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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%.

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OMAHA, Neb., July 24, 2012 /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 $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


Year-to-Date



13 Weeks Ended


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


Year-to-Date



13 Weeks Ended


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

SOURCE Valmont Industries, Inc.



RELATED LINKS
http://www.valmont.com

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