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EX-99.2 - EX-99.2 - VALMONT INDUSTRIES INCa17-18166_1ex99d2.htm
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Exhibit 99.1

 

 

News Release

 

For Immediate Release

 

 

 

 

 

Contact:

 

Jeff Laudin

 

July 19, 2017

Phone:

 

402-963-1158

 

 

Fax:

 

402-963-1198

 

 

 

Valmont Reports Second 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 second quarter 2017 results.

 

 

 

Second Quarter

 

Year to date

 

 

 

13 Weeks Ended

 

26 Weeks Ended

 

Summarized Financial Information

 

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

 

 

Second Quarter Highlights:

 

·                  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.”

 

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

 

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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.

 

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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.”

 

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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.

 

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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 earnings of nonconsolidated subsidiaries

 

68,407

 

62,643

 

123,731

 

113,087

 

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

 

 

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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.

 

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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

 

 

 

1-Jul-17

 

25-Jun-16

 

Cash flows from operating activities

 

 

 

 

 

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

 

 

-end-