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 28, 1996 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 November 5, 1996 there were outstanding 13,636,103 common shares of the registrant. VALMONT INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q ------------------ PART I. FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Financial Statements: Condensed Consolidated Statements of Operations for the three and nine months ended September 28, 1996 and September 30, 1995. 2 Condensed Consolidated Balance Sheets as of September 28, 1996 and December 30, 1995 3 Condensed Consolidated Statements of Cash Flows for the nine months ended September 28, 1996 and September 30, 1995 4 Notes to Condensed Consolidated Financial Statements 5-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II. OTHER INFORMATION - --------------------------- Item 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> <CAPTION> Thirteen Weeks Ended Thirty-nine Weeks Ended -------------------- ---------------------- September 28, September 30, September 28, September 30, 1996 1995 1996 1995 ------- ------- ------- ------- <S> <C> <C> <C> <C> Net sales $148,048 128,269 463,811 403,910 Cost of sales 107,465 93,170 339,316 298,986 ------- ------- ------- ------- Gross profit 40,583 35,099 124,495 104,924 Selling, general and administrative expenses 29,333 26,715 87,300 75,224 ------- ------- ------- ------- Operating income 11,250 8,384 37,195 29,700 ------- ------- ------- ------- Other income (deductions): Interest expense (990) (1,034) (2,999) (3,215) Interest income 103 238 267 513 Miscellaneous (85) 367 (138) 217 ------- ------- ------- ------- (972) (429) (2,870) (2,485) ------- ------- ------- ------- Earnings before income taxes 10,278 7,955 34,325 27,215 ------- ------- ------- ------- Income tax expense: Current 5,063 3,936 13,790 9,622 Deferred (1,363) (1,252) (1,490) (63) ------- ------- ------- ------- 3,700 2,684 12,300 9,559 ------- ------- ------- ------- Net Earnings $ 6,578 5,271 22,025 17,656 ======= ======= ======= ======= Net Earnings per share $ 0.47 0.38 1.58 1.29 ======= ======= ======= ======= Cash dividends per share $ 0.100 0.075 0.275 0.225 ======= ======= ======= ======= Weighted average number of shares of common and common equivalent shares outstanding (000 omitted) 13,998 13,752 13,972 13,700 ======= ======= ======= ======= </TABLE> See accompanying notes to condensed consolidated financial statements. Page 2 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) September 28, December 30, ASSETS 1996 1995 - ----------------------------------------- ------- ------- Current assets: Cash and cash equivalents $ 10,910 16,996 Receivables 93,823 82,211 Deferred income taxes 8,724 8,524 Inventories 86,070 76,426 Prepaid expenses 2,353 1,670 ------- ------- Total current assets 201,880 185,827 ------- ------- Other assets: Investments in nonconsolidated affiliates 3,947 1,375 Other 7,438 7,976 ------- ------- Total other assets 11,385 9,351 ------- ------- Net property, plant and equipment 125,020 113,532 ------- ------- Total assets $ 338,285 308,710 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ----------------------------------------- Current liabilities: Current installments of long-term debt $ 8,045 7,950 Notes payable to banks 12,051 3,492 Accounts payable 46,529 46,900 Accrued expenses 51,073 45,475 Dividends payable 1,363 1,017 ------- ------- Total current liabilities 119,061 104,834 ------- ------- Deferred income taxes 8,856 10,543 Long-term debt, excl. current installments 26,136 28,737 Minority interest in consolidated subsidiaries 2,270 2,220 Other noncurrent liabilities 3,410 3,120 Shareholders' equity: Preferred stock -- -- Common stock of $1 par value 13,950 13,950 Additional paid-in capital 6,042 4,694 Retained earnings 155,289 137,009 Currency translation adjustment 3,337 3,689 Treasury stock (19) .(24) Unearned restricted stock (47) (62) ------- ------- Total shareholders' equity 178,552 159,256 ------- ------- Total liabilities and shareholders' equity $ 338,285 308,710 ======= ======= See accompanying notes to condensed consolidated financial statements. Page 3 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Thirty-nine Weeks Ended ----------------------- September 28, September 30, 1996 1995 ------- ------- Net cash provided by operations $ 14,654 17,112 ------- ------- Cash flows from investment activities: Purchase of property, plant & equipment (22,459) (26,304) Change in other assets (1,292) 1,788 Proceeds from investments by minority shareholders -- 1,644 Acquisitions (703) -- Proceeds from sale, net of gain, of property and equipment 583 107 Other, net (36) 810 ------- ------- Net cash used by investment activities (23,907) (21,955) ------- ------- Cash flows from financing activities: Net borrowings under short-term agreements 8,378 380 Proceeds from long-term borrowings 1,598 -- Principal payments and on long-term obligations (3,898) (4,160) Dividends paid (3,398) (2,598) Distributions of pooled company -- (2,100) Proceeds from exercise of employee stock plans 944 71 Purchase of common treasury shares (457) -- ------- ------- Net cash provided (used) by financing activities 3,167 (8,407) ------- ------- Net decrease in cash and cash equivalents (6,086) (13,250) Cash and cash equivalents--beginning of period 16,996 30,128 ------- ------- Cash and cash equivalents--end of period $10,910 16,878 ======= ======= See accompanying notes to condensed consolidated financial statements. Page 4 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) (Unaudited) 1. Condensed Consolidated Financial Statements ------------------------------------------- The Condensed Consolidated Balance Sheet as of September 28, 1996 and the Condensed Consolidated Statements of Operations for the thirteen week and thirty-nine week periods ended September 28, 1996 and September 30, 1995 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 (which include normal recurring adjustments) have been made to present fairly the financial position at September 28, 1996 and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 30, 1995 Annual Report to shareholders. The results of operations for the period ended September 28, 1996 are not necessarily indicative of the operating results for the full year. 2. 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). 3. 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 $2,651 and $2,763 for the thirty- nine week periods ended September 28, 1996 and September 30, 1995, respectively. Income taxes paid, net of refunds, were $12,803 and $4,675 for the thirty-nine week periods ended September 28, 1996 and September 30, 1995, respectively. 4. Earnings Per Share ------------------ Earnings per share are based on the weighted average number of common shares outstanding and equivalent common shares from in- the-money stock options. The difference between primary and fully-diluted earnings per share is not material. Page 5 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) (Unaudited) (Continued) 5. Use of Estimates ---------------- Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. Page 6 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis contains forward looking statements which reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and the financial results. The statements are based on many assumptions and factors, including availability and price of raw materials, product pricing, competitive environment and related domestic and international market conditions, operating efficiencies, and actions of domestic and foreign governments. Any changes in such assumptions or factors could produce significantly different results. Results of Operations - --------------------- For the third quarter of 1996 net sales were $148.0 million, an increase of 15% over the $128.3 million for the same period last year. Net sales for the first three quarters of 1996 were $463.8 million versus $403.9 million in the same period last year. Sales of Irrigation products for the third quarter and the year-to-date 1996 were at record high levels. North America sales increased from the volume reported in 1995 as excellent commodity prices and improved farm income prompted U.S. farmers to purchase irrigation equipment. Sales of irrigation products to international markets for the third quarter and first three quarters of 1996 also increased compared to sales for the same periods a year ago, as a result of increasing demand for grain products, low grain inventories, and strong commodity prices. Sales in the Industrial Products segment increased in the third quarter of 1996 compared to the same period in 1995. Strong demand for light poles and communication towers in North America was the primary reason for the sales growth. In Europe, sales were up due to acquisitions made earlier this year. Also, the start-up operation in China has added to the overall increase in sales both for the quarter and year-to-date. The ballast business reported a small sales decrease in the third quarter compared to a year ago, but 1996 sales remain ahead of year-to-date sales for 1995. Gross profit as a percent of sales remained unchanged at 27.4% for the third quarter of 1996 and 1995. Year-to-date gross profit was 26.8% compared to 26.0% for 1996 and 1995, respectively. This increase results from a favorable pricing environment in the Irrigation Products Segment and improved productivity and operating efficiencies throughout the Company. Selling, general and administrative (SG&A) expenses were $29.3 million for third quarter of 1996 and $26.7 million for the same period of 1995; and, as a percent of sales, SG&A expenses for the respective quarters were 19.8% and 20.8%. SG&A expenses for the first three quarters of 1996 and 1995 were $87.3 million and $75.2 million, respectively. Year-to-date SG&A expenses, as a percent of sales, were 18.8% for 1996 and 18.6% for 1995. The dollar amount of SG&A expenses increased in 1996 to support the higher sales volume and business development in the domestic and international markets. Page 7 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) For the third quarters of both 1996 and 1995 interest expense was unchanged at $1.0 million. Year-to-date, interest expense was $3.0 million and $3.2 million in 1996 and 1995, respectively. The decrease in 1996 results primarily from average debt levels being lower. The effective income tax rates for the first three quarters of 1996 and 1995 were 35.8% and 35.1%, respectively, which do not vary significantly from the expected statutory rate for the periods. As a result of the aforementioned operating factors and general business conditions, net earnings increased to $22.0 million in the first thirty-nine weeks of 1996 from $17.7 million in the same period in 1995. For the third quarter, net earnings were $6.6 million in 1996 versus $5.3 million in 1995. Earnings per share were $1.58 and $1.29 for the first thirty-nine weeks of 1996 and 1995, respectively and $0.47 and $0.38 for the third quarter of 1996 and 1995, respectively. Liquidity and Capital Resources - ------------------------------- Net working capital at September 28, 1996 amounted to $82.8 million compared to $84.3 million at December 30, 1995. The ratio of current assets to current liabilities was 1.7:1 at September 28, 1996 and 1.8:1 at December 30, 1995. Expenditures for property, plant and equipment for the thirty-nine week period ended September 28, 1996 were approximately $22.5 million, while depreciation of property, plant & equipment was $10.4 million. Available lines of credit total $45.7 million of which approximately $35.6 million was unused at September 28, 1996. Long-term debt was 15.3% of total capitalization at September 28, 1996 versus 19.7% at December 30, 1995. Overall, the Company believes the cash flow from operations, the credit facilities and capital structure now in place will be adequate to satisfy planned capital expenditures, dividends and other financial commitments. Page 8 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 5. OTHER INFORMATION. - ---------------------------- Valmont's bylaws as amended through October 28, 1996, are set forth as Exhibit 3.1. The amended bylaws set forth certain procedures which stockholders must follow in order to nominate a director or present any other business at an annual stockholders' meeting. Generally, a stockholder must give timely notice to the secretary of the company. To be timely, such notice must be received by the company not less than sixty nor more than ninety days prior to the first anniversary of the preceding year's annual stockholders' meeting. Item 6. EXHIBITS AND REPORTS ON FORM 8-K - ------------------------------------------ (a) Exhibits -------- 3.1 Bylaws of Valmont as amended through October 28, 1996 27 Financial Data Schedule (b) Reports on Form 8-K: -------------------- The Company filed no reports on Form 8-K during the past fiscal quarter. Signatures ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and by the undersigned hereunto duly authorized. VALMONT INDUSTRIES, INC. By /s/Terry J. McClain ----------------- Terry J. McClain Vice President and Chief Financial Officer (Principal Financial Officer) Dated this __7th__ day of November, 1996. Page 9