Published:
Valmont Reports Second Quarter Results
OMAHA, Neb., July 17 /PRNewswire-FirstCall/ -- 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, reported second quarter sales of $497.1 million
compared with $402.3 million for the same period of 2007. Net earnings for the
second quarter were $37.3 million, or $1.41 per diluted share, versus second
quarter 2007 net earnings of $26.9 million, or $1.03 per diluted share.
For the first six months of 2008, sales were $919.4 million versus $742.9
million in 2007. Valmont's first half net earnings were $67.0 million, or
$2.55 per diluted share, compared with 2007 first half net earnings of $45.7
million, or $1.76 per diluted share.
Second Quarter Summary:
"Substantially stronger global demand for irrigation equipment led to
record second quarter sales," said Mogens C. Bay, Valmont's Chairman and Chief
Executive Officer. "Sales in our structural segments also increased due to the
impact of acquisitions made earlier in the year and effective pricing actions
to recover higher input costs.
"In our Engineered Support Structures Segment, sales were higher than last
year as highway spending programs remained a priority for governments
worldwide. Sales grew inNorth America despite concerns about reductions in
state budgets. The acquisition of West Coast Engineering Group contributed
meaningfully to segment results and is now being integrated with Valmont's
operations. As a result of actions taken in 2007, North American specialty
structures operations improved substantially compared to last year.
"In the Utility Support Structures Segment, sales increased due to price
increases to recover higher raw material costs and the PennSummit acquisition
that was completed in early 2008. PennSummit performed very well during the
quarter, adding significantly to results while expanding our geographic
footprint.
"Gains in the Coatings Segment sales primarily resulted from higher unit
volumes and lower costs.
"The biggest challenge during the quarter was rapidly rising steel costs.
Steel represents between 35% and 40% of Valmont's cost of goods sold. During
the quarter, steel costs rose approximately 35%. This is the most dramatic
increase in steel prices we have ever faced in one quarter. These inflationary
pressures necessitated raising prices on most of our products. I am very
pleased with the outstanding way our team managed through this period of rapid
inflation. They acted quickly and appropriately to mitigate the impact of
inflation on our results. Additionally, inflation led to an increase in the
LIFO reserve of approximately $16 million during the quarter.
"As a result of strong markets, timely pricing actions to recover
inflationary costs and improved operating leverage, consolidated operating
income for the Company as a whole improved 1.6 percentage points to 12.7% of
revenues."
Second Quarter Segment Review:
Engineered Support Structures Segment (38% of 2nd Quarter Net Sales)
Structures for lighting and traffic, wireless communication and overhead
signs, worldwide. Includes all support structures outside ofNorth America.
Sales were $191.0 million, an increase of 19% over last year's $160.6
million second quarter levels. Sales increased in most global markets. The
West Coast Engineering Group and Tehomet acquisitions accounted for
approximately 45% of the sales increase over second quarter 2007 levels.
InNorth America, lighting and traffic sales surpassed last year's levels
due to increased demand for structures funded through the federal highway
program. This increase was largely offset by lower project sales and sales for
residential lighting. Specialty structures sales also were higher as a result
of improved demand for wireless communication structures.
InEurope, sales were higher mainly due to incremental sales from the
Tehomet acquisition and favorable currency translation.
InChina, sales were flat due to a decline in wireless communication
sales, largely offset by higher utility and lighting sales. The temporary
softness in the communication segment was driven by an industry-wide
restructuring designed to promote competition. Valmont expects this change to
create new opportunities, as the restructuring broadens Valmont's potential
customer base.
Segment operating income increased 7.4% to $17.9 million and was 9.4% of
segment sales. While operating income dollars increased, operating income
percent for the segment declined, largely due to inflationary costs rising
faster than pricing actions to recover those costs.
Utility Support Structures Segment (20% of 2nd Quarter Net Sales)
Steel and concrete structures for the North American electric utility
industry.
Sales increased 13% to $101.3 million compared with $89.7 million in 2007.
The growth in sales primarily reflects the acquisition of PennSummit in
February and sales price increases to recover higher steel costs. While
physical volumes shipped were slightly below second quarter 2007 levels, this
was primarily the result of the timing of shipments. Order rates are strong
and the backlog at the end of the second quarter is at record levels. The
strong pace of orders is due to the continued investment in transmission and
distribution infrastructure by electric utility companies. In their efforts to
increase capacity and improve the reliability of the grid, the level of
investment by utilities is high and project sizes are larger than in prior
years.
Operating income increased 15% to $13.8 million and was 13.7% of segment
sales, due to improved pricing and better factory performance.
Coatings Segment (8% of 2nd Quarter Net Sales)
Hot-dip galvanizing and other coatings services to protect against
corrosion of steel and aluminum in North American markets.
Sales of $37.2 million were 5% above last year's $35.4 million mostly as a
result of stronger demand from agricultural and petrochemical markets.
Segment operating income rose to $9.1 million, an increase of 54%, and was
24.4% of segment sales. Most of the gains in operating income resulted from
improved factory efficiencies and lower costs. Additionally, a $650 thousand
charge for disposal of equipment in the second quarter of 2007 contributed to
favorable quarterly comparisons.
Irrigation Segment (32% of 2nd Quarter Net Sales)
Center pivot and linear move mechanized irrigation equipment and related
service parts for agriculture in global markets.
Sales improved 48% to $159.7 million compared with $107.6 million in 2007.
Irrigation equipment sales were driven by increased global demand for grains
for food and biofuel use. The increase in demand led to higher crop commodity
prices and higher farm income. Farmers increased their purchases of mechanized
irrigation equipment to benefit from the enhanced productivity and water
saving features of center pivot technology. While sales demand was broad-based
through most markets, markets were particularly strong inNorth America,
Brazil,Australia, and theMiddle East. North American demand was also strong
for aftermarket parts.
Valmont believes that the pressures on agriculture to support increased
demand for feed grains worldwide have caused an important shift in the
economics of agriculture. Previously, supply disruptions caused temporary
price increases in grains that would be relieved when production increased in
subsequent years. The current environment is demand driven, as population
growth, dietary improvement and competing demands for biofuels create a much
larger and more sustainable market. Valmont's mechanized irrigation equipment
provides a way for farmers to increase crop production, while at the same time
conserve water resources. This is expected to lead to continued growth in
Valmont's irrigation business.
Segment operating income increased 68% to $28.0 million and was 17.5% of
segment sales. The growth in operating income was due to the operating
leverage that resulted from increased unit volume.
2008 Outlook:
"Our outlook for the second half of the year is positive," Mr. Bay said.
"For the year, we now expect a revenue growth percentage in the mid-twenties,
and we are still expecting operating income as a percent of sales to increase
more than one percentage point.
"Current market trends are expected to continue through the second half of
the year. In the Engineered Support Structures Segment, we believe
infrastructure development inEurope andChina should lead to increased sales.
InNorth America, our outlook is for lighting and traffic product sales to
remain steady as funding continues under the 2005 highway bill. Utility demand
is expected to continue to be supported by the investment needed to add
capacity and improve the reliability of the transmission grid. Current demand
for coatings is firm. Going forward, coatings demand will be a function of the
local economies in our service areas. In the Irrigation Segment, while the
third quarter is the seasonally slowest for sales, the outlook is for better
comparisons as global demand for feed-grains should remain strong.
"Looking beyond 2008, we believe Valmont is well positioned to benefit
from global infrastructure development and the benefits mechanized irrigation
provides in addressing the need for agriculture to increase feed-grain
supply."
An audio discussion of Valmont's second quarter results by Mogens C. Bay,
Chairman and Chief Executive Officer and Terry J. McClain, Senior Vice
President and Chief Financial Officer, will be available live by telephone by
dialing 1-877-493-2981 and entering Conference ID#: 32008444 or via the
Internet at 8:00 a.m. July 18, 2008 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#:32008444 beginning July 18, 2008 at
10:00 a.m. CDT through 12:00 p.m. CDT on July 25, 2008.
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)
Second Quarter Year-to-Date
13 Weeks Ended 26 Weeks Ended
28-Jun-08 30-Jun-07 28-Jun-08 30-Jun-07
Net sales $497,129 $402,257 $919,415 $742,939
Cost of sales 359,926 293,343 666,404 545,258
Gross profit 137,203 108,914 253,011 197,681
Selling, general and
administrative expenses 73,833 64,362 139,175 119,715
Operating income 63,370 44,552 113,836 77,966
Other income (expense)
Interest expense (4,709) (4,404) (9,182) (8,689)
Interest income 877 500 1,498 1,130
Miscellaneous (514) 256 (1,858) (23)
(4,346) (3,648) (9,542) (7,582)
Earnings before
income taxes, minority
interest, and equity
in earnings (losses)
of nonconsolidated
subsidiaries 59,024 40,904 104,294 70,384
Income tax expense 20,548 13,664 35,602 23,974
Earnings before
minority interest,
equity in earnings
(losses) of
nonconsolidated
subsidiaries 38,476 27,240 68,692 46,410
Minority interest (1,243) (443) (1,686) (655)
Earnings (losses)
in nonconsolidated
subsidiaries 31 164 (43) (66)
Net earnings $37,264 $26,961 $66,963 $45,689
Average shares outstanding
(000's) - Basic 25,823 25,497 25,763 25,459
Earnings per share - Basic $1.44 $1.06 $2.60 $1.79
Average shares outstanding
(000's) - Diluted 26,377 26,107 26,306 26,018
Earnings per share - Diluted $1.41 $1.03 $2.55 $1.76
Cash dividends per share $0.105 $0.105 $0.210 $0.200
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
Second Quarter Year-to-Date
13 Weeks Ended 26 Weeks Ended
28-Jun-08 30-Jun-07 28-Jun-08 30-Jun-07
Net sales
Engineered Support
Structures $190,960 $160,588 $340,398 $285,831
Utility Support Structures 101,301 89,649 202,472 170,130
Coatings 37,200 35,390 72,328 69,029
Infrastructure products 329,461 285,627 615,198 524,990
Irrigation 159,667 107,562 290,445 200,479
Other 30,803 32,444 56,251 63,953
Less: Intersegment sales (22,802) (23,376) (42,479) (46,483)
Total $497,129 $402,257 $919,415 $742,939
Operating Income
Engineered Support
Structures $17,990 $16,743 $28,072 $25,423
Utility Support Structures 13,833 12,044 28,506 21,595
Coatings 9,085 5,896 15,631 11,100
Infrastructure products 40,908 34,683 72,209 58,118
Irrigation 28,001 16,657 50,396 28,902
Other 5,288 5,686 9,700 10,229
Corporate (10,827) (12,474) (18,469) (19,283)
Total $63,370 $44,552 $113,836 $77,966
Valmont has aggregated its business segments into four reportable segments
as follows.
Engineered Support Structures: This segment consists of the
manufacture of engineered metal structures and components for the
lighting, traffic and wireless communication industries worldwide
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 and other coating
services in North America.
Irrigation: This segment consists of the manufacture of agricultural
irrigation equipment and related parts and services worldwide.
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 the manufacture of tubular
products and industrial fasteners, are reported in the "Other" category.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
28-Jun-08 30-Jun-07
ASSETS
Current assets:
Cash and cash equivalents $64,835 $47,924
Accounts receivable, net 306,887 247,929
Inventories 250,247 218,197
Prepaid expenses 25,764 11,133
Refundable and deferred income taxes 28,240 18,645
Total current assets 675,973 543,828
Property, plant and equipment, net 259,384 217,135
Goodwill and other assets 270,735 196,103
$1,206,092 $957,066
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $61,820 $22,166
Notes payable to banks 20,588 17,900
Accounts payable 158,522 103,086
Accrued expenses 110,530 84,024
Dividend payable 3,397 2,708
Total current liabilities 354,857 229,884
Long-term debt, excluding current installments 181,409 206,235
Other long-term liabilities 79,158 69,633
Shareholders' equity 590,668 451,314
$1,206,092 $957,066
SOURCE Valmont Industries
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