SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 19, 2001
Date of Report (Date of earliest event reported)
Valmont Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-3701 47-0351813
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Valmont Plaza
Omaha, Nebraska 68154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(402) 963-1000
Item 5. OTHER EVENTS.
RISK FACTORS
The following risk factors describe various risks that may affect
Valmont's business, financial condition and operations.
Increase in energy prices will increase our operating costs and likely reduce
our profitability.
We use energy to manufacture our products. During 2000, increased
energy usage caused by severe winter weather conditions in North America and
higher oil and natural gas prices increased our operating costs. We were able to
recover some of our operating cost increases through price increases; however,
we still experienced reduced profitability. If energy prices further increase we
will likely not be able to increase prices to fully recover our higher operating
costs without decreasing demand for our products. As a result, increase in
energy prices will increase our operating costs and likely reduce our
profitability.
Increase in steel prices will increase our operating costs and likely reduce our
profitability.
Hot rolled steel coil and other carbon steel products constitute
approximately one-third of the cost of manufacturing our products. The price of
steel that we use in our manufacturing processes is highly competitive and
sometimes volatile. The following factors increase the cost of steel for us:
o increased demand for steel which occurs when other industries purchase
greater quantities of steel at times when we require more steel for
manufacturing;
o increased freight costs, because our manufacturing sites are usually not
co-located with the major steel manufacturers;
o lower inventory levels at steel mills and steel service centers when
major steel users, such as the automobile manufacturers, increase their
steel orders, thereby reducing available inventory to meet our
requirements;
o international trade disputes and taxes because we import some steel for
our domestic and foreign manufacturing facilities; and
o greater potential for labor disputes because we purchase steel from
several steel manufacturers and suppliers in the United States and in
other countries.
Increases in the prices of our products may not fully recover our
additional steel costs and generally lag behind increases in steel prices.
Consequently, an increase in steel prices will increase our operating costs and
likely reduce our profitability.
Downturns in the agricultural industry result in a slower, and possibly a
negative, rate of growth in irrigation equipment and tubing sales.
The end-users of our mechanized irrigation equipment and a substantial
portion of our tubing are farmers, and, as a result, sales of those products are
affected by economic changes in the agriculture industry. Farm income decreases
when commodity prices, acreage planted, crop yields, government subsidies and
export levels decrease. Additionally, bad weather decreases farm income. These
factors may cause farmers to delay capital expenditures for farm equipment.
Consequently, downturns in the agricultural industry result in a slower, and
possibly a negative, rate of growth in irrigation equipment and tubing sales.
Construction activity declines in the lighting, utility and wireless
communications industries results in reduced product sales.
We manufacture and distribute engineered metal structures and provide
coating services for the lighting, utility and wireless communications
industries. Because our products primarily are used in infrastructure
construction, sales in these businesses are strongly influenced by construction
activity, which historically has been cyclical. Construction activity by our
private and government customers is strongly affected by and can decline because
of:
o weakness in the general economy reducing funds available for
construction;
o a decrease in government spending as a consequence of budget changes or
lower tax receipts;
o interest rate increases increasing the cost of construction financing;
and
o adverse weather conditions slowing construction activity.
Construction activity declines in the lighting, utility and wireless
communications industries results in reduced product sales.
Increase in our indebtedness requires use of more of our cash flow for debt
payments and increases the risk of non-compliance with our loan covenants.
When we acquired PiRod, Inc. on March 30, 2001, we paid $33.4 million
to retire PiRod's long-term debt. As a result, our business became more
leveraged. Increased leverage:
o requires the dedication of a portion of our expected cash flow to service
our indebtedness, thereby reducing the amount of our expected cash flow
available for business operations and new opportunities; and
o increases our vulnerability to changes in economic and industry
conditions which would require more funds for business operations at a
time when our cash flow has been reduced.
Increased leverage could also make compliance with certain covenants in
our debt agreements more difficult. For example, we may need to borrow more
money in the future. However, the covenants in our debt agreements may limit our
ability to do so. If we breach the covenants in our debt agreements, our lenders
could declare the amounts we owe immediately due and payable, which would
significantly reduce the cash available for business operations. Our increased
debt level at the end of 2000 required us to ask for and receive temporary
amendments to two lending agreements, covering borrowings up to $200 million, to
increase our permitted debt to earnings ratio under those agreements.
We may lose some of our foreign investment or our foreign sales and profits may
be reduced because of risks of doing business in foreign markets.
We are an international manufacturing company with operations around
the world. At December 30, 2000, we operated 30 manufacturing plants, located on
five continents, and sold our products in more than 100 countries. In 2000,
international sales accounted for approximately 18.5% of our net sales. We
expect that international sales will continue to account for a significant
percentage of our net sales into the foreseeable future. Accordingly, our
foreign business operations and our foreign sales and profits are subject to the
following potential risks:
o political and economic instability where we have foreign business
operations resulting in the reduction of the value of, or the loss of,
our investment;
o recessions in economies of countries in which we have business operations
decreasing our international sales ;
o difficulties and costs of staffing and managing our foreign operations
increasing our foreign operating costs and decreasing profits;
o difficulties in enforcing our rights outside the U.S. for a number of our
patents on our manufacturing machinery, poles and irrigation design; and
o increases in tariffs, export controls, taxes and other trade barriers
reducing our international sales and our profit on these sales.
As a result, we may lose some of our foreign investment or our foreign
sales and profits may be reduced because of risks of doing business in foreign
markets.
AMENDED AND RESTATED CREDIT FACILITY
On August 21, 2001, Valmont amended and restated its existing revolving
credit facility to extend the maturity of the borrowings from June 30, 2002 to
June 30, 2006 and increase the borrowing capacity. The amended and restated
revolving credit agreement is an unsecured facility with a group of banks for a
maximum borrowing capacity of $150,000,000. The funds borrowed may be repaid at
any time without penalty, or additional funds may be borrowed up to the facility
limit. Valmont may choose from the following three interest rate alternatives:
the higher of prime commercial lending rate or the federal funds rate, plus
0.5%; the applicable Eurodollar rate plus a leverage ratio-based spread ranging
from 0.625% to 1.25%; or up to $50,000,000 at a rate determined through a
competitive bid process.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit 4.1 Amended and Restated Credit Agreement.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Valmont Industries, Inc.
Date: September 19, 2001
By: /s/ Terry J. McClain
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Terry J. McClain
Senior Vice President and
Chief Financial Officer