Valmont Announces Third Quarter Results

Highlights:

- Substantial decline in Utility Support Structures Segment sales and operating income.

- The Delta Segment contributed $131.4 million to sales and $8.2 million to operating income in the third quarter, net of approximately $4 million of acquisition related amortization expenses.

- Irrigation Segment revenue rose 17% and operating income grew 90%, largely driven by increases in international sales.

- Engineered Support Structures Segment sales and operating income pressured by lower global government spending on infrastructure, and weaker wireless communication structures sales.

- Coatings Segment revenue increased 19% and operating income increased 14%.

Oct 14, 2010, 18:15 ET from Valmont Industries, Inc.

 

OMAHA, Neb., Oct. 14 /PRNewswire-FirstCall/ -- 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 net sales for the third quarter of $527.8 million compared with $434.0 million for the same period of 2009. Third quarter 2010 net earnings were $25.9 million, or $0.98 per diluted share, versus third quarter 2009 net earnings of $40.5 million, or $1.53 per diluted share.

For the first nine months of 2010, net sales were $1,376.8 million versus $1,388.0 million in 2009. Valmont's nine-month net earnings were $59.5 million, or $2.25 per diluted share, compared with 2009 nine-month net earnings of $120.6 million, or $4.59 per diluted share.

Third Quarter Review:

"The positive sales and earnings impact of the Delta plc acquisition and higher operating income in the Irrigation and Coatings Segments partly offset a substantial decline in global utility sales and profits and reduced profitability in the Engineered Support Structures Segment," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.

"Lower sales in the Utility Support Structures Segment were mainly due to a lack of large project orders and lower market prices, when compared to 2009. Engineered Support Structures Segment sales were lower due to a global reduction in government spending on infrastructure and weaker global demand for wireless communication structures. Irrigation Segment sales increased primarily due to growth in international markets. Coatings Segment sales increased as a result of an improved demand for custom coatings and galvanizing.

"Despite higher operating income in the Irrigation and Coatings segments and the contribution of Delta, lower volumes, particularly in the utility business, contributed to substantial de-leverage of fixed costs and a 25% reduction in the Company's operating income."

Third Quarter Segment Review:

Utility Support Structures Segment (23% of 3rd Quarter Sales)

Steel and concrete structures for the global electric utility industry.

Sales decreased 27% to $120.4 million compared with $165.9 million in 2009. The decline in sales was mostly due to North American utility customers deferring large transmission projects until economic recovery becomes apparent. International utility sales were higher due to export sales originating from Europe and China.

Despite the current slowdown in activity, the long-term outlook for utility structures demand remains strong. The need to increase the capacity and reliability of the grid, the drive towards more renewable energy supply and the aging infrastructure of the grid are strong drivers that should lead to increasing demand for transmission structures in this country.

Operating income decreased 80% to $9.3 million and was 7.7% of sales. Profitability was impacted by substantial manufacturing and SG&A de-leverage, combined with a very competitive pricing environment.

Engineered Support Structures Segment (27% of 3rd Quarter Sales)

Structures for lighting and traffic, wireless communication and other specialty structures worldwide.

Third quarter sales were $144.8 million, a decrease of 10% from $160.7 million in 2009. In North America, lighting and traffic sales were lower, due to reduced activity in the transportation market partly reflecting the lack of a multi-year highway bill. Wireless communication structures sales were also lower. Sales of commercial lighting products were higher than the particularly weak levels of 2009.

International engineered structures sales declined primarily due to reduced government investment in infrastructure, and a modest impact of currency translation. In China, sales were lower mainly due to a decrease in wireless communication structures demand.

Government funding to install, upgrade and maintain infrastructure has been deferred due to the global economic recession. When economic recovery strengthens, we believe that spending on global infrastructure for night-time safety and more efficient roadway transportation will accelerate.

Operating income decreased 12% to $11.7 million or 8.1% of segment sales. The decline in operating income resulted from a more competitive pricing environment in all markets and lower volumes, somewhat offset by improved factory performance.

Delta Segment (25% of 3rd Quarter Sales)

Engineered steel products, galvanizing and the production of manganese dioxide.

The "Delta Segment" was formed upon the completion of Valmont's acquisition of Delta plc on May 12, 2010.  Delta Segment sales for the third quarter were $131.4 million. Operating income was 6.2% of sales or $8.2 million, net of approximately $4 million of acquisition related amortization expenses. The principal drivers of Delta's performance during the third quarter were stronger results in the galvanizing businesses, stable performance in the Engineered Steel Products businesses, and weakness in Delta EMD, the magnesium dioxide business.

Irrigation Segment (17% of 3rd Quarter Sales)

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

Sales increased 17% to $88.3 million compared with $75.2 million in 2009. Most of the increase was due to broad-based sales improvements in international markets.

The upturn in international sales reflects improved global crop commodity prices and optimism for higher farm income in 2010. The needs to increase global food production and reduce agriculture's use of water for irrigation are two compelling drivers we believe further support long-term growth.

Operating income increased 90% to $10.6 million and was 12.0% of segment sales. The improvement in operating income was primarily the result of increased leverage of fixed factory costs and SG&A.

Coatings Segment (7% of 3rd Quarter Sales)

Hot-dip galvanizing, anodizing and powder coatings to protect against corrosion of steel and aluminum in North American markets.

Sales of $35.4 million were 19% above last year's $29.7 million. The sales increase reflects improved demand for custom coatings and galvanizing.

Operating income improved 14% to $8.7 million, or 24.5% of segment sales. The increase in operating income was the result of higher sales volumes.

Outlook:

"We continue to expect earnings for the year to decline around 35% from our earnings in 2009, before the impact of Delta revenue and income and any transaction and financing expenses related to the Delta acquisition. After three quarters of unfavorable comparisons following a record 2009, we anticipate positive earnings comparisons in the fourth quarter, and our preliminary outlook for 2011 is for further improvement," said Mr. Bay.

"Our Engineered Support Structures Segment is the business most dependent on government funding. We are not expecting a new multi-year highway bill in this country in the near future, and we expect continued pressure on government spending world-wide. Therefore, we are re-examining our cost structure in this segment to see if we can improve our performance absent improved market conditions, and position ourselves for good leverage when the economy improves in our markets.

"Any possible one-time charge as a result of this review is not included in the above guidance.

"The drivers of infrastructure development and increasing farm productivity with less water are global, compelling and enduring. We have built leadership positions in our industries that we anticipate will provide good platforms for the growth opportunities we anticipate. We believe Valmont is well positioned to benefit from the inevitable renewed investment in infrastructure."

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#: 48124033 or via the Internet at 8:00 a.m. CDT October 15, 2010, 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#: 48124033 beginning October 15, 2010 at 10:00 a.m. CDT through 12:00 p.m. October 22, 2010.

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)

 

 

 

 

 

 

 
 

 

Third Quarter


 

Year-to-Date

 

 

13 Weeks Ended


 

39 Weeks Ended

 

 

25-Sep-10

26-Sep-09


 

25-Sep-10

26-Sep-09

 

Net sales

$    527,831

$             434,010


 

$  1,376,792

$ 1,387,974

 

Cost of sales

395,310

297,652


 

1,014,895

978,619

 

         Gross profit

132,521

136,358


 

361,897

409,355

 

Selling, general and administrative expenses

85,378

73,625


 

245,803

218,887

 

         Operating income

47,143

62,733


 

116,094

190,468

 

Other income (expense)


 

 

 

 

 
 

    Interest expense

(8,487)

(3,587)


 

(22,878)

(11,847)

 

    Interest income

1,733

370


 

3,181

986

 

    Miscellaneous

58

2,106


 

28

1,916

 

 

(6,696)

(1,111)


 

(19,669)

(8,945)

 

         Earnings before income taxes, minority


 

 

 

 

 
 

         interest, and equity in earnings of


 

 

 

 

 
 

         nonconsolidated subsidiaries

40,447

61,622


 

96,425

181,523

 

Income tax expense

13,780

20,338


 

34,908

59,644

 

         Earnings before minority interest, equity in


 

 

 

 

 
 

         earnings of nonconsolidated


 

 

 

 

 
 

         subsidiaries

26,667

41,284


 

61,517

121,879

 

Earnings (losses) in nonconsolidated subsidiaries

1,068

84


 

1,987

579

 

         Net earnings

27,735

41,368


 

63,504

122,458

 

Less:  Earnings attributable to the non-controlling interest

(1,800)

(894)


 

(3,991)

(1,890)

 

         Net earnings attributable to Valmont Industries, Inc.

$      25,935

$               40,474


 

$       59,513

$    120,568

 

 

 

 

 

 

 
 

 

 

 

 

 

 
 

Average shares outstanding (000's) - Basic

26,133

25,963


 

26,084

25,936

 

Earnings per share - Basic

$          0.99

$                   1.56


 

$           2.28

$          4.65

 

 

 

 

 

 

 
 

Average shares outstanding (000's) - Diluted

26,404

26,402


 

26,420

26,257

 

Earnings per share - Diluted

$          0.98

$                   1.53


 

$           2.25

$          4.59

 

 

 

 

 

 

 
 

Cash dividends per share

$        0.165

$                 0.150


 

$         0.480

$        0.430

 

 

 

 

 

 

 
 
           


 

 

 

 

 

 

 
 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

 

SUMMARY OPERATING RESULTS

 

(Dollars in thousands)

 

(unaudited)

 

 

 

 

 

 

 
 

 

Third Quarter


 

Year-to-Date

 

 

13 Weeks Ended


 

39 Weeks Ended

 

 

25-Sep-10

26-Sep-09


 

25-Sep-10

26-Sep-09

 

 

 

 

 

 

 
 

Net sales


 

 

 

 

 
 

    Engineered Support Structures

$    144,836

$             160,716


 

$     386,568

$    447,192

 

    Utility Support Structures

120,397

165,882


 

346,464

566,070

 

    Delta

131,357

-


 

205,522

-

 

    Coatings

35,356

29,683


 

96,693

88,295

 

       Infrastructure products

431,946

356,281


 

1,035,247

1,101,557

 

 

 

 

 

 

 
 

    Irrigation

88,255

75,230


 

309,054

279,339

 

    Other

21,338

16,697


 

68,459

53,457

 

    Less: Intersegment sales

(13,708)

(14,198)


 

(35,968)

(46,379)

 

         Total

$    527,831

$             434,010


 

$  1,376,792

$ 1,387,974

 

 

 

 

 

 

 
 

Operating Income


 

 

 

 

 
 

    Engineered Support Structures

$      11,680

$               13,238


 

$       22,364

$      31,240

 

    Utility Support Structures

9,255

45,220


 

35,903

135,538

 

    Delta

8,170

-


 

15,383

-

 

    Coatings

8,649

7,581


 

20,767

19,965

 

       Infrastructure products

37,754

66,039


 

94,417

186,743

 

 

 

 

 

 

 
 

    Irrigation

10,590

5,560


 

42,584

27,330

 

    Other

4,228

3,146


 

13,693

10,242

 

    Corporate

(5,429)

(12,012)


 

(34,600)

(33,847)

 

         Total

$      47,143

$               62,733


 

$     116,094

$    190,468

 

 

 

 

 

 

 
 

 

 

 

 

 

 
 
           


 

Valmont has aggregated its business segments into five reportable segments as follows.

 

 
 

Engineered Support Structures: This segment consists of the manufacture of engineered metal structures and components for the lighting, traffic and wireless communication industries worldwide and for other specialty 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 galvanizing, painting and anodizing services.

 

 
 

Irrigation: This segment consists of the manufacture of agricultural irrigation equipment and related parts and services worldwide.

 

 
 

Delta: This segment is comprised of the operations of Delta plc, which was acquired by Valmont on May 12, 2010. Its main product lines include engineered steel products for access systems, road safety, poles and grinding media; custom galvanizing and the production of manganese dioxide.      

 

 
 

In the fourth quarter of 2009, the Company reorganized its management structure and redefined the Utility Support Structures segment to include Utility support structures activities on a global basis. Previously, sales of utility support structures were reported as part of the Engineered Support Structures segment. Fiscal 2009 figures have been reclassified to conform to the 2010 presentation.

 

 
 

In addition to these five 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

 

tubular products and industrial fasteners, are reported in the "Other" category.

 

 

 

 

 

 

 
 
           


 

 

 

 

 

 

 
 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Dollars in thousands)

 

(unaudited)

 

 
 

 

 

25-Sep-10


 

 

26-Sep-09

 

ASSETS


 

 

 

 

 
 

Current assets:


 

 

 

 

 
 

    Cash and cash equivalents


 

$             323,150


 

 

$    129,844

 

    Accounts receivable, net


 

400,683


 

 

296,267

 

    Inventories


 

296,335


 

 

216,483

 

    Prepaid expenses


 

29,731


 

 

26,596

 

    Refundable and deferred income taxes


 

35,576


 

 

31,895

 

         Total current assets


 

1,085,475


 

 

701,085

 

Property, plant and equipment, net


 

434,456


 

 

286,666

 

Goodwill and other assets


 

539,439


 

 

300,961

 

 

 

$          2,059,370


 

 

$ 1,288,712

 

 

 

 

 

 

 
 

LIABILITIES AND SHAREHOLDERS' EQUITY


 

 

 

 

 
 

Current liabilities:


 

 

 

 

 
 

    Current installments of long-term debt


 

$                    243


 

 

$           977

 

    Notes payable to banks


 

14,449


 

 

24,950

 

    Accounts payable


 

179,131


 

 

118,463

 

    Accrued expenses


 

164,729


 

 

120,866

 

    Dividend payable


 

4,348


 

 

3,941

 

         Total current liabilities


 

362,900


 

 

269,197

 

Long-term debt, excluding current installments


 

482,932


 

 

171,710

 

Other long-term liabilities


 

276,954


 

 

69,883

 

Shareholders' equity


 

936,584


 

 

777,922

 

 

 

$          2,059,370


 

 

$ 1,288,712

 

 

 

 

 

 

 
 
           


 

 
 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

 

CALCULATION OF COST OF DELTA, plc ACQUISITION EXPENSES

 

(Dollars in thousands)

 

(unaudited)

 

 

 

 

 

 

 
 

YEAR-TO-DATE 2010

As Reported

Delta

Transaction

Costs


 

Without

Delta

Transaction

Costs


 
 

Operating Income

$    116,094

$             (14,572)


 

$     130,666


 
 

 

 

 

 

 

 
 

Earnings before taxes and equity in earnings of nonconsolidated subsidiaries

$      96,425

$             (19,696)


 

$     116,121


 
 

 

 

 

 

 

 
 

Net earnings attributable to Valmont Industries, Inc.

$      59,513

$             (15,609)


 

$       75,122


 
 

 

 

 

 

 

 
 

Diluted earnings per share

$          2.25

$                 (0.59)


 

$           2.84


 
 

 

 

 

 

 

 
 

 

 

 

 

 

 
 

The Company incurred certain expenses in 2010 associated with the offer to purchase the ordinary shares of Delta plc (Delta). The expenses included $14,572 of SG&A expenses related to the Company's evaluation of Delta and other required expenses associated with the Company's offer and ongoing integration. The Company also incurred $5,124 of financing costs related to a bridge financing facility that was established to provide part of the required committed financing to complete the Delta acquisition, as required by United Kingdom takeover regulations, and borrowing costs incurred until the Company acquired Delta on May 12, 2010. The Delta Transaction Costs adjustment for Net earnings above is net of tax effect calculated based on the amounts that are currently deductible at its marginal U.S. tax rate.  Management believes the exclusion of expenses incurred in the quarter related to the pending Delta acquisition is useful for assessing Valmont’s operating performance and provides investors with a more consistent basis of comparison with prior periods.

 
           


 

SOURCE Valmont Industries, Inc.