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 27, 1997 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 October 22, 1997 there were outstanding 27,617,635 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 thirteen
and thirty-nine weeks ended September 27, 1997 and
September 28, 1996 2
Consolidated Balance Sheets as of September 27,
1997 and December 28, 1996 3
Consolidated Statements of Cash Flows for the
thirty-nine weeks ended September 27, 1997 and
September 28, 1996 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 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
-------------------- ----------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
------- ------- ------- -------
Net sales $136,015 $148,048 $460,533 $463,811
Cost of sales 98,269 107,465 334,027 339,316
------- ------- ------- -------
Gross profit 37,746 40,583 126,506 124,495
Selling, general and administrative
expenses 24,432 29,333 82,112 87,300
------- ------- ------- -------
Operating income 13,314 11,250 44,394 37,195
------- ------- ------- -------
Other income (deductions):
Interest expense (1,002) (990) (2,965) (2,999)
Interest income 132 103 403 267
Miscellaneous (87) (85) (28) (138)
------- ------- ------- -------
(957) (972) (2,590) (2,870)
------- ------- ------- -------
Earnings before income taxes 12,357 10,278 41,804 34,325
------- ------- ------- -------
Income tax expense:
Current 4,560 5,063 11,400 13,790
Deferred (60) (1,363) 3,700 (1,490)
------- ------- ------- -------
4,500 3,700 15,100 12,300
------- ------- ------- -------
Net Earnings $ 7,857 $ 6,578 $ 26,704 $ 22,025
======= ======= ======= =======
Net Earnings per share $ 0.28 $ 0.23 $ 0.95 $ 0.79
======= ======= ======= =======
Cash dividends per share $0.05625 $ 0.05 $ 0.1625 $ 0.1375
======= ======= ======= =======
Weighted average number of common
and common equivalent shares
outstanding (000) 28,217 27,996 28,144 27,790
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
Page 2
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 27, December 28,
ASSETS 1997 1996
- ----------------------------------------- ------- -------
Current assets:
Cash and cash equivalents $ 8,616 $ 9,483
Receivables 98,295 82,224
Deferred income taxes 12,076 16,521
Inventories 77,640 73,359
Assets held for sale -- 26,903
Prepaid expenses 7,872 2,356
------- -------
Total current assets 204,499 210,846
------- -------
Other assets:
Investments in nonconsolidated affiliates 4,353 4,307
Other 4,560 5,916
------- -------
Total other assets 8,913 10,223
------- -------
Net property, plant and equipment 138,509 120,579
------- -------
Total assets $ 351,921 $ 341,648
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------
Current liabilities:
Current installments of long-term debt $ 7,233 $ 7,693
Notes payable to banks 25,465 24,007
Accounts payable 43,492 43,699
Accrued expenses 45,213 52,678
Dividends payable 1,552 1,366
------- -------
Total current liabilities 122,955 129,443
------- -------
Deferred income taxes 6,857 9,531
Long-term debt, excl. current installments 17,601 21,880
Minority interest in consolidated
subsidiaries 3,764 2,250
Other noncurrent liabilities 3,567 3,313
Shareholders' equity:
Preferred stock -- --
Common stock of $1 par value 27,900 13,950
Additional paid-in capital 294 6,458
Retained earnings 170,122 153,146
Currency translation adjustment (1,102) 1,737
Treasury stock (9) (18)
Unearned restricted stock (28) (42)
------- -------
Total shareholders' equity 197,177 175,231
------- -------
Total liabilities and shareholders'
equity $ 351,921 $ 341,648
======= =======
See accompanying notes to 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 27, September 28,
1997 1996
------- -------
Net cash provided by operations $ 9,376 $ 14,654
------- -------
Cash flows from investment activities:
Purchase of property, plant & equipment (31,945) (22,459)
Change in other assets 969 (1,292)
Acquisitions (627) (703)
Proceeds from investment by minority
shareholders 2,450 --
Proceeds from sale, net of gain,
of property and equipment 126 583
Proceeds from sale of assets held for
sale 25,000 --
Other, net (183) (36)
------- -------
Net cash used by
investment activities (4,210) (23,907)
------- -------
Cash flows from financing activities:
Net borrowings under short-term agreements 2,112 8,378
Proceeds from long-term borrowings 250 1,598
Principal payments on long-term
obligations (4,019) (3,898)
Dividends paid (4,286) (3,398)
Proceeds from exercise of employee
stock plans 1,569 944
Proceeds from issuance of common stock 905 --
Purchase of common treasury shares (2,564) (457)
------- -------
Net cash provided (used) by
financing activities (6,033) 3,167
------- -------
Net decrease in cash and cash equivalents (867) (6,086)
Cash and cash equivalents--beginning of
period 9,483 16,996
------- -------
Cash and cash equivalents--end of period $ 8,616 $ 10,910
======= =======
See accompanying notes to 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 27, 1997 and the
Condensed Consolidated Statements of Operations for the thirteen and
thirty-nine week periods ended September 27, 1997 and September 28, 1996
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 as of September 27, 1997 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
28, 1996 Annual Report to shareholders. The results of operations for
the period ended September 27, 1997 are not necessarily indicative of the
operating results for the full year.
2. Dispositions of Assets
----------------------
On January 29, 1997, pursuant to a stock purchase agreement between the
Company and Chicago Miniature Lamp, Inc. dated January 3, 1997, the Company
completed the sale to Chicago Miniature Lamp, Inc., of all outstanding
stock of Valmont Electric, Inc. for approximately $25.0 million cash.
The sale of the subsidiary's stock included Valmont's magnetic and
electronic ballast businesses located in El Paso, Texas and Juarez,
Mexico. In compliance with Statement of Financial Accounting Standards
(SFAS) Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", the Company recorded
an asset valuation charge in 1996 to reflect the value of the assets of
the ballast businesses. As such, there was no gain or loss recorded in
1997 upon the sale of such assets.
3. Inventories
-----------
Approximately 64% 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(Continued)
4. 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 $3,099 and
$2,651 for the thirty-nine week periods ended September 27, 1997 and September
29, 1996, respectively. Income taxes paid, net of refunds, were $10,219 and
$12,803 for the thirty-nine week periods ended September 27, 1997 and
September 28, 1996.
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. On April 28, 1997, the Company's Board of Directors declared a two-
for-one stock split effective May 30, 1997. All references in the financial
statements with regard to number of shares of common stock and related
dividends and per share amounts have been restated to reflect the stock split.
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 condensed consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
7. Recently Issued Accounting Pronouncements
---------------------------------------
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share", which is effective for fiscal years ending after December
15, 1997. SFAS 128 specifies the computation, presentation and disclosure
requirements for earnings per share. The objective of the statement is to
simplify the computation of earnings per share. Earnings per share computed
in accordance with SFAS 128 is not expected to be materially different than
earnings per share as currently reported.
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 financial
results. The statements are based on many assumptions and factors, including
operating efficiencies, availability and price of raw materials, availability
and market acceptance of new products, product pricing, domestic and
international competitive environment, actions and policy changes of domestic
and international governments and other risks described from time to time in
the Company's reports to the Securities and Exchange Commission. Any changes
in such assumptions or factors could produce significantly different results.
Results of Operations
- ---------------------
For the third quarter of 1997 net sales were $136.0 million, a decrease of
8.1% from the $148.0 million for the same period last year. Excluding 1996
sales of Valmont Electric which the Company sold earlier this year, sales
increased for the quarter 7.1%. Net sales for the first three quarters of 1997
were $460.5 million versus $463.8 million in the same period last year.
International sales in the Irrigation Products Segment for the third quarter
of 1997 and year-to-date led that segment's growth with domestic sales
remaining strong compared to the 1996 record level of domestic sales. High
sales growth occurred in the Middle East, southern Africa and South America.
The domestic irrigation market was positively influenced by good commodity
prices, low interest rates, farmers' focus on conserving fresh water resources,
lowering labor and energy costs and increasing crop yields. Pricing during
the second quarter was seasonally lower than the first half of the year;
however, replacement parts sales were very strong.
Sales in the Industrial Products Segment decreased in the third quarter
and year-to-date 1997, compared to the same periods in 1996 due to the sale of
Valmont Electric, Inc. in January, 1997. However, overall sales from
continuing businesses in North America increased during the third quarter.
This segment's order flow was strong and backlogs increased. Shipments of
lighting and traffic poles and utility transmission structures were up while
sales of wireless communication poles and towers decreased during the quarter
compared to 1996. In Europe, sales were up due to improving market conditions.
Wireless communication pole and tower sales in Europe increased during the
third quarter compared to 1996. European sales and earnings were dampened
by a 15% appreciation in the value of the U.S. dollar. The start-up plant
in China has continued to operate at the break-even point.
Gross profit as a percent of sales was 27.8% and 27.4% for the third quarter
of 1997 and 1996, respectively. Year-to-date gross profit was 27.5% compared
to 26.8% for 1997 and 1996, respectively. These increases result primarily
from the sale of the ballast business in January of 1997 which had lower gross
profit margins than that of the Company as a whole.
Selling, general and administrative (SG&A) expenses were reduced to $24.4
million for third quarter of 1997 from $29.3 million for the same period
of 1996 reflecting the sale of Valmont Electric in early 1997. As a percent
of sales, SG&A expenses for the respective quarters were 18.0% and 19.8%.
SG&A expenses for the first three quarters of 1997 and 1996 were $82.1 million
and $87.3 million, respectively. Year-to-date SG&A expenses, as a percent of
sales, were 17.8% for 1997 and 18.8% for 1996. The changes reflect the
Company's ability to leverage SG&A expenses.
Page 7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
For the third quarter of both 1997 and 1996, interest expense remained at $1.0
million. Year-to-date, interest expense was unchanged at $3.0 million for
1997 and 1996.
The effective income tax rates for the first three quarters of 1997 and 1996
were 36.1% and 35.8%, 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 $26.7 million in the first thirty-nine
weeks of 1997 from $22.0 million in the same period in 1996. For the third
quarter, net earnings were $7.9 million in 1997 versus $6.6 million in 1996.
Earnings per share were $0.95 and $0.79 for the first thirty-nine weeks of
1997 and 1996, respectively and $0.28 and $0.23 for the third quarter of
1997 and 1996, respectively.
Liquidity and Capital Resources
- -------------------------------
Net working capital at September 27, 1997 amounted to $81.5 million compared to
$81.4 million at December 28, 1996. The ratio of current assets to current
liabilities was 1.7:1 at September 27, 1997 versus 1.6:1 at December 28, 1996.
Expenditures for property, plant and equipment for the thirty-nine week
period ended September 27, 1997 were approximately $31.9 million, while
depreciation of property, plant & equipment was $11.5 million.
Available lines of credit total $55.1 million of which approximately $35.1
million was unused at September 27, 1997. Long-term debt was 9.6% of total
capitalization at September 27, 1997 versus 12.3% at December 28, 1996.
The Company believes that cash flow from operations, current credit facilities
and the capital structure now in place will be adequate to satisfy planned
capital expenditures, dividends and other financial commitments for the
foreseeable future.
Page 8
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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)
/s/Terry J. McClain
_______________________
Terry J. McClain
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated this 31st day of October, 1997.
Page 9