SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 24, 1994
Commission File Number 0-3701
VALMONT INDUSTRIES, INC.
Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 47-0351813
Valley, Nebraska 68064
Registrant's telephone number, including area code (402) 359-2201
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months, and (2) has been
subject to such filing requirements for the past ninety days.
Yes__X__ No_____
As of October 17, 1994 there were outstanding 11,543,426 common shares
of the registrant.
Page 1
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands except per share amounts)
(Unaudited)
September 24, December 25,
ASSETS 1994 1993
- - ----------------------------------------- ------- -------
Current assets:
Cash and cash equivalents $ 29,728 14,018
Receivables, net 73,069 70,159
Deferred income taxes 7,667 9,740
Inventories 55,586 69,913
Prepaid expenses 1,020 1,942
------- -------
Total current assets 167,070 165,772
------- -------
Other assets:
Investments in nonconsolidated affiliates 3,288 261
Other 4,669 7,785
------- -------
Total other assets 7,957 8,046
------- -------
Net property, plant and equipment 80,722 72,831
------- -------
Total assets $ 255,749 246,649
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- - -----------------------------------------
Current liabilities:
Accounts and notes payable $ 47,176 42,404
Other current liabilities 35,520 41,063
------- -------
Total current liabilities 82,696 83,467
------- -------
Deferred income taxes 8,963 8,593
Long-term debt, excl. current installments 37,598 38,419
Minority interest in consolidated
subsidiaries 463 536
Other noncurrent liabilities 2,539 2,242
Shareholders' equity:
Preferred stock of $1 par value.
Authorized 500,000 shares; none issued -- --
Common stock of $1 par value.
Authorized 36,000,000 shares;
issued 12,000,000 shares 12,000 12,000
Additional paid-in capital 1,829 1,101
Retained earnings 108,473 99,880
Currency translation adjustment 1,960 557
------- -------
Less: 124,262 113,538
Cost of common shares in treasury--
456,574 in 1994 (463,602 in 1993) 686 29
Unearned restricted stock 86 117
------- -------
Total shareholders' equity 123,490 113,392
------- -------
Total liabilities and shareholders'
equity $ 255,749 246,649
======= =======
Page 2
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands except per share amounts)
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------- -----------------------
September 24, September 25, September 24, September 25,
1994 1993 1994 1993
------- ------- ------- -------
Net sales $109,852 107,212 343,004 330,100
Cost of sales 83,593 83,174 264,814 254,210
------- ------- ------- -------
Gross profit 26,259 24,038 78,190 75,890
Selling, general and administrative
expenses 19,965 18,467 58,214 57,658
------- ------- ------- -------
Operating income 6,294 5,571 19,976 18,232
------- ------- ------- -------
Other income (deductions):
Interest expense (1,306) (1,270) (3,881) (4,411)
Interest income 189 220 439 551
Miscellaneous,
including sale of property 859 (370) 1,193 (68)
------- ------- ------- -------
(258) (1,420) (2,249) (3,928)
------- ------- ------- -------
Earnings before income taxes,
discontinued operations and
cumulative effect of accounting change 6,036 4,151 17,727 14,304
------- ------- ------- -------
Income tax expense:
Current 2,853 1,105 5,645 3,586
Deferred (675) 373 888 1,414
------- ------- ------- -------
2,178 1,478 6,533 5,000
------- ------- ------- -------
Earnings from continuing operations 3,858 2,673 11,194 9,304
Earnings (loss) from
discontinued operations, net of tax -- (333) -- 4,637
Cumulative effect of accounting change -- -- -- (4,910)
------- ------- ------- -------
Net earnings $ 3,858 2,340 11,194 9,031
======= ======= ======= =======
Earnings (loss) per share:
Continuing operations $ 0.33 0.23 0.96 0.80
Discontinued operations -- (0.03) -- 0.39
Cumulative effect of accounting change -- -- -- (0.42)
------- ------- ------- -------
Net earnings $ 0.33 0.20 0.96 0.77
======= ======= ======= =======
Cash dividends per share $ 0.075 0.075 0.225 0.215
======= ======= ======= =======
Weighted average number of shares of
common stock outstanding (000 omitted) 11,664 11,643 11,673 11,671
======= ======= ======= =======
Page 3
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Thirty-nine Weeks Ended
---------------------------
September 24, September 25,
1994 1993
------- -------
Net cash provided (used) by operations $ 32,521 (15,856)
------- -------
Cash flows from investment activities:
Purchase of property, plant & equipment (15,502) (10,091)
Proceeds from sale of Inacom -- 47,557
Additions to other assets (389) (1,067)
Proceeds from sale, net of gain,
of property and equipment 2,564 2,243
Other, net 243 357
------- -------
Net cash provided by (used in)
investment activities (13,084) 38,999
------- -------
Cash flows from financing activities:
Net borrowings under short-term agreements (829) (1,825)
Proceeds from long-term borrowings 2,251 --
Principal payments and retirement of
long-term obligations (2,297) (21,441)
Dividends paid (2,601) (2,351)
Proceeds from exercise of employee
stock plans 465 917
Purchase of common treasury shares (716) (525)
------- -------
Net cash used in financing activities (3,727) (25,225)
------- -------
Net increase (decrease) in
cash and cash equivalents 15,710 (2,082)
Cash and cash equivalents--beginning of
period 14,018 12,747
------- -------
Cash and cash equivalents--end of period $29,728 10,665
======= =======
Page 4
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands)
(Unaudited)
1. Condensed Consolidated Financial Statements
-------------------------------------------
The Condensed Consolidated Balance Sheet as of September 24, 1994
and the Condensed Consolidated Statements of Operations for the
thirteen week and thirty-nine week periods ended September 24,
1994 and September 25, 1993 and the Condensed Consolidated
Statements of Cash Flows for the thirty-nine week periods 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 position at September 24, 1994 and for all periods
presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles 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 December 25, 1993 Annual Report to
shareholders. The results of operations for the period ended
September 24, 1994 are not necessarily indicative of the
operating results for the full year.
2. Cash Flows
----------
For purposes of the Condensed Consolidated Statements of Cash
Flows, the Company considers cash and cash investments with a
maturity of three months or less when purchased, to be cash
equivalents. Interest paid was $3,050 and $3,718 for the thirty-
nine week periods ended September 24, 1994 and September 25,
1993, respectively. Income taxes paid, net of refunds, were
$1,832 and $12,780 for the thirty-nine week periods ended
September 24, 1994 and September 25, 1993, respectively.
3. Earnings Per Share
------------------
Earnings per share are based on the weighted average number
of common shares outstanding and equivalent common shares from
dilutive stock options.
Page 5
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of
Financial Condition and Results of Operations
Results of Operations
- - ---------------------
For the third quarter of 1994 net sales were $109.9 million, an
increase of 3% over the $107.2 million for the same period last year.
Net sales for the first three quarters of 1994 were $343.0 million
versus $330.1 million in the same period last year. Sales of
Irrigation products increased in the third quarter and the year-to-
date 1994 versus the same periods in 1993 as a result of strong demand
in the North American market. This demand was driven by increased net
farm income, relatively low interest rates and an increased emphasis
on water conservation and environmental awareness. Sales to
international markets for the third quarter and first three quarters
of 1994 declined mainly from the reduction of sales to the Saudi
Arabian market and the absence in 1994 of a large project shipped in
the third quarter of 1993. Irrigation's international sales are
geographically diverse and management does not expect the significant
decrease in sales to Saudi Arabia to have a material adverse effect on
this segment's results.
Sales in the Industrial Products segment increased in the third
quarter of 1994 compared to the same period in 1993. Year-to-date
1994, the Industrial Products segment recorded lower overall sales,
primarily from reduced volume in the ballast business and as a result
of the 1993 sale and closing of the steel reinforcing bar operations
and divestiture of the cathodic protection operation. For the third
quarter and first three quarters, net sales in the North American pole
and tubing operations increased in 1994 versus the same periods in
1993. As economic conditions improved, European pole sales increased
in the third quarter of 1994 compared to the same period in 1993.
Year-to-date European sales in 1994 were comparable to the levels
attained in 1993. The ballast business reflected lower sales in the
third quarter and first three quarters of 1994 compared to the same
periods in 1993 due to excess inventory positions by industry
manufacturers and distributors earlier in the year and the resultant
lower market prices.
Gross profit as a percent of sales was 23.9% and 22.4% for the third
quarter of 1994 and 1993, respectively. Year-to-date gross profit was
22.8% compared to 23.0% for 1994 and 1993, respectively. The third
quarter 1994 gross profit increased in the ballast and pole and tubing
businesses compared to the same period in 1993 due to improvements in
operations. The decrease in 1994's year-to-date gross profit
percentages results primarily from lower market prices experienced in
the ballast business and reduced prices on irrigation orders taken in
the last quarter of 1993 but shipped in early 1994.
Selling, general and administrative (SG&A) expenses were $20.0 million
for third quarter of 1994 and $18.5 million for the same period of
1993; and, as a percent of sales, SG&A expenses for the respective
quarters were 18.2% and 17.2%. SG&A expenses for the first three
quarters of 1994 and 1993 were $58.2 million and $57.7 million,
respectively. Year-to-date SG&A expenses, as a percent of sales, were
17.0% for 1994 and 17.5% for 1993. SG&A expenses increased in 1994
primarily due to the growth in sales volume as well as expenditures to
enhance the long-term performance of the Company.
Page 6
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of
Financial Condition and Results of Operations (Continued)
For both the third quarter of 1994 and 1993, interest expense was $1.3
million. Year-to-date, interest expense was $3.9 million and $4.4
million in 1994 and 1993, respectively. The decrease in 1994 results
primarily from lower debt levels.
The effective income tax rates for the first three quarters of 1994
and 1993 were 36.9% and 35.0%, respectively, which do not vary
significantly from the expected statutory rate for the periods.
The miscellaneous caption of other income (deductions) in the
condensed consolidated statements of operations contains gains and
losses which are of an unusual or infrequent nature. In the third
quarter and year-to-date 1994 miscellaneous income of $0.9 million and
$1.2 million, respectively, substantially exceeded the amounts from
the comparable periods of 1993 and resulted primarily from a gain on
disposal of an excess property.
As a result of the aforementioned operating factors and general
business conditions, earnings from continuing operations increased to
$11.2 million in the first thirty-nine weeks of 1994 from $9.0 million
in the same period in 1993. For the third quarter, earnings from
continuing operations were $3.9 million in 1994 versus $2.7 million in
1993. Earnings per share from continuing operations were $0.96 and
$0.80 for the first thirty-nine weeks of 1994 and 1993, respectively
and $0.33 and $0.23 for the third quarter of 1994 and 1993,
respectively.
In May 1993 Valmont sold its investment in Inacom Corp. in an
underwritten public offering. As a result of this transaction a net
gain from discontinued operation of $3.9 million or $0.33 per share
was realized. Valmont's share of Inacom's 1993 net earnings of $0.7
million or $0.06 per share, when combined with the gain from sale of
this investment, amounted to $4.6 million or $0.39 per share for the
nine month period of 1993.
Effective with the beginning of Valmont's 1993 fiscal year, the
Company adopted SFAS Statement No. 109, "Accounting for Income Taxes."
The cumulative effect of this accounting change decreased 1993 net
earnings by $4.9 million or $0.42 per share.
For the reasons described in the two preceding paragraphs, Valmont's
net earnings for 1993 differed from its earnings from continuing
operations for the periods presented. Valmont's net earnings were
$11.2 million or $0.96 per share for the first three quarters of 1994
versus $9.0 million or $0.77 during the same period of 1993. For the
third quarter of 1994, net earnings were $3.9 million or $0.33 per
share compared to $2.3 million or $0.20 per share.
Liquidity and Capital Resources
- - -------------------------------
Net working capital at September 24, 1994 amounted to $84.4 million
compared to $82.3 million at December 25, 1993. The ratio of current
assets to current liabilities was 2.0:1 at September 24, 1994 and at
December 25, 1993.
Page 7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of
Financial Condition and Results of Operations (Continued)
Expenditures for property, plant and equipment for the thirty-nine
week period ended September 24, 1994 were approximately $15.5 million,
while depreciation of property, plant & equipment was $7.0 million.
Available lines of credit total $50 million of which approximately $47
million was unused at September 24, 1994. Long-term debt was 25.4% of
total capitalization at September 24, 1994 versus 26.5% at December
25, 1993. Valmont's objective is to maintain long-term debt in the
range of 32% to 40% of total capital employed. In 1993, the proceeds
from the sale of Valmont's investment in Inacom Corp. were used to
reduce debt and invest in cash equivalents and working capital.
Overall, the Company believes the cash flow from operations, the
credit facilities and capital structure now in place will be adequate
to satisfy 1994 capital expenditures, dividends and other financial
commitments.
Page 8
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
A. Exhibits
--------
10.1 - Valmont Industries, Inc. 1994 Incentive Bonus Plan
B. Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the
past fiscal quarter.
Signatures
- - ----------
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.
VALMONT INDUSTRIES, INC.
By /s/Terry J. McClain
_______________________
Terry J. McClain
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated this __18th__ day of October, 1994.
Page 9