.1 $ 187 . 7 $ 1 31.7 $ 13 7 . 6 $ 1 58 . 4 $ 1 23 . 0 N/A Free Cash Flow Conversion - GAAP 1 . 2 3 0 .2 9 0. 43 1 . 04 0 . 55 5 . 66 1 . 01 0 . 67 0. 8 6 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 $ 2 34 . 1 $ 2 78 . 5 $ 183 . 9 $ 40 . 1 $ 173 . 2 $ 1 16 .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 $ 1 31 .7 $ 13 7 . 6 $ 1 58 . 4 $ 1 23 . 0 $ 1 5 3. 8 1 Adjusted earnings for purposes of calculating free cash flow conversion may not agree to the adjusted net earnings. The differ ence is due to cash restructuring, debt refinancing, or other non - recurring expenses which were settled in cash in the year of o ccurrence. 22 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Strong Free Cash Flow Throughout The Cycle Years of rapid raw material cost inflation GAAP 1.23X .29X 0.43X 1.04X 0.55X 5.66X 1.01X 0.67X 0.86X 1.37X 1.31X Adj. 1.23X .41X 0.43X 0.98X 0.53X 1.71X 1.27X 0.49X 0.66X 1.37X 0.91X Historical FCF Conversion by Year 1 2010 – 2019 Free Cash Flow 1 ($M) 1 We use the non - GAAP measure of free cash flow, which we define as GAAP net cash flows from operating activities reduced by cap ital 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 b e d irectly comparable to similar measures used by other companies. 116 67 100 290 101 227 175 78 81 210 144 - 50 100 150 200 250 300 350 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10 Year Avg 10 - yr Avg. $ 144M GAAP 1.31X Adj. 0.91X 23 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 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 2 8 - Dec - 1 9 Net earnings attributable to Valmont Industries, Inc. $ 153,769 Interest expense 40,153 Income tax expense 50,207 Depreciation and amortization expense 82, 264 EBITDA 326,293 Debt $ 7 87,478 Leverage Ratio 2. 41 24 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Summary of Effect of Significant Non - recurring Items on Reported Results VALMONT INDUSTRIES, INC. AND SUBSIDIARIES SUMMARY OF EFFECT OF SIGNIFICANT NON - RECURRING ITEMS ON REPORTED 2018 RESULTS REGULATION G RECONCILIATION (Dollars in thousands, except per share amounts) (unaudited) The non - GAAP tables below disclose the impact on (a) diluted earnings per share of (1) debt refinancing expenses (2) impairment of goodwill and tradename (3) restructuring and related asset impairment costs (4) non - recurring costs of a vendor quality issue that we expect to recover through future purcha ses (5) acquisition diligence expenses and (6) the loss from divestiture of its grinding media business, (b) operating income of (1) impairment of goodwill and tradename (2) re str ucturing and related asset impairment costs (3) a non - recurring vendor quality issue (4) acquisition diligence expenses, and (c) segment operating income for these same 4 categor ies of expenses. Amounts may be impacted by rounding. We believe it is useful when considering company performance for the non - GAAP adjusted net earnings and operating inco me to be taken into consideration by management and investors with the related reported GAAP measures. Thirteen Weeks Ended December 29, 2018 Diluted earnings per share Year ended December 29, 2018 Diluted earnings per share Net earnings attributable to Valmont Industries, Inc. - as reported $ 17,662 $ 0.80 $ 94,351 $ 4.20 Debt refinancing expenses, pre - tax — — 14,820 0.66 Impairment of goodwill and tradename, pre - tax (743 ) (0.03 ) 15,037 0.67 Restructuring and related asset impairment costs - pre - tax 24,313 1.10 41,975 1.87 Non - recurring costs for vendor quality issue (Utility), pre - tax 5,000 0.23 5,000 0.22 Acquisition diligence costs, pre - tax 520 0.02 4,360 0.19 Loss from divestiture of grinding media business, pre - tax — — 6,084 0.27 Total Adjustments 29,090 1.32 87,276 3.89 Tax effect of adjustments * (5,407 ) (0.25 ) (10,767 ) (0.48 ) Completion of 2017 tax reform adjustment — — (491 ) (0.02 ) Net earnings attributable to Valmont Industries, Inc. - Adjusted $ 41,345 $ 1.87 $ 170,369 $ 7.59 Average shares outstanding (000’s) - Diluted 22,061 22,446 25 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Summary of Effect of Significant Non - recurring Items on Reported Results Thirteen Weeks Ended December 29, 2018 Year ended December 29, 2018 Operating Income Reconciliation Operating income - as reported $ 36,290 $ 202,280 Impairment of goodwill and tradename — 15,780 Restructuring and related asset impairment costs 24,313 41,975 Non - recurring costs for vendor quality issue (Utility) 5,000 5,000 Acquisition diligence costs 520 4,360 Adjusted Operating Income $ 66,123 $ 269,395 Net Sales - as reported 697,363 2,757,144 Operating Income as a % of Sales 5 .2 % 7.3 % Operating Income as a % of Sales – Adjusted 9.5 % 9.8 % 26 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation
Summary of Effect of Significant Non - recurring Items on Reported Results For the Fourth Quarter Ended Dec 29, 2018 Engineered Utility Support Support Other/ Segment Operating Income Reconciliation Structures Structures Coatings Irrigation Corporate Operating income - as reported $ (1,635 ) $ 18,468 $ 14,217 $ 14,805 $ (9,565 ) Restructuring and related asset impairment costs 21,723 2,410 — 180 — Non - recurring costs for vendor quality issue — 5,000 — — — Acquisition diligence costs 113 21 386 — — Adjusted Operating Income $ 20,201 $ 25,899 $ 14,603 $ 14,985 $ (9,565 ) Net sales 259,691 233,323 86,399 142,602 — Operating Income as a % of Sales (0.6 )% 7.9 % 16.5 % 10.4 % NM Adjusted Operating Income as a % of Sales 7.8 % 11.1 % 16.9 % 10.5 % NM 27 | February 20, 2020 | Valmont Industries, Inc. | 4Q 2019 Earnings Presentation