News Release
February 10, 2004
Valmont Announces Fourth Quarter Earnings
Summary (Comparisons vs. year ago quarter):
o Net sales increase 5.3%.
o Net earnings decrease 4.8%.
o Strong performance in the Irrigation Segment.
o Strong sales across all product lines led to record profits in China.
o Utility results reflect continued pricing pressures.
o Coatings profitability impacted by continued soft market conditions
and workers' compensation costs in California.
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), the leading global
manufacturer of engineered support structures, coating services for
infrastructure, and mechanized irrigation equipment for agriculture, reported
fourth quarter 2003 net earnings of $8.1 million, or 33 cents per diluted share,
versus fourth quarter 2002 net earnings of $8.5 million, or 34 cents per diluted
share. Sales for the fourth quarter were $227 million compared with $216 million
for the same period of 2002.
For the fiscal year 2003, Valmont's net earnings were $25.9 million, or
$1.06 per diluted share, compared with 2002 net earnings of $33.6 million, or
$1.37 per diluted share. Sales for 2003 were $838 million versus $855 million in
2002.
2003 Fourth Quarter and Year Review:
"Our fourth quarter results were mixed," said Mogens C. Bay, Valmont's
Chairman and Chief Executive Officer. "While utility product sales improved
slightly from last year, severe pricing pressure caused most of the earnings
reduction in our structures segment for the quarter. Our coatings segment
comparisons were unfavorable, reflecting continued soft market conditions and
increased workers' compensation costs in California. In our tubing segment,
results were satisfactory, but down slightly due to an unfavorable inventory
adjustment. On the other hand, our irrigation segment had an excellent quarter.
We also had solid growth in sales of lighting and traffic products and a modest
improvement in sales of wireless communication products during the quarter."
"Looking at the year in total, we had successes and disappointments. On the
positive side, we achieved record operating income in our irrigation segment due
to record sales and profits in our international irrigation business. Starting
with our first international investment in local manufacturing more than 20
years ago, we have built a solid and diversified international business with
production and distribution facilities in important agricultural markets. Our
decision to combine the pole and wireless communication divisions early in 2003,
creating the engineered support structures division, was a good one. It allowed
us to expand our product line and successfully enter new markets, such as the
overhead sign structure market, while at the same time lowering our cost
structure."
"On the negative side, we dealt with a substantial decline in the
profitability of our utility business, and volumes in our coatings business
declined leading to significant de-leverage."
"The year 2003 was another year of strong cash flow, which allowed us to
further improve our long-term debt to capital ratio, which now stands at 29.5%."
Fourth Quarter Summary - Infrastructure Markets:
The Engineered Support Structures Segment sales of $114.8 million increased
11% from 2002 levels. Operating income for the segment fell by 34% to $5.6
million, largely as a result of depressed prices for utility structures.
Sales for lighting and traffic products were higher in North America, which
led to improved manufacturing efficiencies and higher profits. In Europe,
lighting sales were also up from 2002 reflecting the Company's participation in
more markets. Profitability however, declined due to higher selling, general and
administrative expenses to expand the Company's geographic coverage in Europe
and Northern Africa.
Globally, sales of wireless communication products improved and so did
profitability. Expenses declined as a result of combining the pole and wireless
communication divisions earlier in the year.
In China, Valmont has now realized seven consecutive years of improved
sales and profits. China continues to invest heavily in infrastructure creating
demand for structures for the lighting and traffic markets, and the wireless
communication and utility industries. Valmont's Shanghai facility and our
excellent organization in China provide a solid platform for future growth.
The Coatings Segment sales of $27.3 million were 6% lower than last year
reflecting the continued softness in the businesses of our customer base, lower
internal volumes and increased competition in certain markets. Operating profits
fell 67% to $1.1 million. In the fourth quarter of 2002, there was a gain on an
asset sale that contributed $1.2 million to last year's profitability.
Profitability was also impacted by higher workers' compensation insurance costs
at the Company's coatings facilities located in California.
Fourth Quarter Summary-Agricultural Markets:
The Irrigation Segment's fourth quarter sales of $74.6 million were about
even with 2002. Sales were higher in North American markets due to rising farm
income. Internationally, higher sales in Brazil and Australia somewhat offset
the lack of sales within the Middle East. The farm economy in Brazil was strong,
due to higher crop prices and stable government farm policy. Operating income
for the segment of $8.4 million was a 41% improvement over 2002, due to higher
equipment and parts sales in North America, favorable currency translations, and
lower selling, general and administrative costs.
The Tubing Segment sales of $14.0 million were 3% lower than in 2002.
Operating income of $1.3 million was 25% below the fourth quarter of 2002,
primarily due to competitive pricing and an unfavorable inventory adjustment.
2004 Outlook:
Commenting on the outlook for 2004, Mr. Bay said, "In our irrigation
business, we look for another strong year. We expect that market conditions in
North America will remain favorable. Our international irrigation markets may
not achieve the record results of 2003 because of continued uncertainty in the
Middle East and some weakness in selected other international markets."
"In our engineered structures segment, we expect higher sales and profits
for the year. There is, however, some uncertainty regarding the new federal
highway bill, which is still under consideration in Congress. This may affect
order flow for our lighting and traffic products. The extension in funding for
the 1998 federal highway bill is due to expire this month. Our utility business
should experience higher volumes, although weak pricing may persist. In our
specialty structures business, (mainly wireless and traffic sign products), we
expect increased sales and profits. Coatings sales should reflect our internal
demand as well as the condition of the U.S. industrial economy. Although there
has been a pickup in the general economy, our industrial customers have not seen
substantial increases in their markets."
"A major issue facing the Company is steel pricing and availability.
China's expanded steel production has led to global disruptions in the
availability of raw materials for steel. Domestic mills have allocated supply,
creating a tight market and higher prices. Under this environment of declining
availability and rising prices, Valmont is working with its suppliers to secure
availability and will need to pass its steel price increases onto the
marketplace."
"In summary, we currently expect 2004 to be a year of increased revenue and
solid profitability gains."
"In the first quarter, we anticipate slightly unfavorable results, compared
to a strong first quarter in 2003. Severe winter weather has affected operations
of and shipments from several of our North American plants."
"Going forward, we feel positive about our outlook on many fronts. We are
in solid businesses with good fundamentals. The support structures we provide
for lighting and traffic and utility help emerging economies develop and mature
economies to grow. Our specialty structures products enable the mobile telephony
that is now a way of life. To improve customer service levels, wireless carriers
need more poles, towers and components. Our coatings business serves industry
and agriculture by protecting investments in infrastructure. For agriculture to
become more efficient and grow more food, better water conservation and more
efficient farming techniques are needed. Our Valley(R) brand of mechanized
irrigation equipment saves water and labor cost while improving yields."
An audio discussion of Valmont's fourth 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. Feb. 11, 2004 CST, 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#: 5169060 beginning Feb. 11, 2004 at
10:00 a.m. CST through 12:00 p.m. CST on Feb.18, 2004.
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 statement. 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)
Fourth Quarter Year-to-Date
13 Weeks Ended 52 Weeks Ended
--------------------------------------------------------
27-Dec-03 28-Dec-02 27-Dec-03 28-Dec-02
------------------------------------------ -------------
Net sales $ 227,167 $ 215,656 $ 837,625 $ 854,898
Cost of sales 171,324 155,298 629,635 623,422
Gross profit 55,843 60,358 207,990 231,476
Selling, general and administrative expenses 39,859 41,619 153,367 161,187
Operating income 15,984 18,739 54,623 70,289
Other income (deductions)
Interest expense (1,888) (2,491) (9,897) (11,722)
Interest income 310 269 1,095 1,048
Miscellaneous (173) 135 (276) (337)
(1,751) (2,087) (9,078) (11,011)
Earnings before income taxes, minority
interest, equity in earnings (losses) of non-
consolidated subsidiaries and change in
accounting principle 14,233 16,652 45,545 59,278
Income tax expense 5,043 6,147 16,534 21,637
Earnings before minority interest, equity in
earnings (losses) of nonconsolidated
subsidiaries and change in accounting
principle 9,190 10,505 29,011 37,641
Minority interest (after tax) (597) (545) (2,222) (1,170)
Earnings (losses) in nonconsolidated subsidiaries (493) (1,456) (936) (2,342)
Cumulative effect of change in accounting principle - - - (500)
Net earnings $ 8,100 $ 8,504 $ 25,853 $ 33,629
Average shares outstanding (000's) - Basic 23,780 24,060 23,805 24,056
Earnings per share - Basic $ 0.34 $ 0.35 $ 1.09 $ 1.40
Average shares outstanding (000's) - Diluted 24,436 24,865 24,358 24,621
Earnings per share - Diluted $ 0.33 $ 0.34 $ 1.06 $ 1.37
Cash dividends per share $ 0.080 $ 0.075 $ 0.315 $ 0.290
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
Fourth Quarter Year-to-Date
13 Weeks Ended 52 Weeks Ended
---------------------------- ---------------------------
---------------------------- ------------- -------------
27-Dec-03 28-Dec-02 27-Dec-03 28-Dec-02
---------------------------- ------------- -------------
---------------------------- ------------- -------------
Net sales
Engineered Support Structures $ 114,805 $ 103,479 $ 406,840 $ 436,696
Coatings 27,333 29,198 103,692 111,704
Infrastructure products 142,138 132,677 510,532 548,400
Irrigation 74,607 74,348 280,780 264,844
Tubing 13,964 14,374 57,783 57,716
Agriculture products 88,571 88,722 338,563 322,560
Other 4,555 4,379 17,676 16,975
Less: Intersegment sales (8,097) (10,122) (29,146) (33,037)
Total $ 227,167 $ 215,656 $ 837,625 $ 854,898
Operating Income
Engineered Support Structures $ 5,615 $ 8,550 $ 14,840 $ 31,213
Coatings 1,103 3,350 5,375 10,710
Infrastructure products 6,718 11,900 20,215 41,923
Irrigation 8,356 5,920 31,064 24,050
Tubing 1,303 1,742 5,706 6,459
Agriculture products 9,659 7,662 36,770 30,509
Other (393) (823) (2,362) (2,143)
Total $ 15,984 $ 18,739 $ 54,623 $ 70,289
Valmont has four reportable segments organized on a worldwide product basis.
Engineered Support Structures: This segment consists of the manufacture of
engineered metal structures and components for the lighting, traffic,
utility and wireless communication industries.
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 four 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)
27-Dec-03 28-Dec-02
-------------- -------------
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ASSETS
Current assets:
Cash and cash equivalents $ 33,345 $ 19,514
Accounts receivable, net 151,765 132,697
Inventories 116,475 120,837
Prepaid expenses 8,622 4,868
Refundable and deferred income taxes 10,903 17,012
Total current assets 321,110 294,928
Property, plant and equipment, net 180,798 193,175
Goodwill and other assets 93,584 90,468
$ 595,492 $ 578,571
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 14,544 $ 10,849
Notes payable to banks 15,500 3,149
Accounts payable 63,256 55,198
Accrued expenses 55,856 69,828
Dividend payable 1,921 1,792
Total current liabilities 151,077 140,816
Long-term debt, excluding current installments 125,237 155,542
Other long-term liabilities 53,318 40,193
Shareholders' equity 265,860 242,020
$ 595,492 $ 578,571