VALMONT INDUSTRIES INC - FORM 8-K - EX-99.1 - October 18, 2012

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News Release
For Immediate Release
   
Contact:     Jeff Laudin
October 18, 2012
Phone:       402-963-1158
  
Fax:           402-963-1198
  



Valmont Announces Third Quarter Results
 
Highlights:
 
·  
Net earnings increased 35% on a 9% increase in sales.
 
·  
Third quarter results driven by substantial increase in Utility Support Structures Segment sales and operating income.
 
·  
Record third quarter sales in all reportable segments.
 
·  
Total operating income as a percent of sales increased from 10.7% to 12.4%.
 
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 third quarter of $729.8 million compared with $672.2 million for the same period of 2011. Third quarter 2012 operating income was $90.4 million versus $72.0 million in 2011. Third quarter 2012 net earnings were $56.7 million, or $2.12 per diluted share, versus third quarter 2011 net earnings of $42.1 million, or $1.59 per diluted share.
 
For the first nine months of 2012, sales were $2,214.5 million versus $1,908.8 million in 2011. Valmont’s nine-month net earnings were $169.0 million, or $6.32 per diluted share, compared with 2011 nine-month net earnings of $113.6 million, or $4.28 per diluted share.
 
Third Quarter Review:
 
“While each segment had record third quarter sales, the major contributor was the substantial increase in Utility Support Structures sales,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “Operating income as a percent of sales increased from 10.7% to 12.4%, led by the Utility Support Structures Segment performance and further supported by positive comparisons in the Irrigation, Coatings and Engineered Infrastructure Products Segments,” added Mr. Bay.
 

 
 
 

Third Quarter Segment Review:
 
Utility Support Structures Segment (30% of 3rd Quarter Net Sales)
Steel and concrete structures for the global electric utility industry.
 
Sales of $217.5 million were 36% higher than the third quarter of 2011. The sales increase reflects an ongoing expansion of the North American electrical transmission grid. There are four main drivers behind the need to expand the grid. One is to improve the reliability of the transmission grid, so power is available during peak demand periods. Another is the need to match physical capacity to the increase in electricity demand over time. Additionally, capacity is needed to accommodate the interconnection of regional transmission entities in order to balance demand with supply. And lastly is the need to connect alternative energy sources, such as wind and solar, to the transmission grid. Valmont believes these demand trends should continue to drive its business over the next several years. The Company is currently adding manufacturing capacity by expanding existing facilities and by constructing a new facility in Oklahoma.
 
Sales in international utility markets rose mostly due to a growing Australian market, which more than offset a sales decline within China where the market has become increasingly more competitive.
 
Operating income more than doubled to $30.2 million and was 13.9% of segment sales. The increase in operating income was due to an improved sales mix and volume leverage.
 
Irrigation Segment (21% of 3rd Quarter Net Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
 
Sales rose 4% to $156.5 million exceeding last year’s record third quarter. Historically high crop commodity prices supported strong demand for mechanized irrigation equipment. Higher crop prices contribute to higher expectations for farm income, thus increasing purchasing power. Initially, third quarter sales faced a typical seasonal sequential decline, however demand firmed as the quarter drew to a close in response to this summer’s extreme drought in the U.S.
 
Sales in international markets rose despite the absence of large project sales during this year’s third quarter, supported by demand for feed-grains and historically high crop prices in global markets.
 
In reaction to the drought, we expect many dry-land farmers with access to water to install irrigation equipment to help mitigate the risk of future dry weather. Irrigated agriculture should benefit from good crops and high commodity prices. Consequently, we expect strong demand during the current selling season.
 
Operating income grew 14% to $27.1 million and was 17.3% of segment sales. The improvement in operating income reflects improved profitability in international markets and operational leverage, particularly SG&A, in North American markets.
 

 
 
 

Engineered Infrastructure Products Segment (30% of 3rd Quarter Net Sales)
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
 
Third quarter sales were $229.3 million, a 3% increase over 2011. In North America, the strongest gains in lighting product sales were in the Canadian markets. Sales of wireless communication structures and components increased supported by the 4G network build-out. Sales gains were further supported by internal demand from the Utility Support Structures Segment.
 
Sales of lighting and traffic structures in Europe were at similar levels in local currency compared with last year, even after the exit of certain geographic markets in 2011. Sales when translated to dollars were lower.
 
In the Asia-Pacific region, sales increased slightly, led by improved sales of Webforge branded engineered access systems.
 
Operating income increased 9% to $18.7 million, or 8.2% of segment sales. The improved profitability in the communication business more than offset reduced productivity in the lighting operations.
 
Coatings Segment (10% of 3rd Quarter Net Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
 
Sales of $83.7 million were 4% higher than last year led by increased sales in North America. The strongest demand in North America came from the utility and agricultural markets. The Asia-Pacific region experienced a softening of demand in Australia.
 
Operating income increased 30% to $18.5 million or 22.1% of segment sales largely as a result of favorable trends in input costs, and improved productivity.
 
Outlook:
 
“Based on current business conditions and trends, we expect a strong finish to the year,” said Mr. Bay. “As we look towards next year we see a record year ahead of us. We expect further increases in the demand for utility support structures. In addition, we anticipate historically high farm income should drive solid demand for irrigation equipment sales.
 
“While utility and irrigation currently have strong market drivers, our other businesses are driven more by the macro-economic environment. We do not expect much to change. In the Engineered Infrastructure Products Segment, demand is driven by the global need for infrastructure. Moderating that demand is a trend towards more austerity in government spending. Coatings Segment demand is driven by the need reduce the corrosive effect of products exposed to the elements. For coatings, short-term demand will be most influenced by the speed of a recovery in the U.S. economy, and demand trends in mining and industry in the Asia-Pacific region.”
 
“Barring a major change in the global economy, Valmont is well positioned to continue its growth trajectory. We hold leading positions in our two major markets; infrastructure and agriculture and we are positioned to continue to capture profitable opportunities within those sectors,” added Mr. Bay.
 
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#: 30186311 or via the Internet at 8:00 a.m. CDT October 19, 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#: 30186311 beginning October 19, 2012 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 26, 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)
       
 
Third Quarter
13 Weeks Ended
  
Year-to-Date
39 Weeks Ended
 
29-Sep-12
  
24-Sep-11
  
29-Sep-12
  
24-Sep-11
Net sales
 $    729,839
  
 $     672,192
  
 $  2,214,504
  
 $  1,908,750
Cost of sales
       537,437
  
        504,802
  
     1,636,393
  
     1,436,885
          Gross profit
       192,402
  
        167,390
  
        578,111
  
        471,865
Selling, general and administrative expenses
       102,020
  
          95,357
  
        307,559
  
        285,912
          Operating income
         90,382
  
          72,033
  
        270,552
  
        185,953
Other income (expense):
              
     Interest expense
         (8,429)
  
           (7,671)
  
         (23,657)
  
         (26,715)
     Interest income
           2,093
  
            3,141
  
            6,081
  
            6,919
     Other
           1,307
  
           (1,671)
  
               907
  
              (776)
 
         (5,029)
  
           (6,200)
  
         (16,669)
  
         (20,572)
          Earnings before income taxes and equity in
              
          earnings of nonconsolidated subsidiaries
         85,353
  
          65,833
  
        253,883
  
        165,381
Income tax expense
         28,447
  
          23,773
  
          87,005
  
          50,612
          Earnings before equity in earnings of
              
          nonconsolidated subsidiaries
         56,906
  
          42,060
  
        166,878
  
        114,769
Equity in earnings of nonconsolidated subsidiaries
           1,536
  
            2,354
  
            5,311
  
            4,509
          Net earnings
         58,442
  
          44,414
  
        172,189
  
        119,278
Less:  Earnings attributable to non-controlling interests
         (1,711)
  
           (2,273)
  
           (3,153)
  
           (5,701)
          Net earnings attributable to Valmont Industries, Inc.
 $      56,731
  
 $       42,141
  
 $     169,036
  
 $     113,577
               
               
Average shares outstanding (000's) - Basic
         26,502
  
          26,351
  
          26,455
  
          26,318
Earnings per share - Basic
 $          2.14
  
 $           1.60
  
 $           6.39
  
 $           4.32
               
Average shares outstanding (000's) - Diluted
         26,806
  
          26,579
  
          26,748
  
          26,567
Earnings per share - Diluted
 $          2.12
  
 $           1.59
  
 $           6.32
  
 $           4.28
               
Cash dividends per share
 $        0.225
  
 $         0.180
  
 $         0.630
  
 $         0.525
               
 
 
 
 
 
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
       
 
Third Quarter
13 Weeks Ended
  
Year-to-Date
39 Weeks Ended
 
29-Sep-12
  
24-Sep-11
  
29-Sep-12
  
24-Sep-11
               
Sales
              
     Engineered Infrastructure Products
 $    229,310
  
 $     222,243
  
 $     652,991
  
 $     597,590
     Utility Support Structures
       217,495
  
        159,815
  
        620,964
  
        422,022
     Coatings
         83,713
  
          80,806
  
        251,397
  
        238,417
     Irrigation
       156,452
  
        150,618
  
        547,214
  
        485,367
     Other
         72,500
  
          88,870
  
        245,757
  
        246,977
          Total
       759,470
  
        702,352
  
     2,318,323
  
     1,990,373
               
Intersegment sales
              
     Engineered Infrastructure Products
         (9,978)
  
           (6,611)
  
         (37,062)
  
         (18,035)
     Utility Support Structures
            (625)
  
           (4,480)
  
           (3,072)
  
           (6,739)
     Coatings
       (12,313)
  
         (11,852)
  
         (38,262)
  
         (34,283)
     Irrigation
              (67)
  
                    -
  
              (498)
  
                  (8)
     Other
         (6,648)
  
           (7,217)
  
         (24,925)
  
         (22,558)
          Total
       (29,631)
  
         (30,160)
  
       (103,819)
  
         (81,623)
               
Net sales
              
     Engineered Infrastructure Products
       219,332
  
        215,632
  
        615,929
  
        579,555
     Utility Support Structures
       216,870
  
        155,335
  
        617,892
  
        415,283
     Coatings
         71,400
  
          68,954
  
        213,135
  
        204,134
     Irrigation
       156,385
  
        150,618
  
        546,716
  
        485,359
     Other
         65,852
  
          81,653
  
        220,832
  
        224,419
          Total
 $    729,839
  
 $     672,192
  
 $  2,214,504
  
 $  1,908,750
               
Operating Income
              
     Engineered Infrastructure Products
 $      18,715
  
 $       17,189
  
 $       40,907
  
 $       30,907
     Utility Support Structures
         30,223
  
          14,731
  
          81,901
  
          41,214
     Coatings
         18,542
  
          14,238
  
          54,571
  
          39,600
     Irrigation
         27,140
  
          23,765
  
        103,155
  
          80,623
     Other
           9,743
  
          12,607
  
          33,413
  
          32,901
     Corporate
       (13,981)
  
         (10,497)
  
         (43,395)
  
         (39,292)
          Total
 $      90,382
  
 $       72,033
  
 $     270,552
  
 $     185,953
               

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 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)
       
 
29-Sep-12
  
24-Sep-11
ASSETS
      
Current assets:
      
     Cash and cash equivalents
 $     427,080
  
 $     336,908
     Accounts receivable, net
        470,240
  
        449,431
     Inventories
        432,689
  
        377,525
     Prepaid expenses
          30,106
  
          28,832
     Refundable and deferred income taxes
          49,692
  
          35,216
          Total current assets
     1,409,807
  
     1,227,912
Property, plant and equipment, net
        475,991
  
        437,139
Goodwill and other assets
        608,662
  
        544,126
 
 $  2,494,460
  
 $  2,209,177
       
LIABILITIES AND SHAREHOLDERS' EQUITY
      
Current liabilities:
      
     Current installments of long-term debt
 $            226
  
 $            236
     Notes payable to banks
          15,730
  
          11,022
     Accounts payable
        217,688
  
        221,909
     Accrued expenses
        173,698
  
        158,236
     Dividend payable
            5,991
  
            4,760
          Total current liabilities
        413,333
  
        396,163
Long-term debt, excluding current installments
        473,227
  
        494,775
Other long-term liabilities
        220,006
  
        254,990
Shareholders' equity
     1,387,894
  
     1,063,249
 
 $  2,494,460
  
 $  2,209,177
       
 

 


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