For Immediate Release
April 19, 2005
Valmont's First Quarter Net Earnings Increase 24%
First Quarter Highlights:
o Net sales rose 23% and operating income increased 37% due to the impact of
2004 acquisitions, higher selling prices resulting from higher steel costs,
improved volumes in the European structures business and the Utility
Support Structures Segment and stronger results in the Tubing Segment.
o Irrigation sales and profitability declined, reflecting reduced demand due
to lower crop prices and higher farm input costs.
o Net earnings rose 24%.
o Cash flows from operations for the quarter were $33.8 million, driven by
stronger earnings and working capital reductions.
o Debt declined $25 million from December 25, 2004 to $303 million.
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 first quarter of $265.7 million
compared with $215.9 million for the same period of 2004. First quarter 2005 net
earnings were $6.8 million, or 27 cents per diluted share, versus first quarter
2004 net earnings of $5.5 million, or 22 cents per diluted share.
First Quarter Review:
"The improvement in net earnings and operating income for the quarter was
mainly due to significantly improved results in our Utility Support Structures
Segment, stronger results in our Engineered Support Structures Segment, the
addition of Newmark, a good performance in our Tubing Segment and an improvement
in Coatings Segment profitability," said Mogens C. Bay, Valmont's Chairman and
Chief Executive Officer. "While irrigation operating profits were lower, we are
pleased that despite a downturn in sales, the Irrigation Segment maintained
operating profit as a percent of sales above 10%.
"Selling, general and administrative spending was comparable to last year
after considering the effects of 2004 acquisitions."
First Quarter Summary - Infrastructure Markets:
Sales in the Engineered Support Structures Segment were $108.8 million, an
increase of 24% from 2004 levels. Operating income for the segment increased 54%
to $5.6 million.
Global sales of lighting and traffic products rose, due primarily to higher
selling prices to offset higher steel costs. In North America, volumes of
lighting and traffic products were similar to last year's levels. The continued
extension of the federal highway bill has kept demand for lighting and traffic
products stable. Commercial lighting sales increased partly due to the 2004
acquisition of Whatley, a composite pole manufacturer. In Europe, improved
market conditions resulted in sales and volume increases.
Sales of wireless communication products were higher in North America, due
to sales price increases implemented in 2004. Sign structure sales improved due
to increased market penetration and the acquisition of Sigma Industries, an
overhead sign structure company, during the third quarter of 2004.
In China, sales were slightly lower for wireless communication structures
offset somewhat by improved volumes of utility structures.
Profitability for the Engineered Support Structures Segment was dampened by
the adverse impact of fixed price orders taken for the sign structure business
prior to the rapid increase in steel prices in 2004. Overall profitability for
the segment increased due to improved pricing worldwide. Better performance in
Europe was due to stronger sales volumes and the positive effect of cost
reductions implemented during 2004.
Utility Support Structures Segment sales were $59.0 million compared with
$22.9 million in 2004. The sharp increase in sales reflects the acquisition of
Newmark in April 2004, significantly higher sales of steel utility structures
and price increases implemented to cover increased steel costs. Operating income
was $4.4 million, reflecting improved margins for steel utility structures and
the addition of Newmark. In North America, demand for steel and concrete utility
structures remains firm due to increased spending by utilities on capital and
maintenance projects to upgrade the electrical transmission grid.
Coatings Segment sales of $19.0 million were 16% lower than last year's
first quarter due to lower anodizing volumes. Operating income for the segment
increased to $0.8 million from $0.5 million last year, as rising zinc and
natural gas costs were more than offset by an improved sales mix and lower
operating expenses.
First Quarter Summary - Agricultural Markets:
In the Irrigation Segment, first quarter sales were $69.9 million, a 13%
decrease from 2004. Operating income for the segment declined 39% to $7.2
million reflecting reduced factory utilization as a result of significantly
lower volumes. While international sales levels were flat with last year, North
American demand fell due to lower crop prices and inflation in energy and
fertilizer costs for farm customers.
In the Tubing Segment, sales were 27% higher at $22.1 million due to higher
pricing to recover increased steel costs. Operating income increased 56% to $3.3
million reflecting higher sales levels and improved operations.
2005 Outlook:
Commenting on the outlook for the remainder of 2005, Mr. Bay said, "The
business conditions that are currently in place should continue throughout the
year. We expect our infrastructure businesses to post solid gains over 2004
results. In our irrigation business, we expect higher fuel and fertilizer costs
and weak commodity prices to result in lower sales and earnings compared to last
year. In our tubing business, we expect results more in line with historical
performance levels as steel supplies are more readily available resulting in a
more competitive market environment. For the Company as a whole, we expect
favorable sales and earnings comparisons for the year, excluding the after-tax
charge for debt prepayment that took place in the second quarter of 2004. We
plan to use our cash flows to pay down debt and expect to return to our targeted
debt to capital ratio of 40% or less."
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 20, 2005 CDT, 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#:3278136 beginning April 20, 2005 at
10:00 a.m. CDT through 12:00 p.m. CDT on April 27, 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)
First Quarter
13 Weeks Ended
----------------------------
26-Mar-05 27-Mar-04
----------------------------
Net sales $ 265,741 $ 215,897
Cost of sales 204,080 164,617
Gross profit 61,661 51,280
Selling, general and administrative expenses 45,554 39,531
Operating income 16,107 11,749
Other income (deductions)
Interest expense (4,827) (2,398)
Interest income 237 276
Miscellaneous (148) 14
(4,738) (2,108)
Earnings before income taxes, minority
interest, and equity in earnings (losses) of
non-consolidated subsidiaries 11,369 9,641
Income tax expense 4,144 3,529
Earnings before minority interest, equity in
earnings (losses) of nonconsolidated
subsidiaries 7,225 6,112
Minority interest (349) (455)
Earnings (losses) in nonconsolidated subsidiaries (66) (156)
Net earnings $ 6,810 $ 5,501
Average shares outstanding (000's) - Basic 24,111 23,846
Earnings per share - Basic $ 0.28 $ 0.23
Average shares outstanding (000's) - Diluted 25,042 24,520
Earnings per share - Diluted $ 0.27 $ 0.22
Cash dividends per share $ 0.080 $ 0.080
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
First Quarter
13 Weeks Ended
---------------------------
26-Mar-05 27-Mar-04
---------------------------
Net sales
Engineered Support Structures $ 108,842 $ 87,537
Utility Support Structures 59,033 22,939
Coatings 18,993 22,656
Infrastructure products 186,868 133,132
Irrigation 69,946 80,099
Tubing 22,067 17,323
Agriculture products 92,013 97,422
Other 4,819 4,360
Less: Intersegment sales (17,959) (19,017)
Total $ 265,741 $ 215,897
Operating Income
Engineered Support Structures $ 5,624 $ 3,662
Utility Support Structures 4,388 (2,221)
Coatings 766 466
Infrastructure products 10,778 1,907
Irrigation 7,220 11,845
Tubing 3,259 2,085
Agriculture products 10,479 13,930
Other (759) (492)
Corporate (4,391) (3,596)
Total $ 16,107 $ 11,749
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)
26-Mar-05 27-Mar-04
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 37,031 $ 24,197
Accounts receivable, net 172,681 149,505
Inventories 176,424 132,068
Prepaid expenses 11,809 7,601
Refundable and deferred income taxes 12,472 10,284
Total current assets 410,417 323,655
Property, plant and equipment, net 200,029 184,784
Goodwill and other assets 200,724 95,807
$ 811,170 $ 604,246
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 7,373 $ 15,115
Notes payable to banks 1,806 20,705
Accounts payable 69,354 65,993
Accrued expenses 58,793 52,070
Dividend payable 1,945 1,910
Total current liabilities 139,271 155,793
Long-term debt, excluding current installments 293,482 129,847
Other long-term liabilities 78,138 49,871
Shareholders' equity 300,279 268,735
$ 811,170 $ 604,246