VALMONT INDUSTRIES INC - FORM 8-K - EX-99.1 - FEBRUARY 17, 2011 EARNINGS PRESS RELEASE - February 17, 2011

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Exhibit 99.1




February 17, 2011                                          


Valmont Announces Record Fourth Quarter, and
Fiscal Year 2010 Results
 
Highlights:
 
 
·  
Fourth quarter revenue increased 50%, including $143.3 million related to Delta. There was a 14% increase in quarterly revenue excluding the contribution of Delta.
 
 
·  
Fourth quarter operating profit rose 31%, including $11.0 million related to Delta. Excluding Delta, operating profit rose 8%.
 
 
·  
Fourth quarter Irrigation Segment sales improved 62%, operating income increased 150%.
 
 
·  
Fiscal year 2010 net earnings declined 37%, excluding the after-tax costs associated with the Delta acquisition, the decline was 27%.
 
 
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 fourth quarter of $598.7 million compared with $398.6 million for the same period of 2009. Fourth quarter 2010 net earnings were $34.9 million, or $1.32 per diluted share, versus fourth quarter 2009 net earnings of $30.0 million, or $1.14 per diluted share.
 
 
For fiscal 2010, sales were $1.976 billion versus $1.787 billion in 2009. Valmont’s fiscal year net earnings were $94.4 million, or $3.57 per diluted share including the expenses and financing associated with the purchase of Delta plc on May 12, 2010, compared with 2009 fiscal year earnings of $150.6 million, or $5.73 per diluted share.
 
 
In the fourth quarter of 2010, Valmont reorganized its segment reporting as a result of the acquisition of Delta plc, on May 12, 2010. The main business units of Delta are organized as follows: Engineered Infrastructure Products Segment includes Delta’s lighting, communication, access systems and roadway safety products. The Coatings Segment includes Delta’s galvanizing operations; Delta’s forged steel grinding media and electrolytic manganese dioxide operations are included in “Other.”
 
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Fourth Quarter Review:

“The contribution to sales and earnings from Delta and a significant improvement in Irrigation and Coatings Segment sales drove fourth quarter results,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer.

“Sales in the Engineered Infrastructure Products Segment were higher due to the inclusion of the Delta businesses. The North American transportation market was weaker and a decline in project orders led to lower sales in international markets. In the Irrigation Segment, global sales were higher benefitting from rising farm income. Coatings Segment sales rose as a result of the addition of Delta and stronger demand from industrial and agricultural markets.

 
“Positive operating income comparisons were due largely to the contribution of the Delta businesses, and improved performance in the Irrigation and Coatings segments which more than offset a decline in profitability in the Utility Support Structures Segment.”
 
 
Fourth Quarter Segment Review:
 
Engineered Infrastructure Products Segment (35% of 4th Quarter Sales)
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
 
Fourth quarter sales were $210.8 million, a 35% increase over 2009. This increase is largely attributable to the Delta businesses now reported in this segment, whose sales were $55.2 million. In North America, commercial lighting sales improved while transportation lighting and traffic product sales declined. Even though funding per the 2005 highway bill continues to be extended, the lack of a new long-term federal highway bill, we believe, is an impediment for states to plan multi-year highway projects. Budget deficits have further reduced states’ ability to match federal funds on highway projects, creating additional market pressures.
 
Global sales of wireless communication products were lower due to weakness in North American markets and reduced investment by China’s wireless carriers.
 
 
Operating income increased 29% to $17.9 million or 8.5% of segment sales. The operating income attributable to the Delta businesses was $5.8 million. While operating results improved in North American locations, the improvement was partially offset by weaker operating performance in the European locations and certain non-recurring charges approximating $2.0 million in the segment.
 
Utility Support Structures Segment (21% of 4th Quarter Sales)
Steel and concrete structures for the global electric utility industry.
 
Sales of $128.5 million were slightly lower than 2009. The decline in sales was primarily due to a weak pricing environment in North America, despite higher volumes, and reduced export activity in international markets.
 
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While 2010 sales were lower in the Utility Support Structures Segment, we believe the outlook has improved for global utility structure demand. North American utility customers have announced plans for increased investments in transmission structures for 2011. Future growth potential is expected in India, where during the fourth quarter Valmont broke ground on a new manufacturing facility.

 
Operating income fell 46% to $15.8 million and was 12.3% of sales. The decline in operating income was mostly due to sharply lower pricing in North America despite higher volumes, a reduction in international volumes, and an unfavorable product sales mix.
 
 
Irrigation Segment (22% of 4th Quarter Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
 
Sales increased 62% to $134.3 million compared with 2009. In global farm markets, confidence in investing in mechanized irrigation equipment was buoyed by rising crop prices and the outlook for a meaningful increase in net farm income. In addition, an earlier fall harvest in North America, when compared to last year widened the window of opportunity for fourth quarter sales.
 
 
Operating income grew 2 ½ times to $19.4 million and was 14.4% of segment sales. The improvement in operating income was the result of improved productivity and volume leverage.
 
 
Coatings Segment (13% of 4th Quarter Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
 
Sales of $76.5 million were nearly 3 times last year’s $27.2 million. The increase in sales included $42.0 million from the Delta galvanizers plus volume gains. Improved demand from industrial manufacturers in Midwestern regions of the U.S. further drove volume gains.
 
 
Operating income increased 204% to $14.3 million, or 19% of segment sales. The operating income increase included $6.0 million from the Delta businesses.
 
 
2010 Review:
 
 
“Typically Valmont’s results trend with the later stages of economic cycles. We were more negatively impacted by the global recession in 2010 than we were in 2009,” said Mr. Bay. “As a result, for the first time in a number of years Valmont did not have a record year.
 
 
“The acquisition of Delta was a significant milestone for Valmont, bringing new platforms for growth and increasing our international revenue mix.
 
 
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“Turning to full-year segment results, comparisons in the Utility Support Structures Segment contrasted sharply with 2009’s exceptional results. A substantial contraction in transmission structure orders led to overcapacity in the industry. As industry participants struggled to utilize capacity, highly competitive pricing pressure resulted. Despite the substantial decline in volumes, operating profits in this segment remained at double digit levels for the year.
 
 
“Engineered Infrastructure Products Segment sales increased due to the addition of the Delta businesses. The recession throughout the world led to tight government budgets, reducing the amount of funds available for highway and lighting projects. International lighting sales also declined as a result of project orders shipped in 2009 that did not repeat in 2010. In North America, the lack of a multi-year highway bill depressed the market throughout the year. During the year, we have noted our ongoing efforts to lower the cost structure and improve the productivity of this segment. We have made great strides to that effect in 2010 and continue to implement initiatives to further drive for enhanced performance in these businesses. Profitability for the segment improved for the year due to the profit contribution from the Delta businesses, operational improvements and cost cutting, which offset the impact of weak pricing and declining volumes in North America and Europe.
 
 
“Irrigation Segment results were driven by more favorable market conditions and operational excellence. International markets were particularly strong during the second half of the year as prospects for a tightening in global grain supplies drove demand. Operating income improved due to productivity and volume gains.
 
 
“Coatings Segment sales rose due to the contribution of Delta, and due to inventory rebuilding activity among our North American customers. Sales to the agriculture industry were notably higher. Operating income performance was good as productivity remained high.
 
 
“For the year, operating income as a percent of sales declined to 9.0% from 13.3% in 2009. Return on invested capital fell to 8.1% from 15.2% due to the increase in total assets and the decline in operating income.”
 
 
2011 Outlook:
 
 
“The year 2011 holds great opportunity and many challenges for Valmont,” Mr. Bay said, “The operating environment during the first quarter will be a particular challenge due to severe weather and the pressures of rising steel costs.
 
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“For the full year, we expect favorable comparisons in the Irrigation Segment as tighter crop supplies and rising farm income should drive sales. In the Coatings Segment, the addition of the Delta locations will lead to positive sales comparisons. In the Engineered Infrastructure Products Segment, our customer base is operating in an environment of no long-term highway bill, budgetary pressures and struggling European markets. Rising steel prices and a weak competitive pricing environment create additional challenges for this segment. In the Utility Support Structures Segment we look for volume gains, and until industry capacity is more fully utilized, a competitive pricing environment.
 
 
“With respect to our outlook for earnings, at the present time we expect 2011earnings per share to increase between 35-45%.
 
 
“Over the long-term, our two markets, Infrastructure development and Agriculture provide ample opportunity for us to grow. Economic progress relies on infrastructure. Population growth demands more efficient production agriculture. Our challenges are to best serve our customers today and to wisely invest for tomorrow’s opportunities.”
 
 
An audio discussion of Valmont’s fourth 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#: 36684597 or via the Internet at 8:00 a.m. CST February 18, 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#: 36684597 beginning February 18, 2011 at 10:00 a.m. CST through 12:00 p.m. CST on February 25, 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.
 
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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.
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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
               
 
Fourth Quarter
  
Year-to-Date
 
13 Weeks Ended
  
52 Weeks Ended
 
25-Dec-10
  
26-Dec-09
  
25-Dec-10
  
26-Dec-09
Net sales
 $    598,712
  
 $     398,627
  
 $ 1,975,505
  
 $ 1,786,601
Cost of sales
       441,036
  
        275,968
  
    1,455,931
  
    1,254,587
          Gross profit
       157,676
  
        122,659
  
       519,574
  
       532,014
Selling, general and administrative expenses
         95,358
  
          75,133
  
       341,161
  
       294,020
          Operating income
         62,318
  
          47,526
  
       178,413
  
       237,994
Other income (expense)
              
     Interest expense
         (8,068)
  
           (3,913)
  
       (30,947)
  
       (15,760)
     Interest income
           1,658
  
               523
  
           4,840
  
           1,509
     Other
              649
  
               424
  
              676
  
           2,340
 
         (5,761)
  
           (2,966)
  
       (25,431)
  
       (11,911)
          Earnings before income taxes,
              
           and equity in earnings of
              
          nonconsolidated subsidiaries
         56,557
  
          44,560
  
       152,982
  
       226,083
Income tax expense
         20,101
  
          13,249
  
         55,008
  
         72,894
          Earnings before equity in
              
          earnings of nonconsolidated
              
          subsidiaries
         36,456
  
          31,311
  
         97,974
  
       153,189
Earnings in nonconsolidated subsidiaries
              453
  
               171
  
           2,439
  
              752
          Net earnings
         36,909
  
          31,482
  
       100,413
  
       153,941
Less:  Earnings attributable to non-controlling interest
         (2,042)
  
           (1,491)
  
         (6,034)
  
         (3,379)
          Net earnings attributable to Valmont Industries, Inc.
 $      34,867
  
 $       29,991
  
 $      94,379
  
 $    150,562
               
               
Average shares outstanding (000's) - Basic
         26,151
  
          25,995
  
         26,100
  
         25,951
Earnings per share - Basic
 $          1.33
  
 $           1.15
  
 $          3.62
  
 $          5.80
               
Average shares outstanding (000's) - Diluted
         26,427
  
          26,384
  
         26,422
  
         26,289
Earnings per share - Diluted
 $          1.32
  
 $           1.14
  
 $          3.57
  
 $          5.73
               
Cash dividends per share
 $        0.165
  
 $         0.150
  
 $        0.645
  
 $        0.580
               

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
               
 
Fourth Quarter
  
Year-to-Date
 
13 Weeks Ended
  
52 Weeks Ended
 
25-Dec-10
  
26-Dec-09
  
25-Dec-10
  
26-Dec-09
               
Net sales
              
     Engineered Infrastructure Products
 $    210,756
  
 $     156,084
  
 $    677,314
  
 $    597,046
     Utility Support Structures
       128,455
  
        129,814
  
       474,920
  
       700,548
     Coatings
         76,528
  
          27,235
  
       238,273
  
       115,530
        Infrastructure products
       415,739
  
        313,133
  
    1,390,507
  
    1,413,124
               
     Irrigation
       134,317
  
          82,848
  
       443,371
  
       362,187
     Other
         67,913
  
          14,392
  
       198,550
  
         68,639
     Less: Intersegment sales
       (19,257)
  
         (11,746)
  
       (56,923)
  
       (57,349)
          Total
 $    598,712
  
 $     398,627
  
 $ 1,975,505
  
 $ 1,786,601
               
Operating Income
              
     Engineered Infrastructure Products
 $      17,944
  
 $       13,903
  
 $      52,151
  
 $      45,143
     Utility Support Structures
         15,837
  
          29,296
  
         51,741
  
       164,834
     Coatings
         14,316
  
            4,704
  
         42,602
  
         24,669
        Infrastructure products
         48,097
  
          47,903
  
       146,494
  
       234,646
               
     Irrigation
         19,388
  
            7,756
  
         61,973
  
         35,086
     Other
           7,927
  
            2,729
  
         28,499
  
         12,971
     Corporate
       (13,094)
  
         (10,862)
  
       (58,553)
  
       (44,709)
          Total
 $      62,318
  
 $       47,526
  
 $    178,413
  
 $    237,994
               

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 for the global agricultural industry.

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 forge steel grinding media, tubular products, electrolytic manganese dioxide and industrial fasteners, are reported in the “Other” category.

In the fourth quarter of 2010, the Company reorganized its segment structure in line with its current management and 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 2009 figures to conform to the 2010 presentation.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
         
   
25-Dec-10
  
26-Dec-09
ASSETS
        
Current assets:
        
     Cash and cash equivalents
  
 $     346,904
  
 $    180,786
     Accounts receivable, net
  
        410,566
  
       259,521
     Inventories
  
        280,223
  
       210,611
     Prepaid expenses
  
          23,806
  
         22,143
     Refundable and deferred income taxes
  
          32,727
  
         42,361
          Total current assets
  
     1,094,226
  
       715,422
Property, plant and equipment, net
  
        439,609
  
       283,088
Goodwill and other assets
  
        556,908
  
       303,659
   
 $  2,090,743
  
 $ 1,302,169
         
LIABILITIES AND SHAREHOLDERS' EQUITY
        
Current liabilities:
        
     Current installments of long-term debt
  
 $            238
  
 $           231
     Notes payable to banks
  
            8,825
  
         11,900
     Accounts payable
  
        179,814
  
       118,210
     Accrued expenses
  
        153,686
  
       122,532
     Dividend payable
  
            4,352
  
           3,944
          Total current liabilities
  
        346,915
  
       256,817
Long-term debt, excluding current installments
  
        468,596
  
       160,250
Other long-term liabilities
  
        265,105
  
         76,795
Shareholders' equity
  
     1,010,127
  
       808,307
   
 $  2,090,743
  
 $ 1,302,169
         


 
 
 


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
 $    178,413
  
 $      (15,307)
  
 $    193,720
           
Earnings before taxes and equity in earnings of nonconsolidated subsidiaries
 $    152,982
  
$      (20,441)
  
 $    173,423
           
Net earnings attributable to Valmont Industries, Inc.
 $      94,379
  
 $      (16,398)
  
 $    110,777
           
Diluted earnings per share
 $          3.57
  
 $          (0.62)
  
 $          4.19
           

The Company incurred certain expenses in 2010 associated with the offer to purchase the ordinary shares of Delta plc (Delta). The expenses included $15,307 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.

END


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