OMAHA, Neb., July 21 /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, reported second quarter sales of $498.8 million compared with $497.1 million for the same period of 2008. Net earnings for the second quarter were $44.2 million, or $1.69 per diluted share, versus second quarter 2008 net earnings of $37.3 million, or $1.41 per diluted share.
For the first six months of 2009, sales were $954.0 million versus $919.4 million in 2008. Valmont's first half net earnings were $80.1 million, or $3.05 per diluted share, compared with 2008 first half net earnings of $67.0 million, or $2.55 per diluted share.
Second Quarter Summary:
"Substantially stronger Utility Segment sales offset lower sales in all other segments," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "Irrigation Segment sales were particularly weak compared to last year, as farmers curtailed spending in reaction to lower crop prices and a weak global economy.
"In our Engineered Support Structures Segment, sales were somewhat lower than last year. Economic weakness and tight budgets have reduced infrastructure spending in most of our markets. The impact of acquisitions completed in 2008 helped to mitigate the extent of the sales decline.
"Coatings Segment sales declined reflecting weakness in the industrial economy.
"In total, profitability increased over last year's second quarter largely due to the strong earnings contribution from the Utility Support Structures Segment. As a result, consolidated operating income improved 1.2 percentage points to 13.9% of revenues.
"We generated strong operating cash flows during the quarter, which we used primarily to pay down debt and strengthen our financial condition."
Second Quarter Segment Review: Utility Support Structures Segment (40% of 2nd Quarter Net Sales)
Steel and concrete structures for the North American electric utility industry.
Sales nearly doubled to $199.2 million compared with $101.3 million in 2008. The increase in sales reflects higher volumes and shipments of some very large projects during the second quarter. There are two main factors driving the demand for utility structures in North America. One is the need to add transmission capacity to the electrical grid to carry additional electricity. The second is to improve the grid's reliability to lower the risk of service interruption. Valmont believes that these two trends should continue to drive long term performance for its Utility Support Structures Segment. While the long term demand trends are strong, the Company anticipates the sales growth comparison to moderate in the second half of the year, due to the reduction in backlog that has occurred so far this year.
Due to better fixed cost leverage on increased volumes and falling material prices, operating income grew to $47.5 million and was 23.8% of sales.
Engineered Support Structures Segment (33% of 2nd Quarter Net Sales)
Structures and specialty structures for lighting and traffic, wireless communication and overhead signs, worldwide. Includes utility structures outside of North America.
Second quarter sales were 4% lower at $182.5 million compared to $191.0 million in 2008. Public spending on lighting and traffic infrastructure in most global economies fell as government entities faced declining tax receipts and tight budgets. In Europe, sales were particularly soft in France and Eastern Europe due to economic weakness. Strength in other markets and the impact of acquisitions completed during 2008 helped to mitigate the extent of the sales decline in Europe.
Commercial lighting demand fell in North America due to weakness in residential and commercial construction markets as a result of the economic recession that started in the second half of 2008.
Specialty structures sales were higher in North America, largely due to the impact of an acquisition. In the Chinese market, specialty structures sales were flat and utility product sales were lower.
Globally, several government stimulus plans promoting infrastructure development have been announced. Valmont believes this spending takes time to translate into orders for the Company. Consequently, we do not expect to see a significant impact from stimulus programs in 2009. Over the long term however, we believe the company is well positioned to benefit from increased global infrastructure spending programs.
Operating income declined 22% to $14.1 million or 7.7% of segment sales. The decline in operating income was primarily due to the impact of lower volumes on fixed factory expenses offset somewhat by the impact of acquisitions. Margins were also lower due to competitive pricing pressure.
Irrigation Segment (20% of 2nd Quarter Net Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
Sales fell 37% to $101.1 million compared with $159.7 million in 2008. Global demand for irrigation equipment was substantially lower than last year's record levels. We believe customers curtailed investment in irrigation equipment in response to a weak global economy and the expectation of lower farm income in 2009.
Operating income declined 65% to $9.8 million due to lower sales and the associated volume de-leverage of fixed operating costs.
While the current economic environment has negatively influenced irrigation customer purchases, we believe the long-term prospects for growth are compelling. Population growth will require increased food production. Increased food production will require better farm productivity, especially as it relates to the use of water. Competing demands for water will draw attention to the need to use less water for agriculture. These factors should drive greater adoption of mechanized irrigation equipment that improves farm productivity and uses less water for large scale agriculture. As a result, we believe Valmont is well positioned to benefit from its global leadership position in the market for irrigation equipment when conditions improve.
Coatings Segment (4% of 2nd Quarter Net Sales)
Hot-dip galvanizing, anodizing and powder coatings to protect against corrosion of steel and aluminum in North American markets.
Sales of $28.6 million were 23% below last year's $37.2 million. The sales decrease reflects weakness in the industrial sector. Additionally, customer pricing was reduced to reflect lower zinc costs.
Operating income declined 30% to $6.4 million and was 22.4% of segment sales. The decrease in operating income resulted from lower production volumes.
2009 Outlook:
"Our outlook for 2009 has improved," Mr. Bay said. "Although we expect sales comparisons to be lower in the second half of the year, we now expect net earnings for the year to be modestly higher than 2008's record earnings.
"Our sales outlook in the second half of the year is based on several factors. Current raw material costs are down from last year, which could impact comparisons in some businesses. In the North American utility market, we expect the sales gain in the second half to moderate as a number of large orders have shipped. In the Engineered Support Structures Segment, while we do not expect major changes in market conditions, we have recently seen an improvement in our export markets from Europe and China; as a result second half sales could show positive comparisons. For the North American business, an important long-term driver would be an extension or renewal of the U.S. Federal Highway bill. In the Coatings Segment, we expect sales declines, reflecting weakness in the industrial economy and lower zinc prices. In the Irrigation Segment, third quarter comparisons will be substantially unfavorable compared to last year's record third quarter results. Fourth quarter results will be determined by the conditions in the agricultural sector following the fall harvest in North America and the resultant outlook for farm income.
"We have leadership positions in very attractive markets. When economic conditions improve, we should be well positioned to participate in global infrastructure and agriculture growth. Our industry, product lines and geographic diversification have allowed us to deliver record earnings during the current global economic recession. We will continue to be prudent in our management of capital and maintain a conservative financial profile."
An audio discussion of Valmont's first 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#: 82131530 or via the Internet at 8:00 a.m. July 22, 2009 CDT, by pointing browsers to: http://www.valmont.com/page.aspx?id=445&pid=21. 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#: 82131530 beginning July 22, 2009 at 9:30 a.m. EDT through 12:00 a.m. EDT on July 29, 2009.
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 -------------- -------------- 27-Jun-09 28-Jun-08 27-Jun-09 28-Jun-08 --------- --------- --------- --------- Net sales $498,810 $497,129 $953,964 $919,415 Cost of sales 354,129 359,926 680,967 666,404 ------- ------- ------- ------- Gross profit 144,681 137,203 272,997 253,011 Selling, general and administrative expenses 75,265 73,833 145,262 139,175 ------ ------ ------- ------- Operating income 69,416 63,370 127,735 113,836 ------ ------ ------- ------- Other income (expense) Interest expense (3,976) (4,708) (8,260) (9,182) Interest income 284 877 616 1,498 Miscellaneous 1,608 (515) (190) (1,858) ----- ---- ---- ------ (2,084) (4,346) (7,834) (9,542) ------ ------ ------ ------ Earnings before income taxes, minority interest, and equity in earnings (losses) of nonconsolidated subsidiaries 67,332 59,024 119,901 104,294 Income tax expense 22,051 20,548 39,306 35,602 ------ ------ ------ ------ Earnings before minority interest, equity in earnings (losses) of nonconsolidated subsidiaries 45,281 38,476 80,595 68,692 Earnings (losses) in nonconsolidated subsidiaries (71) 31 495 (43) --- -- --- --- Net earnings 45,210 38,507 81,090 68,649 ------ ------ ------ ------ Earnings attributable to the non-controlling interest (980) (1,243) (996) (1,686) ---- ------ ---- ------ Net earnings attributable to Valmont Industries, Inc. $44,230 $37,264 $80,094 $66,963 ======= ======= ======= ======= Average shares outstanding (000's) - Basic 25,943 25,823 25,928 25,763 ====== ====== ====== ====== Earnings per share - Basic $1.70 $1.44 $3.09 $2.60 ===== ===== ===== ===== Average shares outstanding (000's) - Diluted 26,223 26,377 26,224 26,306 ====== ====== ====== ====== Earnings per share - Diluted $1.69 $1.41 $3.05 $2.55 ===== ===== ===== ===== Cash dividends per share $0.150 $0.130 $0.280 $0.235 ====== ====== ====== ====== VALMONT INDUSTRIES, INC. AND SUBSIDIARIES SUMMARY OPERATING RESULTS (Dollars in thousands) (unaudited) Second Quarter Year-to-Date 13 Weeks Ended 26 Weeks Ended -------------- -------------- 27-Jun-09 28-Jun-08 27-Jun-09 28-Jun-08 --------- --------- --------- --------- Net sales Engineered Support Structures $182,542 $190,959 $340,929 $340,397 Utility Support Structures 199,145 101,302 375,206 202,472 Coatings 28,600 37,200 58,612 72,328 ------ ------ ------ ------ Infrastructure products 410,287 329,461 774,747 615,197 Irrigation 101,047 159,667 204,109 290,445 Other 17,693 30,802 37,303 56,251 Less: Intersegment sales (30,217) (22,801) (62,195) (42,478) ------- ------- ------- ------- Total $498,810 $497,129 $953,964 $919,415 ======== ======== ======== ======== Operating Income Engineered Support Structures $14,046 $18,073 $22,115 $28,155 Utility Support Structures 47,469 13,732 86,425 28,405 Coatings 6,393 9,085 12,384 15,631 ----- ----- ------ ------ Infrastructure products 67,908 40,890 120,924 72,191 Irrigation 9,834 28,019 21,846 50,414 Other 3,401 5,288 6,875 9,700 Corporate (11,727) (10,827) (21,910) (18,469) ------- ------- ------- ------- Total $69,416 $63,370 $127,735 $113,836 ======= ======= ======== ======== 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, international utility markets, and for other specialty applications. 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. Irrigation: This segment consists of the manufacture of agricultural irrigation equipment and related parts and services. 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 distribution of industrial fasteners, are reported in the "Other" category. VALMONT INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (unaudited) 27-Jun-09 28-Jun-08 --------- --------- ASSETS ------ Current assets: Cash and cash equivalents $96,262 $64,835 Accounts receivable, net 336,168 306,887 Inventories 251,621 250,247 Prepaid expenses 24,824 25,764 Refundable and deferred income taxes 28,444 28,240 ------ ------ Total current assets 737,319 675,973 Property, plant and equipment, net 277,886 259,384 Goodwill and other assets 304,236 270,735 ------- ------- $1,319,441 $1,206,092 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Current installments of long-term debt $1,043 $61,820 Notes payable to banks 17,634 20,588 Accounts payable 129,662 158,522 Accrued expenses 107,359 110,530 Dividend payable 3,940 3,397 ----- ----- Total current liabilities 259,638 354,857 Long-term debt, excluding current installments 258,418 181,409 Other long-term liabilities 69,741 79,158 Shareholders' equity 731,644 590,668 ------- ------- $1,319,441 $1,206,092 ========== ==========
Valmont Industries, Inc.
CONTACT: Jeff Laudin of Valmont Industries, Inc., +1-402-963-1158, fax,
+1-402-963-1198
Web Site: http://www.valmont.com/
