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 second quarter ended June 27,
2020.
Second Quarter 2020 Highlights (all metrics compared to
Second Quarter 2019 unless otherwise noted)
- Net Sales of $688.8 million declined 1.7%; excluding $13.7
million of unfavorable currency impacts, sales were similar to last
year, as strong growth in Utility Support Structures was offset by
lower sales in the Coatings segment due to COVID-19 impacts, as
expected
- Operating Income of $43.4 million, or 6.3% of sales ($65.7
million or 9.5% adjusted1) compared to $61.5 million or 8.8% of
sales last year; profitability improved in all segments except
Coatings
- Diluted Earnings per Share of $1.06 ($2.00 adjusted1) compared
to $1.82; GAAP EPS includes a $16.6 million pre-tax non-cash
impairment charge against goodwill and trade names attributed to
the Access Systems product line
- Generated strong operating cash flow of $88.3 million, driven
by operating income and working capital management; cash and cash
equivalents were $353.3 million at end of second quarter
- Completed two acquisitions in the Irrigation segment; purchased
a majority stake in Solbras - Energia Solar do Brasil, and acquired
100% of the assets of PrecisionKingTM
- Received a large lattice structures order of approximately
$17.0 million for the North American utility market
- Resumed operations at all Valmont manufacturing facilities
- Providing key assumptions and indications for the third quarter
2020
Key Financial Metrics
Second Quarter 2020
GAAP
Adjusted1
06/27/2020 2Q 2020
06/29/2019 2Q
2019
vs. 2Q 2019
06/27/2020 2Q 2020
06/29/2019 2Q
2019
vs. 2Q 2019
Net Sales
$
688,808
$
700,871
(1.7)%
$
688,808
$
700,871
(1.7)%
Operating Income
43,440
61,474
(29.3)%
65,657
61,474
6.8%
Operating Income as a % of Net Sales
6.3
%
8.8
%
9.5
%
8.8
%
Net Earnings
22,607
39,719
(43.1)%
42,847
39,719
7.9%
Diluted Earnings Per Share
$
1.06
$
1.82
(41.8)%
$
2.00
$
1.82
9.9%
Average Shares Outstanding
21,393
21,831
YTD 2020
GAAP
Adjusted1
06/27/2020 YTD 2020
06/29/2019 YTD
2019
vs. 2019
06/27/2020 YTD 2020
06/29/2019 YTD
2019
vs. 2019
Net Sales
$
1,363,008
$
1,393,010
(2.2)%
$
1,363,008
$
1,393,010
(2.2)%
Operating Income
110,335
116,076
(4.9)%
132,552
116,076
14.2%
Operating Income as a % of Net Sales
8.1
%
8.3
%
9.7
%
8.3
%
Net Earnings
65,536
75,823
(13.7)%
85,776
75,823
13.1%
Diluted Earnings Per Share
$
3.05
$
3.46
(11.8)%
$
3.99
$
3.46
15.3%
Average Shares Outstanding
21,471
21,897
"Valmont delivered strong second quarter operating performance
as our team persisted in serving customers despite COVID-19
challenges, including related shutdowns and economic restrictions,"
said Stephen G. Kaniewski, President and Chief Executive Officer.
"Revenue and profitability were better than expected across all
segments, as we successfully managed pricing and operational
performance. We completed strategic capacity additions, which
contributed to improved performance and revenue growth,
particularly in the Utility Support Structures segment. Our
consistent focus on liquidity and working capital management led to
strong operating cash flows. Importantly, I want to thank all
employees for their hard work and resiliency in producing products
and providing services that support critical infrastructure sectors
and food security around the world. As always, the safety and
well-being of our employees remains our top priority."
Second Quarter 2020 Segment Review
Infrastructure
Engineered Support Structures Segment (36.8% 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 $253.4 million decreased 2.1% year-over-year due to
unfavorable currency impacts of $6.1 million, otherwise sales were
similar to last year. Higher volumes in North American
transportation and wireless communication markets were offset by
lower volumes in international markets attributed to temporary
COVID-related facility closures, and strategically exiting product
lines in Access Systems.
Lighting and traffic sales of $181.0 million were flat
year-over-year. Strong transportation volumes in North America were
offset by lower sales in international markets due to temporary
facility closures.
Global sales of wireless communication structures and components
grew 7.2% to $50.9 million compared to last year. Continued capital
spending from wireless carriers in North American markets and
higher volumes in Europe led to the sales growth.
Access Systems product sales decreased 27.7% year-over-year due
to lower volumes from strategically exiting product lines,
unfavorable currency impacts and continued end-market weakness.
Operating income was $4.8 million or 1.9% of sales ($22.9
million adjusted1 or 9.0% of sales), compared to $20.9 million or
8.1% of sales in 2019. During the second quarter of 2020, a $16.6
million pre-tax non-cash impairment charge against goodwill and
trade names was recorded and attributed to the Access Systems
product line. Profitability improvement on an adjusted basis was
led by pricing and improved performance in North American
operations, partially offset by lower volumes in international
markets.
Utility Support Structures Segment (33.6% of Sales)
Steel and concrete structures for global utility transmission,
distribution, substations, and renewable energy generation
equipment
Sales of $231.3 million grew 10.2% year-over-year, driven by
significantly higher volumes from robust market demand and
strategic capacity additions, and favorable pricing.
Operating income was $21.7 million or 9.4% of sales ($25.3
million or 10.9% adjusted1) compared to $16.0 million, or 7.6% of
sales in 2019. Profitability growth was led by higher volumes and
favorable pricing, and improved profitability in the international
businesses.
Coatings Segment (11.6% of Sales)
Global galvanizing, painting and anodizing services to preserve
and protect metal products
Sales of $80.0 million decreased 18.7% year-over-year. Higher
internal volumes were more than offset by lower external volumes
due to the impact from COVID-19 on end customers and temporary
international facility closures.
Operating income was $10.1 million or 12.7% of sales ($10.4
million or 13.0% adjusted1), compared to $15.0 million or 15.3% of
sales in 2019, due to lower volumes, partially offset by
pricing.
Agriculture
Irrigation Segment (21.9% of Sales)
Agricultural irrigation equipment, parts, services and tubular
products, water management solutions, and technology for precision
agriculture
Global sales of $150.6 million decreased 3.0% year-over-year due
to unfavorable currency impacts of $5.6 million, otherwise sales
were similar to last year. Higher sales of irrigation products were
offset by lower industrial tubing sales.
North American sales of $99.0 million were down 3.7% compared to
2019. Higher sales of irrigation products and pricing were more
than offset by lower industrial tubing sales driven by lower steel
costs.
International sales of $51.6 million decreased 1.5% compared to
2019. Sales volumes increased approximately 10.0% excluding
unfavorable currency impacts, led by continued strong demand in
Brazil and higher sales in European markets.
Segment operating income was $22.4 million, or 14.8% of sales,
compared to $21.5 million, or 13.9% of sales in 2019. Profitability
improvement was led by pricing and higher sales volumes. Higher
SG&A expense included $1.4 million of incremental R&D
expense for technology growth investments.
During the quarter, the Company purchased a majority stake in
Solbras - Energia Solar do Brasil, a leading provider of solar
energy solutions for agriculture that allows Valmont to deliver a
first-to-market, advanced solar power and monitoring solution to
growers. The Company also expanded its global technology leadership
position with the asset purchase of PrecisionKingTM, a
subscription-based provider of control technology and remote
monitoring solutions for the U.S. market.
COVID-19 Business Continuity and
Operations Update
Valmont is considered an essential business because of the
products and services that serve critical infrastructure sectors
and food security, as defined by many governments around the world.
To protect the safety, health and well-being of employees,
customers, suppliers and communities, CDC, WHO and local guidelines
continue to be followed.
Beginning late in the first quarter, a number of Valmont
manufacturing facilities outside of the U.S. were closed due to the
pandemic. During the second quarter, all facilities resumed
operations. Incremental expenses related to the pandemic during the
quarter were approximately $2.5 million, or $0.09 per diluted
share.
Valmont monitors health advisories on a continuous basis,
particularly in areas reporting recent increases in infection. The
Company continues to take deliberate steps to protect all
stakeholders and minimize the operational and financial impacts on
the business. To date, Valmont has not experienced any significant
disruptions or changes to the supply of raw materials and other
critical components, and is not currently experiencing meaningful
delays in its global supply chain.
Balance Sheet, Liquidity and Capital
Allocation
At the beginning of the second quarter the Company preemptively
drew down $75.0 million of its $600.0 million revolving credit
facility to ensure sufficient liquidity for business operations.
This amount was repaid in full during the quarter. The Company has
not experienced any meaningful slowdown in customer payments and
has no significant long-term debt maturities until 2044. 2020
capital expenditures are expected to be in the range of $80.0 to
$90.0 million to support strategic future growth initiatives.
Valmont remains committed to maintaining its investment grade
credit rating.
Third-Quarter 2020 Financial Outlook
and Key Assumptions
Although the pandemic's impacts on global economic factors and
pace of economic recovery remain unclear, the Company is providing
a greater level of transparency during this time, including key
assumptions and indications for third quarter 2020, to help the
financial community understand short-term impacts and
expectations.
Financial Outlook
Metrics
Estimates
Net Sales
$680.0 to $700.0M
Operating Profit Margin
8.0% to 9.0%
Segment Sales: Utility Support
Structures
~20% Increase (vs. prior year)
Key Assumptions
- Utility Support Structures sales estimate driven by higher
sales in international businesses
- Tax rate of ~ 25.0%
- Unfavorable currency translation on net sales of $7.0M –
$9.0M
- Positive operating cash flows
- Stable raw material costs and no significant supply chain
interruptions
- No closures of large manufacturing facilities or workforce
disruptions
Kaniewski continued, "Our quick and decisive actions at the
outset of the pandemic allowed us to mitigate the severity of its
impact on our operating and financial results through the first
half of the year. We continue to work diligently and safely to
provide our customers with the essential products and solutions
they need. The global backlogs in our infrastructure businesses are
solid, providing a good line of sight for third quarter sales, and
our balance sheet is strong. We continue to closely monitor all
discretionary spending and capital expenditures, with an additional
emphasis on managing working capital and cash flow. Through the use
of lean and agile, we will continue to aggressively drive
operational efficiencies. We will successfully navigate through
these uncertain times by focusing on employee safety and
well-being, remaining flexible, and managing what we can control to
drive long-term shareholder value."
A live audio discussion with Stephen G. Kaniewski, President and
Chief Executive Officer, and Avner M. Applbaum, Executive Vice
President and Chief Financial Officer, will be accessible by
telephone on Thursday, July 23, 2020 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 2Q
2020 Earnings Conference Call. A slide presentation will
simultaneously be available for download on the Investors page at
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
13698672. The replay will be available through 10:59 p.m. CDT on
July 30, 2020.
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
improve farm productivity while conserving fresh water resources.
In addition, Valmont provides coatings services that protect
against corrosion and improve the service life of steel and other
metal products. For more information, visit valmont.com.
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, the
continuing and developing effects of COVID-19 including the effects
of the outbreak on the general economy and the specific economic
effects on the Company’s business and that of its customers and
suppliers, 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
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
27-Jun-20
29-Jun-19
27-Jun-20
29-Jun-19
Net sales
$
688,808
$
700,871
$
1,363,008
$
1,393,010
Cost of sales
504,871
522,695
992,822
1,050,207
Gross profit
183,937
178,176
370,186
342,803
Selling, general and administrative
expenses
123,859
116,702
243,213
226,727
Impairment of goodwill and intangible
assets
16,638
—
16,638
—
Operating income
43,440
61,474
110,335
116,076
Other income (expense)
Interest expense
(10,098
)
(10,117
)
(20,112
)
(19,995
)
Interest income
458
1,036
1,501
1,846
Gain (loss) on investments
(unrealized)
2,510
1,520
202
4,352
Other
(694
)
156
1,116
1,170
(7,824
)
(7,405
)
(17,293
)
(12,627
)
Earnings before income taxes
35,616
54,069
93,042
103,449
Income tax expense
12,602
13,401
27,088
25,703
Equity in earnings (loss) of
nonconsolidated subsidiaries
(260
)
—
(479
)
—
Net earnings
22,754
40,668
65,475
77,746
Less: Loss (earnings) attributable to
non-controlling interests
(147
)
(949
)
61
(1,923
)
Net earnings attributable to Valmont
Industries, Inc.
$
22,607
$
39,719
$
65,536
$
75,823
Average shares outstanding (000's) -
Basic
21,312
21,734
21,383
21,810
Earnings per share - Basic
$
1.06
$
1.83
$
3.06
$
3.48
Average shares outstanding (000's) -
Diluted
21,393
21,831
21,471
21,897
Earnings per share - Diluted
$
1.06
$
1.82
$
3.05
$
3.46
Cash dividends per share
$
0.450
$
0.375
$
0.900
$
0.750
VALMONT INDUSTRIES, INC. AND
SUBSIDIARIES
SUMMARY OPERATING
RESULTS
(Dollars in thousands)
(unaudited)
Second Quarter
Year-to-Date
13 Weeks Ended
26 Weeks Ended
27-Jun-20
29-Jun-19
27-Jun-20
29-Jun-19
Net sales
Engineered Support Structures
$
253,385
$
258,748
$
484,127
$
489,036
Utility Support Structures
231,324
209,829
456,785
453,751
Coatings
80,005
98,406
168,090
185,185
Infrastructure products
564,714
566,983
1,109,002
1,127,972
Irrigation
150,639
155,185
307,359
308,001
Less: Intersegment sales
(26,545
)
(21,297
)
(53,353
)
(42,963
)
Total
$
688,808
$
700,871
$
1,363,008
$
1,393,010
Operating Income
Engineered Support Structures
$
4,818
$
20,882
$
20,749
$
33,327
Utility Support Structures
21,650
16,033
49,374
41,081
Coatings
10,148
15,032
21,202
25,172
Infrastructure products
36,616
51,947
91,325
99,580
Irrigation
22,351
21,530
46,014
41,664
Corporate
(15,527
)
(12,003
)
(27,004
)
(25,168
)
Total
$
43,440
$
61,474
$
110,335
$
116,076
Valmont has aggregated its business segments into four global
reportable segments as follows.
Engineered Support Structures: This segment consists of
the manufacture and distribution 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 global
utility transmission, distribution, substations, and renewable
energy generation equipment.
Coatings: This segment consists of global galvanizing,
painting and anodizing services to preserve and protect metal
products.
Irrigation: This segment consists of the global
manufacture of agricultural irrigation equipment, parts, services,
tubular products, water management solutions, and technology for
precision agriculture.
VALMONT INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(unaudited)
27-Jun-20
28-Dec-19
ASSETS
Current assets:
Cash and cash equivalents
$
353,348
$
353,542
Accounts receivable, net
500,838
480,000
Inventories
449,516
418,370
Contract asset - costs and profits in
excess of billings
125,004
141,322
Prepaid expenses and other assets
51,113
32,043
Refundable income taxes
—
6,947
Total current assets
1,479,819
1,432,224
Property, plant and equipment, net
563,783
558,129
Goodwill and other assets
788,240
816,863
$
2,831,842
$
2,807,216
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt
$
2,587
$
760
Notes payable to banks
14,577
21,774
Accounts payable
241,294
197,957
Accrued expenses
180,950
167,264
Contract liability - billings in excess of
costs and earnings
138,820
117,945
Income taxes payable
16,984
—
Dividend payable
9,613
8,079
Total current liabilities
604,825
513,779
Long-term debt, excluding current
installments
778,283
764,944
Other long-term liabilities
296,032
338,748
Shareholders' equity
1,152,702
1,189,745
$
2,831,842
$
2,807,216
VALMONT INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
YTD
YTD
27-Jun-20
29-Jun-19
Cash flows from
operating activities
Net Earnings
$
65,475
$
77,746
Depreciation and amortization
40,584
40,583
Impairment of long-lived assets
18,896
—
Contribution to defined benefit pension
plan
(17,138
)
(13,682
)
Change in working capital
42,280
2,801
Other
647
5,989
Net cash flows from operating
activities
150,744
113,437
Cash flows from
investing activities
Purchase of property, plant, and
equipment
(48,165
)
(49,310
)
Proceeds from sale of assets
169
466
Acquisitions
(15,862
)
(81,841
)
Other
10,846
15,077
Net cash flows from investing
activities
(53,012
)
(115,608
)
Cash flows from
financing activities
Proceeds from long-term borrowings
88,872
31,000
Proceeds (payments) from short-term
borrowings
(6,255
)
9,886
Principal payments on long-term
borrowings
(75,568
)
(10,386
)
Purchase of treasury shares
(20,481
)
(38,350
)
Purchase of noncontrolling interest
(55,916
)
(27,845
)
Dividends paid
(17,704
)
(16,425
)
Other
(4,923
)
(3,542
)
Net cash flows from financing
activities
(91,975
)
(55,662
)
Effect of exchange rates on cash and cash
equivalents
(5,951
)
1,567
Net change in cash and cash
equivalents
(194
)
(56,266
)
Cash and cash equivalents - beginning of
year
353,542
313,210
Cash and cash equivalents - end of
period
$
353,348
$
256,944
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) impairment of goodwill, tradenames, and a
facility and (2) restructuring costs (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 June 27,
2020
Diluted
Twenty-six weeks ended June
27, 2020
Diluted
earnings per
earnings per
share
share
Net earnings attributable to Valmont
Industries, Inc. - as reported
$
22,607
$
1.06
$
65,536
$
3.05
Impairment of goodwill and tradename,
pre-tax
16,638
0.78
16,638
0.77
Restructuring and related asset impairment
costs - pre-tax
5,579
0.26
5,579
0.26
Total Adjustments
22,217
1.04
22,217
1.03
Tax effect of adjustments *
(1,977
)
(0.09
)
(1,977
)
(0.09
)
Net earnings attributable to Valmont
Industries, Inc. - Adjusted
$
42,847
$
2.00
$
85,776
$
3.99
Average shares outstanding (000’s) -
Diluted
21,393
21,471
* The tax effect of adjustments is
calculated based on the income tax rate in each applicable
jurisdiction.
Thirteen weeks ended June 27,
2020
Twenty-six weeks ended June
27, 2020
Operating Income Reconciliation
Operating income - as reported
$
43,440
$
110,335
Impairment of goodwill and tradename
16,638
16,638
Restructuring and related asset impairment
costs
5,579
5,579
Adjusted Operating Income
$
65,657
$
132,552
Net Sales - as reported
688,808
1,363,008
Operating Income as a % of Sales
6.3
%
8.1
%
Adjusted Operating Income as a % of
Sales
9.5
%
9.7
%
VALMONT INDUSTRIES, INC. AND
SUBSIDIARIES
SUMMARY OF EFFECT OF
SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
(CONTINUED)
For the
second quarter ended June 27, 2020
Engineered
Utility
Support
Support
Segment Operating Income
Reconciliation
Structures
Structures
Coatings
Irrigation
Corporate
Operating income - as reported
$
4,818
$
21,650
$
10,148
$
22,351
$
(15,527)
Impairment of goodwill and tradename
16,638
—
—
—
—
Restructuring and related asset impairment
costs
1,462
3,674
222
—
221
Adjusted Operating Income
$
22,918
$
25,324
$
10,370
$
22,351
$
(15,306)
Net sales
$
253,385
$
231,324
$
80,005
150,639
—
Operating Income as a % of Sales
1.9
%
9.4
%
12.7
%
14.8
%
NM
Adjusted Operating Income as a % of
Sales
9.0
%
10.9
%
13.0
%
14.8
%
NM
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200722005882/en/
Renee Campbell +1 402.963.1057
Valmont Industries (NYSE:VMI)
Historical Stock Chart
From Feb 2024 to Mar 2024
Valmont Industries (NYSE:VMI)
Historical Stock Chart
From Mar 2023 to Mar 2024