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Valmont Announces Record Fourth Quarter, and Fiscal Year 2010 Results
Feb 17, 2011 (04:02 PM EST)


Highlights:

-- Fourth quarter revenue increased 50%, including $143.3 million related to Delta. There was a 14% increase in quarterly revenue excluding the contribution of Delta.

-- Fourth quarter operating profit rose 31%, including $11.0 million related to Delta. Excluding Delta, operating profit rose 8%.

-- Fourth quarter Irrigation Segment sales improved 62%, operating income increased 150%.

-- Fiscal year 2010 net earnings declined 37%, excluding the after-tax costs associated with the Delta acquisition, the decline was 27%.

OMAHA, Neb., Feb. 17, 2011 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global manufacturer of engineered products for infrastructure, mechanized irrigation equipment for agriculture, and a provider of coating services, reported sales for the fourth quarter of $598.7 million compared with $398.6 million for the same period of 2009. Fourth quarter 2010 net earnings were $34.9 million, or $1.32 per diluted share, versus fourth quarter 2009 net earnings of $30.0 million, or $1.14 per diluted share.

For fiscal 2010, sales were $1.976 billion versus $1.787 billion in 2009. Valmont's fiscal year net earnings were $94.4 million, or $3.57 per diluted share including the expenses and financing associated with the purchase of Delta plc on May 12, 2010, compared with 2009 fiscal year earnings of $150.6 million, or $5.73 per diluted share.

In the fourth quarter of 2010, Valmont reorganized its segment reporting as a result of the acquisition of Delta plc, on May 12, 2010. The main business units of Delta are organized as follows: Engineered Infrastructure Products Segment includes Delta's lighting, communication, access systems and roadway safety products. The Coatings Segment includes Delta's galvanizing operations; Delta's forged steel grinding media and electrolytic manganese dioxide operations are included in "Other."

Fourth Quarter Review:

"The contribution to sales and earnings from Delta and a significant improvement in Irrigation and Coatings Segment sales drove fourth quarter results," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.

"Sales in the Engineered Infrastructure Products Segment were higher due to the inclusion of the Delta businesses. The North American transportation market was weaker and a decline in project orders led to lower sales in international markets. In the Irrigation Segment, global sales were higher benefitting from rising farm income. Coatings Segment sales rose as a result of the addition of Delta and stronger demand from industrial and agricultural markets.

"Positive operating income comparisons were due largely to the contribution of the Delta businesses, and improved performance in the Irrigation and Coatings segments which more than offset a decline in profitability in the Utility Support Structures Segment."

Fourth Quarter Segment Review:

Engineered Infrastructure Products Segment (35% of 4th Quarter Sales)

Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.

Fourth quarter sales were $210.8 million, a 35% increase over 2009. This increase is largely attributable to the Delta businesses now reported in this segment, whose sales were $55.2 million. In North America, commercial lighting sales improved while transportation lighting and traffic product sales declined. Even though funding per the 2005 highway bill continues to be extended, the lack of a new long-term federal highway bill, we believe, is an impediment for states to plan multi-year highway projects. Budget deficits have further reduced states' ability to match federal funds on highway projects, creating additional market pressures.

Global sales of wireless communication products were lower due to weakness in North American markets and reduced investment by China's wireless carriers.

Operating income increased 29% to $17.9 million or 8.5% of segment sales. The operating income attributable to the Delta businesses was $5.8 million. While operating results improved in North American locations, the improvement was partially offset by weaker operating performance in the European locations and certain non-recurring charges approximating $2.0 million in the segment.

Utility Support Structures Segment (21% of 4th Quarter Sales)

Steel and concrete structures for the global electric utility industry.

Sales of $128.5 million were slightly lower than 2009. The decline in sales was primarily due to a weak pricing environment in North America, despite higher volumes, and reduced export activity in international markets.

While 2010 sales were lower in the Utility Support Structures Segment, we believe the outlook has improved for global utility structure demand. North American utility customers have announced plans for increased investments in transmission structures for 2011. Future growth potential is expected in India, where during the fourth quarter Valmont broke ground on a new manufacturing facility.

Operating income fell 46% to $15.8 million and was 12.3% of sales. The decline in operating income was mostly due to sharply lower pricing in North America despite higher volumes, a reduction in international volumes, and an unfavorable product sales mix.

Irrigation Segment (22% of 4th Quarter Sales)

Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.

Sales increased 62% to $134.3 million compared with 2009. In global farm markets, confidence in investing in mechanized irrigation equipment was buoyed by rising crop prices and the outlook for a meaningful increase in net farm income. In addition, an earlier fall harvest in North America, when compared to last year widened the window of opportunity for fourth quarter sales.

Operating income grew 2 ½ times to $19.4 million and was 14.4% of segment sales. The improvement in operating income was the result of improved productivity and volume leverage.

Coatings Segment (13% of 4th Quarter Sales)

Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.

Sales of $76.5 million were nearly 3 times last year's $27.2 million. The increase in sales included $42.0 million from the Delta galvanizers plus volume gains. Improved demand from industrial manufacturers in Midwestern regions of the U.S. further drove volume gains.

Operating income increased 204% to $14.3 million, or 19% of segment sales. The operating income increase included $6.0 million from the Delta businesses.

2010 Review:

"Typically Valmont's results trend with the later stages of economic cycles. We were more negatively impacted by the global recession in 2010 than we were in 2009," said Mr. Bay. "As a result, for the first time in a number of years Valmont did not have a record year.

"The acquisition of Delta was a significant milestone for Valmont, bringing new platforms for growth and increasing our international revenue mix.

"Turning to full-year segment results, comparisons in the Utility Support Structures Segment contrasted sharply with 2009's exceptional results. A substantial contraction in transmission structure orders led to overcapacity in the industry. As industry participants struggled to utilize capacity, highly competitive pricing pressure resulted. Despite the substantial decline in volumes, operating profits in this segment remained at double digit levels for the year.

"Engineered Infrastructure Products Segment sales increased due to the addition of the Delta businesses. The recession throughout the world led to tight government budgets, reducing the amount of funds available for highway and lighting projects. International lighting sales also declined as a result of project orders shipped in 2009 that did not repeat in 2010. In North America, the lack of a multi-year highway bill depressed the market throughout the year. During the year, we have noted our ongoing efforts to lower the cost structure and improve the productivity of this segment. We have made great strides to that effect in 2010 and continue to implement initiatives to further drive for enhanced performance in these businesses. Profitability for the segment improved for the year due to the profit contribution from the Delta businesses, operational improvements and cost cutting, which offset the impact of weak pricing and declining volumes in North America and Europe.

"Irrigation Segment results were driven by more favorable market conditions and operational excellence. International markets were particularly strong during the second half of the year as prospects for a tightening in global grain supplies drove demand. Operating income improved due to productivity and volume gains.

"Coatings Segment sales rose due to the contribution of Delta, and due to inventory rebuilding activity among our North American customers. Sales to the agriculture industry were notably higher. Operating income performance was good as productivity remained high.

"For the year, operating income as a percent of sales declined to 9.0% from 13.3% in 2009. Return on invested capital fell to 8.1% from 15.2% due to the increase in total assets and the decline in operating income."

2011 Outlook:

"The year 2011 holds great opportunity and many challenges for Valmont," Mr. Bay said, "The operating environment during the first quarter will be a particular challenge due to severe weather and the pressures of rising steel costs.

"For the full year, we expect favorable comparisons in the Irrigation Segment as tighter crop supplies and rising farm income should drive sales. In the Coatings Segment, the addition of the Delta locations will lead to positive sales comparisons. In the Engineered Infrastructure Products Segment, our customer base is operating in an environment of no long-term highway bill, budgetary pressures and struggling European markets. Rising steel prices and a weak competitive pricing environment create additional challenges for this segment. In the Utility Support Structures Segment we look for volume gains, and until industry capacity is more fully utilized, a competitive pricing environment.

"With respect to our outlook for earnings, at the present time we expect 2011 earnings per share to increase between 35-45%.

"Over the long-term, our two markets, Infrastructure development and Agriculture provide ample opportunity for us to grow. Economic progress relies on infrastructure. Population growth demands more efficient production agriculture. Our challenges are to best serve our customers today and to wisely invest for tomorrow's opportunities."

An audio discussion of Valmont's fourth 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#: 36684597 or via the Internet at 8:00 a.m. CST February 18, 2011, 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#: 36684597 beginning February 18, 2011 at 10:00 a.m. CST through 12:00 p.m. CST on February 25, 2011.

Valmont is the global leader in designing and manufacturing poles, towers and structures for lighting and traffic, wireless communication and utility markets, industrial access systems, highway safety barriers 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


13 Weeks Ended


52 Weeks Ended


25-Dec-10


26-Dec-09


25-Dec-10


26-Dec-09

Net sales

$ 598,712


$    398,627


$ 1,975,505


$ 1,786,601

Cost of sales

441,036


275,968


1,455,931


1,254,587

         Gross profit

157,676


122,659


519,574


532,014

Selling, general and administrative expenses

95,358


75,133


341,161


294,020

         Operating income

62,318


47,526


178,413


237,994

Other income (expense)








    Interest expense

(8,068)


(3,913)


(30,947)


(15,760)

    Interest income

1,658


523


4,840


1,509

    Other

649


424


676


2,340


(5,761)


(2,966)


(25,431)


(11,911)

         Earnings before income taxes,








          and equity in earnings of








         nonconsolidated subsidiaries

56,557


44,560


152,982


226,083

Income tax expense

20,101


13,249


55,008


72,894

         Earnings before equity in








         earnings of nonconsolidated








         subsidiaries

36,456


31,311


97,974


153,189

Earnings in nonconsolidated subsidiaries

453


171


2,439


752

         Net earnings

36,909


31,482


100,413


153,941

Less:  Earnings attributable to non-controlling interest

(2,042)


(1,491)


(6,034)


(3,379)

         Net earnings attributable to Valmont Industries, Inc.

$   34,867


$      29,991


$      94,379


$    150,562

















Average shares outstanding (000's) - Basic

26,151


25,995


26,100


25,951

Earnings per share - Basic

$       1.33


$          1.15


$          3.62


$          5.80









Average shares outstanding (000's) - Diluted

26,427


26,384


26,422


26,289

Earnings per share - Diluted

$       1.32


$          1.14


$          3.57


$          5.73









Cash dividends per share

$     0.165


$        0.150


$        0.645


$        0.580



















VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)










Fourth Quarter


Year-to-Date


13 Weeks Ended


52 Weeks Ended


25-Dec-10


26-Dec-09


25-Dec-10


26-Dec-09









Net sales








    Engineered Infrastructure Products

$ 210,756


$    156,084


$    677,314


$    597,046

    Utility Support Structures

128,455


129,814


474,920


700,548

    Coatings

76,528


27,235


238,273


115,530

       Infrastructure products

415,739


313,133


1,390,507


1,413,124









    Irrigation

134,317


82,848


443,371


362,187

    Other

67,913


14,392


198,550


68,639

    Less: Intersegment sales

(19,257)


(11,746)


(56,923)


(57,349)

         Total

$ 598,712


$    398,627


$ 1,975,505


$ 1,786,601









Operating Income








    Engineered Infrastructure Products

$   17,944


$      13,903


$      52,151


$      45,143

    Utility Support Structures

15,837


29,296


51,741


164,834

    Coatings

14,316


4,704


42,602


24,669

       Infrastructure products

48,097


47,903


146,494


234,646









    Irrigation

19,388


7,756


61,973


35,086

    Other

7,927


2,729


28,499


12,971

    Corporate

(13,094)


(10,862)


(58,553)


(44,709)

         Total

$   62,318


$      47,526


$    178,413


$    237,994










Valmont has aggregated its business segments into four reportable segments as follows.


Engineered Infrastructure Products: This segment consists of the manufacture of engineered metal structures and components for global lighting and traffic, wireless communication, roadway safety and access systems applications.

Utility Support Structures: This segment consists of the manufacture of engineered steel and concrete structures for the global utility industry.

Coatings: This segment consists of global galvanizing, painting and anodizing services.


Irrigation: This segment consists of the manufacture of agricultural irrigation equipment and related parts and services for the global agricultural industry.

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 forge steel grinding media,

tubular products, electrolytic manganese dioxide and industrial fasteners, are reported in the "Other" category.


In the fourth quarter of 2010, the Company reorganized its segment structure in line with its current management and reporting structure. Delta's galvanizing operations are included in the Coatings segment and Delta's pole sand roadway safety structure and access systems are included in the Engineered Infrastructure Products segment. Delta's forged steel grinding media and electrolytic manganese dioxide operations are classified as "Other". It was not necessary to reclassify 2009 figures to conform to the 2010 presentation.




VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)





25-Dec-10




26-Dec-09

ASSETS








Current assets:








    Cash and cash equivalents



$    346,904




$    180,786

    Accounts receivable, net



410,566




259,521

    Inventories



280,223




210,611

    Prepaid expenses



23,806




22,143

    Refundable and deferred income taxes



32,727




42,361

         Total current assets



1,094,226




715,422

Property, plant and equipment, net



439,609




283,088

Goodwill and other assets



556,908




303,659




$ 2,090,743




$ 1,302,169









LIABILITIES AND SHAREHOLDERS' EQUITY








Current liabilities:








    Current installments of long-term debt



$           238




$           231

    Notes payable to banks



8,825




11,900

    Accounts payable



179,814




118,210

    Accrued expenses



153,686




122,532

    Dividend payable



4,352




3,944

         Total current liabilities



346,915




256,817

Long-term debt, excluding current installments



468,596




160,250

Other long-term liabilities



265,105




76,795

Shareholders' equity



1,010,127




808,307




$ 2,090,743




$ 1,302,169



VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CALCULATION OF COST OF DELTA, plc ACQUISITION EXPENSES

(Dollars in thousands)

(unaudited)







YEAR-TO-DATE 2010

As Reported


Delta
Transaction
Costs


Without Delta
Transaction
Costs

Operating Income

$ 178,413


$    (15,307)


$    193,720







Earnings before taxes and equity in earnings of nonconsolidated subsidiaries

$ 152,982


$    (20,441)


$    173,423







Net earnings attributable to Valmont Industries, Inc.

$   94,379


$    (16,398)


$    110,777







Diluted earnings per share

$       3.57


$        (0.62)


$          4.19













The Company incurred certain expenses in 2010 associated with the offer to purchase the ordinary shares of Delta plc (Delta). The expenses included $15,307 of SG&A expenses related to the Company's evaluation of Delta and other required expenses associated with the Company's offer and ongoing integration. The Company also incurred $5,124 of financing costs related to a bridge financing facility that was established to provide part of the required committed financing to complete the Delta acquisition, as required by United Kingdom takeover regulations, and borrowing costs incurred until the Company acquired Delta on May 12, 2010. The Delta Transaction Costs adjustment for Net earnings above is net of tax effect calculated based on the amounts that are currently deductible at its marginal U.S. tax rate.  Management believes the exclusion of expenses incurred in the quarter related to the pending Delta acquisition is useful for assessing Valmont’s operating performance and provides investors with a more consistent basis of comparison with prior periods.  



SOURCE Valmont Industries, Inc.