VALMONT INDUSTRIES INC - FORM 8-K - EX-99.1 - April 19, 2012

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News Release
For Immediate Release
Contact:  Jeff Laudin
April 19, 2012
Phone:  402-963-1158
  
Fax:  402-963-1198
  
   
   
Valmont Announces First Quarter Results
 
Highlights:
 
·  
Net Income doubled on a 26% sales increase.
 
·  
First quarter Utility Support Structures Segment sales rose 52%, operating income increased 86%.
 
·  
First quarter Irrigation Segment sales improved 30%, operating income increased 61%.
 
·  
Coatings Segment sales rose 13%, operating income increased 60%.
 
·  
Operating income improved in the Engineered Infrastructure Products Segment on a 17% increase in sales.
 
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global manufacturer of engineered products for infrastructure, mechanized irrigation equipment for agriculture, and a provider of coating services, reported sales for the first quarter of $717.4 million compared with $567.9 million for the same period of 2011. First quarter 2012 operating income was $82.8 million versus $45.3 million in 2011. First quarter 2012 net earnings were $52.3 million, or $1.96 per diluted share, versus first quarter 2011 net earnings of $25.6 million, or $0.97 per diluted share.
 
First Quarter Review:
 
“Record first quarter sales of both irrigation equipment and utility structures were the primary drivers of first quarter results,” said Mr. Bay. “This, combined with favorable weather conditions, stable input costs and double-digit sales growth in all of our segments resulted in a record first quarter performance.
 
“Profitability in the Irrigation Segment benefited from volume leverage and improved manufacturing productivity. While volumes and profitability in the Utility Support Structures Segment rose significantly, margins continue to reflect competitive pricing on large project shipments. The operating performance of the Engineered Infrastructure Products Segment improved as a result of better performance in the North American and Asia-Pacific regions. However, in general, the demand for lighting and traffic products still suffers from the lack of a long-term U.S. highway bill and the restraint in government spending in many parts of the world. In the Coatings Segment, the quality of operating results improved due to volume leverage and increased productivity. Financial results in the businesses classified in “Other” improved as well.
 
“The positive impact of volume leverage on our businesses resulted in a substantial improvement in operating income as a percent of sales.”
 
First Quarter Segment Review:
 
Utility Support Structures Segment (26% of 1st Quarter Sales)
Steel and concrete structures for the global electric utility industry.
 
Sales of $191.2 million were 52% higher than 2011. The sales increase reflects large project demand to upgrade the North American transmission grid. In addition, unseasonably mild weather in North America contributed to a favorable environment for production and shipping during the quarter.
 
The need to add capacity and improve the reliability of the North American electrical transmission grid continues to drive demand for utility transmission structures. A period of underinvestment in transmission capacity in North America followed by a period of rapid economic growth in the 1990s resulted in the need for transmission infrastructure improvements to better support increased electricity demand. In addition, occasional outages within the grid highlighted vulnerabilities to its reliability. Provisions of the 2005 Energy bill were designed to address these shortcomings, which have led to utilities increasing their investment in transmission infrastructure. We believe the current demand for large project orders is part of a longer cycle of investment that will lead to thousands of new miles being added to the transmission grid over the next 10 years. This trend supports a positive long-term outlook for our utility business.
 
Sales in international utility markets were lower, as increased sales in the Asia-Pacific region were more than offset by lower project sales to emerging markets.
 
Operating income increased 86% to $25.1 million and was 13.1% of sales. The increase in operating income was due to the positive impact of volumes and the associated operating leverage.
 
Irrigation Segment (27% of 1st Quarter Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
 
Sales rose 30% to $196.3 million, reflecting favorable drivers in the agricultural economy: The outlook for farm income continues to be strong. Crop commodity prices remained at high levels during the first quarter. Dry weather in the Midwest agricultural regions of North America heightened concerns about soil moisture levels for the upcoming planting season. This, along with the drivers of improved productivity and water conservation, led to increased purchases of irrigation equipment.
 
International markets experienced modest growth in sales with most regions showing increases.
 
Operating income grew 61% to $38.4 million and was 19.6% of segment sales. The improvement in operating income was the result of lower input costs, increased productivity and volume leverage.
 

 
 
 

Engineered Infrastructure Products Segment (26% of 1st Quarter Sales)
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
 
First quarter sales were $197.9 million, a 17% increase over 2011. In North America, commercial lighting product sales rose. Transportation lighting and traffic product sales were higher, in part reflecting the positive impact of mild winter weather conditions. Sales of wireless communication structures and components also rose.
 
In international markets, European lighting and traffic structures market conditions remained challenging.
 
In the Asia-Pacific region, sales of Webforge branded industrial gratings and access systems rose, supported by continued investment in the mining and industrial economies in the region. Highway safety product sales were higher in Australia. Sales of wireless communication and lighting products were flat in China.
 
Operating income increased more than threefold to $8.0 million, or 4.1% of segment sales. Increased sales and the associated operating leverage led to the improvement in profitability.
 
Coatings Segment (11% of 1st Quarter Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
 
Sales of $82.8 million were 13% greater than last year. The increase in demand was broad-based and evident in both North American and Australian markets. The effects of a modest economic recovery in North American markets, with an accompanying increase in industrial production, were favorable drivers for galvanizing demand. Industrial activity in the Asia-Pacific region was higher than last year, when severe weather conditions disrupted demand in Australia.
 
Operating income increased 60% to $16.5 million or 19.9% of segment sales as a result of higher volumes, improved productivity and somewhat lower input costs.
 
Outlook:
 
“Presently the drivers for our Utility Support Structures Segment are particularly strong, said Mr. Bay. “We expect utility demand to increase and margins to improve modestly as the year progresses. In the Engineered Infrastructure Products Segment, the environment for lighting and traffic products is not as favorable. Prospects for passage of a new U.S. highway bill appear to have been deferred until after the U.S. election in November, and the markets in Europe continue to be challenging. However, we are pleased with the improved quality of profitability in this segment, and expect continued improvement in the quality of segment profitability as the year progresses. The macroeconomic environment for the Irrigation Segment continues to be strong. The results for the second half of the year will largely depend on the outlook for the farm economy at that time. We expect the quality of the operating performance in the Coatings Segment to remain strong for the remainder of the year.
 
“In light of the strong first quarter results, and the factors outlined above, we are increasing our earnings outlook for the year and now expect earnings to exceed $8.00 per diluted share.”
 
An audio discussion of Valmont’s first 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#: 30179003 or via the Internet at 8:00 a.m. CDT April 20, 2012, 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#: 30179003 beginning April 20, 2012 at 10:00 a.m. CDT through 12:00 p.m. CDT on April 27, 2012.
 
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. In addition, Valmont produces a wide variety of tubing for commercial and industrial applications.
 
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 EARNINGS
(Dollars in thousands, except per share amounts)
(unaudited)
       
 
First Quarter
 
13 Weeks Ended
 
31-Mar-12
  
26-Mar-11
Net sales
 $    717,350
  
 $     567,949
Cost of sales
       531,036
  
        431,456
          Gross profit
       186,314
  
        136,493
Selling, general and administrative expenses
       103,496
  
          91,192
          Operating income
         82,818
  
          45,301
Other income (expense)
      
     Interest expense
         (7,807)
  
           (8,271)
     Interest income
           2,078
  
            1,787
     Other
           1,577
  
               390
 
         (4,152)
  
           (6,094)
          Earnings before income taxes, noncontrolling
      
          interest, and equity in earnings of
      
          nonconsolidated subsidiaries
         78,666
  
          39,207
Income tax expense
         27,766
  
          13,288
          Earnings before noncontrolling interest, equity in
      
          earnings of nonconsolidated
      
          subsidiaries
         50,900
  
          25,919
Equity in earnings of nonconsolidated subsidiaries
           1,688
  
               954
          Net earnings
         52,588
  
          26,873
Less:  Earnings attributable to noncontrolling interests
            (263)
  
           (1,264)
          Net earnings attributable to Valmont Industries, Inc.
 $      52,325
  
 $       25,609
       
       
Average shares outstanding (000's) - Basic
         26,396
  
          26,271
Earnings per share - Basic
 $          1.98
  
 $           0.98
       
Average shares outstanding (000's) - Diluted
         26,678
  
          26,537
Earnings per share - Diluted
 $          1.96
  
 $           0.97
       
Cash dividends per share
 $        0.180
  
 $         0.165
       

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
       
 
First Quarter
 
13 Weeks Ended
 
31-Mar-12
  
26-Mar-11
Sales
      
     Engineered Infrastructure Products
 $    197,899
  
 $     168,930
     Utility Support Structures
       191,232
  
        125,647
     Coatings
         82,847
  
          73,450
     Irrigation
       196,266
  
        151,048
     Other
         86,063
  
          73,986
          Total
       754,307
  
        593,061
       
Intersegment sales
      
     Engineered Infrastructure Products
       (12,392)
  
           (5,944)
     Utility Support Structures
         (1,980)
  
              (308)
     Coatings
       (12,697)
  
         (11,505)
     Irrigation
            (425)
  
                  (3)
     Other
         (9,463)
  
           (7,352)
          Total
       (36,957)
  
         (25,112)
       
Net sales
      
     Engineered Infrastructure Products
       185,507
  
        162,986
     Utility Support Structures
       189,252
  
        125,339
     Coatings
         70,150
  
          61,945
     Irrigation
       195,841
  
        151,045
     Other
         76,600
  
          66,634
          Total
 $    717,350
  
 $     567,949
       
Operating Income
      
     Engineered Infrastructure Products
 $        8,024
  
 $         2,203
     Utility Support Structures
         25,104
  
          13,499
     Coatings
         16,512
  
          10,292
     Irrigation
         38,408
  
          23,894
     Other
         11,411
  
            8,914
     Corporate
       (16,641)
  
         (13,501)
          Total
 $      82,818
  
 $       45,301
       

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 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)
       
 
31-Mar-12
  
26-Mar-11
ASSETS
      
Current assets:
      
     Cash and cash equivalents
 $    339,568
  
 $     358,271
     Accounts receivable, net
       450,280
  
        425,853
     Inventories
       440,600
  
        323,964
     Prepaid expenses
         27,881
  
          29,438
     Refundable and deferred income taxes
         42,263
  
          30,858
          Total current assets
    1,300,592
  
     1,168,384
Property, plant and equipment, net
       469,332
  
        442,959
Goodwill and other assets
       613,045
  
        568,200
 
 $ 2,382,969
  
 $  2,179,543
       
LIABILITIES AND SHAREHOLDERS' EQUITY
      
Current liabilities:
      
     Current installments of long-term debt
 $           264
  
 $            272
     Notes payable to banks
         12,293
  
            9,911
     Accounts payable
       235,743
  
        206,768
     Accrued expenses
       151,386
  
        137,589
     Dividend payable
           4,778
  
            4,358
          Total current liabilities
       404,464
  
        358,898
Long-term debt, excluding current installments
       474,015
  
        484,548
Other long-term liabilities
       223,487
  
        282,640
Shareholders' equity
    1,281,003
  
     1,053,457
 
 $ 2,382,969
  
 $  2,179,543
       

 


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