Valmont Reports Third Quarter 2017 Results


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OMAHA, Neb., Oct. 18, 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 third quarter 2017 results.

Third Quarter Highlights: 










Third quarter


Year-to-date

Summarized Financial Info. 

13 Weeks Ended


39 Weeks Ended


30-Sep-17


24-Sep-16


30-Sep-17


24-Sep-16

Net sales

$ 680,779


$ 610,247


$ 2,030,989


$ 1,847,101

Operating income 

59,923


53,240


202,715


187,411

  Operating income as a % of net sales GAAP

8.8%


8.7%


10.0%


10.1%

Operating income Adjusted*

59,923


58,305


202,715


192,476

  Operating income as a % of net sales Adjusted*

8.8%


9.6%


10.0%


10.4%

Net earnings - GAAP

35,208


28,173


119,851


103,168

Net earnings - Adjusted *

35,603


33,488


120,246


109,518









Diluted EPS - GAAP net earnings

$       1.55


$       1.24


$          5.28


$          4.54

Average Shares Outstanding - Diluted

22,751


22,659


22,717


22,741









Diluted EPS - Adjusted net earnings *

$       1.56


$       1.48


$          5.29


$          4.82









Average Shares Outstanding - Diluted

22,751


22,659


22,717


22,741









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

 

  • Revenues increased 12% to $680.8 million, with increases in every segment except Energy & Mining
  • Operating income as a percent of sales was 8.8%
  • North American hurricanes negatively impacted third quarter earnings by an estimated 10 cents per diluted share
  • Diluted EPS increased 25% to $1.55, adjusted diluted EPS increased 5.4% to $1.56
  • Annual guidance updated to reflect logistical disruptions caused by hurricanes. Earnings per diluted share for the year expected to be between $6.90-7.04, compared to prior guidance of approximately $7.06

"All segments had sales growth except Energy and Mining, with double digit sales growth in the Utility Support Structures, Irrigation and Coatings segments," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "The impact of hurricanes in North America during the third quarter were disruptive to customers, and affected 10 of our facilities, interrupting production and delivery schedules. We estimate that movements of delivery dates and manufacturing downtime negatively impacted EPS by approximately 10 cents.

"Operating income grew largely due to the sales increase, led by improved profitability in the Utility Support Structures, Irrigation and Coatings Segments. In the Engineered Support Structures and Energy and Mining Segments, operating income was negatively impacted by raw material inflation.

"Excluding the disruptive impact of the two hurricanes, results for the quarter met our expectations."

Third Quarter Segment Review

Infrastructure-related

Engineered Support Structures (31% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

Sales of $221.5 million were 9% higher than last year, mainly due to increased highway safety sales in Australia where road development activity increased.

Lighting sales were lower in North America. We believe customers are awaiting clarity on national infrastructure investment policies before embarking on major project planning. In Europe, lighting sales increased as general market conditions stabilized.

Wireless communication sales increased due to improved structures and components demand in North America. In China, wireless communication sales were comparable with last year as China continues to build out its wireless network infrastructure.

Operating income was $16.2 million or 7.3% of sales compared to $20.3 million, or 10.0% of sales in 2016. The effect of sharply higher steel costs in China, a higher mix of intercompany sales and continued competitive pricing compressed margins.

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

Sales of $179.8 million increased 19% over last year, mostly driven by increased pricing to reflect higher steel costs. Sales were supported by the ongoing expansion of the North American grid to improve its reliability and capacity. Expanding investments in renewable energy contributed to continued firm demand.

Operating income increased to $22.1 million or 12.3% of sales, compared to $16.2 million or 10.8% in 2016. The increase in operating income was primarily due to price recovery and favorable mix.

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

Sales of $82.6 million were 18% higher than last year. In North America, increased pricing and stronger internal demand drove higher sales. Asia-Pacific sales rose due to improved volume and pricing as the market recovered.

Despite zinc cost increases, operating income improved to $14.6 million, or 17.6% of sales, compared to $11.7 million, or 16.7% of sales in 2016. The operating income improvement resulted from increased volume, price recovery and operational efficiencies realized from prior restructuring activities.

Energy and Mining Segment (11% of Sales)
Offshore structures, engineered access systems and grinding media.

Sales of $79.8 million were slightly lower than last year.  Higher access system sales partly offset declines in mining consumables and offshore construction.

Operating income at $1.4 million was significantly lower at 1.8% of sales, compared to $3.9 million or 4.8% of sales last year. Most of the reduced profitability resulted from a considerably less favorable steel cost environment in mining consumables.

Australian regulatory approval is pending on the divestiture of the mining consumables business (previously announced on August 24, 2017).

Agriculture-related

Irrigation Segment (21% of Sales)
Agricultural irrigation equipment, parts, services and tubular products.

Sales of $147.4 million rose 15% above last year due to broad based demand in international markets. North American sales were modestly higher.

Operating income was higher at $18.2 million, or 12.3% of sales compared to $15.3 million, or 12.0% of sales in 2016. The increase in operating income was mostly due to higher international irrigation sales. Additionally, improved operational performance more than offset the impact of materials inflation.

Outlook:

"We are updating our guidance to account for the impact of the two hurricanes. We expect earnings for the year to be in the range of $6.90 to 7.04 per diluted share," said Mr. Bay.

"We expect higher fourth quarter revenues, led by favorable Utility Support and Engineered Support Structures sales. In Coatings, we expect similar revenues to last year. We expect unfavorable sales and profitability comparisons in the Energy and Mining Segment. In the Irrigation Segment, the beginning of the North American harvest makes an outlook difficult to quantify. However, we do expect continued firmness in international markets."

An audio discussion of Valmont's third quarter results will be available live by Telephone by dialing 1-877-493-2981 and entering Conference ID#:52423637 or via Webcast at 8:00 a.m. CDT October 19, 2017 at https://engage.vevent.com/rt/valmontindustries_ao~52423637. A replay is available through the above link or by telephone (855) 859-2056 or (404) 537-3406, Conference ID#:52423637 beginning October 19, 2017 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 26, 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)














Third Quarter


Year-to-Date




13 Weeks Ended


39 Weeks Ended




30-Sep-17


24-Sep-16


30-Sep-17


24-Sep-16

Net sales



$       680,779


$     610,247


$  2,030,989


$ 1,847,101

Cost of sales



517,185


455,224


1,519,510


1,355,992

          Gross profit



163,594


155,023


511,479


491,109

Selling, general and administrative expenses



103,671


101,783


308,764


303,698

          Operating income 



59,923


53,240


202,715


187,411

Other income (expense)










     Interest expense



(11,190)


(11,100)


(33,312)


(33,276)

     Interest income



1,311


771


3,205


2,290

     Investment gain (loss)



544


1,455


2,935


591

     Other



(27)


(577)


(1,251)


(140)




(9,362)


(9,451)


(28,423)


(30,535)

          Earnings before income taxes



50,561


43,789


174,292


156,876

Income tax expense



13,895


14,268


50,343


49,742

          Net earnings



36,666


29,521


123,949


107,134

Less:  Earnings attributable to non-controlling interests


(1,458)


(1,348)


(4,098)


(3,966)

          Net earnings attributable to Valmont Industries, Inc.


$         35,208


$       28,173


$     119,851


$    103,168











Average shares outstanding (000's) - Basic



22,527


22,505


22,505


22,602

Earnings per share - Basic



$             1.56


$           1.25


$           5.33


$          4.56











Average shares outstanding (000's) - Diluted



22,751


22,659


22,717


22,741

Earnings per share - Diluted



$             1.55


$           1.24


$           5.28


$          4.54











Cash dividends per share



$           0.375


$         0.375


$         1.125


$        1.125

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)














Third Quarter


Year-to-Date




13 Weeks Ended


39 Weeks Ended




30-Sep-17


24-Sep-16


30-Sep-17


24-Sep-16











Net sales










     Engineered Support Structures



$       221,508


$     203,184


$     619,647


$    584,071

     Utility Support Structures



179,760


150,667


538,994


446,432

     Energy and Mining



79,755


81,552


234,934


234,693

     Coatings



82,593


70,082


235,842


213,961

        Infrastructure products



563,616


505,485


1,629,417


1,479,157











     Irrigation



147,428


127,809


502,939


438,575

     Less: Intersegment sales



(30,265)


(23,047)


(101,367)


(70,631)

          Total



$       680,779


$     610,247


$  2,030,989


$ 1,847,101











Operating Income










     Engineered Support Structures



$         16,226


$       20,323


$       45,683


$      53,615

     Utility Support Structures



22,108


16,195


65,005


48,201

     Energy & Mining



1,417


3,941


9,195


9,096

     Coatings



14,577


11,696


36,091


37,220

        Infrastructure products



54,328


52,155


155,974


148,132











     Irrigation



18,235


15,308


83,196


75,216

    Adjustment to LIFO method of inventory valuation


(1,626)


(2,066)


(2,839)


(3,192)

     Corporate



(11,014)


(12,157)


(33,616)


(32,745)

          Total



$         59,923


$       53,240


$     202,715


$    187,411

 


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.  











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)












30-Sep-17




24-Sep-16

ASSETS








Current assets:








     Cash and cash equivalents



$         493,490




$       349,375

     Accounts receivable, net



492,842




455,692

     Inventories



403,234




379,625

     Prepaid expenses



50,064




69,231

     Refundable and deferred income taxes



8,493




20,342

          Total current assets



1,448,123




1,274,265

Property, plant and equipment, net



522,424




525,640

Goodwill and other assets



639,624




584,138




$    2,610,171




$  2,384,043









LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:








     Current installments of long-term debt



$               949




$             895

     Notes payable to banks



197




853

     Accounts payable



216,104




170,888

     Accrued expenses



187,732




178,834

     Dividend payable



8,478




8,455

          Total current liabilities



413,460




359,925

Long-term debt, excluding current installments



754,202




755,584

Other long-term liabilities



289,914




266,233

Shareholders' equity



1,152,595




1,002,301




$    2,610,171




$  2,384,043

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited) and dollars in thousands












Year to Date




Year to Date




30-Sep-17




24-Sep-16

Cash flows from operating activities








   Net Earnings



$         123,949




$       107,134

   Depreciation and Amortization



63,500




61,242

   Change in working capital 



(47,072)




(31,596)

   Other



(5,973)




(9,526)

        Net cash flows from operating activities



134,404




127,254









Cash flows from investing activities








   Purchase of property, plant, and equipment



(39,898)




(42,233)

   Acquisitions, net of cash acquired 



(5,362)




-

   Other



3,236




1,114

        Net cash flows from investing activities



(42,024)




(41,119)









Cash flows from financing activities








   Principal payments on long-term borrowings



(658)




(1,563)

   Purchase of treasury shares



-




(46,581)

   Dividends paid



(25,385)




(25,604)

   Other



4,072




(8,608)

        Net cash flows from financing activities



(21,971)




(82,356)

Effect of exchange rates on cash and cash equivalents 


23,133




(3,478)

Net change in cash and cash equivalents 



93,542




301

Cash and cash equivalents - beginning of year 



399,948




349,074

Cash and cash equivalents - end of period 



$         493,490




$       349,375

 

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, (2) deferred income tax expense from a change in U.K. statutory rate, and (3) 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 September 30, 2017, and September 24, 2016, (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. 






Third Quarter
Ended Sept. 30,
2017


Diluted earnings
per share


Year-to-Date
Sept. 30, 2017


Diluted
earnings per
share

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



$          35,208


$            1.55


$      119,851


$           5.28











Fair market value adjustment, Delta EMD *



395


0.02


395


0.02











Net earnings attributable to Valmont Industries, Inc. - Adjusted



$          35,603


$            1.56


$      120,246


$           5.29

Average shares outstanding (000's) - Diluted





22,751




22,717




Third Quarter
Ended Sept. 24,
2016


Diluted earnings
per share


Year-to-Date
Sept. 24, 2016


Diluted
earnings per
share

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



$          28,173


$            1.24


$      103,168


$           4.54











Restructuring expenses 



5,065


0.22


5,065


0.22











Fair market value adjustment, Delta EMD *



(65)


-


970


0.04











Total pre-tax adjustments



$          33,173


$            1.46


$      109,203


$           4.80











Tax effect of adjustments 



(1,545)


(0.07)


(1,545)


(0.07)











Deferred tax expense - Change in U.K. rate



1,860


0.08


1,860


0.08











Net earnings attributable to Valmont Industries, Inc. - Adjusted



$          33,488


$            1.48


$      109,518


$           4.82

Average shares outstanding (000's) - Diluted





22,659




22,741











* The mark-to-market adjustment for Delta EMD shares is not tax deductible. 













Operating Income Reconciliation



Third Quarter
Ended Sept. 24,
2016


Year-to-Date
Sept. 24, 2016















Operating income - as reported



$          53,240


$      187,411















Restructuring expenses 



5,065


5,065















Adjusted Operating Income 



58,305


192,476















Net Sales



610,247


1,847,101















Operating Income as a % of Sales



8.7%


10.1%















Adjusted Operating Income as a % of Sales



9.6%


10.4%















 

SOURCE Valmont Industries, Inc.

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