UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One) |
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2007 |
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or |
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o |
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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: 1-31429
Valmont Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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47-0351813 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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One Valmont Plaza, |
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68154-5215 |
Omaha, Nebraska |
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(Zip Code) |
(Address of principal executive offices) |
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(Registrants telephone number, including area code)
402-963-1000
(Former name, former address and former fiscal year, if changed since last report) |
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
25,789,664 |
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Outstanding shares of common stock as of July 23, 2007 |
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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
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Page No. |
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PART I. FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements: |
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3 |
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Condensed Consolidated Balance Sheets as of
June 30, 2007 and |
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4 |
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5 |
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6-20 |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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21-27 |
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27 |
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27 |
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PART II. OTHER INFORMATION |
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28 |
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28 |
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28 |
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29 |
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2
VALMONT
INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in
thousands, except per share amounts)
(Unaudited)
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Thirteen Weeks Ended |
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Twenty-Six Weeks Ended |
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June 30, |
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July 1, |
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June 30, |
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July 1, |
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Net sales |
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$ |
402,257 |
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$ |
338,791 |
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$ |
742,939 |
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$ |
642,416 |
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Cost of sales. |
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293,343 |
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253,729 |
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545,258 |
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481,661 |
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Gross profit |
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108,914 |
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85,062 |
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197,681 |
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160,755 |
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Selling, general and administrative expenses |
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64,362 |
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55,153 |
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119,715 |
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107,269 |
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Operating income |
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44,552 |
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29,909 |
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77,966 |
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53,486 |
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Other income (deductions): |
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Interest expense |
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(4,404 |
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(4,338 |
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(8,689 |
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(8,486 |
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Interest income |
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500 |
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395 |
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1,130 |
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948 |
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Miscellaneous |
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256 |
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286 |
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(23 |
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1,183 |
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(3,648 |
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(3,657 |
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(7,582 |
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(6,355 |
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Earnings before income taxes, minority interest and equity in earnings (losses) of nonconsolidated subsidiaries |
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40,904 |
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26,252 |
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70,384 |
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47,131 |
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Income tax expense (benefit): |
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Current |
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13,299 |
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13,093 |
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22,351 |
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23,993 |
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Deferred |
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365 |
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(4,599 |
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1,623 |
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(7,828 |
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13,664 |
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8,494 |
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23,974 |
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16,165 |
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Earnings before minority interest and equity in earnings (losses) of nonconsolidated subsidiaries |
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27,240 |
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17,758 |
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46,410 |
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30,966 |
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Minority interest |
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(443 |
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(341 |
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(655 |
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(509 |
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Equity in earnings (losses) of nonconsolidated subsidiaries |
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164 |
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(132 |
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(66 |
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(87 |
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Net earnings |
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$ |
26,961 |
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$ |
17,285 |
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$ |
45,689 |
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$ |
30,370 |
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Earnings per shareBasic |
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$ |
1.06 |
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$ |
0.69 |
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$ |
1.79 |
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$ |
1.22 |
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Earnings per shareDiluted |
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$ |
1.03 |
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$ |
0.67 |
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$ |
1.76 |
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$ |
1.18 |
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Cash dividends per share |
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$ |
0.105 |
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$ |
0.095 |
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$ |
0.200 |
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$ |
0.180 |
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Weighted average number of shares of common stock outstanding (000 omitted) |
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25,497 |
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25,091 |
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25,459 |
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24,880 |
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Weighted average number of shares of common stock outstanding plus dilutive potential common shares (000 omitted) |
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26,107 |
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25,859 |
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26,018 |
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25,654 |
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See accompanying notes to condensed consolidated financial statements.
3
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
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June 30, |
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December 30, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
47,924 |
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$ |
63,504 |
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Receivables, net |
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247,929 |
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213,660 |
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Inventories |
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218,197 |
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194,278 |
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Prepaid expenses |
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11,133 |
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6,086 |
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Refundable and deferred income taxes |
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18,645 |
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17,130 |
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Total current assets |
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543,828 |
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494,658 |
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Property, plant and equipment, at cost |
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554,264 |
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522,244 |
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Less accumulated depreciation and amortization |
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337,129 |
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321,634 |
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Net property, plant and equipment |
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217,135 |
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200,610 |
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Goodwill |
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114,373 |
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108,328 |
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Other intangible assets, net |
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59,080 |
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56,333 |
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Other assets |
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22,650 |
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32,381 |
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Total assets |
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$ |
957,066 |
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$ |
892,310 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Current installments of long-term debt |
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$ |
22,166 |
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$ |
18,353 |
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Notes payable to banks |
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17,900 |
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13,114 |
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Accounts payable |
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103,086 |
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103,319 |
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Accrued expenses |
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84,024 |
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79,699 |
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Dividends payable |
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2,708 |
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2,437 |
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Total current liabilities |
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229,884 |
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216,922 |
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Deferred income taxes |
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35,747 |
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34,985 |
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Long-term debt, excluding current installments |
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206,235 |
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202,784 |
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Other noncurrent liabilities |
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24,166 |
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28,049 |
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Minority interest in consolidated subsidiaries |
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9,720 |
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8,289 |
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Shareholders equity: |
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Preferred stock |
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Common stock of $1 par value |
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27,900 |
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27,900 |
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Retained earnings |
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448,560 |
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405,567 |
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Accumulated other comprehensive income |
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8,283 |
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3,626 |
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Treasury stock |
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(33,429 |
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(35,812 |
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Total shareholders equity |
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451,314 |
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401,281 |
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Total liabilities and shareholders equity |
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$ |
957,066 |
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$ |
892,310 |
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See accompanying notes to condensed consolidated financial statements.
4
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share amounts)
(Unaudited)
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Twenty-Six Weeks Ended |
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June 30, |
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July 1, |
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Cash flows from operating activities: |
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Net earnings |
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$ |
45,689 |
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$ |
30,370 |
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Adjustments to reconcile net earnings to net cash flows from operations: |
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Depreciation and amortization |
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16,987 |
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18,557 |
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Stock-based compensation |
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1,752 |
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1,269 |
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Loss on sale of assets |
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777 |
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511 |
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Equity in losses in nonconsolidated subsidiaries |
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66 |
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87 |
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Minority interest |
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655 |
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509 |
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Deferred income taxes |
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1,623 |
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(7,828 |
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Other adjustments |
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318 |
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(137 |
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Payment of deferred compensation |
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(9,186 |
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Changes in assets and liabilities, net of business acquisitions: |
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Receivables |
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(32,095 |
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(38,823 |
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Inventories |
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(18,887 |
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(5,550 |
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Prepaid expenses |
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(3,169 |
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(3,628 |
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Accounts payable |
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(877 |
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5,803 |
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Accrued expenses |
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3,434 |
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1,423 |
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Other noncurrent liabilities |
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1,150 |
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537 |
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Income taxes payable |
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(1,783 |
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(4,830 |
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Net cash flows from operating activities |
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6,454 |
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(1,730 |
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Cash flows from investing activities: |
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Purchase of property, plant & equipment |
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(26,988 |
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(11,430 |
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Acquisitions, net of cash acquired |
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(12,336 |
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Investment in nonconsolidated subsidiary |
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(1,274 |
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Proceeds from sale of assets |
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9,349 |
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1,058 |
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Dividends to minority interests |
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(692 |
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(302 |
) |
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Other, net |
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(1,031 |
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(502 |
) |
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Net cash flows from investing activities |
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(31,698 |
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(12,450 |
) |
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Cash flows from financing activities: |
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Net borrowings (payments) under short-term agreements |
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2,950 |
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(93 |
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Proceeds from long-term borrowings |
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14,051 |
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475 |
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Principal payments on long-term obligations |
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(6,786 |
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(5,197 |
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Dividends paid |
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(4,881 |
) |
(4,232 |
) |
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Proceeds from exercises under stock plans |
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3,337 |
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25,229 |
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Excess tax benefits from stock option exercises |
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2,464 |
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15,428 |
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Purchase of common treasury sharesstock plan exercises |
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(2,970 |
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(30,138 |
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Net cash flows from financing activities |
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8,165 |
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1,472 |
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Effect of exchange rate changes on cash and cash equivalents |
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1,499 |
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388 |
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Net change in cash and cash equivalents |
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(15,580 |
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(12,320 |
) |
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Cash and cash equivalentsbeginning of year |
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63,504 |
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46,867 |
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Cash and cash equivalentsend of period |
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47,924 |
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$ |
34,547 |
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See accompanying notes to condensed consolidated financial statements.
5
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
1. Summary of Significant Accounting Policies
Condensed Consolidated Financial Statements
The Condensed Consolidated Balance Sheet as of June 30, 2007, the Condensed Consolidated Statements of Operations for the thirteen and twenty-six week periods ended June 30, 2007 and July 1, 2006 and the Condensed Consolidated Statements of Cash Flows for the twenty-six 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 June 30, 2007 and for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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 Companys Annual Report on Form 10-K for the fiscal year ended December 30, 2006. 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 30, 2006, except for the adoption of FASB Interpretation No. 48 in fiscal 2007. The results of operations for the periods ended June 30, 2007 are not necessarily indicative of the operating results for the full year.
Inventories
At June 30, 2007, approximately 51% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured finished goods. The excess of replacement cost of inventories over the LIFO value was approximately $36,400 and $37,400 at June 30, 2007 and December 30, 2006, respectively.
Inventories consisted of the following:
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June 30, |
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December 30, |
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Raw materials and purchased parts |
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$ |
137,401 |
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$ |
132,988 |
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Work-in-process |
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24,838 |
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20,825 |
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Finished goods and manufactured goods |
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92,355 |
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77,817 |
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Subtotal |
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254,594 |
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231,630 |
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LIFO reserve |
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36,397 |
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37,352 |
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Net inventory |
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$ |
218,197 |
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$ |
194,278 |
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Stock and Deferred Compensation Plans
The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Compensation Committee of the Board of Directors may grant incentive stock options,
6
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At June 30, 2007, 1,210,490 shares of common stock remained available for issuance under the plans. Shares and options issued and available for issuance are subject to changes in capitalization.
Under the plans, the exercise price of each option equals the market price at the time of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the fifth anniversary of the grant. Expiration of grants is from six to ten years from the date of grant. The Company recorded $408 and $897 of compensation expense (included in selling, general and administrative expenses) for the thirteen and twenty-six weeks ended June 30, 2007, respectively, and $384 and $713 of compensation expense for the thirteen and twenty-six weeks ended July 1, 2006. The associated tax benefits recorded for the thirteen and twenty-six weeks ended June 30, 2007 were $149 and $327, respectively and the $148 and $274 for the thirteen and twenty-six weeks ended July 1, 2006, respectively.
During the twenty-six weeks ended June 30, 2007, $13,374 was distributed from the Companys non-qualified deferred compensation plan to participants under the transition rules of section 409A of the Internal Revenue Code. The distributions were made in the amounts of $9,186 in cash and $4,188 in-kind.
Non-vested awards of 13,032 shares of Company common stock were issued to non-employee directors of the Company during the second quarter of 2007.
Income Taxes
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on December 31, 2006. The result of the implementation was immaterial to the financial statements. The gross amount of unrecognized tax benefits as of the date of adoption was $4,325. Included in this amount is an aggregate of $760 of interest and penalties. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $3,775. The Companys policy is to record interest and penalties directly related to income taxes as income tax expense in the Condensed Consolidated Statements of Operations. There were no material changes to the total amount of unrecognized tax benefits, interest, or penalties for the period ended June 30, 2007.
The Company files income tax returns in the U.S. and various states as well as foreign jurisdictions. Tax years 2003 and forward remain open under U.S. statutes of limitation. Generally, tax years 2002 and forward remain open under state statutes of limitation. The Company has extended statutes of limitation for pending examinations in Nebraska and France for years prior to 2003.
There is approximately $2,692 of uncertain tax positions for which reversal is reasonably possible during the next 12 months due to the closing of the statute of limitation. The nature of these uncertain tax positions is generally the classification of a transaction as tax exempt or the computation of a tax deduction or tax credit.
Recently Issued Accounting Pronouncements
In September 2006, the FASB issued Statement 157 (SFAS 157), Fair Value Measurements. This Statement establishes a framework for measuring fair value in generally accepted accounting principles
7
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
and expands disclosures about fair value measurements. While SFAS 157 does not require any new fair value measurements, it may change the application of fair value measurements embodied in other accounting standards. SFAS 157 will be effective at the beginning of the Companys 2008 fiscal year. The Company is currently assessing the effect of this pronouncement on the consolidated financial statements.
On April 26, 2007, the Company acquired 70% of the outstanding shares of Tehomet Oy (Tehomet), a Finnish manufacturer of lighting poles. Tehomets operations are included in the Companys condensed consolidated financial statements since the acquisition date. The total purchase price amounted to $12,336 in cash (including transaction costs). Goodwill of $5,990 was recognized as part of the preliminary purchase price allocation and was assigned to the Engineered Support Structures segment. The Company has not yet finalized the purchase price allocation related to this acquisition, as fair value measurements of the acquired assets and liabilities were not complete as of June 30, 2007. The Company preliminarily allocated the purchase price as follows: current assets, $4,834; current liabilities, $1,950; plant, property and equipment; $3,259, finite-lived intangible assets, $3,168; indefinite-lived intangible assets, $1,262; goodwill, $5,990 and long term liabilities, $4,227. The Company acquired Tehomet to expand its geographical presence in Europe and to leverage product lines offerings of both companies across the Companys collective market areas for lighting structures.
Subsequent to June 30, 2007, the Company paid approximately $3.8 million for the remaining 20% of the outstanding shares of our Canadian lighting structure manufacturing facility.
3. Goodwill and Intangible Assets
Amortized Intangible Assets
The components of amortized intangible assets at June 30, 2007 and December 30, 2006 were as follows:
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As of June 30, 2007 |
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Gross |
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Accumulated |
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Weighted |
|
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Customer Relationships |
|
$ |
50,983 |
|
|
$ |
12,216 |
|
|
17 years |
|
Proprietary Software & Database |
|
2,609 |
|
|
2,090 |
|
|
6 years |
|
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Patents & Proprietary Technology |
|
2,839 |
|
|
616 |
|
|
14 years |
|
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Non-compete Agreements |
|
649 |
|
|
201 |
|
|
6 years |
|
||
|
|
$ |
57,080 |
|
|
$ |
15,123 |
|
|
|
|
8
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
|
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As of December 30, 2006 |
|
|
|
||||||
|
|
Gross |
|
Accumulated |
|
Weighted |
|
||||
Customer Relationships |
|
$ |
48,133 |
|
|
$ |
10,737 |
|
|
18 years |
|
Proprietary Software & Database |
|
2,609 |
|
|
2,021 |
|
|
6 years |
|
||
Patents & Proprietary Technology |
|
2,839 |
|
|
517 |
|
|
14 years |
|
||
Non-compete Agreements |
|
331 |
|
|
165 |
|
|
5 years |
|
||
|
|
$ |
53,912 |
|
|
$ |
13,440 |
|
|
|
|
Amortization expense for intangible assets for the thirteen weeks ended June 30, 2007 and July 1, 2006 was $853 and $904, respectively. Amortization expense for intangible assets for the twenty-six weeks ended June 30, 2007, and July 1, 2006 was $1,683 and $1,816, respectively. Estimated amortization expense related to finite-lived intangible assets is as follows:
|
|
Estimated |
|
|||
2007 |
|
|
$ |
3,586 |
|
|
2008 |
|
|
3,586 |
|
|
|
2009 |
|
|
3,556 |
|
|
|
2010 |
|
|
3,525 |
|
|
|
2011 |
|
|
3,525 |
|
|
The useful lives assigned to finite-lived intangible assets included consideration of factors such as the Companys past and expected experience related to customer retention rates, the remaining legal or contractual life of the underlying arrangement that resulted in the recognition of the intangible asset and the Companys expected use of the intangible asset.
Non-amortized intangible assets
Under the provisions of SFAS 142, intangible assets with indefinite lives are not amortized. The carrying value of the PiRod and Newmark trade names are $4,750 and $11,111 as of June 30, 2007 and December 30, 2006. The carrying value of the Tehomet trade name was $1,262 as of June 30, 2007. The Newmark trade name arose from the 2004 acquisition, the PiRod amount arose from the 2001 acquisition and the Tehomet amount arose from the 2007 acquisition. The intangible assets with indefinite lives were tested for impairment separately from goodwill in the third quarter of 2006. The values of the trade names were determined using the relief-from-royalty method. Based on this evaluation, the Company determined that its trade names were not impaired as of September 30, 2006.
In its determination of these intangible assets as indefinite-lived, the Company considered such factors as its expected future use of the intangible asset, legal, regulatory, technological and competitive factors that may impact the useful life or value of the intangible asset and the expected costs to maintain the value of the intangible asset. The Company has determined that these intangible assets are expected to maintain their value indefinitely and, therefore, these assets are not amortized.
9
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
Goodwill
The carrying amount of goodwill as of June 30, 2007 was as follows:
|
|
Engineered |
|
Utility |
|
Coatings |
|
Irrigation |
|
Tubing |
|
Total |
|
|||||||||||||||
Balance December 30, 2006 |
|
$ |
19,956 |
|
|
$ |
44,065 |
|
|
$ |
42,192 |
|
|
$ |
1,853 |
|
|
|
$ |
262 |
|
|
$ |
108,328 |
|
|||
Acquisition |
|
5,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,990 |
|
|||||||||
Foreign Currency Translation |
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 |
|
|||||||||
Balance June 30, 2007 |
|
$ |
26,001 |
|
|
$ |
44,065 |
|
|
$ |
42,192 |
|
|
$ |
1,853 |
|
|
|
$ |
262 |
|
|
$ |
114,373 |
|
|||
The Companys annual impairment testing on its reporting units was performed during the third quarter of 2006. As a result of that testing, it was determined the goodwill and other intangible assets on the Companys Consolidated Balance Sheet were not impaired.
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) for the twenty-six weeks ended were as follows:
|
|
June 30, |
|
July 1, |
|
||
Interest |
|
$ |
8,950 |
|
$ |
8,673 |
|
Income Taxes |
|
21,251 |
|
13,148 |
|
||
The following table provides a reconciliation between Basic and Diluted earnings per share (EPS):
|
|
Basic EPS |
|
Dilutive Effect of |
|
Diluted EPS |
|
||||||||
Thirteen weeks ended June 30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net earnings |
|
|
$ |
26,961 |
|
|
|
|
|
|
|
$ |
26,961 |
|
|
Shares outstanding |
|
|
25,497 |
|
|
|
610 |
|
|
|
26,107 |
|
|
||
Per share amount |
|
|
$ |
1.06 |
|
|
|
(.03 |
) |
|
|
$ |
1.03 |
|
|
Thirteen weeks ended July 1, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net earnings |
|
|
$ |
17,285 |
|
|
|
|
|
|
|
$ |
17,285 |
|
|
Shares outstanding |
|
|
25,091 |
|
|
|
768 |
|
|
|
25,859 |
|
|
||
Per share amount |
|
|
$ |
0.69 |
|
|
|
(.02 |
) |
|
|
$ |
0.67 |
|
|
Twenty-six weeks ended June 30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net earnings |
|
|
$ |
45,689 |
|
|
|
|
|
|
|
$ |
45,689 |
|
|
Shares outstanding |
|
|
25,459 |
|
|
|
559 |
|
|
|
26,018 |
|
|
||
Per share amount |
|
|
$ |
1.79 |
|
|
|
(.03 |
) |
|
|
$ |
1.76 |
|
|
Twenty-six weeks ended July 1, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net earnings |
|
|
$ |
30,370 |
|
|
|
|
|
|
|
$ |
30,370 |
|
|
Shares outstanding |
|
|
24,880 |
|
|
|
774 |
|
|
|
25,654 |
|
|
||
Per share amount |
|
|
$ |
1.22 |
|
|
|
(.04 |
) |
|
|
$ |
1.18 |
|
|
10
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
At June 30, 2007 there were no outstanding options with exercise prices exceeding the market price of common stock that were therefore excluded from the computation of diluted earnings per share. At July 1, 2006 there were 36,000 outstanding options with exercise prices exceeding the market price of common stock that were therefore excluded from the computation of diluted earnings per share.
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. The Companys other comprehensive income for the thirteen and twenty-six weeks ended June 30, 2007 and July 1, 2006, respectively, were as follows:
|
|
Thirteen Weeks Ended |
|
Twenty-Six Weeks Ended |
|
||||||||
|
|
June 30, |
|
July 1, |
|
June 30, |
|
July 1, |
|
||||
Net earnings |
|
$ |
26,961 |
|
$ |
17,285 |
|
$ |
45,689 |
|
$ |
30,370 |
|
Currency translation adjustment |
|
2,967 |
|
1,519 |
|
4,657 |
|
4,031 |
|
||||
Total comprehensive income |
|
$ |
29,928 |
|
$ |
18,804 |
|
$ |
50,346 |
|
$ |
34,401 |
|
The Company aggregates its operating segments into five reportable segments. Aggregation is based on similarity of operating segments as to economic characteristics, products, production processes, types or classes of customer and the methods of distribution. Net corporate expense is net of certain service-related expenses that are allocated to business units generally on the basis of employee headcounts and sales dollars.
Reportable segments are as follows:
ENGINEERED SUPPORT STRUCTURES: This segment consists of the manufacture of engineered metal structures and components for the lighting and traffic and wireless communication industries, certain international utility industries and for other specialty applications;
UTILITY SUPPORT STRUCTURES: This segment consists of the manufacture of engineered steel and concrete structures primarily for the North American utility industry;
COATINGS: This segment consists of galvanizing, anodizing and powder coating services;
IRRIGATION: This segment consists of the manufacture of agricultural irrigation equipment and related parts and services; and
TUBING: This segment consists of the manufacture of tubular products for industrial customers.
In addition to these five reportable segments, the Company has other businesses that individually are not more than 10% of consolidated sales. These businesses, which include wind energy development, machine tool accessories and industrial fasteners, are reported in the Other category. In the fourth quarter of 2006, the Company decided to suspend its efforts related to the wind energy industry.
11
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
The accounting policies of the reportable segments are the same as those described in Note 1. The Company evaluates the performance of its business segments based upon operating income and invested capital. The Company does not allocate interest expense, non-operating income and deductions, or income taxes to its business segments.
|
|
Thirteen Weeks Ended |
|
Twenty- |
|
||||||||
|
|
June 30, |
|
July 1, |
|
June 30, |
|
July 1, |
|
||||
Sales: |
|
|
|
|
|
|
|
|
|
||||
Engineered Support Structures segment: |
|
|
|
|
|
|
|
|
|
||||
Lighting & Traffic |
|
$ |
118,264 |
|
$ |
99,719 |
|
$ |
218,868 |
|
$ |
190,405 |
|
Specialty |
|
36,704 |
|
32,371 |
|
57,431 |
|
52,894 |
|
||||
Utility |
|
5,620 |
|
5,533 |
|
9,532 |
|
9,863 |
|
||||
|
|
160,588 |
|
137,623 |
|
285,831 |
|
253,162 |
|
||||
Utility Support Structures segment |
|
|
|
|
|
|
|
|
|
||||
Steel |
|
68,861 |
|
58,290 |
|
128,535 |
|
103,160 |
|
||||
Concrete |
|
20,788 |
|
17,966 |
|
41,595 |
|
39,306 |
|
||||
|
|
89,649 |
|
76,256 |
|
170,130 |
|
142,466 |
|
||||
Coatings segment |
|
35,390 |
|
27,290 |
|
69,029 |
|
52,598 |
|
||||
Irrigation segment |
|
107,562 |
|
87,854 |
|
200,479 |
|
174,725 |
|
||||
Tubing segment |
|
26,541 |
|
23,672 |
|
52,546 |
|
47,137 |
|
||||
Other |
|
5,903 |
|
4,695 |
|
11,407 |
|
9,071 |
|
||||
|
|
425,634 |
|
357,390 |
|
789,422 |
|
679,159 |
|
||||
Intersegment Sales: |
|
|
|
|
|
|
|
|
|
||||
Engineered Support Structures |
|
8,421 |
|
8,064 |
|
17,774 |
|
15,402 |
|
||||
Utility Support Structures |
|
403 |
|
572 |
|
636 |
|
1,443 |
|
||||
Coatings |
|
8,282 |
|
5,259 |
|
15,591 |
|
10,086 |
|
||||
Irrigation |
|
29 |
|
6 |
|
47 |
|
18 |
|
||||
Tubing |
|
4,609 |
|
3,488 |
|
9,521 |
|
7,558 |
|
||||
Other |
|
1,632 |
|
1,210 |
|
2,914 |
|
2,236 |
|
||||
|
|
23,376 |
|
18,599 |
|
46,483 |
|
36,743 |
|
||||
Net Sales: |
|
|
|
|
|
|
|
|
|
||||
Engineered Support Structures |
|
152,167 |
|
129,559 |
|
268,057 |
|
237,760 |
|
||||
Utility Support Structures |
|
89,246 |
|
75,684 |
|
169,494 |
|
141,023 |
|
||||
Coatings |
|
27,108 |
|
22,031 |
|
53,438 |
|
42,512 |
|
||||
Irrigation |
|
107,533 |
|
87,848 |
|
200,432 |
|
174,707 |
|
||||
Tubing |
|
21,932 |
|
20,184 |
|
43,025 |
|
39,579 |
|
||||
Other |
|
4,271 |
|
3,485 |
|
8,493 |
|
6,835 |
|
||||
Consolidated Net Sales |
|
$ |
402,257 |
|
$ |
338,791 |
|
$ |
742,939 |
|
$ |
642,416 |
|
Operating Income: |
|
|
|
|
|
|
|
|
|
||||
Engineered Support Structures |
|
$ |
16,743 |
|
$ |
11,074 |
|
$ |
25,423 |
|
$ |
18,078 |
|
Utility Support Structures |
|
12,044 |
|
8,135 |
|
21,595 |
|
16,094 |
|
||||
Coatings |
|
5,896 |
|
4,883 |
|
11,100 |
|
7,263 |
|
||||
Irrigation |
|
16,657 |
|
11,007 |
|
28,902 |
|
22,284 |
|
||||
Tubing |
|
5,146 |
|
3,679 |
|
9,674 |
|
7,302 |
|
||||
Other |
|
540 |
|
(406 |
) |
555 |
|
(1,065 |
) |
||||
Net corporate expense |
|
(12,474 |
) |
(8,463 |
) |
(19,283 |
) |
(16,470 |
) |
||||
Total Operating Income |
|
$ |
44,552 |
|
$ |
29,909 |
|
$ |
77,966 |
|
$ |
53,486 |
|
12
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
8. Guarantor/ Non-Guarantor Financial Information
On May 4, 2004, the Company completed a $150,000,000 offering of 67¤8% Senior Subordinated Notes. The Notes are guaranteed, jointly, severally, fully and unconditionally, on a senior subordinated basis by certain of our current and future direct and indirect domestic subsidiaries (collectively the Guarantors), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the Non-Guarantors). All Guarantors are 100% owned by the parent company.
Condensed consolidated financial information for the Company (Parent), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Thirteen Weeks
Ended June 30, 2007
|
Parent |
|
Guarantors |
|
Non- |
|
Eliminations |
|
Total |
|
||||||||||||
Net Sales |
|
$ |
249,537 |
|
|
$ |
65,080 |
|
|
|
$ |
115,133 |
|
|
|
$ |
(27,493 |
) |
|
$ |
402,257 |
|
Cost of Sales |
|
181,657 |
|
|
52,711 |
|
|
|
86,437 |
|
|
|
(27,462 |
) |
|
293,343 |
|
|||||
Gross profit |
|
67,880 |
|
|
12,369 |
|
|
|
28,696 |
|
|
|
(31 |
) |
|
108,914 |
|
|||||
Selling, general and administrative expenses |
|
38,312 |
|
|
8,781 |
|
|
|
17,269 |
|
|
|
|
|
|
64,362 |
|
|||||
Operating income |
|
29,568 |
|
|
3,588 |
|
|
|
11,427 |
|
|
|
(31 |
) |
|
44,552 |
|
|||||
Other income (deductions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense |
|
(4,021 |
) |
|
(2 |
) |
|
|
(546 |
) |
|
|
165 |
|
|
(4,404 |
) |
|||||
Interest income |
|
115 |
|
|
141 |
|
|
|
409 |
|
|
|
(165 |
) |
|
500 |
|
|||||
Miscellaneous |
|
22 |
|
|
20 |
|
|
|
214 |
|
|
|
|
|
|
256 |
|
|||||
|
|
(3,884 |
) |
|
159 |
|
|
|
77 |
|
|
|
|
|
|
(3,648 |
) |
|||||
Earnings before income taxes, minority interest and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
25,684 |
|
|
3,747 |
|
|
|
11,504 |
|
|
|
(31 |
) |
|
40,904 |
|
|||||
Income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current |
|
8,648 |
|
|
1,386 |
|
|
|
3,265 |
|
|
|
|
|
|
13,299 |
|
|||||
Deferred |
|
420 |
|
|
(136 |
) |
|
|
81 |
|
|
|
|
|
|
365 |
|
|||||
|
|
9,068 |
|
|
1,250 |
|
|
|
3,346 |
|
|
|
|
|
|
13,664 |
|
|||||
Earnings before minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
16,616 |
|
|
2,497 |
|
|
|
8,158 |
|
|
|
(31 |
) |
|
27,240 |
|
|||||
Minority interest |
|
|
|
|
|
|
|
|
(443 |
) |
|
|
|
|
|
(443 |
) |
|||||
Equity in earnings/(losses) of nonconsolidated subsidiaries |
|
10,376 |
|
|
|
|
|
|
113 |
|
|
|
(10,325 |
) |
|
164 |
|
|||||
Net earnings |
|
$ |
26,992 |
|
|
$ |
2,497 |
|
|
|
$ |
7,828 |
|
|
|
$ |
(10,356 |
) |
|
$ |
26,961 |
|
13
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Twenty-Six Weeks Ended June 30, 2007
|
Parent |
|
Guarantors |
|
Non- |
|
Eliminations |
|
Total |
|
||||||||||||
Net Sales |
|
$ |
468,918 |
|
|
$ |
120,978 |
|
|
|
$ |
206,571 |
|
|
|
$ |
(53,528 |
) |
|
$ |
742,939 |
|
Cost of Sales |
|
344,526 |
|
|
97,507 |
|
|
|
156,367 |
|
|
|
(53,142 |
) |
|
545,258 |
|
|||||
Gross profit |
|
124,392 |
|
|
23,471 |
|
|
|
50,204 |
|
|
|
(386 |
) |
|
197,681 |
|
|||||
Selling, general and administrative expenses |
|
69,403 |
|
|
17,389 |
|
|
|
32,923 |
|
|
|
|
|
|
119,715 |
|
|||||
Operating income |
|
54,989 |
|
|
6,082 |
|
|
|
17,281 |
|
|
|
(386 |
) |
|
77,966 |
|
|||||
Other income (deductions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense |
|
(8,009 |
) |
|
(4 |
) |
|
|
(1,012 |
) |
|
|
336 |
|
|
(8,689 |
) |
|||||
Interest income |
|
281 |
|
|
345 |
|
|
|
840 |
|
|
|
(336 |
) |
|
1,130 |
|
|||||
Miscellaneous |
|
10 |
|
|
36 |
|
|
|
(69 |
) |
|
|
|
|
|
(23 |
) |
|||||
|
|
(7,718 |
) |
|
377 |
|
|
|
(241 |
) |
|
|
|
|
|
(7,582 |
) |
|||||
Earnings before income taxes, minority interest and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
47,271 |
|
|
6,459 |
|
|
|
17,040 |
|
|
|
(386 |
) |
|
70,384 |
|
|||||
Income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current |
|
15,347 |
|
|
2,520 |
|
|
|
4,484 |
|
|
|
|
|
|
22,351 |
|
|||||
Deferred |
|
1,703 |
|
|
(349 |
) |
|
|
269 |
|
|
|
|
|
|
1,623 |
|
|||||
|
|
17,050 |
|
|
2,171 |
|
|
|
4,753 |
|
|
|
|
|
|
23,974 |
|
|||||
Earnings before minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
30,221 |
|
|
4,288 |
|
|
|
12,287 |
|
|
|
(386 |
) |
|
46,410 |
|
|||||
Minority interest |
|
|
|
|
|
|
|
|
(655 |
) |
|
|
|
|
|
(655 |
) |
|||||
Equity in earnings/(losses) of nonconsolidated subsidiaries |
|
15,854 |
|
|
|
|
|
|
25 |
|
|
|
(15,945 |
) |
|
(66 |
) |
|||||
Net earnings |
|
$ |
46,075 |
|
|
$ |
4,288 |
|
|
|
$ |
11,657 |
|
|
|
$ |
(16,331 |
) |
|
$ |
45,689 |
|
14
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Thirteen Weeks Ended July 1, 2006
|
Parent |
|
Guarantors |
|
Non- |
|
Eliminations |
|
Total |
|
||||||||||||
Net Sales |
|
$ |
211,534 |
|
|
$ |
60,052 |
|
|
|
$ |
88,002 |
|
|
|
$ |
(20,797 |
) |
|
$ |
338,791 |
|
Cost of Sales |
|
163,423 |
|
|
46,181 |
|
|
|
64,993 |
|
|
|
(20,868 |
) |
|
253,729 |
|
|||||
Gross profit |
|
48,111 |
|
|
13,871 |
|
|
|
23,009 |
|
|
|
71 |
|
|
85,062 |
|
|||||
Selling, general and administrative expenses |
|
30,739 |
|
|
8,189 |
|
|
|
16,225 |
|
|
|
|
|
|
55,153 |
|
|||||
Operating income |
|
17,372 |
|
|
5,682 |
|
|
|
6,784 |
|
|
|
71 |
|
|
29,909 |
|
|||||
Other income (deductions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense |
|
(4,095 |
) |
|
(2 |
) |
|
|
(249 |
) |
|
|
8 |
|
|
(4,338 |
) |
|||||
Interest income |
|
(34 |
) |
|
26 |
|
|
|
411 |
|
|
|
(8 |
) |
|
395 |
|
|||||
Miscellaneous |
|
(1 |
) |
|
14 |
|
|
|
273 |
|
|
|
|
|
|
286 |
|
|||||
|
|
(4,130 |
) |
|
38 |
|
|
|
435 |
|
|
|
|
|
|
(3,657 |
) |
|||||
Earnings before income taxes, minority interest and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
13,242 |
|
|
5,720 |
|
|
|
7,219 |
|
|
|
71 |
|
|
26,252 |
|
|||||
Income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current |
|
7,802 |
|
|
2,869 |
|
|
|
2,422 |
|
|
|
|
|
|
13,093 |
|
|||||
Deferred |
|
(2,667 |
) |
|
(748 |
) |
|
|
(1,184 |
) |
|
|
|
|
|
(4,599 |
) |
|||||
|
|
5,135 |
|
|
2,121 |
|
|
|
1,238 |
|
|
|
|
|
|
8,494 |
|
|||||
Earnings before minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
8,107 |
|
|
3,599 |
|
|
|
5,981 |
|
|
|
71 |
|
|
17,758 |
|
|||||
Minority interest |
|
|
|
|
|
|
|
|
(341 |
) |
|
|
|
|
|
(341 |
) |
|||||
Equity in earnings/(losses) of nonconsolidated subsidiaries |
|
9,107 |
|
|
(238 |
) |
|
|
128 |
|
|
|
(9,129 |
) |
|
(132 |
) |
|||||
Net earnings |
|
$ |
17,214 |
|
|
$ |
3,361 |
|
|
|
$ |
5,768 |
|
|
|
$ |
(9,058 |
) |
|
$ |
17,285 |
|
15
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Twenty-Six Weeks Ended July 1, 2006
|
Parent |
|
Guarantors |
|
Non- |
|
Eliminations |
|
Total |
|
||||||||||||
Net Sales |
|
$ |
400,295 |
|
|
$ |
115,307 |
|
|
|
$ |
164,006 |
|
|
|
$ |
(37,192 |
) |
|
$ |
642,416 |
|
Cost of Sales |
|
307,733 |
|
|
89,808 |
|
|
|
121,263 |
|
|
|
(37,143 |
) |
|
481,661 |
|
|||||
Gross profit |
|
92,562 |
|
|
25,499 |
|
|
|
42,743 |
|
|
|
(49 |
) |
|
160,755 |
|
|||||
Selling, general and administrative expenses |
|
60,689 |
|
|
16,241 |
|
|
|
30,339 |
|
|
|
|
|
|
107,269 |
|
|||||
Operating income |
|
31,873 |
|
|
9,258 |
|
|
|
12,404 |
|
|
|
(49 |
) |
|
53,486 |
|
|||||
Other income (deductions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense |
|
(8,082 |
) |
|
(4 |
) |
|
|
(415 |
) |
|
|
15 |
|
|
(8,486 |
) |
|||||
Interest income |
|
149 |
|
|
35 |
|
|
|
779 |
|
|
|
(15 |
) |
|
948 |
|
|||||
Miscellaneous |
|
1,114 |
|
|
25 |
|
|
|
44 |
|
|
|
|
|
|
1,183 |
|
|||||
|
|
(6,819 |
) |
|
56 |
|
|
|
408 |
|
|
|
|
|
|
(6,355 |
) |
|||||
Earnings before income taxes, minority interest and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
25,054 |
|
|
9,314 |
|
|
|
12,812 |
|
|
|
(49 |
) |
|
47,131 |
|
|||||
Income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current |
|
16,017 |
|
|
4,251 |
|
|
|
3,725 |
|
|
|
|
|
|
23,993 |
|
|||||
Deferred |
|
(6,236 |
) |
|
(697 |
) |
|
|
(895 |
) |
|
|
|
|
|
(7,828 |
) |
|||||
|
|
9,781 |
|
|
3,554 |
|
|
|
2,830 |
|
|
|
|
|
|
16,165 |
|
|||||
Earnings before minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries |
|
15,273 |
|
|
5,760 |
|
|
|
9,982 |
|
|
|
(49 |
) |
|
30,966 |
|
|||||
Minority interest |
|
|
|
|
|
|
|
|
(509 |
) |
|
|
|
|
|
(509 |
) |
|||||
Equity in earnings/(losses) of nonconsolidated subsidiaries |
|
15,146 |
|
|
(142 |
) |
|
|
157 |
|
|
|
(15,248 |
) |
|
(87 |
) |
|||||
Net earnings |
|
$ |
30,419 |
|
|
$ |
5,618 |
|
|
|
$ |
9,630 |
|
|
|
$ |
(15,297 |
) |
|
$ |
30,370 |
|
16
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2007
|
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Eliminations |
|
Total |
|
|||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
12,022 |
|
|
$ |
1,481 |
|
|
|
$ |
34,421 |
|
|
|
$ |
|
|
|
$ |
47,924 |
|
Receivables, net |
|
104,215 |
|
|
32,212 |
|
|
|
111,565 |
|
|
|
(63 |
) |
|
247,929 |
|
|||||
Inventories |
|
96,048 |
|
|
46,945 |
|
|
|
75,204 |
|
|
|
|
|
|
218,197 |
|
|||||
Prepaid expenses |
|
3,251 |
|
|
509 |
|
|
|
7,373 |
|
|
|
|
|
|
11,133 |
|
|||||
Refundable and deferred income taxes |
|
11,478 |
|
|
3,346 |
|
|
|
3,821 |
|
|
|
|
|
|
18,645 |
|
|||||
Total current assets |
|
227,014 |
|
|
84,493 |
|
|
|
232,384 |
|
|
|
(63 |
) |
|
543,828 |
|
|||||
Property, plant and equipment, at cost |
|
346,968 |
|
|
75,818 |
|
|
|
131,478 |
|
|
|
|
|
|
554,264 |
|
|||||
Less accumulated depreciation and amortization |
|
229,069 |
|
|
32,333 |
|
|
|
75,727 |
|
|
|
|
|
|
(337,129 |
) |
|||||
Net property, plant and equipment |
|
117,899 |
|
|
43,485 |
|
|
|
55,751 |
|
|
|
|
|
|
217,135 |
|
|||||
Goodwill |
|
20,370 |
|
|
73,375 |
|
|
|
20,628 |
|
|
|
|
|
|
114,373 |
|
|||||
Other intangible assets |
|
697 |
|
|
52,004 |
|
|
|
6,379 |
|
|
|
|
|
|
59,080 |
|
|||||
Investment in subsidiaries and intercompany accounts |
|
410,260 |
|
|
60,527 |
|
|
|
(29,770 |
) |
|
|
(441,017 |
) |
|
|
|
|||||
Other assets |
|
17,020 |
|
|
|
|
|
|
6,230 |
|
|
|
(600 |
) |
|
22,650 |
|
|||||
Total assets |
|
$ |
793,260 |
|
|
$ |
313,884 |
|
|
|
$ |
291,602 |
|
|
|
$ |
(441,680 |
) |
|
$ |
957,066 |
|
LIABILITIES AND |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current installments of long-term debt |
|
$ |
19,023 |
|
|
$ |
30 |
|
|
|
$ |
3,113 |
|
|
|
$ |
|
|
|
$ |
22,166 |
|
Notes payable to banks |
|
|
|
|
|
|
|
|
17,900 |
|
|
|
|
|
|
17,900 |
|
|||||
Accounts payable |
|
39,573 |
|
|
11,756 |
|
|
|
51,757 |
|
|
|
|
|
|
103,086 |
|
|||||
Accrued expenses |
|
49,767 |
|
|
5,814 |
|
|
|
28,380 |
|
|
|
63 |
|
|
84,024 |
|
|||||
Dividends payable |
|
2,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,708 |
|
|||||
Total current liabilities |
|
111,071 |
|
|
17,600 |
|
|
|
101,150 |
|
|
|
63 |
|
|
229,884 |
|
|||||
Deferred income taxes |
|
11,359 |
|
|
20,869 |
|
|
|
3,519 |
|
|
|
|
|
|
35,747 |
|
|||||
Long-term debt, excluding current installments |
|
203,900 |
|
|
22 |
|
|
|
2,913 |
|
|
|
(600 |
) |
|
206,235 |
|
|||||
Minority interest in consolidated subsidiaries |
|
|
|
|
|
|
|
|
9,720 |
|
|
|
|
|
|
9,720 |
|
|||||
Other noncurrent liabilities |
|
21,296 |
|
|
|
|
|
|
2,870 |
|
|
|
|
|
|
24,166 |
|
|||||
Shareholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock of $1 par value |
|
27,900 |
|
|
14,249 |
|
|
|
3,492 |
|
|
|
(17,741 |
) |
|
27,900 |
|
|||||
Additional paid-in capital |
|
|
|
|
159,082 |
|
|
|
71,412 |
|
|
|
(230,494 |
) |
|
|
|
|||||
Retained earnings |
|
451,163 |
|
|
102,062 |
|
|
|
88,243 |
|
|
|
(192,908 |
) |
|
448,560 |
|
|||||
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
8,283 |
|
|
|
|
|
|
8,283 |
|
|||||
Treasury stock |
|
(33,429 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(33,429 |
) |
|||||
Unearned restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders equity |
|
445,634 |
|
|
275,393 |
|
|
|
171,430 |
|
|
|
(441,143 |
) |
|
451,314 |
|
|||||
Total liabilities and shareholders equity |
|
$ |
793,260 |
|
|
$ |
313,884 |
|
|
|
$ |
291,602 |
|
|
|
$ |
(441,680 |
) |
|
$ |
957,066 |
|
17
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 30, 2006
|
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Eliminations |
|
Total |
|
||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
25,438 |
|
|
$ |
2,962 |
|
|
|
$ |
35,104 |
|
|
|
$ |
|
|
|
$ |
63,504 |
|
|
Receivables, net |
|
88,295 |
|
|
32,836 |
|
|
|
92,577 |
|
|
|
(48 |
) |
|
213,660 |
|
|
|||||
Inventories |
|
84,073 |
|
|
46,539 |
|
|
|
63,666 |
|
|
|
|
|
|
194,278 |
|
|
|||||
Prepaid expenses |
|
2,368 |
|
|
422 |
|
|
|
3,296 |
|
|
|
|
|
|
6,086 |
|
|
|||||
Refundable and deferred income taxes |
|
9,791 |
|
|
3,323 |
|
|
|
4,016 |
|
|
|
|
|
|
17,130 |
|
|
|||||
Total current assets |
|
209,965 |
|
|
86,082 |
|
|
|
198,659 |
|
|
|
(48 |
) |
|
494,658 |
|
|
|||||
Property, plant and equipment, at cost |
|
331,520 |
|
|
72,482 |
|
|
|
118,242 |
|
|
|
|
|
|
522,244 |
|
|
|||||
Less accumulated depreciation and amortization |
|
221,290 |
|
|
29,603 |
|
|
|
70,741 |
|
|
|
|
|
|
321,634 |
|
|
|||||
Net property, plant and equipment |
|
110,230 |
|
|
42,879 |
|
|
|
47,501 |
|
|
|
|
|
|
200,610 |
|
|
|||||
Goodwill |
|
20,370 |
|
|
73,375 |
|
|
|
14,583 |
|
|
|
|
|
|
108,328 |
|
|
|||||
Other intangible assets |
|
724 |
|
|
53,475 |
|
|
|
2,134 |
|
|
|
|
|
|
56,333 |
|
|
|||||
Investment in subsidiaries and intercompany accounts |
|
380,194 |
|
|
56,503 |
|
|
|
(17,241 |
) |
|
|
(419,456 |
) |
|
|
|
|
|||||
Other assets |
|
25,666 |
|
|
|
|
|
|
7,315 |
|
|
|
(600 |
) |
|
32,381 |
|
|
|||||
Total assets |
|
$ |
747,149 |
|
|
$ |
312,314 |
|
|
|
$ |
252,951 |
|
|
|
$ |
(420,104 |
) |
|
$ |
892,310 |
|
|
LIABILITIES AND |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current installments of long-term debt |
|
$ |
16,068 |
|
|
$ |
29 |
|
|
|
$ |
2,256 |
|
|
|
$ |
|
|
|
$ |
18,353 |
|
|
Notes payable to banks |
|
|
|
|
|
|
|
|
13,114 |
|
|
|
|
|
|
13,114 |
|
|
|||||
Accounts payable |
|
43,321 |
|
|
13,397 |
|
|
|
46,601 |
|
|
|
|
|
|
103,319 |
|
|
|||||
Accrued expenses |
|
47,239 |
|
|
6,549 |
|
|
|
25,959 |
|
|
|
(48 |
) |
|
79,699 |
|
|
|||||
Dividends payable |
|
2,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,437 |
|
|
|||||
Total current liabilities |
|
109,065 |
|
|
19,975 |
|
|
|
87,930 |
|
|
|
(48 |
) |
|
216,922 |
|
|
|||||
Deferred income taxes |
|
11,392 |
|
|
21,196 |
|
|
|
2,397 |
|
|
|
|
|
|
34,985 |
|
|
|||||
Long-term debt, excluding current installments |
|
201,615 |
|
|
38 |
|
|
|
1,731 |
|
|
|
(600 |
) |
|
202,784 |
|
|
|||||
Other noncurrent liabilities |
|
26,203 |
|
|
|
|
|
|
1,846 |
|
|
|
|
|
|
28,049 |
|
|
|||||
Minority interest in consolidated subsidiaries |
|
|
|
|
|
|
|
|
8,289 |
|
|
|
|
|
|
8,289 |
|
|
|||||
Shareholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock of $1 par value |
|
27,900 |
|
|
14,249 |
|
|
|
3,492 |
|
|
|
(17,741 |
) |
|
27,900 |
|
|
|||||
Additional paid-in capital |
|
|
|
|
159,082 |
|
|
|
67,055 |
|
|
|
(226,137 |
) |
|
|
|
|
|||||
Retained earnings |
|
406,786 |
|
|
97,774 |
|
|
|
76,585 |
|
|
|
(175,578 |
) |
|
405,567 |
|
|
|||||
Accumulated other comprehensive income |
|
|
|
|
|
|
|
|
3,626 |
|
|
|
|
|
|
3,626 |
|
|
|||||
Treasury stock |
|
(35,812 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(35,812 |
) |
|
|||||
Total shareholders equity |
|
398,874 |
|
|
271,105 |
|
|
|
150,758 |
|
|
|
(419,456 |
) |
|
401,281 |
|
|
|||||
Total liabilities and shareholders equity |
|
$ |
747,149 |
|
|
$ |
312,314 |
|
|
|
$ |
252,951 |
|
|
|
$ |
(420,104 |
) |
|
$ |
892,310 |
|
|
18
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty-Six Weeks Ended June 30, 2007
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Eliminations |
|
Total |
|
||||||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net earnings |
|
$ |
46,074 |
|
|
$ |
4,289 |
|
|
|
$ |
11,657 |
|
|
|
$ |
(16,331 |
) |
|
$ |
45,689 |
|
Adjustments to reconcile net earnings to net cash flows from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Depreciation and amortization |
|
8,876 |
|
|
4,399 |
|
|
|
3,712 |
|
|
|
|
|
|
16,987 |
|
|||||
Stock based compensation |
|
1,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,752 |
|
|||||
(Gain)/ Loss on sale of property, plant and equipment |
|
20 |
|
|
666 |
|
|
|
91 |
|
|
|
|
|
|
777 |
|
|||||
Equity in (earnings)/losses of nonconsolidated subsidiaries |
|
91 |
|
|
|
|
|
|
(25 |
) |
|
|
|
|
|
66 |
|
|||||
Minority interest |
|
|
|
|
|
|
|
|
655 |
|
|
|
|
|
|
655 |
|
|||||
Deferred income taxes |
|
2,056 |
|
|
(350 |
) |
|
|
(83 |
) |
|
|
|
|
|
1,623 |
|
|||||
Other adjustments |
|
|
|
|
|
|
|
|
318 |
|
|
|
|
|
|
318 |
|
|||||
Payment of deferred compensation |
|
(9,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(9,186 |
) |
|||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Receivables |
|
(15,920 |
) |
|
625 |
|
|
|
(16,886 |
) |
|
|
86 |
|
|
(32,095 |
) |
|||||
Inventories |
|
(11,976 |
) |
|
(406 |
) |
|
|
(6,537 |
) |
|
|
32 |
|
|
(18,887 |
) |
|||||
Prepaid expenses |
|
(883 |
) |
|
(87 |
) |
|
|
(2,199 |
) |
|
|
|
|
|
(3,169 |
) |
|||||
Accounts payable |
|
(1,981 |
) |
|
(1,642 |
) |
|
|
2,746 |
|
|
|
|
|
|
(877 |
) |
|||||
Accrued expenses |
|
2,784 |
|
|
(735 |
) |
|
|
1,400 |
|
|
|
(15 |
) |
|
3,434 |
|
|||||
Other noncurrent liabilities |
|
126 |
|
|
|
|
|
|
1,024 |
|
|
|
|
|
|
1,150 |
|
|||||
Income taxes payable |
|
(1,767 |
) |
|
|
|
|
|
(16 |
) |
|
|
|
|
|
(1,783 |
) |
|||||
Net cash flows from operating activities |
|
20,066 |
|
|
6,759 |
|
|
|
(4,143 |
) |
|
|
(16,228 |
) |
|
6,454 |
|
|||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchase of property, plant and equipment |
|
(16,130 |
) |
|
(4,201 |
) |
|
|
(6,657 |
) |
|
|
|
|
|
(26,988 |
) |
|||||
Acquisitions, net of cash acquired |
|
|
|
|
|
|
|
|
(12,336 |
) |
|
|
|
|
|
(12,336 |
) |
|||||
Dividends to minority interest |
|
|
|
|
|
|
|
|
(692 |
) |
|
|
|
|
|
(692 |
) |
|||||
Proceeds from sale of assets |
|
9,235 |
|
|
|
|
|
|
114 |
|
|
|
|
|
|
9,349 |
|
|||||
Proceeds from minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other, net |
|
(29,776 |
) |
|
(4,025 |
) |
|
|
16,542 |
|
|
|
16,228 |
|
|
(1,031 |
) |
|||||
Net cash flows from investing activities |
|
(36,671 |
) |
|
(8,226 |
) |
|
|
(3,029 |
) |
|
|
16,228 |
|
|
(31,698 |
) |
|||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net borrowings (repayments) under short-term agreements |
|
|
|
|
|
|
|
|
2,950 |
|
|
|
|
|
|
2,950 |
|
|||||
Proceeds from long-term borrowings |
|
11,991 |
|
|
|
|
|
|
2,060 |
|
|
|
|
|
|
14,051 |
|
|||||
Principal payments on long-term obligations |
|
(6,752 |
) |
|
(14 |
) |
|
|
(20 |
) |
|
|
|
|
|
(6,786 |
) |
|||||
Dividends paid |
|
(4,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(4,881 |
) |
|||||
Proceeds from exercises under stock plans |
|
3,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,337 |
|
|||||
Excess tax benefits from stock option exercises |
|
2,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,464 |
|
|||||
Purchase of common treasury sharesstock plan exercises |
|
(2,970 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(2,970 |
) |
|||||
Net cash flows from financing activities |
|
3,189 |
|
|
(14 |
) |
|
|
4,990 |
|
|
|
|
|
|
8,165 |
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
|
|
1,499 |
|
|
|
|
|
|
1,499 |
|
|||||
Net change in cash and cash equivalents |
|
(13,416 |
) |
|
(1,481 |
) |
|
|
(683 |
) |
|
|
|
|
|
(15,580 |
) |
|||||
Cash and cash equivalentsbeginning of period |
|
25,438 |
|
|
2,962 |
|
|
|
35,104 |
|
|
|
|
|
|
63,504 |
|
|||||
Cash and cash equivalentsend of year |
|
$ |
12,022 |
|
|
$ |
1,481 |
|
|
|
$ |
34,421 |
|
|
|
$ |
|
|
|
$ |
47,924 |
|
19
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Twenty-Six Weeks Ended July 1, 2006
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Eliminations |
|
Total |
|
||||||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net earnings |
|
$ |
30,419 |
|
|
$ |
5,618 |
|
|
|
$ |
9,630 |
|
|
|
$ |
(15,297 |
) |
|
$ |
30,370 |
|
Adjustments to reconcile net earnings to net cash flows from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Depreciation and amortization |
|
9,774 |
|
|
4,782 |
|
|
|
4,001 |
|
|
|
|
|
|
18,557 |
|
|||||
Stock based compensation |
|
1,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,269 |
|
|||||
(Gain)/ Loss on sale of property, plant and equipment |
|
480 |
|
|
(90 |
) |
|
|
121 |
|
|
|
|
|
|
511 |
|
|||||
Equity in (earnings)/losses of nonconsolidated subsidiaries |
|
102 |
|
|
142 |
|
|
|
(157 |
) |
|
|
|
|
|
87 |
|
|||||
Minority interest |
|
|
|
|
|
|
|
|
509 |
|
|
|
|
|
|
509 |
|
|||||
Deferred income taxes |
|
(6,236 |
) |
|
(697 |
) |
|
|
(895 |
) |
|
|
|
|
|
(7,828 |
) |
|||||
Other adjustments |
|
|
|
|
|
|
|
|
(137 |
) |
|
|
|
|
|
(137 |
) |
|||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Receivables |
|
(28,550 |
) |
|
3,442 |
|
|
|
(13,730 |
) |
|
|
15 |
|
|
(38,823 |
) |
|||||
Inventories |
|
(2,629 |
) |
|
338 |
|
|
|
(3,259 |
) |
|
|
|
|
|
(5,550 |
) |
|||||
Prepaid expenses |
|
(1,079 |
) |
|
77 |
|
|
|
(2,626 |
) |
|
|
|
|
|
(3,628 |
) |
|||||
Accounts payable |
|
2,643 |
|
|
2,238 |
|
|
|
922 |
|
|
|
|
|
|
5,803 |
|
|||||
Accrued expenses |
|
562 |
|
|
(1,453 |
) |
|
|
2,329 |
|
|
|
(15 |
) |
|
1,423 |
|
|||||
Other noncurrent liabilities |
|
(277 |
) |
|
|
|
|
|
814 |
|
|
|
|
|
|
537 |
|
|||||
Income taxes payable |
|
(4,584 |
) |
|
|
|
|
|
(246 |
) |
|
|
|
|
|
(4,830 |
) |
|||||
Net cash flows from operating activities |
|
1,894 |
|
|
14,397 |
|
|
|
(2,724 |
) |
|
|
(15,297 |
) |
|
(1,730 |
) |
|||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchase of property, plant and equipment |
|
(4,675 |
) |
|
(1,271 |
) |
|
|
(5,484 |
) |
|
|
|
|
|
(11,430 |
) |
|||||
Investment in unconsolidated sub |
|
(1,274 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(1,274 |
) |
|||||
Dividends to minority interest |
|
|
|
|
|
|
|
|
(302 |
) |
|
|
|
|
|
(302 |
) |
|||||
Proceeds from sale of assets |
|
770 |
|
|
122 |
|
|
|
166 |
|
|
|
|
|
|
1,058 |
|
|||||
Proceeds from minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other, net |
|
(5,166 |
) |
|
(12,649 |
) |
|
|
2,016 |
|
|
|
15,297 |
|
|
(502 |
) |
|||||
Net cash flows from investing activities |
|
(10,345 |
) |
|
(13,798 |
) |
|
|
(3,604 |
) |
|
|
15,297 |
|
|
(12,450 |
) |
|||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net borrowings (repayments) under short-term agreements |
|
|
|
|
|
|
|
|
(93 |
) |
|
|
|
|
|
(93 |
) |
|||||
Proceeds from long-term borrowings |
|
|
|
|
|
|
|
|
475 |
|
|
|
|
|
|
475 |
|
|||||
Principal payments on long-term obligations |
|
(5,216 |
) |
|
(13 |
) |
|
|
32 |
|
|
|
|
|
|
(5,197 |
) |
|||||
Dividends paid |
|
(4,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(4,232 |
) |
|||||
Proceeds from exercises under stock plans |
|
25,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
25,229 |
|
|||||
Excess tax benefits from stock option exercises |
|
15,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
15,428 |
|
|||||
Purchase of common treasury sharesstock plan exercises |
|
(30,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(30,138 |
) |
|||||
Net cash flows from financing activities |
|
1,071 |
|
|
(13 |
) |
|
|
414 |
|
|
|
|
|
|
1,472 |
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
|
|
388 |
|
|
|
|
|
|
388 |
|
|||||
Net change in cash and cash equivalents |
|
(7,380 |
) |
|
586 |
|
|
|
(5,526 |
) |
|
|
|
|
|
(12,320 |
) |
|||||
Cash and cash equivalentsbeginning of period |
|
16,875 |
|
|
1,898 |
|
|
|
28,094 |
|
|
|
|
|
|
46,867 |
|
|||||
Cash and cash equivalentsend of year |
|
$ |
9,495 |
|
|
$ |
2,484 |
|
|
|
$ |
22,568 |
|
|
|
$ |
|
|
|
$ |
34,547 |
|
20
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Managements discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on assumptions that management has made in light of experience in the industries in which the Company operates, as well as managements perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. These statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Companys control) and assumptions. Management believes that these forward-looking statements are based on reasonable assumptions. Many factors could affect the Companys actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include, among other things, risk factors described from time to time in the Companys reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments.
This discussion should be read in conjunction with the financial statements and the notes thereto, and the managements discussion and analysis, included in the Companys Annual Report on Form 10-K for the fiscal year ended December 30, 2006. We aggregate our businesses into five reportable segments. See Note 7 to the Condensed Consolidated Financial Statements.
21
Dollars in thousands, except per share amounts
|
|
Thirteen Weeks Ended |
|
Twenty-six Weeks Ended |
|
||||||||||||||||
|
|
June 30, |
|
July 1, |
|
% Incr. |
|
June 30, |
|
July 1, |
|
% Incr. |
|
||||||||
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
402,257 |
|
$ |
338,791 |
|
|
18.7 |
% |
|
$ |
742,939 |
|
$ |
642,416 |
|
|
15.6 |
% |
|
Gross profit |
|
108,914 |
|
85,062 |
|
|
28.0 |
% |
|
197,681 |
|
160,755 |
|
|
23.0 |
% |
|
||||
as a percent of sales |
|
27.1 |
% |
25.1 |
% |
|
|
|
|
26.6 |
% |
25.0 |
% |
|
|
|
|
||||
SG&A expense |
|
64,362 |
|
55,153 |
|
|
16.7 |
% |
|
119,715 |
|
107,269 |
|
|
11.6 |
% |
|
||||
as a percent of sales |
|
16.0 |
% |
16.3 |
% |
|
|
|
|
16.1% |
|
16.7 |
% |
|
|
|
|
||||
Operating income |
|
44,552 |
|
29,909 |
|
|
49.0 |
% |
|
77,966 |
|
53,486 |
|
|
45.8 |
% |
|
||||
as a percent of sales |
|
11.1 |
% |
8.8 |
% |
|
|
|
|
10.5 |
% |
8.3 |
% |
|
|
|
|
||||
Net interest expense |
|
3,904 |
|
3,943 |
|
|
(1.0 |
)% |
|
7,559 |
|
7,538 |
|
|
0.3 |
% |
|
||||
Effective tax rate |
|
33.4 |
% |
32.4 |
% |
|
|
|
|
34.1 |
% |
34.3 |
% |
|
|
|
|
||||
Net earnings |
|
26,961 |
|
17,285 |
|
|
56.0 |
% |
|
45,689 |
|
30,370 |
|
|
50.4 |
% |
|
||||
Earnings per share |
|
$ |
1.03 |
|
$ |
0.67 |
|
|
53.7 |
% |
|
$ |
1.76 |
|
$ |
1.18 |
|
|
49.2 |
% |
|
Engineered Support Structures segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
152,167 |
|
129,559 |
|
|
17.5 |
% |
|
268,057 |
|
237,760 |
|
|
12.7 |
% |
|
||||
Gross profit |
|
41,858 |
|
34,220 |
|
|
22.3 |
% |
|
73,545 |
|
61,708 |
|
|
19.2 |
% |
|
||||
SG&A expense |
|
25,115 |
|
23,146 |
|
|
8.5 |
% |
|
48,122 |
|
43,630 |
|
|
10.3 |
% |
|
||||
Operating income |
|
16,743 |
|
11,074 |
|
|
51.2 |
% |
|
25,423 |
|
18,078 |
|
|
40.6 |
% |
|
||||
Utility Support Structures segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
89,246 |
|
75,684 |
|
|
17.9 |
% |
|
169,494 |
|
141,023 |
|
|
20.2 |
% |
|
||||
Gross profit |
|
21,374 |
|
15,633 |
|
|
36.7 |
% |
|
39,813 |
|
31,316 |
|
|
27.1 |
% |
|
||||
SG&A expense |
|
9,330 |
|
7,498 |
|
|
24.4 |
% |
|
18,218 |
|
15,222 |
|
|
19.7 |
% |
|
||||
Operating income |
|
12,044 |
|
8,135 |
|
|
48.1 |
% |
|
21,595 |
|
16,094 |
|
|
34.2 |
% |
|
||||
Coatings segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
27,108 |
|
22,031 |
|
|
23.0 |
% |
|
53,438 |
|
42,512 |
|
|
25.7 |
% |
|
||||
Gross profit |
|
8,527 |
|
7,543 |
|
|
13.0 |
% |
|
16,345 |
|
12,417 |
|
|
31.6 |
% |
|
||||
SG&A expense |
|
2,631 |
|
2,660 |
|
|
(1.1 |
)% |
|
5,245 |
|
5,154 |
|
|
1.8 |
% |
|
||||
Operating income |
|
5,896 |
|
4,883 |
|
|
20.7 |
% |
|
11,100 |
|
7,263 |
|
|
52.8 |
% |
|
||||
Irrigation segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
107,533 |
|
87,848 |
|
|
22.4 |
% |
|
200,432 |
|
174,707 |
|
|
14.7 |
% |
|
||||
Gross profit |
|
28,574 |
|
21,640 |
|
|
32.0 |
% |
|
51,322 |
|
42,898 |
|
|
19.6 |
% |
|
||||
SG&A expense |
|
11,917 |
|
10,633 |
|
|
12.1 |
% |
|
22,420 |
|
20,614 |
|
|
8.8 |
% |
|
||||
Operating income |
|
16,657 |
|
11,007 |
|
|
51.3 |
% |
|
28,902 |
|
22,284 |
|
|
29.7 |
% |
|
||||
Tubing segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
21,932 |
|
20,184 |
|
|
8.7 |
% |
|
43,025 |
|
39,579 |
|
|
8.7 |
% |
|
||||
Gross profit |
|
6,827 |
|
5,236 |
|
|
30.4 |
% |
|
12,977 |
|
10,377 |
|
|
25.1 |
% |
|
||||
SG&A expense |
|
1,681 |
|
1,557 |
|
|
8.0 |
% |
|
3,303 |
|
3,075 |
|
|
7.4 |
% |
|
||||
Operating income |
|
5,146 |
|
3,679 |
|
|
39.9 |
% |
|
9,674 |
|
7,302 |
|
|
32.5 |
% |
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
4,271 |
|
3,485 |
|
|
22.6 |
% |
|
8,493 |
|
6,835 |
|
|
24.3 |
% |
|
||||
Gross profit |
|
1,720 |
|
1,264 |
|
|
36.1 |
% |
|
3,360 |
|
2,445 |
|
|
37.4 |
% |
|
||||
SG&A expense |
|
1,180 |
|
1,670 |
|
|
(29.3 |
)% |
|
2,805 |
|
3,510 |
|
|
(20.1 |
)% |
|
||||
Operating income (loss) |
|
540 |
|
(406 |
) |
|
NM |
|
|
555 |
|
(1,065 |
) |
|
NM |
|
|
||||
Net Corporate expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
34 |
|
(475 |
) |
|
NM |
|
|
319 |
|
(406 |
) |
|
NM |
|
|
||||
SG&A expense |
|
12,508 |
|
7,988 |
|
|
56.5 |
% |
|
19,602 |
|
16,064 |
|
|
22.0 |
% |
|
||||
Operating income (loss) |
|
(12,474 |
) |
(8,463 |
) |
|
(47.4 |
)% |
|
(19,283 |
) |
(16,470 |
) |
|
(17.1 |
)% |
|
NM = Not meaningful
22
Overview
The sales increases for the thirteen and twenty-six week periods ended June 30, 2007, as compared with the same periods of 2006, were due to increased sales volumes in all reportable segments and increased selling prices to recover higher raw material costs. The improvement in gross margin (gross profit as a percent of sales) for the thirteen and twenty-six week periods ended June 30, 2007, as compared with the same periods of 2006, resulted mainly from improved sales prices and higher sales volumes. The increases in selling, general and administrative (SG&A) expenses for the second quarter and year-to-date periods ended June 30, 2007, as compared with the same periods in 2006, mainly resulted from higher employee incentives related to improved operating performance (approximately $3.6 million and $2.9 million, respectively), increased salary and benefit costs to support the increase in sales activity (approximately $0.6 million and $3.4 million, respectively) and higher sales commissions associated with the increased sales volumes (approximately $1.9 million and $2.4 million, respectively). All reportable segments contributed to the improved operating income in 2007 for the thirteen and twenty-six weeks ended June 30, 2007, as compared with the same periods in 2006. In November 2006, we acquired the remaining 51% ownership in a previously non-consolidated Mexican manufacturing facility that is reported under the Utility Support Structures segment. In April 2007, we acquired 70% ownership in Tehomet Oy (Tehomet), a Finnish manufacturer of lighting structures that is reported under the Engineered Support Structures segment. The impact of these acquisitions on our operating results for the thirteen and twenty-six week periods ended June 30, 2007 was not significant.
Net interest expense for the thirteen and twenty-six weeks ended June 30, 2007 were comparable with the same periods in 2006, as average borrowing levels and interest rates in 2007 were similar to 2006. Our effective tax rate for the second quarter and year-to-date periods ended June 30, 2007 were comparable with the same periods in 2006. Miscellaneous income was lower for the twenty-six week period ended June 30, 2007 as compared with the same period in 2006, due to a $1.1 million settlement associated with a retirement plan of a former subsidiary in the first quarter of 2006. Our cash flows provided by operations was $6.5 million for the twenty-six weeks ended June 30, 2007, as compared with $1.7 million of cash used by operations for the same period in 2006. The higher operating cash flows in 2007 resulted from increased earnings in 2007, offset to a degree by increased working capital required by the increased net sales realized in 2007, as compared with 2006.
Engineered Support Structures (ESS) segment
All geographic regions contributed to the improvement in ESS segment sales in the thirteen and twenty-six week periods ended June 30, 2007, as compared with the same periods in 2006. In North America, lighting and traffic structure sales in 2007 were higher than 2006, due to a combination of increased volume and sales price increases. In the transportation market channel, sales were up modestly in 2007, as compared with 2006, primarily the result of sales price increases. Sales in the commercial market channel in 2007 increased as compared with 2006 through expanded relationships with lighting fixture manufacturers and expansion into new markets, such as lighting structures for decorative applications. In Europe, improved sales volumes in traditional lighting structures more than offset lower sales of tramway structures. The acquisition of Tehomet in the second quarter 2007 also contributed to the increase in European lighting structure sales. Sales of lighting structures in China in 2007 were higher than 2006, on both a quarterly and year-to-date basis, mainly due to continued market expansion and increased sales efforts.
Sales of Specialty Structures products increased in 2007 as compared with 2006, on both a quarterly and year-to-date basis. In North America, structure sales in the wireless communication market in 2007 were comparable to 2006, while weakness in wireless communication components and highway sign sales resulted in lower sales in this product line in 2007, as compared with 2006. Sales of wireless communication
23
poles in China continued to be very strong as Chinese wireless carriers continue the development of their wireless networks.
The increases in operating income of the ESS segment for the thirteen and twenty-six weeks ended June 30, 2007, as compared with the same periods in 2006, were related to the sales growth in all regions. Also, charges to operating income in the second quarter of 2006 related to a sign structure warranty claim and production equipment disposals in Europe ($1.1 million) and the writeoff of the Sigma trade name ($0.4 million) also contributed to the improvement in segment operating income in 2007, as compared with 2006. The main reasons for the increases in SG&A expense for the thirteen and twenty-six weeks ended June 30, 2007, as compared with the same periods in 2006, were increased salary and employee benefit costs of $1.1 million, on a year-to-date basis, commissions related to higher sales volumes (approximately $1.2 million and $1.4 million, respectively), and foreign currency translation (approximately $0.6 million and $1.2 million, respectively).
Utility Support Structures segment
In the Utility Support Structures segment, the sales increases for the thirteen and twenty-six weeks ended June 30, 2007, as compared with the same periods of 2006, were due to improved demand for steel and concrete electrical transmission, substation and distribution pole structures and higher selling prices. The increase in demand for utility structures was the result of continued investment by utility companies to improve the electrical transmission and distribution infrastructure in the U.S. Gross profit increased in the second quarter of 2007, as compared with 2006 due to improved operating leverage from the higher volumes produced by our steel structure manufacturing operations and price improvements, offset to a degree by stronger sales mix of steel structures, which carry slightly lower gross margins compared with concrete structures. The increase in SG&A spending for the thirteen and twenty six weeks ended June 30, 2007 was due to the fourth quarter 2006 acquisition of the remaining 51% of our previously non-consolidated manufacturing facility in Mexico ($0.4 million and $0.9 million respectively), increased commission expenses related to the higher sales volumes, ($0.6 million and $0.9 million respectively) and increased salary, benefits and incentive expenses related to the higher sales activity and profit levels (approximately $0.7 million and $1.4 million, respectively).
Coatings segment
Coatings segment sales for the thirteen and twenty-six week periods ended June 30, 2007 were above 2006 levels, mainly due to higher sales prices associated with higher zinc costs and increased demand for galvanizing services. In our galvanizing operations, pounds of steel galvanized in 2007 for the thirteen and twenty-six weeks ended June 30, 2007 increased over the same periods in 2006 by approximately 20% and 10%, respectively. The volume increases were due to stronger industrial economic conditions in our market areas, including increased galvanizing services provided to our other operations in the U.S. The increase in sales in 2007 as compared with 2006 also reflected increased selling prices for galvanizing services to cover the increase in zinc costs experienced throughout 2006. The increases in operating income for the thirteen and twenty-six weeks ended June 30, 2007 as compared with the same periods in 2006 were principally due to higher production levels and improved production efficiencies. SG&A spending in the second quarter and year-to-date periods ended June 30, 2007 were comparable to last year. In the second quarter of 2007, we recorded a valuation charge of approximately $0.7 million related to the disposal of manufacturing equipment in our anodizing operation.
Irrigation segment
For the thirteen and twenty-six weeks ended June 30, 2007 the sales increases in the Irrigation segment, as compared with the same periods in 2006, were predominantly due to higher sales volumes. In North America, generally higher farm commodity prices in 2007 resulted in improved demand for
24
irrigation machines. In addition, we adjusted our sales prices in the latter part of the first quarter of 2007 due to competitive conditions. We believe this pricing adjustment also contributed to increased demand for our products during the second quarter. International sales in the second quarter of 2007 increased mainly due to stronger sales in South America and China, which more than offset weakness in sales in the Australian market and lower sales in emerging markets in Central Asia and Africa. Argentina sales were driven by higher corn prices while severe drought conditions in Australia contributed to a weaker market in that region. Operating income for the thirteen and twenty-six weeks ended June 30, 2007 increased substantially as compared with the same periods in 2006 due to improved sales volumes and factory utilization as well as effective control of SG&A spending. The increases in SG&A spending for the thirteen and twenty-six weeks ended June 30, 2007, as compared with the same periods in 2006 were mainly attributable to increased employee incentives associated with improved operational performance ($0.5 million and $0.3 million, respectively) and increased salary and benefit expense for additional administrative personnel ($0.3 million and $0.5 million, respectively).
Tubing segment
The increases in Tubing sales for the second quarter and the year-to-date periods ended June 30, 2007, as compared with the same periods in 2006, were due to improved demand for structural tubing products and large diameter products used for industrial and agricultural applications. We believe that the increase in demand from agricultural equipment manufacturers was due in part to an increase in the number of acres to be planted in corn in 2007, resulting in an increase in the demand for grain handling equipment. Operating income was significantly higher in 2007 due to improved operating efficiencies and leverage from increased production volumes which more than offset higher SG&A spending related to sales incentives.
Other
This includes our industrial fastener business, our machine tool accessories operation in France and the development costs associated with our wind energy structure initiative. We made the decision to suspend our wind energy initiative in the fourth quarter of 2006. The main reasons for the improvement in operating income this year was lower spending related to wind energy and improvement in sales and profitability of our machine tool accessory business.
Net corporate expense
The increases in net corporate expenses for the thirteen and twenty-six weeks ended June 30, 2007, as compared with the same periods in 2006 were mainly related to increased employee incentives due to improved earnings and common stock price (which is used to value certain long-term management incentives) this year (approximately $2.4 million and $1.4 million, respectively) and increased costs ($0.5 million and $0.5 million) related to higher health care costs.
Liquidity and Capital Resources
Cash Flows
Working Capital and Operating Cash FlowsNet working capital was $313.9 million at June 30, 2007, as compared with $277.7 million at December 30, 2006. The ratio of current assets to current liabilities was 2.37:1 at June 30, 2007, as compared with 2.28:1 at December 30, 2006. The increase in net working capital mainly relates to increased accounts receivable and inventories associated with higher sales activity in 2007, as compared with 2006. Cash flow provided by operations was $6.5 million for the twenty-six week period ended June 30, 2007, as compared with $1.7 million used by operations for the same period in 2006. The increase in operating cash flows in 2007, as compared with 2006, related primarily to increased net earnings
25
and the timing of income taxes payable. In 2007 $9,186 was distributed from our non-qualified deferred compensation plan to participants under the transition rules of section 409A of the Internal Revenue Code.
Investing Cash FlowsCapital spending during the twenty-six weeks ended June 30, 2007 was $27.0 million, as compared with $11.4 million for the same period in 2006. The main reason for the increased capital spending in 2007, as compared with 2006, was additional manufacturing capacity to serve the North America ESS markets and the Utility Support Structures segment. Our capital spending for the 2007 fiscal year is expected to be between $55 million and $60 million. In addition, we spent approximately $12.3 million (net of cash acquired) to acquire 70% of the outstanding stock of Tehomet Oy, a Finnish manufacturer of lighting structures, in the second quarter of 2007. Subsequent to June 30, 2007, we paid approximately $3.8 million for the remaining 20% of the outstanding shares of our Canadian lighting structure manufacturing facility. The cash used to pay the distributions from our non-qualified deferred compensation plan was generated from the liquidation of investments, which was classified as Proceeds from sale of assets in the statement of cash flows for the twenty-six week period ended June 30, 2007.
Financing Cash FlowsOur total interest-bearing debt increased from $234.3 million as of December 30, 2006 to $246.3 million as of June 30, 2007, which was reported as an increase in financing cash flows for the twenty-six weeks ended June 30, 2007. The main reasons for the increase in borrowings relate to increased capital spending in 2007 and the Tehomet acquisition, which was funded through borrowings against our revolving credit agreement.
Sources of Financing and Capital
We have historically funded our growth, capital spending and acquisitions through a combination of operating cash flows and debt financing. We have an internal long-term objective to maintain long-term debt as a percent of capital at or below 40%. At June 30, 2007, our long-term debt to invested capital ratio was 29.8%, as compared with 31.3% at December 30, 2006. Our internal objective of 40% is exceeded from time to time in order to take advantage of opportunities to grow and improve our businesses, such as the Newmark, Whatley and Sigma acquisitions that were completed in 2004. Subject to our level of acquisition activity and steel and zinc industry operating conditions (which could affect the levels of inventory we need to fulfill customer commitments), we plan to maintain this ratio below 40% in 2007.
Our debt financing at June 30, 2007 consisted primarily of long-term debt. We also maintain certain short-term bank lines of credit totaling $26.8 million, $17.3 million which was unused at June 30, 2007. Our long-term debt principally consists of:
· $150 million of senior subordinated notes that bear interest at 6.875% per annum and are due in May 2014. We may repurchase the notes starting in May 2009 at specified prepayment premiums. These notes are guaranteed by certain of our U.S. subsidiaries.
· $150 million revolving credit agreement that accrues interest at our option at (a) the higher of the prime lending rate and the Federal Funds rate plus 50 basis points or (b) an interest rate spread over the LIBOR of 62.5 to 137.5 basis points (inclusive of facility fees), depending on our ratio of debt to earnings before taxes, interest, depreciation and amortization (EBITDA). At June 30, 2007, there was $12.0 million outstanding balance under the revolving credit agreement at an interest rate of 4.70% per annum. The revolving credit agreement has a termination date of May 4, 2009 and contains certain financial covenants that limit our additional borrowing capability under the agreement. At June 30, 2007, we had the ability to borrow an additional $129.0 million under this facility.
· Term loan with a group of banks that accrues interest at our option at (a) the higher of the prime lending rate and the Federal Funds rate plus 50 basis points or (b) LIBOR plus a spread of 62.5
26
to 137.5 basis points, depending on our debt to EBITDA ratio, and had an outstanding balance of $41.7 million at June 30, 2007. This loan requires quarterly principal payments through 2009. The annualized principal payments beginning in 2007 in millions are: $8.9, $20.9, and $11.9. The effective interest rate on this loan was 6.125% per annum at June 30, 2007.
Under these debt agreements, we are obligated by covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities. At June 30, 2007 we were in compliance with all covenants related to these debt agreements.
Financial Obligations and Financial Commitments
There have been no material changes to our financial obligations and financial commitments as described on page 37 in our Form 10-K for the year ended December 30, 2006.
Off Balance Sheet Arrangements
There have been no changes in our off balance sheet arrangements as described on page 37 in our Form 10-K for the fiscal year ended December 30, 2006.
Critical Accounting Policies
There have been no changes in the Companys critical accounting policies during the quarter ended June 30, 2007. These policies are described on pages 39-42 in our Form 10-K for fiscal year ended December 30, 2006.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
There were no material changes in the companys market risk during the quarter ended June 30, 2007. For additional information, refer to the section Risk Management on pages 38-39 in our Form 10-K for the fiscal year ended December 30, 2006.
Item 4. Controls and Procedures
The Company carried out an evaluation under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Companys disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934 is (1) accumulated and communicated to management, including the Companys Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms. There have been no changes in the Companys internal controls over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, such internal controls.
27
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
|
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
|||||||||||
|
|
|
|
|
|
Total Number of |
|
Maximum Number |
|
|||||||||||
|
|
|
|
|
|
Shares Purchased as |
|
of Shares that May |
|
|||||||||||
|
|
|
|
|
|
Part of Publicly |
|
Yet Be Purchased |
|
|||||||||||
|
|
Total Number of |
|
Average Price |
|
Announced Plans or |
|
Under the Plans or |
|
|||||||||||
Period |
|
|
|
Shares Purchased |
|
paid per share |
|
Programs |
|
Programs |
|
|||||||||
April 1, 2007 to April 28, 2007 |
|
|
25,490 |
|
|
|
$ |
65,29 |
|
|
|
|
|
|
|
|
|
|
||
April 29, 2007 to June 2, 2007 |
|
|
10,283 |
|
|
|
64.13 |
|
|
|
|
|
|
|
|
|
|
|||
June 3, 2007 to June 30, 2007 |
|
|
1,005 |
|
|
|
72.23 |
|
|
|
|
|
|
|
|
|
|
|||
Total |
|
|
36,778 |
|
|
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$ |
65.15 |
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During the second quarter, the only shares reflected above were those delivered to the Company by employees as part of stock option exercises, either to cover the purchase price of the option or the related taxes payable by the employee as part of the option exercise. The price paid per share was the market price at the date of exercise.
On April 23, 2007, the Companys Board of Directors declared a quarterly cash dividend on common stock of 10.5 cents per share, which was paid on July 16, 2007, to stockholders of record June 29, 2007. The indicated annual dividend rate is 42 cents per share.
Exhibit No. |
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Description |
10.1 |
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Amendment No. 5 dated as of May 23, 2007 to the Companys credit agreement with The Bank of New York dated May 4, 2004 |
31.1 |
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Section 302 Certificate of Chief Executive Officer |
31.2 |
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Section 302 Certificate of Chief Financial Officer |
32.1 |
|
Section 906 Certifications of Chief Executive Officer and Chief Financial Officer |
28
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.
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VALMONT INDUSTRIES, INC. |
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(Registrant) |
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/s/ TERRY J. McCLAIN |
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Terry J. McClain |
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Senior Vice President and Chief Financial Officer |
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(Principal Financial Officer) |
Dated this 6th day of August, 2007.
29