Valmont reports first quarter 2022 results and raises full-year guidance
Omaha, neb.--(business wire)--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 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 key financial metrics first quarter 2022 gaap adjusted1 (000's except per share amounts) 03/26/2022 1q 2022 03/27/2021 1q 2021 vs. 1q 2021 03/26/2022 1q 2022 03/27/2021 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. 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 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 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 diluted weeks ended earnings per march 26, 2022 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.
