Valmont Reports Fourth Quarter Loss Due To Restructuring Initiative and Other One-time Charges and Reinstates Annual Guidance

OMAHA, Neb., Feb. 17, 2016 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment and services for agriculture, today reported fourth quarter and full year results.

• 4Q revenues of $633.8 million were down 17% year-over-year, 1/3 of the decline was foreign exchange impact
• 4Q operating loss was $17.0 million, including $3.7 million negative foreign exchange impact; excluding restructuring, impairment and other one-time charges ("charges"), operating income was $49.8 million, or 7.9% of net sales, compared with 8.7% in 2014
• For the year, adjusted operating income as a percent of sales declined from 11.5% in 2014 to 9.1%.
• 4Q GAAP diluted loss per share was $1.34 compared with diluted earnings per share (EPS) of $1.66 in 2014; 2015 adjusted diluted EPS was $1.35 before charges
• Full year EPS was $1.71 or $5.63 before charges, compared with $8.17 adjusted in 2014
• Operating cash flows for the quarter and year totaled $89 million and $272 million, respectively; year-end cash balance was $349 million
• Company reinstated annual guidance; expects 2016 diluted EPS up 12-15% from 2015 adjusted EPS of $5.63

Additional Details

• The previously announced restructuring initiative concluded, with overhead reductions, plant consolidations and other cost actions resulting in charges of $16.0 million (pre-tax) for the quarter, and $39.9 million for the year
• Realized approximately $8 million in benefits from these actions during 2015. Expect further cost savings benefits in 2016 of approximately $22 million
• To enhance transparency and align with its management structure, the Company modified its reporting structure to include a new segment called Energy and Mining
• In the Coatings segment, an additional $7.1 million of after-tax impairment charges were recorded upon completion of the goodwill impairment analysis; in the newly created Energy and Mining segment, a charge of $19.6 million of after-tax goodwill and trade name impairments was recorded
• Other pre-tax non-recurring expenses totaled $24.0 million for the quarter. These were: an increase in the allowance for doubtful accounts of $7.0 million in the Irrigation Segment, made for a receivable from a customer in China, and a commercial settlement with a large customer requiring ongoing inspections that resulted in a provision of $17.0 million in the Utility Support Structures Segment.
• Repurchased 0.2 million of Company shares during quarter. There is $179 remaining on the current authorization.

"2015 was a transformational year for Valmont, as we completed our planned restructuring efforts to strengthen our position amid ongoing end market softness," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "We exited the year with 14 fewer manufacturing facilities and reduced the global workforce by approximately 7%. As we look ahead, we cannot count on an improvement in the global economic environment to support our results. However, restructuring benefits and a focus on operational improvements position us well to deliver solid earnings growth in 2016."

4Q and Full Year 2015 Financial Results

For purposes of the description of fourth quarter results by segment, we will be comparing adjusted operating income for 2015 to actual operating income for 2014.  Please refer to the above table to understand the adjustments from reported operating income to adjusted operating income for 2015.

Reporting Structure Details

During the fourth quarter, the Company modified its reporting structure to improve transparency into its business portfolio and align with the management structure. Going forward, the Company will report in five segments:

• Engineered Support Structures (formerly Engineered Infrastructure Products)
• Utility Support Structures
• Coatings
• Energy & Mining (newly created)
• Irrigation

The modified structure includes four changes in the reportable segments:

First, the newly created Energy & Mining segment comprises the Access Systems and Offshore & Construction businesses (originally in the former Engineered Infrastructure Products Segment) and the Grinding Media business (originally in the "Other" Segment).

Second, the renamed Engineered Support Structures segment now comprises global lighting, traffic and wireless communication support structures, along with the highway safety business.

Third, the tubing business that was formerly in the "Other" segment is now reported in the Irrigation segment, reflecting the importance of agriculture to its revenue.

Fourth, there will no longer be an "Other" segment.

The Utility Support Structures and Coatings Segments were unaffected.

Fourth Quarter Segment Review

Infrastructure-related

Engineered Support Structures (31% of 4Q Sales)

Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.

Fourth quarter sales declined 15% to $193.4 million, including negative currency translation of $12.8 million. The same period in 2014 benefited from intercompany utility sales for an export order.

In North America, sales of lighting and traffic products were comparable to last year. Wireless communication structure sales were lower due to a major carrier postponing its network buildout.

In Europe, Middle East & Africa, lighting and traffic structure sales declined due the benefit of a one-time export project in the same period last year. Otherwise, sales in Europe were similar to last year.

In the Asia-Pacific region, wireless communication structure sales rose slightly, benefitting from China's investment in its 4G wireless technology rollout. Other businesses in the region remained pressured by the weaker economic environment.

Adjusted operating income was $18.0 million or 9.3% compared with operating income of $20.9 million or 9.2% of segment sales in 2014. Volume deleverage and unfavorable currency translation effects accounted for the decline.

Utility Support Structures (27% of 4Q Sales)

Steel and concrete structures for the global electric utility industry.

Sales of $170.6 million decreased 21% year-over-year, due to the revenue impact of lower steel costs, a decline in Canada sales, and a less favorable project mix. International sales, while small, were lower than last year.

Adjusted operating income declined to $16.2 million from last year's operating income of $19.0 million reflecting competitive pricing and an unfavorable sales mix of smaller structures. However, adjusted operating income as a percent of sales improved to 9.4% from operating income as a percent of sales of 8.8% in 2014, reflecting the positive impact of ongoing operational improvements in this segment taken place during the year.

Coatings Segment (12% of 4Q Sales)

Global galvanizing, painting and anodizing services.

Sales of $75.7 million were 5% lower than last year, due to lower sales in Asia Pacific and unfavorable currency translation effect of $4.8 million. In North America, increased sales to external customers offset the impact of lower internal volume.

Adjusted operating income of $12.9 million, or 17.0% of net sales, declined slightly from operating income of $13.6 million in 2014 due to weakness in international operations.

Energy and Mining Segment (12% of 4Q Sales)

Offshore structures, engineered access systems and grinding media.

Sales of $78.8 million declined 28% year-over-year and included negative currency translation of $15.8 million, or half of the decline. Offshore sales were negatively impacted by the significant decline in oil prices. Weak energy markets also weighed on Access Systems results in Asia Pacific. Grinding media revenues softened amid a decline in Australia mining activity.

Adjusted operating income was $0.8 million, or 1% of sales, reflecting a very unfavorable operating environment, specifically the influence of sharply lower oil and energy prices on sales and profitability.

Agriculture-related

Irrigation Segment (22% of 4Q Sales)

Agricultural irrigation equipment, parts, services and tubular products.

Irrigation Segment sales fell 19% to $137.5 million mostly due to reduced international irrigation equipment sales. North America irrigation equipment sales fell less than 10%, reflecting reductions in farm income and continued weak agricultural commodity prices. Contributing to the segment revenue decline was $10 million of currency translation effect, and a decline in tubing sales driven by lower steel prices and weaker industrial demand.

Adjusted operating income was $16.2 million. Adjusted operating income as a percent of sales was 11.8%, only slightly lower than last year's operating income as a percent of sales of 12.3%.

2016 Outlook:

2016 annual guidance and assumptions include:

• Revenue: Slightly lower, which includes expectations for reduced irrigation sales
• Diluted EPS: Up ~12-15% from 2015 adjusted EPS of $5.63 with first quarter results about flat and positive quarterly comparisons for the remainder of the year.

"Looking forward to 2016, we do not anticipate meaningful improvements in our end markets and are prioritizing operational excellence and cost reductions to drive increased earnings," Mr. Bay said. "Additional expectations informing our current outlook include stable input costs and foreign exchange rates."

"While the macro environment remains challenged, none of the positive long-term, global drivers for our businesses have changed. Efficient use of water for food production will only increase in urgency and economic growth cannot be sustained without investments in the world's infrastructure. We believe we are well positioned to participate in these opportunities."

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#: 15296219 or via Webcast at 8:00 a.m. CDT February 18, 2016 at https://engage.vevent.com/rt/valmontindustries_ao~021816.  A replay is available through the above link or by telephone (855-859-2056 or 404-537-3406, Conference ID#: 15296219) beginning February 18, 2016 at 10:00 a.m. CDT through 12:00 p.m. CDT on February 25, 2016.

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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SOURCE Valmont Industries, Inc.