10-Q 1 a2220845z10-q.htm 10-Q

Use these links to rapidly review the document
TABLE OF CONTENTS

Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Form 10-Q

(Mark One)    

ý

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2014

or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                              

Commission file number 1-31429



Valmont Industries, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  47-0351813
(I.R.S. Employer
Identification No.)

One Valmont Plaza,

 

 
Omaha, Nebraska   68154-5215
(Address of Principal Executive Offices)   (Zip Code)

(402) 963-1000
(Registrant's telephone number, including area code)


(Former name, former address and former fiscal year, if changed since last report)



        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No ý

26,193,724
Outstanding shares of common stock as of July 22, 2014

   


Table of Contents


VALMONT INDUSTRIES, INC.

INDEX TO FORM 10-Q

Page No.  

PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements:

       

 

Condensed Consolidated Statements of Earnings for the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013

    3  

 

Condensed Consolidated Statements of Comprehensive Income for the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013

    4  

 

Condensed Consolidated Balance Sheets as of June 28, 2014 and December 28, 2013

    5  

 

Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended June 28, 2014 and June 29, 2013

    6  

 

Condensed Consolidated Statements of Shareholders' Equity for the twenty-six weeks ended June 28, 2014 and June 29, 2013

    7  

 

Notes to Condensed Consolidated Financial Statements

    8  

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

    34  

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

    44  

Item 4.

 

Controls and Procedures

    44  

PART II. OTHER INFORMATION

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    45  

Item 6.

 

Exhibits

    45  

Signatures

    46  

2


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(Unaudited)

 
  Thirteen Weeks Ended   Twenty-six Weeks Ended  
 
  June 28,
2014
  June 29,
2013
  June 28,
2014
  June 29,
2013
 

Product sales

  $ 766,844   $ 794,341   $ 1,447,887   $ 1,534,788  

Services sales

    75,755     84,318     146,452     163,501  
                   

Net sales

    842,599     878,659     1,594,339     1,698,289  

Product cost of sales

    573,067     563,306     1,070,910     1,092,467  

Services cost of sales

    49,055     53,882     95,970     108,982  
                   

Total cost of sales

    622,122     617,188     1,166,880     1,201,449  
                   

Gross profit

    220,477     261,471     427,459     496,840  

Selling, general and administrative expenses

    115,701     117,206     223,835     234,385  
                   

Operating income

    104,776     144,265     203,624     262,455  
                   

Other income (expenses):

                         

Interest expense

    (8,304 )   (8,025 )   (16,501 )   (16,215 )

Interest income

    1,577     1,852     3,316     3,205  

Other

    1,903     123     (3,909 )   1,679  
                   

    (4,824 )   (6,050 )   (17,094 )   (11,331 )
                   

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    99,952     138,215     186,530     251,124  
                   

Income tax expense (benefit):

                         

Current

    26,117     48,210     59,055     86,870  

Deferred

    7,953     (1,042 )   5,030     (4,729 )
                   

    34,070     47,168     64,085     82,141  
                   

Earnings before equity in earnings of nonconsolidated subsidiaries

    65,882     91,047     122,445     168,983  

Equity in earnings of nonconsolidated subsidiaries

    (30 )   269     (30 )   473  
                   

Net earnings

    65,852     91,316     122,415     169,456  

Less: Earnings attributable to noncontrolling interests

    (1,876 )   (1,753 )   (2,459 )   (2,324 )
                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 63,976   $ 89,563   $ 119,956   $ 167,132  
                   
                   

Earnings per share:

                         

Basic

  $ 2.40   $ 3.36   $ 4.50   $ 6.28  
                   
                   

Diluted

  $ 2.38   $ 3.33   $ 4.46   $ 6.22  
                   
                   

Cash dividends declared per share

  $ 0.375   $ 0.250   $ 0.625   $ 0.475  
                   
                   

Weighted average number of shares of common stock outstanding—Basic (000 omitted)

    26,623     26,648     26,669     26,615  
                   
                   

Weighted average number of shares of common stock outstanding—Diluted (000 omitted)

    26,856     26,910     26,903     26,884  
                   
                   

   

See accompanying notes to condensed consolidated financial statements.

3


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

 
  Thirteen Weeks Ended   Twenty-six Weeks Ended  
 
  June 28,
2014
  June 29,
2013
  June 28,
2014
  June 29,
2013
 

Net earnings

  $ 65,852   $ 91,316   $ 122,415   $ 169,456  
                   

Other comprehensive income (loss), net of tax:

                         

Foreign currency translation adjustments:

                         

Unrealized translation gain (loss)

    13,869     (52,962 )   25,506     (62,582 )

Realized loss included in net earnings during the period

                (5,194 )

Unrealized loss on cash flow hedge:

                         

Amortization cost included in interest expense          

    (33 )   100     67     200  

Actuarial gain (loss) in defined benefit pension plan

   
(614

)
 
42
   
(847

)
 
(894

)
                   

Other comprehensive income (loss)

    13,222     (52,820 )   24,726     (68,470 )
                   

Comprehensive income

    79,074     38,496     147,141     100,986  

Comprehensive loss (income) attributable to noncontrolling interests

    (1,792 )   1,549     (1,704 )   3,189  
                   

Comprehensive income attributable to Valmont Industries, Inc. 

  $ 77,282   $ 40,045   $ 145,437   $ 104,175  
                   
                   

   

See accompanying notes to condensed consolidated financial statements.

4


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except shares and per share amounts)

(Unaudited)

 
  June 28,
2014
  December 28,
2013
 

ASSETS

             

Current assets:

             

Cash and cash equivalents

  $ 455,927   $ 613,706  

Receivables, net

    543,608     515,440  

Inventories

    381,943     380,000  

Prepaid expenses

    66,916     22,997  

Refundable and deferred income taxes

    71,334     65,697  
           

Total current assets

    1,519,728     1,597,840  
           

Property, plant and equipment, at cost

    1,160,142     1,017,126  

Less accumulated depreciation and amortization

    521,288     482,916  
           

Net property, plant and equipment

    638,854     534,210  
           

Goodwill

    368,405     349,632  

Other intangible assets, net

    195,359     170,917  

Other assets

    136,258     123,895  
           

Total assets

  $ 2,858,604   $ 2,776,494  
           
           

LIABILITIES AND SHAREHOLDERS' EQUITY

             

Current liabilities:

             

Current installments of long-term debt

  $ 188   $ 202  

Notes payable to banks

    17,485     19,024  

Accounts payable

    208,834     216,121  

Accrued employee compensation and benefits

    95,365     122,967  

Accrued expenses

    91,631     71,560  

Dividends payable

    9,930     6,706  
           

Total current liabilities

    423,433     436,580  
           

Deferred income taxes

    95,674     78,924  

Long-term debt, excluding current installments

    478,498     470,907  

Defined benefit pension liability

    143,114     154,397  

Deferred compensation

    48,292     39,109  

Other noncurrent liabilities

    54,503     51,731  

Shareholders' equity:

             

Preferred stock of $1 par value—

             

Authorized 500,000 shares; none issued

         

Common stock of $1 par value—

             

Authorized 75,000,000 shares; 27,900,000 issued

    27,900     27,900  

Retained earnings

    1,672,287     1,562,670  

Accumulated other comprehensive income (loss)

    (22,204 )   (47,685 )

Treasury stock

    (95,714 )   (20,860 )
           

Total Valmont Industries, Inc. shareholders' equity

    1,582,269     1,522,025  
           

Noncontrolling interest in consolidated subsidiaries

    32,821     22,821  
           

Total shareholders' equity

    1,615,090     1,544,846  
           

Total liabilities and shareholders' equity

  $ 2,858,604   $ 2,776,494  
           
           

   

See accompanying notes to condensed consolidated financial statements.

5


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 
  Twenty-six Weeks Ended  
 
  June 28,
2014
  June 29,
2013
 

Cash flows from operating activities:

             

Net earnings

  $ 122,415   $ 169,456  

Adjustments to reconcile net earnings to net cash flows from operations:

             

Depreciation and amortization

    43,368     38,186  

Loss on investment

    3,501      

Stock-based compensation

    3,686     3,342  

Defined benefit pension plan expense

    1,334     3,245  

Contribution to defined benefit pension plan

    (17,484 )   (10,346 )

Gain on sale of property, plant and equipment

    (102 )   (5,071 )

Equity in earnings in nonconsolidated subsidiaries

    30     (473 )

Deferred income taxes

    5,030     (4,729 )

Changes in assets and liabilities (net of acquisitions):

             

Receivables

    21,083     (3,331 )

Inventories

    6,624     (2,491 )

Prepaid expenses

    (18,289 )   (5,910 )

Accounts payable

    (28,633 )   736  

Accrued expenses

    (30,415 )   2,916  

Other noncurrent liabilities

    1,766     1,873  

Income taxes refundable

    (22,063 )   (11,810 )
           

Net cash flows from operating activities

    91,851     175,593  
           

Cash flows from investing activities:

             

Purchase of property, plant and equipment

    (46,991 )   (54,258 )

Proceeds from sale of assets

    1,151     39,054  

Acquisitions, net of cash acquired

    (120,483 )   (53,152 )

Other, net

    (2,940 )   (133 )
           

Net cash flows from investing activities

    (169,263 )   (68,489 )
           

Cash flows from financing activities:

             

Net borrowings under short-term agreements

    (1,861 )   2,620  

Proceeds from long-term borrowings

        68  

Principal payments on long-term borrowings

    (259 )   (303 )

Dividends paid

    (13,427 )   (12,021 )

Dividends to noncontrolling interest

    (1,340 )   (1,767 )

Proceeds from exercises under stock plans

    11,996     14,098  

Excess tax benefits from stock option exercises

    3,576     305  

Purchase of treasury shares

    (77,084 )    

Purchase of common treasury shares—stock plan exercises

    (11,984 )   (13,602 )
           

Net cash flows from financing activities

    (90,383 )   (10,602 )
           

Effect of exchange rate changes on cash and cash equivalents

    10,016     (20,154 )
           

Net change in cash and cash equivalents

    (157,779 )   76,348  

Cash and cash equivalents—beginning of year

    613,706     414,129  
           

Cash and cash equivalents—end of period

  $ 455,927   $ 490,477  
           
           

   

See accompanying notes to condensed consolidated financial statements.

6


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands)

(Unaudited)

 
  Common
stock
  Additional
paid-in
capital
  Retained
earnings
  Accumulated
other
comprehensive
income (loss)
  Treasury
stock
  Noncontrolling
interest in
consolidated
subsidiaries
  Total
shareholders'
equity
 

Balance at December 29, 2012

  $ 27,900   $   $ 1,300,529   $ 43,938   $ (22,455 ) $ 57,098   $ 1,407,010  

Net earnings

            167,132             2,324     169,456  

Other comprehensive income (loss)

                (62,957 )       (5,513 )   (68,470 )

Cash dividends declared

            (12,713 )               (12,713 )

Dividends to noncontrolling interests

                        (1,767 )   (1,767 )

Acquisition of Locker

                        325     325  

Stock plan exercises; 85,874 shares acquired

                    (13,602 )       (13,602 )

Stock options exercised; 177,902 shares issued

        (3,647 )   3,378         14,367         14,098  

Tax benefit from stock option exercises

        305                     305  

Stock option expense

        2,627                     2,627  

Stock awards; 2,667 shares issued

        715             373         1,088  
                               

Balance at June 29, 2013

  $ 27,900   $   $ 1,458,326   $ (19,019 ) $ (21,317 ) $ 52,467   $ 1,498,357  
                               
                               

Balance at December 28, 2013

  $ 27,900   $   $ 1,562,670   $ (47,685 ) $ (20,860 ) $ 22,821   $ 1,544,846  

Net earnings

            119,956             2,459     122,415  

Other comprehensive income (loss)

                25,481         (755 )   24,726  

Cash dividends declared

            (16,651 )               (16,651 )

Dividends to noncontrolling interests

                        (1,340 )   (1,340 )

Acquisition of DS SM

                        9,232     9,232  

Addition of noncontrolling interest

                        404     404  

Purchase of treasury shares; 490,172 shares acquired

                    (77,084 )       (77,084 )

Stock plan exercises; 78,217 shares acquired

                    (11,984 )       (11,984 )

Stock options exercised; 158,317 shares issued

        (7,262 )   6,312         12,946         11,996  

Tax benefit from stock option exercises

        3,576                     3,576  

Stock option expense

        2,525                     2,525  

Stock awards; 8,822 shares issued

        1,161             1,268         2,429  
                               

Balance at June 28, 2014

  $ 27,900   $   $ 1,672,287   $ (22,204 ) $ (95,714 ) $ 32,821   $ 1,615,090  
                               
                               

   

See accompanying notes to condensed consolidated financial statements.

7


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Condensed Consolidated Financial Statements

        The Condensed Consolidated Balance Sheet as of June 28, 2014, the Condensed Consolidated Statements of Earnings and Comprehensive Income for the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013, and the Condensed Consolidated Statements of Cash Flows and Shareholders' Equity for the twenty-six week periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of June 28, 2014 and for all periods presented.

        Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2013. 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 28, 2013. The results of operations for the period ended June 28, 2014 are not necessarily indicative of the operating results for the full year.

    Inventories

        Approximately 41% and 43% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market as of June 28, 2014 and December 28, 2013, respectively. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately $47,141 and $45,204 at June 28, 2014 and December 28, 2013, respectively.

        Inventories consisted of the following:

 
  June 28,
2014
  December 28,
2013
 

Raw materials and purchased parts

  $ 178,366   $ 179,576  

Work-in-process

    27,242     27,294  

Finished goods and manufactured goods

    223,476     218,334  
           

Subtotal

    429,084     425,204  

Less: LIFO reserve

    47,141     45,204  
           

  $ 381,943   $ 380,000  
           
           

8


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    Income Taxes

        Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries for the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013, were as follows:

 
  Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
 
  2014   2013   2014   2013  

United States

  $ 65,096   $ 98,684   $ 136,790   $ 187,421  

Foreign

    34,856     39,531     49,740     63,703  
                   

  $ 99,952   $ 138,215   $ 186,530   $ 251,124  
                   
                   

    Pension Benefits

        The Company incurs expenses in connection with the Delta Pension Plan ("DPP"). The DPP was acquired as part of the Delta plc acquisition in fiscal 2010 and has no members that are active employees. In order to measure expense and the related benefit obligation, various assumptions are made including discount rates used to value the obligation, expected return on plan assets used to fund these expenses and estimated future inflation rates. These assumptions are based on historical experience as well as current facts and circumstances. An actuarial analysis is used to measure the expense and liability associated with pension benefits.

        The components of the net periodic pension expense for the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013 were as follows:

 
  Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
 
  2014   2013   2014   2013  

Net periodic benefit expense:

                         

Interest cost

  $ 7,312   $ 6,487   $ 14,509   $ 13,058  

Expected return on plan assets

    (6,640 )   (4,875 )   (13,175 )   (9,813 )
                   

Net periodic benefit expense

  $ 672   $ 1,612   $ 1,334   $ 3,245  
                   
                   

    Stock Plans

        The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Human Resource Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At June 28, 2014, 1,463,096 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.

        Under the plans, the exercise price of each option equals the closing market price at the date of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the fifth anniversary of the grant.

9


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Expiration of grants is from six to ten years from the date of grant. The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options for the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013, respectively, were as follows:

 
  Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
 
  2014   2013   2014   2013  

Compensation expense

  $ 1,262   $ 1,314   $ 2,525   $ 2,627  

Income tax benefits

    486     505     972     1,011  

    Equity Method Investments

        The Company has equity method investments in non-consolidated subsidiaries, which are recorded within "Other assets" on the Condensed Consolidated Balance Sheet. In February 2013, the Company sold its nonconsolidated investment in Manganese Materials Company Pty. Ltd. to the majority owner of the business for approximately $29,250. The profit on the sale was not significant, which included the recognition of $5,194 in currency translation adjustments previously recorded as part of "Accumulated other comprehensive income" on the Condensed Consolidated Balance Sheet. The Company also recognized certain deferred tax benefits of approximately $3,200 associated with the sale in the first quarter of fiscal 2013.

    Fair Value

        The Company applies the provisions of Accounting Standards Codification 820, Fair Value Measurements ("ASC 820") which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 apply to other accounting pronouncements that require or permit fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

        ASC 820 establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

            Level 1:    Quoted market prices in active markets for identical assets or liabilities.

            Level 2:    Observable market based inputs or unobservable inputs that are corroborated by market data.

            Level 3:    Unobservable inputs that are not corroborated by market data.

        The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

10


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

        Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan of $35,852 ($27,133 at December 2013) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification 320, Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time. The Company's ownership in Delta EMD Pty. Ltd. (JSE:DTA) of $10,114 and $13,910 is recorded at fair value at June 28, 2014 and December 28, 2013, respectively. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.

 
   
  Fair Value Measurement Using:  
 
  Carrying Value
June 28,
2014
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         

Trading Securities

  $ 45,966   $ 45,966   $   $  

 

 
   
  Fair Value Measurement Using:  
 
  Carrying Value
December 28,
2013
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         

Trading Securities

  $ 41,043   $ 41,043   $   $  

    Comprehensive Income

        Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Accumulated other comprehensive income (loss) consisted of the following at June 28, 2014 and December 28, 2013:

 
  Foreign
Currency
Translation
Adjustments
  Unrealized
Loss on Cash
Flow Hedge
  Defined
Benefit
Pension Plan
  Accumulated
Other
Comprehensive
Income
 

Balance at December 28, 2013

  $ (20,165 ) $ (2,535 ) $ (24,985 ) $ (47,685 )

Current-period comprehensive income (loss)

    26,261     67     (847 )   25,481  
                   

Balance at June 28, 2014

  $ 6,096   $ (2,468 ) $ (25,832 ) $ (22,204 )
                   
                   

11


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    Recently Issued Accounting Pronouncements

        In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2016 and is to be applied retrospectively. Early application is not permitted. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations and financial position.

(2) ACQUISITIONS

        On March 3, 2014, the Company purchased 90% of the outstanding shares of DS SM A/S, which was renamed Valmont SM. Valmont SM is a manufacturer of heavy complex steel structures for a diverse range of industries including wind energy, offshore oil and gas, and electricity transmission. Valmont SM's operations are reported in the Engineered Infrastructure Products Segment. Valmont SM's annual sales are approximately $190,000 and it operates two manufacturing locations in Denmark. The purchase price paid for the business at closing (net of $56 cash acquired) was $120,483, including the payoff of an intercompany note payable by Valmont SM to its prior affiliates. The purchase is subject to an earn-out clause that is contingent on meeting future operational metrics for which no liability has been established based on current expectations. Additionally, the fair value measurements are subject to a trade working capital adjustment that has not yet been finalized. The acquisition, which was funded by cash held by the Company, was completed to participate in markets for wind energy, oil and gas exploration, power transmission and other related infrastructure projects and to increase the Company's geographic footprint in Europe. The Company also funded a portion of the acquisition with an intercompany note payable. The excess purchase price over the fair value of assets resulted in goodwill, which is not deductible for tax purposes.

        The preliminary fair value measurement disclosed below is subject to management reviews and completion of the fair value measurements of the assets acquired and liabilities assumed. The Company expects the fair value measurement process and purchase price allocation to be completed in the third quarter of 2014 in conjunction with the finalization of the trade working capital settlement.

12


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(2) ACQUISITIONS (Continued)

        The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the date of acquisition.

 
  At March 3,
2014
 

Current assets

  $ 73,421  

Property, plant and equipment

    88,917  

Intangible assets

    30,340  

Goodwill

    11,846  
       

Total fair value of assets acquired

  $ 204,524  
       

Current liabilities

    50,953  

Deferred income taxes

    14,915  

Intercompany note payable

    37,448  

Long-term debt

    8,941  
       

Total fair value of liabilities assumed

    112,257  

Non-controlling interests

    9,232  
       

Net assets acquired

  $ 83,035  
       
       

        The Company's Condensed Consolidated Statements of Earnings for the thirteen and twenty-six weeks ended June 28, 2014 included net sales of $47,217 and $64,521 and net earnings of $2,925 and $4,102, respectively, resulting from Valmont SM's operations from March 3, 2014 to June 28, 2014. No proforma information for 2014 has been provided as it does not have a material effect on the financial statements.

        Based on the preliminary fair value assessments, the Company allocated $30,340 of the purchase price to acquired intangible assets. The following table summarizes the major classes of Valmont SM's acquired intangible assets and the respective weighted average amortization periods:

 
  Amount   Weighted
Average
Amortization
Period
(Years)
 

Trade Names

  $ 12,210     Indefinite  

Backlog

    3,145     1.5  

Customer Relationships

    14,985     15.0  
             

Total Intangible Assets

  $ 30,340        
             

        On February 5, 2013, the Company purchased 100% of the outstanding shares of Locker Group Holdings Pty. Ltd. ("Locker"). Locker is a manufacturer of perforated and expanded metal for the non-residential market, industrial flooring and handrails for the access systems market, and screening media for applications in the industrial and mining sectors in Australia and Asia. Locker's operations are reported in the Engineered Infrastructure Products Segment. The purchase price paid for the

13


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(2) ACQUISITIONS (Continued)

business at closing (net of $116 cash acquired) was $53,152. In addition, a maximum of $7,911 additional purchase price may be paid to the sellers upon the achievement of certain gross profit and inventory targets over the next two years. The Company determined the present value of the potential additional purchase price at February 5, 2013 to be $7,178. The acquisition, which was funded by cash held by the Company, was completed to expand our product offering and sales coverage for access systems and related products in Asia Pacific.

        In December 2013, the Company purchased 100% of the outstanding shares of Armorflex International Ltd. ("Armorflex") for $10,000. Armorflex is a company holding proprietary intellectual property for products serving the highway safety market. In the measurement of fair values of assets acquired and liabilities assumed, we recorded goodwill of $6,823 and an aggregate of $3,792 for customer relationships, patented technology and other intangible assets. The goodwill is not deductible for tax purposes. Armorflex is included in the Engineered Infrastructure Products segment and was acquired to expand the Company's highway safety product offerings in the Asia Pacific region. This acquisition did not have a significant effect on the Company's fiscal 2013 financial results.

        The Company's Condensed Consolidated Statement of Earnings for the thirteen and twenty-six weeks ended June 28, 2014 included net sales of $69,473 and $104,054 and net earnings of $3,888 and $5,574 resulting from the Valmont SM, Locker, and Armorflex acquisitions. The pro forma effect of these acquisitions on the second quarter and first half of 2013 Statement of Earnings was as follows:

 
  Thirteen weeks Ended
June 29, 2013
  Twenty-six weeks Ended
June 29, 2013
 

Net sales

  $ 929,722   $ 1,797,577  

Net earnings

  $ 92,791   $ 172,224  

Earnings per share—diluted

  $ 3.44   $ 6.41  

(3) GOODWILL AND INTANGIBLE ASSETS

    Amortized Intangible Assets

        The components of amortized intangible assets at June 28, 2014 and December 28, 2013 were as follows:

 
  June 28, 2014
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Weighted
Average
Life

Customer Relationships

  $ 194,824   $ 84,034   13 years

Proprietary Software & Database

    3,977     2,985   5 years

Patents & Proprietary Technology

    11,397     8,148   8 years

Other

    4,731     2,153   3 years
             

  $ 214,929   $ 97,320    
             
             

14


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(3) GOODWILL AND INTANGIBLE ASSETS (Continued)


 
  December 28, 2013
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Weighted
Average
Life

Customer Relationships

  $ 177,495   $ 76,024   13 years

Proprietary Software & Database

    3,896     2,896   6 years

Patents & Proprietary Technology

    11,334     7,239   8 years

Other

    1,620     1,438   6 years
             

  $ 194,345   $ 87,597    
             
             

        Amortization expense for intangible assets for the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013, respectively was as follows:

Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
2014   2013   2014   2013  
$ 4,634   $ 3,458   $ 8,737   $ 7,696  

        Estimated annual amortization expense related to finite-lived intangible assets is as follows:

 
  Estimated
Amortization
Expense
 

2014

  $ 18,243  

2015

    17,436  

2016

    15,470  

2017

    15,421  

2018

    13,738  

        The useful lives assigned to finite-lived intangible assets included consideration of factors such as the Company's past and expected experience related to customer retention rates, the remaining legal or contractual life of the underlying arrangement that resulted in the recognition of the intangible asset and the Company's expected use of the intangible asset.

15


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(3) GOODWILL AND INTANGIBLE ASSETS (Continued)

    Non-amortized intangible assets

        Intangible assets with indefinite lives are not amortized. The carrying values of trade names at June 28, 2014 and December 28, 2013 were as follows:

 
  June 28,
2014
  December 28,
2013
  Year
Acquired
 

Webforge

  $ 18,389   $ 17,787     2010  

Valmont SM

    12,059         2014  

Newmark

    11,111     11,111     2004  

Ingal EPS/Ingal Civil Products

    9,705     9,387     2010  

Donhad

    7,322     7,082     2010  

Industrial Galvanizers

    4,257     4,117     2010  

Other

    14,907     14,685        
                 

  $ 77,750   $ 64,169        
                 
                 

        In its determination of these intangible assets as indefinite-lived, the Company considered such factors as its expected future use of the intangible asset, legal, regulatory, technological and competitive factors that may impact the useful life or value of the intangible asset and the expected costs to maintain the value of the intangible asset. The Company expects that these intangible assets will maintain their value indefinitely. Accordingly, these assets are not amortized.

        The Company's trade names were tested for impairment in the third quarter of 2013 (exclusive of Valmont SM acquired in the first quarter of 2014). The values of the trade names were determined using the relief-from-royalty method. Based on this evaluation, the Company determined that its trade names were not impaired.

    Goodwill

        The carrying amount of goodwill by segment as of June 28, 2014 and December 28, 2013 was as follows:

 
  Engineered
Infrastructure
Products
Segment
  Utility
Support
Structures
Segment
  Coatings
Segment
  Irrigation
Segment
  Other   Total  

Balance at December 28, 2013

  $ 175,442   $ 75,404   $ 77,062   $ 2,420   $ 19,304   $ 349,632  

Acquisitions

    11,846                     11,846  

Foreign currency translation

    5,548         679     46     654     6,927  
                           

Balance at June 28, 2014

  $ 192,836   $ 75,404   $ 77,741   $ 2,466   $ 19,958   $ 368,405  
                           
                           

16


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(3) GOODWILL AND INTANGIBLE ASSETS (Continued)

        The goodwill from acquisitions arose from the acquisition of Valmont SM in the first quarter of 2014. The Company's goodwill was tested for impairment during the third quarter of 2013. As a result of that testing, the Company determined that its goodwill was not impaired, as the valuation of the reporting units exceeded their respective carrying values. The Company continues to monitor changes in the global economy that could impact future operating results of its reporting units. If such conditions arise, the Company will test a given reporting unit for impairment prior to the annual test.

(4) 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 twenty-six weeks ended June 28, 2014 and June 29, 2013 were as follows:

 
  2014   2013  

Interest

  $ 16,564   $ 16,329  

Income taxes

    77,691     103,604  

        On May 13, 2014, the Company announced a new capital allocation philosophy which increased the dividend by 50% and covered a share repurchase program of up to $500 million of the Company's outstanding common stock to be acquired from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. As of June 28, 2014, the Company has acquired 490,172 shares for approximately $77.1 million.

17


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(5) 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 June 28, 2014:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 63,976   $   $ 63,976  

Shares outstanding

    26,623     233     26,856  

Per share amount

  $ 2.40   $ (0.02 ) $ 2.38  

Thirteen weeks ended June 29, 2013:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 89,563   $   $ 89,563  

Shares outstanding

    26,648     262     26,910  

Per share amount

  $ 3.36   $ (0.03 ) $ 3.33  

Twenty-six weeks ended June 28, 2014:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 119,956   $   $ 119,956  

Shares outstanding

    26,669     234     26,903  

Per share amount

  $ 4.50   $ (0.04 ) $ 4.46  

Twenty-six weeks ended June 29, 2013:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 167,132   $   $ 167,132  

Shares outstanding

    26,615     269     26,884  

Per share amount

  $ 6.28   $ (0.06 ) $ 6.22  

(6) BUSINESS SEGMENTS

        The Company has four reportable segments based on its management structure. Each segment is global in nature with a manager responsible for segment operational performance and the allocation of capital within the segment. Net corporate expense is net of certain service-related expenses that are allocated to business units generally on the basis of employee headcounts and sales dollars.

        Reportable segments are as follows:

        ENGINEERED INFRASTRUCTURE PRODUCTS:    This segment consists of the manufacture of engineered metal structures and components for the global lighting and traffic, wireless communication, wind energy, offshore oil and gas, roadway safety and access systems applications;

        UTILITY SUPPORT STRUCTURES:    This segment consists of the manufacture of engineered steel and concrete structures for the global utility industry;

        COATINGS:    This segment consists of galvanizing, anodizing and powder coating services on a global basis; and

18


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(6) BUSINESS SEGMENTS (Continued)

        IRRIGATION:    This segment consists of the manufacture of agricultural irrigation equipment and related parts and services for the global agricultural industry.

        In addition to these four reportable segments, the Company has other businesses and activities that individually are not more than 10% of consolidated sales. These include the manufacture of forged steel grinding media for the mining industry, tubular products for industrial customers, electrolytic manganese dioxide for disposable batteries and the distribution of industrial fasteners and are reported in the "Other" category.

        The accounting policies of the reportable segments are the same as those described in Note 1. The Company evaluates the performance of its business segments based upon operating income and invested capital. The Company does not allocate interest expense, non-operating income and deductions, or income taxes to its business segments.

19


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(6) BUSINESS SEGMENTS (Continued)

Summary by Business

 
  Thirteen Weeks Ended   Twenty-six Weeks Ended  
 
  June 28,
2014
  June 29,
2013
  June 28,
2014
  June 29,
2013
 

SALES:

                         

Engineered Infrastructure Products segment:

                         

Lighting, Traffic, and Roadway Products

  $ 164,753   $ 161,487   $ 303,730   $ 308,657  

Communication Products

    43,618     34,771     73,504     63,393  

Offshore Structures

    47,217         64,521      

Access Systems

    48,764     54,378     91,059     102,256  
                   

Engineered Infrastructure Products segment          

    304,352     250,636     532,814     474,306  

Utility Support Structures segment:

                         

Steel

    179,574     200,650     371,011     411,661  

Concrete

    33,456     27,593     56,746     56,220  
                   

Utility Support Structures segment

    213,030     228,243     427,757     467,881  

Coatings segment

    85,157     93,798     167,328     183,043  

Irrigation segment

    219,917     270,175     432,650     514,882  

Other

    61,786     83,679     120,388     161,548  
                   

Total

    884,242     926,531     1,680,937     1,801,660  

INTERSEGMENT SALES:

                         

Engineered Infrastructure Products segment          

    18,166     22,169     37,731     51,621  

Utility Support Structures segment

    1,025     299     1,520     710  

Coatings segment

    14,770     14,448     29,723     28,778  

Irrigation segment

    4     1     13     1  

Other

    7,678     10,955     17,611     22,261  
                   

Total

    41,643     47,872     86,598     103,371  

NET SALES:

                         

Engineered Infrastructure Products segment

    286,186     228,467     495,083     422,685  

Utility Support Structures segment

    212,005     227,944     426,237     467,171  

Coatings segment

    70,387     79,350     137,605     154,265  

Irrigation segment

    219,913     270,174     432,637     514,881  

Other

    54,108     72,724     102,777     139,287  
                   

Total

  $ 842,599   $ 878,659   $ 1,594,339   $ 1,698,289  
                   
                   

OPERATING INCOME:

                         

Engineered Infrastructure Products segment

  $ 28,625   $ 22,603   $ 42,334   $ 35,337  

Utility Support Structures segment

    26,375     42,121     59,132     88,276  

Coatings segment

    15,820     23,552     29,706     36,972  

Irrigation segment

    41,473     64,174     84,619     118,733  

Other

    8,343     13,025     16,893     23,812  

Corporate

    (15,860 )   (21,210 )   (29,060 )   (40,675 )
                   

Total

  $ 104,776   $ 144,265   $ 203,624   $ 262,455  
                   
                   

20


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION

        The Company has $450,000 principal amount of senior unsecured notes outstanding at a coupon interest rate of 6.625% per annum. The notes are guaranteed, jointly, severally, fully and unconditionally by certain of the Company's current and future direct and indirect domestic and foreign subsidiaries (collectively the "Guarantors"), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the "Non-Guarantors"). All Guarantors are 100% owned by the parent company.

        In 2014, the Company classified "Equity in earnings of nonconsolidated subsidiaries" as an adjustment to reconcile net earnings to operating cash flows, as part of "Net cash flows from operating activities" in the Condensed Consolidating Statement of Cash Flows. In the 2013 Condensed Consolidating Statement of Cash Flows, these amounts were classified within "Other, net", as part of "Net cash flows from investing activities". The Company revised its presentation for 2013 with respect to the supplemental information included in this footnote in order to achieve comparability in the Condensed Consolidating Statements of Cash Flows.

        The revisions consisted of recording the amounts previously reported in "Other, net" in cash flows from investing activities that were related to earnings from subsidiaries to "Equity in earnings of nonconsolidated subsidiaries" in cash flows from operating activities. Accordingly, the eliminations to reconcile consolidated net earnings are contained in the "Net cash flows from operating activities".

        The "Non-Guarantor" and "Total" columns were not affected by any of these revisions. There was also no effect on the consolidated (total) net cash flows or any other statements in this footnote. The following is a reconciliation of the columns affected for 2013.

 
  Parent   Parent   Guarantor   Guarantor   Eliminations   Eliminations  
 
  As previously
reported
  As revised   As
previously
reported
  As revised   As previously
reported
  As revised  

2013

                                     

Cash flows from operating activities:

                                     

Equity in earnings of nonconsolidated subsidiaries

  $ (266 ) $ (85,146 ) $   $ (42,385 ) $   $ 127,265  

Net cash flows from operating activities

    180,493     95,613     68,144     25,759     (124,172 )   3,093  

Cash flows from investing activities:

   
 
   
 
   
 
   
 
   
 
   
 
 

Other, net

    (53,317 )   31,563     (99,472 )   (57,087 )   124,172     (3,093 )

Net cash flows from investing activities

    (74,677 )   10,203     (118,009 )   (75,624 )   124,172     (3,093 )

21


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

        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 June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 378,642   $ 124,414   $ 387,715   $ (48,172 ) $ 842,599  

Cost of sales

    280,054     91,536     298,764     (48,232 )   622,122  
                       

Gross profit

    98,588     32,878     88,951     60     220,477  

Selling, general and administrative expenses

    50,164     12,670     52,867         115,701  
                       

Operating income

    48,424     20,208     36,084     60     104,776  
                       

Other income (expense):

                               

Interest expense

    (7,691 )   (11,337 )   (613 )   11,337     (8,304 )

Interest income

    6     152     12,756     (11,337 )   1,577  

Other

    1,754     140     9         1,903  
                       

    (5,931 )   (11,045 )   12,152         (4,824 )
                       

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    42,493     9,163     48,236     60     99,952  
                       

Income tax expense (benefit):

                               

Current

    9,315     2,626     14,148     28     26,117  

Deferred

    7,672     2,079     (1,798 )       7,953  
                       

    16,987     4,705     12,350     28     34,070  
                       

Earnings before equity in earnings of nonconsolidated subsidiaries

    25,506     4,458     35,886     32     65,882  

Equity in earnings of nonconsolidated subsidiaries

   
38,470
   
16,964
   
   
(55,464

)
 
(30

)
                       

Net earnings

    63,976     21,422     35,886     (55,432 )   65,852  

Less: Earnings attributable to noncontrolling interests

            (1,876 )       (1,876 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 63,976   $ 21,422   $ 34,010   $ (55,432 ) $ 63,976  
                       
                       

22


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Twenty-six weeks ended June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 755,284   $ 260,311   $ 687,996   $ (109,252 ) $ 1,594,339  

Cost of sales

    551,813     191,352     533,398     (109,683 )   1,166,880  
                       

Gross profit

    203,471     68,959     154,598     431     427,459  

Selling, general and administrative expenses

    97,954     25,661     100,220         223,835  
                       

Operating income

    105,517     43,298     54,378     431     203,624  
                       

Other income (expense):

                               

Interest expense

    (15,366 )   (22,217 )   (1,135 )   22,217     (16,501 )

Interest income

    26     335     25,172     (22,217 )   3,316  

Other

    1,821     (352 )   (5,378 )       (3,909 )
                       

    (13,519 )   (22,234 )   18,659         (17,094 )
                       

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    91,998     21,064     73,037     431     186,530  
                       

Income tax expense (benefit):

                               

Current

    29,193     8,213     21,517     132     59,055  

Deferred

    5,829     1,667     (2,466 )       5,030  
                       

    35,022     9,880     19,051     132     64,085  
                       

Earnings before equity in earnings of nonconsolidated subsidiaries

    56,976     11,184     53,986     299     122,445  

Equity in earnings of nonconsolidated subsidiaries

   
62,980
   
25,903
   
   
(88,913

)
 
(30

)
                       

Net earnings

    119,956     37,087     53,986     (88,614 )   122,415  

Less: Earnings attributable to noncontrolling interests

            (2,459 )       (2,459 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 119,956   $ 37,087   $ 51,527   $ (88,614 ) $ 119,956  
                       
                       

23


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended June 29, 2013

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 426,817   $ 169,027   $ 360,802   $ (77,987 ) $ 878,659  

Cost of sales

    297,949     126,290     273,482     (80,533 )   617,188  
                       

Gross profit

    128,868     42,737     87,320     2,546     261,471  

Selling, general and administrative expenses

    55,720     14,347     47,139         117,206  
                       

Operating income

    73,148     28,390     40,181     2,546     144,265  
                       

Other income (expense):

                               

Interest expense

    (7,636 )   (11,944 )   (390 )   11,945     (8,025 )

Interest income

    8     237     13,552     (11,945 )   1,852  

Other

    394     31     (302 )       123  
                       

    (7,234 )   (11,676 )   12,860         (6,050 )
                       

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    65,914     16,714     53,041     2,546     138,215  
                       

Income tax expense (benefit):

                               

Current

    24,824     6,546     16,182     658     48,210  

Deferred

    (750 )   1,399     (1,691 )       (1,042 )
                       

    24,074     7,945     14,491     658     47,168  
                       

Earnings before equity in earnings of nonconsolidated subsidiaries

    41,840     8,769     38,550     1,888     91,047  

Equity in earnings of nonconsolidated subsidiaries

   
47,723
   
23,234
   
   
(70,688

)
 
269
 
                       

Net earnings

    89,563     32,003     38,550     (68,800 )   91,316  

Less: Earnings attributable to noncontrolling interests

            (1,753 )       (1,753 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 89,563   $ 32,003   $ 36,797   $ (68,800 ) $ 89,563  
                       
                       

24


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Twenty-six weeks ended June 29, 2013

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 843,430   $ 339,876   $ 686,211   $ (171,228 ) $ 1,698,289  

Cost of sales

    598,629     255,288     521,865     (174,333 )   1,201,449  
                       

Gross profit

    244,801     84,588     164,346     3,105     496,840  

Selling, general and administrative expenses

    105,746     28,341     100,298         234,385  
                       

Operating income

    139,055     56,247     64,048     3,105     262,455  
                       

Other income (expense):

                               

Interest expense

    (15,391 )   (24,574 )   (824 )   24,574     (16,215 )

Interest income

    15     490     27,274     (24,574 )   3,205  

Other

    1,802     46     (169 )       1,679  
                       

    (13,574 )   (24,038 )   26,281         (11,331 )
                       

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    125,481     32,209     90,329     3,105     251,124  
                       

Income tax expense (benefit):

                               

Current

    45,999     13,382     26,652     837     86,870  

Deferred

    (2,504 )   1,702     (3,927 )       (4,729 )
                       

    43,495     15,084     22,725     837     82,141  
                       

Earnings before equity in earnings of nonconsolidated subsidiaries

    81,986     17,125     67,604     2,268     168,983  

Equity in earnings of nonconsolidated subsidiaries

   
85,146
   
42,385
   
207
   
(127,265

)
 
473
 
                       

Net earnings

    167,132     59,510     67,811     (124,997 )   169,456  

Less: Earnings attributable to noncontrolling interests

            (2,324 )       (2,324 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 167,132   $ 59,510   $ 65,487   $ (124,997 ) $ 167,132  
                       
                       

25


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirteen weeks ended June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net earnings

  $ 63,976   $ 21,422   $ 35,886   $ (55,432 ) $ 65,852  
                       

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustments:          

                               

Unrealized gains (losses) arising during the period

        (8,954 )   22,823         13,869  
                       

        (8,954 )   22,823         13,869  
                       

Unrealized loss on cash flow hedge:

                               

Amortization cost included in interest expense

    100         (133 )       (33 )
                       

    100         (133 )       (33 )
                       

Actuarial gain (loss) in defined benefit pension plan liability

            (614 )       (614 )

Equity in other comprehensive income

   
13,206
   
   
   
(13,206

)
 
 
                       

Other comprehensive income (loss)

    13,306     (8,954 )   22,076     (13,206 )   13,222  
                       

Comprehensive income

    77,282     12,468     57,962     (68,638 )   79,074  

Comprehensive income attributable to noncontrolling interests

            (1,792 )       (1,792 )
                       

Comprehensive income attributable to Valmont Industries, Inc. 

  $ 77,282   $ 12,468   $ 56,170   $ (68,638 ) $ 77,282  
                       
                       

26


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Twenty-six weeks ended June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net earnings

  $ 119,956   $ 37,087   $ 53,986   $ (88,614 ) $ 122,415  
                       

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustments:

                               

Unrealized gains (losses) arising during the period

        (29,315 )   54,821         25,506  
                       

        (29,315 )   54,821         25,506  
                       

Unrealized loss on cash flow hedge: