OMAHA, Neb., Oct. 21, 2015 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment for agriculture, today reported third quarter results.
Summarized Financial Info.
13 Weeks Ended
39 Weeks Ended
($ in thousands, except per share data)
Operating Income - GAAP
Operating Income - Adjusted *
Net Earnings - GAAP
Net Earnings - Adjusted *
Diluted EPS - GAAP Earnings
Diluted EPS - Adjusted Earnings *
Average Shares Outstanding - Diluted
* Please see Reg. G reconciliation table on last page.
"The end-market challenges of weak agricultural commodity prices and reduced mining and energy driven demand, along with unfavorable currency translation, persisted during the quarter," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "Our goal in this environment remains to drive earnings improvement next year despite continued difficult market conditions. During the quarter, we continued our restructuring efforts and are on track to complete most initiatives by year-end. We now expect annualized cost savings from restructuring and cost reduction actions to approximate $30 million per year, compared to our prior expectations of $19 million in annualized savings."
Restructuring Plan Update
Third quarter progress on the Company's 2015 restructuring efforts entailed numerous actions to streamline management structure, consolidate production to lower cost facilities and reduce overhead. The major actions that took place during the quarter were as follows: In the Engineered Infrastructure Products Segment, overhead reductions occurred in all geographic regions, plant consolidations took place in access systems in Australia and a small facility in China was closed. In the Coatings segment, the idling of one Australian facility was completed.
The total restructuring costs incurred during the third quarter for the above actions, plus other restructuring activities, were $8.8 million pre-tax. The restructuring charges comprised of $5.5 million of cash expenses and $3.3 million of non-cash asset impairments. As part of the Company's annual impairment testing of intangible assets, during the third quarter, a pre-tax, non-cash impairment charge of $15.2 million was recorded on certain intangible assets, including a $10.2 million impairment of certain intangible assets in the Coatings Segment.
Third Quarter Segment Review
Engineered Infrastructure Products Segment (41% of 3rd Quarter Sales)
Engineered structures and components for global lighting and traffic, wireless communication, roadway safety, offshore structures and access systems applications.
Third quarter sales were $259.9 million, compared to $294.9 million in 2014, of which currency translation represented $30.0 million of the decline.
In North America, sales of lighting and traffic products increased due to the acquisition of Shakespeare, a composite structures manufacturer, in October, 2014. Wireless communication structure sales were lower due a major carrier's absence from the market.
In Europe, lighting and traffic structure sales declined slightly in local currency reflecting continued restraint in government investment in infrastructure due to general economic conditions in the region. Offshore structure sales were lower as investments in the energy sector were curtailed. A customer's delayed introduction of larger next-generation wind turbines also pushed out offshore structure deliveries into next year.
In the Asia-Pacific region, an increase in wireless communication structure sales benefitting from China's investment in its 4G wireless technology rollout was more than offset by engineered access system sales declines due to lower oil and gas investment in the region and a reduction of new investment in the Australian mining sector.
Operating income was $14.2 million, or 5.4% of segment sales, (9.1% before charges) compared with $33.2 million or 11.3% of segment sales in 2014, (included approximately $4.0 million reversal of a contingent purchase price provision related to the 2013 acquisition of Locker). Volume deleverage, impairment and restructuring charges and currency translation effects accounted for most the decline.
Utility Support Structures Segment (26% of 3rd Quarter Sales)Steel and concrete structures for the global electric utility industry.
Sales of $164.7 million were 9% lower than 2014, due to the revenue impact of lower steel costs, modest volume declines and continued competitive pricing. International sales were comparable with last year.
In North America, utility investment in transmission this year, in some cases favored capital deployment to coal plant retirements required by the EPA.
Segment operating income declined to $14.5 million or 8.8% of segment sales, (9.5% excluding charges). Operating income as a percent of sales was 9.4% in 2014.
Coatings Segment (12% of 3rd Quarter Sales)Global galvanizing, painting and anodizing services.
Global Coatings Segment sales of $76.2 million were 12% lower than last year. Sales declined in Australia due to reduced volumes related to mining and energy development projects. In North America, both custom and internal irrigation volumes declined. Custom volumes were slightly lower mostly due to weaker demand from agricultural customers.
Operating income was $3.1 million, ($14.2 million, or 18.6% of net sales excluding restructuring and impairment costs of $11.0 million), operating income was 20.2% of net sales last year.
During the quarter, the Company completed the acquisition of American Galvanizing, located in Folsom, New Jersey. This operation provides an important galvanizing presence for Valmont in the Northeast U.S. for both custom and internal volumes.
Irrigation Segment (18% of 3rd Quarter Sales)Agricultural irrigation equipment and related parts and services worldwide.
Irrigation Segment sales fell 36% to $112.2 million due to the absence this year of approximately $25 million in sales to replace and repair storm damaged machines that were included in last year's sales of $174.3 million, and the impact on demand of lower global farm income. In North America, favorable growing conditions lowered operating run-times on irrigation equipment, also reducing demand for aftermarket parts. Sales declined in international markets, due to currency translation effects and reduced volumes, particularly in South America.
Operating income was $10.5 million or 9.4% of segment sales, primarily reflecting lower sales volume and related manufacturing and SG&A deleverage.
"At this time, we are not expecting the current market environment to improve and our immediate focus remains on aligning our cost structure through the planned restructuring activities, but still investing in product line development to strengthen our leading market positions. We expect a meaningful improvement in 2016 earnings," said Mr. Bay.
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#: 66187261 or via Webcast at 8:00 a.m. CDT October 22, 2015 at https://engage.vevent.com/rt/valmontindustries_ao~102215. A replay is available through the above link or by telephone (855-859-2056 or 404-537-3406, Conference ID#: 66187261) beginning October 22, 2015 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 29, 2015.
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)
Cost of sales
Selling, general and administrative expenses
Impairment of goodwill and intangible assets
Other income (expense)
Costs related to refinancing of debt
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries
Income tax expense
Earnings before equity in earnings of nonconsolidated subsidiaries
Equity in earnings of nonconsolidated subsidiaries
Less: Earnings attributable to non-controlling interests
Net earnings attributable to Valmont Industries, Inc.
Average shares outstanding (000's) - Basic
Earnings per share - Basic
Average shares outstanding (000's) - Diluted
Earnings per share - Diluted
Cash dividends per share
SUMMARY OPERATING RESULTS
(Dollars in thousands)
Engineered Infrastructure Products
Utility Support Structures
Less: Intersegment sales
Valmont has aggregated its business segments into four reportable segments as follows.
Engineered Infrastructure Products:This segment consists of the manufacture of engineered metal structures and components for global lighting and traffic, wireless communication, roadway safety and access systems applications.
Utility Support Structures:This segment consists of the manufacture of engineered steel and concrete structures for the global utility industry.
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.
In addition to these four reportable segments, Valmont also has other businesses that individually are not more than 10% of consolidated net sales. These businesses, which include the manufacture of forged steel grinding media, tubular products, and industrial fasteners are reported in the "Other" category.
CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents
Accounts receivable, net
Refundable and deferred income taxes
Total current assets
Property, plant and equipment, net
Goodwill and other assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current installments of long-term debt
Notes payable to banks
Total current liabilities
Long-term debt, excluding current installments
Other long-term liabilities
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) and dollars in thousands
Year to Date
Cash flows from operating activities
Depreciation and amortization
Impairment of assets - restructuring activities
Impairment of goodwill and trade names
Change in working capital
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant, and equipment
Acquisitions, net of cash acquired
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from long-term borrowings
Principal payments on long-term borrowings
Purchase of treasury shares
Net cash flows from financing activities
Effect of exchange rates on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of period
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
The non-GAAP tables below disclose the impact on (a) diluted earnings per share of (1) restructuring costs, (2) goodwill and trade name impairment charges, and (3) 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 26, 2015, and September 27, 2014, (b) operating income of restructuring costs, and (c) segment operating income of restructuring costs. 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.
Ended Sept. 26,
Sept. 26, 2015
Net earnings attributable to Valmont Industries, Inc. - as reported
Restructuring expenses - after tax
Impairment of goodwill and trade names - after tax
Fair market value adjustment, Delta EMD - after-tax
Net earnings attributable to Valmont Industries, Inc. - Adjusted
Ended Sept. 27,
Sept. 27, 2014
Costs related to refinancing of debt - after tax
Operating Income Reconciliation
Operating income - as reported
Restructuring expenses - before tax
Impairment of goodwill and trade names - before tax
Adjusted Operating Income
Operating Income as a % of Sales
Adjusted Operating Income as a % of Sales
For the Third Quarter Ended Sept. 26, 2015
Segment Operating Income Reconciliation
NM - Not Meaningful
SOURCE Valmont Industries, Inc.