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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.”
1Please 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 adjusted1] compared to $110.0 million or 10.0% of net sales in 2022 [$114.1 million or 10.6% of net sales adjusted1] |
| 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 adjusted1] compared to $3.34 in 2022 [$3.49 adjusted1] |
| 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 | | Adjusted1 | | |||||||||||||
(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 | | Adjusted1 | | |||||||||||||
(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 | |
| |
1Please 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% adjusted1] 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 adjusted1] compared to $43.3 million or 13.3% of net sales in the third quarter of 2022 [$47.4 million or 14.6% adjusted1]. 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.
1Please 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.
1Please 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.
2023 Full Year Financial Outlook | Previous Outlook with Updated Adjustments1 | Revised Outlook1 | |
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 Share1 | $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.
1Please 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.
###
1Please 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 share1,2 | | 30, 2023 | | share2 | ||||
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 adjustments3 | | | (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 | | share2 | | 24, 2022 | | share2 | ||||
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 adjustments3 | | | (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 |
1In 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.
2Earnings (loss) per share includes rounding.
3The 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 Guidance1 | | 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 expenses2 | | | | | | | | | (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 - GAAP3 | | $ | 7.20 | | $ | 7.50 | | |
|
Diluted Earnings per Share Range - Adjusted3 | | $ | 14.80 | | $ | 15.10 | | |
|
2023 Previous Guidance1 | | 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 expenses2 | | | | | | | | | (2,450) |
Total adjustments, after-tax | | | | | |
| | $ | 13,950 |
Estimated net earnings - Adjusted | | $ | 332,200 | | $ | 344,000 | | |
|
Diluted Earnings per Share Range - GAAP3 | | $ | 14.80 | | $ | 15.35 | | |
|
Diluted Earnings per Share Range - Adjusted3 | | $ | 15.45 | | $ | 16.00 | | |
|
2023 Revised Previous Guidance1 | | 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 expenses2 | | | | | | | | | — |
Total adjustments, after-tax | | | | | |
| | $ | — |
Estimated net earnings - Adjusted | | $ | 318,250 | | $ | 330,050 | | |
|
Diluted Earnings per Share Range - GAAP3 | | $ | 14.80 | | $ | 15.35 | | |
|
Diluted Earnings per Share Range - Adjusted3 | | $ | 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
###
