Valmont Reports First Quarter 2016 Earnings


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OMAHA, Neb., April 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 first quarter results.

  • Revenues of $596.6 million were down 11% year-over-year, reflecting negative foreign currency translation and the revenue impact of significantly lower steel costs
  • Operating income rose 8% to $62.4 million, which included $1.1 million negative foreign exchange impact; operating income was 10.5% of net sales, compared with 8.6% in 2015
  • Diluted EPS increased 13% to $1.45 compared with $1.28 in 2015 due to restructuring, improved productivity and continued cost-cutting initiatives
  • Free cash flow for the quarter totaled $66.5 million and the cash balance was $388 million
  • The Company repurchased 154,000 shares for $17 million during the quarter; $169 million remains on the current authorization
  • The Company is reaffirming 2016 annual guidance of diluted EPS up 12-15% from 2015 adjusted EPS of $5.63

"The positive impacts of cost savings associated with last year's restructuring, productivity improvements beyond restructuring, and lower input costs contributed to improved profitability despite challenging end markets," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "We remain committed to delivering solid earnings growth this year."


First Quarter

Summarized Financial Info. 

13 Weeks Ended


26-Mar-16


28-Mar-15

Net sales

$  596,605


$  670,398

Operating income 

62,365


57,684

  Operating income as a % of net sales

10.5%


8.6%

Net earnings - GAAP

32,969


30,739

Net earnings - Adjusted *

33,954


30,649





Diluted EPS - GAAP net earnings

$        1.45


$        1.28

Average Shares Oustanding - Diluted

22,816


23,982





Diluted EPS - Adjusted net earnings *

$        1.49


$        1.28





Average Shares Oustanding - Diluted

22,816


23,982





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



 

First Quarter Segment Review

Infrastructure-related

Engineered Support Structures (30% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

First quarter sales of $177.0 million were comparable to last year, despite negative currency translation of $5.6 million. Improved sales in Asia Pacific were more than offset by lower project sales in Europe.

In North America, sales of lighting and traffic products were comparable with last year, with stronger U.S. sales in the commercial lighting market offsetting lower sales in Canada. Wireless communication product sales remain subdued in the US.

In Europe, Middle East and Africa, lighting and traffic structure sales declined year-over-year on difficult comps as the prior period reflected an export project in the Middle East. Sales in Europe were similar to last year.

In the Asia-Pacific region, wireless communication structure sales rose significantly amid the continued rollout of 4G wireless technology over broader regions of China. Other highway and pole businesses in the region remained comparable to last year.

Operating income rose 50% to $14.2 million or 8.0% of sales compared with operating income of $9.5 million or 5.3% of sales in 2015. The increase was driven by restructuring and cost reduction efforts, lower raw material prices, improved operating performance in North America, and volume leverage in the Asia Pacific region.

Utility Support Structures (24% of Sales)
Steel and concrete structures for the global electric utility industry.

Sales of $144.5 million decreased 18% year-over-year due to lower volume and lower selling prices per ton, reflecting the impact of lower steel costs and mix shift toward smaller structures. International sales were lower than last year.

Operating income was $14.8 million compared to $15.4 million in 2015. Operating income as a percent of sales increased to 10.2% from 8.7%, reflecting the positive impact of restructuring and ongoing operational improvements.

Coatings Segment (12% of Sales)
Global galvanizing, painting and anodizing services.

Sales of $68.6 million were 8% lower than last year due to reduced sales in the Asia Pacific region; half of the decline was unfavorable currency translation. In North America, sales were comparable with 2015, including the revenue contribution from American Galvanizing, acquired in the fourth quarter of 2015.

Operating income of $11.4 million grew 4% over last year's $11.0 million. Operating income as a percent of sales rose to 16.6% from 14.8% as a result of the favorable impact of 2015 restructuring initiatives and lower natural gas and zinc costs.

Energy and Mining Segment (12% of Sales)
Offshore structures, engineered access systems and grinding media.

Sales of $72.5 million reflect declines in all product lines leading to an 18% decrease from last year. Sales of wind tower products were firm, while other offshore structure sales were lower, negatively impacted by continued depressed oil prices. Weak energy and mining markets weighed on Access Systems results in Asia Pacific, although sales in civil and architectural markets improved. Grinding media revenues softened amid continued sluggish mining activity in Australia and also reflect the impact of lower-cost steel.

Operating income was $1.9 million compared with $4.4 million last year, a 56% decline. Operating income as a percent of sales was 2.6% reflecting the influence of lower oil and energy prices and reduced mining activity in Australia on segment performance. Last year's restructuring dampened the impact of the weaker markets on operating performance.

Agriculture-related

Irrigation Segment (27% of Sales)
Agricultural irrigation equipment, parts, services and tubular products.

Irrigation Segment sales declined 9% to $158.5 million mostly due to reduced North America irrigation equipment and tubing sales. Irrigation equipment sales in North America were pressured by a reduction in net farm income. International irrigation equipment sales decreased due to the impact of currency translation. The international irrigation markets are highly diverse and benefitted from increased project activity in Eastern Europe and the Middle East that more than offset declines in other markets. Tubing sales were significantly lower due to reduced demand from agricultural equipment manufacturers and continued low steel prices.

Operating income of $28.8 million was modestly below last year's $30.2 million due to the weakness in tubing markets. Operating income as a percent of sales improved to 18.2% from 17.3% last year mainly due to cost management, improved productivity and lower raw material cost.

Outlook:

"The result of the restructuring activities of last year are manifested in our improved profitability despite lower first quarter revenues," Mr. Bay said. "For the balance of the year, we expect revenues more in line with last year and are reaffirming annual guidance."

"We continue to operate in a challenging external environment but continue to control what we can do to drive improved profitability. The positive long-term, global drivers for our businesses remain in place. 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 first quarter results will be available live by Telephone by dialing 1-877-493-2981 and entering Conference ID#: 15295782 or via Webcast at 8:00 a.m. CDT April 21, 2016 at https://engage.vevent.com/rt/valmontindustries_ao~42116.  A replay is available through the above link or by telephone (877-493-2981 or 404-537-3406, Conference ID#: 15295782) beginning April 21, 2016 at 10:00 a.m. CDT through 12:00 p.m. CDT on April 28, 2016. The Company's slide presentation to be used by management for the call is available on Form 8-K filed April 21, 2016 with the Securities and Exchange Commission.

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)






First Quarter


13 Weeks Ended


26-Mar-16


28-Mar-15

Net sales

$    596,605


$     670,398

Cost of sales

435,636


504,944

          Gross profit

160,969


165,454

Selling, general and administrative expenses

98,604


107,771

          Operating income 

62,365


57,683

Other income (expense):




     Interest expense

(11,054)


(11,128)

     Interest income

811


875

     Other

(1,678)


1,016


(11,921)


(9,237)

          Earnings before income taxes and equity in




          earnings of nonconsolidated subsidiaries 

50,444


48,446

Income tax expense

16,273


16,939

          Net earnings

34,171


31,507

Less:  Earnings attributable to non-controlling interests

(1,202)


(768)

          Net earnings attributable to Valmont Industries, Inc.

$      32,969


$       30,739









Average shares outstanding (000's) - Basic

22,700


23,868

Earnings per share - Basic

$          1.45


$           1.29





Average shares outstanding (000's) - Diluted

22,816


23,982

Earnings per share - Diluted

$          1.45


$           1.28





Cash dividends per share

$        0.375


$         0.375

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)






First Quarter


13 Weeks Ended


26-Mar-16


28-Mar-15

Sales




     Engineered Support Structures

$    176,971


$     177,904

     Energy & Mining 

$      72,449


88,061

     Utility Support Structures

144,520


176,341

     Coatings

68,581


74,360

        Infrastructure products

462,521


516,666





     Irrigation

158,514


174,577

     Other

-


2,169

     Less:  Intersegment sales

(24,430)


(23,014)

          Total

$    596,605


$     670,398





Operating Income




     Engineered Support Structures

$      14,208


$         9,450

     Energy & Mining 

1,903


4,366

     Utility Support Structures

14,768


15,357

     Coatings

11,413


10,999

        Infrastructure products

42,292


40,172





     Irrigation

28,844


30,174

     Other 

-


(1,108)

     Corporate

(8,771)


(11,555)

          Total

$      62,365


$       57,683


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, related parts, and services worldwide as well as tubular products for industrial customers.  

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)







26-Mar-16



28-Mar-15

ASSETS





Current assets:





     Cash and cash equivalents

$     387,714



$     318,366

     Accounts receivable, net

449,379



503,649

     Inventories

350,768



379,514

     Prepaid expenses

46,080



48,344

     Refundable and deferred income taxes

18,897



53,032

          Total current assets

1,252,838



1,302,905

Property, plant and equipment, net

532,507



586,745

Goodwill and other assets

614,517



694,479


$  2,399,862



$  2,584,129






LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:





     Current installments of long-term debt

$         1,110



$         1,070

     Notes payable to banks

2,402



14,459

     Accounts payable

183,059



189,349

     Accrued expenses

169,479



169,823

     Dividend payable

8,527



8,889

          Total current liabilities

364,577



383,590

Long-term debt, excluding current installments

756,878



765,762

Other long-term liabilities

298,256



290,913

Shareholders' equity

980,151



1,143,864


$  2,399,862



$  2,584,129

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited) and dollars in thousands








13 Weeks Ended



13 Weeks Ended



26-Mar-16



28-Mar-15


Cash flows from operating activities






   Net Earnings

$         34,171



$         31,507


   Depreciation and amortization

20,598



23,901


   Contribution to defined benefit pension plan

-



(15,735)


   Change in working capital 

16,427



4,802


   Other

9,331



11,053


        Net cash flows from operating activities

80,527



55,528








Cash flows from investing activities






   Purchase of property, plant, and equipment

(13,961)



(16,615)


   Other

(2,180)



3,115


        Net cash flows from investing activities

(16,141)



(13,500)








Cash flows from financing activities






   Principal payments on long-term borrowings

(220)



(224)


   Purchase of treasury shares

(16,939)



(72,900)


   Dividends paid

(8,571)



(9,086)


   Other

2,356



(186)


        Net cash flows from financing activities

(23,374)



(82,396)


Effect of exchange rates on cash and cash equivalents 

(2,372)



(12,845)


Net change in cash and cash equivalents 

38,640



(53,213)


Cash and cash equivalents - beginning of year 

349,074



371,579


Cash and cash equivalents - end of period 

$       387,714



$       318,366


 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS

REGULATION G RECONCILIATION

(Dollars in thousands)

(unaudited)

The schedule below details the non-cash after-tax loss/(gain) recorded to adjust the shares of Delta EMD Pty. Ltd (Delta EMD) to its quoted market price (fair value) at each quarter-end. It also discloses the after-tax restructuring expense recognized in fiscal 2015.  Earnings per share for each item are calculated separately. Therefore the sum of earnings per share amounts for each item below may not agree with the total. We believe it is useful when considering company performance for the non-GAAP adjusted net earnings to be taken into consideration by management and investors with the related reported GAAP measures.









Quarter ended
March 26,
2016

Diluted
earnings per
share


Quarter ended
March 28,
2015


Diluted
earnings per
share

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

$       32,969

$          1.45


$       30,739


$           1.28








Fair market value adjustment, Delta EMD - after-tax

985

0.04


(600)


(0.03)








Restructuring Expense (pre-tax $785 in 2015)

-

-


510


0.02








Net earnings attributable to Valmont Industries, Inc. - Adjusted

$       33,954

$          1.49


$       30,649


$           1.28

 

 

SOURCE Valmont Industries, Inc.

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