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Valmont Announces First Quarter 2014 Results

Highlights:

OMAHA, Neb., April 22, 2014 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment for agriculture, reported first quarter sales of $751.7 million compared with $819.6 million for the same period of 2013. First quarter 2014 operating income was $98.8 million versus $118.2 million in 2013. First quarter diluted earnings per share were $2.08 compared with $2.89 in 2013.

First Quarter Review:

"In contrast to last year's exceptional irrigation results driven by high farm income, this year's significantly lower crop commodity prices and a projected decline in North American farm income led to a reduction in irrigation equipment sales," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.

"Lower sales in the Utility Support Structures Segment were the result of pricing pressure, slightly lower volumes due to harsh winter weather in North America and a significant decline in international projects.

"In the Engineered Infrastructure Products Segment, a slowdown in mining activity in Australia, plus weather disruptions in North American markets, were more than offset by the Valmont-SM acquisition.

"Weaker markets in Australia led to a decline in Coatings Segment sales.

"Operating income was significantly lower in the Irrigation and Utility Support Structures Segments and was slightly higher in both the Coatings and Engineered Infrastructure Products Segments."

First Quarter Segment Review:
Utility Support Structures Segment (27% of 1st Quarter Sales)
Steel and concrete structures for the global electric utility industry.

Global sales of $214.7 million were 10% lower than 2013. In North American markets, harsher winter weather conditions than last year and a more competitive pricing environment contributed to the revenue decline. A reduction in project activity led to a decline in international sales, which last year made a significant contribution to first quarter results.

Operating income declined 29% to $32.8 million, which represents 15.3% of segment sales. Reduced volumes plus unfavorable pricing and sales mix led to a reduction in operating income.

Our outlook for the Utility Support Structures Segment for the year is for increased volumes, flat revenue and reduced profitability due to a less favorable pricing environment.

Our long-term demand outlook remains positive. Utilities are responding to the need to improve reliability and increase the interconnectivity of regional transmission grids with a number of large projects on the drawing board for 2015 and 2016. We expect additional demand to result from new renewable energy sources coming on stream. Coupled with a regulatory environment supportive of growth, these factors indicate strong, long-term market conditions.

Irrigation Segment (27% of 1st Quarter Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.

Sales of $212.7 million were 13% below last year's record levels. International sales increased while North American sales declined.

Increased ending inventories of crops after the 2013 harvest caused downward pressure on commodity prices. We believe in light of an expected decline in 2014 net farm income, North American farmers reduced purchases of mechanized irrigation equipment. The first quarter selling season unfolded in a more typical seasonal pattern, resulting in solid volumes, however below the exceptional first quarter levels of 2013.

The increase in international sales was broad-based, reflecting improved market demand and the Company's sales initiatives in support of growth.

Operating income was 21% lower than last year at $43.1 million. International profitability improved, however the decline in operating income dollars was a consequence of lower North American volumes and associated operating deleverage. Despite the lower sales, the quality of operating income was high at 20.3% of sales due to effective operational management.

Engineered Infrastructure Products Segment (29% of 1st Quarter Sales)
Lighting, traffic and highway safety products, wireless communication structures and components, industrial gratings, access systems and wind energy and oil and gas exploration applications in global markets.

First quarter sales were $228.5 million, a 2% increase from last year. The March 3, acquisition of Valmont-SM contributed $17.3 million to quarterly sales and more than offset negative foreign exchange translation effects and a decline in intercompany sales to Valmont's utility division.

In North American markets, increased U.S. lighting and traffic sales offset declines in Canada. Sales of lighting and traffic structures in Europe were comparable to last year. A reduction in Australian mining activity reduced demand for lighting, and engineered access systems. Sales of wireless communication products were flat in North American markets, but higher in China.

Operating income at $13.7 million rose 8% from 5.7% to 6.0% of segment sales. Valmont-SM contributed $1.9 million to operating income.

Coatings Segment (10% of 1st Quarter Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.

Sales of $82.2 million were 8% below last year, with most of the decline due to the impact of lower manufacturing and mining activity in Australia. Operating income was slightly higher despite lower sales, primarily due to improved operations in North America and Asia and the benefits of a capacity reduction made in Australia in 2013.

2014 Outlook:

"We currently expect a slight increase in 2014 sales for the Company," Mr. Bay said. Included in this outlook is the contribution of the Valmont-SM acquisition, expectations for sales gains in other product lines within the Engineered Infrastructure Products Segment, and that segment profitability should continue to show improvement over last year. Our outlook for the Utility Support Structures Segment is for increased volumes, flat revenues and reduced profitability. We expect Coatings Segment sales and profitability to be in line with last year. Our outlook for the Irrigation Segment is for second quarter sales and profitability to be significantly lower and second half irrigation sales and profitability to be flat with last year. In summary, our current earnings outlook is for diluted earnings for the year in a range of $10.00 to $10.50 per share."

An audio discussion of Valmont's first quarter results by Mogens C. Bay, Chairman and Chief Executive Officer and Mark C. Jaksich, Executive Vice President and Chief Financial Officer, will be available live by telephone by dialing 1-877-493-2981 and entering Conference ID#: 50577343 or via the Internet at 8:00 a.m. CDT April 23, 2014, 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 1-855-859-2056 or 404-537-3406, and enter the Conference ID#: 50577343 beginning April 23, 2014 at 10:00 a.m. CDT through 12:00 p.m. CDT on April 30, 2014.

Valmont is a 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 EARNINGS

(Dollars in thousands, except per share amounts)

(unaudited)








First Quarter



13 Weeks Ended



29-Mar-14


30-Mar-13

Net sales


$ 751,740


$    819,630

Cost of sales


544,758


584,261

          Gross profit


206,982


235,369

Selling, general and administrative expenses


108,134


117,179

          Operating income 


98,848


118,190

Other income (expense):





     Interest expense


(8,197)


(8,190)

     Interest income


1,739


1,353

     Unrealized loss in investment 


(3,386)


-

     Other


(2,426)


1,556



(12,270)


(5,281)

          Earnings before income taxes and equity in





          earnings of nonconsolidated subsidiaries 


86,578


112,909

Income tax expense


30,015


34,973

          Earnings before equity in earnings of 





          nonconsolidated subsidiaries 


56,563


77,936

Equity in earnings of nonconsolidated subsidiaries


-


204

          Net earnings


56,563


78,140

Less:  Earnings attributable to non-controlling interests


(583)


(571)

          Net earnings attributable to Valmont Industries, Inc.


$   55,980


$      77,569











Average shares outstanding (000's) - Basic


26,715


26,583

Earnings per share - Basic


$       2.10


$          2.92






Average shares outstanding (000's) - Diluted


26,950


26,859

Earnings per share - Diluted


$       2.08


$          2.89






Cash dividends per share


$     0.250


$        0.225

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)








First Quarter



13 Weeks Ended



29-Mar-14


30-Mar-13

Sales





     Engineered Infrastructure Products


$ 228,462


$    223,670

     Utility Support Structures


214,727


239,638

     Coatings


82,171


89,245

     Irrigation


212,733


244,707

     Other


58,602


77,869

          Total


796,695


875,129






Intersegment sales





     Engineered Infrastructure Products


(19,565)


(29,452)

     Utility Support Structures


(495)


(411)

     Coatings


(14,953)


(14,330)

     Irrigation


(9)


-

     Other


(9,933)


(11,306)

          Total


(44,955)


(55,499)






Net sales





     Engineered Infrastructure Products


208,897


194,218

     Utility Support Structures


214,232


239,227

     Coatings


67,218


74,915

     Irrigation


212,724


244,707

     Other


48,669


66,563

          Total


$ 751,740


$    819,630






Operating Income





     Engineered Infrastructure Products


$   13,709


$      12,734

     Utility Support Structures


32,757


46,155

     Coatings


13,886


13,420

     Irrigation


43,146


54,559

     Other 


8,550


10,787

     Corporate


(13,200)


(19,465)

          Total


$   98,848


$    118,190


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, access systems and wind energy and oil and gas exploration 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 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 forged steel grinding media, tubular products, electrolytic manganese dioxide and industrial fasteners, are reported in the "Other" category.

 

 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)









29-Mar-14



30-Mar-13



ASSETS







Current assets:







     Cash and cash equivalents

$     488,195



$    419,996



     Accounts receivable, net

529,693



503,933



     Inventories

424,825



451,257



     Prepaid expenses

57,913



33,555



     Refundable and deferred income taxes

57,935



61,745



          Total current assets

1,558,561



1,470,486



Property, plant and equipment, net

612,203



534,350



Goodwill and other assets

715,102



612,408




$  2,885,866



$ 2,617,244










LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:







     Current installments of long-term debt

$            188



$           189



     Notes payable to banks

14,860



13,324



     Accounts payable

234,218



211,572



     Accrued expenses

177,437



163,616



     Income taxes payable

9,967



16,061



     Dividend payable

6,721



6,020



          Total current liabilities

443,391



410,782



Long-term debt, excluding current installments

479,141



472,249



Other long-term liabilities

343,531



270,288



Shareholders' equity

1,619,803



1,463,925




$  2,885,866



$ 2,617,244



 

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS

REGULATION G RECONCILIATION

(Dollars in thousands, except per share amounts)

(unaudited)

The schedule below relates to the non-cash after-tax loss associated with adjusting the fair value of Delta EMD Pty. Ltd (Delta EMD) shares owned to its quoted market price on March 29, 2014. Earnings per share for each item are calculated separately. Therefore, due to rounding, the sum of earnings per share amounts for each item below may not agree with the total.


Quarter ended

March 29, 2014

Diluted earnings

 per share

Net earnings attributable to Valmont Industries, Inc. - as reported

$       55,980

$       2.08




Fair market value adjustment, Delta EMD - after-tax

3,386

0.13




Net earnings attributable to Valmont Industries, Inc. - Adjusted

$       59,366

$       2.20

 

SOURCE Valmont Industries, Inc.

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