UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2006
or
o
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
47-0351813
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
One Valmont Plaza,
68154-5215
Omaha, Nebraska
(Zip Code)
(Address of principal executive offices)
(Registrant’s 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 o
Accelerated filer þ
Non-accelerated filer o
Indicate by check mark whether the registrant is a a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
25,516,389
Outstanding shares of common stock as of July 24, 2006
Index is located on page 2.
Total number of pages 35
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page No.
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements:
Condensed Consolidated Statements of Operations for the thirteen and twenty-six weeks ended July 1, 2006 and June 25, 2005
3
Condensed Consolidated Balance Sheets as of July 1, 2006 and December 31, 2005
4
Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended July 1, 2006 and June 25, 2005
5
Notes to Condensed Consolidated Financial Statements
6-23
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
24-30
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
30
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Unregistered Sales of Equity Securities and Use of Proceeds
31
Item 5.
Other Information
Item 6.
Exhibits
Signatures
32
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
Twenty-Six Weeks Ended
July 1,2006
June 25,2005
Net sales
$
338,791
265,134
642,416
530,875
Cost of sales.
253,729
197,541
481,661
401,621
Gross profit
85,062
67,593
160,755
129,254
Selling, general and administrative expenses
55,153
46,387
107,269
91,941
Operating income
29,909
21,206
53,486
37,313
Other income (deductions):
Interest expense
(4,338
)
(4,884
(8,486
(9,711
Interest income
395
592
948
829
Miscellaneous
286
33
1,183
(115
(3,657
(4,259
(6,355
(8,997
Earnings before income taxes, minority interest and equity in earnings (losses) of nonconsolidated subsidiaries
26,252
16,947
47,131
28,316
Income tax expense (benefit):
Current
13,093
5,129
23,993
7,741
Deferred
(4,599
996
(7,828
2,528
8,494
6,125
16,165
10,269
Earnings before minority interest and equity in earnings (losses) of nonconsolidated subsidiaries
17,758
10,822
30,966
18,047
Minority interest
(341
(313
(509
(662
Equity in earnings (losses) of nonconsolidated subsidiaries
(132
(66
(87
Net earnings
17,285
10,443
30,370
17,253
Earnings per share—Basic Earnings per share—Basic
0.69
0.43
1.22
0.71
Earnings per share—Diluted Earnings per share—Diluted
0.67
0.42
1.18
Cash dividends per share
0.095
0.085
0.180
0.165
Weighted average number of shares of common stock outstanding (000 omitted)
25,091
24,292
24,880
24,201
Weighted average number of shares of common stock outstanding plus dilutive potential common shares (000 omitted)
25,859
25,035
25,654
25,042
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,2005
ASSETS
Current assets:
Cash and cash equivalents
34,547
46,867
Receivables, net
223,068
180,969
Inventories
165,248
158,327
Prepaid expenses
10,818
7,643
Refundable and deferred income taxes
17,479
14,506
Total current assets
451,160
408,312
Property, plant and equipment, at cost
500,781
489,660
Less accumulated depreciation and amortization
310,375
294,984
Net property, plant and equipment
190,406
194,676
Goodwill
106,887
106,695
Other intangible assets, net
57,919
60,140
Other assets
34,381
32,219
Total assets
840,753
802,042
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt
15,587
13,583
Notes payable to banks
4,825
4,918
Accounts payable
93,452
90,674
Accrued expenses
70,102
67,869
Dividends payable
2,426
2,107
Total current liabilities
186,392
179,151
Deferred income taxes
37,955
43,199
Long-term debt, excluding current installments
212,030
218,757
Other noncurrent liabilities
27,105
24,889
Minority interest in consolidated subsidiaries
7,443
7,371
Shareholders’ equity:
Preferred stock
—
Common stock of $1 par value
27,900
Retained earnings
377,429
357,025
Accumulated other comprehensive income
1,510
(2,521
Treasury stock
(37,011
(50,067
Unearned restricted stock
(3,662
Total shareholders’ equity
369,828
328,675
Total liabilities and shareholders’ equity
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operations:
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization
19,113
20,095
Stock option expense
713
Loss on sale of assets
511
376
Equity in (earnings)/losses in nonconsolidated subsidiaries
87
132
509
662
Other adjustments
(137
(117
Changes in assets and liabilities, net of business acquisitions:
Receivables
(38,823
9,210
(5,550
10,050
(3,628
(2,547
5,803
(901
1,423
(6,945
537
644
Income taxes payable
(4,830
4,097
Net cash flows from operations
(1,730
54,537
Cash flows from investing activities:
Purchase of property, plant & equipment
(11,430
(25,346
Investment in nonconsolidated subsidiary
(1,274
Proceeds from sale of assets
1,058
1,422
Dividends to minority interests
(302
(247
Other, net
(502
185
Net cash flows from investing activities
(12,450
(23,986
Cash flows from financing activities:
Net borrowings (payments) under short-term agreements
(93
2,091
Proceeds from long-term borrowings
475
16,500
Principal payments on long-term obligations
(5,197
(39,908
Dividends paid
(4,232
(3,877
Proceeds from exercises under stock plans
25,229
5,809
Excess tax benefits from stock option exercises
15,428
Purchase of common treasury shares—stock plan exercises
(30,138
(552
Net cash flows from financing activities
1,472
(19,937
Effect of exchange rate changes on cash and cash equivalents
388
(997
Net change in cash and cash equivalents
(12,320
9,617
Cash and cash equivalents—beginning of period
30,210
Cash and cash equivalents—end of period
39,827
VALMONT INDUSTRIES, INC. AND SUBSIDIARIESNOTES 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 July 1, 2006, the Condensed Consolidated Statements of Operations for the thirteen and twenty-six week periods ended July 1, 2006 and June 25, 2005 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 July 1, 2006 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. 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 31, 2005 except for the January 1, 2006 adoption of SFAS 123(R). The results of operations for the periods ended July 1, 2006 are not necessarily indicative of the operating results for the full year.
Cash overdrafts
Cash book overdrafts totaling $8,344 and $7,243 were classified as accounts payable at July 1, 2006 and December 31, 2005, respectively. The Company’s policy is to report changes in book overdrafts as an operating activity in the Condensed Consolidated Statement of Cash Flows.
At July 1, 2006, approximately 51.2% 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 $34,300 and $29,100 at July 1, 2006 and December 31, 2005, respectively.
Inventories consisted of the following:
Raw materials and purchased parts
107,872
97,606
Work-in-process
18,798
19,419
Finished goods and manufactured goods
72,846
70,377
Subtotal
199,516
187,402
LIFO reserve
34,268
29,075
Net inventory
6
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, except per share amounts) (Unaudited)
Stock 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, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At July 1, 2006, 1,283,295 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. On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS 123(R)), Shared Based Payment. The Company chose to apply the modified prospective transition method as permitted by SFAS 123(R) and therefore has not restated prior periods. Under this transition method, compensation cost associated with employee stock options recognized in the thirteen and twenty-six weeks ended July 1, 2006 includes amortization related to the remaining unvested portion of stock option awards granted prior to December 31, 2005, and amortization related to new awards granted after January 1, 2006. Accordingly, the Company recorded $384 and $713 of compensation expense (included in selling, general and administrative expenses) for the thirteen and twenty-six weeks ended July 1, 2006, respectively. The associated tax benefits recorded were $148 and $274, respectively. Prior to the adoption of SFAS 123(R), the Company accounted for these plans under APB Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations. Under APB Opinion 25, no compensation cost associated with stock options was reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share for the thirteen weeks and twenty-six weeks ended June 25, 2005 if the company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
Twenty-six Weeks Ended
June 25,
2005
Net earnings as reported
Add:
Stock-based employee compensation expense included in reported net income, net of related tax effects
122
231
Deduct:
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
380
813
Pro forma net earnings
10,185
16,671
Earnings per share
As reported:
Basic
Diluted
Pro forma:
0.41
7
Recently Issued Accounting Pronouncements
On July 13, 2006, the FASB issued Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No 109. The Interpretation provides a consistent recognition threshold and measurement attribute, as well as clear criteria for subsequently recognizing, derecognizing and measuring uncertain tax positions for financial statement purposes. The Interpretation also requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 will be effective at the beginning of the Company’s 2007 fiscal year. The Company is currently assessing the effect of this pronouncement on the financial statements.
2. Goodwill and Intangible Assets
The Company’s annual impairment testing on its reporting units was performed during the third quarter of 2005. As a result of that testing, it was determined the goodwill and other intangible assets on the Company’s Consolidated Balance Sheet were not impaired.
Amortized Intangible Assets
The components of amortized intangible assets at July 1, 2006 and December 31, 2005 were as follows:
As of July 1, 2006
GrossCarryingAmount
AccumulatedAmortization
WeightedAverageLife
Customer Relationships
48,133
9,278
18 years
Proprietary Software & Database
2,609
2,035
6 years
Patents & Proprietary Technology
2,839
418
14 years
Non-compete Agreements
331
123
5 years
53,912
11,854
As of December 31, 2005
7,819
1,802
319
98
10,038
8
Amortization expense for intangible assets for the thirteen weeks ended July 1, 2006 and June 25, 2005 was $904 and $901, respectively. Amortization expense for intangible assets for the twenty-six weeks ended July 1, 2006, and June 25, 2005 was $1,816 and $1,803, respectively. Estimated amortization expense related to finite-lived intangible assets is as follows:
EstimatedAmortization Expense
2006
3,404
2007
3,321
2008
2009
3,289
2010
3,255
The useful lives assigned to finite-lived intangible assets included consideration of factors such as the Company’s past and expected experience related to customer retention rates, the remaining legal or contractual life of the underlying arrangement that resulted in the the recognition of the intangible asset and the Company’s 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 July 1, 2006 and December 31, 2005. The Newmark trade name arose from the 2004 acquisition and the PiRod amount arose from the 2001 acquisition. The indefinite lived intangible assets were tested for impairment separately from goodwill in the third quarter of 2005. 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 24, 2005.
In its determination of these intangible assets as indefinite-lived, 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.
In addition, the Company acquired the Sigma trade name as part of the acquisition of Sigma’s assets in 2004 and recorded an associated indefinite-lived intangible asset of $405. In the second quarter of 2006, the Company determined it would no longer use the Sigma trade name and, accordingly, a complete impairment of the $405 value assigned to the Sigma trade name was recorded in the second quarter of 2006.
9
The carrying amount of goodwill as of July 1, 2006 was as follows:
EngineeredSupportStructuresSegment
UtilitySupportStructuresSegment
CoatingsSegment
IrrigationSegment
TubingSegment
Total
Balance December 31, 2005
19,760
42,628
42,192
1,853
262
Foreign Currency Translation
192
Balance July 1, 2006
19,952
Goodwill in the Company’s reporting units was tested in the third quarter of 2005. Based on the evaluation, the Company concluded that goodwill was not impaired as of September 24, 2005.
3. Cash Flows
The Company considers all highly liquid temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the twenty-six weeks ended were as follows:
Interest
8,673
9,793
Income Taxes
13,148
3,902
10
4. Earnings Per Share
The following table provides a reconciliation between Basic and Diluted earnings per share (EPS):
Basic EPS
Dilutive Effect ofStock Options
Diluted EPS
Thirteen weeks ended July 1, 2006:
Shares outstanding
768
Per share amount
(.02
Thirteen weeks ended June 25, 2005:
743
(.01
Twenty-six weeks ended July 1, 2006:
774
(.04
Twenty-six weeks ended June 25, 2005:
841
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.
5. Comprehensive Income
Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. The Company’s other comprehensive income for the thirteen and twenty-six weeks ended July 1, 2006 and June 25, 2005, respectively, were as follows:
Net derivative adjustment
(35
Currency translation adjustment
1,519
(2,039
4,031
(4,810
Total comprehensive income
18,804
8,369
34,401
12,443
6. Stock Plans
On January 1, 2006, the Company adopted SFAS No. 123R,Shared Based Payment (SFAS 123R). The Company chose to apply the modified prospective transition method as permitted by SFAS 123R and
11
therefore has not restated prior periods. Under this transition method, compensation cost associated with employee stock options recognized in the thirteen and twenty-six weeks ended July 1, 2006 includes amortization related to the remaining unvested portion of stock options granted prior to December 31, 2005, and amortization related to stock options granted after January 1, 2006. At July 1, 2006, the amount of unrecognized stock option compensation cost, to be recognized over a weighted average period of 1.60 years, was approximately $2,300.
Upon adoption of SFAS 123R, the Company changed its method of valuation for share-based awards granted beginning in 2006 to a binomial option pricing model from the Black-Scholes-Merton option pricing model which was previously used for the Company’s pro forma information required under SFAS 123. The fair value of each option grant made in 2006 was estimated using the following assumptions:
Expected volatility
27
%
Risk-free interest rate
4.40
Expected life from vesting date
2.7 yrs.
Dividend yield
1.51
As a result of adopting SFAS 123R, earnings before income taxes included $384 and $713 of share-based compensation expense, with associated tax benefit of $148 and $274 for the thirteen and twenty-six weeks ended July 1, 2006, respectively. Prior to the adoption of SFAS 123R, the Company presented all benefits of tax deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statements of Cash Flows. SFAS 123R requires the cash flows resulting from tax deductions in excess of the compensation cost recognized for share-based payments (“excess tax benefits”) to be classified as financing cash flows. The excess tax benefit of $15,428 was classified as financing cash flows for the twenty-six weeks ended July 1, 2006.
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, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At July 1, 2006, 1,283,295 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization. The Company’s policy is to issue shares upon exercise of stock options from treasury shares held by the Company.
12
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.
Following is a summary of the activity of the stock plans during the twenty-six weeks ended July 1, 2006:
Number ofShares
WeightedAverageExercisePrice
Outstanding at December 31, 2005
2,670,094
20.76
Granted
38,500
51.97
Exercised
(1,338,327
(18.72
Forfeited
(42,165
(25.87
Outstanding at July 1, 2006
1,328,102
23.56
Options exercisable at July 1, 2006
888,645
19.92
Weighted average fair value of options granted during 2006
Following is a summary of the status of stock options outstanding at July 1, 2006:
Outstanding and Exercisable By Price Range
Options Outstanding
Options Exercisable
Weighted Average
Weighted
Exercise Price
Remaining
Average
Range
Number
Contractual Life
$13.91-19.97
484,273
4.33 years
$17.29
20.53-24.78
595,639
6.84 years
23.29
387,182
22.96
24.86-53.01
248,190
6.33 years
36.43
17,190
25.14
In accordance with shareholder-approved plans, the Company grants stock under various stock-based compensation arrangements, including non-vested share awards and stock issued in lieu of cash bonuses. Under such arrangements, stock is issued without direct cost to the employee. In addition, the Company grants non-vested share units. The non-vested share units are settled in Company stock when the vesting period ends. Non-vested awards of 18,000 shares of Company common stock were issued to non-employee directors of the Company during the second quarter of 2006. There were no non-vested share units issued during the twenty-six weeks ended July 1, 2006.
At July 1, 2006, there was $4,858 of unrecognized compensation expense related to these non-vested share awards, which is expected to be recognized over a weighted average period of approximately 4 years. The Company recorded expense of $302 and $584 in the thirteen and twenty-six weeks ended July 1, 2006 (with associated tax benefits of $116 and $225, respectively), related to the amortization of non-vested shares and share units. Beginning January 1, 2006, the unamortized balance of the non-vested share awards
13
is a component of retained earnings. Prior to January 1, 2006, this unamortized balance was shown as a separate component of shareholders’ equity.
7. Business Segments
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.
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.
14
Sales:
Engineered Support Structures segment:
Lighting & Traffic
99,719
86,954
190,405
174,801
Specialty
32,371
25,545
52,894
41,693
Utility
5,533
7,903
9,863
12,750
137,623
120,402
253,162
229,244
Utility Support Structures segment
Steel
58,290
29,534
103,160
73,105
Concrete
17,966
13,374
39,306
28,836
76,256
42,908
142,466
101,941
Coatings segment
27,290
21,202
52,598
40,196
Irrigation segment
87,854
65,425
174,725
135,371
Tubing segment
23,672
22,743
47,137
44,810
Other
4,695
4,631
9,071
9,449
357,390
277,311
679,159
561,011
Intersegment Sales:
Engineered Support Structures
8,064
3,002
15,402
12,075
Utility Support Structures
572
1,068
1,443
1,585
Coatings
5,259
3,540
10,086
7,151
Irrigation
18
Tubing
3,488
3,588
7,558
7,398
1,210
975
2,236
1,916
18,599
12,177
36,743
30,136
Net Sales
129,559
117,400
237,760
217,169
75,684
41,840
141,023
100,356
22,031
17,662
42,512
33,045
87,848
65,421
174,707
135,360
20,184
19,155
39,579
37,412
3,485
3,656
6,835
7,533
Consolidated Net Sales
Operating Income
11,074
10,708
18,078
16,332
8,135
3,583
16,094
7,971
4,883
2,108
7,263
2,874
11,007
7,523
22,284
14,744
3,679
3,896
7,302
7,156
(406
(655
(1,065
(1,416
Net corporate expense
(8,463
(5,957
(16,470
(10,348
Total Operating Income
15
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 OPERATIONSFor the Thirteen Weeks Ended July 1, 2006
Parent
Guarantors
Non-Guarantors
Eliminations
211,534
60,052
88,002
(20,797
Cost of Sales
163,423
46,181
64,993
(20,868
48,111
13,871
23,009
71
30,739
8,189
16,225
17,372
5,682
6,784
(4,095
(2
(249
(34
26
411
(8
(1
273
(4,130
38
435
Earnings before income taxes, minority interest and equity in earnings / (losses) of nonconsolidated subsidiaries
13,242
5,720
7,219
Income tax expense:
7,802
2,869
2,422
(2,667
(748
(1,184
5,135
2,121
1,238
Earnings before minority interest, and equity in earnings / (losses) of nonconsolidated subsidiaries
8,107
3,599
5,981
Equity in earnings / (losses) of nonconsolidated subsidiaries
9,107
(238
128
(9,129
17,214
3,361
5,768
(9,058
16
For the Twenty-Six Weeks Ended July 1, 2006
400,295
115,307
164,006
(37,192
307,733
89,808
121,263
(37,143
92,562
25,499
42,743
(49
60,689
16,241
30,339
31,873
9,258
12,404
(8,082
(4
(415
149
35
779
(15
1,114
25
44
(6,819
56
408
25,054
9,314
12,812
16,017
4,251
3,725
(6,236
(697
(895
9,781
3,554
2,830
Earnings before minority interest, and equity in earnings/ (losses) of nonconsolidated subsidiaries
15,273
5,760
9,982
15,146
(142
157
(15,248
30,419
5,618
9,630
(15,297
17
For the Thirteen Weeks Ended June 25, 2005
160,610
42,515
77,217
(15,208
121,723
33,496
57,669
(15,347
38,887
9,019
19,548
139
25,486
7,389
13,512
13,401
1,630
6,036
(4,700
(5
(198
19
29
574
(19
(128
153
(4,799
529
8,602
1,641
6,565
2,387
628
2,114
839
59
3,226
726
2,173
5,376
915
4,392
4,928
61
(5,055
10,304
4,140
(4,916
For the Twenty-Six Weeks Ended June 25, 2005
326,690
92,971
147,731
(36,517
251,616
75,858
111,230
(37,083
75,074
17,113
36,501
566
50,294
15,339
26,308
24,780
1,774
10,193
(9,416
(16
(322
43
55
805
(43
(141
(9,502
495
Earnings before income taxes, minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries
15,278
1,784
10,688
3,264
757
3,720
2,727
(206
5,991
764
3,514
Earnings before minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries
9,287
1,020
7,174
Equity in earnings/(losses) of nonconsolidated subsidiaries
7,400
(21
(7,511
16,687
6,491
CONDENSED CONSOLIDATED BALANCE SHEETSJuly 1, 2006
9,495
2,484
22,568
102,947
33,055
87,099
(33
68,740
42,201
54,307
3,412
1,613
5,793
11,569
3,365
2,545
196,163
82,718
172,312
326,639
68,908
105,234
215,175
27,887
67,313
111,464
41,021
37,921
20,370
73,458
13,059
Other intangible assets
751
54,863
2,305
Investment in subsidiaries and intercompany accounts
354,853
49,729
(2,077
(402,505
26,092
6,545
2,344
(600
709,693
308,334
225,864
(403,138
LIABILITIES ANDSHAREHOLDERS’ EQUITY
13,156
2,404
36,557
13,519
43,376
43,058
5,905
21,172
95,197
19,451
71,777
14,237
21,329
2,389
210,845
53
1,732
1,896
25,209
14,249
3,492
(17,741
Additional paid-in capital
159,081
67,055
(226,136
373,316
94,171
68,570
(158,628
Accumulated other comprehensive loss
364,205
267,501
140,627
20
December 31, 2005
16,875
1,898
28,094
74,397
36,496
70,094
(18
66,111
42,540
49,676
3,008
1,690
2,945
8,931
3,406
2,169
169,322
86,030
152,978
325,620
66,218
97,822
208,862
23,207
62,915
116,758
43,011
34,907
73,375
12,950
778
56,498
2,864
319,473
41,560
(10,471
(350,562
31,305
1,514
658,006
300,474
194,742
(351,180
11,624
1,933
38,109
11,281
41,284
42,608
7,357
17,922
94,448
18,664
66,057
18,224
22,066
2,909
217,592
68
1,697
23,807
1,082
10,343
(24,592
159,082
71,885
(230,967
329,764
86,345
35,919
(95,003
303,935
259,676
115,626
21
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Twenty-Six Weeks Ended July 1, 2006
10,330
4,782
4,001
Stock Option Expense
(Gain)/ Loss on sale of property, plant and equipment
480
(90
121
Equity in (earnings)/losses of nonconsolidated subsidiaries
102
142
(157
Changes in assets and liabilities:
(28,550
3,442
(13,730
(2,629
338
(3,259
(1,079
77
(2,626
2,643
2,238
922
562
(1,453
2,329
(277
814
(4,584
(246
1,894
14,397
(2,724
Purchase of property, plant and equipment
(4,675
(1,271
(5,484
Investment in unconsolidated sub
Dividends to minority interest
770
166
Proceeds from minority interests
(5,166
(12,649
2,016
15,297
(10,345
(13,798
(3,604
Net borrowings (repayments) under short-term agreements
(5,216
(13
1,071
414
(7,438
586
(5,468
Cash and cash equivalents—beginning ofyear
Cash and cash equivalents—end of year
22
11,108
5,187
3,800
358
111
143
(260
5,973
5,233
(1,989
(7
23,732
(4,609
(9,073
(1,947
95
(695
(1,655
(2,135
2,889
(7,226
241
782
(138
3,839
258
54,293
4,830
2,359
(21,554
(1,458
(2,334
750
664
(2,337
(5,078
1,955
5,645
(23,141
(6,528
(38,803
(2,392
1,300
(20,923
(301
10,229
(1,711
1,099
966
3,694
25,550
11,195
1,983
26,649
23
PART 1. FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis contains forward-looking statements 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 management’s 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 Company’s control) and assumptions. Management believes that these forward-looking statements are based on reasonable assumptions. Many factors could affect the Company’s 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 Company’s 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 management’s discussion and analysis, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. We report our businesses as five reportable segments. See Note 7 to the Condensed Consolidated Financial Statements.
24
Results of Operations
Dollars in thousands, except per share amounts
% Incr.(Decr.)
% Incr(Decr.)
Consolidated
27.8
21.0
25.8
24.4
as a percent of sales
25.1
25.5
25.0
24.3
SG&A expense
18.9
16.7
16.3
17.5
17.3
41.0
43.3
8.8
8.0
8.3
7.0
Net interest expense
3,943
4,292
-8.1
7,538
8,882
-15.1
Effective tax rate
32.4
36.1
34.3
36.3
65.5
76.0
59.5
71.0
Engineered Support Structures Segment
10.4
9.5
34,220
30,710
11.4
61,708
55,429
11.3
23,146
20,001
15.7
43,630
39,097
11.6
3.4
14.5
80.9
40.5
15,633
9,939
57.3
31,316
21,079
48.6
7,498
6,356
18.0
15,222
13,108
16.1
127.0
101.9
24.7
28.6
7,543
4,478
68.4
12,417
7,491
65.8
2,660
2,370
12.2
5,154
4,617
131.6
152.7
29.1
21,640
15,944
35.7
42,898
32,715
31.1
10,633
8,421
26.3
20,614
17,971
14.7
46.3
51.1
5.4
5.8
5,236
5,564
-5.9
10,377
10,458
-0.8
1,557
1,668
-6.7
3,075
3,302
-6.9
-5.6
2.0
-4.7
-9.3
1,264
1,097
15.2
2,445
2,225
9.9
1,670
1,753
3,510
3,641
-3.5
Operating income (loss)
38.1
Net Corporate expense
(475
(139
NM
(143
7,988
5,818
37.3
16,064
10,205
57.4
-42.1
-59.1
NM = Not meaningful
Overview
The sales increases for the thirteen and twenty-six week periods ended July 1, 2006, as compared with the same periods of 2005, were mainly due to improved sales volumes in all reportable segments. Gross profit as a percent of sales in the second quarter of 2006 was slightly lower than the same period in 2005. Certain product warranty charges and production asset writedowns in the Engineered Support Structures (ESS) segment totaling $1.1 million and lower gross profit margins in the Utility Support Structures segment were the primary reasons for the lower gross profit percentage. On a year-to-date basis, gross profit as a percent of sales in 2006 was higher than 2005, as higher sales volumes allowed us to achieve greater factory utilization and improved leverage of our fixed factory expenses. Selling, general and administrative (SG&A) spending in the second quarter and year-to-date periods ended July 1, 2006 increased mainly as a result of higher employee incentives related to improved operating performance (approximately $3.1 million and $6.4 million, respectively), increased compensation costs (approximately $1.7 million and $2.7 million, respectively), higher sales commissions associated with the increased sales volumes (approximately $0.4 million and $1.0 million, respectively) and expenses related to stock options (approximately $0.3 million and $0.6 million, respectively) were required to be recorded under the provisions of SFAS 123(R), which we adopted during the first quarter of 2006. In addition, in the second quarter of 2005, we realized a $0.8 million reversal of a bad debt provision related to an international receivable. All reportable segments contributed to the improved operating income in 2006 for the thirteen and twenty-six weeks ended July 1, 2006, as compared with the same periods in 2005.
Interest expense decreased for the thirteen and twenty-six weeks ended July 1, 2006 as compared with the same periods in 2005, primarily due to lower average borrowing levels this year. Average borrowing levels in the second quarter of 2006 were approximately $71 million lower than the second quarter of 2005, which resulted from operating cash inflows throughout 2005 that were used to pay down our interest-bearing debt. The impact of lower borrowing levels on interest expense were somewhat offset by higher interest rates on our variable rate debt. Our effective tax rate was lower in 2006 as compared with 2005, due to an increase in the amount of our pre-tax earnings derived from foreign locations. These locations generally have lower statutory income tax rates than the U.S., resulting in a lower overall effective tax rate, as compared with prior periods. “Miscellaneous” income was higher in 2006 as compared with 2005, 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 used by operations were $1.7 million for the twenty-six weeks ended July 1, 2006, as compared with $54.5 million of cash provided by operations for the same period in 2005. The lower operating cash flows in 2006 resulted from increased working capital required by the increased net sales realized in 2006.
Engineered Support Structures (ESS) segment
All geographic regions contributed to the improvement in ESS segment sales in the thirteen and twenty-six weeks ended July 1, 2006, as compared with the same periods in 2005. In North America, lighting and traffic structure sales improved slightly over 2005 sales levels, as higher sales order levels achieved after the passage of U.S. highway funding legislation have started to result in higher sales shipment levels in 2006. Commercial lighting sales volumes in 2006 were comparable to 2005 levels. In Europe, lighting sales were higher than 2005 on both a quarterly and year-to-date basis, mainly due to new tramway and decorative lighting structures developed for the European market, improved market penetration in certain geographic areas and improvement in economic conditions in our main market areas.
Sales of Specialty Structures products increased in 2006 as compared with 2005, on both a quarterly and year-to-date basis. In North America, market conditions for sales of structures and components for the wireless communication market were slightly better in 2006, as compared with 2005, especially in component parts. Sign structure sales in 2006 were comparable to 2005 levels, on both a quarterly and year-to-date basis. Sales of wireless communication poles in China and Europe improved in 2006 on a
quarterly and year-to-date basis, as compared with relatively weak sales volumes in 2005, due to stronger sales demand in China and certain export markets. The increases in the profitability of the ESS segment for the thirteen and twenty-six weeks ended July 1, 2006 as compared with the same periods in 2005 were related to the sales growth in Europe and China. Segment operating income was hampered in the second quarter of 2006 by a total of approximately $1.1 million in expenses associated with a warranty claim from a sign structure customer and production equipment disposals in Europe. The main reasons for the increases in SG&A expense for the thirteen and twenty-six weeks ended July 1, 2006 as compared with the same periods in 2005 were increased compensation costs ($0.7 million and $0.9 million, respectively), commissions related to higher sales volumes (approximately $0.2 million and $0.7 million, respectively), increased international management expenses (approximately $0.4 million and $0.8 million, respectively), the writeoff of the Sigma trade name of $0.4 million in the second quarter of 2006 and start-up expenses related to our new plant in China (approximately $0.3 million on a year-to-date basis). The new China plant began commercial production and shipments in the second quarter of 2006.
In the Utility Support Structures segment, the sales increases for the thirteen and twenty-six weeks ended July 1, 2006 as compared with the same periods of 2005 were due to improved demand for steel and concrete electrical transmission, substation and distribution pole structures. Throughout 2005 and into 2006, our order rates for structures from utility companies and independent power producers were relatively strong and built our backlog to over $80 million and positioned us for improved shipment levels in the first two quarters of 2006. We believe the sales increase in the second quarter of 2006 as compared with 2005 was also due to shipping delays requested by our customers in 2005. Gross profit increased at a lower rate than sales in the second quarter of 2006, as compared with 2005, due to an unfavorable sales mix on some large sales orders that were at lower gross profit margins than normal. The improved operating income for this segment as compared with 2006 on both a quarterly and year-to-date basis relate to the improved sales levels and the resulting operating leverage of our SG&A cost structure. The increases in SG&A spending for the thirteen and twenty-six weeks ended July 1, 2006 as compared with the same periods in 2005 were related primarily to increased compensation and incentive costs related to higher business activity levels (approximately $0.6 million and $1.2 million, respectively) .
Coatings segment sales for the thirteen and twenty-six week periods ended July 1, 2006 were well above 2005 levels, mainly due to higher sales prices associated with higher zinc costs and increased demand for galvanizing services. In our galvanizing operations, year-to-date sales volume increased approximately 10% over 2005 volumes, mainly due to generally stronger industrial economic conditions in our market areas, a continuation of conditions that existed in the latter part of 2005. In the second quarter of 2006, zinc prices were more stable than in the first quarter, which helped us recover more of the increased cost of zinc in our sales prices than in the first quarter. The increases in operating income for the thirteen and twenty-six weeks ended July 1, 2006 as compared with the same periods in 2005 were principally due to higher production levels and improved production efficiencies. The increases in SG&A spending in the second quarter and year-to-date periods ended July 1, 2006, as compared with the periods in 2005 were primarily related to higher employee incentives associated with improved operating income.
For the thirteen and twenty-six weeks ended July 1, 2006, the sales increases realized in the Irrigation segment, as compared with the same periods in 2005, were predominantly due to higher sales volumes. In North America, generally dry weather conditions in much of the U.S. contributed to improved demand for irrigation machines and related service parts. Irrigation machines damaged in winter storms also contributed to the growth in the sales of service parts and replacement machines. International sales in the
second quarter of 2006 increased approximately $12 million as compared with the second quarter of 2005, mainly due to sales in newly-developed international markets and improved market conditions in sub-Saharan Africa, offset to an extent by continued weak market demand in Brazil. Operating income for the thirteen and twenty-six weeks ended July 1, 2006 increased substantially as compared with the same periods in 2005 was 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 July 1, 2006, as compared with the same periods in 2005 were mainly attributable to increased employee incentives associated with improved operational performance ($0.7 million and $1.1 million, respectively) and increased bad debts provisions of $1.4 million in the second quarter of 2006. In the second quarter of 2005, we realized a $0.8 million reversal of an international accounts receivable provision.
The increases in Tubing sales for the second quarter and the year-to-date periods ended July 1, 2006 as compared with the same periods in 2005 were due to improved demand for tubing products, offset somewhat by lower sales prices associated with generally lower average steel costs than in 2005. Despite higher sales volumes, operating income was negatively impacted in 2006 by recent steel price increases that have not yet been recovered in the marketplace through higher selling prices and a competitive pricing environment for certain commodity-type tubing products.
This includes our industrial fastener business, our machine tool accessories operation in France and the development costs associated with our wind energy structure initiative. The main reason for the improvement in operating income this year was lower spending related to wind energy and some improvement in the profitability of our machine tool accessory business.
The increases in net corporate expenses for the thirteen and twenty-six weeks ended July 1, 2006, as compared with the same periods in 2005, were mainly related to increased employee incentives due to improved earnings this year (approximately $1.5 million and $3.7 million, respectively), increased compensation costs partly associated with finance and audit support ($0.5 million and $1.1 million, respectively) and approximately $0.4 million of expense incurred in the first quarter of 2006 related to the termination of our synthetic lease on the corporate headquarters building and release of the related residual value guarantee.
Liquidity and Capital Resources
Cash Flows
Working Capital and Operating Cash Flows—Net working capital was $264.8 million at July 1, 2006, as compared with $229.2 million at December 31, 2005. The ratio of current assets to current liabilities was 2.42:1 at July 1, 2006, as compared with 2.28:1 at of December 31, 2005. Operating cash flow was a $1.7 million use of cash for the twenty-six week period ended July 1, 2006, as compared with $54.5 million provided by operations for the same period in 2005. The main reason for the lower operating cash flows in 2006, as compared with 2005, were increased working capital levels resulting from higher sales volumes this year.
Investing Cash Flows—Capital spending during the twenty-six weeks ended July 1, 2006 was $11.4 million, as compared with $25.3 million for the same period in 2005. Our capital spending for the 2006 fiscal year is expected to be between $25 million and $30 million.
28
Financing Cash Flows—Our total interest-bearing debt decreased from $237.3 million as of December 31, 2005 to $232.4 million as of July 1, 2006. The decrease in borrowings was related to normal scheduled debt repayments. In addition, the large volume of stock option exercises in 2006 resulted in excess tax benefits of $15,428, which was the income tax effect of tax deductions on these stock option exercises realized in excess of expense recorded for financial reporting purposes.
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 July 1, 2006, our long-term debt to invested capital ratio was 33.7%, as compared with 36.2% at December 31, 2005. 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 2006.
Our debt financing at July 1, 2006 consisted primarily of long-term debt. We also maintain certain short-term bank lines of credit totaling $19.9 million, $16.9 million which was unused at July 1, 2006. 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). In addition, this agreement provides that another $50 million may be added to the total credit agreement at our request at any time prior to May 31, 2007, subject to the group of banks increasing their current commitment. At July 1, 2006, we had no outstanding balance under the revolving credit agreement. 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 July 1, 2006, we had the ability to borrow an additional $145 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 to 137.5 basis points, depending on our debt to EBITDA ratio, and had an outstanding balance of $53.7 million at July 1, 2006. This loan requires quarterly principal payments through 2009. The annualized principal payments beginning in 2006 in millions are: $6.0, $10.4, $19.4, and $17.9. The effective interest rate on this loan was 6.125% per annum at July 1, 2006.
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 July 1, 2006 we were in compliance with all covenants related to these debt agreements.
On July 13, 2006, the FASB issued Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No 109. The Interpretation provides a consistent recognition threshold and measurement attribute, as well as clear criteria for subsequently recognizing, derecognizing and measuring uncertain tax positions for financial statement purposes. The Interpretation also requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 will be effective at the
beginning of our 2007 fiscal year. We are currently assessing the effect of this pronouncement on the financial statements.
FINANCIAL OBLIGATIONS AND FINANCIAL COMMITMENTS
There have been no material changes to our financial obligations and financial commitments as described on page 34 in our Form 10-K for the year ended December 31, 2005.
Off Balance Sheet Arrangements
On March 1, 2006, our corporate headquarters building complex was sold to a third party. As a result of the sale, our residual value guarantee to the former owner of the building complex was terminated. There have been no other material changes in our off balance sheet arrangements as described on pages 35-36 in our Form 10-K for the fiscal year ended December 31, 2005.
Critical Accounting Policies
There have been no changes in the Company’s critical accounting policies during the quarter ended April 1, 2006 other than our adoption of SFAS 123(R) related to the accounting for stock options. These policies are described on pages 37-40 in our Form 10-K for fiscal year ended December 31, 2005.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
There were no material changes in the company’s market risk during the quarter ended April 1, 2006. For additional information, refer to the section “Risk Management” on pages 36-37 in our Form 10-K for the fiscal year ended December 31, 2005.
Item 4. Controls and Procedures
The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s 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 Company’s 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 Company’s 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 Commission’s rules and forms. There have been no changes in the Company’s 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.
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
Average Price
Announced Plans or
Under the Plans or
Period
Shares Purchased
paid per share
Programs
April 2, 2006 to April 29, 2006
415,328
51.79
April 30, 2006 to June 3, 2006
34,658
55.10
June 4, 2006 to July 1, 2006
449,986
52.04
0
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.
Item 5. Other Information
On April 24, 2006, the Company’s Board of Directors declared a quarterly cash dividend on common stock of 9.5 cents per share, which was paid on July 14, 2006, to stockholders of record June 30, 2006. The indicated annual dividend rate is 38 cents per share.
Item 6. Exhibits
(a) Exhibits
Exhibit No.
Description
Section 302 Certificate of Chief Executive Officer
31.2
Section 302 Certificate of Chief Financial Officer
32.1
Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and by the undersigned hereunto duly authorized.
VALMONT INDUSTRIES, INC.
(Registrant)
/s/ TERRY J. McCLAIN
Terry J. McClain
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Dated this 8th day of August, 2006.