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Valmont Announces Record Second Quarter Results

July 14, 2011

OMAHA, Neb., July 14, 2011 /PRNewswire/ — 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 $668.6 million compared with $481.6 million for the same period of 2010. Second quarter 2011 net earnings were $45.8 million, or $1.72 per diluted share, versus second quarter 2010 net earnings of $17.1 million, or $0.65 per diluted share, which included $0.45 per share of deal and financing expenses related to the Delta acquisition in 2010. Diluted earnings per share for second quarter 2011, adjusted for non-recurring second quarter items of $3.7 million, or $0.14 per share is reconciled for Regulation G purposes on the table following the balance sheet.

Second Quarter Review:

“Record quarterly sales in the Irrigation Segment were a significant driver of second quarter performance,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “In the Utility Support Structures Segment, substantially higher North American sales more than offset lower international sales. Increased sales in the Engineered Infrastructure Products Segment mostly reflect the contribution of Delta. Coatings Segment sales increased due to the additional Delta locations plus volume gains in North America.

“During the quarter, we acquired the 40% of Donhad that we did not own. Donhad is an Australian grinding media business with annual revenues of approximately $160.0 million serving the mining industry.

“Despite inflationary raw material cost pressures, weak market conditions for our Engineered Infrastructure Products Segment and a competitive pricing environment in many of our businesses, operating income as a percent of sales was double digit for the quarter.”

Second Quarter Segment Review:

Irrigation Segment (28% of 2nd Quarter Sales)

Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.

Sales increased 64% over 2010 to $183.7 million. Demand was broad-based in both North American and international markets. Diminished buffer stocks of grain, coupled with strong demand supported crop prices for most of 2011. As a result, farm income in 2011 is expected to be at record levels. These conditions supported increased investment in mechanized irrigation equipment, including on non-irrigated farms and conversion of gravity-flow irrigated farms.

Global population growth and improved diets place greater demands on agriculture to increase production. Water conservation is a global issue encouraging growers to install center pivot technology to enhance productivity and conserve water, which is supportive of a positive long-term outlook for mechanized irrigation equipment sales.

Operating income nearly doubled to $33.0 million and was 17.9% of segment sales. The increase in operating income was driven by a volume increase and operational leverage, that together more than offset higher raw material costs.

Utility Support Structures Segment (20% of 2nd Quarter Sales)

Steel and concrete structures for the global electric utility industry.

Sales of $136.6 million were 19% above 2010. North American sales were significantly higher, while international sales declined. Last year, international utility sales benefitted from a large project in an emerging market. The contribution to utility sales from Delta was minor.

Order intake activity in North America has accelerated, which reflects the resumption of certain transmission projects deferred by utility companies in 2010, plus new projects under development.

Operating income rose 4% to $13.0 million and was 9.5% of segment sales. The decline in operating income as a percent of sales reflects the reduced international activity leading to an overall decline in margins. North American shipments during the quarter reflect orders taken when pricing was particularly unfavorable.

Engineered Infrastructure Products Segment (31% 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 $206.4 million, a 25% increase over 2010. North American lighting and traffic product sales declined due to the lack of a long-term U.S. highway bill, tight state and municipal budgets and weak Canadian markets. International lighting sales were higher overall, with some regions still benefitting from stimulus programs.

Global sales of wireless communication products increased due to improved demand in North America.

The highway safety products, engineered access system and structures businesses acquired from Delta contributed $28.3 million to the increase in 2011 revenue. In general, business conditions in Australia and Southeast Asia were slightly weaker than last year.

Operating income fell 5% to $11.5 million or 5.6% of segment sales. A decline in operating income as a percent of sales reflects higher input costs coupled with a weaker pricing environment, particularly in the North American and European lighting markets, which pressured gross margins.

Coatings Segment (13% of 2nd Quarter Sales)

Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.

Sales of $84.2 million were 55% higher than last year. The increase in sales reflects the addition of $24.7 million of Delta sales, broad-based industrial demand, and greater internal utility and irrigation volumes. Positive conditions in the agricultural and industrial economies where Valmont has galvanizing presence also supported North American sales. In Australia and Southeast Asia, galvanizing volumes also increased.

Operating income increased 53% to $15.1 million, or 17.9% of segment sales. The Delta businesses contributed $4.4 million to the increase in operating income.

Included in “Other” are tubing, grinding media and electrolytic manganese businesses. The increase in sales and operating income mainly reflects the addition of the Delta businesses acquired in 2010.

2011 Outlook:

“We are raising our earnings outlook for the year,” Mr. Bay said. “In light of improving demand for utility structures, strength in the irrigation market and expectations of better operational performance in the Engineered Infrastructure Products segment, we now expect reported earnings in the range of $5.70 to $5.90 per share.

“The long-term outlook for our businesses continues to be positive. Economic growth is supported by global investing in quality infrastructure. A growing world population will need more efficient production agriculture to support rising food demand. We believe our geographic mix and product diversification positions us well to benefit from future global economic growth, positive trends in agriculture, and investments in infrastructure.”

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#: 36683171 or via the Internet at 8:00 a.m. CDT July 15, 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#: 36683171 beginning July 15, 2011 at 10:00 a.m. CDT through 12:00 p.m. CDT on July 22, 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. 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 OPERATIONS
                         (Dollars in thousands, except per share amounts)
                                           (unaudited)
                                                      Second Quarter
                                                      13 Weeks Ended
                                                      --------------
                                              25-Jun-11         26-Jun-10
                                              ---------         ---------
    Net sales                                   $668,609          $481,559
    Cost of sales                                500,627           352,913
                                                 -------           -------
              Gross profit                       167,982           128,646
    Selling, general and
     administrative expenses                      99,363            91,345
                                                  ------            ------
              Operating income                    68,619            37,301
                                                  ------            ------
    Other income (expense)
         Interest expense                        (10,773)           (8,429)
         Interest income                           1,991             1,092
         Other                                       504                47
                                                  (8,278)           (7,290)
                                                  ------            ------
              Earnings before income taxes,
               noncontrolling
              interest, and equity in
               earnings of
              nonconsolidated subsidiaries        60,341            30,011
    Income tax expense                            13,551            11,682
                                                  ------            ------
              Earnings before noncontrolling
               interest, equity in
              earnings of nonconsolidated
              subsidiaries                        46,790            18,329
    Earnings (losses) in
     nonconsolidated subsidiaries                  1,201               805
                                                   -----               ---
              Net earnings                        47,991            19,134
    Less:  Earnings attributable to
     noncontrolling interests                     (2,164)           (2,019)
                                                  ------            ------
              Net earnings attributable to
               Valmont Industries, Inc.          $45,827           $17,115
                                                 =======           =======

    Average shares outstanding
     (000's) -Basic                               26,333            26,087
                                                  ======            ======
    Earnings per share - Basic                     $1.74             $0.66
                                                   =====             =====

    Average shares outstanding
     (000's) -Diluted                             26,585            26,448
                                                  ======            ======
    Earnings per share - Diluted                   $1.72             $0.65
                                                   =====             =====

    Cash dividends per share                      $0.180            $0.165
                                                  ======            ======


                                                          Year-to-Date
                                                         26 Weeks Ended
                                                         --------------
                                                   25-Jun-11       26-Jun-10
                                                   ---------       ---------
    Net sales                                      $1,236,558        $848,961
    Cost of sales                                     932,083         619,585
                                                      -------         -------
              Gross profit                            304,475         229,376
    Selling, general and administrative
     expenses                                         190,555         160,425
                                                      -------         -------
              Operating income                        113,920          68,951
                                                      -------          ------
    Other income (expense)
         Interest expense                             (19,044)        (14,391)
         Interest income                                3,778           1,448
         Other                                            894             (30)
                                                      (14,372)        (12,973)
                                                      -------         -------
              Earnings before income taxes,
               noncontrolling
              interest, and equity in earnings of
              nonconsolidated subsidiaries             99,548          55,978
    Income tax expense                                 26,839          21,128
                                                       ------          ------
              Earnings before noncontrolling
               interest, equity in
              earnings of nonconsolidated
              subsidiaries                             72,709          34,850
    Earnings (losses) in nonconsolidated
     subsidiaries                                       2,155             919
                                                        -----             ---
              Net earnings                             74,864          35,769
    Less:  Earnings attributable to
     noncontrolling interests                          (3,428)         (2,191)
                                                       ------          ------
              Net earnings attributable to Valmont
               Industries, Inc.                       $71,436         $33,578
                                                      =======         =======

    Average shares outstanding (000's) -
     Basic                                             26,302          26,059
                                                       ======          ======
    Earnings per share - Basic                          $2.72           $1.29
                                                        =====           =====

    Average shares outstanding (000's) -
     Diluted                                           26,561          26,434
                                                       ======          ======
    Earnings per share - Diluted                        $2.69           $1.27
                                                        =====           =====

    Cash dividends per share                           $0.345          $0.315
                                                       ======          ======

                         VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
                                 SUMMARY OPERATING RESULTS
                                   (Dollars in thousands)
                                        (unaudited)
                                              Second Quarter
                                              13 Weeks Ended
                                              --------------
                                      25-Jun-11         26-Jun-10
                                      ---------         ---------

    Net sales
         Engineered Infrastructure
          Products                      $206,417           $163,352
         Utility Support Structures      136,560            114,838
         Coatings                         84,161             54,441
                                          ------             ------
            Infrastructure products      427,138            332,631

         Irrigation                      183,701            112,159
         Other                            84,121             47,996
         Less: Intersegment sales        (26,351)           (11,227)
                                         -------            -------
              Total                     $668,609           $481,559
                                        ========           ========

    Operating Income
         Engineered Infrastructure
          Products                       $11,515            $12,082
         Utility Support Structures       12,984             12,542
         Coatings                         15,070              9,884
                                          ------              -----
            Infrastructure products       39,569             34,508

         Irrigation                       32,964             16,596
         Other                            11,380              8,708
         Corporate                       (15,294)           (22,511)
                                         -------            -------
              Total                      $68,619            $37,301
                                         =======            =======


                                               Year-to-Date
                                              26 Weeks Ended
                                              --------------
                                       25-Jun-11         26-Jun-10
                                       ---------         ---------

    Net sales
         Engineered Infrastructure
          Products                        $375,347         $270,358
         Utility Support Structures        262,207          228,066
         Coatings                          157,611           82,371
                                           -------           ------
            Infrastructure products        795,165          580,795

         Irrigation                        334,749          220,798
         Other                             158,107           70,285
         Less: Intersegment sales          (51,463)         (22,917)
                                           -------          -------
              Total                     $1,236,558         $848,961
                                        ==========         ========

    Operating Income
         Engineered Infrastructure
          Products                         $13,718          $14,693
         Utility Support Structures         26,483           27,248
         Coatings                           25,362           14,416
                                            ------           ------
            Infrastructure products         65,563           56,357

         Irrigation                         56,858           31,994
         Other                              20,294           12,972
         Corporate                         (28,795)         (32,372)
                                           -------          -------
              Total                       $113,920          $68,951
                                          ========          =======


    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". It was not necessary to
     reclassify the 2010 figures 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)
                                          25-Jun-11          26-Jun-10
                                          ---------          ---------
    ASSETS
    ------
    Current assets:
         Cash and cash equivalents          $326,790           $314,373
         Accounts receivable, net            453,066            376,005
         Inventories                         366,185            296,634
         Prepaid expenses                     30,862             39,943
         Refundable and deferred income
          taxes                               34,850             35,930
                                              ------             ------
              Total current assets         1,211,753          1,062,885
    Property, plant and equipment,
     net                                     448,017            425,134
    Goodwill and other assets                563,510            541,538
                                             -------            -------
                                          $2,223,280         $2,029,557
                                          ==========         ==========

    LIABILITIES AND SHAREHOLDERS'
     EQUITY
    -----------------------------
    Current liabilities:
         Current installments of long-
          term debt                             $272               $270
         Notes payable to banks               11,415              9,752
         Accounts payable                    237,687            202,587
         Accrued expenses                    144,068            143,634
         Dividend payable                      4,757              4,346
                                               -----              -----
              Total current liabilities      398,199            360,589
    Long-term debt, excluding
     current installments                    489,130            517,913
    Other long-term liabilities              262,923            271,801
    Shareholders' equity                   1,073,028            879,254
                                           ---------            -------
                                          $2,223,280         $2,029,557
                                          ==========         ==========


                VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
    SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED
                                 RESULTS
                       REGULATION G RECONCILIATION
                         (Dollars in thousands)
                               (unaudited)
    Non-recurring items listed below relate to: a one-time expense
    related to a bond refinancing, a one-time tax benefit associated
    with the Donhad acquisition, and a decrease in an uncertain tax
    position.
                                     Net earnings
                                    attributable to
                                        Valmont             Diluted
                                      Industries,        earnings per
                                         Inc.                share
    As Reported                            $45,827                1.72

    After-tax effect of
     refinancing                             1,722                0.06

    Donhad tax benefit                      (4,058)              -0.15

    Net tax contingency
     adjustment                             (1,380)              -0.05

    Adjusted                               $42,111               $1.58

SOURCE Valmont Industries, Inc.


Source: newswire



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