OMAHA, Neb., July 20, 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 second quarter results.
"Net earnings improved meaningfully on lower revenues reflecting the positive impact of last year's restructuring and further cost reduction initiatives implemented this year more than offsetting the weakness in the irrigation business," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.
"Ongoing reviews of our cost structure identified opportunities to reduce costs in Australia. This will result in a mostly cash restructuring charge, estimated to be $4.7 million over the remainder of the year. Restructuring activities will affect the Energy and Mining and Coatings Segments. The primary activities will be the consolidation and closure of a few facilities, and headcount reductions."
Summarized Financial Info.
13 Weeks Ended
26 Weeks Ended
Operating income as a % of net sales
Net earnings - GAAP
Net earnings - Adjusted *
Diluted EPS - GAAP net earnings
Average Shares Outstanding - Diluted
Diluted EPS - Adjusted net earnings *
* Please see Reg. G reconciliation table on last page.
Second Quarter Segment Review
Engineered Support Structures(32% of Sales)Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.
Sales of $203.9 million were slightly higher than last year mainly due to increased telecommunication structure sales in the Asia-Pacific region.
In North America, sales of lighting and traffic products were comparable to last year while wireless communication products sales were lower.
In Europe, lighting and traffic structure sales declined modestly reflecting continued spending restraint for infrastructure projects.
Operating income was $21.0 million or 10.3% of sales compared to $16.2 million, ($19.3 million adjusted for restructuring), in the prior-year period, driven by the positive impacts of last year's restructuring, and lower raw material costs that more than offset a less favorable sales mix.
Utility Support Structures (24% of Sales)Steel and concrete structures for the global electric utility industry.
Sales of $151.2 million decreased 7% year-over-year, largely a result of contractual price reductions tied to lower steel costs (de-escalation clauses), but volume increased. The overall market environment remains attractive, with demand continuing to be driven by reliability standards and increased renewable energy projects. Market pricing remains competitive.
Operating income was $17.5 million or 11.6% of sales compared to $10.4 million ($12.9 million adjusted for restructuring) in the prior-year period, reflecting the positive impact of ongoing operational improvements and restructuring.
Coatings Segment (12% of Sales)Global galvanizing, painting and anodizing services.
Sales of $75.3 million were essentially flat with last year. The positive impact of the acquisition of American Galvanizing last year mostly offset lower sales in the Asia-Pacific region.
Operating income was $14.0 million, or 18.6% of sales, compared to $7.9 million ($12.6 million adjusted for restructuring), in the prior-year period.
Energy and Mining Segment (13% of Sales)Offshore structures, engineered access systems and grinding media.
Sales of $80.7 million were 6.5% lower than last year due to reduced sales of access systems and grinding media products partially offset by increased sales of wind tower products. Continued weakness in the oil and gas markets led to lower offshore structure and access systems sales into those markets.
Operating income was $3.3 million or 4.1% of sales compared to $2.7 million ($4.2 million adjusted for restructuring), in the prior-year period. Last year's restructuring helped mitigate the impact of weaker access systems markets on operating performance.
Irrigation Segment (24% of Sales)Agricultural irrigation equipment, parts, services and tubular products.
Sales of $152.3 million were down 12% due to lower North America irrigation equipment and tubing sales. Irrigation equipment sales in North America were muted by restrained capital investment by growers facing forecasts of further pressure on net farm income. Given a declining sales environment, industry pricing was competitive although relatively disciplined, its impact mitigated by lower average input costs. International irrigation equipment sales were comparable to last year despite unfavorable currency translation effects. The international irrigation business benefited from Valmont's geographic diversification, supporting the business.
Tubing sales fell despite recent firmness in steel prices. In the past, steel inflation has led to higher tubing sales. This year, declines reflected customer wariness over short-term steel price volatility.
Operating income fell 13% to $27.8 million impacted by the lower volumes. Operating income as a percent of sales of 18.2% was similar to last year despite lower revenue, due to cost management and lower input costs.
"We do not expect a significant short-term improvement in our end markets, and we see continued downward pressure in the irrigation market," Mr. Bay said. "With steel being a major input cost, our guidance of earnings per-share between $6.31 and $6.49 in 2016 takes into account some margin pressure in the second half, particularly in the Engineered Support Structures Segment, and assumes stable steel prices for the remainder of the year."
"Our goal of improving earnings in a challenging environment is showing results. Looking forward, we are investing in new products, opening new markets and pursuing acquisitions to drive future profitable growth in our infrastructure and agricultural markets."
"Long-term, our outlook is quite positive due to the strong inherent drivers in infrastructure and agriculture markets."
An audio discussion of Valmont's second quarter results will be available live by Telephone by dialing 1-877-493-2981 and entering Conference ID#:15297367 or via Webcast at 8:00 a.m. CDT July 21, 2016 at https://engage.vevent.com/rt/valmontindustries_ao~15297367. A replay is available through the above link or by telephone (877-493-2981 or 404-537-3406, Conference ID#:15297367) beginning July 21, 2016 at 10:00 a.m. CDT through 12:00 p.m. CDT on July 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)
Cost of sales
Selling, general and administrative expenses
Other income (expense)
Earnings before income taxes and equity in
earnings of nonconsolidated subsidiaries
Income tax expense
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 Support Structures
Utility Support Structures
Energy and Mining
Less: Intersegment sales
Valmont has aggregated its business segments into five global reportable segments as follows.
Engineered Support Structures: This segment consists of the manufacture of engineered metal structures and components for 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 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 galvanizing, painting and anodizing services.
Irrigation:This segment consists of the manufacture of agricultural irrigation equipment and related parts and services for the agricultural industry and tubular products for industrial customers.
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 STATEMENTS OF CASH FLOWS
(Dollars in thousands) and unaudited
Cash flows from operating activities
Depreciation and amortization
Contribution to defined benefit pension plan
Change in working capital
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant, and equipment
Increase in restricted cash - pension plan
Net cash flows from investing activities
Cash flows from financing activities
Net borrowings on short and long-term agreements
Purchase of treasury shares
Purchase of noncontrolling interest
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, and (2) 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 June 25, 2016 and June 27, 2015, (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.
Second Quarter Ended June 25, 2016
Diluted earnings per share
Year-to-Date June 25, 2016
Net earnings attributable to Valmont Industries, Inc. - as reported
Fair market value adjustment, Delta EMD - after-tax
Net earnings attributable to Valmont Industries, Inc. - Adjusted
Second Quarter Ended June 27, 2015
Year-to-Date June 27, 2015
Restructuring expenses - after tax
Operating Income Reconciliation
Operating Income as a % of Sales
Operating income - as reported
Restructuring expenses - before tax
Adjusted Operating Income
For the Second Quarter Ended June 25, 2016
Segment Operating Income Reconciliation
Engineered Support Structures
Energy and Mining
Utility Support Structures
Operating Income as a % of Sales
For the Second Quarter Ended June 27, 2015
Adjusted Operating Income as a % of Sales
SOURCE Valmont Industries, Inc.