Valmont Reports Second Quarter 2017 Results


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OMAHA, Neb., July 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 second quarter 2017 results.

Second Quarter Highlights:


Second Quarter


Year to date

Summarized Financial Information

13 Weeks Ended


26 Weeks Ended


7/1/2017


6/25/2016


7/1/2017


6/25/2016

Net sales

$ 712,737


$ 640,249


$ 1,350,210


$ 1,236,854

Operating income 

78,290


71,806


142,792


134,171

  Operating income as a % of net sales 

11.0%


11.2%


10.6%


10.8%

Net earnings

45,664


42,026


84,643


74,995

Diluted EPS 

$       2.01


$       1.85


$          3.73


$          3.29









Average Shares Outstanding - Diluted

22,740


22,749


22,700


22,782

 

  • Revenues increased 11% to $712.7 million, with gains in every segment except Energy & Mining
  • Operating income increased largely due to the higher sales. On a segment basis, the Irrigation and Utility Support Structures Segments had the largest improvement over last year
  • Diluted earnings per share increased 9% to $2.01
  • Reaffirming annual guidance for earnings to be slightly above $7.00 per diluted share

"Substantial increases in Utility Support Structures and Irrigation Segment sales drove second quarter performance," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "Engineered Support Structures and Coatings Segment sales also improved, while Energy and Mining sales declined due to weaker end market demand. Overall, a less favorable sales mix and some lagging recoveries of increased raw material costs resulted in slightly lower operating income as a percent of sales."

Second Quarter Segment Review

Infrastructure-related

Engineered Support Structures (29% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

Sales of $217.6 million were 7% higher than last year, mainly due to increased intersegment sales to the Utility Support Structures Segment and improved wireless communication product sales in North America.

Lighting sales decreased slightly in North America and Europe, partly offset by higher sales in the Asia-Pacific region.

Operating income was $20.2 million or 9.3% of sales compared to $20.8 million, or 10.2% of sales in 2016. The effect of higher steel costs and higher intersegment sales resulted in margin compression.

Utility Support Structures (25% of Sales)
Steel and concrete structures for the global electric utility industry.

Sales of $184.6 million increased 22% over last year, driven by a combination of volume increases and some pricing tied to higher steel costs. Sales growth remains supported by the ongoing expansion of the North American grid to improve its reliability and capacity. New investments in renewable energy generation also contribute to the need for transmission structures.

Operating income increased to $20.2 million or 10.9% of sales, compared to $17.6 million or 11.6% in 2016. The increase in operating income was due to higher sales. Operating income as a percent of sales declined due to a less favorable product line mix.

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

Sales of $79.8 million were 6% higher than last year, mostly due to increased activity in the Asia-Pacific region. North American sales improved, benefitting from the new facility in Texas and increased internal volumes to other segments, which partially offset lower external demand.

Operating income was $12.1 million, or 15.2% of sales, compared to $14.0 million, or 18.6% of sales in 2016. The decrease in operating income resulted from the effect of lower external volumes, and zinc cost increases not fully recovered in sales by pricing, this was partly offset by improved profitability in the Asia-Pacific region.

Energy and Mining Segment (10% of Sales)
Offshore structures, engineered access systems and grinding media.

Sales of $77.2 million were 4% lower than last year mostly due to lower sales of access systems. Expansion into markets outside of mining and energy helped mitigate the impact of reduced demand from markets exposed to oil and gas, which weakened during the quarter.

Operating income at $3.9 million was 18% higher at 5.1% of sales, compared to $3.3 million or 4.1% of sales last year.

Agriculture-related

Irrigation Segment (25% of Sales)
Agricultural irrigation equipment, parts, services and tubular products.

Sales of $188.3 million rose 24% above last year, with significant increases in both North America and International regions. North American sales increased due to improved demand from markets outside the traditional corn-belt. Additionally, higher equipment operating times drove increased service parts sales. The broad increase in International sales was led by project demand and continued favorable market conditions in Brazil.

Operating income was higher at $34.7 million, or 18.4% of sales compared to $31.0 million, or 20.4% of sales in 2016. The decline in operating income as a percent of sales was due to higher raw material costs only partly offset by leverage of volume, and selling, general and administrative expenses.

Outlook:

"We are reaffirming our annual guidance for earnings to be slightly above $7.00 per diluted share," said Mr. Bay.

"The Utility market has developed stronger than our earlier expectations and we anticipate good demand for the rest of the year. In Engineered Support Structures, we believe moderating steel costs along with price recovery reinforces expectations for second half improvement. In Coatings, we expect stable demand supported by internal and industrial demand. Our Energy and Mining Segment is challenged by difficult end-market demand, and we expect lower second half comparisons. In Irrigation, our international presence developed over many years will be an important contributor to second-half Irrigation results. For North America, we expect the normal third quarter seasonality, with the fourth quarter dependent on crop prices and farmer sentiment upon completion of the growing season."

An audio discussion of Valmont's second quarter results will be available live by

Telephone by dialing 1-877-493-2981 and entering Conference ID#:52421279 or via Webcast at 8:00 a.m. CDT July 20, 2017 at https://engage.vevent.com/rt/valmontindustries_ao~52421279. A replay is available through the above link or by telephone (855) 859-2056 or (404) 537-3406, Conference ID#:52421279 beginning July 20, 2017 at 10:00 a.m. CDT through 12:00 p.m. CDT on July 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)










Second Quarter


Year-to-Date


13 Weeks Ended


26 Weeks Ended


1-Jul-17


25-Jun-16


1-Jul-17


25-Jun-16

Net sales

$    712,737


$ 640,249


$ 1,350,210


$ 1,236,854

Cost of sales

529,457


465,132


1,002,325


900,768

          Gross profit

183,280


175,117


347,885


336,086

Selling, general and administrative expenses

104,990


103,311


205,093


201,915

          Operating income 

78,290


71,806


142,792


134,171

Other income (expense)








     Interest expense

(10,818)


(11,122)


(22,122)


(22,176)

     Interest income

967


707


1,894


1,518

     Other

(32)


1,252


1,167


(426)


(9,883)


(9,163)


(19,061)


(21,084)

          Earnings before income taxes and equity in

68,407


62,643


123,731


113,087

          earnings of nonconsolidated subsidiaries 








Income tax expense

21,085


19,201


36,448


35,474

          Net earnings

47,322


43,442


87,283


77,613

Less:  Earnings attributable to non-controlling interests

(1,658)


(1,416)


(2,640)


(2,618)

          Net earnings attributable to Valmont Industries, Inc.

$      45,664


$   42,026


$      84,643


$      74,995

















Average shares outstanding (000's) - Basic

22,517


22,602


22,494


22,651

Earnings per share - Basic

$          2.03


$       1.86


$          3.76


$          3.31









Average shares outstanding (000's) - Diluted

22,740


22,749


22,700


22,782

Earnings per share - Diluted

$          2.01


$       1.85


$          3.73


$          3.29









Cash dividends per share

$        0.375


$     0.375


$        0.750


$        0.750









 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)














Second Quarter


Year-to-Date




13 Weeks Ended


26 Weeks Ended




1-Jul-17


25-Jun-16


1-Jul-17


25-Jun-16











Net sales










     Engineered Support Structures



$    217,581


$ 203,916


$    398,139


$    380,887

     Utility Support Structures



184,622


151,245


359,234


295,765

     Energy and Mining



77,207


80,692


155,179


153,141

     Coatings



79,781


75,298


153,249


143,879

        Infrastructure products



559,191


511,151


1,065,801


973,672











     Irrigation



188,287


152,252


355,511


310,766

     Less: Intersegment sales



(34,741)


(23,154)


(71,102)


(47,584)

          Total



$    712,737


$ 640,249


$ 1,350,210


$ 1,236,854











Operating Income










     Engineered Support Structures



$      20,244


$   20,817


$      29,457


$      33,292

     Utility Support Structures



20,189


17,582


42,897


32,006

     Energy and Mining



3,941


3,341


7,778


5,243

     Coatings



12,108


14,023


21,514


25,436

        Infrastructure products



56,482


55,763


101,646


95,977











     Irrigation



34,670


31,013


64,961


59,908

    Adjustment to LIFO inventory valuation method



(434)


(3,153)


(1,213)


(1,126)

     Corporate



(12,428)


(11,817)


(22,602)


(20,588)

          Total



$      78,290


$   71,806


$    142,792


$    134,171











Valmont has aggregated its business segments into five global reportable segments as follows.












Engineered Support Structures: This segment consists of the manufacture of engineered structures and components for lighting and traffic, wireless communication, and roadway safety industries.  











Utility Support Structures: This segment consists of the manufacture of engineered steel and concrete structures for the utility industry.











Energy and Mining: This segment includes the manufacture of access systems applications, forged steel grinding media, and offshore oil, gas and wind energy structures;











Coatings: This segment consists of galvanizing, painting and anodizing services.











Irrigation: This segment consists of the manufacture of agricultural irrigation equipment and related parts and services for agricultural industry and tubular products for industrial customers.










 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS



(Dollars in thousands)



(unaudited)
















1-Jul-17




25-Jun-16



ASSETS










Current assets:










     Cash and cash equivalents



$      448,222




$      344,346



     Accounts receivable, net



496,962




466,749



     Inventories



382,648




372,106



     Prepaid expenses



43,545




63,650



     Refundable and deferred income taxes



4,830




20,441



          Total current assets



1,376,207




1,267,292



Property, plant and equipment, net



520,107




526,347



Goodwill and other assets



626,848




602,234






$ 2,523,162




$ 2,395,873













LIABILITIES AND SHAREHOLDERS' EQUITY










Current liabilities:










     Current installments of long-term debt



$            921




$            889



     Notes payable to banks



376




3,735



     Accounts payable



193,087




183,126



     Accrued expenses



171,191




161,784



     Dividend payable



8,472




8,505



          Total current liabilities



374,047




358,039



Long-term debt, excluding current installments



754,436




756,543



Other long-term liabilities



292,233




287,120



Shareholders' equity



1,102,446




994,171






$ 2,523,162




$ 2,395,873













CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



(Dollars in thousands) and unaudited









YTD




YTD



Cash flows from operating activities



1-Jul-17




25-Jun-16



   Net Earnings



$       87,283




$       77,613



   Depreciation and amortization



41,784




40,804



   Change in restricted cash - pension plan



12,568




(13,652)



   Contribution to defined benefit pension plan



(25,379)




(712)



   Change in working capital 



(60,300)




(33,615)



   Other



12,345




9,484



        Net cash flows from operating activities



68,301




79,922













Cash flows from investing activities










   Purchase of property, plant, and equipment



(26,183)




(26,019)



   Other



3,543




219



        Net cash flows from investing activities



(22,640)




(25,800)













Cash flows from financing activities










   Net borrowings on short and long-term agreements



(803)




1,934



   Purchase of treasury shares



-




(28,621)



   Purchase of noncontrolling interest



-




(11,009)



   Dividends paid



(16,913)




(17,098)



   Other



4,223




2,599



        Net cash flows from financing activities



(13,493)




(52,195)



Effect of exchange rates on cash and cash equivalents 



16,106




(6,655)



Net change in cash and cash equivalents 



48,274




(4,728)



Cash and cash equivalents - beginning of year 



399,948




349,074



Cash and cash equivalents - end of period 



$      448,222




$      344,346













 

SOURCE Valmont Industries, Inc.

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