Valmont's First Quarter Net Earnings Increase 8%
Highlights:
o Irrigation Segment sales rise 16%.
o International sales growth in Irrigation and Pole segments.
o Pole Segment sales decline 9% due to weaker utility markets.
o Net earnings increase 8%.
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), the leading global
manufacturer of poles, towers, structures and coating services for
infrastructure, and mechanized irrigation equipment for agriculture, reported
first quarter 2003 net earnings of $7.3 million, or 30 cents per diluted share,
versus first quarter 2002 net earnings of $6.8 million, or 28 cents per diluted
share. Sales for the first quarter were $207.3 million compared with $208.7
million for the same period of 2002.
First Quarter 2003 Review:
"An improvement in Irrigation Segment sales offset weaker sales in the
utility and wireless communication markets," said Mogens C. Bay, Valmont's
Chairman and Chief Executive Officer. "Most of our international businesses
performed better than last year, which helped balance some of the impact of a
weak U.S. economy. Compared to the first quarter of 2002, when we shipped a
large utility order in response to winter storm damage, this year's slower
utility and wireless communication markets resulted in deleverage in our North
American pole plants. Profitability in our Wireless Communication Segment also
suffered as a result of significantly lower volumes. For the Company, the 8%
increase in net earnings reflected lower interest expense and the $0.5 million
impairment charge taken in the first quarter of 2002."
First Quarter Summary - Infrastructure Markets:
Poles Segment sales of $80.9 million represented a 9.0% decline from 2002
levels. Lower sales of utility products in North America accounted for the
decrease. In addition to a general slowdown in the utility market, 2002 sales
included a large utility order to replace poles damaged by winter storms.
Operating income fell by 26.9% to $5.4 million due to lower volumes and pricing
pressure. Due to the economic slowdown and high utility debt levels, North
American utilities and independent power producers have delayed capital projects
and expansions. Valmont believes the long-term outlook remains favorable, as
power generating capacity is expected to grow over time to sustain economic
growth around the world. Needed upgrades and expansions to the electrical
transmission grid should also support future growth.
Sales of lighting and traffic products showed solid growth as highway
safety and efficient traffic control have driven strong demand. The Company
continues to benefit from federal highway spending. Lighting sales in Europe
improved as Valmont strengthened its market position. In China, lighting and
utility product sales were level with last year. Valmont's joint venture in
Mexico has been negatively affected by the lack of export opportunities to the
U.S. utility market.
Sales of $11.0 million in the Wireless Communication Segment were 35.6%
below last year's levels as wireless communication markets weakened even
further. An operating loss of $3.2 million for the quarter resulted from very
competitive pricing pressure and lower volumes. The Wireless Communication
Division has a great set of talents and assets in place that are under-utilized
due to the collapse of the telecommunication market. To better utilize these
assets, the Company plans to combine the Communication Division and the Pole
Division into a new segment: Engineered Support Structures. This will bring
together outstanding engineering skills, marketing talent and flexible
manufacturing operations, while lowering costs. The combined organization should
allow Valmont to pursue a wider range of support structures and enter new
markets in a more efficient manner.
In China, wireless communication product sales and profits were lower. The
structures market in China has slowed as China's telecommunication carriers
reduced spending on new sites.
In the Coatings Segment, sales of $27.2 million were 1.4% lower than last
year. Continued weakness in the U.S. economy has adversely impacted industrial
demand for Valmont's coating services. Operating profits fell 27.2% to $1.6
million. The decrease in profitability resulted from a less favorable sales mix
and lower volumes with continuing fixed costs at the galvanizing facilities.
First Quarter Summary-Agricultural Markets:
In the Irrigation Segment, first quarter sales increased 15.6% to $75.6
million. Operating income of $10.0 million was 37.3% higher than last year.
Profitability rose due to increased volumes, improved pricing and operating
efficiencies. Key factors leading to stronger demand for irrigation equipment in
North America were the drought in 2002, low interest rates, improvement in some
farm crop prices and certain support programs of the U.S. farm bill.
International sales and profits rose as Valmont continues to benefit from
its strategic manufacturing presence in key agricultural markets around the
world. The market in Brazil was strong due to higher crop prices and supportive
government farm policies and programs. Markets were also strong in South Africa
and Australia where continued dry conditions and higher crop prices led to
increased sales. Turmoil in the Middle East slowed sales in that region.
Tubing Segment sales of $16.5 million were 18.6% higher than in 2002. Sales
rose due to new product introductions and higher internal volumes. A 3.5%
increase in operating income to $1.6 million reflected the sales mix impact of
higher internal volumes.
Second Quarter Outlook:
Commenting on the outlook for the second quarter, Mr. Bay said, "We expect
second quarter consolidated sales and earnings comparisons to be unfavorable, as
we do not anticipate strength in lighting and traffic sales to offset lower
wireless communication and utility sales. At this time, unless the economy
recovers, we anticipate lower sales for the year and earnings per share flat to
slightly lower. We will continue to pursue growth opportunities and reduce
costs. We will use our strong market positions and commitment to customer
service to attract new customers. Even though some of the markets we participate
in are in down cycles, we are able to generate strong cash flows."
An audio discussion of Valmont's first quarter results by Valmont officers,
Mogens C. Bay, Chairman and Chief Executive Officer, and Terry J. McClain,
Senior Vice President and Chief Financial Officer, will be available live via
the Internet at 8:00 a.m. April 22, 2003 CDT, by pointing browsers to:
http://www.valmont.com/investor_relations/call.shtml. 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#: 7501763 beginning April 22, 2003 at
10:00 a.m. CDT through 12:00 p.m. CDT on April 29, 2003.
Valmont is the global leader in designing and manufacturing poles, towers
and structures for lighting and traffic, wireless communication and utility
markets, 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 statements are based on
management's current views and estimates and are subject to uncertainty and
changes in circumstances. Future economic and market circumstances, industry
conditions, Company performance and financial results, operating efficiencies,
availability and price of raw materials, availability and market acceptance of
new products, product pricing, domestic and international competitive
environment, actions and policy changes of domestic and international
governments and other risks described from time to time in Valmont's reports to
the Securities and Exchange Commission are examples of factors, among others,
that could cause results to differ materially from those described in the
forward-looking statements. The Company is under no obligation to (and expressly
disclaims such obligation to) update or alter its forward-looking statements
whether as a result of new information, future events or otherwise.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
First Quarter
13 Weeks Ended
--------------------------
29-Mar-03 30-Mar-02
--------------------------
Net sales $207,294 $ 208,648
Cost of sales 154,441 153,415
-------- -------
Gross profit 52,853 55,233
Selling, general and administrative expenses 37,802 39,313
------- ------
Operating income 15,051 15,920
------- ------
Other income (deductions)
Interest expense (2,685) (3,199)
Interest income 234 335
Miscellaneous (38) (306)
---- -----
(2,489) (3,170)
Earnings before income taxes, minority
interest, equity in earnings(losses) of
nonconsolidated subsidiaries and change
in accounting principle 12,562 12,750
Income tax expense 4,648 4,723
------ -----
Earnings before minority interest, equity in
earnings (losses) of nonconsolidated
subsidiaries and change in accounting
principle 7,914 8,027
Minority interest (after tax) (271) 20
Loss in nonconsolidated subsidiaries (350) (778)
Cumulative effect of change in accounting principle - (500)
-- -----
Net earnings $ 7,293 $ 6,769
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Average shares outstanding (000's) - Basic 23,878 24,033
======= ======
Earnings per share - Basic $ 0.31 $ 0.28
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Average shares outstanding (000's) - Diluted 24,388 24,344
======= ======
Earnings per share - Diluted $ 0.30 $ 0.28
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Cash dividends per share $ 0.075 $ 0.065
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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
First Quarter
13 Weeks Ended
-------------------------
29-Mar-03 30-Mar-02
-------------------------
Net sales
Poles $ 80,885 $ 88,882
Wireless Communication 10,995 17,056
Coatings 27,162 27,549
------- ------
Infrastructure products 119,042 133,487
Irrigation 75,569 65,360
Tubing 16,461 13,878
------- ------
Agriculture products 92,030 79,238
Other 4,616 4,108
Less: Intersegment sales (8,394) (8,185)
------- -------
Total $207,294 $ 208,648
========= =========
Operating Income (Loss)
Poles 5,388 7,374
Wireless Communication (3,173) (2,361)
Coatings 1,633 2,244
------ -----
Infrastructure products 3,848 7,257
Irrigation 10,009 7,290
Tubing 1,616 1,562
------ -----
Agriculture products 11,625 8,852
Other (422) (189)
----- -----
Total $ 15,051 $ 15,920
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Valmont has five reportable segments organized on a worldwide product basis.
Poles: This segment consists of the manufacture of engineered metal
structures for the lighting, traffic and utility industries.
Wireless Communication: This segment consists of the manufacture of towers,
poles and components for the wireless telephone industry.
Coatings: This segment consists of galvanizing, anodizing and powder
coating services.
Irrigation: This segment consists of the manufacture of agricultural
irrigation equipment and related parts and services.
Tubing: This segment consists of the manufacture of tubular products.
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 wind energy development, machine tool
accessories and industrial fasteners, are reported in the "Other" category.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
29-Mar-03 30-Mar-02
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 23,330 $ 19,006
Accounts receivable, net 131,997 130,876
Inventories 121,117 113,881
Prepaid expenses 5,560 5,107
Refundable and deferred income taxes 11,719 11,536
------- ------
Total current assets 293,723 280,406
Property, plant and equipment, net 190,531 205,276
Goodwill and other assets 88,905 93,417
------- ------
$ 573,159 $ 579,099
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 10,790 $ 11,074
Notes payable to banks 21,806 15,886
Accounts payable 52,616 59,576
Accrued expenses 51,170 57,180
Dividend payable 1,792 1,592
------ -----
Total current liabilities 138,174 145,308
Long-term debt, excluding current installments 145,530 174,494
Other long-term liabilities 41,464 35,698
Shareholders' equity 247,991 223,599
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$ 573,159 $ 579,099
========== =========