VALMONT INDUSTRIES INC - FORM 8-K - EX-99.1 - October 13, 2011

Attached files

file filename
8-K - VALMONT INDUSTRIES INCvmi8k_oct13.htm

 





Valmont Announces Record Third Quarter Results

Highlights:
 
·  
Third quarter operating income rose 53% on a 27% increase in sales.
 
·  
Operating income as a percent of sales improved more than one percentage point to 10.7%.
 
·  
Third quarter Utility Support Structures Segment operating income improved 51% on a 31% increase in sales.
 
·  
Third quarter Irrigation Segment operating income improved 124% on a 71% increase in sales.
 
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global manufacturer of engineered products for infrastructure, and mechanized irrigation equipment for agriculture, and a provider of coating services, reported sales for the third quarter of $672.2 million compared with $527.8 million for the same period of 2010. Third quarter 2011 net earnings were $42.1 million, or $1.59 per diluted share, versus third quarter 2010 net earnings of $25.9 million, or $0.98 per diluted share.
 
Third Quarter Review:
 
“Increased revenue in every segment and a significant improvement in the operating performance of our businesses with strong market fundamentals resulted in a 27% sales gain and a 53% improvement in operating income,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “Substantially higher irrigation equipment sales had the greatest impact on third quarter revenue gains. Farmers increased their investment in pivots to improve productivity in light of strong feed-grain demand. Significantly higher North American Utility Support Structures Segment sales resulted from increased investment in the transmission grid by electric utilities. Increased revenues in the Engineered Infrastructure Products Segment mostly reflect higher international revenues. Coatings Segment sales increased due to improved revenues in the Asia-Pacific region.”
 

 
 
 

Third Quarter Segment Review:
 
Irrigation Segment (22% of 3rd Quarter Sales)
 
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
 
Global sales were $150.6 million, an increase of 71% over 2010. In international markets, sales increases were broad-based and supported by firm global crop prices. North American demand was significantly higher, even during the seasonally slow summer months. An increase in aftermarket parts sales due to irrigation equipment operating longer in hot weather, further supported North American sales increases.
 
A growing world population and a move towards higher protein in diets are resulting in increased global demand for feed-grains. Consequently, crop prices have remained firm for most of the year driving expectations for record farm incomes. We believe this environment motivated farmers to seek productivity enhancing tools to maximize income. Since mechanized irrigation equipment is one of the highest-return capital investments farmers can make to increase production, demand for Valmont’s products was substantially higher.
 
Operating income more than doubled to $23.8 million and was 15.8% of segment sales. The rise in operating income was driven by volume increases and the resulting operating leverage.
 
Utility Support Structures Segment (24% of 3rd Quarter Sales)
 
Steel and concrete structures for the global electric utility industry.
 
Sales of $159.8 million were 31% above 2010, led by increased demand in North America. Reduced activity in China, along with a decline in project orders, resulted in lower international sales compared with last year.
 
Order activity in North America increased during the third quarter resulting in a growing backlog. Electric utility companies have increased capital spending on projects to add physical capacity and increase the reliability of the transmission grid. We believe a growing pipeline of large projects is expected to stimulate demand for structures for a number of years.
 
Operating income rose 51% to $14.7 million and was 9.2% of segment sales. Operating margins for the quarter were pressured by shipments out of backlog taken when the pricing environment was highly competitive, and by higher material costs than last year.
 
Engineered Infrastructure Products Segment (33% of 3rd Quarter Sales)
 
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
 
Third quarter sales were $222.2 million, a 12% increase over 2010, mostly due to improved revenues in international markets. Government budgetary constraints, the lack of a long-term highway bill and a slow recovery in non-residential construction have led to weak market conditions and a competitive pricing environment in the North American commercial, and lighting and traffic markets.
 
In Europe, lighting and traffic sales improved modestly due to regional strength in some markets. In most European markets, pricing was competitive due to sluggish demand resulting from economic uncertainty and fiscal restraint.
 
Wireless communication product sales were lower in North American markets due to uncertainty about carrier consolidations. In China, sales improved.
 
Sales of engineered infrastructure products in the Asia-Pacific region were somewhat higher mainly as a result of growing infrastructure investment in Southeast Asia.
 
Operating income for the segment was flat despite higher sales. Operating income as a percent of sales was 7.7% compared with 8.7% in 2010. The pressure on operating income as a percent of sales reflects pricing competitiveness in all markets and generally higher material costs than last year.
 
 
Coatings Segment (12% of 3rd Quarter Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
 
Sales of $80.8 million were 7% higher than last year. The increase in sales reflects higher internal demand from Valmont’s utility and irrigation divisions in North America. Revenues also rose in the Asia-Pacific region.
 
Operating income increased 5% to $14.2 million, or 17.6% of segment sales.
 
Included in “Other” are tubing, grinding media, and electrolytic manganese dioxide businesses. The improvement in results in these businesses reflects higher sales and improved operations.
 
Fourth Quarter Outlook:
 
“We are reconfirming our guidance for earnings per share for the year to be in the range of $5.70-5.90,” Mr. Bay said. “However, because of the deteriorating economic outlook in general over the past few months, particularly in Europe, we now expect results to be in the mid-to-lower end of that range.
 
“Going forward, our outlook remains positive. Demand for Utility Support Structures is rising. Recent order activity and a growing backlog support our expectations for a strong fourth quarter and 2012.
 
“In the irrigation business, a growing global demand for feed-grains to sustain dietary improvement and historically high farm income levels support a positive outlook.
 
 
“Our outlook for the Engineered Infrastructure Products Segment is mixed. In North America and Europe, we face reduced government spending and uncertain economic conditions. However, in the Asia-Pacific region we expect our operations to benefit from economic growth and new infrastructure investment, albeit at slower growth rates than in recent history.
 
“Coatings segment results will be mostly driven by economic conditions in North America and industrial demand in the Asia-Pacific region.”
 
An audio discussion of Valmont’s third quarter results by Mogens C. Bay, Chairman and Chief Executive Officer and Terry J. McClain, Senior Vice President and Chief Financial Officer, will be available live by telephone by dialing 1-877-493-2981 and entering Conference ID#: 36684177 or via the Internet at 8:00 a.m. CDT October 14, 2011, by pointing browsers to: http://www.valmont.com/page.aspx?id=445&pid=21 After the event, you may listen by accessing the above link or by telephone. Dial 1-800-642-1687 or 706-645-9291, and enter the Conference ID#: 36684177 beginning October 14, 2011 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 21, 2011.
 
Valmont is the global leader in designing and manufacturing poles, towers and structures for lighting and traffic, wireless communication and utility markets, industrial access systems, highway safety barriers and a provider of protective coating services. Valmont also leads the world in mechanized irrigation equipment for agriculture, enhancing food production while conserving and protecting natural water resources.
 
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.
 
 
 


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
               
 
Third Quarter
  
Year-to-Date
 
13 Weeks Ended
  
39 Weeks Ended
 
24-Sep-11
  
25-Sep-10
  
24-Sep-11
  
25-Sep-10
Net sales
 $    672,192
  
 $     527,831
  
 $  1,908,750
  
 $  1,376,792
Cost of sales
       504,802
  
        395,310
  
     1,436,885
  
     1,014,895
          Gross profit
       167,390
  
        132,521
  
        471,865
  
        361,897
Selling, general and administrative expenses
         95,357
  
          85,378
  
        285,912
  
        245,803
          Operating income
         72,033
  
          47,143
  
        185,953
  
        116,094
Other income (expense)
              
     Interest expense
         (7,671)
  
           (8,487)
  
         (26,715)
  
         (22,878)
     Interest income
           3,141
  
            1,733
  
            6,919
  
            3,181
     Other
         (1,670)
  
                 58
  
              (776)
  
                 28
 
         (6,200)
  
           (6,696)
  
         (20,572)
  
         (19,669)
          Earnings before income taxes, noncontrolling
              
          interest, and equity in earnings of
              
          nonconsolidated subsidiaries
         65,833
  
          40,447
  
        165,381
  
          96,425
Income tax expense
         23,773
  
          13,780
  
          50,612
  
          34,908
          Earnings before noncontrolling interest, equity in
              
          earnings of nonconsolidated
              
          subsidiaries
         42,060
  
          26,667
  
        114,769
  
          61,517
Earnings (losses) in nonconsolidated subsidiaries
           2,354
  
            1,068
  
            4,509
  
            1,987
          Net earnings
         44,414
  
          27,735
  
        119,278
  
          63,504
Less:  Earnings attributable to noncontrolling interests
         (2,273)
  
           (1,800)
  
           (5,701)
  
           (3,991)
          Net earnings attributable to Valmont Industries, Inc.
 $      42,141
  
 $       25,935
  
 $     113,577
  
 $       59,513
               
               
Average shares outstanding (000's) - Basic
         26,351
  
          26,133
  
          26,318
  
          26,084
Earnings per share - Basic
 $          1.60
  
 $           0.99
  
 $           4.32
  
 $           2.28
               
Average shares outstanding (000's) - Diluted
         26,579
  
          26,404
  
          26,567
  
          26,420
Earnings per share - Diluted
 $          1.59
  
 $           0.98
  
 $           4.28
  
 $           2.25
               
Cash dividends per share
 $        0.180
  
 $         0.165
  
 $         0.525
  
 $         0.480
               

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
               
 
Third Quarter
  
Year-to-Date
 
13 Weeks Ended
  
39 Weeks Ended
 
24-Sep-11
  
25-Sep-10
  
24-Sep-11
  
25-Sep-10
               
Net sales
              
     Engineered Infrastructure Products
 $    222,243
  
 $     197,601
  
 $     597,590
  
 $     467,959
     Utility Support Structures
       159,815
  
        122,241
  
        422,022
  
        350,307
     Coatings
         80,806
  
          75,665
  
        238,417
  
        158,036
        Infrastructure products
       462,864
  
        395,507
  
     1,258,029
  
        976,302
               
     Irrigation
       150,618
  
          88,255
  
        485,367
  
        309,053
     Other
         88,870
  
          61,328
  
        246,977
  
        131,613
     Less: Intersegment sales
       (30,160)
  
         (17,259)
  
         (81,623)
  
         (40,176)
          Total
 $    672,192
  
 $     527,831
  
 $  1,908,750
  
 $  1,376,792
               
Operating Income
              
     Engineered Infrastructure Products
 $      17,189
  
 $       17,169
  
 $       30,907
  
 $       31,862
     Utility Support Structures
         14,731
  
            9,740
  
          41,214
  
          36,988
     Coatings
         14,238
  
          13,577
  
          39,600
  
          27,993
        Infrastructure products
         46,158
  
          40,486
  
        111,721
  
          96,843
               
     Irrigation
         23,765
  
          10,590
  
          80,623
  
          42,584
     Other
         12,607
  
            7,124
  
          32,901
  
          20,096
     Corporate
       (10,497)
  
         (11,057)
  
         (39,292)
  
         (43,429)
          Total
 $      72,033
  
 $       47,143
  
 $     185,953
  
 $     116,094
               

Valmont has aggregated its business segments into four reportable segments as follows.
 
Engineered Infrastructure Products: This segment consists of the manufacture of engineered metal structures and components for global lighting and traffic, wireless communication, roadway safety and access systems applications.
 
Utility Support Structures: This segment consists of the manufacture of engineered steel and concrete structures for the global utility industry.
 
Coatings: This segment consists of global galvanizing, painting and anodizing services.
 
Irrigation: This segment consists of the manufacture of agricultural irrigation equipment and related parts and services worldwide.
 
In the fourth quarter of 2010, the Company reorganized its management structure in line with its current reporting structure. Delta's galvanizing operations are included in the Coatings segment and Delta's pole sand roadway safety structure and access systems are included in the Engineered Infrastructure Products segment. Delta's forged steel grinding media and electrolytic manganese dioxide operations are classified as "Other". Fiscal 2010 figures have been reclassified to conform to the 2011 presentation.
 
In addition to these four reportable segments, Valmont also has other businesses that individually are not more than 10% of consolidated net sales. These businesses, which include the manufacture of forged steel grinding media, tubular products, electrolytic manganese dioxide and industrial fasteners, are reported in the "Other" category.
 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
       
 
24-Sep-11
  
25-Sep-10
ASSETS
      
Current assets:
      
     Cash and cash equivalents
 $     336,908
  
 $     323,150
     Accounts receivable, net
        449,431
  
        400,683
     Inventories
        377,525
  
        296,335
     Prepaid expenses
          28,832
  
          29,731
     Refundable and deferred income taxes
          35,216
  
          35,576
          Total current assets
     1,227,912
  
     1,085,475
Property, plant and equipment, net
        437,139
  
        434,456
Goodwill and other assets
        544,126
  
        539,439
 
 $  2,209,177
  
 $  2,059,370
       
LIABILITIES AND SHAREHOLDERS' EQUITY
      
Current liabilities:
      
     Current installments of long-term debt
 $            236
  
 $            243
     Notes payable to banks
          11,022
  
          14,449
     Accounts payable
        221,909
  
        179,131
     Accrued expenses
        158,236
  
        164,729
     Dividend payable
            4,760
  
            4,348
          Total current liabilities
        396,163
  
        362,900
Long-term debt, excluding current installments
        494,775
  
        482,932
Other long-term liabilities
        254,990
  
        276,954
Shareholders' equity
     1,063,249
  
        936,584
 
 $  2,209,177
  
 $  2,059,370
         



VALMONT INDUSTRIES INC Reports