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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 September 26, 2009

Or

o

 

TRANSITION REPORT UNDER 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

(Address of principal executive offices)

 

68154-5215
(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 section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 o    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. (Check one):

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

26,276,932
Outstanding shares of common stock as of October 26, 2009


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

 
   
  Page No.  

PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements:

       

 

Condensed Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended September 26, 2009 and September 27, 2008

    3  

 

Condensed Consolidated Balance Sheets as of September 26, 2009 and December 27, 2008

    4  

 

Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended September 26, 2009 and September 27, 2008

    5  

 

Condensed Consolidated Statements of Shareholders' Equity for the thirty-nine weeks ended September 26, 2009 and September 27, 2008

    6  

 

Notes to Condensed Consolidated Financial Statements

    7-24  

Item 2.

 

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

    25-32  

Item 3.

 

Quantitative and Qualitative Disclosure About Market Risk

    33  

Item 4.

 

Controls and Procedures

    33  


PART II. OTHER INFORMATION


 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    34  

Item 5.

 

Other Information

    34  

Item 6.

 

Exhibits

    34  

Signatures

    35  

2


Table of Contents


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

 
  Thirteen Weeks Ended   Thirty-nine Weeks Ended  
 
  Sept. 26,
2009
  Sept. 27,
2008
  Sept. 26,
2009
  Sept. 27,
2008
 

Net sales

  $ 434,010   $ 494,801   $ 1,387,974   $ 1,414,216  

Cost of sales

    297,652     359,802     978,619     1,026,206  
                   
 

Gross profit

    136,358     134,999     409,355     388,010  

Selling, general and administrative expenses

    73,625     73,103     218,887     212,278  
                   
 

Operating income

    62,733     61,896     190,468     175,732  
                   

Other income (expense):

                         
 

Interest expense

    (3,587 )   (4,264 )   (11,847 )   (13,446 )
 

Interest income

    370     382     986     1,880  
 

Miscellaneous

    2,106     (376 )   1,916     (2,234 )
                   

    (1,111 )   (4,258 )   (8,945 )   (13,800 )
                   

Earnings before income taxes, minority interest and equity in earnings of nonconsolidated subsidiaries

    61,622     57,638     181,523     161,932  
                   

Income tax expense (benefit):

                         
 

Current

    22,779     24,089     54,345     65,625  
 

Deferred

    (2,441 )   (4,501 )   5,299     (10,435 )
                   

    20,338     19,588     59,644     55,190  
                   

Earnings before equity in earnings of nonconsolidated subsidiaries

    41,284     38,050     121,879     106,742  

Equity in earnings of nonconsolidated subsidiaries

    84     412     579     369  
                   

Net earnings

    41,368     38,462     122,458     107,111  
                   

Less: Earnings attributable to noncontrolling interests

    (894 )   (1,478 )   (1,890 )   (3,164 )
                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 40,474   $ 36,984   $ 120,568   $ 103,947  
                   

Earnings per share—Basic

  $ 1.56   $ 1.43   $ 4.65   $ 4.03  
                   

Earnings per share—Diluted

  $ 1.53   $ 1.40   $ 4.59   $ 3.95  
                   

Cash dividends per share

  $ 0.150   $ 0.130   $ 0.430   $ 0.365  
                   

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

    25,963     25,864     25,936     25,793  
                   

Weighted average number of shares of common stock outstanding plus dilutive potential common shares (000 omitted)

    26,402     26,362     26,257     26,321  
                   

See accompanying notes to condensed consolidated financial statements.

3


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

 
  September 26,
2009
  December 27,
2008
 

ASSETS

             

Current assets:

             
 

Cash and cash equivalents

  $ 129,844   $ 68,567  
 

Receivables, net

    296,267     327,620  
 

Inventories

    216,483     313,411  
 

Prepaid expenses

    26,596     13,821  
 

Refundable and deferred income taxes

    31,895     32,380  
           
   

Total current assets

    701,085     755,799  
           

Property, plant and equipment, at cost

    674,762     630,410  
 

Less accumulated depreciation and amortization

    388,096     361,090  
           
   

Net property, plant and equipment

    286,666     269,320  
           

Goodwill

    174,042     175,291  

Other intangible assets, net

    98,134     104,506  

Other assets

    28,785     21,372  
           
   

Total assets

  $ 1,288,712   $ 1,326,288  
           

LIABILITIES AND SHAREHOLDERS' EQUITY

             

Current liabilities:

             
 

Current installments of long-term debt

  $ 977   $ 904  
 

Notes payable to banks

    24,950     19,552  
 

Accounts payable

    118,463     136,868  
 

Accrued expenses

    57,671     49,700  
 

Accrued employee compensation and benefits

    63,195     70,158  
 

Dividends payable

    3,941     3,402  
           
   

Total current liabilities

    269,197     280,584  
           

Deferred income taxes

    43,393     45,124  

Long-term debt, excluding current installments

    171,710     337,128  

Other noncurrent liabilities

    26,490     22,476  

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; issued 27,900,000 shares

    27,900     27,900  
 

Retained earnings

    740,784     624,254  
 

Accumulated other comprehensive income (loss)

    14,781     (533 )
 

Treasury stock

    (26,789 )   (27,490 )
           
   

Total Valmont Industries, Inc. shareholders' equity

    756,676     624,131  
           
 

Noncontrolling interest in consolidated subsidiaries

    21,246     16,845  
           
   

Total shareholders' equity

    777,922     640,976  
           
   

Total liabilities and shareholders' equity

  $ 1,288,712   $ 1,326,288  
           

See accompanying notes to condensed consolidated financial statements.

4


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 
  Thirty-nine Weeks Ended  
 
  Sept. 26,
2009
  Sept. 27,
2008
 

Cash flows from operating activities:

             
 

Net earnings

  $ 122,458   $ 107,111  
 

Adjustments to reconcile net earnings to net cash flows from operating activities:

             
   

Depreciation and amortization

    33,639     29,081  
   

Stock-based compensation

    4,814     3,869  
   

Loss/(gain) on sale of assets

    807     (377 )
   

Equity in earnings of nonconsolidated subsidiaries

    (579 )   (369 )
   

Deferred income taxes

    5,299     (10,435 )
   

Other

    (238 )   (840 )
   

Payment of deferred compensation

        (589 )
   

Changes in assets and liabilities, net of business acquisitions:

             
     

Receivables

    37,945     (49,109 )
     

Inventories

    102,820     (78,663 )
     

Prepaid expenses

    (11,556 )   (28 )
     

Accounts payable

    (19,949 )   34,510  
     

Accrued expenses

    (1,262 )   24,152  
     

Other noncurrent liabilities

    (737 )   (1,430 )
     

Income taxes payable/refundable

    (7,035 )   10,111  
           
     

Net cash flows from operating activities

    266,426     66,994  
           

Cash flows from investing activities:

             
 

Purchase of property, plant & equipment

    (38,718 )   (38,924 )
 

Proceeds from sale of assets

    595     3,133  
 

Acquisitions, net of cash acquired

        (119,044 )
 

Dividends to noncontrolling interests

    (289 )   (184 )
 

Other, net

    (2,454 )   (598 )
           
     

Net cash flows from investing activities

    (40,866 )   (155,617 )
           

Cash flows from financing activities:

             
 

Net borrowings under short-term agreements

    5,398     10,395  
 

Proceeds from long-term borrowings

    10,001     80,895  
 

Principal payments on long-term obligations

    (175,909 )   (38,787 )
 

Dividends paid

    (10,753 )   (8,852 )
 

Proceeds from exercises under stock plans

    4,549     6,689  
 

Excess tax benefits from stock option exercises

    1,954     7,117  
 

Purchase of common treasury shares—stock plan exercises

    (3,440 )   (7,895 )
           
     

Net cash flows from financing activities

    (168,200 )   49,562  
           

Effect of exchange rate changes on cash and cash equivalents

    3,917     624  
           

Net change in cash and cash equivalents

    61,277     (38,437 )

Cash and cash equivalents—beginning of year

    68,567     106,532  
           

Cash and cash equivalents—end of period

  $ 129,844   $ 68,095  
           

See accompanying notes to condensed consolidated financial statements.

5


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, 2007

  $ 27,900   $   $ 496,388   $ 16,996   $ (30,671 ) $ 10,373   $ 520,986  

Comprehensive income:

                                           
 

Net earnings

            103,947             3,164     107,111  
 

Currency translation adjustment

                (657 )       (835 )   (1,492 )
                                           
   

Total comprehensive income

                            105,619  

Cash dividends ($0.365 per share)

            (9,527 )               (9,527 )

Dividends to noncontrolling interests

                        (184 )   (184 )

Acquisitions

                        7,192     7,192  

Stock plan exercises; 77,328 shares purchased

                    (7,896 )       (7,896 )

Stock options exercised; 266,973 shares issued

        (11,360 )   6,866         11,149         6,655  

Tax benefit from exercise of stock options

        7,117                     7,117  

Stock option expense

          2,248                     2,248  

Stock awards; 13,025 shares issued

        1,995                     1,995  
                               

Balance at September 27, 2008

  $ 27,900   $   $ 597,674   $ 16,339   $ (27,418 ) $ 19,710   $ 634,205  
                               

Balance at December 27, 2008

 
$

27,900
 
$

 
$

624,254
 
$

(533

)

$

(27,490

)

$

16,845
 
$

640,976
 

Comprehensive income:

                                           
 

Net earnings

            120,568             1,890     122,458  
 

Currency translation adjustment

                15,314         2,800     18,114  
                                           
   

Total comprehensive income

                            140,572  

Cash dividends ($0.43 per share)

            (11,292 )               (11,292 )

Dividends to noncontrolling interests

                        (289 )   (289 )

Stock plan exercises; 152,864 shares issued

        (6,410 )   7,254         3,705         4,549  

Stock plan exercises; 49,709 shares purchased

                    (3,440 )       (3,440 )

Tax benefit from exercise of stock options

        1,954                     1,954  

Stock option expense

        3,061                     3,061  

Stock awards; 9,746 shares issued

        1,395             436         1,831  
                               

Balance at September 26, 2009

  $ 27,900   $   $ 740,784   $ 14,781   $ (26,789 ) $ 21,246   $ 777,922  
                               

See accompanying notes to condensed consolidated financial statements.

6


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

        The Condensed Consolidated Balance Sheet as of September 26, 2009, the Condensed Consolidated Statements of Operations for the thirteen and thirty-nine week periods ended September 26, 2009 and September 27, 2008, the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Shareholders' Equity for the thirty-nine week periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of September 26, 2009 and for all periods presented. Information related to noncontrolling interest in consolidated subsidiaries for 2008 has been reclassified to conform to the 2009 presentation, as required under Accounting Standards Codification 810, Consolidation, which was adopted effective December 28, 2008, the beginning of the Company's 2009 fiscal year. The effect of this standard was to classify noncontrolling interests on the condensed consolidated balance sheets as equity and to reclassify the related earnings in the condensed consolidated statements of operations 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 27, 2008. 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 27, 2008. The results of operations for the periods ended September 26, 2009 are not necessarily indicative of the operating results for the full year.

        At September 26, 2009, approximately 44.8% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured finished goods. The excess of replacement cost of inventories over the LIFO value was approximately $41,600 and $58,200 at September 26, 2009 and December 27, 2008, respectively.

7


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)

        Inventories consisted of the following:

 
  September 26,
2009
  December 27,
2008
 

Raw materials and purchased parts

  $ 128,584   $ 207,011  

Work-in-process

    18,562     28,925  

Finished goods and manufactured goods

    110,968     135,671  
           
 

Subtotal

    258,114     371,607  

LIFO reserve

    41,631     58,196  
           

Net inventory

  $ 216,483   $ 313,411  
           

        In 2009, the Company reduced its inventory quantities, thereby liquidating a portion of its LIFO inventories acquired in prior years. The result of this liquidation was an increase in operating income of $1,204 and $4,047 for the thirteen and thirty-nine week periods ended September 26, 2009, respectively.

        The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Compensation Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At September 26, 2009, 1,335,570 shares of common stock remained available for issuance under the plans. Shares and options issued and available for issuance are subject to changes in capitalization.

        Under the plans, the exercise price of each option equals the market price at the time of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the fifth anniversary of the grant. Expiration of grants is from six to ten years from the date of grant. The Company's compensation expense related to stock options (included in selling, general and administrative expenses) and associated tax benefits for the periods listed below were as follows:

 
  Thirteen Weeks Ended   Thirty-nine Weeks Ended  
 
  September 26,
2009
  September 27,
2008
  September 26,
2009
  September 27,
2008
 

Compensation expense

  $ 1,021   $ 760   $ 3,061   $ 2,248  

Related tax benefits

    394     289     1,178     854  

        On December 30, 2007, the Company adopted Accounting Standards Codification 820, Fair Value Measurements and Disclosures (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. The Company

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)

adopted ASC 820 in 2008, except as it applies to those nonfinancial assets and liabilities affected by the one-year delay, which was adopted in fiscal 2009.

        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 refers 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:

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

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

        Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan 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. 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
September 26,
2009
  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         
 

Trading Securities

  $ 15,238   $ 15,238   $   $  

 

 
   
  Fair Value Measurement Using:  
 
  Carrying Value
December 27,
2008
  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         
 

Trading Securities

  $ 10,488   $ 10,488   $   $  

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)

        The Company implemented Accounting Standards Codification 855, Subsequent Events, in the second quarter of 2009. In accordance with this pronouncement, the Company evaluated subsequent events through November 3, 2009. The Company evaluated all subsequent events requiring recognition as of September 26, 2009 and did not identify any subsequent events that require disclosure.

        In June 2009, the FASB updated ASC Topic 860, Transfers and Servicing, which significantly changes the accounting for transfers of financial assets. The update to ASC 860 eliminates the qualifying special purpose entity ("QSPE") concept, establishes conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies the financial-asset derecognition criteria, revises how interests retained by the transferor in a sale of financial assets initially are measured, and removes the guaranteed mortgage securitization recharacterization provisions. The Company is currently assessing the potential impact of adopting this new accounting guidance.

2. Acquisitions

        In the first quarter of 2008, the Company acquired substantially all of the assets of Penn Summit LLC (Penn Summit), a manufacturer of steel utility and wireless communication poles located in Hazelton, Pennsylvania and 70% of the outstanding shares of West Coast Engineering Group, Ltd. (West Coast), a Canadian and U.S. manufacturer of steel structures for the lighting, transportation and wireless communication industries headquartered in Delta, British Columbia. In July 2008, the Company acquired the assets of Site Pro 1, Inc. (Site Pro), a company that distributes wireless communication components for the U.S. market.

        In November 2008, the Company acquired all of the outstanding shares of Stainton Metals Co., Ltd. (Stainton), an English manufacturer of steel structures for the lighting, transportation and wireless communication industries headquartered in Stockton-on-Tees, England. The Company completed the purchase price allocation related to this acquisition in the third quarter of fiscal 2009. The changes to the purchase price allocation from what was previously recorded were related to the adjustment of the recorded amount of fixed assets to fair value, and certain deferred income tax assets with corresponding adjustments to intangible assets.

        In addition, the Company acquired the assets of a provider of materials analysis, testing and inspection services, formed a 51% owned joint venture in Turkey with a Turkish company to manufacture and sell pole structures and acquired the assets of a galvanizing operation located near Louisville, Kentucky in 2008.

        The aggregate amount paid by the Company for the businesses acquired in the year-to-date period ended September 27, 2008 was $119,044.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

2. Acquisitions (Continued)

        The Company's pro forma results of operations for the thirteen and thirty-nine weeks ended September 27, 2008, assuming that these transactions occurred at the beginning of fiscal 2008 were as follows:

 
  Thirteen Weeks
Ended
September 27, 2008
  Thirty-nine Weeks
Ended
September 27, 2008
 

Net sales

  $ 507,112   $ 1,462,657  

Net earnings attributable to Valmont Industries, Inc. 

    37,685     107,154  

Earnings per share attributable to Valmont Industries, Inc.—diluted

  $ 1.43   $ 4.07  

3. Goodwill and Intangible Assets

        The Company's annual impairment testing of goodwill and intangible assets was performed during the third quarter of fiscal 2009. As a result of that testing, it was determined the goodwill and other intangible assets on the Company's Consolidated Balance Sheet were not impaired, other than certain intangible assets associated with a sign structures operation. The Company continues to monitor changes in the global economy that could impact future operating results of its reporting units and related components.

        The components of amortized intangible assets at September 26, 2009 and December 27, 2008 were as follows:

 
  As of September 26, 2009    
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Weighted
Average
Life

Customer Relationships

  $ 97,046   $ 25,683   14 years

Proprietary Software & Database

    2,628     2,399   6 years

Patents & Proprietary Technology

    3,466     1,176   13 years

Non-compete Agreements

    1,711     765   6 years
             

  $ 104,851   $ 30,023    
             

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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)

 

 
  As of December 27, 2008    
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Weighted
Average
Life

Customer Relationships

  $ 97,202   $ 19,560   14 years

Proprietary Software & Database

    2,609     2,295   6 years

Patents & Proprietary Technology

    3,427     929   13 years

Non-compete Agreements

    1,696     548   7 years
             

  $ 104,934   $ 23,332    
             

        Amortization expense for intangible assets for the thirteen and thirty-nine weeks ended September 26, 2009 and September 27, 2008, respectively was as follows:

 
  Thirteen Weeks
Ended
September 26, 2009
  Thirteen Weeks
Ended
September 27, 2008
  Thirty-nine Weeks
Ended
September 26, 2009
  Thirty-nine Weeks
Ended
September 27, 2008
 
    $ 2,419   $ 1,768   $ 6,534   $ 4,600  

 

 
  Estimated
Amortization
Expense
 

2009

  $ 8,231  

2010

    8,077  

2011

    7,836  

2012

    7,798  

2013

    6,964  

        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.

        Intangible assets with indefinite lives are not amortized. The carrying values of trade names at September 26, 2009 and December 27, 2008 were as follows:

 
  September 26,
2009
  December 27,
2008
 

PiRod

  $ 4,750   $ 4,750  

Newmark

    11,111     11,111  

Tehomet

    1,374     1,316  

West Coast

    2,268     2,030  

Site Pro

    1,800     1,800  

Stainton

    1,360     1,254  

Other

    643     643  
           

  $ 23,306   $ 22,904  
           

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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)

        These trade names were tested for impairment separately from goodwill in the third quarter of 2009. The values of the trade names were determined using the relief-from-royalty method. Based on this evaluation, the Company determined that its trade names were not impaired as of September 26, 2009.

        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 carrying amount of goodwill as of September 26, 2009 was as follows:

 
  Engineered
Support
Structures
Segment
  Utility
Support
Structures
Segment
  Coatings
Segment
  Irrigation
Segment
  Total  

Balance December 27, 2008

  $ 52,324   $ 77,141   $ 43,777   $ 2,049   $ 175,291  

Purchase accounting adjustment

    (2,911 )               (2,911 )

Impairment

    (395 )               (395 )

Foreign currency translation

    2,042             15     2,057  
                       

Balance September 26, 2009

  $ 51,060   $ 77,141   $ 43,777   $ 2,064   $ 174,042  
                       

        The purchase accounting adjustment was related to the finalization of the purchase price allocation of the Company's acquisition of 100% of the shares of Stainton. The impairment charge was related to the Company's evaluation of its goodwill and intangible assets assigned to a sign structure operation in the third quarter of 2009, which were all determined to be impaired based on estimated future cash flows.

4. Cash Flows

        The Company considers all highly liquid temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the thirty-nine weeks ended were as follows:

 
  Sept. 26,
2009
  Sept. 27,
2008
 

Interest

    10,104   $ 11,216  

Income taxes

    59,940     57,076  

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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 reconciles Basic and Diluted earnings per share (EPS):

 
  Basic EPS   Dilutive Effect of
Stock Options
  Diluted EPS  

Thirteen weeks ended September 26, 2009:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 40,474       $ 40,474  
 

Shares outstanding

    25,963     439     26,402  
 

Per share amount

  $ 1.56     (.03 ) $ 1.53  

Thirteen weeks ended September 27, 2008:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 36,984       $ 36,984  
 

Shares outstanding

    25,864     498     26,362  
 

Per share amount

  $ 1.43     (.03 ) $ 1.40  

Thirty-nine weeks ended September 26, 2009:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 120,568       $ 120,568  
 

Shares outstanding

    25,936     321     26,257  
 

Per share amount

  $ 4.65     (.06 ) $ 4.59  

Thirty-nine weeks ended September 27, 2008:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 103,947       $ 103,947  
 

Shares outstanding

    25,793     528     26,321  
 

Per share amount

  $ 4.03     (.08 ) $ 3.95  

        At September 26, 2009 there were 185,773 of outstanding stock options with exercise prices exceeding the market price of common stock that were therefore excluded from the computation of fully diluted shares earnings per share for the thirteen and thirty-nine weeks ended September 26, 2009. At September 27, 2008, there were no outstanding stock options with exercise prices exceeding the market price of common stock. Therefore, there were no shares contingently issuable upon exercise of stock options excluded from the computation of diluted earnings per share for the thirteen and thirty-nine weeks ended September 27, 2008.

6. Comprehensive Income

        Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Currency translation adjustment is the Company's only component of accumulated other

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

6. Comprehensive Income (Continued)


comprehensive income. The Company's total comprehensive income for the thirteen and thirty-nine weeks ended September 26, 2009 and September 27, 2008, respectively, were as follows:

 
  Thirteen Weeks
Ended
  Thirty-nine Weeks
Ended
 
 
  Sept. 26,
2009
  Sept. 27,
2008
  Sept. 26,
2009
  Sept. 27,
2008
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 40,474   $ 36,984   $ 120,568   $ 103,947  

Currency translation adjustment

    5,070     (11,139 )   15,314     (657 )
                   

Total comprehensive income attributable to Valmont Industries, Inc. 

  $ 45,544   $ 25,845   $ 135,882   $ 103,290  
                   

7. Business Segments

        The Company aggregates its operating segments into four reportable segments. Aggregation is based on similarity of operating segments as to economic characteristics, products, production processes, types or classes of customer and the methods of distribution. Net corporate expense is net of certain service-related expenses that are allocated to business units generally based on employee headcounts and sales dollars.

        Reportable segments are as follows:

        ENGINEERED SUPPORT STRUCTURES:    This segment consists of the manufacture of engineered metal structures and components for the lighting and traffic and wireless communication industries, certain international utility industries and for other specialty applications;

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

        COATINGS:    This segment consists of galvanizing, anodizing and powder coating services; and

        IRRIGATION:    This segment consists of the manufacture of agricultural irrigation equipment and related parts and services

        In addition to these four reportable segments, the Company has other businesses that individually are not more than 10% of consolidated sales. These businesses, which include the manufacture of tubular products and the distribution of industrial fasteners, are reported in the "Other" category.

        The accounting policies of the reportable segments are the same as those described in Note 1. The Company evaluates the performance of its business segments based upon operating income and

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

7. Business Segments (Continued)


invested capital. The Company does not allocate interest expense, non-operating income and deductions, or income taxes to its business segments.

 
  Thirteen Weeks Ended   Thirty-nine Weeks Ended  
 
  Sept. 26,
2009
  Sept. 27,
2008
  Sept. 26,
2009
  Sept. 27,
2008
 

Sales:

                         
 

Engineered Support Structures segment:

                         
   

Lighting & Traffic

  $ 142,184   $ 132,466   $ 396,504   $ 395,215  
   

Specialty

    33,478     37,174     99,991     96,742  
   

Utility

    14,736     17,429     34,832     35,509  
                   

    190,398     187,069     531,327     527,466  
 

Utility Support Structures segment:

                         
   

Steel

    127,199     92,888     424,516     252,580  
   

Concrete

    23,520     20,098     101,409     62,878  
                   

    150,719     112,986     525,925     315,458  
 

Coatings segment

    29,683     35,889     88,295     108,217  
 

Irrigation segment

    75,230     150,445     279,339     440,890  
 

Other

    16,943     33,564     54,246     89,815  
                   

    462,973     519,953     1,479,132     1,481,846  

Intersegment Sales:

                         
 

Engineered Support Structures

    17,961     7,880     58,740     20,680  
 

Utility Support Structures

    553     1,973     1,639     4,087  
 

Coatings

    7,020     6,961     19,351     21,823  
 

Irrigation

    2     5     16     18  
 

Other

    3,427     8,333     11,412     21,022  
                   

    28,963     25,152     91,158     67,630  

Net Sales:

                         
 

Engineered Support Structures

    172,437     179,189     472,587     506.786  
 

Utility Support Structures

    150,166     111,013     524,286     311,371  
 

Coatings

    22,663     28,928     68,944     86,394  
 

Irrigation

    75,228     150,440     279,323     440,872  
 

Other

    13,516     25,231     42,834     68,793  
                   

Consolidated Net Sales

  $ 434,010   $ 494,801   $ 1,387,974   $ 1,414,216  
                   

Operating Income:

                         
 

Engineered Support Structures

  $ 18,186   $ 16,336   $ 40,301   $ 44,394  
 

Utility Support Structures

    40,372     14,531     126,797     43,033  
 

Coatings

    7,581     9,284     19,965     24,915  
 

Irrigation

    5,633     25,249     27,479     75,663  
 

Other

    3,046     5,821     9,921     15,521  
 

Net corporate expense

    (12,085 )   (9,325 )   (33,995 )   (27,794 )
                   

Total Operating Income

  $ 62,733   $ 61,896   $ 190,468   $ 175,732  
                   

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Guarantor/Non-Guarantor Financial Information

        On May 4, 2004, the Company completed a $150,000,000 offering of 67/8% Senior Subordinated Notes. The Notes are guaranteed, jointly, severally, fully and unconditionally, on a senior subordinated basis by certain of the Company's current and future direct and indirect domestic subsidiaries (collectively the "Guarantors"), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the "Non-Guarantors"). All Guarantors are 100% owned by the parent company. Condensed consolidated financial information for the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Thirteen Weeks Ended September 26, 2009

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 225,013   $ 101,875   $ 143,657   $ (36,535 ) $ 434,010  

Cost of sales

    160,249     69,914     104,594     (37,105 )   297,652  
                       
 

Gross profit

    64,764     31,961     39,063     570     136,358  

Selling, general and administrative expenses

    37,667     13,121     22,837         73,625  
                       
 

Operating income

    27,097     18,840     16,226     570     62,733  
                       

Other income (deductions):

                               
 

Interest expense

    (3,331 )       (256 )       (3,587 )
 

Interest income

    15         355         370  
 

Miscellaneous

    1,440     46     620         2,106  
                       

    (1,876 )   46     719         (1,111 )

Earnings before income taxes, minority interest, and equity in earnings of nonconsolidated subsidiaries

    25,221     18,886     16,945     570     61,622  
                       

Income tax expense:

                               
 

Current

    9,439     5,872     7,468         22,779  
 

Deferred

    (789 )   1,618     (3,270 )       (2,441 )
                       

    8,650     7,490     4,198         20,338  
                       

Earnings before equity in earnings of nonconsolidated subsidiaries

    16,571     11,396     12,747     570     41,284  

Equity in earnings of nonconsolidated subsidiaries

    23,333             (23,249 )   84  
                       

Net earnings

    39,904     11,396     12,747     (22,679 )   41,368  

Less: Earnings attributable to noncontrolling interests

            (894 )       (894 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 39,904   $ 11,396   $ 11,853   $ (22,679 ) $ 40,474  
                       

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Guarantor/Non-Guarantor Financial Information (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Thirty-nine Weeks Ended September 26, 2009

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 732,898   $ 359,051   $ 414,983   $ (118,958 ) $ 1,387,974  

Cost of sales

    530,621     260,205     308,660     (120,867 )   978,619  
                       
 

Gross profit

    202,277     98,846     106,323     1,909     409,355  

Selling, general and administrative expenses

    114,842     41,401     62,644         218,887  
                       
 

Operating income

    87,435     57,445     43,679     1,909     190,468  
                       

Other income (deductions):

                               
 

Interest expense

    (11,003 )   (13 )   (831 )       (11,847 )
 

Interest income

    44     1     941         986  
 

Miscellaneous

    2,536     149     (769 )       1,916  
                       

    (8,423 )   137     (659 )       (8,945 )

Earnings before income taxes, minority interest, and equity in earnings of nonconsolidated subsidiaries

    79,012     57,582     43,020     1,909     181,523  
                       

Income tax expense:

                               
 

Current

    22,215     19,807     12,323         54,345  
 

Deferred

    5,822     1,949     (2,472 )       5,299  
                       

    28,037     21,756     9,851         59,644  
                       

Earnings before equity in earnings of nonconsolidated subsidiaries

    50,975     35,826     33,169     1,909     121,879  

Equity in earnings of nonconsolidated subsidiaries

    67,684             (67,105 )   579  
                       

Net earnings

    118,659     35,826     33,169     (65,196 )   122,458  

Less: Earnings attributable to noncontrolling interests

            (1,890 )       (1,890 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 118,659   $ 35,826   $ 31,279   $ (65,196 ) $ 120,568  
                       

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Guarantor/Non-Guarantor Financial Information (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Thirteen Weeks Ended September 27, 2008

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 286,461   $ 93,062   $ 160,629   $ (45,351 ) $ 494,801  

Cost of sales

    216,297     71,132     118,724     (46,351 )   359,802  
                       
 

Gross profit

    70,164     21,930     41,905     1,000     134,999  

Selling, general and administrative expenses

    39,703     12,966     20,434         73,103  
                       
 

Operating income

    30,461     8,964     21,471     1,000     61,896  
                       

Other income (deductions):

                               
 

Interest expense

    (3,778 )   (3 )   (483 )       (4,264 )
 

Interest income

    17     9     356         382  
 

Miscellaneous

    (758 )   59     323         (376 )
                       

    (4,519 )   65     196         (4,258 )

Earnings before income taxes, minority interest, and equity in earnings of nonconsolidated subsidiaries

    25,942     9,029     21,667     1,000     57,638  
                       

Income tax expense:

                               
 

Current

    13,108     3,578     7,403         24,089  
 

Deferred

    (3,406 )   (77 )   (1,018 )       (4,501 )
                       

    9,702     3,501     6,385         19,588  
                       

Earnings before equity in earnings/ (losses) of nonconsolidated subsidiaries

    16,240     5,528     15,282     1,000     38,050  

Equity in earnings of nonconsolidated subsidiaries

    19,744             (19,332 )   412  
                       

Net earnings

    35,984     5,528     15,282     (18,332 )   38,462  

Less: Earnings attributable to noncontrolling interests

            (1,478 )       (1,478 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 35,984   $ 5,528   $ 13,804   $ (18,332 ) $ 36,984  
                       

19


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Guarantor/Non-Guarantor Financial Information (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Thirty-nine Weeks Ended September 27, 2008

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 834,881   $ 255,982   $ 430,455   $ (107,102 ) $ 1,414,216  

Cost of sales

    620,442     196,743     317,372     (108,351 )   1,026,206  
                       
 

Gross profit

    214,439     59,239     113,083     1,249     388,010  

Selling, general and administrative expenses

    115,476     36,031     60,771         212,278  
                       
 

Operating income

    98,963     23,208     52,312     1,249     175,732  
                       

Other income (deductions):

                               
 

Interest expense

    (11,457 )   (14 )   (1,975 )       (13,446 )
 

Interest income

    170     28     1,682         1,880  
 

Miscellaneous

    (1,779 )   161     (616 )       (2,234 )
                       

    (13,066 )   175     (909 )       (13,800 )

Earnings before income taxes, minority interest, and equity in earnings of nonconsolidated subsidiaries

    85,897     23,383     51,403     1,249     161,932  
                       

Income tax expense:

                               
 

Current

    40,679     8,362     16,584         65,625  
 

Deferred

    (8,699 )   398     (2,134 )       (10,435 )
                       

    31,980     8,760     14,450         55,190  
                       

Earnings before equity in earnings (losses) of nonconsolidated subsidiaries

    53,917     14,623     36,953     1,249     106,742  

Equity in earnings of nonconsolidated subsidiaries

    48,781         39     (48,451 )   369  
                       

Net earnings

  $ 102,698   $ 14,623   $ 36,992   $ (47,202 ) $ 107,111  

Less: Earnings attributable to noncontrolling interests

            (3,164 )       (3,164 )
                       

Net earnings attributable to Valmont Industries, Inc

  $ 102,698   $ 14,623   $ 33,828   $ (47,202 ) $ 103,947  
                       

20


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Guarantor/Non-Guarantor Financial Information (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS
September 26, 2009

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

ASSETS

                               

Current assets:

                               
 

Cash and cash equivalents

  $ 44,517   $ 3,790   $ 81,537   $   $ 129,844  
 

Receivables, net

    106,950     48,234     141,083         296,267  
 

Inventories

    73,779     46,038     96,666         216,483  
 

Prepaid expenses

    4,148     487     21,961         26,596  
 

Refundable and deferred income taxes

    17,390     5,579     8,926         31,895  
                       
   

Total current assets

    246,784     104,128     350,173         701,085  
                       

Property, plant and equipment, at cost

    406,981     94,356     173,425         674,762  
 

Less accumulated depreciation and amortization

    254,624     43,432     90,040         388,096  
                       

Net property, plant and equipment

    152,357     50,924     83,385         286,666  
                       

Goodwill

    20,108     107,542     46,392         174,042  

Other intangible assets

    1,025     75,822     21,287         98,134  

Investment in subsidiaries and intercompany accounts

    545,495     59,782     (17,269 )   (588,008 )    

Other assets

    22,366         6,419         28,785  
                       
   

Total assets

  $ 988,135   $ 398,198   $ 490,387   $ (588,008 ) $ 1,288,712  
                       

LIABILITIES AND SHAREHOLDERS' EQUITY

                               

Current liabilities:

                               
 

Current installments of long-term debt

  $ 880       $ 97       $ 977  
 

Notes payable to banks

        3     24,947         24,950  
 

Accounts payable

    42,548     15,379     60,536         118,463  
 

Accrued expenses

    60,354     13,961     46,551         120,866  
 

Dividends payable

    3,941                 3,941  
                       
   

Total current liabilities

    107,723     29,343     132,131         269,197  
                       

Deferred income taxes

    27,522     8,369     7,502         43,393  

Long-term debt, excluding current installments

    165,829     12     5,869         171,710  

Other noncurrent liabilities

    22,959         3,531         26,490  

Commitments and contingencies

                     

Shareholders' equity:

                               
 

Common stock of $1 par value

    27,900     14,249     3,494     (17,743 )   27,900  
 

Additional paid-in capital

        181,542     149,600     (331,142 )    
 

Retained earnings

    662,991     164,683     152,233     (239,123 )   740,784  
 

Accumulated other comprehensive income

            14,781         14,781  
 

Treasury stock

    (26,789 )               (26,789 )
                       
 

Total Valmont Industries, Inc. shareholders' equity

    664,102     360,474     320,108     (588,008 )   756,676  
                       

Noncontrolling interest in consolidated subsidiaries

            21,246         21,246  
                       
 

Total shareholders' equity

    664,102     360,474     341,354     (588,008 )   777,922  
                       
 

Total liabilities and shareholders' equity

  $ 988,135   $ 398,198   $ 490,387   $ (588,008 ) $ 1,288,712  
                       

21


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Guarantor/Non-Guarantor Financial Information (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS
December 27, 2008

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

ASSETS

                               

Current assets:

                               
 

Cash and cash equivalents

  $ 18,989   $ 1,503   $ 48,075   $   $ 68,567  
 

Receivables, net

    114,510     61,625     151,485         327,620  
 

Inventories

    132,896     69,913     110,602         313,411  
 

Prepaid expenses

    3,362     639     9,820         13,821  
 

Refundable and deferred income taxes

    19,636     6,235     6,509         32,380  
                       
   

Total current assets

    289,393     139,915     326,491         755,799  
                       

Property, plant and equipment, at cost

    386,488     88,723     155,199         630,410  
 

Less accumulated depreciation and amortization

    243,153     38,903     79,034         361,090  
                       

Net property, plant and equipment

    143,335     49,820     76,165         269,320  
                       

Goodwill

    20,108     107,542     47,641         175,291  

Other intangible assets

    1,147     80,329     23,030         104,506  

Investment in subsidiaries and intercompany accounts

    679,653     2,722     (56,869 )   (625,506 )    

Other assets

    17,584         3,788         21,372  
                       
   

Total assets

  $ 1,151,220   $ 380,328   $ 420,246   $ (625,506 ) $ 1,326,288  
                       

LIABILITIES AND SHAREHOLDERS' EQUITY

                               

Current liabilities:

                               
 

Current installments of long-term debt

  $ 852   $ 16   $ 36       $ 904  
 

Notes payable to banks

        13     19,539         19,552  
 

Accounts payable

    52,891     19,812     64,165         138,868  
 

Accrued expenses

    62,958     13,175     43,725         119,858  
 

Dividends payable

    3,402                 3,402  
                       
   

Total current liabilities

    120,103     33,016     127,465         280,584  
                       

Deferred income taxes

    14,558     22,642     7,924         45,124  

Long-term debt, excluding current installments

    335,537     23     1,568         337,128  

Other noncurrent liabilities

    19,524         2,952         22,476  

Commitments and contingencies

                     

Shareholders' equity:

                               
 

Common stock of $1 par value

    27,900     14,248     3,494     (17,742 )   27,900  
 

Additional paid-in capital

        181,542     139,577     (321,119 )    
 

Retained earnings

    661,088     128,857     120,954     (286,645 )   624,254  
 

Accumulated other comprehensive income

            (533 )       (533 )
 

Treasury stock

    (27,490 )               (27,490 )
                       
 

Total Valmont Industries, Inc. shareholders' equity

    661,498     324,647     263,492     (625,506 )   624,131  
                       

Noncontrolling interest in consolidated subsidiaries

            16,845         16,845  
                       
 

Total shareholders' equity

    661,498     324,647     280,337     (625,506 )   640,976  
                       
 

Total liabilities and shareholders' equity

  $ 1,151,220   $ 380,328   $ 420,246   $ (625,506 ) $ 1,326,288  
                       

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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 26, 2009

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Cash flows from operating activities:

                               
 

Net earnings

  $ 118,659   $ 35,826   $ 33,169   $ (65,196 ) $ 122,458  
 

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

                               
   

Depreciation and amortization

    14,155     9,486     9,998         33,639  
   

Stock based compensation

    4,814                 4,814  
   

(Gain)/ Loss on sale of property, plant and equipment

    134     193     480         807  
   

Equity in earnings of nonconsolidated subsidiaries

    (579 )               (579 )
   

Deferred income taxes

    5,673     1,949     (2,323 )         5,299  
   

Other adjustments

            (238 )       (238 )
   

Payment of deferred compensation

                     
   

Changes in assets and liabilities:

                               
     

Receivables

    6,575     13,391     17,979         37,945  
     

Inventories

    59,116     23,874     19,830         102,820  
     

Prepaid expenses

    (786 )   153     (10,923 )       (11,556 )
     

Accounts payable

    (9,130 )   (4,433 )   (6,386 )       (19,949 )
     

Accrued expenses

    (2,528 )   787     479         (1,262 )
     

Other noncurrent liabilities

    (1,316 )       579         (737 )
     

Income taxes payable

    8,326     (15,567 )   206         (7,035 )
                       
   

Net cash flows from operating activities

    203,113     65,659     62,850     (65,196 )   266,426  
                       

Cash flows from investing activities:

                               
 

Purchase of property, plant and equipment

    (21,734 )   (6,771 )   (10,213 )       (38,718 )
 

Proceeds from sale of assets

    22     494     79         595  
 

Acquisitions, net of cash acquired

                     
 

Dividends to minority interests

            (289 )       (289 )
 

Other, net

    21,497     (57,060 )   (32,087 )   65,196     (2,454 )
                       
   

Net cash flows from investing activities

    (215 )   (63,337 )   (42,510 )   65,196     (40,866 )
                       

Cash flows from financing activities:

                               
 

Net borrowings under short-term agreements

        (9 )   5,407         5,398  
 

Proceeds from long-term borrowings

            10,001         10,001  
 

Principal payments on long-term obligations

    (169,680 )   (26 )   (6,203 )       (175,909 )
 

Dividends paid

    (10,753 )               (10,753 )
 

Proceeds from exercises under stock plans

    4,549                 4,549  
 

Excess tax benefits from stock option exercises

    1,954                 1,954  
 

Purchase of common treasury shares—stock plan exercises

    (3,440 )               (3,440 )
                       
   

Net cash flows from financing activities

    (177,370 )   (35 )   9,205         (168,200 )
                       
 

Effect of exchange rate changes on cash and cash equivalents

            3,917         3,917  
                       
 

Net change in cash and cash equivalents

    25,528     2,287     33,462         61,277  
 

Cash and cash equivalents—beginning of year

    18,989     1,503     48,075         68,567  
                       
 

Cash and cash equivalents—end of period

  $ 44,517   $ 3,790   $ 81,537       $ 129,844  
                       

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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 27, 2008

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Cash flows from operating activities:

                               
 

Net earnings

  $ 103,026   $ 14,623   $ 36,664   $ (47,202 ) $ 107,111  
 

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

                               
   

Depreciation and amortization

    12,556     8,116     8,409         29,081  
   

Stock based compensation

    3,869                 3,869  
   

Loss on sale of property, plant and equipment

    29     42     (448 )       (377 )
   

Equity in earnings of nonconsolidated subsidiaries

    (330 )       (39 )       (369 )
   

Deferred income taxes

    (8,698 )   398     (2,135 )       (10,435 )
   

Other adjustments

    (4 )       (836 )       (840 )
   

Payment of deferred compensation

    (589 )               (589 )
   

Changes in assets and liabilities:

                               
     

Receivables

    (21,390 )   (4,568 )   (23,151 )       (49,109 )
     

Inventories

    (37,540 )   (4,631 )   (36,492 )       (78,663 )
     

Prepaid expenses

    (94 )   (96 )   162         (28 )
     

Accounts payable

    29,130     1,502     3,878         34,510  
     

Accrued expenses

    12,645     1,199     10,308         24,152  
     

Other noncurrent liabilities

    (1,502 )       72         (1,430 )
     

Income taxes payable

    11,209         (1,098 )       10,111  
                       
   

Net cash flows from operating activities

    102,317     16,585     (4,706 )   (47,202 )   66,994  
                       

Cash flows from investing activities:

                               
 

Purchase of property, plant and equipment

    (24,910 )   (2,626 )   (11,388 )       (38,924 )
 

Proceeds from sale of assets

    726     65     2,342         3,133  
 

Acquisitions, net of cash acquired

    (849 )   (84,065 )   (34,130 )       (119,044 )
 

Dividends to minority interests

            (184 )       (184 )
 

Other, net

    (181,320 )   71,141     62,378     47,202     (599 )
                       
   

Net cash flows from investing activities

    (206,353 )   (15,485 )   19,018     47,202     (155,618 )
                       

Cash flows from financing activities:

                               
 

Net borrowings under short-term agreements

    16,000         (5,605 )       10,395  
 

Proceeds from long-term borrowings

    80,000         895         80,895  
 

Principal payments on long-term obligations

    (33,055 )   (97 )   (5,635 )       (38,787 )
 

Dividends paid

    (8,852 )               (8,852 )
 

Proceeds from exercises under stock plans

    6,689                 6,689  
 

Excess tax benefits from stock option exercises

    7,117                 7,117  
 

Purchase of common treasury shares—stock plan exercises

    (7,895 )               (7,895 )
                       
   

Net cash flows from financing activities

    60,004     (97 )   (10,345 )       49,562  
                       
 

Effect of exchange rate changes on cash and cash equivalents

            625         625  
                       
 

Net change in cash and cash equivalents

    (44,032 )   1,003     4,592         (38,437 )
 

Cash and cash equivalents—beginning of year

    58,344     464     47,724         106,532  
                       
 

Cash and cash equivalents—end of period

  $ 14,312   $ 1,467   $ 52,316       $ 68,095  
                       

*****

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        Management's discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on assumptions that management has made in light of experience in the industries in which the Company operates, as well as management's perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. These statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond the Company's control) and assumptions. Management believes that these forward-looking statements are based on reasonable assumptions. Many factors could affect the Company's actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include, among other things, risk factors described from time to time in the Company's reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments.

        This discussion should be read in conjunction with the financial statements and the notes thereto, and the management's discussion and analysis, included in the Company's annual report on Form 10-K for the fiscal year ended December 27, 2008. We aggregate our businesses into four reportable segments. See Note 7 to the Condensed Consolidated Financial Statements.

25


Table of Contents

Results of Operations

 
  Thirteen Weeks Ended   Thirty-nine Weeks Ended  
 
  September 26,
2009
  September 27,
2008
  % Incr.
(Decr.)
  September 26,
2009
  September 27,
2008
  % Incr.
(Decr.)
 

Consolidated

                                     
 

Net sales

  $ 434,010   $ 494,801     (12.3 )% $ 1,387,974   $ 1,414,216     (1.9 )%
 

Gross profit

    136,358     134,999     1.0 %   409,355     388,010     5.5 %
   

as a percent of sales

    31.4 %   27.3 %         29.5 %   27.4 %      
 

SG&A expense

    73,625     73,103     0.7 %   218,887     212,278     3.1 %
   

as a percent of sales

    17.0 %   14.8 %         15.8 %   15.0 %      
 

Operating income

    62,733     61,896     1.4 %   190,468     175,732     8.4 %
   

as a percent of sales

    14.5 %   12.5 %         13.7 %   12.4 %      
 

Net interest expense

    3,217     3,882     (17.1 )%   10,861     11,566     (6.1 )%
 

Effective tax rate

    33.0 %   34.0 %         32.9 %   34.1 %      
 

Net earnings attributable to Valmont Industries, Inc. 

    40,474     36,984     9.4 %   120,568     103,947     16.0 %
 

Earnings per share attributable to Valmont Industries, Inc.-diluted

  $ 1.53   $ 1.40     9.3 % $ 4.59   $ 3.95     16.2 %

Engineered Support Structures segment

                                     
 

Net sales

  $ 172,437   $ 179,189     (3.8 )% $ 472,587   $ 506,786     (6.7 )%
 

Gross profit

    49,613     45,919     8.0 %   129,791     131,666     (1.4 )%
 

SG&A expense

    31,427     29,583     6.2 %   89,490     87,272     2.5 %
 

Operating income

    18,186     16,336     11.3 %   40,301     44,394     (9.2 )%

Utility Support Structures segment

                                     
 

Net sales

    150,166     111,013     35.3 %   524,286     311,371     68.4 %
 

Gross profit

    54,035     27,902     93.7 %   170,262     81,482     109.0 %
 

SG&A expense

    13,663     13,371     2.2 %   43,465     38,449     13.0 %
 

Operating income

    40,372     14,531     177.8 %   126,797     43,033     194.7 %

Coatings segment

                                     
 

Net sales

    22,662     28,928     (21.7 )%   68,944     86,394     (20.2 )%
 

Gross profit

    10,901     12,485     (12.7 )%   30,338     34,826     (12.9 )%
 

SG&A expense

    3,320     3,201     3.7 %   10,373     9,911     4.7 %
 

Operating income

    7,581     9,284     (18.3 )%   19,965     24,915     (19.9 )%

Irrigation segment

                                     
 

Net sales

    75,228     150,440     (50.0 )%   279,323     440,872     (36.6 )%
 

Gross profit

    17,570     40,141     (56.2 )%   63,890     117,420     (45.6 )%
 

SG&A expense

    11,937     14,891     (19.8 )%   36,411     41,756     (12.8 )%
 

Operating income

    5,633     25,249     (77.7 )%   27,479     75,663     (63.7 )%

Other

                                     
 

Net sales

    13,517     25,231     (46.4 )%   42,834     68,793     (37.7 )%
 

Gross profit

    5,029     8,283     (39.4 )%   16,128     22,806     (29.3 )%
 

SG&A expense

    1,983     2,472     (19.8 )%   6,207     7,285     (14.8 )%
 

Operating income

    3,046     5,821     (47.7 )%   9,921     15,521     (36.1 )%

Net corporate expense

                                     
 

Gross profit

    (790 )   259     (405.0 )%   (1,053 )   (189 )   457.1 %
 

SG&A expense

    11,295     9,584     17.9 %   32,942     27,605     19.3 %
 

Operating loss

    (12,085 )   (9,325 )   (29.6 )%   (33,995 )   (27,794 )   (22.3 )%

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        The decrease in net sales for the third quarter and year-to-date periods ended September 26, 2009, as compared with the same periods in 2008, were mainly due to the following:

        These decreases were offset to a degree by the full-year impact of acquisitions completed in 2008 (approximately $14.0 million and $50.8 million, respectively) for the third quarter and year-to-date periods ended September 26, 2009, as compared with the same periods in fiscal 2008.

        On a year-to-date basis, unit selling prices were higher in 2009, as compared with 2008, due to steel cost increases that occurred throughout most of 2008 and reflected in sales shipments in 2009. In the third quarter of 2009, unit selling prices were slightly lower than in 2008. Despite higher sales unit prices 2009, as compared with 2008, pricing levels in 2009 have generally decreased as compared with late 2008, due to pricing pressures associated with weaker sales demand and lower raw material prices.

        The increase in gross profit margin (gross profit as a percent of sales) for the third quarter and year-to-date periods ended September 26, 2009 over the same periods in 2008 was mainly due to the strong sales and operational performance of the Utility segment and a modest gross margin improvement in the Coatings segment. The Irrigation segment reported weaker gross margins in 2009, as compared with 2008, mainly due to lower sales and production levels. Declining raw materials costs throughout 2009 and aggressive manufacturing cost control helped us maintain gross margins to some degree despite weaker sales demand and lower factory production levels in most of our businesses.

        Selling, general and administrative (SG&A) spending in 2009 (on a quarterly and year-to-date basis) increased over 2008, due to:

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        These increases were somewhat offset by:

        The decrease in net interest expense for the third quarter and year-to-date periods ended September 26, 2009, as compared with the same periods in 2008, was due to a combination of lower interest rates on our variable rate debt in 2009 and decreased borrowing levels throughout 2009.

        "Miscellaneous" income was higher in the third quarter and year-to-date periods ended September 26, 2009, as compared with 2008, due to improved investment performance in the assets in our deferred compensation plan (approximately $1.9 million and $3.7 million, respectively) and foreign currency transaction gains realized in 2009.

        The effective income tax rate for the third quarter and year-to-date periods ended September 26, 2009, as compared with the same periods in 2008, were slightly lower, due to a reduction in the first quarter of 2009 of our income tax contingency liabilities. Our cash flows provided by operations were $266.4 million for the thirty-nine week period ended September 26, 2009, as compared with $67.0 million for the same period in 2008. Improved net earnings and working capital management in 2009, as compared with 2008, were the main reasons for the improved operating cash flow in 2009.

        The decrease in ESS segment sales in the quarter and year-to-date periods ended September 26, 2009, as compared with the same periods in 2008, was mainly due to weaker sales demand in worldwide markets. Foreign currency translation effects (approximately $4.2 million and $15.6 million, respectively) also contributed to the decrease in segment sales. These decreases were offset somewhat by the impact of acquisitions (approximately $14.0 million and $50.1 million, respectively).

        In North America, lighting and traffic structure sales were lower than 2008 levels due to decreased demand for lighting and traffic control support structures. In particular, sales demand for lighting structures for residential and commercial outdoor lighting applications were lower in 2009, as compared with 2008, due to weaker residential and commercial construction activity that resulted from the global economic recession and tightness in credit markets. Net sales in the transportation market channel likewise were lower in 2009 as compared with 2008. In addition to the recession in the U.S. economy, we believe that state budget deficits and uncertainty over the U.S. federal highway funding legislation also contributed to weaker sales order flows and shipments in 2009. We believe that the lack of legislative activity on long-term street and highway funding is negatively impacting street and highway project activity, because the amount and nature of any funding is uncertain. We also believe that the impact from the U.S. economic stimulus spending directed towards street and highway construction projects is not substantial, aside from some potential positive impact of financial aid provided to the various states, which could be used to fund street and highway construction projects. In Europe, sales for the third quarter and year-to-date periods ended September 26, 2009 were above 2008. The positive impact from the Mitas and Stainton acquisitions in late 2008 and special project sales outside of Europe more than offset lower sales demand in our core markets due to economic weakness in Europe and currency translation effects.

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        Sales of Specialty Structures products in the third quarter of 2009 were lower than 2008. In North America, market conditions for sales of structures and components for the wireless communication market in 2009 were lower than 2008. Sales of wireless communication poles in China in 2009 were comparable to 2008. Year-to-date sales of Specialty Structures in 2009 were comparable to 2008, as lower sales in the U.S. wireless market were offset by the acquisition of Site Pro 1 (Site Pro) in July 2008.

        Operating income in the ESS segment for the third quarter of 2009 was slightly higher than 2008 but lower than 2008 on a year-to-date basis. The impact of acquisitions (approximately $0.9 million and $5.1 million, respectively) and lower raw material costs contributed to increased profitability and offset to a degree the lower sales volumes. In response to market conditions, we took actions in 2009 to reduce costs, including decreases in employment levels and reducing production capacity in selected areas. These actions allowed us to gain certain operating efficiencies to mitigate the impact of lower sales volumes on segment operating income.

        The increase in SG&A expense for the third quarter and year-to date periods ended September 26, 2009, as compared with 2008, was due to the impact from acquisitions (approximately $1.4 million and $5.9 million, respectively) and impairment charges incurred in the third quarter as part of our evaluation of the goodwill and other intangible assets assigned to our North American sign structure operations (approximately $0.7 million). These increases were offset somewhat by currency translation impacts (approximately $0.6 million and $3.0 million, respectively) and lower sales commissions associated with lower sales volumes (approximately $0.3 million and $2.8 million, respectively).

        In the Utility Support Structures segment, the sales increase in the third quarter and year-to-date periods ended September 26, 2009, as compared with the same periods of 2008, was due to continued strong demand for steel and concrete high-voltage transmission and substation structures and higher average sales prices. We entered the 2009 fiscal year with a record backlog and the strong 2009 sales performance relates in part to the large backlogs from year-end 2008. Our customers, who are mainly utility companies, are continuing their investment commitments in transmission and substation structures which began over the past several years to improve the reliability and capacity of the electrical grid in the U.S. Sales demand for pole structures for low voltage electrical distribution applications was weaker in 2009, as compared with 2008. This weakness relates directly to the downturn in residential and commercial construction in the U.S. that started in late 2008 due to the economic recession and credit crisis.

        The improved operating income for this segment in the third quarter and year-to-date of 2009, as compared with the same periods in 2008, related to the increased sales levels, improved operating leverage associated with higher sales volumes, lower raw material costs and a more favorable sales mix than 2008. The increase in year-to-date SG&A spending in 2009, as compared with 2008, was principally due to higher salary and employee benefit costs and sales commissions ($1.6 million and $0.6 million, respectively) to support the higher sales volumes and higher employee incentives (approximately $1.1 million) associated with improved operating income of this segment.

        The decrease in Coatings segment sales in the third quarter and year-to-date periods ended September 26, 2009 as compared with the same periods of 2008 was predominantly due to decreased sales volumes from both internal and external customers along with lower selling prices due to lower per pound zinc costs in 2009, as compared with 2008. The decrease in sales volumes in our galvanizing operations in the third quarter and year-to-date periods ended September 26, 2009 was approximately

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13%, as compared with the same periods in 2008. The decrease in sales demand was related to industrial economic conditions in our served markets due to the U.S. economic recession.

        Operating income decreased in the third quarter and year-to-date of 2009, as compared with the same periods in 2008, mainly the result of lower unit sales demand. The impact of lower sales volumes was mitigated by cost reductions in factory operations and lower natural gas prices in 2009. SG&A spending in the third quarter and year-to-date of 2009 was comparable with 2008, as the impact of an acquisition completed in the fourth quarter of 2008 was offset by lower management incentive expense.

        The sales decreases in the Irrigation segment for the third quarter and year-to-date of 2009, as compared with the same periods in 2008, was mainly due to weaker sales volumes in both domestic and international markets. In 2009, lower farm commodity prices and lower anticipated net farm income in worldwide agricultural markets, as compared with 2008, resulted in decreased demand for mechanized irrigation machines in global markets. In addition, we believe that the global economic recession and an uncertain outlook for world economies caused customers to delay capital investments in irrigation technology in 2009. In international irrigation markets, the sales decrease in 2009, as compared with 2008, was broad-based across most geographic markets. In both North American and international markets, average selling prices were slightly lower than last year, due to price competition in our various markets and lower raw material prices. Currency translation effects also contributed to lower irrigation segment sales for the thirteen and thirty-nine weeks periods ended September 26, 2009, as compared with 2008 (approximately $2.8 million and $10.7 million, respectively).

        The decrease in operating income for the thirteen and thirty-nine week periods ended September 26, 2009, as compared with the same periods in 2008, was due to the effect of lower sales unit volumes and the associated operating deleverage realized as a result of lower sales and production levels. The decrease in SG&A spending in the third quarter and year-to-date 2009, as compared with 2008, was due to lower incentive expense accruals related to decreased operating income this year (approximately $1.7 million and $4.6 million, respectively) and currency translation effects (approximately $0.2 million and $1.1 million, respectively), offset somewhat by higher salary and employee benefits costs (approximately $0.3 million and $1.7 million, respectively).

        These businesses mainly include our tubing and industrial fastener operations. The decreases in sales and operating income in the third quarter and year-to-date 2009, as compared with the same periods in 2008, mainly related to weaker sales of industrial tubing due to the economic recession in the U.S. this year.

        The increases in net corporate expense for the quarterly and year-to-date periods ended September 26, 2009, as compared with the same periods in 2008, were mainly due to increased deferred compensation liabilities related to higher investment returns on the assets of the deferred compensation plan (approximately $1.9 million and $3.7 million, respectively), which is recorded in SG&A expenses. The investment gains and losses were recorded in "Miscellaneous" in our condensed consolidated statement of operations for the thirteen and thirty-nine week periods ended September 26, 2009 and September 27, 2008.

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Liquidity and Capital Resources

        Working Capital and Operating Cash Flows—Net working capital was $431.9 million at September 26, 2009, as compared with $475.2 million at December 27, 2008. The ratio of current assets to current liabilities was 2.60:1 at September 26, 2009, as compared with 2.69:1 at December 27, 2008. Operating cash flow was $266.4 million for the thirty-nine week period ended September 26, 2009, as compared with $67.0 million for the same period in 2008. The improved operating cash flow in 2009 was the result of higher net earnings and a decrease in working capital in 2009, as compared with an increase in working capital in 2008. Accounts receivable turnover in 2009 was slightly lower than the same period in 2008, mainly due to a shift in our sales mix from irrigation to other product lines. Inventory levels decreased significantly in 2009, as compared to December 27, 2008. In 2008, our inventory levels increased throughout the year due to significant growth in our business and extended delivery lead times from our raw material providers. As demand slowed in most of our businesses, we placed additional focus on reducing our inventories to align them better with current sales demand. Steel price volatility also contributed to the changes in inventory levels experienced in 2008 and 2009. Our future inventory levels will depend on business conditions, vendor delivery performance and the overall supply and demand conditions of our key raw material commodities (mainly hot-rolled steel, aluminum and zinc).

        Investing Cash Flows—Capital spending during the thirty-nine weeks ended September 26, 2009 was $38.7 million, as compared with $38.9 million for the same period in 2008. We expect our capital spending for the 2009 fiscal year to be approximately $50 million. Investing cash flows in 2008 reflected the aggregate of $119.0 million of cash paid for the West Coast, Penn Summit, Site-Pro, Matco and Mitas acquisitions.

        Financing Cash Flows—Our total interest-bearing debt decreased from $357.6 million at December 27, 2008 to $197.6 million at September 26, 2009. The decrease in borrowings in 2009 was predominantly associated with using our operating cash flows to pay down borrowings under our revolving credit agreement.

        We have historically funded our growth, capital spending and acquisitions through a combination of operating cash flows and debt financing. We have an internal long-term objective to maintain long-term debt as a percent of invested capital at or below 40%. At September 26, 2009, our long-term debt to invested capital ratio was 16.7%, as compared with 31.7% at December 27, 2008. We plan to maintain this ratio below 40% for the balance of 2009. Our debt financing at September 26, 2009 consisted primarily of long-term debt. We also maintain certain short-term bank lines of credit totaling $34.5 million, $28.7 million of which was unused at September 26, 2009. Our long-term debt principally consists of:

 
  Redemption
Price
 

Until May 1, 2010

    103.438 %

From May 1, 2010 until May 1, 2011

    102.292 %

From May 1, 2011 until May 1, 2012

    101.146 %

After May 1, 2012

    100.000 %

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        These notes are guaranteed by certain of our U.S. subsidiaries.

        At September 26, 2009, we had $4.4 million in outstanding borrowings under the revolving credit agreement, at an interest rate of 1.39875% per annum, not including facility fees. The revolving credit agreement has a termination date of October 16, 2013 and contains certain financial covenants that may limit our additional borrowing capability under the agreement. At September 26, 2009, we had the ability to borrow an additional $250.7 million under this facility.

        These debt agreements contain covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities, including capital expenditures. Our key debt covenants are that interest-bearing debt is not to exceed 3.75x EBITDA of the prior four quarters and that our EBITDA over our prior four quarters must be at least 2.50x our interest expense over the same period. At September 26, 2009, we were in compliance with all covenants related to these debt agreements.

        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 and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs.

FINANCIAL OBLIGATIONS AND FINANCIAL COMMITMENTS

        There have been no material changes to our financial obligations and financial commitments as described beginning on page 35 in our Form 10-K for the year ended December 27, 2008.

Off Balance Sheet Arrangements

        There have been no changes in our off balance sheet arrangements as described on page 36 in our Form 10-K for the fiscal year ended December 27, 2008.

Critical Accounting Policies

        There have been no changes in our critical accounting policies during the quarter ended September 26, 2009. These policies are described on pages 38-41 in our Form 10-K for fiscal year ended December 27, 2008.

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Item 3.    Quantitative and Qualitative Disclosure about Market Risk

        There were no material changes in our market risk during the quarter ended September 26, 2009. For additional information, refer to the section "Risk Management" beginning on page 37 in our Form 10-K for the fiscal year ended December 27, 2008.

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.

        In the third quarter of 2009, the Company implemented various processes and information system enhancements, principally related to the implementation of enterprise resource planning software and related business improvements in its Mansfield, Texas operation that is part of the Utility Support Structures segment. These process and information system enhancements resulted in modifications to internal controls over sales, customer service, inventory management, accounts receivable and accounts payable processes. There were no other changes in the Company's internal controls over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

 
  (a)
  (b)
  (c)
  (d)
 
Period
  Total Number of
Shares Purchased
  Average Price
paid per share
  Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
  Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans or
Programs
 

June 28, 2009 to July 25, 2009

    576   $ 77.83          

July 26, 2009 to Aug. 29, 2009

    15,652     79.83          

Aug. 30, 2009 to Sept. 26, 2009

                 
                   
 

Total

    16,228   $ 79.76          
                   

        During the third quarter, the only shares reflected above were those delivered to the Company by employees as part of stock option exercises, either to cover the purchase price of the option or the related taxes payable by the employee as part of the option exercise. The price paid per share was the market price at the date of exercise.

Item 5.    Other Information

        On July 27, 2009, the Company's Board of Directors declared a quarterly cash dividend on common stock of 15 cents per share, which was paid on October 15, 2009, to stockholders of record September 25, 2009. The indicated annual dividend rate is 60 cents per share.

Item 6.    Exhibits

(a)
Exhibits

Exhibit No.   Description
  31.1   Section 302 Certificate of Chief Executive Officer

 

31.2

 

Section 302 Certificate of Chief Financial Officer

 

32.1

 

Section 906 Certifications of Chief Executive Officer and Chief Financial Officer

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and by the undersigned hereunto duly authorized.

    VALMONT INDUSTRIES, INC.
(Registrant)

 

 

/s/ TERRY J. MCCLAIN

Terry J. McClain
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

Dated this 3rd day of November, 2009.

 

 

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List of Exhibits

Exhibit No.   Description
  31.1   Section 302 Certificate of Chief Executive Officer

 

31.2

 

Section 302 Certificate of Chief Financial Officer

 

32.1

 

Section 906 Certifications of Chief Executive Officer and Chief Financial Officer

36