EX-99.1 2 tm19208411_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

 

 

News Release For Immediate Release
Contact: Renee Campbell October 23, 2019
  402-963-1057

 

Valmont Reports Third Quarter 2019 Results

 

Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure development and irrigation equipment and services for agriculture, today reported financial results for the third quarter ended September 28, 2019.

 

Third Quarter 2019 Highlights (metrics compared to third quarter 2018 unless otherwise noted)

 

•Revenues grew 1.7% to $690.3 million, despite a challenging agricultural market environment; sales were higher in three of four segments

 

•Operating income improved to $63.9 million or 9.3% of sales, compared to $38.4 million or 5.7% of sales ($63.2 million adjusted1 or 9.3% of sales)

 

•Diluted Earnings per Share increased to $1.85 compared to $0.20 ($1.82 adjusted1); 2019 results include a ($0.24) after-tax impact from a non-recurring loss associated with two large Access Systems sales projects in the Engineered Support Structures segment

 

•Operating cash flows grew to $125.0 million, a substantial increase compared to 2018, and the highest third quarter level since 2012

 

•Repurchased 126,700 shares of company stock for $16.8 million, at an average price of $132.76 per share

 

•Revising 2019 diluted EPS guidance range to $7.05 - $7.45 from $8.10 - $8.70, due to the impact of non-recurring expenses recognized in the third quarter, insufficient capacity to meet North American infrastructure market demand, lower anticipated volumes in the Coatings segment, and continued lower Irrigation segment sales

 

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

 

 

 

Key Financial Metrics

 

Third Quarter 2019  GAAP   Adjusted1 
   9/28/2019
3Q 2019		   9/29/2018
3Q 2018		   vs. 3Q 2019   9/28/2019
3Q 2019		   9/29/2018
3Q 2018		   vs. 3Q 2019 
Net Sales  $690,340   $678,692    1.7%  $690,340   $678,692    1.7%
Operating Income   63,863   $38,360    66.5%   63,863   $63,242    1.0%
Operating Income as a % of Net Sales   9.3%   5.7%      9.3%   9.3%     
Net Earnings   40,144    4,448    802.5%   40,144    40,728    (1.4)%
Diluted Earnings Per Share  $1.85   $0.20    825.0%  $1.85   $1.82    1.6%
Average Shares Outstanding   21,684    22,352                     

 

YTD 2019  GAAP   Adjusted1 
   09/28/2019
YTD 2019		   09/29/2018
YTD 2018		   vs. YTD 2019   09/28/2019
YTD 2019		   09/29/2018
YTD 2018		   vs. YTD 2019 
Net Sales  $2,083,350   $2,059,781    1.1%  $2,083,350   $2,059,781    1.1%
Operating Income   182,679    165,990    10.1%   182,679    203,272    (10.1)%
Operating Income as a % of Net Sales   8.8%   8.1%      8.8%   9.9%     
Net Earnings   118,022    76,689    53.8%   118,022    129,024    (8.5)%
Diluted Earnings Per Share  $5.41   $3.40    59.1%  $5.41   $5.72    (5.4)%
Average Shares Outstanding   21,826    22,574                     

 

"We achieved year-over-year revenue and earnings growth despite a challenging agricultural market environment and significant project losses in our Engineered Support Structures segment," said Stephen G. Kaniewski, President and Chief Executive Officer. "Continued strong order flow from robust market demand in our infrastructure businesses created capacity constraints this quarter, leading to operational inefficiencies and impacting our ability to effectively manage the additional volume. Sales growth this quarter was led by strong demand from transportation and wireless communication markets, particularly in North America, revenue from acquisitions, and favorable pricing across the portfolio. Order flow in Engineered Support Structures continued to accelerate during the quarter, increasing backlogs and causing industry lead times to remain extended. Utility Support Structures revenue in the third quarter was below our expectations, from less available market capacity in China, and factory capacity constraints in North American markets. Coatings benefited from recent acquisitions and pricing discipline."

 

Kaniewski continued, "Despite the usual seasonal slowdown, North America Irrigation sales grew in line with our expectations, but volumes were lower in international markets as projects pushed into 2020. For the Company, gross profit margins were higher, due to pricing discipline and the benefit of lower steel costs. We were pleased to recognize another quarter of very strong operating cash flows of $125 million, a result of working capital improvements and the receipt of a project down payment."

 

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

2 Led by approximately 10% lower Irrigation segment sales compared to 2018 and excludes additional acquisitions in 2019.

 

 

 

Third Quarter 2019 Segment Review

 

Infrastructure

 

Engineered Support Structures Segment (38.8% of Sales)

 

Poles, towers and components for the global lighting, traffic and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products

 

Sales of $268.1 million increased 6.6% compared to last year, net of a 2.3% unfavorable currency translation impact. Significantly higher volumes in North American markets, revenue from recent acquisitions, and favorable pricing drove sales growth.

 

Lighting and traffic sales were higher in North America, driven by strong market demand from continued state and local government spending, and pricing. In Europe, sales decreased from lower volumes and unfavorable currency impacts. Sales of highway safety products were also lower from a slowdown in government spending in Australia and India, and lower project sales.

 

Wireless communication and components sales increased more than 30% globally compared to last year. As expected, strong demand in North American markets was led by carriers' ongoing expansion of 4G networks and 5G site preparation. Sales growth was driven by higher volumes and revenues from recent acquisitions.

 

Sales of Access Systems products were lower compared to last year, from lower volumes in the Asia Pacific region due to strategically exiting certain markets and product lines in 2018 and currency translation impacts.

 

Operating income was $21.8 million or 8.1% of sales compared to $16.5 million, or 6.6% of sales ($22.8 million or 9.1% adjusted1) in 2018. Profitability improvement from pricing discipline across the segment, a more favorable product mix, and benefits from the 2018 operational transformation, were more than offset by a one-time loss of approximately $7.5 million associated with two Access Systems projects that were completed in the third quarter.

 

Utility Support Structures Segment (29.7% of Sales)

 

Steel and concrete structures for global utility transmission, distribution and generation applications, renewable energy generation equipment, and substations

 

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

2 Led by approximately 10% lower Irrigation segment sales compared to 2018 and excludes additional acquisitions in 2019.

 

 

 

Revenues of $205.0 million decreased 6.1% compared to last year. Favorable pricing was more than offset by lower volumes from less available market capacity, particularly in China, and a North America plant closure in early 2019. Profitability was also impacted by slightly lower production levels in North American facilities.

 

Operating income was $20.4 million or 9.9% of sales compared to $2.1 million, or 1.0% of sales ($20.0 million or 9.2% adjusted1) in 2018. Pricing actions were offset by lower volumes and factory capacity constraints, and lower profitability in the international businesses.

 

Coatings Segment (13.5% of Sales)

 

Global galvanizing, painting and anodizing services to preserve and protect metal products

 

Global sales of $93.0 million increased 2.8% versus the prior year, led by sales from recent acquisitions and continued pricing discipline, offset by slightly lower volumes in external markets.

 

Operating income was $13.9 million or 14.9% of sales, compared to $14.4 million or 15.9% of sales in 2018. Improved pricing was more than offset by factory inefficiencies from lower external volumes and non-recurring integration-related expenses.

 

Agriculture

 

Irrigation Segment (20.9% of Sales)

 

Agricultural irrigation equipment, parts, services and tubular products, water management solutions, and technology for precision agriculture

 

Global sales of $144.1 million were 2.9% higher compared to last year.

 

North America sales of $82.8 million were 6.0% higher compared to last year, led by higher sales of systems, aftermarket parts and technology solutions, offset by lower industrial tubing sales.

 

International irrigation sales of $61.3 million decreased 1.0% compared to last year. Higher Middle East project sales and solid demand from Brazil were offset by significantly lower volumes in Australia and New Zealand, where adverse weather has been muting demand.

 

Segment operating income was $18.2 million, or 12.6% of sales, compared to $21.3 million, or 15.2% of sales in 2018. Lower volumes in international markets and industrial tubing and higher R&D expense for technology growth investments, led to lower profitability.

 

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

2 Led by approximately 10% lower Irrigation segment sales compared to 2018 and excludes additional acquisitions in 2019.

 

 

 

2019 Outlook

 

2019 Full Year Financial Outlook  Previous Outlook  Revised Outlook
Diluted Earnings per Share  $8.10 - $8.70  $7.05 - $7.45
Revenue Growth2  6% - 7%  1% - 2%2
Operating Margin Change  10 - 40 bps increase  (60 - 90) bps decrease
Global Effective Tax Rate  ~25%  No Change
Capital Expenditures  $90 - $100 million  No Change

 

"While North American market demand in Engineered Support Structures and Utility Support Structures remains very strong, Irrigation segment sales are trending approximately 10% below our previous expectations for the year," said Mr. Kaniewski. "Additionally, the recent slowdown in U.S. industrial production is expected to impact Coatings segment volumes in the fourth quarter. Based on shipment schedules, fourth quarter wireless communication sales are not expected to grow as fast, but we expect continued growth in 2020. Accordingly, we have lowered our 2019 revenue growth expectations for the Company. The non-recurring expenses recognized in the third quarter, along with insufficient capacity in our North American infrastructure facilities, are not expected to be recovered this year. These impacts have collectively led to downward revisions to full-year operating margin and earnings per share."

 

Kaniewski continued, "We have already taken immediate steps to carefully add capacity to only our existing infrastructure factories in North America, and are actively expanding our workforce and training programs. The benefits from these actions are expected to be realized over the next two quarters. In Engineered Support Structures, we expect demand to remain strong from North American transportation and wireless communication markets, causing industry lead times to remain extended. Global backlogs of more than $600 million in Utility Support Structures are being driven by receipt of the second purchase order of the large, multi-year project in the southeastern United States, along with robust market demand that has accelerated throughout this year, continuing into 2020. We are monitoring changes to industrial production trends that may impact our Coatings business, and are awaiting the outcome of fall harvest in North American Irrigation markets, along with any resulting impact to commodity prices that could affect demand. We continue to focus on margin expansion given the current, favorable raw material environment, and are making smart investments in technology, new products and market growth. Additionally, our balance sheet and cash flows remain very strong and we expect to deliver free cash flow of more than 1.2x net earnings for 2019."

 

A live audio discussion with Stephen G. Kaniewski, President and Chief Executive Officer, and Mark C. Jaksich, Executive Vice President and Chief Financial Officer, will be accessible by telephone on Thursday, October 24, 2019 at 8:00 a.m. CDT by dialing 1-877-407-6184 or 1-201-389-0877 (no Conference ID needed), or via webcast by pointing browsers to this link: Valmont Industries Third Quarter 2019 Earnings Call. A slide presentation will simultaneously be available for download on the Investors page at www.valmont.com. A replay of the event can be accessed two hours after the call at the above link or by telephone at 1-877-660-6853 or 1-201-612-7415. Please use conference identification number 13684642. The replay will be available through 10:59 p.m. CDT on October 31, 2019.

 

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

2 Led by approximately 10% lower Irrigation segment sales compared to 2018 and excludes additional acquisitions in 2019.

 

 

 

About Valmont Industries, Inc.

 

Valmont is a global leader, designing and manufacturing 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 irrigation equipment and services 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.

 

Concerning Forward-Looking Statements

 

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 sales, operating income, net earnings and EPS to Adjusted figures at end of document

2 Led by approximately 10% lower Irrigation segment sales compared to 2018 and excludes additional acquisitions in 2019.

 

 

 

 

 

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 
   28-Sep-19   29-Sep-18   28-Sep-19   29-Sep-18 
Net sales  $690,340   $678,692   $2,083,350   $2,059,781 
Cost of sales   514,254    514,352    1,561,721    1,551,202 
Gross profit   176,086    164,340    521,629    508,579 
Selling, general and administrative expenses   112,223    125,980    338,950    342,589 
Operating income   63,863    38,360    182,679    165,990 
Other income (expense)                    
Interest expense   (9,976)   (10,954)   (29,971)   (33,819)
Interest income   969    1,000    2,815    3,713 
Gain on investments (unrealized)   402    1,068    4,754    1,146 
Costs associated with refinancing of debt   —    (14,820)   —    (14,820)
Loss from divestiture of grinding media business (Donhad)   —    —    —    (6,084)
Other   768    1,428    1,938    2,053 
    (7,837)   (22,278)   (20,464)   (47,811)
Earnings before income taxes   56,026    16,082    162,215    118,179 
Income tax expense   13,763    9,091    40,151    36,028 
Net earnings   42,263    6,991    122,064    82,151 
Less: Earnings attributable to non-controlling interests   (2,119)   (2,543)   (4,042)   (5,462)
Net earnings attributable to Valmont Industries, Inc.  $40,144   $4,448   $118,022   $76,689 
                     
Average shares outstanding (000's) - Basic   21,556    22,215    21,725    22,421 
Earnings per share - Basic  $1.86   $0.20   $5.43   $3.42 
                     
Average shares outstanding (000's) - Diluted   21,684    22,352    21,826    22,574 
Earnings per share - Diluted  $1.85   $0.20   $5.41   $3.40 
                     
Cash dividends per share  $0.375   $0.375   $1.125   $1.125 

 

   

 

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)

 

   Third Quarter   Year-to-Date 
   13 Weeks Ended   39 Weeks Ended 
   28-Sep-19   29-Sep-18   28-Sep-19   29-Sep-18 
Net sales                    
Engineered Support Structures  $268,058   $251,524   $757,094   $727,189 
Utility Support Structures   204,958    218,269    658,709    625,850 
Coatings   92,957    90,433    278,142    266,952 
Infrastructure products   565,973    560,226    1,693,945    1,619,991 
Irrigation   144,180    140,175    452,181    491,064 
Other   —    —    —    23,080 
Less: Intersegment sales   (19,813)   (21,709)   (62,776)   (74,354)
Total  $690,340   $678,692   $2,083,350   $2,059,781 
                     
Operating Income                    
Engineered Support Structures  $21,825   $16,499   $55,152   $36,411 
Utility Support Structures   20,362    2,090    61,443    46,298 
Coatings   13,865    14,373    39,037    41,108 
Infrastructure products   56,052    32,962    155,632    123,817 
Irrigation   18,204    21,302    59,868    82,917 
Other   —    —    —    (913)
Adjustment to LIFO inventory valuation method   2,799    (2,780)   5,539    (5,512)
Corporate   (13,192)   (13,124)   (38,360)   (34,319)
Total  $63,863   $38,360   $182,679   $165,990 

 

Valmont has aggregated its business segments into four global reportable segments as follows.

 

Engineered Support Structures: This segment consists of the manufacture of engineered metal and composite poles, towers, and components for global lighting, traffic, and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products.

 

Utility Support Structures: This segment consists of the manufacture of engineered steel and concrete structures for the global utility transmission, distribution, and generation applications, renewable energy generation equipment, and substations.

 

Coatings: This segment consists of global galvanizing, painting and anodizing services.

 

Irrigation: This segment consists of the global manufacture of agricultural irrigation equipment, parts, services, tubular products, water management solutions, and technology for precision agriculture.

 

In addition to these four reportable segments, the Company had other businesses and activities that individually are not more than 10% of consolidated sales, operating income or assets. This includes the manufacture of forged steel grinding media and is reported in the "Other" category until its divestiture.

 

   

 

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

 

   28-Sep-19   29-Dec-18 
ASSETS          
Current assets:          
Cash and cash equivalents  $327,200   $313,210 
Accounts receivable, net   501,215    483,963 
Inventories   377,300    383,566 
Contract asset - costs and profits in excess of billings   120,376    112,525 
Prepaid expenses   50,420    42,800 
Refundable income taxes   11,893    4,576 
Total current assets   1,388,404    1,340,640 
Property, plant and equipment, net   548,368    513,992 
Goodwill and other assets   789,745    675,642 
   $2,726,517   $2,530,274 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current liabilities:          
Current installments of long-term debt  $745   $779 
Notes payable to banks   19,324    10,678 
Accounts payable   197,535    218,115 
Accrued expenses   305,255    171,233 
Dividend payable   8,088    8,230 
Total current liabilities   530,947    409,035 
Long-term debt, excluding current installments   764,524    741,822 
Other long-term liabilities   299,875    243,894 
Shareholders' equity   1,131,171    1,135,523 
   $2,726,517   $2,530,274 

 

   

 

 

 

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

 

   YTD   YTD 
   28-Sep-19   29-Sep-18 
Cash flows from operating activities          
Net Earnings  $122,064   $82,151 
Depreciation and amortization   60,424    62,018 
Impairment of long-lived assets   —    4,197 
Impairment of goodwill and intangibles   —    15,780 
Loss from divestiture of grinding media business   —    6,084 
Contribution to defined benefit pension plan   (17,426)   (1,555)
Change in working capital   72,575    (96,912)
Other   1,593    (3,710)
Net cash flows from operating activities   239,230    68,053 
           
Cash flows from investing activities          
Purchase of property, plant, and equipment   (71,981)   (48,919)
Proceeds from sale of assets   1,325    64,786 
Acquisitions   (81,841)   (125,309)
Other   13,301    (3,992)
Net cash flows from investing activities   (139,196)   (113,434)
           
Cash flows from financing activities          
Proceeds from long-term borrowings   31,000    236,936 
Proceeds from short-term borrowings   9,284    3,217 
Principal payments on long-term borrowings   (10,578)   (252,952)
Purchase of treasury shares   (55,172)   (86,919)
Purchase of noncontrolling interest   (27,845)   (5,510)
Dividends paid   (24,554)   (25,415)
Other   (4,794)   (6,064)
Net cash flows from financing activities   (82,659)   (136,707)
Effect of exchange rates on cash and cash equivalents   (3,385)   (15,095)
Net change in cash and cash equivalents   13,990    (197,183)
Cash and cash equivalents - beginning of year   313,210    492,805 
Cash and cash equivalents - end of period  $327,200   $295,622 

 

 

 

 

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) debt refinancing expenses (2) impairment of goodwill and tradename (3) restructuring costs (4) acquisition diligence expenses and (5) the loss from divestiture of Donhad, (b) operating income from these expenses, and (c) segment operating income for these items. 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.

 

   Thirteen
Weeks ended
September 29,
2018		   Diluted
earnings per
share		   Thirty-nine
Weeks Ended
September 29, 2018		   Diluted
earnings per
share		 
Net earnings attributable to Valmont Industries, Inc. - as reported  $4,448   $0.20   $76,689   $3.40 
Debt refinancing expenses, pre-tax   14,820    0.66    14,820    0.66 
Impairment of goodwill and tradename, pre-tax   15,780    0.71    15,780    0.70 
Restructuring and related asset impairment costs - pre-tax   6,243    0.28    17,662    0.78 
Acquisition diligence costs, pre-tax   2,859    0.13    3,840    0.17 
Loss from divestiture of grinding media business, pre-tax   —    —    6,084    0.27 
Total Adjustments   39,702    1.78    58,186    2.58 
Tax effect of adjustments *   (3,422)   (0.15)   (5,851)   (0.26)
Net earnings attributable to Valmont Industries, Inc. - Adjusted  $40,728   $1.82   $129,024   $5.72 
Average shares outstanding (000’s) - Diluted        22,352         22,574 

 

* The tax effect of adjustments is calculated based on the income tax rate in each applicable jurisdiction.

 

Operating Income Reconciliation  Thirteen
Weeks ended
September 29,
2018		   Thirty-nine
Weeks Ended
September 29,
2018		 
Operating income - as reported  $38,360   $165,990 
Impairment of goodwill and tradename   15,780    15,780 
Restructuring and related asset impairment costs   6,243    17,662 
Acquisition diligence costs   2,859    3,840 
Adjusted Operating Income  $63,242   $203,272 
Net Sales - as reported   678,692    2,059,781 
Operating Income as a % of Sales   5.7%   8.1%
Adjusted Operating Income as a % of Sales   9.3%   9.9%

 

 

 

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS

REGULATION G RECONCILIATION (CONTINUED)

 

For the third quarter ended September 29, 2018

 

   Engineered   Utility             
   Support   Support           Other/ 
Segment Operating Income Reconciliation  Structures   Structures   Coatings   Irrigation   Corporate 
Operating income - as reported  $16,499   $2,090   $14,373   $21,302   $(15,904)
Impairment of goodwill and tradename   —    15,780    —    —    — 
Restructuring and related asset impairment costs   5,746    497    —    —    — 
Acquisition diligence costs   553    1,672    —    —    634 
Adjusted Operating Income  $22,798   $20,039   $14,373   $21,302   $(15,270)
                          
Net sales   251,524    218,269    90,433    140,175    — 
                          
Operating Income as a % of Sales   6.6%   1.0%   15.9%   15.2%   NM 
                          
Adjusted Operating Income as a % of Sales   9.1%   9.2%   15.9%   15.2%   NM