SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Second Quarter Ended Commission File Number
June 29, 1996 0-3701
VALMONT INDUSTRIES, INC.
Valley, Nebraska 68064
Telephone Number 402-359-2201
Delaware 47-0351813
(State of Incorporation) (I.R.S. Employer Identification
No.)
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 July 31, 1996 there were outstanding 13,630,350 common shares of
the registrant.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
------------------
PART I. FINANCIAL INFORMATION Page No.
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Item 1. Condensed Financial Statements:
Consolidated Statements of Operations for the three
and six months ended June 29, 1996 and
July 1, 1995 2
Consolidated Balance Sheets as of June 29,
1996 and December 30, 1995 3
Consolidated Statement of Cash Flows for the
six months ended June 29, 1996 and
July 1, 1995 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
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Page 1
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
------- ------- ------- -------
Net sales $166,849 133,418 315,763 275,641
Cost of sales 122,936 98,470 231,851 205,816
------- ------- ------- -------
Gross profit 43,913 34,948 83,912 69,825
Selling, general and administrative
expenses 29,693 23,640 57,967 48,509
------- ------- ------- -------
Operating income 14,220 11,308 25,945 21,316
------- ------- ------- -------
Other income (deductions):
Interest expense (1,010) (1,096) (2,009) (2,181)
Interest income 75 119 164 275
Miscellaneous 16 66 (53) (150)
------- ------- ------- -------
(919) (911) (1,898) (2,056)
------- ------- ------- -------
Earnings before income taxes 13,301 10,397 24,047 19,260
------- ------- ------- -------
Income tax expense:
Current 5,127 3,502 8,727 5,686
Deferred (327) 204 (127) 1,189
------- ------- ------- -------
4,800 3,706 8,600 6,875
------- ------- ------- -------
Net Earnings $ 8,501 6,691 15,447 12,385
======= ======= ======= =======
Net Earnings per share $ 0.61 0.49 1.11 0.91
======= ======= ======= =======
Cash dividends per share $ 0.10 0.075 0.175 0.150
======= ======= ======= =======
Weighted average number of shares of
common and common equivalent shares
outstanding (000) 14,013 13,709 13,895 13,671
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
Page 2
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 29, December 30,
ASSETS 1996 1995
- ----------------------------------------- ------- -------
Current assets:
Cash and cash equivalents $ 11,173 16,996
Receivables 92,202 82,211
Deferred income taxes 6,635 8,524
Inventories 79,081 76,426
Prepaid expenses 2,001 1,670
------- -------
Total current assets 191,092 185,827
------- -------
Other assets:
Investments in nonconsolidated affiliates 3,922 1,375
Other 7,237 7,976
------- -------
Total other assets 11,159 9,351
------- -------
Net property, plant and equipment 122,651 113,532
------- -------
Total assets $ 324,902 308,710
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------
Current liabilities:
Current installments of long-term debt $ 8,061 7,950
Notes payable to banks 6,806 3,492
Accounts payable 46,088 46,900
Accrued expenses 46,992 45,475
Dividends payable 1,363 1,017
------- -------
Total current liabilities 109,310 104,834
------- -------
Deferred income taxes 10,351 10,543
Long-term debt, excl. current installments 27,729 28,737
Minority interest in consolidated
subsidiaries 2,259 2,220
Other noncurrent liabilities 3,087 3,120
Shareholders' equity:
Preferred stock -- --
Common stock of $1 par value 13,950 13,950
Additional paid-in capital 5,531 4,694
Retained earnings 150,075 137,009
Currency translation adjustment 2,682 3,689
Treasury stock (20) (24)
Unearned restricted stock (52) (62)
------- -------
Total shareholders' equity 172,166 159,256
------- -------
Total liabilities and shareholders'
equity $ 324,902 308,710
======= =======
See accompanying notes to consolidated financial statements.
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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Twenty-six Weeks Ended
-----------------------
June 29, July 1,
1996 1995
------- -------
Net cash provided by operations $ 11,573 8,014
------- -------
Cash flows from investment activities:
Purchase of property, plant & equipment (16,618) (17,037)
Change in other assets (2,203) (140)
Proceeds from investment by minority
shareholders -- 1,594
Acquisitions (762) --
Proceeds from sale, net of gain,
of property and equipment 1,266 120
Other, net (246) 654
------- -------
Net cash used by investment activities (18,563) (14,809)
------- -------
Cash flows from financing activities:
Net borrowings under short-term
agreements 3,170 1,513
Proceeds from long-term borrowings 1,598 --
Principal payments on long-term
obligations (1,999) (2,204)
Dividends paid (2,036) (1,732)
Distributions of pooled company -- (2,101)
Proceeds from exercise of employee
stock plans 831 30
Purchase of common treasury shares (397) (1)
------- -------
Net cash provided (used) by
financing activities 1,167 (4,495)
------- -------
Net decrease in cash and
cash equivalents (5,823) (11,290)
Cash and cash equivalents--beginning of
period 16,996 30,128
------- -------
Cash and cash equivalents--end of period $11,173 18,838
======= =======
See accompanying notes to consolidated financial statements.
Page 4
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. Condensed Consolidated Financial Statements
-------------------------------------------
The Condensed Consolidated Balance Sheet as of June 29, 1996 and
the Condensed Consolidated Statements of Operations for the
thirteen week and twenty-six week periods ended June 29, 1996 and
July 1, 1995 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 (all of which are of a
normal recurring nature) of the Company have been made to present
fairly the financial position at June 29, 1996 and the results of
operations and cash flows for each of the periods presented.
Certain information and footnote disclosures normally included in
annual 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 30, 1995 Annual Report to
shareholders. The results of operations for the period ended
June 29, 1996 are not necessarily indicative of the operating
results for the full year.
2. Acquisitions
------------
On July 31, 1995, Microflect Company, Inc. was merged with and
became a wholly-owned subsidiary of the Company pursuant to the
terms of an agreement and Plan of Merger under which the Company
exchanged 1,950,000 shares of its common stock for all of the
outstanding common stock of Microflect. The merger qualifies as
a tax-free reorganization and was accounted for as a pooling of
interests. Accordingly, the Company's financial statements have
been restated to include the results of Microflect for all
periods presented. Microflect designs, manufactures and installs
communication structures, passive repeaters, waveguide supporting
systems, and components for the wireless communication market.
In addition to its microwave tower business, it operates a
grating division and an industrial fasteners division.
3. Inventories
-----------
Approximately 49% 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 lower of first-in first-out (FIFO) cost
or market (net realizable value).
Page 5
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(Continued)
4. 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 $1,733 and $1,734 for the twenty-
six week periods ended June 29, 1996 and July 1, 1995,
respectively. Income taxes paid, net of refunds, were $6,233 and
$1,014 for the twenty-six week periods ended June 29, 1996 and
July 1, 1995, respectively.
5. Earnings Per Share
------------------
Earnings per share are based on the weighted average number
of common shares outstanding and equivalent common shares from
in-the-money stock options. The difference between primary and
fully-diluted earnings per share is not material.
6. Use of Estimates
----------------
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
Page 6
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The accompanying consolidated financial statements have been restated
for all periods presented to reflect the acquisition of Microflect
Company, Inc. on July 31, 1995. For the second quarter of 1996 net
sales were $166.8 million, an increase of 25% over the $133.4 million
for the same period last year. Net sales for the first two quarters
of 1996 were $315.8 million versus $275.6 million in the same period
last year. Sales in the Irrigation Products Segment for the second
quarter and year-to-date 1996 were at record high levels. North
America sales increased from the volume reported in 1995 as excellent
commodity prices and improved farm income prompted U.S. farmers to
expedite the purchase of irrigation equipment. Sales of irrigation
products to international markets for the second quarter and first two
quarters of 1996 increased compared to sales for the same periods a
year ago,as a result of strong sales volume in South America, Western
Europe and Southern Afica.
Sales in the Industrial Products Segment increased in the second
quarter and year-to-date 1996, compared to the same periods in 1995.
Strong demand for light poles and communication towers in North
America was the primary reason for the sales growth. In Europe, sales
were up due to acquisitions made earlier this year. Also, the start-
up operation in China has added to the overall increase in sales both
for the quarter and year-to-date. The ballast business reported small
sales increases in the second quarter and the first six months of 1996
compared to the same periods in 1995.
Gross profit as a percent of sales was 26.3% and 26.2% for the second
quarter of 1996 and 1995, respectively. Year-to-date gross profit was
26.6% compared to 25.3% for 1996 and 1995, respectively. These
increases result from a favorable pricing environment in the
Irrigation Products Segment and improved productivity and operating
efficiencies throughout the Company.
Selling, general and administrative (SG&A) expenses were $29.7 million
for second quarter of 1996 and $23.6 million for the same period of
1995; and, as a percent of gross profit, SG&A expenses for the
respective quarters were unchanged at 67.6%. SG&A expenses for the
first two quarters of 1996 and 1995 were $58.0 million and $48.5
million, respectively. Year-to-date SG&A expenses, as a percent of
gross profit, were 69.1% for 1996 and 69.5% for 1995. The dollar
amount of SG&A expenses increased in 1996 to support the higher sales
volume and business development in the domestic and international
markets.
For the second quarter of 1996 interest expense was $1.0 million
compared to $1.1 million in the same period of 1995. Year-to-date,
interest expense was $2.0 million and $2.2 million in 1996 and 1995,
respectively. The decrease in 1996 results primarily from lower debt
levels.
Page 7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The effective income tax rates for the first two quarters of 1996 and
1995 were 35.8% and 35.7%, respectively, which do not vary
significantly from the expected statutory rate for the periods.
As a result of the aforementioned operating factors and general
business conditions, net earnings increased to $15.4 million in the
first twenty-six weeks of 1996 from $12.4 million in the same period
in 1995. For the second quarter, net earnings were $8.5 million in
1996 versus $6.7 million in 1995. Earnings per share were $1.11 and
$0.91 for the first twenty-six weeks of 1996 and 1995, respectively
and $0.61 and $0.49 for the second quarter of 1996 and 1995,
respectively.
Liquidity and Capital Resources
- -------------------------------
Net working capital at June 29, 1996 amounted to $81.8 million
compared to $81.0 million at December 30, 1995. The ratio of current
assets to current liabilities was 1.7:1 at June 29, 1996 versus 1.8:1
at December 30, 1995.
Expenditures for property, plant and equipment for the twenty-six week
period ended June 29, 1996 were approximately $16.8 million, while
depreciation of property, plant & equipment was $6.9 million.
Available lines of credit total $50.7 million of which approximately
$45.8 million was unused at June 29, 1996. Long-term debt was 15.7%
of total capitalization at June 29, 1996 versus 17.3% at December 30,
1995.
The Company believes that cash flow from operations, the credit
facilities and capital structure now in place will be adequate to
satisfy planned capital expenditures, dividends and other financial
commitments.
Page 8
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
Valmont's annual stockholders' meeting was held on April 22,
1996. Information concerning matters voted on at the meeting was
included in Valmont's 10-Q Report for the quarter ended March 30,
1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- -------------------------------------------
(a) Exhibits:
27 Financial Data Schedule
(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.
(Registrant)
By /s/ Terry J. McClain
_______________________
Terry J. McClain
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated this 2ND day of August, 1996.
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