Valmont Announces Record Third Quarter Results,
Net Earnings Increase 44%
Third Quarter 2005 Highlights:
o Operating income increased 39%.
o Net earnings increased 44% to a third quarter record of $10.2 million.
o Operating income in both the Engineered Support and Utility Support
Structures Segments rose significantly as a result of a margin
recovery in North America and strong results in Europe and China.
o Operating income increased in the Coatings Segment due to improved
plant efficiencies and reduced workers' compensation costs.
o Irrigation profitability improved despite lower sales as a result of a
favorable product mix and lower factory and SG&A spending.
o Strong cash flows from operations for the quarter and nine-month
period of $36 million and $91 million, respectively.
o At 39.5%, the long-term debt to invested capital ratio was below the
Company's stated goal of 40%.
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 third quarter of $265.9 million
compared with $262.9 million for the same period of 2004. Third quarter 2005 net
earnings were $10.2 million, or 40 cents per diluted share, versus third quarter
2004 net earnings of $7.1 million, or 29 cents per diluted share.
For the first nine months of 2005, sales were $796.8 million versus $744.8
million in 2004. Valmont's nine-month net earnings were $27.5 million, or $1.09
per diluted share, compared with 2004 nine-month net earnings of $15.4 million,
or 63 cents per diluted share. Nine-month 2004 net earnings included a $6.1
million after-tax charge related to debt prepayment costs, which occurred during
the second quarter of 2004.
Third Quarter Review:
"Operating income improved significantly for the third quarter," said
Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "The factors that
led to the improvement included a strong increase in profitability in the
Engineered Support Structures Segment led by a solid performance in Europe and
China, improved profitability in the Utility Support Structures Segment, and
better Coatings Segment results.
"Sales rose in the Engineered Support Structures Segment, led by strong
sales in Europe and China. In the Utility Support Structures Segment, sales were
lower due to a disruption of shipments caused by recent hurricanes. Sales in the
Irrigation, Coatings and Tubing Segments were modestly below last year's
levels."
Third Quarter Summary - Infrastructure Markets:
Sales in the Engineered Support Structures Segment were $125.4 million, an
increase of 5% from 2004 levels. Operating income for the segment increased 77%
to $13.2 million mostly due to improved market conditions. Steel costs were
still escalating during the third quarter of 2004 and pricing at that time did
not fully recover steel price increases.
In North America, sales of lighting and traffic products were flat compared
to last year. The new federal highway bill passed this summer after a long delay
that resulted in many projects being postponed. It is expected that over time,
increased government funding through the highway bill should lead to increased
demand for Valmont's lighting, traffic and sign structures. Commercial lighting
sales declined due to softer commercial construction markets.
In Europe, stronger municipal spending and new product introductions
resulted in sales and profitability increases. The improved results also reflect
administrative cost reductions implemented last year.
Sales of wireless communication products were essentially flat in North
America. Sign structure sales improved due to increased market demand and the
acquisition of the assets of Sigma Industries, an overhead sign structure
company, during the third quarter of 2004.
In China, sales were significantly higher, driven by continued strong
demand for utility and communication structures as well as by higher export
sales to the Asia-Pacific region. Infrastructure investments will be needed to
support ongoing economic expansion in China. Valmont has a second pole plant
under construction in southern China to support this increased demand.
Utility Support Structures Segment sales decreased 8% to $51.3 million
while operating income rose 37% to $4.9 million as margins recovered to more
traditional levels. During the quarter, hurricanes in the Gulf disrupted
scheduled shipments. Utility crews from many parts of the country were diverted
to aid in restoring power to the hurricane stricken regions. The Company's
utility backlog grew during the third quarter as electric utilities continue to
invest in upgrades to the transmission grid in order to improve capacity and
reliability.
Coatings Segment sales of $22.2 million were essentially unchanged from
last year. Operating income for the segment of $2.6 million was significantly
above last year's $1.5 million due to an improved sales mix, better operating
efficiencies and reduced workers' compensation costs in California.
Third Quarter Summary - Agricultural Markets:
Irrigation Segment third quarter sales were $55.5 million, an 11% decrease
from last year's third quarter results. Operating income for the segment
increased 7% to $4.9 million largely due to cost cutting measures implemented
earlier in the year. Most of the sales declines were in international markets,
although North American sales were modestly lower. Worldwide, lower world crop
prices and increased energy and fertilizer costs reduced demand. Parts sales
improved as a result of the hot dry weather in the North American corn belt.
Tubing Segment sales were 7% lower at $20.4 million due to modestly lower
steel costs that led to selling price reductions. Operating income decreased 10%
to $3.7 million reflecting the lower sales.
Fourth Quarter Outlook:
Commenting on the outlook for the fourth quarter, Mr. Bay said, "At this
time we expect favorable comparisons over last year's record fourth quarter
results.
"We remain positive about our longer term outlook as well. There is a need
for enhanced public safety through better lighting, highway safety and relieving
traffic congestion. These are strong drivers for our engineered support
structures businesses. Growing electricity demand worldwide is supportive of our
utility business. And, the need to use water more efficiently and produce more
food for a growing world population supports our irrigation business."
An audio discussion of Valmont's third 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 at
8:00 a.m. October 18, 2005 CDT, by telephone by dialing 1-877-493-2981 and
entering Conference ID#: 3278563 or via the Internet 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#: 3278563 beginning October 18, 2005
at 10:00 a.m. CDT through 12:00 p.m. CDT on October 25, 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)
Third Quarter Year-to-Date
13 Weeks Ended 39 Weeks Ended
-----------------------------------------------------
24-Sep-05 25-Sep-04 24-Sep-05 25-Sep-04
---------------------------------------- ------------
Net sales $ 265,942 $ 262,890 $ 796,817 $ 744,800
Cost of sales 196,332 201,790 597,953 566,340
Gross profit 69,610 61,100 198,864 178,460
Selling, general and administrative expenses 47,579 45,268 139,520 131,870
Operating income 22,031 15,832 59,344 46,590
Other income (deductions)
Interest expense (5,002) (4,639) (14,713) (11,104)
Interest income 408 687 1,237 1,382
Debt prepayment expenses - - - (9,860)
Miscellaneous (462) (23) (577) (283)
(5,056) (3,975) (14,053) (19,865)
Earnings before income taxes, minority
interest, and equity in earnings (losses) of
non-consolidated subsidiaries 16,975 11,857 45,291 26,725
Income tax expense 6,459 4,307 16,728 9,763
Earnings before minority interest, equity in
earnings (losses) of non-consolidated
subsidiaries 10,516 7,550 28,563 16,962
Minority interest (480) (668) (1,142) (1,841)
Earnings (losses) in non-consolidated subsidiaries 170 222 38 296
Net earnings $ 10,206 $ 7,104 $ 27,459 $ 15,417
Average shares outstanding (000's) - Basic 24,382 23,887 24,262 23,866
Earnings per share - Basic $ 0.42 $ 0.30 $ 1.13 $ 0.65
Average shares outstanding (000's) - Diluted 25,380 24,464 25,197 24,465
Earnings per share - Diluted $ 0.40 $ 0.29 $ 1.09 $ 0.63
Cash dividends per share $ 0.085 $ 0.080 $ 0.250 $ 0.240
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
Third Quarter Year-to-Date
13 Weeks Ended 39 Weeks Ended
--------------------------- -------------------------
24-Sep-05 25-Sep-04 24-Sep-05 25-Sep-04
--------------------------- -------------------------
Net sales
Engineered Support Structures $ 125,380 $ 119,436 $ 354,624 $ 314,474
Utility Support Structures 51,298 55,803 153,239 117,171
Coatings 22,196 22,486 62,392 68,710
Infrastructure products 198,874 197,725 570,255 500,355
Irrigation 55,467 62,593 190,838 230,274
Tubing 20,386 21,990 65,196 63,409
Agriculture products 75,853 84,583 256,034 293,683
Other 4,558 4,117 14,007 12,980
Less: Intersegment sales (13,343) (23,535) (43,479) (62,218)
Total $ 265,942 $ 262,890 $ 796,817 $ 744,800
Operating Income
Engineered Support Structures $ 13,160 $ 7,438 $ 29,492 $ 17,470
Utility Support Structures 4,888 3,558 12,859 2,689
Coatings 2,584 1,471 5,458 4,538
Infrastructure products 20,632 12,467 47,809 24,697
Irrigation 4,870 4,533 19,614 28,386
Tubing 3,725 4,152 10,881 9,658
Agriculture products 8,595 8,685 30,495 38,044
Other (532) (1,247) (1,948) (2,332)
Corporate (6,664) (4,073) (17,012) (13,819)
Total $ 22,031 $ 15,832 $ 59,344 $ 46,590
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)
24-Sep-05 25-Sep-04
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 33,941 $ 30,557
Accounts receivable, net 182,431 189,337
Inventories 164,070 197,803
Prepaid expenses 9,148 9,556
Refundable and deferred income taxes 12,840 8,842
Total current assets 402,430 436,095
Property, plant and equipment, net 207,375 209,072
Goodwill and other assets 198,214 181,184
$ 808,019 $ 826,351
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 8,542 $ 1,251
Notes payable to banks 5,214 17,078
Accounts payable 72,208 84,317
Accrued expenses 65,337 71,052
Dividend payable 2,086 1,913
Total current liabilities 153,387 175,611
Long-term debt, excluding current installments 255,211 324,905
Other long-term liabilities 79,520 49,166
Shareholders' equity 319,901 276,669
$ 808,019 $ 826,351