Valmont Announces Second Quarter 2015 Results


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OMAHA, Neb., July 22, 2015 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment for agriculture, reported second quarter sales of $682.1 million compared with $842.6 million for the same period of 2014. Second quarter 2015 operating income was $54.0 million ($68.3 million before restructuring charges), versus $104.8 million in 2014. Second quarter net income was $27.9 million versus $64.0 million in 2014, or $1.19 per diluted share compared to $2.38 in 2014. Excluding the effects of restructuring, second quarter earnings per diluted share were $1.61. (See Reg. G table on last page).

For the first six months of 2015, sales were $1,352.5 million versus $1,594.3 million in 2014. Valmont's first-half net earnings were $58.6 million, or $2.47 per diluted share, compared with 2014 first-half net earnings of $120.0 million, or $4.46 per diluted share. Excluding the effects of restructuring, six-month earnings per diluted share were $2.89.

Second Quarter Review: 

"Each of our segments continued to face challenging end-markets," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "In the Engineered Infrastructure Products Segment, reduced capital investments in oil, gas and mining negatively affected certain of our businesses. However, North American results improved aided by the Shakespeare acquisition and better lighting and traffic markets. In the Utility Support Structures Segment, lower volumes and competitive pricing substantially reduced results. Continued weakness in the Australian industrial economy adversely affected the Coatings segment. Global demand for our Irrigation products decreased as a result of lower net farm income resulting in reduced investments by farmers.

"We have made significant progress on our previously announced restructuring. In North America, the Utility Support Structures Segment consolidated some production into lower cost operating sites, reducing the overall cost structure. In Australia, plant consolidations took place both in the Coatings and Engineered Infrastructure Products Segments. In Europe, we also reduced our cost structure. The total pre-tax cost of the above actions, plus other cost reductions was $14.3 million. Non-cash asset impairments were $9.3 million and cash charges were $5.0 million.

"Operating income was 8.0% of net sales. Excluding restructuring costs, operating income was 10.0% of net sales, compared with 12.4% in 2014."

Second Quarter Segment Review:

Engineered Infrastructure Products Segment(37% of 2nd Quarter Sales)
Engineered structures and components for global lighting and traffic, wireless communication, roadway safety, offshore structures and access systems applications.

Second quarter sales were $261.1 million, a 14% decrease from 2014, of which currency translation contributed $29.3 million to the decline. The primary drivers of lower comparisons were in the offshore structures and access systems product lines.

In North America, sales of lighting and traffic products increased mainly due to the acquisition of Shakespeare, a composite structures manufacturer, in October, 2014. Wireless communication structure sales declined due to a slowdown in network investment by a large carrier.

In Europe, lighting and traffic structure sales rose in local currency due to the completion of a large project. Offshore structure sales were negatively impacted by customer delays in introducing new wind products, and deferred oil and gas investment.

In the Asia-Pacific region, growing investment in China's 4G networks led to a significant sales increase in wireless communication structures. However, engineered access system sales declined due to lower oil and gas investment in the region and continued weakness in the Australian mining sector.

Operating income was $17.4 million, or 6.7% of segment sales. Excluding the restructuring costs, operating income as a percent of sales was 8.4% compared with 9.4% in 2014.

Utility Support Structures Segment (23% of 2nd Quarter Sales)
Steel and concrete structures for the global electric utility industry.

Sales of $163.0 million were 24% lower than 2014, due to a decline in North American volumes, significantly lower steel costs and competitive pricing pressure. International sales, while not significant, were unchanged from last year.

In North America, deferred transmission investment by several of our larger customers, and an increase of smaller structures in the sales mix led to reduced sales. Canadian transmission project activity slowed as oil investment declined.

Utility operating income declined to $10.4 million or 6.4% of segment sales. Excluding restructuring costs, operating income as a percent of sales was 7.9% compared with 12.4% in 2014. Ongoing operational improvements were more than offset by lower competitive pricing and volume. Current restructuring and cost reducing initiatives are expected to improve profitability.

Coatings Segment (11% of 2nd Quarter Sales)
Global galvanizing, painting and anodizing services.

Global Coatings Segment sales of $76.1 million were 11% lower than last year. Sales declined in Australia due to reduced mining and industrial activity. The restructuring actions in Australia focused on consolidation of facilities, reducing operating costs going forward. In North America both custom and internal irrigation and utility volumes declined.

Including restructuring costs of $4.8 million, operating income was $7.9 million, or 10.4% of net sales compared to last year's $15.8 million. Excluding the effect of restructuring, operating income declined $3.2 million and was 16.6% compared with 18.6% in 2014.

Irrigation Segment (22% of 2nd Quarter Sales)
Agricultural irrigation equipment and related parts and services worldwide.

Irrigation Segment sales fell 30% to $153.8 million, due to a global decline in farm income and crop prices. Currency translation had a $12.6 million negative impact on sales.

In North America, declining sales reflect significantly reduced capital spending by farmers due to lower farm income. Additionally, a relatively wet spring meant lower operating time on irrigation equipment, reducing demand for aftermarket parts. Furthermore, sales of storm damaged equipment were substantially lower than last year's unusually strong levels.

International sales declined in several markets, particularly Brazil, where sales fell below record 2014 levels. Investment in farm equipment in Brazil slowed, partly due to delays and uncertainty in government-sponsored financing programs. Currency translation had a negative impact on international results, in particular due to a significant devaluation of the Brazilian currency.

The quality of segment operating income remained solid at $25.8 million or 16.8% of sales due to effective cost management. Excluding the effect of restructuring, operating income was 17.0% compared with 18.9% in 2014.

Outlook:

"We do not expect the challenges we face in the external environment to abate in the near future," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.

"Reduced global investment in oil and gas development, the weaker Australian economy, and foreign currency translation will lead to unfavorable second-half comparisons in the Engineered Infrastructure Products Segment.

"In the Utility Support Structures Segment, market conditions are not expected to change in the short-term. However, good progress has been made on our cost reduction and restructuring initiatives that will meaningfully reduce our overall cost structure going into next year.

"In the Coatings Segment, we currently do not expect a meaningful change in end market demand.  We will continue to press operational improvements and should benefit from the restructuring efforts to date.

"In the Irrigation Segment, we expect a significant unfavorable comparison in the third quarter absent the benefit of last year's storm damage and reduced sales in Brazil.

"Given this outlook, we will continue to intensify our focus on operational improvements and cost reductions. We are on schedule by year-end to complete many of the restructuring initiatives we announced in April. I am confident our restructuring efforts should lead to improved performance over time."

"Despite the short-term challenges in our businesses, the long-term drivers of our businesses have not changed, underpinning our optimism and positive outlook for Valmont," added Mr. Bay.

An audio discussion of Valmont's second quarter results by Mogens C. Bay, Chairman and Chief Executive Officer, and Mark C. Jaksich, Executive Vice President and Chief Financial Officer, will be available live by telephone by dialing 1-877-493-2981 and entering Conference ID#: 66198011 or via the Internet at 8:00 a.m. CDT July 23, 2015, by pointing browsers to: https://engage.vevent.com/rt/valmontindustries_ao~072315.  After the event you may listen by accessing the above link or by telephone. Dial 1-855-859-2056 or 404-537-3406, and enter the Conference ID#: 66198011 beginning July 23, 2015 at 10:00 a.m. CDT through 12:00 p.m. CDT on July 30, 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)

(unaudited)














Second Quarter


Year-to-Date




13 Weeks Ended


26 Weeks Ended




27-Jun-15


28-Jun-14


27-Jun-15


28-Jun-14

Net sales



$ 682,123


$ 842,599


$ 1,352,521


$ 1,594,339

Cost of sales



512,575


622,122


1,017,519


1,166,880

          Gross profit



169,548


220,477


335,002


427,459

Selling, general and administrative expenses



115,548


115,701


223,319


223,835

          Operating income 



54,000


104,776


111,683


203,624

Other income (expense)










     Interest expense



(11,232)


(8,304)


(22,360)


(16,501)

     Interest income



616


1,577


1,490


3,316

     Other



(28)


1,903


988


(3,909)




(10,644)


(4,824)


(19,882)


(17,094)

          Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries 



43,356


99,952


91,801


186,530

Income tax expense



13,917


34,070


30,855


64,085

          Earnings before equity in earnings of nonconsolidated subsidiaries 



29,439


65,882


60,946


122,445

Equity in earnings of nonconsolidated subsidiaries



-


(30)


-


(30)

          Net earnings



29,439


65,852


60,946


122,415

Less:  Earnings attributable to non-controlling interests



(1,566)


(1,876)


(2,334)


(2,459)

          Net earnings attributable to Valmont Industries, Inc.



$   27,873


$   63,976


$      58,612


$    119,956





















Average shares outstanding (000's) - Basic



23,336


26,623


23,602


26,669

Earnings per share - Basic



$       1.19


$       2.40


$          2.48


$          4.50











Average shares outstanding (000's) - Diluted



23,450


26,856


23,716


26,903

Earnings per share - Diluted



$       1.19


$       2.38


$          2.47


$          4.46











Cash dividends per share



$     0.375


$     0.375


$        0.750


$        0.625

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)














Second Quarter


Year-to-Date




13 Weeks Ended


26 Weeks Ended




27-Jun-15


28-Jun-14


27-Jun-15


28-Jun-14











Net sales










     Engineered Infrastructure Products



$      261,069


$     304,352


$    499,462


$     532,814

     Utility Support Structures



162,929


213,030


339,270


427,757

     Coatings



76,094


85,157


150,454


167,328

        Infrastructure products



500,092


602,539


989,186


1,127,899











     Irrigation



153,821


219,917


308,297


432,650

     Other



50,404


61,786


104,262


120,388

     Less: Intersegment sales



(22,194)


(41,643)


(49,224)


(86,598)

          Total



$      682,123


$     842,599


$ 1,352,521


$  1,594,339











Operating Income










     Engineered Infrastructure Products



$        17,424


$       28,625


$      29,406


$       42,334

     Utility Support Structures



10,399


26,375


25,756


59,132

     Coatings



7,862


15,820


18,861


29,706

        Infrastructure products



35,685


70,820


74,023


131,172











     Irrigation



25,814


41,473


50,116


84,619

     Other 



6,273


8,343


12,871


16,893

     Corporate



(13,772)


(15,860)


(25,327)


(29,060)

          Total



$        54,000


$     104,776


$    111,683


$     203,624











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, offshore, 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.

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)












27-Jun-15




28-Jun-14

ASSETS








Current assets:








     Cash and cash equivalents



$      317,523




$    455,927

     Accounts receivable, net



491,706




543,608

     Inventories



379,897




381,943

     Prepaid expenses



56,653




66,916

     Refundable and deferred income taxes



44,072




71,334

          Total current assets



1,289,851




1,519,728

Property, plant and equipment, net



570,977




638,854

Goodwill and other assets



706,564




700,022




$   2,567,392




$ 2,858,604









LIABILITIES AND SHAREHOLDERS' EQUITY








Current liabilities:








     Current installments of long-term debt



$          1,096




$           188

     Notes payable to banks



7,914




17,485

     Accounts payable



186,421




208,834

     Accrued expenses



165,138




186,996

     Dividend payable



8,733




9,930

          Total current liabilities



369,302




423,433

Long-term debt, excluding current installments



765,272




478,498

Other long-term liabilities



292,225




341,583

Shareholders' equity



1,140,593




1,615,090




$   2,567,392




$ 2,858,604

 

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, 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 27, 2015, and June 28, 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. 





Second Quarter
Ended June 27,
2015


Diluted
earnings per
share


Year-to-Date
June 27, 2015


Diluted
earnings per
share

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



$         27,873


$            1.19


$       58,612


$            2.47











Restructuring expenses - after tax



9,828


0.42


10,324


0.44











Fair market value adjustment, Delta EMD - after-tax



167


0.01


(433)


(0.02)











Net earnings attributable to Valmont Industries, Inc. - Adjusted



$         37,868


$            1.61


$       68,503


$            2.89

Average shares outstanding (000's) - Diluted





23,450




23,716














Second Quarter
Ended June 28,
2014


Diluted
earnings per
share


Year-to-Date
June 28, 2014


Diluted
earnings per
share

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



$         63,976


$            2.38


$     119,956


$            4.46











Fair market value adjustment, Delta EMD - after-tax



115


0.01


3,501


0.13











Net earnings attributable to Valmont Industries, Inc. - Adjusted



$         64,091


$            2.39


$     123,457


4.59

Average shares outstanding (000's) - Diluted





26,856




26,903











Operating Income Reconciliation



Second Quarter
Ended June 27,
2015







Operating income - as reported



$         54,000

















Restructuring expenses - before tax



14,270

















Adjusted Operating Income 



$         68,270

















Net Sales



682,123

















Operating Income as a % of Sales



7.9%

















Adjusted Operating Income as a % of Sales



10.0%


















For the Second Quarter Ended June 27, 2015

Segment Operating Income Reconciliation

Engineered
Infrastructure
Products


Utility Support
Structures


Coatings


Irrigation


Other/
Corporate











Operating income - as reported

$         17,424


$         10,399


$          7,862


$       25,814


$         (7,499)











Restructuring expenses - before tax

4,497


2,455


4,769


349


2,203











Adjusted Operating Income 

$         21,921


$         12,854


$         12,631


$       26,163


$         (5,296)











Net sales 

261,069


162,929


76,094


153,821













Operating Income as a % of Sales

6.7%


6.4%


10.3%


16.8%


NM











Adjusted Operating Income as a % of Sales

8.4%


7.9%


16.6%


17.0%


NM

 

 

SOURCE Valmont Industries, Inc.

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