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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One) | ||
ý | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to | ||
Commission file number 1-31429 |
Valmont Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 47-0351813 (I.R.S. Employer Identification No.) | |
One Valmont Plaza, | ||
Omaha, Nebraska | 68154-5215 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(402) 963-1000 (Registrant's telephone number, including area code) | ||
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
24,605,84823,556,137
Outstanding shares of common stock as of October 20, 2014April 22, 2015
Page No. | ||||||
---|---|---|---|---|---|---|
PART I. FINANCIAL INFORMATION | ||||||
Item 1. | Financial Statements: | |||||
Condensed Consolidated Statements of Earnings for the thirteen | 3 | |||||
Condensed Consolidated Statements of Comprehensive Income for the thirteen | 4 | |||||
Condensed Consolidated Balance Sheets as of | 5 | |||||
Condensed Consolidated Statements of Cash Flows for the | 6 | |||||
Condensed Consolidated Statements of Shareholders' Equity for the | 7 | |||||
Notes to Condensed Consolidated Financial Statements | 8 | |||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||||
Item 4. | Controls and Procedures | |||||
PART II. OTHER INFORMATION | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||
Item 5. | Other Information | 38 | ||||
Item 6. | Exhibits | |||||
Signatures |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2014 | September 28, 2013 | September 27, 2014 | September 28, 2013 | March 28, 2015 | March 29, 2014 | ||||||||||||||
Product sales | $ | 686,508 | $ | 693,480 | $ | 2,134,395 | $ | 2,228,268 | $ | 603,894 | $ | 681,043 | ||||||||
Services sales | 79,160 | 84,552 | 225,612 | 248,053 | 66,504 | 70,697 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Net sales | 765,668 | 778,032 | 2,360,007 | 2,476,321 | 670,398 | 751,740 | ||||||||||||||
Product cost of sales | 515,217 | 499,190 | 1,586,127 | 1,591,657 | 459,541 | 497,843 | ||||||||||||||
Services cost of sales | 50,951 | 53,278 | 146,921 | 162,260 | 45,403 | 46,915 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Total cost of sales | 566,168 | 552,468 | 1,733,048 | 1,753,917 | 504,944 | 544,758 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Gross profit | 199,500 | 225,564 | 626,959 | 722,404 | 165,454 | 206,982 | ||||||||||||||
Selling, general and administrative expenses | 111,697 | 115,663 | 335,532 | 350,048 | 107,771 | 108,134 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Operating income | 87,803 | 109,901 | 291,427 | 372,356 | 57,683 | 98,848 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (8,716 | ) | (8,149 | ) | (25,217 | ) | (24,364 | ) | (11,128 | ) | (8,197 | ) | ||||||||
Interest income | 1,477 | 1,560 | 4,793 | 4,765 | 874 | 1,739 | ||||||||||||||
Costs associated with refinancing of debt | (38,705 | ) | — | (38,705 | ) | — | ||||||||||||||
Other | (2,344 | ) | (584 | ) | (6,253 | ) | 1,095 | 1,016 | (5,812 | ) | ||||||||||
| | | | | | | | |||||||||||||
(9,238 | ) | (12,270 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | ||||
(48,288 | ) | (7,173 | ) | (65,382 | ) | (18,504 | ) | |||||||||||||
| | | | | | | | | ||||||||||||
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 39,515 | 102,728 | 226,045 | 353,852 | ||||||||||||||||
Earnings before income taxes | 48,445 | 86,578 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Income tax expense (benefit): | ||||||||||||||||||||
Current | 23,290 | 40,458 | 82,345 | 127,328 | 11,774 | 32,938 | ||||||||||||||
Deferred | (9,064 | ) | 3,454 | (4,034 | ) | (1,275 | ) | 5,164 | (2,923 | ) | ||||||||||
| | | | | | | | | | | | | | | | | ||||
14,226 | 43,912 | 78,311 | 126,053 | |||||||||||||||||
| | | | | | | | | ||||||||||||
Earnings before equity in earnings of nonconsolidated subsidiaries | 25,289 | 58,816 | 147,734 | 227,799 | ||||||||||||||||
Equity in earnings of nonconsolidated subsidiaries | (4 | ) | 75 | (34 | ) | 548 | ||||||||||||||
16,938 | 30,015 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Net earnings | 25,285 | 58,891 | 147,700 | 228,347 | 31,507 | 56,563 | ||||||||||||||
Less: Earnings attributable to noncontrolling interests | (1,726 | ) | (2,402 | ) | (4,185 | ) | (4,726 | ) | (768 | ) | (583 | ) | ||||||||
| | | | | | | | | | | | | | | | | ||||
Net earnings attributable to Valmont Industries, Inc. | $ | 23,559 | $ | 56,489 | $ | 143,515 | $ | 223,621 | $ | 30,739 | $ | 55,980 | ||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | | |||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 0.93 | $ | 2.12 | $ | 5.48 | $ | 8.40 | $ | 1.29 | $ | 2.10 | ||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | | |||||||||||||
Diluted | $ | 0.92 | $ | 2.10 | $ | 5.43 | $ | 8.31 | $ | 1.28 | $ | 2.08 | ||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | | |||||||||||||
Cash dividends declared per share | $ | 0.375 | $ | 0.250 | $ | 1.000 | $ | 0.725 | $ | 0.375 | $ | 0.250 | ||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | | |||||||||||||
Weighted average number of shares of common stock outstanding—Basic (000 omitted) | 25,287 | 26,665 | 26,208 | 26,632 | 23,868 | 26,715 | ||||||||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | | |||||||||||||
Weighted average number of shares of common stock outstanding—Diluted (000 omitted) | 25,513 | 26,919 | 26,439 | 26,896 | 23,982 | 26,950 | ||||||||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | |
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2014 | September 28, 2013 | September 27, 2014 | September 28, 2013 | March 28, 2015 | March 29, 2014 | ||||||||||||||
Net earnings | $ | 25,285 | $ | 58,891 | $ | 147,700 | $ | 228,347 | $ | 31,507 | $ | 56,563 | ||||||||
| | | | | | | | | | | | | | | | | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||||||
Unrealized translation gain (loss) | (59,001 | ) | 18,124 | (33,495 | ) | (44,458 | ) | (58,178 | ) | 11,637 | ||||||||||
Realized loss included in net earnings during the period | — | — | — | (5,194 | ) | |||||||||||||||
Unrealized gain/(loss) on cash flow hedge: | ||||||||||||||||||||
Amortization cost included in interest expense | 383 | 100 | 450 | 300 | 18 | 100 | ||||||||||||||
Realized loss included in net earnings during the period | 983 | — | 983 | — | ||||||||||||||||
Gain on cash flow hedges | 4,837 | — | 4,837 | — | 294 | — | ||||||||||||||
Actuarial gain (loss) in defined benefit pension plan | 1,116 | 857 | 269 | (37 | ) | — | (233 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | ||||
Other comprehensive income (loss) | (51,682 | ) | 19,081 | (26,956 | ) | (49,389 | ) | (57,866 | ) | 11,504 | ||||||||||
| | | | | | | | | | | | | | | | | ||||
Comprehensive income (loss) | (26,397 | ) | 77,972 | 120,744 | 178,958 | (26,359 | ) | 68,067 | ||||||||||||
Comprehensive loss (income) attributable to noncontrolling interests | 89 | (2,156 | ) | (1,615 | ) | 1,033 | 1,327 | 88 | ||||||||||||
| | | | | | | | | | | | | | | | | ||||
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | (26,308 | ) | $ | 75,816 | $ | 119,129 | $ | 179,991 | $ | (25,032 | ) | $ | 68,155 | ||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | |
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except shares and per share amounts)
(Unaudited)
| September 27, 2014 | December 28, 2013 | March 28, 2015 | December 27, 2014 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 452,218 | $ | 613,706 | $ | 318,366 | $ | 371,579 | ||||||
Receivables, net | 570,810 | 515,440 | 503,649 | 536,918 | ||||||||||
Inventories | 384,645 | 380,000 | 379,514 | 359,522 | ||||||||||
Prepaid expenses | 64,673 | 22,997 | 48,344 | 56,912 | ||||||||||
Refundable and deferred income taxes | 64,438 | 65,697 | 53,032 | 68,010 | ||||||||||
| | | | | | | | | | | | | ||
Total current assets | 1,536,784 | 1,597,840 | 1,302,905 | 1,392,941 | ||||||||||
| | | | | | | | | | | | | ||
Property, plant and equipment, at cost | 1,138,421 | 1,017,126 | 1,124,251 | 1,139,569 | ||||||||||
Less accumulated depreciation and amortization | 521,869 | 482,916 | 537,505 | 533,116 | ||||||||||
| | | | | | | | | | | | | ||
Net property, plant and equipment | 616,552 | 534,210 | 586,746 | 606,453 | ||||||||||
| | | | | | | | | | | | | ||
Goodwill | 374,144 | 349,632 | 373,888 | 385,111 | ||||||||||
Other intangible assets, net | 199,819 | 170,917 | 189,390 | 202,004 | ||||||||||
Other assets | 135,422 | 123,895 | 131,201 | 143,159 | ||||||||||
| | | | | | | | | | | | | ||
Total assets | $ | 2,862,721 | $ | 2,776,494 | $ | 2,584,130 | $ | 2,729,668 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Current installments of long-term debt | $ | 188 | $ | 202 | $ | 1,070 | $ | 1,181 | ||||||
Notes payable to banks | 17,863 | 19,024 | 14,459 | 13,952 | ||||||||||
Accounts payable | 209,996 | 216,121 | 189,349 | 196,565 | ||||||||||
Accrued employee compensation and benefits | 94,459 | 122,967 | 71,188 | 87,950 | ||||||||||
Accrued expenses | 93,483 | 71,560 | 98,636 | 88,480 | ||||||||||
Dividends payable | 9,299 | 6,706 | 8,889 | 9,086 | ||||||||||
| | | | | | | | | | | | | ||
Total current liabilities | 425,288 | 436,580 | 383,591 | 397,214 | ||||||||||
| | | | | | | | | | | | | ||
Deferred income taxes | 76,607 | 78,924 | 66,329 | 71,797 | ||||||||||
Long-term debt, excluding current installments | 768,611 | 470,907 | 765,762 | 766,654 | ||||||||||
Defined benefit pension liability | 136,808 | 154,397 | 127,708 | 150,124 | ||||||||||
Deferred compensation | 48,014 | 39,109 | 51,027 | 47,932 | ||||||||||
Other noncurrent liabilities | 48,707 | 51,731 | 45,849 | 45,542 | ||||||||||
Shareholders' equity: | ||||||||||||||
Preferred stock of $1 par value— | ||||||||||||||
Authorized 500,000 shares; none issued | — | — | — | — | ||||||||||
Common stock of $1 par value— | ||||||||||||||
Authorized 75,000,000 shares; 27,900,000 issued | 27,900 | 27,900 | 27,900 | 27,900 | ||||||||||
Retained earnings | 1,687,536 | 1,562,670 | 1,741,252 | 1,718,662 | ||||||||||
Accumulated other comprehensive income (loss) | (72,071 | ) | (47,685 | ) | (190,204 | ) | (134,433 | ) | ||||||
Treasury stock | (333,744 | ) | (20,860 | ) | (481,039 | ) | (410,296 | ) | ||||||
| | | | | | | | | | | | | ||
Total Valmont Industries, Inc. shareholders' equity | 1,309,621 | 1,522,025 | 1,097,909 | 1,201,833 | ||||||||||
| | | | | | | | | | | | | ||
Noncontrolling interest in consolidated subsidiaries | 49,065 | 22,821 | 45,955 | 48,572 | ||||||||||
| | | | | | | | | | | | | ||
Total shareholders' equity | 1,358,686 | 1,544,846 | 1,143,864 | 1,250,405 | ||||||||||
| | | | | | | | | | | | | ||
Total liabilities and shareholders' equity | $ | 2,862,721 | $ | 2,776,494 | $ | 2,584,130 | $ | 2,729,668 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | |
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| Thirty-nine Weeks Ended | Thirteen Weeks Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2014 | September 28, 2013 | March 28, 2015 | March 29, 2014 | ||||||||||
Cash flows from operating activities: | ||||||||||||||
Net earnings | $ | 147,700 | $ | 228,347 | $ | 31,507 | $ | 56,563 | ||||||
Adjustments to reconcile net earnings to net cash flows from operations: | ||||||||||||||
Depreciation and amortization | 64,460 | 57,417 | 23,901 | 19,601 | ||||||||||
Loss on investment | 4,859 | — | ||||||||||||
Non-cash debt refinancing costs | (2,478 | ) | — | |||||||||||
Noncash loss on trading securities | 4,415 | 3,386 | ||||||||||||
Stock-based compensation | 5,444 | 4,999 | 1,761 | 1,880 | ||||||||||
Change in fair value of contingent consideration | 4,300 | — | ||||||||||||
Defined benefit pension plan expense | 2,003 | 4,870 | (150 | ) | 662 | |||||||||
Contribution to defined benefit pension plan | (18,245 | ) | (16,755 | ) | (15,735 | ) | (17,484 | ) | ||||||
Gain on sale of property, plant and equipment | 58 | (5,060 | ) | (136 | ) | (127 | ) | |||||||
Equity in earnings in nonconsolidated subsidiaries | 34 | (548 | ) | |||||||||||
Deferred income taxes | (4,034 | ) | (1,275 | ) | 5,164 | (2,923 | ) | |||||||
Changes in assets and liabilities (net of acquisitions): | ||||||||||||||
Receivables | (19,951 | ) | (757 | ) | 18,584 | 31,668 | ||||||||
Inventories | (4,152 | ) | (14,574 | ) | (27,041 | ) | (37,911 | ) | ||||||
Prepaid expenses | (19,182 | ) | (7,041 | ) | 4,954 | (9,148 | ) | |||||||
Accounts payable | (21,082 | ) | 1,161 | (1,261 | ) | (12,471 | ) | |||||||
Accrued expenses | (27,926 | ) | 16,931 | (5,324 | ) | (29,889 | ) | |||||||
Other noncurrent liabilities | (6,409 | ) | 2,510 | 1,684 | 1,551 | |||||||||
Income taxes refundable | (22,702 | ) | (21,120 | ) | 13,205 | 16,559 | ||||||||
| | | | | | | | | | | | | ||
Net cash flows from operating activities | 82,697 | 249,105 | 55,528 | 21,917 | ||||||||||
| | | | | | | | | | | | | ||
Cash flows from investing activities: | �� | |||||||||||||
Purchase of property, plant and equipment | (63,412 | ) | (75,072 | ) | (16,615 | ) | (23,526 | ) | ||||||
Proceeds from sale of assets | 2,107 | 39,564 | 185 | 1,391 | ||||||||||
Acquisitions, net of cash acquired | (137,438 | ) | (53,152 | ) | — | (120,483 | ) | |||||||
Other, net | 2,992 | 1,231 | 2,930 | (990 | ) | |||||||||
| | | | | | | | | | | | | ||
Net cash flows from investing activities | (195,751 | ) | (87,429 | ) | (13,500 | ) | (143,608 | ) | ||||||
| | | | | | | | | | | | | ||
Cash flows from financing activities: | ||||||||||||||
Net borrowings under short-term agreements | (1,065 | ) | 3,439 | 1,155 | (4,056 | ) | ||||||||
Proceeds from long-term borrowings | 652,540 | 274 | ||||||||||||
Principal payments on long-term borrowings | (357,059 | ) | (508 | ) | (224 | ) | (63 | ) | ||||||
Settlement of financial derivatives | 4,837 | — | ||||||||||||
Dividends paid | (23,357 | ) | (18,717 | ) | (9,086 | ) | (6,706 | ) | ||||||
Dividends to noncontrolling interest | (1,340 | ) | (1,767 | ) | (1,290 | ) | (351 | ) | ||||||
Debt issuance costs | (5,464 | ) | — | |||||||||||
Purchase of treasury shares | (72,900 | ) | — | |||||||||||
Proceeds from exercises under stock plans | 12,824 | 15,064 | 1,760 | 7,860 | ||||||||||
Excess tax benefits from stock option exercises | 3,916 | 4,630 | 345 | 2,296 | ||||||||||
Purchase of treasury shares | (316,296 | ) | — | |||||||||||
Purchase of common treasury shares—stock plan exercises | (12,739 | ) | (14,644 | ) | (2,156 | ) | (8,574 | ) | ||||||
| | | | | | | | | | | | | ||
Net cash flows from financing activities | (43,203 | ) | (12,229 | ) | (82,396 | ) | (9,594 | ) | ||||||
| | | | | | | | | | | | | ||
Effect of exchange rate changes on cash and cash equivalents | (5,231 | ) | (20,207 | ) | (12,845 | ) | 5,774 | |||||||
| | | | | | | | | | | | | ||
Net change in cash and cash equivalents | (161,488 | ) | 129,240 | (53,213 | ) | (125,511 | ) | |||||||
Cash and cash equivalents—beginning of year | 613,706 | 414,129 | 371,579 | 613,706 | ||||||||||
| | | | | | | | | | | | | ||
Cash and cash equivalents—end of period | $ | 452,218 | $ | 543,369 | $ | 318,366 | $ | 488,195 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | |
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
| Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) | Treasury stock | Noncontrolling interest in consolidated subsidiaries | Total shareholders' equity | |||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at December 29, 2012 | $ | 27,900 | $ | — | $ | 1,300,529 | $ | 43,938 | $ | (22,455 | ) | $ | 57,098 | $ | 1,407,010 | |||||||||||||||||||||||||||||
Net earnings | — | — | 223,621 | — | — | 4,726 | 228,347 | |||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | (43,630 | ) | — | (5,759 | ) | (49,389 | ) | ||||||||||||||||||||||||||||||||||
Cash dividends declared | — | — | (19,412 | ) | — | — | — | (19,412 | ) | |||||||||||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | (1,767 | ) | (1,767 | ) | |||||||||||||||||||||||||||||||||||
Acquisition of Locker | — | — | — | — | — | 325 | 325 | |||||||||||||||||||||||||||||||||||||
Stock plan exercises; 93,059 shares acquired | — | — | — | — | (14,644 | ) | — | (14,644 | ) | |||||||||||||||||||||||||||||||||||
Stock options exercised; 192,377 shares issued | — | (9,629 | ) | 9,361 | — | 15,332 | — | 15,064 | ||||||||||||||||||||||||||||||||||||
Tax benefit from stock option exercises | — | 4,630 | — | — | — | — | 4,630 | |||||||||||||||||||||||||||||||||||||
Stock option expense | — | 3,935 | — | — | — | — | 3,935 | |||||||||||||||||||||||||||||||||||||
Stock awards; 9,801 shares issued | — | 1,064 | — | — | 622 | — | 1,686 | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||
Balance at September 28, 2013 | $ | 27,900 | $ | — | $ | 1,514,099 | $ | 308 | $ | (21,145 | ) | $ | 54,623 | $ | 1,575,785 | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||
Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) | Treasury stock | Noncontrolling interest in consolidated subsidiaries | Total shareholders' equity | ||||||||||||||||||||||||||||||||||||||
Balance at December 28, 2013 | $ | 27,900 | $ | — | $ | 1,562,670 | $ | (47,685 | ) | $ | (20,860 | ) | $ | 22,821 | $ | 1,544,846 | $ | 27,900 | $ | — | $ | 1,562,670 | $ | (47,685 | ) | $ | (20,860 | ) | $ | 22,821 | $ | 1,544,846 | ||||||||||||
Net earnings | — | — | 143,515 | — | — | 4,185 | 147,700 | — | — | 55,980 | — | — | 583 | 56,563 | ||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | (24,386 | ) | — | (2,570 | ) | (26,956 | ) | — | — | — | 12,175 | — | (671 | ) | 11,504 | ||||||||||||||||||||||||||
Cash dividends declared | — | — | (25,950 | ) | — | — | — | (25,950 | ) | — | — | (6,721 | ) | — | — | — | (6,721 | ) | ||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | (1,340 | ) | (1,340 | ) | — | — | — | — | — | (351 | ) | (351 | ) | ||||||||||||||||||||||||||
Acquisition of DS SM | — | — | — | — | — | 9,232 | 9,232 | — | — | — | — | — | 9,232 | 9,232 | ||||||||||||||||||||||||||||||
Acquisition of AgSense | — | — | — | — | — | 16,333 | 16,333 | |||||||||||||||||||||||||||||||||||||
Addition of noncontrolling interest | — | — | — | — | — | 404 | 404 | |||||||||||||||||||||||||||||||||||||
Purchase of treasury shares; 2,126,392 shares acquired | — | — | — | — | (316,296 | ) | — | (316,296 | ) | |||||||||||||||||||||||||||||||||||
Stock plan exercises; 83,431 shares acquired | — | — | — | — | (12,739 | ) | — | (12,739 | ) | |||||||||||||||||||||||||||||||||||
Stock options exercised; 171,508 shares issued | — | (9,360 | ) | 7,301 | — | 14,883 | — | 12,824 | ||||||||||||||||||||||||||||||||||||
Stock plan exercises; 57,854 shares acquired | — | — | — | — | (8,574 | ) | — | (8,574 | ) | |||||||||||||||||||||||||||||||||||
Stock options exercised; 110,339 shares issued | — | (4,176 | ) | 3,767 | — | 8,269 | — | 7,860 | ||||||||||||||||||||||||||||||||||||
Tax benefit from stock option exercises | — | 3,916 | — | — | — | — | 3,916 | — | 2,296 | — | — | — | — | 2,296 | ||||||||||||||||||||||||||||||
Stock option expense | — | 3,767 | — | — | — | — | 3,767 | — | 1,263 | — | — | — | — | 1,263 | ||||||||||||||||||||||||||||||
Stock awards; 8,247 shares issued | — | 1,677 | — | — | 1,268 | — | 2,945 | |||||||||||||||||||||||||||||||||||||
Stock awards; 8,290 shares issued | — | 617 | — | — | 1,268 | — | 1,885 | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
Balance at September 27, 2014 | $ | 27,900 | $ | — | $ | 1,687,536 | $ | (72,071 | ) | $ | (333,744 | ) | $ | 49,065 | $ | 1,358,686 | ||||||||||||||||||||||||||||
Balance at March 29, 2014 | $ | 27,900 | $ | — | $ | 1,615,696 | $ | (35,510 | ) | $ | (19,897 | ) | $ | 31,614 | $ | 1,619,803 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||
Balance at December 27, 2014 | $ | 27,900 | $ | — | $ | 1,718,662 | $ | (134,433 | ) | $ | (410,296 | ) | $ | 48,572 | $ | 1,250,405 | ||||||||||||||||||||||||||||
Net earnings | — | — | 30,739 | — | — | 768 | 31,507 | |||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | (55,771 | ) | — | (2,095 | ) | (57,866 | ) | ||||||||||||||||||||||||||||||||||
Cash dividends declared | — | — | (8,889 | ) | — | — | — | (8,889 | ) | |||||||||||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | (1,290 | ) | (1,290 | ) | |||||||||||||||||||||||||||||||||||
Purchase of treasury shares; 598,227 shares acquired | — | — | — | — | (72,900 | ) | — | (72,900 | ) | |||||||||||||||||||||||||||||||||||
Stock plan exercises; 16,950 shares acquired | — | — | — | — | (2,156 | ) | — | (2,156 | ) | |||||||||||||||||||||||||||||||||||
Stock options exercised; 25,119 shares issued | — | (2,106 | ) | 740 | — | 3,126 | — | 1,760 | ||||||||||||||||||||||||||||||||||||
Tax benefit from stock option exercises | — | 345 | — | — | — | — | 345 | |||||||||||||||||||||||||||||||||||||
Stock option expense | — | 1,350 | — | — | — | — | 1,350 | |||||||||||||||||||||||||||||||||||||
Stock awards; 9,656 shares issued | — | 411 | — | — | 1,187 | — | 1,598 | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||
Balance at March 28, 2015 | $ | 27,900 | $ | — | $ | 1,741,252 | $ | (190,204 | ) | $ | (481,039 | ) | $ | 45,955 | $ | 1,143,864 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Consolidated Financial Statements
The Condensed Consolidated Balance Sheet as of September 27, 2014,March 28, 2015, the Condensed Consolidated Statements of Earnings and Comprehensive Income for the thirteen and thirty-nine weeks ended September 27,March 28, 2015 and March 29, 2014, and September 28, 2013, and the Condensed Consolidated Statements of Cash Flows and Shareholders' Equity for the thirty-ninethirteen week periodsperiod then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of September 27, 2014March 28, 2015 and for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2013.27, 2014. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December 28, 2013.27, 2014. The results of operations for the period ended September 27, 2014March 28, 2015 are not necessarily indicative of the operating results for the full year.
Inventories
Approximately 43%41% and 44% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market as of SeptemberMarch 28, 2015 and December 27, 2014, and December 28, 2013, respectively. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately $47,380$43,908 and $45,204$47,178 at September 27, 2014March 28, 2015 and December 28, 2013,27, 2014, respectively.
Inventories consisted of the following:
| September 27, 2014 | December 28, 2013 | March 28, 2015 | December 27, 2014 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Raw materials and purchased parts | $ | 185,573 | $ | 179,576 | $ | 187,281 | $ | 179,093 | ||||||
Work-in-process | 29,954 | 27,294 | 26,078 | 27,835 | ||||||||||
Finished goods and manufactured goods | 216,498 | 218,334 | 210,063 | 199,772 | ||||||||||
| | | | | | | | | | | | | ||
Subtotal | 432,025 | 425,204 | 423,422 | 406,700 | ||||||||||
Less: LIFO reserve | 47,380 | 45,204 | 43,908 | 47,178 | ||||||||||
| | | | | | | | | | | | | ||
$ | 384,645 | $ | 380,000 | |||||||||||
$ | 379,514 | $ | 359,522 | |||||||||||
| | | | | | | | | | | | | | |
| | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries for the thirteen and thirty-nine weeks ended September 27,March 28, 2015 and March 29, 2014, and September 28, 2013, were as follows:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2015 | 2014 | ||||||||||||||
United States | $ | 4,844 | $ | 66,143 | $ | 141,635 | $ | 253,564 | $ | 32,641 | $ | 71,694 | ||||||||
Foreign | 34,671 | 36,585 | 84,410 | 100,288 | 15,804 | 14,884 | ||||||||||||||
| | | | | | | | | | | | | | | �� | | ||||
$ | 39,515 | $ | 102,728 | $ | 226,045 | $ | 353,852 | |||||||||||||
$ | 48,445 | $ | 86,578 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | |
Pension Benefits
The Company incurs expenses in connection with the Delta Pension Plan ("DPP"). The DPP was acquired as part of the Delta plc acquisition in fiscal 2010 and has no members that are active employees. In order to measure expense and the related benefit obligation, various assumptions are made including discount rates used to value the obligation, expected return on plan assets used to fund these expenses and estimated future inflation rates. These assumptions are based on historical experience as well as current facts and circumstances. An actuarial analysis is used to measure the expense and liability associated with pension benefits.
The components of the net periodic pension (benefit) expense for the thirteen and thirty-nine weeks ended September 27,March 28, 2015 and March 29, 2014 and September 28, 2013 were as follows:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2015 | 2014 | ||||||||||||||
Net periodic benefit expense: | ||||||||||||||||||||
Net periodic (benefit) expense: | ||||||||||||||||||||
Interest cost | $ | 7,274 | $ | 6,535 | $ | 21,783 | $ | 19,593 | $ | 6,111 | $ | 7,197 | ||||||||
Expected return on plan assets | (6,605 | ) | (4,910 | ) | (19,780 | ) | (14,723 | ) | (6,261 | ) | (6,535 | ) | ||||||||
| | | | | | | | | | | | | | | | | ||||
Net periodic benefit expense | $ | 669 | $ | 1,625 | $ | 2,003 | $ | 4,870 | ||||||||||||
Net periodic (benefit) expense | $ | (150 | ) | $ | 662 | |||||||||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | |
Stock Plans
The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Human Resource Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At September 27, 2014, 1,463,600March 28, 2015, 1,191,723 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Under the plans, the exercise price of each option equals the closing market price at the date of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the fifth anniversary of the grant.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Expiration of grants is from six to ten years from the date of grant. The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options for the thirteen and thirty-nine weeks ended September 27,March 28, 2015 and March 29, 2014, and September 28, 2013, respectively, were as follows:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2015 | 2014 | ||||||||||||||
Compensation expense | $ | 1,242 | $ | 1,308 | $ | 3,767 | $ | 3,935 | $ | 1,350 | $ | 1,263 | ||||||||
Income tax benefits | 478 | 504 | 1,450 | 1,515 | 520 | 486 |
Equity Method Investments
The Company has equity method investments in non-consolidated subsidiaries, which are recorded within "Other assets" on the Condensed Consolidated Balance Sheet. In February 2013, the Company sold its nonconsolidated investment in Manganese Materials Company Pty. Ltd. to the majority owner of the business for approximately $29,250. The profit on the sale was not significant, which included the recognition of $5,194 in currency translation adjustments previously recorded as part of "Accumulated other comprehensive income" on the Condensed Consolidated Balance Sheet. The Company also recognized certain deferred tax benefits of approximately $3,200 associated with the sale in the first quarter of fiscal 2013.
Fair Value
The Company applies the provisions of Accounting Standards Codification 820,Fair Value Measurements ("ASC 820") which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 apply to other accounting pronouncements that require or permit fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Level 3: Unobservable inputs that are not corroborated by market data.
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.
Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan of $36,308$39,718 ($27,13336,439 at December 28, 2013)27, 2014) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification 320,Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time. The Company's ownership in Delta EMD Pty. Ltd. (JSE:DTA) of $8,295 and $13,910 is recorded at fair value at September 27, 2014 and December 28, 2013, respectively. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.
| | Fair Value Measurement Using: | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying Value September 27, 2014 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Assets: | |||||||||||||
Trading Securities | $ | 44,603 | $ | 44,603 | $ | — | $ | — |
| | Fair Value Measurement Using: | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying Value December 28, 2013 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Assets: | |||||||||||||
Trading Securities | $ | 41,043 | $ | 41,043 | $ | — | $ | — |
Derivative Instruments
On September 22, 2014, the Company issued and sold $250,000 aggregate principal amount of the Company's 5.00% Senior Notes due 2044 (the "2044 Notes") and $250,000 aggregate principal amount of the Company's 5.25% Senior Notes due 2054 (the "2054 Notes"). During the third quarter of 2014, the Company executed a contract to lock in the treasury rate related to the issuance of the 2044 Notes and a second contract to lock in the base interest rate on the issuance of the 2054 Notes. These contracts, each for a notional amount of $125,000, were executed to hedge the risk of potential fluctuations in the treasury rates which would change the amount of net proceeds received from the debt offering. As the benchmark rate component of the fixed rate debt issuance and the cash flow hedged risk is based on that same benchmark, this was deemed an effective hedge at inception. On September 10, 2014, these contracts were settled with the Company receiving approximately $4,837
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Standards Codification 320,Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time.
The Company's ownership of shares in Delta EMD Pty. Ltd. (JSE:DTA) is also classified as trading securities. During first quarter of 2015, the Company received a special dividend of $5,010 from Delta EMD Pty. Ltd and the counterpartiesmarket price of the shares were proportionately decreased accordingly. The shares are valued at $4,826 and $9,034 as of March 28, 2015 and December 27, 2014, respectively, which was recordedis the estimated fair value. Quoted market prices are available for these securities in accumulated other comprehensive incomean active market and will be amortizedtherefore categorized as a reduction of interest expense over the term of the debt.Level 1 input.
| | Fair Value Measurement Using: | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying Value March 28, 2015 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Assets: | |||||||||||||
Trading Securities | $ | 44,544 | $ | 44,544 | $ | — | $ | — |
In conjunction with the repurchase through a partial tender offer of $199,800 of the Company's 6.625% Senior notes due 2020 (the "2020 Notes") during September 2014, the Company recognized $983 of expense, which is a proportionate amount of the unrealized loss on cash flow hedge with respect to the 2020 Notes recorded within other comprehensive income. This $983 is included in the costs associated with refinancing of debt in the condensed consolidated statement of earnings.
| | Fair Value Measurement Using: | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying Value December 27, 2014 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Assets: | |||||||||||||
Trading Securities | $ | 45,473 | $ | 45,473 | $ | — | $ | — |
Comprehensive Income
Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Accumulated other comprehensive income (loss) consisted of the following at September 27, 2014March 28, 2015 and December 28, 2013:27, 2014:
| Foreign Currency Translation Adjustments | Unrealized Loss on Cash Flow Hedge | Defined Benefit Pension Plan | Accumulated Other Comprehensive Income | Foreign Currency Translation Adjustments | Unrealized Gain on Cash Flow Hedge | Defined Benefit Pension Plan | Accumulated Other Comprehensive Income | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at December 28, 2013 | $ | (20,165 | ) | $ | (2,535 | ) | $ | (24,985 | ) | $ | (47,685 | ) | ||||||||||||||
Balance at December 27, 2014 | $ | (99,618 | ) | $ | 3,879 | $ | (38,694 | ) | $ | (134,433 | ) | |||||||||||||||
Current-period comprehensive income (loss) | (30,925 | ) | 6,270 | 269 | (24,386 | ) | (56,083 | ) | 312 | — | (55,771 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||
Balance at September 27, 2014 | $ | (51,090 | ) | $ | 3,735 | $ | (24,716 | ) | $ | (72,071 | ) | |||||||||||||||
Balance at March 28, 2015 | $ | (155,701 | ) | $ | 4,191 | $ | (38,694 | ) | $ | (190,204 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |||
| | | | | | | | | | | | | |
Subsequent Events
On October 6, 2014, the Company purchased the assets of Shakespeare Composite Structures (Shakespeare) for $48 million in cash, net of assumed liabilities. Shakespeare is a manufacturer of fiberglass reinforced composite structures and products, and the originator of the composite light pole, with two manufacturing facilities in South Carolina. Shakespeare's annual sales are approximately $55 million and it will be included in the Engineered Infrastructure Products Segment. The acquisition, which was funded by cash held by the Company, was completed to extend Valmont's leading product offerings in the lighting, traffic, and utility markets.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,Revenue from Contracts with Customers (Topic 606), which supersedes the
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
revenue recognition requirements in Accounting Standards Codification ("ASC") 605,Revenue Recognition. The new revenue recognition standard requires entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2016 and is to be applied retrospectively. Early applicationadoption is not permitted. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations and financial position.
Subsequent EventTable
In April 2015, the Company's Board of ContentsDirectors authorized a broad restructuring plan (the "Plan") of up to $60 million to respond to the market environment in certain businesses. The initial restructuring activities primarily involve consolidation of operations in the Utility segment and consolidation of Asia Pacific operations within the Engineered Infrastructure Products and Coatings segments. Accordingly, the Company expects to incur pre-tax cash severance and property relocation and site closure expenses of $19 million and asset impairments of approximately $11 million. The asset impairments are primarily write-downs of property, plant, and equipment in the Utility, Engineered Infrastructure Products, and Coatings segments. These charges are expected to be incurred over the remainder of 2015.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars Certain of these initial restructuring actions are within the APAC Coatings reporting unit which has approximately $16 million of goodwill as of March 28, 2015. The Company expects these activities to improve the profitability of this reporting unit. Should operating income not improve within this reporting unit after these restructuring activities are implemented, the Company will have to perform an interim goodwill impairment analysis. In addition to this goodwill, the Company is also evaluating other potential restructuring activities authorized under the Plan. In total, these restructuring items could result in thousands, except per share amounts)
(Unaudited)asset impairments of up to $25 million and cash charges of $5 million.
(2) ACQUISITIONS
On March 3, 2014, the Company purchased 90% of the outstanding shares of DS SM A/S, which was renamed Valmont SM. Valmont SM is a manufacturer of heavy complex steel structures for a diverse range of industries including wind energy, offshore oil and gas, and electricity transmission. Valmont SM's operations are reported in the Engineered Infrastructure Products Segment. Valmont SM's annual sales are approximately $190,000 and it operates two manufacturing locations in Denmark. The purchase price paid for the business at closing (net of $56 cash acquired) was $120,483, including the payoff of an intercompany note payable by Valmont SM to its prior affiliates. The purchase is subject to an earn-out clause that is contingent on meeting future operational metrics for which no liability has been established based on current expectations. Additionally, the fair value measurements are subject to a trade working capital adjustment that has not yet been finalized. The acquisition, which was funded by cash held by the Company, was completed to participate in markets for wind energy, oil and gas exploration, power transmission and other related infrastructure projects and to increase the Company's geographic footprint in Europe. The Company also funded a portion of the acquisition with an intercompany note payable. The excess purchase price over the fair value of assets resulted in goodwill, which is not deductible for tax purposes.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(2) ACQUISITIONS (Continued)
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of acquisition, which was finalized in the fourth quarter of 2014.
| At March 3, 2014 | |||
---|---|---|---|---|
Current assets | $ | 73,421 | ||
Property, plant and equipment | 85,645 | |||
Intangible assets | 30,340 | |||
Goodwill | 14,317 | |||
| | | | |
Total fair value of assets acquired | $ | 203,723 | ||
| | | | |
Current liabilities | 50,953 | |||
Deferred income taxes | 14,114 | |||
Intercompany note payable | 37,448 | |||
Long-term debt | 8,941 | |||
| | | | |
Total fair value of liabilities assumed | 111,456 | |||
Non-controlling interests | 9,232 | |||
| | | | |
Net assets acquired | $ | 83,035 | ||
| | | | |
Based on the fair value assessments, the Company allocated $30,340 of the purchase price to acquired intangible assets. The following table summarizes the major classes of Valmont SM's acquired intangible assets and the respective weighted average amortization periods:
| Amount | Weighted Average Amortization Period (Years) | |||||
---|---|---|---|---|---|---|---|
Trade Names | $ | 11,470 | Indefinite | ||||
Backlog | 3,145 | 1.5 | |||||
Customer Relationships | 15,725 | 12.0 | |||||
| | | | | | | |
Total Intangible Assets | $ | 30,340 | |||||
| | | | | | | |
On October 6, 2014, the Company acquired Shakespeare Composite Structures (Shakespeare) for $48,272 in cash, plus assumed liabilities. Shakespeare is a manufacturer of fiberglass reinforced composite structures and products with two manufacturing facilities in South Carolina. Shakespeare's annual sales are approximately $55,000 and its operations will be included in the Engineered Infrastructure Products segment. The acquisition of Shakespeare was completed to expand our product offering of composite structure solutions.
The preliminary fair value measurement disclosed below is subject to management reviews and completion of the fair value measurements of the assets acquired and liabilities assumed. The Company expects the fair value measurement process and purchase price allocation for Shakespeare to be completed in the fourthsecond quarter of 2014 in conjunction with the finalization of the trade working capital settlement.
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the date of acquisition.
| At March 3, 2014 | |||
---|---|---|---|---|
Current assets | $ | 73,421 | ||
Property, plant and equipment | 85,645 | |||
Intangible assets | 30,340 | |||
Goodwill | 14,317 | |||
| | | | |
Total fair value of assets acquired | $ | 203,723 | ||
| | | | |
Current liabilities | 50,953 | |||
Deferred income taxes | 14,114 | |||
Intercompany note payable | 37,448 | |||
Long-term debt | 8,941 | |||
| | | | |
Total fair value of liabilities assumed | 111,456 | |||
Non-controlling interests | 9,232 | |||
| | | | |
Net assets acquired | $ | 83,035 | ||
| | | | |
The Company's Condensed Consolidated Statements of Earnings for the thirteen and thirty-nine weeks ended September 27, 2014 included net sales of $41,284 and $105,805 and net earnings of $2,466 and $6,568, respectively, resulting from Valmont SM's operations from March 3, 2014 to September 27,2015.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(2) ACQUISITIONS (Continued)
2014. No proforma information The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the date of the Shakespeare acquisition (goodwill is not deductible for 2014 has been provided as it does not have a material effect on the financial statements.tax purposes):
| At October 6, 2014 | |||
---|---|---|---|---|
Current assets | $ | 12,532 | ||
Property, plant and equipment | 10,694 | |||
Intangible assets | 13,500 | |||
Goodwill | 15,416 | |||
| | | | |
Total fair value of assets acquired | $ | 52,142 | ||
| | | | |
Current liabilities | 3,870 | |||
| | | | |
Net assets acquired | $ | 48,272 | ||
| | | | |
Based on the preliminary fair value assessments, the Company allocated $30,340$13,500 of the purchase price to acquired intangible assets. The following table summarizes the major classes of Valmont SM'sShakespeare acquired intangible assets and the respective weighted averageweighted-average amortization periods:
| Amount | Weighted Average Amortization Period (Years) | Amount | Weighted Average Amortization Period (Years) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trade Names | $ | 12,210 | Indefinite | $ | 4,000 | Indefinite | ||||||||
Backlog | 3,145 | 1.5 | ||||||||||||
Customer Relationships | 14,985 | 15.0 | 9,500 | 12.0 | ||||||||||
| | | �� | | | | | | | | | | ||
Total Intangible Assets | $ | 30,340 | $ | 13,500 | ||||||||||
| | | | | | | | | | | |
On February 5, 2013, the Company purchased 100% of the outstanding shares of Locker Group Holdings Pty. Ltd. ("Locker"). Locker is a manufacturer of perforated and expanded metal for the non-residential market, industrial flooring and handrails for the access systems market, and screening media for applications in the industrial and mining sectors in Australia and Asia. Locker's operations are reported in the Engineered Infrastructure Products Segment. The acquisition, which was funded by cash held by the Company, was completed to expand our product offering and sales coverage for access systems and related products in Asia Pacific.
The purchase price paid for the business at closing (net of $116 cash acquired) was $53,152. In addition, a maximum of $7,911 additional purchase price could be paid to the sellers upon the achievement of certain gross profit and inventory targets over the two years following date of acquisition and the Company recognized an estimated liability of $7,178 at February 5, 2013. During 2014 and 2013, the Company made payments of approximately $2.3 million to the sellers with respect to achievement of these targets. The Company determined that the additional purchase price tied to a gross profit target for the twelve months ending February 2015 would not be achieved and therefore the additional purchase price with respect to that target will not be paid. As such, approximately $4.3 million of this liability was reversed and recognized against cost of goods sold during the third quarter of 2014.
On August 25, 2014, the Company acquired 51% of AgSense, LLC (AgSense) for $17 million in cash. AgSense operates in South Dakota and is the creator of global WagNet network which provides growers with a more complete view of their entire farming operation by tying irrigation decision making to field, crop and weather conditions. In the preliminary measurement of fair values of assets acquired and liabilities assumed, goodwill of $17,343 and $13,510 of customer relationships, trade name and other intangible assets were recorded. A portion of the goodwill is deductible for tax purposes. AgSense is included in the Irrigation SegmentSegment.
The Company's Condensed Consolidated Statement of Earnings for the thirteen weeks ended March 28, 2015 included net sales of $41,924 and net earnings of $1,997 resulting from the purchase price allocation is expected to be finalized inValmont SM, AgSense, and Shakespeare acquisitions. The pro forma effect of these acquisitions on the fourthfirst quarter of 2014.the 2014 Statement of Earnings was as follows:
| Thirteen weeks Ended March 29, 2014 | |||
---|---|---|---|---|
Net sales | $ | 800,265 | ||
Net earnings | $ | 58,692 | ||
Earnings per share—diluted | $ | 2.18 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(2) ACQUISITIONS (Continued)
In December 2013, the Company purchased 100% of the outstanding shares of Armorflex International Ltd. ("Armorflex") for $10,000. Armorflex is a company holding proprietary intellectual property for products serving the highway safety market. In the measurement of fair values of assets acquired and liabilities assumed, we recorded goodwill of $6,823 and an aggregate of $3,792 for customer relationships, patented technology and other intangible assets. The goodwill is not deductible for tax purposes. Armorflex is included in the Engineered Infrastructure Products segment and was acquired to expand the Company's highway safety product offerings in the Asia Pacific region. This acquisition did not have a significant effect on the Company's fiscal 2013 financial results.
The Company's Condensed Consolidated Statement of Earnings for the thirteen and thirty-nine weeks ended September 27, 2014 included net sales of $64,838 and $168,891 and net earnings of $8,185 and $13,760 resulting from the Valmont SM, AgSense, Locker, and Armorflex acquisitions. The pro forma effect of these acquisitions on the third quarter and first three quarters of the 2013 Statement of Earnings was as follows:
| Thirteen weeks Ended September 28, 2013 | Thirty-nine weeks Ended September 28, 2013 | |||||
---|---|---|---|---|---|---|---|
Net sales | $ | 827,374 | $ | 2,630,881 | |||
Net earnings | $ | 60,549 | $ | 233,437 | |||
Earnings per share—diluted | $ | 2.25 | $ | 8.68 |
(3) GOODWILL AND INTANGIBLE ASSETS
Amortized Intangible Assets
The components of amortized intangible assets at SeptemberMarch 28, 2015 and December 27, 2014 and December 28, 2013 were as follows:
| September 27, 2014 | March 28, 2015 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Carrying Amount | Accumulated Amortization | Weighted Average Life | Gross Carrying Amount | Accumulated Amortization | Weighted Average Life | ||||||||||||
Customer Relationships | $ | 203,018 | $ | 86,175 | 13 years | $ | 201,990 | $ | 90,546 | 13 years | ||||||||
Proprietary Software & Database | 3,872 | 2,983 | 6 years | 3,680 | 2,954 | 8 years | ||||||||||||
Patents & Proprietary Technology | 12,694 | 8,258 | 8 years | 12,109 | 8,712 | 8 years | ||||||||||||
Other | 4,499 | 2,584 | 3 years | 3,997 | 3,216 | 3 years | ||||||||||||
| | | | | | | | | | | | | | | | |||
$ | 224,083 | $ | 100,000 | |||||||||||||||
$ | 221,776 | $ | 105,428 | |||||||||||||||
| | | | | | | | | | | | | | | | | ||
| | | | | | | | | |
| December 27, 2014 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
| Gross Carrying Amount | Accumulated Amortization | Weighted Average Life | |||||||
Customer Relationships | $ | 207,509 | $ | 88,538 | 13 years | |||||
Proprietary Software & Database | 3,769 | 2,977 | 8 years | |||||||
Patents & Proprietary Technology | 12,394 | 8,537 | 8 years | |||||||
Other | 4,355 | 2,998 | 3 years | |||||||
| | | | | | | | | | |
$ | 228,027 | $ | 103,050 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Amortization expense for intangible assets for the thirteen weeks ended March 28, 2015 and March 29, 2014, respectively was as follows:
Thirteen Weeks Ended | ||||
---|---|---|---|---|
2015 | 2014 | |||
$4,913 | $ | 4,103 |
Estimated annual amortization expense related to finite-lived intangible assets is as follows:
| Estimated Amortization Expense | |||
---|---|---|---|---|
2015 | $ | 17,039 | ||
2016 | 16,607 | |||
2017 | 15,871 | |||
2018 | 14,227 | |||
2019 | 13,423 |
The useful lives assigned to finite-lived intangible assets included consideration of factors such as the Company's past and expected experience related to customer retention rates, the remaining legal or
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(3) GOODWILL AND INTANGIBLE ASSETS (Continued)
| December 28, 2013 | |||||||
---|---|---|---|---|---|---|---|---|
| Gross Carrying Amount | Accumulated Amortization | Weighted Average Life | |||||
Customer Relationships | $ | 177,495 | $ | 76,024 | 13 years | |||
Proprietary Software & Database | 3,896 | 2,896 | 6 years | |||||
Patents & Proprietary Technology | 11,334 | 7,239 | 8 years | |||||
Other | 1,620 | 1,438 | 6 years | |||||
| | | | | | | | |
$ | 194,345 | $ | 87,597 | |||||
| | | | | | | | |
| | | | | | | | |
Amortization expense for intangible assets for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013, respectively was as follows:
Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2014 | 2013 | 2014 | 2013 | ||||||||
$ | 4,702 | $ | 3,750 | $ | 13,439 | $ | 11,446 |
Estimated annual amortization expense related to finite-lived intangible assets is as follows:
| Estimated Amortization Expense | |||
---|---|---|---|---|
2014 | $ | 19,489 | ||
2015 | 17,182 | |||
2016 | 16,719 | |||
2017 | 16,519 | |||
2018 | 14,863 |
The useful lives assigned to finite-lived intangible assets included consideration of factors such as the Company's past and expected experience related to customer retention rates, the remaining legal or contractual life of the underlying arrangement that resulted in the recognition of the intangible asset and the Company's expected use of the intangible asset.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(3) GOODWILL AND INTANGIBLE ASSETS (Continued)
Non-amortized intangible assets
Intangible assets with indefinite lives are not amortized. The carrying values of trade names at SeptemberMarch 28, 2015 and December 27, 2014 and December 28, 2013 were as follows:
| September 27, 2014 | December 28, 2013 | Year Acquired | March 28, 2015 | December 27, 2014 | Year Acquired | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Webforge | $ | 17,595 | $ | 17,787 | 2010 | $ | 16,052 | $ | 16,801 | 2010 | ||||||||||
Valmont SM | 11,285 | — | 2014 | 9,043 | 10,818 | 2014 | ||||||||||||||
Newmark | 11,111 | 11,111 | 2004 | 11,111 | 11,111 | 2004 | ||||||||||||||
Ingal EPS/Ingal Civil Products | 9,286 | 9,387 | 2010 | 8,472 | 8,867 | 2010 | ||||||||||||||
Donhad | 7,006 | 7,082 | 2010 | 6,391 | 6,689 | 2010 | ||||||||||||||
Shakespeare | 4,000 | 4,000 | 2014 | |||||||||||||||||
Industrial Galvanizers | 4,073 | 4,117 | 2010 | 3,716 | 3,889 | 2010 | ||||||||||||||
Other | 15,380 | 14,685 | 14,257 | 14,852 | ||||||||||||||||
| | | | | | | | | | | | | | | | | ||||
$ | 75,736 | $ | 64,169 | |||||||||||||||||
$ | 73,042 | $ | 77,027 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | | | |
In its determination of these intangible assets as indefinite-lived, the Company considered such factors as its expected future use of the intangible asset, legal, regulatory, technological and competitive factors that may impact the useful life or value of the intangible asset and the expected costs to maintain the value of the intangible asset. The Company expects that these intangible assets will maintain their value indefinitely. Accordingly, these assets are not amortized.
The Company's trade names were tested for impairment in the third quarter of 2014. The values of the trade names were determined using the relief-from-royalty method. Based on this evaluation, the Company determined that its trade names were not impaired.
Goodwill
The carrying amount of goodwill by segment as of SeptemberMarch 28, 2015 and December 27, 2014 and December 28, 2013 was as follows:
| Engineered Infrastructure Products Segment | Utility Support Structures Segment | Coatings Segment | Irrigation Segment | Other | Total | Engineered Infrastructure Products Segment | Utility Support Structures Segment | Coatings Segment | Irrigation Segment | Other | Total | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at December 28, 2013 | $ | 175,442 | $ | 75,404 | $ | 77,062 | $ | 2,420 | $ | 19,304 | $ | 349,632 | ||||||||||||||||||||||||||
Acquisitions | 14,317 | — | — | 17,343 | — | 31,660 | ||||||||||||||||||||||||||||||||
Balance at December 27, 2014 | $ | 197,074 | $ | 75,404 | $ | 74,862 | $ | 19,536 | $ | 18,235 | $ | 385,111 | ||||||||||||||||||||||||||
Foreign currency translation | (6,194 | ) | — | (729 | ) | (18 | ) | (207 | ) | (7,148 | ) | (8,654 | ) | — | (1,667 | ) | (89 | ) | (813 | ) | (11,223 | ) | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Balance at September 27, 2014 | $ | 183,565 | $ | 75,404 | $ | 76,333 | $ | 19,745 | $ | 19,097 | $ | 374,144 | ||||||||||||||||||||||||||
Balance at March 28, 2015 | $ | 188,420 | $ | 75,404 | $ | 73,195 | $ | 19,447 | $ | 17,422 | $ | 373,888 | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | |
The goodwill from acquisitions arose from the acquisitionTable of Valmont SMContents
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in the first quarter, and the purchase of 51% ownership in AgSense in the third quarter of 2014.thousands, except per share amounts)
(Unaudited)
(3) GOODWILL AND INTANGIBLE ASSETS (Continued)
The Company's goodwill was tested for impairment during the third quarter of 2014. As a result of that testing, the Company determined that its goodwill was not impaired, as the valuation of the reporting units exceeded their respective carrying values. The Company continues to monitor changes in the global economy that
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(3) GOODWILL AND INTANGIBLE ASSETS (Continued)
could impact future operating results of its reporting units. If such conditions arise, the Company will test a given reporting unit for impairment prior to the annual test.
(4) CASH FLOW SUPPLEMENTARY INFORMATION
The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the thirty-ninethirteen weeks ended September 27,March 28, 2015 and March 29, 2014 and September 28, 2013 were as follows:
| 2014 | 2013 | 2015 | 2014 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest | $ | 23,199 | $ | 17,010 | $ | 510 | $ | 736 | ||||||
Income taxes | 94,493 | 149,529 | 5,047 | 13,345 |
On May 13, 2014, the Company announced a new capital allocation philosophy which increased the dividend by 50% and covered a share repurchase program of up to $500 million of the Company's outstanding common stock to be acquired from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. On February 24, 2015, the Board of Directors authorized an additional purchase of up to $250 million of the Company's outstanding common stock with no stated expiration date. As of September 27, 2014,March 28, 2015, the Company has acquired 2,126,3923,309,376 shares for approximately $316.3 million.$467.9 million under the share repurchase program.
(5) EARNINGS PER SHARE
The following table provides a reconciliation between Basic and Diluted earnings per share (EPS):
| Basic EPS | Dilutive Effect of Stock Options | Diluted EPS | Basic EPS | Dilutive Effect of Stock Options | Diluted EPS | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Thirteen weeks ended September 27, 2014: | ||||||||||||||||||||
Thirteen weeks ended March 28, 2015: | ||||||||||||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 23,559 | $ | — | $ | 23,559 | $ | 30,739 | $ | — | $ | 30,739 | ||||||||
Shares outstanding | 25,287 | 226 | 25,513 | 23,868 | 114 | 23,982 | ||||||||||||||
Per share amount | $ | 0.93 | $ | (0.01 | ) | $ | 0.92 | $ | 1.29 | $ | (0.01 | ) | $ | 1.28 | ||||||
Thirteen weeks ended September 28, 2013: | ||||||||||||||||||||
Thirteen weeks ended March 29, 2014: | ||||||||||||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 56,489 | $ | — | $ | 56,489 | $ | 55,980 | $ | — | $ | 55,980 | ||||||||
Shares outstanding | 26,665 | 254 | 26,919 | 26,715 | 235 | 26,950 | ||||||||||||||
Per share amount | $ | 2.12 | $ | (0.02 | ) | $ | 2.10 | $ | 2.10 | $ | (0.02 | ) | $ | 2.08 | ||||||
Thirty-nine weeks ended September 27, 2014: | ||||||||||||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 143,515 | $ | — | $ | 143,515 | ||||||||||||||
Shares outstanding | 26,208 | 231 | 26,439 | |||||||||||||||||
Per share amount | $ | 5.48 | $ | (0.05 | ) | $ | 5.43 | |||||||||||||
Thirty-nine weeks ended September 28, 2013: | ||||||||||||||||||||
Net earnings attributable to Valmont Industries, Inc. | $ | 223,621 | $ | — | $ | 223,621 | ||||||||||||||
Shares outstanding | 26,632 | 264 | 26,896 | |||||||||||||||||
Per share amount | $ | 8.40 | $ | (0.09 | ) | $ | 8.31 |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(5) EARNINGS PER SHARE (Continued)
Earnings per share are computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per share does not equal the total for the year primarily due to the share buyback program that began in the second quarter of 2014.
At September 27,March 28, 2015 and March 29, 2014, there were 273,170452,103 and 1,172 outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share, for the thirteen and thirty-nine weeks ending September 27, 2014. At September 28, 2013, there were 1,172 outstanding stock options with exercise prices exceeding the market price of common stock.respectively.
(6) LONG-TERM DEBT
On September 22, 2014, the Company issued and sold $250,000 aggregate principal amount of the Company's 5.00% senior notes due 2044 and $250,000 aggregate principal amount of the Company's 5.25% senior notes due 2054. On September 22, 2014, the Company repurchased through a partial tender offer $199,800 in aggregate principal amount of the Company's 6.625% senior notes due 2020, and $250,200 of the notes remain outstanding following the conclusion of the tender offer.
| September 27, 2014 | December 28, 2013 | |||||
---|---|---|---|---|---|---|---|
5.00% senior unsecured notes due 2044(a) | $ | 250,000 | $ | — | |||
5.25% senior unsecured notes due 2054(b) | 250,000 | — | |||||
Unamortized discount on 5.00% and 5.25% senior unsecured notes(a and b) | (4,460 | ) | — | ||||
6.625% senior unsecured notes due 2020(c) | 250,200 | 450,000 | |||||
Unamortized premium on 6.625% senior unsecured notes(c) | 5,650 | 11,241 | |||||
Revolving credit agreement(d) | — | — | |||||
IDR Bonds(e) | 8,500 | 8,500 | |||||
Other notes | 8,909 | 1,368 | |||||
| | | | | | | |
Total long-term debt | 768,799 | 471,109 | |||||
Less current installments of long-term debt | 188 | 202 | |||||
| | | | | | | |
Long-term debt, excluding current installments | $ | 768,611 | $ | 470,907 | |||
| | | | | | | |
| | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(6) LONG-TERM DEBT (Continued)
part, at any time at 100% of their principal amount plus a make-whole premium and accrued and unpaid interest. These notes are guaranteed by certain subsidiaries of the Company.
Plus, in each case, 0 to 62.5 basis points, depending on the credit rating of the Company's senior debt published by Standard & Poor's Rating Services and Moody's Investors Service, Inc.
At September 27, 2014, the Company had no outstanding borrowings under the revolving credit agreement. The revolving credit agreement contains certain financial covenants that may limit additional borrowing capability under the agreement. At October 21, 2014, the Company had the ability to borrow $582.4 million under this facility. Standby letters of credit totaling $17.6 million related to various insurance obligations were outstanding at October 21, 2014 and reduce the amount available to borrow under this agreement.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(6) LONG-TERM DEBT (Continued)
The lending agreements include certain maintenance covenants, including financial leverage and interest coverage. The Company was in compliance with all financial debt covenants at September 27, 2014. The minimum aggregate maturities of long-term debt for each of the five years following 2014 are: $1,262, $1,265, $1,050, $1,050 and $1,050.
The obligations arising under the 5.00% senior unsecured notes due 2044, the 5.25% senior unsecured notes due 2054, the 6.625% senior unsecured notes due 2020, and the Amended Credit Agreement are guaranteed by the Company and its wholly-owned subsidiaries PiRod, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc., Valmont Group Pty. Ltd. and Valmont Queensland Pty. Ltd.
(7) BUSINESS SEGMENTS
The Company has four reportable segments based on its management structure. Each segment is global in nature with a manager responsible for segment operational performance and the allocation of capital within the segment. Net corporate expense is net of certain service-related expenses that are allocated to business units generally on the basis of employee headcounts and sales dollars.
Reportable segments are as follows:
ENGINEERED INFRASTRUCTURE PRODUCTS: This segment consists of the manufacture of engineered metal structures and components for the global lighting and traffic, wireless communication, wind energy, offshore oil and gas, 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 galvanizing, anodizing and powder coating services on a global basis; and
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, the Company has other businesses and activities that individually are not more than 10% of consolidated sales. These include the manufacture of forged steel grinding media for the mining industry, tubular products for industrial customers, electrolytic manganese dioxide for disposable batteries and the distribution of industrial fasteners and are reported in the "Other" category.
The accounting policies of the reportable segments are the same as those described in Note 1. The Company evaluates the performance of its business segments based upon operating income and invested capital. The Company does not allocate interest expense, non-operating income and deductions, or income taxes to its business segments.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(7)(6) BUSINESS SEGMENTS (Continued)
Summary by Business
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2014 | September 28, 2013 | September 27, 2014 | September 28, 2013 | March 28, 2015 | March 29, 2014 | ||||||||||||||
SALES: | ||||||||||||||||||||
Engineered Infrastructure Products segment: | ||||||||||||||||||||
Lighting, Traffic, and Roadway Products | $ | 158,977 | $ | 171,991 | $ | 462,707 | $ | 480,648 | $ | 145,267 | $ | 138,977 | ||||||||
Communication Products | 45,952 | 38,674 | 119,456 | 102,067 | 32,556 | 29,886 | ||||||||||||||
Offshore Structures | 41,284 | — | 105,805 | — | 24,848 | 17,304 | ||||||||||||||
Access Systems | 48,686 | 49,618 | 139,745 | 151,874 | 35,722 | 42,295 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Engineered Infrastructure Products segment | 294,899 | 260,283 | 827,713 | 734,589 | 238,393 | 228,462 | ||||||||||||||
Utility Support Structures segment: | ||||||||||||||||||||
Steel | 156,112 | 199,912 | 527,123 | 611,573 | 158,273 | 191,437 | ||||||||||||||
Concrete | 25,073 | 29,508 | 81,819 | 85,728 | 18,068 | 23,290 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Utility Support Structures segment | 181,185 | 229,420 | 608,942 | 697,301 | 176,341 | 214,727 | ||||||||||||||
Coatings segment | 86,735 | 89,009 | 254,063 | 272,052 | 74,360 | 82,171 | ||||||||||||||
Irrigation segment | 174,288 | 175,120 | 606,938 | 690,002 | 154,476 | 212,733 | ||||||||||||||
Other | 60,838 | 71,836 | 181,226 | 233,384 | 53,858 | 58,602 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Total | 797,945 | 825,668 | 2,478,882 | 2,627,328 | 697,428 | 796,695 | ||||||||||||||
INTERSEGMENT SALES: | ||||||||||||||||||||
Engineered Infrastructure Products segment | 10,696 | 24,970 | 48,427 | 76,591 | 7,074 | 19,565 | ||||||||||||||
Utility Support Structures segment | 626 | 489 | 2,146 | 1,199 | 289 | 495 | ||||||||||||||
Coatings segment | 13,166 | 13,697 | 42,889 | 42,475 | 12,547 | 14,953 | ||||||||||||||
Irrigation segment | 1 | 4 | 14 | 5 | 9 | 9 | ||||||||||||||
Other | 7,788 | 8,476 | 25,399 | 30,737 | 7,111 | 9,933 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Total | 32,277 | 47,636 | 118,875 | 151,007 | 27,030 | 44,955 | ||||||||||||||
NET SALES: | ||||||||||||||||||||
Engineered Infrastructure Products segment | 284,203 | 235,313 | 779,286 | 657,998 | 231,319 | 208,897 | ||||||||||||||
Utility Support Structures segment | 180,559 | 228,931 | 606,796 | 696,102 | 176,052 | 214,232 | ||||||||||||||
Coatings segment | 73,569 | 75,312 | 211,174 | 229,577 | 61,813 | 67,218 | ||||||||||||||
Irrigation segment | 174,287 | 175,116 | 606,924 | 689,997 | 154,467 | 212,724 | ||||||||||||||
Other | 53,050 | 63,360 | 155,827 | 202,647 | 46,747 | 48,669 | ||||||||||||||
| | | | | | | | | | | | | | | | | ||||
Total | $ | 765,668 | $ | 778,032 | $ | 2,360,007 | $ | 2,476,321 | $ | 670,398 | $ | 751,740 | ||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | | |||||||||||||
OPERATING INCOME: | ||||||||||||||||||||
Engineered Infrastructure Products segment | $ | 33,200 | $ | 25,689 | $ | 75,534 | $ | 61,026 | $ | 11,982 | $ | 13,709 | ||||||||
Utility Support Structures segment | 16,975 | 41,491 | 76,107 | 129,767 | 15,357 | 32,757 | ||||||||||||||
Coatings segment | 17,554 | 19,833 | 47,260 | 56,805 | 10,999 | 13,886 | ||||||||||||||
Irrigation segment | 26,888 | 31,145 | 111,507 | 149,878 | 24,302 | 43,146 | ||||||||||||||
Other | 6,211 | 9,978 | 23,104 | 33,790 | 6,598 | 8,550 | ||||||||||||||
Corporate | (13,025 | ) | (18,235 | ) | (42,085 | ) | (58,910 | ) | (11,555 | ) | (13,200 | ) | ||||||||
| | | | | | | | | | | | | | | | | ||||
Total | $ | 87,803 | $ | 109,901 | $ | 291,427 | $ | 372,356 | $ | 57,683 | $ | 98,848 | ||||||||
| | | | | | | | | | | | | | | | | | |||
| | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
On September 22, 2014, the Company issued and sold $250,000 aggregate principal amount of the Company's 5.00% senior notes due 2044 and $250,000 aggregate principal amount of the Company's 5.25% senior notes due 2054. On September 22, 2014, the Company repurchased through a partial tender offer $199,800 in aggregate principal amount of the Company's 6.625% senior notes due 2020, and $250,200 of the notes remain outstanding following the conclusion of the tender offer. All of the notes are guaranteed, jointly, severally, fully and unconditionally by certain of the Company's current and future direct and indirect domestic and foreign subsidiaries (collectively the "Guarantors"), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the "Non-Guarantors"). All Guarantors are 100% owned by the parent company.
In the fourth quarter of 2014, a subsidiary of the Company classified "Equity in earningswas removed as a guarantor of nonconsolidated subsidiaries"our revolving credit facility, and consequently was removed as an adjustment to reconcile net earnings to operating cash flows, as part of "Net cash flows from operating activities" in the Condensed Consolidating Statement of Cash Flows. In the 2013 Condensed Consolidating Statement of Cash Flows, these amounts were classified within "Other, net", as part of "Net cash flows from investing activities". The Company revised its presentation for 2013 with respect to the supplemental information included in this footnote in order to achieve comparability in the Condensed Consolidating Statements of Cash Flows.
The revisions consisted of recording the amounts previously reported in "Other, net" in cash flows from investing activities that were related to earnings from subsidiaries to "Equity in earnings of nonconsolidated subsidiaries" in cash flows from operating activities. Accordingly, the eliminations to reconcile consolidated net earnings are contained in the "Net cash flows from operating activities".
The "Non-Guarantor" and "Total" columns were not affected by any of these revisions. There was also no effect on the consolidated (total) net cash flows or any other statements in this footnote. The following is a reconciliationguarantor of the columns affectednotes. All prior year consolidated financial information has been recast to reflect the current guarantor structure. Consolidated financial information for 2013.the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended March 28, 2015
| Parent | Parent | Guarantor | Guarantor | Eliminations | Eliminations | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As previously reported | As revised | As previously reported | As revised | As previously reported | As revised | |||||||||||||
2013 | |||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Equity in earnings of nonconsolidated subsidiaries | $ | (341 | ) | $ | (121,211 | ) | $ | — | $ | (48,927 | ) | $ | — | $ | 169,797 | ||||
Net cash flows from operating activities | 239,277 | 118,407 | 77,264 | 28,337 | (166,675 | ) | 3,122 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Other, net | (68,447 | ) | 52,423 | (105,512 | ) | (56,585 | ) | 166,675 | (3,122 | ) | |||||||||
Net cash flows from investing activities | (107,989 | ) | 12,881 | (123,858 | ) | (74,931 | ) | 166,675 | (3,122 | ) |
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | $ | 329,131 | $ | 95,948 | $ | 302,236 | $ | (56,917 | ) | $ | 670,398 | |||||
Cost of sales | 249,867 | 74,896 | 236,985 | (56,804 | ) | 504,944 | ||||||||||
| | | | | | | | | | | | | | | | |
Gross profit | 79,264 | 21,052 | 65,251 | (113 | ) | 165,454 | ||||||||||
Selling, general and administrative expenses | 48,042 | 11,297 | 48,432 | — | 107,771 | |||||||||||
| | | | | | | | | | | | | | | | |
Operating income | 31,222 | 9,755 | 16,819 | (113 | ) | 57,683 | ||||||||||
| | | | | | | | | | | | | | | | |
Other income (expense): | ||||||||||||||||
Interest expense | (10,832 | ) | — | (296 | ) | — | (11,128 | ) | ||||||||
Interest income | 9 | 2 | 863 | — | 874 | |||||||||||
Other | (649 | ) | (24 | ) | 1,689 | — | 1,016 | |||||||||
| | | | | | | | | | | | | | | | |
(11,472 | ) | (22 | ) | 2,256 | — | (9,238 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 19,750 | 9,733 | 19,075 | (113 | ) | 48,445 | ||||||||||
| | | | | | | | | | | | | | | | |
Income tax expense (benefit): | ||||||||||||||||
Current | 1,392 | 4,627 | 5,797 | (42 | ) | 11,774 | ||||||||||
Deferred | 5,469 | (533 | ) | 228 | — | 5,164 | ||||||||||
| | | | | | | | | | | | | | | | |
6,861 | 4,094 | 6,025 | (42 | ) | 16,938 | |||||||||||
| | | | | | | | | | | | | | | | |
Earnings before equity in earnings of nonconsolidated subsidiaries | 12,889 | 5,639 | 13,050 | (71 | ) | 31,507 | ||||||||||
Equity in earnings of nonconsolidated subsidiaries | 17,850 | 4,305 | — | (22,155 | ) | — | ||||||||||
| | | | | | | | | | | | | | | | |
Net earnings | 30,739 | 9,944 | 13,050 | (22,226 | ) | 31,507 | ||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (768 | ) | — | (768 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net earnings attributable to Valmont Industries, Inc | $ | 30,739 | $ | 9,944 | $ | 12,282 | $ | (22,226 | ) | $ | 30,739 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
Consolidated financial information for the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended September 27,March 29, 2014
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | Parent | Guarantors | Non- Guarantors | Eliminations | Total | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | $ | 313,775 | $ | 120,016 | $ | 384,564 | $ | (52,687 | ) | $ | 765,668 | $ | 376,642 | $ | 135,897 | $ | 300,281 | $ | (61,080 | ) | $ | 751,740 | ||||||||||
Cost of sales | 234,085 | 92,091 | 292,722 | (52,730 | ) | 566,168 | 271,759 | 99,816 | 234,634 | (61,451 | ) | 544,758 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Gross profit | 79,690 | 27,925 | 91,842 | 43 | 199,500 | 104,883 | 36,081 | 65,647 | 371 | 206,982 | ||||||||||||||||||||||
Selling, general and administrative expenses | 48,560 | 12,145 | 50,992 | — | 111,697 | 47,790 | 12,991 | 47,353 | — | 108,134 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Operating income | 31,130 | 15,780 | 40,850 | 43 | 87,803 | 57,093 | 23,090 | 18,294 | 371 | 98,848 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense | (8,061 | ) | (11,288 | ) | (655 | ) | 11,288 | (8,716 | ) | (7,675 | ) | — | (522 | ) | — | (8,197 | ) | |||||||||||||||
Interest income | 2 | 161 | 12,602 | (11,288 | ) | 1,477 | 20 | 183 | 1,536 | — | 1,739 | |||||||||||||||||||||
Costs associated with refinancing of debt | (38,705 | ) | — | — | — | (38,705 | ) | |||||||||||||||||||||||||
Other | (196 | ) | (149 | ) | (1,999 | ) | — | (2,344 | ) | 67 | (492 | ) | (5,387 | ) | — | (5,812 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
(46,960 | ) | (11,276 | ) | 9,948 | — | (48,288 | ) | |||||||||||||||||||||||||
(7,588 | ) | (309 | ) | (4,373 | ) | — | (12,270 | ) | ||||||||||||||||||||||||
| | | | | | | | | | | | | ��� | | | | | | | | | | | | | | | |||||
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | (15,830 | ) | 4,504 | 50,798 | 43 | 39,515 | 49,505 | 22,781 | 13,921 | 371 | 86,578 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Income tax expense (benefit): | ||||||||||||||||||||||||||||||||
Current | 9,296 | 3,600 | 10,397 | (3 | ) | 23,290 | 19,878 | 8,054 | 4,902 | 104 | 32,938 | |||||||||||||||||||||
Deferred | (12,430 | ) | (342 | ) | 3,708 | — | (9,064 | ) | (1,843 | ) | (412 | ) | (668 | ) | — | (2,923 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
(3,134 | ) | 3,258 | 14,105 | (3 | ) | 14,226 | ||||||||||||||||||||||||||
18,035 | 7,642 | 4,234 | 104 | 30,015 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Earnings before equity in earnings of nonconsolidated subsidiaries | (12,696 | ) | 1,246 | 36,693 | 46 | 25,289 | 31,470 | 15,139 | 9,687 | 267 | 56,563 | |||||||||||||||||||||
Equity in earnings of nonconsolidated subsidiaries | 36,255 | 17,026 | — | (53,285 | ) | (4 | ) | 24,510 | 545 | — | (25,055 | ) | — | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Net earnings | 23,559 | 18,272 | 36,693 | (53,239 | ) | 25,285 | 55,980 | 15,684 | 9,687 | (24,788 | ) | 56,563 | ||||||||||||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (1,726 | ) | — | (1,726 | ) | — | — | (583 | ) | — | (583 | ) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Net earnings attributable to Valmont Industries, Inc | $ | 23,559 | $ | 18,272 | $ | 34,967 | $ | (53,239 | ) | $ | 23,559 | $ | 55,980 | $ | 15,684 | $ | 9,104 | $ | (24,788 | ) | $ | 55,980 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSCOMPREHENSIVE INCOME
For the Thirty-nineThirteen weeks ended September 27, 2014March 28, 2015
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | $ | 1,069,059 | $ | 380,327 | $ | 1,072,560 | $ | (161,939 | ) | $ | 2,360,007 | |||||
Cost of sales | 785,898 | 283,443 | 826,120 | (162,413 | ) | 1,733,048 | ||||||||||
| | | | | | | | | | | | | | | | |
Gross profit | 283,161 | 96,884 | 246,440 | 474 | 626,959 | |||||||||||
Selling, general and administrative expenses | 146,514 | 37,806 | 151,212 | — | 335,532 | |||||||||||
| | | | | | | | | | | | | | | | |
Operating income | 136,647 | 59,078 | 95,228 | 474 | 291,427 | |||||||||||
| | | | | | | | | | | | | | | | |
Other income (expense): | ||||||||||||||||
Interest expense | (23,427 | ) | (33,505 | ) | (1,790 | ) | 33,505 | (25,217 | ) | |||||||
Interest income | 28 | 496 | 37,774 | (33,505 | ) | 4,793 | ||||||||||
Costs associated with refinancing of debt | (38,705 | ) | — | — | — | (38,705 | ) | |||||||||
Other | 1,625 | (501 | ) | (7,377 | ) | — | (6,253 | ) | ||||||||
| | | | | | | | | | | | | | | | |
(60,479 | ) | (33,510 | ) | 28,607 | — | (65,382 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 76,168 | 25,568 | 123,835 | 474 | 226,045 | |||||||||||
| | | | | | | | | | | | | | | | |
Income tax expense (benefit): | ||||||||||||||||
Current | 38,489 | 11,813 | 31,914 | 129 | 82,345 | |||||||||||
Deferred | (6,601 | ) | 1,325 | 1,242 | — | (4,034 | ) | |||||||||
| | | | | | | | | | | | | | | | |
31,888 | 13,138 | 33,156 | 129 | 78,311 | ||||||||||||
| | | | | | | | | | | | | | | | |
Earnings before equity in earnings of nonconsolidated subsidiaries | 44,280 | 12,430 | 90,679 | 345 | 147,734 | |||||||||||
Equity in earnings of nonconsolidated subsidiaries | 99,235 | 42,929 | — | (142,198 | ) | (34 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net earnings | 143,515 | 55,359 | 90,679 | (141,853 | ) | 147,700 | ||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (4,185 | ) | — | (4,185 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net earnings attributable to Valmont Industries, Inc | $ | 143,515 | $ | 55,359 | $ | 86,494 | $ | (141,853 | ) | $ | 143,515 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings | $ | 30,739 | $ | 9,944 | $ | 13,050 | $ | (22,226 | ) | $ | 31,507 | |||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||
Unrealized gains (losses) arising during the period | — | (8,888 | ) | (49,290 | ) | — | (58,178 | ) | ||||||||
Unrealized loss on cash flow hedge: | ||||||||||||||||
Amortization cost included in interest expense | 18 | — | — | — | 18 | |||||||||||
Gain on cash flow hedges | 92 | — | 202 | 294 | ||||||||||||
Equity in other comprehensive income | (55,881 | ) | — | — | 55,881 | — | ||||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | (55,771 | ) | (8,888 | ) | (49,688 | ) | 55,881 | (57,866 | ) | |||||||
| | | | | | | | | | | | | | | | |
Comprehensive income | (25,032 | ) | 1,056 | (36,038 | ) | 33,655 | (26,359 | ) | ||||||||
Comprehensive income attributable to noncontrolling interests | — | — | 1,327 | — | 1,327 | |||||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income attributable to Valmont Industries, Inc. | $ | (25,032 | ) | $ | 1,056 | $ | (39,711 | ) | $ | 33,655 | $ | (25,032 | ) | |||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSCOMPREHENSIVE INCOME
For the Thirteen weeks ended September 28, 2013March 29, 2014
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | $ | 331,525 | $ | 161,432 | $ | 366,522 | $ | (81,447 | ) | $ | 778,032 | |||||
Cost of sales | 238,692 | 121,870 | 273,317 | (81,411 | ) | 552,468 | ||||||||||
| | | | | | | | | | | | | | | | |
Gross profit | 92,833 | 39,562 | 93,205 | (36 | ) | 225,564 | ||||||||||
Selling, general and administrative expenses | 51,621 | 14,530 | 49,512 | — | 115,663 | |||||||||||
| | | | | | | | | | | | | | | | |
Operating income | 41,212 | 25,032 | 43,693 | (36 | ) | 109,901 | ||||||||||
| | | | | | | | | | | | | | | | |
Other income (expense): | ||||||||||||||||
Interest expense | (7,724 | ) | (11,122 | ) | (425 | ) | 11,122 | (8,149 | ) | |||||||
Interest income | 18 | 242 | 12,422 | (11,122 | ) | 1,560 | ||||||||||
Other | 1,422 | 9 | (2,015 | ) | — | (584 | ) | |||||||||
| | | | | | | | | | | | | | | | |
(6,284 | ) | (10,871 | ) | 9,982 | — | (7,173 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 34,928 | 14,161 | 53,675 | (36 | ) | 102,728 | ||||||||||
| | | | | | | | | | | | | | | | |
Income tax expense (benefit): | ||||||||||||||||
Current | 19,473 | 7,419 | 13,631 | (65 | ) | 40,458 | ||||||||||
Deferred | (4,969 | ) | (360 | ) | 8,783 | — | 3,454 | |||||||||
| | | | | | | | | | | | | | | | |
14,504 | 7,059 | 22,414 | (65 | ) | 43,912 | |||||||||||
| | | | | | | | | | | | | | | | |
Earnings before equity in earnings of nonconsolidated subsidiaries | 20,424 | 7,102 | 31,261 | 29 | 58,816 | |||||||||||
Equity in earnings of nonconsolidated subsidiaries | 36,065 | 6,542 | — | (42,532 | ) | 75 | ||||||||||
| | | | | | | | | | | | | | | | |
Net earnings | 56,489 | 13,644 | 31,261 | (42,503 | ) | 58,891 | ||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (2,402 | ) | — | (2,402 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net earnings attributable to Valmont Industries, Inc | $ | 56,489 | $ | 13,644 | $ | 28,859 | $ | (42,503 | ) | $ | 56,489 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSFor the Thirty-nine weeks ended September 28, 2013
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | $ | 1,174,955 | $ | 501,308 | $ | 1,052,733 | $ | (252,675 | ) | $ | 2,476,321 | |||||
Cost of sales | 837,321 | 377,158 | 795,182 | (255,744 | ) | 1,753,917 | ||||||||||
| | | | | | | | | | | | | | | | |
Gross profit | 337,634 | 124,150 | 257,551 | 3,069 | 722,404 | |||||||||||
Selling, general and administrative expenses | 157,367 | 42,871 | 149,810 | — | 350,048 | |||||||||||
| | | | | | | | | | | | | | | | |
Operating income | 180,267 | 81,279 | 107,741 | 3,069 | 372,356 | |||||||||||
| | | | | | | | | | | | | | | | |
Other income (expense): | ||||||||||||||||
Interest expense | (23,115 | ) | (35,696 | ) | (1,249 | ) | 35,696 | (24,364 | ) | |||||||
Interest income | 33 | 732 | 39,696 | (35,696 | ) | 4,765 | ||||||||||
Other | 3,224 | 55 | (2,184 | ) | — | 1,095 | ||||||||||
| | | | | | | | | | | | | | | | |
(19,858 | ) | (34,909 | ) | 36,263 | — | (18,504 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 160,409 | 46,370 | 144,004 | 3,069 | 353,852 | |||||||||||
| | | | | | | | | | | | | | | | |
Income tax expense (benefit): | ||||||||||||||||
Current | 65,472 | 20,801 | 40,283 | 772 | 127,328 | |||||||||||
Deferred | (7,473 | ) | 1,342 | 4,856 | — | (1,275 | ) | |||||||||
| | | | | | | | | | | | | | | | |
57,999 | 22,143 | 45,139 | 772 | 126,053 | ||||||||||||
| | | | | | | | | | | | | | | | |
Earnings before equity in earnings of nonconsolidated subsidiaries | 102,410 | 24,227 | 98,865 | 2,297 | 227,799 | |||||||||||
Equity in earnings of nonconsolidated subsidiaries | 121,211 | 48,927 | 207 | (169,797 | ) | 548 | ||||||||||
�� | ||||||||||||||||
| | | | | | | | | | | | | | | | |
Net earnings | 223,621 | 73,154 | 99,072 | (167,500 | ) | 228,347 | ||||||||||
Less: Earnings attributable to noncontrolling interests | — | — | (4,726 | ) | — | (4,726 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net earnings attributable to Valmont Industries, Inc | $ | 223,621 | $ | 73,154 | $ | 94,346 | $ | (167,500 | ) | $ | 223,621 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings | $ | 55,980 | $ | 15,684 | $ | 9,687 | $ | (24,788 | ) | $ | 56,563 | |||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||
Unrealized gains (losses) arising during the period | — | 1,189 | 10,448 | — | 11,637 | |||||||||||
Unrealized loss on cash flow hedge: | ||||||||||||||||
Amortization cost included in interest expense | 100 | — | — | — | 100 | |||||||||||
Actuarial gain (loss) in defined benefit pension plan liability | — | — | (233 | ) | — | (233 | ) | |||||||||
Equity in other comprehensive income | 12,075 | — | — | (12,075 | ) | — | ||||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | 12,175 | 1,189 | 10,215 | (12,075 | ) | 11,504 | ||||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income | 68,155 | 16,873 | 19,902 | (36,863 | ) | 68,067 | ||||||||||
Comprehensive income attributable to noncontrolling interests | — | — | 88 | — | 88 | |||||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income attributable to Valmont Industries, Inc. | $ | 68,155 | $ | 16,873 | $ | 19,990 | $ | (36,863 | ) | $ | 68,155 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEBALANCE SHEETSFor the Thirteen weeks ended September 27, 2014March 28, 2015
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings | $ | 23,559 | $ | 18,272 | $ | 36,693 | $ | (53,239 | ) | $ | 25,285 | |||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||
Unrealized gains (losses) arising during the period | — | 37,807 | (96,808 | ) | — | (59,001 | ) | |||||||||
Unrealized loss on cash flow hedge: | ||||||||||||||||
Amortization cost included in interest expense | 100 | — | 283 | — | 383 | |||||||||||
Realized loss included in net earnings during the period | 983 | — | — | — | 983 | |||||||||||
Gain on cash flow hedges | 4,837 | — | — | — | 4,837 | |||||||||||
Actuarial gain (loss) in defined benefit pension plan liability | — | — | 1,116 | — | 1,116 | |||||||||||
Equity in other comprehensive income | (55,787 | ) | — | — | 55,787 | — | ||||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | (49,867 | ) | 37,807 | (95,409 | ) | 55,787 | (51,682 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income | (26,308 | ) | 56,079 | (58,716 | ) | 2,548 | (26,397 | ) | ||||||||
Comprehensive income attributable to noncontrolling interests | — | — | 89 | — | 89 | |||||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income attributable to Valmont Industries, Inc. | $ | (26,308 | ) | $ | 56,079 | $ | (58,627 | ) | $ | 2,548 | $ | (26,308 | ) | |||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Parent | Guarantors | Non-Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 25,571 | $ | 1,367 | $ | 291,428 | $ | — | $ | 318,366 | ||||||
Receivables, net | 163,095 | 61,818 | 278,736 | — | 503,649 | |||||||||||
Inventories | 122,962 | 65,221 | 194,400 | (3,069 | ) | 379,514 | ||||||||||
Prepaid expenses | 4,806 | 753 | 42,785 | — | 48,344 | |||||||||||
Refundable and deferred income taxes | 39,909 | 6,397 | 6,726 | — | 53,032 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current assets | 356,343 | 135,556 | 814,075 | (3,069 | ) | 1,302,905 | ||||||||||
| | | | | | | | | | | | | | | | |
Property, plant and equipment, at cost | 561,174 | 125,618 | 437,459 | — | 1,124,251 | |||||||||||
Less accumulated depreciation and amortization | 326,839 | 67,383 | 143,283 | — | 537,505 | |||||||||||
| | | | | | | | | | | | | | | | |
Net property, plant and equipment | 234,335 | 58,235 | 294,176 | — | 586,746 | |||||||||||
| | | | | | | | | | | | | | | | |
Goodwill | 20,108 | 107,542 | 246,238 | — | 373,888 | |||||||||||
Other intangible assets | 279 | 42,439 | 146,672 | — | 189,390 | |||||||||||
Investment in subsidiaries and intercompany accounts | 1,405,751 | 821,802 | 896,850 | (3,124,403 | ) | — | ||||||||||
Other assets | 49,615 | — | 81,586 | — | 131,201 | |||||||||||
| | | | | | | | | | | | | | | | |
Total assets | $ | 2,066,431 | $ | 1,165,574 | $ | 2,479,597 | $ | (3,127,472 | ) | $ | 2,584,130 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current installments of long-term debt | $ | 213 | $ | — | $ | 857 | $ | — | $ | 1,070 | ||||||
Notes payable to banks | — | — | 14,459 | — | 14,459 | |||||||||||
Accounts payable | 64,251 | 13,709 | 111,389 | — | 189,349 | |||||||||||
Accrued employee compensation and benefits | 32,270 | 4,359 | 34,559 | — | 71,188 | |||||||||||
Accrued expenses | 44,316 | 6,077 | 48,243 | — | 98,636 | |||||||||||
Dividends payable | 8,889 | — | — | — | 8,889 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current liabilities | 149,939 | 24,145 | 209,507 | — | 383,591 | |||||||||||
| | | | | | | | | | | | | | | | |
Deferred income taxes | 3,906 | 28,658 | 33,765 | 66,329 | ||||||||||||
Long-term debt, excluding current installments | 759,682 | — | 6,080 | 765,762 | ||||||||||||
Defined benefit pension liability | — | 127,708 | 127,708 | |||||||||||||
Deferred compensation | 45,121 | — | 5,906 | 51,027 | ||||||||||||
Other noncurrent liabilities | 9,874 | — | 35,975 | 45,849 | ||||||||||||
Shareholders' equity: | ||||||||||||||||
Common stock of $1 par value | 27,900 | 457,950 | 648,682 | (1,106,632 | ) | 27,900 | ||||||||||
Additional paid-in capital | — | 150,286 | 1,098,408 | (1,248,694 | ) | — | ||||||||||
Retained earnings | 1,741,252 | 562,619 | 409,583 | (972,202 | ) | 1,741,252 | ||||||||||
Accumulated other comprehensive income (loss) | (190,204 | ) | (58,084 | ) | (141,972 | ) | 200,056 | (190,204 | ) | |||||||
Treasury stock | (481,039 | ) | — | — | — | (481,039 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Total Valmont Industries, Inc. shareholders' equity | 1,097,909 | 1,112,771 | 2,014,701 | (3,127,472 | ) | 1,097,909 | ||||||||||
| | | | | | | | | | | | | | | | |
Noncontrolling interest in consolidated subsidiaries | — | — | 45,955 | — | 45,955 | |||||||||||
| | | | | | | | | | | | | | | | |
Total shareholders' equity | 1,097,909 | 1,112,771 | 2,060,656 | (3,127,472 | ) | 1,143,864 | ||||||||||
| | | | | | | | | | | | | | | | |
Total liabilities and shareholders' equity | $ | 2,066,431 | $ | 1,165,574 | $ | 2,479,597 | $ | (3,127,472 | ) | $ | 2,584,130 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEBALANCE SHEETSFor the Thirty-nine weeks ended SeptemberDecember 27, 2014
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings | $ | 143,515 | $ | 55,359 | $ | 90,679 | $ | (141,853 | ) | $ | 147,700 | |||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||
Unrealized gains (losses) arising during the period | 8,492 | (41,987 | ) | — | (33,495 | ) | ||||||||||
Unrealized loss on cash flow hedge: | ||||||||||||||||
Amortization cost included in interest expense | 300 | — | 150 | — | 450 | |||||||||||
Realized loss included in net earnings during the period | 983 | — | — | — | 983 | |||||||||||
Gain on cash flow hedges | 4,837 | — | — | — | 4,837 | |||||||||||
Actuarial gain (loss) in defined benefit pension plan liability | — | — | 269 | — | 269 | |||||||||||
Equity in other comprehensive income | (30,506 | ) | — | 30,506 | — | |||||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | (24,386 | ) | 8,492 | (41,568 | ) | 30,506 | (26,956 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income | 119,129 | 63,851 | 49,111 | (111,347 | ) | 120,744 | ||||||||||
Comprehensive income attributable to noncontrolling interests | — | — | (1,615 | ) | — | (1,615 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income attributable to Valmont Industries, Inc. | $ | 119,129 | $ | 63,851 | $ | 47,496 | $ | (111,347 | ) | $ | 119,129 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the Thirteen weeks ended September 28, 2013
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings | $ | 56,489 | $ | 13,644 | $ | 31,261 | $ | (42,503 | ) | $ | 58,891 | |||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||
Unrealized gains (losses) arising during the period | — | 30,221 | (12,097 | ) | — | 18,124 | ||||||||||
Unrealized loss on cash flow hedge: | ||||||||||||||||
Amortization cost included in interest expense | 100 | — | — | — | 100 | |||||||||||
Actuarial gain (loss) in defined benefit pension plan liability | — | — | 857 | — | 857 | |||||||||||
Equity in other comprehensive income | 19,227 | — | — | (19,227 | ) | — | ||||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | 19,327 | 30,221 | (11,240 | ) | (19,227 | ) | 19,081 | |||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income | 75,816 | 43,865 | 20,021 | (61,730 | ) | 77,972 | ||||||||||
Comprehensive income attributable to noncontrolling interests | — | — | (2,156 | ) | — | (2,156 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income attributable to Valmont Industries, Inc. | $ | 75,816 | $ | 43,865 | $ | 17,865 | $ | (61,730 | ) | $ | 75,816 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the Thirty-nine weeks ended September 28, 2013
| Parent | Guarantors | Non- Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings | $ | 223,621 | $ | 73,154 | $ | 99,072 | $ | (167,500 | ) | $ | 228,347 | |||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||
Unrealized gains (losses) arising during the period | — | 57,707 | (102,165 | ) | — | (44,458 | ) | |||||||||
Realized (loss) included in net earnings during the period | — | — | (5,194 | ) | — | (5,194 | ) | |||||||||
Unrealized loss on cash flow hedge: | ||||||||||||||||
Amortization cost included in interest expense | 300 | — | — | — | 300 | |||||||||||
Actuarial gain (loss) in defined benefit pension plan liability | — | — | (37 | ) | — | (37 | ) | |||||||||
Equity in other comprehensive income | (43,930 | ) | — | — | 43,930 | — | ||||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | (43,630 | ) | 57,707 | (107,396 | ) | 43,930 | (49,389 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income | 179,991 | 130,861 | (8,324 | ) | (123,570 | ) | 178,958 | |||||||||
Comprehensive income attributable to noncontrolling interests | — | — | 1,033 | — | 1,033 | |||||||||||
| | | | | | | | | | | | | | | | |
Comprehensive income attributable to Valmont Industries, Inc. | $ | 179,991 | $ | 130,861 | $ | (7,291 | ) | $ | (123,570 | ) | $ | 179,991 | ||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Parent | Guarantors | Non-Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 69,869 | $ | 2,157 | $ | 299,553 | $ | — | $ | 371,579 | ||||||
Receivables, net | 158,316 | 68,414 | 310,188 | — | 536,918 | |||||||||||
Inventories | 127,859 | 54,914 | 177,512 | (763 | ) | 359,522 | ||||||||||
Prepaid expenses | 7,087 | 502 | 49,323 | — | 56,912 | |||||||||||
Refundable and deferred income taxes | 53,307 | 6,194 | 8,509 | — | 68,010 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current assets | 416,438 | 132,181 | 845,085 | (763 | ) | 1,392,941 | ||||||||||
| | | | | | | | | | | | | | | | |
Property, plant and equipment, at cost | 556,658 | 124,182 | 458,729 | — | 1,139,569 | |||||||||||
Less accumulated depreciation and amortization | 319,899 | 65,493 | 147,724 | — | 533,116 | |||||||||||
| | | | | | | | | | | | | | | | |
Net property, plant and equipment | 236,759 | 58,689 | 311,005 | — | 606,453 | |||||||||||
| | | | | | | | | | | | | | | | |
Goodwill | 20,108 | 107,542 | 257,461 | 385,111 | ||||||||||||
Other intangible assets | 292 | 43,644 | 158,068 | 202,004 | ||||||||||||
Investment in subsidiaries and intercompany accounts | 1,446,989 | 825,236 | 887,055 | (3,159,280 | ) | — | ||||||||||
Other assets | 46,587 | — | 96,572 | 143,159 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total assets | $ | 2,167,173 | $ | 1,167,292 | $ | 2,555,246 | $ | (3,160,043 | ) | $ | 2,729,668 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current installments of long-term debt | $ | 213 | $ | — | $ | 968 | $ | — | $ | 1,181 | ||||||
Notes payable to banks | — | — | 13,952 | — | 13,952 | |||||||||||
Accounts payable | 59,893 | 15,151 | 121,521 | 196,565 | ||||||||||||
Accrued employee compensation and benefits | 48,169 | 5,385 | 34,396 | — | 87,950 | |||||||||||
Accrued expenses | 32,616 | 6,052 | 49,812 | — | 88,480 | |||||||||||
Dividends payable | 9,086 | — | — | — | 9,086 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current liabilities | 149,977 | 26,588 | 220,649 | — | 397,214 | |||||||||||
| | | | | | | | | | | | | | | | |
Deferred income taxes | 5,584 | 28,988 | 37,225 | — | 71,797 | |||||||||||
Long-term debt, excluding current installments | 759,895 | — | 6,759 | — | 766,654 | |||||||||||
Defined benefit pension liability | — | — | 150,124 | — | 150,124 | |||||||||||
Deferred compensation | 41,803 | — | 6,129 | 47,932 | ||||||||||||
Other noncurrent liabilities | 8,081 | — | 37,461 | — | 45,542 | |||||||||||
Shareholders' equity: | ||||||||||||||||
Common stock of $1 par value | 27,900 | 457,950 | 648,682 | (1,106,632 | ) | 27,900 | ||||||||||
Additional paid-in capital | — | 150,286 | 1,098,408 | (1,248,694 | ) | — | ||||||||||
Retained earnings | 1,718,662 | 552,676 | 397,302 | (949,978 | ) | 1,718,662 | ||||||||||
Accumulated other comprehensive income | (134,433 | ) | (49,196 | ) | (96,065 | ) | 145,261 | (134,433 | ) | |||||||
Treasury stock | (410,296 | ) | — | — | — | (410,296 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Total Valmont Industries, Inc. shareholders' equity | 1,201,833 | 1,111,716 | 2,048,327 | (3,160,043 | ) | 1,201,833 | ||||||||||
| | | | | | | | | | | | | | | | |
Noncontrolling interest in consolidated subsidiaries | 48,572 | 48,572 | ||||||||||||||
| | | | | | | | | | | | | | | | |
Total shareholders' equity | 1,201,833 | 1,111,716 | 2,096,899 | (3,160,043 | ) | 1,250,405 | ||||||||||
| | | | | | | | | | | | | | | | |
Total liabilities and shareholders' equity | $ | 2,167,173 | $ | 1,167,292 | $ | 2,555,246 | $ | (3,160,043 | ) | $ | 2,729,668 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETSSTATEMENTS OF CASH FLOWSSeptember 27, 2014For the Thirteen Weeks Ended March 28, 2015
| Parent | Guarantors | Non-Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 153,921 | $ | 3,663 | $ | 294,634 | $ | — | $ | 452,218 | ||||||
Receivables, net | 158,080 | 78,808 | 333,922 | — | 570,810 | |||||||||||
Inventories | 130,039 | 65,194 | 189,412 | — | 384,645 | |||||||||||
Prepaid expenses | 6,948 | 759 | 56,966 | — | 64,673 | |||||||||||
Refundable and deferred income taxes | 46,233 | 6,396 | 11,809 | — | 64,438 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current assets | 495,221 | 154,820 | 886,743 | — | 1,536,784 | |||||||||||
| | | | | | | | | | | | | | | | |
Property, plant and equipment, at cost | 555,552 | 126,438 | 456,431 | — | 1,138,421 | |||||||||||
Less accumulated depreciation and amortization | 316,637 | 66,509 | 138,723 | — | 521,869 | |||||||||||
| | | | | | | | | | | | | | | | |
Net property, plant and equipment | 238,915 | 59,929 | 317,708 | — | 616,552 | |||||||||||
| | | | | | | | | | | | | | | | |
Goodwill | 20,108 | 107,542 | 246,494 | — | 374,144 | |||||||||||
Other intangible assets | 306 | 44,847 | 154,666 | — | 199,819 | |||||||||||
Investment in subsidiaries and intercompany accounts | 1,477,670 | 1,489,054 | 564,888 | (3,531,612 | ) | — | ||||||||||
Other assets | 44,958 | — | 90,464 | — | 135,422 | |||||||||||
| | | | | | | | | | | | | | | | |
Total assets | $ | 2,277,178 | $ | 1,856,192 | $ | 2,260,963 | $ | (3,531,612 | ) | $ | 2,862,721 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current installments of long-term debt | $ | 188 | $ | — | $ | — | $ | — | $ | 188 | ||||||
Notes payable to banks | — | — | 17,863 | — | 17,863 | |||||||||||
Accounts payable | 59,365 | 16,720 | 133,911 | — | 209,996 | |||||||||||
Accrued employee compensation and benefits | 49,004 | 5,508 | 39,947 | — | 94,459 | |||||||||||
Accrued expenses | 35,806 | 6,223 | 51,454 | — | 93,483 | |||||||||||
Dividends payable | 9,299 | — | — | — | 9,299 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current liabilities | 153,662 | 28,451 | 243,175 | — | 425,288 | |||||||||||
| | | | | | | | | | | | | | | | |
Deferred income taxes | 2,575 | 28,649 | 45,383 | — | 76,607 | |||||||||||
Long-term debt, excluding current installments | 760,130 | 507,362 | 8,481 | (507,362 | ) | 768,611 | ||||||||||
Defined benefit pension liability | — | — | 136,808 | — | 136,808 | |||||||||||
Deferred compensation | 41,629 | — | 6,385 | — | 48,014 | |||||||||||
Other noncurrent liabilities | 9,561 | — | 39,146 | — | 48,707 | |||||||||||
Shareholders' equity: | ||||||||||||||||
Common stock of $1 par value | 27,900 | 457,950 | 254,982 | (712,932 | ) | 27,900 | ||||||||||
Additional paid-in capital | — | 150,286 | 1,034,236 | (1,184,522 | ) | — | ||||||||||
Retained earnings | 1,687,536 | 608,558 | 505,735 | (1,114,293 | ) | 1,687,536 | ||||||||||
Accumulated other comprehensive income (loss) | (72,071 | ) | 74,936 | (62,433 | ) | (12,503 | ) | (72,071 | ) | |||||||
Treasury stock | (333,744 | ) | — | — | — | (333,744 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Total Valmont Industries, Inc. shareholders' equity | 1,309,621 | 1,291,730 | 1,732,520 | (3,024,250 | ) | 1,309,621 | ||||||||||
| | | | | | | | | | | | | | | | |
Noncontrolling interest in consolidated subsidiaries | — | — | 49,065 | — | 49,065 | |||||||||||
| | | | | | | | | | | | | | | | |
Total shareholders' equity | 1,309,621 | 1,291,730 | 1,781,585 | (3,024,250 | ) | 1,358,686 | ||||||||||
| | | | | | | | | | | | | | | | |
Total liabilities and shareholders' equity | $ | 2,277,178 | $ | 1,856,192 | $ | 2,260,963 | $ | (3,531,612 | ) | $ | 2,862,721 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Parent | Guarantors | Non-Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operating activities: | ||||||||||||||||
Net earnings | $ | 30,739 | $ | 9,944 | $ | 13,050 | $ | (22,226 | ) | $ | 31,507 | |||||
Adjustments to reconcile net earnings to net cash flows from operations: | ||||||||||||||||
Depreciation and amortization | 7,478 | 3,151 | 13,272 | — | 23,901 | |||||||||||
Loss on investment | — | — | 4,415 | — | 4,415 | |||||||||||
Stock-based compensation | 1,761 | — | — | — | 1,761 | |||||||||||
Defined benefit pension plan expense | — | — | (150 | ) | (150 | ) | ||||||||||
Contribution to defined benefit pension plan | — | — | (15,735 | ) | — | (15,735 | ) | |||||||||
Gain on sale of property, plant and equipment | (13 | ) | (10 | ) | (113 | ) | — | (136 | ) | |||||||
Equity in earnings in nonconsolidated subsidiaries | (17,850 | ) | (4,305 | ) | — | 22,155 | — | |||||||||
Deferred income taxes | 5,469 | (533 | ) | 228 | — | 5,164 | ||||||||||
Changes in assets and liabilities (net of acquisitions): | ||||||||||||||||
Receivables | (4,779 | ) | 6,595 | 16,768 | — | 18,584 | ||||||||||
Inventories | 4,897 | (10,307 | ) | (21,631 | ) | — | (27,041 | ) | ||||||||
Prepaid expenses | 2,282 | (251 | ) | 2,923 | — | 4,954 | ||||||||||
Accounts payable | 4,358 | (1,442 | ) | (4,177 | ) | — | (1,261 | ) | ||||||||
Accrued expenses | (2,966 | ) | (1,001 | ) | (1,357 | ) | — | (5,324 | ) | |||||||
Other noncurrent liabilities | 1,834 | — | (150 | ) | — | 1,684 | ||||||||||
Income taxes payable (refundable) | 6,252 | (4 | ) | 6,957 | — | 13,205 | ||||||||||
| | | | | | | | | | | | | | | | |
Net cash flows from operating activities | 39,462 | 1,837 | 14,300 | (71 | ) | 55,528 | ||||||||||
| | | | | | | | | | | | | | | | |
Cash flows from investing activities: | ||||||||||||||||
Purchase of property, plant and equipment | (4,995 | ) | (1,492 | ) | (10,128 | ) | — | (16,615 | ) | |||||||
Proceeds from sale of assets | 15 | 19 | 151 | — | 185 | |||||||||||
Acquisitions, net of cash acquired | — | — | — | — | — | |||||||||||
Other, net | 3,257 | (1,130 | ) | 732 | 71 | 2,930 | ||||||||||
| | | | | | | | | | | | | | | | |
Net cash flows from investing activities | (1,723 | ) | (2,603 | ) | (9,245 | ) | 71 | (13,500 | ) | |||||||
| | | | | | | | | | | | | | | | |
Cash flows from financing activities: | ||||||||||||||||
Net borrowings under short-term agreements | — | — | 1,155 | — | 1,155 | |||||||||||
Proceeds from long-term borrowings | — | — | — | — | — | |||||||||||
Principal payments on long-term borrowings | — | — | (224 | ) | — | (224 | ) | |||||||||
Settlement of financial derivative | — | — | — | — | — | |||||||||||
Dividends paid | (9,086 | ) | — | — | — | (9,086 | ) | |||||||||
Intercompany dividends | — | — | — | — | — | |||||||||||
Dividends to noncontrolling interest | — | — | (1,290 | ) | — | (1,290 | ) | |||||||||
Proceeds from exercises under stock plans | 1,760 | — | — | — | 1,760 | |||||||||||
Excess tax benefits from stock option exercises | 345 | — | — | — | 345 | |||||||||||
Purchase of treasury shares | (72,900 | ) | — | — | — | (72,900 | ) | |||||||||
Purchase of common treasury shares—stock plan exercises: | (2,156 | ) | — | — | — | (2,156 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net cash flows from financing activities | (82,037 | ) | — | (359 | ) | — | (82,396 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | — | (24 | ) | (12,821 | ) | — | (12,845 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Net change in cash and cash equivalents | (44,298 | ) | (790 | ) | (8,125 | ) | — | (53,213 | ) | |||||||
Cash and cash equivalents—beginning of year | 69,869 | 2,157 | 299,553 | — | 371,579 | |||||||||||
| | | | | | | | | | | | | | | | |
Cash and cash equivalents—end of period | $ | 25,571 | $ | 1,367 | $ | 291,428 | $ | — | $ | 318,366 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETSDecember 28, 2013
| Parent | Guarantors | Non-Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 215,576 | $ | 49,053 | $ | 349,077 | $ | — | $ | 613,706 | ||||||
Receivables, net | 139,179 | 108,646 | 267,615 | — | 515,440 | |||||||||||
Inventories | 132,953 | 70,231 | 176,816 | — | 380,000 | |||||||||||
Prepaid expenses | 4,735 | 932 | 17,330 | — | 22,997 | |||||||||||
Refundable and deferred income taxes | 41,167 | 8,351 | 16,179 | — | 65,697 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current assets | 533,610 | 237,213 | 827,017 | — | 1,597,840 | |||||||||||
| | | | | | | | | | | | | | | | |
Property, plant and equipment, at cost | 522,734 | 125,764 | 368,628 | — | 1,017,126 | |||||||||||
Less accumulated depreciation and amortization | 300,066 | 61,520 | 121,330 | — | 482,916 | |||||||||||
| | | | | | | | | | | | | | | | |
Net property, plant and equipment | 222,668 | 64,244 | 247,298 | — | 534,210 | |||||||||||
| | | | | | | | | | | | | | | | |
Goodwill | 20,108 | 107,542 | 221,982 | — | 349,632 | |||||||||||
Other intangible assets | 346 | 48,461 | 122,110 | — | 170,917 | |||||||||||
Investment in subsidiaries and intercompany accounts | 1,417,425 | �� | 1,367,308 | 518,059 | (3,302,792 | ) | — | |||||||||
Other assets | 30,759 | — | 93,136 | — | 123,895 | |||||||||||
| | | | | | | | | | | | | | | | |
Total assets | $ | 2,224,916 | $ | 1,824,768 | $ | 2,029,602 | $ | (3,302,792 | ) | $ | 2,776,494 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current installments of long-term debt | $ | 188 | $ | — | $ | 14 | $ | — | $ | 202 | ||||||
Notes payable to banks | — | — | 19,024 | — | 19,024 | |||||||||||
Accounts payable | 62,153 | 20,365 | 133,603 | — | 216,121 | |||||||||||
Accrued employee compensation and benefits | 76,370 | 13,713 | 32,884 | — | 122,967 | |||||||||||
Accrued expenses | 28,362 | 7,315 | 35,883 | — | 71,560 | |||||||||||
Dividends payable | 6,706 | — | — | — | 6,706 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current liabilities | 173,779 | 41,393 | 221,408 | — | 436,580 | |||||||||||
| | | | | | | | | | | | | | | | |
Deferred income taxes | 18,983 | 29,279 | 30,662 | — | 78,924 | |||||||||||
Long-term debt, excluding current installments | 470,175 | 514,223 | 732 | (514,223 | ) | 470,907 | ||||||||||
Defined benefit pension liability | — | — | 154,397 | — | 154,397 | |||||||||||
Deferred compensation | 32,339 | — | 6,770 | — | 39,109 | |||||||||||
Other noncurrent liabilities | 7,615 | — | 44,116 | — | 51,731 | |||||||||||
Shareholders' equity: | ||||||||||||||||
Common stock of $1 par value | 27,900 | 457,950 | 254,982 | (712,932 | ) | 27,900 | ||||||||||
Additional paid-in capital | — | 150,286 | 891,236 | (1,041,522 | ) | — | ||||||||||
Retained earnings | 1,562,670 | 565,193 | 517,703 | (1,082,896 | ) | 1,562,670 | ||||||||||
Accumulated other comprehensive income | (47,685 | ) | 66,444 | (115,225 | ) | 48,781 | (47,685 | ) | ||||||||
Treasury stock | (20,860 | ) | — | — | — | (20,860 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Total Valmont Industries, Inc. shareholders' equity | 1,522,025 | 1,239,873 | 1,548,696 | (2,788,569 | ) | 1,522,025 | ||||||||||
| | | | | | | | | | | | | | | | |
Noncontrolling interest in consolidated subsidiaries | — | — | 22,821 | — | 22,821 | |||||||||||
| | | | | | | | | | | | | | | | |
Total shareholders' equity | 1,522,025 | 1,239,873 | 1,571,517 | (2,788,569 | ) | 1,544,846 | ||||||||||
| | | | | | | | | | | | | | | | |
Total liabilities and shareholders' equity | $ | 2,224,916 | $ | 1,824,768 | $ | 2,029,602 | $ | (3,302,792 | ) | $ | 2,776,494 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Thirty-nine Weeks Ended September 27, 2014
| Parent | Guarantors | Non-Guarantors | Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operating activities: | ||||||||||||||||
Net earnings | $ | 143,515 | $ | 55,359 | $ | 90,679 | $ | (141,853 | ) | $ | 147,700 | |||||
Adjustments to reconcile net earnings to net cash flows from operations: | ||||||||||||||||
Depreciation and amortization | 17,094 | 9,804 | 37,562 | — | 64,460 | |||||||||||
Loss on investment | — | — | 4,859 | — | 4,859 | |||||||||||
Non-cash debt refinancing costs | (2,478 | ) | — | — | — | (2,478 | ) | |||||||||
Stock-based compensation | 5,444 | — | — | — | 5,444 | |||||||||||
Change in fair value of contingent consideration | — | — | 4,300 | — | 4,300 | |||||||||||
Defined benefit pension plan expense | — | — | 2,003 | — | 2,003 | |||||||||||
Contribution to defined benefit pension plan | — | — | (18,245 | ) | — | (18,245 | ) | |||||||||
Gain on sale of property, plant and equipment | 37 | (30 | ) | 51 | — | 58 | ||||||||||
Equity in earnings in nonconsolidated subsidiaries | (99,235 | ) | (42,929 | ) | — | 142,198 | 34 | |||||||||
Deferred income taxes | (6,601 | ) | 1,324 | 1,243 | — | (4,034 | ) | |||||||||
Changes in assets and liabilities (net of acquisitions): | ||||||||||||||||
Receivables | (18,901 | ) | 29,838 | (30,888 | ) | — | (19,951 | ) | ||||||||
Inventories | 2,914 | 5,036 | (12,102 | ) | — | (4,152 | ) | |||||||||
Prepaid expenses | (2,213 | ) | 173 | (17,142 | ) | — | (19,182 | ) | ||||||||
Accounts payable | (2,788 | ) | (3,643 | ) | (14,651 | ) | — | (21,082 | ) | |||||||
Accrued expenses | (18,654 | ) | (9,296 | ) | 24 | — | (27,926 | ) | ||||||||
Other noncurrent liabilities | 2,061 | — | (8,470 | ) | — | (6,409 | ) | |||||||||
Income taxes payable (refundable) | (16,149 | ) | (225 | ) | (6,328 | ) | — | (22,702 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net cash flows from operating activities | 4,046 | 45,411 | 32,895 | 345 | 82,697 | |||||||||||
| | | | | | | | | | | | | | | | |
Cash flows from investing activities: | ||||||||||||||||
Purchase of property, plant and equipment | (35,925 | ) | (1,972 | ) | (25,515 | ) | — | (63,412 | ) | |||||||
Proceeds from sale of assets | 8 | 127 | 1,972 | — | 2,107 | |||||||||||
Acquisitions, net of cash acquired | — | — | (137,438 | ) | — | (137,438 | ) | |||||||||
Other, net | 36,954 | (15,989 | ) | (17,628 | ) | (345 | ) | 2,992 | ||||||||
| | | | | | | | | | | | | | | | |
Net cash flows from investing activities | 1,037 | (17,834 | ) | (178,609 | ) | (345 | ) | (195,751 | ) | |||||||
| | | | | | | | | | | | | | | | |
Cash flows from financing activities: | ||||||||||||||||
Net borrowings under short-term agreements | — | — | (1,065 | ) | — | (1,065 | ) | |||||||||
Proceeds from long-term borrowings | 652,540 | — | — | — | 652,540 | |||||||||||
Principal payments on long-term borrowings | (356,994 | ) | — | (65 | ) | — | (357,059 | ) | ||||||||
Settlement of financial derivative | 4,837 | — | — | — | 4,837 | |||||||||||
Dividends paid | (23,357 | ) | — | — | — | (23,357 | ) | |||||||||
Intercompany dividends | 116,995 | (18,533 | ) | (98,462 | ) | — | — | |||||||||
Dividends to noncontrolling interest | — | — | (1,340 | ) | — | (1,340 | ) | |||||||||
Intercompany interest on long-term note | — | (54,398 | ) | 54,398 | — | — | ||||||||||
Debt issuance costs | (5,464 | ) | — | — | — | (5,464 | ) | |||||||||
Intercompany capital contribution | (143,000 | ) | — | 143,000 | — | — | ||||||||||
Proceeds from exercises under stock plans | 12,824 | — | — | — | 12,824 | |||||||||||
Excess tax benefits from stock option exercises | 3,916 | — | — | — | 3,916 | |||||||||||
Purchase of treasury shares | (316,296 | ) | — | — | — | (316,296 | ) | |||||||||
Purchase of common treasury shares—stock plan exercises: | (12,739 | ) | — | — | — | (12,739 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net cash flows from financing activities | (66,738 | ) | (72,931 | ) | 96,466 | — | (43,203 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | — | (36 | ) | (5,195 | ) | — | (5,231 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Net change in cash and cash equivalents | (61,655 | ) | (45,390 | ) | (54,443 | ) | — | (161,488 | ) | |||||||
Cash and cash equivalents—beginning of year | 215,576 | 49,053 | 349,077 | — | 613,706 | |||||||||||
| | | | | | | | | | | | | | | | |
Cash and cash equivalents—end of period | $ | 153,921 | $ | 3,663 | $ | 294,634 | $ | — | $ | 452,218 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-nineThirteen Weeks Ended September 28, 2013March 29, 2014
| Parent | Guarantors | Non-Guarantors | Eliminations | Total | Parent | Guarantors | Non-Guarantors | Eliminations | Total | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operations: | ||||||||||||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||||||||||
Net earnings | $ | 223,621 | $ | 73,154 | $ | 99,072 | $ | (167,500 | ) | $ | 228,347 | $ | 55,980 | $ | 15,684 | $ | 9,687 | $ | (24,788 | ) | $ | 56,563 | ||||||||||
Adjustments to reconcile net earnings to net cash flows from operations: | ||||||||||||||||||||||||||||||||
Depreciation and amortization | 15,252 | 9,620 | 32,545 | — | 57,417 | 6,041 | 3,278 | 10,282 | — | 19,601 | ||||||||||||||||||||||
Loss on investment | — | — | 3,386 | — | 3,386 | |||||||||||||||||||||||||||
Stock-based compensation | 4,999 | — | — | — | 4,999 | 1,880 | — | — | — | 1,880 | ||||||||||||||||||||||
Defined benefit pension plan expense | — | — | 4,870 | — | 4,870 | — | — | 662 | — | 662 | ||||||||||||||||||||||
Contribution to defined benefit pension plan | — | — | (16,755 | ) | — | (16,755 | ) | — | — | (17,484 | ) | — | (17,484 | ) | ||||||||||||||||||
Gain on sale of property, plant and equipment | 354 | 37 | (5,451 | ) | — | (5,060 | ) | (9 | ) | (77 | ) | (41 | ) | — | (127 | ) | ||||||||||||||||
Equity in earnings of nonconsolidated subsidiaries | (121,211 | ) | (48,927 | ) | (207 | ) | 169,797 | (548 | ) | |||||||||||||||||||||||
Equity in earnings in nonconsolidated subsidiaries | (24,510 | ) | (545 | ) | — | 25,055 | — | |||||||||||||||||||||||||
Deferred income taxes | (7,473 | ) | 1,342 | 4,856 | — | (1,275 | ) | (1,843 | ) | (412 | ) | (668 | ) | — | (2,923 | ) | ||||||||||||||||
Changes in assets and liabilities: | ||||||||||||||||||||||||||||||||
Changes in assets and liabilities (net of acquisitions): | ||||||||||||||||||||||||||||||||
Receivables | 8,737 | 3,552 | (13,046 | ) | — | (757 | ) | (13,949 | ) | 24,027 | 21,590 | — | 31,668 | |||||||||||||||||||
Inventories | 3,146 | (5,556 | ) | (12,164 | ) | — | (14,574 | ) | (20,723 | ) | 2,753 | (19,941 | ) | — | (37,911 | ) | ||||||||||||||||
Prepaid expenses | (1,148 | ) | 290 | (6,183 | ) | — | (7,041 | ) | 286 | 89 | (9,523 | ) | — | (9,148 | ) | |||||||||||||||||
Accounts payable | (11,968 | ) | (2,992 | ) | 16,121 | — | 1,161 | 9,294 | (1,175 | ) | (20,590 | ) | — | (12,471 | ) | |||||||||||||||||
Accrued expenses | 17,944 | (148 | ) | (865 | ) | — | 16,931 | (22,614 | ) | (9,943 | ) | 2,668 | — | (29,889 | ) | |||||||||||||||||
Other noncurrent liabilities | 5,987 | — | (3,477 | ) | — | 2,510 | 2,104 | — | (553 | ) | — | 1,551 | ||||||||||||||||||||
Income taxes payable (refundable) | (19,833 | ) | (2,035 | ) | (77 | ) | 825 | (21,120 | ) | 16,640 | 586 | (667 | ) | — | 16,559 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Net cash flows from operations | 118,407 | 28,337 | 99,239 | 3,122 | 249,105 | |||||||||||||||||||||||||||
Net cash flows from operating activities | 8,577 | 34,265 | (21,192 | ) | 267 | 21,917 | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Cash flows from investing activities: | ||||||||||||||||||||||||||||||||
Purchase of property, plant and equipment | (41,034 | ) | (18,381 | ) | (15,657 | ) | — | (75,072 | ) | (11,282 | ) | (1,767 | ) | (10,477 | ) | — | (23,526 | ) | ||||||||||||||
Proceeds from sale of assets | 1,492 | 35 | 38,037 | — | 39,564 | 19 | 77 | 1,295 | — | 1,391 | ||||||||||||||||||||||
Acquisitions, net of cash acquired | — | — | (53,152 | ) | — | (53,152 | ) | — | — | (120,483 | ) | — | (120,483 | ) | ||||||||||||||||||
Other, net | 52,423 | (56,585 | ) | 8,515 | (3,122 | ) | 1,231 | 17,175 | (36,918 | ) | 19,020 | (267 | ) | (990 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Net cash flows from investing activities | 12,881 | (74,931 | ) | (22,257 | ) | (3,122 | ) | (87,429 | ) | 5,912 | (38,608 | ) | (110,645 | ) | (267 | ) | (143,608 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Cash flows from financing activities: | ||||||||||||||||||||||||||||||||
Net borrowings under short-term agreements | — | — | 3,439 | — | 3,439 | — | — | (4,056 | ) | — | (4,056 | ) | ||||||||||||||||||||
Proceeds from long-term borrowings | — | — | 274 | — | 274 | |||||||||||||||||||||||||||
Principal payments on long-term borrowings | (187 | ) | — | (321 | ) | — | (508 | ) | — | — | (63 | ) | — | (63 | ) | |||||||||||||||||
Dividends paid | (18,717 | ) | — | — | — | (18,717 | ) | (6,706 | ) | — | — | — | (6,706 | ) | ||||||||||||||||||
Intercompany dividends | — | 20,133 | (20,133 | ) | — | — | ||||||||||||||||||||||||||
Dividend to noncontrolling interests | — | — | (1,767 | ) | — | (1,767 | ) | |||||||||||||||||||||||||
Dividends to noncontrolling interest | — | — | (351 | ) | — | (351 | ) | |||||||||||||||||||||||||
Intercompany capital contribution | (143,000 | ) | — | 143,000 | — | — | ||||||||||||||||||||||||||
Proceeds from exercises under stock plans | 15,064 | — | — | — | 15,064 | 7,860 | — | — | — | 7,860 | ||||||||||||||||||||||
Excess tax benefits from stock option exercises | 4,630 | — | — | — | 4,630 | 2,296 | — | — | — | 2,296 | ||||||||||||||||||||||
Purchase of common treasury shares—stock plan exercises | (14,644 | ) | — | — | — | (14,644 | ) | |||||||||||||||||||||||||
Purchase of common treasury shares—stock plan exercises: | (8,574 | ) | — | — | — | (8,574 | ) | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Net cash flows from financing activities | (13,854 | ) | 20,133 | (18,508 | ) | — | (12,229 | ) | (148,124 | ) | — | 138,530 | — | (9,594 | ) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Effect of exchange rate changes on cash and cash equivalents | — | (5,556 | ) | (14,651 | ) | — | (20,207 | ) | — | 1,154 | 4,620 | — | 5,774 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Net change in cash and cash equivalents | 117,434 | (32,017 | ) | 43,823 | — | 129,240 | (133,635 | ) | (3,189 | ) | 11,313 | — | (125,511 | ) | ||||||||||||||||||
Cash and cash equivalents—beginning of year | 40,926 | 83,203 | 290,000 | — | 414,129 | 215,576 | 29,797 | 368,333 | — | 613,706 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Cash and cash equivalents—end of period | $ | 158,360 | $ | 51,186 | $ | 333,823 | $ | — | $ | 543,369 | $ | 81,941 | $ | 26,608 | $ | 379,646 | $ | — | $ | 488,195 | ||||||||||||
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| | | | | | | | | | | | | | | | |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's discussion and analysis 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 the Company 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. These statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Company's control) and assumptions. Management believes that these forward-looking statements are based on reasonable assumptions. Many factors could affect the Company'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 the Company'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 materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments.
This discussion should be read in conjunction with the financial statements and notes thereto, and the management's discussion and analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2013.27, 2014. Segment sales in the table below are presented net of intersegment sales.
Results of Operations
Dollars in millions, except per share amounts
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | Thirteen Weeks Ended | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2014 | September 28, 2013 | % Incr. (Decr.) | September 27, 2014 | September 28, 2013 | % Incr. (Decr.) | March 28, 2015 | March 29, 2014 | % Incr. (Decr.) | ||||||||||||||||||||
Consolidated | |||||||||||||||||||||||||||||
Net sales | $ | 765.7 | $ | 778.0 | (1.6 | )% | $ | 2,360.0 | $ | 2,476.3 | (4.7 | )% | $ | 670.4 | $ | 751.7 | (10.8 | )% | |||||||||||
Gross profit | 199.5 | 225.6 | (11.6 | )% | 627.0 | 722.4 | (13.2 | )% | 165.5 | 207.0 | (20.0 | )% | |||||||||||||||||
as a percent of sales | 26.1 | % | 29.0 | % | 26.6 | % | 29.2 | % | 24.7 | % | 27.5 | % | |||||||||||||||||
SG&A expense | 111.7 | 115.7 | (3.5 | )% | 335.5 | 350.0 | (4.1 | )% | 107.8 | 108.1 | (0.3 | )% | |||||||||||||||||
as a percent of sales | 14.6 | % | 14.9 | % | 14.2 | % | 14.1 | % | 16.1 | % | 14.4 | % | |||||||||||||||||
Operating income | 87.8 | 109.9 | (20.1 | )% | 291.4 | 372.4 | (21.8 | )% | 57.7 | 98.9 | (41.7 | )% | |||||||||||||||||
as a percent of sales | 11.5 | % | 14.1 | % | 12.3 | % | 15.0 | % | 8.6 | % | 13.2 | % | |||||||||||||||||
Net interest expense | 7.2 | 6.6 | 9.1 | % | 20.4 | 19.6 | 4.1 | % | 10.3 | 6.5 | 58.5 | % | |||||||||||||||||
Refinancing costs | 38.7 | — | NM | 38.7 | — | NM | |||||||||||||||||||||||
Effective tax rate | 36.0 | % | 42.8 | % | 34.6 | % | 35.6 | % | 35.0 | % | 34.7 | % | |||||||||||||||||
Net earnings | $ | 23.6 | $ | 56.5 | (58.2 | )% | $ | 143.5 | $ | 223.6 | (35.8 | )% | $ | 30.7 | $ | 56.0 | (45.2 | )% | |||||||||||
Diluted earnings per share | $ | 0.92 | $ | 2.10 | (56.2 | )% | $ | 5.43 | $ | 8.31 | (34.7 | )% | $ | 1.28 | $ | 2.08 | (38.5 | )% | |||||||||||
Engineered Infrastructure Products | |||||||||||||||||||||||||||||
Net sales | $ | 284.2 | $ | 235.3 | 20.8 | % | $ | 779.3 | $ | 658.0 | 18.4 | % | 231.3 | 208.9 | 10.7 | % | |||||||||||||
Gross profit | 76.9 | 67.6 | 13.8 | % | 205.3 | 186.0 | 10.4 | % | 55.0 | 54.5 | 0.9 | % | |||||||||||||||||
SG&A expense | 43.7 | 41.9 | 4.3 | % | 129.8 | 125.0 | 3.8 | % | 43.0 | 40.8 | 5.4 | % | |||||||||||||||||
Operating income | 33.2 | 25.7 | 29.2 | % | 75.5 | 61.0 | 23.8 | % | 12.0 | 13.7 | (12.4 | )% | |||||||||||||||||
Utility Support Structures | |||||||||||||||||||||||||||||
Net sales | $ | 180.6 | $ | 228.9 | (21.1 | )% | $ | 606.8 | $ | 696.1 | (12.8 | )% | $ | 176.1 | $ | 214.2 | (17.8 | )% | |||||||||||
Gross profit | 36.5 | 61.8 | (40.9 | )% | 134.5 | 189.8 | (29.1 | )% | 34.6 | 52.1 | (33.6 | )% | |||||||||||||||||
SG&A expense | 19.5 | 20.3 | (3.9 | )% | 58.4 | 60.0 | (2.7 | )% | 19.2 | 19.3 | (0.5 | )% | |||||||||||||||||
Operating income | 17.0 | 41.5 | (59.0 | )% | 76.1 | 129.8 | (41.4 | )% | 15.4 | 32.8 | (53.0 | )% | |||||||||||||||||
Coatings | |||||||||||||||||||||||||||||
Net sales | $ | 73.6 | $ | 75.3 | (2.3 | )% | $ | 211.2 | $ | 229.6 | (8.0 | )% | $ | 61.8 | $ | 67.2 | (8.0 | )% | |||||||||||
Gross profit | 26.7 | 28.7 | (7.0 | )% | 75.3 | 80.9 | (6.9 | )% | 19.8 | 23.3 | (15.0 | )% | |||||||||||||||||
SG&A expense | 9.1 | 8.9 | 2.2 | % | 28.0 | 24.1 | 16.2 | % | 8.8 | 9.4 | (6.4 | )% | |||||||||||||||||
Operating income | 17.6 | 19.8 | (11.1 | )% | 47.3 | 56.8 | (16.7 | )% | 11.0 | 13.9 | (20.9 | )% | |||||||||||||||||
Irrigation | |||||||||||||||||||||||||||||
Net sales | $ | 174.3 | $ | 175.1 | (0.5 | )% | $ | 606.9 | $ | 690.0 | (12.0 | )% | $ | 154.5 | $ | 212.7 | (27.4 | )% | |||||||||||
Gross profit | 49.1 | 52.9 | (7.2 | )% | 176.7 | 216.3 | (18.3 | )% | 45.3 | 64.7 | (30.0 | )% | |||||||||||||||||
SG&A expense | 22.3 | 21.7 | 2.8 | % | 65.2 | 66.4 | (1.8 | )% | 21.0 | 21.6 | (2.8 | )% | |||||||||||||||||
Operating income | 26.8 | 31.2 | (14.1 | )% | 111.5 | 149.9 | (25.6 | )% | 24.3 | 43.1 | (43.6 | )% | |||||||||||||||||
Other | |||||||||||||||||||||||||||||
Net sales | $ | 53.0 | $ | 63.4 | (16.4 | )% | $ | 155.8 | $ | 202.6 | (23.1 | )% | $ | 46.7 | $ | 48.7 | (4.1 | )% | |||||||||||
Gross profit | 10.3 | 14.9 | (30.9 | )% | 35.0 | 49.2 | (28.9 | )% | 10.9 | 12.3 | (11.4 | )% | |||||||||||||||||
SG&A expense | 4.1 | 4.9 | (16.3 | )% | 11.9 | 15.4 | (22.7 | )% | 4.3 | 3.7 | 16.2 | % | |||||||||||||||||
Operating income | 6.2 | 10.0 | (38.0 | )% | 23.1 | 33.8 | (31.7 | )% | 6.6 | 8.6 | (23.3 | )% | |||||||||||||||||
Net corporate expense | |||||||||||||||||||||||||||||
Gross profit | $ | — | $ | (0.1 | ) | NM | $ | 0.2 | $ | 0.2 | NM | $ | (0.1 | ) | $ | 0.1 | NM | ||||||||||||
SG&A expense | 13.0 | 18.1 | (28.2 | )% | 42.3 | 59.1 | (28.4 | )% | 11.5 | 13.3 | (13.5 | )% | |||||||||||||||||
Operating loss | (13.0 | ) | (18.2 | ) | 28.6 | % | (42.1 | ) | (58.9 | ) | 28.5 | % | (11.6 | ) | (13.2 | ) | 12.1 | % |
NM=Not meaningful
Overview
On a consolidated basis, the decrease in net sales in the thirdfirst quarter and first three quarters of fiscal 2014,2015, as compared with 2013,2014, reflected lower sales in all reportable segments except for the Engineered Infrastructure Products (EIP) segment. The changes in net sales in the thirdfirst quarter and first three quarters of fiscal 2014,2015, as compared with fiscal 2013,2014, were as follows:
| Third quarter | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | EIP | Utility | Coatings | Irrigation | Other | |||||||||||||
Sales—2013 | $ | 778.0 | $ | 235.3 | $ | 228.9 | $ | 75.3 | $ | 175.1 | $ | 63.4 | |||||||
Volume | (26.1 | ) | (1.0 | ) | (22.0 | ) | (5.1 | ) | 0.9 | 1.1 | |||||||||
Pricing/mix | (21.7 | ) | 4.4 | (26.4 | ) | 3.4 | (2.0 | ) | (1.1 | ) | |||||||||
Acquisitions/Divestiture | 33.6 | 43.9 | — | — | 0.6 | (10.9 | ) | ||||||||||||
Currency translation | 1.9 | 1.6 | 0.1 | — | (0.3 | ) | 0.5 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Sales—2014 | $ | 765.7 | $ | 284.2 | $ | 180.6 | $ | 73.6 | $ | 174.3 | $ | 53.0 | |||||||
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| | | | | | | | | | | | | | | | | | | |
| Year-to-date | First quarter | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | EIP | Utility | Coatings | Irrigation | Other | Total | EIP | Utility | Coatings | Irrigation | Other | ||||||||||||||||||||||||||
Sales—2013 | $ | 2,476.3 | $ | 658.0 | $ | 696.1 | $ | 229.6 | $ | 690.0 | $ | 202.6 | ||||||||||||||||||||||||||
Sales—2014 | $ | 751.7 | $ | 208.9 | $ | 214.2 | $ | 67.2 | $ | 212.7 | $ | 48.7 | ||||||||||||||||||||||||||
Volume | (126.3 | ) | 8.3 | (38.1 | ) | (15.4 | ) | (75.0 | ) | (6.1 | ) | (63.8 | ) | 9.6 | (14.5 | ) | (7.7 | ) | (53.1 | ) | 1.9 | |||||||||||||||||
Pricing/mix | (48.0 | ) | 4.3 | (49.7 | ) | 3.7 | (1.4 | ) | (4.9 | ) | (18.8 | ) | (0.1 | ) | (21.2 | ) | 5.5 | (2.0 | ) | (1.0 | ) | |||||||||||||||||
Acquisitions/Divestiture | 88.5 | 117.0 | — | — | 0.6 | (29.1 | ) | |||||||||||||||||||||||||||||||
Acquisitions | 32.6 | 29.3 | — | — | 3.3 | — | ||||||||||||||||||||||||||||||||
Currency translation | (30.5 | ) | (8.3 | ) | (1.5 | ) | (6.7 | ) | (7.3 | ) | (6.7 | ) | (31.3 | ) | (16.4 | ) | (2.4 | ) | (3.2 | ) | (6.4 | ) | (2.9 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Sales—2014 | $ | 2,360.0 | $ | 779.3 | $ | 606.8 | $ | 211.2 | $ | 606.9 | $ | 155.8 | ||||||||||||||||||||||||||
Sales—2015 | $ | 670.4 | $ | 231.3 | $ | 176.1 | $ | 61.8 | $ | 154.5 | $ | 46.7 | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | |
Volume effects are estimated based on a physical production or sales measure. Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the product sold. Accordingly, pricing and mix changes do not necessarily directly result in operating income changes.
Acquisitions included Locker Group Holdings ("Locker"), Armorflex International Ltd. ("Armorflex"), AgSense LLC, Shakespeare, and DS SM A/S, which was renamed Valmont SM. We acquired Locker in February 2013, Armorflex in December 2013, AgSense in August 2014, Shakespeare in October 2014, and Valmont SM in March 2014. All of these acquisitionsShakespeare and Valmont SM are reported in the Engineered Infrastructure Products segment, except forand AgSense which is reported in the Irrigation segment. In the "Other" category, the sales reduction of $10.9 million and $29.1 million in the third quarter and first three quarters of 2014 reflects the deconsolidation of Delta EMD Pty. Ltd. ("EMD") in December 2013, following the reduction of our ownership in the operation to below 50%.
In the thirdfirst quarter and first three quarters of fiscal 2014,2015, we realized a decrease in operating profit, as compared with fiscal 2013,2014, due to currency translation effects. On average, the U.S. dollar strengthened in particular against the Australian dollar, Brazilian Real, Euro, and South Africa Rand, resulting in less operating profit in U.S. dollar terms. The breakdown of this effect by segment was as follows:
| Total | EIP | Utility | Coatings | Irrigation | Other | Corporate | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Third quarter | $ | 0.1 | $ | 0.1 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Year-to-date | $ | (3.7 | ) | $ | (0.8 | ) | $ | (0.3 | ) | $ | (0.8 | ) | $ | (1.3 | ) | $ | (0.9 | ) | $ | 0.4 | ||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total | EIP | Utility | Coatings | Irrigation | Other | Corporate | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
First quarter | $ | (2.3 | ) | $ | (0.8 | ) | $ | (0.1 | ) | $ | (0.3 | ) | $ | (1.0 | ) | $ | (0.2 | ) | $ | 0.1 |
The decrease in gross margin (gross profit as a percent of sales) in fiscal 2014,2015, as compared with 2013,2014, was due to a combination of lower sales prices, unfavorable sales mix, and reduced sales volumes and slightly higher raw material costs in 2014,2015, as compared with 2013.2014.
Selling, general and administrative (SG&A) spending in the thirdfirst quarter and first three quarters of fiscal 2014,2015, as compared with the same periodsperiod in 2013,2014, decreased mainly due to the following factors:
The above reductions in SG&A were partially offset by the following:
The decrease in operating income on a reportable segment basis in 2014,2015, as compared to 2013,2014, was due to reduced operating performance in the Utility, Irrigation, and Coatingsall segments. The EIP segment showed improveddecrease in operating performance in 2014 compared to 2013,income is primarily due to the acquisitions of Valmont SM and Armorflex. The "Other" category reported reduced operating performance in 2014 compared to 2013, mainly dueattributable to lower grinding media sales.
Net interest expense increased slightly in the third quartervolumes and first three quarters of fiscal 2014, as compared with 2013, due to slightly higher interest expense due to additional long-term debt issued in the third quarter.
The approximate $38.7 million in costs associated with refinancing of debt is due to the Company's repurchase through partial tender of $199.8 million in aggregate principal amount of a portion of the 6.625% senior unsecured notes due 2020. This expense was comprised of the following:
The increase in other expense in the third quarter and first three quarters of 2014, as compared with 2013, was mainly attributable to recording the change (loss) in fair value of the Company's investment in EMD of $1.4 million and $4.9 million, respectively. $1.3 million in lower appreciation of the deferred compensation assets in the third quarter and first three quarters of 2014 as compared to 2013 also contributed to the higher other expense.
Our effective income tax rate in the third quarter of fiscal 2014 was lower than the same period in fiscal 2013, principally due to a lowering of the U.K. income tax rates in 2013. In the third quarter of fiscal 2013, U.K. tax rates were collectively reduced from 23% to 20%. Accordingly, we reduced the value of our deferred tax assets associated with net operating loss carryforwards and certain timingsales pricing.
differences by $8.3 million Net interest expense increased in the first quarter of fiscal 2015, as compared with 2014, primarily due to additional long-term debt borrowed in the third quarter of fiscal 2013, with2014. Interest income decreased due to less cash on hand.
The decrease in other expense was mainly attributable to the difference in the investment income from the Company's shares of Delta EMD. In 2014, we recorded a corresponding increasenon-cash mark to market loss of $3.4 million and in income tax expense.2015, we received an approximately $5 million special dividend offset by a noncash mark to market loss of approximately $4.4 million. The year-to-dateremaining decrease in other expense relates to more favorable currency transactional gains/losses compared to 2014 of approximately $2.2 million.
Our effective income tax rate in fiscal 2014 was slightly lower than 2013, mainly due to lower U.K. tax rates discussed above, offset by approximately $3.2 million of non-cash tax benefits associated with the first quarter 2013 sale of our nonconsolidated investmentfiscal 2015 was relatively flat when compared with the same period in South Africa and $1.0 million offiscal 2014.
Earnings attributable to noncontrolling interest was slightly higher research and development tax credits in the U.S in 2013.
Earnings in non-consolidated subsidiaries were lower infirst quarter of fiscal 2014,2015, as compared with 2013, with a small amount of activity2014 due to the acquisitions completed in 2014. In February 2013, the Company sold its 49% ownership interest in a manganese materials operation. There was no significant gain or loss on the sale.
Our cash flows provided by operations were approximately $82.7$55.5 million in the first three quartersquarter of fiscal 2014,2015, as compared with $249.1$21.9 million provided by operations in 2013.2014. The decreaseincrease in operating cash flow in the first three quartersquarter of fiscal 20142015 was the result of the cash prepayment expenses related to the refinancing of debt, decreased net earnings, and higherimproved net working capital, aspartially offset by lower net earnings, compared with 2013.2014.
Engineered Infrastructure Products (EIP) segment
The increase in net sales in the thirdfirst quarter and first three quarters of fiscal 20142015 as compared with 20132014 was mainly due to the acquisition of Valmont SM in early March 2014 and ArmorflexShakespeare in December 2013 ($43.9 million and $112.6 million).October 2014 totaling $29.3 million.
Global lighting. traffic, and roadway product sales in the thirdfirst quarter and first three quarters of fiscal 20142015 improved compared to the same period in fiscal 2013.2014. This improvement was offset somewhat by unfavorable currency translation effects of $1.8 million. In the third quarter and first three quarters of fiscal 2014,2015, sales volumes in the U.S. were slightly higher in the commercial markets and slightly lower in the transportation markets as construction and installation activity continue to show slight improvement over 2013. However, themarkets. The transportation market continues to be challenging, due in part to the lack of long-term U.S. federal highway funding legislation. Sales volumes in Canada were downincreased in the thirdfirst quarter and first three quarters of 20142015 as compared to 20132014, due to project delays, lower government spending,some improvement in the markets and increased competition.more favorable weather conditions. Sales in Europe were lowerhigher in the thirdfirst quarter of fiscal 2014 and slightly lower year-to-date2015 compared to the same periods in fiscal 2013. Decreased volumes2014 due primarily to a large project in France werethe Middle East, offset to an extent by volume increases in the U.K and favorableunfavorable currency impacts.translation effects. In the Asia Pacific region, sales were lowerrelatively flat in the thirdfirst quarter of fiscal 2015 over 2014 over 2013 due to softer market conditionswith improved volumes in Australia partiallyand India offset by growthdecreased volumes in India.China. Highway safety product sales improveddecreased slightly in the thirdfirst quarter and first three quarters of 20142015 compared to 2013,2014, due to the acquisition of Armorflex in December 2013 (approximately $2.6 million and $6.7 million, respectively) and modestly improved market conditions in Australia and New Zealand due to more highway construction projects this year. This improvement is offset somewhat by unfavorable year-to-date currency translation effects of $2.7 million.lower sales volumes.
Communication product line sales were slightly higher in the thirdfirst quarter and first three quarters of fiscal 2014,2015, as compared with the same periods in fiscal 2013. On a regional basis,2014. North America communication structure sales in the third quarter and first three quarters increased. The year-to-date increase in North American sales was mainly attributable to higher wireless communication structures salesdecreased, primarily due to the continuedone customer who significantly reduced its 4G wireless network build out of wireless networks, partially offset by decreased communicationin 2015 compared with 2014. Communication component sales resulting from a large customer temporarily curtailing spending.were flat year over year. In China, sales of wireless communication structures in the thirdfirst quarter and first three quarters of fiscal 2014 were higher than2015 increased over the same periodsperiod in fiscal 2013. Chinese2014 as the investment levels by the major wireless carriers are increasing investment in 4G upgrades, as the government began issuing licenses in late 2013.have remained strong.
Access systems product line sales decreased in the thirdfirst quarter and first three quarters of 2014,2015, as compared with 2013,2014, primarily due to the negative impact of currency translation year-to-date of $7.5$3.8 million and lower volumes. The volume decrease was primarily related to the slowdown in mining sector investment in Australia and weaker market conditions in China.
Operating income for the segment in the first quarter of fiscal 2015 was lower, as compared with the same period of fiscal 2014, due to unfavorable currency translation effects of $0.8 million and sales mix. The volume decrease wasincrease in SG&A spending in the first quarter of 2015 were due to costs related to the
partially offset by the full 2014 effect of the Locker acquisition (approximately $4.5 million) that was acquired in February 2013.
Operating income for the segment in the third quarter and first three quarters of fiscal 2014 increased, as compared with the same period of fiscal 2013, due primarily to operating profit generated from the acquisitions of Valmont SM and Armorflex of $4.8 million and $12.5 million, respectively, and the reversal of the Locker earn-out liability in the third quarter of fiscal 2014 of approximately $4.3 million. The earn-out reversal was recorded against product cost of sales in the condensed consolidated statements of earnings.
The increase in SG&A spending in the third quarter and first three quarters of 2014 were due to costs related to the ArmorflexShakespeare and Valmont SM acquisitions totaling $3.7$4.4 million, and $9.6 million, respectively. These increased costs in the third quartercompensation and first three quarters of 2014 were offset by lower incentive costs of $1.1 million and $2.7 million, respectively.$1.2 million. Currency effects also reduced SG&A expense for the three quarters ended September 27, 2014 approximately $1.3 million.first quarter of 2015 as compared to 2014.
Utility Support Structures (Utility) segment
In the Utility segment, the sales decreasedecreased in the thirdfirst quarter and first three quarters of 2014,2015, as compared with 2013, was2014, due to lower sales volume, a decrease in sales price most notably for our steel products, and a decline in the percentagean unfavorable sales mix. Our mix of salesrevenue from very large transmission projects which changedin first quarter of 2015 was unfavorable to first quarter of 2014. A backlog including some very large transmission projects at year-end 2013 provided for the more favorable mix of utility structure sales between the reporting periods.large transmission projects revenue in first quarter 2014. As steel prices have declined in 2015, our average selling prices for steel products were lower as well. In North America, sales volumes in tons for steel and concrete utility structures were down in the first three quartersquarter of 2014,2015, as compared with 2013, offset by increases in sales volume for concrete structures. We believe industry supply and demand are now more aligned as compared with this time in 2013, as we and our competitors have increased production capacity to meet demand. We believe this has resulted in increased price competition for certain portions of the market where orders are awarded based on competitive bidding.2014. In the thirdfirst quarter of 2014,2015, as compared to 2013, international utility structures sales increased due to higher sales volumes. For the nine months ended September 27, 2014, as compared to the same period in 2013, international utility structures sales decreased due to lower sales volumes.volumes in the Asia Pacific region.
SG&A expense decreased approximately $1$1.2 million in the thirdfirst quarter and first three quarters of 2014,2015, as compared with 2013,2014, primarily due to lower incentive compensation tied to lower operating income offset by higher employee compensation due to increased headcount to support capacity expansion to meet projected long-term growth.and sales commissions. Operating income in the thirdfirst quarter and first three quarters of 2014,2015, as compared with 2013,2014, decreased due to lower sales and reduced leverage of fixed costs, and increased depreciation expense on plant capacity added in 2013.costs.
Coatings segment
Coatings segment sales decreased in the thirdfirst quarter and first three quarters of 2014,2015, as compared with 2013,2014, due to lower sales volumes in the Asia Pacific regionglobally and currency translation effects related to the strengthening of the U.S. dollar against the Australian dollar. More specifically, weak demandand Canadian dollars. Sales volume decreases were partially offset by price increases to recover higher costs for zinc in Australia led to decreases in volumes offset somewhat by improved sales volumes in Asia. In the third quarter of fiscal 2014, U.S. sales were relatively flat2015 as compared to the same period in fiscal 2013. On a year-to-date basis, the lower sales volumes in North America for galvanizing services were attributable2014.
SG&A expense decreased approximately $0.6 million due to unfavorable winter weather conditions that affected our customers into early second quarter.
currency translation effects and other reduced general expenses. Operating income was also lower in the thirdfirst quarter and first three quarters of 2014,2015, as compared with 2013,2014, due to the lower sales volumes, unfavorable currency impacts, and reduced leverage of fixed costs in both Australia and North America. The decrease in segment operating income in the first three quarters of 2014, as compared with 2013, was also due to the $4.6 million gain recognized on the sale of an Australian galvanizing operation in the second quarter of fiscal 2013. The decrease in segment
operating income in the third quarter and first three quarters of 2014, as compared to the same periods in 2013, was partially offset by approximately $2.5 million of business interruption insurance proceeds received related to a 2013 fire at one of our North American facilities which was recorded against Service Cost of Sales in the Condensed Consolidated Statement of Earnings.
Irrigation segment
The decrease in Irrigation segment net sales in the thirdfirst quarter and first three quarters of fiscal 2014,2015, as compared with 2013,2014, was mainly due to sales volume decreases in theboth North American market. The decrease in North America was offset to an extent by increased sales volumes in internationaland International markets. In North America, lower expected net farm income in 2014,2015, as compared with 2013,2014, and much lower sales backlogs at the beginning of the year resulted in lower sales of irrigation equipment in 2014,2015, as compared with 2013.2014. In fiscal 2014,2015, net farm income in the United States is expected to decrease 13.8%32% from the record levels of 2013,2014, due in part to lower market prices for corn and soybeans. We believe this reduction contributed to lower demand for irrigation machines in North America in 2014,the first quarter of 2015, as compared with 2013.2014. In international markets, sales improveddecreased in the thirdfirst quarter and first three quarters of fiscal 2014,2015, as compared with 2013, mainly2014, primarily due to increased activityreduced demand in Brazil Middle East, and Australia.Eastern Europe and unfavorable currency translation effects.
SG&A decreased slightly in the first quarter of fiscal 2015, as compared with 2014, due to reduced employee compensation and incentives of $1.2 million and favorable currency translation effects of $0.5 million. These reductions in SG&A were offset partially by expenses incurred by AgSense that was acquired in August 2014. Operating income for the segment declined in the thirdfirst quarter and first three quarters of fiscal 20142015 over 2013,2014, due to the sales volume decrease and associated operating deleverage of fixed operating costs. The primary reasons for the slight decrease in SG&A expense in the first three quarters
Other
This unit includes the grinding media, industrial tubing, and industrial fasteners operations. The decrease in sales in the thirdfirst quarter and first three quarters of fiscal 2014,2015, as compared with 2013,2014, was mainly due lowerto unfavorable currency translation of $2.9 million. Grinding media sales volumesimproved in 2015 due to the deconsolidation of EMD in December 2013 (approximately $10.9 million and $29.1 million, respectively), lower saleshigher volumes in the grinding media operations and exchange rate translation effects. Grinding media volumes were negatively affected by less favorable Australian mining industry demand.Australia. Tubing sales in 20142015 were slightly lower due to lowerreduced volumes compared to 2013.2014. Operating income in the thirdfirst quarter and first three quarters of fiscal 20142015 was lower than the same period in 2013,2014, due primarily to lower grinding mediatubing sales volumes, the deconsolidation of EMD in 2013, and currency translation effects.volumes.
Net corporate expense
Net corporate expense in the thirdfirst quarter and first three quarters of fiscal 20142015 decreased over the same period in fiscal 2013.2014. These decreases were mainly due to:
Restructuring Plan
In April 2015, our Board of Directors authorized a broad restructuring plan (the "Plan") of up to $60 million to respond to the market environment in certain of our businesses. The initial restructuring activities primarily involve consolidation of Asia Pacific operations within the Engineered Infrastructure Products and Coatings segments and in the Utility segment. Accordingly, we expect to incur pre-tax cash expenses of $19 million and $2.9asset impairments of approximately $11 million. These charges are expected to be incurred over the remainder of 2015.
Certain of these restructuring actions are within the APAC Coatings reporting unit which has approximately $16 million respectively); and
Tablecash charges of Contents$5 million.
Liquidity and Capital Resources
Cash Flows
Working Capital and Operating Cash Flows—Net working capital was $1,111.5$919.3 million at September 27, 2014,March 28, 2015, as compared with $1,161.3$995.7 million at December 28, 2013.27, 2014. The decrease in net working capital in 20142015 mainly resulted from decreased cash on hand due to the acquisition of Valmont SM and cash used in the share repurchase program. Cash flow provided by operations was $82.7$55.5 million in fiscal 2014,2015, as compared with $249.1$21.9 million in fiscal 2013.2014. The decreaseincrease in operating cash flow in 20142015 was primarily the result of the cash prepayment expenses related to the 2014 refinancing activities, lower net earnings and higher working capital inimprovements over 2014, as compared with 2013.offset to an extent by reduced net earnings.
Investing Cash Flows—Capital spending in the first three quartersquarter of fiscal 20142015 was $63.4$16.6 million, as compared with $75.1$23.5 million for the same period in 2013. The most significant2014. Significant capital spending projects in 2015 and 2014 includedinclude certain investments in machinery and equipment across all businesses. We expect our capital spending for the 20142015 fiscal year to be approximately $85$70 million. In 2013,The biggest contributor to lower investing cash flows included proceeds from asset salesoutflows in 2015 as compared to 2014, was the acquisition of $39.6 million, principally consisting of $29.2 million received from the sale of our 49% owned non-consolidated subsidiary in South Africa and $8.2 million received from the sale of the Western Australia galvanizing operation. Investing cash flows also includes $120.5 million paid for the Valmont SM acquisition in the first quarter and $17.0 million paid for 51% of Agsense in the third quarter of 2014 and $53.2 million paid for the Locker acquisition in 2013.March 2014.
Financing Cash Flows—Our total interest-bearing debt increaseddecreased slightly to $786.7$781.3 million at September 27, 2014March 28, 2015 from $490.1$781.8 million at December 28, 2013 as a result of the issuance of $500 million face value of long-term unsecured notes and the repurchase by partial tender of $199.8 million of the 2020 senior notes.27, 2014. Financing cash flows changed from a use of approximately $12.2$9.6 million in the first three quartersquarter of fiscal 20132014 to a use of approximately $43.2$82.4 million in
the first three quartersquarter of fiscal 2014. In addition2015. The primary change was due to the third quarter 2014 refinancing activities, the Company purchased $316.3purchasing $72.9 million of treasury shares in 2014 resulting from2015 related to the recently announced share repurchase program.
Financing and Capital
On May 13, 2014, we announced a new capital allocation philosophy which covered both the quarterly dividend rate as well as a share repurchase program. Specifically, theThe Board of Directors authorized the purchase of up to $500 million of the Company's outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. As of March 28, 2015, we have acquired approximately 3.3 million shares for approximately $468 million under this share repurchase program. As of April 22, 2015, the date as of which we report on the cover of this form 10-Q the number of outstanding shares of our common stock, we have acquired a total of 3,438,677 shares for approximately $483 million under the share repurchase program. In February 2015, the Board of Directors authorized an additional $250 million of share purchase, without an expiration date. The share purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any repurchases and may discontinue the program at any time. As of September 27, 2014, we have acquired 2,126,392 shares for approximately $316.3 million under this share repurchase program. As of October 20, 2014, the date as of which we report on the cover of this Form 10-Q the number of outstanding shares of our common stock, we have acquired a total of 2,425,892 shares for $356.4 millionrepurchases under the share repurchase program.This philosophy also authorizes dividends on common shares in the range of 15% of the prior year's fully diluted net earnings; the most recent quarterly dividend was $0.375 perprogram and we may discontinue either or both share paid on October 15, 2014.
Our debt financingrepurchase programs at September 27, 2014 consisted primarily of long-term debt. During the third quarter of 2014, the Company issued $500 million of new notes and repurchased by partial tenderany time.
$199.8 million in aggregate principal amount of the 2020 notes. Our long-term debt principally consists of:
Our capital allocation philosophy is focused on maintainingannouncement included our intention to manage our capital structure to maintain our investment grade debt rating. Our most recent rating were Baa2 by Moody's Investors Services, Inc. and BBB+ rating by Standard and Poor's Rating Services. We would be willing to allow our debt rating to fall to Baa3 or BBB-BBB– to finance a special acquisition or other opportunity. Otherwise, we expect to maintain a ratio of debt to invested capital which will support our current investment grade debt rating.
On October 17, 2014, we entered into a First Amendment to our Credit Agreement with JPMorgan Chase Bank, as Administrative Agent, and the other lenders party thereto, dated as of August 15, 2012, which increased the committed unsecured revolving credit facility from $400 million to $600 million and extends the maturity date from August 15, 2017 to October 17, 2019. Under the Amended Credit Agreement, up to $25 millionOur debt financing at March 28, 2015 is available for swingline loans, up to $75 million is available for letters of credit and up to $200 million is available for borrowings in foreign currencies. We may increase the credit facility by up to an additional $200 million at any time, subject to lenders increasing the amount of their commitments. The interest rate on our borrowings will be, at our option, either:
Plus,at 5.25% per annum and are due in each case, 0October 2054.
At SeptemberMarch 28, 2015 and December 27, 2014, and December 28, 2013, we had no outstanding borrowings under theour revolving credit agreement. The revolving credit agreement contains certain financial covenants that may limit our additional borrowing capability under the agreement. At October 21, 2014,March 28, 2015, we had the ability to borrow $582.4$581.4 million under this facility, after consideration of standby letters of credit of $17.6$18.6 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling $111.8$106.0 million, $94.8$92.3 million of which was unused at September 27, 2014.
Table of ContentsMarch 28, 2015.
Our senior unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness.
The debt agreements contain covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities, including capital expenditures. Our key debt covenants are as follows:
At September 27, 2014,March 28, 2015, we were in compliance with all covenants related to the debt agreements. The key covenant calculations at September 27, 2014March 28, 2015 were as follows:
Interest-bearing debt | $ | 786,662 | $ | 781,291 | ||||
EBITDA—last four quarters | 434,815 | 378,837 | ||||||
Leverage ratio | 1.81 | 2.06 | ||||||
EBITDA—last four quarters | $ | 434,815 | $ | 378,837 | ||||
Interest expense—last four quarters | 30,877 | 42,199 | ||||||
Interest earned ratio | 14.08 | 8.98 |
The calculation of EBITDA-last four quarters (September(March 30, 2014 through March 28, 2013 through September 27, 2014)2015) is as follows:
Net cash flows from operations | $ | 230,034 | ||
Interest expense | 30,877 | |||
Income tax expense | 110,038 | |||
Deconsolidation of subsidiary | (12,011 | ) | ||
Impairment of property, plant and equipment | (12,161 | ) | ||
Loss on investment | (4,859 | ) | ||
Debt refinancing expense | 2,478 | |||
Acquisition earn-out release | (4,300 | ) | ||
Deferred income tax benefit | 12,901 | |||
Noncontrolling interest | (1,431 | ) | ||
Equity in earnings of nonconsolidated subsidiaries | 253 | |||
Stock-based compensation | (6,958 | ) | ||
Pension plan expense | (3,702 | ) | ||
Contribution to pension plan | 19,109 | |||
Valmont SM EBITDA—Sept. 28, 2013—March 3, 2014 | 11,038 | |||
Changes in assets and liabilities | 64,308 | |||
Other | (799 | ) | ||
| | | | |
EBITDA | $ | 434,815 | ||
| | | | |
| | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 198,383 | ||
Interest expense | 30,877 | |||
Income tax expense | 110,038 | |||
Depreciation and amortization expense | 84,479 | |||
Valmont SM EBITDA—Sept. 28, 2013—March 3, 2014 | 11,038 | |||
| | | | |
EBITDA | $ | 434,815 | ||
| | | | |
| | | | |
Net cash flows from operations Interest expense Income tax expense Loss on investment Non-cash debt refinancing expense Acquisition earn-out release Deferred income tax benefit Noncontrolling interest Equity in earnings of nonconsolidated subsidiaries Stock-based compensation Pension plan expense Contribution to pension plan Shakespeare EBITDA—March 30, 2014—Oct. 5, 2014 Changes in assets and liabilities Other EBITDA Net earnings attributable to Valmont Industries, Inc. Interest expense Income tax expense Depreciation and amortization expense Shakespeare EBITDA—March 30, 2014—Oct. 5, 2014 EBITDA During the third quarter of 2014, we incurred $38,705 of costs associated with refinancing of debt. This category of expense is not in the definition of EBITDA for debt covenant calculation purposes per our debt agreements. As such, it has not been added back in the EBITDA reconciliation to cash flows from operation or net earnings for the four quarters between Our businesses are cyclical, but we have diversity in our markets, from a product, customer and a geographical standpoint. We have demonstrated the ability to effectively manage through business cycles and maintain liquidity. We have consistently generated operating cash flows in excess of our capital expenditures. Based on our available credit facilities, recent issuance of senior unsecured notes and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs. We have not made any provision for U.S. income taxes in our financial statements on approximately $608.9 million of undistributed earnings of our foreign subsidiaries, as we intend to reinvest those earnings. Of our cash balances at If we need to repatriate foreign cash balances to the United States to meet our cash needs, income taxes would be paid to the extent that those cash repatriations were undistributed earnings of our foreign subsidiaries. The income taxes that we would pay if cash were repatriated depends on the amounts to be repatriated and from which country. If all of our cash outside the United States were to be repatriated to the United States, we estimate that we would pay approximately Financial Obligations and Financial Commitments Long-term debt Interest Delta pension plan contributions Operating leases Acquisition earn-out payments Unconditional purchase commitments Total contractual cash obligations Off Balance Sheet Arrangements There have been no changes in our off balance sheet arrangements as described on page Critical Accounting Policies There have been no changes in our critical accounting policies as described on pages Item 3. Quantitative and Qualitative Disclosures about Market Risk There were no material changes in the company's market risk during the quarter ended Item 4. Controls and Procedures The Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934 is (1) accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. No changes in the Company's internal control over financial reporting occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Issuer Purchases of Equity Securities June 29, 2014 to July 26, 2014 July 27, 2014 to August 30, 2014 August 31, 2014 to September 27, 2014 December 28, 2014 to January 24, 2015 January 25, 2015 to February 28, 2015 March 1, 2015 to March 28, 2015 Total Submission of Matters to a Vote of Security Holders Valmont's annual meeting of stockholders was held on April 28, 2015. The stockholders elected two directors to serve three-year terms, approved, on an advisory basis, a resolution approving Valmont's named executive officer compensation, and ratified the appointment of Deloitte & Touche LLP to audit the Company's financial statements for fiscal 2015. For the annual meeting there were 23,847,403 shares outstanding and eligible to votes of which 21,905,803 were present at the meeting in person or by proxy. The tabulation for each matter voted upon at the meeting was as follows: Election of Directors: Daniel P. Neary Kenneth E. Stinson Advisory vote on executive compensation: Proposal to ratify the appointment of Deloitte & Touche LLP as independent auditors for fiscal 2015: Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and by the undersigned hereunto duly authorized. Dated this 29th day of Table of Contents$ 207,707 42,199 81,817 (4,824 ) 2,478 4,300 (13,339 ) (5,526 ) 29 (6,611 ) (1,826 ) 16,424 2,460 53,934 (385 ) $ 378,837 $ 158,735 42,199 81,817 93,626 2,460 $ 378,837 SeptemberMarch 30, 2014 and March 28, 2013 and September 27, 2014.2015.September 27, 2014,March 28, 2015, approximately $294.5$289.4 million is held in entities outside the United States with approximately $94$104.2 million specifically held within consolidated Delta Ltd., a wholly-owned subsidiary of the Company. Delta Ltd. sponsors a defined benefit pension plan and therefore, the Company is allowed to dividend out Delta Ltd.'s available cash only as long as that dividend does not negatively impact Delta Ltd.'s ability to meet its annual contribution requirements of the pension plan. We believe that the cash payments Delta Ltd. receives from its intercompany notes will provide sufficient funds to meet the pension funding requirements but additional analysis on pension funding requirements would have to be performed prior to the repatriation of the $94$104.2 million of Delta Ltd.'s cash balances.$34.1$28.2 million in income taxes to repatriate that cash.WeThere have futurebeen no material changes to our financial obligations related to (1) payment of principal and interestfinancial commitments as described on interest-bearing debt, (2) Delta pension plan contributions, (3) operating leases and (4) purchase obligations. These obligations at September 27, 2014 were as follows (in millions of dollars): Total Remaining
2014 2015 - 2016 2017 - 2018 After
2018 $ 768.8 $ 0.2 $ 2.5 $ 2.1 $ 764 1,002.5 10.7 85.3 85.3 821.2 136.8 — 36.2 36.2 64.4 97.9 6.9 40.0 22.1 28.9 4.7 — — 4.7 — 82.0 22.0 60.0 — — $ 2,092.7 $ 39.8 $ 224.0 $ 150.4 $ 1,678.5 Long-term debt mainly consists of three tranches of senior unsecured notes. On September 22, 2014, the Company issued and sold $250.0 million aggregate principal amount of the Company's 5.00% senior notes due 2044 and $250.0 million aggregate principal amount of the Company's 5.25% senior notes due 2054. On September 22, 2014, the Company repurchased through a partial tender offer $199.8 millionpage 40 in aggregate principal amount of the company's 6.625% senior notes due 2020, and$250.2 million of the notes remain outstanding following the conclusion of the tender offer. At September 27, 2014, we had no outstanding borrowings under our bank revolving credit agreement (which was amended on October 17, 2014 to extend the maturity to 2019 and increase potential borrowings to $600 million). Obligations under these agreements may be accelerated in event of non-compliance with debt covenants. The Delta pension plan contributions are related to the current cash funding commitments to the plan with the plan's trustees. Operating leases relate mainly to various production and office facilities and are in the normal course of business. Acquisition earn-out payments relate to anticipated payments to the prior owners of Pure Metal Galvanizing (PMG) and Locker, as a portion of the consideration paid for these entities is contingent in nature. The earn-out arrangements generally relate to the meeting of certain profitability targets. Locker's target period ends in February 2015 and PMG's ends in December 2017. During 2014, the Company made payments of approximately $2.3 million to the sellers of Locker with respect to achievement of those targets. The Company determined during the third quarter of 2014 that the Locker gross profit targetForm 10-K for the twelve months ending February 2015 would not be achieved and therefore the additional purchase price with respect to this target will not be paid. As such, approximately $4.3 milllion of this liability was reversed and recognized against cost of goods sold for the third quarterfiscal year ended December 27, 2014. Unconditional purchase commitments relate to purchase orders for zinc, aluminum and steel, all of which we plan to use within the next year, and certain capital investments planned for the next year. We believe the quantities under contract are reasonable in light of normal fluctuations in business levels and we expect to use the commodities under contract during the contract period. At September 27, 2014, we had approximately $44.4 million of various long-term liabilities related to certain income tax, environmental and other matters. These items are not scheduled above because we are unable to make a reasonably reliable estimate as to the timing of any potential payments.3840 in our Form 10-K for the fiscal year ended December 28, 2013.27, 2014.39-4342-45 in our Form 10-K for the fiscal year ended December 28, 201327, 2014 during the quarter ended September 27, 2014.March 28, 2015.September 27, 2014.March 28, 2015. For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year ended December 28, 2013.27, 2014. Total Number
of Shares
Purchased Average Price
paid per share Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs Approximate Dollar
Value of Maximum
Number of Shares
that may yet be
Purchased under
the Program(1) Total Number
of Shares
Purchased Average Price
paid per share Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs Approximate Dollar
Value of Maximum
Number of Shares
that may yet be
Purchased under
the Program(1) 703,020 $ 149.80 703,020 317,602,000 699,200 145.16 699,200 216,109,000 234,000 138.48 234,000 183,704,000 111,500 $ 118.42 111,500 91,751,000 308,970 122.37 308,970 303,941,000 177,757 123.12 177,757 282,055,000 1,636,220 $ 146.20 1,636,220 183,704,000 598,227 $ 121.86 598,227 282,055,000 �� September 27, 2014,March 28, 2015, we have acquired 2,126,3923,309,376 shares for approximately $316.3$467.9 million under this share repurchase program. For Withheld Broker Non-Votes 19,144,560 555,440 2,205,803 18,970,834 729,166 2,205,803 For 18,944,137
Against
718,311
Abstain
37,552
Broker non-votes
2,205,803For 21,385,277
Against
430,715
Abstain
89,811 Exhibit No. Description 31.1 Section 302 Certificate of Chief Executive Officer
31.2
Section 302 Certificate of Chief Financial Officer
32.1
Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
101
The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended September 27, 2014,March 28, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information. VALMONT INDUSTRIES, INC.
(Registrant)
/s/ MARK C. JAKSICH
Mark C. Jaksich
Executive Vice President and Chief Financial OfficerOctober, 2014.April, 2015. Exhibit No. Description 31.1 Section 302 Certificate of Chief Executive Officer
31.2
Section 302 Certificate of Chief Financial Officer
32.1
Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
101
The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended September 27, 2014,March 28, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information.