Valmont Reports Fourth Quarter Loss Due To Restructuring Initiative and Other One-time Charges and Reinstates Annual Guidance


Share:

OMAHA, Neb., Feb. 17, 2016 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment and services for agriculture, today reported fourth quarter and full year results.

  • 4Q revenues of $633.8 million were down 17% year-over-year, 1/3 of the decline was foreign exchange impact
  • 4Q operating loss was $17.0 million, including $3.7 million negative foreign exchange impact; excluding restructuring, impairment and other one-time charges ("charges"), operating income was $49.8 million, or 7.9% of net sales, compared with 8.7% in 2014
  • For the year, adjusted operating income as a percent of sales declined from 11.5% in 2014 to 9.1%.
  • 4Q GAAP diluted loss per share was $1.34 compared with diluted earnings per share (EPS) of $1.66 in 2014; 2015 adjusted diluted EPS was $1.35 before charges
  • Full year EPS was $1.71 or $5.63 before charges, compared with $8.17 adjusted in 2014
  • Operating cash flows for the quarter and year totaled $89 million and $272 million, respectively; year-end cash balance was $349 million
  • Company reinstated annual guidance; expects 2016 diluted EPS up 12-15% from 2015 adjusted EPS of $5.63

Additional Details

  • The previously announced restructuring initiative concluded, with overhead reductions, plant consolidations and other cost actions resulting in charges of $16.0 million (pre-tax) for the quarter, and $39.9 million for the year
  • Realized approximately $8 million in benefits from these actions during 2015. Expect further cost savings benefits in 2016 of approximately $22 million
  • To enhance transparency and align with its management structure, the Company modified its reporting structure to include a new segment called Energy and Mining
  • In the Coatings segment, an additional $7.1 million of after-tax impairment charges were recorded upon completion of the goodwill impairment analysis; in the newly created Energy and Mining segment, a charge of $19.6 million of after-tax goodwill and trade name impairments was recorded
  • Other pre-tax non-recurring expenses totaled $24.0 million for the quarter. These were: an increase in the allowance for doubtful accounts of $7.0 million in the Irrigation Segment, made for a receivable from a customer in China, and a commercial settlement with a large customer requiring ongoing inspections that resulted in a provision of $17.0 million in the Utility Support Structures Segment.
  • Repurchased 0.2 million of Company shares during quarter. There is $179 remaining on the current authorization.

"2015 was a transformational year for Valmont, as we completed our planned restructuring efforts to strengthen our position amid ongoing end market softness," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "We exited the year with 14 fewer manufacturing facilities and reduced the global workforce by approximately 7%. As we look ahead, we cannot count on an improvement in the global economic environment to support our results. However, restructuring benefits and a focus on operational improvements position us well to deliver solid earnings growth in 2016."


4Q and Full Year 2015 Financial Results

Summarized Financial Info. 

Fourth Quarter


Year-to-Date





13 Weeks Ended


52 Weeks Ended






26-Dec-15


27-Dec-14


26-Dec-15


27-Dec-14





Net Sales

$  633,828


$  763,137


$ 2,618,924


$ 3,123,143





Operating Income - GAAP

(17,000)


66,289


131,695


357,716





Operating Income - Adjusted *

49,789


66,289


237,527


357,716





Net Earnings - GAAP

(30,561)


40,461


40,117


183,976





Net Earnings - Adjusted *

31,104


39,398


131,798


21,943

















Diluted EPS - GAAP Earnings

$      (1.34)


$        1.66


$          1.71


$          7.09





Average Shares Outstanding - Diluted

22,892


24,409


23,405


25,932

















Diluted EPS - Adjusted Earnings *

$        1.35


$        1.61


$          5.63


$          8.17

















Average Shares Outstanding - Diluted

23,018


24,409


23,405


25,932

















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





















Segment Operating Income Reconciliation

Engineered
Support
Structures


Energy & Mining


Utility
Support
Structures


Coatings


Irrigation


Other/
Corporate













Operating income (loss) - as reported

$    13,850


$   (21,523)


$      (2,414)


$        5,363


$      8,305


$   (20,581)













Restructuring expenses 

4,159


2,353


1,578


1,005


876


6,037













Other non-recurring charges 

-


-


17,001


-


7,009


-













Impairment of goodwill and trade names 

-


19,640


-


6,530


-


600













Adjusted Operating Income 

$    18,009


$         470


$      16,165


$      12,898


$    16,190


$   (13,944)













Net sales 

$  193,383


$    78,764


$    170,623


$      75,731


$  137,546















Operating Income as a % of Sales

7.2%


-27.3%


0.2%


7.1%


6.0%


NM













Adjusted Operating Income as a % of Sales

9.3%


0.6%


9.5%


17.0%


11.8%


NM

NM - Not Meaningful

For purposes of the description of fourth quarter results by segment, we will be comparing adjusted operating income for 2015 to actual operating income for 2014.  Please refer to the above table to understand the adjustments from reported operating income to adjusted operating income for 2015.

Reporting Structure Details

During the fourth quarter, the Company modified its reporting structure to improve transparency into its business portfolio and align with the management structure. Going forward, the Company will report in five segments:

  • Engineered Support Structures (formerly Engineered Infrastructure Products)
  • Utility Support Structures
  • Coatings
  • Energy & Mining (newly created)
  • Irrigation

The modified structure includes four changes in the reportable segments:

First, the newly created Energy & Mining segment comprises the Access Systems and Offshore & Construction businesses (originally in the former Engineered Infrastructure Products Segment) and the Grinding Media business (originally in the "Other" Segment).

Second, the renamed Engineered Support Structures segment now comprises global lighting, traffic and wireless communication support structures, along with the highway safety business.

Third, the tubing business that was formerly in the "Other" segment is now reported in the Irrigation segment, reflecting the importance of agriculture to its revenue.

Fourth, there will no longer be an "Other" segment.

The Utility Support Structures and Coatings Segments were unaffected.

Fourth Quarter Segment Review

Infrastructure-related

Engineered Support Structures (31% of 4Q Sales)

Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

Fourth quarter sales declined 15% to $193.4 million, including negative currency translation of $12.8 million. The same period in 2014 benefited from intercompany utility sales for an export order.

In North America, sales of lighting and traffic products were comparable to last year. Wireless communication structure sales were lower due to a major carrier postponing its network buildout.

In Europe, Middle East & Africa, lighting and traffic structure sales declined due the benefit of a one-time export project in the same period last year. Otherwise, sales in Europe were similar to last year.

In the Asia-Pacific region, wireless communication structure sales rose slightly, benefitting from China's investment in its 4G wireless technology rollout. Other businesses in the region remained pressured by the weaker economic environment.

Adjusted operating income was $18.0 million or 9.3% compared with operating income of $20.9 million or 9.2% of segment sales in 2014. Volume deleverage and unfavorable currency translation effects accounted for the decline.

Utility Support Structures (27% of 4Q Sales)

Steel and concrete structures for the global electric utility industry.

Sales of $170.6 million decreased 21% year-over-year, due to the revenue impact of lower steel costs, a decline in Canada sales, and a less favorable project mix. International sales, while small, were lower than last year.

Adjusted operating income declined to $16.2 million from last year's operating income of $19.0 million reflecting competitive pricing and an unfavorable sales mix of smaller structures. However, adjusted operating income as a percent of sales improved to 9.4% from operating income as a percent of sales of 8.8% in 2014, reflecting the positive impact of ongoing operational improvements in this segment taken place during the year.

Coatings Segment (12% of 4Q Sales)

Global galvanizing, painting and anodizing services.

Sales of $75.7 million were 5% lower than last year, due to lower sales in Asia Pacific and unfavorable currency translation effect of $4.8 million. In North America, increased sales to external customers offset the impact of lower internal volume.

Adjusted operating income of $12.9 million, or 17.0% of net sales, declined slightly from operating income of $13.6 million in 2014 due to weakness in international operations.

Energy and Mining Segment (12% of 4Q Sales)

Offshore structures, engineered access systems and grinding media.

Sales of $78.8 million declined 28% year-over-year and included negative currency translation of $15.8 million, or half of the decline. Offshore sales were negatively impacted by the significant decline in oil prices. Weak energy markets also weighed on Access Systems results in Asia Pacific. Grinding media revenues softened amid a decline in Australia mining activity.

Adjusted operating income was $0.8 million, or 1% of sales, reflecting a very unfavorable operating environment, specifically the influence of sharply lower oil and energy prices on sales and profitability.

Agriculture-related

Irrigation Segment (22% of 4Q Sales)

Agricultural irrigation equipment, parts, services and tubular products.

Irrigation Segment sales fell 19% to $137.5 million mostly due to reduced international irrigation equipment sales. North America irrigation equipment sales fell less than 10%, reflecting reductions in farm income and continued weak agricultural commodity prices. Contributing to the segment revenue decline was $10 million of currency translation effect, and a decline in tubing sales driven by lower steel prices and weaker industrial demand.

Adjusted operating income was $16.2 million. Adjusted operating income as a percent of sales was 11.8%, only slightly lower than last year's operating income as a percent of sales of 12.3%.

2016 Outlook:

2016 annual guidance and assumptions include:

  • Revenue: Slightly lower, which includes expectations for reduced irrigation sales
  • Diluted EPS: Up ~12-15% from 2015 adjusted EPS of $5.63 with first quarter results about flat and positive quarterly comparisons for the remainder of the year.

"Looking forward to 2016, we do not anticipate meaningful improvements in our end markets and are prioritizing operational excellence and cost reductions to drive increased earnings," Mr. Bay said. "Additional expectations informing our current outlook include stable input costs and foreign exchange rates."

"While the macro environment remains challenged, none of the positive long-term, global drivers for our businesses have changed. Efficient use of water for food production will only increase in urgency and economic growth cannot be sustained without investments in the world's infrastructure. We believe we are well positioned to participate in these opportunities."

An audio discussion of Valmont's fourth quarter results will be available live by telephone by dialing 1-877-493-2981 and entering Conference ID#: 15296219 or via Webcast at 8:00 a.m. CDT February 18, 2016 at https://engage.vevent.com/rt/valmontindustries_ao~021816.  A replay is available through the above link or by telephone (855-859-2056 or 404-537-3406, Conference ID#: 15296219) beginning February 18, 2016 at 10:00 a.m. CDT through 12:00 p.m. CDT on February 25, 2016.

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)










Fourth Quarter


Year-to-Date


13 Weeks Ended


52 Weeks Ended


26-Dec-15


27-Dec-14


26-Dec-15


27-Dec-14

Net sales

$           633,828


$      763,136


$   2,618,924


$      3,123,143

Cost of sales

504,548


581,978


1,997,891


2,315,026

      Gross profit

129,280


181,158


621,033


808,117

Selling, general and administrative expenses

119,510


114,869


447,368


450,401

Impairment of goodwill and intangible assets

26,770


-


41,970


-

      Operating income (loss)

(17,000)


66,289


131,695


357,716

Other income (expense)








     Interest expense

(11,141)


(11,573)


(44,621)


(36,790)

     Interest income

901


1,253


3,296


6,046

     Costs related to refinancing of debt

-


-


-


(38,705)

     Other

2,879


2,169


2,637


(4,084)


(7,361)


(8,151)


(38,688)


(73,533)

      Earnings (loss) before income taxes and equity in earnings of nonconsolidated subsidiaries 

(24,361)


58,138


93,007


284,183

Income tax expense

4,554


16,583


47,427


94,894

      Earnings (loss) before equity in earnings of nonconsolidated subsidiaries 

(28,915)


41,555


45,580


189,289

Equity in earnings of nonconsolidated subsidiaries

(247)


63


(247)


29

      Net earnings (loss)

(29,162)


41,618


45,333


189,318

Less:  Earnings attributable to non-controlling interests

(1,399)


(1,157)


(5,216)


(5,342)

      Net earnings (loss) attributable to Valmont Industries, Inc.

$          (30,561)


$      40,461


$     40,117


$      183,976

















Average shares outstanding (000's) - Basic

22,892


24,253


23,288


25,719

Earnings (loss) per share - Basic

$              (1.34)


$          1.67


$         1.72


$            7.15









Average shares outstanding (000's) - Diluted

22,892


24,409


23,405


25,932

Earnings (loss) per share - Diluted

$              (1.34)


$          1.66


$         1.71


$            7.09









Cash dividends per share

$               0.375


$         0.375


$         1.500


$            1.375

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)














Fourth Quarter


Year-to-Date




13 Weeks Ended


52 Weeks Ended




26-Dec-15


27-Dec-14


26-Dec-15


27-Dec-14











Net sales










     Engineered Support Structures



$         193,383


$    227,840


$   771,453


$      810,074

     Energy and Mining



78,764


109,675


337,859


443,983

     Utility Support Structures



170,623


216,074


674,577


825,016

     Coatings



75,731


79,790


302,385


333,853

           Infrastructure products



518,501


633,379


2,086,274


2,412,926











     Irrigation



137,546


169,979


612,201


846,326

     Other



1,046


1,980


7,247


10,108

     Less: Intersegment sales



(23,265)


(42,202)


(86,798)


(146,217)

              Total



$         633,828


$    763,136


$2,618,924


$   3,123,143











Operating Income (loss)










     Engineered Support Structures



$           13,850


$      20,878


$     59,592


$        66,024

     Energy and Mining



(21,523)


6,043


(18,762)


41,342

     Utility Support Structures



(2,414)


19,012


37,847


95,118

     Coatings



5,363


13,661


27,369


60,921

            Infrastructure products



(4,724)


59,594


106,046


263,405











     Irrigation



8,305


20,962


84,537


151,508

     Other 



(6,039)


(690)


(9,802)


(1,535)

     Corporate



(14,542)


(13,577)


(49,086)


(55,662)

              Total



$          (17,000)


$      66,289


$   131,695


$      357,716











 The backlog of orders for the principal products manufactured and marketed was $516.4 million at the end of the 2015 fiscal year and $553.8 million at the end of the 2014 fiscal year. We anticipate that most of the backlog of orders will be filled during fiscal year 2016. At year-end, the segments with backlog were as follows (dollar amounts in millions): 




26-Dec-15




27-Dec-14



 Engineered Support Structures 



$148




$           170



 Energy and Mining



37




52



 Utility Support Structures 



245




280



 Irrigation 



87




53



 Coatings 



-




-



 Other 



-




-






$                 517




$           554




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. 


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;


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 and tubular products for industrial customers.


The distribution of industrial fasteners business and certain other product lines (each under 10% of consolidated sales) are included in the "Other" category.

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)










26-Dec-15


27-Dec-14

ASSETS






Current assets:






     Cash and cash equivalents



$         349,074


$   371,579

     Accounts receivable, net



466,443


536,918

     Inventories



340,672


359,522

     Prepaid expenses



46,137


56,912

     Refundable and deferred income taxes



24,526


68,010

            Total current assets



1,226,852


1,392,941

Property, plant and equipment, net



532,489


606,453

Goodwill and other assets



640,087


730,274




$      2,399,428


$2,729,668







LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:






     Current installments of long-term debt



$             1,077


$       1,181

     Notes payable to banks



976


13,952

     Accounts payable



179,983


196,565

     Accrued expenses



175,947


176,430

     Dividend payable



8,571


9,086

            Total current liabilities



366,554


397,214

Long-term debt, excluding current installments


763,964


766,654

Other long-term liabilities



303,699


315,395

Shareholders' equity



965,211


1,250,405




$      2,399,428


$2,729,668







CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) and dollars in thousands










Year to Date


Year to Date




26-Dec-15


27-Dec-14

Cash flows from operating activities






   Net Earnings



$             45,333


$     189,318

   Depreciation and amortization



91,144


89,328

   Impairment of assets - restructuring activities


19,836


-

   Impairment of goodwill and trade names



41,970


-

   Change in working capital 



71,891


(98,376)

   Other



2,093


(6,174)

          Net cash flows from operating activities


272,267


174,096







Cash flows from investing activities






   Purchase of property, plant, and equipment


(45,468)


(73,023)

   Acquisitions, net of cash acquired 



(12,778)


(185,710)

   Other



10,075


1,870

          Net cash flows from investing activities


(48,171)


(256,863)







Cash flows from financing activities






   Proceeds from long-term borrowings



68,000


652,211

   Principal payments on long-term borrowings


(69,098)


(357,858)

   Purchase of treasury shares



(168,983)


(395,045)

   Dividends paid



(35,357)


(32,443)

   Other



(14,567)


(6,621)

          Net cash flows from financing activities


(220,005)


(139,756)

Effect of exchange rates on cash and cash equivalents 


(26,596)


(19,604)

Net change in cash and cash equivalents 



(22,505)


(242,127)

Cash and cash equivalents - beginning of year 


371,579


613,706

Cash and cash equivalents - end of period 



$           349,074


$     371,579

 

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 2015 impact on (a) diluted earnings per share of (1) restructuring costs, (2) goodwill and trade name impairment charges, and (3) other non-recurring expenses  (b) operating income of restructuring costs, impairments, and non-recurring expenses (c) segment operating income of restructuring costs, impairments, and non-recurring expenses. For 2014, the non-GAAP table discloses the impact on diluted earnings per share of (1) the debt refinancing activities and (2) the non-cash mark-to-market for our shares of Delta EMD.  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. 




Fourth Quarter
Ended Dec. 26,
2015


Diluted
earnings per
share


Year-to-Date
Dec. 26, 2015


Diluted earnings
per share



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



$           (30,561)


$         (1.34)


$       40,117


$             1.71















Restructuring expenses - after tax



11,521


0.50


28,167


1.20















Impairment of goodwill and trade names - after tax


26,770


1.16


40,140


1.72















Other non-recurring charges - after-tax *



23,374


1.02


23,374


1.00















Net earnings attributable to Valmont Industries, Inc. - Adjusted



$             31,104


$           1.35


$     131,798


$             5.63



Average shares outstanding (000's) - Diluted





23,018




23,405


















Fourth Quarter
Ended Dec. 27,
2014


Diluted
earnings per
share


Year-to-Date
Dec. 27, 2014


Diluted earnings
per share



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



$             40,461


$           1.66


$     183,976


$             7.09















Costs related to refinancing of debt - after tax


-


-


24,171


0.93















Fair market value adjustment, Delta EMD - after-tax


(1,063)


(0.04)


3,796


0.15















Net earnings attributable to Valmont Industries, Inc. - Adjusted



$             39,398


$           1.62


$     211,943


$             8.17



Average shares outstanding (000's) - Diluted





24,409




25,932


















Fourth Quarter
Ended Dec. 26,
2015




Year-to-Date
Dec. 26, 2015





Operating Income Reconciliation












Operating income (loss) - as reported



$           (17,000)




$     131,695

















Restructuring expenses - before tax



16,009




39,852

















Impairment of goodwill and trade names - before tax


26,770




41,970

















Other non-recurring charges* 



24,010




24,010

















Adjusted Operating Income 



$             49,789




$     237,527

















Net Sales



$           633,828




$  2,618,924

















Operating Income as a % of Sales



-2.7%




5.0%

















Adjusted Operating Income as a % of Sales



7.9%




9.1%


















For the Fourth Quarter Ended Dec. 26, 2015



Segment Operating Income Reconciliation

Engineered
Support
Structures


Energy & Mining


Utility
Support
Structures


Coatings


Irrigation


Other/ Corporate













Operating income (loss) - as reported

$    13,850


$           (21,523)


(2,414)


5,363


8,305


(20,581)













Restructuring expenses 

4,159


2,353


1,578


1,005


876


6,037













Other non-recurring charges* 

-


-


17,001


-


7,009


-













Impairment of goodwill and trade names 

-


19,640


-


6,530


-


600













Adjusted Operating Income 

$    18,009


$                 470


$       16,165


$       12,898


$          16,190


$             (13,944)













Net sales 

$  193,383


78,764


170,623


75,731


137,546















Operating Income as a % of Sales

7.2%


-27.3%


-1.4%


7.1%


6.0%


NM













Adjusted Operating Income as a % of Sales

9.3%


0.6%


9.5%


17.0%


11.8%


NM

 * Other non-recurring charges (pre-tax) are the provision for the Utility commercial settlement and the allowance for doubtful China receivable (Irrigation).  

  On an after-tax basis, the line also includes $7.1 million of deferred income tax expense due to a 2% decrease in the U.K. corporate tax rate.  

  NM - Not Meaningful 












 

 

 

SOURCE Valmont Industries, Inc.

Share:

Media Contact

Jeff Laudin Phone: 402-963-1158
  Fax: 402-963-1198