VALMONT INDUSTRIES INC - FORM 8-K - EX-99.1 - October 17, 2013

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News Release
For Immediate Release
Contact:  Jeff Laudin
October 17, 2013
Phone:  402-963-1158
  
Fax:  402-963-1198
  
   

Valmont Announces Third Quarter 2013 Results
 
Highlights:
 
·
Third quarter sales increased 7% and operating income rose 22% for a record third quarter.
 
·
Third quarter operating income as a percent of sales rose to 14.1% compared with 12.4% for the same period in 2012.
 
·
The Engineered Infrastructure Products and Utilities Segments made the greatest contributions to the quarterly operating income improvement.
 
·
A decrease in the U.K. tax rate required a reduction in deferred tax assets and an increase in third quarter tax expense. This lowered net earnings by $8.3 million, or $0.31 in fully diluted earnings per share. As a result, reported diluted earnings per share were $2.10 and adjusted for the non-cash deferred tax asset reduction, diluted earnings per share were $2.41. (See table page 7)
 
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment for agriculture, reported third quarter sales of $778.0 million compared with $729.8 million for the same period of 2012. Third quarter 2013 operating income was $109.9 million versus $90.4 million in 2012. Including the impact of a non-cash income tax expense, third quarter net income was $56.5 million versus $56.7 million in 2012, which resulted in quarterly diluted earnings per share of $2.10 compared to $2.12 in 2012.
 
Third Quarter Review:
 
“Sales and earnings comparisons were positive in each reportable segment,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “Gross profit margins increased due to improved sales mix and pricing in certain markets combined with somewhat lower input costs. This increase, plus improved operating leverage, drove operating profit improvement.
 
“Achieving 14.1% operating income as a percent of sales in a third quarter is a record,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “This is the result of good performances in our all of our segments, including significant improvement in the Engineered Infrastructure Products Segment, which continues to face challenges in several markets.”
 
Third Quarter Segment Review:
Utility Support Structures Segment (30% of 3rd Quarter Sales)
Steel and concrete structures for the global electric utility industry.
 
Utility sales of $229.4 million were 5% higher than 2012. Substantial utility investment in the North American transmission grid continues to drive increased demand. Late in the third quarter, at the request of customers, some shipments were deferred into the fourth quarter. Utility sales in international markets, which remain project based, declined.
 
Increasing transmission grid reliability is a national priority. Regulatory measures effected in 2005 and 2010 created a compelling framework for substantial new investment in transmission infrastructure. Enhancing the interconnectivity of regional grids, and accommodating increased use of renewable energy sources are additional drivers of demand. Valmont believes the size of these opportunities combined with our market leadership, should result in further growth over the next few years.
 
Operating income rose 37% to $41.5 million, which represents 18.1% of segment sales. The increase in operating income was due to increased SG&A leverage, sales mix, and improved gross profit margins.
 
Irrigation Segment (23% of 3rd Quarter Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
 
Irrigation Segment sales increased 12% to $175.1 million, led by strong North American demand. Sales in international markets also improved. Despite lower third quarter crop prices than last year, the outlook among farm customers remained positive and drove sales increases above last year’s record levels.
 
Over 80% of global irrigated acres still use less efficient flood methods rather than efficient mechanized irrigation equipment. This creates tremendous long-term market opportunities for Valmont’s irrigation segment. Population growth, improved diets and competing demands for water are additional factors that will drive the need for more efficient mechanized irrigation use over time.
 
Operating income rose 15% to $31.1 million resulting in operating income as a percent of sales of 17.8%.
 
Engineered Infrastructure Products Segment (33% of 3rd Quarter Sales)
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
 
Third quarter sales were $260.3 million, a 6% increase over 2012. Sales gains reflect increases in North America and Europe as well as the addition of $16.8 million in revenue from the February 2013 acquisition of the Locker Group in Australia.
 
In North America, lighting and traffic products sales were flat with last year. Wireless communication product sales increased over last year reflecting increased carrier investment in 4G infrastructure to support the increased network demands of data.
 
In Europe, lighting and traffic product sales were comparable to last year.
 
In the Asia-Pacific region, additional sales from acquired businesses more than offset declines in engineered access systems sales in Australia. Lighting and traffic products revenues in the region increased, while wireless communication product sales declined.
 
Operating income increased 37% to $25.7 million, or 9.9% of segment sales. This increase was driven by improved operating productivity, increased demand for wireless communication products in North America, improved cost structures in North America and Europe, and the contribution of the Locker Group.
 
Coatings Segment (11% of 3rd Quarter Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
 
Sales of $89.0 million were 6% higher than last year. North American sales rose due to $9 million revenue contribution from the acquisition of a Canadian galvanizer in December, 2012 and increased internal demand. Sales declined in the Asia Pacific region due to softer market conditions in Australia and the slight revenue loss from a divestiture during the second quarter.
 
Operating income increased 7% to $19.8 million, or 22.3% of segment sales which was similar to last year’s levels.
 
Outlook:
 
“Looking to the fourth quarter, new capacity coming on-line in the Utility Support Structures Segment combined with a strong backlog should lead to record fourth quarter segment results. In the Irrigation Segment, we expect a good quarter, although not to last year’s levels as a later harvest in North America will likely reduce customer traffic in dealerships. We expect our Coatings business to continue its good performance. In the Engineered Infrastructure Products Segment, our outlook is for positive comparisons in sales and operating income. In summary, we expect full-year diluted earnings of approximately $11.00 per share, even after absorbing the $0.31 in higher tax expense this quarter.
 
“Looking to 2014, at this early juncture our expectations are for continued improvement in the Utility Support and Engineered Infrastructure Support segments. Market demand should result in continued strength in the Coatings Segment. For the Irrigation Segment, it remains too early to assess the outlook for 2014.
 
“We believe that the long term drivers present in our two core markets, engineered products for infrastructure and efficient irrigation equipment for agriculture provide compelling, global and enduring opportunities for Valmont’s continued growth going forward,” concluded Mr. Bay.
 
An audio discussion of Valmont’s third quarter results by Mogens C. Bay, Chairman and Chief Executive Officer and Terry J. McClain, Executive Vice President and Chief Financial Officer, will be available live by telephone by dialing 1-877-493-2981 and entering Conference ID#: 98704886 or via the Internet at 8:00 a.m. CDT October 18, 2013, 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#: 98704886 beginning October 18, 2013 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 25, 2013.
 
Valmont is a 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
 
28-Sep-13
  
29-Sep-12
  
28-Sep-13
  
29-Sep-12
Net sales
$   778,032
  
 $     729,839
  
 $  2,476,321
  
 $  2,214,504
Cost of sales
     552,468
  
        537,437
  
     1,753,917
  
     1,636,393
          Gross profit
     225,564
  
        192,402
  
        722,404
  
        578,111
Selling, general and administrative expenses
     115,663
  
        102,020
  
        350,048
  
        307,559
          Operating income
     109,901
  
          90,382
  
        372,356
  
        270,552
Other income (expense)
              
     Interest expense
       (8,149)
  
           (8,429)
  
         (24,364)
  
         (23,657)
     Interest income
         1,560
  
            2,093
  
            4,765
  
            6,081
     Other
          (584)
  
            1,307
  
            1,095
  
               907
 
       (7,173)
  
           (5,029)
  
         (18,504)
  
         (16,669)
          Earnings before income taxes and equity in
              
          earnings of nonconsolidated subsidiaries
     102,728
  
          85,353
  
        353,852
  
        253,883
Income tax expense
       43,912
  
          28,447
  
        126,053
  
          87,005
          Earnings before equity in earnings of
              
          nonconsolidated subsidiaries
       58,816
  
          56,906
  
        227,799
  
        166,878
Equity in earnings of nonconsolidated subsidiaries
              75
  
            1,536
  
               548
  
            5,311
          Net earnings
       58,891
  
          58,442
  
        228,347
  
        172,189
Less:  Earnings attributable to non-controlling interests
       (2,402)
  
           (1,711)
  
           (4,726)
  
           (3,153)
          Net earnings attributable to Valmont Industries, Inc.
$     56,489
  
 $       56,731
  
 $     223,621
  
 $     169,036
               
               
Average shares outstanding (000's) - Basic
       26,665
  
          26,502
  
          26,632
  
          26,455
Earnings per share - Basic
$         2.12
  
 $           2.14
  
 $           8.40
  
 $           6.39
               
Average shares outstanding (000's) - Diluted
       26,919
  
          26,806
  
          26,896
  
          26,748
Earnings per share - Diluted
$         2.10
  
 $           2.12
  
 $           8.31
  
 $           6.32
               
Cash dividends per share
$       0.250
  
 $         0.225
  
 $         0.725
  
 $         0.630
               

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
       
 
Third Quarter
13 Weeks Ended
  
Year-to-Date
39 Weeks Ended
   
 
28-Sep-13
  
29-Sep-12
  
28-Sep-13
  
29-Sep-12
               
Net sales
              
     Engineered Infrastructure Products
$   260,283
  
 $     244,684
  
 $     734,589
  
 $     684,427
     Utility Support Structures
     229,420
  
        217,495
  
        697,301
  
        620,964
     Coatings
       89,009
  
          83,713
  
        272,052
  
        251,397
        Infrastructure products
     578,712
  
        545,892
  
     1,703,942
  
     1,556,788
               
     Irrigation
     175,120
  
        156,452
  
        690,002
  
        547,214
     Other
       71,836
  
          72,500
  
        233,384
  
        245,757
     Less: Intersegment sales
     (47,636)
  
         (45,005)
  
       (151,007)
  
       (135,255)
          Total
$   778,032
  
 $     729,839
  
 $  2,476,321
  
 $  2,214,504
               
Operating Income
              
     Engineered Infrastructure Products
$     25,689
  
 $       18,715
  
 $       61,026
  
 $       40,907
     Utility Support Structures
       41,491
  
          30,223
  
        129,767
  
          81,901
     Coatings
       19,833
  
          18,542
  
          56,805
  
          54,571
        Infrastructure products
       87,013
  
          67,480
  
        247,598
  
        177,379
               
     Irrigation
       31,145
  
          27,140
  
        149,878
  
        103,155
     Other
         9,978
  
            9,743
  
          33,790
  
          33,413
     Corporate
     (18,235)
  
         (13,981)
  
         (58,910)
  
         (43,395)
          Total
$   109,901
  
 $       90,382
  
 $     372,356
  
 $     270,552
               
               
Valmont has four reportable segments based on its reporting structure.
 
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)
       
 
28-Sep-13
  
29-Sep-12
ASSETS
      
Current assets:
      
     Cash and cash equivalents
$     543,369
  
 $     427,080
     Accounts receivable, net
       513,832
  
        470,240
     Inventories
       427,215
  
        432,689
     Prepaid expenses
         35,071
  
          30,106
     Refundable and deferred income taxes
         81,766
  
          49,692
          Total current assets
    1,601,253
  
     1,409,807
Property, plant and equipment, net
       541,030
  
        475,991
Goodwill and other assets
       606,237
  
        608,662
 
$  2,748,520
  
 $  2,494,460
       
LIABILITIES AND SHAREHOLDERS' EQUITY
      
Current liabilities:
      
     Current installments of long-term debt
$            265
  
 $            226
     Notes payable to banks
         17,129
  
          15,730
     Accounts payable
       214,188
  
        217,688
     Accrued expenses
       196,388
  
        173,698
     Dividend payable
           6,697
  
            5,991
          Total current liabilities
       434,667
  
        413,333
Long-term debt, excluding current installments
       471,294
  
        473,227
Other long-term liabilities
       266,774
  
        220,006
Shareholders' equity
    1,575,785
  
     1,387,894
 
$  2,748,520
  
 $  2,494,460
       

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS
REGULATION G RECONCILIATION
(Dollars in thousands)
(unaudited)
 
The following non-GAAP financial measures should be considered in conjunction with the GAAP financial measures arising from a change in the U.K. tax rate.
 
 
Quarter ended September 28, 2013
Diluted earnings per share
  
Year-to-date September 28, 2013
  
Diluted earnings per share
Net earnings attributable to Valmont Industries, Inc. - as reported
$       56,489
$         2.10
  
 $     223,621
  
 $           8.31
             
Deferred tax expense related to tax rate change
           8,272
0.31
  
            8,272
  
0.31
             
Net earnings attributable to Valmont Industries, Inc. - Adjusted
$       64,761
$         2.41
  
 $     231,893
  
 $           8.62
             

 


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