Valmont Reports First Quarter 2017 Results


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OMAHA, Neb., April 19, 2017 /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 2017 results.

First Quarter Highlights:


First Quarter

Summarized Financial Information

13 Weeks Ended


1-Apr-17


26-Mar-16

Net sales

$ 637,474


$ 596,605

Operating income 

64,502


62,365

  Operating income as a % of net sales GAAP

10.1%


10.5%

Net earnings

38,979


32,969

Diluted EPS 

$       1.72


$       1.45





Average Shares Outstanding - Diluted

22,660


22,816

 

  • Revenues increased 7% to $637.5 million
  • Operating income increased largely due to improved performance in the Utility Support Structures, Irrigation, and Energy and Mining Segments, offset somewhat by margin compression in the Engineered Support Structures and Coatings Segments
    • Operating income increased $2.1 million, which included $2.8 million in higher LIFO expense related to increased raw material costs and $1.8 million of higher deferred compensation costs that is offset by increased other income. Excepting these items, the increase in operating income was $6.7 million, or 11% over 2016
  • Diluted earnings per share increased 19% to $1.72
  • Reaffirming annual guidance for earnings to be slightly above $7.00 per diluted share

"Revenue increased across all segments, led by a strong performance in Utility Support Structures Segment," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "All segments saw improved demand and contributed to the sales growth, which supports our outlook for revenue and earnings growth in 2017.

"As expected, rising steel and zinc costs pressured operating margins in Engineered Support Structures and Coatings segments, where sales price increases somewhat lagged cost increases. All other segments had good operating performance."

First Quarter Segment Review

Infrastructure-related

Engineered Support Structures (28% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

Sales of $180.6 million were 2% higher than last year as a result of improved global wireless communication product and intercompany sales.

Lighting sales declined in modestly North America, however order rates are solid. Pricing in North America did yet not reflect rising steel costs due to competitive market pressures. In Europe, sales of lighting and traffic structures declined due to lower export sales. Sales of lighting and traffic products were comparable in the Asia-Pacific region.

Wireless communication product sales rose mainly due to increased North American demand for poles, towers and components. In Australia, sales increases were driven by wireless carriers building out their networks. In China, sales were comparable to last year.

Operating income was $9.2 million or 5.1% of sales compared to $12.5 million, or 7.0% of sales in 2016. Higher steel costs compressed segment profitability.

Utility Support Structures (27% of Sales)
Steel and concrete structures for the global electric utility industry.

Sales of $174.6 million increased 21% over last year primarily driven by higher volumes. Sales growth is being supported by utility reliability investments in the North American transmission grid, renewables, interconnecting regional transmission grids, and a favorable sales mix.

Operating income increased to $22.7 million or 13.0% of sales, compared to $14.4 million or 10.0% in 2016, benefitting from higher volume and operating leverage.

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

Sales of $73.5 million were 7% higher than last year, mainly due to increased price to recover higher zinc cost. Following a weak start to the year, volumes increased as the quarter progressed. The sales mix consisted of higher intercompany, and lower external volumes, particularly to the solar energy and oil and gas markets.

Operating income was $9.4 million, or 12.8% of sales, compared to $11.4 million, or 16.6% of sales in 2016. A greater mix of intercompany volumes, which carry a lower margin and  a sharp rise in zinc costs pressured margins.  Included in Q1 results were final startup costs associated with the previously communicated opening of a new facility in Texas.

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

Segment sales of $78.0 million were 8% higher than last year with each major product line contributing to growth. Offshore wind structures and component sales increased, supported by continued development in Europe's North Sea region. The pipeline of sales to non-traditional markets continues to improve, helping to offset weak demand from the oil and gas exploration markets. Access systems sales increased due to an improving construction market as well as stronger commodity prices supporting mining sales in Australia. Grinding media sales increased as pricing rose in-line with higher input costs.

Operating income increased to $3.8 million or 4.8% of sales compared to $1.9 million, or 2.6% of sales in 2016. The increase was driven by improved operating leverage as well as benefits from restructuring actions taken within the Australia region in 2016.

Agriculture-related

Irrigation Segment (26% of Sales)
Agricultural irrigation equipment, parts, services and tubular products.

Global sales of $167.2 million were 6% above last year. North American sales were up slightly from last year, reflecting stabilizing demand. International sales rose broadly, led by a stronger market in Brazil. Favorable currency translation contributed to the international sales gains.

Operating income was higher at $30.3 million, or 18.1% of sales compared to $28.9 million, or 18.2% of sales in 2016. The quality of segment profitability remained strong despite rising raw material costs and some competitive pricing pressure, as better sales volumes, cost and productivity improvements offset inflationary effects.

Outlook:

"We are off to a good start to the year," Mr. Bay said. "We are encouraged by signs of improved demand in certain of our markets, evidenced by our second consecutive quarter of improved sales. While the current volatility in certain raw material costs, and weak farm economy fundamentals, could still impact some of our businesses, we reconfirm our sales, earnings and cash flow guidance for the year."

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#:52418614 or via Webcast at 8:00 a.m. CDT April 20, 2017 at https://engage.vevent.com/rt/valmontindustries_ao~52418614.  

A replay is available through the above link or by telephone (855) 859-2056 or (404) 537-3406, Conference ID#:52418614 beginning April 20, 2017 at 10:00 a.m. CDT through 12:00 p.m. CDT on April 27, 2017. 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)

(unaudited)








First Quarter



13 Weeks Ended



1-Apr-17


26-Mar-16

Net sales


$      637,473


$ 596,605

Cost of sales


472,868


435,636

          Gross profit


164,605


160,969

Selling, general and administrative expenses


100,103


98,604

          Operating income 


64,502


62,365

Other income (expense)





     Interest expense


(11,304)


(11,054)

     Interest income


928


811

     Gain (loss) on investments (unrealized)


1,237


(1,430)

     Other


(39)


(248)



(9,178)


(11,921)

          Earnings before income taxes and equity in


55,324


50,444

          earnings of nonconsolidated subsidiaries 





Income tax expense


15,363


16,273

          Net earnings


39,961


34,171

Less:  Earnings attributable to non-controlling interests


(982)


(1,202)

          Net earnings attributable to Valmont Industries, Inc.


$        38,979


$   32,969











Average shares outstanding (000's) - Basic


22,472


22,700

Earnings per share - Basic


$            1.73


$       1.45






Average shares outstanding (000's) - Diluted


22,660


22,816

Earnings per share - Diluted


$            1.72


$       1.45






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



1-Apr-17


26-Mar-16






Net sales





     Engineered Support Structures


$        180,558


$   176,971

     Utility Support Structures


174,612


144,520

     Energy & Mining


77,972


72,449

     Coatings


73,468


68,581

        Infrastructure products


506,610


462,521






     Irrigation


167,224


158,514

     Less: Intersegment sales


(36,361)


(24,430)

          Total


$        637,473


$   596,605






Operating Income





     Engineered Support Structures


$            9,213


$     12,475

     Utility Support Structures


22,708


14,424

     Energy and Mining 


3,837


1,902

     Coatings


9,406


11,413

        Infrastructure products


45,164


40,214






     Irrigation


30,291


28,895

     Adjustment to LIFO inventory valuation method


(779)


2,027

     Corporate


(10,174)


(8,771)

          Total


$          64,502


$     62,365












In first quarter of 2017, Valmont changed its reportable segment operating income to separate out the LIFO (expense) benefit.  Prior year information has been updated to reflect this change.  Valmont has aggregated its business segments into five reportable segments as follows:










Engineered Support Structures:  This segment consists of the manufacture of engineered metal, composite, and wood 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.

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)








1-Apr-17


26-Mar-16

ASSETS





Current assets:





     Cash and cash equivalents


$              425,216


$              387,714

     Accounts receivable, net


455,044


449,379

     Inventories


389,156


350,768

     Prepaid expenses


54,532


46,080

     Refundable and deferred income taxes


7,325


18,897

          Total current assets


1,331,273


1,252,838

Property, plant and equipment, net


519,658


532,507

Goodwill and other assets


615,957


614,517



$         2,466,888


$         2,399,862






LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:





     Current installments of long-term debt


$                    860


$                 1,110

     Notes payable to banks


957


2,402

     Accounts payable


194,525


183,059

     Accrued expenses


177,894


169,479

     Dividend payable


8,468


8,527

          Total current liabilities


382,704


364,577

Long-term debt, excluding current installments


754,523


756,878

Other long-term liabilities


288,381


298,256

Shareholders' equity


1,041,280


980,151



$         2,466,888


$         2,399,862






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) and dollars in thousands








13 Weeks Ended


13 Weeks Ended

Cash flows from operating activities


1-Apr-17


26-Mar-16

   Net Earnings


$               39,961


$               34,171

   Depreciation and amortization


20,827


20,598

   Change in restricted cash - pension plan 


12,568


-

   Contribution to defined benefit pension plan


(25,379)


-

   Change in working capital 


(28,675)


16,427

   Other


16,681


9,331

        Net cash flows from operating activities


$               35,983


80,527






Cash flows from investing activities





   Purchase of property, plant, and equipment


$              (14,168)


$              (13,961)

   Other


(1,413)


(2,180)

        Net cash flows from investing activities


$              (15,581)


$              (16,141)






Cash flows from financing activities





   Net borrowings on short and long-term agreements


$                     38


$                  (220)

   Purchase of treasury shares


-


(16,939)

   Dividends paid


(8,445)


(8,571)

   Other


5,547


2,356

        Net cash flows from financing activities


$                (2,860)


$              (23,374)

Effect of exchange rates on cash and cash equivalents 


7,726


(2,372)

Net change in cash and cash equivalents 


25,268


38,640

Cash and cash equivalents - beginning of year 


399,948


349,074

Cash and cash equivalents - end of period 


$              425,216


$              387,714

 

SOURCE Valmont Industries, Inc.

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