VALMONT INDUSTRIES INC - FORM 8-K - EX-99.1 - July 24, 2012

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News Release
For Immediate Release
   
Contact:  Jeff Laudin
July 24, 2012
Phone:  402-963-1158
  
Fax:  402-963-1198
  
   
   
   
Valmont Announces Second Quarter Results
 
Highlights:
 
·  
Net earnings increased 31% on a 14.8% increase in sales.
 
·  
Second quarter results driven by substantial increase in Utility Support Structures Segment sales and operating income.
 
·  
Total operating income as a percent of sales increased from 10.3% to 12.7%.
 
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 second quarter of $767.3 million compared with $668.6 million for the same period of 2011. Second quarter 2012 operating income was $97.4 million versus $68.6 million in 2011. Second quarter 2012 net earnings were $60.0 million, or $2.24 per diluted share, versus second quarter 2011 net earnings of $45.8 million, or $1.72 per diluted share.
 
For the first six months of 2012, sales were $1,484.7 million versus $1,236.6 million in 2011. Valmont’s first half net earnings were $112.3 million, or $4.20 per diluted share, compared with 2011 first half net earnings of $71.4 million, or $2.69 per diluted share.
 
Second Quarter Review:
 
“Led by a substantial sales increase in the Utility Support Structures Segment, all segments had positive sales comparisons for the quarter,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “Operating income as a percent of sales rose 2.4 percentage points to 12.7%. Volume and SG&A leverage combined with lower input costs drove the improvement in operating income,” added Mr. Bay.
 
Second Quarter Segment Review:
 
Utility Support Structures Segment (28% of 2nd Quarter Sales)
 
Steel and concrete structures for the global electric utility industry.
 
Sales of $212.2 million were 55% higher than the second quarter of 2011. The sales growth resulted from broad-based demand from electric utility companies increasing their investment in the North American transmission grid.
 
The North American electrical transmission grid needs additional capacity to facilitate interconnections between different utilities, relieve capacity constraints and connect new generating capacity from alternative energy sources. To achieve these objectives, utility companies are undertaking multi-year projects to build out the transmission grid. The additional capacity will also improve reliability. It is estimated that over seventeen thousand miles in new large projects are already planned by major utilities to expand the transmission grid over the next 10 years.
 
Sales in international utility markets were comparable to last year, with improved sales in the Asia-Pacific region offset by lower sales in Europe.
 
Operating income more than doubled to $26.6 million and was 12.5% of segment sales. The increase in operating income was due to the positive impact of volumes and the associated operating leverage, offset in part by unfavorably priced orders taken between 2010 and 2011, and the additional costs incurred to complete certain orders.
 
Irrigation Segment (25% of 2nd Quarter Sales)
 
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
 
Sales rose 6% to $194.5 million surpassing last year’s record second quarter and bringing the year to date sales growth to 17%. Sales revenue increases occurred in both North American and international markets, supported by positive fundamental drivers in the global agricultural economy. Population growth and diets richer in protein have led to an increase in the global demand for feed-grains. This has supported grain prices, resulting in near record levels of farm income in the U.S. Farmers around the world seeking to improve productivity continue to invest in efficient irrigation equipment to increase production. Productivity is improved with mechanized irrigation equipment as yields increase while water use decreases compared with flood irrigation methods.
 
Operating income grew 14% to a second quarter record of $37.6 million and was 19.3% of segment sales.
 
Engineered Infrastructure Products Segment (29% of 2nd Quarter Sales)
 
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
 
Second quarter sales were $225.8 million, a 9% increase over 2011. In North America, commercial lighting product sales rose. Transportation lighting and traffic product sales also increased mostly due to improved market conditions in Canada. There was a substantial increase in the sales of wireless communication structures and components compared with last year. Sales increases were further supported by internal demand from the Utility Support Structures Segment.
 
Despite difficult market conditions in Europe, sales of lighting and traffic structures were comparable to last year. Total European sales declined due to the exit in 2011 of certain operations.
 
In the Asia-Pacific region, sales of Engineered Infrastructure Products increased led by improved sales of Webforge branded engineered access systems. The Australian markets remain strong, driven in part by demand from the natural resources economy. Increased market activity in Southeast Asia and China provided further sales gains.
 
Operating income increased 23% to $14.2 million, or 6.3% of segment sales. Increased sales and the associated operating leverage led to the improvement in profitability.
 
Coatings Segment (11% of 2nd Quarter Sales)
 
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
 
Sales of $84.8 million were comparable to last year reflecting record second quarter volumes in North America, offsetting lower volumes in the Asia-Pacific region. North American demand was broad-based and was further supported by increased internal demand from the Utility Support Structures Segment.
 
Operating income increased 30% to $19.5 million or 23.0% of segment sales as a result of lower costs combined with volume and SG&A leverage in North America.
 
Outlook:
 
“We are maintaining our outlook for earnings to exceed $8.00 per diluted share this year,” said Mr. Bay.
 
“A major driver of our outlook is the strength of the utility market. To continue to fully participate in the significant opportunity in the North American utility market, we are currently adding capacity that will come on line during the next year. In the Engineered Infrastructure Products Segment, the passage of a two-year highway bill is a necessary precursor to improved traffic lighting market conditions in the United States, but will not alter the near-term outlook. We are encouraged by improvements in other structural markets in North America. In Europe, while market conditions remain challenging, our total exposure is relatively small. In the Asia Pacific region, the Australian natural resources economy continues to support a positive outlook, while in China, a slowing of the economic growth rate may lead to an increasingly competitive environment. The macroeconomic environment for the global Irrigation Segment is strong. Today, crops in North America are being stressed by lack of moisture. While drought is typically a positive driver, it remains too early to adequately gauge how second half revenues will compare with last year’s record second half sales. We expect the positive environment in the Coatings Segment to continue.
 
“Over the long-term, investing in infrastructure is crucial to economic development. Additionally, to keep up with the world’s growing food demand, agriculture must become more productive, particularly in its use of water. Valmont is uniquely positioned to participate in these enduring global opportunities,” added Mr. Bay.”
 
An audio discussion of Valmont’s second 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#: 30185161 or via the Internet at 8:00 a.m. CDT July 25, 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 1-855-859-2056 or 404-537-3406, and enter the Conference ID#: 30185161 beginning July 25, 2012 at 10:00 a.m. CDT through 12:00 p.m. CDT on Aug 01, 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)
               
 
Second Quarter
13 Weeks Ended
  
Year-to-Date
26 Weeks Ended
 
30-Jun-12
  
25-Jun-11
  
30-Jun-12
  
25-Jun-11
Net sales
 $    767,315
  
 $     668,609
  
 $  1,484,665
  
 $  1,236,558
Cost of sales
       567,920
  
        500,627
  
     1,098,956
  
        932,083
          Gross profit
       199,395
  
        167,982
  
        385,709
  
        304,475
Selling, general and administrative expenses
       102,043
  
          99,363
  
        205,539
  
        190,555
          Operating income
         97,352
  
          68,619
  
        180,170
  
        113,920
Other income (expense):
              
     Interest expense
         (7,421)
  
         (10,783)
  
         (15,228)
  
         (19,044)
     Interest income
           1,910
  
            2,001
  
            3,988
  
            3,778
     Other
         (1,977)
  
                      504
  
              (400)
  
               894
 
         (7,488)
  
           (8,278)
  
         (11,640)
  
         (14,372)
          Earnings before income taxes and equity in
              
          earnings of nonconsolidated subsidiaries
         89,864
  
          60,341
  
        168,530
  
          99,548
Income tax expense
         30,792
  
          13,551
  
          58,558
  
          26,839
          Earnings before equity in earnings of
              
          nonconsolidated subsidiaries
         59,072
  
          46,790
  
        109,972
  
          72,709
Equity in earnings of nonconsolidated subsidiaries
           2,087
  
            1,201
  
            3,775
  
            2,155
          Net earnings
         61,159
  
          47,991
  
        113,747
  
          74,864
Less:  Earnings attributable to non-controlling interests
         (1,179)
  
           (2,164)
  
           (1,442)
  
           (3,428)
          Net earnings attributable to Valmont Industries, Inc.
 $      59,980
  
 $       45,827
  
 $     112,305
  
 $       71,436
               
               
Average shares outstanding (000's) - Basic
         26,467
  
          26,333
  
          26,432
  
          26,302
Earnings per share - Basic
 $          2.27
  
 $           1.74
  
 $           4.25
  
 $           2.72
               
Average shares outstanding (000's) - Diluted
         26,758
  
          26,585
  
          26,718
  
          26,561
Earnings per share - Diluted
 $          2.24
  
 $           1.72
  
 $           4.20
  
 $           2.69
               
Cash dividends per share
 $        0.225
  
 $         0.180
  
 $         0.405
  
 $         0.345
               

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
               
 
Second Quarter
13 Weeks Ended
  
Year-to-Date
26 Weeks Ended
 
30-Jun-12
  
25-Jun-11
  
30-Jun-12
  
25-Jun-11
               
Sales
              
     Engineered Infrastructure Products
 $    225,782
  
 $     206,417
  
 $     423,681
  
 $     375,347
     Utility Support Structures
       212,237
  
        136,560
  
        403,469
  
        262,207
     Coatings
         84,837
  
          84,161
  
        167,684
  
        157,611
     Irrigation
       194,496
  
        183,701
  
        390,762
  
        334,749
     Other
         87,194
  
          84,121
  
        173,257
  
        158,107
          Total
       804,546
  
        694,960
  
     1,558,853
  
     1,288,021
               
Intersegment sales
              
     Engineered Infrastructure Products
       (14,692)
  
           (5,480)
  
         (27,084)
  
         (11,424)
     Utility Support Structures
            (467)
  
           (1,951)
  
           (2,447)
  
           (2,259)
     Coatings
       (13,252)
  
         (10,926)
  
         (25,949)
  
         (22,431)
     Irrigation
                (6)
  
                  (5)
  
              (431)
  
                  (8)
     Other
         (8,814)
  
           (7,989)
  
         (18,277)
  
         (15,341)
          Total
       (37,231)
  
         (26,351)
  
         (74,188)
  
         (51,463)
               
Net sales
              
     Engineered Infrastructure Products
       211,090
  
        200,937
  
        396,597
  
        363,923
     Utility Support Structures
       211,770
  
        134,609
  
        401,022
  
        259,948
     Coatings
         71,585
  
          73,235
  
        141,735
  
        135,180
     Irrigation
       194,490
  
        183,696
  
        390,331
  
        334,741
     Other
         78,380
  
          76,132
  
        154,980
  
        142,766
          Total
 $    767,315
  
 $     668,609
  
 $  1,484,665
  
 $  1,236,558
               
Operating Income
              
     Engineered Infrastructure Products
 $      14,168
  
 $       11,515
  
 $       22,192
  
 $       13,718
     Utility Support Structures
         26,574
  
          12,984
  
          51,678
  
          26,483
     Coatings
         19,517
  
          15,070
  
          36,029
  
          25,362
     Irrigation
         37,607
  
          32,964
  
          76,015
  
          56,858
     Other
         12,259
  
          11,380
  
          23,670
  
          20,294
     Corporate
       (12,773)
  
         (15,294)
  
         (29,414)
  
         (28,795)
          Total
 $      97,352
  
 $       68,619
  
 $     180,170
  
 $     113,920
               
               
Valmont has aggregated its business segments into four reportable segments as follows.
 
Engineered Infrastructure Products: This segment consists of the manufacture of engineered 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)
       
 
30-Jun-12
  
25-Jun-11
ASSETS
      
Current assets:
      
     Cash and cash equivalents
 $     328,381
  
 $     326,790
     Accounts receivable, net
        489,371
  
        453,066
     Inventories
        441,296
  
        366,185
     Prepaid expenses
          29,772
  
          30,862
     Refundable and deferred income taxes
          43,999
  
          34,850
          Total current assets
     1,332,819
  
     1,211,753
Property, plant and equipment, net
        465,692
  
        448,017
Goodwill and other assets
        598,238
  
        563,510
 
 $  2,396,749
  
 $  2,223,280
       
LIABILITIES AND SHAREHOLDERS' EQUITY
      
Current liabilities:
      
     Current installments of long-term debt
 $            248
  
 $            272
     Notes payable to banks
          17,374
  
          11,415
     Accounts payable
        222,216
  
        237,688
     Accrued expenses
        155,951
  
        141,268
     Dividend payable
            5,985
  
            4,757
          Total current liabilities
        401,774
  
        395,400
Long-term debt, excluding current installments
        473,592
  
        489,130
Other long-term liabilities
        213,544
  
        262,923
Shareholders' equity
     1,307,839
  
     1,075,827
 
 $  2,396,749
  
 $  2,223,280
       

 


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