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Valmont Industries Inc. Reports Operating Results (10-Q)

November 03, 2009 | About:
10qk

10qk

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Valmont Industries Inc. (VMI) filed Quarterly Report for the period ended 2009-09-26.

VALMONT INDUSTRIES INC. is engaged in industrial products and irrigation products businesses. The Industrial Products segment involves the manufacture and distribution of engineered metal structures and other fabricated products for industrial and commercial applications. The Irrigation Products segment involves the manufacture and distribution of agricultural irrigation equipment and related products. Valmont Industries Inc. has a market cap of $1.94 billion; its shares were traded at around $73.98 with a P/E ratio of 13 and P/S ratio of 1. The dividend yield of Valmont Industries Inc. stocks is 0.8%. Valmont Industries Inc. had an annual average earning growth of 9.1% over the past 10 years. GuruFocus rated Valmont Industries Inc. the business predictability rank of 4-star.

Highlight of Business Operations:

•Lower unit sales volumes in 2009, as compared with 2008. In the third quarter and year-to-date periods ended September 26, 2009, we experienced lower sales unit volumes, as compared with 2008. On a consolidated basis, sales unit volumes for the thirteen and thirty-nine weeks ended September 26, 2009 were approximately 11% and 7%, respectively, less than the same periods in 2008. On a reportable segment basis, we realized a significant sales unit volume increase in the Utility Support Structures ("Utility") segment. The sales unit volume increase in Utility was more than offset by lower unit sales volumes in our other reportable segments. We believe these decreases were mainly due to the global economic recession that began in late 2008, which resulted in weaker sales demand in our other reportable segments. Sales demand in the Irrigation segment was also adversely impacted by lower projected net farm income in 2009, as compared with 2008. •Currency translation effects. Our third quarter and year-to-date net sales in 2009 decreased as compared with 2008 due to currency translation effects (approximately $7.0 million and $19.4 million, respectively). The U.S. dollar, on average, was stronger in relation to the euro, Brazilian real, South African rand and the Canadian dollar in 2009, as compared with 2008. As a result, our 2009 consolidated net sales were lower than 2008 when our sales in those currencies were translated into U.S. dollars. These decreases were offset to a degree by the full-year impact of acquisitions completed in 2008 (approximately $14.0 million and $50.8 million, respectively) for the third quarter and year-to-date periods ended September 26, 2009, as compared with the same periods in fiscal 2008.

•increased salary and benefit costs (approximately $0.7 million and $9.1 million, respectively); •the full-year effect of acquisitions completed in 2008 (approximately $1.4 million and $6.8 million, respectively), and; 27

•currency translation effects (approximately $0.8 million and $4.1 million, respectively), and; •lower management incentive accruals in 2009, as compared with 2008 (approximately $2.3 million and $6.6 million, respectively). The decrease in net interest expense for the third quarter and year-to-date periods ended September 26, 2009, as compared with the same periods in 2008, was due to a combination of lower interest rates on our variable rate debt in 2009 and decreased borrowing levels throughout 2009.

The increase in SG&A expense for the third quarter and year-to date periods ended September 26, 2009, as compared with 2008, was due to the impact from acquisitions (approximately $1.4 million and $5.9 million, respectively) and impairment charges incurred in the third quarter as part of our evaluation of the goodwill and other intangible assets assigned to our North American sign structure operations (approximately $0.7 million). These increases were offset somewhat by currency translation impacts (approximately $0.6 million and $3.0 million, respectively) and lower sales commissions associated with lower sales volumes (approximately $0.3 million and $2.8 million, respectively).

The decrease in operating income for the thirteen and thirty-nine week periods ended September 26, 2009, as compared with the same periods in 2008, was due to the effect of lower sales unit volumes and the associated operating deleverage realized as a result of lower sales and production levels. The decrease in SG&A spending in the third quarter and year-to-date 2009, as compared with 2008, was due to lower incentive expense accruals related to decreased operating income this year (approximately $1.7 million and $4.6 million, respectively) and currency translation effects (approximately $0.2 million and $1.1 million, respectively), offset somewhat by higher salary and employee benefits costs (approximately $0.3 million and $1.7 million, respectively).

•$280 million revolving credit agreement with a group of banks. We may increase the credit facility by up to an additional $100 million at any time, subject to participating banks increasing the amount of their lending commitments. The interest rate on our borrowings will be, at our option, either: (a)LIBOR (based on a 1, 2, 3 or 6 month interest period, as selected by us) plus 125 to 200 basis points (inclusive of facility fees), depending on our ratio of debt to earnings before taxes, interest, depreciation and amortization (EBITDA), or; (b)the higher of •The higher of (a) the prime lending rate and (b) the Federal Funds rate plus 50 basis points plus in each case, 25 to 100 basis points (inclusive of facility fees), depending on our ratio of debt to EBITDA, or •LIBOR (based on a 1 week interest period) plus 125 to 200 basis points (inclusive of facility fees), depending on our ratio of debt to EBITDA At September 26, 2009, we had $4.4 million in outstanding borrowings under the revolving credit agreement, at an interest rate of 1.39875% per annum, not including facility fees. The revolving credit agreement has a termination date of October 16, 2013 and contains certain financial covenants that may limit our additional borrowing capability under the agreement. At September 26, 2009, we had the ability to borrow an additional $250.7 million under this facility.

Read the The complete ReportVMI is in the portfolios of John Keeley of Keeley Fund Management, Kenneth Fisher of Fisher Asset Management, LLC, Kenneth Fisher of Fisher Asset Management, LLC.

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