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Valmont Reports Third Quarter 2016 Earnings

Mittwoch, 19.10.2016 23:55 von

PR Newswire

OMAHA, Neb., Oct. 19, 2016 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure development and mechanized irrigation equipment and services for agriculture, today reported third quarter results.

  • Revenues were $610.2 million, down 3.5% year-over-year reflecting lower sales in the Utility Support Structures, Coatings and Energy and Mining segments
  • Operating income on a GAAP basis was $53.2 million, up from $37.0 million last year. Before restructuring charges and impairments, operating income was $58.3 million, a slight decrease from last year's $61.0 million
    • Improved profitability in the Energy and Mining, and Utility Support Structures segments was offset by lower profitability in the Coatings and Engineered Support Structures segments on an adjusted basis
    • While steel prices declined during the quarter, largely erasing second quarter increases, Valmont's third quarter average steel costs were slightly higher than last year. Aside from LIFO accounting effects, the increase did not have a significant impact on operating results
  • Diluted EPS were $1.24 compared to $0.52 in 2015 (excluding restructuring expenses and impairments, diluted EPS were $1.48 and $1.39 in 2016 and 2015, respectively)
  • The Company incurred approximately $5.1 million of pre-tax restructuring expense this quarter, of which approximately $2.3 million was related to the previously announced $4.8 million 2016 Australia restructuring program. The remaining approximately $2.8 million expense was related to 2015 restructuring efforts
  • Year-to-date, savings recognized from the 2015 restructuring approximated $17 million
  • During the quarter, the Company appointed Stephen G. Kaniewski as President and Chief Operating Officer, effective October 1
  • The Company repurchased 139,000 shares for $18.0 million during the quarter; $139 million remains on the current authorization
  • The Company is slightly lowering its annual guidance primarily to reflect recent weakness in the Coatings Segment. Adjusted diluted EPS are now expected to range between $6.23 and $6.35, (GAAP EPS $5.88 to $6.00). In response, coatings cost structure has been cut to better match current demand. The updated guidance meets the long-term earnings targets presented at the company's February, 2016 investor day of achieving 10% adjusted EPS growth.

"The market environment continued to be challenging. Sales declines were largely driven by lower international volumes in Utility Support Structures and weaker Coatings demand in North America," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "Despite slightly lower overall sales, volatile steel prices and operational challenges in the Coatings Segment, we continue to benefit from the restructuring and operational actions undertaken over the last 18 months, delivering operating income at 8.7% of sales, or 9.6% of sales before charges."










Third


Year-to-date

Summarized Financial Info. 

13 Weeks Ended


39 Weeks Ended


24-Sep-16


26-Sep-15


24-Sep-16


26-Sep-15

Net sales

$    610,247


$    632,576


$   1,847,101


$   1,985,096

Operating income 

53,240


37,012


187,411


148,695

  Operating income as a % of net sales GAAP

8.7%


5.9%


10.1%


7.5%

Operating income Adjusted*

58,315


61,013


192,476


187,738

  Operating income as a % of net sales Adjusted*

9.6%


9.6%


10.4%


9.5%

Net earnings - GAAP

28,173


12,066


103,168


70,678

Net earnings - Adjusted *

33,488


32,176


109,518


100,678









Diluted EPS - GAAP net earnings

$         1.24


$         0.52


$           4.54


$           3.00

Average Shares Outstanding - Diluted

22,659


23,170


22,741


23,534









Diluted EPS - Adjusted net earnings *

$         1.48


$         1.39


$           4.82


$           4.28









Average Shares Outstanding - Diluted

22,659


23,170


22,741


23,534









* Please see Reg. G reconciliation table on the last page




 

Third Quarter Segment Review

Infrastructure-related

Engineered Support Structures (33% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

Sales of $203.2 million were 2% higher than last year due to increased sales of wireless communication structures in the Asia Pacific region, particularly in Australia, which is undergoing an upgrade and expansion of their wireless network.

In North America, sales of lighting and traffic products were higher, mostly driven by increased non-residential construction. Sales of wireless communication products were lower.

In Europe, sales of lighting and traffic structures were flat with last year, reflecting continued weak markets and limited new infrastructure investments.

Operating income was $19.6 million or 9.6%, of sales ($20.2 million and 9.9% adjusted for restructuring) compared to $20.1 million, or 10.1% of sales in 2015 ($21.7 million and 10.9% adjusted for restructuring).

Utility Support Structures (25% of Sales)
Steel and concrete structures for the global electric utility industry.

Sales of $150.7 million decreased 9% year-over-year, largely a result of lower sales in international markets, which are typically project-based. North American sales were comparable with last year. Higher volumes largely offset lower pricing associated with lower average steel costs. The North American market remains robust. In general, increased volumes and extending lead times point to tightening industry capacity.

Operating income increased to $16.0 million or 10.6% of sales ($16.6 million and 11.0% adjusted for restructuring) compared to $14.5 million or 8.8% of sales in 2015 ($15.7 million and 9.5% adjusted for restructuring), benefitting from continuing operational improvements in North America somewhat offset by the effect of lower international volumes.

Coatings Segment (11% of Sales)
Global galvanizing, painting and anodizing services.

Sales of $70.1 million were 8% lower than last year, reflecting lower North American demand from both external and internal customers and a significant falloff in demand from the solar energy industry. The change in end market demand was sudden, as earlier in 2016 and last year, demand from solar energy customers was strong in anticipation of the expiration of certain energy tax credits, which did not materialize.

Operating income was $11.7 million, or 16.7% of sales, ($12.3 million and 17.5% adjusted for restructuring) compared to $3.1 million, or 4.1% of sales in 2015 ($14.2 million and 18.6% adjusted for restructuring and impairments).

Aside from volume and factory deleverage from the impact of lower volumes, there was unexpected downtime due to kettle and crane repairs at certain galvanizing facilities. These operational issues are unusual and have been corrected to ensure efficient operational performance going forward. Our network of plants allowed us to serve our customers uninterrupted, but with temporary inefficiencies and higher costs. Partially offsetting the volume and operational matters was a $2.6 million reversal of a contingent purchase price accrual associated with an acquisition.

Energy and Mining Segment (13% of Sales)
Offshore structures, engineered access systems and grinding media.

Segment sales of $81.6 million were 4% lower than last year due to lower grinding media revenues.

Operating income increased to $3.9 million or 4.8% of sales ($5.6 million and 6.8% adjusted for restructuring) compared to a loss of $4.3 million in 2015, (operating income of $3.6 million and 4.3% adjusted for restructuring and impairments). The increase was mostly driven by improved operational performance and the benefit of last year's restructuring efforts in the Asia Pacific region to reduce cost while maintaining capability to serve customers.

Agriculture-related

Irrigation Segment (21% of Sales)
Agricultural irrigation equipment, parts, services and tubular products.

Segment sales of $127.8 million were comparable with last year. In North America, the third quarter is the seasonal low period. Irrigation equipment sales increased, led by stronger international markets in Brazil and Sub-Saharan Africa. Tubing sales were lower, driven by weak demand from agricultural OEM's and service center customers.

Operating income was flat at $14.2 million. Operating income as a percent of sales of 11.1% was also similar to last year.

Fourth Quarter Outlook:

"We expect positive fourth quarter comparisons," Mr. Bay said. "On a positive note, Utility demand is firming in North America and we are shipping an international project during the quarter. Growth in the Engineered Support Structures Segment, should be driven by continued telecom strength in the Asia Pacific region. The Energy and Mining Segment is making good progress, and we expect favorable comparisons with last year. However, Coatings Segment sales are expected near current levels, which are weaker than last year's fourth quarter. The operational issues we encountered in Coatings have been fixed and SG&A and labor costs were adjusted. Our Irrigation Segment outlook remains cautious. We expect lower North American demand than last year due to crop price levels and related pressure on net farm income. International irrigation markets are expected to be solid. Our guidance for adjusted earnings per share for the year, based on the first three quarters' adjusted EPS of $4.82, is in the range of $6.23 to $6.35, (GAAP EPS $5.88 to $6.00)."

An audio discussion of Valmont's third quarter results will be available live by Telephone by dialing 1-877-493-2981 and entering Conference ID#:15297121 or via Webcast at 8:00 a.m. CDT October 20, 2016 at https://engage.vevent.com/rt/valmontindustries_ao~15297121.  

A replay is available through the above link or by telephone (855) 859-2056 or +44 (0)1452550000, Conference ID#:15297121 beginning October 20, 2016 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 28, 2016. The Company's slide presentation for the call will be simultaneously available on the investor relations tab at www.valmont.com under Investor Relations.

Valmont is a global leader, designing and manufacturing highly engineered products that support global infrastructure development and agricultural productivity. Its products for infrastructure serve highway, transportation, wireless communication, electric transmission, and industrial construction and energy markets. Its mechanized irrigation equipment for large scale agriculture improves farm productivity while conserving fresh water resources. In addition, Valmont provides coatings services that protect against corrosion and improve the service lives of steel and other metal products.

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which Valmont operates, as well as management's perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. As you read and consider this release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond Valmont's control) and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont's actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include among other things, risk factors described from time to time in Valmont's reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw material, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in this press release is made as of the date of this press release and the Company does not undertake to update any forward-looking statement.

 


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(unaudited)












Third Quarter


Year-to-Date



13 Weeks Ended


39 Weeks Ended



24-Sep-16


26-Sep-15


24-Sep-16


26-Sep-15

Net sales


$       610,247


$       632,575


$  1,847,101


$ 1,985,096

Cost of sales


455,224


475,824


1,355,992


1,493,343

          Gross profit


155,023


156,751


491,109


491,753

Selling, general and administrative expenses


101,783


104,539


303,698


327,858

Impairment of goodwill and intangible assets


-


15,200


-


15,200

          Operating income 


53,240


37,012


187,411


148,695

Other income (expense)









     Interest expense


(11,100)


(11,120)


(33,276)


(33,480)

     Interest income


771


905


2,289


2,395

     Investment gain (loss)


1,455


(2,253)


591


(983)

     Other


(577)


1,023


(139)


741



(9,451)


(11,445)


(30,535)


(31,327)

          Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries 










43,789


25,567


156,876


117,368

Income tax expense


14,268


12,018


49,742


42,873

          Net earnings


29,521


13,549


107,134


74,495

Less:  Earnings attributable to non-controlling interests


(1,348)


(1,483)


(3,966)


(3,817)

          Net earnings attributable to Valmont Industries, Inc.


$         28,173


$         12,066


$     103,168


$      70,678



















Average shares outstanding (000's) - Basic


22,505


23,057


22,602


23,420

Earnings per share - Basic


$             1.25


$             0.52


$           4.56


$          3.02










Average shares outstanding (000's) - Diluted


22,659


23,170


22,741


23,534

Earnings per share - Diluted


$             1.24


$             0.52


$           4.54


$          3.00










Cash dividends per share


$           0.375


$           0.375


$         1.125


$        1.125










 


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)












Third Quarter


Year-to-Date



13 Weeks Ended


39 Weeks Ended



24-Sep-16


26-Sep-15


24-Sep-16


26-Sep-15










Net sales









     Engineered Support Structures


$       203,184


$       199,410


$     584,071


$    578,070

     Utility Support Structures


150,667


164,684


446,432


503,954

     Energy and Mining


81,552


84,732


234,693


259,095

     Coatings


70,082


76,201


213,961


226,654

        Infrastructure products


505,485


525,027


1,479,157


1,567,773










     Irrigation


127,809


126,775


438,575


474,655

     Other


-


1,691


-


6,202

     Less: Intersegment sales


(23,047)


(20,918)


(70,631)


(63,534)

          Total


$       610,247


$       632,575


$  1,847,101


$ 1,985,096










Operating Income









     Engineered Support Structures


$         19,577


$         20,073


$       54,753


$      45,742

     Utility Support Structures


16,030


14,505


48,326


40,261

     Energy & Mining


3,941


(4,302)


9,184


2,762

     Coatings


11,696


3,145


37,132


22,006

        Infrastructure products


51,244


33,421


149,395


110,771










     Irrigation


14,154


14,194


70,761


76,233

     Other 


-


(1,386)


-


(3,765)

     Corporate


(12,158)


(9,217)


(32,745)


(34,544)

          Total


$         53,240


$         37,012


$     187,411


$    148,695




















Valmont has aggregated its business segments into five reportable segments as follows.











Engineered Support Structures:This segment consists of the manufacture of engineered metal structures and components for global lighting and traffic, wireless communication, and roadway safety.  











Utility Support Structures:This segment consists of the manufacture of engineered steel and concrete structures for the global utility industry.











Energy and Mining: This segment includes the manufacture of access systems applications, forged steel grinding media, and offshore oil and gas and wind energy structures;











Coatings:This segment consists of global galvanizing, painting and anodizing services.











Irrigation:This segment consists of the manufacture of agricultural irrigation equipment and related parts and services worldwide.

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)










24-Sep-16




26-Sep-15

ASSETS







Current assets:







     Cash and cash equivalents


$         349,375




$       312,851

     Accounts receivable, net


455,692




501,403

     Inventories


379,625




368,290

     Prepaid expenses


69,231




52,208

     Refundable and deferred income taxes


20,342




44,736

          Total current assets


1,274,265




1,279,488

Property, plant and equipment, net


525,640




543,235

Goodwill and other assets


584,138




666,978



$    2,384,043




$  2,489,701








LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:







     Current installments of long-term debt


$               895




$          1,099

     Notes payable to banks


853




1,496

     Accounts payable


170,888




186,581

     Accrued expenses


178,834




175,028

     Dividend payable


8,455




8,649

          Total current liabilities


359,925




372,853

Long-term debt, excluding current installments


755,584




764,823

Other long-term liabilities


266,233




286,248

Shareholders' equity


1,002,301




1,065,777



$    2,384,043




$  2,489,701

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited) and dollars in thousands










Year to Date




Year to Date



24-Sep-16




26-Sep-15

Cash flows from operating activities







   Net Earnings


$         107,134




$        74,495

   Depreciation and Amortization


61,242




70,859

   Impairment of assets - restructuring activities


618




12,659

   Impairment of goodwill and trade names


-




15,200

   Change in working capital 


(31,596)




8,637

   Other


(10,144)




972

        Net cash flows from operating activities


127,254




182,822








Cash flows from investing activities







   Purchase of property, plant, and equipment


(42,233)




(34,447)

   Acquisitions, net of cash acquired 


-




-

   Other


1,114




9,236

        Net cash flows from investing activities


(41,119)




(25,211)








Cash flows from financing activities







   Proceeds from long-term borrowings


-




37,000

   Principal payments on long-term borrowings


(1,563)




(37,878)

   Purchase of treasury shares


(46,581)




(148,220)

   Dividends paid


(25,604)




(26,708)

   Other


(8,608)




(14,420)

        Net cash flows from financing activities


(82,356)




(190,226)

Effect of exchange rates on cash and cash equivalents 


(3,478)




(26,113)

Net change in cash and cash equivalents 


301




(58,728)

Cash and cash equivalents - beginning of year 


349,074




371,579

Cash and cash equivalents - end of period 


$         349,375




$       312,851

 

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 on (a) diluted earnings per share of (1) restructuring costs, (2) non-recurring deferred income tax expense, (3) asset impairment charges in 2015, and (4) the non-cash after-tax loss or gain associated with adjusting the fair value of Delta EMD Pty. Ltd (Delta EMD) shares owned to its quoted market price at September 24, 2016, and September 26, 2015, (b) segment operating income from restructuring costs and asset impairment charges in 2015. 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. 





Third Quarter Ended Sept. 24, 2016


Diluted earnings per share


Year-to-Date Sept. 24, 2016


Diluted earnings per share

Net earnings attributable to Valmont Industries, Inc. - as reported



$          28,173


$              1.24


$      103,168


$           4.54











Restructuring expenses - after tax



3,520


0.16


3,520


0.15











Deferred tax expense - Change in UK rate



1,860


0.08


1,860


0.08











Fair market value adjustment, Delta EMD - after-tax



(65)


-


970


0.04











Net earnings attributable to Valmont Industries, Inc. - Adjusted



$          33,488


$              1.48


$      109,518


$           4.82

Average shares outstanding (000's) - Diluted





22,659




22,741











* With respect to our annual 2016 diluted EPS guidance, we are estimating GAAP EPS of $5.88 to $6.00.  This assumes $1.7 million (after-tax) of estimated fourth quarter restructuring expense.  When this restructuring expense and the same year-to-date third quarter 2016 adjustments (detailed above) are added back, that results in an adjusted diluted EPS range of $6.23 to $6.35 for 2016.*














Third Quarter Ended Sept. 26, 2015


Diluted earnings per share


Year-to-Date Sept. 26, 2015


Diluted earnings per share

Net earnings attributable to Valmont Industries, Inc. - as reported



$          12,066


$              0.52


$        70,678


$           3.00











Restructuring expenses - after tax



6,310


0.27


16,634


0.71











Impairment of goodwill and trade names - after tax



13,370


0.58


13,370


0.57











Fair market value adjustment, Delta EMD - after-tax



430


0.02


(4)


NM











Net earnings attributable to Valmont Industries, Inc. - Adjusted



$          32,176


$              1.39


$      100,678


$           4.28

Average shares outstanding (000's) - Diluted





23,170




23,534












For the Third Quarter Ended Sept. 24, 2016

Segment Operating Income Reconciliation

Operating Income- As Reported


Restructuring expenses - before tax


Adjusted Operating Income 


Net Sales













Engineered Support Structures

$         19,577


$               587


$           20,164


$      203,184



  Op Inc. & Adjusted Op Inc. as a % of Sales

9.6%




9.9%





Utility Support Structures

16,030


528


16,558


150,667



  Op Inc. & Adjusted Op Inc. as a % of Sales

10.6%




11.0%





Energy & Mining 

3,941


1,610


5,551


81,552



  Op Inc. & Adjusted Op Inc. as a % of Sales

4.8%




6.8%





Coatings 

11,696


545


12,241


70,082



  Op Inc. & Adjusted Op Inc. as a % of Sales

16.7%




17.5%





Irrigation

14,154


-


14,154


127,809



  Op Inc. & Adjusted Op Inc. as a % of Sales

11.1%




11.1%





Corporate/Other

(12,158)


1,795


(10,363)















Consolidated Results

$         53,240


$            5,065


$       58,305


$      610,247



  Op Inc. & Adjusted Op Inc. as a % of Sales

8.7%




9.6%
















For the Third Quarter Ended Sept. 26, 2015

Segment Operating Income Reconciliation

Operating Income- As Reported


Restructuring expenses - before tax


Impairment of goodwill and TM - before tax


Adjusted Operating Income 


Net Sales











Engineered Support Structures

$         20,073


$            1,634


$                 -


$        21,707


$     199,410

  Op Inc. & Adjusted Op Inc. as a % of Sales

10.1%






10.9%



Utility Support Structures

14,505


1,159


-


15,664


164,684

  Op Inc. & Adjusted Op Inc. as a % of Sales

8.8%






9.5%



Energy & Mining 

(4,302)


2,934


5,000


3,632


84,732

  Op Inc. & Adjusted Op Inc. as a % of Sales

-5.1%






4.3%



Coatings 

3,145


$               806


10,200


14,151


76,201

  Op Inc. & Adjusted Op Inc. as a % of Sales

4.1%






18.6%



Irrigation

14,194


52


-


14,246


126,775

  Op Inc. & Adjusted Op Inc. as a % of Sales

11.2%






11.2%



Corporate/Other

(10,603)


2,215


-


(8,388)


1,691











Consolidated Results

$         37,012


$            8,800


$           15,200


$        61,013


$     632,575











  Op Inc. & Adjusted Op Inc. as a % of Sales

5.9%






9.6%













 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/valmont-reports-third-quarter-2016-earnings-300347980.html

SOURCE Valmont Industries, Inc.