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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 June 27, 2015

or

o

 

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

For the transition period from                             to                              

Commission file number 1-31429



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

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

One Valmont Plaza,

 

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

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


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



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

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

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

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

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

23,248,776
Outstanding shares of common stock as of July 22, 2015

   


Table of Contents


VALMONT INDUSTRIES, INC.

INDEX TO FORM 10-Q

Page No.  

PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements:

       

 

Condensed Consolidated Statements of Earnings for the thirteen and twenty-six weeks ended June 27, 2015 and June 28, 2014

    3  

 

Condensed Consolidated Statements of Comprehensive Income for the thirteen and twenty-six weeks ended June 27, 2015 and June 28, 2014

    4  

 

Condensed Consolidated Balance Sheets as of June 27, 2015 and December 27, 2014

    5  

 

Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended June 27, 2015 and June 28, 2014

    6  

 

Condensed Consolidated Statements of Shareholders' Equity for the twenty-six weeks ended June 27, 2015 and June 28, 2014

    7  

 

Notes to Condensed Consolidated Financial Statements

    8  

Item 2.

 

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

    35  

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

    45  

Item 4.

 

Controls and Procedures

    45  

PART II. OTHER INFORMATION

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    47  

Item 6.

 

Exhibits

    47  

Signatures

    48  

2


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(Unaudited)

 
  Thirteen Weeks Ended   Twenty-six Weeks Ended  
 
  June 27,
2015
  June 28,
2014
  June 27,
2015
  June 28,
2014
 

Product sales

  $ 611,782   $ 766,844   $ 1,215,676   $ 1,447,887  

Services sales

    70,341     75,755     136,845     146,452  

Net sales

    682,123     842,599     1,352,521     1,594,339  

Product cost of sales

    461,173     573,067     920,714     1,070,910  

Services cost of sales

    51,402     49,055     96,805     95,970  

Total cost of sales

    512,575     622,122     1,017,519     1,166,880  

Gross profit

    169,548     220,477     335,002     427,459  

Selling, general and administrative expenses

    115,548     115,701     223,319     223,835  

Operating income

    54,000     104,776     111,683     203,624  

Other income (expenses):

                         

Interest expense

    (11,232 )   (8,304 )   (22,360 )   (16,501 )

Interest income

    616     1,577     1,490     3,316  

Other

    (28 )   1,903     988     (3,909 )

    (10,644 )   (4,824 )   (19,882 )   (17,094 )

Earnings before income taxes

    43,356     99,952     91,801     186,530  

Income tax expense (benefit):

                         

Current

    19,136     26,117     30,910     59,055  

Deferred

    (5,219 )   7,953     (55 )   5,030  

    13,917     34,070     30,855     64,085  

Earnings before equity in earnings of nonconsolidated subsidiaries

    29,439     65,882     60,946     122,445  

Equity in earnings of nonconsolidated subsidiaries

        (30 )       (30 )

Net earnings

    29,439     65,852     60,946     122,415  

Less: Earnings attributable to noncontrolling interests

    (1,566 )   (1,876 )   (2,334 )   (2,459 )

Net earnings attributable to Valmont Industries, Inc. 

  $ 27,873   $ 63,976   $ 58,612   $ 119,956  

Earnings per share:

                         

Basic

  $ 1.19   $ 2.40   $ 2.48   $ 4.50  

Diluted

  $ 1.19   $ 2.38   $ 2.47   $ 4.46  

Cash dividends declared per share

  $ 0.375   $ 0.375   $ 0.750   $ 0.625  

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

    23,336     26,623     23,602     26,669  

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

    23,450     26,856     23,716     26,903  

   

See accompanying notes to condensed consolidated financial statements.

3


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

 
  Thirteen Weeks
Ended
  Twenty-six Weeks Ended  
 
  June 27,
2015
  June 28,
2014
  June 27,
2015
  June 28,
2014
 

Net earnings

  $ 29,439   $ 65,852   $ 60,946   $ 122,415  

Other comprehensive income (loss), net of tax:

                         

Foreign currency translation adjustments:

                         

Unrealized translation gain (loss)                    

    18,328     13,869     (39,850 )   25,506  

Unrealized gain/(loss) on cash flow hedge:

                         

Amortization cost included in interest expense              

    19     (33 )   37     67  

Gain on cash flow hedges

    751         1,045      

Actuarial gain (loss) in defined benefit pension plan              

        (614 )       (847 )

Other comprehensive income (loss)

    19,098     13,222     (38,768 )   24,726  

Comprehensive income (loss)

    48,537     79,074     22,178     147,141  

Comprehensive loss (income) attributable to noncontrolling interests

    (1,968 )   (1,792 )   (641 )   (1,704 )

Comprehensive income (loss) attributable to Valmont Industries, Inc. 

  $ 46,569   $ 77,282   $ 21,537   $ 145,437  

   

See accompanying notes to condensed consolidated financial statements.

4


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

 
  June 27,
2015
  December 27,
2014
 

ASSETS

             

Current assets:

             

Cash and cash equivalents

  $ 317,523   $ 371,579  

Receivables, net

    491,706     536,918  

Inventories

    379,897     359,522  

Prepaid expenses

    56,653     56,912  

Refundable and deferred income taxes

    44,072     68,010  

Total current assets

    1,289,851     1,392,941  

Property, plant and equipment, at cost

    1,123,885     1,139,569  

Less accumulated depreciation and amortization

    552,908     533,116  

Net property, plant and equipment

    570,977     606,453  

Goodwill

    380,086     385,111  

Other intangible assets, net

    189,892     202,004  

Other assets

    136,586     143,159  

Total assets

  $ 2,567,392   $ 2,729,668  

LIABILITIES AND SHAREHOLDERS' EQUITY

             

Current liabilities:

             

Current installments of long-term debt

  $ 1,096   $ 1,181  

Notes payable to banks

    7,914     13,952  

Accounts payable

    186,421     196,565  

Accrued employee compensation and benefits

    75,155     87,950  

Accrued expenses

    89,983     88,480  

Dividends payable

    8,733     9,086  

Total current liabilities

    369,302     397,214  

Deferred income taxes

    62,959     71,797  

Long-term debt, excluding current installments

    765,272     766,654  

Defined benefit pension liability

    135,068     150,124  

Deferred compensation

    51,056     47,932  

Other noncurrent liabilities

    43,142     45,542  

Shareholders' equity:

             

Preferred stock of $1 par value—

             

Authorized 500,000 shares; none issued

         

Common stock of $1 par value—

             

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

    27,900     27,900  

Retained earnings

    1,762,534     1,718,662  

Accumulated other comprehensive income (loss)

    (171,508 )   (134,433 )

Treasury stock

    (525,877 )   (410,296 )

Total Valmont Industries, Inc. shareholders' equity

    1,093,049     1,201,833  

Noncontrolling interest in consolidated subsidiaries

    47,544     48,572  

Total shareholders' equity

    1,140,593     1,250,405  

Total liabilities and shareholders' equity

  $ 2,567,392   $ 2,729,668  

   

See accompanying notes to condensed consolidated financial statements.

5


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 
  Twenty-six Weeks Ended  
 
  June 27,
2015
  June 28,
2014
 

Cash flows from operating activities:

             

Net earnings

  $ 60,946   $ 122,415  

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

             

Depreciation and amortization

    47,761     43,368  

Noncash loss on trading securities

    4,582     3,501  

Impairment of assets

    9,292      

Stock-based compensation

    3,513     3,686  

Defined benefit pension plan expense

    (305 )   1,334  

Contribution to defined benefit pension plan

    (15,735 )   (17,484 )

Gain on sale of property, plant and equipment

    542     (102 )

Equity in earnings in nonconsolidated subsidiaries

        30  

Deferred income taxes

    (55 )   5,030  

Changes in assets and liabilities (net of acquisitions):

             

Receivables

    32,511     21,083  

Inventories

    (27,746 )   6,624  

Prepaid expenses

    (3,087 )   (18,289 )

Accounts payable

    (5,021 )   (28,633 )

Accrued expenses

    (6,431 )   (30,415 )

Other noncurrent liabilities

    1,761     1,766  

Income taxes refundable

    15,817     (22,063 )

Net cash flows from operating activities

    118,345     91,851  

Cash flows from investing activities:

             

Purchase of property, plant and equipment

    (24,758 )   (46,991 )

Proceeds from sale of assets

    1,101     1,151  

Acquisitions, net of cash acquired

        (120,483 )

Other, net

    5,896     (2,940 )

Net cash flows from investing activities

    (17,761 )   (169,263 )

Cash flows from financing activities:

             

Net borrowings under short-term agreements

    (5,890 )   (1,861 )

Proceeds from long-term borrowings

    33,000      

Principal payments on long-term borrowings

    (33,657 )   (259 )

Dividends paid

    (17,956 )   (13,427 )

Dividends to noncontrolling interest

    (1,669 )   (1,340 )

Purchase of treasury shares

    (121,020 )   (77,084 )

Proceeds from exercises under stock plans

    9,454     11,996  

Excess tax benefits from stock option exercises

    1,394     3,576  

Purchase of common treasury shares—stock plan exercises

    (10,490 )   (11,984 )

Net cash flows from financing activities

    (146,834 )   (90,383 )

Effect of exchange rate changes on cash and cash equivalents

    (7,806 )   10,016  

Net change in cash and cash equivalents

    (54,056 )   (157,779 )

Cash and cash equivalents—beginning of year

    371,579     613,706  

Cash and cash equivalents—end of period

  $ 317,523   $ 455,927  

   

See accompanying notes to condensed consolidated financial statements.

6


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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 28, 2013

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

Net earnings

            119,956             2,459     122,415  

Other comprehensive income (loss)

                25,481         (755 )   24,726  

Cash dividends declared

            (16,651 )               (16,651 )

Dividends to noncontrolling interests

                        (1,340 )   (1,340 )

Acquisition of DS SM

                        9,232     9,232  

Addition of noncontrolling interest

                                  404     404  

Purchase of treasury shares; 490,172 shares acquired

                            (77,084 )         (77,084 )

Stock plan exercises; 78,217 shares acquired

                    (11,984 )       (11,984 )

Stock options exercised; 158,317 shares issued

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

Tax benefit from stock option exercises

        3,576                     3,576  

Stock option expense

        2,525                     2,525  

Stock awards; 8,822 shares issued

        1,161             1,268         2,429  

Balance at June 28, 2014

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

Balance at December 27, 2014

  $ 27,900   $   $ 1,718,662   $ (134,433 ) $ (410,296 ) $ 48,572   $ 1,250,405  

Net earnings

            58,612             2,334     60,946  

Other comprehensive income (loss)

                (37,075 )       (1,693 )   (38,768 )

Cash dividends declared

            (17,603 )               (17,603 )

Dividends to noncontrolling interests

                        (1,669 )   (1,669 )

Purchase of treasury shares; 989,821 shares acquired

                    (121,020 )       (121,020 )

Stock plan exercises; 82,989 shares acquired

                    (10,490 )       (10,490 )

Stock options exercised; 119,687 shares issued

        (8,860 )   2,863         15,451         9,454  

Tax benefit from stock option exercises

        1,394                     1,394  

Stock option expense

        2,653                     2,653  

Stock awards; 4,846 shares issued

        4,813             478         5,291  

Balance at June 27, 2015

  $ 27,900   $   $ 1,762,534   $ (171,508 ) $ (525,877 ) $ 47,544   $ 1,140,593  

   

See accompanying notes to condensed consolidated financial statements.

7


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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 June 27, 2015, the Condensed Consolidated Statements of Earnings and Comprehensive Income for the thirteen and twenty-six weeks ended June 27, 2015 and June 28, 2014, and the Condensed Consolidated Statements of Cash Flows and Shareholders' Equity for the twenty-six week period then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of June 27, 2015 and for all periods presented.

        Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 27, 2014. 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, 2014. The results of operations for the period ended June 27, 2015 are not necessarily indicative of the operating results for the full year.

        Approximately 36% and 44% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market as of June 27, 2015 and December 27, 2014, respectively. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately $39,093 and $47,178 at June 27, 2015 and December 27, 2014, respectively.

        Inventories consisted of the following:

 
  June 27,
2015
  December 27,
2014
 

Raw materials and purchased parts

  $ 182,927   $ 179,093  

Work-in-process

    26,286     27,835  

Finished goods and manufactured goods

    209,777     199,772  

Subtotal

    418,990     406,700  

Less: LIFO reserve

    39,093     47,178  

  $ 379,897   $ 359,522  

8


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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)

        Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries for the thirteen and twenty-six weeks ended June 27, 2015 and June 28, 2014, were as follows:

 
  Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
 
  2015   2014   2015   2014  

United States

  $ 33,641   $ 65,096   $ 66,282   $ 136,790  

Foreign

    9,715     34,856     25,519     49,740  

  $ 43,356   $ 99,952   $ 91,801   $ 186,530  

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

        The components of the net periodic pension (benefit) expense for the thirteen and twenty-six weeks ended June 27, 2015 and June 28, 2014 were as follows:

 
  Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
 
  2015   2014   2015   2014  

Net periodic (benefit) expense:

                         

Interest cost

  $ 6,189   $ 7,312   $ 12,300   $ 14,509  

Expected return on plan assets

    (6,344 )   (6,640 )   (12,605 )   (13,175 )

Net periodic (benefit) expense

  $ (155 ) $ 672   $ (305 ) $ 1,334  

        The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Human Resource Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At June 27, 2015, 1,176,222 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.

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

9


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Expiration of grants is from six to ten years from the date of grant. The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options for the thirteen and twenty-six weeks ended June 27, 2015 and June 28, 2014, respectively, were as follows:

 
  Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
 
  2015   2014   2015   2014  

Compensation expense

  $ 1,303   $ 1,262   $ 2,653   $ 2,525  

Income tax benefits

    501     486     1,021     972  

        The Company has equity method investments in non-consolidated subsidiaries, which are recorded within "Other assets" on the Condensed Consolidated Balance Sheet.

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

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

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

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

        Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan of $39,789 ($36,439 at December 27, 2014) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting

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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)

Standards Codification 320, Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time.

        The Company's ownership of shares in Delta EMD Pty. Ltd. (JSE:DTA) is also classified as trading securities. During first quarter of 2015, the Company received a special dividend of $5,010 from Delta EMD Pty. Ltd and the market price of the shares were proportionately decreased accordingly. The shares are valued at $4,966 and $9,034 as of June 27, 2015 and December 27, 2014, respectively, which is the estimated fair value. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.

 
   
  Fair Value Measurement Using:  
 
  Carrying Value
June 27,
2015
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         

Trading Securities

  $ 44,755   $ 44,755   $   $  

 

 
   
  Fair Value Measurement Using:  
 
  Carrying Value
December 27,
2014
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         

Trading Securities

  $ 45,473   $ 45,473   $   $  

        Comprehensive income includes net earnings, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Accumulated other comprehensive income (loss) consisted of the following at June 27, 2015 and December 27, 2014:

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

Balance at December 27, 2014

  $ (99,618 ) $ 3,879   $ (38,694 ) $ (134,433 )

Current-period comprehensive income (loss)

    (38,157 )   1,082         (37,075 )

Balance at June 27, 2015

  $ (137,775 ) $ 4,961   $ (38,694 ) $ (171,508 )

        In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the

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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)

revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017 and is to be applied retrospectively. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations and financial position.

        In July 2015, the FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory." Under this ASU, inventory will be measured at the "lower of cost and net realizable value" and options that currently exist for "market value" will be eliminated. The ASU defines net realizable value as the "estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation." No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. Management is evaluating the provisions of this statement, including which period to adopt, and has not determined what impact the adoption of ASU 2015-11 will have on the Company's financial position or results of operations.

(2) ACQUISITIONS

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

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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 following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of acquisition, which was finalized in the fourth quarter of 2014.

 
  At March 3,
2014
 

Current assets

  $ 73,421  

Property, plant and equipment

    85,638  

Intangible assets

    30,340  

Goodwill

    16,803  

Total fair value of assets acquired

  $ 206,202  

Current liabilities

    47,754  

Deferred income taxes

    19,715  

Intercompany note payable

    37,448  

Long-term debt

    8,941  

Total fair value of liabilities assumed

    113,858  

Non-controlling interests

    9,309  

Net assets acquired

  $ 83,035  

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

 
  Amount   Weighted
Average
Amortization
Period
(Years)
 

Trade Names

  $ 11,470     Indefinite  

Backlog

    3,145     1.5  

Customer Relationships

    15,725     12.0  

Total Intangible Assets

  $ 30,340        

        On October 6, 2014, the Company acquired Shakespeare Composite Structures (Shakespeare) for $48,272 in cash, plus assumed liabilities. Shakespeare is a manufacturer of fiberglass reinforced composite structures and products with two manufacturing facilities in South Carolina. Shakespeare's annual sales are approximately $55,000 and its operations are included in the Engineered Infrastructure Products segment. The acquisition of Shakespeare was completed to expand our product offering of composite structure solutions.

        The preliminary fair value measurement disclosed below is subject to management reviews and completion of the fair value measurements of the assets acquired and liabilities assumed. The Company expects the fair value measurement process and purchase price allocation for Shakespeare to be completed in the third quarter of 2015.

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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 following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the date of the Shakespeare acquisition (goodwill is not deductible for tax purposes):

 
  At October 6,
2014
 

Current assets

  $ 12,532  

Property, plant and equipment

    10,694  

Intangible assets

    13,500  

Goodwill

    15,416  

Total fair value of assets acquired

  $ 52,142  

Current liabilities

    3,870  

Net assets acquired

  $ 48,272  

        Based on the preliminary fair value assessments, the Company allocated $13,500 of the purchase price to acquired intangible assets. The following table summarizes the major classes of Shakespeare acquired intangible assets and the respective weighted-average amortization periods:

 
  Amount   Weighted
Average
Amortization
Period
(Years)
 

Trade Names

  $ 4,000     Indefinite  

Customer Relationships

    9,500     12.0  

Total Intangible Assets

  $ 13,500        

        On August 25, 2014, the Company acquired 51% of AgSense, LLC (AgSense) for $17 million in cash. AgSense operates in South Dakota and is the creator of global WagNet network which provides growers with a more complete view of their entire farming operation by tying irrigation decision making to field, crop and weather conditions. In the measurement of fair values of assets acquired and liabilities assumed, goodwill of $17,193 and $16,083 of customer relationships, trade name and other intangible assets were recorded. A portion of the goodwill is deductible for tax purposes. AgSense is included in the Irrigation Segment.

        The Company's Condensed Consolidated Statement of Earnings for the thirteen and twenty-six weeks ended June 27, 2015 included net sales of $44,271 and $86,195 and net earnings of $2,935 and $4,933 resulting from the Valmont SM, AgSense, and Shakespeare acquisitions. The pro forma effect of

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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)

these acquisitions on the second quarter and first half of the 2014 Statement of Earnings was as follows:

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

Net sales

  $ 858,068   $ 1,658,333  

Net earnings

  $ 64,525   $ 123,441  

Earnings per share—diluted

  $ 2.40   $ 4.59  

(3) RESTRUCTURING ACTIVITIES

        In April 2015, the Company's Board of Directors authorized a broad restructuring plan (the "Plan") of up to $60 million to respond to the market environment in certain businesses. We anticipate the Company will recognize the following pre-tax expenses in conjunction with the initial restructuring activities from the Plan announced in 2015:

 
  EIP   Utility   Coatings   Irrigation   Other/
Corporate
  TOTAL  

Severance

  $ 4,000   $ 1,445   $ 460   $ 425   $ 75   $ 6,405  

Other cash restructuring expenses

    725     1,810     225             2,760  

Asset impairments/net loss on disposals

    3,850     625     4,150     250         8,875  

Total cost of sales

    8,575     3,880     4,835     675     75     18,040  

Severance

    3,900     450         575     1,025     5,950  

Other cash restructuring expenses

    750     270     275     100     650     2,045  

Asset impairments/net loss on disposals

    2,375             150     1,890     4,415  

Total selling, general and administrative expenses

    7,025     720     275     825     3,565     12,410  

Consolidated total

  $ 15,600   $ 4,600   $ 5,110   $ 1,500   $ 3,640   $ 30,450  

        Certain of these initial restructuring actions are within the APAC Coatings reporting unit which has approximately $16 million of goodwill as of June 27, 2015. The Company expects these activities to improve the profitability of this reporting unit. Should operating income not improve within this reporting unit after these restructuring activities are implemented, we may have to write off all or a portion of our goodwill for this reporting unit during our annual impairment testing during the third quarter. Inclusive of this goodwill, the Company is currently evaluating additional potential restructuring activities estimated up to $25 million of asset impairments and $5 million of cash expenses.

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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) RESTRUCTURING ACTIVITIES (Continued)

        The following is a summary of the segments affected by these additional potential restructuring activities under current evaluation and the estimated pre-tax expense:

 
  EIP   Coatings   Other/
Corporate
  TOTAL  

Severance

  $ 2,000   $   $ 250   $ 2,250  

Other cash restructuring expenses

    700         250     950  

Asset impairments/net loss on disposals

    3,800         500     4,300  

Total cost of sales

    6,500         1,000     7,500  

Severance

    500         1,150     1,650  

Asset impairments/net loss on disposals

    600     16,000     3,500     20,100  

Total selling, general and administrative expenses

    1,100     16,000     4,650     21,750  

Consolidated total

  $ 7,600   $ 16,000   $ 5,650   $ 29,250  

        During the first quarter of fiscal 2015, the Company's EIP segment recognized approximately $800 of pre-tax expense for severance and other cash restructuring expenses. During the second quarter of fiscal 2015, the Company recognized the following pre-tax restructuring expenses:

 
  EIP   Utility   Coatings   Irrigation   Other/
Corporate
  TOTAL  

Severance

  $ 535   $ 1,380   $ 310   $   $ 73   $ 2,298  

Other cash restructuring expenses

    45     375     40             460  

Asset impairments/net loss on disposals

    797     295     4,150             5,242  

Total cost of sales

    1,377     2,050     4,500         73     8,000  

Severance

    965     405         219     240     1,829  

Other cash restructuring expenses

    125         269             394  

Asset impairments/net loss on disposals

    2,030             130     1,890     4,050  

Total selling, general and administrative expenses

    3,120     405     269     349     2,130     6,273  

Consolidated total

  $ 4,497   $ 2,455   $ 4,769   $ 349   $ 2,203   $ 14,273  

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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) RESTRUCTURING ACTIVITIES (Continued)

        Liabilities recorded for the restructuring Plan and changes therein for the first half of fiscal 2015 were as follows:

 
  Balance at
December 27,
2014
  Recognized
Restructuring
Expense
  Costs Paid or
Otherwise
Settled
  Balance at
June 27,
2015
 

Severance

  $   $ 4,927   $ (2,294 ) $ 2,633  

Other cash restructuring expenses

        885     (645 )   240  

Total cost of sales

  $   $ 5,812   $ (2,939 ) $ 2,873  

(4) GOODWILL AND INTANGIBLE ASSETS

        The components of amortized intangible assets at June 27, 2015 and December 27, 2014 were as follows:

 
  June 27, 2015
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Weighted
Average
Life

Customer Relationships

  $ 206,053   $ 96,178   13 years

Proprietary Software & Database

    3,676     2,985   8 years

Patents & Proprietary Technology

    13,029     9,290   8 years

Other

    3,858     3,486   3 years

  $ 226,616   $ 111,939    

 

 
  December 27, 2014
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Weighted
Average
Life

Customer Relationships

  $ 207,509   $ 88,538   13 years

Proprietary Software & Database

    3,769     2,977   8 years

Patents & Proprietary Technology

    12,394     8,537   8 years

Other

    4,355     2,998   3 years

  $ 228,027   $ 103,050    

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(4) GOODWILL AND INTANGIBLE ASSETS (Continued)

        Amortization expense for intangible assets for the thirteen and twenty-six weeks ended June 27, 2015 and June 28, 2014, respectively was as follows:

Thirteen Weeks
Ended
  Twenty-six Weeks
Ended
 
2015   2014   2015   2014  
$ 4,737   $ 4,634   $ 9,650   $ 8,737  

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

 
  Estimated
Amortization
Expense
 

2015

  $ 18,124  

2016

    16,322  

2017

    16,276  

2018

    14,622  

2019

    13,795  

        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 June 27, 2015 and December 27, 2014 were as follows:

 
  June 27,
2015
  December 27,
2014
  Year
Acquired
 

Webforge

  $ 16,997   $ 16,801     2010  

Valmont SM

    9,294     10,818     2014  

Newmark

    11,111     11,111     2004  

Ingal EPS/Ingal Civil Products

    8,971     8,867     2010  

Donhad

    6,767     6,689     2010  

Shakespeare

    4,000     4,000     2014  

Industrial Galvanizers

    3,935     3,889     2010  

Other

    14,140     14,852        

  $ 75,215   $ 77,027        

        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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(4) GOODWILL AND INTANGIBLE ASSETS (Continued)

maintain the value of the intangible asset. The Company expects that these intangible assets will maintain their value indefinitely. Accordingly, these assets are not amortized.

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

        The carrying amount of goodwill by segment as of June 27, 2015 and December 27, 2014 was as follows:

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

Balance at December 27, 2014

  $ 197,074   $ 75,404   $ 74,862   $ 19,536   $ 18,235   $ 385,111  

Impairment

    (1,737 )                   (1,737 )

Foreign currency translation

    (2,789 )       (634 )   (78 )   213     (3,288 )

Balance at June 27, 2015

  $ 192,548   $ 75,404   $ 74,228   $ 19,458   $ 18,448   $ 380,086  

        During the second quarter of 2015, the Company implemented a plan to divest of a small business in its EIP segment. The goodwill allocated to that business was $1,737 and based on its current estimation of value, the goodwill was determined to be impaired and was recorded in Selling, General and Administrative Expenses in the Condensed Consolidated Statements of Earnings. The Company's annual impairment test of goodwill was last performed during the third quarter of 2014. As a result of that testing, the Company determined that its goodwill was not impaired, as the valuation of the reporting units exceeded their respective carrying values. The Company continues to monitor changes in the global economy that could impact future operating results of its reporting units. If such conditions arise, the Company will test a given reporting unit for impairment prior to the annual test.

(5) CASH FLOW SUPPLEMENTARY INFORMATION

        The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the twenty-six weeks ended June 27, 2015 and June 28, 2014 were as follows:

 
  2015   2014  

Interest

  $ 22,898   $ 16,564  

Income taxes

    14,280     77,691  

        On May 13, 2014, the Company announced a new capital allocation philosophy which increased the dividend by 50% and covered a share repurchase program of up to $500 million of the Company's outstanding common stock to be acquired from time to time over twelve months at prevailing market

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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) CASH FLOW SUPPLEMENTARY INFORMATION (Continued)

prices, through open market or privately-negotiated transactions. On February 24, 2015, the Board of Directors authorized an additional purchase of up to $250 million of the Company's outstanding common stock with no stated expiration date. As of June 27, 2015, the Company has acquired 3,700,970 shares for approximately $516.1 million under the share repurchase programs.

(6) EARNINGS PER SHARE

        The following table provides a reconciliation between Basic and Diluted earnings per share (EPS):

 
  Basic
EPS
  Dilutive
Effect of
Stock Options
  Diluted
EPS
 

Thirteen weeks ended June 27, 2015:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 27,873   $   $ 27,873  

Shares outstanding

    23,336     114     23,450  

Per share amount

  $ 1.19   $   $ 1.19  

Thirteen weeks ended June 28, 2014:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 63,976   $   $ 63,976  

Shares outstanding

    26,623     233     26,856  

Per share amount

  $ 2.40   $ (0.02 ) $ 2.38  

Twenty-six weeks ended June 27, 2015:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 58,612   $   $ 58,612  

Shares outstanding

    23,602     114     23,716  

Per share amount

  $ 2.48   $ (0.01 ) $ 2.47  

Twenty-six weeks ended June 28, 2014:

                   

Net earnings attributable to Valmont Industries, Inc. 

  $ 119,956   $   $ 119,956  

Shares outstanding

    26,669     234     26,903  

Per share amount

  $ 4.50   $ (0.04 ) $ 4.46  

        Earnings per share are computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per share may not equal the total for the year primarily due to the share buyback program that began in the second quarter of 2014.

        At June 27, 2015, there were 452,459 outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share.

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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

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

        Reportable segments are as follows:

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

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

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

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

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

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

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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)

Summary by Business

 
  Thirteen Weeks Ended   Twenty-six Weeks Ended  
 
  June 27,
2015
  June 28,
2014
  June 27,
2015
  June 28,
2014
 

SALES:

                         

Engineered Infrastructure Products segment:

                         

Lighting, Traffic, and Roadway Products

  $ 154,688   $ 164,753   $ 299,955   $ 303,730  

Communication Products

    45,935     43,618     78,491     73,504  

Offshore Structures

    23,135     47,217     47,983     64,521  

Access Systems

    37,311     48,764     73,033     91,059  

Engineered Infrastructure Products segment

    261,069     304,352     499,462     532,814  

Utility Support Structures segment:

                         

Steel

    139,425     179,574     297,698     371,011  

Concrete

    23,504     33,456     41,572     56,746  

Utility Support Structures segment

    162,929     213,030     339,270     427,757  

Coatings segment

    76,094     85,157     150,454     167,328  

Irrigation segment

    153,821     219,917     308,297     432,650  

Other

    50,404     61,786     104,262     120,388  

Total

    704,317     884,242     1,401,745     1,680,937  

INTERSEGMENT SALES:

                         

Engineered Infrastructure Products segment

    4,052     18,166     11,126     37,731  

Utility Support Structures segment

    273     1,025     562     1,520  

Coatings segment

    12,178     14,770     24,725     29,723  

Irrigation segment

    3     4     12     13  

Other

    5,688     7,678     12,799     17,611  

Total

    22,194     41,643     49,224     86,598  

NET SALES:

                         

Engineered Infrastructure Products segment

    257,017     286,186     488,336     495,083  

Utility Support Structures segment

    162,656     212,005     338,708     426,237  

Coatings segment

    63,916     70,387     125,729     137,605  

Irrigation segment

    153,818     219,913     308,285     432,637  

Other

    44,716     54,108     91,463     102,777  

Total

  $ 682,123   $ 842,599   $ 1,352,521   $ 1,594,339  

OPERATING INCOME:

                         

Engineered Infrastructure Products segment

  $ 17,424   $ 28,625   $ 29,406   $ 42,334  

Utility Support Structures segment

    10,399     26,375     25,756     59,132  

Coatings segment

    7,862     15,820     18,861     29,706  

Irrigation segment

    25,814     41,473     50,116     84,619  

Other

    6,273     8,343     12,871     16,893  

Corporate

    (13,772 )   (15,860 )   (25,327 )   (29,060 )

Total

  $ 54,000   $ 104,776   $ 111,683   $ 203,624  

22


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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

        The Company has three tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully and unconditionally by certain of the Company's current and future direct and indirect domestic and foreign subsidiaries (collectively the "Guarantors"), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the "Non-Guarantors"). All Guarantors are 100% owned by the parent company.

        In the fourth quarter of 2014, a subsidiary of the Company was removed as a guarantor of our revolving credit facility, and consequently was removed as a guarantor of the notes. All prior year consolidated financial information has been recast to reflect the current guarantor structure. Consolidated financial information for the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended June 27, 2015

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 311,156   $ 102,090   $ 322,555   $ (53,678 ) $ 682,123  

Cost of sales

    232,779     78,149     254,666     (53,019 )   512,575  

Gross profit

    78,377     23,941     67,889     (659 )   169,548  

Selling, general and administrative expenses

    50,913     11,091     53,544         115,548  

Operating income

    27,464     12,850     14,345     (659 )   54,000  

Other income (expense):

                               

Interest expense

    (10,894 )       (338 )       (11,232 )

Interest income

    4     2     610         616  

Other

    (248 )   24     196         (28 )

    (11,138 )   26     468         (10,644 )

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    16,326     12,876     14,813     (659 )   43,356  

Income tax expense (benefit):

                               

Current

    7,545     5,223     6,547     (179 )   19,136  

Deferred

    (1,650 )   (51 )   (3,518 )       (5,219 )

    5,895     5,172     3,029     (179 )   13,917  

Earnings before equity in earnings of nonconsolidated subsidiaries

    10,431     7,704     11,784     (480 )   29,439  

Equity in earnings of nonconsolidated subsidiaries

    17,442     876         (18,318 )    

Net earnings

    27,873     8,580     11,784     (18,798 )   29,439  

Less: Earnings attributable to noncontrolling interests

            (1,566 )       (1,566 )

Net earnings attributable to Valmont Industries, Inc

  $ 27,873   $ 8,580   $ 10,218   $ (18,798 ) $ 27,873  

23


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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 EARNINGS
For the Twenty-six weeks ended June 27, 2015

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

  $ 640,287   $ 198,038   $ 624,791   $ (110,595 ) $ 1,352,521  

Cost of sales

    482,646     153,045     491,651     (109,823 )   1,017,519  

Gross profit

    157,641     44,993     133,140     (772 )   335,002  

Selling, general and administrative expenses

    98,955     22,388     101,976         223,319  

Operating income

    58,686     22,605     31,164     (772 )   111,683  

Other income (expense):

                               

Interest expense

    (21,726 )       (634 )       (22,360 )

Interest income

    13     4     1,473         1,490  

Other

    (897 )       1,885         988  

    (22,610 )   4     2,724         (19,882 )

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    36,076     22,609     33,888     (772 )   91,801  

Income tax expense (benefit):

                               

Current

    8,937     9,850     12,344     (221 )   30,910  

Deferred

    3,819     (584 )   (3,290 )       (55 )

    12,756     9,266     9,054     (221 )   30,855  

Earnings before equity in earnings of nonconsolidated subsidiaries

    23,320     13,343     24,834     (551 )   60,946  

Equity in earnings of nonconsolidated subsidiaries

    35,292     5,181         (40,473 )    

Net earnings

    58,612     18,524     24,834     (41,024 )   60,946  

Less: Earnings attributable to noncontrolling interests

            (2,334 )       (2,334 )

Net earnings attributable to Valmont Industries, Inc

  $ 58,612   $ 18,524   $ 22,500   $ (41,024 ) $ 58,612  

24


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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 EARNINGS
For the Thirteen weeks ended June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

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

Cost of sales

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

Gross profit

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

Selling, general and administrative expenses

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

Operating income

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

Other income (expense):

                               

Interest expense

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

Interest income

    6     113     1,458         1,577  

Other

    1,754     140     9         1,903  

    (5,931 )   253     854         (4,824 )

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    42,493     20,461     36,938     60     99,952  

Income tax expense (benefit):

                               

Current

    9,315     5,458     11,316     28     26,117  

Deferred

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

    16,987     7,537     9,518     28     34,070  

Earnings before equity in earnings of nonconsolidated subsidiaries

    25,506     12,924     27,420     32     65,882  

Equity in earnings of nonconsolidated subsidiaries

    38,470     8,478         (46,978 )   (30 )

Net earnings

    63,976     21,402     27,420     (46,946 )   65,852  

Less: Earnings attributable to noncontrolling interests

            (1,876 )       (1,876 )

Net earnings attributable to Valmont Industries, Inc

  $ 63,976   $ 21,402   $ 25,544   $ (46,946 ) $ 63,976  

25


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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 EARNINGS
For the Twenty-six weeks ended June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net sales

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

Cost of sales

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

Gross profit

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

Selling, general and administrative expenses

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

Operating income

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

Other income (expense):

                               

Interest expense

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

Interest income

    26     296     2,994         3,316  

Other

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

    (13,519 )   (56 )   (3,519 )       (17,094 )

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    91,998     43,242     50,859     431     186,530  

Income tax expense (benefit):

                               

Current

    29,193     13,512     16,218     132     59,055  

Deferred

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

    35,022     15,179     13,752     132     64,085  

Earnings before equity in earnings of nonconsolidated subsidiaries

    56,976     28,063     37,107     299     122,445  

Equity in earnings of nonconsolidated subsidiaries

    62,980     9,023         (72,033 )   (30 )

Net earnings

    119,956     37,086     37,107     (71,734 )   122,415  

Less: Earnings attributable to noncontrolling interests

            (2,459 )       (2,459 )

Net earnings attributable to Valmont Industries, Inc

  $ 119,956   $ 37,086   $ 34,648   $ (71,734 ) $ 119,956  

26


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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 COMPREHENSIVE INCOME
For the Thirteen weeks ended June 27, 2015

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net earnings

  $ 27,873   $ 8,580   $ 11,784   $ (18,798 ) $ 29,439  

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustments:

                               

Unrealized gains (losses) arising during the period

        76     18,252         18,328  

Unrealized loss on cash flow hedge:

                               

Amortization cost included in interest expense

    19                 19  

Gain on cash flow hedges

    (301 )       1,052         751  

Equity in other comprehensive income

    18,978             (18,978 )    

Other comprehensive income (loss)

    18,696     76     19,304     (18,978 )   19,098  

Comprehensive income

    46,569     8,656     31,088     (37,776 )   48,537  

Comprehensive income attributable to noncontrolling interests

            (1,968 )       (1,968 )

Comprehensive income attributable to Valmont Industries, Inc. 

  $ 46,569   $ 8,656   $ 29,120   $ (37,776 ) $ 46,569  

27


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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 COMPREHENSIVE INCOME
For the Twenty-six weeks ended June 27, 2015

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net earnings

  $ 58,612   $ 18,524   $ 24,834   $ (41,024 ) $ 60,946  

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustments:

                               

Unrealized gains (losses) arising during the period

        (8,812 )   (31,038 )       (39,850 )

Unrealized loss on cash flow hedge:

                               

Amortization cost included in interest expense

    37                 37  

Gain on cash flow hedges

    (209 )       1,254         1,045  

Equity in other comprehensive income          

   
(36,903

)
 
   
   
36,903
   
 

Other comprehensive income (loss)

    (37,075 )   (8,812 )   (29,784 )   36,903     (38,768 )

Comprehensive income

    21,537     9,712     (4,950 )   (4,121 )   22,178  

Comprehensive income attributable to noncontrolling interests

            (641 )       (641 )

Comprehensive income attributable to Valmont Industries, Inc. 

  $ 21,537   $ 9,712   $ (5,591 ) $ (4,121 ) $ 21,537  

28


Table of Contents


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 COMPREHENSIVE INCOME
For the Thirteen weeks ended June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net earnings

  $ 63,976   $ 21,402   $ 27,420   $ (46,946 ) $ 65,852  

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustments:          

                               

Unrealized gains (losses) arising during the period

        (126 )   13,995         13,869  

Unrealized loss on cash flow hedge:

                               

Amortization cost included in interest expense

    100         (133 )       (33 )

Actuarial gain (loss) in defined benefit pension plan liability

            (614 )       (614 )

Equity in other comprehensive income

   
13,206
   
   
   
(13,206

)
 
 

Other comprehensive income (loss)

    13,306     (126 )   13,248     (13,206 )   13,222  

Comprehensive income

    77,282     21,276     40,668     (60,152 )   79,074  

Comprehensive income attributable to noncontrolling interests

            (1,792 )       (1,792 )

Comprehensive income attributable to Valmont Industries, Inc. 

  $ 77,282   $ 21,276   $ 38,876   $ (60,152 ) $ 77,282  

29


Table of Contents


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 COMPREHENSIVE INCOME
For the Twenty-six weeks ended June 28, 2014

 
  Parent   Guarantors   Non-
Guarantors
  Eliminations   Total  

Net earnings

  $ 119,956   $ 37,086   $ 37,107   $ (71,734 ) $ 122,415  

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustments:

                               

Unrealized gains (losses) arising during the period

        1,063     24,443         25,506  

Unrealized loss on cash flow hedge:

                               

Amortization cost included in interest expense

    200         (133 )       67  

Actuarial gain (loss) in defined benefit pension plan liability

            (847 )       (847 )

Equity in other comprehensive income          

   
25,281
   
   
   
(25,281

)
 
 

Other comprehensive income (loss)

    25,481     1,063     23,463     (25,281 )   24,726  

Comprehensive income

    145,437     38,149     60,570     (97,015 )   147,141  

Comprehensive income attributable to noncontrolling interests

            (1,704 )       (1,704 )

Comprehensive income attributable to Valmont Industries, Inc. 

  $ 145,437   $ 38,149   $ 58,866   $ (97,015 ) $ 145,437  

30


Table of Contents


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
June 27, 2015

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

ASSETS

                               

Current assets:

                               

Cash and cash equivalents

  $ 12,453   $ 1,800   $ 303,270   $   $ 317,523  

Receivables, net

    146,163     54,606     290,937         491,706  

Inventories

    133,029     51,821     198,598     (3,551 )   379,897  

Prepaid expenses

    6,782     662     49,209         56,653  

Refundable and deferred income taxes

    29,974     6,089     8,009         44,072  

Total current assets

    328,401     114,978     850,023     (3,551 )   1,289,851  

Property, plant and equipment, at cost

    561,190     125,366     437,329         1,123,885  

Less accumulated depreciation and amortization

    334,149     67,516     151,243         552,908  

Net property, plant and equipment

    227,041     57,850     286,086         570,977  

Goodwill

    20,108     107,542     252,436         380,086  

Other intangible assets

    265     41,235     148,392         189,892  

Investment in subsidiaries and intercompany accounts

    1,405,594     854,867     899,268     (3,159,729 )    

Other assets

    49,438         87,148         136,586  

Total assets

  $ 2,030,847   $ 1,176,472   $ 2,523,353   $ (3,163,280 ) $ 2,567,392  

LIABILITIES AND SHAREHOLDERS' EQUITY

                               

Current liabilities:

                               

Current installments of long-term debt

  $ 215   $   $ 881   $   $ 1,096  

Notes payable to banks

            7,914         7,914  

Accounts payable

    51,355     15,355     119,711         186,421  

Accrued employee compensation and benefits

    33,728     5,209     36,218         75,155  

Accrued expenses

    32,928     6,182     50,873         89,983  

Dividends payable

    8,733                 8,733  

Total current liabilities

    126,959     26,746     215,597         369,302  

Deferred income taxes

    1,085     28,299     33,575         62,959  

Long-term debt, excluding current installments

    759,251         6,021         765,272  

Defined benefit pension liability

            135,068         135,068  

Deferred compensation

    45,231         5,825         51,056  

Other noncurrent liabilities

    5,272         37,870         43,142  

Shareholders' equity:

                               

Common stock of $1 par value

    27,900     457,950     648,682     (1,106,632 )   27,900  

Additional paid-in capital

        150,286     1,098,408     (1,248,694 )    

Retained earnings

    1,762,534     571,199     420,383     (991,582 )   1,762,534  

Accumulated other comprehensive income (loss)

    (171,508 )   (58,008 )   (125,620 )   183,628     (171,508 )

Treasury stock

    (525,877 )               (525,877 )

Total Valmont Industries, Inc. shareholders' equity

    1,093,049     1,121,427     2,041,853     (3,163,280 )   1,093,049  

Noncontrolling interest in consolidated subsidiaries

            47,544         47,544  

Total shareholders' equity

    1,093,049     1,121,427     2,089,397     (3,163,280 )   1,140,593  

Total liabilities and shareholders' equity

  $ 2,030,847   $ 1,176,472   $ 2,523,353   $ (3,163,280 ) $ 2,567,392  

31


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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, 2014

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

ASSETS

                               

Current assets:

                               

Cash and cash equivalents

  $ 69,869   $ 2,157   $ 299,553   $   $ 371,579  

Receivables, net

    158,316     68,414     310,188         536,918  

Inventories

    127,859     54,914     177,512     (763 )   359,522  

Prepaid expenses

    7,087     502     49,323         56,912  

Refundable and deferred income taxes

    53,307     6,194     8,509         68,010  

Total current assets

    416,438     132,181     845,085     (763 )   1,392,941  

Property, plant and equipment, at cost

    556,658     124,182     458,729         1,139,569  

Less accumulated depreciation and amortization

    319,899     65,493     147,724         533,116  

Net property, plant and equipment

    236,759     58,689     311,005         606,453  

Goodwill

    20,108     107,542     257,461         385,111  

Other intangible assets

    292     43,644     158,068         202,004  

Investment in subsidiaries and intercompany accounts

    1,446,989     825,236     887,055     (3,159,280 )    

Other assets

    46,587         96,572         143,159  

Total assets

  $ 2,167,173   $ 1,167,292   $ 2,555,246   $ (3,160,043 ) $ 2,729,668  

LIABILITIES AND SHAREHOLDERS' EQUITY

                               

Current liabilities:

                               

Current installments of long-term debt

  $ 213   $   $ 968   $   $ 1,181  

Notes payable to banks

            13,952         13,952  

Accounts payable

    59,893     15,151     121,521         196,565  

Accrued employee compensation and benefits

    48,169     5,385     34,396         87,950  

Accrued expenses

    32,616     6,052     49,812         88,480  

Dividends payable

    9,086                 9,086  

Total current liabilities

    149,977     26,588     220,649         397,214  

Deferred income taxes

    5,584     28,988     37,225         71,797  

Long-term debt, excluding current installments

    759,895         6,759         766,654  

Defined benefit pension liability

            150,124         150,124  

Deferred compensation

    41,803         6,129         47,932  

Other noncurrent liabilities

    8,081         37,461         45,542  

Shareholders' equity:

                               

Common stock of $1 par value

    27,900     457,950     648,682     (1,106,632 )   27,900  

Additional paid-in capital

        150,286     1,098,408     (1,248,694 )    

Retained earnings

    1,718,662     552,676     397,302     (949,978 )   1,718,662  

Accumulated other comprehensive income

    (134,433 )   (49,196 )   (96,065 )   145,261     (134,433 )

Treasury stock

    (410,296 )               (410,296 )

Total Valmont Industries, Inc. shareholders' equity

    1,201,833     1,111,716     2,048,327     (3,160,043 )   1,201,833  

Noncontrolling interest in consolidated subsidiaries

            48,572         48,572  

Total shareholders' equity

    1,201,833     1,111,716     2,096,899     (3,160,043 )   1,250,405  

Total liabilities and shareholders' equity

  $ 2,167,173   $ 1,167,292   $ 2,555,246   $ (3,160,043 ) $ 2,729,668  

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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 Twenty-six Weeks Ended June 27, 2015

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Cash flows from operating activities:

                               

Net earnings

  $ 58,612   $ 18,524   $ 24,834   $ (41,024 ) $ 60,946  

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

                               

Depreciation and amortization

    14,983     6,278     26,500         47,761  

Noncash loss on trading securities

            4,582         4,582  

Impairment of assets

    1,890     215     7,187         9,292  

Stock-based compensation

    7,466         (3,953 )       3,513  

Defined benefit pension plan expense

            (305 )       (305 )

Contribution to defined benefit pension plan

            (15,735 )       (15,735 )

Gain on sale of property, plant and equipment

    (8 )   97     453         542  

Equity in earnings in nonconsolidated subsidiaries

    (35,292 )   (5,181 )       40,473      

Deferred income taxes

    3,819     (584 )   (3,290 )       (55 )

Changes in assets and liabilities (net of acquisitions):

                               

Receivables

    12,153     13,807     6,551         32,511  

Inventories

    10,161     3,093     (41,000 )       (27,746 )

Prepaid expenses

    305     (160 )   (3,232 )       (3,087 )

Accounts payable

    (8,538 )   204     3,313         (5,021 )

Accrued expenses

    (13,652 )   (46 )   7,267         (6,431 )

Other noncurrent liabilities

    (2,729 )       4,490         1,761  

Income taxes payable (refundable)

    15,016     (5 )   806         15,817  

Net cash flows from operating activities

    64,186     36,242     18,468     (551 )   118,345  

Cash flows from investing activities:

                               

Purchase of property, plant and equipment            

    (7,065 )   (3,147 )   (14,546 )       (24,758 )

Proceeds from sale of assets

    25     19     1,057         1,101  

Other, net

    24,268     (33,440 )   14,517     551     5,896  

Net cash flows from investing activities                  

    17,228     (36,568 )   1,028     551     (17,761 )

Cash flows from financing activities:

                               

Net borrowings under short-term agreements            

            (5,890 )       (5,890 )

Proceeds from long-term borrowings

    33,000                 33,000  

Principal payments on long-term borrowings

    (33,212 )       (445 )       (33,657 )

Dividends paid

    (17,956 )               (17,956 )

Dividends to noncontrolling interest

            (1,669 )       (1,669 )

Proceeds from exercises under stock plans            

    9,454                 9,454  

Excess tax benefits from stock option exercises            

    1,394                 1,394  

Purchase of treasury shares

    (121,020 )               (121,020 )

Purchase of common treasury shares—stock plan exercises

    (10,490 )               (10,490 )

Net cash flows from financing activities                  

    (138,830 )       (8,004 )       (146,834 )

Effect of exchange rate changes on cash and cash equivalents

        (31 )   (7,775 )       (7,806 )

Net change in cash and cash equivalents

    (57,416 )   (357 )   3,717         (54,056 )

Cash and cash equivalents—beginning of year

    69,869     2,157     299,553         371,579  

Cash and cash equivalents—end of period

  $ 12,453   $ 1,800   $ 303,270   $   $ 317,523  

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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 Twenty-six Weeks Ended June 28, 2014

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Cash flows from operating activities:

                               

Net earnings

  $ 119,956   $ 37,086   $ 37,107   $ (71,734 ) $ 122,415  

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

                               

Depreciation and amortization

    12,539     6,584     24,245         43,368  

Noncash loss on trading securities

            3,501         3,501  

Stock-based compensation

    3,686                 3,686  

Defined benefit pension plan expense

            1,334         1,334  

Contribution to defined benefit pension plan

            (17,484 )       (17,484 )

Gain on sale of property, plant and equipment

    7     (74 )   (35 )       (102 )

Equity in earnings in nonconsolidated subsidiaries            

    (62,980 )   (9,023 )       72,033     30  

Deferred income taxes

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

Changes in assets and liabilities (net of acquisitions):

                               

Receivables

    (9,471 )   34,803     (4,249 )       21,083  

Inventories

    9,584     10,651     (13,611 )       6,624  

Prepaid expenses

    (1,870 )   241     (16,660 )       (18,289 )

Accounts payable

    1,352     (3,892 )   (26,093 )       (28,633 )

Accrued expenses

    (23,205 )   (8,411 )   1,201         (30,415 )

Other noncurrent liabilities

    1,941         (175 )       1,766  

Income taxes payable (refundable)

    (22,572 )   1,071     (562 )       (22,063 )

Net cash flows from operating activities

    34,796     70,703     (13,947 )   299     91,851  

Cash flows from investing activities:

                               

Purchase of property, plant and equipment

    (27,046 )   (1,486 )   (18,459 )       (46,991 )

Proceeds from sale of assets

    21     88     1,042         1,151  

Acquisitions, net of cash acquired

            (120,483 )       (120,483 )

Other, net

    49,004     (74,035 )   22,390     (299 )   (2,940 )

Net cash flows from investing activities

    21,979     (75,433 )   (115,510 )   (299 )   (169,263 )

Cash flows from financing activities:

                               

Net borrowings under short-term agreements

            (1,861 )       (1,861 )

Principal payments on long-term borrowings

    (196 )       (63 )       (259 )

Dividends paid

    (13,427 )               (13,427 )

Intercompany dividends

    20,895         (20,895 )        

Dividends to noncontrolling interest

            (1,340 )       (1,340 )

Intercompany capital contribution

    (143,000 )       143,000          

Proceeds from exercises under stock plans

    11,996                 11,996  

Excess tax benefits from stock option exercises            

    3,576                 3,576  

Purchase of treasury shares

    (77,084 )               (77,084 )

Purchase of common treasury shares—stock plan exercises

    (11,984 )               (11,984 )

Net cash flows from financing activities

    (209,224 )       118,841         (90,383 )

Effect of exchange rate changes on cash and cash equivalents

        2,691     7,325         10,016  

Net change in cash and cash equivalents

    (152,449 )   (2,039 )   (3,291 )       (157,779 )

Cash and cash equivalents—beginning of year

    215,576     29,797     368,333         613,706  

Cash and cash equivalents—end of period

  $ 63,127   $ 27,758   $ 365,042   $   $ 455,927  

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

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

        This discussion should be read in conjunction with the financial statements and notes thereto, and the management's discussion and analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended December 27, 2014. Segment sales in the table below are presented net of intersegment sales.

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Results of Operations

        Dollars in millions, except per share amounts

 
  Thirteen Weeks Ended   Twenty-six Weeks Ended  
 
  June 27,
2015
  June 28,
2014
  % Incr.
(Decr.)
  June 27,
2015
  June 28,
2014
  % Incr.
(Decr.)
 

Consolidated

                                     

Net sales

  $ 682.1   $ 842.6     (19.0 )% $ 1,352.5   $ 1,594.3     (15.2 )%

Gross profit

    169.5     220.5     (23.1 )%   335.0     427.5     (21.6 )%

as a percent of sales

    24.8 %   26.2 %         24.8 %   26.8 %      

SG&A expense

    115.5     115.7     (0.2 )%   223.3     223.8     (0.2 )%

as a percent of sales

    16.9 %   13.7 %         16.5 %   14.0 %      

Operating income

    54.0     104.8     (48.5 )%   111.7     203.6     (45.1 )%

as a percent of sales

    7.9 %   12.4 %         8.3 %   12.8 %      

Net interest expense

    10.6     6.7     58.2 %   20.9     13.2     58.3 %

Effective tax rate

    32.1 %   34.1 %         33.6 %   34.4 %      

Net earnings

  $ 27.9   $ 64.0     (56.4 )% $ 58.6   $ 120.0     (51.2 )%

Diluted earnings per share

  $ 1.19   $ 2.38     (50.0 )% $ 2.47   $ 4.46     (44.6 )%

Engineered Infrastructure Products

                                     

Net sales

    257.0     286.2     (10.2 )%   488.3     495.1     (1.4 )%

Gross profit

    63.5     73.9     (14.1 )%   118.5     128.4     (7.7 )%

SG&A expense

    46.1     45.3     1.8 %   89.1     86.1     3.5 %

Operating income

    17.4     28.6     (39.2 )%   29.4     42.3     (30.5 )%

Utility Support Structures

                                     

Net sales

  $ 162.6   $ 212.0     (23.3 )% $ 338.7   $ 426.2     (20.5 )%

Gross profit

    30.6     45.9     (33.3 )%   65.2     98.0     (33.5 )%

SG&A expense

    20.3     19.6     3.6 %   39.5     38.9     1.5 %

Operating income

    10.3     26.3     (60.8 )%   25.7     59.1     (56.5 )%

Coatings

                                     

Net sales

  $ 63.9   $ 70.4     (9.2 )% $ 125.7   $ 137.6     (8.6 )%

Gross profit

    17.0     25.3     (32.8 )%   36.8     48.6     (24.3 )%

SG&A expense

    9.1     9.5     (4.2 )%   17.9     18.9     (5.3 )%

Operating income

    7.9     15.8     (50.0 )%   18.9     29.7     (36.4 )%

Irrigation

                                     

Net sales

  $ 153.8   $ 219.9     (30.1 )% $ 308.3   $ 432.6     (28.7 )%

Gross profit

    47.7     62.9     (24.2 )%   93.0     127.6     (27.1 )%

SG&A expense

    21.9     21.3     2.8 %   42.9     42.9     %

Operating income

    25.8     41.6     (38.0 )%   50.1     84.7     (40.9 )%

Other

                                     

Net sales

  $ 44.8   $ 54.1     (17.2 )% $ 91.5   $ 102.8     (11.0 )%

Gross profit

    10.5     12.4     (15.3 )%   21.4     24.7     (13.4 )%

SG&A expense

    4.2     4.1     2.4 %   8.5     7.8     9.0 %

Operating income

    6.3     8.3     (24.1 )%   12.9     16.9     (23.7 )%

Net corporate expense

                                     

Gross profit

  $ 0.2   $ 0.1     (100.0 )% $ 0.1   $ 0.2     50.0 %

SG&A expense

    13.9     16.0     (13.1 )%   25.4     29.3     (13.3 )%

Operating loss

    (13.7 )   (15.9 )   13.8 %   (25.3 )   (29.1 )   13.1 %

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Overview

        On a consolidated basis, the decrease in net sales in the second quarter and first half of fiscal 2015, as compared with 2014, reflected lower sales in all reportable segments. The changes in net sales in the second quarter and first half of fiscal 2015, as compared with fiscal 2014, were as follows:

 
  Second quarter  
 
  Total   EIP   Utility   Coatings   Irrigation   Other  

Sales—2014

  $ 842.6   $ 286.2   $ 212.0   $ 70.4   $ 219.9   $ 54.1  

Volume

    (101.2 )   (12.5 )   (24.4 )   (5.0 )   (57.6 )   (1.7 )

Pricing/mix

    (25.5 )   (3.1 )   (21.7 )   2.9     (1.3 )   (2.3 )

Acquisitions

    21.1     15.7             5.4      

Currency translation

    (54.9 )   (29.3 )   (3.3 )   (4.4 )   (12.6 )   (5.3 )

Sales—2015

  $ 682.1   $ 257.0   $ 162.6   $ 63.9   $ 153.8   $ 44.8  

 

 
  Year-to-date  
 
  Total   EIP   Utility   Coatings   Irrigation   Other  

Sales—2014

  $ 1,594.3   $ 495.1   $ 426.2   $ 137.6   $ 432.6   $ 102.8  

Volume

    (165.0 )   (2.9 )   (38.9 )   (12.7 )   (110.7 )   0.2  

Pricing/mix

    (44.3 )   (3.2 )   (42.9 )   8.4     (3.3 )   (3.3 )

Acquisitions

    53.7     45.0             8.7      

Currency translation

    (86.2 )   (45.7 )   (5.7 )   (7.6 )   (19.0 )   (8.2 )

Sales—2015

  $ 1,352.5   $ 488.3   $ 338.7   $ 125.7   $ 308.3   $ 91.5  

        Volume effects are estimated based on a physical production or sales measure. Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the product sold. Accordingly, pricing and mix changes do not necessarily directly result in operating income changes.

        Acquisitions included DS SM A/S (renamed Valmont SM), AgSense LLC, and Shakespeare. We acquired Valmont SM in March 2014, AgSense in August 2014, and Shakespeare in October 2014. Shakespeare and Valmont SM are reported in the Engineered Infrastructure Products segment, and AgSense is reported in the Irrigation segment. Average steel index prices for both hot rolled coil and plate decreased substantially in North America over the three and six month periods ended June 27, 2015 compared to June 28, 2014. Decreases in sales pricing and volumes offset the increase in gross profit realized from the lower steel prices.

Restructuring Plan

        In April 2015, our Board of Directors authorized a broad restructuring plan (the "Plan") of up to $60 million to respond to the market environment in certain of our businesses. We expect to incur pre-tax cash expenses of $17 million and asset impairments of approximately $13 million. These charges are expected to be incurred over the remainder of 2015. Approximately $14.3 million of restructuring expense was recorded during the second quarter of 2015; $8.0 million in cost of goods sold and $6.3 million in selling, general, and administrative expense. The decrease in second quarter 2015 gross profit due to restructuring expense by segment is as follows:

Gross Profit
  Total   EIP   Utility   Coatings   Irrigation   Other   Corporate  

Second quarter

  $ (8.0 ) $ (1.4 ) $ (2.0 ) $ (4.5 ) $   $ (0.1 ) $  

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        The decrease in second quarter 2015 operating income due to restructuring expense by segment is as follows:

 
  Total   EIP   Utility   Coatings   Irrigation   Other   Corporate  

Second quarter

  $ (14.3 ) $ (4.5 ) $ (2.5 ) $ (4.8 ) $ (0.3 ) $ (0.1 ) $ (2.1 )

        Certain of these restructuring actions are within the APAC Coatings reporting unit which has approximately $16 million of goodwill as of June 27, 2015. We expect these activities to improve the profitability of this reporting unit. Should operating income not improve within this reporting unit after these restructuring activities are implemented, we may have to write off all or a portion of our goodwill for this reporting unit during our annual impairment testing during the third quarter. In addition to this goodwill, we are also evaluating other potential restructuring activities authorized under the Plan. In total, these restructuring items could result in asset impairments of up to $25 million and cash charges of $5 million.

        In the second quarter and first half of fiscal 2015, we realized a decrease in operating profit, as compared with fiscal 2014, due to currency translation effects. On average, the U.S. dollar strengthened in particular against the Australian dollar, Brazilian Real, Euro, and South Africa Rand, resulting in less operating profit in U.S. dollar terms. The breakdown of this effect by segment was as follows:

 
  Total   EIP   Utility   Coatings   Irrigation   Other   Corporate  

Second quarter

  $ (5.4 ) $ (2.4 ) $   $ (0.3 ) $ (2.5 ) $ (0.4 ) $ 0.2  

Year-to-date

  $ (7.7 ) $ (3.2 ) $ (0.1 ) $ (0.6 ) $ (3.5 ) $ (0.6 ) $ 0.3  

        The decrease in gross margin (gross profit as a percent of sales) in fiscal 2015, as compared with 2014, was due to a combination of lower sales prices, unfavorable sales mix, restructuring charges, and reduced sales volumes in 2015, as compared with 2014.

        Selling, general and administrative (SG&A) spending in the second quarter and first half of fiscal 2015, as compared with the same periods in 2014, decreased slightly due to the following factors:

        The above reductions in SG&A were partially offset by the following:

        The decrease in operating income on a reportable segment basis in 2015, as compared to 2014, was due to reduced operating performance in all segments. The decrease in operating income is primarily attributable to lower volumes and sales prices, restructuring expenses, and currency translation effects.

        Net interest expense increased in the second quarter and first half of fiscal 2015, as compared with 2014, primarily due to additional long-term debt borrowed in the third quarter of 2014. In addition, interest income decreased due to less cash on hand due to the share buyback program.

        The increase in other expense in the second quarter of 2015, as compared with 2014, was due to a smaller gain on deferred compensation assets of $1.1 million and less favorable foreign currency

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transaction gains/losses due to currency exchange rate changes. The decrease in other expense in the first half of fiscal 2015, as compared with 2014, was primarily attributable to the difference in the investment income from the Company's shares of Delta EMD. In 2014, we recorded a non-cash mark to market loss of $3.5 million and in 2015, we received a $5.0 million special dividend offset by a noncash mark to market loss of approximately $4.6 million. The remaining decrease in other expense relates to a smaller gain on deferred compensation assets of $0.7 million and more favorable currency transactional gains/losses.

        Our effective income tax rate in the second quarter and first half of fiscal 2015 was lower when compared with the same period in fiscal 2014. The reduction relates to a tax benefit recorded in 2015 for certain withholding taxes paid in foreign jurisdictions.

        Earnings attributable to noncontrolling interest was relatively flat in the second quarter and first half of fiscal 2015, as compared with the same periods in 2014.

        Our cash flows provided by operations were approximately $118.3 million in the first half of fiscal 2015, as compared with $91.9 million provided by operations in 2014. The increase in operating cash flow in the first half of fiscal 2015 was the result of improved net working capital, partially offset by lower net earnings, compared with 2014.

        The decrease in net sales in the second quarter and first half of fiscal 2015 as compared with 2014 was primarily due to unfavorable foreign currency translation effects of $29.3 million and $45.7 million, respectively, and lower sales volumes. These reductions were partially offset by the acquisitions of Valmont SM in March 2014 and Shakespeare in October 2014, which added sales in the second quarter and first half of fiscal 2015 of $15.7 million and $45.0 million, respectively.

        Global lighting, traffic, and roadway product sales in the second quarter and first half of 2015 were lower compared to the same periods in fiscal 2014. In the second quarter and first half of fiscal 2015, sales volumes in the U.S. were higher in the commercial steel and aluminum markets and slightly lower in the transportation markets. The transportation market continues to be challenging, due in part to the lack of long-term U.S. federal highway funding legislation. Sales volumes in Canada decreased in the second quarter and first half of 2015 as compared to 2014, due to lower volumes and unfavorable currency impacts. Sales in Europe were lower in the second quarter and first half of fiscal 2015 compared to the same periods in fiscal 2014, due to unfavorable currency translation effects that were offset to an extent by higher volumes relating to a large project in the Middle East that ended in the second quarter. The domestic markets in general remain subdued in Europe. In the Asia Pacific region, sales were slightly lower in the second quarter and first half of fiscal 2015, as compared to 2014, due to lower investment activity in both China and Australia. Highway safety product sales decreased slightly in the second quarter and first half of 2015 compared to 2014, due to unfavorable foreign currency translation that was partially offset by increased volume due to improvement in highway project activity in Australia and New Zealand.

        Communication product line sales were slightly higher in the second quarter and first half of fiscal 2015, as compared with the same periods in fiscal 2014. North America communication structure sales decreased, primarily due to one customer who significantly reduced its 4G wireless network build out in 2015 compared with 2014. Communication component sales were flat year over year. In China, sales of wireless communication structures in the second quarter and first half of fiscal 2015 increased over the same period in 2014 as the investment levels by the major wireless carriers have remained strong and we have increased our market share through better sales coverage.

        Access systems product line sales decreased in the second quarter and first half of 2015, as compared with 2014, primarily due to the negative impact of currency translation effects and lower

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volumes. The volume decrease was primarily related to the slowdown in mining sector investment in Australia, weaker market conditions in China, and fewer oil and gas related construction projects.

        Offshore structures sales were down $24.1 million and $16.5 million in the second quarter and first half of 2015, as compared to the same periods in 2014. These decreases are impacted by unfavorable currency translation effects of $9.1 million and $12.3 million in the second quarter and first half of 2015, respectively, as well as reduced volumes partially offset by two additional months of sales in 2015. A delay in wind energy product introduction by our customers has resulted in some projects being postponed. An additional factor contributing to the sales decrease was the postponement of oil and gas orders due to lower oil prices.

        Operating income for the segment in the second quarter and first half of fiscal 2015 was lower, as compared with the same period of fiscal 2014, due to restructuring charges recorded in the second quarter and first half of 2015 and unfavorable currency translation effects of $2.4 million and $3.2 million, respectively. The remainder of the decrease can be attributed to lower volumes and sales mix. The slight increase in SG&A spending in the second quarter and first half of 2015 was due to the Shakespeare and Valmont SM acquisitions totaling $2.3 million and $6.7 million, respectively, and restructuring charges incurred in 2015. These increases were partially offset by currency translation effects.

        In the Utility segment, sales decreased in the second quarter and first half of 2015, as compared with 2014, due to lower sales volume, a decrease in average selling prices, most notably for our steel products, and an unfavorable sales mix. Our mix of revenue from very large transmission projects in second quarter and first half of 2015 was unfavorable to same periods of 2014. A backlog including some very large transmission projects at year-end 2013 provided for the more favorable mix of large transmission projects revenue in first quarter of 2014. Declining steel prices during the first half of 2015 and a competitive pricing environment also contributed to lower average selling prices in the second quarter of 2015 compared to 2014.

        In North America, sales volumes in tons for steel and concrete utility structures were down in the first half of 2015, as compared with 2014. Our large utility customers delayed capital investment in transmission and we believe this trend will continue for the remainder of 2015. The pricing environment in North America continues to be very competitive. In the second quarter and first half of 2015, as compared to 2014, international utility structures sales decreased due to unfavorable currency translation effects and lower volumes in the Asia-Pacific region.

        SG&A expense was slightly lower in the second quarter and first half of 2015, as compared with 2014, primarily due to lower employee compensation and sales commissions, offset to an extent by restructuring costs. Operating income in the second quarter and first half of 2015, as compared with 2014, decreased due to lower volumes, sales margins, and reduced leverage of fixed costs. While we initiated a number of actions to improve our cost structure in this segment, including certain restructuring activities, the full effect will be recognized upon a rebound in our sales volumes.

        Coatings segment sales in North America decreased in the second quarter and first half of 2015, as compared with 2014, due to lower sales volumes and currency translation effects related to the strengthening of the U.S. dollar against the Canadian dollar. Intercompany sales volumes in North America were down as well. Those decreases were partially offset by price increases to recover higher costs for zinc in 2015 as compared to 2014. Coatings sales in Asia Pacific decreased primarily due to currency translation effects related to the strengthening of the U.S. dollar against the Australian dollar. Continued weak demand in Australia led to the lower volumes that were partially offset by price increases to recover higher costs of zinc. Sales in Asia were relatively flat in the second quarter and first half of 2015.

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        SG&A expense decreased in the second quarter and first half of 2015, as compared to the same periods in 2014, by $0.3 million and $1.0 primarily due to currency translation effects. Operating income was lower in the second quarter and first half of 2015, as compared with 2014, due to $4.8 million of restructuring costs in Australia, the lower sales volumes, unfavorable currency impacts, and reduced leverage of fixed costs in both Australia and North America.

        The decrease in Irrigation segment net sales in the second quarter and first half of fiscal 2015, as compared with 2014, was mainly due to sales volume decreases in both North American and International markets. In fiscal 2015, net farm income in the United States is expected to decrease 32% from the levels of 2014, due in part to lower market prices for corn and soybeans. We believe this reduction contributed to lower demand for irrigation machines in North America in the second quarter and first half of 2015, as compared with 2014. In international markets, sales decreased in the second quarter and first half of 2015, as compared with 2014, primarily due to reduced volumes in Brazil, Eastern Europe, and the Middle East and unfavorable currency translation effects in Brazil and South Africa.

        SG&A was relatively flat in the second quarter and first half of fiscal 2015, as compared with 2014; SG&A increased due to AgSense (acquired in August 2014) of $1.1 million and $2.1 million, respectively, offset by currency translation reductions of $0.9 million and $1.4 million, respectively. Operating income for the segment declined in the second quarter and first half of fiscal 2015 over 2014, due to sales volume decreases and associated operating deleverage of fixed operating costs, unfavorable currency impacts, and slightly lower pricing. These reductions were partially offset by the operating income of AgSense that was acquired in August 2014, lower average steel purchase prices, and reduced factory spending to adjust to the lower sales volumes.

        This unit includes the grinding media, industrial tubing, and industrial fasteners operations. The decrease in sales in the second quarter and first half of fiscal 2015, as compared with 2014, was due in part to unfavorable currency translation of $5.3 million and $8.2 million, respectively. Grinding media volumes were slightly lower in the second quarter but higher in the first half of 2015. Tubing sales in 2015 were lower due to a decline in steel prices and lower volumes. Industrial fasteners sales were down due to lower volumes in 2015. Operating income in the second quarter and first half of fiscal 2015 was lower than the same periods in 2014, due primarily to lower tubing and industrial fasteners sales volumes and unfavorable currency translation.

        Net corporate expense in the second quarter and first half of fiscal 2015 decreased over the same period in fiscal 2014. These decreases were mainly due to lower employee incentives of $4.4 million and $6.0 million associated with reduced net earnings, respectively, offset partially by restructuring expenses in the second quarter of $2.1 million.

Liquidity and Capital Resources

        Working Capital and Operating Cash Flows—Net working capital was $920.5 million at June 27, 2015, as compared with $995.7 million at December 27, 2014. The decrease in net working capital in 2015 mainly resulted from decreased cash which was used in the share repurchase program and lower accounts receivable due to improved collections. Cash flow provided by operations was $118.3 million in the first half of 2015, as compared with $91.9 million in first half of 2014. The increase in operating

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cash flow in 2015 was primarily the result of working capital improvements over 2014, offset to an extent by reduced net earnings.

        Investing Cash Flows—Capital spending in the first half of fiscal 2015 was $24.8 million, as compared with $47.0 million for the same period in 2014. Significant capital spending projects in 2015 and 2014 include certain investments in machinery and equipment across all businesses. We expect our capital spending for the 2015 fiscal year to be approximately $60 million. The biggest contributor to lower investing cash outflows in 2015 as compared to 2014, was no acquisitions in the first half of 2015 and $120.5 million in the first half of 2014 for the acquisition of Valmont SM.

        Financing Cash Flows—Our total interest-bearing debt decreased slightly to $774.3 million at June 27, 2015 from $781.8 million at December 27, 2014. Financing cash flows changed from a use of approximately $90.4 million in the first half of fiscal 2014 to a use of approximately $146.9 million in the first half of fiscal 2015. The primary change was due to the Company purchasing $44.0 million more treasury shares in 2015 over 2014 related to the share repurchase program.

        On May 13, 2014, we announced a new capital allocation philosophy which covered a share repurchase program. The Board of Directors authorized the purchase of up to $500 million of the Company's outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. In February 2015, the Board of Directors authorized an additional $250 million of share purchase, without an expiration date. The share purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any share repurchases under the share repurchase program and we may discontinue the share repurchase program at any time.

        As of June 27, 2015, we have acquired approximately 3.7 million shares for approximately $516.1 million under these share repurchase programs. As of July 22, 2015, the date as of which we report on the cover of this form 10-Q the number of outstanding shares of our common stock, we have acquired a total of 3.74 million shares for approximately $521.0 million under these share repurchase programs.

        Our capital allocation philosophy announcement included our intention to manage our capital structure to maintain our investment grade debt rating. Our most recent rating were Baa2 by Moody's Investors Services, Inc. and BBB+ rating by Standard and Poor's Rating Services. We would be willing to allow our debt rating to fall to Baa3 or BBB– to finance a special acquisition or other opportunity. Otherwise, we expect to maintain a ratio of debt to invested capital which will support our current investment grade debt rating.

        Our debt financing at June 27, 2015 is primarily long-term debt consisting of:

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        At June 27, 2015 and December 27, 2014, we had no outstanding borrowings under our revolving credit agreement. The revolving credit agreement contains certain financial covenants that may limit our additional borrowing capability under the agreement. At June 27, 2015, we had the ability to borrow $581.4 million under this facility, after consideration of standby letters of credit of $18.6 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling $105.9 million, $98.8 million of which was unused at June 27, 2015.

        Our senior unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness.

        The debt agreements contain covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities, including capital expenditures. The debt agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired business. As such, our calculations below are on an Adjusted EBITDA basis. Our key debt covenants are as follows:

        At June 27, 2015, we were in compliance with all covenants related to the debt agreements. The key covenant calculations at June 27, 2015 were as follows:

Interest-bearing debt

  $ 774,282  

Adjusted EBITDA—last four quarters

    324,373  

Leverage ratio

    2.39  

Adjusted EBITDA—last four quarters

  $ 324,373  

Interest expense—last four quarters

    45,127  

Interest earned ratio

    7.19  

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        The calculation of Adjusted EBITDA-last four quarters (June 28, 2014 through June 27, 2015) is as follows:

Net cash flows from operations

  $ 200,590  

Interest expense

    45,127  

Income tax expense

    61,663  

Impairment of assets

    (9,292 )

Loss on investment

    (4,876 )

Non-cash debt refinancing expense

    2,478  

Acquisition earn-out release

    4,300  

Deferred income tax benefit

    (166 )

Noncontrolling interest

    (5,217 )

Equity in earnings of nonconsolidated subsidiaries

    60  

Stock-based compensation

    (6,557 )

Pension plan expense

    (999 )

Contribution to pension plan

    16,424  

Changes in assets and liabilities

    20,644  

Other

    (1,036 )

EBITDA

    323,143  

Shakespeare EBITDA—June 29, 2014—Oct. 5, 2014

    1,230  

Adjusted EBITDA

  $ 324,373  

Net earnings attributable to Valmont Industries, Inc. 

  $ 122,632  

Interest expense

    45,127  

Income tax expense

    61,663  

Depreciation and amortization expense

    93,721  

EBITDA

    323,143  

Shakespeare EBITDA—Jun 29, 2014—Oct. 5, 2014

    1,230  

Adjusted EBITDA

  $ 324,373  

        During the third quarter of 2014, we incurred $38,705 of costs associated with refinancing of debt. This category of expense is not in the definition of EBITDA for debt covenant calculation purposes per our debt agreements. As such, it has not been added back in the Adjusted EBITDA reconciliation to cash flows from operation or net earnings for the four quarters between June 28, 2014 and June 27, 2015.

        Our businesses are cyclical, but we have diversity in our markets, from a product, customer and a geographical standpoint. We have demonstrated the ability to effectively manage through business cycles and maintain liquidity. We have consistently generated operating cash flows in excess of our capital expenditures. Based on our available credit facilities, recent issuance of senior unsecured notes and our history of positive operational cash flows, we believe that we have adequate liquidity to meet our needs.

        We have not made any provision for U.S. income taxes in our financial statements on approximately $683.7 million of undistributed earnings of our foreign subsidiaries, as we intend to reinvest those earnings. Of our cash balances at June 27, 2015, approximately $299.1 million is held in entities outside the United States with $108.9 million specifically held within consolidated Delta Ltd., a wholly-owned subsidiary of the Company. Delta Ltd. sponsors a defined benefit pension plan and therefore, the Company is allowed to dividend out Delta Ltd.'s available cash only as long as that dividend does not negatively impact Delta Ltd.'s ability to meet its annual contribution requirements of the pension plan. We believe that the cash payments Delta Ltd. receives from its intercompany notes will provide sufficient funds to meet the pension funding requirements but additional analysis on

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pension funding requirements would have to be performed prior to the repatriation of the $108.9 million of Delta Ltd.'s cash balances.

        If we need to repatriate foreign cash balances to the United States to meet our cash needs, income taxes would be paid to the extent that those cash repatriations were undistributed earnings of our foreign subsidiaries. The income taxes that we would pay if cash were repatriated depends on the amounts to be repatriated and from which country. If all of our cash outside the United States were to be repatriated to the United States, we estimate that we would pay approximately $21.9 million in income taxes to repatriate that cash.

Financial Obligations and Financial Commitments

        There have been no material changes to our financial obligations and financial commitments as described on page 40 in our Form 10-K for the fiscal year ended December 27, 2014.

Off Balance Sheet Arrangements

        There have been no changes in our off balance sheet arrangements as described on page 40 in our Form 10-K for the fiscal year ended December 27, 2014.

Critical Accounting Policies

        There have been no changes in our critical accounting policies as described on pages 42-45 in our Form 10-K for the fiscal year ended December 27, 2014 during the quarter ended June 27, 2015.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

        Steel is a key material we use and over the last several years, prices for this commodity have been volatile. Our main strategy in managing this risk is a combination of fixed price purchase contracts with our vendors to reduce the volatility and sales price increases where possible. This commodity is most significant for our utility support structures segment where the cost of steel has been approximately 50% of the net sales on average. Assuming a similar sales mix, a hypothetical 20% change in the price of steel would have affected our net sales from our utility support structures by approximately $30 million on a year-to-date basis ended June 27, 2015.

        There were no other material changes in the company's market risk during the quarter ended June 27, 2015. For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year ended December 27, 2014.

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.

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        No changes in the Company's internal control over financial reporting occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

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

Issuer Purchases of Equity Securities

Period
  Total Number
of Shares
Purchased
  Average Price
paid per share
  Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs
  Approximate Dollar
Value of Maximum
Number of Shares
that may yet be
Purchased under
the Program(1)
 

March 29, 2015 to April 25, 2015

    129,301   $ 120.14     129,301   $ 266,520,000  

April 26, 2015 to May 30, 2015

    164,413     125.12     164,413     245,948,000  

May 31, 2015 to June 27, 2015

    97,880     122.73     97,880     233,935,000  

Total

    391,594   $ 122.88     391,594   $ 233,935,000  

(1)
On May 13, 2014, we announced a new capital allocation philosophy which covered both the quarterly dividend rate as well as a share repurchase program. Specifically, the Board of Directors authorized the purchase of up to $500 million of the Company's outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. On February 24, 2015, the Board of Directors authorized an additional purchase of up to $250 million of the Company's outstanding common stock with no stated expiration date. As of June 27, 2015, we have acquired 3,700,970 shares for approximately $516.1 million under this share repurchase program.

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

 

 

 

101

 

The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended June 27, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information.

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SIGNATURES

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

    VALMONT INDUSTRIES, INC.
(Registrant)

 

 

/s/ MARK C. JAKSICH

Mark C. Jaksich
Executive Vice President and Chief Financial Officer

Dated this 29th day of July, 2015.

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Index of Exhibits

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

 

 

 

  31.2

 

Section 302 Certificate of Chief Financial Officer

 

 

 

  32.1

 

Section 906 Certifications of Chief Executive Officer and Chief Financial Officer

 

 

 

101 

 

The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended June 27, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information.

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