OMAHA, Neb., July 18 /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 second quarter sales of $402.3 million compared with $338.8 million for the same period of 2006. Net earnings for the second quarter were $26.9 million, or $1.03 per diluted share, versus second quarter 2006 net earnings of $17.3 million, or 67 cents per diluted share.
For the first six months of 2007, sales were $742.9 million versus $642.4 million in 2006. Valmont's first half net earnings were $45.7 million, or $1.76 per diluted share, compared with 2006 first half net earnings of $30.4 million, or $1.18 per diluted share.
Second Quarter Review:
"Sales growth was broad-based across all segments and driven primarily by unit volume increases," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.
"In our largest segment, Engineered Support Structures, we had stronger demand in China and Europe and solid demand in North America.
"Utility Support Structure Segment sales were very strong, responding to continued increased levels of investment in the electrical transmission grid by utility companies.
"In the Irrigation Segment, North American sales rose sharply, reflecting positive conditions in the agricultural economy and successful spring sales incentives. International sales gains were the result of stronger demand in our core markets.
"Gains in Coatings Segment sales were volume-related and from price increases to recover higher costs, as demand from infrastructure spending increased and zinc costs were above last year's second quarter levels.
"Sales in the Tubing Segment improved, sparked by demand from manufacturers of grain handling equipment, and increased demand for the custom tubing sizes in which Valmont specializes.
"We have had a focus on improving the quality of our earnings with an emphasis on getting value in the market for the products we produce, reducing costs and improving employee engagement. As a result of these initiatives, and a combination of good markets and strong operating leverage, consolidated operating income for the Company as a whole improved 2.3 percentage points to 11.1% of revenues."
Second Quarter Summary -- Infrastructure Markets: (67% of 2nd Quarter Net Sales)
Engineered Support Structures Segment (38% of 2nd Quarter Net Sales)
Structures and specialty structures for lighting and traffic, wireless communication and overhead signs, worldwide. Includes utility support structures outside of North America.
Sales were $160.6 million, an increase of 17% over last year's $137.6 million second quarter level. Most of the sales gains were from very strong demand for utility and wireless communication structures in China. In Europe, increased municipal spending on infrastructure products drove sales higher.
In North America, sales to the transportation market were similar to last year's levels. Commercial and decorative product sales in North America were moderately above last year. Sales of specialty structures remain below last year's levels.
Segment operating income increased 51% to $16.7 million and was 10.4% of segment sales. The improvement in operating profit was largely due to the strong performance in all regions, partly offset by sub-par performance in North American specialty structures.
Utility Support Structures Segment (22% of 2nd Quarter Net Sales)
Steel and concrete structures for electric power delivery in North America.
Sales increased 18% to $89.7 million compared with $76.3 million in 2006. The improvement in sales reflects increased investment by utility companies in transmission and distribution structures for electrical power delivery. Utility investment in the electric transmission grid is increasing and proposed project sizes have become larger. Incentives in U.S. Energy Bill policy encourage utilities to improve the reliability and interconnectivity of the transmission and distribution grid.
Operating income increased 48% to $12.0 million and was 13.4% of segment sales. The increase in operating income was mostly due to higher volumes and a more favorable pricing environment.
Coatings Segment (7% 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 $35.4 million were 30% above last year's $27.3 million. Improved conditions in the industrial economy, strong internal demand and higher levels of infrastructure spending drove the sales increase. Additionally, the sales increase reflects higher pricing to recover zinc costs above last year's second quarter levels.
Segment operating income rose to $5.9 million, an increase of 21%, and was 16.7% of segment sales. During the quarter, the Company took a $650 thousand charge for disposal of equipment at one of the coatings locations.
Second Quarter Summary -- Agricultural Markets: (32% of 2nd Quarter Net Sales)
Irrigation Segment (27% of 2nd Quarter Net Sales)
Center pivot and linear move mechanized irrigation equipment and related service parts for agriculture in global markets.
Sales improved 22% to $107.6 million compared with $87.9 million in 2006. North American sales were supported by grower expectations for an improved agricultural economy and by a strong backlog generated by a sales promotion during the first quarter of this year.
International sales increased in most markets for mechanized irrigation equipment, except Australia, where drought has led to government restrictions on irrigation. Higher grain prices and increased emphasis on the efficient use of water for irrigation are the primary drivers for growth in the market worldwide.
Segment operating income increased 51% to $16.7 million and was 15.5% of segment sales. The improved operating income was the result of the operating leverage that resulted from increased unit volume.
Tubing Segment (5% of 2nd Quarter Net Sales)
Custom steel tubing for mechanical and structural applications.
Sales were 12% higher at $26.5 million. Demand was especially strong from agricultural equipment manufacturers, driven by the increased need for grain handling and storage.
Segment operating income increased 40% to $5.2 million as a result of higher volumes and a favorable sales mix, and was 19.4% of segment sales.
2007 Outlook:
"Our outlook for the second half of the year is for improved operating performance and favorable comparisons with last year, Mr. Bay said. "We will likely achieve our near-term goal of improving operating income as a percent of sales to 10% this year. Year-over-year percentage improvements for the last two quarters of the year however, will likely not be as strong as those in the first half of 2007.
"The current market trends for our businesses are strong. Our performance reflects favorable market conditions as well as our initiatives to realize full value for the products we sell, reduce costs and improve employee engagement. A combination of a continued emphasis on these programs, favorable competitive pricing environments and good market conditions could provide a climate for additional improvement in results.
"Looking forward, we believe our current business drivers are global, compelling and enduring. Many opportunities remain for us to leverage our products, markets and capabilities around the world. Our core businesses have strong fundamentals and continue to offer good returns on invested capital."
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#: 2634530 or via the Internet at 8:00 a.m. July 19, 2007 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#:2634530 beginning July 19, 2007 at 10:00 a.m. CDT through 12:00 p.m. CDT on July 26, 2007.
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
30-Jun-07 1-Jul-06 30-Jun-07 1-Jul-06
Net sales $402,257 $338,791 $742,939 $642,416
Cost of sales 293,343 253,729 545,258 481,661
Gross profit 108,914 85,062 197,681 160,755
Selling, general and
administrative expenses 64,362 55,153 119,715 107,269
Operating income 44,552 29,909 77,966 53,486
Other income (expense)
Interest expense (4,404) (4,338) (8,689) (8,486)
Interest income 500 395 1,130 948
Miscellaneous 256 286 (23) 1,183
(3,648) (3,657) (7,582) (6,355)
Earnings before
income taxes,
minority
interest, and
equity in
earnings
(losses) of
nonconsolidated
subsidiaries 40,904 26,252 70,384 47,131
Income tax expense 13,664 8,494 23,974 16,165
Earnings before
minority
interest,
equity in
earnings
(losses) of
nonconsolidated
subsidiaries 27,240 17,758 46,410 30,966
Minority interest (443) (341) (655) (509)
Earnings (losses) in
nonconsolidated
subsidiaries 164 (132) (66) (87)
Net earnings $26,961 $17,285 $45,689 $30,370
Average shares outstanding
(000's) - Basic 25,497 25,091 25,459 24,880
Earnings per share - Basic $1.06 $0.69 $1.79 $1.22
Average shares outstanding
(000's) - Diluted 26,107 25,859 26,018 25,654
Earnings per share - Diluted $1.03 $0.67 $1.76 $1.18
Cash dividends per share $0.105 $0.095 $0.200 $0.180
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)
Second Quarter Year-to-Date
13 Weeks Ended 39 Weeks Ended
30-Jun-07 1-Jul-06 30-Jun-07 1-Jul-06
Net sales
Engineered Support
Structures $160,588 $137,623 $285,831 $253,162
Utility Support
Structures 89,649 76,256 170,130 142,466
Coatings 35,390 27,290 69,029 52,598
Infrastructure
products 285,627 241,169 524,990 448,226
Irrigation 107,562 87,854 200,479 174,725
Tubing 26,541 23,672 52,546 47,137
Agriculture
products 134,103 111,526 253,025 221,862
Other 5,903 4,695 11,407 9,071
Less: Intersegment
sales (23,376) (18,599) (46,483) (36,743)
Total $402,257 $338,791 $742,939 $642,416
Operating Income
Engineered Support
Structures $16,743 $11,075 $25,423 $18,078
Utility Support
Structures 12,044 8,135 21,595 16,094
Coatings 5,896 4,883 11,100 7,263
Infrastructure
products 34,683 24,093 58,118 41,435
Irrigation 16,657 11,007 28,902 22,284
Tubing 5,146 3,679 9,674 7,302
Agriculture
products 21,803 14,686 38,576 29,586
Other 540 (406) 555 (1,065)
Corporate (12,474) (8,464) (19,283) (16,470)
Total $44,552 $29,909 $77,966 $53,486
Valmont has aggregated its business segments into five 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.
Tubing: This segment consists of the manufacture of steel
tubular products in North America.
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 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)
30-Jun-07 1-Jul-06
ASSETS
Current assets:
Cash and cash equivalents $47,924 $34,547
Accounts receivable, net 247,929 223,068
Inventories 218,197 165,248
Prepaid expenses 11,133 10,818
Refundable and deferred
income taxes 18,645 17,479
Total current assets 543,828 451,160
Property, plant and equipment,
net 217,135 190,406
Goodwill and other assets 196,103 199,187
$957,066 $840,753
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt $22,166 $15,587
Notes payable to banks 17,900 4,825
Accounts payable 103,086 93,452
Accrued expenses 84,024 70,102
Dividend payable 2,708 2,426
Total current liabilities 229,884 186,392
Long-term debt, excluding current
installments 206,235 212,030
Other long-term liabilities 69,633 72,503
Shareholders' equity 451,314 369,828
$957,066 $840,753
