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.
"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."
Summarized Financial Info.
13 Weeks Ended
39 Weeks Ended
Operating income as a % of net sales GAAP
Operating income Adjusted*
Operating income as a % of net sales Adjusted*
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 the last page
Third Quarter Segment Review
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.
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)
Cost of sales
Selling, general and administrative expenses
Impairment of goodwill and intangible assets
Other income (expense)
Investment gain (loss)
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
Energy & Mining
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.
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) 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
Net earnings attributable to Valmont Industries, Inc. - as reported
Restructuring expenses - after tax
Deferred tax expense - Change in UK rate
Fair market value adjustment, Delta EMD - after-tax
Net earnings attributable to Valmont Industries, Inc. - Adjusted
* 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
Year-to-Date Sept. 26, 2015
Impairment of goodwill and trade names - after tax
For the Third Quarter Ended Sept. 24, 2016
Segment Operating Income Reconciliation
Operating Income- As Reported
Restructuring expenses - before tax
Adjusted Operating Income
Engineered Support Structures
Op Inc. & Adjusted Op Inc. as a % of Sales
Utility Support Structures
Energy & Mining
For the Third Quarter Ended Sept. 26, 2015
Impairment of goodwill and TM - before tax
SOURCE Valmont Industries, Inc.