UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 201728, 2019
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
Incorporation or Organization) | 47-0351813 (I.R.S. Employer
Identification No.)
|
One Valmont Plaza,
| |
Omaha, | Nebraska
(Address | 68154-5215 |
(Address of Principal Executive Offices) |
68154-5215
(Zip (Zip Code)
|
(402) (402) 963-1000
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
________________________
Securities registered pursuant to Section 12(b) of the Act:
|
| | | | |
Title of each class | | Symbol | | Name of exchange on which registered |
Common Stock $1.00 par value | | VMI | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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. Yesx No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|
| | | | | | | |
Large accelerated filerx | ☒ | Accelerated filer o | ☐ | Non‑accelerated filero | ☐ | Smaller reporting company o | ☐ |
Emerging growth company o
| (Do not check if a
smaller reporting company)☐ | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 x
22,607,68021,525,585
Outstanding shares of common stock as of October 23, 201725, 2019
VALMONT INDUSTRIES, INC.
INDEX TO FORM 10-Q
| | | | Page No. | | Page No. |
| PART I. FINANCIAL INFORMATION | | PART I. FINANCIAL INFORMATION | |
| | | | |
| | | | |
| ended September 30, 2017 and September 24, 2016 | | ended September 28, 2019 and September 29, 2018 | |
| | | | |
| and thirty-nine weeks ended September 30, 2017 and September 24, 2016 | | and thirty-nine weeks ended September 28, 2019 and September 29, 2018 | |
| Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, | | Condensed Consolidated Balance Sheets as of September 28, 2019 and December 29, | |
| 2016 | | 2018 | |
| Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended | | Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended | |
| September 30, 2017 and September 24, 2016 | | September 28, 2019 and September 29, 2018
| |
| Condensed Consolidated Statements of Shareholders' Equity for the thirty-nine | | Condensed Consolidated Statements of Shareholders' Equity for the thirteen and | |
| weeks ended September 30, 2017 and September 24, 2016 | | thirty-nine weeks ended September 28, 2019 and September 29, 2018 | |
| Notes to Condensed Consolidated Financial Statements | | Notes to Condensed Consolidated Financial Statements | |
Item 2. | | | | |
Item 3. | | | | |
Item 4. | | | | |
| | |
| PART II. OTHER INFORMATION | | PART II. OTHER INFORMATION | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 6. | | | | |
| | | | |
| | |
| | |
| | |
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
| | | Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Thirteen weeks ended | | Thirty-nine weeks ended |
| September 30, 2017 | | September 24, 2016 | | September 30, 2017 | | September 24, 2016 | September 28, 2019 | | September 29, 2018 | | September 28, 2019 | | September 29, 2018 |
Product sales | $ | 602,080 |
| | $ | 544,828 |
| | $ | 1,807,539 |
| | $ | 1,648,530 |
| $ | 605,439 |
| | $ | 597,469 |
| | $ | 1,829,919 |
| | $ | 1,816,597 |
|
Services sales | 78,699 |
| | 65,419 |
| | 223,450 |
| | 198,571 |
| 84,901 |
| | 81,223 |
| | 253,431 |
| | 243,184 |
|
Net sales | 680,779 |
| | 610,247 |
| | 2,030,989 |
| | 1,847,101 |
| 690,340 |
| | 678,692 |
| | 2,083,350 |
| | 2,059,781 |
|
Product cost of sales | 462,854 |
| | 409,003 |
| | 1,366,875 |
| | 1,220,567 |
| 457,750 |
| | 460,547 |
| | 1,393,236 |
| | 1,389,832 |
|
Services cost of sales | 54,331 |
| | 46,221 |
| | 152,635 |
| | 135,425 |
| 56,504 |
| | 53,805 |
| | 168,485 |
| | 161,370 |
|
Total cost of sales | 517,185 |
| | 455,224 |
| | 1,519,510 |
| | 1,355,992 |
| 514,254 |
| | 514,352 |
| | 1,561,721 |
| | 1,551,202 |
|
Gross profit | 163,594 |
|
| 155,023 |
|
| 511,479 |
|
| 491,109 |
| 176,086 |
| | 164,340 |
| | 521,629 |
| | 508,579 |
|
Selling, general and administrative expenses | 103,671 |
| | 101,783 |
| | 308,764 |
| | 303,698 |
| 112,223 |
| | 110,200 |
| | 338,950 |
| | 326,809 |
|
Impairment of goodwill and intangible assets | | — |
| | 15,780 |
| | — |
| | 15,780 |
|
Operating income | 59,923 |
| | 53,240 |
| | 202,715 |
| | 187,411 |
| 63,863 |
| | 38,360 |
| | 182,679 |
| | 165,990 |
|
Other income (expenses): | | | | | | | | | | | | | | |
Interest expense | (11,190 | ) | | (11,100 | ) | | (33,312 | ) | | (33,276 | ) | (9,976 | ) | | (10,954 | ) | | (29,971 | ) | | (33,819 | ) |
Interest income | 1,311 |
| | 771 |
| | 3,205 |
| | 2,289 |
| 969 |
| | 1,000 |
| | 2,815 |
| | 3,713 |
|
Gain on investments (unrealized) | | 402 |
| | 1,068 |
| | 4,754 |
| | 1,146 |
|
Costs associated with refinancing of debt | | — |
| | (14,820 | ) | | — |
| | (14,820 | ) |
Loss from divestiture of grinding media business | | — |
| | — |
| | — |
| | (6,084 | ) |
Other | 517 |
| | 878 |
| | 1,684 |
| | 452 |
| 768 |
| | 1,428 |
| | 1,938 |
| | 2,053 |
|
| (9,362 | ) | | (9,451 | ) | | (28,423 | ) | | (30,535 | ) | (7,837 | ) | | (22,278 | ) | | (20,464 | ) | | (47,811 | ) |
Earnings before income taxes | 50,561 |
| | 43,789 |
| | 174,292 |
| | 156,876 |
| 56,026 |
| | 16,082 |
| | 162,215 |
| | 118,179 |
|
Income tax expense: | | | | | | | | |
Income tax expense (benefit): | | | | | | | | |
Current | 21,163 |
| | 18,017 |
| | 50,264 |
| | 51,276 |
| 12,375 |
| | 10,777 |
| | 33,053 |
| | 35,214 |
|
Deferred | (7,268 | ) | | (3,749 | ) | | 79 |
| | (1,534 | ) | 1,388 |
| | (1,686 | ) | | 7,098 |
| | 814 |
|
| 13,895 |
| | 14,268 |
| | 50,343 |
| | 49,742 |
| 13,763 |
| | 9,091 |
| | 40,151 |
| | 36,028 |
|
Net earnings | 36,666 |
| | 29,521 |
| | 123,949 |
| | 107,134 |
| 42,263 |
| | 6,991 |
| | 122,064 |
| | 82,151 |
|
Less: Earnings attributable to noncontrolling interests | (1,458 | ) | | (1,348 | ) | | (4,098 | ) | | (3,966 | ) | (2,119 | ) | | (2,543 | ) | | (4,042 | ) | | (5,462 | ) |
Net earnings attributable to Valmont Industries, Inc. | $ | 35,208 |
| | $ | 28,173 |
| | 119,851 |
| | 103,168 |
| $ | 40,144 |
| | $ | 4,448 |
| | $ | 118,022 |
| | $ | 76,689 |
|
Earnings per share: | | | | | | | | | | | | | | |
Basic | $ | 1.56 |
| | $ | 1.25 |
| | $ | 5.33 |
| | $ | 4.56 |
| $ | 1.86 |
| | $ | 0.20 |
| | $ | 5.43 |
| | $ | 3.42 |
|
Diluted | $ | 1.55 |
| | $ | 1.24 |
| | $ | 5.28 |
| | $ | 4.54 |
| $ | 1.85 |
| | $ | 0.20 |
| | $ | 5.41 |
| | $ | 3.40 |
|
Cash dividends declared per share | $ | 0.375 |
| | $ | 0.375 |
| | $ | 1.125 |
| | $ | 1.125 |
| |
Weighted average number of shares of common stock outstanding - Basic (000 omitted) | 22,527 |
| | 22,505 |
| | 22,505 |
| | 22,602 |
| |
Weighted average number of shares of common stock outstanding - Diluted (000 omitted) | 22,751 |
| | 22,659 |
| | 22,717 |
| | 22,741 |
| |
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
| | | Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Thirteen Weeks Ended | | Thirty-nine Weeks Ended |
| September 30, 2017 | | September 24, 2016 | | September 30, 2017 | | September 24, 2016 | September 28, 2019 | | September 29, 2018 | | September 28, 2019 | | September 29, 2018 |
Net earnings | $ | 36,666 |
| | $ | 29,521 |
| | $ | 123,949 |
| | $ | 107,134 |
| 42,263 |
| | 6,991 |
| | 122,064 |
| | 82,151 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | | | | | | |
Unrealized translation gain (loss) | 19,530 |
| | 770 |
| | 60,471 |
| | (1,938 | ) | (23,781 | ) | | (10,632 | ) | | (20,466 | ) | | (50,781 | ) |
Gain/(loss) on hedging activities: | | | | | | | | |
Net investment hedge | (740 | ) | | 1,972 |
| | (1,816 | ) | | 4,897 |
| |
Realized loss on divestiture of grinding media business recorded in earnings | | — |
| | — |
| | — |
| | 9,203 |
|
Gain (loss) on hedging activities: | | | | | | | | |
Net investment hedges | | 2,580 |
| | 1,223 |
| | 3,360 |
| | 2,830 |
|
Realized loss on net investment hedge for grinding media business recorded in earnings | | — |
| | — |
| | — |
| | 1,215 |
|
Amortization cost included in interest expense | 19 |
| | 18 |
| | 56 |
| | 56 |
| (16 | ) | | 395 |
| | (48 | ) | | 439 |
|
Other comprehensive income (loss) | 18,809 |
| | 2,760 |
| | 58,711 |
| | 3,015 |
| |
Deferred loss on interest rate hedges | | — |
| | — |
| | — |
| | (2,467 | ) |
Commodity hedges | | (21 | ) | | 226 |
| | (2,130 | ) | | 1,571 |
|
Realized gain (loss) on commodity hedges recorded in earnings | | 1,329 |
| | (717 | ) | | 1,329 |
| | (717 | ) |
Cross currency swaps | | 5,443 |
| | (2,037 | ) | | 3,771 |
| | (2,037 | ) |
Other comprehensive income | | (14,466 | ) | | (11,542 | ) | | (14,184 | ) | | (40,744 | ) |
Comprehensive income | 55,475 |
| | 32,281 |
| | 182,660 |
| | 110,149 |
| 27,797 |
| | (4,551 | ) | | 107,880 |
| | 41,407 |
|
Comprehensive loss (income) attributable to noncontrolling interests | (2,570 | ) | | (1,618 | ) | | (4,552 | ) | | (5,732 | ) | |
Comprehensive income attributable to noncontrolling interests | | (1,297 | ) | | (2,389 | ) | | (3,390 | ) | | (8,250 | ) |
Comprehensive income attributable to Valmont Industries, Inc. | $ | 52,905 |
| | $ | 30,663 |
| | $ | 178,108 |
| | $ | 104,417 |
| $ | 26,500 |
| | $ | (6,940 | ) | | $ | 104,490 |
| | $ | 33,157 |
|
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | September 30, 2017 | | December 31, 2016 | September 28, 2019 | | December 29, 2018 |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | $ | 493,490 |
| | $ | 399,948 |
| $ | 327,200 |
| | $ | 313,210 |
|
Receivables, net | 492,842 |
| | 439,342 |
| 501,215 |
| | 483,963 |
|
Inventories | 403,234 |
| | 350,028 |
| 377,300 |
| | 383,566 |
|
Prepaid expenses, restricted cash, and other assets | 50,064 |
| | 57,297 |
| |
Contract asset - costs and profits in excess of billings | | 120,376 |
| | 112,525 |
|
Prepaid expenses and other assets | | 50,420 |
| | 42,800 |
|
Refundable income taxes | 8,493 |
| | 6,601 |
| 11,893 |
| | 4,576 |
|
Total current assets | 1,448,123 |
| | 1,253,216 |
| 1,388,404 |
| | 1,340,640 |
|
Property, plant and equipment, at cost | 1,169,854 |
| | 1,105,736 |
| 1,233,762 |
| | 1,160,865 |
|
Less accumulated depreciation and amortization | 647,430 |
| | 587,401 |
| 685,394 |
| | 646,873 |
|
Net property, plant and equipment | 522,424 |
| | 518,335 |
| 548,368 |
| | 513,992 |
|
Goodwill | 336,754 |
| | 321,110 |
| 421,679 |
| | 385,207 |
|
Other intangible assets, net | 142,090 |
| | 144,378 |
| 177,734 |
| | 175,956 |
|
Other assets | 160,780 |
| | 154,692 |
| 189,257 |
| | 114,479 |
|
Total assets | $ | 2,610,171 |
| | $ | 2,391,731 |
| $ | 2,725,442 |
| | $ | 2,530,274 |
|
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Current liabilities: | | | | | | |
Current installments of long-term debt | $ | 949 |
| | $ | 851 |
| $ | 745 |
| | $ | 779 |
|
Notes payable to banks | 197 |
| | 746 |
| 19,324 |
| | 10,678 |
|
Accounts payable | 216,104 |
| | 177,488 |
| 197,535 |
| | 218,115 |
|
Accrued employee compensation and benefits | 81,494 |
| | 72,404 |
| 78,540 |
| | 79,291 |
|
Accrued expenses | 106,238 |
| | 89,914 |
| 226,715 |
| | 91,942 |
|
Dividends payable | 8,478 |
| | 8,445 |
| 8,088 |
| | 8,230 |
|
Total current liabilities | 413,460 |
| | 349,848 |
| 530,947 |
| | 409,035 |
|
Deferred income taxes | 28,183 |
| | 35,803 |
| 43,778 |
| | 43,489 |
|
Long-term debt, excluding current installments | 754,202 |
| | 754,795 |
| 764,524 |
| | 741,822 |
|
Defined benefit pension liability | 199,562 |
| | 209,470 |
| 121,282 |
| | 143,904 |
|
Operating lease liabilities | | 78,790 |
| | — |
|
Deferred compensation | 48,612 |
| | 44,319 |
| 43,837 |
| | 46,107 |
|
Other noncurrent liabilities | 13,557 |
| | 14,910 |
| 11,113 |
| | 10,394 |
|
Shareholders’ equity: | | | | | | |
Preferred stock of $1 par value - | | | | |
Authorized 500,000 shares; none issued | — |
| | — |
| |
Common stock of $1 par value - | | | | | | |
Authorized 75,000,000 shares; 27,900,000 issued | 27,900 |
| | 27,900 |
| 27,900 |
| | 27,900 |
|
Retained earnings | 1,974,601 |
| | 1,874,722 |
| 2,119,843 |
| | 2,027,596 |
|
Accumulated other comprehensive loss | (288,102 | ) | | (346,359 | ) | (316,717 | ) | | (303,185 | ) |
Treasury stock | (601,565 | ) | | (612,781 | ) | (744,335 | ) | | (692,549 | ) |
Total Valmont Industries, Inc. shareholders’ equity | 1,112,834 |
| | 943,482 |
| 1,086,691 |
| | 1,059,762 |
|
Noncontrolling interest in consolidated subsidiaries | 39,761 |
| | 39,104 |
| 44,480 |
| | 75,761 |
|
Total shareholders’ equity | 1,152,595 |
| | 982,586 |
| 1,131,171 |
| | 1,135,523 |
|
Total liabilities and shareholders’ equity | $ | 2,610,171 |
| | $ | 2,391,731 |
| $ | 2,725,442 |
| | $ | 2,530,274 |
|
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| | | Thirty-nine Weeks Ended | Thirty-nine weeks ended |
| September 30, 2017 | | September 24, 2016 | September 28, 2019 | | September 29, 2018 |
Cash flows from operating activities: | | | | | | |
Net earnings | $ | 123,949 |
| | $ | 107,134 |
| $ | 122,064 |
| | $ | 82,151 |
|
Adjustments to reconcile net earnings to net cash flows from operations: | | | | | | |
Depreciation and amortization | 63,500 |
| | 61,242 |
| 60,424 |
| | 62,018 |
|
Noncash loss on trading securities | 395 |
| | 973 |
| (48 | ) | | (62 | ) |
Impairment of assets - restructuring activities | — |
| | 618 |
| |
Impairment of property, plant and equipment | | — |
| | 4,197 |
|
Impairment of goodwill & intangible assets | | — |
| | 15,780 |
|
Loss on divestiture of grinding media business | | — |
| | 6,084 |
|
Stock-based compensation | 7,300 |
| | 6,572 |
| 8,889 |
| | 8,076 |
|
Change in fair value of contingent consideration | — |
| | (3,527 | ) | |
Defined benefit pension plan expense | 481 |
| | 1,486 |
| |
Defined benefit pension plan benefit | | (382 | ) | | (1,713 | ) |
Contribution to defined benefit pension plan | (26,064 | ) | | (712 | ) | (17,426 | ) | | (1,555 | ) |
Change in restricted cash - pension plan trust | 12,568 |
| | (13,652 | ) | |
(Gain)/loss on sale of property, plant and equipment | (732 | ) | | 250 |
| |
Gain on sale of property, plant and equipment | | (465 | ) | | (353 | ) |
Deferred income taxes | 79 |
| | (1,534 | ) | 7,098 |
| | 814 |
|
Changes in assets and liabilities: | | | | | | |
Receivables | (39,584 | ) | | 16,436 |
| (21,117 | ) | | (612 | ) |
Inventories | (41,545 | ) | | (34,413 | ) | 5,348 |
| | (33,004 | ) |
Prepaid expenses and other assets | (11,636 | ) | | (10,624 | ) | (14,451 | ) | | (18,486 | ) |
Contract asset - costs and profits in excess of billings | | (7,850 | ) | | (33,029 | ) |
Accounts payable | 28,895 |
| | (11,338 | ) | (19,256 | ) | | (19,069 | ) |
Accrued expenses | 20,157 |
| | 3,272 |
| 129,901 |
| | 7,288 |
|
Other noncurrent liabilities | (1,627 | ) | | 240 |
| (4,563 | ) | | (1,249 | ) |
Income taxes refundable | (1,732 | ) | | 4,831 |
| (8,936 | ) | | (9,223 | ) |
Net cash flows from operating activities | 134,404 |
| | 127,254 |
| 239,230 |
| | 68,053 |
|
Cash flows from investing activities: | | | | | | |
Purchase of property, plant and equipment | (39,898 | ) | | (42,233 | ) | (71,981 | ) | | (48,919 | ) |
Proceeds from sale of assets | 1,575 |
| | 3,938 |
| 1,325 |
| | 64,786 |
|
Acquisitions, net of cash acquired | (5,362 | ) | | — |
| (81,841 | ) | | (125,309 | ) |
Proceeds from settlement of net investment hedge | 5,123 |
| | — |
| |
Settlement of net investment hedges | | 11,184 |
| | (1,621 | ) |
Other, net | (3,462 | ) | | (2,824 | ) | 2,117 |
| | (2,371 | ) |
Net cash flows from investing activities | (42,024 | ) | | (41,119 | ) | (139,196 | ) | | (113,434 | ) |
Cash flows from financing activities: | | | | | | |
Net borrowings under short-term agreements | (549 | ) | | (128 | ) | |
Proceeds from short-term agreements | | 9,284 |
| | 3,217 |
|
Proceeds from long-term borrowings | | 31,000 |
| | 236,936 |
|
Principal payments on long-term borrowings | (658 | ) | | (1,563 | ) | (10,578 | ) | | (252,952 | ) |
Settlement of financial derivatives | | — |
| | (2,467 | ) |
Debt issuance costs | | — |
| | (2,322 | ) |
Dividends paid | (25,386 | ) | | (25,604 | ) | (24,554 | ) | | (25,415 | ) |
Dividends to noncontrolling interest | (3,895 | ) | | (2,527 | ) | (6,549 | ) | | (5,737 | ) |
Purchase of noncontrolling interest | — |
| | (11,009 | ) | (27,845 | ) | | (5,510 | ) |
Purchase of treasury shares | — |
| | (46,581 | ) | (55,172 | ) | | (86,919 | ) |
Proceeds from exercises under stock plans | 12,446 |
| | 6,509 |
| 3,211 |
| | 6,376 |
|
Purchase of common treasury shares—stock plan exercises | (3,929 | ) | | (1,453 | ) | (1,456 | ) | | (1,914 | ) |
Net cash flows from financing activities | (21,971 | ) | | (82,356 | ) | (82,659 | ) | | (136,707 | ) |
Effect of exchange rate changes on cash and cash equivalents | 23,133 |
| | (3,478 | ) | (3,385 | ) | | (15,095 | ) |
Net change in cash and cash equivalents | 93,542 |
| | 301 |
| 13,990 |
| | (197,183 | ) |
Cash and cash equivalents—beginning of year | 399,948 |
| | 349,074 |
| |
Cash and cash equivalents—end of period | $ | 493,490 |
| | $ | 349,375 |
| |
Cash, cash equivalents, and restricted cash—beginning of year | | 313,210 |
| | 492,805 |
|
Cash, cash equivalents, and restricted cash—end of period | | $ | 327,200 |
| | $ | 295,622 |
|
See accompanying notes to condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Treasury stock | | Noncontrolling interest in consolidated subsidiaries | | Total shareholders’ equity |
Balance at December 26, 2015 | $ | 27,900 |
| | $ | — |
| | $ | 1,729,679 |
| | $ | (267,218 | ) | | $ | (571,920 | ) | | $ | 46,770 |
| | $ | 965,211 |
|
Net earnings | — |
| | — |
| | 103,168 |
| | — |
| | — |
| | 3,966 |
| | 107,134 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | 1,249 |
| | — |
| | 1,766 |
| | 3,015 |
|
Cash dividends declared | — |
| | — |
| �� | (25,482 | ) | | — |
| | — |
| | — |
| | (25,482 | ) |
Dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | (2,527 | ) | | (2,527 | ) |
Purchase of noncontrolling interests | — |
| | (137 | ) | | — |
| | — |
| | — |
| | (10,872 | ) | | (11,009 | ) |
Purchase of treasury shares; 384,622 shares acquired | — |
| | — |
| | — |
| | — |
| | (46,581 | ) | | — |
| | (46,581 | ) |
Stock plan exercises; 10,747 shares acquired | — |
| | — |
| | — |
| | — |
| | (1,453 | ) | | — |
| | (1,453 | ) |
Stock options exercised; 68,631 shares issued | — |
| | (6,435 | ) | | 4,582 |
| | — |
| | 8,362 |
| | — |
| | 6,509 |
|
Stock option expense | — |
| | 4,358 |
| | — |
| | — |
| | — |
| | — |
| | 4,358 |
|
Stock awards; 6,725 shares issued | — |
| | 2,214 |
| | — |
| | — |
| | 912 |
| | — |
| | 3,126 |
|
Balance at September 24, 2016 | $ | 27,900 |
| | $ | — |
| | $ | 1,811,947 |
| | $ | (265,969 | ) | | $ | (610,680 | ) | | $ | 39,103 |
| | $ | 1,002,301 |
|
Balance at December 31, 2016 | $ | 27,900 |
| | $ | — |
| | $ | 1,874,722 |
| | $ | (346,359 | ) | | $ | (612,781 | ) | | $ | 39,104 |
| | $ | 982,586 |
|
Net earnings | — |
| | — |
| | 119,851 |
| | — |
| | — |
| | 4,098 |
| | 123,949 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | 58,257 |
| | — |
| | 454 |
| | 58,711 |
|
Cash dividends declared | — |
| | — |
| | (25,417 | ) | | — |
| | — |
| | — |
| | (25,417 | ) |
Dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | (3,895 | ) | | (3,895 | ) |
Stock plan exercises; 24,672 shares acquired | — |
| | — |
| | — |
| | — |
| | (3,929 | ) | | — |
| | (3,929 | ) |
Stock options exercised; 106,351 shares issued | — |
| | (7,300 | ) | | 5,445 |
| | — |
| | 14,301 |
| | — |
| | 12,446 |
|
Stock option expense | — |
| | 3,868 |
| | — |
| | — |
| | — |
| | — |
| | 3,868 |
|
Stock awards; 6,034 shares issued | — |
| | 3,432 |
| | — |
| | — |
| | 844 |
| | — |
| | 4,276 |
|
Balance at September 30, 2017 | $ | 27,900 |
| | $ | — |
| | $ | 1,974,601 |
| | $ | (288,102 | ) | | $ | (601,565 | ) | | $ | 39,761 |
| | $ | 1,152,595 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Treasury stock | | Noncontrolling interest in consolidated subsidiaries | | Total shareholders’ equity |
Balance at June 30, 2018 | $ | 27,900 |
| | $ | — |
| | $ | 2,023,919 |
| | $ | (311,166 | ) | | $ | (628,487 | ) | | $ | 37,658 |
| | $ | 1,149,824 |
|
Net earnings | — |
| | — |
| | 4,448 |
| | — |
| | — |
| | 2,543 |
| | $ | 6,991 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | (11,388 | ) | | — |
| | (154 | ) | | $ | (11,542 | ) |
Cash dividends declared ($0.375 per share) | — |
| | — |
| | (8,311 | ) | | — |
| | — |
| | — |
| | $ | (8,311 | ) |
Dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | (885 | ) | | $ | (885 | ) |
Addition of noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | 37,369 |
| | $ | 37,369 |
|
Purchase of treasury shares; 309,198 shares acquired | — |
| | — |
| | — |
| | — |
| | (42,920 | ) | | — |
| | $ | (42,920 | ) |
Stock plan exercises; 1,033 shares acquired | — |
| | — |
| | — |
| | — |
| | (145 | ) | | — |
| | $ | (145 | ) |
Stock options exercised; 6,191 shares issued | — |
| | (2,713 | ) | | 2,482 |
| | — |
| | 896 |
| | — |
| | $ | 665 |
|
Stock option expense | — |
| | 987 |
| | — |
| | — |
| | — |
| | — |
| | $ | 987 |
|
Stock awards; 82 shares issued | — |
| | 1,726 |
| | — |
| | — |
| | (11 | ) | | — |
| | $ | 1,715 |
|
Balance at September 29, 2018 | $ | 27,900 |
| | $ | — |
| | $ | 2,022,538 |
| | $ | (322,554 | ) | | $ | (670,667 | ) | | $ | 76,531 |
| | $ | 1,133,748 |
|
Balance at June 29, 2019 | $ | 27,900 |
| | $ | — |
| | $ | 2,085,594 |
| | $ | (303,072 | ) | | $ | (728,680 | ) | | $ | 45,272 |
| | $ | 1,127,014 |
|
Net earnings | — |
| | — |
| | 40,144 |
| | — |
| | — |
| | 2,119 |
| | $ | 42,263 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | (13,645 | ) | | — |
| | (821 | ) | | $ | (14,466 | ) |
Cash dividends declared ($0.375 per share) | — |
| | — |
| | (8,085 | ) | | — |
| | — |
| | — |
| | $ | (8,085 | ) |
Dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | (2,090 | ) | | $ | (2,090 | ) |
Purchase of treasury shares; 126,734 shares acquired | — |
| | — |
| | — |
| | — |
| | (16,822 | ) | | — |
| | $ | (16,822 | ) |
Stock plan exercises; 4,403 shares acquired | — |
| | — |
| | — |
| | — |
| | (629 | ) | | — |
| | $ | (629 | ) |
Stock options exercised; 12,856 shares issued | — |
| | (2,514 | ) | | 2,190 |
| | — |
| | 1,791 |
| | — |
| | $ | 1,467 |
|
Stock option expense | — |
| | 600 |
| | — |
| | — |
| | — |
| | — |
| | $ | 600 |
|
Stock awards; 223 shares issued | — |
| | 1,914 |
| | — |
| | — |
| | 5 |
| | — |
| | $ | 1,919 |
|
Balance at September 28, 2019 | $ | 27,900 |
| | $ | — |
| | $ | 2,119,843 |
| | $ | (316,717 | ) | | $ | (744,335 | ) | | $ | 44,480 |
| | $ | 1,131,171 |
|
See accompanying notes to the condensed consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Treasury stock | | Noncontrolling interest in consolidated subsidiaries | | Total shareholders’ equity |
Balance at December 30, 2017 | $ | 27,900 |
| | $ | — |
| | $ | 1,954,344 |
| | $ | (279,022 | ) | | $ | (590,386 | ) | | $ | 38,959 |
| | $ | 1,151,795 |
|
Net earnings | — |
| | — |
| | 76,689 |
| | — |
| | — |
| | 5,462 |
| | 82,151 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | (43,532 | ) | | — |
| | 2,788 |
| | (40,744 | ) |
Cash dividends declared ($1.125 per share) | — |
| | — |
| | (25,204 | ) | | — |
| | — |
| | — |
| | (25,204 | ) |
Dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | (5,737 | ) | | (5,737 | ) |
Cumulative impact of ASC 606 adoption | — |
| | — |
| | 9,771 |
| | — |
| | — |
| | — |
| | 9,771 |
|
Impact of ASU 2016-16 adoption | — |
| | — |
| | 1,038 |
| | — |
| | — |
| | — |
| | 1,038 |
|
Addition of noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | 40,569 |
| | 40,569 |
|
Purchase of noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | (5,510 | ) | | (5,510 | ) |
Purchase of treasury shares; 614,454 shares acquired | — |
| | — |
| | — |
| | — |
| | (86,919 | ) | | — |
| | (86,919 | ) |
Stock plan exercises; 12,971 shares acquired | — |
| | — |
| | — |
| | — |
| | (1,914 | ) | | — |
| | (1,914 | ) |
Stock options exercised; 52,404 shares issued | — |
| | (7,172 | ) | | 5,900 |
| | — |
| | 7,648 |
| | — |
| | 6,376 |
|
Stock option expense | — |
| | 3,138 |
| | — |
| | — |
| | — |
| | — |
| | 3,138 |
|
Stock awards; 7,774 shares issued | — |
| | 4,034 |
| | — |
| | — |
| | 904 |
| | — |
| | 4,938 |
|
Balance at September 29, 2018 | $ | 27,900 |
| | $ | — |
| | $ | 2,022,538 |
| | $ | (322,554 | ) | | $ | (670,667 | ) | | $ | 76,531 |
| | $ | 1,133,748 |
|
Balance at December 29, 2018 | $ | 27,900 |
| | $ | — |
| | $ | 2,027,596 |
| | $ | (303,185 | ) | | $ | (692,549 | ) | | $ | 75,761 |
| | $ | 1,135,523 |
|
Net earnings | — |
| | — |
| | 118,022 |
| | — |
| | — |
| | 4,042 |
| | 122,064 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | (13,532 | ) | | — |
| | (652 | ) | | (14,184 | ) |
Cash dividends declared ($1.125 per share) | — |
| | — |
| | (24,424 | ) | | — |
| | — |
| | — |
| | (24,424 | ) |
Dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | (6,549 | ) | | (6,549 | ) |
Purchase of noncontrolling interest | — |
| | 277 |
| | — |
| | — |
| | — |
| | (28,122 | ) | | (27,845 | ) |
Impact of ASC 842 adoption | — |
| | — |
| | (8,886 | ) | | — |
| | — |
| | — |
| | (8,886 | ) |
Purchase of treasury shares; 433,463 shares acquired | — |
| | — |
| | — |
| | — |
| | (55,172 | ) | | — |
| | (55,172 | ) |
Stock plan exercises; 10,499 shares acquired | — |
| | — |
| | — |
| | — |
| | (1,456 | ) | | — |
| | (1,456 | ) |
Stock options exercised; 28,493 shares issued | — |
| | (7,756 | ) | | 7,535 |
| | — |
| | 3,432 |
| | — |
| | 3,211 |
|
Stock option expense | — |
| | 2,056 |
| | — |
| | — |
| | — |
| | — |
| | 2,056 |
|
Stock awards; 10,550 shares issued | — |
| | 5,423 |
| | — |
| | — |
| | 1,410 |
| | — |
| | 6,833 |
|
Balance at September 28, 2019 | $ | 27,900 |
| | $ | — |
| | $ | 2,119,843 |
| | $ | (316,717 | ) | | $ | (744,335 | ) | | $ | 44,480 |
| | $ | 1,131,171 |
|
See accompanying notes to condensed consolidated financial statements.
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 September 30, 201728, 2019, the Condensed Consolidated Statements of Earnings, and Comprehensive Income, and Shareholders' Equity for the thirteen and thirty-nine weeks ended September 30, 201728, 2019 and September 24, 2016,29, 2018, and the Condensed Consolidated Statements of Cash Flows and Shareholders' Equity 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 statements as of September 30, 201728, 2019 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, 2016.29, 2018. 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, 2016.29, 2018 with the exception of the lease accounting policy which changed from adopting Accounting Standards Update ("ASU") 2016-02 and is discussed in footnote 9. The results of operations for the period ended September 30, 201728, 2019 are not necessarily indicative of the operating results for the full year.
Inventories
Approximately 36%38% and 38%37% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method or market as of September 30, 201728, 2019 and December 31, 2016.29, 2018. 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 and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately $40,886$48,080 and $38,047$53,619 at September 30, 201728, 2019 and December 31, 2016,29, 2018, respectively.
Inventories consisted of the following: |
| | | | | | | |
| September 28, 2019 | | December 29, 2018 |
Raw materials and purchased parts | $ | 172,064 |
| | $ | 190,115 |
|
Work-in-process | 34,696 |
| | 35,566 |
|
Finished goods and manufactured goods | 218,620 |
| | 211,504 |
|
Subtotal | 425,380 |
| | 437,185 |
|
Less: LIFO reserve | 48,080 |
| | 53,619 |
|
| $ | 377,300 |
| | $ | 383,566 |
|
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Raw materials and purchased parts | $ | 175,222 |
| | $ | 143,659 |
|
Work-in-process | 35,126 |
| | 27,291 |
|
Finished goods and manufactured goods | 233,772 |
| | 217,125 |
|
Subtotal | 444,120 |
| | 388,075 |
|
Less: LIFO reserve | 40,886 |
| | 38,047 |
|
| $ | 403,234 |
| | $ | 350,028 |
|
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 (Continued)
Income Taxes
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries for the thirteen and thirty-nine weeks ended September 30, 201728, 2019 and September 24, 2016,29, 2018, were as follows: |
| | | | | | | | | | | | | | | |
| Thirteen weeks ended | | Thirty-nine weeks ended |
| 2019 | | 2018 | | 2019 | | 2018 |
United States | $ | 44,897 |
| | $ | 15,596 |
| | $ | 134,417 |
| | $ | 99,697 |
|
Foreign | 11,129 |
| | 486 |
| | 27,798 |
| | 18,482 |
|
| $ | 56,026 |
| | $ | 16,082 |
| | $ | 162,215 |
| | $ | 118,179 |
|
|
| | | | | | | | | | | | | | | |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended |
| 2017 | | 2016 | | 2017 | | 2016 |
United States | $ | 28,886 |
| | $ | 21,550 |
| | $ | 115,082 |
| | $ | 105,390 |
|
Foreign | 21,675 |
| | 22,239 |
| | 59,210 |
| | 51,486 |
|
| $ | 50,561 |
| | $ | 43,789 |
| | $ | 174,292 |
| | $ | 156,876 |
|
Pension Benefits
The Company incurs expenses in connection with the Delta Pension Plan ("DPP"). The DPP was acquired as part of the Delta plc acquisition in fiscal 2010 and has no members that are active employees. In order to measure expense and the related benefit obligation, various assumptions are made including discount rates used to value the obligation, expected return on plan assets used to fund these expenses and estimated future inflation rates. These assumptions are based on historical experience as well as current facts and circumstances. An actuarial analysis is used to measure the expense and liability associated with pension benefits.
The components of the net periodic pension (benefit) expense for the thirteen and thirty-nine weeks ended September 30, 201728, 2019 and September 24, 201629, 2018 were as follows:
|
| | | | | | | | | | | | | | | |
| Thirteen weeks ended | | Thirty-nine weeks ended |
Net periodic (benefit) expense: | 2019 | | 2018 | | 2019 | | 2018 |
Interest cost | $ | 4,075 |
| | $ | 4,400 |
| | $ | 12,602 |
| | $ | 13,602 |
|
Expected return on plan assets | (4,815 | ) | | (5,704 | ) | | (14,893 | ) | | (17,633 | ) |
Amortization of actuarial loss | 617 |
| | 750 |
| | 1,909 |
| | 2,318 |
|
Net periodic expense (benefit) | $ | (123 | ) | | $ | (554 | ) | | $ | (382 | ) | | $ | (1,713 | ) |
|
| | | | | | | | | | | | | | | |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended |
Net periodic (benefit) expense: | 2017 | | 2016 | | 2017 | | 2016 |
Interest cost | $ | 4,676 |
| | $ | 6,092 |
| | $ | 13,475 |
| | $ | 19,134 |
|
Expected return on plan assets | (5,277 | ) | | (5,565 | ) | | (15,208 | ) | | (17,648 | ) |
Amortization of actuarial loss | 768 |
| | — |
| | 2,214 |
| | — |
|
Net periodic expense | $ | 167 |
| | $ | 527 |
| | $ | 481 |
| | $ | 1,486 |
|
Stock Plans
The Company maintains stock‑based compensation plans approved by the shareholders, which provide that the Human Resource Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vestedrestricted stock awards, restricted stock units, and bonuses of common stock. At September 30, 2017, 704,81828, 2019, 1,403,051 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.
Under the plans, the exercise price of each option equals the closing market price at the date of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three years to six years or on the grant's fifth anniversary of the grant.
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 (Continued)
anniversary. Expiration of grants is from seven to ten years from the date of grant. Restricted stock units and awards generally vest in equal installments over three years beginning on the first anniversary of the grant.
The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options and restricted stock for the thirteen and thirty-nine weeks ended September 30, 201728, 2019 and September 24, 2016,29, 2018, respectively, were as follows:
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended |
| 2017 | | 2016 | | 2017 | | 2016 |
Compensation expense | $ | 1,290 |
| | $ | 1,399 |
| | $ | 3,868 |
| | $ | 4,358 |
|
Income tax benefits | 496 |
| | 539 |
| | 1,489 |
| | 1,678 |
|
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
| | | | | | | | | | | | | | | |
| Thirteen weeks ended | | Thirty-nine weeks ended |
| 2019 | | 2018 | | 2019 | | 2018 |
Compensation expense | $ | 2,519 |
| | $ | 2,702 |
| | $ | 8,889 |
| | $ | 8,076 |
|
Income tax benefits | 630 |
| | 676 |
| | 2,222 |
| | 2,019 |
|
Fair Value
The Company applies the provisions of Accounting Standards Codification 820, Fair Value Measurements (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 apply to other accounting pronouncements that require or permit fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a three‑level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.
Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan of $39,283$35,144 ($35,78437,516 at December 31, 2016)29, 2018) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification ("ASC") 320, Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time.
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 (Continued)
The Company's ownership of shares in Delta EMD Pty. Ltd. (JSE:DTA) is also classified as trading securities. The shares are valued at $1,779$80 and $2,016$2,508 as of September 30, 201728, 2019 and December 31, 2016,29, 2018, respectively, which is the estimated fair value. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.
Derivative Financial Instruments: The fair value of foreign currency and commodity forward contracts, and cross currency contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.
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 (Continued)
| | | | | Fair Value Measurement Using: | | | Fair Value Measurement Using: |
| Carrying Value September 30, 2017 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | Carrying Value September 28, 2019 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | | | | | | | | |
Trading Securities | $ | 41,062 |
| | $ | 41,062 |
| | $ | — |
| | $ | — |
| $ | 35,224 |
| | $ | 35,224 |
| | $ | — |
| | $ | — |
|
Derivative financial instruments, net | | 9,408 |
| | — |
| | 9,408 |
| | — |
|
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurement Using: |
| Carrying Value December 29, 2018 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Trading Securities | $ | 40,024 |
| | $ | 40,024 |
| | $ | — |
| | $ | — |
|
Derivative financial instruments, net | 9,147 |
| | — |
| | 9,147 |
| | — |
|
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurement Using: |
| Carrying Value December 31, 2016 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Trading Securities | $ | 37,800 |
| | $ | 37,800 |
| | $ | — |
| | $ | — |
|
Long-Lived AssetsThe Company's other non-financial assets include goodwill and other intangible assets, which are classified as Level 3 items. These assets are measured at fair value on a non-recurring basis as part of annual impairment testing. Note 5 to these condensed consolidated financial statements contain additional information related to goodwill and intangible asset impairments.
Comprehensive Income
Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. 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. Accumulated other comprehensive income (loss) consisted of the following at September 30, 201728, 2019 and December 31, 2016:29, 2018: |
| | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustments | | Gain/(Loss) on Hedging Activities | | Defined Benefit Pension Plan | | Accumulated Other Comprehensive Loss |
Balance at December 29, 2018 | $ | (230,261 | ) | | $ | 11,171 |
| | $ | (84,095 | ) | | $ | (303,185 | ) |
Current-period comprehensive income (loss) | (19,814 | ) | | 6,282 |
| | — |
| | (13,532 | ) |
Balance at September 28, 2019 | $ | (250,075 | ) | | $ | 17,453 |
| | $ | (84,095 | ) | | $ | (316,717 | ) |
|
| | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustments | | Gain/(Loss) on Hedging Activities | | Defined Benefit Pension Plan | | Accumulated Other Comprehensive Loss |
Balance at December 31, 2016 | $ | (251,228 | ) | | $ | 7,978 |
| | $ | (103,109 | ) | | $ | (346,359 | ) |
Current-period comprehensive income (loss) | 60,017 |
| | (1,760 | ) | | — |
| | 58,257 |
|
Balance at September 30, 2017 | $ | (191,211 | ) | | $ | 6,218 |
| | $ | (103,109 | ) | | $ | (288,102 | ) |
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 (Continued)
Revenue Recognition
Net Investment Hedge
In the second quarter of 2016, the Company entered into a one-year foreign currency forward contract which qualified as a net investment hedge, in order to mitigate foreign currency risk on a portion of our investments denominated in British pounds. The forward contract had a notional amount to sell British pounds and receive $44,000, and matured in May 2017. The realized gain of $5,123 ($3,150 after tax) has been deferred in other comprehensive income where it will remain until the Company's net investments in its British subsidiaries are divested. No ineffectiveness resulted from the hedge prior to its maturity.
In the third quarter of 2017, the Company entered into two six-month foreign currency forward contracts which qualified as net investment hedges, in order to mitigate foreign currency risk on our grinding media business that is denominated in both Australian dollars and British pounds. The Company announced its intention to divest of this business in August 2017 and regulatory approval in Australia is currently pending. The forward contracts have a maturity date of January 2018 and a notional amount to sell Australian dollars and British pounds to receive $27,000 and $18,500, respectively. The unrealized loss recorded at September 30, 2017 is $740 and is included in Accounts Payable ondetermines the Consolidated Balance Sheets. No ineffectiveness has resulted from the hedge and the balance is recorded in the Consolidated Statement of Other Comprehensive Income within gain/(loss) on hedging activities. When the forward contract matures, the realized gain/(loss) will be deferred in Other Comprehensive Income where it will remain until the grinding media business is divested.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-9, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This standard is effective for interim and annual reporting periods beginning after December 15, 2017, and can be adopted either retrospectively or as a cumulative effect adjustment as of the date of adoption. Early adoption is permitted for interim and annual periods beginning after December 15, 2016. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations and financial position. One area under assessment is the timing ofappropriate revenue recognition for our contracts by analyzing the Company’s product lines that are custom engineered to a single customer’s specifications resulting in limited ability that the asset can be used for another customer. These product lines reside in the Utility and Engineered Support Structures segments. When thetype, terms and conditions allowof each contract or arrangement with a customer. Contracts with customers for all businesses are fixed-price with sales tax excluded from revenue, and do not include variable consideration.Discounts included in contracts with customers, typically early pay discounts, are recorded as a reduction of net sales in the Company to bill a customer for full compensation on a canceled order forperiod in which the sale is recognized. Contract revenues are classified as product when the performance completedobligation is related to date,the manufacturing of goods. Contract revenues are classified as service when the performance obligation is the performance of a service. Service revenue will be recognized overis primarily related to the production periodCoatings segment.
Customer acceptance provisions exist only in the design stage of our products and notacceptance of the current practice whichdesign by the customer is upon shipment or time of deliveryrequired before the project is manufactured and delivered to the customer. The Company is also evaluatingnot entitled to any compensation solely based on design of the necessary changes to its internal control processes toproduct and does not recognize revenue associated with the design stage. There is one performance obligation for revenue recognition. No general rights of return exist for customers once the product has been delivered and the Company establishes provisions for estimated warranties. The Company does not sell extended warranties for any of its products.
Shipping and handling costs associated with sales are recorded as cost of goods sold. The Company elected to use the practical expedient of treating freight as a fulfillment obligation instead of a separate performance obligation and ratably recognize freight expense as the structure is being manufactured, when the revenue from the associated customer contract is being recognized over time. With the exception of the Utility segment and the wireless communication structures product line, the Company’s inventory is interchangeable for a variety of each segment’s customers. The Company elected the practical expedient to not disclose the partially satisfied performance obligation at the end of the period when the contract has an original expected duration of one year or less. In addition, the Company elected the practical expedient to not adjust the amount of consideration to be received in a contract for any significant financing component if payment is expected within twelve months of transfer of control of goods or services; the Company expects all consideration to be received in one year or less at contract inception.
Segment and Product Line Revenue Recognition
The global Utility segment revenues are derived from manufactured steel and concrete structures for the North America utility industry and offshore and other complex structures used in energy generation and distribution outside of the United States. Steel and concrete utility structures are engineered to customer specifications resulting in limited ability to sell the structure to a different customer if an order is canceled after production commences. The continuous transfer of control to the customer is evidenced either by contractual termination clauses or by our rights to payment for work performed to-date plus a reasonable profit as the products do not have an alternative use to the Company. Since control is transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment. For our steel and concrete utility and wireless communication structure product lines, we generally recognize revenue on an inputs basis, using total production hours incurred to-date for each order as a percentage of total hours estimated to produce the order. The completion percentage is applied to the order’s total revenue and total estimated costs to determine reported revenue, cost of goods sold and gross profit. Production of an order, once started, is typically completed within three months. Revenue from the offshore and other complex structures business is also recognized using an inputs method, based model after adoption. Based on the current statusratio of costs incurred to date to the total estimated costs at completion of the evaluation,performance obligation. External sales agents are used in certain sales of steel and concrete structures; the adoptionCompany has chosen to use the practical expedient to expense estimated commissions owed to third parties by recognizing them proportionately as the goods are manufactured.
The global ESS segment revenues are derived from the manufacture and distribution of engineered metal, composite structures and components for lighting and traffic and roadway safety, engineered access systems, and wireless communication. For the lighting and traffic and roadway safety product lines, revenue is recognized upon shipment or delivery of goods to the customer depending on contract terms, which is the same point in time that the customer is billed. For Access Systems, revenue is generally recognized upon delivery of goods to the customer which is the same point in time that the customer is billed. The wireless communication product line has large regional customers who have unique product
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 (Continued)
specifications for communication structures. When the customer contract includes a cancellation clause that would require them to pay for work completed plus a reasonable margin if an order was canceled, revenue is recognized over time based on hours worked as a percent of total estimated hours to complete production. For the remaining wireless communication product line customers which do not provide a contractual right to bill for work completed on a canceled order, revenue is recognized upon shipment or delivery of the standardgoods to the customer which is not expectedthe same point in time that the customer is billed.
The global Coatings segment revenues are derived by providing coating services to have a material effect oncustomers’ products, which include galvanizing, anodizing, and powder coating. Revenue is recognized once the amountscoating service has been performed and the goods are ready to be picked up or timingdelivered to the customer which is the same time that the customer is billed.
The global Irrigation segment revenues are derived from the manufacture of revenueagricultural irrigation equipment and related parts and services for the agricultural industry and tubular products for industrial customers. Revenue recognition for the Company’s other segments.irrigation segment is generally upon shipment of the goods to the customer which is the same point in time that the customer is billed. The remote monitoring subscription services are primarily billed annually and revenue is recognized on a straight-line basis over the subsequent twelve months.
Disaggregation of revenue by product line is disclosed in the Segment footnote. A breakdown by segment of revenue recognized over time and at a point in time for the thirteen and thirty-nine weeks ended September 28, 2019 and September 29, 2018 is as follows:
|
| | | | | | | | | | | | | | | |
| Point in Time | | Over Time | | Point in Time | | Over Time |
| Thirteen weeks ended September 28, 2019 | | Thirteen weeks ended September 28, 2019 | | Thirty-nine weeks ended September 28, 2019 | | Thirty-nine weeks ended September 28, 2019 |
Utility Support Structures | $ | 3,418 |
| | $ | 200,778 |
| | $ | 43,642 |
| | $ | 612,821 |
|
Engineered Support Structures | 252,501 |
| | 13,993 |
| | 713,574 |
| | 38,454 |
|
Coatings | 76,922 |
| | — |
| | 228,242 |
| | — |
|
Irrigation | 139,093 |
| | 3,635 |
| | 436,907 |
| | 9,710 |
|
Total | $ | 471,934 |
| | $ | 218,406 |
| | $ | 1,422,365 |
| | $ | 660,985 |
|
|
| | | | | | | | | | | | | | | |
| Point in Time | | Over Time | | Point in Time | | Over Time |
| Thirteen weeks ended September 29, 2018 | | Thirteen weeks ended September 29, 2018 | | Thirty-nine weeks ended September 29, 2018 | | Thirty-nine weeks ended September 29, 2018 |
Utility Support Structures | $ | 6,090 |
| | $ | 211,853 |
| | $ | 6,090 |
| | $ | 618,243 |
|
Engineered Support Structures | 235,948 |
| | 12,483 |
| | 680,863 |
| | 29,525 |
|
Coatings | 74,547 |
| | — |
| | 217,544 |
| | — |
|
Irrigation | 134,710 |
| | 3,061 |
| | 475,744 |
| | 8,692 |
|
Other | — |
| | — |
| | 23,080 |
| | — |
|
Total | $ | 451,295 |
| | $ | 227,397 |
| | $ | 1,403,321 |
| | $ | 656,460 |
|
Both steel and concrete utility customers are generally invoiced upon shipment or delivery of the goods to the customer's specified location and there are normally no up-front or progress payments. The offshore and complex steel structures business invoices customers a number of ways including advanced billings, progress billings, and billings upon shipment.
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 (Continued)
At September 28, 2019 and December 29, 2018, the contract liability for revenue recognized over time was $123,878 and $4,906, respectively. The contract liability is included in Accrued Expenses on the condensed consolidated balance sheets.
During the thirteen and thirty-nine weeks ended September 28, 2019, the Company expectsrecognized $314 and $2,242 of revenue that was included in the liability as of December 29, 2018. In the thirteen and thirty-nine weeks ended September 29, 2018, the Company recognized $0 and $4,456 of revenue that was included in the liability as of December 30, 2017. The revenue recognized was due to adoptapplying advance payments received for projects completed during the new standard using the modified retrospective approach effective January 1, 2018.period.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which provides revised guidance on leases requiring lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liabilityCompany implemented a lease management tool to support the new reporting requirements and adopted the ASU on the first day of fiscal 2019. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet for all classes of underlying assets. The Company elected to not recast its comparative periods in transition (the "Comparatives Under 840 Option") as allowed under ASU 2018-11. The new standard did not have an impact in the condensed consolidated statements of earnings; footnote 9 provides the impact on the condensed consolidated balance sheet including the transition adoption adjustment recorded to retained earnings.
(2) ACQUISITIONS
On May 13, 2019, the Company acquired the assets of Connect-It Wireless, Inc. ("Connect-It") for $6,034 in cash. Connect-It operates in Florida and is a manufacturer and distributor of wireless site components and safety products. In the preliminary purchase price allocation, goodwill of $3,299 and customer relationships of $828 were recorded and the remainder is net working capital. A portion of the goodwill is deductible for tax purposes. Connect-It is included in the ESS segment and was acquired to expand the Company's wireless component distribution network. The Company expects the purchase price allocation to be finalized in the fourth quarter of 2019, after all management reviews have been completed.
On February 11, 2019, the Company acquired the outstanding shares of United Galvanizing ("United"), a provider of coatings services for $26,000 in cash. The agreed upon purchase price was $28,000, with $2,000 being contingent on seller representations and warranties that will be equal tosettled within 12 months of the present valueacquisition date. The acquisition of lease payments. For income statementUnited, located in Houston, Texas further expands the Company's galvanizing footprint in North America and will be reported in the Coatings segment. The preliminary fair values assigned were $11,715 for goodwill, $4,034 for customer relationships, trade name of $894, $11,016 for property, plant, and equipment, and the remainder is net working capital. Goodwill is not deductible for tax purposes and the FASB retained a dual model, requiring leasescustomer relationship will be amortized over 10 years. The trade name has an indefinite life. The Company expects the purchase price allocation to be classified as either operating or finance. Operating leases will resultfinalized in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria thatthe fourth quarter of 2019, once the contingent payment is settled and management reviews are largely similar to those applied in current lease accounting, but without explicit bright lines. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018 and is to be applied on a modified retrospective transition. The Company is currently evaluating the effect of adopting this new accounting guidance but expects the adoption will result in a significant increase in total assets and liabilities.complete.
(2) ACQUISITIONS (Continued)
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 (Continued)
In August 2016,On December 31, 2018, the FASB issued ASU 2016-15, ClassificationCompany acquired the assets of Certain Cash ReceiptsLarson Camouflage ("Larson"), an industry leading provider of architectural and Cash Paymentscamouflage concealment solutions for the wireless telecommunication market for $31,106 in cash. The agreed upon purchase price was $34,562, with 10% being held back for seller representations and warranties and will be settled within 12 months of the acquisition date. Larson was acquired to grow our product offerings in the Statement of Cash Flows, which provides more specific guidance on cash flow presentationwireless communication market and will be reported in the ESS segment. The preliminary fair values assigned were $17,050 for certain transactions. ASU 2016-15customer relationships, $14,519 for goodwill, $1,151 for property, plant, and equipment and the remainder is effectivenet working capital. Goodwill is deductible for interim periodstax purposes and fiscal years beginning after December 15, 2017, with early adoption permitted.the customer relationships will be amortized over 12 years. The Company does not expectexpects the provisions of this new standard will have a material impact on the consolidated financial statements and planspurchase price allocation to adopt itbe finalized in the firstfourth quarter of 2018.2019, once the hold back payment is settled and management reviews are complete.
On October 18, 2018, the Company acquired CSP Coatings Systems of Auckland, New Zealand, a provider of a wide range of coatings services for $17,711 in cash. The acquisition further strengthens the Company's Asia-Pacific market position and is reported in the Coatings segment. The fair values assigned were $7,373 to property, plant, and equipment, $3,113 for customer relationships, $5,120 for goodwill, with the remainder net working capital. Goodwill is not deductible for tax purposes and the customer relationships will be amortized over 10 years. The purchase price allocation was finalized in the second quarter of 2019.
On August 3, 2018, the Company purchased approximately 72% of the outstanding shares of Walpar, LLC ("Walpar") for $57,805 in cash. Walpar is an industry leader in the design, engineering and manufacturing of overhead sign structures for the North America transportation market. Walpar is located in Birmingham, Alabama and its operations are reported in the ESS segment. The transaction was funded with cash on hand. The acquisition of Walpar was completed to expand the Company's product offering in the sign structure market. Customer relationships are amortized over 12 years and the trade name has an indefinite life. Goodwill is not deductible for tax purposes.
In January 2017,2019, the FASB issued ASU 2017-04, Simplifying the Test28% non-controlling interest shares of Walpar, LLC were acquired for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. ASU 2017-04 is effective for periods and fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this standard in$23,082. During the third quarter, the Company finalized its purchase price allocation including its assessment of 2017 which is the same period asvalue of intangibles on the opening balance sheet. As a result of updated cash flow projections it performswas determined that a $3,500 reduction in customer relationships, along with an offsetting increase in goodwill less deferred tax, was necessary to adjust the annual goodwill impairment testing.
In March 2017,preliminary allocation of fair value to assets acquired and liabilities assumed. The following table summarizes the FASB issued ASU 2017-07, Presentationfair values of Net Periodic Benefit Cost Related to Defined Benefit Plans, which amends the income statement presentation requirements for the componentsassets acquired and liabilities assumed of net periodic benefit cost for an entity's defined benefit pension and post-retirement plans. ASU 2017-07 is effective for periods and fiscal years beginning after December 15, 2017. Early adoption is permittedWalpar as of the beginningdate of any annual period for which an entity's financial statements have not been issued. The Company does not believe this ASU will have a material impact on the consolidated financial statements and plans to adopt this ASU in the first quarter of 2018.acquisition:
|
| | | | |
| | At August 3, 2018 |
Current assets | | $ | 13,210 |
|
Customer relationships | | 28,500 |
|
Trade name | | 3,500 |
|
Goodwill | | 45,453 |
|
Total fair value of assets acquired | | $ | 90,663 |
|
Current liabilities | | 2,197 |
|
Deferred taxes | | 7,579 |
|
Total fair value of liabilities assumed | | $ | 9,776 |
|
Non-controlling interest | | 23,082 |
|
Net assets acquired | | $ | 57,805 |
|
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. ASU 2017-12 is effective for periods and fiscal years beginning after December 15, 2018. Early adoption is permitted for any interim period post issuance. The Company does not believe the adoption of this ASU will have a material impact on the consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(2) ACQUISITIONS
On July 31, 2017, the Company purchased Aircon Guardrails Private Limited ("Aircon") for $5,362 in cash, net of cash acquired, plus assumed liabilities. Aircon produces highway safety systems including guardrails, structural metal products, and solar structural products in India with annual sales of approximately $10,000. In the preliminary purchase price allocation, goodwill of $3,327 and $2,109 of customer relationships and other intangible assets were recorded. Goodwill is not deductible for tax purposes. This business is included in the Engineered Support Structures segment and was acquired to expand the Company's geographic presence in the Asia-Pacific region. The Company expects to finalize the purchase price allocation in the fourth quarter of 2017. Proforma disclosures were omitted as this business does not have a significant impact on the Company's financial results.
Acquisitions of Noncontrolling Interests
In April 2016,August 3, 2018, the Company acquired 75% of the remaining 30%outstanding shares of IGC Galvanizing Industries (M) Sdn Bhd that it did not ownConvert Italia SpA ("Convert") for $5,841.$43,504 in cash. In June 2016,the second quarter of 2019, the Company acquired 5.2% ofpaid the remaining 10% of Valmont SM that it did not own for $5,168. As these transactions were for acquisitions of part or all of the remaining shares of consolidated subsidiaries with no change in control, they were recorded within shareholders' equity and as a financing cash flowformer owners approximately $18,700 additional purchase price which was reflected in the Consolidated Statementscontingent consideration liability on the fair value of Cash Flows.
3) RESTRUCTURING ACTIVITIES
In April 2015,assets and liabilities assumed on acquisition. Convert is a designer and provider of engineered solar tracker solutions that is headquartered in Italy, with offices in Brazil and Argentina. The Company acquired Convert to grow market adjacencies in the Company's Board of Directors authorized a broad restructuring plan (the "2015 Plan") to respond to the market environment in certain businesses. During fiscal 2016, the Company incurred pre-tax restructuring charges of $4,581 as it completed the 2015 Plan.
In 2016, the Company identified and executed further region specific restructuring activities (the "2016 Plan") and incurred $5,045 of pre-tax restructuring expenses in cost of sales and $2,780 of pre-tax restructuring expense in SG&A in 2016. Within the total $7,825, were pre-tax asset impairments of $1,099. The 2016 Plan was primarily completed by year-end 2016. The Energy and Mining segment incurred $1,607, the Coatings segment incurred $305, and Corporate incurred approximately $225 of restructuring expenses during the third quarter of 2016. A significant change in market conditions in any of the Company's segments may affect the Company's assessment of necessity for further restructuring activities.Utility Support Structures segment.
Liabilities recorded for the restructuring plans and changes therein for the first three quarters of fiscal 2017 were as follows:
|
| | | | | | | | | | | | | | | | |
| | Balance at December 31, 2016 | | Recognized Restructuring Expense | | Costs Paid or Otherwise Settled | | Balance at September 30, 2017 |
Severance | | $ | 1,597 |
| | $ | — |
| | $ | (1,597 | ) | | $ | — |
|
Other cash restructuring expenses | | 4,581 |
| | — |
| | (3,377 | ) | | 1,204 |
|
Total | | $ | 6,178 |
| | $ | — |
| | $ | (4,974 | ) | | $ | 1,204 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(2) ACQUISITIONS (Continued)
Patents and proprietary technology will be amortized over 15 years and the trade name has an indefinite life. Goodwill is not deductible for tax purposes. The fair value measurement process and purchase price allocation was finalized in the third quarter of 2019. The following table summarizes the fair values of the assets acquired and liabilities assumed of Convert as of the date of acquisition:
|
| | | | |
| | At August 3, 2018 |
Current assets | | $ | 18,349 |
|
Other assets | | 3,166 |
|
Patent and Proprietary Technology | | 16,554 |
|
Trade name | | 8,701 |
|
Goodwill | | 42,169 |
|
Total fair value of assets acquired | | $ | 88,939 |
|
Current liabilities | | 5,376 |
|
Contingent consideration liability | | 19,497 |
|
Deferred taxes | | 6,061 |
|
Total fair value of liabilities assumed | | $ | 30,934 |
|
Non-controlling interest | | 14,501 |
|
Net assets acquired | | $ | 43,504 |
|
The Company's condensed consolidated statements of earnings for the thirteen and thirty-nine weeks ended September 28, 2019 included net sales of $26,999 and $94,975 resulting from these acquisitions. In aggregate, these acquisitions did not contribute net earnings to the Company's consolidated 2019 results. The proforma effect of these acquisitions on the thirteen and thirty-nine weeks of 2019 and 2018 is as follows:
|
| | | | | | | | | | | | |
| Thirteen weeks ended September 28, 2019 | Thirteen weeks ended September 29, 2018 | Thirty-nine weeks ended September 28, 2019 | Thirty-nine weeks ended September 29, 2018
|
Net sales | $ | 690,340 |
| $ | 698,306 |
| $ | 2,088,524 |
| $ | 2,129,968 |
|
Net earnings | 40,144 |
| 5,002 |
| 118,555 |
| 80,842 |
|
Earnings per share-diluted | 1.85 |
| 0.22 |
| 5.43 |
| 3.58 |
|
Acquisitions of Noncontrolling Interests
In April 2019, the Company acquired the remaining 4.8% of Valmont SM that it did not own for $4,763. In March 2018, the Company acquired the remaining 10% of Valmont Industria e Commercio Ltda. that it did not own for $5,510. As these transactions were for the acquisition of all of the remaining shares of a consolidated subsidiary with no change in control, they were recorded within shareholders' equity and as a financing activity in the Consolidated Statements of Cash Flows.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(3) DIVESTITURE
On April 30, 2018, the Company completed the sale of Donhad, its grinding media business in Australia, reported in the Other segment. The business was sold because it did not fit the long-term strategic plans for the Company. The grinding media business historical annual sales, operating profit, and net assets are not significant for discontinued operations presentation. The grinding media business had an operating loss of $0 and $913 for the thirteen and thirty-nine weeks ended September 29, 2018. The Company received Australian $82,500 (U.S. $62,518) in proceeds from the sale.
The pre-tax loss recorded during the second quarter of 2018 from the divestiture is reported in other income (expense). The loss is comprised of the proceeds from buyer, less deal-related costs, less the net assets of the business which resulted in a gain of $4,334. Offsetting this amount is a $(10,418) realized loss on foreign exchange translation adjustments and net investment hedges previously reported in shareholders' equity.
|
| | | |
| |
Pre-tax gain from divestiture, before recognition of currency translation loss | $ | 4,334 |
|
Recognition of cumulative currency translation loss and hedges (out of OCI) | (10,418 | ) |
Net pre-tax loss from divestiture of the grinding media business | $ | (6,084 | ) |
The transaction did not result in a taxable capital gain as the cash proceeds were less than the tax carrying value of the business. There is an insignificant tax benefit from the tax deductibility of deal related expenses.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(4) RESTRUCTURING ACTIVITIES
During 2018, the Company executed certain regional restructuring activities (the "2018 Plan") primarily in the ESS and Utility segments to transform its operational business model including exiting certain local markets. During the full year of 2018, the Company incurred $18,380 of cost of sales and $15,651 of selling, general, and administrative expense for the 2018 Plan. In connection with exiting certain local markets as a result of the 2018 Plan, the Company also recorded $7,944 of impairments of current and other assets during fiscal 2018, primarily inventory.
The following pre-tax expense were recognized during the third quarter of 2018:
|
| | | | | | | | | | | | | | | | |
| | ESS | | Utility | | Corporate | | Total |
Severance | | $ | 1,706 |
| | $ | — |
| | $ | — |
| | $ | 1,706 |
|
Other cash restructuring expenses | | 326 |
| | 497 |
| | — |
| | 823 |
|
Asset impairments/net loss on disposals | | 1,406 |
| | — |
| | — |
| | 1,406 |
|
Total cost of sales | | 3,438 |
| | 497 |
| | — |
| | 3,935 |
|
| | | | | | | | |
Severance | | 1,757 |
| | — |
| | — |
| | 1,757 |
|
Other cash restructuring expenses | | 551 |
| | — |
| | — |
| | 551 |
|
Asset impairments/net loss on disposals | | — |
| | — |
| | — |
| | — |
|
Total selling, general and administrative expenses | | 2,308 |
| | — |
| | — |
| | 2,308 |
|
Consolidated total | | $ | 5,746 |
| | $ | 497 |
| | $ | — |
| | $ | 6,243 |
|
In the first three quarters of 2018, the Company recognized the following pre-tax restructuring expenses:
|
| | | | | | | | | | | | | | | | |
| | ESS | | Utility | | Corporate | | Total |
Severance | | $ | 3,732 |
| | $ | 515 |
| | $ | — |
| | $ | 4,247 |
|
Other cash restructuring expenses | | 478 |
| | 2,228 |
| | — |
| | 2,706 |
|
Asset impairments/net loss on disposals | | 3,812 |
| | — |
| | — |
| | $ | 3,812 |
|
Total cost of sales | | 8,022 |
| | 2,743 |
| | — |
| | 10,765 |
|
| | | | | | | | |
Severance | | 5,268 |
| | — |
| | — |
| | $ | 5,268 |
|
Other cash restructuring expenses | | 1,118 |
| | — |
| | 126 |
| | 1,244 |
|
Asset impairments/net loss on disposals | | 385 |
| | — |
| | — |
| | 385 |
|
Total selling, general and administrative expenses | | 6,771 |
| | — |
| | 126 |
| | 6,897 |
|
Consolidated total | | $ | 14,793 |
| | $ | 2,743 |
| | $ | 126 |
| | $ | 17,662 |
|
Liabilities recorded for the restructuring plans and changes therein for the first three quarters of 2019 were as follows:
|
| | | | | | | | | | | | | | | | |
| | Balance at December 29, 2018 | | Recognized Restructuring Expense | | Costs Paid or Otherwise Settled | | Balance at September 28, 2019 |
Severance | | $ | 6,594 |
| | $ | — |
| | $ | (6,237 | ) | | $ | 357 |
|
Other cash restructuring expenses | | 3,462 |
| | — |
| | (2,982 | ) | | 480 |
|
Total | | $ | 10,056 |
| | $ | — |
| | $ | (9,219 | ) | | $ | 837 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(5) GOODWILL AND INTANGIBLE ASSETS
Amortized Intangible Assets
The components of amortized intangible assets at September 30, 201728, 2019 and December 31, 201629, 2018 were as follows: | | | September 30, 2017 | September 28, 2019 |
| Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Life | Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Life |
Customer Relationships | $ | 200,269 |
| | $ | 126,845 |
| | 13 years | $ | 236,029 |
| | $ | 143,306 |
| | 13 years |
Proprietary Software & Database | 3,687 |
| | 3,111 |
| | 8 years | |
Patents & Proprietary Technology | 6,633 |
| | 3,859 |
| | 11 years | 22,936 |
| | 5,945 |
| | 14 years |
Other | 4,807 |
| | 4,032 |
| | 3 years | 7,494 |
| | 6,886 |
| | 5 years |
| $ | 215,396 |
| | $ | 137,847 |
| | $ | 266,459 |
| | $ | 156,137 |
| |
|
| | | | | | | | | |
| December 29, 2018 |
| Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Life |
Customer Relationships | $ | 219,508 |
| | $ | 132,180 |
| | 13 years |
Patents & Proprietary Technology | 23,662 |
| | 4,837 |
| | 14 years |
Other | 7,971 |
| | 6,891 |
| | 5 years |
| $ | 251,141 |
| | $ | 143,908 |
| | |
|
| | | | | | | | | |
| December 31, 2016 |
| Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Life |
Customer Relationships | $ | 191,316 |
| | $ | 111,342 |
| | 13 years |
Proprietary Software & Database | 3,616 |
| | 3,056 |
| | 8 years |
Patents & Proprietary Technology | 6,434 |
| | 3,420 |
| | 11 years |
Other | 3,713 |
| | 3,668 |
| | 3 years |
| $ | 205,079 |
| | $ | 121,486 |
| | |
Amortization expense for intangible assets for the thirteen and thirty-nine weeks ended September 30, 201728, 2019 and September 24, 2016,29, 2018, respectively was as follows:
|
| | | | | | | | | | | | | | |
Thirteen weeks ended | | Thirty-nine weeks ended |
2019 | | 2018 | | 2019 | | 2018 |
$ | 4,484 |
| | $ | 3,721 |
| | $ | 13,506 |
| | $ | 11,176 |
|
|
| | | | | | | | | | |
Thirteen Weeks Ended | | Thirty-nine Weeks Ended |
2017 | | 2016 | | 2017 | | 2016 |
4,025 |
| | 3,964 |
| | 11,792 |
| | 12,037 |
|
Estimated annual amortization expense related to finite‑lived intangible assets is as follows:
|
| | | |
| Estimated Amortization Expense |
2019 | $ | 17,687 |
|
2020 | 17,821 |
|
2021 | 15,523 |
|
2022 | 13,286 |
|
2023 | 11,594 |
|
|
| | | |
| Estimated Amortization Expense |
2017 | $ | 15,823 |
|
2018 | 14,492 |
|
2019 | 13,718 |
|
2020 | 12,608 |
|
2021 | 10,474 |
|
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 recognition of the intangible asset and the Company’s expected use of the intangible asset.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(4)(5) GOODWILL AND INTANGIBLE ASSETS (Continued)
Non-amortized intangible assets
Intangible assets with indefinite lives are not amortized.amortized and consist solely of trade names. The carrying valuesvalue of trade names at September 30, 201728, 2019 and December 31, 2016 were29, 2018 are as follows:
|
| | | | | | | | | |
| September 28, 2019 | | December 29, 2018 | | Year Acquired |
Newmark | $ | 11,111 |
| | $ | 11,111 |
| | 2004 |
Webforge | 8,587 |
| | 8,872 |
| | 2010 |
Convert Italia S.p.A | 8,203 |
| | 8,580 |
| | 2018 |
Valmont SM | 7,799 |
| | 8,155 |
| | 2014 |
Ingal EPS/Ingal Civil Products | 7,001 |
| | 7,233 |
| | 2010 |
Walpar | 3,500 |
| | 4,300 |
| | 2018 |
Shakespeare | 4,000 |
| | 4,000 |
| | 2014 |
Other | 17,211 |
| | 16,472 |
| | |
| $ | 67,412 |
| | $ | 68,723 |
| | |
|
| | | | | | | | | |
| September 30, 2017 | | December 31, 2016 | | Year Acquired |
Webforge | $ | 9,362 |
| | $ | 8,624 |
| | 2010 |
Valmont SM | 9,839 |
| | 8,765 |
| | 2014 |
Newmark | 11,111 |
| | 11,111 |
| | 2004 |
Ingal EPS/Ingal Civil Products | 7,633 |
| | 7,032 |
| | 2010 |
Donhad | 5,758 |
| | 5,305 |
| | 2010 |
Shakespeare | 4,000 |
| | 4,000 |
| | 2014 |
Industrial Galvanizers | 2,390 |
| | 2,201 |
| | 2010 |
Other | 14,448 |
| | 13,747 |
| | |
| $ | 64,541 |
| | $ | 60,785 |
| | |
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 expects that these intangible assets will maintain their value indefinitely. Accordingly, these assets are not amortized.
The Company’s trade names were tested for impairment in the third quarter of 2017.2019. The values of each trade name was determined using the relief-from-royalty method. Based on this evaluation, no trade names were determined to be impaired. The Company recorded a charge of $1,425 in the third quarter of 2018 for the offshore and other complex steel structures (Valmont SM) trade name.
Goodwill
The carrying amount of goodwill by segment as of September 30, 201728, 2019 and December 31, 201629, 2018 was as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Engineered Support Structures Segment | | Utility Support Structures Segment | | Coatings Segment | | Irrigation Segment | | Total |
Gross Balance December 29, 2018 | $ | 204,735 |
| | $ | 123,618 |
| | $ | 80,937 |
| | $ | 25,164 |
| | $ | 434,454 |
|
Accumulated impairment losses | (18,670 | ) | | (14,355 | ) | | (16,222 | ) | | — |
| | (49,247 | ) |
Balance at December 29, 2018 | 186,065 |
| | 109,263 |
| | 64,715 |
| | 25,164 |
| | 385,207 |
|
Acquisitions | 21,043 |
| | 7,889 |
| | 11,715 |
| | — |
| | 40,647 |
|
Foreign currency translation | (2,652 | ) | | (1,758 | ) | | (133 | ) | | 368 |
| | (4,175 | ) |
Balance at September 28, 2019 | $ | 204,456 |
| | $ | 115,394 |
| | $ | 76,297 |
| | $ | 25,532 |
| | $ | 421,679 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Engineered Support Structures Segment | | Energy & Mining Segment | | Utility Support Structures Segment | | Coatings Segment | | Irrigation Segment | | | Total |
Balance at December 31, 2016 | $ | 94,314 |
| | $ | 72,212 |
| | $ | 75,404 |
| | $ | 59,569 |
| | $ | 19,611 |
| | | $ | 321,110 |
|
Foreign currency translation | 4,568 |
| | 6,704 |
| | — |
| | 951 |
| | 94 |
| | | 12,317 |
|
Acquisitions | 3,327 |
| | — |
| | — |
| | — |
| | — |
| | | 3,327 |
|
Balance at September 30, 2017 | $ | 102,209 |
| | $ | 78,916 |
| | $ | 75,404 |
| | $ | 60,520 |
|
| $ | 19,705 |
| | | $ | 336,754 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(4)(5) GOODWILL AND INTANGIBLE ASSETS (Continued)
The Company’s annual impairment test of goodwill was performed during the third quarter of 2017,2019, using the discounted cash flow method. As a resultThe estimated fair value of that testing, the Company determined that its goodwill was not impaired, as the valuationall of theour reporting units exceeded their respective carrying values.value, so no goodwill was impaired. The Company's offshore and other complex steel structuresaccess systems reporting unit with $14,645$43,400 of goodwill, is the reporting unit withthat did not have a substantial excess of estimated fair value over its carrying value. The model assumes geographic expansion of its architectural product lines which realized recent organic growth in its existing market. If architectural systems sales do not increase, the smallestCompany will be required to perform an interim test of goodwill. A hypothetical 1.0% change in the discount rate would increase/decrease the fair value of this reporting unit by approximately $15,000, which approximates the cushion between itsthe estimated fair value and its carrying value. Sales and profitability amounts for the first nine monthsvalue of 2017 approximated the amounts in the 2016 annual impairment model. The 2017 model assumes continued expansion into other highly engineered steel product offerings, such as utility support structures, where the reporting unit completed profitable projects in the past. The Company will continue to monitor the outlook for wind energy in Europe and oil and natural gas prices, which will affect the sales demand assumptions in the five year model for this reporting unit. If demand for off and onshore structures for wind energy changes significantly,In the third quarter of 2018, the Company will perform an interimrecognized a goodwill impairment test for goodwill. The Company also tracks changes intotaling $14,355, which represented all of the global economy that could impact future operating resultsgoodwill of any of itsthe offshore and other complex steel reporting units.unit.
(5)(6) CASH FLOW SUPPLEMENTARY INFORMATION
The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the thirty-nine weeks ended September 30, 201728, 2019 and September 24, 201629, 2018 were as follows: |
| | | | | | | |
| 2019 | | 2018 |
Interest | $ | 19,440 |
| | $ | 23,624 |
|
Income taxes | 39,850 |
| | 36,855 |
|
|
| | | | | | | |
| 2017 | | 2016 |
Interest | $ | 22,732 |
| | $ | 24,036 |
|
Income taxes | 52,823 |
| | 47,954 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(6)(7) EARNINGS PER SHARE
The following table provides a reconciliation between Basic and Diluted earnings per share (EPS):
|
| | | | | | | | | | | |
| Basic EPS | | Dilutive Effect of Stock Options | | Diluted EPS |
Thirteen weeks ended September 28, 2019: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 40,144 |
| | $ | — |
| | $ | 40,144 |
|
Weighted average shares outstanding (000's) | 21,556 |
| | 128 |
| | 21,684 |
|
Per share amount | $ | 1.86 |
| | $ | 0.01 |
| | $ | 1.85 |
|
Thirteen weeks ended September 29, 2018: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 4,448 |
| | $ | — |
| | $ | 4,448 |
|
Weighted average shares outstanding (000's) | 22,215 |
| | 137 |
| | 22,352 |
|
Per share amount | $ | 0.20 |
| | $ | — |
| | $ | 0.20 |
|
Thirty-nine weeks ended September 28, 2019 | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 118,022 |
| | $ | — |
| | $ | 118,022 |
|
Weighted average shares outstanding (000's) | 21,725 |
| | 101 |
| | 21,826 |
|
Per share amount | $ | 5.43 |
| | $ | (0.02 | ) | | $ | 5.41 |
|
Thirty-nine weeks ended September 29, 2018: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 76,689 |
| | $ | — |
| | $ | 76,689 |
|
Weighted average shares outstanding (000's) | 22,421 |
| | 153 |
| | 22,574 |
|
Per share amount | $ | 3.42 |
| | $ | (0.02 | ) | | $ | 3.40 |
|
|
| | | | | | | | | | | |
| Basic EPS | | Dilutive Effect of Stock Options | | Diluted EPS |
Thirteen weeks ended September 30, 2017: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 35,208 |
| | $ | — |
| | $ | 35,208 |
|
Shares outstanding (000 omitted) | 22,527 |
| | 224 |
| | 22,751 |
|
Per share amount | $ | 1.56 |
| | $ | (0.01 | ) | | $ | 1.55 |
|
Thirteen weeks ended September 24, 2016: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 28,173 |
| | $ | — |
| | $ | 28,173 |
|
Shares outstanding (000 omitted) | 22,505 |
| | 154 |
| | 22,659 |
|
Per share amount | $ | 1.25 |
| | $ | (0.01 | ) | | $ | 1.24 |
|
Thirty-nine weeks ended September 30, 2017: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 119,851 |
| | $ | — |
| | $ | 119,851 |
|
Shares outstanding (000 omitted) | 22,505 |
| | 212 |
| | 22,717 |
|
Per share amount | $ | 5.33 |
| | $ | (0.05 | ) | | $ | 5.28 |
|
Thirty-nine weeks ended September 24, 2016: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 103,168 |
| | $ | — |
| | $ | 103,168 |
|
Shares outstanding (000 omitted) | 22,602 |
| | 139 |
| | 22,741 |
|
Per share amount | $ | 4.56 |
| | $ | (0.02 | ) | | $ | 4.54 |
|
At September 24, 2016,28, 2019 and September 29, 2018, there were 378,566177,153 and 190,021 outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share.share, respectively.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(7)(8) HEDGING ACTIVITIES
The Company manages interest rate risk, commodity price risk, and foreign currency risk related to foreign currency denominated transactions and investments in foreign subsidiaries. Depending on the circumstances, the Company may manage these risks by utilizing derivative financial instruments. Some derivative financial instruments are marked to market and recorded in the Company's consolidated statements of earnings, while others may be accounted for as fair value, cash flow, or net investment hedges. Derivative financial instruments have credit and market risk. The Company manages these risks of derivative instruments by monitoring limits as to the types and degree of risk that can be taken, and by entering into transactions with counterparties who are recognized, stable multinational banks.
Fair value of derivative instruments at September 28, 2019 and December 29, 2018 are as follows:
|
| | | | | | | | | |
Derivatives designated as hedging instruments: | Balance sheet location | | September 28, 2019 | | December 29, 2018 |
Commodity forward contracts | Prepaid expenses and other assets | | $ | — |
| | $ | (285 | ) |
Foreign currency forward contracts | Prepaid expenses and other assets | | 4,936 |
| | 8,357 |
|
Cross currency swap contracts | Prepaid expenses and other assets | | 4,472 |
| | 1,075 |
|
| | | $ | 9,408 |
| | $ | 9,147 |
|
Gains (losses) on derivatives recognized in the condensed consolidated statements of earnings for the thirteen and thirty-nine weeks ended September 28, 2019 and September 29, 2018 are as follows:
|
| | | | | | | | | | | | | | | | | |
| | | Thirteen weeks ended | | Thirty-nine weeks ended |
| Statements of earnings location | | September 28, 2019 | | September 29, 2018 | | September 28, 2019 | | September 29, 2018 |
Commodity forward contracts | Product cost of sales | | $ | (1,329 | ) | | $ | 717 |
| | $ | (1,425 | ) | | $ | 717 |
|
Foreign currency forward contracts | Other income (expenses) | | 123 |
| | 230 |
| | 827 |
| | 230 |
|
Foreign currency forward contracts | Loss from divestiture of grinding media business | | $ | — |
| | — |
| | — |
| | (1,215 | ) |
Interest rate hedges | Interest expense | | (16 | ) | | (395 | ) | | (48 | ) | | (439 | ) |
Cross currency swap contracts | Interest expense | | 769 |
| | 206 |
| | 2,096 |
| | 206 |
|
| | | $ | (453 | ) | | $ | 758 |
| | $ | 1,450 |
| | $ | (501 | ) |
Cash Flow Hedges
In 2019 and 2018, the Company entered into steel hot rolled coil (HRC) forward contracts that qualified as a cash flow hedge of the variability in cash flows attributable to future steel purchases. In 2019, the forward contracts had a notional amount of $12,128 for the purchase of 3,500 short tons for each month from May 2019 to September 2019. In 2018, the forward contracts entered into had a notional amount of $8,469 for the purchase of 3,500 short tons for each month from July 2018 to September 2018 and a notional amount of $15,563 for the purchase of 6,500 short tons for each month from October 2018 to December 2018. The gain/(loss) realized upon settlement is recorded in product cost of sales in the condensed consolidated statements of earnings over average inventory turns. The forward contracts were closed out in the third quarter of 2019.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) HEDGING ACTIVITIES (Continued)
On June 19, 2018, the Company issued and sold $200,000 aggregate principal amount of the Company’s 5.00% senior notes due 2044 and $55,000 aggregate principal amount of the Company’s 5.25% senior notes due 2054. During the second quarter of 2018, the Company executed contracts to hedge the risk of potential fluctuations in the treasury rates on the 2044 Notes and 2054 Notes which would change the amount of net proceeds received from the debt offering. These contracts had a combined notional amount of $175,000. On June 8, 2018, these contracts were settled with the Company paying $2,467 to the counterparties which was recorded in Other Comprehensive Income ("OCI") and will be amortized as an increase to interest expense over the term of the debt. Due to the retirement of the 2020 bonds in July 2018, the Company wrote off the remaining $411 unamortized loss on the related cash flow hedge.
Net Investment Hedges
In the second quarter of 2019, all net investment hedges incepted in 2018 were early settled and the Company received proceeds of $11,184, which will remain in OCI until either the sale or substantially complete liquidation of the related subsidiaries.
In the second quarter of 2019, the Company entered into a new foreign currency forward contract to mitigate foreign currency risk of the Company's investment in its Australian dollar denominated businesses. The forward contract, which qualifies as a net investment hedge, has a maturity date of April 2021 and a notional amount to sell Australian dollars to receive $100,000. The Australian dollar forward contract effectiveness was assessed under the spot method with forward points excluded totaling $881, which the Company has elected to amortize in other income (expense) in the condensed consolidated statements of earnings using the straight-line method over the remaining term of the contract.
In the second quarter of 2019, the Company entered into two new fixed-for-fixed cross currency swaps (“CCS”), swapping U.S. dollar principal and interest payments on a portion of its 5.00% senior unsecured notes due 2044 for Danish krone (DKK) and Euro denominated payments. The CCS were entered into in order to mitigate foreign currency risk on the Company's Euro and DKK investments and to reduce interest expense. Interest is exchanged twice per year on April 1 and October 1.
Key terms of the two CCS are as follows: |
| | | | | | |
Currency | Notional Amount | Termination Date | Swapped Interest Rate | Set Settlement Amount |
Danish Krone, DKK | $ | 50,000 |
| April 1, 2024 | 2.68% | DKK 333,625 |
Euro | $ | 80,000 |
| April 1, 2024 | 2.825% | €71,550 |
The Company designated the full notional amount of the two CCS ($130,000) as a hedge of the net investment in certain Danish and European subsidiaries under the spot method, with all changes in the fair value of the CCS that are included in the assessment of effectiveness (changes due to spot foreign exchange rates) are recorded as cumulative foreign currency translation within OCI, and will remain in OCI until either the sale or substantially complete liquidation of the related subsidiaries. Net interest receipts will be recorded as a reduction of interest expense over the life of the CCS.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(9) LEASES
The Company has operating leases for plant locations, corporate offices, sales offices, and certain equipment. Outstanding leases at September 28, 2019 have remaining lease terms of one year to fifteen years, some of which include options to extend leases for up to five years. The Company does not have any financing leases. The Company elected practical expedients not to reassess whether existing contracts are or contain leases, to not reassess the lease classification of any existing leases, to not reassess initial direct costs for any existing leases, to use hindsight in determining the lease term and in assessing impairment of the right-of-use asset, and to not separate lease and non-lease components for all classes of underlying assets.
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, accrued expenses, and operating lease liabilities in our condensed consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make future lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company used its incremental borrowing rate based on information available at the date of adoption in determining the present value of future lease payments. The operating lease ROU asset also includes any lease payments made and excludes any lease incentives and impairments. Some of the Company's facility leases include options to extend the lease when it is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.
Lease cost and other information related to the Company's operating leases are as follows:
|
| | | | | | | |
| Thirteen weeks ended September 28, 2019 | | Thirty-nine weeks ended September 28, 2019 |
Operating lease cost | $ | 5,002 |
| | $ | 15,471 |
|
Short-term lease cost | $ | 650 |
| | $ | 1,919 |
|
Total lease cost | $ | 5,652 |
| | $ | 17,390 |
|
| | | |
Operating cash outflows from operating leases | $ | 5,499 |
| | $ | 16,966 |
|
ROU assets obtained in exchange for lease obligations | $ | 626 |
| | $ | 3,057 |
|
Weighted average remaining lease term | 10 years |
| | 10 years |
|
Weighted average discount rate | 3.9 | % | | 3.9 | % |
As part of the adoption of ASC 842, the Company evaluated at the historical and projected cash flow generation of the operations at each of its long-term leased facilities. One of those facilities, a galvanizing operation in Melbourne, Australia, will not generate sufficient cash flows on an undiscounted cash flow basis to recover the carrying value of the right of use asset. The Company then estimated a value for this operation using a discounted cash flow model. The result was an impairment of the right-of-use lease asset of approximately $12,063. The after-tax balance of $8,444 was recorded as a reduction to retained earnings for the transition adjustment of adoption.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(9) LEASES (Continued)
Supplemental balance sheet information related to operating leases for the third quarter of 2019 is as follows:
|
| | | | |
| Classification | September 28, 2019 |
Operating lease assets | Other assets | $ | 80,715 |
|
| | |
Operating lease short-term liabilities | Accrued expenses | 14,634 |
|
Operating lease long-term liabilities | Operating lease liabilities | 78,790 |
|
Total lease liabilities | | $ | 93,424 |
|
Minimum lease payments under operating leases expiring subsequent to September 28, 2019 are as follows:
|
| | | |
Fiscal year ending: | |
2019 (excluding the nine months ended September 28, 2019) | $ | 4,738 |
|
2020 | 17,397 |
|
2021 | 14,154 |
|
2022 | 11,508 |
|
2023 | 8,684 |
|
Subsequent | 57,574 |
|
Total minimum lease payments | $ | 114,055 |
|
Less: Interest | $ | 20,631 |
|
Present value of minimum lease payments | $ | 93,424 |
|
The below table as of December 29, 2018 is carried forward, including certain amounts that were historically included in the table as a result of the historical lease term conclusions but were not included in the initial ROU asset and lease liability measurement as of December 30, 2018 due to the Company's election of the hindsight practical expedient. The Company also determined one of its leases with escalating rent payments should be expensed using the straight-line method over a longer term and the result was an additional reduction to retained earnings of $442 for a transition adjustment. Minimum lease payments for operating leases under ASC 840 expiring subsequent to December 29, 2018 are as follows:
|
| | | |
Fiscal year ending: | |
2019 | $ | 18,757 |
|
2020 | 16,830 |
|
2021 | 13,992 |
|
2022 | 11,932 |
|
2023 | 8,866 |
|
Subsequent | 76,438 |
|
Total minimum lease payments | $ | 146,815 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(10) BUSINESS SEGMENTS
The accounting principles usedCompany has four reportable segments based on its management structure. Each segment is global in nature with a manager responsible for segment operational performance and the preparationallocation of capital within the segment informationsegment. Net corporate expense is net of certain service‑related expenses that are allocated to business units generally on the same as those used for the consolidated financial statements as disclosed in Note 1, except that the segment assets and income reflect the FIFO basis of accounting for inventory. Certain inventories are accounted for using the LIFO basis in the consolidated financial statements. In the first quarter of 2017, the Company changed its reportable segment operating income to separate out the LIFO expense (benefit). Prior year financial information has been updated to reflect this change.employee headcounts.
Reportable segments are as follows:
ENGINEERED SUPPORT STRUCTURES: This segment consists of the manufacture of engineered metal
structures and composite poles, towers, and components for the global lighting, traffic, and traffic, wireless communication and roadway safety
industries;
ENERGY AND MINING: This segment, all outside of the United States, consists of the manufacture of
markets, engineered access systems, applications, forged steel grinding media, onintegrated structure solutions for smart cities, and offshore oil, gas, and wind energy structures;highway safety products;
UTILITY SUPPORT STRUCTURES: This segment consists of the manufacture of engineered steel and
concrete structures for the global utility industry;transmission, distribution, and generation applications, renewable energy generation equipment, and substations;
COATINGS: This segment consists of galvanizing, painting, and anodizing services; and powder coating services on a global
basis; and
IRRIGATION: This segment consists of the manufacture of agricultural irrigation equipment, parts, services, tubular products, water management solutions, and relatedtechnology for precision agriculture.
partsIn addition to these 4 reportable segments, the Company had other businesses and servicesactivities that individually are not more than 10% of consolidated sales, operating income or assets. This includes the manufacture of forged steel grinding media for the global agriculturalmining industry and tubular products for industrial customers.
is reported in the "Other" category until its divestiture in 2018.
The Company evaluates the performance of its business segments based upon operating income and invested capital. The Company does not allocate LIFO expense, interest expense, non-operating income and deductions, or income taxes to its business segments.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(7)(10) BUSINESS SEGMENTS (Continued)
Summary by Business
|
| | | | | | | | | | | | | | | |
| Thirteen weeks ended | | Thirty-nine weeks ended |
| September 28, 2019 | | September 29, 2018 | | September 28, 2019 | | September 29, 2018 |
SALES: | | | | | | | |
Engineered Support Structures segment: | | | | | | | |
Lighting, Traffic, and Highway Safety Products | $ | 191,262 |
| | $ | 183,184 |
| | $ | 530,021 |
| | $ | 522,558 |
|
Communication Products | 48,391 |
| | 35,985 |
| | 138,710 |
| | 109,690 |
|
Access Systems | 28,405 |
| | 32,355 |
| | 88,363 |
| | 94,941 |
|
Engineered Support Structures segment | 268,058 |
| | 251,524 |
| | 757,094 |
| | 727,189 |
|
Utility Support Structures segment: | | | | | | | |
Steel | 153,433 |
| | 161,847 |
| | 460,309 |
| | 471,947 |
|
Concrete | 28,011 |
| | 27,715 |
| | 88,415 |
| | 81,562 |
|
Engineered Solar Tracker Solutions | 3,418 |
| | 6,090 |
| | 43,642 |
| | 6,090 |
|
Offshore and Other Complex Steel Structures | 20,096 |
| | 22,617 |
| | 66,343 |
| | 66,251 |
|
Utility Support Structures segment | 204,958 |
| | 218,269 |
| | 658,709 |
| | 625,850 |
|
Coatings segment | 92,957 |
| | 90,433 |
| | 278,142 |
| | 266,952 |
|
Irrigation segment: |
|
| |
|
| |
|
| |
|
|
North America | 82,840 |
| | 78,168 |
| | 294,127 |
| | 301,887 |
|
International | 61,340 |
| | 62,007 |
| | 158,054 |
| | 189,177 |
|
Irrigation segment | 144,180 |
| | 140,175 |
| | 452,181 |
| | 491,064 |
|
Other | — |
| | — |
| | — |
| | 23,080 |
|
Total | 710,153 |
| | 700,401 |
| | 2,146,126 |
| | 2,134,135 |
|
INTERSEGMENT SALES: | | | | | | | |
Engineered Support Structures segment | 1,564 |
| | 3,093 |
| | 5,066 |
| | 16,801 |
|
Utility Support Structures segment | 762 |
| | 326 |
| | 2,246 |
| | 1,517 |
|
Coatings segment | 16,035 |
| | 15,886 |
| | 49,900 |
| | 49,408 |
|
Irrigation segment | 1,452 |
| | 2,404 |
| | 5,564 |
| | 6,628 |
|
Total | 19,813 |
| | 21,709 |
| | 62,776 |
| | 74,354 |
|
NET SALES: | | | | | | | |
Engineered Support Structures segment | 266,494 |
| | 248,431 |
| | 752,028 |
| | 710,388 |
|
Utility Support Structures segment | 204,196 |
| | 217,943 |
| | 656,463 |
| | 624,333 |
|
Coatings segment | 76,922 |
| | 74,547 |
| | 228,242 |
| | 217,544 |
|
Irrigation segment | 142,728 |
| | 137,771 |
| | 446,617 |
| | 484,436 |
|
Other | — |
| | — |
| | — |
| | 23,080 |
|
Total | $ | 690,340 |
| | $ | 678,692 |
| | $ | 2,083,350 |
| | $ | 2,059,781 |
|
| | | | | | | |
OPERATING INCOME: | | | | | | | |
Engineered Support Structures segment | $ | 21,825 |
| | $ | 16,499 |
| | $ | 55,152 |
| | $ | 36,411 |
|
Utility Support Structures segment | 20,362 |
| | 2,090 |
| | 61,443 |
| | 46,298 |
|
Coatings segment | 13,865 |
| | 14,373 |
| | 39,037 |
| | 41,108 |
|
Irrigation segment | 18,204 |
| | 21,302 |
| | 59,868 |
| | 82,917 |
|
Other | — |
| | — |
| | — |
| | (913 | ) |
Adjustment to LIFO inventory valuation method | 2,799 |
| | (2,780 | ) | | 5,539 |
| | (5,512 | ) |
Corporate | (13,192 | ) | | (13,124 | ) | | (38,360 | ) | | (34,319 | ) |
Total | $ | 63,863 |
| | $ | 38,360 |
| | $ | 182,679 |
| | $ | 165,990 |
|
|
| | | | | | | | | | | | | | | |
| Thirteen Weeks Ended | | Thirty-nine Weeks Ended |
| September 30, 2017 | | September 24, 2016 | | September 30, 2017 | | September 24, 2016 |
SALES: | | | | | | | |
Engineered Support Structures segment: | | | | | | | |
Lighting, Traffic, and Roadway Products | $ | 175,184 |
| | $ | 159,089 |
| | $ | 498,034 |
| | $ | 468,582 |
|
Communication Products | 46,324 |
| | 44,095 |
| | 121,613 |
| | 115,489 |
|
Engineered Support Structures segment | 221,508 |
| | 203,184 |
| | 619,647 |
| | 584,071 |
|
Energy and Mining segment: | | | | | | | |
Offshore and Other Complex Steel Structures | 25,046 |
| | 27,330 |
| | 75,372 |
| | 76,207 |
|
Grinding Media | 19,800 |
| | 20,681 |
| | 60,466 |
| | 61,189 |
|
Access Systems | 34,909 |
| | 33,541 |
| | 99,096 |
| | 97,297 |
|
Energy and Mining segment | 79,755 |
| | 81,552 |
| | 234,934 |
| | 234,693 |
|
Utility Support Structures segment: | | | | | | | |
Steel | 160,948 |
| | 131,085 |
| | 471,072 |
| | 379,157 |
|
Concrete | 18,811 |
| | 19,582 |
| | 67,921 |
| | 67,275 |
|
Utility Support Structures segment | 179,759 |
| | 150,667 |
| | 538,993 |
| | 446,432 |
|
Coatings segment | 82,593 |
| | 70,082 |
| | 235,842 |
| | 213,961 |
|
Irrigation segment | 147,428 |
| | 127,809 |
| | 502,939 |
| | 438,575 |
|
Total | 711,043 |
| | 633,294 |
| | 2,132,355 |
| | 1,917,732 |
|
INTERSEGMENT SALES: | | | | | | | |
Engineered Support Structures segment | 11,736 |
| | 10,076 |
| | 48,399 |
| | 29,202 |
|
Energy & Mining segment | 6 |
| | 319 |
| | 6 |
| | 3,386 |
|
Utility Support Structures segment | 1,231 |
| | 276 |
| | 2,448 |
| | 538 |
|
Coatings segment | 14,913 |
| | 10,079 |
| | 44,230 |
| | 31,778 |
|
Irrigation segment | 2,378 |
| | 2,297 |
| | 6,283 |
| | 5,727 |
|
Total | 30,264 |
| | 23,047 |
| | 101,366 |
| | 70,631 |
|
NET SALES: | | | | | | | |
Engineered Support Structures segment | 209,772 |
| | 193,108 |
| | 571,248 |
| | 554,869 |
|
Energy & Mining segment | 79,749 |
| | 81,233 |
| | 234,928 |
| | 231,307 |
|
Utility Support Structures segment | 178,528 |
| | 150,391 |
| | 536,545 |
| | 445,894 |
|
Coatings segment | 67,680 |
| | 60,003 |
| | 191,612 |
| | 182,183 |
|
Irrigation segment | 145,050 |
| | 125,512 |
| | 496,656 |
| | 432,848 |
|
Total | $ | 680,779 |
| | $ | 610,247 |
| | $ | 2,030,989 |
| | $ | 1,847,101 |
|
| | | | | | | |
OPERATING INCOME: | | | | | | | |
Engineered Support Structures segment | $ | 16,226 |
| | $ | 20,323 |
| | $ | 45,683 |
| | $ | 53,615 |
|
Energy & Mining segment | 1,417 |
| | 3,941 |
| | 9,195 |
| | 9,184 |
|
Utility Support Structures segment | 22,108 |
| | 16,195 |
| | 65,005 |
| | 48,201 |
|
Coatings segment | 14,577 |
| | 11,696 |
| | 36,091 |
| | 37,132 |
|
Irrigation segment | 18,235 |
| | 15,308 |
| | 83,196 |
| | 75,216 |
|
Adjustment to LIFO inventory valuation method | (1,626 | ) | | (2,066 | ) | | (2,839 | ) | | (3,192 | ) |
Corporate | (11,014 | ) | | (12,157 | ) | | (33,616 | ) | | (32,745 | ) |
Total | $ | 59,923 |
| | $ | 53,240 |
| | $ | 202,715 |
| | $ | 187,411 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
The Company has three2 tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) by certain of the Company’s current and future direct and indirect domestic and foreign 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.
Consolidated financial information for the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended September 30, 201728, 2019
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 302,461 |
| | $ | 135,392 |
| | $ | 310,676 |
| | $ | (58,189 | ) | | $ | 690,340 |
|
Cost of sales | 223,949 |
| | 96,566 |
| | 251,561 |
| | (57,822 | ) | | 514,254 |
|
Gross profit | 78,512 |
| | 38,826 |
| | 59,115 |
| | (367 | ) | | 176,086 |
|
Selling, general and administrative expenses | 67,366 |
| | 2,325 |
| | 42,532 |
| | — |
| | 112,223 |
|
Operating income | 11,146 |
| | 36,501 |
| | 16,583 |
| | (367 | ) | | 63,863 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (9,471 | ) | | (2,544 | ) | | (504 | ) | | 2,543 |
| | (9,976 | ) |
Interest income | 607 |
| | 2 |
| | 2,903 |
| | (2,543 | ) | | 969 |
|
Other | 849 |
| | 12 |
| | 309 |
| | — |
| | 1,170 |
|
| (8,015 | ) | | (2,530 | ) | | 2,708 |
| | — |
| | (7,837 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 3,131 |
| | 33,971 |
| | 19,291 |
| | (367 | ) | | 56,026 |
|
Income tax expense (benefit) | 2,084 |
| | 8,834 |
| | 2,930 |
| | (85 | ) | | 13,763 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | 1,047 |
| | 25,137 |
| | 16,361 |
| | (282 | ) | | 42,263 |
|
Equity in earnings of nonconsolidated subsidiaries | 39,097 |
| | 2,017 |
| | — |
| | (41,114 | ) | | — |
|
Net earnings | 40,144 |
| | 27,154 |
| | 16,361 |
| | (41,396 | ) | | 42,263 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (2,119 | ) | | — |
| | (2,119 | ) |
Net earnings attributable to Valmont Industries, Inc. | $ | 40,144 |
| | $ | 27,154 |
| | $ | 14,242 |
| | $ | (41,396 | ) | | $ | 40,144 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 284,538 |
| | $ | 113,243 |
| | $ | 343,818 |
| | $ | (60,820 | ) | | $ | 680,779 |
|
Cost of sales | 216,039 |
| | 88,757 |
| | 272,959 |
| | (60,570 | ) | | 517,185 |
|
Gross profit | 68,499 |
| | 24,486 |
| | 70,859 |
| | (250 | ) | | 163,594 |
|
Selling, general and administrative expenses | 46,451 |
| | 12,046 |
| | 45,174 |
| | — |
| | 103,671 |
|
Operating income | 22,048 |
| | 12,440 |
| | 25,685 |
| | (250 | ) | | 59,923 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (10,884 | ) | | (3,989 | ) | | (306 | ) | | 3,989 |
| | (11,190 | ) |
Interest income | 268 |
| | 9 |
| | 5,023 |
| | (3,989 | ) | | 1,311 |
|
Other | 1,379 |
| | 11 |
| | (873 | ) | | — |
| | 517 |
|
| (9,237 | ) | | (3,969 | ) | | 3,844 |
| | — |
| | (9,362 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 12,811 |
| | 8,471 |
| | 29,529 |
| | (250 | ) | | 50,561 |
|
Income tax expense (benefit): | | | | | | | | | |
Current | 9,030 |
| | 3,082 |
| | 9,059 |
| | (8 | ) | | 21,163 |
|
Deferred | (3,474 | ) | | — |
| | (3,794 | ) | | — |
| | (7,268 | ) |
| 5,556 |
| | 3,082 |
| | 5,265 |
| | (8 | ) | | 13,895 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | 7,255 |
| | 5,389 |
| | 24,264 |
| | (242 | ) | | 36,666 |
|
Equity in earnings of nonconsolidated subsidiaries | 27,953 |
| | 9,965 |
| | — |
| | (37,918 | ) | | — |
|
Net earnings | 35,208 |
| | 15,354 |
| | 24,264 |
| | (38,160 | ) | | 36,666 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (1,458 | ) | | — |
| | (1,458 | ) |
Net earnings attributable to Valmont Industries, Inc | $ | 35,208 |
| | $ | 15,354 |
| | $ | 22,806 |
| | $ | (38,160 | ) | | $ | 35,208 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirty-nine Weeks Endedweeks ended September 30, 2017 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 893,988 |
| | $ | 352,827 |
| | $ | 967,130 |
| | $ | (182,956 | ) | | $ | 2,030,989 |
|
Cost of sales | 666,060 |
| | 271,620 |
| | 764,607 |
| | (182,777 | ) | | 1,519,510 |
|
Gross profit | 227,928 |
| | 81,207 |
| | 202,523 |
| | (179 | ) | | 511,479 |
|
Selling, general and administrative expenses | 143,590 |
| | 35,555 |
| | 129,619 |
| | — |
| | 308,764 |
|
Operating income | 84,338 |
| | 45,652 |
| | 72,904 |
| | (179 | ) | | 202,715 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (32,672 | ) | | (10,040 | ) | | (640 | ) | | 10,040 |
| | (33,312 | ) |
Interest income | 563 |
| | 33 |
| | 12,649 |
| | (10,040 | ) | | 3,205 |
|
Other | 3,900 |
| | 42 |
| | (2,258 | ) | | — |
| | 1,684 |
|
| (28,209 | ) | | (9,965 | ) | | 9,751 |
| | — |
| | (28,423 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 56,129 |
| | 35,687 |
| | 82,655 |
| | (179 | ) | | 174,292 |
|
Income tax expense (benefit): | | | | | | | | | |
Current | 19,487 |
| | 13,184 |
| | 17,612 |
| | (19 | ) | | 50,264 |
|
Deferred | 2,065 |
| | — |
| | (1,986 | ) | | — |
| | 79 |
|
| 21,552 |
| | 13,184 |
| | 15,626 |
| | (19 | ) | | 50,343 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | 34,577 |
| | 22,503 |
| | 67,029 |
| | (160 | ) | | 123,949 |
|
Equity in earnings of nonconsolidated subsidiaries | 85,274 |
| | 15,281 |
| | — |
| | (100,555 | ) | | — |
|
Net earnings | 119,851 |
| | 37,784 |
| | 67,029 |
| | (100,715 | ) | | 123,949 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (4,098 | ) | | — |
| | (4,098 | ) |
Net earnings attributable to Valmont Industries, Inc | $ | 119,851 |
| | $ | 37,784 |
| | $ | 62,931 |
| | $ | (100,715 | ) | | $ | 119,851 |
|
28, 2019
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 915,436 |
| | $ | 413,050 |
| | $ | 939,484 |
| | $ | (184,620 | ) | | $ | 2,083,350 |
|
Cost of sales | 675,093 |
| | 307,209 |
| | 763,499 |
| | (184,080 | ) | | 1,561,721 |
|
Gross profit | 240,343 |
| | 105,841 |
| | 175,985 |
| | (540 | ) | | 521,629 |
|
Selling, general and administrative expenses | 175,000 |
| | 28,301 |
| | 135,649 |
| | — |
| | 338,950 |
|
Operating income | 65,343 |
| | 77,540 |
| | 40,336 |
| | (540 | ) | | 182,679 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (28,638 | ) | | (8,583 | ) | | (1,333 | ) | | 8,583 |
| | (29,971 | ) |
Interest income | 1,060 |
| | 32 |
| | 10,306 |
| | (8,583 | ) | | 2,815 |
|
Other | 6,264 |
| | 33 |
| | 395 |
| | — |
| | 6,692 |
|
| (21,314 | ) | | (8,518 | ) | | 9,368 |
| | — |
| | (20,464 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 44,029 |
| | 69,022 |
| | 49,704 |
| | (540 | ) | | 162,215 |
|
Income tax expense (benefit) | 9,856 |
| | 16,691 |
| | 13,680 |
| | (76 | ) | | 40,151 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | 34,173 |
| | 52,331 |
| | 36,024 |
| | (464 | ) | | 122,064 |
|
Equity in earnings of nonconsolidated subsidiaries | 83,849 |
| | 8,843 |
| | — |
| | (92,692 | ) | | — |
|
Net earnings | 118,022 |
| | 61,174 |
| | 36,024 |
| | (93,156 | ) | | 122,064 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (4,042 | ) | | — |
| | (4,042 | ) |
Net earnings attributable to Valmont Industries, Inc. | $ | 118,022 |
| | $ | 61,174 |
| | $ | 31,982 |
| | $ | (93,156 | ) | | $ | 118,022 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended September 24, 201629, 2018 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 293,070 |
| | $ | 132,059 |
| | $ | 319,129 |
| | $ | (65,566 | ) | | $ | 678,692 |
|
Cost of sales | 227,467 |
| | 100,130 |
| | 252,353 |
| | (65,598 | ) | | 514,352 |
|
Gross profit | 65,603 |
| | 31,929 |
| | 66,776 |
| | 32 |
| | 164,340 |
|
Selling, general and administrative expenses | 51,159 |
| | 12,908 |
| | 61,913 |
| | — |
| | 125,980 |
|
Operating income | 14,444 |
| | 19,021 |
| | 4,863 |
| | 32 |
| | 38,360 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (10,511 | ) | | (3,600 | ) | | (443 | ) | | 3,600 |
| | (10,954 | ) |
Interest income | 174 |
| | 47 |
| | 4,379 |
| | (3,600 | ) | | 1,000 |
|
Other | (13,765 | ) | | 15 |
| | 1,426 |
| | — |
| | (12,324 | ) |
| (24,102 | ) | | (3,538 | ) | | 5,362 |
| | — |
| | (22,278 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | (9,658 | ) | | 15,483 |
| | 10,225 |
| | 32 |
| | 16,082 |
|
Income tax expense (benefit) | (4,497 | ) | | 4,732 |
| | 8,882 |
| | (26 | ) | | 9,091 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | (5,161 | ) | | 10,751 |
| | 1,343 |
| | 58 |
| | 6,991 |
|
Equity in earnings of nonconsolidated subsidiaries | 9,609 |
| | 4,041 |
| | — |
| | (13,650 | ) | | — |
|
Net earnings | 4,448 |
| | 14,792 |
| | 1,343 |
| | (13,592 | ) | | 6,991 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (2,543 | ) | | — |
| | (2,543 | ) |
Net earnings attributable to Valmont Industries, Inc. | $ | 4,448 |
| | $ | 14,792 |
| | $ | (1,200 | ) | | $ | (13,592 | ) | | $ | 4,448 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 261,928 |
| | $ | 89,305 |
| | $ | 300,648 |
| | $ | (41,634 | ) | | $ | 610,247 |
|
Cost of sales | 199,957 |
| | 66,401 |
| | 230,561 |
| | (41,695 | ) | | 455,224 |
|
Gross profit | 61,971 |
| | 22,904 |
| | 70,087 |
| | 61 |
| | 155,023 |
|
Selling, general and administrative expenses | 46,183 |
| | 11,073 |
| | 44,527 |
| | — |
| | 101,783 |
|
Operating income | 15,788 |
| | 11,831 |
| | 25,560 |
| | 61 |
| | 53,240 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (10,920 | ) | | (6 | ) | | (174 | ) | | — |
| | (11,100 | ) |
Interest income | 68 |
| | 12 |
| | 691 |
| | — |
| | 771 |
|
Other | 1,370 |
| | 12 |
| | (504 | ) | | — |
| | 878 |
|
| (9,482 | ) | | 18 |
| | 13 |
| | — |
| | (9,451 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 6,306 |
| | 11,849 |
| | 25,573 |
| | 61 |
| | 43,789 |
|
Income tax expense (benefit): | | | | | | | | | |
Current | 6,112 |
| | 5,095 |
| | 6,762 |
| | 48 |
| | 18,017 |
|
Deferred | (5,321 | ) | | — |
| | 1,572 |
| | — |
| | (3,749 | ) |
| 791 |
| | 5,095 |
| | 8,334 |
| | 48 |
| | 14,268 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | 5,515 |
| | 6,754 |
| | 17,239 |
| | 13 |
| | 29,521 |
|
Equity in earnings of nonconsolidated subsidiaries | 22,658 |
| | — |
| | — |
| | (22,658 | ) | | — |
|
Net earnings | 28,173 |
| | 6,754 |
| | 17,239 |
| | (22,645 | ) | | 29,521 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (1,348 | ) | | — |
| | (1,348 | ) |
Net earnings attributable to Valmont Industries, Inc | $ | 28,173 |
| | $ | 6,754 |
| | $ | 15,891 |
| | $ | (22,645 | ) | | $ | 28,173 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirty-nine Weeks Endedweeks ended September 24, 2016 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 837,137 |
| | $ | 277,990 |
| | $ | 873,673 |
| | $ | (141,699 | ) | | $ | 1,847,101 |
|
Cost of sales | 619,493 |
| | 205,497 |
| | 671,202 |
| | (140,200 | ) | | 1,355,992 |
|
Gross profit | 217,644 |
| | 72,493 |
| | 202,471 |
| | (1,499 | ) | | 491,109 |
|
Selling, general and administrative expenses | 133,207 |
| | 33,583 |
| | 136,908 |
| | — |
| | 303,698 |
|
Operating income | 84,437 |
| | 38,910 |
| | 65,563 |
| | (1,499 | ) | | 187,411 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (32,768 | ) | | (9 | ) | | (499 | ) | | — |
| | (33,276 | ) |
Interest income | 181 |
| | 51 |
| | 2,057 |
| | — |
| | 2,289 |
|
Other | 1,694 |
| | 39 |
| | (1,281 | ) | | — |
| | 452 |
|
| (30,893 | ) | | 81 |
| | 277 |
| | — |
| | (30,535 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 53,544 |
| | 38,991 |
| | 65,840 |
| | (1,499 | ) | | 156,876 |
|
Income tax expense (benefit): | | | | | | | | | |
Current | 22,086 |
| | 13,909 |
| | 15,762 |
| | (481 | ) | | 51,276 |
|
Deferred | (1,834 | ) | | — |
| | 300 |
| | — |
| | (1,534 | ) |
| 20,252 |
| | 13,909 |
| | 16,062 |
| | (481 | ) | | 49,742 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | 33,292 |
| | 25,082 |
| | 49,778 |
| | (1,018 | ) | | 107,134 |
|
Equity in earnings of nonconsolidated subsidiaries | 69,876 |
| | 7,859 |
| | — |
| | (77,735 | ) | | — |
|
Net earnings | 103,168 |
| | 32,941 |
| | 49,778 |
| | (78,753 | ) | | 107,134 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (3,966 | ) | | — |
| | (3,966 | ) |
Net earnings attributable to Valmont Industries, Inc | $ | 103,168 |
| | $ | 32,941 |
| | $ | 45,812 |
| | $ | (78,753 | ) | | $ | 103,168 |
|
29, 2018
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net sales | $ | 906,978 |
| | $ | 386,793 |
| | $ | 966,764 |
| | $ | (200,754 | ) | | $ | 2,059,781 |
|
Cost of sales | 683,740 |
| | 293,238 |
| | 776,254 |
| | (202,030 | ) | | 1,551,202 |
|
Gross profit | 223,238 |
| | 93,555 |
| | 190,510 |
| | 1,276 |
| | 508,579 |
|
Selling, general and administrative expenses | 147,949 |
| | 37,360 |
| | 157,280 |
| | — |
| | 342,589 |
|
Operating income | 75,289 |
| | 56,195 |
| | 33,230 |
| | 1,276 |
| | 165,990 |
|
Other income (expense): | | | | | | | | | |
Interest expense | (32,788 | ) | | (11,229 | ) | | (1,031 | ) | | 11,229 |
| | (33,819 | ) |
Interest income | 655 |
| | 62 |
| | 14,225 |
| | (11,229 | ) | | 3,713 |
|
Other | (15,773 | ) | | 41 |
| | (1,973 | ) | | — |
| | (17,705 | ) |
| (47,906 | ) | | (11,126 | ) | | 11,221 |
| | — |
| | (47,811 | ) |
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries | 27,383 |
| | 45,069 |
| | 44,451 |
| | 1,276 |
| | 118,179 |
|
Income tax expense (benefit) | 6,181 |
| | 12,260 |
| | 17,525 |
| | 62 |
| | 36,028 |
|
Earnings before equity in earnings of nonconsolidated subsidiaries | 21,202 |
| | 32,809 |
| | 26,926 |
| | 1,214 |
| | 82,151 |
|
Equity in earnings of nonconsolidated subsidiaries | 55,487 |
| | 37,939 |
| | — |
| | (93,426 | ) | | — |
|
Net earnings | 76,689 |
| | 70,748 |
| | 26,926 |
| | (92,212 | ) | | 82,151 |
|
Less: Earnings attributable to noncontrolling interests | — |
| | — |
| | (5,462 | ) | | — |
| | (5,462 | ) |
Net earnings attributable to Valmont Industries, Inc. | $ | 76,689 |
| | $ | 70,748 |
| | $ | 21,464 |
| | $ | (92,212 | ) | | $ | 76,689 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirteen weeks ended September 30, 201728, 2019
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 40,144 |
| | $ | 27,154 |
| | $ | 16,361 |
| | $ | (41,396 | ) | | $ | 42,263 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | 4,512 |
| | (28,293 | ) | | — |
| | (23,781 | ) |
Gain (loss) on hedging activities | 9,315 |
| | — |
| | — |
| | — |
| | 9,315 |
|
Equity in other comprehensive income | (22,959 | ) | | — |
| | — |
| | 22,959 |
| | — |
|
Other comprehensive income (loss) | (13,644 | ) | | 4,512 |
| | (28,293 | ) | | 22,959 |
| | (14,466 | ) |
Comprehensive income (loss) | 26,500 |
| | 31,666 |
| | (11,932 | ) | | (18,437 | ) | | 27,797 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (1,297 | ) | | — |
| | (1,297 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 26,500 |
| | $ | 31,666 |
| | $ | (13,229 | ) | | $ | (18,437 | ) | | $ | 26,500 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 35,208 |
| | $ | 15,354 |
| | $ | 24,264 |
| | $ | (38,160 | ) | | $ | 36,666 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | (3,613 | ) | | 23,143 |
| | — |
| | 19,530 |
|
Unrealized gain/(loss) on hedging activities: | | | | | | | | | |
Net investment hedge | (740 | ) | | — |
| | — |
| | — |
| | (740 | ) |
Amortization cost included in interest expense | 19 |
| | — |
| | — |
| | — |
| | 19 |
|
Equity in other comprehensive income | 18,418 |
| | — |
| | — |
| | (18,418 | ) | | — |
|
Other comprehensive income (loss) | 17,697 |
| | (3,613 | ) | | 23,143 |
| | (18,418 | ) | | 18,809 |
|
Comprehensive income (loss) | 52,905 |
| | 11,741 |
| | 47,407 |
| | (56,578 | ) | | 55,475 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (2,570 | ) | | — |
| | (2,570 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 52,905 |
| | $ | 11,741 |
| | $ | 44,837 |
| | $ | (56,578 | ) | | $ | 52,905 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirty-nine Weeks Endedweeks ended September 30, 201728, 2019
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 118,022 |
| | $ | 61,174 |
| | $ | 36,024 |
| | $ | (93,156 | ) | | $ | 122,064 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | 291 |
| | (20,757 | ) | | — |
| | (20,466 | ) |
Gain (loss) on hedging activities | 6,282 |
| | — |
| | — |
| | — |
| | 6,282 |
|
Equity in other comprehensive income | (19,814 | ) | | — |
| | — |
| | 19,814 |
| | — |
|
Other comprehensive income (loss) | (13,532 | ) | | 291 |
| | (20,757 | ) | | 19,814 |
| | (14,184 | ) |
Comprehensive income (loss) | 104,490 |
| | 61,465 |
| | 15,267 |
| | (73,342 | ) | | 107,880 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (3,390 | ) | | — |
| | (3,390 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 104,490 |
| | $ | 61,465 |
| | $ | 11,877 |
| | $ | (73,342 | ) | | $ | 104,490 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 119,851 |
| | $ | 37,784 |
| | $ | 67,029 |
| | $ | (100,715 | ) | | $ | 123,949 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | 64,411 |
| | (3,940 | ) | | — |
| | 60,471 |
|
Unrealized gain/(loss) on hedging activities: | | | | | | | | | |
Net investment hedge | (1,816 | ) | | | | — |
| | — |
| | (1,816 | ) |
Amortization cost included in interest expense | 56 |
| | — |
| | — |
| | — |
| | 56 |
|
Equity in other comprehensive income | 60,017 |
| | — |
| | — |
| | (60,017 | ) | | — |
|
Other comprehensive income (loss) | 58,257 |
| | 64,411 |
| | (3,940 | ) | | (60,017 | ) | | 58,711 |
|
Comprehensive income (loss) | 178,108 |
| | 102,195 |
| | 63,089 |
| | (160,732 | ) | | 182,660 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (4,552 | ) | | — |
| | (4,552 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 178,108 |
| | $ | 102,195 |
| | $ | 58,537 |
| | $ | (160,732 | ) | | $ | 178,108 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirteen weeks ended September 24, 201629, 2018
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 4,448 |
| | $ | 14,792 |
| | $ | 1,343 |
| | $ | (13,592 | ) | | $ | 6,991 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | 4,289 |
| | (14,921 | ) | | — |
| | (10,632 | ) |
Realized loss on divestiture of grinding media business recorded in earnings | — |
| | — |
| | — |
| | — |
| | — |
|
Gain (loss) on hedging activities | (910 | ) | | — |
| | — |
| | — |
| | (910 | ) |
Equity in other comprehensive income | (10,478 | ) | | — |
| | — |
| | 10,478 |
| | — |
|
Other comprehensive income (loss) | (11,388 | ) | | 4,289 |
| | (14,921 | ) | | 10,478 |
| | (11,542 | ) |
Comprehensive income (loss) | (6,940 | ) | | 19,081 |
| | (13,578 | ) | | (3,114 | ) | | (4,551 | ) |
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (2,389 | ) | | — |
| | (2,389 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | (6,940 | ) | | $ | 19,081 |
| | $ | (15,967 | ) | | $ | (3,114 | ) | | $ | (6,940 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 28,173 |
| | $ | 6,754 |
| | $ | 17,239 |
| | $ | (22,645 | ) | | $ | 29,521 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | (114 | ) | | 884 |
| | — |
| | 770 |
|
Unrealized gain/(loss) on hedging activities: | | | | | | | | | |
Net investment hedge | 1,972 |
| | — |
| | — |
| | — |
| | 1,972 |
|
Amortization cost included in interest expense | 18 |
| | — |
| | — |
| | — |
| | 18 |
|
Equity in other comprehensive income | 500 |
| | — |
| | — |
| | (500 | ) | | — |
|
Other comprehensive income (loss) | 2,490 |
| | (114 | ) | | 884 |
| | (500 | ) | | 2,760 |
|
Comprehensive income (loss) | 30,663 |
| | 6,640 |
| | 18,123 |
| | (23,145 | ) | | 32,281 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (1,618 | ) | | — |
| | (1,618 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 30,663 |
| | $ | 6,640 |
| | $ | 16,505 |
| | $ | (23,145 | ) | | $ | 30,663 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirty-nine Weeks Endedweeks ended September 24, 201629, 2018
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 76,689 |
| | $ | 70,748 |
| | $ | 26,926 |
| | $ | (92,212 | ) | | $ | 82,151 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | 2,122 |
| | (52,903 | ) | | — |
| | (50,781 | ) |
Realized loss on divestiture of grinding media business recorded in earnings
| — |
| | — |
| | 9,203 |
| | — |
| | 9,203 |
|
Gain (loss) on hedging activities | 834 |
| | — |
| | — |
| | — |
| | 834 |
|
Equity in other comprehensive income | (44,366 | ) | | — |
| | — |
| | 44,366 |
| | — |
|
Other comprehensive income (loss) | (43,532 | ) | | 2,122 |
| | (43,700 | ) | | 44,366 |
| | (40,744 | ) |
Comprehensive income (loss) | 33,157 |
| | 72,870 |
| | (16,774 | ) | | (47,846 | ) | | 41,407 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (8,250 | ) | | — |
| | (8,250 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 33,157 |
| | $ | 72,870 |
| | $ | (25,024 | ) | | $ | (47,846 | ) | | $ | 33,157 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Net earnings | $ | 103,168 |
| | $ | 32,941 |
| | $ | 49,778 |
| | $ | (78,753 | ) | | $ | 107,134 |
|
Other comprehensive income (loss), net of tax: | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | |
Unrealized translation gain (loss) | — |
| | (263 | ) | | (1,675 | ) | | — |
| | (1,938 | ) |
Unrealized gain/(loss) on hedging activities: | | | | | | | | | |
Net Investment Hedge | 4,897 |
| | — |
| | — |
| | — |
| | 4,897 |
|
Amortization cost included in interest expense | 56 |
| | — |
| | — |
| | — |
| | 56 |
|
Equity in other comprehensive income | (3,704 | ) | | — |
| | — |
| | 3,704 |
| | — |
|
Other comprehensive income (loss) | 1,249 |
| | (263 | ) | | (1,675 | ) | | 3,704 |
| | 3,015 |
|
Comprehensive income (loss) | 104,417 |
| | 32,678 |
| | 48,103 |
| | (75,049 | ) | | 110,149 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | (5,732 | ) | | — |
| | (5,732 | ) |
Comprehensive income (loss) attributable to Valmont Industries, Inc. | $ | 104,417 |
| | $ | 32,678 |
| | $ | 42,371 |
| | $ | (75,049 | ) | | $ | 104,417 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2017
| | | Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total | Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
ASSETS | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 118,499 |
| | $ | 4,167 |
| | $ | 370,824 |
| | $ | — |
| | $ | 493,490 |
| $ | 179,765 |
| | $ | 1,963 |
| | $ | 145,472 |
| | $ | — |
| | $ | 327,200 |
|
Receivables, net | 152,290 |
| | 69,781 |
| | 270,771 |
| | — |
| | 492,842 |
| 161,260 |
| | 79,077 |
| | 260,878 |
| | — |
| | 501,215 |
|
Inventories | 141,774 |
| | 46,747 |
| | 219,046 |
| | (4,333 | ) | | 403,234 |
| 125,240 |
| | 46,133 |
| | 208,869 |
| | (2,942 | ) | | 377,300 |
|
Prepaid expenses, restricted cash, and other assets | 8,903 |
| | 1,023 |
| | 40,138 |
| | — |
| | 50,064 |
| |
Contract asset - costs and profits in excess of billings | | 58,713 |
| | 35,195 |
| | 26,468 |
| | — |
| | 120,376 |
|
Prepaid expenses and other assets | | 15,569 |
| | 4,866 |
| | 29,985 |
| | — |
| | 50,420 |
|
Refundable income taxes | 8,493 |
| | — |
| | — |
| | — |
| | 8,493 |
| 11,893 |
| | — |
| | — |
| | — |
| | 11,893 |
|
Total current assets | 429,959 |
| | 121,718 |
| | 900,779 |
| | (4,333 | ) | | 1,448,123 |
| 552,440 |
| | 167,234 |
| | 671,672 |
| | (2,942 | ) | | 1,388,404 |
|
Property, plant and equipment, at cost | 558,484 |
| | 158,087 |
| | 453,283 |
| | — |
| | 1,169,854 |
| 614,979 |
| | 199,176 |
| | 419,607 |
| | — |
| | 1,233,762 |
|
Less accumulated depreciation and amortization | 369,620 |
| | 82,708 |
| | 195,102 |
| | — |
| | 647,430 |
| 411,808 |
| | 100,692 |
| | 172,894 |
| | — |
| | 685,394 |
|
Net property, plant and equipment | 188,864 |
| | 75,379 |
| | 258,181 |
| | — |
| | 522,424 |
| 203,171 |
| | 98,484 |
| | 246,713 |
| | — |
| | 548,368 |
|
Goodwill | 20,108 |
| | 110,562 |
| | 206,084 |
| | — |
| | 336,754 |
| 20,108 |
| | 140,095 |
| | 261,476 |
| | — |
| | 421,679 |
|
Other intangible assets | 144 |
| | 32,204 |
| | 109,742 |
| | — |
| | 142,090 |
| 36 |
| | 46,758 |
| | 130,940 |
| | — |
| | 177,734 |
|
Investment in subsidiaries and intercompany accounts | 1,392,533 |
| | 1,180,732 |
| | 1,029,831 |
| | (3,603,096 | ) | | — |
| 1,333,420 |
| | 1,138,854 |
| | 840,925 |
| | (3,313,199 | ) | | — |
|
Other assets | 47,613 |
| | — |
| | 113,167 |
| | — |
| | 160,780 |
| 78,721 |
| | 4,859 |
| | 105,677 |
| | — |
| | 189,257 |
|
Total assets | $ | 2,079,221 |
| | $ | 1,520,595 |
| | $ | 2,617,784 |
| | $ | (3,607,429 | ) | | $ | 2,610,171 |
| $ | 2,187,896 |
| | $ | 1,596,284 |
| | $ | 2,257,403 |
| | $ | (3,316,141 | ) | | $ | 2,725,442 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | |
Current installments of long-term debt | $ | — |
| | $ | — |
| | $ | 949 |
| | $ | — |
| | $ | 949 |
| $ | — |
| | $ | — |
| | $ | 745 |
| | $ | — |
| | $ | 745 |
|
Notes payable to banks | — |
| | — |
| | 197 |
| | — |
| | 197 |
| — |
| | — |
| | 19,324 |
| | — |
| | 19,324 |
|
Accounts payable | 59,467 |
| | 8,032 |
| | 148,605 |
| | — |
| | 216,104 |
| 64,256 |
| | 18,681 |
| | 114,598 |
| | — |
| | 197,535 |
|
Accrued employee compensation and benefits | 40,760 |
| | 8,293 |
| | 32,441 |
| | — |
| | 81,494 |
| 41,371 |
| | 5,994 |
| | 31,175 |
| | — |
| | 78,540 |
|
Accrued expenses | 44,896 |
| | 9,222 |
| | 52,120 |
| | — |
| | 106,238 |
| 162,640 |
| | 13,024 |
| | 51,051 |
| | — |
| | 226,715 |
|
Dividends payable | 8,478 |
| | — |
| | — |
| | — |
| | 8,478 |
| 8,088 |
| | — |
| | — |
| | — |
| | 8,088 |
|
Total current liabilities | 153,601 |
| | 25,547 |
| | 234,312 |
| | — |
| | 413,460 |
| 276,355 |
| | 37,699 |
| | 216,893 |
| | — |
| | 530,947 |
|
Deferred income taxes | 15,617 |
| | — |
| | 12,566 |
| | — |
| | 28,183 |
| 16,645 |
| | — |
| | 27,133 |
| | — |
| | 43,778 |
|
Long-term debt, excluding current installments | 750,933 |
| | 185,674 |
| | 10,060 |
| | (192,465 | ) | | 754,202 |
| 734,417 |
| | 119,716 |
| | 30,107 |
| | (119,716 | ) | | 764,524 |
|
Defined benefit pension liability | — |
| | — |
| | 199,562 |
| | — |
| | 199,562 |
| — |
| | — |
| | 121,282 |
| | — |
| | 121,282 |
|
Deferred compensation | 43,077 |
| | — |
| | 5,535 |
| | — |
| | 48,612 |
| |
Other noncurrent liabilities | 3,159 |
| | 5 |
| | 10,393 |
| | — |
| | 13,557 |
| 73,788 |
| | 3,622 |
| | 56,330 |
| | — |
| | 133,740 |
|
Shareholders’ equity: | | | | | | | | | |
|
| |
|
| |
|
| | | | |
Common stock of $1 par value | 27,900 |
| | 457,950 |
| | 648,682 |
| | (1,106,632 | ) | | 27,900 |
| 27,900 |
| | 457,950 |
| | 648,957 |
| | (1,106,907 | ) | | 27,900 |
|
Additional paid-in capital | — |
| | 166,789 |
| | 1,107,536 |
| | (1,274,325 | ) | | — |
| — |
| | 162,906 |
| | 1,107,536 |
| | (1,270,442 | ) | | — |
|
Retained earnings | 1,974,601 |
| | 684,532 |
| | 636,283 |
| | (1,320,815 | ) | | 1,974,601 |
| 2,119,843 |
| | 733,109 |
| | 416,932 |
| | (1,150,041 | ) | | 2,119,843 |
|
Accumulated other comprehensive income (loss) | (288,102 | ) | | 98 |
| | (286,906 | ) | | 286,808 |
| | (288,102 | ) | (316,717 | ) | | 81,282 |
| | (412,247 | ) | | 330,965 |
| | (316,717 | ) |
Treasury stock | (601,565 | ) | | — |
| | — |
| | — |
| | (601,565 | ) | (744,335 | ) | | — |
| | — |
| | — |
| | (744,335 | ) |
Total Valmont Industries, Inc. shareholders’ equity | 1,112,834 |
| | 1,309,369 |
| | 2,105,595 |
| | (3,414,964 | ) | | 1,112,834 |
| 1,086,691 |
| | 1,435,247 |
| | 1,761,178 |
| | (3,196,425 | ) | | 1,086,691 |
|
Noncontrolling interest in consolidated subsidiaries | — |
| | — |
| | 39,761 |
| | — |
| | 39,761 |
| — |
| | — |
| | 44,480 |
| | — |
| | 44,480 |
|
Total shareholders’ equity | 1,112,834 |
| | 1,309,369 |
| | 2,145,356 |
| | (3,414,964 | ) | | 1,152,595 |
| 1,086,691 |
| | 1,435,247 |
| | 1,805,658 |
| | (3,196,425 | ) | | 1,131,171 |
|
Total liabilities and shareholders’ equity | $ | 2,079,221 |
| | $ | 1,520,595 |
| | $ | 2,617,784 |
| | $ | (3,607,429 | ) | | $ | 2,610,171 |
| $ | 2,187,896 |
| | $ | 1,596,284 |
| | $ | 2,257,403 |
| | $ | (3,316,141 | ) | | $ | 2,725,442 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 201629, 2018 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 104,256 |
| | $ | 5,518 |
| | $ | 203,436 |
| | $ | — |
| | $ | 313,210 |
|
Receivables, net | 134,943 |
| | 75,204 |
| | 273,816 |
| | — |
| | 483,963 |
|
Inventories | 138,158 |
| | 37,019 |
| | 210,791 |
| | (2,402 | ) | | 383,566 |
|
Contract asset - costs and profits in excess of billings | 50,271 |
| | 35,200 |
| | 27,054 |
| | — |
| | 112,525 |
|
Prepaid expenses and other assets | 21,858 |
| | 746 |
| | 20,196 |
| | — |
| | 42,800 |
|
Refundable income taxes | 4,576 |
| | — |
| | — |
| | — |
| | 4,576 |
|
Total current assets | 454,062 |
| | 153,687 |
| | 735,293 |
| | (2,402 | ) | | 1,340,640 |
|
Property, plant and equipment, at cost | 579,046 |
| | 172,050 |
| | 409,769 |
| | — |
| | 1,160,865 |
|
Less accumulated depreciation and amortization | 390,438 |
| | 93,374 |
| | 163,061 |
| | — |
| | 646,873 |
|
Net property, plant and equipment | 188,608 |
| | 78,676 |
| | 246,708 |
| | — |
| | 513,992 |
|
Goodwill | 20,108 |
| | 110,562 |
| | 254,537 |
| | — |
| | 385,207 |
|
Other intangible assets | 76 |
| | 27,452 |
| | 148,428 |
| | — |
| | 175,956 |
|
Investment in subsidiaries and intercompany accounts | 1,286,545 |
| | 1,161,612 |
| | 932,982 |
| | (3,381,139 | ) | | — |
|
Other assets | 47,674 |
| | — |
| | 66,805 |
| | — |
| | 114,479 |
|
Total assets | $ | 1,997,073 |
| | $ | 1,531,989 |
| | $ | 2,384,753 |
| | $ | (3,383,541 | ) | | $ | 2,530,274 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Current installments of long-term debt | $ | — |
| | $ | — |
| | $ | 779 |
| | $ | — |
| | $ | 779 |
|
Notes payable to banks | — |
| | — |
| | 10,678 |
| | — |
| | 10,678 |
|
Accounts payable | 68,304 |
| | 21,081 |
| | 128,730 |
| | — |
| | 218,115 |
|
Accrued employee compensation and benefits | 41,418 |
| | 7,186 |
| | 30,687 |
| | — |
| | 79,291 |
|
Accrued expenses | 25,936 |
| | 10,132 |
| | 55,874 |
| | — |
| | 91,942 |
|
Dividends payable | 8,230 |
| | — |
| | — |
| | — |
| | 8,230 |
|
Total current liabilities | 143,888 |
| | 38,399 |
| | 226,748 |
| | — |
| | 409,035 |
|
Deferred income taxes | 14,376 |
| | — |
| | 29,113 |
| | — |
| | 43,489 |
|
Long-term debt, excluding current installments | 733,964 |
| | 166,729 |
| | 7,858 |
| | (166,729 | ) | | 741,822 |
|
Defined benefit pension liability | — |
| | — |
| | 143,904 |
| | — |
| | 143,904 |
|
Other noncurrent liabilities | 45,083 |
| | 620 |
| | 10,798 |
| | — |
| | 56,501 |
|
Shareholders’ equity: | | | | | | | | | |
Common stock of $1 par value | 27,900 |
| | 457,950 |
| | 648,682 |
| | (1,106,632 | ) | | 27,900 |
|
Additional paid-in capital | — |
| | 162,906 |
| | 1,107,536 |
| | (1,270,442 | ) | | — |
|
Retained earnings | 2,027,596 |
| | 624,394 |
| | 467,699 |
| | (1,092,093 | ) | | 2,027,596 |
|
Accumulated other comprehensive income | (303,185 | ) | | 80,991 |
| | (333,346 | ) | | 252,355 |
| | (303,185 | ) |
Treasury stock | (692,549 | ) | | — |
| | — |
| | — |
| | (692,549 | ) |
Total Valmont Industries, Inc. shareholders’ equity | 1,059,762 |
| | 1,326,241 |
| | 1,890,571 |
| | (3,216,812 | ) | | 1,059,762 |
|
Noncontrolling interest in consolidated subsidiaries | — |
| | — |
| | 75,761 |
| | — |
| | 75,761 |
|
Total shareholders’ equity | 1,059,762 |
| | 1,326,241 |
| | 1,966,332 |
| | (3,216,812 | ) | | 1,135,523 |
|
Total liabilities and shareholders’ equity | $ | 1,997,073 |
| | $ | 1,531,989 |
| | $ | 2,384,753 |
| | $ | (3,383,541 | ) | | $ | 2,530,274 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 67,225 |
| | $ | 6,071 |
| | $ | 326,652 |
| | $ | — |
| | $ | 399,948 |
|
Receivables, net | 134,351 |
| | 60,522 |
| | 244,469 |
| | — |
| | 439,342 |
|
Inventories | 126,669 |
| | 45,457 |
| | 182,056 |
| | (4,154 | ) | | 350,028 |
|
Prepaid expenses | 13,271 |
| | 880 |
| | 43,146 |
| | — |
| | 57,297 |
|
Refundable income taxes | 6,601 |
| | — |
| | — |
| | — |
| | 6,601 |
|
Total current assets | 348,117 |
| | 112,930 |
| | 796,323 |
| | (4,154 | ) | | 1,253,216 |
|
Property, plant and equipment, at cost | 547,076 |
| | 153,596 |
| | 405,064 |
| | — |
| | 1,105,736 |
|
Less accumulated depreciation and amortization | 352,960 |
| | 76,776 |
| | 157,665 |
| | — |
| | 587,401 |
|
Net property, plant and equipment | 194,116 |
| | 76,820 |
| | 247,399 |
| | — |
| | 518,335 |
|
Goodwill | 20,108 |
| | 110,561 |
| | 190,441 |
| | — |
| | 321,110 |
|
Other intangible assets | 184 |
| | 35,953 |
| | 108,241 |
| | — |
| | 144,378 |
|
Investment in subsidiaries and intercompany accounts | 1,279,413 |
| | 901,758 |
| | 1,089,369 |
| | (3,270,540 | ) | | — |
|
Other assets | 43,880 |
| | — |
| | 110,812 |
| | — |
| | 154,692 |
|
Total assets | $ | 1,885,818 |
| | $ | 1,238,022 |
| | $ | 2,542,585 |
| | $ | (3,274,694 | ) | | $ | 2,391,731 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Current installments of long-term debt | $ | — |
| | $ | — |
| | $ | 851 |
| | $ | — |
| | $ | 851 |
|
Notes payable to banks | — |
| | — |
| | 746 |
| | — |
| | 746 |
|
Accounts payable | 52,272 |
| | 15,732 |
| | 109,484 |
| | — |
| | 177,488 |
|
Accrued employee compensation and benefits | 34,508 |
| | 7,243 |
| | 30,653 |
| | — |
| | 72,404 |
|
Accrued expenses | 30,261 |
| | 15,242 |
| | 44,411 |
| | — |
| | 89,914 |
|
Dividends payable | 8,445 |
| | — |
| | — |
| | — |
| | 8,445 |
|
Total current liabilities | 125,486 |
| | 38,217 |
| | 186,145 |
| | — |
| | 349,848 |
|
Deferred income taxes | 22,481 |
| | — |
| | 13,322 |
| | — |
| | 35,803 |
|
Long-term debt, excluding current installments | 751,251 |
| | — |
| | 3,544 |
| | — |
| | 754,795 |
|
Defined benefit pension liability | — |
| | — |
| | 209,470 |
| | — |
| | 209,470 |
|
Deferred compensation | 39,476 |
| | — |
| | 4,843 |
| | — |
| | 44,319 |
|
Other noncurrent liabilities | 3,642 |
| | 5 |
| | 11,263 |
| | — |
| | 14,910 |
|
Shareholders’ equity: | | | | | | | | |
|
|
Common stock of $1 par value | 27,900 |
| | 457,950 |
| | 648,683 |
| | (1,106,633 | ) | | 27,900 |
|
Additional paid-in capital | — |
| | 159,414 |
| | 1,107,536 |
| | (1,266,950 | ) | | — |
|
Retained earnings | 1,874,722 |
| | 646,749 |
| | 603,338 |
| | (1,250,087 | ) | | 1,874,722 |
|
Accumulated other comprehensive income | (346,359 | ) | | (64,313 | ) | | (284,663 | ) | | 348,976 |
| | (346,359 | ) |
Treasury stock | (612,781 | ) | | — |
| | — |
| | — |
| | (612,781 | ) |
Total Valmont Industries, Inc. shareholders’ equity | 943,482 |
| | 1,199,800 |
| | 2,074,894 |
| | (3,274,694 | ) | | 943,482 |
|
Noncontrolling interest in consolidated subsidiaries | — |
| | — |
| | 39,104 |
| | — |
| | 39,104 |
|
Total shareholders’ equity | 943,482 |
| | 1,199,800 |
| | 2,113,998 |
| | (3,274,694 | ) | | 982,586 |
|
Total liabilities and shareholders’ equity | $ | 1,885,818 |
|
| $ | 1,238,022 |
| | $ | 2,542,585 |
| | $ | (3,274,694 | ) | | $ | 2,391,731 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)
(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-nine Weeks Endedweeks ended September 30, 201728, 2019
| | | Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total | Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | |
Net earnings | $ | 119,851 |
| | $ | 37,784 |
| | $ | 67,029 |
| | $ | (100,715 | ) | | $ | 123,949 |
| $ | 118,022 |
| | $ | 61,174 |
| | $ | 36,024 |
| | $ | (93,156 | ) | | $ | 122,064 |
|
Adjustments to reconcile net earnings to net cash flows from operations: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | 19,600 |
| | 11,130 |
| | 32,770 |
| | — |
| | 63,500 |
| 19,891 |
| | 10,201 |
| | 30,332 |
| | — |
| | 60,424 |
|
Noncash loss on trading securities | — |
| | — |
| | 395 |
| | — |
| | 395 |
| |
Noncash gain on trading securities | | — |
| | — |
| | (48 | ) | | — |
| | (48 | ) |
Stock-based compensation | 7,300 |
| | — |
| | — |
| | — |
| | 7,300 |
| 8,889 |
| | — |
| | — |
| | — |
| | 8,889 |
|
Defined benefit pension plan expense | — |
| | — |
| | 481 |
| | — |
| | 481 |
| |
Defined benefit pension plan benefit | | — |
| | — |
| | (382 | ) | | — |
| | (382 | ) |
Contribution to defined benefit pension plan | — |
| | — |
| | (26,064 | ) | | — |
| | (26,064 | ) | — |
| | — |
| | (17,426 | ) | | — |
| | (17,426 | ) |
Decrease in restricted cash - pension plan trust | — |
| | — |
| | 12,568 |
| | — |
| | 12,568 |
| |
Loss (gain) on sale of property, plant and equipment | (725 | ) | | 59 |
| | (66 | ) | | — |
| | (732 | ) | 103 |
| | 81 |
| | (649 | ) | | — |
| | (465 | ) |
Equity in earnings in nonconsolidated subsidiaries | (85,274 | ) | | (15,281 | ) | | — |
| | 100,555 |
| | — |
| (83,849 | ) | | (8,843 | ) | | — |
| | 92,692 |
| | — |
|
Deferred income taxes | 2,065 |
| | — |
| | (1,986 | ) | | — |
| | 79 |
| 3,869 |
| | — |
| | 3,229 |
| | — |
| | 7,098 |
|
Changes in assets and liabilities: | | | | | | | | | | | | | | | | | | |
Receivables | (16,190 | ) | | (9,259 | ) | | (14,135 | ) | | — |
| | (39,584 | ) | |
Inventories | (15,105 | ) | | (1,290 | ) | | (25,329 | ) | | 179 |
| | (41,545 | ) | |
Prepaid expenses and other assets | (2,501 | ) | | (144 | ) | | (8,991 | ) | | — |
| | (11,636 | ) | |
Accounts payable | 7,196 |
| | (7,700 | ) | | 29,399 |
| | — |
| | 28,895 |
| |
Accrued expenses | 20,887 |
| | (4,971 | ) | | 4,241 |
| | — |
| | 20,157 |
| |
Net working capital | | 94,054 |
| | (15,715 | ) | | (6,305 | ) | | 541 |
| | 72,575 |
|
Other noncurrent liabilities | (381 | ) | | — |
| | (1,246 | ) | | — |
| | (1,627 | ) | 1,005 |
| | (5,461 | ) | | (107 | ) | | — |
| | (4,563 | ) |
Income taxes payable (refundable) | (11,403 | ) | | 802 |
| | 8,869 |
| | — |
| | (1,732 | ) | (4,488 | ) | | (2,229 | ) | | (2,219 | ) | | — |
| | (8,936 | ) |
Net cash flows from operating activities | 45,320 |
| | 11,130 |
| | 77,935 |
| | 19 |
| | 134,404 |
| 157,496 |
| | 39,208 |
| | 42,449 |
| | 77 |
| | 239,230 |
|
Cash flows from investing activities: | | | | | | | | | | | | | | | | | | |
Purchase of property, plant and equipment | (14,046 | ) | | (5,952 | ) | | (19,900 | ) | | — |
| | (39,898 | ) | (33,321 | ) | | (12,462 | ) | | (26,198 | ) | | — |
| | (71,981 | ) |
Proceeds from sale of assets | 745 |
| | (48 | ) | | 878 |
| | — |
| | 1,575 |
| 35 |
| | 26 |
| | 1,264 |
| | — |
| | 1,325 |
|
Acquisitions, net of cash acquired | — |
| | — |
| | (5,362 | ) | | — |
| | (5,362 | ) | — |
| | (63,141 | ) | | (18,700 | ) | | — |
| | (81,841 | ) |
Proceeds from settlement of net investment hedge | 5,123 |
| | — |
| | — |
| | — |
| | 5,123 |
| |
Settlement of net investment hedge | | 11,184 |
| | — |
| | — |
| | — |
| | 11,184 |
|
Other, net | 15,714 |
| | (8,985 | ) | | (10,172 | ) | | (19 | ) | | (3,462 | ) | (30,475 | ) | | 27,878 |
| | 4,791 |
| | (77 | ) | | 2,117 |
|
Net cash flows from investing activities | 7,536 |
| | (14,985 | ) | | (34,556 | ) | | (19 | ) | | (42,024 | ) | (52,577 | ) | | (47,699 | ) | | (38,843 | ) | | (77 | ) | | (139,196 | ) |
Cash flows from financing activities: | | | | | | | | | | | | | | | | | | |
Net borrowings under short-term agreements | — |
| | — |
| | (549 | ) | | — |
| | (549 | ) | |
Proceeds from short-term agreements | | — |
| | — |
| | 9,284 |
| | — |
| | 9,284 |
|
Proceeds from long-term borrowings | | 31,000 |
| | — |
| | — |
| | — |
| | 31,000 |
|
Principal payments on long-term borrowings |
|
| | — |
| | (658 | ) | | — |
| | (658 | ) | (10,000 | ) | | — |
| | (578 | ) | | — |
| | (10,578 | ) |
Principal payments on long-term intercompany note | | — |
| | (42,574 | ) | | 42,574 |
| | — |
| | — |
|
Dividends paid | (25,386 | ) | | — |
| | — |
| | — |
| | (25,386 | ) | (24,554 | ) | | — |
| | — |
| | — |
| | (24,554 | ) |
Dividends to noncontrolling interest | — |
| |
|
| | (3,895 | ) | | — |
| | (3,895 | ) | — |
| | — |
| | (6,549 | ) | | — |
| | (6,549 | ) |
Intercompany dividends | 22,662 |
| | — |
| | (22,662 | ) | | — |
| | — |
| 63,650 |
| | 47,541 |
| | (111,191 | ) | | — |
| | — |
|
Intercompany interest on long-term note | — |
| | (5,669 | ) | | 5,669 |
| | — |
| | — |
| |
Purchase of noncontrolling interest | | (22,805 | ) | | — |
| | (5,040 | ) | | — |
| | (27,845 | ) |
Intercompany capital contribution | (7,375 | ) | | 7,375 |
| | — |
| | — |
| | — |
| (13,284 | ) | | — |
| | 13,284 |
| | — |
| | — |
|
Purchase of treasury shares | | (55,172 | ) | | — |
| | — |
| | — |
| | (55,172 | ) |
Proceeds from exercises under stock plans | 12,446 |
| | — |
| | — |
| | — |
| | 12,446 |
| 3,211 |
| | — |
| | — |
| | — |
| | 3,211 |
|
Purchase of common treasury shares - stock plan exercises | (3,929 | ) | | — |
| | — |
| | — |
| | (3,929 | ) | (1,456 | ) | | — |
| | — |
| | — |
| | (1,456 | ) |
Net cash flows from financing activities | (1,582 | ) | | 1,706 |
| | (22,095 | ) | | — |
| | (21,971 | ) | (29,410 | ) | | 4,967 |
| | (58,216 | ) | | — |
| | (82,659 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| | 245 |
| | 22,888 |
| | — |
| | 23,133 |
| — |
| | (31 | ) | | (3,354 | ) | | — |
| | (3,385 | ) |
Net change in cash and cash equivalents | 51,274 |
| | (1,904 | ) | | 44,172 |
| | — |
| | 93,542 |
| 75,509 |
| | (3,555 | ) | | (57,964 | ) | | — |
| | 13,990 |
|
Cash and cash equivalents—beginning of year | 67,225 |
| | 6,071 |
| | 326,652 |
| | — |
| | 399,948 |
| 104,256 |
| | 5,518 |
| | 203,436 |
| | — |
| | 313,210 |
|
Cash and cash equivalents—end of period | $ | 118,499 |
| | $ | 4,167 |
| | $ | 370,824 |
| | $ | — |
| | $ | 493,490 |
| $ | 179,765 |
| | $ | 1,963 |
| | $ | 145,472 |
| | $ | — |
| | $ | 327,200 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8)(11) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-nine Weeks Endedweeks ended September 24, 201629, 2018 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net earnings | $ | 76,689 |
| | $ | 70,748 |
| | $ | 26,926 |
| | $ | (92,212 | ) | | $ | 82,151 |
|
Adjustments to reconcile net earnings to net cash flows from operations: | | | | | | | | | |
Depreciation and amortization | 19,498 |
| | 10,564 |
| | 31,956 |
| | — |
| | 62,018 |
|
Noncash loss on trading securities | — |
| | — |
| | (62 | ) | | — |
| | (62 | ) |
Impairment of property, plant and equipment | — |
| | — |
| | 4,197 |
| | — |
| | 4,197 |
|
Impairment of Goodwill & Intangibles | — |
| | — |
| | 15,780 |
| | — |
| | 15,780 |
|
Loss on divestiture of grinding media business | 2,518 |
| | — |
| | 3,566 |
| | — |
| | 6,084 |
|
Stock-based compensation | 8,076 |
| | — |
| | — |
| | — |
| | 8,076 |
|
Defined benefit pension plan expense | — |
| | — |
| | (1,713 | ) | | — |
| | (1,713 | ) |
Contribution to defined benefit pension plan | — |
| | — |
| | (1,555 | ) | | — |
| | (1,555 | ) |
Loss (gain) on sale of property, plant and equipment | 7 |
| | (27 | ) | | (333 | ) | | — |
| | (353 | ) |
Equity in earnings in nonconsolidated subsidiaries | (55,487 | ) | | (37,939 | ) | | — |
| | 93,426 |
| | — |
|
Deferred income taxes | 729 |
| | 1,791 |
| | (1,706 | ) | | — |
| | 814 |
|
Changes in assets and liabilities: | | | | | | | | | |
Net working capital | (28,948 | ) | | (40,255 | ) | | (26,432 | ) | | (1,277 | ) | | (96,912 | ) |
Other noncurrent liabilities | (762 | ) | | 387 |
| | (874 | ) | | — |
| | (1,249 | ) |
Income taxes payable (refundable) | (23,256 | ) | | (1,066 | ) | | 15,099 |
| | — |
| | (9,223 | ) |
Net cash flows from operating activities | (936 | ) | | 4,203 |
| | 64,849 |
| | (63 | ) | | 68,053 |
|
Cash flows from investing activities: | | | | | | | | | |
Purchase of property, plant and equipment | (16,940 | ) | | (9,546 | ) | | (22,433 | ) | | — |
| | (48,919 | ) |
Proceeds from sale of assets | 39 |
| | 232 |
| | 64,515 |
| | — |
| | 64,786 |
|
Acquisitions, net of cash acquired | (57,805 | ) | | — |
| | (67,504 | ) | | — |
| | (125,309 | ) |
Settlement of net investment hedge | (1,621 | ) | | — |
| | — |
| | — |
| | (1,621 | ) |
Other, net | 28,299 |
| | (3,683 | ) | | (27,050 | ) | | 63 |
| | (2,371 | ) |
Net cash flows from investing activities | (48,028 | ) | | (12,997 | ) | | (52,472 | ) | | 63 |
| | (113,434 | ) |
Cash flows from financing activities: | | | | | | | | | |
Payments under short-term agreements | — |
| | — |
| | 3,217 |
| | — |
| | 3,217 |
|
Proceeds from long-term borrowings | 236,936 |
| | — |
| | — |
| | — |
| | 236,936 |
|
Principal payments on long-term borrowings | (252,219 | ) | | — |
| | (733 | ) | | — |
| | (252,952 | ) |
Settlement of financial derivative | (2,467 | ) | | — |
| | — |
| | — |
| | (2,467 | ) |
Debt issuance costs | (2,322 | ) | | — |
| | — |
| | — |
| | (2,322 | ) |
Dividends paid | (25,415 | ) | | — |
| | — |
| | — |
| | (25,415 | ) |
Dividends to noncontrolling interest | — |
| | — |
| | (5,737 | ) | | — |
| | (5,737 | ) |
Intercompany dividends | 123,363 |
| | 11,296 |
| | (134,659 | ) | | — |
| | — |
|
Purchase of noncontrolling interest | — |
| | — |
| | (5,510 | ) | | — |
| | (5,510 | ) |
Purchase of treasury shares | (86,919 | ) | | — |
| | — |
| | — |
| | (86,919 | ) |
Intercompany capital contribution | (3,492 | ) | | 3,492 |
| | — |
| | — |
| | — |
|
Proceeds from exercises under stock plans | 6,376 |
| | — |
| | — |
| | — |
| | 6,376 |
|
Purchase of common treasury shares - stock plan exercises | (1,914 | ) | | — |
| | — |
| | — |
| | (1,914 | ) |
Net cash flows from financing activities | (8,073 | ) | | 14,788 |
| | (143,422 | ) | | — |
| | (136,707 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| | (670 | ) | | (14,425 | ) | | — |
| | (15,095 | ) |
Net change in cash and cash equivalents | (57,037 | ) | | 5,324 |
| | (145,470 | ) | | — |
| | (197,183 | ) |
Cash and cash equivalents—beginning of year | 83,329 |
| | 5,304 |
| | 404,172 |
| | — |
| | 492,805 |
|
Cash and cash equivalents—end of period | $ | 26,292 |
| | $ | 10,628 |
| | $ | 258,702 |
| | $ | — |
| | $ | 295,622 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net earnings | $ | 103,168 |
| | $ | 32,941 |
| | $ | 49,778 |
| | $ | (78,753 | ) | | $ | 107,134 |
|
Adjustments to reconcile net earnings to net cash flows from operations: | | | | | | | | | |
Depreciation and amortization | 20,482 |
| | 9,897 |
| | 30,863 |
| | — |
| | 61,242 |
|
Noncash loss on trading securities | — |
| | — |
| | 973 |
| | — |
| | 973 |
|
Impairment of assets - restructuring activities | — |
| | — |
| | 618 |
| | — |
| | 618 |
|
Stock-based compensation | 6,572 |
| | — |
| | — |
| | — |
| | 6,572 |
|
Change in fair value of contingent consideration | — |
| | — |
| | (3,527 | ) | | — |
| | (3,527 | ) |
Defined benefit pension plan expense | — |
| | — |
| | 1,486 |
| | — |
| | 1,486 |
|
Contribution to defined benefit pension plan | — |
| | — |
| | (712 | ) | | — |
| | (712 | ) |
Increase in restricted cash - pension plan trust | — |
| | — |
| | (13,652 | ) | | — |
| | (13,652 | ) |
Loss (gain) on sale of property, plant and equipment | 2 |
| | 117 |
| | 131 |
| | — |
| | 250 |
|
Equity in earnings in nonconsolidated subsidiaries | (69,876 | ) | | (7,859 | ) | | — |
| | 77,735 |
| | — |
|
Deferred income taxes | (1,834 | ) | | — |
| | 300 |
| | — |
| | (1,534 | ) |
Changes in assets and liabilities: | | | | | | | | | |
Receivables | (10,501 | ) | | 14,969 |
| | 11,968 |
| | — |
| | 16,436 |
|
Inventories | (11,847 | ) | | (5,024 | ) | | (19,041 | ) | | 1,499 |
| | (34,413 | ) |
Prepaid expenses | (4,526 | ) | | 76 |
| | (6,174 | ) | | — |
| | (10,624 | ) |
Accounts payable | (16,605 | ) | | 2,530 |
| | 2,737 |
| | — |
| | (11,338 | ) |
Accrued expenses | 11,179 |
| | (7,218 | ) | | (689 | ) | | — |
| | 3,272 |
|
Other noncurrent liabilities | (252 | ) | | 5 |
| | 487 |
| | — |
| | 240 |
|
Income taxes payable (refundable) | 19,132 |
| | (16,444 | ) | | 2,143 |
| | — |
| | 4,831 |
|
Net cash flows from operating activities | 45,094 |
| | 23,990 |
| | 57,689 |
| | 481 |
| | 127,254 |
|
Cash flows from investing activities: | | | | | | | | | |
Purchase of property, plant and equipment | (5,699 | ) | | (17,944 | ) | | (18,590 | ) | | — |
| | (42,233 | ) |
Proceeds from sale of assets | 36 |
| | 84 |
| | 3,818 |
| | — |
| | 3,938 |
|
Other, net | 13,070 |
| | (4,488 | ) | | (10,925 | ) | | (481 | ) | | (2,824 | ) |
Net cash flows from investing activities | 7,407 |
| | (22,348 | ) | | (25,697 | ) | | (481 | ) | | (41,119 | ) |
Cash flows from financing activities: | | | | | | | | | |
Net borrowings under short-term agreements | — |
| | — |
| | (128 | ) | | — |
| | (128 | ) |
Principal payments on long-term borrowings | (215 | ) | | — |
| | (1,348 | ) | | — |
| | (1,563 | ) |
Dividends paid | (25,604 | ) | | — |
| | — |
| | — |
| | (25,604 | ) |
Dividends to noncontrolling interest | — |
| | — |
| | (2,527 | ) | | — |
| | (2,527 | ) |
Purchase of noncontrolling interest | (137 | ) | | — |
| | (10,872 | ) | | — |
| | (11,009 | ) |
Proceeds from exercises under stock plans | 6,509 |
| | — |
| | — |
| | — |
| | 6,509 |
|
Purchase of treasury shares | (46,581 | ) | | — |
| | — |
| | — |
| | (46,581 | ) |
Purchase of common treasury shares - stock plan exercises | (1,453 | ) | | — |
| | — |
| | — |
| | (1,453 | ) |
Net cash flows from financing activities | (67,481 | ) | | — |
| | (14,875 | ) | | — |
| | (82,356 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| | 168 |
| | (3,646 | ) | | — |
| | (3,478 | ) |
Net change in cash and cash equivalents | (14,980 | ) | | 1,810 |
| | 13,471 |
| | — |
| | 301 |
|
Cash and cash equivalents—beginning of year | 62,281 |
| | 4,008 |
| | 282,785 |
| | — |
| | 349,074 |
|
Cash and cash equivalents—end of period | $ | 47,301 |
| | $ | 5,818 |
| | $ | 296,256 |
| | $ | — |
| | $ | 349,375 |
|
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 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, 2016.29, 2018. Segment net sales in the table below and elsewhere are presented net of intersegment sales. See Note 10 of our condensed consolidated financial statements for additional information on segment sales and intersegment sales.
Results of Operations (Dollars in millions, except per share amounts) | | | Thirteen Weeks Ended | | Thirty-nine Weeks Ended | Thirteen weeks ended | | Thirty-nine weeks ended |
| September 30, 2017 | | September 24, 2016 | | % Incr. (Decr.) | | September 30, 2017 | | September 24, 2016 | | % Incr. (Decr.) | September 28, 2019 | | September 29, 2018 | | % Incr. (Decr.) | | September 28, 2019 | | September 29, 2018 | | % Incr. (Decr.) |
Consolidated | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 680.8 |
| | $ | 610.2 |
| | 11.6 | % | | $ | 2,031.0 |
| | $ | 1,847.1 |
| | 10.0 | % | $ | 690.3 |
| | $ | 678.7 |
| | 1.7 | % | | $ | 2,083.4 |
| | $ | 2,059.8 |
| | 1.1 | % |
Gross profit | 163.6 |
| | 155.0 |
| | 5.5 | % | | 511.5 |
| | 491.1 |
| | 4.2 | % | 176.1 |
| | 164.3 |
| | 7.2 | % | | 521.6 |
| | 508.6 |
| | 2.6 | % |
as a percent of sales | 24.0 | % | | 25.4 | % | | | | 25.2 | % | | 26.6 | % | | | 25.5 | % | | 24.2 | % | | | | 25.0 | % | | 24.7 | % | | |
SG&A expense | 103.7 |
| | 101.8 |
| | 1.9 | % | | 308.8 |
| | 303.7 |
| | 1.7 | % | 112.2 |
| | 126.0 |
| | (11.0 | )% | | 339.0 |
| | $ | 342.6 |
| | (1.1 | )% |
as a percent of sales | 15.2 | % | | 16.7 | % | | | | 15.2 | % | | 16.4 | % | | | 16.3 | % | | 18.6 | % | | | | 16.3 | % | | 16.6 | % | | |
Operating income | 59.9 |
| | 53.2 |
| | 12.6 | % | | 202.7 |
| | 187.4 |
| | 8.2 | % | 63.9 |
| | 38.4 |
| | 66.4 | % | | 182.7 |
| | 166.0 |
| | 10.1 | % |
as a percent of sales | 8.8 | % | | 8.7 | % | | | | 10.0 | % | | 10.1 | % | | | 9.3 | % | | 5.7 | % | | | | 8.8 | % | | 8.1 | % | | |
Net interest expense | 9.9 |
| | 10.3 |
| | (3.9 | )% | | 30.1 |
| | 31.0 |
| | (2.9 | )% | 9.0 |
| | 10.0 |
| | (10.0 | )% | | 27.2 |
| | 30.1 |
| | (9.6 | )% |
Effective tax rate | 27.5 | % | | 32.6 | % | | | | 28.9 | % | | 31.7 | % | | | 24.6 | % | | 56.5 | % | | | | 24.8 | % | | 30.5 | % | | |
Net earnings | $ | 35.2 |
| | $ | 28.2 |
| | 24.8 | % | | $ | 119.9 |
| | $ | 103.2 |
| | 16.2 | % | $ | 40.1 |
| | $ | 4.4 |
| | 811.4 | % | | $ | 118.0 |
| | $ | 76.7 |
| | 53.8 | % |
Diluted earnings per share | $ | 1.55 |
| | $ | 1.24 |
| | 25.0 | % | | $ | 5.28 |
| | $ | 4.54 |
| | 16.3 | % | $ | 1.85 |
| | $ | 0.20 |
| | 825.0 | % | | $ | 5.41 |
| | $ | 3.40 |
| | 59.1 | % |
Engineered Support Structures (ESS) | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 209.8 |
| | $ | 193.1 |
| | 8.6 | % | | $ | 571.3 |
| | $ | 554.9 |
| | 3.0 | % | $ | 266.5 |
| | $ | 248.4 |
| | 7.3 | % | | $ | 752.0 |
| | $ | 710.4 |
| | 5.9 | % |
Gross profit | 50.9 |
| | 54.3 |
| | (6.3 | )% | | 145.2 |
| | 156.9 |
| | (7.5 | )% | 62.4 |
| | 58.3 |
| | 7.0 | % | | 177.8 |
| | 164.5 |
| | 8.1 | % |
SG&A expense | 34.6 |
| | 34.0 |
| | 1.8 | % | | 99.5 |
| | 103.3 |
| | (3.7 | )% | 40.5 |
| | 41.8 |
| | (3.1 | )% | | 122.6 |
| | 128.1 |
| | (4.3 | )% |
Operating income | 16.3 |
| | 20.3 |
| | (19.7 | )% | | 45.7 |
| | 53.6 |
| | (14.7 | )% | 21.9 |
| | 16.5 |
| | 32.7 | % | | 55.2 |
| | 36.4 |
| | 51.6 | % |
Energy and Mining (E&M) | | | | | | | | | | | | |
Net sales | $ | 79.7 |
| | $ | 81.2 |
| | (1.8 | )% | | $ | 234.9 |
| | $ | 231.3 |
| | 1.6 | % | |
Gross profit | 12.5 |
| | 14.8 |
| | (15.5 | )% | | 41.6 |
| | 41.6 |
| | — | % | |
SG&A expense | 11.1 |
| | 10.9 |
| | 1.8 | % | | 32.4 |
| | 32.5 |
| | (0.3 | )% | |
Operating income | 1.4 |
| | 3.9 |
| | (64.1 | )% | | 9.2 |
| | 9.1 |
| | 1.1 | % | |
Utility Support Structures (Utility) | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 178.5 |
| | $ | 150.4 |
| | 18.7 | % | | $ | 536.5 |
| | $ | 445.9 |
| | 20.3 | % | $ | 204.2 |
| | $ | 218.0 |
| | (6.3 | )% | | $ | 656.5 |
| | $ | 624.4 |
| | 5.1 | % |
Gross profit | 39.4 |
| | 31.8 |
| | 23.9 | % | | 115.4 |
| | 94.2 |
| | 22.5 | % | 44.0 |
| | 41.1 |
| | 7.1 | % | | 133.6 |
| | 127.0 |
| | 5.2 | % |
SG&A expense | 17.3 |
| | 15.6 |
| | 10.9 | % | | 50.4 |
| | 46.0 |
| | 9.6 | % | 23.7 |
| | 39.0 |
| | (39.2 | )% | | 72.2 |
| | 80.7 |
| | (10.5 | )% |
Operating income | 22.1 |
| | 16.2 |
| | 36.4 | % | | 65.0 |
| | 48.2 |
| | 34.9 | % | 20.3 |
| | 2.1 |
| | 866.7 | % | | 61.4 |
| | 46.3 |
| | 32.6 | % |
Coatings | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 67.7 |
| | $ | 60.0 |
| | 12.8 | % | | $ | 191.6 |
| | $ | 182.2 |
| | 5.2 | % | $ | 76.9 |
| | $ | 74.5 |
| | 3.2 | % | | $ | 228.3 |
| | $ | 217.5 |
| | 5.0 | % |
Gross profit | 20.3 |
| | 17.9 |
| | 13.4 | % | | 58.5 |
| | 59.1 |
| | (1.0 | )% | 24.0 |
| | 23.8 |
| | 0.8 | % | | 71.7 |
| | 68.6 |
| | 4.5 | % |
SG&A expense | 5.8 |
| | 6.2 |
| | (6.5 | )% | | 22.5 |
| | 22.0 |
| | 2.3 | % | 10.1 |
| | 9.4 |
| | 7.4 | % | | 32.7 |
| | 27.5 |
| | 18.9 | % |
Operating income | 14.5 |
| | 11.7 |
| | 23.9 | % | | 36.0 |
| | 37.1 |
| | (3.0 | )% | 13.9 |
| | 14.4 |
| | (3.5 | )% | | 39.0 |
| | 41.1 |
| | (5.1 | )% |
Irrigation | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 145.1 |
| | $ | 125.5 |
| | 15.6 | % | | $ | 496.7 |
| | $ | 432.8 |
| | 14.8 | % | $ | 142.7 |
| | $ | 137.8 |
| | 3.6 | % | | $ | 446.6 |
| | $ | 484.4 |
| | (7.8 | )% |
Gross profit | 42.1 |
| | 38.1 |
| | 10.5 | % | | 153.6 |
| | 141.4 |
| | 8.6 | % | 42.9 |
| | 44.0 |
| | (2.5 | )% | | 133.0 |
| | 153.2 |
| | (13.2 | )% |
SG&A expense | 23.9 |
| | 22.7 |
| | 5.3 | % | | 70.4 |
| | 66.1 |
| | 6.5 | % | 24.7 |
| | 22.7 |
| | 8.8 | % | | 73.1 |
| | 70.3 |
| | 4.0 | % |
Operating income | 18.2 |
| | 15.4 |
| | 18.2 | % | | 83.2 |
| | 75.3 |
| | 10.5 | % | 18.2 |
| | 21.3 |
| | (14.6 | )% | | 59.9 |
| | 82.9 |
| | (27.7 | )% |
Other | | | | | | | | | | | | |
Net sales | | $ | — |
| | $ | — |
| | NM | | $ | — |
| | $ | 23.1 |
| | (100.0 | )% |
Gross profit | | — |
| | — |
| | NM | | — |
| | 0.8 |
| | (100.0 | )% |
SG&A expense | | — |
| | — |
| | NM | | — |
| | 1.7 |
| | (100.0 | )% |
Operating income | | — |
| | — |
| | NM | | — |
| | (0.9 | ) | | (100.0 | )% |
Adjustment to LIFO inventory valuation method | | | | | | | | | | | | | | | | | | | | | | |
Gross profit | $ | (1.6 | ) | | $ | (2.1 | ) | | NM | | $ | (2.8 | ) | | $ | (3.2 | ) | | NM | $ | 2.8 |
| | $ | (2.8 | ) | | NM | | $ | 5.5 |
| | $ | (5.5 | ) | | NM |
Operating income | (1.6 | ) | | (2.1 | ) | | NM | | (2.8 | ) | | (3.2 | ) | | NM | 2.8 |
| | (2.8 | ) | | NM | | 5.5 |
| | (5.5 | ) | | NM |
Net corporate expense | | | | | | | | | | | | | | | | | | | | | | |
Gross profit | $ | — |
| | $ | 0.3 |
| | NM | | $ | — |
| | $ | 1.1 |
| | NM | |
SG&A expense | 11.0 |
| | 12.4 |
| | (11.3 | )% | | 33.6 |
| | 33.8 |
| | (0.6 | )% | $ | 13.2 |
| | $ | 13.1 |
| | 0.8 | % | | $ | 38.4 |
| | $ | 34.3 |
| | 12.0 | % |
Operating loss | (11.0 | ) | | (12.1 | ) | | 9.1 | % | | (33.6 | ) | | (32.7 | ) | | (2.8 | )% | (13.2 | ) | | (13.1 | ) | | (0.8 | )% | | (38.4 | ) | | (34.3 | ) | | (12.0 | )% |
NM=Not meaningful
Overview
On a consolidated basis, the increase in net sales were higher in the third quarter of fiscal 2017,2019, as compared to 2018, due to higher sales in the ESS, Coatings, and Irrigation segments and lower sales for the Utility segment. Net sales were higher in the first three quarters of 2019, as compared with the third quarter of fiscal 2016, reflectedsame period in 2018, due to higher sales in all reportablethe ESS, Utility, and Coatings segments except for the Energy & Mining segment. On a year-to-date basis, higher consolidatedthat were offset by lower sales in 2017, as compared to 2016, reflected increases across all reportablethe Irrigation and Other segments. The changeschange in net sales in the third quarter and first three quarters of fiscal 2017,2019, as compared with the same periods in fiscal 2016, were2018, is as follows:
| | | Third quarter | Third quarter |
| Total | ESS | E&M | Utility | Coatings | Irrigation | Total | ESS | Utility | Coatings | Irrigation | Other |
Sales - 2016 | $ | 610.2 |
| $ | 193.1 |
| $ | 81.2 |
| $ | 150.4 |
| $ | 60.0 |
| $ | 125.5 |
| |
Sales - 2018 | | $ | 678.7 |
| $ | 248.4 |
| $ | 218.0 |
| $ | 74.5 |
| $ | 137.8 |
| $ | — |
|
Volume | 29.7 |
| 15.9 |
| (6.9 | ) | 1.6 |
| 1.5 |
| 17.6 |
| (9.8 | ) | 15.0 |
| (27.7 | ) | (6.1 | ) | 9.0 |
| — |
|
Pricing/mix | 31.7 |
| (3.5 | ) | 2.0 |
| 26.5 |
| 5.6 |
| 1.1 |
| 12.6 |
| 0.5 |
| 12.8 |
| 2.8 |
| (3.5 | ) | — |
|
Acquisitions | 1.6 |
| 1.6 |
| — |
| — |
| — |
| — |
| |
Acquisition/(divestiture) | | 17.4 |
| 8.4 |
| 2.1 |
| 6.9 |
| — |
| — |
|
Currency translation | 7.6 |
| 2.7 |
| 3.4 |
| — |
| 0.6 |
| 0.9 |
| (8.6 | ) | (5.8 | ) | (1.0 | ) | (1.2 | ) | (0.6 | ) | — |
|
Sales - 2017 | $ | 680.8 |
| $ | 209.8 |
| $ | 79.7 |
| $ | 178.5 |
| $ | 67.7 |
| $ | 145.1 |
| |
Sales - 2019 | | $ | 690.3 |
| $ | 266.5 |
| $ | 204.2 |
| $ | 76.9 |
| $ | 142.7 |
| $ | — |
|
| | | Year-to-date | Year-to-date |
| Total | ESS | E&M | Utility | Coatings | Irrigation | Total | ESS | Utility | Coatings | Irrigation | Other |
Sales - 2016 | $ | 1,847.1 |
| $ | 554.9 |
| $ | 231.3 |
| $ | 445.9 |
| $ | 182.2 |
| $ | 432.8 |
| |
Sales - 2018 | | $ | 2,059.8 |
| $ | 710.4 |
| $ | 624.4 |
| $ | 217.5 |
| $ | 484.4 |
| $ | 23.1 |
|
Volume | 110.4 |
| 20.4 |
| (4.9 | ) | 48.2 |
| (5.6 | ) | 52.3 |
| (77.4 | ) | 28.0 |
| (48.0 | ) | (18.7 | ) | (38.7 | ) | — |
|
Pricing/mix | 63.1 |
| (2.2 | ) | 5.1 |
| 42.4 |
| 14.5 |
| 3.3 |
| 70.5 |
| 18.1 |
| 40.1 |
| 9.4 |
| 2.9 |
| — |
|
Acquisitions | 1.6 |
| 1.6 |
| — |
| — |
| — |
| — |
| |
Acquisition/(divestiture) | | 70.4 |
| 20.3 |
| 43.9 |
| 25.1 |
| 4.2 |
| (23.1 | ) |
Currency translation | 8.8 |
| (3.4 | ) | 3.4 |
| — |
| 0.5 |
| 8.3 |
| (39.9 | ) | (24.8 | ) | (3.9 | ) | (5.0 | ) | (6.2 | ) | — |
|
Sales - 2017 | $ | 2,031.0 |
| $ | 571.3 |
| $ | 234.9 |
| $ | 536.5 |
| $ | 191.6 |
| $ | 496.7 |
| |
Sales - 2019 | | $ | 2,083.4 |
| $ | 752.0 |
| $ | 656.5 |
| $ | 228.3 |
| $ | 446.6 |
| $ | — |
|
Volume effects are estimated based on a physical production or sales measure. Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the product sold. Accordingly, pricing and mix changes do not necessarily directly result in operating income changes.
Average steel index prices for both hot rolled coil and plate were higherlower in North America and China in the third quarter and first three quarters of 2017,2019, as compared to the same periods in 2016, resulting in higher average2018, contributing to lower cost of material. We expect that average selling prices will increase over time to offset the decrease insales and improved gross profit realized from the higher cost of steel for the Company.profit.
In the third quarter of 2017, the two hurricanes in the continental United States negatively impacted 10 of our facilities by interrupting production and delivery schedules. This impacted certain locations in the ESS, Coatings, and Utility segments. The Company acquired a highway businessthe following businesses during 2018 and 2019:
A majority ownership stake in IndiaTorrent Engineering and Equipment ("Aircon"Torrent") in the first quarter of 2018 (Irrigation).
Derit Infrastructure Pvt. Ltd. ("Derit") in the third quarter of 2017 that is included2018, which operates a lattice steel manufacturing facility located in our ESS segment.India (Utility and Coatings).
A majority ownership stake in Convert Italia SpA ("Convert") in the third quarter of 2018, a provider of engineered solar tracker solutions (Utility).
Walpar in the third quarter of 2018, a domestic manufacturer of overhead sign structures (ESS).
CSP Coating Systems ("CSP Coatings") in the fourth quarter of 2018, a coatings provider in New Zealand (Coatings).
Larson Camouflage ("Larson") in the first quarter of 2019, an industry leading provider of architectural and camouflage concealment solutions for the wireless telecommunication market (ESS).
United Galvanizing ("United") in the first quarter of 2019, a domestic coatings provider (Coatings).
Connect-It Wireless, Inc. ("Connect-It") in the second quarter of 2019, a domestic communication components business (ESS).
The Company divested of its grinding media business, which was reported in Other, during the second quarter of 2018.
Restructuring Plan
In July 2016,February 2018, the Company identifiedannounced a restructuring plan related to certain operations in Australia/New Zealand2018, primarily in the ESS and Utility segments, through consolidation and other cost-reduction activities (the "2016"2018 Plan") focused primarily on closing and consolidating locations within the Energy and Mining and Coatings segments.. The Company incurred pre-tax expenses from the 20162018 Plan of $2.1$6.2 million and $17.7 million in the third quarter and first three quarters of 2016.2018. The Energy and Mining segment incurred approximately $1.6 million, the Coatings segment incurred approximately $0.3 million, and Corporate incurred approximately $0.2 million of restructuring expenses duringdecrease in the third quarter and first three quarters of 2016.2018 gross profit and operating income due to restructuring expense by segment is as follows:
|
| | | | | | | | | | | | |
Gross Profit | Total | ESS | Utility | Corporate |
Third quarter | $ | 3.9 |
| $ | 3.4 |
| $ | 0.5 |
| $ | — |
|
| | | | |
Year-to-date | $ | 10.8 |
| $ | 8.0 |
| $ | 2.8 |
| $ | — |
|
|
| | | | | | | | | | | | |
Operating Income | Total | ESS | Utility | Corporate |
Third quarter | $ | 6.2 |
| $ | 5.7 |
| $ | 0.5 |
| $ | — |
|
| | | | |
Year-to-date | $ | 17.7 |
| $ | 14.8 |
| $ | 2.8 |
| $ | 0.1 |
|
Currency Translation
In the third quarter and first three quarters of fiscal 2017,2019, we realized an increasea decrease in operating profit, as compared with fiscal 2016,2018, due in part to currency translation effects. Theeffects associated with a stronger U.S. dollar primarily weakened against the Brazilian real and South African rand, resulting in more operating profit in U.S. dollar terms.most foreign currencies. The breakdown of this effect by segment was as
follows:
| | | Total | ESS | E&M | Utility | Coatings | Irrigation | Corporate | Total | ESS | Coatings | Irrigation | Corporate |
Third quarter | $ | 0.4 |
| $ | 0.2 |
| $ | 0.1 |
| $ | — |
| $ | 0.1 |
| $ | — |
| $ | — |
| $ | (0.7 | ) | $ | (0.5 | ) | $ | (0.1 | ) | $ | (0.1 | ) | $ | — |
|
|
|
| |
|
| |
Year-to-date | $ | 1.3 |
| $ | 0.1 |
| $ | 0.1 |
| $ | — |
| $ | (0.1 | ) | $ | 1.2 |
| $ | — |
| $ | (2.2 | ) | $ | (1.2 | ) | $ | (0.4 | ) | $ | (0.7 | ) | $ | 0.1 |
|
Gross Profit, SG&A, and Operating Income
At a consolidated level, the reduction in gross margin (gross profit as a percent of sales) was higher in the third quarter and first three quarters of 2017,2019, as compared with the same periods in 2016, was primarily due2018 attributed to higherlower raw material costs across the Company and improved selling prices across mostour infrastructure businesses. In the third quarter and first three quarters of our businesses. Gross2019, gross profit increased for the ESS, Utility, and Coatings segments and decreased for the Irrigation segment. On a year-to-date basis, lower sales volumes and associated operating deleverage of fixed costs led to the decline for the Irrigation segment.
SG&A expenses decreased in the third quarter and first three quarters of 2017,2019, as compared to the same periods in 2016,2018. The decrease was due to increased sales volumesimpairment of the goodwill and trade name of the Offshore business in most operating segments. The Irrigationthe third quarter of 2018 of $15.8 million and Utility segments realized increasesrestructuring costs incurred in the third quarter and first three quarters of 2017, while ESS2018 totaling $2.3 million and Energy & Mining realized a decrease in gross profit primarily due to sales pricing that did not fully recover$6.9 million, respectively. These decreases were partially offset by SG&A expenses from acquired businesses and higher raw material costs anddeferred compensation expense (offset by an unfavorable sales mix. The Coatings segment realized higher gross profit in the third quarter, but lower gross profit in the first three quartersincrease of 2017 as compared to the same periodsamount in fiscal 2016.other income).
The Company saw an increase in SG&A inIn the third quarter and first three quarters of fiscal 2017,2019, as compared to the same periods in 2016, due to higher incentive expenses related to improved business operations. In addition, the Company incurred higher deferred compensation expenses in the first three quarters of 2017 of $1.7 million, which was offset by the same amount of other income.
In the third quarter of 2017, as compared to 2016, operating income for all operating segments were higher except for the ESS and Energy & Mining segments. On a year-to-date basis,2018, operating income was higher in 2017 for the UtilityESS and IrrigationUtility segments and lower forin the ESSIrrigation and Coatings segments. The overall increase in operating income in the third quarter and first three quarters of 2017, as compared to the same periods in 2016,2019 is primarily attributable to increased sales volumesthe Offshore goodwill and tradename impairment and restructuring costs incurred in the Utility2018 and Irrigation segments.a lower cost structure resulting from those activities in 2019.
Net Interest Expense and Debt
Net interest expense in the third quarter and first three quarters of 2017,2019, as compared to 2018, was lower due to a refinancing related to retiring $250.2 million senior unsecured notes due 2020 at 6.625% in the third quarter of 2018 and issuing new senior unsecured notes of $200.0 million due 2044 and $55.0 million due 2054 at 5.0% and 5.25%, respectively. Costs associated with the same periodsrefinancing of debt in 2016,the third quarter of 2018 totaled $14.8 million. In addition, the Company entered into certain cross currency swaps in 2018, which effectively swaps the Company's U.S. denominated debt for euro and Danish kroner debt at lower interest rates that resulted in lower interest expense. Interest income was consistentlower in the first three quarters of 2019, as compared to 2018, due to minimal changes in short and long-term borrowings. Interest income increased due to morehaving less cash on hand to invest.
Other Income/ExpenseExpenses
The change in other income/expenseexpenses in the third quarter and first three quarters of 2017,2019, as compared with the same periods in 2016,to 2018, was primarily due to athe change in valuation of deferred compensation assets. This changeassets which resulted in lowerless other income of $0.7 million. On a year-to-date basis, deferred compensation assets resulted in the third quarter of $0.4 million but increasedadditional other income for the first three quarters of $1.7$3.6 million. This amount isThe change related to deferred compensation assets are offset by an opposite change of the same amount in SG&A expense. The change in the market value of the Company's shares held of Delta EMD was a $0.6 million smaller loss on a year-to-date basis when comparing 2017 to 2016. The remaining change was due to fluctuations in foreign currency transaction gains or gains/losses.
Income Tax Expense
Our effective income tax rate in the third quarter and first three quarters of 20172019 was 27.5%24.5% and 28.9%24.7%, respectively, compared to 32.6%56.5% and 31.7%30.5% in the third quarter and first three quarters of 2016, respectively. A $1.9 million reversal2018. The decrease in effective tax rate results from the impairment of a valuation allowance against certain foreign net operating loss carryforwardsgoodwill and trade name of the Offshore business that are not tax deductible and restructuring activities recognized in third quarter of 2017 contributed to the lower2018.
tax rate. In addition, the Company recorded $1.8 million of deferred income tax expense related to decreased future corporate tax rates in the United Kingdom in the third quarter of 2016.
Earnings attributable to noncontrolling interests was consistentlower in the third quarter and first three quarters of 2017,2019, as compared to the same periods in 2016.2018, due to lower earnings of certain less than 100%-owned subsidiaries.
Cash Flows from Operations
Our cash flows provided by operations was $134.4$239.2 million in the first three quarters of fiscal 2017,2019, as compared with $127.3$68.1 million provided by operations in the first three quarters of 2016.2018. The increase in operating cash flow in the first three quarters of fiscal 2017,2019, as compared with 2016,2018, was due to improved working capital management. The lower working capital is primarily the resultattributed to a larger liability for customer billings in excess of improved netcosts and earnings mostly(accrued expenses). This was partially offset by higher net working capital tied to increased sales volumes.the 2019 Delta pension plan contribution (the 2018 annual payment was contributed early in December 2017) which is a use of cash flows from operations.
Engineered Support Structures (ESS)ESS segment
The increase in sales in the third quarter and first three quarters of fiscal 2017,2019, as compared with the same periods of 2016,in 2018, was due to improved roadway product sales volumesvolume increase, higher sales prices, and higher communication product linerecent acquisitions. The sales volumes.increase was partially offset by $5.8 million and $24.8 million of unfavorable currency translation effects, respectively.
Global lighting and traffic, and roadwayhighway safety product sales in the third quarter and first three quarters of 2017 were2019 was higher by $8.1 million and $7.5 million, as compared to the same periods in fiscal 2016, primarily due to increased sales volumes in roadway product sales, which is a product line outside of North America.2018. In the third quarter and first three quarters of 2017,2019, as compared to 2016, sales volumes in the U.S. were lower across commercial and transportation markets. The 2015 long-term U.S. highway bill has not yet provided a meaningful uplift for our North America structures business. Sales in Europe were higher in the third quarter but lower in the first three quarters of 2017 compared to the same periods in fiscal 2016. The domestic2018, sales pricing improved in North America across commercial and transportation markets and volume increased. Lower sales volumes mainly due to the ceasing of operations in general remain subdued in Europe. The increase in sales volume was partially offset byMorocco and unfavorable currency translation effects on a year-to-date basis.
Communicationcontributed to lower sales in Europe. Highway safety product line sales were highervolumes decreased in the third quarter and first three quarters of fiscal 2017,2019, as compared to 2018, due primarily to a slowdown in government spending in Australia and India.
Communication product line sales were higher by $12.4 million and $29.0 million in the third quarter and first three quarters of 2019, as compared with the same periods in fiscal 2016.2018. In both North America, component and Asia-Pacific, communication structure sales volumes increased in the third quarter and component sales increasedfirst three quarters of 2019 due to higher demand from the continued network expansion by providers.providers and the sales
contribution from the acquisition of Larson Camouflage and Connect-It. In Asia-Pacific, sales volumes decreased due to lower demand in China and Australia.
Access Systems product line net sales decreased in the third quarter and first three quarters of 2019, as compared to 2018, by $4.0 million and $6.6 million, respectively. Sales volume declines and unfavorable foreign currency translation for the Australia business drove the decrease in sales.
Gross profit, as a percentage of sales, and operating income for the segment were higher in the third quarter and first three quarters of 2019, as compared to 2018, due to improved sales pricing, restructuring costs incurred in 2018, and recent acquisitions. These improvements in profitability were partially offset in the third quarter of 2019 by an approximately $7 million loss recognized on certain access systems projects. SG&A spending was lower in the third quarter and first three quarters of 2017, as compared with the same periods in 2016, due to margin contraction from higher raw material costs that the business was not able to fully recover through higher sales pricing. SG&A spending was higher in the third quarter of 2017, as compared to 2016,2019 due to foreign currency translation effects.effects, restructuring costs incurred in 2018 and benefits realized in 2019 related to those activities. The SG&A spending was lowerexpenses from acquisitions completed in the first three quarters of 2017, as compared to 2016, due primarily to lower commissions owed on communication product line sales, reduced incentives due to decreased operating performance, and currency translation effects.
Energy & Mining (E&M) segment
Theprevious twelve months partially offset the decrease in net salesSG&A in the third quarter of 2017, as compared to 2016, was due primarily to lower sales volumes that were partially offset by higher sales pricing and favorable currency translation effects. The increase in net sales in the first three quarters of 2017, as compared to 2016, was due to higher sales pricing and favorable currency translation effects.
Access systems product line net sales in2019. In the third quarter and first three quarters of 2017 were higher than2018, the same periods in 2016 due to highersegment incurred $3.4 million and $8.0 million of restructuring costs within product cost of sales pricing and favorable currency translation effects. The increase was partially offset by lower external sales volumes in Asia.$2.3 million and $6.8 million within SG&A expenses, respectively.
Offshore and other complex structuresUtility segment
In the Utility segment, sales decreased in the third quarter of 2017,2019, as compared to the same period in 2016,with 2018, due to lower volumes and currency translation effects that were partially offset by favorable currency translation effects. Sales decreasedan increase in the first three quarters of 2017, as compared to 2016, due to loweraverage sales pricing that was partially offset by volume improvements primarily in the wind tower product line.
Grinding media sales were down slightly in the third quarter and first three quarters of 2017, as compared to the same periods in 2016. A decrease in sales volumes was offset by higher sales pricing and favorable currency translation effects.
Operating income for the segment in the third quarter of 2017, as compared to 2016, was lower primarily due to sales pricing that did not fully recover higher material costs in the grinding media business. Operating income was comparable in the first three quarters of 2017 as compared to 2016, due to benefits realized in Access Systems from the 2016 restructuring activities offsetting the lower gross profit realized from higher material costs. SG&A expense was flat in the third quarter and first three quarters of 2017, as compared to the same periods in 2016. Restructuring costs incurred in the third quarter of 2016 and lower compensation costs were offset by currency translation effects in 2017.
Utility Support Structures (Utility) segment
In the Utility segment, sales increased in the third quarter of 2017, as compared with 2016, due to the higher costs of steel and a favorable sales mix. A numberprices. Most of our sales contracts in North America contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order. For the first three quarters of 2017, as comparedSpecific to 2016, improved sales demand in North America, resulted in increasedthe average sales price increase was partially offset by lower sales volumes in tons for steel utility structures also contributed to the increase in sales. Sales volumes in tons forstructures; concrete utility structuresstructure sales volumes were also higher in the third quarter and first three quarters of 2017,2019, as compared to the same periods in 2016. International utility2018 due to good demand. The 2018 acquisitions of Convert and Derit contributed $43.9 million of sales increases in the first three quarters of 2019, as compared with 2018.
Offshore and other complex structures sales decreased in 2017the third quarter 2019, as compared to 2018, due to lower volumes.volumes and unfavorable currency translation effects. Sales were flat on a year-to-date basis due to higher volumes that were offset by less favorable sales pricing and currency translation effects.
Gross profit as a percentage of sales increased in the third quarter and first three quarters of 2017,2019, as compared to the same periods in 2016,2018, due to recent acquisitions and improved sales mix and pricing and sales mix.for the North America utility business. The increase in gross profit for the first three quarters of 2019, as compared to 2018, was partially offset by $3.0 million of second quarter 2019 inspection costs to finalize the requirements from a 2015 commercial settlement. SG&A expense was higherlower in the third quarter and first three quarters of 2017,2019, as compared with the same periods in 2016,2018, due to the 2018 goodwill and trade name impairment of the Offshore business of $15.8 million, expenses of Derit and Convert and higher incentive expensesales commissions. Excluding the goodwill and commission expense attributed to the increased sales volumes. Operatingtrade name impairment and inspection costs, operating income increased in the third quarter and first three quarters of 2017, as compared with 2016,2019 due to the increased sales volumes and improved sales pricing.mix and pricing in North America and restructuring activities undertaken in 2018.
Coatings segment
Coatings segment sales increased in the third quarter and first three quarters of 2017,2019, as compared to the same periods in 2016,2018, due primarily to increasedhigher sales prices to recover higher zinc costs globally. External sales volumesand recent acquisitions. Sales volume demand decreased in North America increased in the third quarter but were lower year-to-date, while intercompany volumes increased in the third quarter and first three quarters.quarters of 2019, as compared to 2018, but was more than offset by price actions and revenue contributions from the United acquisition. In the Asia-Pacific region, the acquisition of Derit and CSP Coatings and price increases to recover zinc cost increases drove improved demand/volume provided an increasesales in net sales.the third quarter and first three quarters of 2019.
SG&A expense was higher in the third quarter and first three quarters of 2019, as compared to 2018, due to SG&A expenses of recent acquisitions and approximately $3.0 million of one-time expenses associated with a legal settlement in the second quarter of 2019. Operating income was lower in the third quarter of 2017, as compared to 2016, due to restructuring actions undertaken in 2016 to reduce the cost structure in Australia. SG&A expense was comparable in theand first three quarters of 2017, as2019, compared to 2016. Operating income was higherthe same periods in the third quarter of 2017 compared to 2016,2018, due to volume decreases globally and non-recurring legal expenses. The decrease was partially offset by contributions from the acquisition of United and CSP Coatings and improved sales pricing and restructuring actions undertaken in 2016. Operating income was lower in the first three quarters of 2017, as compared with 2016, due to costs incurred to start up our facility in Texas.pricing.
Irrigation segment
The increase in Irrigation segment net sales in the third quarter of 2017,2019, as compared to 2016, was2018, is primarily due to sales volume increases for international irrigation.in North America. On a year-to-date basis, the decrease in 2017 as comparedIrrigation segment net sales is due to 2016, thelower sales increase is drivenvolumes in North America and international markets and unfavorable currency translation effects, partially offset by improved volumes for both the domesticsales pricing. Continued low commodity prices and internationaluncertainty around trade disputes with China caused growers to
delay irrigation businesses. In North America, when comparing 2017purchases. However, sales of technology-related products and services continue to the same periodsgrow, as growers are increasing adoption of 2016,technology to reduce costs and enhance profitability. International sales volumes were comparable in the third quarter but increased year-to-date primarily driven by markets outside the traditional corn-belt. In addition, higher equipment running times due to weather conditions resulted in higherof irrigation and service parts sales on a year-to-date basis. International sales increaseddecreased in the third quarter and first three quarters of 2017,2019, as compared to the same periods in 2016,2018, due to volume increases across most regionsreduced volumes and favorable foreignunfavorable currency translation effects for Brazil and South Africa.effects.
SG&A was higher in the third quarter and the first three quarters of fiscal 2017,2019, as compared with the same periods in 2016. The increase can primarily be attributed to higher incentive costs2018, due to improved business results2018 acquisitions and currency translation effects related to the international irrigation business.higher product development expenses. Operating income for the segment increaseddecreased in the third quarter and first three quarters of fiscal 20172019 over the same periods in 2016, primarily2018, due to North Americalower tubing and international irrigation sales volume increases, productivity improvements,volumes and favorable foreign currency translation effects.associated operating deleverage of fixed factory and SG&A costs.
Other
At the end of April 2018, the Company completed the sale of Donhad, a mining consumable business with operations in Australia. There are no remaining businesses recorded within Other.
LIFO expense
Unit costs of raw materialsin the U.S. decreased in the first three quarters of 2019, as compared to the end of 2018, resulting in a LIFO benefit during 2019. In the first three quarters of 2018, unit costs of raw materials in the U.S. increased, as compared to the end of 2017, resulting in LIFO expense in 2018.
Net corporate expense
Corporate SG&A expense was lower in the third quarter of 2017,2019 approximated the amount recognized in the same quarter of 2018. Corporate SG&A expense was higher in the first three quarters of 2019, as compared to the same period in 2016,2018, due to $0.4 million lower pension expense for the Delta Pension Plan and $0.4$3.6 million of lowerincreased appreciation of deferred compensation expenses thatplan assets. The increase in deferred compensation plan assets is offset by the same amount in other expense. Net corporate expense slightly increased in the first three quarters of 2017 as
compared to 2016, due to $1.7 million of higher deferred compensation expenses that is offset by a reduction of the same amount in other expense. This increase was partially offset by $1.0 million of lower pension expenses for the Delta Pension Plan.income/expenses.
Liquidity and Capital Resources
Cash Flows
Working Capital and Operating Cash Flows-Net working capital was $1,034.7$857.5 million at September 30, 2017,28, 2019, as compared to $903.4$931.6 million at December 31, 2016.29, 2018. The increasedecrease in net working capital in 2017 mainly resulted from increased receivables, cash on hand, and inventory, partially offset by2019 is attributed to higher accrued expenses primarily due to a higher balance in customer billings in excess of costs and accounts payable.earnings. Cash flow provided by operations was $134.4$239.2 million in the first three quarters of 2017,2019, as compared with $127.3$68.1 million in first three quarters of 2016.2018. The increase in operating cash flowflows in the first three quarters of 2017,2019, as compared to 2016,2018, was primarily the result of higher net earnings tied to increased sales volumes and pricing that was mostly offset by a corresponding increase inimproved working capital.capital management this year.
Investing Cash Flows-Capital spending in the first three quarters of fiscal 20172019 was $39.9$72.0 million, as compared to $42.2$48.9 million for the same period in 2016.2018. The increase in investing cash outflows in the first three quarters of 2019, as compared to 2018, can be attributed to lower proceeds from the sale of assets due to the sale of our mining consumable business in 2018. Capital spending projects in 20172019 and 20162018 related to certain facility expansions and investments in machinery and equipment across all businesses. We expect our capital spending for the 20172019 fiscal year to be approximately $60$90 to $100 million.
Financing Cash Flows-Our total interest‑bearing debt decreased slightly to $755.3was $784.6 million at September 30, 2017 from $756.4 million28, 2019 and $753.3 at December 31, 2016.29, 2018. Financing cash flows changed from a usean outflow of approximately $82.4$136.7 million in the first three quarters of fiscal 20162018 to a usean outflow of $22.0$82.7 million infor the first three quarters of fiscal 2017.2019. The reduction ofdecrease in financing cash outflows in the first three quarters of 2017,2019, as compared to 2016,2018, was due to the Company purchasing $46.6 millionhigher net borrowings and lower purchases of treasury shares under our share repurchase program and the purchase of certain noncontrolling interests totaling $11.0 million in 2016.2019.
Financing and Capital
We have an openThe Board of Directors authorized the purchase of $250 million authorized share purchase programof the Company's shares without an expiration date.date in October 2018. The share purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any share repurchases under the share repurchase program and we may discontinue the share repurchase program at any time. NoWe acquired 126,734 treasury shares were repurchased
for approximately $16.8 million under our share repurchase program during the first three quartersthird quarter of 2017.2019. As of September 30, 2017,28, 2019, we have approximately $132.2$212.2 million open under this authorization to repurchase shares in the future.
Our capital allocation philosophy announcement included our intention to manage our capital structure to maintain our investment grade debt rating. Our most recent ratingratings were Baa3 by Moody's Investors Services, Inc., BBB- rating by Fitch Rating Services, and BBB+ rating by Standard and Poor's Rating Services. We expect to maintain a leverage ratio which will support our current investment grade debt rating.
Our debt financing at September 30, 201728, 2019 is primarily long-term debt consisting of:
$250.2450 million face value ($253.0 million carrying value) of senior unsecured notes that bear interest at 6.625% per annum and are due in April 2020.
$250 million face value ($248.9436.3 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044.
$250305 million face value ($246.8297.5 million carrying value) of unsecured notes that bear interest at 5.25% per annum and are due in October 2054.
We are allowed to repurchase the notes at specified prepayment premiums. All threeBoth tranches of these notes are guaranteed by certain of our subsidiaries.
On October 18, 2017, we amended and restated our revolving credit facility with JP Morgan Chase Bank, N.A., as Administrative Agent, and the other lenders party thereto. The credit facility provides for $600 million of committed unsecured revolving credit loans. We may increase the credit facility by up to an additional $200 million at any time, subject to lenders increasing the amount of their commitments. Our wholly-owned subsidiaries Valmont Industries Holland B.V. and Valmont Group Pty. Ltd., along with the Company, are borrowers under the credit facility. The obligations arising under the credit facility are guaranteed by the Company and its wholly-owned subsidiaries PiRod, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc. and Valmont Queensland Pty. Ltd.
The amendments to the credit facility, which are adopted in the amended and restated credit agreement, include:
an extension of the maturity date of the credit facility from October 17, 2019 to October 18, 2022;
an increase in the available borrowings in foreign currencies from $200 million to $400 million;
a decrease in the range of commitment fees payable from 10 to 27.5 basis points to 10 to 25 basis points (the specific commitment fees payable on the average daily unused portion of the commitments under the credit facility depend on the credit rating of the Company's senior, unsecured, long-term debt);
a modification of the definition of "EBITDA" to add-back non-recurring cash and non-cash restructuring costs in an amount that does not exceed $75 million in any trailing twelve month period;
a modification of the leverage ratio permitting it to increase from 3.5X to 3.75X for the four consecutive fiscal quarters after certain material acquisitions;
implementing beneficial changes to certain of the baskets and exceptions in the negative covenants of the credit facility; and
updating the credit facility with certain market provisions.
At September 30, 201728, 2019 and December 31, 2016,29, 2018, we had no$28.4 million and $5.7 million outstanding borrowings under our revolving credit agreement.agreement, respectively. The revolving credit agreement contains certain financial covenants that may limit our additional borrowing capability under the agreement. At September 30, 2017,28, 2019, we had the ability to borrow $585.2$557.0 million under this facility, after consideration of standby letters of credit of $14.8$14.6 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling $113.0$131.3 million, $112.8$112.0 million of which was unused at September 30, 2017.28, 2019.
Our senior unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness.
The debt agreements contain covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities, including capital expenditures. The debt agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired business. The debt agreements also provide for an adjustment to EBITDA, subject to certain limitations, for non-cash charges or gains that are non-recurring in nature. For 2017, our covenant calculations do not include any estimated EBITDA from acquired businesses.
Our key debt covenants are as follows:
| |
• | Leverage ratio - Interest-bearing debt is not to exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four quarters; and |
| |
• | Interest earned ratio - Adjusted EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period. |
Interest-bearing debt is not to exceed 3.5X Adjusted EBITDA of the prior four quarters; and
Adjusted EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period.
At September 30, 2017,28, 2019, we were in compliance with all covenants related to the debt agreements. The key covenant calculations at September 30, 201728, 2019 were as follows:follows (in 000's):
|
| | | |
Interest-bearing debt | $ | 784,593 |
|
Adjusted EBITDA-last four quarters | 327,014 |
|
Leverage ratio | 2.40 |
|
| |
Adjusted EBITDA-last four quarters | $ | 327,014 |
|
Interest expense-last four quarters | 40,389 |
|
Interest earned ratio | 8.10 |
|
|
| | | |
Interest-bearing debt | $ | 755,348 |
|
Adjusted EBITDA-last four quarters | 345,590 |
|
Leverage ratio | 2.19 |
|
| |
Adjusted EBITDA-last four quarters | $ | 345,590 |
|
Interest expense-last four quarters | 44,445 |
|
Interest earned ratio | 7.78 |
|
The calculation of Adjusted EBITDA-last four quarters (September 25, 201630, 2018 through September 30, 2017)28, 2019) is as follows:follows. The last four quarters information ended September 28, 2019 is calculated by taking the full fiscal year ended December 29, 2018, subtracting the first three quarters ended September 29, 2018, and adding the first three quarters ended September 28, 2019.
| | Net cash flows from operations | $ | 226,318 |
| $ | 324,185 |
|
Interest expense | 44,445 |
| 40,389 |
|
Income tax expense | 42,666 |
| 47,258 |
|
Impairment of property, plant and equipment | (481 | ) | (803 | ) |
Loss on investment | (8 | ) | |
Change in fair value of contingent consideration | (285 | ) | |
Gain on investment | | 48 |
|
Deferred income tax benefit | 22,072 |
| (4,625 | ) |
Noncontrolling interest | (5,292 | ) | (4,534 | ) |
Stock-based compensation | (10,659 | ) | (11,205 | ) |
Increase in restricted cash - pension plan trust | (12,568 | ) | |
Pension plan expense | (865 | ) | 920 |
|
Contribution to pension plan | 26,840 |
| 17,408 |
|
Changes in assets and liabilities | 29,167 |
| (104,815 | ) |
Other | 350 |
| 338 |
|
EBITDA | 361,700 |
| 304,564 |
|
Reversal of contingent liability | (16,591 | ) | |
Cash restructuring expenses | | 15,566 |
|
EBITDA from acquisitions (months not owned) | | 2,411 |
|
Impairment of property, plant and equipment | 481 |
| 4,473 |
|
Adjusted EBITDA | $ | 345,590 |
| $ | 327,014 |
|
| | Net earnings attributable to Valmont Industries, Inc. | $ | 189,915 |
| $ | 135,684 |
|
Interest expense | 44,445 |
| 40,389 |
|
Income tax expense | 42,666 |
| 47,258 |
|
Depreciation and amortization expense | 84,674 |
| 81,233 |
|
EBITDA | 361,700 |
| 304,564 |
|
Reversal of contingent liability | (16,591 | ) | |
Cash restructuring expenses | | 15,566 |
|
EBITDA from acquisitions (months not owned) | | 2,411 |
|
Impairment of property, plant, and equipment | 481 |
| 4,473 |
|
Adjusted EBITDA | $ | 345,590 |
| $ | 327,014 |
|
Our businesses are cyclical, but we have diversity in our markets from a product, customer and a geographical standpoint. We have demonstrated the ability to effectively manage through business cycles and maintain liquidity. We have consistently generated operating cash flows in excess of our capital expenditures. Based on our available credit facilities, recent issuance of senior unsecured notes and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs.
We have not made any provisionAt the end of the third quarter of 2019, the unremitted foreign earnings were approximately $312.3 million as a result of dividends that were paid. While the tax on these foreign earnings resulted in the reduction of the excess of the amount for U.S. income taxesfinancial reporting over the tax basis in our financial statements on approximately $437.8 million of undistributed earnings of our foreign subsidiaries, as we intendan actual repatriation from our non-U.S. subsidiaries may still be subject to reinvest those earnings.foreign withholding taxes and U.S. state income taxes. Our earnings in our non-U.S. subsidiaries are not indefinitely reinvested. Of our cash balances of $493.5$327.2 million at September 30, 2017,28, 2019, approximately $370.5$139.0 million is held in entities outside the United States. If we need to repatriate foreign cash balances to the United States to meet our cash needs,non-U.S. subsidiaries. We recorded deferred income taxes would be paid to the extent that those cash repatriations were undistributed earnings of ourfor foreign subsidiaries. The determination of the additionalwithholding taxes and U.S. federal and state income taxes or foreign withholding taxes have not been provided, as the determination is not practicable.of $3.3 million and $0.6 million, respectively.
Financial Obligations and Financial Commitments
There have been no material changes to our financial obligations and financial commitments as described on page 3634-35 in our Form 10-K for the fiscal year ended December 31, 2016.29, 2018.
Off Balance Sheet Arrangements
There have been no changes in our off balance sheet arrangements as described on page 3735 in our Form 10-K for the fiscal year ended December 31, 2016.29, 2018.
Critical Accounting Policies
There have beenwere no changes in our critical accounting policies as described on pages 38-4237-40 in our Form 10-K for the fiscal year ended December 31, 201629, 2018 during the quarternine months ended September 30, 2017.28, 2019.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There were no material changes in the company's market risk during the quarter ended September 30, 2017.28, 2019. For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year ended December 31, 2016.29, 2018.
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.
No changes in the Company's internal control over financial reporting occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
|
| | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average Price paid per share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Maximum Number of Shares that may yet be Purchased under the Program (1) |
July 2, 2017 to July 29, 2017 | — |
| | $ | — |
| | — |
| | $ | 132,172,000 |
|
July 30, 2017 to September 2, 2017 | — |
| | — |
| | — |
| | 132,172,000 |
|
September 3, 2017 to September 30, 2017 | — |
| | — |
| | — |
| | 132,172,000 |
|
Total | — |
| | $ | — |
| | — |
| | $ | 132,172,000 |
|
|
| | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average Price paid per share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Maximum Number of Shares that may yet be Purchased under the Program (1) |
June 30, 2019 to July 27, 2019 | 30,430 |
| | $ | 127.78 |
| | 37,375 |
| | $ | 225,128,000 |
|
July 28, 2019 to August 31, 2019 | 56,178 |
| | 132.28 |
| | 153,791 |
| | 217,697,000 |
|
September 1, 2019 to September 28, 2019 | 40,126 |
| | 137.14 |
| | 45,157 |
| | 212,194,000 |
|
Total | 126,734 |
| | $ | 132.74 |
| | 236,323 |
| | $ | 212,194,000 |
|
(1) On May 13, 2014, we announced a new capital allocation philosophy which included a share repurchase program. Specifically, the Board of Directors authorized the purchase of up to $500 million of the Company's outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. On February 24, 2015 and again on October 31, 2018, the Board of Directors authorized an additional purchase of up to $250 million of the Company's outstanding common stock with no stated expiration date. As of September 30, 2017,28, 2019, we have acquired 4,588,1315,864,872 shares for approximately $617.8$787.8 million under this share repurchase program.
Item 6. Exhibits
|
| | |
Exhibit No. | | Description |
| | Section 302 Certificate of Chief Executive Officer |
| | Section 302 Certificate of Chief Financial Officer |
| | Section 906 Certifications of Chief Executive Officer and Chief Financial Officer |
101 | | The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017,28, 2019, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information. |
104 | | Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101) |
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/ MARK C. JAKSICH |
| Mark C. Jaksich Executive Vice President and Chief Financial Officer |
Dated this 1st31st day of November, 2017October, 2019.
Index of Exhibits
|
| | |
Exhibit No. | | Description |
31.1 | | 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 |
101 | | The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information.
|