Washington, D.C. 20549
Valmont Industries, Inc.
(Former name, former address and former fiscal year, if changed since last report)
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
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. 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, 2016.26, 2020. The results of operations for the period ended September 30, 201725, 2021 are not necessarily indicative of the operating results for the full year.
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.
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 to six years or on the grant's fifth anniversary of the grant.
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.
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$99 and $2,016$202 as of September 30, 201725, 2021 and December 31, 2016,26, 2020, 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.
|
| | | | | | | | | | | | | | | |
| 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)
Net Investment Hedge
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 the second quarter of 2016,addition, the Company entered into a one-year foreign currency forward contract which qualified as a net investment hedge, in orderelected the practical expedient 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 on 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 recognizenot adjust the amount of revenue to which it expectsconsideration to be entitledreceived in a contract for any significant financing component if payment is expected within twelve months of transfer of control of goods or services.
Segment and Product Line Revenue Recognition
The Utility segment revenues are derived from manufactured steel and concrete structures for the transfer of promised goods or services to customers. This standard is effective for interimNorth America utility industry and annual reporting periods beginning after December 15, 2017,offshore and can be adopted either retrospectively or as a cumulative effect adjustment asother complex structures used in energy generation and distribution outside of the date of adoption. Early adoption is permitted for interimUnited States. Steel 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 of revenue recognition for the Company’s product lines thatconcrete utility structures are custom engineered to a single customer’scustomer 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 on the ratio of costs incurred to-date to the total estimated costs at completion of the performance obligation. External sales agents are used in certain sales of steel and concrete structures; the Company 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 ESS segment revenues are derived from the manufacture and distribution of poles, towers, and components for lighting, transportation, and highway safety, engineered access systems, and wireless communication markets. For the lighting, transportation, and highway 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 asset can be usedcustomer 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 specifications for another customer. These product lines reside in the Utility and Engineered Support Structures segments.communication structures. When the terms and conditions allowcustomer 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 Companyremaining wireless communication product line customers which do not provide a contractual right to bill a customer for full compensationwork completed on a canceled order, for the performance completed to date, revenue will beis recognized over the production period and not the current practice which is upon shipment or timedelivery of deliverythe goods to the customer.customer which is the same point in time that the customer is billed.
The CompanyCoatings segment revenues are derived by providing coating services to customers’ products, which include galvanizing, anodizing, and powder coating. Revenue is also evaluatingrecognized once the necessary changescoating service has been performed and the goods are ready to its internal control processesbe picked up or delivered to recognize revenue overthe customer which is the same time using an inputs based model after adoption. Based onthat the current statuscustomer is billed.
The Irrigation segment revenues are derived from the manufacture of agricultural irrigation equipment and related parts and services for the evaluation, the adoption of the standard is not expected to have a material effect on the amounts or timing of revenueagricultural industry and tubular products for industrial customers. Revenue recognition for the Company’s other segments. The Company expects to adoptirrigation segment is generally upon shipment of the new standard using the modified retrospective approach effective January 1, 2018.
In February 2016, the FASB issued ASU 2016-02, Leases, 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 liability will be equalgoods to the present value of lease payments. For income statement purposes,customer which is the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will resultsame point 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 criteriatime that the customer is billed. The remote monitoring subscription services are largely similar to those applied in current lease accounting, but without explicit bright lines. ASU 2016-02primarily billed annually and revenue is effective for interim and annual reporting periods beginning after December 15, 2018 and is to be appliedrecognized on a modified retrospective transition. The Companystraight-line basis over the subsequent twelve months.
Disaggregation of revenue by product line is currently evaluatingdisclosed in the effectSegment footnote. A breakdown by segment of adopting this new accounting guidance but expectsrevenue recognized over time and at a point in time for the adoption will result in a significant increase in total assetsthirteen and liabilities.thirty-nine weeks ended September 25, 2021 and September 26, 2020 is as follows:
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Point in Time | | Over Time | | Point in Time | | Over Time |
| Thirteen weeks ended September 25, 2021 | | Thirteen weeks ended September 25, 2021 | | Thirty-nine weeks ended September 25, 2021 | | Thirty-nine weeks ended September 25, 2021 |
Utility Support Structures | $ | 12,834 | | | $ | 263,668 | | | $ | 28,255 | | | $ | 768,808 | |
Engineered Support Structures | 271,277 | | | 9,772 | | | 745,125 | | | 27,420 | |
Coatings | 74,906 | | | — | | | 224,102 | | | — | |
Irrigation | 230,273 | | | 6,052 | | | 729,813 | | | 14,774 | |
Total | $ | 589,290 | | | $ | 279,492 | | | $ | 1,727,295 | | | $ | 811,002 | |
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) | | | | | | | | | | | | | | | | | | | | | | | |
| Point in Time | | Over Time | | Point in Time | | Over Time |
| Thirteen weeks ended September 26, 2020 | | Thirteen weeks ended September 26, 2020 | | Thirty-nine weeks ended September 26, 2020 | | Thirty-nine weeks ended September 26, 2020 |
Utility Support Structures | $ | 43,287 | | | $ | 229,192 | | | $ | 56,830 | | | $ | 667,070 | |
Engineered Support Structures | 244,785 | | | 10,160 | | | 697,491 | | | 33,693 | |
Coatings | 68,698 | | | — | | | 199,955 | | | — | |
Irrigation | 133,999 | | | 3,849 | | | 430,729 | | | 11,210 | |
Total | $ | 490,769 | | | $ | 243,201 | | | $ | 1,385,005 | | | $ | 711,973 | |
The Company's contract asset as of September 25, 2021 and December 26, 2020 was $155,417 and $123,495,
respectively. Both steel and concrete utility customers are generally invoiced upon shipment or delivery of the goods to the customer's specified location with few customers that make 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.
At September 25, 2021 and December 26, 2020, total contract liabilities were $203,198 and $170,919, respectively. At September 25, 2021, $138,286 is recorded as contract liabilities and $64,912 is recorded as other noncurrent liabilities on the condensed consolidated balance sheets. During the thirteen and thirty-nine weeks ended September 25, 2021, the Company recognized $18,981 and $88,350 of revenue that was included in the liability as of December 26, 2020. In August 2016,the thirteen and thirty-nine weeks ended September 26, 2020, the Company recognized $16,333 and $55,610 of revenue that was included in the liability as of December 28, 2019. The revenue recognized was due to applying advance payments received for performance obligations completed during the period. At September 25, 2021, the Company had $124,767 of remaining performance obligations on contracts with an original expected duration of one year or more and expects to complete the remaining performance obligations on these contracts within the next 12 to 24 months.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments inAccounting Standards Update No. 2018-14 (ASU 2019-12), Income Taxes (Topic 740): Simplifying the Statement of Cash FlowsAccounting for Income Taxes, which provides more specificsimplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance on cash flow presentation for certain transactions. ASU 2016-15 is effective for interim periods and fiscal years beginning after December 15, 2017, with early adoption permitted.to improve consistency in application of Accounting Standards Codification (ASC) 740. The Company doesadopted this standard on the first day of fiscal 2021 and it did not expect the provisions of this new standard will have a material impact on the consolidated financial statements and plans to adopt it in the first quarter of 2018.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test 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 the third quarter of 2017 which is the same period as it performs the annual goodwill impairment testing.
In March 2017, the FASB issued ASU 2017-07, Presentation of Net Periodic Benefit Cost Related to Defined Benefit Plans, which amends the income statement presentation requirements for the components 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 permitted as of the beginning 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.
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 theCompany's condensed consolidated financial statements.
Recently Issued Accounting Pronouncements (not yet adopted)
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
In March 2020, the FASB issued Accounting Standards Update No. 2020-04 (ASU 2020-04), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP principles to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform. . In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarified that certain optional expedients and exceptions in Topic 848 apply to derivative instruments that are affected by the discounting transition due to reference rate reform. The Company has not used any of the accommodations to date, but may use them up until December 31, 2022.
(2) ACQUISITIONS
On July 31, 2017,May 12, 2021, the Company purchased Aircon Guardrails Private Limited ("Aircon")acquired the outstanding shares of Prospera, an artificial intelligence company focused on machine learning and computer vision in agriculture, for $5,362$300,000 in cash net(net of cash acquired, plus assumed liabilities. Aircon produces highway safety systems including guardrails, structural metal products,acquired). The acquisition of Prospera, located in Tel Aviv, Israel, allows the Company to accelerate innovation with machine learning for agronomy and solar structural productswill be reported in India with annual salesthe Irrigation segment. The preliminary fair values assigned were $269,859 for goodwill, $37,300 for developed technology, trade name of approximately $10,000. In$2,900, property, plant, and equipment of $1,063, deferred tax liability of $9,246, and the preliminary purchase price allocation, goodwill of $3,327 and $2,109 of customer relationships and other intangible assets were recorded.remainder to net working capital. Goodwill is not deductible for tax purposes. This business is included inpurposes and the Engineered Support Structures segmentdeveloped technology asset will be amortized over 5 years. The amount allocated to goodwill was primarily attributable to anticipated synergies and was acquired to expand the Company's geographic presence in the Asia-Pacific region.other intangibles that do not qualify for separate recognition. The Company expects to finalize the purchase price allocation in the fourth quarter of 2017. 2021.
On April 20, 2021 the Company acquired the assets of PivoTrac for $12,500 in cash. The agreed upon purchase price was $14,000, with $1,500 being held back for seller representations and warranties that will be settled within 12 months of the acquisition date. The acquisition of PivoTrac, located in Texas, allows the Company to advance its technology strategy and increase its number of connected agricultural devices and will be reported in the Irrigation segment. The preliminary fair values assigned were $10,800 for goodwill, $2,627 for customer relationships, and the remainder is net working capital. Goodwill is not deductible for tax purposes and the customer relationship will be amortized over 10 years. The Company expects the purchase price allocation to be finalized in the second quarter of 2022.
OnMay 29, 2020, the Company acquired 55% of Energia Solar do Brasil ("Solbras") for $4,308. Approximately $646 of the purchase price was contingent on seller representations and warranties was settled for the full amount in the second quarter of 2021. Solbras is a leading provider of solar energy solutions for agriculture. In the purchase price allocation, goodwill of $3,341 and customer relationships of $3,718 were recorded and the remainder is net working capital. Goodwill is not deductible for tax purposes and the customer relationship will be amortized over 8 years. The acquisition of Solbras, located in Brazil, allows the Company to expand its product offerings in the Irrigation segment to include not only pivots, but also a sustainable and low-cost energy source to provide electricity to the units. The Company finalized the purchase price allocation in the fourth quarter of 2020.
On March 6, 2020, the Company acquired 75% of KC Utility Packaging, LLC for $4,200. Approximately $400 of the purchase price was contingent on seller representations and warranties and was settled for the full amount in the first quarter of 2021. The Company name was subsequently changed to Valmont Substations LLC. The acquisition was made to expand the Company's utility substation product offering. In the purchase price allocation, goodwill of $1,100, customer relationships of $4,000, and other intangibles of $500 were recorded. The Company finalized the purchase price allocation in the fourth quarter of 2020.
Proforma disclosures were omitted for these acquisitions as this business doesthe they do not have a significant impact on the Company's financial results.
Acquisitions of Noncontrolling Interests
In April 2016,February 2020, the Company acquired the remaining 30%49% of IGC Galvanizing Industries (M) Sdn BhdAgSense that it did not own for $5,841. In June 2016, the Company acquired 5.2%$43,983, which includes a holdback payment of the remaining 10% of Valmont SM$2,200 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 flowwas made in the Consolidated Statements of Cash Flows.
3) RESTRUCTURING ACTIVITIES
In April 2015, 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 thirdsecond quarter of 2016. A significant change2020. The Company finalized the accounting for owning 100% of AgSense in market conditionsthe second quarter of 2020 which resulted in anythe recognition of the Company's segments may affect the Company's assessmenta deferred tax asset of necessity for further restructuring activities.
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)
approximately $7,700. In the first quarter of 2020, the Company acquired 16% of the remaining 25% that it did not own of Convert Italia for a cash payment of $11,750. The purchase agreement also settled the escrow funds which the Company had paid at date of acquisition.
As these transactions were for the acquisition of all or part 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 Condensed Consolidated Statements of Cash Flows.
(3) RESTRUCTURING ACTIVITIES
In 2020, the Company executed certain regional restructuring activities (the "2020 Plan") primarily in the ESS and Utility segments and a U.S. specific early retirement program covering all segments. The 2020 Plan included the closure of 1 U.S. Coatings facility and restructuring activities were completed by the end of 2020. For the third quarter and first three quarters of 2020, the Company recorded restructuring expenses in cost of sales and selling, general, and administrative expenses of $2,910 and $8,489, respectively.
Changes in liabilities recorded for the restructuring plans were as follows: | | | | | | | | | | | | | | | | | | | | |
| | Balance at December 26, 2020 | | Costs Paid or Otherwise Settled | | Balance at September 25, 2021 |
Severance | | $ | 12,660 | | | $ | (12,660) | | | $ | — | |
(4) GOODWILL AND INTANGIBLE ASSETS
Amortized Intangible Assets
The components of amortized intangible assets at September 30, 201725, 2021 and December 31, 201626, 2020 were as follows: | | | | | | | | | | | | | | | | | |
| September 25, 2021 |
| Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Life |
Customer Relationships | $ | 239,493 | | | $ | 166,857 | | | 13 years |
| | | | | |
Patents & Proprietary Technology | 63,109 | | | 12,318 | | | 8 years |
Other | 7,469 | | | 6,828 | | | 4 years |
| $ | 310,071 | | | $ | 186,003 | | | |
| | | September 30, 2017 | | December 26, 2020 |
| Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Life | | Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Life |
Customer Relationships | $ | 200,269 |
| | $ | 126,845 |
| | 13 years | Customer Relationships | $ | 237,232 | | | $ | 155,760 | | | 13 years |
Proprietary Software & Database | 3,687 |
| | 3,111 |
| | 8 years | |
| Patents & Proprietary Technology | 6,633 |
| | 3,859 |
| | 11 years | Patents & Proprietary Technology | 26,208 | | | 8,301 | | | 14 years |
Other | 4,807 |
| | 4,032 |
| | 3 years | Other | 7,602 | | | 6,786 | | | 4 years |
| $ | 215,396 |
| | $ | 137,847 |
| | | $ | 271,042 | | | $ | 170,847 | | |
|
| | | | | | | | | |
| 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, 201725, 2021 and September 24, 2016,26, 2020, respectively was 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 |
4,025 |
| | 3,964 |
| | 11,792 |
| | 12,037 |
|
| | | | | | | | | | | | | | | | | | | | |
Thirteen weeks ended | | Thirty-nine weeks ended |
2021 | | 2020 | | 2021 | | 2020 |
$ | 6,137 | | | $ | 4,518 | | | $ | 15,551 | | | $ | 13,621 | |
Estimated annual amortization expense related to finite‑livedfinite-lived intangible assets is as follows:
|
| | | |
| Estimated Amortization Expense |
2017 | $ | 15,823 |
|
2018 | 14,492 |
|
2019 | 13,718 |
|
2020 | 12,608 |
|
2021 | 10,474 |
|
| | | | | |
| Estimated Amortization Expense |
2021 | $ | 21,392 | |
2022 | 21,062 | |
2023 | 19,261 | |
2024 | 17,324 | |
2025 | 15,868 | |
The useful lives assigned to finite‑livedfinite-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) 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, 201725, 2021 and December 31, 2016 were26, 2020 are as follows: | | | | | | | | | | | | | | | | | |
| September 25, 2021 | | December 26, 2020 | | Year Acquired |
Newmark | $ | 11,111 | | | $ | 11,111 | | | 2004 |
Webforge | 8,035 | | | 7,972 | | | 2010 |
Convert Italia S.p.A | 8,790 | | | 9,137 | | | 2018 |
Valmont SM | 8,386 | | | 8,720 | | | 2014 |
Ingal EPS/Ingal Civil Products | 7,790 | | | 7,730 | | | 2010 |
Walpar | 3,500 | | | 3,500 | | | 2018 |
Shakespeare | 4,000 | | | 4,000 | | | 2014 |
Other | 17,769 | | | 14,828 | | | Various |
| $ | 69,381 | | | $ | 66,998 | | | |
|
| | | | | | | | | |
| 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,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 quarteras of 2017.August 28, 2021. The values of each trade name waswere determined using the relief-from-royalty method. Based on this evaluation, no trade names were determined to be impaired. In conjunction with an interim second quarter 2020 goodwill impairment test, impairment indicators were noted for the Webforge and Locker trade names requiring an interim impairment test. As a result, an impairment charge of approximately $3,900 was recognized against these 2 trade names in fiscal 2020.
Goodwill
The carrying amount of goodwill by segment as of September 30, 2017 and December 31, 2016 was as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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)
Goodwill
(4) GOODWILL AND INTANGIBLE ASSETS (Continued)The carrying amount of goodwill by segment as of September 25, 2021 and December 26, 2020 was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Engineered Support Structures Segment | | Utility Support Structures Segment | | Coatings Segment | | Irrigation Segment | | | | Total |
Gross Balance December 26, 2020 | $ | 232,323 | | | $ | 135,335 | | | $ | 94,309 | | | $ | 30,177 | | | | | $ | 492,144 | |
Accumulated impairment losses | (31,245) | | | (14,355) | | | (16,222) | | | — | | | | | (61,822) | |
Balance at December 26, 2020 | 201,078 | | | 120,980 | | | 78,087 | | | 30,177 | | | | | 430,322 | |
Acquisitions | — | | | — | | | — | | | 280,659 | | | | | 280,659 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Foreign currency translation | 170 | | | (1,731) | | | 129 | | | (87) | | | | | (1,519) | |
Balance at September 25, 2021 | $ | 201,248 | | | $ | 119,249 | | | $ | 78,216 | | | $ | 310,749 | | | | | $ | 709,462 | |
The Company’s annual impairment test of goodwill was performed during the third quarteras of 2017,August 28, 2021, using primarily the discounted cash flow method. As a resultDuring fiscal 2021, no goodwill impairment has been recorded.
An interim impairment test was required in the second quarter of 2020 and that testing,test showed that the Company determined that its goodwillAccess Systems reporting unit's carrying value was not impaired, as the valuation of the reporting units exceeded their respective carrying values. The Company's offshore and other complex steel structures reporting unit with $14,645 of goodwill, is the reporting unit with the smallest cushion betweenhigher than its estimated fair value and its carrying value. Sales and profitability amounts for the first nine months 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,Accordingly, the Company will perform an interimrecorded a $12,575 impairment test for goodwill. The Company also tracks changesof Access System's goodwill in the global economy that could impact future operating results of any of its reporting units.fiscal 2020.
(5) 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, 201725, 2021 and September 24, 201626, 2020 were as follows: | | | | | | | | | | | |
| 2021 | | 2020 |
Interest | $ | 20,716 | | | $ | 20,298 | |
Income taxes | 40,113 | | | 35,803 | |
|
| | | | | | | |
| 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) 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 25, 2021: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 51,650 | | | $ | — | | | $ | 51,650 | |
Weighted average shares outstanding (000's) | 21,175 | | | 377 | | | 21,552 | |
Per share amount | $ | 2.44 | | | $ | (0.04) | | | $ | 2.40 | |
Thirteen weeks ended September 26, 2020: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 39,342 | | | $ | — | | | $ | 39,342 | |
Weighted average shares outstanding (000's) | 21,309 | | | 107 | | | 21,416 | |
Per share amount | $ | 1.85 | | | $ | (0.01) | | | $ | 1.84 | |
Thirty-nine weeks ended September 25, 2021 | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 168,774 | | | $ | — | | | $ | 168,774 | |
Weighted average shares outstanding (000's) | 21,182 | | | 301 | | | 21,483 | |
Per share amount | $ | 7.97 | | | $ | (0.11) | | | $ | 7.86 | |
Thirty-nine weeks ended September 26, 2020: | | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 104,878 | | | $ | — | | | $ | 104,878 | |
Weighted average shares outstanding (000's) | 21,358 | | | 95 | | | 21,453 | |
Per share amount | $ | 4.91 | | | $ | (0.02) | | | $ | 4.89 | |
|
| | | | | | | | | | | |
| 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, 2016,25, 2021 and September 26, 2020, there were 378,5660 and 296,966 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) DERIVATIVE FINANCIAL INSTRUMENTS
(7) 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. Any gains or losses from net investment hedge activities remain in OCI until either the sale or substantially complete liquidation of the related subsidiaries.
Fair value of derivative instruments at September 25, 2021 and December 26, 2020 are as follows: | | | | | | | | | | | | | | | | | | | |
Derivatives designated as hedging instruments: | Balance sheet location | | September 25, 2021 | | December 26, 2020 | | |
| | | | | | | |
Commodity forward contracts | Prepaid expenses and other assets | | $ | 7,623 | | | $ | — | | | |
Foreign currency forward contracts | Prepaid expenses and other assets | | — | | | 724 | | | |
Foreign currency forward contracts | Accrued expenses | | (84) | | | — | | | |
Cross currency swap contracts | Prepaid expenses and other assets | | 1,309 | | | 600 | | | |
Cross currency swap contracts | Accrued expenses | | (1,847) | | | (7,235) | | | |
| | | $ | 7,001 | | | $ | (5,911) | | | |
Gains (losses) on derivatives recognized in the condensed consolidated statements of earnings for the thirteen and thirty-nine weeks ended September 25, 2021 and September 26, 2020 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Thirteen weeks ended | | Thirty-nine weeks ended | | |
| Statements of earnings location | | September 25, 2021 | | September 26, 2020 | | September 25, 2021 | | September 26, 2020 | | |
Commodity forward contracts | Product cost of sales | | $ | 9,870 | | | $ | — | | | $ | 10,140 | | | $ | — | | | |
Foreign currency forward contracts | Other income | | 187 | | | 116 | | | 123 | | | 146 | | | |
Foreign currency forward contracts | Product sales | | — | | | 1,017 | | | — | | | 1,169 | | | |
Interest rate hedge amortization | Interest expense | | (16) | | | (16) | | | (48) | | | (48) | | | |
Cross currency swap contracts | Interest expense | | 691 | | | 649 | | | 2,060 | | | 2,111 | | | |
| | | $ | 10,732 | | | $ | 1,766 | | | $ | 12,275 | | | $ | 3,378 | | | |
Cash Flow Hedges
During the first three quarters of 2021, the Company entered into steel hot rolled coil (HRC) forward contracts that qualify as a cash flow hedge of the variability in cash flows attributable to future steel purchases. The forward contracts had a notional amount of $39,731 for the total purchase of 41,000 short tons from May 2021 to June 2022. The gain/(loss) realized upon settlement will be recorded in product cost of sales in the condensed consolidated statements of earnings over average inventory turns.
During the first half of 2021, a Brazilian subsidiary with a Real functional currency entered into foreign currency forward contracts to mitigate foreign currency risk related to a customer order with components purchased in Euros. The forward contracts, which qualify as a cash flow hedge, matured in July and September 2021 and had notional amounts to buy 3,800 euros in exchange for a stated amount of Brazilian Real. During the first half of 2021, a subsidiary with a Euro functional currency entered into a foreign currency forward contract to mitigate foreign currency risk related to a large customer order denominated in U.S. dollars. The forward contract, which qualifies as a fair value hedge, matures in December 2021 and has a notional amount to sell $2,000 in exchange for a stated amount of Euros.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
Net Investment Hedges
In the second quarter of 2020, the Company early settled their Australian dollar denominated forward currency contracts and received proceeds of $11,983. The proceeds/gain from these settlements (net of tax) will remain in Other Comprehensive Income (OCI) until either the sale or substantially complete liquidation of the related subsidiaries.
In 2019, the Company entered into 2 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 2 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. 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)
(8) BUSINESS SEGMENTS
The accounting principles usedCompany has 4 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 components for the global lighting and traffic, wireless communication, and roadway safety
industries;
ENERGY AND MINING: This segment, all outside of the United States, consists of the manufacture of
access systems applications, forged steel grinding media, on and offshore oil, gas, and wind energy structures;
UTILITY SUPPORT STRUCTURES: This segment consists of the manufacture of engineered steel, concrete and
concrete composite structures for the global utility industry;markets, including transmission, distribution, substations, and renewable energy generation equipment and drone inspection services;
ENGINEERED SUPPORT STRUCTURES: This segment consists of the manufacture and distribution of engineered poles, towers, and components for lighting, traffic, and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products;
COATINGS: This segment consists of galvanizing, painting, and anodizing services to preserve and powder coating services on a globalprotect metal products; and
basis; and
IRRIGATION: This segment consists of the manufacture of agriculturalcenter pivot and linear irrigation equipment and related
for agricultural markets, including parts, and services for the global agricultural industry and tubular products, and advanced technology solutions for industrial customers.water management and precision agriculture.
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) BUSINESS SEGMENTS (Continued)
Summary by Business | | | | | | | | | | | | | | | | | | | | | | | |
| Thirteen weeks ended | | Thirty-nine weeks ended |
| September 25, 2021 | | September 26, 2020 | | September 25, 2021 | | September 26, 2020 |
SALES: | | | | | | | |
Utility Support Structures segment: | | | | | | | |
Steel | $ | 199,946 | | | $ | 156,082 | | | $ | 545,417 | | | $ | 482,430 | |
Concrete | 39,656 | | | 39,215 | | | 123,477 | | | 120,653 | |
Engineered Solar Tracker Solutions | 13,224 | | | 43,287 | | | 28,690 | | | 56,830 | |
Offshore and Other Complex Steel Structures | 23,676 | | | 35,809 | | | 99,914 | | | 71,265 | |
Utility Support Structures segment | $ | 276,502 | | | $ | 274,393 | | | $ | 797,498 | | | $ | 731,178 | |
Engineered Support Structures segment: | | | | | | | |
Lighting, Traffic, and Highway Safety Products | $ | 188,589 | | | $ | 181,571 | | | $ | 529,432 | | | $ | 534,585 | |
Communication Products | 63,424 | | | 50,677 | | | 164,055 | | | 139,759 | |
Access Systems | 29,084 | | | 23,408 | | | 79,326 | | | 65,439 | |
Engineered Support Structures segment | 281,097 | | | 255,656 | | | 772,813 | | | 739,783 | |
Coatings segment | 96,685 | | | 87,886 | | | 288,131 | | | 255,976 | |
Irrigation segment: | | | | | | | |
North America | 116,308 | | | 75,803 | | | 395,096 | | | 281,397 | |
International | 124,023 | | | 63,406 | | | 356,864 | | | 165,171 | |
Irrigation segment | 240,331 | | | 139,209 | | | 751,960 | | | 446,568 | |
| | | | | | | |
Total | 894,615 | | | 757,144 | | | 2,610,402 | | | 2,173,505 | |
INTERSEGMENT SALES: | | | | | | | |
Utility Support Structures segment | — | | | 1,914 | | | 435 | | | 7,278 | |
Engineered Support Structures segment | 48 | | | 711 | | | 268 | | | 8,599 | |
Coatings segment | 21,779 | | | 19,188 | | | 64,029 | | | 56,021 | |
Irrigation segment | 4,006 | | | 1,361 | | | 7,373 | | | 4,629 | |
| | | | | | | |
Total | 25,833 | | | 23,174 | | | 72,105 | | | 76,527 | |
NET SALES: | | | | | | | |
Utility Support Structures segment | 276,502 | | | 272,479 | | | 797,063 | | | 723,900 | |
Engineered Support Structures segment | 281,049 | | | 254,945 | | | 772,545 | | | 731,184 | |
Coatings segment | 74,906 | | | 68,698 | | | 224,102 | | | 199,955 | |
Irrigation segment | 236,325 | | | 137,848 | | | 744,587 | | | 441,939 | |
| | | | | | | |
Total | $ | 868,782 | | | $ | 733,970 | | | $ | 2,538,297 | | | $ | 2,096,978 | |
| | | | | | | |
OPERATING INCOME: | | | | | | | |
Utility Support Structures segment | $ | 24,561 | | | $ | 25,881 | | | $ | 61,168 | | | $ | 75,255 | |
Engineered Support Structures segment | 34,383 | | | 25,434 | | | 86,235 | | | 46,183 | |
Coatings segment | 12,478 | | | 12,416 | | | 40,018 | | | 33,618 | |
Irrigation segment | 27,735 | | | 14,687 | | | 108,467 | | | 60,701 | |
| | | | | | | |
| | | | | | | |
Corporate | (22,962) | | | (16,939) | | | (59,857) | | | (43,943) | |
Total | $ | 76,195 | | | $ | 61,479 | | | $ | 236,031 | | | $ | 171,814 | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| 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) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
(9) SUBSEQUENT EVENT
On October 18, 2021, subsequent to the end of our third quarter of 2021, the Company and its wholly-owned subsidiaries Valmont Industries Holland B.V. and Valmont Group Pty. Ltd., as Borrowers, entered into a Second Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent, and the other lenders party thereto (the “Restated Credit Agreement”). The Company has three tranchesRestated Credit Agreement amends and restates the First Amended and Restated Credit Agreement dated as of senior unsecured notes. AllOctober 18, 2017 among the Borrowers, the Administrative Agent and the other lenders party thereto (as amended, the “Original Credit Agreement”) The changes to the Restated Credit Agreement are as follows:
a.an increase in the commitments under the credit facility from $600 million to $800 million;
b.an increase in the accordion under the credit facility from $200 million to $300 million;
c.an extension of the senior notes are guaranteed, jointly, severally, fully and unconditionally (subject to certain customary release provisions, including salematurity date of the subsidiary guarantor, or salecredit facility from October 18, 2022 to October 18, 2026;
d.replacement of all or substantially all of its assets) by certainLIBOR as the benchmark interest rate with SOFR;
e.removal of the Company’s current and future direct and indirect domestic and foreign subsidiaries (collectivelyinterest coverage ratio (adjusted EBITDA / interest expense) as a covenant;
f.a modification of the “Guarantors”), excluding its other current domestic and foreign subsidiaries which doleverage ratio (interest-bearing debt / adjusted EBITDA) to deduct unrestricted cash in excess of $50 million (but 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, 2017exceeding $500 million) from interest-bearing debt.
|
| | | | | | | | | | | | | | | | | | | |
| 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) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirty-nine Weeks 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 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended September 24, 2016 |
| | | | | | | | | | | | | | | | | | | |
| 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) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirty-nine Weeks 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 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirteen weeks ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | |
| 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 Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | |
| 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) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirteen weeks ended September 24, 2016
|
| | | | | | | | | | | | | | | | | | | |
| 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 Ended September 24, 2016
|
| | | | | | | | | | | | | | | | | | | |
| 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) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2017
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 118,499 |
| | $ | 4,167 |
| | $ | 370,824 |
| | $ | — |
| | $ | 493,490 |
|
Receivables, net | 152,290 |
| | 69,781 |
| | 270,771 |
| | — |
| | 492,842 |
|
Inventories | 141,774 |
| | 46,747 |
| | 219,046 |
| | (4,333 | ) | | 403,234 |
|
Prepaid expenses, restricted cash, and other assets | 8,903 |
| | 1,023 |
| | 40,138 |
| | — |
| | 50,064 |
|
Refundable income taxes | 8,493 |
| | — |
| | — |
| | — |
| | 8,493 |
|
Total current assets | 429,959 |
| | 121,718 |
| | 900,779 |
| | (4,333 | ) | | 1,448,123 |
|
Property, plant and equipment, at cost | 558,484 |
| | 158,087 |
| | 453,283 |
| | — |
| | 1,169,854 |
|
Less accumulated depreciation and amortization | 369,620 |
| | 82,708 |
| | 195,102 |
| | — |
| | 647,430 |
|
Net property, plant and equipment | 188,864 |
| | 75,379 |
| | 258,181 |
| | — |
| | 522,424 |
|
Goodwill | 20,108 |
| | 110,562 |
| | 206,084 |
| | — |
| | 336,754 |
|
Other intangible assets | 144 |
| | 32,204 |
| | 109,742 |
| | — |
| | 142,090 |
|
Investment in subsidiaries and intercompany accounts | 1,392,533 |
| | 1,180,732 |
| | 1,029,831 |
| | (3,603,096 | ) | | — |
|
Other assets | 47,613 |
| | — |
| | 113,167 |
| | — |
| | 160,780 |
|
Total assets | $ | 2,079,221 |
| | $ | 1,520,595 |
| | $ | 2,617,784 |
| | $ | (3,607,429 | ) | | $ | 2,610,171 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Current installments of long-term debt | $ | — |
| | $ | — |
| | $ | 949 |
| | $ | — |
| | $ | 949 |
|
Notes payable to banks | — |
| | — |
| | 197 |
| | — |
| | 197 |
|
Accounts payable | 59,467 |
| | 8,032 |
| | 148,605 |
| | — |
| | 216,104 |
|
Accrued employee compensation and benefits | 40,760 |
| | 8,293 |
| | 32,441 |
| | — |
| | 81,494 |
|
Accrued expenses | 44,896 |
| | 9,222 |
| | 52,120 |
| | — |
| | 106,238 |
|
Dividends payable | 8,478 |
| | — |
| | — |
| | — |
| | 8,478 |
|
Total current liabilities | 153,601 |
| | 25,547 |
| | 234,312 |
| | — |
| | 413,460 |
|
Deferred income taxes | 15,617 |
| | — |
| | 12,566 |
| | — |
| | 28,183 |
|
Long-term debt, excluding current installments | 750,933 |
| | 185,674 |
| | 10,060 |
| | (192,465 | ) | | 754,202 |
|
Defined benefit pension liability | — |
| | — |
| | 199,562 |
| | — |
| | 199,562 |
|
Deferred compensation | 43,077 |
| | — |
| | 5,535 |
| | — |
| | 48,612 |
|
Other noncurrent liabilities | 3,159 |
| | 5 |
| | 10,393 |
| | — |
| | 13,557 |
|
Shareholders’ equity: | | | | | | | | | |
Common stock of $1 par value | 27,900 |
| | 457,950 |
| | 648,682 |
| | (1,106,632 | ) | | 27,900 |
|
Additional paid-in capital | — |
| | 166,789 |
| | 1,107,536 |
| | (1,274,325 | ) | | — |
|
Retained earnings | 1,974,601 |
| | 684,532 |
| | 636,283 |
| | (1,320,815 | ) | | 1,974,601 |
|
Accumulated other comprehensive income (loss) | (288,102 | ) | | 98 |
| | (286,906 | ) | | 286,808 |
| | (288,102 | ) |
Treasury stock | (601,565 | ) | | — |
| | — |
| | — |
| | (601,565 | ) |
Total Valmont Industries, Inc. shareholders’ equity | 1,112,834 |
| | 1,309,369 |
| | 2,105,595 |
| | (3,414,964 | ) | | 1,112,834 |
|
Noncontrolling interest in consolidated subsidiaries | — |
| | — |
| | 39,761 |
| | — |
| | 39,761 |
|
Total shareholders’ equity | 1,112,834 |
| | 1,309,369 |
| | 2,145,356 |
| | (3,414,964 | ) | | 1,152,595 |
|
Total liabilities and shareholders’ equity | $ | 2,079,221 |
| | $ | 1,520,595 |
| | $ | 2,617,784 |
| | $ | (3,607,429 | ) | | $ | 2,610,171 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| | | | | | | | | | | | | | | | | | | |
| 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) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-nine Weeks Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Guarantors | | Non- Guarantors | | Eliminations | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net earnings | $ | 119,851 |
| | $ | 37,784 |
| | $ | 67,029 |
| | $ | (100,715 | ) | | $ | 123,949 |
|
Adjustments to reconcile net earnings to net cash flows from operations: | | | | | | | | | |
Depreciation and amortization | 19,600 |
| | 11,130 |
| | 32,770 |
| | — |
| | 63,500 |
|
Noncash loss on trading securities | — |
| | — |
| | 395 |
| | — |
| | 395 |
|
Stock-based compensation | 7,300 |
| | — |
| | — |
| | — |
| | 7,300 |
|
Defined benefit pension plan expense | — |
| | — |
| | 481 |
| | — |
| | 481 |
|
Contribution to defined benefit pension plan | — |
| | — |
| | (26,064 | ) | | — |
| | (26,064 | ) |
Decrease in restricted cash - pension plan trust | — |
| | — |
| | 12,568 |
| | — |
| | 12,568 |
|
Loss (gain) on sale of property, plant and equipment | (725 | ) | | 59 |
| | (66 | ) | | — |
| | (732 | ) |
Equity in earnings in nonconsolidated subsidiaries | (85,274 | ) | | (15,281 | ) | | — |
| | 100,555 |
| | — |
|
Deferred income taxes | 2,065 |
| | — |
| | (1,986 | ) | | — |
| | 79 |
|
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 |
|
Other noncurrent liabilities | (381 | ) | | — |
| | (1,246 | ) | | — |
| | (1,627 | ) |
Income taxes payable (refundable) | (11,403 | ) | | 802 |
| | 8,869 |
| | — |
| | (1,732 | ) |
Net cash flows from operating activities | 45,320 |
| | 11,130 |
| | 77,935 |
| | 19 |
| | 134,404 |
|
Cash flows from investing activities: | | | | | | | | | |
Purchase of property, plant and equipment | (14,046 | ) | | (5,952 | ) | | (19,900 | ) | | — |
| | (39,898 | ) |
Proceeds from sale of assets | 745 |
| | (48 | ) | | 878 |
| | — |
| | 1,575 |
|
Acquisitions, net of cash acquired | — |
| | — |
| | (5,362 | ) | | — |
| | (5,362 | ) |
Proceeds from settlement of net investment hedge | 5,123 |
| | — |
| | — |
| | — |
| | 5,123 |
|
Other, net | 15,714 |
| | (8,985 | ) | | (10,172 | ) | | (19 | ) | | (3,462 | ) |
Net cash flows from investing activities | 7,536 |
| | (14,985 | ) | | (34,556 | ) | | (19 | ) | | (42,024 | ) |
Cash flows from financing activities: | | | | | | | | | |
Net borrowings under short-term agreements | — |
| | — |
| | (549 | ) | | — |
| | (549 | ) |
Principal payments on long-term borrowings |
|
| | — |
| | (658 | ) | | — |
| | (658 | ) |
Dividends paid | (25,386 | ) | | — |
| | — |
| | — |
| | (25,386 | ) |
Dividends to noncontrolling interest | — |
| |
|
| | (3,895 | ) | | — |
| | (3,895 | ) |
Intercompany dividends | 22,662 |
| | — |
| | (22,662 | ) | | — |
| | — |
|
Intercompany interest on long-term note | — |
| | (5,669 | ) | | 5,669 |
| | — |
| | — |
|
Intercompany capital contribution | (7,375 | ) | | 7,375 |
| | — |
| | — |
| | — |
|
Proceeds from exercises under stock plans | 12,446 |
| | — |
| | — |
| | — |
| | 12,446 |
|
Purchase of common treasury shares - stock plan exercises | (3,929 | ) | | — |
| | — |
| | — |
| | (3,929 | ) |
Net cash flows from financing activities | (1,582 | ) | | 1,706 |
| | (22,095 | ) | | — |
| | (21,971 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| | 245 |
| | 22,888 |
| | — |
| | 23,133 |
|
Net change in cash and cash equivalents | 51,274 |
| | (1,904 | ) | | 44,172 |
| | — |
| | 93,542 |
|
Cash and cash equivalents—beginning of year | 67,225 |
| | 6,071 |
| | 326,652 |
| | — |
| | 399,948 |
|
Cash and cash equivalents—end of period | $ | 118,499 |
| | $ | 4,167 |
| | $ | 370,824 |
| | $ | — |
| | $ | 493,490 |
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-nine Weeks Ended September 24, 2016 |
| | | | | | | | | | | | | | | | | | | |
| 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‑lookingforward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward‑lookingforward-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‑lookingforward-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‑lookingforward-looking statements. These factors include, among other things, the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific effects on the Company's business and that of its customers and suppliers, 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, 2016.26, 2020. Segment net sales in the table below and elsewhere are presented net of intersegment sales. See Note 8 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 |
| September 30, 2017 | | September 24, 2016 | | % Incr. (Decr.) | | September 30, 2017 | | September 24, 2016 | | % Incr. (Decr.) |
Consolidated | | | | | | | | | | | |
Net sales | $ | 680.8 |
| | $ | 610.2 |
| | 11.6 | % | | $ | 2,031.0 |
| | $ | 1,847.1 |
| | 10.0 | % |
Gross profit | 163.6 |
| | 155.0 |
| | 5.5 | % | | 511.5 |
| | 491.1 |
| | 4.2 | % |
as a percent of sales | 24.0 | % | | 25.4 | % | | | | 25.2 | % | | 26.6 | % | | |
SG&A expense | 103.7 |
| | 101.8 |
| | 1.9 | % | | 308.8 |
| | 303.7 |
| | 1.7 | % |
as a percent of sales | 15.2 | % | | 16.7 | % | | | | 15.2 | % | | 16.4 | % | | |
Operating income | 59.9 |
| | 53.2 |
| | 12.6 | % | | 202.7 |
| | 187.4 |
| | 8.2 | % |
as a percent of sales | 8.8 | % | | 8.7 | % | | | | 10.0 | % | | 10.1 | % | | |
Net interest expense | 9.9 |
| | 10.3 |
| | (3.9 | )% | | 30.1 |
| | 31.0 |
| | (2.9 | )% |
Effective tax rate | 27.5 | % | | 32.6 | % | | | | 28.9 | % | | 31.7 | % | | |
Net earnings | $ | 35.2 |
| | $ | 28.2 |
| | 24.8 | % | | $ | 119.9 |
| | $ | 103.2 |
| | 16.2 | % |
Diluted earnings per share | $ | 1.55 |
| | $ | 1.24 |
| | 25.0 | % | | $ | 5.28 |
| | $ | 4.54 |
| | 16.3 | % |
Engineered Support Structures (ESS) | | | | | | | | | | | |
Net sales | $ | 209.8 |
| | $ | 193.1 |
| | 8.6 | % | | $ | 571.3 |
| | $ | 554.9 |
| | 3.0 | % |
Gross profit | 50.9 |
| | 54.3 |
| | (6.3 | )% | | 145.2 |
| | 156.9 |
| | (7.5 | )% |
SG&A expense | 34.6 |
| | 34.0 |
| | 1.8 | % | | 99.5 |
| | 103.3 |
| | (3.7 | )% |
Operating income | 16.3 |
| | 20.3 |
| | (19.7 | )% | | 45.7 |
| | 53.6 |
| | (14.7 | )% |
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 | % |
Gross profit | 39.4 |
| | 31.8 |
| | 23.9 | % | | 115.4 |
| | 94.2 |
| | 22.5 | % |
SG&A expense | 17.3 |
| | 15.6 |
| | 10.9 | % | | 50.4 |
| | 46.0 |
| | 9.6 | % |
Operating income | 22.1 |
| | 16.2 |
| | 36.4 | % | | 65.0 |
| | 48.2 |
| | 34.9 | % |
Coatings | | | | | | | | | | | |
Net sales | $ | 67.7 |
| | $ | 60.0 |
| | 12.8 | % | | $ | 191.6 |
| | $ | 182.2 |
| | 5.2 | % |
Gross profit | 20.3 |
| | 17.9 |
| | 13.4 | % | | 58.5 |
| | 59.1 |
| | (1.0 | )% |
SG&A expense | 5.8 |
| | 6.2 |
| | (6.5 | )% | | 22.5 |
| | 22.0 |
| | 2.3 | % |
Operating income | 14.5 |
| | 11.7 |
| | 23.9 | % | | 36.0 |
| | 37.1 |
| | (3.0 | )% |
Irrigation | | | | | | | | | | | |
Net sales | $ | 145.1 |
| | $ | 125.5 |
| | 15.6 | % | | $ | 496.7 |
| | $ | 432.8 |
| | 14.8 | % |
Gross profit | 42.1 |
| | 38.1 |
| | 10.5 | % | | 153.6 |
| | 141.4 |
| | 8.6 | % |
SG&A expense | 23.9 |
| | 22.7 |
| | 5.3 | % | | 70.4 |
| | 66.1 |
| | 6.5 | % |
Operating income | 18.2 |
| | 15.4 |
| | 18.2 | % | | 83.2 |
| | 75.3 |
| | 10.5 | % |
Adjustment to LIFO inventory valuation method | | | | | | | | | | | |
Gross profit | $ | (1.6 | ) | | $ | (2.1 | ) | | NM | | $ | (2.8 | ) | | $ | (3.2 | ) | | NM |
Operating income | (1.6 | ) | | (2.1 | ) | | NM | | (2.8 | ) | | (3.2 | ) | | 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 | )% |
Operating loss | (11.0 | ) | | (12.1 | ) | | 9.1 | % | | (33.6 | ) | | (32.7 | ) | | (2.8 | )% |
NM=Not meaningful
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Thirteen weeks ended | | Thirty-nine weeks ended |
| September 25, 2021 | | September 26, 2020 | | % Incr. (Decr.) | | September 25, 2021 | | September 26, 2020 | | % Incr. (Decr.) |
Consolidated | | | | | | | | | | | |
Net sales | $ | 868.8 | | | $ | 734.0 | | | 18.4 | % | | $ | 2,538.3 | | | $ | 2,097.0 | | | 21.0 | % |
Gross profit | 227.4 | | | 190.7 | | | 19.2 | % | | 661.6 | | | 560.9 | | | 18.0 | % |
as a percent of sales | 26.2 | % | | 26.0 | % | | | | 26.1 | % | | 26.7 | % | | |
SG&A expense | 151.2 | | | 129.3 | | | 16.9 | % | | 425.6 | | | $ | 389.1 | | | 9.4 | % |
as a percent of sales | 17.4 | % | | 17.6 | % | | | | 16.8 | % | | 18.6 | % | | |
Operating income | 76.2 | | | 61.5 | | | 23.9 | % | | 236.0 | | | 171.8 | | | 37.4 | % |
as a percent of sales | 8.8 | % | | 8.4 | % | | | | 9.3 | % | | 8.2 | % | | |
Net interest expense | 10.6 | | | 10.0 | | | 6.0 | % | | 30.6 | | | 28.6 | | | 7.0 | % |
| | | | | | | | | | | |
Effective tax rate | 23.4 | % | | 23.0 | % | | | | 21.3 | % | | 26.9 | % | | |
Net earnings | $ | 51.7 | | | $ | 39.3 | | | 31.6 | % | | $ | 168.8 | | | $ | 104.9 | | | 60.9 | % |
Diluted earnings per share | $ | 2.40 | | | $ | 1.84 | | | 30.4 | % | | $ | 7.86 | | | $ | 4.89 | | | 60.7 | % |
Utility Support Structures (Utility) | | | | | | | | | | | |
Net sales | $ | 276.5 | | | $ | 272.5 | | | 1.5 | % | | $ | 797.1 | | | $ | 723.9 | | | 10.1 | % |
Gross profit | 53.5 | | | 54.7 | | | (2.2) | % | | 149.3 | | | 156.1 | | | (4.4) | % |
SG&A expense | 28.9 | | | 28.8 | | | 0.3 | % | | 88.1 | | | 80.8 | | | 9.0 | % |
Operating income | 24.6 | | | 25.9 | | | (5.0) | % | | 61.2 | | | 75.3 | | | (18.7) | % |
Engineered Support Structures (ESS) | | | | | | | | | | | |
Net sales | $ | 281.0 | | | $ | 255.0 | | | 10.2 | % | | $ | 772.5 | | | $ | 731.2 | | | 5.6 | % |
Gross profit | 79.9 | | | 71.3 | | | 12.1 | % | | 219.6 | | | 201.4 | | | 9.0 | % |
SG&A expense | 45.6 | | | 45.8 | | | (0.4) | % | | 133.4 | | | 155.2 | | | (14.0) | % |
Operating income | 34.3 | | | 25.5 | | | 34.5 | % | | 86.2 | | | 46.2 | | | 86.6 | % |
Coatings | | | | | | | | | | | |
Net sales | $ | 74.9 | | | $ | 68.7 | | | 9.0 | % | | $ | 224.1 | | | $ | 200.0 | | | 12.1 | % |
Gross profit | 22.9 | | | 22.6 | | | 1.3 | % | | 71.1 | | | 64.2 | | | 10.7 | % |
SG&A expense | 10.4 | | | 10.2 | | | 2.0 | % | | 31.1 | | | 30.6 | | | 1.6 | % |
Operating income | 12.5 | | | 12.4 | | | 0.8 | % | | 40.0 | | | 33.6 | | | 19.0 | % |
Irrigation | | | | | | | | | | | |
Net sales | $ | 236.4 | | | $ | 137.8 | | | 71.6 | % | | $ | 744.6 | | | $ | 441.9 | | | 68.5 | % |
Gross profit | 70.7 | | | 42.2 | | | 67.5 | % | | 220.9 | | | 139.2 | | | 58.7 | % |
SG&A expense | 42.9 | | | 27.5 | | | 56.0 | % | | 112.4 | | | 78.5 | | | 43.2 | % |
Operating income | 27.8 | | | 14.7 | | | 89.1 | % | | 108.5 | | | 60.7 | | | 78.7 | % |
Net corporate expense | | | | | | | | | | | |
Gross profit | $ | 0.3 | | | — | | | NM | | $ | 0.6 | | | $ | — | | | NM |
SG&A | $ | 23.3 | | | $ | 17.0 | | | 37.1 | % | | $ | 60.5 | | | $ | 44.0 | | | 37.5 | % |
Operating loss | (23.0) | | | (17.0) | | | (35.3) | % | | (59.9) | | | (44.0) | | | (36.1) | % |
Overview
Overview
On a consolidated basis, the increase in net sales were higher in the third quarter and first three quarters of fiscal 2017,2021, as compared withto the third quartersame periods of fiscal 2016, reflected2020, with higher sales in all reportable segments except for the Energy & Mining segment. On a year-to-date basis, higher consolidated sales in 2017, as compared to 2016, reflected increases across all reportable segments. The changeschange in net sales in the third quarter and first three quarters of fiscal 2017,2021, as compared with fiscal 2016, werethe same period in 2020, is as follows: | | | | | | | | | | | | | | | | | | | |
| Third quarter |
| Total | Utility | ESS | Coatings | Irrigation | | |
Sales - 2020 | $ | 734.0 | | $ | 272.5 | | $ | 255.0 | | $ | 68.7 | | $ | 137.8 | | | |
Volume | 32.6 | | (22.3) | | (1.3) | | 0.5 | | 55.7 | | | |
Pricing/mix | 91.1 | | 25.6 | | 21.6 | | 4.6 | | 39.3 | | | |
Acquisition/(divestiture) | 1.2 | | — | | — | | — | | 1.2 | | | |
Currency translation | 9.9 | | 0.7 | | 5.8 | | 1.1 | | 2.3 | | | |
Sales - 2021 | $ | 868.8 | | $ | 276.5 | | $ | 281.1 | | $ | 74.9 | | $ | 236.3 | | | |
|
| | | | | | | | | | | | | | | | | | |
| Third quarter |
| Total | ESS | E&M | Utility | Coatings | Irrigation |
Sales - 2016 | $ | 610.2 |
| $ | 193.1 |
| $ | 81.2 |
| $ | 150.4 |
| $ | 60.0 |
| $ | 125.5 |
|
Volume | 29.7 |
| 15.9 |
| (6.9 | ) | 1.6 |
| 1.5 |
| 17.6 |
|
Pricing/mix | 31.7 |
| (3.5 | ) | 2.0 |
| 26.5 |
| 5.6 |
| 1.1 |
|
Acquisitions | 1.6 |
| 1.6 |
| — |
| — |
| — |
| — |
|
Currency translation | 7.6 |
| 2.7 |
| 3.4 |
| — |
| 0.6 |
| 0.9 |
|
Sales - 2017 | $ | 680.8 |
| $ | 209.8 |
| $ | 79.7 |
| $ | 178.5 |
| $ | 67.7 |
| $ | 145.1 |
|
| | | | | | | | | | | | | | | | Year-to-Date |
| Year-to-date | | Total | Utility | ESS | Coatings | Irrigation | |
| Total | ESS | E&M | Utility | Coatings | Irrigation | |
Sales - 2016 | $ | 1,847.1 |
| $ | 554.9 |
| $ | 231.3 |
| $ | 445.9 |
| $ | 182.2 |
| $ | 432.8 |
| |
Sales - 2020 | | Sales - 2020 | $ | 2,097.0 | | $ | 723.9 | | $ | 731.2 | | $ | 200.0 | | $ | 441.9 | | |
Volume | 110.4 |
| 20.4 |
| (4.9 | ) | 48.2 |
| (5.6 | ) | 52.3 |
| Volume | 222.5 | | 37.9 | | (22.9) | | 3.2 | | 204.3 | | |
Pricing/mix | 63.1 |
| (2.2 | ) | 5.1 |
| 42.4 |
| 14.5 |
| 3.3 |
| Pricing/mix | 173.0 | | 28.4 | | 38.4 | | 12.8 | | 93.4 | | |
Acquisitions | 1.6 |
| 1.6 |
| — |
| — |
| — |
| — |
| |
Acquisition/(divestiture) | | Acquisition/(divestiture) | 9.2 | | 2.2 | | — | | — | | 7.0 | | |
Currency translation | 8.8 |
| (3.4 | ) | 3.4 |
| — |
| 0.5 |
| 8.3 |
| Currency translation | 36.6 | | 4.7 | | 25.9 | | 8.1 | | (2.1) | | |
Sales - 2017 | $ | 2,031.0 |
| $ | 571.3 |
| $ | 234.9 |
| $ | 536.5 |
| $ | 191.6 |
| $ | 496.7 |
| |
Sales - 2021 | | Sales - 2021 | $ | 2,538.3 | | $ | 797.1 | | $ | 772.6 | | $ | 224.1 | | $ | 744.5 | | |
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 higher in North America and China in the third quarter and first three quarters of 2017,2021, as compared to the same periods in 2016, resulting in higher average cost of material. We expect that average selling prices will increase over time2020, contributing to offset the decrease in gross profit realized from the higher cost of steelsales and lower gross profit margin for the Company.Utility segment and the overall Company as raw material cost inflation was not fully recovered through selling pricing mechanisms.
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 the following businesses:
•PivoTrac in the second quarter of 2021, an agricultural technology company that offers solutions focused on remote monitoring of center pivot irrigation machines (Irrigation).
•Prospera in the second quarter of 2021, a highway businessprivately-held Israeli-based artificial intelligence company, focused on machine learning and computer vision in Indiaagriculture (Irrigation).
•KC Utility Packaging ("Aircon"Valmont Substation") in the thirdfirst quarter of 20172020, a provider of engineering, design, and packaging services in the substation market (Utility).
•Energia Solar Do Brasil ("Solbras") in the second quarter of 2020, a leading provider of solar energy solutions for agriculture (Irrigation).
COVID-19 Impact on Financial Results and Liquidity
We are considered an essential business because of the products and services that serve critical infrastructure sectors as defined by many governments around the world. Our significant manufacturing facilities are open and fully operational as of September 25, 2021. Certain foreign manufacturing facilities were temporarily closed for part of the first half of 2020 due to government mandates. We continue to monitor incidence of COVID-19 on a continuous basis, particularly in areas reporting recent increases in infection. To protect the safety, health and well-being of employees, customers, suppliers and communities, CDC and WHO guidelines are being followed in all facilities.
We generated $61.8 million of cash flows from operating activities during the first three quarters of 2021. Our main focus is includedto maintain liquidity to support the working capital needs of our operations and maintain our investment grade credit rating.
The ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operational results, cash balances and available borrowings on our line of credit, will be determined by the length of time the pandemic continues, its effect on the demand for the Company’s products and services and supply chain, as well as the effect of governmental regulations imposed in our ESS segment.response to the pandemic.
Restructuring PlanBacklog
In July 2016,The backlog of unshipped orders at September 25, 2021 was approximately $1.5 billion compared with approximately $1.1 billion at December 26, 2020. The increase is primarily attributed to the Company identifiedreceipt of three additional purchase orders during the first three quarters of 2021 totaling approximately $267 million for a restructuring planlarge Utility project in Australia/New Zealand (the "2016 Plan") focused primarily on closing and consolidating locationsNorth America. We expect the backlog to be fulfilled within the Energy and Mining and Coatings segments. The Company incurred pre-tax expenses fromsubsequent 12 months with the 2016 Planexception of $2.1$175 million in the third quarter of 2016. 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 during the third quarter of 2016.primarily related to these three new Utility orders.
Currency Translation
In the third quarter and first three quarters of fiscal 2017,2021, we realized an increase in operating profit,income, as compared with fiscal 2016,2020, due in part to currency translation effects. The U.S. dollar primarily weakened against the Brazilian real and South African rand, resulting in more operating profit in U.S. dollar terms. The breakdown of this effect by segment was as
follows:
| | | | | | | | | | | | | | | | | | | | |
| |
| Total | Utility | ESS | Coatings | Irrigation | Corporate |
Third quarter | $ | 1.5 | | $ | — | | $ | 0.9 | | $ | 0.2 | | $ | 0.4 | | $ | — | |
| | | | | | |
Year-to-date | $ | 0.3 | | $ | (0.8) | | $ | 1.0 | | $ | 1.3 | | $ | (0.3) | | $ | (0.9) | |
|
| | | | | | | | | | | | | | | | | | | | | |
| Total | ESS | E&M | Utility | Coatings | Irrigation | Corporate |
Third quarter | $ | 0.4 |
| $ | 0.2 |
| $ | 0.1 |
| $ | — |
| $ | 0.1 |
| $ | — |
| $ | — |
|
|
|
| | | | | | |
Year-to-date | $ | 1.3 |
| $ | 0.1 |
| $ | 0.1 |
| $ | — |
| $ | (0.1 | ) | $ | 1.2 |
| $ | — |
|
Gross Profit, SG&A, and Operating Income
At a consolidated level, the reduction in gross margin (gross profit as a percent of sales)sales was relatively flat in the third quarter and lower in the first three quarters of 2021, as compared with the same periods in 2020, due to higher raw material costs across the Company, somewhat offset by improved selling prices and sales mix. In the third quarter and first three quarters of 2017,2021 as compared withto 2020, gross profit was higher for all operating segments except the same periods in 2016, was primarily due to higher raw material prices across most of our businesses. Gross profitUtility segment.
SG&A expenses increased in the third quarter and first three quarters of 2017,2021 as compared to the same periods in 2016, due to increased sales volumes in most operating segments.2020. The Irrigation and Utility segments realized increasesincrease in the third quarter and first three quarters of 2017, while ESS and Energy & Mining realized a decrease in gross profit primarily2021 over the same period of 2020 was due to sales pricing that did not fully recover higher raw material costsincentives due to improved operations, salary merit increases, foreign currency translation effects, and an unfavorable sales mix.SG&A contributed from the recent acquisition of Prospera and PivoTrac, and intangible asset amortization from such acquisitions. The Coatings segment realized higher gross profit in the third quarter, but lower gross profit inincrease for the first three quarters of 2017 as compared to2021 versus 2020 were somewhat offset by a reduction in certain restructuring expenses, and a partial impairment of goodwill and tradename for the same periodsAccess Systems business that did not recur in fiscal 2016.2021.
The Company saw an increase in SG&A inIn the third quarter and first three quarters of fiscal 2017,2021, 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,2020, operating income was higher in 2017 for the UtilityIrrigation, ESS, and IrrigationCoatings segments and lower forin the ESS and Coatings segments.Utility segment. The increase in consolidated operating income in the third quarter is primarily attributed to higher irrigation sales volume and pricing actions in both Irrigation and ESS, somewhat offset by the decrease in gross profit in Utility with higher average selling prices more than offset by the impact of the cost of steel and lower offshore product sales, as well as increases in SG&A expenses. The increase in consolidated operating income in the first three quarters of 2017, as comparedis primarily attributed to higher irrigation sales volumes, pricing actions in both Irrigation and ESS, the partial goodwill and tradename impairment recognized in 2020 that did not recur in 2021; somewhat offset by the decrease in gross profit in Utility due to the same periodsfactors mentioned above for the third quarter and increases in 2016, is primarily attributable to increased sales volumes in the Utility and Irrigation segments.SG&A expenses.
Net Interest Expense and Debt
Net interest Interest expense in the third quarter and first three quarters of 2017, as compared with2021 approximated the same periodsamount recognized in 2016, was consistent due to minimal changes in short and long-term borrowings.2020. Interest income increased due to more cash on hand to invest.
Other Income/Expense
The change in other income/expensewas lower in the third quarter and first three quarters of 2017,2021, as compared withto 2020, due to lower interest rates on cash equivalents and lower overall related balances of cash equivalents throughout 2021.
Other Income/Expenses
The change in other income/expenses in the same periods in 2016,third quarter of 2021, as compared to 2020, was primarily due to a higher pension benefit of $1.8 million, and the change in valuation of deferred compensation assets. This changeassets which resulted in lower other income in the third quarter of $0.4 million but increasedmillion. The change in other income forincome/expenses in the first three quarters of $1.72021, as compared to 2020, was primarily due to a higher pension benefit of $5.6 million and the change in valuation of deferred compensation assets which resulted in higher other income of $0.5 million. This amountThe change in valuation of deferred compensation is shown as "Gain on investments (unrealized)" on the condensed consolidated statements of earnings. The 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 primarily due to fluctuations in foreign currency transaction gains or losses.gains/losses that was more favorable in 2021.
Income Tax Expense
Our effective income tax rate in the third quarter and first three quarters of 20172021 was 27.5%23.4% and 28.9%21.3%, respectively, compared to 32.6%23.0% and 31.7%26.9% in the third quarter and first three quarters of 2016, respectively. A $1.9 million reversal2020. On a year-to-date basis, the decrease in the effective tax rate is primarily the result of a valuation allowance against certainU.S. tax benefit related to foreign net operating loss carryforwardstaxes paid which did not occur in third quarter of 2017 contributed2020 in addition to the lower2020 partial impairment of goodwill and tradename for the Access Systems business that was not fully tax deductible.
Earnings Attributable to Noncontrolling Interests
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 wasand equity in loss of nonconsolidated subsidiaries were consistent in the third quarter and first three quarters of 2017,2021 as compared to the same periods in 2016.2020.
Cash Flows from Operations
Our cash flows provided by operations was $134.4$61.8 million in the first three quarters of fiscal 2017,2021, as compared with $127.3$273.0 million provided by operations in the first three quarters of 2016.2020. The increasedecrease in operating cash flow in the first three quarters of fiscal 2017,2021, as compared with 2016,2020, was primarily the result of improved net earnings mostly offset by higher net working capital tied to increased sales volumes.
Engineered Support Structures (ESS) segment
The increase in sales in the third quarter and first three quarters of fiscal 2017, as compared with the same periods of 2016, was due to improved roadway product sales volumes and higher communication product line sales volumes.
Global lighting and traffic, and roadway product sales in the third quarter and first three quarters of 2017 were higher 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. In the third quarter and first three quarters of 2017, 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 domestic markets in general remain subdued in Europe. Thean increase in sales volume wasinventory, partially offset by unfavorable currency translation effects on a year-to-date basis.an increase in advance payments received for performance obligations.
Communication product line sales were higher in the third quarter and first three quarters of fiscal 2017, as compared with the same periods in fiscal 2016. In both North America and Asia-Pacific, communication structure and component sales increased due to higher demand from the continued network expansion by providers.
Gross profit, as a percentage of sales, and operating income for the segment were 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, due to foreign currency translation effects. SG&A spending was lower 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)Utility segment
The decrease in net sales 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 in the third quarter and first three quarters of 2017 were higher than the same periods in 2016 due to higher sales pricing and favorable currency translation effects. The increase was partially offset by lower external sales volumes in Asia.
Offshore and other complex structures sales decreased in the third quarter of 2017, as compared to the same period in 2016, due to lower volumes that were partially offset by favorable currency translation effects. Sales decreased in the first three quarters of 2017, as compared to 2016, due to lower 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 and first three quarters of 2017,2021 as compared with 2016,2020, primarily due to higher average selling prices in the higher costs of steel and a favorable sales mix.product line. A number of our sales contracts in North America contain provisionsmechanisms that tie the sales price to published steel index pricing at the time our customer issues their purchase order. This resulted in increases to the average selling prices for our steel utility structures product line for the third quarter and first three quarters of 2021, as compared with 2020. For the third quarter and first three quarters of 2021, sales of concrete structures approximated the amount recognized in fiscal 2020, as slightly lower volumes were offset by increases in average selling prices and improved product mix.
Offshore sales decreased in the third quarter and increased in the first three quarters of 2017,2021, as compared to 2016, improved2020, due to a large decrease in sales demandvolume in North America resulted in increased salesthe third quarter that was more than offset by higher volumes in tonsthe first half of 2021. Solar tracker solution sales decreased in the third quarter and first three quarters of 2021, as compared to 2020, due to lower volumes.
Gross profit decreased in the third quarter and first three quarters of 2021, as compared to 2020, due to the rapid steel cost inflation that could not be fully recovered through pricing mechanisms for the steel utility structures also contributedproduct line, as well as the decreased volumes in the solar tracker solutions product line. SG&A expense was relatively flat in the third quarter, as compared with 2020. SG&A expense was higher in the first three quarters, as compared with 2020, due primarily to a $5.5 million write-off of a receivable following arbitration within the offshore and other complex structures product line. The decrease in operating income for the third quarter of 2021, as compared with 2020, is primarily due to higher average selling prices more than offset by the impact of the cost of steel and lower offshore product sales. The decrease in operating income
for the first three quarters of 2021, as compared with 2020, is primarily due to the increase in sales.the cost of steel that could not be fully recovered through higher average selling prices and the $5.5 million receivable write-off recognized in 2021.
ESS segment
Net sales in the third quarter of 2021, as compared to 2020, increased across the three product lines from pricing actions and due to favorable currency translation effect of $5.8 million. Net sales increased in the first three quarters of 2021 as compared to 2020, driven by $25.9 million of favorable foreign currency translation, higher average selling prices across the three product lines, partially offset by lower sales volumes of lighting, traffic and highway safety products.
Global lighting, traffic, and highway safety product sales in the third quarter of 2021 increased by $7.0 million, as compared to the same period in fiscal 2020, primarily attributed to higher average selling price partially offset by lower sales volumes across most regions. Sales volumes decreased in tonsNorth America in the third quarter and first three quarters of 2021, attributed to a slowdown in order volumes in the latter half of 2020 due to delays in approving the FAST Act extension. Europe sales of lighting and traffic products were similar in the third quarter of 2021 versus 2020 and higher for concrete utilitythe first three quarters of 2021 versus 2020, due to COVID mandated plant closures in 2020 that did not recur in 2021. Lighting, traffic, and highway safety product sales in the Asia-Pacific region increased in the third quarter and first three quarters of 2021, as compared to 2020, due to improved volumes of highway safety products and favorable currency translation.
Communication product line sales were higher by $12.7 and $24.2 million in the third quarter and first three quarters of 2021, as compared with the same periods in 2020. In North America, communication product selling prices increased in the third quarter and first three quarters of 2021, as well as increases in sales volumes in the third quarter and first three quarters of 2021 due to higher demand for communication structures wereand components. Communication product sales also improved due to an increase in sales volumes in the U.K. and Asia-Pacific. 5G deployments continue to increase market opportunities across all regions.
Access Systems product line net sales increased in the third quarter of 2021, as compared to 2020, by $5.7 million due to favorable currency translation effects and higher sales volumes. The sales improvement on a year-to-date basis can be attributed to the favorable currency translation effects and the higher second and third quarter sales volumes.
Gross profit was higher in the third quarter and first three quarters of 2017,2021, as compared to the same periods in 2016. International utility structures sales decreased in 20172020, primarily due to selling price management that expanded margins in a rising commodity cost environment and improved performance by the access systems product line. SG&A spending was lower volumes.for the first three quarters of 2021 versus 2020 due primarily to the $16.6 million partial impairment of goodwill and tradenames within the access systems product line recognized in 2020 which did not recur in 2021. Operating income increased in the third quarter and first three quarters of 2021 due to improved average selling prices and the $16.6 million impairment recognized in 2020 which did not recur in 2021.
Gross profit as a percentage ofCoatings segment
Coatings segment sales increased in the third quarter and first three quarters of 2017,2021, as compared to the same periods in 2016,2020, due to higher average selling prices and favorable foreign currency translation. In North America, a modest improvement in sales volume combined with the increase in average selling prices to counteract the higher cost of zinc resulted in an increase in net sales in the third quarter and first three quarters of 2021. In Asia-Pacific region, sales improved in all regions in 2021 due to sales price increases, higher volumes, and favorable foreign currency translation.
The gross profit margin decreased in the third quarter of 2021, as compared to 2020, as inflation in costs (zinc and labor) were not fully offset by the increase in average selling prices. SG&A expense was similar in the third quarter and first three quarters of 2021, as compared to 2020. Operating income was higher in the first three quarters of 2021, compared to the same period in 2020, due to improved sales pricing, volume increases, and favorable foreign currency translation, partially offset by startup costs related to the new Pittsburgh facility.
Irrigation segment
The increase in Irrigation segment net sales mix.in the third quarter and first three quarters of 2021, as compared to 2020, is due to strong sales volume improvements in almost all markets, as well as higher average selling prices. The sales volume improvements for international irrigation was primarily due to deliveries on the multi-year Egypt project and higher sales in Brazil. In North America, higher sales volumes for irrigation systems and parts were driven by improved agricultural commodity prices. Sales of technology-related products and services continue to increase, as growers continued adoption of technology to reduce costs and enhance profitability.
The increase in gross profit in 2021 as compared to 2020 is primarily attributed to the sales volume growth and partially attributed to the significant increase in average selling prices for the industrial tubing product line. SG&A was higher in the third quarter and first three quarters of 2021, as compared to 2020, due to approximately $8.5 million of SG&A from the recently acquired Prospera and PivoTrac, and higher incentive expense due to improved operating results. Operating income for the segment increased in 2021 due to improved global sales volumes and pricing.
Net corporate expense
Corporate SG&A expense was higher in the third quarter and first three quarters of 2017,2021, as compared withto 2020. The increase in the same periods in 2016,third quarter is primarily due to higher incentive expense and commission expense attributedaccruals related to the increased sales volumes. Operating income increased in the third quarter and first three quarters of 2017, as compared with 2016, due to the increased sales volumes and improved sales pricing.
Coatings segment
Coatings segment sales increased in the third quarter and first three quarters of 2017, as compared to the same periods in 2016, due primarily to increased sales prices to recover higher zinc costs globally. External sales volumes 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. In the Asia-Pacific region, improved demand/volume provided anbusiness performance. The increase in net sales.
SG&A expense 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 the first three quarters of 2017, 2021,as compared to 2016. Operating income was higher in the third quarter of 2017 compared to 2016,2020, is due to 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.
Irrigation segment
The increase in Irrigation segment net sales in the third quarter of 2017, as compared to 2016, was primarily due to sales volume increases for international irrigation. On a year-to-date basis in 2017 as compared to 2016, the sales increase is driven by improved volumes for both the domestic and international irrigation businesses. In North America, when comparing 2017 to the same periods of 2016, 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 higher service parts sales on a year-to-date basis. International sales increased in the third quarter and first three quarters of 2017, as compared to the same periods in 2016, due to volume increases across most regions and favorable foreign currency translation effects for Brazil and South Africa.
SG&A was higher in the third quarter and first three quarters of fiscal 2017, as compared with the same periods in 2016. The increase can primarily be attributed to higher incentive costs due to improved business resultsaccruals, an increase in stock compensation expense, and currency translation effects related to the international irrigation business. Operating income for the segment increasedan increase in the third quarter and first three quarters of fiscal 2017 over the same periods in 2016, primarily due to North America and international irrigation sales volume increases, productivity improvements, and favorable foreign currency translation effects.acquisition diligence expense.
Net corporate expense
Corporate SG&A expense was lower in the third quarter of 2017, as compared to the same period in 2016, due to $0.4 million lower pension expense for the Delta Pension Plan and $0.4 million of lower deferred compensation expenses that 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.
Liquidity and Capital Resources
Cash Flows
Working Capital and Operating Cash Flows-Net working capital was $1,034.7$863.8 million at September 30, 2017,25, 2021, as compared to $903.4$881.3 million at December 31, 2016.26, 2020. The increasedecrease in net working capital in 2017 mainly resulted from increased receivables,2021 is attributed to a decrease in cash on hand, and inventory,cash equivalents due to the recent business acquisitions and an increase in accounts payable, partially offset by higher accrued expensesan increase in inventory and accounts payable.receivable balances. Cash flow provided by operations was $134.4$61.8 million in the first three quarters of 2017,2021, as compared with $127.3$273.0 million in first three quarters of 2016. The increase in operating cash flow in the first three quarters of 2017,2020. The decrease in operating cash flows in 2021, as compared to 2016,2020, was primarily the result of higher net earnings tied toan increased sales volumes and pricinginventory balance that was mostlypartially offset by a correspondingan increase in working capital.customer advances payments (contract liabilities) and lower pension plan contributions. The required 2021 pension contribution was made in the fourth quarter of 2020.
Investing Cash Flows-Capital- The increase in investing cash outflows in the first three quarters of 2021, as compared to 2020, can be attributed to $312.5 million paid for acquisitions occurring during 2021 as compared to $15.9 million paid in 2020. Capital spending in the first three quarters of fiscal 20172021 was $39.9$80.5 million, as compared to $42.2$71.0 million for the same period in 2016. Capital spending projects in 2017 and 2016 related to investments in machinery and equipment across all businesses.2020. We expect our capital spending for the 2017 fiscal yearexpenditures to be approximately $60 million.in the range of $110 million to $120 million for fiscal 2021.
Financing Cash Flows-Our total interest‑bearinginterest-bearing debt decreased slightly to $755.3was $916.1 million at September 30, 2017 from $756.425, 2021 and $766.3 million at December 31, 2016.26, 2020. Financing cash flows changed from a usean outflow of approximately $82.4$110.0 million in the first three quarters of fiscal 20162020 to a usean inflow of $22.0$101.0 million in the first three quarters of fiscal 2017.2021. The reduction of financing cash outflowsinflow in the first three quarters of 2017, as compared2021 was primarily the result of our borrowing on the revolving credit agreement to 2016, was due topartially fund the Company purchasing $46.6 million of treasury shares underProspera acquisition, slightly offset by principal payments on our share repurchase programdebt, dividends paid, and the purchase of certaintreasury shares. The financing cash outflow for the first three quarters of 2020 was due primarily to the purchase of noncontrolling interests, totaling $11.0 millionprincipal payments on our debt, dividends paid, and the purchase of treasury shares; somewhat offset by our debt borrowings.
Guarantor Summarized Financial Information
We are providing the following information in 2016.compliance with Rule 3-10 and Rule 13-01 of Regulation S-X with respect to our two 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”). The Parent is the Issuer of the notes and consolidates all Guarantors.
The financial information of Issuer and Guarantors is presented on a combined basis with intercompany balances and transactions between Issuer and Guarantors eliminated. The Issuer’s or Guarantors' amounts due from, amounts due to, and transactions with non-guarantor subsidiaries are separately disclosed.
Combined financial information is as follows:
Supplemental Combined Parent and Guarantors Financial Information
For the thirteen and thirty-nine weeks ended September 25, 2021 and September 26, 2020 | | | | | | | | | | | | | | | | | | | | | | | |
| Thirteen weeks ended | | Thirty-nine weeks ended |
Dollars in thousands | September 25, 2021 | | September 26, 2020 | | September 25, 2021 | | September 26, 2020 |
Net sales | $ | 520,188 | | | $ | 438,947 | | | $ | 1,551,701 | | | $ | 1,377,294 | |
Gross Profit | 143,724 | | 115,116 | | 426,167 | | 385,314 |
Operating income | 49,166 | | 35,261 | | 159,994 | | 149,866 |
Net earnings | 26,125 | | 13,760 | | 92,200 | | 87,235 |
Net earnings attributable to Valmont Industries, Inc. | 26,098 | | 13,759 | | 92,090 | | 87,249 |
Supplemental Combined Parent and Guarantors Financial Information
September 25, 2021 and December 26, 2020
| | | | | | | | | | | |
Dollars in thousands | September 25, 2021 | | December 26, 2020 |
Current assets | $ | 729,047 | | | $ | 738,437 | |
Noncurrent assets | 813,116 | | | 701,571 | |
Current liabilities | 371,801 | | | 321,979 | |
Noncurrent liabilities | 1,287,332 | | | 1,100,657 | |
Noncontrolling interest in consolidated subsidiaries | 1,757 | | | 1,738 | |
Included in noncurrent assets is a due from non-guarantor subsidiaries receivable of $99,251 and $88,309 at September 25, 2021 and December 26, 2020. Included in noncurrent liabilities is a due to non-guarantor subsidiaries payable of $279,108 and $262,935 at September 25, 2021 and December 26, 2020.
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. NoShare repurchases were temporarily suspended at the end of the first quarter of 2020 until September 2020 as a precaution to preserve liquidity. We acquired 103,056 treasury shares were repurchasedfor approximately $24.1 million under our share repurchase program during the first three quarters of 2017.2021. As of September 30, 2017,25, 2021, we have approximately $132.2$123.9 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, 201725, 2021 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 ($248.9436.5 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 ($246.8297.6 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, 201725, 2021 and December 31, 2016,26, 2020, we had $168.1 million and no 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, 2017,25, 2021, we had the ability to borrow $585.2$415.6 million under this facility, after consideration of standby letters of credit of $14.8$16.3 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling $113.0$139.7 million, $112.8$126.6 million of which was unused at September 30, 2017.25, 2021.
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.
On October 18, 2021, we along with our wholly-owned subsidiaries Valmont Industries Holland B.V. and Valmont Group Pty. Ltd., as borrowers, entered into an amendment and restatement of our revolving credit agreement with our lenders. The maturity date of the revolving credit facility was extended to October 18, 2026.
Borrowings under the amended and restated revolving credit agreement will bear interest, payable quarterly, monthly or at the end of any interest period (depending on the type of borrowing), at our option, at either:
• term SOFR (based on one, three, or six month interest periods, as selected by us) plus a ten basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of our senior, unsecured, long-term debt;
• the higher of (i) the prime lending rate, (ii) an overnight bank rate plus 50 basis points and (ii) term SOFR (based on a 1 month interest period) plus a 110 basis point adjustment plus, in each case, a spread of 0 to 62.5 basis points, depending on the credit rating of the Company’s senior, unsecured, long-term debt; or
• daily simple SOFR plus a 10 basis point adjustment plus a spread of 100 to 162.5 basis points, depending on the credit rating of our senior, unsecured, long-term debt.
A commitment fee, payable quarterly, is also required under the amended and restated revolving credit agreement which accrues at 10 to 25 basis points, depending on the credit rating of our senior, unsecured, long-term debt, on the average daily unused portion of the commitments under the amended and restated revolving credit agreement.
The amended and restated revolving credit agreement requires maintenance of a leverage ratio, measured as of the last day of each of our fiscal quarters, of 3.50:1 or less. The leverage ratio is the ratio of: (a) interest-bearing debt minus unrestricted cash in excess of $50 million (but not exceeding $500 million); to (b) adjusted EBITDA. The debt agreements contain covenants that require usprovide a modification of the definition of “EBITDA” to maintain certain coverage ratiosadd-back any non-cash stock based compensation in any trailing twelve month period 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,The leverage ratio is permitted to increase from 3.50:1 to 3:75:1 for the four consecutive fiscal quarters after certain material acquisitions.
The amended and restated revolving credit agreement also contains customary affirmative and negative covenants for credit facilities of this type, including, among others, limitations on us and our covenant calculations do not include any estimated EBITDA from acquired businesses.
Our key debt covenants are as follows:
Interest-bearing debt is notsubsidiaries with respect to exceed 3.5X Adjusted EBITDAindebtedness, liens, mergers and acquisitions, investments, dispositions of assets, restricted payments, transactions with affiliates and prepayments of indebtedness. The amended and restated revolving credit agreement also provides for acceleration of the prior four quarters;obligations thereunder and exercise of other enforcement remedies upon the occurrence of customary events of default (subject to customary grace periods, as applicable).
Adjusted EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period.
At September 30, 2017,25, 2021, we were in compliance with all covenants related to the debt agreements. The key covenant calculationscalculation at September 30, 2017 were25, 2021 was as follows:follows (in 000's):
|
| | | |
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 |
|
| | | | | |
Interest-bearing debt | $ | 916,056 | |
| |
Less: Cash and cash equivalents in excess of $50 million | 119,795 | |
Net indebtedness | $ | 796,261 | |
Adjusted EBITDA-last four quarters | 429,775 | |
Leverage ratio | 1.85 | |
| |
| |
| |
| |
The calculation of Adjusted EBITDA-last four quarters (September 25, 201626, 2020 through September 30, 2017)25, 2021) is as follows:follows. The last four quarters information ended September 25, 2021 is calculated by taking the full fiscal year ended December 26, 2020, subtracting the first three quarters ended September 26, 2020, and adding the first three quarters ended September 25, 2021.
| | | | | |
Net cash flows from operations | $ | 105,077 | |
Interest expense | 41,976 | |
Income tax expense | 56,765 | |
Impairment of property, plant and equipment | (940) | |
| |
| |
Deferred income tax benefit | 6,394 | |
Noncontrolling interest | (1,767) | |
Pension plan expense | 12,961 | |
Contribution to pension plan | 18,971 | |
Changes in assets and liabilities | 177,260 | |
Other | (199) | |
EBITDA | 416,498 | |
Cash restructuring expenses | 13,277 | |
| |
| |
| |
| |
Adjusted EBITDA | $ | 429,775 | |
| |
| |
|
| | | |
Net cash flows from operations | $ | 226,318 |
|
Interest expense | 44,445 |
|
Income tax expense | 42,666 |
|
Impairment of property, plant and equipment | (481 | ) |
Loss on investment | (8 | ) |
Change in fair value of contingent consideration | (285 | ) |
Deferred income tax benefit | 22,072 |
|
Noncontrolling interest | (5,292 | ) |
Stock-based compensation | (10,659 | ) |
Increase in restricted cash - pension plan trust | (12,568 | ) |
Pension plan expense | (865 | ) |
Contribution to pension plan | 26,840 |
|
Changes in assets and liabilities | 29,167 |
|
Other | 350 |
|
EBITDA | 361,700 |
|
Reversal of contingent liability | (16,591 | ) |
Impairment of property, plant and equipment | 481 |
|
Adjusted EBITDA | $ | 345,590 |
|
|
| | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 189,915 |
|
Interest expense | 44,445 |
|
Income tax expense | 42,666 |
|
Depreciation and amortization expense | 84,674 |
|
EBITDA | 361,700 |
|
Reversal of contingent liability | (16,591 | ) |
Impairment of property, plant, and equipment | 481 |
|
Adjusted EBITDA | $ | 345,590 |
|
| | | | | |
Net earnings attributable to Valmont Industries, Inc. | $ | 204,590 | |
Interest expense | 41,976 | |
Income tax expense | 56,765 | |
Stock-based compensation | 24,034 | |
Depreciation and amortization expense | 89,133 | |
EBITDA | 416,498 | |
Cash restructuring expenses | 13,277 | |
| |
| |
| |
Adjusted EBITDA | $ | 429,775 | |
| |
| |
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 provision for U.S. income taxes in our financial statements on approximately $437.8 million of undistributed earnings of our foreign subsidiaries, as we intend to reinvest those earnings. Of our cash balances of $493.5$169.8 million at September 30, 2017,25, 2021, approximately $370.5$145.0 million is held in entities outside the United States.our non-U.S. subsidiaries. If we need to repatriatedistributed our foreign cash balances to the United States to meet our cash needs, incomecertain taxes would be paid to the extent that those cash repatriations were undistributed earnings of ourapplicable. At September 25, 2021, we have a liability for 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 $3.4 million and $0.7 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, 2016.26, 2020 with the exception of the following:
During the second quarter of 2021 the Company, the Company commenced on a new corporate headquarters operating lease with straight-line annual expense of approximately $5,100, a 2% annual increase in lease payment, and a 25 year term. In recognition of this lease, an operating lease asset of $71,853 and an operating lease long-term liability of $71,196 was incurred. These amounts are included within other assets and operating lease liabilities, respectively, in the Condensed Consolidated Balance Sheets as of September 25, 2021.
Off Balance Sheet Arrangements
There have been no material changes in our off balance sheet arrangements as described on page 3738 in our Form 10-K for the fiscal year ended December 31, 2016.26, 2020.
Critical Accounting Policies
There have beenwere no changes in our critical accounting policies as described on pages 38-4239-42 in our Form 10-K for the fiscal year ended December 31, 201626, 2020 during the quarterthree months ended September 30, 2017.25, 2021.
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, 2017.25, 2021. For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year ended December 31, 2016.26, 2020.
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 1A – Risk Factors
There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A in each of the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.
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) |
June 27, 2021 to July 24, 2021 | — | | | $ | — | | | — | | | $ | 126,356,000 | |
July 25, 2021 to August 28, 2021 | 10,759 | | | 232.37 | | | 10,759 | | | 123,856,000 | |
August 29, 2021 to September 25, 2021 | — | | | — | | | — | | | 123,856,000 | |
Total | 10,759 | | | $ | 232.37 | | | 10,759 | | | $ | 123,856,000 | |
|
| | | | | | | | | | | | | | |
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) |
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 |
|
(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.date bringing total authorization to $1.0 billion. As of September 30, 2017,25, 2021, we have acquired 4,588,1316,466,629 shares for approximately $617.8$876.1 million under this share repurchase program.
Item 6. Exhibits
(a) Exhibits |
| | | |
Exhibit No. | | Description |
| | Second Amended and Restated Credit Agreement, dated as of October 18, 2021, among the Company, Valmont Industries Holland B.V. and Valmont Group Pty. Ltd., as Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other lenders party thereto.This document was filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated October 18, 2021 (Commission file number 001-31429) and herein incorporated by reference. |
| | List of Issuer and Guarantor Subsidiaries. |
| | 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, 2017,25, 2021, 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) |
* Filed herewith
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. JAKSICHAVNER M. APPLBAUM |
| Mark C. JaksichAvner M. Applbaum
Executive Vice President and Chief Financial Officer |
Dated this 1stthe 28th day of November, 2017.October, 2021.
Index of Exhibits
|
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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.
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