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EX-99.2 - EX-99.2 - VALMONT INDUSTRIES INCa17-24203_1ex99d2.htm

Exhibit 99.1

 

 

News Release

For Immediate Release

 

 

 

 

Contact:

Jeff Laudin

October 18, 2017

 

402-963-1158

 

 

Renee Campbell

 

 

402-963-1057

 

 

Valmont Reports Third Quarter 2017 Results

 

Omaha, NE - 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

 

 

 

13 Weeks Ended

 

39 Weeks Ended

 

Summarized Financial Info.

 

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

 

-more-

 

Valmont Industries, Inc. · One Valmont Plaza · Omaha, Nebraska 68154 U.S.A. ·

 



 

·                  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.

 

-more-

 



 

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.

 

-more-

 



 

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#:52423637or 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.

 

-more-

 



 

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

 

 

-more-

 



 

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.

 

-more-

 



 

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

 

 

-more-

 



 

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

%

 

END