For Immediate Release
February 8, 2005
Valmont's Fourth Quarter Net Earnings Increase 52%
On 26% Increase in Sales
Fourth Quarter Highlights:
o Net sales rose 26% due to the impact of fiscal 2004 acquisitions,
product pricing reflective of higher steel costs and improved volumes
in the Engineered Support Structures and Utility Support Structures
Segments.
o Operating income increased 46% mainly due to stronger results in the
Engineered Support Structures Segment, a significant improvement in
the Utility Support Structures Segment, continued record performance
in the Tubing Segment and the impact of acquisitions completed in
fiscal 2004.
o Irrigation sales and profitability declined, reflecting reduced North
American demand due to lower crop prices and higher energy costs.
o Net earnings rose 52%.
o Cash flow from operations for the quarter exceeded $20 million, driven
by stronger earnings and inventory reductions.
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global
manufacturer of engineered support structures for infrastructure, mechanized
irrigation equipment for agriculture, and a provider of coating services and
tubular products, reported sales for the fourth quarter of $286.7 million
compared with $227.2 million for the same period of 2003. Fourth quarter 2004
net earnings were $11.8 million, or 48 cents per diluted share, versus fourth
quarter 2003 net earnings of $7.7 million, or 32 cents per diluted share.
For the fiscal year 2004, sales were $1,031.5 million versus $837.6 million
in 2003. Valmont's fiscal year net earnings, which included a $6.1 million
after-tax charge related to the second quarter debt prepayment, were $27.2
million, or $1.11 per diluted share, compared with 2003 fiscal year earnings of
$25.5 million, or $1.05 per diluted share.
Fourth Quarter Review:
"Improved profitability in our Engineered Support Structures Segment,
stronger market conditions and pricing for the Utility Support Structures
Segment, the acquisition of Newmark and higher sales and profitability in our
Tubing Segment were the main factors that contributed to the improvement in net
earnings for the quarter," said Mogens C. Bay, Valmont's Chairman and Chief
Executive Officer. "Fourth quarter sales increases and the effect of ongoing
cost improvements led to improved profitability for the Engineered Support
Structure and Utility Support Structures segments. Valmont self-insures employee
health care benefits and favorable claims experience reduced health care costs
in North America. Additionally, certain foreign income tax benefits resulted in
a modest reduction in the effective tax rate for the quarter.
"Tubing Segment sales rose substantially reflecting higher prices to
recover increased steel costs. The increase in sales and stronger market
conditions improved profitability.
"Sales and operating income were lower in the Irrigation Segment. Farmer
concerns over lower commodity prices and higher energy costs impacted demand in
North America. Significant increases in the selling price of irrigation
equipment due to higher steel costs further dampened demand.
"Coatings Segment results weakened due to reduced demand for anodizing and
slightly lower galvanizing sales."
2004 Review:
"Looking at the year 2004 in total, we faced significant challenges with
rapidly rising steel costs. I am pleased with the way our management team
reacted. They quickly and appropriately raised prices as steel costs went up.
Pricing discipline in every segment, and good cost control helped us to mitigate
the impact of rising steel costs on profitability. Market conditions improved in
our utility and specialty structures businesses, leading to better performance
than last year. The irrigation business improved, reflecting a strong growing
season in North America. The tubing business benefited by having steel available
in a period of tight supply for customers looking for stable sources of supply.
Our coatings business suffered from weak demand for anodizing services and
continued increases in workers' compensation costs in California. Apart from the
Newmark acquisition, we also successfully completed several smaller
acquisitions, improving our product offerings in our utility, lighting and
traffic, and sign structures businesses, while providing additional platforms
for growth."
Fourth Quarter Summary - Infrastructure Markets:
Sales in the Engineered Support Structures Segment were $115.5 million, an
increase of 24% from 2003 levels. Operating income for the segment rose 60% to
$14.1 million.
Global sales of lighting and traffic products rose. While much of the sales
increase was due to higher prices to recover increased steel costs, physical
volumes increased as well. In Europe, improved market conditions led to sales
gains. Cost reductions made earlier in the year and volume increases contributed
to improved profitability for the segment. In North America, while sales of
lighting and traffic products to the transportation market increased, the lack
of a new long-term highway bill caused delays in some municipal projects,
resulting in weaker order entry rates. Commercial lighting sales increased,
partly due to the acquisition of Whatley, a composite pole manufacturer, in the
second quarter of 2004.
Sales of wireless communication and sign structures were higher in North
America due to price increases to recover higher steel costs and the acquisition
of Sigma Industries, an overhead sign structure company, during the third
quarter. In China, sales of wireless communication products were lower, as
service providers focused on installing the heavy volume of product purchased
earlier in the year. Utility structure sales in China were higher than 2003 as
the Chinese power industry continued to expand its power grid.
Profitability for the Engineered Support Structures Segment improved due to
volume increases and improved factory performance.
Valmont has added a Utility Support Structures Segment to its reporting
structure. The Utility Support Structures Segment is comprised of Valmont's
North American steel utility business and Newmark's concrete and steel utility
businesses. The results of these operations were previously reported in the
Engineered Support Structures Segment and the former Concrete Support Structures
Segment, respectively. Utility Support Structures Segment sales were $67.2
million, sharply higher than the weak fourth quarter of 2003, reflecting the
acquisition of Newmark in early 2004, higher sales of steel utility structures
and selling price increases. Operating income was $4.5 million, reflecting the
return to profitability for the steel utility business and the addition of
Newmark. In North America, demand for steel and concrete utility structures rose
due to increased spending by utilities on capital and maintenance projects to
improve the reliability of the electrical grid system. The integration of
Newmark is substantially complete. The combination of Valmont and Newmark's
complementary product offerings and skills is expected to result in stronger
customer relationships and improved results.
Sales in the Coatings Segment were 29% lower than last year's fourth
quarter at $19.4 million, resulting in an operating loss of $0.3 million for the
segment. While galvanizing sales and operating income were slightly lower, the
loss of a large anodizing customer caused most of the sales and profitability
reduction. The Company also experienced an increase in workers' compensation
costs in its California operations. Recent reforms in the California workers'
compensation program are expected to moderate the impact of these costs going
forward.
Fourth Quarter Summary - Agricultural Markets:
In the Irrigation Segment, fourth quarter sales were $67.7 million, a 9%
decrease from 2003. Operating income for the segment declined 22% to $7.1
million due to lower sales in North America where demand was adversely impacted
by lower crop prices, and inflation in energy and fertilizer costs. Despite
lower sales, the Irrigation Segment is still producing operating income greater
than 10% of sales. The lower sales and production levels led to reduced factory
efficiencies, which contributed to lower operating income. In international
markets, sales and profitability were comparable to last year.
In the Tubing Segment, sales were 43% higher at $20.0 million due to higher
pricing to recover increased steel costs. Operating income of $3.8 million
increased due to an improved pricing environment this year and an unfavorable
inventory adjustment made in 2003.
2005 Outlook:
Commenting on the outlook for 2005, Mr. Bay said, "The relative stability
of steel prices is positive going into 2005. We are entering the new year with
good momentum in most of our businesses and remain optimistic that we will have
a strong performance in 2005. For the Company as a whole, we currently expect
sales growth of 5-10% and favorable net earnings comparisons for the year. Our
structures businesses should continue to grow with the economy, while reflecting
improvements from the 2004 acquisitions. The expected passage of a new federal
highway bill this spring would also be positive. We expect solid gains in our
utility business as the market strengthens. In our tubing business, the tight
supply situation has eased, which might put some pressure on margins. In
coatings, unless the industrial economy improves, we expect flat sales with
increased profitability. In the irrigation business, the current concern over
crop prices and energy costs lead us to believe that 2005 will not exceed 2004
levels."
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. February 9, 2005 CST, by pointing browsers
to: http://www.valmont.com/asp/investor_relations/ir6.asp. 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#: 3277058 beginning February 9, 2005
at 10:00 a.m. CDT through 12:00 p.m. CDT on February 16, 2005.
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 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 OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
Fourth Quarter Year-to-Date
13 Weeks Ended 52 Weeks Ended
------------------------------------------------------
25-Dec-04 27-Dec-03 25-Dec-04 27-Dec-03
---------------------------------------- -------------
Net sales $ 286,675 $ 227,167 $ 1,031,475 $ 837,625
Cost of sales 219,213 171,324 785,553 629,635
Gross profit 67,462 55,843 245,922 207,990
Selling, general and administrative expenses 44,190 39,859 176,060 153,367
Operating income 23,272 15,984 69,862 54,623
Other income (deductions)
Interest expense (4,969) (1,888) (16,073) (9,897)
Interest income 414 310 1,796 1,095
Debt prepayment expense - - (9,860) -
Miscellaneous (396) (173) (679) (276)
(4,951) (1,751) (24,816) (9,078)
Earnings before income taxes, minority
interest, equity in earnings (losses) of
non-consolidated subsidiaries and change 18,321 14,233 45,046 45,545
in accounting principle
Income tax expense 6,268 5,043 16,031 16,534
Earnings before minority interest, equity in
earnings (losses) of nonconsolidated
subsidiaries and change in accounting
principle 12,053 9,190 29,015 29,011
Minority interest (556) (597) (2,397) (2,222)
Earnings (losses) in nonconsolidated subsidiaries 276 (493) 572 (936)
Cumulative effect of change in accounting principle - (366) - (366)
Net earnings $ 11,773 $ 7,734 $ 27,190 $ 25,487
Average shares outstanding (000's) - Basic 23,955 23,780 23,889 23,805
Earnings per share - Basic $ 0.49 $ 0.33 $ 1.14 $ 1.07
Average shares outstanding (000's) - Diluted 24,697 24,436 24,520 24,358
Earnings per share - Diluted $ 0.48 $ 0.32 $ 1.11 $ 1.05
Cash dividends per share $ 0.080 $ 0.080 $ 0.320 $ 0.315
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-04 27-Dec-03 25-Dec-04 27-Dec-03
--------------------------- ------------ -------------
Net sales
Engineered Support Structures $ 115,494 $ 93,329 $ 400,933 $ 329,998
Utility Support Structures 67,185 21,476 178,213 76,842
Coatings 19,370 27,333 88,080 103,692
Infrastructure products 202,049 142,138 667,226 510,532
Irrigation 67,711 74,607 297,985 280,780
Tubing 19,989 13,964 83,398 57,783
Agriculture products 87,700 88,571 381,383 338,563
Other 4,996 4,555 17,976 17,676
Less: Intersegment sales (8,070) (8,097) (35,110) (29,146)
Total $ 286,675 $ 227,167 $ 1,031,475 $ 837,625
Operating Income
Engineered Support Structures $ 14,137 $ 8,831 $ 31,607 $ 26,258
Utility Support Structures 4,456 (2,142) 7,145 (5,557)
Coatings (307) 1,364 4,231 6,798
Infrastructure products 18,286 8,053 42,983 27,499
Irrigation 7,056 8,999 35,442 34,574
Tubing 3,750 1,450 13,408 6,506
Agriculture products 10,806 10,449 48,850 41,080
Other (505) (351) (2,837) (2,133)
Corporate (5,315) (2,167) (19,134) (11,823)
Total $ 23,272 $ 15,984 $ 69,862 $ 54,623
Valmont has five 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 and
wireless communication industries, and certain international utility
businesses.
Utility Support Structures: This segment consists of the manufacture of
engineered steel and concrete structures primarily for the North American
utility 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 steel 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)
25-Dec-04 27-Dec-03
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 30,210 $ 33,345
Accounts receivable, net 188,975 151,765
Inventories 186,988 116,475
Prepaid expenses 8,409 8,622
Refundable and deferred income taxes 14,491 10,903
Total current assets 429,073 321,110
Property, plant and equipment, net 205,655 190,103
Goodwill and other assets 201,948 93,584
$ 836,676 $ 604,797
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 7,962 $ 15,009
Notes payable to banks 4,682 15,500
Accounts payable 69,979 63,256
Accrued expenses 66,756 55,856
Dividend payable 1,932 1,921
Total current liabilities 151,311 151,542
Long-term debt, excluding current installments 314,813 134,653
Other long-term liabilities 75,588 53,108
Shareholders' equity 294,964 265,494
$ 836,676 $ 604,797