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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 25, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-3701
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VALMONT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0351813
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
ONE VALMONT PLAZA, OMAHA, NEBRASKA 68154-5215
(Address of principal executive offices) (Zip code)
402-963-1000
(Registrant's telephone number, including area code)
COMMON STOCK $1.00 PAR VALUE NASDAQ (SYMBOL VALM)
Title of Class Name of each exchange
on which registered
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
23,219,218
Outstanding Common Shares as of April 24, 2000
Index is located on page 2.
Total number of pages 14.
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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Consolidated Statements of Operations for the thirteen weeks
ended March 25, 2000 and March 27, 1999................... 3
Consolidated Balance Sheets as of March 25, 2000 and
December 25, 1999......................................... 4
Consolidated Statements of Cash Flows for the thirteen weeks
ended March 25, 2000 and March 27, 1999................... 5
Notes to Consolidated Financial Statements.................. 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 9-11
Item 3. Quantitative and Qualitative Disclosure about Market Risk....... 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............. 13
Item 5. Other Information............................................... 13
Item 6. Exhibits and Reports on Form 8-K................................ 13
SIGNATURES............................................................... 14
2
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 25, MARCH 27,
2000 1999
---------- ----------
Net sales................................................... $188,365 $154,403
Cost of sales............................................... 138,464 114,005
-------- --------
Gross profit.............................................. 49,901 40,398
Selling, general and administrative expenses................ 34,650 29,483
-------- --------
Operating income.......................................... 15,251 10,915
-------- --------
Other income (deductions):
Interest expense.......................................... (3,145) (1,905)
Interest income........................................... 135 230
Miscellaneous............................................. (212) (79)
-------- --------
(3,222) (1,754)
-------- --------
Earnings before income taxes.............................. 12,029 9,161
-------- --------
Income tax expense:
Current................................................... 5,100 5,500
Deferred.................................................. (600) (2,100)
-------- --------
4,500 3,400
-------- --------
Net Earnings.............................................. $ 7,529 $ 5,761
======== ========
Earnings per share:
Basic................................................... $ 0.32 $ 0.23
======== ========
Diluted................................................. $ 0.32 $ 0.23
======== ========
Cash dividends per share.................................. $ 0.065 $ 0.065
======== ========
Weighted average number of shares of common stock
outstanding (000 omitted)................................. 23,316 24,588
======== ========
Weighted average number of shares of common stock
outstanding plus dilutive potential common shares (000
omitted).................................................. 23,645 24,784
======== ========
See accompanying notes to consolidated financial statements.
3
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
MARCH 25, DECEMBER 25,
2000 1999
---------- -------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 17,198 $ 14,936
Receivables............................................... 125,985 106,844
Inventories............................................... 112,565 85,383
Prepaid expenses.......................................... 5,277 4,784
Refundable and deferred income taxes...................... 9,972 8,086
-------- --------
Total current assets.................................... 270,997 220,033
-------- --------
Property, plant and equipment, at cost...................... 353,434 326,451
Less accumulated depreciation and amortization............ 161,956 152,531
-------- --------
Net property, plant and equipment....................... 191,478 173,920
-------- --------
Goodwill and other assets................................... 59,417 25,382
-------- --------
Total assets............................................ $521,892 $419,335
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt.................... $ 4,710 $ 4,372
Notes payable to banks.................................... 52,034 18,834
Accounts payable.......................................... 65,653 46,753
Accrued expenses.......................................... 51,232 49,962
Dividends payable......................................... 1,516 1,524
-------- --------
Total current liabilities............................... 175,145 121,445
-------- --------
Deferred income taxes....................................... 12,297 11,109
Long-term debt, excl. current installments.................. 148,476 104,250
Minority interest in consolidated subsidiaries.............. 7,467 7,302
Other noncurrent liabilities................................ 4,538 4,741
Shareholders' equity:
Preferred stock........................................... -- --
Common stock of $1 par value.............................. 27,900 27,900
Additional paid-in capital................................ 1,015 1,043
Retained earnings......................................... 226,526 220,506
Accumulated other comprehensive income.................... (5,394) (5,113)
Treasury stock............................................ (76,045) (73,808)
Unearned restricted stock................................. (33) (40)
-------- --------
Total shareholders' equity.............................. 173,969 170,488
-------- --------
Total liabilities and shareholders' equity.............. $521,892 $419,335
======== ========
See accompanying notes to consolidated financial statements.
4
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THIRTEEN WEEKS ENDED
-----------------------
MARCH 25, MARCH 27,
2000 1999
---------- ----------
Net cash provided (used) by operations...................... $ (8,153) $ 23,725
-------- --------
Cash flows from investing activities:
Purchase of property, plant & equipment................... (7,244) (11,116)
Acquisitions.............................................. (51,225) (2,854)
Proceeds from sale of property and equipment.............. 55 79
Proceeds from investment by minority shareholder.......... -- 134
Proceeds from sale of nonconsolidated affiliate........... -- 8,294
Changes in other assets................................... (558) (185)
Other, net................................................ 208 130
-------- --------
Net cash used in investing activities................... (58,764) (5,518)
-------- --------
Cash flows from financing activities:
Net borrowings (repayments) under short-term agreements... 32,154 (7,955)
Proceeds from long-term borrowings........................ 44,562 --
Principal payments on long-term obligations............... (3,670) (2,274)
Dividends paid............................................ (1,524) (1,607)
Proceeds from exercises under stock plans................. 17 16
Purchase of common treasury shares:
Stock repurchase program................................ (2,322) (4,883)
Stock plan exercises.................................... (38) (15)
-------- --------
Net cash provided (used) by financing activities........ 69,179 (16,718)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents.......................................... -- (860)
-------- --------
Net increase in cash and cash equivalents............... 2,262 629
Cash and cash equivalents--beginning of period.............. 14,936 7,580
-------- --------
Cash and cash equivalents--end of period.................... $ 17,198 $ 8,209
======== ========
See accompanying notes to consolidated financial statements.
5
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 25, 2000 and the
Condensed Consolidated Statements of Operations for the thirteen week periods
ended March 25, 2000 and March 27, 1999 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 statements as of March 25, 2000 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 25, 1999 Annual Report to
Stockholders. The accounting policies and methods of computation followed in
these interim financial statements are the same as those followed in the
financial statements for the year ended December 25, 1999. The results of
operations for the period ended March 25, 2000 are not necessarily indicative of
the operating results for the full year.
2. 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.
3. CASH FLOWS
The Company considers all highly liquid temporary cash investments purchased
with a maturity of three months or less to be cash equivalents. Cash payments
for interest and income taxes (net of refunds) were as follows:
MARCH 25, MARCH 27,
2000 1999
---------- ----------
Interest................................................. $2,520 $1,986
Income Taxes............................................. 1,245 651
6
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. EARNINGS PER SHARE
The following table provides a reconciliation between Basic and Diluted
earnings per share:
BASIC DILUTIVE EFFECT DILUTED
EPS OF STOCK OPTIONS EPS
-------- ---------------- --------
Thirteen weeks ended March 27, 1999:
Net earnings.............................. $ 5,761 -- $ 5,761
Shares outstanding........................ 24,588 196 24,784
Per share amount.......................... $ 0.23 -- $ 0.23
Thirteen weeks ended March 25, 2000:
Net earnings.............................. $ 7,529 -- $ 7,529
Shares outstanding........................ 23,316 329 23,645
Per share amount.......................... $ 0.32 -- $ 0.32
5. COMPREHENSIVE INCOME
Results of operations for foreign subsidiaries are translated using the
average exchange rates during the period. Assets and liabilities are translated
at the exchange rates in effect on the balance sheet dates. These translation
adjustments are the Company's only component of other comprehensive income.
THIRTEEN WEEKS ENDED
-----------------------
MARCH 25, MARCH 27,
2000 1999
---------- ----------
Net earnings............................................. $7,529 $ 5,761
Currency translation adjustments......................... (281) (3,266)
------ -------
Total comprehensive income........................... $7,248 $ 2,495
====== =======
6. TREASURY STOCK
During 1998, the Board of Directors authorized management to repurchase up
to 5.4 million shares of the Company's common stock. Repurchased shares are
recorded as "Treasury Stock" and result in a reduction of "Shareholders'
Equity." When treasury shares are reissued, the Company uses the last-in,
first-out method, and the difference between the repurchase cost and reissuance
price is charged or credited to "Additional Paid-In Capital." As of March 25,
2000, a total of 4.7 million shares had been purchased for $77,787 including
140,000 shares during 2000 at a cost of $2,322.
7. BUSINESS SEGMENTS
The Company has two reportable segments:
IRRIGATION: This segment consists of the manufacture and distribution of
agricultural irrigation equipment, tubular products and related parts and
services, and
INFRASTRUCTURE: This segment includes the manufacture and distribution of
engineered metal structures and coating services for the lighting, utility and
wireless communications industries.
7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
7. BUSINESS SEGMENTS (CONTINUED)
In addition to these two reportable segments, the Company has other
businesses that individually are not more than 10% of consolidated sales, profit
or assets.
FIRST QUARTER
THIRTEEN WEEKS ENDED
-----------------------
MARCH 25, MARCH 27,
2000 1999
---------- ----------
Sales:
Irrigation............................................ $ 77,741 $ 71,372
Infrastructure........................................ 109,331 78,878
Other................................................. 6,537 7,931
-------- --------
193,609 158,181
Intersegment Sales:
Irrigation............................................ $ 1,656 $ 690
Infrastructure........................................ 2,455 2,635
Other................................................. 1,133 453
-------- --------
5,244 3,778
Net Sales
Irrigation............................................ $ 76,085 $ 70,682
Infrastructure........................................ 106,876 76,243
Other................................................. 5,404 7,478
-------- --------
Consolidated Net Sales.............................. $188,365 $154,403
======== ========
Operating Income
Irrigation operations................................. $ 7,578 $ 9,661
Gain on sale of investment............................ -- 2,823
-------- --------
Total Irrigation.................................... 7,578 12,484
-------- --------
Infrastructure operations............................. 7,443 396
Impairment charge..................................... -- (2,431)
-------- --------
Total Infrastructure................................ 7,443 (2,035)
-------- --------
Other................................................... 230 466
-------- --------
Total Operating Income................................ $ 15,251 $ 10,915
======== ========
8
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 2. 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 view and estimates of future economic and
market 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 environments, actions and policy changes of domestic
and foreign 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
CONSOLIDATED
Net sales for the first quarter of 2000 were $188.4 million, an increase of
22.0% from $154.4 million for the same period last year. The increase in 2000
was attributable to higher sales in both the irrigation and infrastructure
segments.
Gross profit margin was 26.5% for the thirteen week period in 2000 compared
to 26.2% for the same period of 1999. Selling, general and administrative
expenses increased from $29.5 million (19.1% of sales) in the first quarter of
1999 to $34.7 million (18.4% of sales) for the first quarter of 2000. Operating
income for the first quarter of 2000 was $15.3 million, up 39.7% from
$10.9 million for the same period in 1999.
Net interest expense was $3.0 million for the first quarter of 2000, up from
the $1.7 million incurred in the first quarter of 1999. This reflects higher
average borrowings. The effective tax rate increased as a result of higher state
and local taxes to 37.4% for the first quarter of 2000 from 37.1% for the first
quarter in 1999.
Quarter-to-quarter, net earnings increased 31% to $7.5 million and diluted
earnings per share increased 39% to $0.32. The higher percentage increase in
earnings per share was attributable to the Company's repurchase of shares.
IRRIGATION SEGMENT
The Irrigation segment net sales for the quarter increased 7.6% compared to
1999. Operating income declined 39.2% from $12.5 million to $7.6 million.
Operating income for the first quarter of 2000 declined to $7.6 million compared
to last year's first quarter operating income of $9.7 million, which included a
non-recurring gain. Additionally, last year's operating income included a gain
on the sale of an investment of $2.8 million. Increased costs of raw materials
and start-up expenses associated with the Company's new manufacturing plant in
McCook, Nebraska, contributed to the decrease in operating income.
Domestically, irrigation sales increased as a result of the acquisitions
made during 1999, weather conditions and government support programs, and sales
of tubular products also increased from last year. International sales increased
slightly as compared to the first quarter of 1999. Improved sales in the
Mercusur, Middle East and Africa offset a decrease in Europe. In addition, a
portion of a large project sale to eastern Europe was shipped in the first
quarter of 1999, however, there were no shipments on this project in the first
quarter of 2000. The Company expects the remaining portion of this sale will be
shipped in the second quarter of this year. The Company's operations in Brazil
continue to perform well, recording improved sales and operating profits as
compared with 1999.
9
INFRASTRUCTURE SEGMENT
Net sales for the first quarter in the Infrastructure segment increased
39.6% to $106.4 million in 2000 from $76.2 million in 1999. Sales improved for
all product lines. Domestically, lighting and traffic sales increased due to
higher levels of government spending. Demand for capacity and distribution by
electric utility customers continued to drive sales increases for utility poles
and structures. Sales of communication structures domestically were up in the
first quarter of 2000 due to an increased activity level in the network
build-out by providers of wireless communications. Internationally, the
Company's plant in China showed increased net sales in lighting and
communication pole sales. In Europe, lighting sales were higher due to favorable
market conditions and weather. First quarter 2000 acquisitions of three
protective coating facilities and an aluminum pole facility also contributed to
increased sales volumes during the first quarter of 2000.
Operating income for the segment increased $7.0 million to $7.4 million in
2000 from the 1999 first quarter results of $0.4 million prior to last year's
impairment charge. Additionally, the segment incurred an impairment charge in
the first quarter of 1999 of $2.8 million to adjust certain asset values to
their fair values and record severance costs related to a reduction in size of a
communication tower facility in France. All product lines contributed to the
improvement in operating profits. The Coatings division performed better due to
acquisitions as well as volume increases at existing facilities. Profitability
in the communication and lighting and utility product lines showed improvement
domestically due to increased sales levels, cost reductions and operating
leverage. Due to unseasonally mild weather, construction activity has been at
higher levels during the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at March 25, 2000 was $95.9 million compared to
$98.6 million at December 25, 1999. The ratio of current assets to current
liabilities was 1.6:1 at March 25, 2000, versus 1.8:1 at December 25, 1999.
The Company's capital expenditure program is directed towards growth,
improving productivity and keeping facilities modern and safe. Expenditures for
property, plant and equipment for the thirteen-week period ended March 25, 2000,
were approximately $ 7.2 million. In addition to those expenditures, an
additional $51.2 million was spent for newly acquired coatings facilities in
Illinois, Minnesota and California; the purchase of a minority interest in an
irrigation distribution business in Argentina and the acquisition of the assets
of an aluminum pole manufacturer in Minnesota.
During the quarter, the Company repurchased 140,000 shares of its common
stock for $2.3 million. Depreciation and amortization totaled $7.2 million for
the first quarter of 2000 compared to $5.4 million a year ago.
Available short-term credit facilities through bank lines of credit were
$55 million at March 25, 2000, compared with $50 million at December 25, 1999.
On March 25, 2000, approximately $9.7 million was unused.
Historically, the Company's growth has been financed through a combination
of cash provided from operations and debt financing. The Company's objective is
to maintain long-term debt as a percent of invested capital below 40%. At the
end of the quarter long-term debt as a percent of invested capital was 38.0% as
compared with 33.8% at December 25, 1999. Increased debt levels were the result
of acquisitions, capital expenditures, and share repurchases. Cash used by
operating activities was $8.2 million for the first quarter 2000 and cash
provided from operating activities was $23.7 in the first quarter of 1999. The
reduction of operating cash flows was mainly the result of higher working
capital levels as compared to 1999. Increased sales and sales backlogs in both
segments were the primary reasons for increases in inventory and receivables as
compared to 1999.
10
The Company believes cash flow from operations, available credit facilities,
and the present capital structure now in place will be adequate for 2000 planned
capital expenditures, dividends, additional share repurchases and other
financial commitments, as well as to take advantage of opportunities to expand
its markets and businesses.
11
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in the company's market risk during the
first quarter ended March 25, 2000. For additional information, refer to
page 36 of the Company's Annual Report to Stockholders' for the fiscal year
ended December 25, 1999.
12
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Valmont's annual meeting of stockholders was held on April 26, 2000. The
stockholders elected three directors to serve three-year terms and ratified the
appointment of Deloitte & Touche LLP to audit the Company's financial statements
for fiscal 2000. Charles M. Harper retired as a director effective with the
annual stockholders meeting and consequently the Board of Directors currently
has eight members. For the annual meeting there were 23,316,298 shares
outstanding and eligible to vote of which 20,432,163 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:
FOR WITHHELD ABSTAIN
---------- -------- ----------
Robert B. Daugherty 20,242,027 190,136 -0-
Charles D. Peebler, Jr. 20,325,043 107,120 -0-
Kenneth E. Stinson 20,316,835 115,328 -0-
Proposal to ratify the appointment of Deloitte & Touche LLP as independent
accountants for fiscal 2000:
For 20,076,366
Against 332,462
Withheld 23,335
Abstain -0-
ITEM 5. OTHER INFORMATION
On February 23, 2000, the Company's Board of Directors authorized a
quarterly cash dividend on common stock of 6.5 cents per share, payable
April 14, 2000, to stockholders of record March 31, 2000. The indicated annual
dividend rate is 26 cents per share.
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.
13
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 3rd day of May, 2000.
14