SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Third Quarter Ended Commission File Number September 30, 1995 0-3701 VALMONT INDUSTRIES, INC. Valley, Nebraska 68064 Telephone Number 402-359-2201 Delaware 47-0351813 (State of Incorporation) (I.R.S. Employer Identification No.) Indicate by check mark whether the registrant (1) has filed all reports to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past ninety days. Yes__X__ No_____ As of October 31, 1995 there were outstanding 13,511,720 common shares of the registrant. VALMONT INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q ------------------ PART I. FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Condensed Financial Statements: Consolidated Statements of Operations for the three and nine months ended September 30, 1995 and September 24, 1994 2 Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 3 Consolidated Statement of Cash Flows for the nine months ended September 30, 1995 and September 24, 1994 4 Notes to Consolidated Financial Statements 5-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 9 - ---------- Page 1 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share amounts) (Unaudited) <TABLE> Thirteen Weeks Ended Thirty-nine Weeks Ended -------------------- ----------------------- <CAPTION> September 30, September 24, September 30, September 24, 1995 1994 1995 1994 ------- ------- ------- ------- <S> <C> <C> <C> <C> Net sales $128,269 118,500 403,910 364,827 Cost of sales 93,170 89,081 298,986 278,560 ------- ------- ------- ------- Gross profit 35,099 29,419 104,924 86,267 Selling, general and administrative expenses 26,715 21,790 75,224 63,091 ------- ------- ------- ------- Operating income 8,384 7,629 29,700 23,176 ------- ------- ------- ------- Other income (deductions): Interest expense (1,034) (1,318) (3,215) (3,926) Interest income 238 189 513 439 Miscellaneous, including sale of property 367 930 217 1,278 ------- ------- ------- ------- (429) (199) (2,485) (2,209) ------- ------- ------- ------- Earnings before income taxes 7,955 7,430 27,215 20,967 ------- ------- ------- ------- Income tax expense: Current 3,936 3,447 9,622 6,957 Deferred (1,252) (664) (63) 887 ------- ------- ------- ------- 2,684 2,783 9,559 7,844 ------- ------- ------- ------- Net Earnings $ 5,271 4,647 17,656 13,123 ======= ======= ======= ======= Net Earnings per share $ 0.38 0.34 1.29 0.96 ======= ======= ======= ======= Cash dividends per share $ 0.075 0.075 0.225 0.225 ======= ======= ======= ======= Weighted average number of shares of common and common equivalent shares outstanding (000 omitted) 13,752 13,614 13,700 13,623 ======= ======= ======= ======= </TABLE> See accompanying notes to consolidated financial statements. Page 2 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands except per share amounts) (Unaudited) September 30, December 31, ASSETS 1995 1994 - ----------------------------------------- ------- ------- Current assets: Cash and cash equivalents $ 16,878 30,128 Receivables, net 85,714 78,160 Deferred income taxes 7,633 7,363 Inventories 73,576 66,031 Prepaid expenses 2,386 1,894 ------- ------- Total current assets 186,187 183,576 ------- ------- Other assets: Investments in nonconsolidated affiliates 1,300 991 Other 7,129 9,675 ------- ------- Total other assets 8,429 10,666 ------- ------- Net property, plant and equipment 108,870 89,201 ------- ------- Total assets $ 303,486 283,443 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ----------------------------------------- Current liabilities: Accounts and notes payable $ 44,526 46,198 Other current liabilities 57,342 49,100 ------- ------- Total current liabilities 101,868 95,298 ------- ------- Deferred income taxes 10,638 10,243 Long-term debt, excl. current installments 32,626 35,489 Minority interest in consolidated subsidiaries 2,141 501 Other noncurrent liabilities 2,853 4,330 Shareholders' equity: Preferred stock of $1 par value. Authorized 500,000 shares; none issued -- -- Common stock of $1 par value. Authorized 36,000,000 shares; issued 13,950,000 shares 13,950 13,950 Additional paid-in capital 4,376 4,285 Retained earnings 130,923 118,076 Currency translation adjustment 4,590 2,001 ------- ------- Less: 153,839 138,312 Cost of common shares in treasury-- 439,930 in 1995 (456,574 in 1994) 412 648 Unearned restricted stock 67 82 ------- ------- Total shareholders' equity 153,360 137,582 ------- ------- Total liabilities and shareholders' equity $ 303,486 283,443 ======= ======= See accompanying notes to consolidated financial statements. Page 3 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Thirty-nine Weeks Ended ----------------------- September 30, September 24, 1995 1994 ------- ------- Net cash provided (used) by operations $ 17,112 34,296 ------- ------- Cash flows from investment activities: Purchase of property, plant & equipment (26,304) (15,533) Proceeds from investments by minority shareholder 1,644 -- Change in other assets 1,788 (388) Proceeds from sale, net of gain, of property and equipment 107 2,564 Other, net 810 243 ------- ------- Net cash used in investment activities (21,955) (13,114) ------- ------- Cash flows from financing activities: Net borrowings (repayments) under short-term agreements 380 (829) Proceeds from long-term borrowings -- 2,251 Principal payments on long-term obligations (4,160) (2,297) Dividends paid (2,598) (2,601) Distributions of pooled company (2,100) (1,144) Proceeds from exercise of employee stock plans 71 465 Purchase of common treasury shares -- (716) ------- ------- Net cash used in financing activities (8,407) (4,871) ------- ------- Net increase (decrease) in cash and cash equivalents (13,250) 16,311 Cash and cash equivalents--beginning of period 30,128 14,553 ------- ------- Cash and cash equivalents--end of period $16,878 30,864 ======= ======= See accompanying notes to consolidated financial statements. Page 4 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) (Unaudited) 1. Condensed Consolidated Financial Statements ------------------------------------------- The Condensed Consolidated Balance Sheet as of September 30, 1995 and the Condensed Consolidated Statements of Operations for the thirteen week and thirty-nine week periods ended September 30, 1995 and September 24, 1994 and the Condensed Consolidated Statements of Cash Flows for the thirty-nine week periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (all of whcich are of a normal recurring nature) of the Company have been made to present fairly the financial position at September 30, 1995 and the results of operations and cash flows for each of the periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Annual Report to shareholders. The results of operations for the period ended September 30, 1995 are not necessarily indicative of the operating results for the full year. 2. Acquisitions ------------ On July 31, 1995, Microflect Company, Inc. was merged with and became a wholly-owned subsidiary of the Company pursuant to the terms of an agreement and Plan of Merger under which the Company exchanged 1,950,000 shares of its common stock for all of the outstanding common stock of Microflect. The merger qualifies as a tax-free reorganization and was accounted for as a pooling of interests. Accordingly, the Company's financial statements have been restated to include the results of Microflect for all periods presented. The combined financial results presented above include adjustments made to conform accounting policies of the two companies. The only adjustment impacting net income was the recording of income taxes as prescribed by SFAS No. 109 for Microflect as it was a subchapter S corporation prior to the merger. All other adjustments are reclassifications to conform financial statement presentation. Combined and separate results of the Company and Microflect during the periods preceding the merger were as follows (in thousands): Six months ended July 1, 1995 the Micro- Adjust- (Unaudited) Company flect ments Combined ----------- ------- ------ ------- -------- Net revenues $258,298 $18,068 $ (725) $275,641 Net income $ 10,628 $ 2,768 $(1,011) $ 12,385 Fiscal year ended December 31, 1994 the Micro- Adjust- (Unaudited) Company flect ments Combined ----------- ------- ------ ------- -------- Net revenues $471,745 $30,616 $ (621) $501,740 Net income $ 16,119 $ 4,630 $(1,862) $ 18,887 Page 5 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) (Unaudited) (Continued) Microflect designs, manufactures and installs communication structures, passive repeaters, waveguide supporting systems, and components for the wireless communication market. 3. Inventories ----------- Approximately 58% of the Company's inventories are valued at cost on the basis of the last-in first-out (LIFO) dollar value method under the natural business unit concept, which is not in excess of market (net realizable value). As a result, it is not possible to segregate the inventories into their component values of raw material, work-in-process and finished goods. All other inventories are valued at lower of first-in first-out (FIFO) cost or market (net realizable) value. 4. Cash Flows ---------- For purposes of the Condensed Consolidated Statements of Cash Flows, the Company considers cash and cash investments with a maturity of three months or less when purchased, to be cash equivalents. Interest paid was $2,763 and $3,050 for the thirty- nine week periods ended September 30, 1995 and September 24, 1994, respectively. Income taxes paid, net of refunds, were $4,675 and $1,832 for the thirty-nine week periods ended September 30, 1995 and September 24, 1994, respectively. 5. Earnings Per Share ------------------ Earnings per share are based on the weighted average number of common shares outstanding and equivalent common shares from dilutive stock options. Page 6 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- The accompanying consolidated financial statements have been restated for all periods presented to reflect the acquisition of Microflect Company, Inc. as described in footnote number two. For the third quarter of 1995 net sales were $128.3 million, an increase of 8% over the $118.5 million for the same period last year. Net sales for the first three quarters of 1995 were $403.9 million versus $364.8 million in the same period last year. Sales in the Irrigation Products Segment were approximately the same in the third quarter and year-to- date 1995 versus the same periods in 1994. North America sales declined from the record volume reported 1994 as weather conditions dampened market demand. Sales to international markets for the third quarter and first three quarters of 1995 increased compared to sales for the same periods a year ago, offsetting the decline in domestic sales. Sales in the Industrial Products Segment increased in the third quarter of 1995 compared to the same period in 1994. Year-to-date 1995, the Industrial Products Segment recorded a sales increase versus 1994 due to strong volume from light pole sales in Europe and sales of towers for the communication industry in North America. Additionally, increased sales of steel and aluminum lighting and traffic signal poles in North America contributed to the segment's improved performance. The ballast business reflected similar sales in the third quarter and first three quarters of 1995 compared to the same periods in 1994. Gross profit as a percent of sales was 27.4% and 24.8% for the third quarter of 1995 and 1994, respectively. Year-to-date gross profit was 26.0% compared to 23.7% for 1995 and 1994, respectively. The third quarter 1995 gross profit increased in the ballast and metal structures businesses compared to the same period in 1994 due to improved pricing, enchanced operating performance in the European metal structures businesses and reduced costs in the ballast operation. Selling, general and administrative (SG&A) expenses were $26.7 million for third quarter of 1995 and $21.8 million for the same period of 1994; and, as a percent of sales, SG&A expenses for the respective quarters were 20.8% and 18.4%. SG&A expenses for the first three quarters of 1995 and 1994 were $75.2 million and $63.1 million, respectively. Year-to-date SG&A expenses, as a percent of sales, were 18.6% for 1995 and 17.3% for 1994. SG&A expenses increased in 1995 primarily due to professional fees associated with the acquisition of Microflect, commissions and incentive accruals, and the development of international markets. For the third quarter of 1995 interest expense was $1.0 million compared to $1.3 million in the same period of 1994. Year-to-date, interest expense was $3.2 million and $3.9 million in 1995 and 1994, respectively. The decrease in 1995 results primarily from lower debt levels. Page 7 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The miscellaneous caption of other income (deductions) in the condensed consolidated statements of operations contains gains and losses which are of an unusual or infrequent nature. For the third quarter and year-to-date 1995 miscellaneous income of $0.4 million and $0.2 million, respectively, both were substantially lower than the amounts from the comparable periods of 1994, which resulted primarily from a gain on disposal of excess property in 1994. The effective income tax rates for the first three quarters of 1995 and 1994 were 35.1% and 37.4%, respectively, which do not vary significantly from the expected statutory rate for the periods. Increased nontaxable municipal interest income and foreign sales corporation benefits caused the reduced rate. As a result of the aforementioned operating factors and general business conditions, net earnings increased to $17.7 million in the first thirty-nine weeks of 1995 from $13.1 million in the same period in 1994. For the third quarter, net earnings were $5.3 million in 1995 versus $4.6 million in 1994. Earnings per share were $1.29 and $0.96 for the first thirty-nine weeks of 1995 and 1994, respectively and $0.38 and $0.34 for the third quarter of 1995 and 1994, respectively. Liquidity and Capital Resources - ------------------------------- Net working capital at September 30, 1995 amounted to $84.3 million compared to $88.3 million at December 31, 1994. The ratio of current assets to current liabilities was 1.8:1 at September 30, 1995 and 1.9:1 at December 31, 1994. Expenditures for property, plant and equipment for the thirty-nine week period ended September 30, 1995 were approximately $26.3 million, while depreciation of property, plant & equipment was $9.1 million. Available lines of credit total $54.8 million of which approximately $52.7 million was unused at September 30, 1995. Long-term debt was 19.7% of total capitalization at September 30, 1995 versus 22.6% at December 31, 1994. Valmont's objective is to maintain long-term debt in the range of 32% to 40% of total capital employed. The Company is below the lower limit of the range due to the disposal of its interest in InaCom Corp. in 1993 and subsequent payment on long-term debt. The Company believes that cash flow from operations, the credit facilities and capital structure now in place will be adequate to satisfy 1995 capital expenditures, dividends and other financial commitments. Page 8 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K - ------------------------------------------- (a) Exhibits: 3.1 Bylaws of the Company, as amended to date 27 Financial Data Schedule (b) Reports on Form 8-K: The Registrant filed a Form 8-K dated July 31, 1995 and reported that it had completed the acquisition of Microflect Company Inc., an Oregon corporation, which became a wholly-owned subsidiary of the registrant, pursuant to the terms of an agreement and Plan of Merger. The Merger constituted a nontaxable reorganization under Internal Revenue Code Sections 368(a)(1)(a) and 368(a)(2)(E) and will be accounted for as a pooling of interests pursuant to APB 16. The 8-K included (i) audited financial statements of Microflect for the year ended December 31, 1994, (ii) unaudited interim financial information of Microflect as of June 30, 1995 and for the 26-week period then ended and (iii) certain pro forma financial information of the Company and Microflect combined. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and by the undersigned hereunto duly authorized. VALMONT INDUSTRIES, INC. (Registrant) By /s/Terry J. McClain _______________________ Terry J. McClain Vice President and Chief Financial Officer (Principal Financial Officer) Dated this __7th__ day of November, 1995. Page 9