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 Third Quarter Ended Commission File Number
September 28, 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 November 5, 1996 there were outstanding 13,636,103 common shares
of the registrant.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations for
the three and nine months ended September 28, 1996
and September 30, 1995. 2
Condensed Consolidated Balance Sheets as of
September 28, 1996 and December 30, 1995 3
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 28, 1996 and
September 30, 1995 4
Notes to Condensed 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 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 Thirty-nine Weeks Ended
-------------------- ----------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
------- ------- ------- -------
Net sales $148,048 128,269 463,811 403,910
Cost of sales 107,465 93,170 339,316 298,986
------- ------- ------- -------
Gross profit 40,583 35,099 124,495 104,924
Selling, general and
administrative expenses 29,333 26,715 87,300 75,224
------- ------- ------- -------
Operating income 11,250 8,384 37,195 29,700
------- ------- ------- -------
Other income (deductions):
Interest expense (990) (1,034) (2,999) (3,215)
Interest income 103 238 267 513
Miscellaneous (85) 367 (138) 217
------- ------- ------- -------
(972) (429) (2,870) (2,485)
------- ------- ------- -------
Earnings before income
taxes 10,278 7,955 34,325 27,215
------- ------- ------- -------
Income tax expense:
Current 5,063 3,936 13,790 9,622
Deferred (1,363) (1,252) (1,490) (63)
------- ------- ------- -------
3,700 2,684 12,300 9,559
------- ------- ------- -------
Net Earnings $ 6,578 5,271 22,025 17,656
======= ======= ======= =======
Net Earnings per share $ 0.47 0.38 1.58 1.29
======= ======= ======= =======
Cash dividends per share $ 0.100 0.075 0.275 0.225
======= ======= ======= =======
Weighted average number of
shares of common and
common equivalent shares
outstanding (000 omitted) 13,998 13,752 13,972 13,700
======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
Page 2
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 28, December 30,
ASSETS 1996 1995
- ----------------------------------------- ------- -------
Current assets:
Cash and cash equivalents $ 10,910 16,996
Receivables 93,823 82,211
Deferred income taxes 8,724 8,524
Inventories 86,070 76,426
Prepaid expenses 2,353 1,670
------- -------
Total current assets 201,880 185,827
------- -------
Other assets:
Investments in nonconsolidated affiliates 3,947 1,375
Other 7,438 7,976
------- -------
Total other assets 11,385 9,351
------- -------
Net property, plant and equipment 125,020 113,532
------- -------
Total assets $ 338,285 308,710
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------
Current liabilities:
Current installments of long-term debt $ 8,045 7,950
Notes payable to banks 12,051 3,492
Accounts payable 46,529 46,900
Accrued expenses 51,073 45,475
Dividends payable 1,363 1,017
------- -------
Total current liabilities 119,061 104,834
------- -------
Deferred income taxes 8,856 10,543
Long-term debt, excl. current installments 26,136 28,737
Minority interest in consolidated
subsidiaries 2,270 2,220
Other noncurrent liabilities 3,410 3,120
Shareholders' equity:
Preferred stock -- --
Common stock of $1 par value 13,950 13,950
Additional paid-in capital 6,042 4,694
Retained earnings 155,289 137,009
Currency translation adjustment 3,337 3,689
Treasury stock (19) .(24)
Unearned restricted stock (47) (62)
------- -------
Total shareholders' equity 178,552 159,256
------- -------
Total liabilities and shareholders'
equity $ 338,285 308,710
======= =======
See accompanying notes to condensed consolidated financial statements.
Page 3
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Thirty-nine Weeks Ended
-----------------------
September 28, September 30,
1996 1995
------- -------
Net cash provided by operations $ 14,654 17,112
------- -------
Cash flows from investment activities:
Purchase of property, plant & equipment (22,459) (26,304)
Change in other assets (1,292) 1,788
Proceeds from investments by minority
shareholders -- 1,644
Acquisitions (703) --
Proceeds from sale, net of gain,
of property and equipment 583 107
Other, net (36) 810
------- -------
Net cash used by investment activities (23,907) (21,955)
------- -------
Cash flows from financing activities:
Net borrowings under short-term
agreements 8,378 380
Proceeds from long-term borrowings 1,598 --
Principal payments and on long-term
obligations (3,898) (4,160)
Dividends paid (3,398) (2,598)
Distributions of pooled company -- (2,100)
Proceeds from exercise of employee
stock plans 944 71
Purchase of common treasury shares (457) --
------- -------
Net cash provided (used) by
financing activities 3,167 (8,407)
------- -------
Net decrease in cash and
cash equivalents (6,086) (13,250)
Cash and cash equivalents--beginning of
period 16,996 30,128
------- -------
Cash and cash equivalents--end of period $10,910 16,878
======= =======
See accompanying notes to condensed consolidated financial statements.
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 28, 1996
and the Condensed Consolidated Statements of Operations for the
thirteen week and thirty-nine week periods ended September 28,
1996 and September 30, 1995 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 28, 1996 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 30, 1995 Annual Report to
shareholders. The results of operations for the period ended
September 28, 1996 are not necessarily indicative of the
operating results for the full year.
2. Inventories
-----------
Approximately 58% 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).
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 $2,651 and $2,763 for the thirty-
nine week periods ended September 28, 1996 and September 30,
1995, respectively. Income taxes paid, net of refunds, were
$12,803 and $4,675 for the thirty-nine week periods ended
September 28, 1996 and September 30, 1995, respectively.
4. 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.
Page 5
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(Continued)
5. 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
Management's discussion and analysis contains forward looking
statements which reflect management's current views and estimates of
future economic circumstances, industry conditions, company
performance and the financial results. The statements are based on
many assumptions and factors, including availability and price of raw
materials, product pricing, competitive environment and related
domestic and international market conditions, operating efficiencies,
and actions of domestic and foreign governments. Any changes in such
assumptions or factors could produce significantly different results.
Results of Operations
- ---------------------
For the third quarter of 1996 net sales were $148.0 million, an
increase of 15% over the $128.3 million for the same period last year.
Net sales for the first three quarters of 1996 were $463.8 million
versus $403.9 million in the same period last year. Sales of
Irrigation products for the third quarter and the 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 purchase irrigation equipment.
Sales of irrigation products to international markets for the third
quarter and first three quarters of 1996 also increased compared to
sales for the same periods a year ago, as a result of increasing
demand for grain products, low grain inventories, and strong commodity
prices.
Sales in the Industrial Products segment increased in the third
quarter of 1996 compared to the same period 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 a small sales
decrease in the third quarter compared to a year ago, but 1996 sales
remain ahead of year-to-date sales for 1995.
Gross profit as a percent of sales remained unchanged at 27.4% for the
third quarter of 1996 and 1995. Year-to-date gross profit was 26.8%
compared to 26.0% for 1996 and 1995, respectively. This increase
results 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 $29.3 million
for third quarter of 1996 and $26.7 million for the same period of
1995; and, as a percent of sales, SG&A expenses for the respective
quarters were 19.8% and 20.8%. SG&A expenses for the first three
quarters of 1996 and 1995 were $87.3 million and $75.2 million,
respectively. Year-to-date SG&A expenses, as a percent of sales, were
18.8% for 1996 and 18.6% 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.
Page 7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
For the third quarters of both 1996 and 1995 interest expense was
unchanged at $1.0 million. Year-to-date, interest expense was $3.0
million and $3.2 million in 1996 and 1995, respectively. The decrease
in 1996 results primarily from average debt levels being lower.
The effective income tax rates for the first three quarters of 1996
and 1995 were 35.8% and 35.1%, 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 $22.0 million in the
first thirty-nine weeks of 1996 from $17.7 million in the same period
in 1995. For the third quarter, net earnings were $6.6 million in
1996 versus $5.3 million in 1995. Earnings per share were $1.58 and
$1.29 for the first thirty-nine weeks of 1996 and 1995, respectively
and $0.47 and $0.38 for the third quarter of 1996 and 1995,
respectively.
Liquidity and Capital Resources
- -------------------------------
Net working capital at September 28, 1996 amounted to $82.8 million
compared to $84.3 million at December 30, 1995. The ratio of current
assets to current liabilities was 1.7:1 at September 28, 1996 and
1.8:1 at December 30, 1995.
Expenditures for property, plant and equipment for the thirty-nine
week period ended September 28, 1996 were approximately $22.5 million,
while depreciation of property, plant & equipment was $10.4 million.
Available lines of credit total $45.7 million of which approximately
$35.6 million was unused at September 28, 1996. Long-term debt was
15.3% of total capitalization at September 28, 1996 versus 19.7% at
December 30, 1995.
Overall, the Company believes the 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 5. OTHER INFORMATION.
- ----------------------------
Valmont's bylaws as amended through October 28, 1996, are set
forth as Exhibit 3.1. The amended bylaws set forth certain procedures
which stockholders must follow in order to nominate a director or
present any other business at an annual stockholders' meeting.
Generally, a stockholder must give timely notice to the secretary of
the company. To be timely, such notice must be received by the
company not less than sixty nor more than ninety days prior to the
first anniversary of the preceding year's annual stockholders'
meeting.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
--------
3.1 Bylaws of Valmont as amended through October 28, 1996
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.
By /s/Terry J. McClain
-----------------
Terry J. McClain
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated this __7th__ day of November, 1996.
Page 9