UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 19, 2017
Date of report (Date of earliest event reported)
Valmont Industries, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-31429 |
|
47-0351813 |
(Commission File Number) |
|
(IRS Employer Identification No.) |
|
|
|
One Valmont Plaza |
|
|
Omaha, NE |
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68154 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
(402) 963-1000
(Registrants Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. Results of Operations and Financial Condition.
The information in this Item 2.02 is being furnished and shall not be deemed filed for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
Valmont Industries, Inc. issued a press release on July 19, 2017 announcing its financial results for the companys quarter ended July 1, 2017. The press release, along with the slide presentation to be used during its earnings call on July 20, 2017, are furnished with this Form 8-K as Exhibit 99.1 and Exhibit 99.2, respectively.
Item 9.01. Financial Statements and Exhibits.
(d) |
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Exhibits. |
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99.1 |
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Press Release dated July 19, 2017. |
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|
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99.2 |
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Presentation Slides for Earnings call on July 20, 2017. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Valmont Industries, Inc. | ||
Date: July 19, 2017 |
| ||
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| ||
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By: |
/s/ Mark C. Jaksich | |
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Name: |
Mark C. Jaksich |
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Title: |
Executive Vice President and |
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|
|
Chief Financial Officer |
Exhibit 99.1
News Release |
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For Immediate Release | ||
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|
|
|
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Contact: |
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Jeff Laudin |
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July 19, 2017 |
Phone: |
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402-963-1158 |
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Fax: |
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402-963-1198 |
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|
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.
|
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Second Quarter |
|
Year to date |
| ||||||||
|
|
13 Weeks Ended |
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26 Weeks Ended |
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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 |
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$ |
1.85 |
|
$ |
3.73 |
|
$ |
3.29 |
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|
|
|
|
|
|
|
|
|
| ||||
Average Shares Outstanding - Diluted |
|
22,740 |
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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, Valmonts 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. ·
-more-
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.
-more-
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.
-more-
An audio discussion of Valmonts 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 Companys 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 managements 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 Valmonts 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 Valmonts 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 Valmonts 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)
|
|
Second Quarter |
|
Year-to-Date |
| ||||||||
|
|
13 Weeks Ended |
|
26 Weeks Ended |
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|
|
1-Jul-17 |
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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 |
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347,885 |
|
336,086 |
| ||||
Selling, general and administrative expenses |
|
104,990 |
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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 (000s) - Basic |
|
22,517 |
|
22,602 |
|
22,494 |
|
22,651 |
| ||||
Earnings per share - Basic |
|
$ |
2.03 |
|
$ |
1.86 |
|
$ |
3.76 |
|
$ |
3.31 |
|
|
|
|
|
|
|
|
|
|
| ||||
Average shares outstanding (000s) - 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 |
|
-more-
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 |
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25-Jun-16 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
|
|
|
|
|
|
|
|
| ||||
Engineered Support Structures |
|
$ |
217,581 |
|
$ |
203,916 |
|
$ |
398,139 |
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$ |
380,887 |
|
Utility Support Structures |
|
184,622 |
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151,245 |
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359,234 |
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295,765 |
| ||||
Energy and Mining |
|
77,207 |
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80,692 |
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155,179 |
|
153,141 |
| ||||
Coatings |
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79,781 |
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75,298 |
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153,249 |
|
143,879 |
| ||||
Infrastructure products |
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559,191 |
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511,151 |
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1,065,801 |
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973,672 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Irrigation |
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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.
-more-
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-
Exhibit 99.2
2Q 2017 Earnings Call Presentation
2 These slides contain (and the accompanying oral discussion will contain) forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks. uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements. including general economic and business conditions. conditions affecting the industries served by the Company and its subsidiaries. conditions affecting the Companys customers and suppliers. competitor responses to the Companys products and services. the overall market acceptance of such products and services. the integration of acquisitions and other factors disclosed in the Companys periodic reports filed with the Securities and Exchange Commission. Consequently such forward-looking statements should be regarded as the Companys current plans. estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Forward-looking Statement Disclosure
3 Net Sales grew 11% with increases in all segments except Energy and Mining Operating income grew 9% Operating income as a percent of sales of 11.0% in 2017 compared to 11.2% in 2016 Diluted earnings per share increase 8.6% from $1.85 to $2.01 Reconfirm fiscal 2017 earnings guidance of slightly above $7.00 per diluted share2. Second Quarter Highlights Net sales gross of intercompany eliminations. Unless otherwise noted, net sales presented by segment throughout the presentation is net of intercompany eliminations. See 2017 guidance assumption in February 21, 2017 earnings release.
4 NET SALES Dollars in millions except per share amounts 2017 2016 Percent Change Engineered Support Structures $217.6 $203.9 6.7% Utility Support Structures 184.6 151.2 22.1% Coatings 79.8 75.3 5.9% Energy & Mining 77.2 80.7 (4.3)% Irrigation 188.3 152.3 23.6% Intersegment Sales (34.8) (23.2) NM Net Sales $712.7 $640.2 11.3% Operating Income $78.3 $71.8 9.1% Net Income $45.7 $42.0 8.8% Diluted Earnings Per Share (EPS) $2.01 $1.85 8.6% Financial Highlights - Second Quarter
5 Dollars in millions Operating Income 2Q 2017 Operating Income2Q 2016 Increase /Decrease Operating Income Percent 2Q 2017 Operating Income Percent 2Q 2016 Engineered SupportStructures $20.2 $20.8 (2.9%) 9.3% 10.2% Utility Support Structures 20.2 17.6 14.8% 10.9% 11.6% Coatings 12.1 14.0 (13.6%) 15.2% 18.6% Energy & Mining 3.9 3.3 18.2% 5.1% 4.1% Irrigation 34.7 31.0 11.7% 18.4% 20.4% LIFO adjustment (0.4) (3.1) NM Corporate (12.4) (11.8) (3.4%) Consolidated Operating Income $78.3 $71.8 9.1% 11.0% 11.2% Financial Highlights - Operating Income
6 Engineered Support Structures 2nd Qtr. 2016 Net Sales $195.8 Volume 9.1 Pricing/Mix 0.3 Acquisitions - Currency Translation (4.1) 2017 Net Sales $201.1 Slightly lower lighting and traffic sales in North America. EMEA markets remain sluggish due to lack of infrastructure investment Wireless communication sales increase globally, recovery in North American markets Margin compression due to rising steel costs in some cases not being fully recovered by price, particularly compared to last year when purchases of low cost steel in the first quarter translated into better second quarter margins. $ in millions Sales presented net of intersegment sales $20.2 $20.8 $- $5 $10 $15 $20 $25 Operating Income 2017 2016 $201.1 $195.8 $- $50 $100 $150 $200 $250 Net Sales 2017 2016
7 Utility Support Structures 2nd Qtr. 2016 Net Sales $151.2 Volume 18.5 Pricing/Mix 13.9 Acquisitions - Currency Translation - 2017 Net Sales $183.6 Significant sales and volume increases. Some of the sales increase reflect customer pricing tied to steel cost increases Operating income increased due to the higher sales volumes partially offset by unfavorable product mix. Sales presented net of intersegment sales $ in millions $183.6 $151.2 $50 $75 $100 $125 $150 $175 $200 Net Sales 2017 2016 $20.2 $17.6 $- $5 $10 $15 $20 $25 Operating Income 2017 2016
8 Coatings 2nd Qtr. 2016 Net Sales $63.4 Volume (3.1) Pricing/Mix 4.8 Acquisitions - Currency Translation (0.5) 2017 Net Sales $64.6 Sales decreased in North America, less external and higher intercompany volumes Volumes increase in Asia-Pacific regionpricing recovery also achieved Reduced operating income attributed to lower external volumes and lagging zinc cost recovery in North America. Sales presented net of intersegment sales $ in millions $64.6 $63.4 $- $20 $40 $60 $80 Net Sales 2017 2016 $12.1 $14.0 $- $10 $20 Operating Income 2017 2016
9 Energy and Mining 2nd Qtr. 2016 Net Sales $79.3 Volume (3.1) Pricing/Mix 1.8 Acquisitions - Currency Translation (0.8) 2017 Net Sales $77.2 Access and Offshore sales decreased slightly Operating income increased with lower SG&A expense Outlook for unfavorable second-half comparisonsfurther weakness in oil & gas end markets, less favorable steel cost environment Sales presented net of intersegment sales $ in millions $77.2 $79.3 $50 $60 $70 $80 $90 Net Sales 2017 2016 $3.9 $3.3 $- $5 Operating Income 2017 2016
10 Irrigation 2nd Qtr. 2016 Net Sales $150.5 Volume 29.2 Pricing/Mix 3.8 Acquisitions - Currency Translation 2.7 2017 Net Sales $186.2 International markets benefit from projects and stronger Latin American demand North America sales increased on stabilizing markets and uptick in markets outside the corn belt Service parts sales increase as irrigation machines log more hours than last year Operating income higher, operating income percent pressured by raw material costs Sales presented net of intersegment sales $ in millions $186.2 $150.5 $- $50 $100 $150 $200 Net Sales 2017 2016 $34.7 $31.0 $- $10 $20 $30 $40 Operating Income 2017 2016
2Q 2017 Actual Credit Rating 11 Balance Sheet 2nd Qtr. 2017 Goal: Maintain Investment-grade rating; Keep Debt/EBITDA from 1.5 to 2.5x Cash At 7/1/2017 $448M ($350M Ex. US) Total Debt $755M Debt/Adjusted EBITDA* 2.25 Adjusted S&P BBB+ Negative Moodys Baa3 Stable * See the Companys calculation at end of presentation. Debt Maturities in Millions
Valmont Calculation of Adjusted EBITDA & Leverage Ratio 12 Last 4 fiscal quarters (June 26, 2016 to July 1, 2017) Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our Debt/Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA of the prior four quarters. See Leverage Ratio below. TTM 1 7/1/2017 Net earnings attributable to Valmont Industries, Inc. $182,880 Interest expense 41,877 Income tax expense 43,038 Depreciation and amortization expense 83,367 EBITDA 351,162 Reversal of contingent liability (16,591) Impairment of property, plant, and equipment 1,099 Adjusted EBITDA $335,670 Interest Bearing Debt $ 755,733 Leverage Ratio 2.25
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