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 July 1, 1995
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 August 1, 1995 there were outstanding 11,554,546 common shares
of the registrant.
Page 1
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands except per share amounts)
(Unaudited)
July 1, December 31,
ASSETS 1995 1994
----------------------------------------- ------- -------
Current assets:
Cash and cash equivalents $ 18,631 29,582
Receivables, net 78,427 73,185
Deferred income taxes 7,189 7,149
Inventories 66,663 59,221
Prepaid expenses 1,695 1,867
------- -------
Total current assets 172,605 171,004
------- -------
Other assets:
Investments in nonconsolidated affiliates 991 991
Other 7,362 7,796
------- -------
Total other assets 8,353 8,787
------- -------
Net property, plant and equipment 99,197 86,383
------- -------
Total assets $ 280,155 266,174
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------
Current liabilities:
Accounts and notes payable $ 43,409 42,519
Other current liabilities 47,416 47,570
------- -------
Total current liabilities 90,825 90,089
------- -------
Deferred income taxes 11,479 9,990
Long-term debt, excl. current installments 34,458 35,489
Minority interest in consolidated
subsidiaries 2,127 501
Other noncurrent liabilities 2,745 2,638
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 1,749 1,664
Retained earnings 121,427 112,532
Currency translation adjustment 3,916 2,001
------- -------
Less: 139,092 128,197
Cost of common shares in treasury--
445,454 in 1995 (454,745 in 1994) 500 648
Unearned restricted stock 71 82
------- -------
Total shareholders' equity 138,521 127,467
------- -------
Total liabilities and shareholders'
equity $ 280,155 266,174
Page 2 ======= =======
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-
six Weeks Ended
-------------------- --------
--------------
July 1, June 25, July 1,
June 25,
1995 1994 1995
1994
------- ------- -------
-------
Net sales $124,640 121,967 258,298
233,152
Cost of sales 92,879 94,393 194,920
181,221
------- ------- -------
-------
Gross profit 31,761 27,574 63,378
51,931
Selling, general and administrative
expenses 21,826 19,580 44,858
38,249
------- ------- -------
-------
Operating income 9,935 7,994 18,520
13,682
------- ------- -------
-------
Other income (deductions):
Interest expense (1,041) (1,263)
(2,126) (2,575)
Interest income 119 142 275
250
Miscellaneous 50 3
(194) 334
------- ------- -------
-------
(872) (1,118)
(2,045) (1,991)
------- ------- -------
-------
Earnings before income taxes 9,063 6,876 16,475
11,691
------- ------- -------
-------
Income tax expense:
Current 2,971 2,371 4,596
2,792
Deferred 226 182 1,251
1,563
------- ------- -------
-------
3,197 2,553 5,847
4,355
------- ------- -------
-------
Net earnings $ 5,866 4,323 10,628
7,336
======= ======= =======
=======
Net earnings per share $ 0.50 0.37 0.91
0.63
======= ======= =======
=======
Cash dividends per share $ 0.075 0.075 0.150
0.150
======= ======= =======
=======
Weighted average number of shares of
common stock outstanding (000 omitted) 11,759 11,673 11,721
11,678
======= ======= =======
=======
Page 3
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Twenty-six Weeks Ended
--------------------
July 1, June 25,
1995 1994
------- -------
Net cash provided (used) by operations $ 7,038 22,146
------- -------
Cash flows from investment activities:
Purchase of property, plant & equipment (16,618) (10,824)
Additions to other assets (146) (379)
Proceeds from investments by minority
shareholders 1,594 --
Proceeds from sale, net of gain,
of property and equipment 120 2,501
Other, net 654 177
------- -------
Net cash used in
investment activities (14,396) (8,525)
------- -------
Cash flows from financing activities:
Net borrowings under short-term agreements 313 (141)
Principal payments and retirement of
long-term obligations (2,204) (389)
Dividends paid (1,732) (1,732)
Proceeds from exercise of employee
stock plans 30 451
Purchase of common treasury shares -- (44)
------- -------
Net cash used in financing activities (3,593) (1,855)
------- -------
Net increase (decrease)in cash and
cash equivalents (10,951) 11,766
Cash and cash equivalents--beginning of
period 29,582 14,018
------- -------
Cash and cash equivalents--end of period $18,631 25,784
======= =======
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 July 1, 1995 and
the Condensed Consolidated Statements of Operations for the
thirteen week and twenty-six week periods ended July 1, 1995 and
June 25, 1994 and the Condensed Consolidated Statements of Cash
Flows for the twenty-six 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 July 1, 1995 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 31, 1994 Annual Report to
shareholders. The results of operations for the periods ended
July 1, 1995 are not necessarily indicative of the operating
results for the full year.
2. Inventories
-----------
Approximately 56% of the Company's inventories are valued at cost
on the basis of the last-in first-out (LIFO) dollar value method
under the natural business unit concept, which is not in excess
of market (net realizable value). As a result, it is not
possible to segregate the inventories into their component values
of raw material, work-in-process and finished goods. All other
inventories are valued at the lower of first-in first-out (FIFO)
cost or market (net realizable) value.
3. 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 $1,734 and $2,025 for the twenty-
six week periods ended July 1, 1995 and June 25, 1994,
respectively. Income taxes paid, net of refunds, were $1,014 and
$129 for the twenty-six week periods ended July 1, 1995 and June
25, 1994, respectively.
4. 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 second quarter of 1995 net sales were $124.6 million versus
$122.0 million for the same period last year. Net sales for this
year's first half were $258.3 million, an increase of 11% over the
$233.2 million in the same period last year. Sales in the Irrigation
Products Segment decreased in the second quarter but remained
approximately the same for the first half of 1995 versus the same
period in 1994. The decrease in 1995's second quarter sales was the
result of a wet spring in a large part of the market area, reduced
buying due to uncertainty over farm legislation and the threat of
higher interest rates. Sales to international markets for both the
second quarter and first half of 1995 were above those levels for
1994.
Sales in the Industrial Products Segment rose substantially, primarily
on strong volume from European based manufacturing operations and
continued growing demand for poles and towers for the communication
industry. For the second quarter and first half, net sales in the
North American pole and tubing operations increased in 1995 versus the
same periods in 1994. The ballast business reflected level sales in
the second quarter and first half of 1995 compared to the same periods
in 1994.
Gross profit as a percent of sales was 25.5% and 22.6% for the second
quarter of 1995 and 1994, respectively. Year-to-date gross profit was
24.5% compared to 22.3% for 1994. The increase in 1995's gross profit
percentages primarily results from the ballast business reporting a
substantial improvement due to reduced costs and the European pole
operations recovering from the economic downturns of a year ago.
Selling, general and administrative (SG&A) expenses were $21.8 million
and $19.6 million for second quarters of 1995 and 1994, respectively;
and, as a percent of sales, SG&A expenses for both respective quarters
were 17.1% and 16.1%. SG&A expenses for the first half of 1995 and
1994 were $44.9 million and $38.2 million, respectively. Year-to-date
SG&A expenses, as a percent of sales, were 17.4% for 1995 and 16.4%
for 1994. The increase in SG&A expenses are due to higher sales
commissions and incentives and investments in future business
development both domestically and abroad.
For the second quarter of 1995 and 1994, interest expense was $1.0
million and $1.3 million, respectively. For the first half of 1995
and 1994, interest expense was $2.1 million and $2.6 million,
respectively. The decreases in 1995 result primarily from lower debt
levels.
The effective income tax rates for the first half of 1995 and 1994
were 35.5% and 37.3%, respectively, which do not vary significantly
from the expected statutory rate for the periods. Increased tax
exempt interest income and larger tax benefits from the use of a
foreign sales corporation have caused the decrease in the rate.
Page 6
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of
Financial Condition and Results of Operations (Continued)
As a result of the aforementioned operating factors and general
business conditions, net earnings increased to $10.6 million in the
first half of 1995 from $7.3 million in the same period in 1994. For
the second quarter, net earnings were $5.9 million in 1995 versus $4.3
million in 1994. Net earnings per share were $0.91 and $0.63 for the
first half of 1995 and 1994, respectively and $0.50 and $0.37 for the
second quarter of 1995 and 1994, respectively.
Liquidity and Capital Resources
-------------------------------
Net working capital at July 1, 1995 was $81.8 million compared to
$80.9 million at December 31, 1994. The ratio of current assets to
current liabilities was 1.9:1 at both July 1, 1995 and December 31,
1994.
Expenditures for property, plant and equipment for the twenty-six week
period ended July 1, 1995 were approximately $16.6 million, while
depreciation of property, plant & equipment was $5.8 million. The
major investments during the first six months are the China facility
under construction, the move to a new Utah facility, expansion of the
Texas light pole plant and capacity improvements at the Valley site.
Available lines of credit total $55 million of which approximately $53
million was unused at July 1, 1995. Long-term debt was 21.8% of total
capitalization at July 1, 1995 versus 23.9% at December 31, 1994.
Valmont's objective is to maintain long-term debt in the range of 32%
to 40% of total capital employed. The Company is below the lower
limit of the range due to the disposal of Inacom Corp. in 1993 and the
subsequent payment on long-term debt.
The Company believes the cash flow from operations, existing credit
facilities and capital structure now in place will be adequate to
satisfy 1995 capital expenditures, dividends and other financial
commitments.
Page 7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Valmont's annual shareholders' meeting was held on April 18,
1995. Information concerning matters voted on at the
meeting was included in Valmont's 10-Q Report for the
quarter ended April 1, 1995.
Item 5. OTHER INFORMATION
-----------------
On July 9, 1995, the Company entered into an agreement to
merge Microflect Company Inc. of Salem, Oregon, into Valmont
Industries, Inc. Terms of the agreement provide that
Valmont will exchange 1.95 million shares of its common
stock for all the outstanding capital stock of Microflect.
Currently, Valmont has 11.6 million common shares out-
standing. The transaction will be accounted for as a
pooling of interests. Closing of the transaction occurred
on July 31, 1995.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
A. Exhibits
--------
None
B. Reports on Form 8-K
-------------------
The Company filed a report on Form 8-K dated July 9, 1995
relating to the agreement to acquire Microflect Company Inc.
The 8-K included as an exhibit the Agreement of merger.
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 __1st__ day of August, 1995.
Page 8