OMAHA, Neb., Feb. 14 /PRNewswire-FirstCall/ -- Valmont Industries, Inc. , 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 $311.3 million compared with $286.7 million for the same period of 2004. Fourth quarter 2005 net earnings were $11.6 million, or 45 cents per diluted share, versus fourth quarter 2004 net earnings of $11.5 million, or 46 cents per diluted share.
For the fiscal year 2005, sales were $1,108.1 million versus $1,031.5 million in 2004, an increase of 7.4%. Valmont's fiscal year net earnings were $39.1 million, or $1.54 per diluted share, compared with 2004 fiscal year earnings of $26.9 million, or $1.10 per diluted share. Fiscal year 2004 earnings included a $9.9 million charge, ($6.1 million after-tax) related to debt prepayment. Valmont's 2005 fiscal year consisted of 53 weeks compared with 52 weeks in 2004.
Fourth Quarter Review:
"Profitability improved in our Utility Support Structures Segment on a modest sales increase, and sales and profitability in our Coatings Segment were appreciably higher for the quarter," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "In the Engineered Support Structures Segment, operating income increased 7% on 2.5% higher sales.
"While Tubing Segment sales were higher, competitive pricing pressures reduced operating income slightly below last year's record levels.
"In the Irrigation Segment, sales were comparable to 2004, as improved North American volumes were offset by continued weakness in international markets. Operating income for the segment declined as a result of rising material and energy costs in North America and lower international volumes.
"Net earnings were impacted by a $1.1 million increase in income taxes related to the repatriation of foreign dividends. We availed ourselves of the opportunity to bring back these dividends at favorable tax rates."
2005 Review:
"Engineered Support Structures Segment sales and earnings improved in all regions with record performances in Europe and China. North American structures results contributed to the operating income improvement despite level sales volumes. Margins recovered to more traditional levels as we continue to recover from the impact of the volatile steel markets of 2004.
"In the first full year operating as an integrated business unit, the combined Valmont and Newmark utility businesses recorded higher sales and significant improvements in operating income. The broadened product line strengthened many key alliances with utility customers.
"The Coatings Segment improved its operating income on flat sales.
"The Tubing Segment continued its strong performance.
"Sales in the Irrigation Segment declined significantly as low crop prices and increased input costs for farmers drove the largest cyclical decline in the irrigation industry in 15 years.
"Looking at the total year, we made progress on our goal to improve operating income, which increased from 6.8% to 7.5%.
"This year we continued to face inflation in many raw material and input costs. Prices for natural gas, aluminum and zinc were especially volatile. While steel was more stable than during 2004, it remained relatively expensive from a historical perspective."
Fourth Quarter Summary -- Infrastructure Markets:
Sales in the Engineered Support Structures Segment were $137.5 million, an increase of 2.5% from 2004 levels. Operating income for the segment increased 7% to $15.1 million. Most of the profitability improvement came from results in the North American structures business. Profitability was adversely impacted by certain fixed price sign structure orders in the backlog at December 31, 2005 and startup expenses related to a new pole manufacturing plant in southern China scheduled to start production in the second quarter of 2006.
In North America, sales volumes of lighting and traffic products were flat compared to last year. Sales of wireless communication products were essentially flat in North America. Sign structure sales improved due to our presence in more states. In Europe, sales were comparable to last year's record performance, while in China, sales increases were driven by strong demand in all product lines.
Utility Support Structures Segment sales were $69.2 million, 2% higher than the fourth quarter of 2004. Operating income increased from $4.5 million to $7.8 million, reflecting better market conditions. Demand for utility structures remained firm due to increased spending by utilities on capital and maintenance projects to improve the reliability of the electrical transmission grid and reconstruction in hurricane stricken areas.
Sales in the Coatings Segment were 28% higher than last year's fourth quarter at $24.7 million. Most of the sales increase was in galvanizing services as a result of improved demand from the industrial sector. Operating income increased to $2.9 million compared with last year's modest loss, despite rapidly increasing zinc prices and historically high natural gas costs.
Fourth Quarter Summary -- Agricultural Markets:
In the Irrigation Segment, fourth quarter sales were $69.5 million, a 3% increase over 2004. Sales increased in North American markets, reflecting improved demand in the new selling season that started in the fall. In international markets, strong local currencies and low prices dampened export demand for crops, which led to lower irrigation equipment sales. Operating income for the segment declined 26% to $5.2 million as inflation in raw material and energy costs dampened the impact of improved North American sales volumes on segment profitability. The lower international sales and production levels led to reduced factory efficiencies, which contributed to lower operating income.
In the Tubing Segment, volumes drove sales 8.5% higher to $21.7 million. Operating income of $3.7 million was comparable to 2004 as pricing pressures in certain markets offset the impact of higher sales volumes.
2006 Outlook:
Commenting on the outlook for 2006, Mr. Bay said, "We have a positive outlook for 2006. We are entering the year with strong drivers in most of our businesses and we expect strong earnings improvement over last year in the first quarter. For the year in total, we currently expect solid sales growth and strong net earnings growth.
"In our Engineered Support Structures Segment, increased highway spending and the improved fiscal conditions in many states and municipalities should provide good support for our lighting, traffic and overhead sign structures businesses. We expect solid gains in our utility business as the industry continues to work on improving the reliability of the electrical transmission grid. In the coatings business, the improved industrial economy should lead to stronger results. In our tubing business, we will closely monitor developments in the steel industry to best optimize performance. In the irrigation business, we expect volumes similar to 2005 levels due to low crop prices and rising energy costs."
An audio discussion of Valmont's fourth quarter results by Valmont officer Terry J. McClain, Senior Vice President and Chief Financial Officer, will be available live at 8:00 a.m. CDT February 15, 2006, by telephone by dialing 1-877-493-2981 and entering Conference ID#: 3821186 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#: 3821186 beginning February 15, 2006 at 10:30 a.m. CDT through 12:00 p.m. CDT on February 23, 2006.
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
14 and 13 Weeks 53 and 52 Weeks
Ended Ended
31-Dec-05 25-Dec-04 31-Dec-05 25-Dec-04
Net sales $311,283 $286,675 $1,108,100 $1,031,475
Cost of sales 231,852 219,213 829,805 785,553
Gross profit 79,431 67,462 278,295 245,922
Selling, general and
administrative expenses 55,912 43,940 195,432 175,810
Operating income 23,519 23,522 82,863 70,112
Other income (expense)
Net interest expense (4,212) (5,018) (17,688) (14,740)
Debt prepayment expenses -- -- -- (9,860)
Miscellaneous (225) (396) (802) (679)
(4,437) (5,414) (18,490) (25,279)
Earnings before income
taxes, minority
interest, and equity
in earnings of non-
consolidated
subsidiaries 19,082 18,108 64,373 44,833
Income tax expense 7,620 6,364 24,348 16,127
Earnings before
minority interest,
equity in earnings
of non-consolidated
subsidiaries 11,462 11,744 40,025 28,706
Minority interest 90 (556) (1,052) (2,397)
Earnings in non-consolidated
subsidiaries 68 276 106 572
Net earnings $11,620 $11,464 $39,079 $26,881
Average shares outstanding
(000's) - Basic 24,502 23,955 24,287 23,889
Earnings per share - Basic $0.47 $0.48 $1.61 $1.13
Average shares outstanding
(000's) - Diluted 25,728 24,697 25,367 24,520
Earnings per share - Diluted $0.45 $0.46 $1.54 $1.10
Cash dividends per share $0.085 $0.080 $0.335 $0.320
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
Fourth Quarter Year-to-Date
14 and 13 Weeks 53 and 52 Weeks
Ended Ended
31-Dec-05 25-Dec-04 31-Dec-05 25-Dec-04
Net sales
Engineered Support
Structures $137,491 $134,119 $492,115 $448,593
Utility Support
Structures 69,234 67,837 222,473 185,008
Coatings 24,717 19,370 87,109 88,080
Infrastructure
products 231,442 221,326 801,697 721,681
Irrigation 69,521 67,711 260,359 297,985
Tubing 21,695 19,989 86,891 83,398
Agriculture pro 91,216 87,700 347,250 381,383
Other 4,393 4,996 18,400 17,976
Less: Intersegment sales (15,768) (27,347) (59,247) (89,565)
Total $311,283 $286,675 $1,108,100 $1,031,475
Operating Income
Engineered Support
Structures $15,096 $14,137 $44,588 $31,607
Utility Support
Structures 7,773 4,456 20,632 7,145
Coatings 2,994 (307) 8,452 4,231
Infrastructure
products 25,863 18,286 73,672 42,983
Irrigation 5,215 7,056 24,830 35,442
Tubing 3,662 3,750 14,543 13,408
Agriculture products 8,877 10,806 39,373 48,850
Other (2,114) (506) (4,062) (2,837)
Corporate (9,107) (5,064) (26,120) (18,884)
Total $23,519 $23,522 $82,863 $70,112
Valmont has aggregated its segments into 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)
31-Dec-05 25-Dec-04
ASSETS
Current assets:
Cash and cash equivalents $46,867 $37,453
Accounts receivable, net 180,969 188,512
Inventories 158,327 186,988
Prepaid expenses 7,643 8,408
Refundable and deferred income taxes 14,506 14,387
Total current assets 408,312 435,748
Property, plant and equipment, net 194,676 205,655
Goodwill and other assets 199,054 201,948
$802,042 $843,351
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $13,583 $7,962
Notes payable to banks 4,918 4,682
Accounts payable 90,674 77,222
Accrued expenses 67,869 66,506
Dividend payable 2,107 1,932
Total current liabilities 179,151 158,304
Long-term debt, excluding current
installments 218,757 314,813
Other long-term liabilities 75,459 75,579
Shareholders' equity 328,675 294,655
$802,042 $843,351
First Call Analyst:
FCMN Contact: debra.andersen@valmont.com
