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Valmont Reports Fourth Quarter and Fiscal Year 2016 Results

OMAHA, Neb., Feb. 21, 2017 /PRNewswire/ -- Valmont Industries, Inc. (VMI), a leading global provider of engineered products and services for infrastructure development and mechanized irrigation equipment and services for agriculture, today reported fourth quarter and full year 2016 results.


Fourth Quarter


Year-to-date

Summarized Financial Information

14/13 Weeks Ended


53/52 Weeks Ended


31-Dec-16


26-Dec-15


31-Dec-16


26-Dec-15

Net sales

$ 674,575


$ 633,828


$ 2,521,676


$ 2,618,924

Operating income 

56,093


(17,000)


243,504


131,695

  Operating income as a % of net sales GAAP

8.3%


-2.7%


9.7%


5.0%

Operating income Adjusted1

63,434


49,789


255,929


237,527

  Operating income as a % of net sales Adjusted1

9.4%


7.9%


10.1%


9.1%

Net earnings - GAAP

70,064


(30,561)


173,232


40,117

Net earnings - Adjusted1

36,343


31,104


145,767


131,798









Diluted EPS - GAAP net earnings

$       3.10


$     (1.34)


$          7.63


$          1.71

Average Shares Outstanding - Diluted

22,611


22,892


22,709


23,405









Diluted EPS - Adjusted net earnings1

$       1.61


$       1.35


$          6.42


$          5.63









Average Shares Outstanding - Diluted

22,611


23,018


22,709


23,405

 

Fourth Quarter Highlights:

  • Revenues increased 6% due to improved volumes in the Engineered Support Structures, Utility Support Structures and Energy and Mining Segments
  • GAAP operating income increased $73.1 million and adjusted operating income1 increased 27%, or $13.6 million; all segments realized improved profitability except Coatings
  • GAAP diluted earnings per share (EPS) were $3.10 compared to a loss of $1.34 in 2015 and adjusted diluted EPS1 were $1.61 and $1.35 in 2016 and 2015, respectively
  • Q4 included two non-cash, non-recurring transactions with positive effect; the removal of a contingent liability and an increase in deferred tax assets related to a legal entity reorganization

Total Year Highlights:

  • Full-year revenues declined 4% mostly due to the revenue impact of lower cost steel in the Utility Support Structures Segment and foreign exchange translation
  • GAAP operating income increased $111.8 million and adjusted operating income1 increased 8%, or $18.4 million 
  • GAAP diluted EPS were $7.63, compared to $1.71 last year and adjusted diluted EPS1 were $6.42, compared to last year's $5.63, up 14%
  • The Company completed its announced restructuring plans and incurred $12.4 million of pre-tax restructuring expense in 2016; total savings realized from restructuring actions approximate $22 million
  • The Company repurchased 441,000 shares for $53.8 million; $132 million remains on the current authorization

"We are pleased with our revenue growth in the fourth quarter," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "Utility Support Structures Segment sales benefited from a stronger North American market. The Engineered Support Structures and Energy and Mining Segments had double-digit revenue gains. Coatings Segment sales equaled last year, as internal utility volumes offset lower external demand. Irrigation Segment sales were equivalent to last year, with modestly lower North American and improved international sales.

"For the fourth quarter, GAAP operating income was 8.3% of sales, and 9.4% on an adjusted basis1. For the year, GAAP operating income was 9.7% of sales, and 10.1% on an adjusted basis1."

Fourth Quarter Segment Review

Infrastructure-related

Engineered Support Structures (32% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

Sales of $216.5 million were 12% higher than last year as a result of improved wireless communication product sales in North America and the Asia Pacific region. In North America, sales of lighting and traffic products were comparable with last year.

In Europe, sales of lighting and traffic structures were similar to last year as general economic conditions are limiting growth in infrastructure investment.

Operating income was $16.6 million or 7.7% of sales ($19.2 million and 8.9% adjusted1) compared to $13.9 million, or 7.2% of sales in 2015 ($18.0 million and 9.3% adjusted1). Higher steel costs during the quarter modestly pressured margins in the segment.

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

Sales of $185.1 million increased 8.5% year-over-year driven by higher volumes and pricing that rose in-line with higher average steel costs earlier in the year. The ongoing needs to improve grid reliability and interconnect regional transmission grids are supporting market growth.

Operating income increased to $20.8 million or 11.2% of sales, compared to a loss of $2.4 million in 2015 ($16.2 million and 9.5% adjusted1), benefitting from higher volume, operational leverage, improved pricing and productivity improvements.

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

Sales of $75.5 million were equal to last year. Higher sales in the Asia-Pacific region offset lower North American sales, where sales to external customers were lower than last year, largely due to weaker demand in the alternative energy markets. Sales to other Valmont segments helped to partly offset lower external volumes.

Operating income was $9.5 million, or 12.5% of sales, ($9.8 million and 13.0% adjusted1) compared to $5.4 million, or 7.1% of sales in 2015 ($12.9 million and 17.0% adjusted1). In North America, in addition to lower volumes, the sales mix was unfavorable with greater internal sales. Rising zinc costs pressured margins as price recovery lagged somewhat. Included in Q4 results were startup costs associated with a new facility in Texas.

Energy and Mining Segment (13% of Sales)
Offshore structures, engineered access systems and grinding media.

Segment sales of $87.9 million were 12% higher than last year with gains across the major product lines. Offshore wind structures and component sales helped offset continued soft demand for oil and gas exploration structures. Access systems sales increased led by improved sales into architectural and construction markets in Australia. Grinding media demand increased partly due to customer purchase patterns in light of rising steel costs.

Operating income increased to $2.7 million or 3.0% of sales ($6.2 million and 7.1% adjusted1) compared to a loss of $21.5 million in 2015, (operating income of $0.5 million and 0.6% adjusted1). The increase was driven by improved operating performance, in part due to restructuring actions, as well as higher sales.

Agriculture-related

Irrigation Segment (20% of Sales) 
Agricultural irrigation equipment, parts, services and tubular products.

Global sales of $136.6 million were similar to last year. In North America, sales declined modestly. International sales rose, led by a stronger Latin American market. Tubing sales were similar to last year.

Operating income was higher at $17.1 million, or 12.5% of sales ($17.5 million and 12.8% adjusted1) compared to $8.3 million, or 6.0% of sales in 2015 ($16.2 million and 11.8% adjusted1).The improvement in operating income was largely due to the contribution of stronger international results and lower SG&A.

2017 Outlook:

For 2017, the company is issuing annual guidance for diluted EPS to increase approximately 10% from adjusted EPS1 of $6.42.

Assumptions:

  • Revenue growth – mid single digit with each segment expecting positive comparisons
  • Raw material costs – up early in year, moderate later
  • Foreign exchange translation effects minor
  • Tax rate of 31%

"We expect to meet all of our financial goals as outlined at our February 2016 investor day," Mr. Bay said. "For 2017, revenue should grow around 5% without acquisitions. While EPS is expected to decrease on a GAAP basis from $7.63, we expect 10% growth over the $6.42 adjusted result. We also expect to meet or exceed our 10% return on invested capital and more than one-time free cash flow conversion targets."

An audio discussion of Valmont's fourth quarter results will be available live by Telephone by dialing 1-877-493-2981 and entering Conference ID#:52411634 or via Webcast at 8:00 a.m. CST February 22, 2017 at https://engage.vevent.com/rt/valmontindustries_ao~52411634.  

A replay is available through the above link or by telephone (855) 859-2056 or (404) 537-3406, Conference ID#:52411634 beginning February 22, 2017 at 10:00 a.m. CST through 12:00 p.m. CST on March 2, 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.

1) Please see Reg G reconciliation of GAAP operating income, net earnings and EPS to Adjusted figures at end of document.

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(unaudited)














Fourth Quarter


Year-to-Date




14/13 Weeks Ended


53/52 Weeks Ended




31-Dec-16


26-Dec-15


31-Dec-16


26-Dec-15

Net sales



$       674,575


$    633,828


$   2,521,676


$      2,618,924

Cost of sales



509,441


504,548


1,865,433


1,997,891

      Gross profit



165,134


129,280


656,243


621,033

Selling, general and administrative expenses



109,041


119,510


412,739


447,368

Impairment of goodwill and intangible assets



-


26,770


-


41,970

      Operating income (loss)



56,093


(17,000)


243,504


131,695

Other income (expense)










     Interest expense



(11,133)


(11,141)


(44,409)


(44,621)

     Interest income



816


901


3,105


3,296

     Other



17,802


2,879


18,254


2,637




7,485


(7,361)


(23,050)


(38,688)

      Earnings (loss) before income taxes and equity in earnings of nonconsolidated subsidiaries 



63,578


(24,361)


220,454


93,007

Income tax expense



(7,679)


4,554


42,063


47,427

      Earnings (loss) before equity in earnings of nonconsolidated subsidiaries 



71,257


(28,915)


178,391


45,580

Equity in earnings of nonconsolidated subsidiaries


-


(247)


-


(247)

      Net earnings (loss)



71,257


(29,162)


178,391


45,333

Less:  Earnings attributable to non-controlling interests


(1,193)


(1,399)


(5,159)


(5,216)

      Net earnings (loss) attributable to Valmont Industries, Inc.

$       70,064


$  (30,561)


$    173,232


$        40,117





















Average shares outstanding (000's) - Basic



22,439


22,892


22,562


23,288

Earnings (loss) per share - Basic



$           3.12


$      (1.34)


$          7.68


$            1.72











Average shares outstanding (000's) - Diluted


22,611


22,892


22,709


23,405

Earnings (loss) per share - Diluted



$           3.10


$      (1.34)


$          7.63


$            1.71











Cash dividends per share



$          0.375


$       0.375


$         1.500


$          1.500

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)














Fourth Quarter


Year-to-Date




14/13 Weeks Ended


53/52 Weeks Ended




31-Dec-16


26-Dec-15


31-Dec-16


26-Dec-15











Net sales










     Engineered Support Structures



$     216,454


$  193,383


$    800,525


$      771,453

     Energy and Mining



87,944


78,764


322,637


337,859

     Utility Support Structures



185,119


170,623


631,551


674,577

     Coatings



75,520


75,731


289,481


302,385

        Infrastructure products



565,037


518,501


2,044,194


2,086,274











     Irrigation



136,628


137,546


575,204


612,201

     Other



-


1,046


-


7,247

     Less: Intersegment sales



(27,091)


(23,265)


(97,722)


(86,798)

          Total



$     674,575


$  633,828


$ 2,521,676


$   2,618,924











Operating Income (loss)










     Engineered Support Structures



$       16,645


$    13,850


$      71,398


$        59,592

     Energy and Mining



2,667


(21,523)


11,851


(18,762)

     Utility Support Structures



20,751


(2,414)


69,077


37,847

     Coatings



9,464


5,363


46,596


27,369

        Infrastructure products



49,527


(4,724)


198,922


106,046











     Irrigation



17,074


8,305


87,835


84,537

     Other 



-


(6,039)


-


(9,802)

     Corporate



(10,508)


(14,542)


(43,253)


(49,086)

          Total



$       56,093


$  (17,000)


$    243,504


$      131,695











The backlog of orders for the principal products manufactured and marketed was $602 million at the end of fiscal 2016 and $591 million at the end of the 2015 fiscal year. We anticipate that most of the backlog of orders will be filled during fiscal year 2017. At year-end, the segments with backlog were as follows (dollar amounts in millions): 




31-Dec-16




26-Dec-15



 Engineered Support Structures 



$171




$148



 Energy and Mining



99




111



 Utility Support Structures 



268




245



 Irrigation 



64




87



 Coatings 



-




-



 Other 



-




-






$             602




$            591













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







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











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.











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











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 and tubular products for industrial customers.

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)












31-Dec-16




26-Dec-15

ASSETS








Current assets:








     Cash and cash equivalents



$       399,948




$      349,074

     Accounts receivable, net



439,342




466,443

     Inventories



350,028




340,672

     Prepaid expenses



57,297




46,137

     Refundable and deferred income taxes



6,601




24,526

          Total current assets



1,253,216




1,226,852

Property, plant and equipment, net



518,335




532,489

Goodwill and other assets



620,180




633,041




$  2,391,731




$ 2,392,382









LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:








     Current installments of long-term debt



$             851




$         1,077

     Notes payable to banks



746




976

     Accounts payable



177,488




179,983

     Accrued expenses



162,318




175,947

     Dividend payable



8,445




8,571

          Total current liabilities



349,848




366,554

Long-term debt, excluding current installments


754,795




756,918

Defined benefit pension liability



209,470




179,323

Other long-term liabilities



95,032




124,376

Shareholders' equity



982,586




965,211




$  2,391,731




$ 2,392,382









CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)




Year to Date




Year to Date




31-Dec-16




26-Dec-15

Cash flows from operating activities








   Net Earnings



$       178,391




$        45,333

   Depreciation and amortization



82,417




91,144

   Impairment of assets - restructuring activities


1,099




19,836

   Impairment of goodwill and trade names



-




41,970

   Change in working capital 



10,190




71,891

   Deferred income tax (benefit) expense



(23,685)




4,858

   Other



(29,244)




(2,765)

        Net cash flows from operating activities


219,168




272,267









Cash flows from investing activities








   Purchase of property, plant, and equipment


(57,920)




(45,468)

   Acquisitions, net of cash acquired 



-




(12,778)

   Other



4,871




10,075

        Net cash flows from investing activities


(53,049)




(48,171)









Cash flows from financing activities








   Proceeds from long-term borrowings



-




68,000

   Principal payments on borrowings



(2,206)




(81,951)

   Purchase of treasury shares



(53,800)




(168,983)

   Dividends paid



(34,053)




(35,357)

   Other



(5,099)




(1,714)

        Net cash flows from financing activities


(95,158)




(220,005)

Effect of exchange rates on cash and cash equivalents 


(20,087)




(26,596)

Net change in cash and cash equivalents 



50,874




(22,505)

Cash and cash equivalents - beginning of year 


349,074




371,579

Cash and cash equivalents - end of period 



399,948




349,074


 

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 (benefit) expense arising from changes in foreign tax rates and an international legal reorganization (3) goodwill and trade name impairment charges, and (4) other non-recurring expenses (including the reversal of a contingent liability), and (b) segment operating income of restructuring costs, impairments, and non-recurring expenses. 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 as a number of non-recurring transactions were recognized in 2016 and 2015, some of which are non-cash. 





Fourth Quarter
Ended Dec. 31,
2016


Diluted
earnings per
share


Year-to-Date
Dec. 31, 2016


Diluted earnings
per share

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



$        70,064


$         3.10


$      173,232


$             7.63











Restructuring expenses



7,341


0.32


12,425


0.55











Reversal of contingent liability



(16,591)


(0.73)


(16,591)


(0.73)











Fair market value adjustment, Delta EMD 



(332)


(0.01)


586


0.03











Total pre-tax adjustments



(9,582)


(0.42)


(3,580)


(0.16)











Tax effect of adjustments **



(1,574)


(0.07)


(3,180)


(0.14)











Deferred income tax benefit - non-recurring



(22,565)


(1.00)


(20,705)


(0.91)











Net earnings attributable to Valmont Industries, Inc. - Adjusted

$        36,343


$         1.61


$      145,767


$             6.42

Average shares outstanding (000's) - Diluted





22,611




22,709














Fourth Quarter
Ended Dec. 26,
2015


Diluted
earnings per
share


Year-to-Date
Dec. 26, 2015


Diluted earnings
per share

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



$       (30,561)


$       (1.34)


$       40,117


$             1.71











Restructuring expenses 



16,009


0.70


39,852


1.70











Impairment of goodwill and trade names 



26,770


1.16


41,970


1.80











Other one-time charges *



24,010


1.04


24,010


1.03











Total pre-tax adjustments



66,789


2.90


105,832


4.52











Tax effect of adjustments **



(12,244)


(0.53)


(21,271)


(0.91)











Deferred income tax expense - non-recurring***


7,120


0.31


7,120


0.30











Net earnings attributable to Valmont Industries, Inc. - Adjusted

$        31,104


$         1.35


$      131,798


$             5.63

Average shares outstanding (000's) - Diluted





23,018




23,405











 * Other non-recurring charges (pre-tax) in 2015 are the $17,000 provision for a Utility commercial settlement and the $7,010 recognized allowance for doubtful China receivable (Irrigation).

** The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction, except the reversal of the contingent liability in 2016 and the impairment of goodwill, both of which are not taxable. 

***The $7,120 of deferred income tax expense is due to a 2% decrease in the U.K. corporate tax rate in 2015.  

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES



SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED OPERATING INCOME



REGULATION G RECONCILIATION (Continued)















Operating Income Reconciliation



Year-to-Date 
Dec. 31, 2016




Year-to-Date
Dec. 26, 2015


Increase 2016
from 2015















Operating income (loss) - as reported



$       243,504




$      131,695


$        111,809















Restructuring expenses 



12,425




39,852

















Impairment of goodwill and trade names 



-




41,970

















Other non-recurring charges



-




24,010

















Adjusted Operating Income 



$       255,929




$      237,527


$          18,402















Net Sales



$    2,521,676




$   2,618,924

















Operating Income as a % of Sales



9.7%




5.0%

















Adjusted Operating Income as a % of Sales



10.1%




9.1%


















For the Fourth Quarter Ended Dec. 31, 2016



Segment Operating Income Reconciliation

Operating
Income- As
Reported


Restructuring
expenses 


Adjusted
Operating
Income 


Net Sales

















Engineered Support Structures

$      16,645


$          2,561


$     19,206


$      216,454





  Op Inc. & Adjusted Op Inc. as a % of Sales

7.7%




8.9%







Utility Support Structures

20,751


-


20,751


185,119





  Op Inc. & Adjusted Op Inc. as a % of Sales

11.2%




11.2%







Energy & Mining 

2,667


3,571


6,238


87,944





  Op Inc. & Adjusted Op Inc. as a % of Sales

3.0%




7.1%







Coatings 

9,464


361


9,825


75,520





  Op Inc. & Adjusted Op Inc. as a % of Sales

12.5%




13.0%







Irrigation

17,074


468


17,542


136,628





  Op Inc. & Adjusted Op Inc. as a % of Sales

12.5%




12.8%







Corporate/Other

(10,508)


380


(10,128)



















Consolidated Results

$      56,093


$          7,341


$     63,434


$      674,575

















  Op Inc. & Adjusted Op Inc. as a % of Sales

8.3%




9.4%




















For the Fourth Quarter Ended Dec. 26, 2015



Segment Operating Income Reconciliation

Operating
Income- As

Reported


Restructuring
expenses 


Impairment of
goodwill and
TM


Other Non-
recurring
expenses 


Adjusted
Operating
Income 


Net Sales













Engineered Support Structures

$      13,850


$          4,159






$          18,009


$           193,383

  Op Inc. & Adjusted Op Inc. as a % of Sales

7.2%








9.3%



Utility Support Structures

(2,414)


1,578




17,001


16,165


170,623

  Op Inc. & Adjusted Op Inc. as a % of Sales

-1.4%








9.5%



Energy & Mining 

(21,523)


2,353


19,640




470


78,764

  Op Inc. & Adjusted Op Inc. as a % of Sales

-27.3%








0.6%



Coatings 

5,363


1,005


6,530




12,898


75,731

  Op Inc. & Adjusted Op Inc. as a % of Sales

7.1%








17.0%



Irrigation

8,305


876




7,009


16,190


137,546

  Op Inc. & Adjusted Op Inc. as a % of Sales

6.0%








11.8%



Corporate/Other

(20,581)


6,038


600




(13,943)


 NM 













Consolidated Results

$    (17,000)


$        16,009


$     26,770


$       24,010


$          49,789


$           633,828













  Op Inc. & Adjusted Op Inc. as a % of Sales

-2.7%








7.9%















Increase 4th qtr 2016 from 2015

$      73,093








$          13,645















  NM - Not Meaningful 






 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/valmont-reports-fourth-quarter-and-fiscal-year-2016-results-300411114.html