8-K
VALMONT INDUSTRIES INC (VMI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
April 20, 2022
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
One Valmont Plaza, Omaha NE 68154
__________________________________________________________________________________
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $1.00 par value | VMI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Item 2.02. Results of Operations and Financial Condition.
Valmont Industries, Inc. issued a press release on April 20, 2022 announcing its financial results for its fiscal quarter ended March 26, 2022. The press release, along with the presentation to be used during its earnings call on April 21, 2022, are furnished with this Form 8-K as Exhibit 99.1 and Exhibit 99.2, respectively.
The information in this Item 2.02 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated April 20, 2022 |
| 99.2 | Presentation Slides for earnings call on April 21, 2022 |
| 104 | Cover Page Interactive File (the cover page XBRL tags are embedded in the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Valmont Industries, Inc. | ||
|---|---|---|
| Date: April 20, 2022 | ||
| By: | /s/ AVNER M. APPLBAUM | |
| Name: Avner M. Applbaum | ||
| Title: Executive Vice President and Chief Financial Officer |
Document
| FOR IMMEDIATE RELEASE | ||
|---|---|---|
| Contact: | Renee Campbell | |
| Email: | renee.campbell@valmont.com | |
| Date: | April 20, 2022 |
Valmont Reports First Quarter 2022 Results and Raises Full-Year Guidance
Achieved Record First-Quarter Sales and Earnings per Share
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 first quarter ended March 26, 2022.
First Quarter 2022 Highlights (all metrics compared to First Quarter 2021 unless otherwise noted)
•First Quarter Record Net Sales increased 26.6% to $980.8 million.
•Operating Income increased to $94.8 million, or 9.7% of net sales ($99.0 million or 10.1% adjusted1) compared to $77.2 million or 10.0% of net sales
•First Quarter Record Diluted Earnings per Share (EPS) of $2.90 ($3.07 adjusted1) compared to $2.57
•Record backlog of $1.8 billion, reflecting improved pricing and continued strong market demand across the portfolio
•Announced a 10% quarterly dividend increase, from $0.50 to $0.55 ($2.00 to $2.20 annualized)
•Realigned financial reporting from four reportable segments to two: Infrastructure and Agriculture
◦Infrastructure includes the previous segments of Utility Support Structures, Engineered Support Structures and Coatings
◦Agriculture is a renaming of the previous Irrigation segment
◦Elevates the focus on capital allocation, technology development and market growth strategies
•Released the Valmont 2022 Sustainability Report and enhanced the Company's dedicated Sustainability website while updating key disclosures and highlighting Valmont products and solutions that support ESG principles
1 Please see Reg G reconciliation to GAAP measures at end of document
Key Financial Metrics
| First Quarter 2022 | GAAP | Adjusted1 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (000's except per share amounts) | 03/26/2022 1Q 2022 | 03/27/2021<br>1Q 2021 | vs. 1Q 2021 | 03/26/2022 1Q 2022 | 03/27/2021<br>1Q 2021 | vs. 1Q 2021 | |||||||||
| Net Sales | $ | 980,820 | $ | 774,886 | 26.6% | $ | 980,820 | $ | 774,886 | 26.6% | |||||
| Operating Income | 94,842 | 77,211 | 22.8% | 98,985 | 77,211 | 28.2% | |||||||||
| Operating Income as a % of Net Sales | 9.7 | % | 10.0 | % | 10.1 | % | 10.0 | % | |||||||
| Net Earnings | 62,311 | 55,014 | 13.3% | 65,888 | 55,014 | 19.8% | |||||||||
| Diluted Earnings Per Share | $ | 2.90 | $ | 2.57 | 12.8% | $ | 3.07 | $ | 2.57 | 19.5% | |||||
| Average Shares Outstanding | 21,492 | 21,429 | 21,492 | 21,429 |
"We delivered strong financial results in our first quarter, exceeding our expectations and achieving another quarter of record sales," said Stephen G. Kaniewski, President and Chief Executive Officer. "I am very pleased with our relentless focus on price management, operational excellence and the realization of increasing strong demand across the portfolio. Through these actions, we achieved first-quarter adjusted operating margins of 10.1% and record first-quarter adjusted earnings per share of $3.07. We are seeing strong demand across global infrastructure markets, especially in our key growth businesses including products and solutions for utility and telecommunications markets. Agricultural market conditions continue to be very favorable, which is leading to increasing demand for irrigation equipment and technology solutions globally. I want to recognize our Valmont teams around the world as they continue to drive our momentum and success. We continue executing on our strategy of creating sustainable growth initiatives across our businesses and long-term value for our shareholders."
Kaniewski continued, "During the quarter, we realigned our segment structure from four reportable segments to two, Infrastructure and Agriculture, to reflect how the businesses are managed, while elevating our focus on capital allocation, technology, talent development, and market growth strategies. In parallel with the segment realignment, we are also centralizing operations of our global manufacturing footprint across both segments to focus on improving productivity, increasing output, and driving efficient capital allocation. We remain committed to our tagline of Conserving Resources. Improving Life®. as we simplify our company structure to more effectively articulate our strategy and purpose."
First Quarter 2022 Segment Review
Infrastructure (69.1% of Net Sales)
Products and solutions to serve the infrastructure markets of utility, renewable energy, lighting, transportation and telecommunications, and coatings services to preserve and protect metal products
Sales of $680.7 million grew 23.8% year-over-year with sales growth across most product lines. Higher sales were driven by favorable pricing globally, primarily in the transmission, distribution, and substation (TD&S), and lighting and transportation (L&T) product lines, and higher volumes, primarily in telecommunications.
Operating Income improved 42.3% to $77.5 million or 11.4% of sales compared to $54.4 million or 9.9% of sales in 2021, driven by favorable pricing and improved fixed-cost leverage, including SG&A.
1 Please see Reg G reconciliation to GAAP measures at end of document
Agriculture (30.9% of Net Sales)
Center pivot and linear irrigation equipment for agricultural markets, including parts and tubular products; advanced technology solutions for precision agriculture
Sales of $306.6 million increased 33.5% year-over-year. Sales growth was led by higher average selling prices of irrigation equipment globally, higher volumes in North American markets and higher technology sales, partially offset by lower international project sales.
Operating Income was $37.5 million, or 12.2% of sales ($41.6 million or 13.7% adjusted1) compared to $38.7 million or 16.9% of sales in 2021. The benefit of higher average selling prices during the quarter was more than offset by higher SG&A, including incremental SG&A from the Prospera acquisition.
Realignment of Reporting Segments
On April 6, 2022, the Company announced that it had realigned its reporting segment structure beginning with its first quarter 2022 financial results. The new reporting segments are Infrastructure (includes the previous segments of Utility Support Structures, Engineered Support Structures and Coatings) and Agriculture (a renaming of the previous Irrigation segment). A recast of comparable prior-year segment financial information for 2020 and 2021 affected by the change is available in a summary presentation on the Investors page at Valmont.com. The Company's historical GAAP balance sheet, income statement and cash flows are not affected.
Balance Sheet, Liquidity and Capital Allocation
First quarter cash flows from operations were $2.7 million, primarily reflecting higher net working capital levels compared to year-end 2021, in support of strong customer demand. At the end of the first quarter, cash and cash equivalents were $149.7 million. During the quarter, Moody's reaffirmed the Company's Baa3/Stable credit rating.
Updating Full Year 2022 Financial Outlook and Key Assumptions
The Company is increasing its 2022 full-year net sales and diluted earnings per share outlook from the previous indications that were communicated last quarter, and is providing key assumptions for the year.
| 2022 Full Year Financial Outlook | Previous Outlook | Revised Outlook |
|---|---|---|
| Net Sales Growth (vs. PY) | 9% to 14% | 11% to 17% |
| GAAP Diluted EPS1 | $11.55 to $12.30 | $12.30 to $12.80 |
| Adjusted Diluted EPS1 | $12.25 to $13.00 | $13.00 to $13.50 |
| Tax Rate | ~ 25.0% | ~26.5% |
| FX Translation Impact on Net Sales | ~ 1.0% | 0.0% |
•No expected foreign currency translation impact on net sales vs. prior year
•2022 tax rate of approximately 26.5% due to the expected geographic mix of earnings
•Capital expenditures to be in the range of $110.0 - $120.0 million to support strategic growth and Industry 4.0 advanced manufacturing initiatives
Kaniewski added, "We are increasing our 2022 outlook due to several positive factors. We've had a very strong start to the year, as our teams have continued to execute from a position of strength to drive growth and performance, with significant momentum supported by strong, global market drivers across our businesses. We entered the second quarter with a record backlog of more than $1.8 billion, reflecting strong market demand and providing a solid line of sight for us through 2022. In the Infrastructure segment, the need for critical infrastructure investment globally gives us confidence in the long-term market growth trends. In Agriculture, favorable market trends globally are providing strong momentum. Across the portfolio, we continue to execute pricing strategies to manage broad-based inflation and leverage the strength of our organization
1 Please see Reg G reconciliation to GAAP measures at end of document
and global supply chain to deliver value-added products and innovative solutions to our customers. Additionally, our balance sheet is strong and gives us flexibility to execute our long-term strategic plan. Our strategy remains focused on long-term profitable growth, with an organizational emphasis on ESG principles, return on invested capital, operational excellence and strengthening our organization for the future."
A live audio discussion with Stephen G. Kaniewski, President and Chief Executive Officer, Aaron Schapper, Group President, Infrastructure, and Avner M. Applbaum, Executive Vice President and Chief Financial Officer, will be accessible by telephone on Thursday, April 21, 2022 at 8:00 a.m. CDT by dialing 1-877-407-6184 or 1-201-389-0877 (no Conference ID needed), or via webcast by pointing browsers to this link: Valmont Industries 1Q 2022 Earnings Conference Call. A slide presentation will simultaneously be available for download on the Investors page at valmont.com. A replay of the event can be accessed two hours after the call at the above link or by telephone at 1-877-660-6853 or 1-201-612-7415. Please use conference identification number 13728740. The replay will be available through 10:59 p.m. CDT on April 28, 2022.
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.
Concerning Forward-Looking Statements
This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which Valmont operates, as well as management’s perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. As you read and consider this release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond Valmont’s control) and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont’s actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include among other things, the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific economic effects on the Company’s business and that of its customers and suppliers, risk factors described from time to time in Valmont’s reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw material, availability and market acceptance of new products, product pricing, domestic and international competitive environments, 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.
1 Please see Reg G reconciliation to GAAP measures at end of document
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 26-Mar-22 | 27-Mar-21 | |||
| Net sales | $ | 980,820 | $ | 774,886 |
| Cost of sales | 731,634 | 570,332 | ||
| Gross profit | 249,186 | 204,554 | ||
| Selling, general and administrative expenses | 154,344 | 127,343 | ||
| Operating income | 94,842 | 77,211 | ||
| Other income (expense) | ||||
| Interest expense | (11,263) | (9,999) | ||
| Interest income | 227 | 311 | ||
| Loss on investments (unrealized) | (1,063) | (109) | ||
| Other | 3,642 | 3,449 | ||
| Other income (expense), net | (8,457) | (6,348) | ||
| Earnings before income taxes | 86,385 | 70,863 | ||
| Income tax expense | 23,121 | 15,502 | ||
| Equity in loss of nonconsolidated subsidiaries | (358) | (360) | ||
| Net earnings | 62,906 | 55,001 | ||
| Less: (earnings)/loss attributable to non-controlling interests | (595) | 13 | ||
| Net earnings attributable to Valmont Industries, Inc. | $ | 62,311 | $ | 55,014 |
| Average shares outstanding (000's) - Basic | 21,279 | 21,179 | ||
| Earnings per share - Basic | $ | 2.93 | $ | 2.60 |
| Average shares outstanding (000's) - Diluted | 21,492 | 21,429 | ||
| Earnings per share - Diluted | $ | 2.90 | $ | 2.57 |
| Cash dividends per share | $ | 0.55 | $ | 0.50 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 26-Mar-22 | 27-Mar-21 | |||
| Net sales | ||||
| Infrastructure | $ | 680,726 | $ | 549,646 |
| Agriculture | 306,580 | 229,664 | ||
| Total | 987,306 | 779,310 | ||
| Less: Intersegment sales | (6,486) | (4,424) | ||
| Total | $ | 980,820 | $ | 774,886 |
| Operating Income | ||||
| Infrastructure | $ | 77,507 | $ | 54,449 |
| Agriculture | 37,475 | 38,748 | ||
| Corporate | (20,140) | (15,986) | ||
| Total | $ | 94,842 | $ | 77,211 |
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 infrastructure markets of utility, renewable energy, lighting, transportation and telecommunications, and coatings services to preserve and protect metal products.
Agriculture: This segment consists of the manufacture of center pivot and linear irrigation equipment for agricultural markets, including parts and tubular products, and advanced technology solutions for precision agriculture.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
| Thirteen Weeks ended March 26, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Infrastructure | Agriculture | Intersegment Sales | Consolidated | |||||
| Geographical market: | ||||||||
| North America | $ | 505,980 | $ | 198,109 | $ | (6,486) | $ | 697,603 |
| International | 174,746 | 108,471 | — | 283,217 | ||||
| Total | $ | 680,726 | $ | 306,580 | $ | (6,486) | $ | 980,820 |
| Product line: | ||||||||
| Transmission, Distribution and Substation (TD&S) | $ | 281,600 | $ | — | $ | — | $ | 281,600 |
| Lighting and Transportation (L&T) | 212,767 | — | — | 212,767 | ||||
| Coatings | 81,976 | — | (3,101) | 78,875 | ||||
| Telecommunications | 61,396 | — | — | 61,396 | ||||
| Renewable Energy | 42,987 | — | — | 42,987 | ||||
| Irrigation Equipment and Parts, excluding Technology | — | 278,034 | (3,385) | 274,649 | ||||
| Technology Products and Services | — | 28,546 | — | 28,546 | ||||
| Total | $ | 680,726 | $ | 306,580 | $ | (6,486) | $ | 980,820 |
| Thirteen weeks ended March 27, 2021 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Infrastructure | Agriculture | Intersegment Sales | Consolidated | |||||
| Geographical market: | ||||||||
| North America | $ | 385,734 | $ | 128,865 | $ | (4,424) | $ | 510,175 |
| International | 163,912 | 100,799 | — | 264,711 | ||||
| Total | $ | 549,646 | $ | 229,664 | $ | (4,424) | $ | 774,886 |
| Product line: | ||||||||
| Transmission, Distribution and Substation (TD&S) | $ | 208,444 | $ | — | $ | — | $ | 208,444 |
| Lighting and Transportation (L&T) | 176,516 | — | — | 176,516 | ||||
| Coatings | 74,793 | — | (3,201) | 71,592 | ||||
| Telecommunications | 45,640 | — | — | 45,640 | ||||
| Renewable Energy | 44,253 | — | — | 44,253 | ||||
| Irrigation Equipment and Parts, excluding Technology | — | 207,258 | (1,223) | 206,035 | ||||
| Technology Products and Services | — | 22,406 | — | 22,406 | ||||
| Total | $ | 549,646 | $ | 229,664 | $ | (4,424) | $ | 774,886 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
| 26-Mar-22 | 25-Dec-21 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 149,700 | $ | 177,232 |
| Accounts receivable, net | 616,538 | 571,593 | ||
| Inventories | 807,471 | 728,834 | ||
| Contract asset - costs and profits in excess of billings | 161,633 | 142,643 | ||
| Prepaid expenses and other assets | 105,233 | 83,646 | ||
| Refundable income taxes | — | 8,815 | ||
| Total current assets | 1,840,575 | 1,712,763 | ||
| Property, plant and equipment, net | 610,218 | 598,605 | ||
| Goodwill and other assets | 1,130,690 | 1,135,881 | ||
| $ | 3,581,483 | $ | 3,447,249 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Current installments of long-term debt | $ | 4,226 | $ | 4,884 |
| Notes payable to banks | 8,380 | 13,439 | ||
| Accounts payable | 404,410 | 347,841 | ||
| Accrued expenses | 215,082 | 253,330 | ||
| Contract liability - billings in excess of costs and earnings | 168,794 | 135,746 | ||
| Income taxes payable | 6,074 | — | ||
| Dividend payable | 11,721 | 10,616 | ||
| Total current liabilities | 818,687 | 765,856 | ||
| Long-term debt, excluding current installments | 963,065 | 947,072 | ||
| Operating lease liabilities | 146,493 | 147,759 | ||
| Other long-term liabilities | 148,747 | 172,965 | ||
| Shareholders' equity | 1,504,491 | 1,413,597 | ||
| $ | 3,581,483 | $ | 3,447,249 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| First Quarter | ||||
|---|---|---|---|---|
| 13 Weeks Ended | ||||
| 26-Mar-22 | 27-Mar-21 | |||
| Cash flows from operating activities | ||||
| Net Earnings | $ | 62,906 | $ | 55,001 |
| Depreciation and amortization | 23,884 | 21,031 | ||
| Contribution to defined benefit pension plan | — | (964) | ||
| Change in working capital | (91,929) | (54,500) | ||
| Other | 7,842 | 12,585 | ||
| Net cash flows from operating activities | 2,703 | 33,153 | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant, and equipment | (27,095) | (27,565) | ||
| Other | (2,005) | (1,743) | ||
| Net cash flows from investing activities | (29,100) | (29,308) | ||
| Cash flows from financing activities | ||||
| Proceeds from long-term borrowings | 97,000 | 4,181 | ||
| Principal payments on long-term borrowings | (82,529) | (712) | ||
| Net (payments)/proceeds on short-term borrowings | (5,562) | 3,975 | ||
| Purchase of treasury shares | — | (11,131) | ||
| Dividends paid | (10,616) | (9,556) | ||
| Other | (1,814) | 2,593 | ||
| Net cash flows from financing activities | (3,521) | (10,650) | ||
| Effect of exchange rates on cash and cash equivalents | 2,386 | (2,463) | ||
| Net change in cash and cash equivalents | (27,532) | (9,268) | ||
| Cash and cash equivalents - beginning of year | 177,232 | 400,726 | ||
| Cash and cash equivalents - end of period | $ | 149,700 | $ | 391,458 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
(Dollars in thousands, except per share amounts)
(unaudited)
The non-GAAP tables below disclose the impact of (1) intangible asset amortization (Prospera) and (2) stock-based compensation recognized for the Prospera employees. Amounts may be impacted by rounding. We believe the adjustments for Prospera allow for a better comparison of future Agriculture segment performance as compared to historical results. 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 March 26, 2022 | Diluted | ||||
|---|---|---|---|---|---|
| earnings per | |||||
| share | |||||
| Net earnings attributable to Valmont Industries, Inc. - as reported | $ | 62,311 | $ | 2.90 | |
| Prospera intangible asset amortization | 1,645 | 0.08 | |||
| Stock-based compensation - Prospera | 2,498 | 0.12 | |||
| Total Adjustments, pre-tax1 | 4,143 | 0.19 | |||
| Tax effect of adjustments2 | (566) | (0.03) | |||
| Net earnings attributable to Valmont Industries, Inc. - Adjusted1 | $ | 65,888 | $ | 3.07 | |
| Average shares outstanding (000’s) - Diluted | 21,492 |
1Earnings per share includes rounding
2The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction.
| Thirteen weeks ended March 26, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating Income Reconciliation | Infrastructure | Agriculture | Corporate | Valmont | |||||||
| Operating income - as reported | $ | 77,507 | $ | 37,475 | $ | (20,140) | $ | 94,842 | |||
| Stock-based compensation - Prospera | — | 2,498 | — | 2,498 | |||||||
| Prospera intangible asset amortization | — | 1,645 | — | 1,645 | |||||||
| Adjusted Operating Income | $ | 77,507 | $ | 41,618 | $ | (20,140) | $ | 98,985 | |||
| Net Sales - as reported | 677,625 | 303,195 | NM | 980,820 | |||||||
| Operating Income as a % of Sales | 11.4 | % | 12.4 | % | NM | 9.7 | % | ||||
| Adjusted Operating Income as a % of Sales | 11.4 | % | 13.7 | % | NM | 10.1 | % |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
REGULATION G RECONCILIATION OF FORECASTED GAAP AND ADJUSTED EARNINGS
(Dollars in thousands, except per share amounts)
The non-GAAP tables below disclose the impact on the range of estimated diluted earnings per share of the (1) amortization of the intangible asset (Prospera) and (2) stock-based compensation for Prospera employees. We believe the adjustments for Prospera allow for a better comparison of future Agriculture segment performance as compared to historical results. 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 - 2022 Guidance | Low End | High End | Adjustments | |||
|---|---|---|---|---|---|---|
| Estimated net earnings - GAAP | $ | 266,000 | $ | 277,000 | ||
| Prospera intangible asset (proprietary technology) amortization, pre-tax | 6,800 | |||||
| Stock-based compensation - Prospera, pre-tax | 10,000 | |||||
| Total pre-tax adjustments | 16,800 | |||||
| Estimated tax benefit from above expenses* | (2,200) | |||||
| Total Adjustments, after-tax | $ | 14,600 | ||||
| Estimated net earnings - Adjusted | $ | 280,600 | $ | 291,600 | ||
| Diluted Earnings Per Share Range - GAAP | $ | 12.30 | $ | 12.80 | ||
| Diluted Earnings Per Share Range - Adjusted | $ | 13.00 | $ | 13.50 |
* The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction.
vmi1q2022presentation
© 2022 Valmont® Industries, Inc. Valmont Industries, Inc. First Quarter 2022 Earnings Presentation April 21, 2022
Disclosure Regarding Forward-Looking Statements These slides contain (and the accompanying oral discussion will contain) “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries including the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific economic responses to the Company’s products and services, the overall market acceptance of such products and services, the integration of acquisitions and other factors disclosed in the Company’s periodic reports filed with the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, 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. Consequently, such forward-looking statements should be regarded as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 2 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022
3 April 21, 2022 STEVE KANIEWSKI PRESIDENT & CHIEF EXECUTIVE OFFICER | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
1Q 2022 Segment Summary 4 April 21, 2022 • Strong broad-based market demand in all regions • Leveraging pricing strategies • Backlog of more than $1.8 billion, reflecting improved pricing and strong market demand TOTAL 1Q 2022 SALES $980.8M; +27% Y/Y AGRICULTURE $306.6M; +33% Y/Y 31% of Net Sales • Strength in all regions with North American sales growing 54% YoY driven by considerable increases in pricing and higher volumes • Another record sales quarter in Brazil • Positive farmer sentiment trends and elevated grain commodity prices • Technology sales grew 27% driven by demand for connected crop management and advanced analytics INFRASTRUCTURE $680.7M; +24% Y/Y 69% of Net Sales • Led by considerably higher pricing and strong underlying demand across global markets • Continued investment by utilities to upgrade and harden the grid • Cross-regional strength in lighting and transportation markets • More than 30% sales growth in the telecommunications product line | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
5 April 21, 2022 Conserving Resources, Improving Life® • Released our 2022 Sustainability Report and conducted a dedicated ESG conference call • Recommitted to 2025 environmental goals − 9% reduction in carbon emissions from Scope 1 mobile sources − 12% reduction in normalized electricity usage − 100% of global manufacturing facilities to adopt low-flow water fixtures for nonproduction areas • Identified and committed to four United Nations Sustainability Development Goals Responsibly Managing Key Resources • Completed 3-megawatt Ag Solar project in Brazil − Strong market for solar solutions − Government legislation enhances opportunities • Valmont delivers unique, sustainable solutions − Exclusive software monitors sustainability and ROI in real-time − Supported by world-class dealer network | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
New Segment Structure Supports Long-Term Strategy Elevating our Focus on Capital Allocation, Technology Development and Market Growth Strategies | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 Expanding Markets that We Serve Accelerating Growth Operational Excellence with ESG Focus Elevating ESG Accelerating Innovation Optimizing Talent and Technology Fosters collaboration across locations, led by global operations organization Focus on delivering smart infrastructure to our customer Resource sharing for optimal development of innovation 6
7 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 AARON SCHAPPER GROUP PRESIDENT, INFRASTRUCTURE
8 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 Simplifying the business to manage our portfolio to enable greater focus on higher growth opportunities Leveraging key partnerships with leading global technology providers to enable smart infrastructure Capturing opportunities from continued infrastructure investments enabled by our global footprint and strong market position Infrastructure Segment
9 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 AVNER APPLBAUM EVP & CHIEF FINANCIAL OFFICER
Diluted EPS GAAP Adjusted1 +12.8% +19.5% Sales ($M) +26.6% Operating Income ($M) GAAP Adjusted1 +22.8% +28.2% 1Q 2022 Financial Summary 10 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 • Relentless focus on price management, operational excellence and the realization of increasing strong demand across the portfolio • Operating margin improved to 9.7% (10.1% adjusted1) • EPS growth driven by higher operating income, partially offset by a higher tax rate from a change in the geographic mix of earnings 1 Please see Reg G reconciliation to GAAP measures at end of document. $77.2 $94.8 $77.2 $99.0 2021 2022 2021 2022 $774.9 $980.8 2021 2022 $2.57 $2.90 $2.57 $3.07 2021 2022 2021 2022
Sales ($M) 23.8% 1Q 2022 Results | Infrastructure 11 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 Operating Income ($M) 42.3% • Sales growth was driven by favorable pricing, primarily in the transmission, distribution, and substation (TD&S) and lighting and transportation (L&T) product lines, and higher volumes, primarily in telecommunications • Operating income improved 42.3% to $77.5 million or 11.4% of sales, driven by pricing and strong demand across all product lines, and improved fixed-cost leverage, including SG&A $54.4 $77.5 2021 2022 Sales ($M) 2021 2022 Transmission, Distribution and Substation $ 208.4 $ 281.6 +35% Lighting and Transportation 176.5 212.7 +21% Coatings 74.8 82.0 +10% Telecommunications 45.6 61.4 +35% Renewable Energy 44.3 43.0 -3% $549.6 $680.7 2021 2022
Operating Income ($M) GAAP Adjusted1 -3.3% 7.4% Sales ($M) 33.5% 1Q 2022 Results | Agriculture 12 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 1 Please see Reg G reconciliation to GAAP measures at end of document. 2Technology sales are reported as a subset of total Agriculture segment sales $229.7 $306.6 2021 2022 • Global sales increased due to higher average selling prices of irrigation equipment globally, higher North American volumes and higher technology sales, partially offset by lower international project sales • The benefit of higher average selling prices during the quarter was more than offset by higher SG&A, including incremental SG&A from the Prospera acquisition. Sales ($M) 2021 2022 North American Irrigation $ 128.9 $ 198.1 +54% International Irrigation 100.8 108.5 +8% Agricultural Technology2 22.4 28.5 +27% $38.7 $37.5 $38.7 $41.6 2021 2022 2021 2022
2022 Cash Flow Highlights 2021 Cash Flow | FCF Reconciliation | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 ($M) YTD 3/26/2022 Net Cash Flows from Operating Activities $ 2.7 Net Cash Flows from Investing Activities (29.1) Net Cash Flows from Financing Activities (3.5) Net Cash Flows from Operating Activities $ 2.7 Purchase of Property, Plant & Equipment (27.1) Free Cash Flows $ (24.4) Strategically Securing Raw Materials to Supp rt Strong Sales Growth 13
Balanced Approach to Capital Allocation – 1Q 2022 14 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 GROWING OUR BUSINESS RETURNING CASH TO SHAREHOLDERS $27M N/A N/A $11M Capital Expenditures Acquisitions Share Repurchases Dividends • In line with expected 2022 FY CapEx of $110 - $120M • Investments to support strategic growth initiatives and Industry 4.0 advanced manufacturing • Strategic fit + market expansion • Returns exceeding cost of capital within 3 years • Opportunistic approach, supported by free cash flow • ~$122M remains on current authorization at 03/26/22 • 10% dividend increase announced February 2022 • Payout ratio target: 22% of earnings • Current payout: ~18%
Strong Balance Sheet and Liquidity 15 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 Cash $149.7M Total Long-Term Debt $963.1M Shareholders’ Equity $1,504.5M Total Debt to Adj. EBITDA1 1.9x Available Credit under Revolving Credit Facility2 $565.2M Cash $149.7M Total Available Liquidity $714.9M AS OF MARCH 26, 20221 ► Long-term debt of $963.1M, mostly fixed-rate, with long-dated maturities to 2044 and 2054 ► Total Debt to Adjusted EBITDA remains within our desired range of 1.5 to 2.5 times ► Moody’s reaffirmed Baa3/Stable credit rating during the quarter ► Capital allocation strategy has not changed; the primary focus is growing and reinvesting in our businesses while returning cash to shareholders 1 The values on this slide are calculated in accordance with the amended credit facility dated October 18, 2021. See slide 30 for calculation of Adjusted EBITDA and Leverage Ratio. 2 $800M Total Revolver less borrowings and Standby LC’s of $235M.
Full Year 2022 Outlook and Key Assumptions 16 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 KEY ASSUMPTIONS • No expected foreign currency translation impact on Net Sales • Expect ~26.5% full year tax rate due to the expected geographic mix of earnings • Stabilized steel costs for the year • CapEx to support strategic growth initiatives and Industry 4.0 advanced manufacturing initiatives PREVIOUS FY22 OUTLOOK1 11% – 17% Increase in Net Sales YoY $110.0M – $120.0M Capital Expenditures CURRENT FY22 OUTLOOK1 $13.00 – $13.50 Adj. Diluted EPS2 $12.30 – $12.80 GAAP Diluted EPS ~26.5% Tax Rate 9% – 14% Increase in Net Sales YoY $110.0M – $120.0M Capital Expenditures $12.25 – $13.00 Adj. Diluted EPS2 $11.55 – $12.30 GAAP Diluted EPS ~25% Tax Rate 1 Exclusive of potential future restructuring activities. 2 Please see Reg G reconciliation to GAAP measures at end of document.
Fundamental Market Drivers Remain Resilient 17 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 Record Backlog of More than $1.8B at the End of 1Q 2022 INFRASTRUCTURE • Long term need for critical infrastructure investment globally, including current and future stimulus, will continue to benefit global markets giving us confidence in future growth • Ongoing demand and necessity for renewables, grid hardening and expanding ESG focus within utility markets • Solid long-term market trends for road construction and single- family housing • Carriers’ investments support work and school at home and macro buildouts in suburban and rural communities, aligning with favorable trends in residential construction • Increased number of economies actively fighting costs of corrosion will drive need to extend life of steel products globally over long term AGRICULTURE • Favorable market conditions leading to increasing demand for irrigation equipment and technology solutions globally • Higher net farm income levels and elevated grain commodity prices are driving positive farmer sentiment • Global ag market fundamentals remain strong with strength across international markets • Expected growth in technology adoption led by growers' increasing demand for connected crop management and advanced analytics to reduce input costs, increase land productivity and minimize farm labor costs
Summary 18 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 Ability to grow sales through innovation and execution while being flexible and responding quickly to meet customer needs Increased profitability by executing on our pricing strategies and advancing operational excellence across our footprint Disciplined capital allocation allocating capital to high-growth strategic investments while returning capital to shareholders through dividends and share repurchases Invested in our employees and technologies to drive new products and services, and build upon the strength of our operations Poised and Well Positioned to Capture Growth and Drive Stakeholder Value in the Future
19 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 Q&A
20 | Valmont Industries, Inc . | 1Q 2022 Earnings PresentationApril 21, 2022 APPENDIX
1Q 2022 Financial Summary 21 Net Sales 2021 2022 Change Infrastructure $ 549.6 $ 680.7 23.8% Agriculture 229.7 306.6 33.5% Intersegment Sales1 (4.4) (6.5) NM Net Sales $ 774.9 $ 980.8 26.6% Operating Income $ 77.2 $ 94.8 22.8% Adjusted Operating Income2 $ 77.2 $ 99.0 28.2% Net Income $ 55.0 $ 62.3 13.3% Adjusted Net Income $ 55.0 $ 65.9 19.8% Diluted Earnings Per Share (EPS) $ 2.57 $ 2.90 12.8% Adj Diluted Earnings Per Share (EPS)2 $ 2.57 $ 3.07 19.5% $M, except for per share amounts .1Includes rounding 2Please see Reg G reconciliation to GAAP measures at end of document.. April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures 22 April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures 23 April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
Regulation G Reconciliation of Forecasted GAAP and Adjusted Earnings 24 April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
Historical Segment Financials 25 April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation 2020 Q1 Q2 Q3 Q4 FY FY Sales: Infrastructure segment 549,646$ 617,604$ 634,283$ 693,568$ 2,495,101$ 2,261,804$ Agriculture segment 229,664 281,965 240,331 276,757 1,028,717 645,831 Total 779,310 899,569 874,614 970,325 3,523,818 2,907,635 Intersegment Sales: Infrastructure segment (3,201) (2,796) (1,826) (2,753) (10,576) (6,541) Agriculture segment (1,223) (2,144) (4,006) (4,294) (11,667) (5,739) Total (4,424) (4,940) (5,832) (7,047) (22,243) (12,280) Net Sales: Infrastructure segment 546,445 614,808 632,457 690,815 2,484,525 2,255,263 Agriculture segment 228,441 279,821 236,325 272,463 1,017,050 640,092 Total 774,886$ 894,629$ 868,782$ 963,278$ 3,501,575$ 2,895,355$ Operating Income: Infrastructure segment 54,449 61,550 71,422 45,985 233,406 209,172 Agriculture segment 38,748 41,984 27,735 28,560 137,027 83,046 Corporate (15,986) (20,909) (22,962) (23,791) (83,648) (66,265) Total 77,211$ 82,625$ 76,195$ 50,754$ 286,785$ 225,953$ 2021
5G Adoption and Capex Spend Forecasts 26 Source: GSM Association. April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
U.S. Net Cash Farm Income by Year 27 Source: USDA, American Farm Bureau Federation April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
Agricultural Commodity Prices 28 April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation Source: World Bank
2012-2021 Historical Free Cash Flow1 29 10 Year Average FCF is $143M; Last 5 Years Has Averaged $107M 1 Adjusted earnings for purposes of calculating FCF conversion may not agree to the adjusted net earnings. The difference is due to cash restructuring, debt refinancing, or other non-recurring expenses which were settled in cash in the year of occurrence. ($M) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Net cash flows from operating activities $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 $ 65.9 Net cash flows from investing activities (136.7) (131.7) (256.9) (48.2) (53.0) (49.6) (155.4) (168.1) (104.0) (417.3) Net cash flows from financing activities (16.4) (37.4) (136.8) (32.0) (95.2) (32.0) (162.1) (98.9) (173.8) 133.5 Net cash flows from operating activities $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 $ 65.9 Purchase of plant, property, and equipment (97.1) (106.8) (73.0) (45.5) (57.9) (55.3) (72.0) (97.4) (106.7) (107.8) Free Cash flows 100.0 289.7 101.1 226.8 174.9 77.8 81.0 210.2 209.6 (41.9) Net earnings attributed to Valmont Industries, Inc. $ 234.1 $ 278.5 $ 183.9 $ 40.1 $ 175.5 $ 120.5 $ 101.8 $ 146.4 $ 140.7 $ 195.6 Adjusted net earnings attributed to Valmont Industries, Inc. N/A $ 295.1 $ 187.7 $ 131.7 $ 139.9 $ 162.7 $ 130.4 N/A $ 159.8 $ 222.3 Free Cash Flow Conversion - GAAP 0.43 1.04 0.55 5.66 1.00 0.65 0.80 1.44 1.49 (0.21) Free Cash Flow Conversion - Adjusted N/A 0.98 0.53 1.71 1.25 0.48 0.62 N/A 1.31 (0.19) 1) Reconciliation of Net Earnings to Adjusted Figures Net earnings attributed to Valmont Industries, Inc. $ 234.1 $ 278.5 $ 183.9 $ 40.1 $ 175.5 $ 120.5 $ 101.8 $ 146.4 $ 140.7 $ 195.6 Change in valuation allowance against deferred tax assets - - - 7.1 (20.7) 41.9 - - - 5.0 Impairment of long-lived assets - 12.2 - 61.8 1.1 - 28.6 - 19.1 21.7 Reversal of contingent liability - - - (16.6) - - - - - Other non-recurring expenses (non-cash) - - - 18.1 - - - - Deconsolidation of Delta EMD, after-tax and NCI - 4.4 - - - - - - - - Noncash loss from Delta EMD shares - - 3.8 4.6 0.6 0.2 - - - - Adjusted net earnings attributed to Valmont Industries, Inc. $ 234.1 $ 295.1 $ 187.7 $ 131.7 $ 139.9 $ 162.7 $ 130.4 $ 146.4 $ 159.8 $ 222.3 April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
Years of rapid raw material cost inflation GAAP 0.43X 1.04X 0.55X 5.66X 1.01X 0.67X 0.86X 1.37X 1.49X (0.21X) Adj. N/A 0.98X 0.53X 1.71X 1.27X 0.49X 0.66X N/A 1.28X (0.19X) 2012 – 2021 Free Cash Flow1 ($M) 100 290 101 227 175 78 81 210 210 (42) 143 (100) (50) - 50 100 150 200 250 300 350 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 10 Year Avg 10-yr Avg. $143M GAAP 1.28X Adj. 0.84X Historical FCF Conversion by Year1 Strong Free Cash Flow throughout the Cycle 30 1 We use the non-GAAP measure of FCF, which we define as GAAP net cash flows from operating activities reduced by capex. We believe that FCF is a useful performance measure for management and useful to investors as the basis for comparing our performance with other companies. Our measure of FCF may not be directly comparable to similar measures used by other companies. April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation
Calculation of Adjusted EBITDA and Leverage Ratio 31 Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our Debt/Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four quarters. See “Leverage Ratio “ below. TTM 26-Mar-22 Net earnings attributable to Valmont Industries, Inc. $ 202,926 Interest expense 69,034 Income tax expense 43,875 Stock-based compensation 33,512 Depreciation and amortization expense 95,430 EBITDA 444,777 Asset impairments 27,911 Adjusted EBITDA – last four quarters $ 472,688 Net indebtedness $ 875,971 Leverage Ratio 1.85 Interest-bearing debt $ 975,671 Less: Cash and cash equivalents in excess of $50 million 99,700 Net indebtedness 875,971 ($000s) April 21, 2022 | Valmont Industries, Inc . | 1Q 2022 Earnings Presentation