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 First Quarter Ended Commission File Number
March 28, 1998 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 April 23, 1998 there were outstanding 27,711,054 common shares of the
registrant.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
------------------
PART I. FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations for
the thirteen weeks ended March 28, 1998 and March 29,
1997. 2
Condensed Consolidated Balance Sheets as of March 28,
1998 and December 27, 1997. 3
Condensed Consolidated Statements of Cash Flows for
the thirteen weeks ended March 28, 1998 and March 29,
1997. 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 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
--------------------
March 28, March 29,
1998 1997
------- -------
Net sales $160,587 $165,418
Cost of sales 117,518 120,802
------- -------
Gross profit 43,069 44,616
Selling, general and administrative
expenses 27,405 30,039
------- -------
Operating income 15,664 14,577
------- -------
Other income (deductions):
Interest expense (1,038) (898)
Interest income 244 25
Miscellaneous 375 250
------- -------
(419) (623)
------- -------
Earnings before income taxes 15,245 13,954
------- -------
Income tax expense (benefit):
Current 5,700 700
Deferred (100) 4,300
------- -------
5,600 5,000
------- -------
Net Earnings $ 9,645 $ 8,954
======= =======
Earnings per share:
Basic $ 0.35 $ 0.33
======= =======
Diluted $ 0.34 $ 0.32
======= =======
Cash dividends per share $0.05625 $ 0.05
======= =======
Weighted average number of shares of
common stock outstanding (000 omitted) 27,654 27,408
======= =======
Weighted average number of shares of
common stock outstanding plus dilutive
potential common shares (000 omitted) 28,271 27,641
======= =======
See accompanying notes to condensed consolidated financial statements.
Page 2
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
March 28, December 27,
ASSETS 1998 1997
- ----------------------------------------- ------- -------
Current assets:
Cash and cash equivalents $ 12,230 $ 11,505
Receivables 106,649 110,531
Inventories 81,245 79,444
Prepaid expenses 4,670 3,388
Deferred income taxes 8,514 13,062
------- -------
Total current assets 213,308 217,930
------- -------
Net property, plant and equipment 144,233 140,834
------- -------
Other assets:
Investments in nonconsolidated affiliates 4,833 4,730
Other 11,417 4,558
------- -------
Total other assets 16,250 9,288
------- -------
Total assets $ 373,791 $ 368,052
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------
Current liabilities:
Current installments of long-term debt $ 7,259 $ 7,317
Notes payable to banks 16,119 18,545
Accounts payable 51,629 48,717
Accrued expenses 41,890 47,380
Dividends payable 1,557 1,555
------- -------
Total current liabilities 118,454 123,514
------- -------
Deferred income taxes 9,270 9,038
Long-term debt, excl. current installments 24,002 20,743
Minority interest in consolidated
subsidiaries 3,680 3,957
Other noncurrent liabilities 3,729 3,698
Shareholders' equity:
Preferred stock -- --
Common stock of $1 par value 27,900 27,900
Additional paid-in capital 1,131 838
Retained earnings 187,449 179,360
Accumulated Other Comprehensive Income (1,804) (966)
Treasury stock (7) (8)
Unearned restricted stock (13) (22)
------- -------
Total shareholders' equity 214,656 207,102
------- -------
Total liabilities and shareholders'
equity $ 373,791 $ 368,052
======= =======
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)
Thirteen Weeks Ended
--------------------
March 28, March 29,
1998 1997
------- -------
Net cash provided (used) by operations $ 18,927 $ (1,294)
------- -------
Cash flows from investment activities:
Purchase of property, plant & equipment (3,167) (11,829)
Acquisitions (13,309) (627)
Change in other assets (994) (578)
Proceeds from sale of assets held for sale -- 26,903
Proceeds from sale, net of gain,
of property and equipment 43 84
Other, net (253) (149)
------- -------
Net cash used by investment activities (17,680) 13,804
------- -------
Cash flows from financing activities:
Net borrowings under short-term
agreements (2,308) (9,449)
Proceeds from long-term borrowings 5,483 --
Principal payments on long-term
obligations (2,035) (1,979)
Dividends paid (1,555) (1,367)
Proceeds from exercises under
stock plans 371 838
Purchase of common treasury shares (478) (740)
------- -------
Net cash used by
financing activities (522) (12,697)
------- -------
Net increase (decrease) in cash and
cash equivalents 725 (187)
Cash and cash equivalents--beginning of
period 11,505 9,483
------- -------
Cash and cash equivalents--end of period $ 12,230 $ 9,296
======= =======
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 March 28, 1998 and the
Condensed Consolidated Statements of Operations for the thirteen week
periods ended March 28, 1998 and March 29, 1997 and the Condensed
Consolidated Statements of Cash Flows for the thirteen 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
March 28, 1998 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 27, 1997 Annual Report to shareholders. The results of
operations for the period ended March 28, 1998 are not necessarily
indicative of the operating results for the full year.
2. Inventories
-----------
Approximately 60% 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
----------
The Company considers cash and cash investments with a maturity of
three months or less when purchased, to be cash equivalents.
Interest paid was $1,021 and $633 for the thirteen week periods
ended March 28, 1998 and March 29, 1997, respectively. Income
taxes paid, net of refunds, were $598 and $490 for the thirteen
week periods ended March 28, 1998 and March 29, 1997,
respectively.
4. Earnings Per Share
------------------
Share and per share information have been adjusted to give effect to the
two-for-one stock split effected in the form of a dividend on May 30,
1997. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share,"
(EPS) which requires companies to present Basic EPS and Diluted
EPS as well as to provide a reconciliation between Basic and
Diluted EPS. Accordingly all prior periods have been restated.
---------------------------------------------------------------------
BASIC DILUTIVE EFFECT DILUTED
EPS OF STOCK OPTIONS EPS
---------------------------------------------------------------------
1997:
Net earnings $ 8,954 -- $ 8,954
Shares 27,408 233 27,641
Per share amount $ 0.33 -- $ 0.32
1998:
Net earnings $ 9,645 -- $ 9,645
Shares 27,654 617 28,271
Per share amount $ 0.35 -- $ 0.34
Page 5
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
5. Comprehensive Income
--------------------
Statement of Financial Standards No. 130, "Reporting Comprehensive
Income", which is effective for fiscal years beginning after
December 15, 1997, defines items such as (1) foreign currency
translation adjustments, (2) unrealized gains and losses on
certain investments in debt and equity securities, and (3)
minimum pension liability adjustments as items of other
comprehensive income and as such must be reported "in a financial
statement that is displayed with the same prominence as other
financial statements".
Thirteen Weeks Ended
--------------------
March 28, March 29,
1998 1997
---- ----
Net income $ 9,645 $ 8,954
Other comprehensive income, before tax:
Foreign currency translation adjustments (838) (1,466)
------- -------
Comprehensive income $ 8,807 $ 7,488
======= =======
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
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 first quarter of 1998 net sales were $160.6 million, a decrease of
2.9% from the $165.4 million for the same period last year. Last
year's sales included $5.3 million from the ballast business, which was sold
in the first quarter of 1997. Sales of Irrigation products for the first
quarter of 1998 were at record high levels. North America irrigation sales
increased from the volume reported in 1997 because farm income remained
strong and more farmers converted to the Company's mechanized center-pivot
and linear move irrigation equipment. Demand for replacement parts
was slowed by a wet early Spring. Sales of irrigation products to South
American markets for the first quarter of 1998 also increased compared to
sales for the same periods a year ago.
Sales in the Industrial Products segment had an overall decline in the first
quarter of 1998 as a result of lower sales of communication products. Demand
for area lighting and traffic signal poles were slowed by weather
delays in shipments and customers awaiting final passage of a new
federal highway bill. Orders for transmission poles were strong due
to alliances formed with selected customers to provide savings and
custom engineering solutions to the utilities. Also, tubular product sales
grew in part from the 1997 acquisition of a new high-speed tubing mill. In
Europe, sales were up in local currencies, but remained flat when converted
into U.S. dollars as a result of the 9-10% strengthening of the dollar from
a year ago.
Due to continued softness for communication products, the Company is
reorganizing its North American pole and tower business for higher efficiencies.
The Company is consolidating the activities of its two smallest plants into
larger facilities, implementing reductions in force in other locations and
reducing other expenses. The cost of this reorganization will be absorbed in
the second quarter.
Gross profit was down 3.5%, or $1.5 million, in the first quarter of 1998
compared to first quarter 1997. As a percent of sales, gross profit was
26.8% and 27.0% for the first quarters of 1998 and 1997, respectively. The
first quarter 1998 gross profit increased in the Irrigation Products Segment
due to larger sales volumes and improved operational performance and decreased
in the Industrial Products Segment due to the lower sales of communication
products compared to the same period in 1997.
Selling, general and administrative (SG&A) expenses were $27.4 million for
first quarter of 1998 and $30.0 million for the same period of 1997; and,
as a percent of sales, SG&A expenses for the respective quarters were
17.1% and 18.2%. The dollar amount of SG&A expenses decreased $2.6
million in 1998. The decrease in SG&A expenses from 1997 levels were
in part due to the sales of the ballast business in the first quarter
of 1997 which had $1.2 million of SG&A expense and a decrease in incentive
accruals in 1998.
For the first quarter of 1998 interest expense was $1.0 million compared to
$0.9 million in the same period of 1997. The increase in 1998 results
primarily from average debt levels being higher.
The effective income tax rates for the first quarter of 1998 and 1997 were
36.7% and 35.8%, respectively, which do not vary significantly from the
expected statutory rate for the periods. Decreased foreign tax
benefits and increased state income taxes resulted in the higher rate in 1998.
Page 7
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 $9.6 million in the first thirteen weeks
of 1998 from $9.0 million in the same period in 1997. Basic earnings per
share were $0.35 and $0.33 for the first thirteen weeks of 1998 and
1997, respectively, with diluted earnings per share $0.34 and $0.32
respectively.
Liquidity and Capital Resources
- -------------------------------
Net working capital at March 28, 1998 amounted to $94.9 million compared to
$94.4 million at December 27, 1997. The ratio of current assets to
current liabilities remained constant at 1.8:1 for the same two
periods.
Expenditures for property, plant and equipment for the thirteen week period
ended March 28, 1998 were approximately $3.2 million. An additional $13.3
million was spent for the acquisition of galvanizing assets at two new
locations. Depreciation of property, plant & equipment was $4.5 million for
the first quarter of 1998 compared to $3.7 million a year ago.
Available lines of credit total $46.5 million of which approximately $36.1
million was unused at March 28, 1998. Long-term debt was 11.2% of
total capitalization at March 28, 1998 versus 10.4% at December 27, 1997.
The Company believes cash flows from operations, available credit facilities,
and the present capital structure will be adequate for 1998 planned
capital expenditures, for dividends and other financial commitments, and for the
Company to pursue opportunities to expand its markets and businesses.
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 shareholders' meeting was held on April 27, 1998. The
shareholders voted to elect three directors, to approve an amendment to
the Company's Certificate of Incorporation increasing the authorized
number of common shares, and to ratify the appointment of Deloitte &
Touche LLP as independent accountants for fiscal 1998. For the annual
meeting there were 27,670,846 shares outstanding and eligible to vote of
which 24,731,461 were present at the meeting in person or by proxy. The
tabulation for each matter voted upon at the meeting was as follows:
Election of Directors:
(all shares shown post-split)
For Withheld Abstain
--- -------- -------
Charles M. Harper 24,340,008 391,453 -0-
Lloyd P. Johnson 24,344,991 386,470 -0-
Thomas F. Madison 24,347,135 384,326 -0-
Proposal to amend the Certificate of Incorporation to increase authorized
common stock:
For 21,713,469
Against 2,998,960
Withheld 19,032
Broker Non-vote -0-
Proposal to ratify the appointment of Deloitte & Touche LLP as
independent accountants for fiscal 1998:
For 24,399,644
Against 315,601
Withheld 16,216
Broker Non-vote -0-
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- -------------------------------------------
(a) Exhibits
--------
3 Certificate of Incorporation, as amended to date
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
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated this 4TH day of May, 1998.
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Page 9