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
October 23, 2023
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.) |
| | | |
| 15000 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.
☐
Item 2.02. Results of Operations and Financial Condition.
Valmont Industries, Inc. issued a press release on October 25, 2023 announcing its financial results for its fiscal quarter ended September 30, 2023. The press release, along with the presentation to be used during its earnings call on October 26, 2023, 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 2.05. Costs Associated with Exit or Disposal Activities .
On October 23, 2023, the board of directors of Valmont authorized an organizational realignment program across the company to streamline segment support and reduce cost. The program, expected to be completed by the end of 2023, provides for a reduction in force, which with a voluntary early retirement program, will reduce this company’s workforce by approximately 360 administrative employees (or approximately 3% of its total workforce and 8% of its administrative workforce). The company expects to incur cash charges primarily in the fourth quarter of 2023 in the range of $33 million to $36 million.
Item 2.06. Material Impairments .
On October 23, 2023, in connection with its annual testing of goodwill and impairments Valmont concluded under generally accepted accounting principles to recognize impairment charges of $141 million, which is reflected in the company’s reporting for the third quarter of 2023. The non-cash charges primarily relate to the Agricultural Technology reporting unit of the company’s Agriculture segment due to significantly slower than expected adoption of agronomy technology solutions as well as the recent decline in the North American agricultural market.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| | | |
|---|---|---|
| Exhibit No. | Description | |
| 99.1 | | Press Release dated October 25, 2023 |
| 99.2 | | Presentation Slides for earnings call on October 26, 2023 |
| 104 | | Cover Page Interactive File (the cover page XBRL tags are embedded in the Inline XBRL document) |
Concerning Forward-Looking Statements
This report 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 report, 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, geopolitical risks, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in this report is made as of the date of this report and Valmont does not undertake to update any forward-looking statement.
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: | October 25, 2023 | | | |
| | By: | /s/ TIMOTHY P. FRANCIS | ||
| | | Name: | Timothy P. Francis | |
| | | Title: | Interim Chief Financial Officer |
Exhibit **** 99.1
| | | | |
|---|---|---|---|
| | FOR IMMEDIATE RELEASE | ||
| | | | |
| Contact: | Renee Campbell | | |
| Email: | renee.campbell@valmont.com | | |
| Date: | October 25, 2023 | |
Valmont Reports Third Quarter 2023 Results and Updates Full-Year Financial Outlook
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a global leader that provides vital infrastructure and advances agricultural productivity while driving innovation through technology, today reported financial results for the third quarter ended September 30, 2023.
President and Chief Executive Officer Avner M. Applbaum commented, “Our global teams performed extremely well during the third quarter, expanding gross profit and delivering strong third-quarter adjusted earnings per share against a dynamic demand environment. In Infrastructure, our solid results reflect volume growth from continued strong market demand, and we achieved operating margin improvement year-over-year despite near-term headwinds in telecommunications markets. In Agriculture, international sales growth was led by EMEA project sales and Brazil, where we recognized another quarter of record sales. As expected, North America agriculture sales decreased year-over-year due to continued muted farmer sentiment and third quarter 2022 benefited from the ongoing delivery of elevated backlog. I’m very pleased with our reduction in inventory which helped deliver strong operating cash flows.
“In the third quarter, we also recorded an impairment of goodwill and intangible assets in the Agriculture Technology reporting unit, primarily driven by significantly slower growth of Prospera’s agronomy technology solutions compared to the original financial projections.
“A few weeks ago, the leadership team and I met to discuss our strategy. From where I stand today, our core strategic priorities remain intact. While we will continue prioritizing growth initiatives, looking ahead we will invest with discipline to strengthen our core businesses, and proactively make decisions in conjunction with market cycles. Going forward, we will also ensure new innovation is introduced with the purpose of meeting the immediate needs of our customers. In addition, to align our organization with our strategy, today we are announcing an organizational realignment program to streamline administrative support of our business segments. This realignment, which is expected to be recovered through lower operating costs within 12 months, will enable a more efficient and effective structure for driving long-term profitable growth while reducing costs.”
^1^Please see Reg G reconciliation to GAAP measures at end of document
Third Quarter 2023 Highlights (all metrics compared to Third Quarter 2022 unless otherwise noted)
| ● | Net Sales of $1.1 billion decreased 4.3%; accounting for the 2022 divestiture of the offshore wind energy structures business, reported in the “Other” segment, Net Sales decreased 2.3%^1^ |
|---|---|
| ● | Operating Income (Loss) was ($24.2) million [$120.8 million or 11.5% of net sales adjusted^1^] compared to $110.0 million or 10.0% of net sales in 2022 [$114.1 million or 10.6% of net sales adjusted^1^] |
| --- | --- |
| o | Operating Income (Loss) includes non-cash pre-tax goodwill and intangible asset impairment charges of $137.3 million related to the Agriculture Technology reporting unit [$133.3 million after-tax] and $4.2 million of pre-tax cash expenses related to the organizational realignment program |
| --- | --- |
| ● | Diluted Earnings (Loss) per Share (“EPS”) of ($2.34) [$4.12 adjusted^1^] compared to $3.34 in 2022 [$3.49 adjusted^1^] |
| --- | --- |
| o | GAAP effective tax rate of (44.6)% reflects the impairment of goodwill for which there is no tax deduction; adjusted effective tax rate of 22.2%^1^ was driven by favorable legislation regarding usage of foreign tax credits generated in Brazil and benefits from research and development expenses |
| --- | --- |
| ● | Generated strong operating cash flows of $81.3 million in the third quarter and $190.9 million year-to-date; cash and cash equivalents at the end of the third quarter were $172.6 million |
| --- | --- |
| ● | Returned $44.2 million to shareholders through dividends and share repurchases including repurchasing approximately 126,500 shares of Company stock for $31.5 million |
| --- | --- |
| ● | Completed the acquisition of HR Products, a leading wholesale supplier of irrigation parts in Australia |
| --- | --- |
| ● | Providing updated 2023 full-year outlook and announcing an organizational realignment program to enable a more efficient and effective administrative structure for driving long-term profitable growth |
| --- | --- |
Key Financial Metrics
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Third Quarter 2023 | | GAAP | | Adjusted^1^ | | |||||||||||||
| (000's except per share amounts) | **** | 09/30/2023 | **** | 09/24/2022 | **** | | **** | | 09/30/2023 | **** | 09/24/2022 | **** | | | ||||
| | | Q3 2023 | | Q3 2022 | | vs. Q3 2022 | | | Q3 2023 | | Q3 2022 | | vs. Q3 2022 | | ||||
| Net Sales | | $ | 1,050,295 | | $ | 1,097,382 | | (4.3) | % | | $ | 1,050,295 | | $ | 1,074,521 | | (2.3) | % |
| Operating Income (Loss) | | | (24,190) | | | 109,972 | | NM | | | | 120,834 | | | 114,147 | | 5.9 | % |
| Operating Inc. (Loss) as a % of Net Sales | | | (2.3) | % | | 10.0 | % | | | | | 11.5 | % | | 10.6 | % | | |
| Net Earnings (Loss) | | | (49,028) | | | 72,112 | | NM | | | | 86,976 | | | 75,313 | | 15.5 | % |
| Diluted Earnings (Loss) Per Share | | $ | (2.34) | | $ | 3.34 | | NM | | | $ | 4.12 | | $ | 3.49 | | 18.1 | % |
| Average Shares Outstanding | | | 20,951 | | | 21,605 | | | | | | 21,131 | | | 21,605 | | |
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year-to-Date 2023 | | GAAP | | Adjusted^1^ | | |||||||||||||
| (000's except per share amounts) | **** | 09/30/2023 | **** | 09/24/2022 | **** | | **** | | 09/30/2023 | **** | 09/24/2022 | **** | | | ||||
| | | FY 2023 | | FY 2022 | | vs. FY 2022 | | | FY 2023 | | FY 2022 | | vs. FY 2022 | | ||||
| Net Sales | | $ | 3,159,072 | | $ | 3,213,734 | | (1.7) | % | | $ | 3,159,072 | | $ | 3,146,787 | | 0.4 | % |
| Operating Income | | | 228,009 | | | 323,533 | | (29.5) | % | | | 380,601 | | | 335,991 | | 13.3 | % |
| Operating Income as a % of Net Sales | | | 7.2 | % | | 10.1 | % | | | | | 12.0 | % | | 10.7 | % | | |
| Net Earnings | | | 114,888 | | | 210,531 | | (45.4) | % | | | 257,368 | | | 220,883 | | 16.5 | % |
| Diluted Earnings Per Share | | $ | 5.40 | | $ | 9.77 | | (44.8) | % | | $ | 12.09 | | $ | 10.25 | | 17.9 | % |
| Average Shares Outstanding | | | 21,290 | | | 21,546 | | | | | | 21,290 | | | 21,546 | | |
^1^Please see Reg G reconciliation to GAAP measures at end of document
Third Quarter 2023 Segment Review
Infrastructure (71.8% of Net Sales)
Products and solutions to serve the infrastructure markets of utility, solar, lighting, transportation, and telecommunications, along with coatings services to preserve metal products
Sales of $755.1 million were comparable with last year, driven by higher volumes, notably in the Solar, Lighting and Transportation (“L&T”) and Transmission, Distribution, and Substation (“TD&S”) product lines. Lower Telecommunications volumes and lower pricing associated with a reduced cost of steel in the TD&S product line more than offset higher pricing across the rest of the portfolio.
Operating Income improved to $103.4 million or 13.7% of net sales [$108.0 million or 14.3% adjusted^1^] compared to $92.5 million or 12.3% of net sales in the third quarter of 2022 as pricing not linked to steel commodity costs was higher and the Company took deliberate actions to improve overall cost of goods sold.
Agriculture (28.2% of Net Sales)
Center pivot components and linear irrigation equipment for agricultural markets, including parts and tubular products; advanced technology solutions for precision agriculture
Sales of $298.5 million decreased 8.8% year-over-year as higher international sales were more than offset by lower sales in North America. Sales of agriculture technology products and services globally were similar to last year.
In North America, the sales decrease was primarily driven by lower irrigation equipment sales volumes. As expected, farmer sentiment remained somewhat muted during the quarter and the third quarter of 2022 benefited from the ongoing delivery of elevated backlog. Average irrigation equipment selling prices were comparable with last year. International sales growth was driven by higher project sales in the EMEA region, a record sales quarter in Brazil, and higher sales in Argentina. Third quarter 2023 also benefited from approximately $5.5 million of favorable foreign currency translation impacts compared to last year.
Operating Income (Loss) was ($99.7) million [$38.5 million or 13.0% of net sales adjusted^1^] compared to $43.3 million or 13.3% of net sales in the third quarter of 2022 [$47.4 million or 14.6% adjusted^1^]. A $137.3 million impairment of goodwill and intangible assets led to the operating loss in the quarter, as described later in the press release.
Other
Offshore wind energy structures business
As previously announced, the divestiture of the offshore wind energy structures business was completed in December 2022. In the third quarter of 2022, the subsequently-divested business generated sales of $22.9 million and operating income of $1.1 million.
^1^Please see Reg G reconciliation to GAAP measures at end of document
Non-Cash Goodwill and Intangible Asset Impairment Charge of Agriculture Technology
During the third quarter of 2023, Valmont completed its annual impairment testing of goodwill and certain intangible assets. As a result of the impairment analysis, it was concluded that the carrying value of the Agriculture Technology reporting unit exceeded its market value. As such, the Company recorded an impairment loss on goodwill and certain intangible assets of $137.3 million. Significantly slower growth of Prospera’s agronomy technology solutions compared to the original financial projections was the primary driver of the impairment. The recent decline in the North American agriculture market was also a contributing factor. The impairment charge did not affect the Company’s liquidity or cash flows from operating activities.
Balance Sheet, Liquidity, and Capital Allocation
The Company generated strong third quarter 2023 operating cash flows of $81.3 million through effectively managing working capital, specifically inventory. At the end of the third quarter of 2023, cash and cash equivalents were $172.6 million. During the third quarter of 2023, Valmont repurchased $31.5 million of Company stock, with $314.7 million remaining on the authorized share repurchase program.
Organizational Realignment Program
Today, Valmont is announcing a broad organizational realignment program which better aligns the Company’s administrative support structure to its strategy by reducing layers of management, offering a voluntary early retirement program and other headcount reductions. These actions are expected to enable a more efficient and effective administrative structure for driving long-term profitable growth while still investing in growth initiatives. The program affects both reportable segments as well as corporate, and is targeted to take place during 2023. Cash expenses are expected to be between $33 and $36 million and are expected to be recovered through lower operating costs within 12 months. Of the above cost estimates, $4.2 million of pre-tax cash expenses related to the realignment program were incurred during the third quarter 2023.
^1^Please see Reg G reconciliation to GAAP measures at end of document
Updating 2023 Full Year Financial Outlook and Key Assumptions
Taking into consideration third quarter sales and diluted earnings per share results, the expected timing of international agriculture project shipments and the near-term demand outlook for telecommunications markets, the Company is updating its full-year net sales growth and earnings per share outlook from the previous indications that were communicated last quarter and providing updated key assumptions for the year.
| <br><br><br><br> | | |
|---|---|---|
| 2023 Full Year Financial Outlook | Previous Outlook with Updated Adjustments^1^ | Revised Outlook^1^ |
| Net Sales Growth (vs. PY) | 0% to 2% | (3%) to (4%) |
| GAAP Diluted Earnings per Share | $14.80 to $15.35 | $7.20 to $7.50 |
| Adjusted Diluted Earnings per Share^1^ | $14.80 to $15.35 | $14.80 to $15.10 |
| ● | The impairment charge significantly reduces the future Prospera technology intangible asset amortization, and the realignment program announced in this release lowers future stock-based compensation to be recognized for Prospera employees. The Previous Adjusted Diluted Earnings per Share Outlook has been updated to remove the Prospera adjustments of approximately 65 cents per diluted share from the prior Outlook for comparison to the Revised Outlook |
|---|---|
| ● | Expect full-year operating margin improvement compared to 2022 |
| --- | --- |
| ● | 2022 sales include $100 million from the offshore wind energy structures business which was divested at the end of fiscal 2022 |
| --- | --- |
| ● | GAAP effective tax rate of 36% to 36.5% due to the non-deductibility of the goodwill impairment; Adjusted effective tax rate of 26% to 26.5% due to recent favorable U.S. tax legislation |
| --- | --- |
| ● | Minimal expected foreign currency translation impact to net sales |
| --- | --- |
| ● | Capital expenditures expected to be in the range of $100 to $110 million to support strategic growth initiatives |
| --- | --- |
Applbaum continued, “The Valmont team continues to perform well, optimizing margins and earnings while generating strong cash flows, positioning us for profitable growth as we streamline the organization. The long-term outlook across all our end markets remains very positive, while acknowledging near-term headwinds in certain markets. Our management team and organization are united around our strategic priorities, with a focus on initiatives that deliver a compelling value proposition to our customers and drive long-term shareholder value. I am excited about Valmont’s journey as a company that maximizes financial performance through the cycles, made possible by an unwavering discipline on capital allocation and ROIC.”
A live audio discussion with Avner M. Applbaum, President and Chief Executive Officer, and Timothy P. Francis, Interim Chief Financial Officer, will be accessible by telephone on Thursday, October 26, 2023 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 3Q 2023 Earnings Conference Call. A slide presentation will simultaneously be available for download on the Investors page of valmont.com. A replay of the event can be accessed three hours after the call at the above link or by telephone at 1-877-660-6853 or 1-201-612-7415. Please use access code 13734765. The replay will be available through 10:59 p.m. CDT on Thursday, November 2, 2023.
About Valmont Industries, Inc.
For over 75 years, Valmont^®^ has been a global leader in creating vital infrastructure and advancing agricultural productivity. Today, we remain committed to doing more with less by innovating through technology. Learn more about how we’re Conserving Resources. Improving Life.^®^ at valmont.com.
^1^Please see Reg G reconciliation to GAAP measures at end of document
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, geopolitical risks, 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.
Website and Social Media Disclosure
The Company uses its website and social media channels identified on its website as channels of distribution of Company information. The information that the Company posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following the Company’s press releases, Securities and Exchange Commission filings, and public conference calls and webcasts. The contents of the Company’s website and social media channels are not part of this press release.
^1^Please see Reg G reconciliation to GAAP measures at end of document
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended | | Thirty-nine weeks ended | ||||||||
| | | September 30, | | September 24, | | September 30, | | September 24, | ||||
| | | 2023 | **** | 2022 | **** | 2023 | **** | 2022 | ||||
| Net sales | | $ | 1,050,295 | | $ | 1,097,382 | | $ | 3,159,072 | | $ | 3,213,734 |
| Cost of sales | | | 735,184 | | | 811,904 | | | 2,205,979 | | | 2,386,469 |
| Gross profit | | | 315,111 | | | 285,478 | | | 953,093 | | | 827,265 |
| Selling, general, and administrative expenses | | | 194,277 | | | 175,506 | | | 580,060 | | | 503,732 |
| Impairment of long-lived assets | | | 140,844 | | | — | | | 140,844 | | | — |
| Realignment charges | | | 4,180 | | | — | | | 4,180 | | | — |
| Operating income (loss) | | | (24,190) | | | 109,972 | | | 228,009 | | | 323,533 |
| Other income (expense) | | | | | | | | | ||||
| Interest expense | | | (13,472) | | | (11,629) | | | (41,494) | | | (34,278) |
| Interest income | | | 3,186 | | | 507 | | | 4,579 | | | 1,019 |
| Gain (loss) on investments - unrealized | | | (344) | | | (901) | | | 1,791 | | | (4,306) |
| Other | | | 165 | | | 2,822 | | | (1,599) | | | 8,537 |
| Other income (expense), net | | | (10,465) | | | (9,201) | | | (36,723) | | | (29,028) |
| Earnings (loss) before income taxes and equity in loss of | | | | | | | | | | | | |
| nonconsolidated subsidiaries | | | (34,655) | | | 100,771 | | | 191,286 | | | 294,505 |
| Income tax expense | | | 15,461 | | | 27,823 | | | 79,239 | | | 80,531 |
| Equity in loss of nonconsolidated subsidiaries | | | (199) | | | (18) | | | (1,219) | | | (931) |
| Net earnings (loss) | | | (50,315) | | | 72,930 | | | 110,828 | | | 213,043 |
| Loss (earnings) attributable to non-controlling interests | | | 1,287 | | | (818) | | | 4,060 | | | (2,512) |
| Net earnings (loss) attributable to Valmont Industries, Inc. | | $ | (49,028) | | $ | 72,112 | | $ | 114,888 | | $ | 210,531 |
| | | | | | | | | | | | | |
| Average shares outstanding (000's) - Basic | | | 20,951 | | | 21,332 | | | 21,083 | | | 21,308 |
| Earnings (loss) per share - Basic | | $ | (2.34) | | $ | 3.38 | | $ | 5.45 | | $ | 9.88 |
| | | | | | | | | | | | | |
| Average shares outstanding (000's) - Diluted | | | 20,951 | | | 21,605 | | | 21,290 | | | 21,546 |
| Earnings (loss) per share - Diluted | | $ | (2.34) | | $ | 3.34 | | $ | 5.40 | | $ | 9.77 |
| | | | | | | | | | | | | |
| Cash dividends per share | | $ | 0.60 | | $ | 0.55 | | $ | 1.80 | | $ | 1.65 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended | | Thirty-nine weeks ended | ||||||||
| | | September 30, | | September 24, | | September 30, | | September 24, | ||||
| | | 2023 | **** | 2022 | **** | 2023 | **** | 2022 | ||||
| Net sales | | | | | | | | | | | | |
| Infrastructure | | $ | 755,076 | | $ | 755,492 | | $ | 2,261,777 | | $ | 2,157,082 |
| Agriculture | | | 298,483 | | | 327,261 | | | 910,579 | | | 1,011,606 |
| Other | | | — | | | 22,861 | | | — | | | 66,947 |
| Total | | | 1,053,559 | | | 1,105,614 | | | 3,172,356 | | | 3,235,635 |
| Less: Intersegment sales | | | (3,264) | | | (8,232) | | | (13,284) | | | (21,901) |
| Total | | $ | 1,050,295 | | $ | 1,097,382 | | $ | 3,159,072 | | $ | 3,213,734 |
| | | | | | | | | | | | | |
| Operating income (loss) | | | | | | | | | ||||
| Infrastructure | | $ | 103,401 | | $ | 92,465 | | $ | 313,703 | | $ | 254,908 |
| Agriculture | | | (99,670) | | | 43,258 | | | 2,904 | | | 138,779 |
| Other | | | — | | | 1,107 | | | — | | | 814 |
| Corporate | | | (27,921) | | | (26,858) | | | (88,598) | | | (70,968) |
| Total | | $ | (24,190) | | $ | 109,972 | | $ | 228,009 | | $ | 323,533 |
Valmont has aggregated its business segments into two global reportable segments, as follows.
Infrastructure*: This segment consists of the manufacture and distribution of products and solutions to serve the infrastructure markets of utility, solar, lighting, transportation, and telecommunications, along with coatings services to preserve metal products.*
Agriculture*: This segment consists of the manufacture of center pivot components and linear irrigation equipment for agricultural markets, including parts and tubular products, and advanced technology solutions for precision agriculture.*
In addition to these two reportable segments, the Company had a business and related activities in 2022 that were not more than 10% of consolidated sales, operating income, or assets. This comprised the offshore wind energy structures business which was reported in the “Other” segment until its divestiture in December 2022.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended September 30, 2023 | |||||||||||||
| Sales | **** | Infrastructure | **** | Agriculture | **** | Other | | Intersegment | **** | Consolidated | |||||
| Geographical Market: | | | | | | | | | | | | | | | |
| North America | | $ | 572,239 | | $ | 126,828 | | $ | — | | $ | (3,055) | | $ | 696,012 |
| International | | | 182,837 | | | 171,655 | | | — | | | (209) | | | 354,283 |
| Total | | $ | 755,076 | | $ | 298,483 | | $ | — | | $ | (3,264) | | $ | 1,050,295 |
| | | | | | | | | | | | | | | | |
| Product Line: | | | | | | | | | | | |||||
| Transmission, Distribution, and Substation | | $ | 297,967 | | $ | — | | $ | — | | $ | — | | $ | 297,967 |
| Lighting and Transportation | | | 252,603 | | | — | | | — | | | — | | | 252,603 |
| Coatings | | | 88,967 | | | — | | | — | | | (1,241) | | | 87,726 |
| Telecommunications | | | 59,630 | | | — | | | — | | | — | | | 59,630 |
| Solar | | | 55,909 | | | — | | | — | | | (209) | | | 55,700 |
| Irrigation Equipment and Parts | | | — | | | 273,639 | | | — | | | (1,814) | | | 271,825 |
| Technology Products and Services | | | — | | | 24,844 | | | — | | | — | | | 24,844 |
| Total | | $ | 755,076 | | $ | 298,483 | | $ | — | | $ | (3,264) | | $ | 1,050,295 |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended September 24, 2022 | |||||||||||||
| Sales | **** | Infrastructure | **** | Agriculture | **** | Other | | Intersegment | **** | Consolidated | |||||
| Geographical Market: | | | | | | | | | | | | | | | |
| North America | | $ | 579,628 | | $ | 178,626 | | $ | — | | $ | (7,114) | | $ | 751,140 |
| International | | | 175,864 | | | 148,635 | | | 22,861 | | | (1,118) | | | 346,242 |
| Total | | $ | 755,492 | | $ | 327,261 | | $ | 22,861 | | $ | (8,232) | | $ | 1,097,382 |
| | | | | | | | | | | | | | | | |
| Product Line: | | | | | | | | | | | | | | | |
| Transmission, Distribution, and Substation | | $ | 304,781 | | $ | — | | $ | — | | $ | — | | $ | 304,781 |
| Lighting and Transportation | | | 241,590 | | | — | | | — | | | — | | | 241,590 |
| Coatings | | | 91,969 | | | — | | | — | | | (3,994) | | | 87,975 |
| Telecommunications | | | 92,830 | | | — | | | — | | | — | | | 92,830 |
| Solar | | | 24,322 | | | — | | | 22,861 | | | (1,118) | | | 46,065 |
| Irrigation Equipment and Parts | | | — | | | 303,003 | | | — | | | (3,120) | | | 299,883 |
| Technology Products and Services | | | — | | | 24,258 | | | — | | | — | | | 24,258 |
| Total | | $ | 755,492 | | $ | 327,261 | | $ | 22,861 | | $ | (8,232) | | $ | 1,097,382 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirty-nine weeks ended September 30, 2023 | |||||||||||||
| Sales | **** | Infrastructure | **** | Agriculture | **** | Other | | Intersegment | **** | Consolidated | |||||
| Geographical Market: | | | | | | | | | | | | | | | |
| North America | | $ | 1,743,635 | | $ | 450,678 | | $ | — | | $ | (12,042) | | $ | 2,182,271 |
| International | | | 518,142 | | | 459,901 | | | — | | | (1,242) | | | 976,801 |
| Total | | $ | 2,261,777 | | $ | 910,579 | | $ | — | | $ | (13,284) | | $ | 3,159,072 |
| | | | | | | | | | | | | | | | |
| Product Line: | | | | | | | | | | | | | | | |
| Transmission, Distribution, and Substation | | $ | 927,094 | | $ | — | | $ | — | | $ | — | | $ | 927,094 |
| Lighting and Transportation | | | 727,862 | | | — | | | — | | | — | | | 727,862 |
| Coatings | | | 270,201 | | | — | | | — | | | (6,611) | | | 263,590 |
| Telecommunications | | | 195,505 | | | — | | | — | | | — | | | 195,505 |
| Solar | | | 141,115 | | | — | | | — | | | (1,242) | | | 139,873 |
| Irrigation Equipment and Parts | | | — | | | 825,277 | | | — | | | (5,431) | | | 819,846 |
| Technology Products and Services | | | — | | | 85,302 | | | — | | | — | | | 85,302 |
| Total | | $ | 2,261,777 | | $ | 910,579 | | $ | — | | $ | (13,284) | | $ | 3,159,072 |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirty-nine weeks ended September 24, 2022 | |||||||||||||
| Sales | **** | Infrastructure | **** | Agriculture | **** | Other | | Intersegment | **** | Consolidated | |||||
| Geographical Market: | | | | | | | | | | | | | | | |
| North America | | $ | 1,645,472 | | $ | 564,369 | | $ | — | | $ | (20,316) | | $ | 2,189,525 |
| International | | | 511,610 | | | 447,237 | | | 66,947 | | | (1,585) | | | 1,024,209 |
| Total | | $ | 2,157,082 | | $ | 1,011,606 | | $ | 66,947 | | $ | (21,901) | | $ | 3,213,734 |
| | | | | | | | | | | | | | | | |
| Product Line: | | | | | | | | | | | | ||||
| Transmission, Distribution, and Substation | | $ | 882,216 | | $ | — | | $ | — | | $ | — | | $ | 882,216 |
| Lighting and Transportation | | | 701,009 | | | — | | | — | | | — | | | 701,009 |
| Coatings | | | 264,266 | | | — | | | — | | | (11,295) | | | 252,971 |
| Telecommunications | | | 232,765 | | | — | | | — | | | — | | | 232,765 |
| Solar | | | 76,826 | | | — | | | 66,947 | | | (1,118) | | | 142,655 |
| Irrigation Equipment and Parts | | | — | | | 928,622 | | | — | | | (9,488) | | | 919,134 |
| Technology Products and Services | | | — | | | 82,984 | | | — | | | — | | | 82,984 |
| Total | | $ | 2,157,082 | | $ | 1,011,606 | | $ | 66,947 | | $ | (21,901) | | $ | 3,213,734 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | September 30, | | December 31, | ||
| | | 2023 | **** | 2022 | ||
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 172,566 | | $ | 185,406 |
| Receivables, net | | | 673,999 | | | 604,181 |
| Inventories | | | 693,629 | | | 728,762 |
| Contract assets | | | 169,931 | | | 174,539 |
| Prepaid expenses and other current assets | | | 97,302 | | | 87,697 |
| Total current assets | | | 1,807,427 | | | 1,780,585 |
| Property, plant, and equipment, net | | | 603,979 | | | 595,578 |
| Goodwill and other non-current assets | | | 1,074,773 | | | 1,180,833 |
| Total assets | | $ | 3,486,179 | | $ | 3,556,996 |
| | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | ||
| Current liabilities: | | | | | ||
| Current installments of long-term debt | | $ | 941 | | $ | 1,194 |
| Notes payable to banks | | | 3,639 | | | 5,846 |
| Accounts payable | | | 355,934 | | | 360,312 |
| Accrued expenses | | | 260,873 | | | 248,320 |
| Contract liabilities | | | 88,600 | | | 172,915 |
| Income taxes payable | | | 2,062 | | | 3,664 |
| Dividends payable | | | 12,533 | | | 11,742 |
| Total current liabilities | | | 724,582 | | | 803,993 |
| Long-term debt, excluding current installments | | | 977,260 | | | 870,935 |
| Operating lease liabilities | | | 160,521 | | | 155,469 |
| Other non-current liabilities | | | 65,104 | | | 84,887 |
| Total liabilities | | | 1,927,467 | | | 1,915,284 |
| Shareholders' equity | | | 1,558,712 | | | 1,641,712 |
| Total liabilities and shareholders' equity | | $ | 3,486,179 | | $ | 3,556,996 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Thirty-nine weeks ended | ||||
| | | September 30, | | September 24, | ||
| | | 2023 | **** | 2022 | ||
| Cash flows from operating activities: | | | | | | |
| Net earnings | | $ | 110,828 | | $ | 213,043 |
| Depreciation and amortization | | | 73,638 | | | 72,803 |
| Contribution to defined benefit pension plan | | | (15,259) | | | (17,155) |
| Impairment of long-lived assets | | | 140,844 | | | — |
| Gain on divestiture | | | (2,994) | | | — |
| Change in working capital | | | (110,550) | | | (96,995) |
| Other | | | (5,639) | | | 12,030 |
| Net cash flows provided by operating activities | | | 190,868 | | | 183,726 |
| | | | | | | |
| Cash flows from investing activities: | | | | | ||
| Purchase of property, plant, and equipment | | | (71,233) | | | (67,122) |
| Proceeds from divestiture, net of cash divested | | | 6,369 | | | — |
| Proceeds from sale of assets | | | 1,565 | | | 71 |
| Proceeds from property damage insurance claims | | | 6,770 | | | — |
| Acquisitions, net of cash acquired | | | (31,839) | | | (39,287) |
| Other | | | (898) | | | (108) |
| Net cash flows used in investing activities | | | (89,266) | | | (106,446) |
| | | | | | | |
| Cash flows from financing activities: | | | | | ||
| Proceeds from short-term borrowings | | | 24,649 | | | 4,137 |
| Payments on short-term borrowings | | | (27,290) | | | (12,366) |
| Proceeds from long-term borrowings | | | 215,012 | | | 235,470 |
| Principal payments on long-term borrowings | | | (109,335) | | | (251,155) |
| Proceeds from settlement of financial derivatives | | | — | | | 2,243 |
| Dividends paid | | | (36,983) | | | (34,080) |
| Dividends to noncontrolling interests | | | (662) | | | — |
| Purchase of noncontrolling interests | | | — | | | (7,338) |
| Purchase of treasury shares | | | (166,663) | | | (20,491) |
| Proceeds from exercises under stock plans | | | 5,348 | | | 8,778 |
| Other | | | (15,567) | | | (4,341) |
| Net cash flows used in financing activities | | | (111,491) | | | (79,143) |
| Effect of exchange rates on cash and cash equivalents | | | (2,951) | | | (9,148) |
| Net change in cash and cash equivalents | | | (12,840) | | | (11,011) |
| Cash and cash equivalents - beginning of year | | | 185,406 | | | 177,232 |
| Cash and cash equivalents - end of period | | $ | 172,566 | | $ | 166,221 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
(Dollars in thousands, except per share amounts)
(Unaudited)
The non-GAAP tables below disclose the impact of the impairment of long-lived assets, realignment charges, intangible asset amortization (Prospera), and stock-based compensation recognized for the Prospera employees on fiscal 2023 and 2022 results, as well as the impact of non-recurring tax benefit items on net earnings. Amounts may be impacted by rounding. We believe it is useful when considering Company performance for the non-GAAP adjusted net earnings and operating income to be taken into consideration by management and investors with the related reported GAAP measures.
We previously presented non-GAAP financial measures adjusted for Prospera intangible asset amortization and stock-based compensation recognized for the Prospera employees for a better investor understanding of Agriculture segment performance related to traditional segment products. The Company conducted its annual impairment testing of intangible asset value as of September 2, 2023 and significantly reduced the Prospera intangible asset value. Additionally, the board approved certain realignment plans subsequent to the third quarter of fiscal 2023 that significantly affected the compensation recognized for the Prospera employees. As a result of this, we do not consider our historical adjustments related to Prospera to arrive at non-GAAP financial measures to be relevant to investor understanding of third quarter and future segment performance.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen | | | | | Thirty-nine | | | | ||
| | | weeks ended | | Diluted | | weeks ended | | Diluted | ||||
| | | September | | earnings (loss) | | September | | earnings per | ||||
| | | 30, 2023 | | per share^1,2^ | | 30, 2023 | | share^2^ | ||||
| Net earnings (loss) attrib. to Valmont Industries, Inc. - as reported | | $ | (49,028) | | $ | (2.32) | | $ | 114,888 | | $ | 5.40 |
| Impairment of long-lived assets | | | 140,844 | | | 6.67 | | | 140,844 | | | 6.62 |
| Realignment charges | | | 4,180 | | | 0.20 | | | 4,180 | | | 0.20 |
| Prospera intangible asset amortization | | | — | | | — | | | 3,290 | | | 0.15 |
| Prospera stock-based compensation | | | — | | | — | | | 4,278 | | | 0.20 |
| Total adjustments, pre-tax | | | 145,024 | | | 6.86 | | | 152,592 | | | 7.17 |
| Tax effect of adjustments^3^ | | | (5,432) | | | (0.26) | | | (6,524) | | | (0.31) |
| Non-recurring tax benefit items | | | (3,588) | | | (0.17) | | | (3,588) | | | (0.17) |
| Net earnings attributable to Valmont Industries, Inc. - adjusted | | $ | 86,976 | | $ | 4.12 | | $ | 257,368 | | $ | 12.09 |
| Average shares outstanding (000’s) - diluted | | | | | | 21,131 | | | | | 21,290 |
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen | | | | | Thirty-nine | | | | ||
| | | weeks ended | | Diluted | | weeks ended | | Diluted | ||||
| | | September | | earnings per | | September | | earnings per | ||||
| | | 24, 2022 | | share^2^ | | 24, 2022 | | share^2^ | ||||
| Net earnings attributable to Valmont Industries, Inc. - as reported | | $ | 72,112 | | $ | 3.34 | | $ | 210,531 | | $ | 9.77 |
| Prospera intangible asset amortization | | | 1,645 | | | 0.08 | | | 4,935 | | | 0.23 |
| Prospera stock-based compensation | | | 2,530 | | | 0.12 | | | 7,523 | | | 0.35 |
| Total adjustments, pre-tax | | | 4,175 | | | 0.19 | | | 12,458 | | | 0.58 |
| Tax effect of adjustments^3^ | | | (974) | | | (0.05) | | | (2,106) | | | (0.10) |
| Net earnings attributable to Valmont Industries, Inc. - adjusted | | $ | 75,313 | | $ | 3.49 | | $ | 220,883 | | $ | 10.25 |
| Average shares outstanding (000’s) - diluted | | | | | | 21,605 | | | | | 21,546 |
^1^In the third quarter of fiscal 2023, we reported a GAAP net loss. In periods in which we recognize a net loss, we exclude the impact of outstanding stock awards from the diluted loss per share calculation, as their inclusion would have an anti-dilutive effect. The adjusted diluted earnings per share calculation includes the impact of outstanding stock awards.
^2^Earnings (loss) per share includes rounding.
^3^The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
(Dollars in thousands)
(Unaudited)
The non-GAAP tables below disclose the impacts of the impairment of long-lived assets, realignment charges, intangible asset amortization (Prospera) and stock-based compensation recognized for the Prospera employees on fiscal 2023 and 2022 results. Amounts may be impacted by rounding. We believe it is useful when considering company performance for the non-GAAP adjusted net earnings and operating income to be taken into consideration by management and investors with the related reported GAAP measures.
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended September 30, 2023 | | |||||||||||||
| Operating Income (Loss) Reconciliation | | Infrastructure | Agriculture | Other | | Corporate | Consolidated | |||||||||
| Operating income (loss) - as reported | | $ | 103,401 | | $ | (99,670) | | $ | — | | $ | (27,921) | | $ | (24,190) | |
| Impairment of long-lived assets | | | 3,571 | | | 137,273 | | | — | | | — | | | 140,844 | |
| Realignment charges | | | 1,069 | | | 907 | | | — | | | 2,204 | | | 4,180 | |
| Adjusted operating income | | $ | 108,041 | | $ | 38,510 | | $ | — | | $ | (25,717) | | $ | 120,834 | |
| Net sales - as reported | | | 753,626 | | | 296,669 | | | — | | | — | | | 1,050,295 | |
| | | | | | | | | | | | | | | | | |
| Operating income (loss) as a % of net sales | | | 13.7 | % | | (33.6) | % | | NM | | | NM | | | (2.3) | % |
| Adj. operating income as a % of adj. net sales | | | 14.3 | % | | 13.0 | % | | NM | | | NM | | | 11.5 | % |
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended September 24, 2022 | | |||||||||||||
| Operating Income Reconciliation | | Infrastructure | Agriculture | Other | | Corporate | Consolidated | |||||||||
| Operating income - as reported | | $ | 92,465 | | $ | 43,258 | | $ | 1,107 | | $ | (26,858) | | $ | 109,972 | |
| Prospera intangible asset amortization | | | — | | | 1,645 | | | — | | | — | | | 1,645 | |
| Prospera stock-based compensation | | | — | | | 2,530 | | | — | | | — | | | 2,530 | |
| Adjusted operating income | | $ | 92,465 | | $ | 47,433 | | $ | 1,107 | | $ | (26,858) | | $ | 114,147 | |
| Net sales - as reported | | | 750,380 | | | 324,141 | | | 22,861 | | | — | | | 1,097,382 | |
| Adjusted net sales | | | 750,380 | | | 324,141 | | | — | | | — | | | 1,074,521 | |
| | | | | | | | | | | | | | | | | |
| Operating income as a % of net sales | | | 12.3 | % | | 13.3 | % | | 4.8 | % | | NM | | | 10.0 | % |
| Adj. operating income as a % of net sales | | | 12.3 | % | | 14.6 | % | | 4.8 | % | | NM | | | 10.4 | % |
| Adj. operating income as a % of adj. net sales | | | 12.3 | % | | 14.6 | % | | NM | | | NM | | | 10.6 | % |
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirty-nine weeks ended September 30, 2023 | | |||||||||||||
| Operating Income Reconciliation | | Infrastructure | Agriculture | Other | | Corporate | Consolidated | |||||||||
| Operating income - as reported | | $ | 313,703 | | $ | 2,904 | | $ | — | | $ | (88,598) | | $ | 228,009 | |
| Impairment of long-lived assets | | | 3,571 | | | 137,273 | | | — | | | — | | | 140,844 | |
| Realignment charges | | | 1,069 | | | 907 | | | — | | | 2,204 | | | 4,180 | |
| Prospera intangible asset amortization | | | — | | | 3,290 | | | — | | | — | | | 3,290 | |
| Prospera stock-based compensation | | | — | | | 4,278 | | | — | | | — | | | 4,278 | |
| Adjusted operating income | | $ | 318,343 | | $ | 148,652 | | $ | — | | $ | (86,394) | | $ | 380,601 | |
| Net sales - as reported | | | 2,253,924 | | | 905,148 | | | — | | | — | | | 3,159,072 | |
| | | | | | | | | | | | | | | | | |
| Operating income as a % of net sales | | | 13.9 | % | | 0.3 | % | | NM | | | NM | | | 7.2 | % |
| Adj. operating income as a % of adj. net sales | | | 14.1 | % | | 16.4 | % | | NM | | | NM | | | 12.0 | % |
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirty-nine weeks ended September 24, 2022 | | |||||||||||||
| Operating Income Reconciliation | | Infrastructure | Agriculture | Other | | Corporate | Consolidated | |||||||||
| Operating income - as reported | | $ | 254,908 | | $ | 138,779 | | $ | 814 | | $ | (70,968) | | $ | 323,533 | |
| Prospera intangible asset amortization | | | — | | | 4,935 | | | — | | | — | | | 4,935 | |
| Prospera stock-based compensation | | | — | | | 7,523 | | | — | | | — | | | 7,523 | |
| Adjusted operating income | | $ | 254,908 | | $ | 151,237 | | $ | 814 | | $ | (70,968) | | $ | 335,991 | |
| Net sales - as reported | | | 2,144,669 | | | 1,002,118 | | | 66,947 | | | — | | | 3,213,734 | |
| Adjusted net sales | | | 2,144,669 | | | 1,002,118 | | | — | | | — | | | 3,146,787 | |
| | | | | | | | | | | | | | | | | |
| Operating income as a % of net sales | | | 11.9 | % | | 13.8 | % | | 1.2 | % | | NM | | | 10.1 | % |
| Adj. operating income as a % of net sales | | | 11.9 | % | | 15.1 | % | | 1.2 | % | | NM | | | 10.5 | % |
| Adj. operating income as a % of adj. net sales | | | 11.9 | % | | 15.1 | % | | NM | | | NM | | | 10.7 | % |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
REGULATION G RECONCILIATION OF EXCLUDING OTHER SEGMENT NET SALES
(Dollars in thousands)
(Unaudited)
Excluding Other segment net sales from the third quarter and first three quarters of fiscal 2022, which we refer to in this reconciliation as “Adjusted Net Sales”, is a non-GAAP measure. The Other segment net sales were generated by the offshore wind energy structures business which was divested in December 2022. Adjusted Net Sales should not be considered in isolation or as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with GAAP, or as a measure of our operating performance or liquidity. The table below shows how Adjusted Net Sales is calculated from the Company’s Statements of Operations. Adjusted Net Sales is calculated as total net sales less Other segment net sales. Adjusted Net Sales allows investors to analyze our operating performance in light of the amount of net sales less net sales of a divested business.
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended | | | | | Thirty-nine weeks ended | | | | ||||||||
| | | September 30, | **** | September 24, | | Percent | | September 30, | **** | September 24, | | Percent | ||||||
| | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change | ||||||
| Net sales | | $ | 1,050,295 | | $ | 1,097,382 | | | (4.3)% | | $ | 3,159,072 | | $ | 3,213,734 | | | (1.7)% |
| Less: Other segment net sales | | | — | | | (22,861) | | | NM | | | — | | | (66,947) | | | NM |
| Adjusted net sales | | $ | 1,050,295 | | $ | 1,074,521 | | | (2.3)% | | $ | 3,159,072 | | $ | 3,146,787 | | | 0.4% |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
REGULATION G RECONCILIATION OF ADJUSTED EFFECTIVE TAX RATE
(Dollars in thousands)
(Unaudited)
Excluding significant non-recurring items from the third quarter of fiscal 2023 from the calculation of effective tax rate, which we refer to as “Adjusted Effective Tax Rate”, is a non-GAAP measure. Adjusted Effective Tax Rate should not be considered in isolation or as a substitute for the effective tax rate prepared in accordance with GAAP. The table below shows how Adjusted Effective Tax Rate is calculated from the Company’s Statements of Operations. Adjusted Effective Tax Rate is calculated as total earnings (loss) before income taxes plus the significant non-recurring items of impairment of goodwill and intangible assets, realignment charges, and non-recurring tax benefit items. Adjusted Effective Tax Rate allows investors to analyze our effective tax rate in light of these non-recurring items.
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | Thirteen weeks ended September 30, 2023 | |||||||
| | | Earnings (loss) before income taxes and equity in loss of nonconsolidated subsidiaries | | Income tax expense | | Effective tax rate | |||
| As reported | | $ | (34,655) | | $ | 15,461 | | | (44.6)% |
| Impairment of long-lived assets | | | 140,844 | | | 4,387 | | | |
| Realignment charges | | | 4,180 | | | 1,045 | | | |
| Non-recurring tax benefit items | | | — | | | 3,588 | | | |
| Adjusted | | $ | 110,369 | | $ | 24,481 | | | 22.2% |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
REGULATION G RECONCILIATION OF FORECASTED GAAP AND ADJUSTED EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
The non-GAAP tables below discloses the impact on the range of estimated diluted earnings per share of the (1) amortization of intangible assets (Prospera), (2) stock-based compensation for Prospera employees, (3) impairment of long-lived assets, (4) realignment charges, and (5) non-recurring tax benefit items. We believe it is useful when considering company performance for the non-GAAP adjusted net earnings to be taken into consideration by management and investors with the related reported GAAP measures.
Reconciliation of Range of Net Earnings
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| 2023 Revised Guidance^1^ | | Low End | **** | High End | **** | Adjustments | |||
| Estimated net earnings - GAAP | | $ | 154,000 | | $ | 160,400 | | | |
| Impairment of long-lived assets, pre-tax | | | | | | | | $ | 141,000 |
| Realignment charges, pre-tax | | | | | | | | | 36,000 |
| Total pre-tax adjustments | | | | | | | | | 177,000 |
| Estimated tax benefit from above expenses^2^ | | | | | | | | | (12,900) |
| Non-recurring tax benefit items | | | | | | | | | (3,600) |
| Total adjustments, after-tax | | | | | | | $ | 160,500 | |
| Estimated net earnings - Adjusted | | $ | 314,500 | | $ | 320,900 | | | |
| Diluted Earnings per Share Range - GAAP^3^ | | $ | 7.20 | | $ | 7.50 | | | |
| Diluted Earnings per Share Range - Adjusted^3^ | | $ | 14.80 | | $ | 15.10 | | |
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| 2023 Previous Guidance^1^ | | Low End | **** | High End | **** | Adjustments | |||
| Estimated net earnings - GAAP | | $ | 318,250 | | $ | 330,050 | | | |
| Prospera intangible asset (proprietary technology) amortization, pre-tax | | | | | | | | $ | 6,600 |
| Prospera stock-based compensation, pre-tax | | | | | | | | | 9,800 |
| Total pre-tax adjustments | | | | | | | | | 16,400 |
| Estimated tax benefit from above expenses^2^ | | | | | | | | | (2,450) |
| Total adjustments, after-tax | | | | | | | $ | 13,950 | |
| Estimated net earnings - Adjusted | | $ | 332,200 | | $ | 344,000 | | | |
| Diluted Earnings per Share Range - GAAP^3^ | | $ | 14.80 | | $ | 15.35 | | | |
| Diluted Earnings per Share Range - Adjusted^3^ | | $ | 15.45 | | $ | 16.00 | | |
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| 2023 Revised Previous Guidance^1^ | | Low End | **** | High End | **** | Adjustments | |||
| Estimated net earnings - GAAP | | $ | 318,250 | | $ | 330,050 | | | |
| Prospera intangible asset (proprietary technology) amortization, pre-tax | | | | | | | | $ | — |
| Prospera stock-based compensation, pre-tax | | | | | | | | | — |
| Total pre-tax adjustments | | | | | | | | | — |
| Estimated tax benefit from above expenses^2^ | | | | | | | | | — |
| Total adjustments, after-tax | | | | | | | $ | — | |
| Estimated net earnings - Adjusted | | $ | 318,250 | | $ | 330,050 | | | |
| Diluted Earnings per Share Range - GAAP^3^ | | $ | 14.80 | | $ | 15.35 | | | |
| Diluted Earnings per Share Range - Adjusted^3^ | | $ | 14.80 | | $ | 15.35 | | |
^1^ See accompanying press release for our key assumptions
^2^ The tax effect of adjustments is calculated based on the estimated income tax rate in each applicable jurisdiction
^3^ Assumes weighted average shares outstanding of 21.3M for revised guidance and 21.5M for previous and revised previous guidance, and includes rounding
Exhibit 99.2
| 3Q 2023 Earnings Presentation<br>October 26, 2023 | ||||||||||||||
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| 2<br>These slides contain (and the accompanying oral discussion will contain) “forward-looking statements” within the meaning of the Private Securities Litigation Reform<br>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<br>materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served<br>by the Company and its subsidiaries, the overall market acceptance of such products and services, the integration of acquisitions and other factors disclosed in the<br>Company’s periodic reports filed with the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions,<br>company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products,<br>product pricing, domestic and international competitive environments, geopolitical risks and actions and policy changes of domestic and foreign governments.<br>Consequently, such forward-looking statements should be regarded as the Company’s current plans, estimates, and beliefs. The Company does not undertake and<br>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<br>or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.<br>Disclosure Regarding Forward-Looking Statements | ||||||||||||||
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| Avner Applbaum<br>President and CEO<br>CEO Opening<br>Comments | ||||||||||||||
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| 3Q 2023 Financials and Key Messages<br>4<br>The global Valmont team continued to perform well, delivering solid third quarter<br>adjusted operating margins and adjusted diluted earnings per share, while navigating<br>a mixed demand environment<br>01<br>Infrastructure demand globally remains robust, with several multi-year growth drivers 02 across our markets; global agriculture market fundamentals remain relatively strong<br>Operational excellence and pricing strategies in both segments drove margin 03 expansion and allows us to capture the value we add to customers<br>Announced necessary actions to position Valmont for long-term success, including an 04 organizational realignment program and executive leadership changes<br>Net Sales Y/Y Net Sales Operating Margin Adj. Operating Margin1 GAAP Diluted EPS Adj. Diluted EPS1 Operating Cash Flow Cash Returned to Shareholders<br>1 Please see Reg G reconciliation to GAAP measures at end of document. $1.05B (4.3%) (2.3%) 11.5% ($2.34) $4.12 $81M $44M | ||||||||||||||
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| Agriculture<br>Performing Well in Current Market Conditions<br>Investing in Capacity and Technology to Capture Attractive Industry Trends and Drive Above-Market Growth<br>• Benefiting from several long-term, secular growth drivers<br>• Utilities increasing capex spending to support grid hardening initiatives,<br>power load growth and accelerate the energy transition<br>• Solar expects to see demand tailwinds from the Inflation Reduction Act<br>(“IRA”); 10-year investment tax credit extension supports US demand;<br>favorable policies support international demand<br>• Transportation market demand is supported by road construction<br>investment; Future benefits expected from Infrastructure Investment and<br>Jobs Act (“IIJA”) although funding is slower than anticipated; muted<br>commercial lighting demand<br>• Telecom softness as wireless carriers reduce capex spending following<br>record levels of investment<br>• U.S. net farm income levels are expected to be relatively strong; however,<br>as farmers see a decline from the substantial profit margins seen in 2021<br>and 2022, sentiment remains somewhat muted<br>• International market fundamentals remain robust<br>‒ Another record quarter in Brazil; increasing levels of production and<br>expansion of irrigated acres<br>‒ Project pipeline is providing a multi-year line of sight; food security<br>concerns, the ability to produce goods for export and growing<br>populations driving demand; Egypt project shipments expected to<br>continue through 2024<br>Infrastructure<br>5 | ||||||||||||||
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| Aligning Organization to Strategy and<br>Improving Cost Structure<br>Reorganization and Early Retirement Program<br>• Create synergies and optimize our support structure for scale<br>• Simplify reporting lines<br>− Better internal visibility and management decision-making<br>− Drive accountability to achieve results<br>• Enable a more efficient and effective structure for driving long-term<br>profitable growth while reducing costs<br>Ag Tech Impairment<br>• Slower adoption rate of Prospera’s agronomy technology<br>solutions; near-term softness in North America<br>• Updated go-to-market approach; innovate with the<br>purpose of meeting the immediate needs of irrigation<br>customers<br>• Committed to staying the market leader and delivering<br>advanced technology to our customers<br>6 | ||||||||||||||
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| Avner M. Applbaum<br>President & Chief<br>Executive Officer<br>Timothy P. Francis<br>Interim Chief Financial<br>Officer<br>Diane M. Larkin<br>EVP, Global Operations<br>J. Timothy Donahue<br>Group President,<br>Infrastructure<br>Aaron M. Schapper<br>Group President,<br>Agriculture & Chief<br>Strategy Officer<br>Aligned Around Core Strategic Priorities<br>Executive Leadership Team<br>7<br>T. Mitchell Parnell<br>EVP, Chief Human<br>Resources Officer<br>Renee L. Campbell<br>SVP, Investor Relations<br>& Treasurer<br>Gene N. Padgett<br>SVP, Finance & Chief<br>Accounting Officer<br>Ellen S. Dasher<br>VP, Global Taxation<br>R. Andrew Massey<br>VP, Chief Legal Officer<br>& Corporate Secretary<br>Delivering Profitable Growth<br>• Leveraging our competitive advantages that have<br>enabled us to be the trusted partner of choice<br>• Grow through natural adjacencies and geographic<br>expansion<br>Investing with Discipline<br>• Solving customers’ most pressing challenges<br>• Strengthening core businesses<br>• Prioritizing high-value revenue that delivers high<br>ROIC<br>• Continue to prioritize innovation and deliver<br>advanced solutions to our customers<br>Maximizing Financial Performance Through the Cycles | ||||||||||||||
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| Tim Francis<br>Interim CFO<br>Financial Results<br>and Outlook | ||||||||||||||
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| 3Q 2023 Financial Summary<br>9<br>• Infrastructure sales comparable to last year,<br>offset by lower Agriculture sales<br>• GAAP operating margin decreased to (2.3%);<br>Adjusted1 operating margin increased to 11.5%<br>reflecting higher pricing and deliberate actions<br>to improve COGS<br>• GAAP Diluted Earnings (Loss) per Share was<br>($2.34); Adjusted1 Diluted Earnings per Share<br>increased 18.1% to a third-quarter record of<br>$4.12<br>• Initiated an organizational realignment program<br>with estimated 2023 pre-tax cash expense in<br>the range of $33 to $36 million<br>• $16M in Infrastructure and the remainder<br>split between Agriculture and Corporate<br>1 Please see Reg G reconciliation to GAAP measures at end of document.<br>$M, except EPS 3Q 2023 3Q 2022 Y/Y 3Q 2023 3Q 2022 Y/Y<br>Net Sales 1,050.3 1,097.4 -4.3% 1,050.3 1,074.5 -2.3%<br>Operating Income (Loss) (24.2) 110.0 NM 120.8 114.1 +5.9%<br>Operating Margin (2.3%) 10.0% NM 11.5% 10.6% +90 bps<br>Net Earnings (Loss) (49.0) 72.1 NM 87.0 75.3 +15.5%<br>Diluted EPS (2.34) 3.34 NM 4.12 3.49 +18.1%<br>GAAP Adjusted1<br>NM = “not meaningful” | ||||||||||||||
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| $92.5<br>$103.4<br>$92.5<br>$108.0<br>2022 2023 2022 2023<br>3Q 2023 Results | Infrastructure<br>10<br>• Sales comparable to last year driven by higher<br>volumes in Solar, L&T, and TD&S<br>• Lower Telecom volumes and lower pricing<br>associated with a reduced cost of steel in<br>TD&S more than offset higher pricing across<br>the rest of the portfolio<br>• Operating margin improved 140 bps to 13.7%<br>(14.3% adjusted1<br>) as pricing not linked to steel<br>commodity costs was higher and the company<br>took deliberate actions to improve COGS<br>Sales ($M) Operating Income ($M)<br>$755.5 $755.1<br>2022 2023<br>GAAP: +11.8% 12.3%<br>Sales ($M) 2023 2022 %<br>Transmission, Distribution, and Substation (TD&S) $298.0 $304.8 -2%<br>Lighting and Transportation (L&T) $252.6 $241.6 +5%<br>Coatings $89.0 $92.0 -3%<br>Telecommunications $59.6 $92.8 -36%<br>Solar $55.9 $24.3 +130%<br>13.7% -0.1%<br>Adjusted1<br>: -+16.8% 12.3% 14.3% 1 Please see Reg G reconciliation to GAAP measures at end of document. | |||||||||||||
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| 3Q 2023 Results | Agriculture<br>11<br>Sales ($M) Operating Income ($M)<br>• Sales down 8.8% as higher International<br>volumes were more than offset by lower North<br>America volumes<br>• North America sales were lower as farmer<br>sentiment remained muted and 3Q 2022<br>benefited from ongoing delivery of elevated<br>backlog<br>• International growth was led by higher project<br>sales in EMEA, a record quarter in Brazil and<br>higher sales in Argentina<br>• Recorded an impairment of goodwill and<br>intangible assets in the agriculture technology<br>reporting unit of $137.3M, which led to the<br>operating loss in the quarter<br>Adjusted1<br>:<br>Sales ($M) 2023 2022 %<br>North America $126.8 $178.6 -29%<br>International $171.7 $148.7 +15%<br>Irrigation Equipment and Parts $273.6 $303.0 -10%<br>Technology Products and Services $24.9 $24.3 +2%<br>-8.8% GAAP: NM -18.8%<br>$327.3<br>$298.5<br>2022 2023<br>$43.3<br>$(99.7)<br>$47.4 $38.5<br>2022 2023 2022 2023 13.3% -33.6% 14.6% 13.0% 1 Please see Reg G reconciliation to GAAP measures at end of document.<br>NM = “not meaningful” | |||||||||||||
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| YTD Cash Flow Highlights<br>Diligent Working Capital Management Drove Third Quarter Operating Cash Flows of $81.3M<br>12<br>$M YTD 09/30/2023<br>Net Cash Flows from Operating Activities $ 191<br>Net Cash Flows from Investing Activities (89)<br>Net Cash Flows from Financing Activities (111)<br>Net Cash Flows from Operating Activities $ 191<br>Purchase of Property, Plant, & Equipment (71)<br>Free Cash Flows $ 120 | ||||||||||||||
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| Balanced Approach to Capital Allocation<br>13<br>Growing Our Business Returning Cash To Shareholders<br>• Targeting high growth<br>opportunities in end<br>markets with favorable<br>and global long-term<br>demand trends<br>• Completed acquisition of<br>HR products<br>• Returns exceeding cost<br>of capital within 3 years<br>• Q3 Capex of $26M as we<br>continue to invest in<br>strategic capacity<br>expansions<br>• Prioritize projects that<br>deliver high ROIC<br>• Support Industry 4.0<br>technology to drive<br>efficiency and productivity<br>• Q3 Dividends Paid of<br>$12.6M<br>• 9% dividend increase<br>announced February 2023<br>• Payout ratio target:<br>15% of earnings<br>• Current payout: ~15%<br>• Q3 Share Repurchase of<br>$31.5M<br>• Additional $400M share<br>repurchase authorization<br>announced February 2023<br>• Opportunistic approach,<br>supported by free cash flow<br>• ~$315M remains on<br>current authorization<br>Capital Expenditures Acquisitions Share Repurchases Dividends<br>$71M $32M $167M $37M 2023 Year-to-Date Capital Deployment: $307M | ||||||||||||||
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| Strong Balance Sheet and Liquidity<br>14<br>• Long-term debt mostly fixed-rate, with long-dated<br>maturities to 2044 and 2054<br>• Total Debt to Adjusted<br>EBITDA remains within our<br>desired range of 1.5 to 2.5<br>times<br>• Strong and flexible balance<br>sheet to support balanced<br>capital allocation strategy<br>1See Adjusted EBITDA and Leverage Ratio at end of document. 2$800M Total Revolver less borrowings and Standby LC’s of $247M.<br>As of September 30, 2023<br>Cash $173 M<br>Total Long-Term Debt $977 M<br>Shareholders' Equity $1,559 M<br>Total Debt to Adj. EBITDA1 1.53 x<br>Available Credit under Revolving Credit Facility2 $553 M<br>Cash $173 M<br>Total Available Liquidity $726 M | ||||||||||||||
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| Updated Full Year 2023 Outlook and Key Assumptions2<br>15<br>• The previous adjusted EPS outlook has been updated to<br>remove the adjustments associated with the Prospera<br>technology intangible asset amortization and stock-based<br>compensation; ~65 cents per diluted share1<br>• Expect full-year operating margin improvement compared<br>to 2022<br>• 2022 sales include $100 million from the offshore wind<br>energy structures business which was divested at the end<br>of fiscal 2022<br>• GAAP effective tax rate of 36% to 36.5%; Adjusted effective<br>tax rate of 26% to 26.5%<br>• Minimal expected foreign currency translation impact to net<br>sales<br>• Capital expenditures expected to be in the range of $100 to<br>$110 million to support strategic growth initiatives<br>Key Assumptions<br>(3%) – (4%)<br>Decrease In Net Sales Y/Y<br>$14.80 to $15.10<br>Adj. Diluted EPS2<br>$7.20 to $7.50<br>GAAP Diluted EPS<br>Revised Outlook1<br>4% – 7%<br>Increase in Net Sales Y/Y<br>$15.35 – $15.90<br>Adj. Diluted EPS1<br>$14.70 – $15.25<br>GAAP Diluted EPS<br>Previous Outlook with<br>Updated Adjustments1<br>0% – 2%<br>Increase In Net Sales Y/Y<br>$14.80 – $15.35<br>Adj. Diluted EPS2<br>$14.80 – $15.35<br>GAAP Diluted EPS<br>1 Exclusive of potential future restructuring activities. 2Please see Reg G reconciliation to GAAP measures at end of document. | ||||||||||||||
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| Valmont Team is Executing Our Strategy and<br>Performing Well in Dynamic Market<br>16<br>Controlling what we can control to maximize financial performance<br>• Streamlining the organization to align with our strategy<br>• Fully realize benefits of ongoing strategic initiatives<br>• Enable a more efficient and effective structure for driving long-term profitable growth while<br>reducing costs<br>Diversified portfolio with compelling long-term drivers<br>• Ongoing Infrastructure strength supported by multi-year secular demand drivers<br>• Favorable long-term demand trends in Agriculture<br>• Continued focus on delivering high-value solutions through investments in innovation<br>Focused strategy drives long-term shareholder value<br>• Capital allocation strategy; investing with discipline to strengthen our core businesses<br>• Innovation is introduced with the purpose of meeting the immediate needs of our customers | ||||||||||||||
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| Q&A | ||||||||||||||
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| Appendix | ||||||||||||||
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| U.S. Electric Utilities Capital Expenditures<br>Source: EEI Finance Department, member company reports, and S&P Global Market Intelligence (updated July 2023). 19 | ||||||||||||||
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| Infrastructure Investment and Jobs Act (IIJA)<br>20<br>Infrastructure Investment and Jobs Act Spending Breakdown (In Order - Most to Least)<br>Previously-Passed Transportation Funding | $650B<br>Roads, Bridges and Related Programs | $111B<br>Energy, Power and Electric Grid Reliability | $107.5B<br>Freight and Passenger Rail | $66B<br>Broadband | $65B<br>Water and Wastewater Infrastructure | $55B<br>Public Transportation | $39.2B<br>Airports | $25B<br>Natural Disaster Prevention and Mitigation | $23.3B<br>Cleaning-Up Abandoned Sites | $21B<br>Army Corps of Engineers | $16.7B<br>Highway and Pedestrian Safety | $11B<br>Ports and Coast Guard | $7.8B<br>Cybersecurity and other Infrastructure Programs | $10.11B<br>Source: Grassley.senate.gov |
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| 5G Adoption and Capex Spend Forecasts<br>Source: GSMA Intelligence- The Mobile Economy 2023 21 | ||||||||||||||
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| U.S. Net Cash Farm Income by Year<br>Source: USDA (August 31, 2023) 22 | ||||||||||||||
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| U.S. Drought Condition<br>Source: Drought Monitor (October 17, 2023) 23 | ||||||||||||||
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| Steel Material Index Trends 2020-2023 YTD<br>Source: FastMarkets AMM 24<br>• The spike in steel costs during<br>the first four months of the<br>year is expected to slightly<br>reduce our Infrastructure<br>operating income margin for<br>the second half of the year<br>compared to the strong<br>second quarter results<br>• Cost changes impact TD&S<br>the most because of the<br>contractual pricing<br>mechanisms and strong<br>backlog in that product line | ||||||||||||||
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| The non-GAAP tables below disclose the impact of impairment of long-lived assets, realignment charges, intangible asset<br>amortization (Prospera), and stock-based compensation recognized for the Prospera employees on fiscal 2023 results, as well<br>as the impact of non-recurring tax benefit items on net earnings. Amounts may be impacted by rounding. We believe it is useful<br>when considering company performance for the non-GAAP adjusted net earnings and operating income to be taken into<br>consideration by management and investors with the related reported GAAP measures.<br>Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures<br>Dollars in thousands, except per share amounts<br>25<br>1<br>In the third quarter of fiscal 2023, we reported a GAAP net loss. In periods in which we recognize a net loss, we exclude the<br>impact of outstanding stock awards from the diluted loss per share calculation, as their inclusion would have an anti-dilutive<br>effect. The adjusted diluted earnings per share calculation includes the impact of outstanding stock awards.<br>2Earnings (loss) per share includes rounding<br>3The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction<br>Net earnings (loss) attributable to Valmont Industries, Inc. - as reported $ (49,028) $ (2.32) $ 114,888 $ 5.40<br>Impairment of long-lived assets 140,844 6.67 140,844 6.62<br>Realignment charges 4,180 0.20 4,180 0.20<br>Prospera intangible asset amortization — — 3,290 0.15<br>Prospera stock-based compensation — — 4,278 0.20<br>Total adjustments, pre-tax 145,024 6.86 152,592 7.17<br>Tax effect of adjustments3<br> (5,432) (0.26) (6,524) (0.31)<br>Non-recurring tax benefit items (3,588) (0.17) (3,588) (0.17)<br>Net earnings attributable to Valmont Industries, Inc. - adjusted $ 86,976 $ 4.12 $ 257,368 $ 12.09<br>Average shares outstanding (000’s) - diluted 21,131 21,290<br>2023 per share1,2 2023 share2<br>Thirteen<br>Diluted<br>Thirty-nine<br>weeks ended weeks ended Diluted<br>September 30, earnings (loss) September 30, earnings per | ||||||||||||||
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| The non-GAAP tables below disclose the impact of impairment of long-lived assets, realignment charges, intangible asset<br>amortization (Prospera), and stock-based compensation recognized for the Prospera employees on fiscal 2023 results, as well<br>as the impact of non-recurring tax benefit items on net earnings. Amounts may be impacted by rounding. We believe it is useful<br>when considering company performance for the non-GAAP adjusted net earnings and operating income to be taken into<br>consideration by management and investors with the related reported GAAP measures.<br>Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures<br>Dollars in thousands<br>26<br>Operating Income Reconciliation<br>Operating income - as reported $ 313,703 $ 2,904 $ — $ (88,598) $ 228,009<br>Impairment of long-lived assets 3,571 137,273 — — 140,844<br>Realignment charges 1,069 907 — 2,204 4,180<br>Prospera intangible asset amortization — 3,290 — — 3,290<br>Prospera stock-based compensation — 4,278 — — 4,278<br>Adjusted operating income $ 318,343 $ 148,652 $ — $ (86,394) $ 380,601<br>Net sales - as reported 2,253,924 905,148 — — 3,159,072<br>Operating income as a % of net sales 13.9 % 0.3 % N M N M 7.2 %<br>Adj. operating income as a % of adj. net sales 14.1 % 16.4 % N M N M 12.0 %<br>Infrastructure Agriculture Corporate Valmont<br>Thirty-nine weeks ended September 30, 2023<br>Other Operating Income (Loss) Reconciliation<br>Operating income (loss) - as reported $ 103,401 $ (99,670) $ — $ (27,921) $ (24,190)<br>Impairment of long-lived assets 3,571 137,273 — — 140,844<br>Realignment charges 1,069 907 — 2,204 4,180<br>Adjusted operating income $ 108,041 $ 38,510 $ — $ (25,717) $ 120,834<br>Net sales - as reported 753,626 296,669 — — 1,050,295<br>Operating income (loss) as a % of net sales 13.7 % (33.6) % NM N M (2.3) %<br>Adj. operating income as a % of adj. net sales 14.3 % 13.0 % NM N M 11.5 %<br>Thirteen weeks ended September 30, 2023<br>Infrastructure Agriculture Other Corporate Valmont | ||||||||||||||
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| The non-GAAP tables below disclose the impact of intangible asset amortization (Prospera) and stock-based compensation<br>recognized for the Prospera employees on fiscal 2022 results. We believe the adjustments for Prospera allow for a better<br>investor understanding of Agriculture segment performance related to traditional segment products. Amounts may be impacted<br>by rounding. We believe it is useful when considering company performance for the non-GAAP adjusted net earnings and<br>operating income to be taken into consideration by management and investors with the related reported GAAP measures.<br>Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures<br>Dollars in thousands, except per share amounts<br>27<br>1Earnings per share includes rounding<br>2The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction<br>Net earnings attributable to Valmont Industries, Inc. - as reported $ 72,112 $ 3.34 $ 210,531 $ 9.77<br>Prospera intangible asset amortization 1,645 0.08 4,935 0.23<br>Prospera stock-based compensation 2,530 0.12 7,523 0.35<br>Total adjustments, pre-tax 4,175 0.19 12,458 0.58<br>Tax effect of adjustments2<br> (974) (0.05) (2,106) (0.10)<br>Net earnings attributable to Valmont Industries, Inc. - adjusted $ 75,313 $ 3.49 $ 220,883 $ 10.25<br>Average shares outstanding (000’s) - Diluted 21,605 21,546<br>Thirteen<br>Diluted<br>Thirty-nine<br>weeks ended weeks ended Diluted<br>earnings per<br>24, 2022 share1 24, 2022 share1<br>September earnings per September | ||||||||||||||
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| The non-GAAP tables below disclose the impact of intangible asset amortization (Prospera) and stock-based compensation<br>recognized for the Prospera employees on fiscal 2022 results. We believe the adjustments for Prospera allow for a better<br>investor understanding of Agriculture segment performance related to traditional segment products. Amounts may be impacted<br>by rounding. We believe it is useful when considering company performance for the non-GAAP adjusted net earnings and<br>operating income to be taken into consideration by management and investors with the related reported GAAP measures.<br>Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures<br>Dollars in thousands<br>28<br>Operating Income Reconciliation<br>Operating income - as reported $ 254,908 $ 138,779 814 $ (70,968) $ 323,533<br>Prospera intangible asset amortization — 4,935 — — 4,935<br>Prospera stock-based compensation — 7,523 — — 7,523<br>Adjusted Operating Income $ 254,908 $ 151,237 $ 814 $ (70,968) $ 335,991<br>Net Sales - as reported 2,144,669 1,002,118 66,947 — 3,213,734<br>Adjusted Net Sales - as reported 2,144,669 1,002,118 — — 3,146,787<br>Operating Income as a % of Net Sales 11.9 % 13.8 % 1.2 % N M 10.1 %<br>Adjusted Operating Income as a % of Net Sales 11.9 % 15.1 % 1.2 % N M 10.5 %<br>Adjusted Operating Income as a % of Adjusted Net Sales 11.9 % 15.1 % N M N M 10.7 %<br>Infrastructure Agriculture Corporate Valmont<br>Thirty-nine weeks ended September 24, 2022<br>Other Operating Income Reconciliation<br>Operating income - as reported $ 92,465 $ 43,258 $ 1,107 $ (26,858) $ 109,972<br>Prospera intangible asset amortization — 1,645 — — 1,645<br>Prospera stock-based compensation — 2,530 — — 2,530<br>Adjusted Operating Income $ 92,465 $ 47,433 $ 1,107 $ (26,858) $ 114,147<br>Net Sales - as reported 750,380 324,141 22,861 — 1,097,382<br>Adjusted Net Sales - as reported 750,380 324,141 — — 1,074,521<br>Operating Income as a % of Net Sales 12.3 % 13.3 % 4.8 % N M 10.0 %<br>Adjusted Operating Income as a % of Net Sales 12.3 % 14.6 % 4.8 % N M 10.4 %<br>Adjusted Operating Income as a % of Adjusted Net Sales 12.3 % 14.6 % N M N M 10.6 %<br>Thirteen weeks ended September 24, 2022<br>Infrastructure Agriculture Other Corporate Valmont | ||||||||||||||
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| Reconciliation of Forecasted GAAP and Adjusted Earnings<br>Dollars in thousands, except per share amounts<br>29<br>The non-GAAP tables below disclose the impact on the range of estimated diluted earnings per share of the (1) impairment of<br>long-lived assets, (2) realignment charges, and (3) non-recurring tax benefit items. We believe it is useful when considering<br>company performance for the non-GAAP adjusted net earnings to be taken into consideration by management and investors<br>with the related reported GAAP measures.<br>1 See accompanying press release for our key assumptions<br>2 The tax effect of adjustments is calculated based on the estimated income tax rate in each applicable jurisdiction<br>3 Assumes weighted average shares outstanding of 21.3M, and includes rounding<br>Reconciliation of Range of Net Earnings - 2023 Revised Guidance 1<br><br>Estimated net earnings - GAAP $ 154,000 $ 160,400<br>Impairment of long-lived assets, pre-tax $ 141,000<br>Realignment charges, pre-tax 36,000<br>Total pre-tax adjustments 177,000<br>Estimated tax benefit from above expenses2<br> (12,900)<br>Non-recurring tax benefit items (3,600)<br>Total Adjustments, after-tax $ 160,500<br>Estimated net earnings - Adjusted $ 314,500 $ 320,900<br>Diluted Earnings Per Share Range - GAAP3 $ 7.20 $ 7.50<br>Diluted Earnings Per Share Range - Adjusted3 $ 14.80 $ 15.10<br>Low End High End Adjustments | ||||||||||||||
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| Reconciliation of Forecasted GAAP and Adjusted Earnings<br>Dollars in thousands, except per share amounts<br>30<br>The non-GAAP tables below disclose the impact on the range of estimated diluted earnings per share of the (1) amortization of<br>intangible assets (Prospera) and (2) stock-based compensation for Prospera employees. We believe it is useful when<br>considering company performance for the non-GAAP adjusted net earnings to be taken into consideration by management and<br>investors with the related reported GAAP measures.<br>1 See accompanying press release for our key assumptions<br>2 The tax effect of adjustments is calculated based on the estimated income tax rate in each applicable jurisdiction<br>3 Assumes weighted average shares outstanding of 21.5M, and includes rounding<br>Reconciliation of Range of Net Earnings - 2023 Previous Guidance 1<br><br>Estimated net earnings - GAAP $ 318,250 $ 330,050<br>Prospera intangible asset (proprietary technology) amortization, pre-tax $ 6,600<br>Prospera stock-based compensation, pre-tax 9,800<br>Total pre-tax adjustments 16,400<br>Estimated tax benefit from above expenses2<br> (2,450)<br>Total Adjustments, after-tax $ 13,950<br>Estimated net earnings - Adjusted $ 332,200 $ 344,000<br>Diluted Earnings Per Share Range - GAAP3 $ 14.80 $ 15.35<br>Diluted Earnings Per Share Range - Adjusted3 $ 15.45 $ 16.00<br>Low End High End Adjustments | ||||||||||||||
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| Reconciliation of Forecasted GAAP and Adjusted Earnings<br>Dollars in thousands, except per share amounts<br>31<br>The non-GAAP tables below disclose the impact on the range of estimated diluted earnings per share of the (1) amortization of<br>intangible assets (Prospera) and (2) stock-based compensation for Prospera employees. We believe it is useful when<br>considering company performance for the non-GAAP adjusted net earnings to be taken into consideration by management and<br>investors with the related reported GAAP measures.<br>1 See accompanying press release for our key assumptions<br>2 The tax effect of adjustments is calculated based on the estimated income tax rate in each applicable jurisdiction<br>3 Assumes weighted average shares outstanding of 21.5M, and includes rounding<br>Reconciliation of Range of Net Earnings - 2023 Revised Previous Guidance 1<br><br>Estimated net earnings - GAAP $ 318,250 $ 330,050<br>Prospera intangible asset (proprietary technology) amortization, pre-tax $ —<br>Prospera stock-based compensation, pre-tax —<br>Total pre-tax adjustments —<br>Estimated tax benefit from above expenses2<br> —<br>Total Adjustments, after-tax $ —<br>Estimated net earnings - Adjusted $ 318,250 $ 330,050<br>Diluted Earnings Per Share Range - GAAP3 $ 14.80 $ 15.35<br>Diluted Earnings Per Share Range - Adjusted3 $ 14.80 $ 15.35<br>Low End High End Adjustments | ||||||||||||||
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| Reconciliation of Excluding Other Segment Net Sales<br>Dollars in thousands<br>32<br>Excluding Other segment net sales from the third quarter and first three quarters of fiscal 2022, which we refer to in this<br>reconciliation as “Adjusted Net Sales” is a non-GAAP measure. The Other segment net sales were generated by the wind<br>energy structures business which was divested in December 2022. Adjusted Net Sales should not be considered in isolation or<br>as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with<br>GAAP, or as a measure of our operating performance or liquidity. The table below shows how Adjusted Net Sales is calculated<br>from our statements of earnings. Adjusted Net Sales is calculated as Net Sales less Other segment net sales. Adjusted Net Sales<br>allows investors to analyze our operating performance in light of the amount of net sales less net sales of a divested business.<br><br>Net sales $ 1,050,295 $ 1,097,382 -4.3% $ 3,159,072 $ 3,213,734 -1.7%<br>Less: Other segment net sales — (22,861) N M — (66,947) N M<br>Adjusted net sales $ 1,050,295 $ 1,074,521 -2.3% $ 3,159,072 $ 3,146,787 0.4%<br>Thirty-nine weeks ended<br>September 30, September 24, Percent<br>2023 2022 Change 2023 2022 Change<br>September 30, September 24, Percent<br>Thirteen weeks ended | ||||||||||||||
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| Reconciliation of Adjusted Effective Tax Rate<br>Dollars in thousands<br>33<br>As reported $ (34,655) $ 15,461 -44.6%<br>Impairment of long-lived assets 140,844 4,387<br>Realignment charges 4,180 1,045<br>Non-recurring tax benefit items — 3,588<br>Adjusted $ 110,369 $ 24,481 22.2%<br>Earnings (loss)<br>before income taxes<br>and equity in loss of<br>nonconsolidated<br>subsidiaries<br>Income tax<br>expense<br>Effective tax<br>rate<br>Thirteen weeks ended September 30, 2023<br>Excluding significant non-recurring items from the third quarter of fiscal 2023 from the calculation of effective tax rate, which<br>we refer to as “Adjusted Effective Tax Rate”, is a non-GAAP measure. Adjusted Effective Tax Rate should not be considered in<br>isolation or as a substitute for the effective tax rate prepared in accordance with GAAP. The table below shows how Adjusted<br>Effective Tax Rate is calculated from the Company’s Statements of Operations. Adjusted Effective Tax Rate is calculated as<br>total earnings (loss) before income taxes plus the significant non-recurring items of impairment of goodwill and intangible<br>assets, realignment charges, and non-recurring tax benefit items. Adjusted Effective Tax Rate allows investors to analyze our<br>effective tax rate in light of these non-recurring items. | ||||||||||||||
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| 34<br>1 Adjusted earnings for purposes of calculating FCF conversion may not agree to the adjusted net earnings. The difference is due to non-recurring expenses which were settled in cash in the year of occurrence as part of net cash flows from operating activities.<br>2 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<br>companies. Our measure of FCF may not be directly comparable to similar measures used by other companies.<br>2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>Net cash flows from operating activities $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 $ 65.9 $ 326.3<br>Net cash flows from investing activities (131.7) (256.9) (48.2) (53.0) (49.6) (155.4) (168.1) (104.0) (417.3) (132.1)<br>Net cash flows from financing activities (37.4) (136.8) (32.0) (95.2) (32.0) (162.1) (98.9) (173.8) 133.5 (181.9)<br>Net cash flows from operating activities $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 $ 65.9 $ 326.3<br>Purchase of plant, property, and equipment (106.8) (73.0) (45.5) (57.9) (55.3) (72.0) (97.4) (106.7) (107.8) (93.3)<br> Free cash flows 289.7 101.1 226.8 174.9 77.8 81.0 210.2 209.6 (41.9) 233.0<br>Net earnings attributed to Valmont Industries, Inc. $ 278.5 $ 183.9 $ 40.1 $ 175.5 $ 120.5 $ 101.8 $ 146.4 $ 140.7 $ 195.6 $ 250.9<br>Adjusted free cash flow net earnings attributed to Valmont Industries, Inc. $ 295.1 $ 187.7 $ 131.7 $ 139.9 $ 162.7 $ 130.4 N/A $ 159.8 $ 222.3 $ 284.2<br>Free Cash Flow Conversion - GAAP 1.04 0.55 5.66 1.00 0.65 0.80 1.44 1.49 (0.21) 0.93<br>Free Cash Flow Conversion - Adjusted 0.98 0.53 1.71 1.25 0.48 0.62 N/A 1.31 (0.19) 0.82<br>Reconciliation of Net Earnings to Adjusted Figures<br>Net earnings attributed to Valmont Industries, Inc. $ 278.5 $ 183.9 $ 40.1 $ 175.5 $ 120.5 $ 101.8 $ 146.4 $ 140.7 $ 195.6 $ 250.9<br>Loss from divestiture of offshore wind energy structures business - - - - - - - - - 33.3<br>Change in valuation allowance against deferred tax assets - - 7.1 (20.7) 41.9 - - - 5.0 -<br>Impairment of long-lived assets 12.2 - 61.8 1.1 - 28.6 - 19.1 21.7 -<br>Reversal of contingent liability - - (16.6) - - - - - -<br>Other non-recurring expenses (non-cash) - - 18.1 - - - - -<br>Deconsolidation of Delta EMD, after-tax and NCI 4.4 - - - - - - - - -<br>Noncash loss from Delta EMD shares - 3.8 4.6 0.6 0.2 - - - - -<br> Adjusted free cash flow net earnings attributed to Valmont Industries, Inc. $ 295.1 $ 187.7 $ 131.7 $ 139.9 $ 162.7 $ 130.4 $ 146.4 $ 159.8 $ 222.3 $ 284.2<br>2013 – 2022 Historical Free Cash Flow1,2<br>Dollars in millions | ||||||||||||||
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| 290<br>101<br>227<br>175<br>78 81<br>210 210<br>(42)<br>233<br>156<br> (100)<br> (50)<br> -<br> 50<br> 100<br> 150<br> 200<br> 250<br> 300<br> 350<br>2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 10 Year<br>Avg<br>Strong Free Cash Flow throughout the Cycle<br>Dollars in millions<br>35<br>Years of rapid raw material cost inflation<br>GAAP 1.04X 0.55X 5.66X 1.00X 0.65X 0.80X 1.44X 1.49X (0.21X) 0.93X<br>Adj. 0.98X 0.53X 1.71X 1.25X 0.48X 0.62X N/A 1.31X (0.19X) 0.82X<br>2013 – 2022 Free Cash Flow1<br>10-yr Avg. $156M<br>GAAP 1.33X<br>Adj. 0.83X<br>Historical FCF Conversion by Year1<br>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<br>companies. Our measure of FCF may not be directly comparable to similar measures used by other companies. | ||||||||||||||
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| Calculation of Adjusted EBITDA and Leverage Ratio<br>Dollars in thousands<br>36<br>Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our<br>Debt/Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material<br>acquisitions) of the prior four fiscal quarters. See “Leverage Ratio” below.<br><br>Net earnings attributable to Valmont Industries, Inc. $ 155,220<br>Interest expense 54,750<br>Income tax expense 107,395<br>Depreciation and amortization expense 98,002<br>Stock based compensation 40,662<br>Loss on divestiture of offshore wind energy structures business 33,273<br>Impairment of long-lived assets 140,844<br>Restructuring costs 4,180<br>HR Products Pro-Forma EBITDA 24,921<br>Adjusted EBITDA $ 659,247<br>Interest-bearing debt, excluding origination fees and discounts of $26,481 $ 1,008,321<br>Less: cash and cash equivalents in excess of $50 million 122,566<br>Net indebtedness $ 885,755<br>Net indebtedness $ 885,755<br>Leverage ratio 1.34<br>Interest-bearing debt, excluding origination fees and discounts of $26,481 $ 1,008,321<br>Total debt to adjusted EBITDA 1.53<br>Four Fiscal<br>Quarters Ended<br>September 30,<br>2023 | ||||||||||||||
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