Valmont Industries Inc (VMI)

[EarlyOne]

Valmont Reports Third Quarter Results
Wednesday October 17, 5:30 pm ET
Third Quarter Highlights:
* Net sales rose 20%.
* Operating income rose 30% and was 10.1% of net sales.
* Net earnings increased 72%.
* Effective tax rate was 22.1% due to the expiration of certain tax contingencies, other tax benefits and the mix of international sales.


OMAHA, Neb., Oct. 17 /PRNewswire-FirstCall/ -- Valmont Industries, Inc. (NYSE: VMI - News), 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 third quarter sales of $372.0 million compared with $310.9 million for the same period of 2006. Net earnings for the third quarter were $25.9 million, or 99 cents per diluted share, versus third quarter 2006 net earnings of $15.1 million, or 58 cents per diluted share. Included in the results for the third quarter of 2006 were a $0.7 million after-tax gain from the sale of property and a $2.1 million after-tax charge at a non-consolidated subsidiary. The most significant reason for a lower effective tax rate was approximately $1.4 million in income tax benefits related to activities in prior tax years that were recognized during the quarter.
ADVERTISEMENT


For the first nine months of 2007, sales were $1,115.0 million versus $953.3 million in 2006. Valmont's nine month net earnings were $71.6 million, or $2.74 per diluted share, compared with 2006 nine month net earnings of $45.4 million, or $1.76 per diluted share.

Third Quarter Review:

"Very strong market conditions in our four biggest segments drove a 20% increase in sales," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.

"Strength in the global agricultural economy driven by higher crop prices led to increased demand in our Irrigation Segment.

"As the utility industry continues to invest in the transmission grid, Utility Support Structure Segment sales increased.

"In the Engineered Support Structures Segment, growing global infrastructure development drove sales gains.

"Gains in Coatings and Tubing Segment sales reflect strong domestic demand and increased volumes.

"The effective tax rate of 22.1% resulted from the expiration of certain tax contingencies and a favorable mix of international earnings.

"Favorable markets and our continued focus on improving performance led to operating income as a percent of sales of 10.1% versus 9.3% in the third quarter of 2006."

Third Quarter Summary -- Infrastructure Markets: (71% of 3rd Quarter Net Sales)

Engineered Support Structures Segment (42% of 3rd 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 $164.8 million, an increase of 24% over last year's $133.3 million third quarter level. The increase in sales was due to strong demand for utility and wireless communication structures in China and increased infrastructure spending in Europe. In North America, lighting product sales to lighting fixture manufacturers increased as well as specialty structure sales. Sales to the transportation market were slightly lower in North America, reflecting slower highway funding for municipalities and departments of transportation.

Segment operating income increased 15% to $16.7 million and was 10.1% of segment sales. The improvement in operating profit was largely due to the strong performance in Europe and China.

Utility Support Structures Segment (20% of 3rd Quarter Net Sales)

Steel and concrete structures for electric power delivery in North America.

Sales increased 19% to $79.1 million compared with $66.3 million in 2006. The improvement in sales reflects increased investment by utility companies in transmission and distribution structures for electrical power delivery.

Greater investments in the transmission and distribution grid should lead to a more reliable network, and are supported by provisions in the 2005 energy bill that created incentives for utilities to upgrade the transmission and distribution grid.

Operating income increased 50% to $10.0 million and was 12.7% of segment sales. The increase was mostly due to operating leverage on higher volumes and a more favorable pricing environment.

Coatings Segment (9% of 3rd Quarter Net Sales)

Hot-dip galvanizing and other coatings services to protect against corrosion of steel and aluminum in North American markets.

Sales of $34.3 million were 15% above last year's $29.9 million. Improved conditions in the industrial economy and strong internal demand drove the sales increase. Steel fabricators and structure manufacturers continue to recognize that hot-dip galvanizing is a cost effective method to extend service life and protect steel structures exposed to the elements from corrosion.

Segment operating income rose to $6.1 million, an increase of 3% and was 17.8% of segment sales due to manufacturing leverage on increased unit volume. Included in the results for the third quarter of 2006 was a $1.1 million gain on the sale of property.

Third Quarter Summary -- Agricultural Markets: (28% of 3rd Quarter Net Sales)

Irrigation Segment (22% of 3rd Quarter Net Sales)

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

Sales improved 25% to $84.8 million compared with $67.8 million in 2006. North American sales were supported by historically strong crop prices and grower expectations for an improved agricultural economy. Additionally, increased usage of irrigation equipment during the hot growing season resulted in greater sales of replacement parts.

International sales increased in most markets for mechanized irrigation equipment. Reduced global grain stocks have led to a tightening of supplies, resulting in higher crop prices. Higher global grain prices and an increased emphasis on the efficient use of water for irrigation are the primary drivers for growth in agricultural markets worldwide.

Segment operating income increased 59% to $8.9 million and was 10.4% of segment sales. The improved operating income resulted from the increased volume and related operating leverage.

Tubing Segment (6% of 3rd Quarter Net Sales)

Custom steel tubing for mechanical and structural applications.

Sales were 5% higher at $24.1 million. Demand continued strong from agricultural equipment manufacturers, driven by the increased need for grain handling and storage in anticipation of a large harvest season.

Segment operating income increased 13% to $4.3 million as a result of higher volumes and a favorable sales mix, and was 17.9% of segment sales.

Fourth Quarter Outlook:

Commenting on the outlook for the fourth quarter, Mr. Bay said, "We are expecting favorable comparisons in sales, operating income and earnings per share for the fourth quarter. Our businesses continue to perform well, market conditions are favorable and the long term drivers are supportive."

An audio discussion of Valmont's third 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#: 2635157 or via the Internet at 8:00 a.m. October 18, 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#:2635157 beginning October 18, 2007 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 25, 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)

Third Quarter Year-to-Date
13 Weeks Ended 39 Weeks Ended
29-Sep-07 30-Sep-06 29-Sep-07 30-Sep-06
Net sales $372,033 $310,904 $1,114,972 $953,320
Cost of sales 274,461 230,234 819,719 711,895
Gross profit 97,572 80,670 295,253 241,425
Selling, general and
administrative expenses 59,858 51,651 179,573 158,920
Operating
income 37,714 29,019 115,680 82,505
Other income (expense)
Interest expense (4,470) (4,328) (13,159) (12,815)
Interest income 666 549 1,796 1,497
Miscellaneous (319) 113 (342) 1,297
(4,123) (3,666) (11,705) (10,021)
Earnings before income
taxes, minority
interest, and equity
in earnings (losses)
of nonconsolidated
subsidiaries 33,591 25,353 103,975 72,484
Income tax expense 7,436 7,495 31,410 23,660
Earnings before
minority interest,
equity in earnings
(losses) of
nonconsolidated
subsidiaries 26,155 17,858 72,565 48,824
Minority interest (700) (393) (1,355) (902)
Earnings (losses) in
nonconsolidated
subsidiaries 438 (2,403) 372 (2,490)
Net earnings $25,893 $15,062 $71,582 $45,432

Average shares
outstanding (000's) -
Basic 25,570 25,255 25,500 25,027
Earnings per share - Basic $1.01 $0.60 $2.81 $1.82

Average shares
outstanding (000's) -
Diluted 26,207 25,851 26,096 25,743
Earnings per share -
Diluted $0.99 $0.58 $2.74 $1.76

Cash dividends per share $0.105 $0.095 $0.305 $0.275



VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Dollars in thousands)
(unaudited)

Third Quarter Year-to-Date
13 Weeks Ended 39 Weeks Ended
29-Sep-07 30-Sep-06 29-Sep-07 30-Sep-06

Net sales
Engineered Support
Structures $164,768 $133,268 $450,598 $386,430
Utility Support
Structures 79,062 66,340 249,192 208,806
Coatings 34,321 29,936 103,351 82,534
Infrastructure
products 278,151 229,544 803,141 677,770

Irrigation 84,822 67,803 285,301 242,527
Tubing 24,106 22,997 76,652 70,134
Agriculture
products 108,928 90,800 361,953 312,661

Other 5,253 4,328 16,660 13,397
Less: Intersegment
sales (20,299) (13,768) (66,782) (50,508)
Total $372,033 $310,904 $1,114,972 $953,320

Operating Income
Engineered Support
Structures $16,679 $14,469 $42,102 $32,547
Utility Support
Structures 10,045 6,710 31,640 22,804
Coatings 6,117 5,917 17,217 13,180
Infrastructure
products 32,841 27,096 90,959 68,531

Irrigation 8,859 5,583 37,761 27,867
Tubing 4,308 3,812 13,982 11,114
Agriculture
products 13,167 9,395 51,743 38,981

Other 399 (373) 954 (1,438)
Corporate (8,693) (7,099) (27,976) (23,569)
Total $37,714 $29,019 $115,680 $82,505

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)

29-Sep-07 30-Sep-06
ASSETS
Current assets:
Cash and cash equivalents $69,337 $55,249
Accounts receivable, net 264,518 219,744
Inventories 212,982 176,160
Prepaid expenses 8,571 11,438
Refundable and deferred income
taxes 20,825 18,723
Total current assets 576,233 481,314
Property, plant and equipment, net 226,363 189,806
Goodwill and other assets 200,094 200,065
$1,002,690 $871,185

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt $22,616 $18,254
Notes payable to banks 14,890 8,708
Accounts payable 113,357 99,502
Accrued expenses 98,352 80,411
Dividend payable 2,717 2,430
Total current liabilities 251,932 209,305
Long-term debt, excluding current
installments 200,521 205,880
Other long-term liabilities 67,339 72,290
Shareholders' equity 482,898 383,710
$1,002,690 $871,185