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1: 10-K Annual Report 16 63K
2: EX-4 Instrument Defining the Rights of Security Holders 2 9K
3: EX-10 Material Contract 6 22K
4: EX-10 Material Contract 11 41K
5: EX-11 Statement re: Computation of Earnings Per Share 2 7K
6: EX-13 Annual or Quarterly Report to Security Holders 45 204K
7: EX-21 Subsidiaries of the Registrant 2 7K
8: EX-23 Consent of Experts or Counsel 2 9K
9: EX-23 Consent of Experts or Counsel 2 10K
10: EX-24 Power of Attorney 2 10K
11: EX-27 ƒ Financial Data Schedule (Pre-XBRL) 2 10K
12: EX-27 Financial Data Schedule (Pre-XBRL) 2 10K
13: EX-99 Miscellaneous Exhibit 2 9K
EX-13 — Annual or Quarterly Report to Security Holders
Exhibit Table of Contents
(FRONT COVER)
Providing Efficient
Water Management
to meet the world's
growing demand For food
AND supplying
highly engineered
poles, towers & services for
Infrastructure Development
Worldwide
VALMONT LOGO:
1997 ANNUAL REPORT
34
(INSIDE FRONT COVER)
Valmont is an international manufacturing company with operations
around the world. Valmont designs and manufactures: mechanized
irrigation equipment to enhance food production through efficient
water management; poles, towers and structures for lighting,
utility and communication applications; and fabricated products
for various industrial uses. Valmont also provides custom
coatings and installation services. Valmont operates 20 plants
located in nine countries in North and South America, Europe and
Asia and markets its products in more than 100 countries.
Brenham, Texas, USA
Elkhart, Indiana, USA
Lindon, Utah, USA
Salem, Oregon, USA
Springville, Utah, USA
Tualatin, Oregon, USA
Tulsa, Oklahoma, USA
Valley, Nebraska, USA
West Point, Nebraska, USA
St Hubert, Quebec, Canada
Uberaba, Brazil
Charmeil, France
Creuzier-le-Neuf, France
Lempdes, France
Rive-de-Gier, France
Gelsenkirchen, Germany
Maarheeze, The Netherlands
Madrid, Spain
Siedlce, Poland
Shanghai, China
Corporate Headquarters
Omaha, Nebraska, USA
Contents
________________________________________
www.valmont.com
Letter to Shareholders
________________________________________
2 From the Chairman
About Valmont
________________________________________
6 Water Management
10 Infrastructure Development
14 Financial Objectives and Results
Financial Review
________________________________________
16 Management's Discussion and Analysis
22 Selected Eleven-Year Financial Data
24 Consolidated Statements of Operations
25 Consolidated Balance Sheets
26 Consolidated Statements of Cash Flows
27 Consolidated Statements of Shareholders' Equity
28 Notes to Consolidated Financial Statements
35 Business Segment Information
36 Quarterly Financial Data
37 Report of Independent Accountants
38 Report of Management
39 Officers and Management
40 Board of Directors
41 Shareholder Information
MAP ILLUSTRATION:
This report contains forward-looking statements in the Letter to
Shareholders, About Valmont, and Management's Discussion and
Analysis. The statements reflect management's current views and
estimates of future economic circumstances, industry conditions,
company performance and financial results. The statements are
based on many assumptions and factors including availability and
prices of raw materials, product pricing, competitive environment
and related market conditions, operating efficiencies, access to
capital and actions of governments. Any changes in such
assumptions or factors could produce significantly different
results.
(END OF INSIDE FRONT COVER)
35
Valmont Industries, Inc. and Subsidiaries
Financial Highlights
______________________________________________________________________________
(Dollars in millions, except per share amounts)
Operating results and ratios for 1996 are before asset valuation
charge and for 1993 are from continuing operations before
restructuring charge.
[Download Table]
1997 1996 1995
__________________________________________________________________________
Operating Results
Net sales $ 622.5 $ 644.5 $ 544.6
Net earnings 37.5 31.3 24.8
Diluted earnings per share 1.33 1.12 0.90
Dividends per share 0.21875 0.1875 0.15
Financial Position
Shareholders' equity $ 207.1 $ 175.2 $ 159.3
Shareholders' equity per share 7.49 6.41 5.87
Long-term debt as a % of invested capital 10.4% 12.3% 17.3%
Operating Ratios
Gross profit as a % of net sales 27.2% 26.7% 26.6%
Operating income as a % of net sales 10.0% 8.1% 7.7%
Net earnings as a % of net sales 6.0% 4.9% 4.5%
Return on beginning equity 21.4% 19.7% 18.0%
Return on invested capital 14.6% 13.8% 12.5%
Year-End Data
Shares outstanding (000) 27,641 27,330 27,120
Approximate number of shareholders 5,400 4,400 3,900
Number of employees 3,751 4,868 4,166
GRAPHS:
Net Sales
Diluted Earnings Per Share
Return on Invested Capital
1997 Annual Report
1
36
PULL QUOTE:
"We again beat our
financial objectives
in 1997 and
further strengthened
Valmont's leadership
position in our industries."
1997 was another good year for Valmont. We again exceeded all our
financial objectives and established an enhanced organizational
structure designed to facilitate growth in our two main
businesses. We were fortunate to have strong market conditions in
most of our businesses and managed to further consolidate our
leadership positions.
The year was not without challenges, however. In Europe, the
drive toward qualifying for a single European currency led several
countries to curtail spending programs and in China it proved more
costly and time consuming than we expected to build our
distribution channels.
PHOTO:
Mogens C. Bay
Chairman and Chief Executive Officer
Financial Objectives 1997 Results
___________________________________________
Increase trendline earnings 15% per year. 19.8%
Achieve a minimum 10% after-tax
return on invested capital. 14.6%
Maintain long-term debt as a percent
of invested capital at less than 40%. 10.4%
___________________________________________
As we enter 1998, the market drivers for our businesses are
favorable worldwide with the possible exception of the wireless
communication industry in this country, where there is some
uncertainty as to the pace of further buildout of the cellular and
PCS systems. We are excited about the opportunities we see
developing today and expect 1998 to be another strong year.
1997 Annual Report
2
37
PULL QUOTE:
"Tomorrow's
challenge is to take
advantage of the
vast opportunities
in water management
for agriculture
beyond
what we are
doing today."
Water Management for Agriculture
As you fly around the world, you cannot help but notice all those
large, green circles. They are fields of crops irrigated with
center pivots, our type of water management equipment. What I get
excited about are all the places where there are no green
circles...yet.
The demand for food products will continue to grow as the world's
population increases and diets improve. Efficient use of the
world's water supply is key to meeting the future demand for food
and fiber. Center pivot and linear move irrigation equipment is
by far the most efficient way to irrigate large scale agriculture,
often saving up to 50% compared to the amount of water used by
traditional forms of irrigation.
Approximately two-thirds of the world's fresh water is used for
agriculture today and, in some countries, that figure is as high
as 80% to 90%. Competition for fresh water will only increase.
Urban and industrial demand for water will force agriculture to
use a lesser share of the world's fresh water supply in the
future.
PHOTO:
Effective water management is a big challenge facing both the
developed and developing nations of the world. Regardless of the
status of the agricultural economy, there is no alternative to
managing scarce water resources well if we are to produce the
crops needed to feed the population of the next century.
Our task is to continue to provide farmers with ever more
efficient ways to manage their water resources. This includes
equipment as well as the scheduling techniques and management
support systems leading to precision farming. Areas of growth
opportunities for Valmont include technologies for sprinklers and
low volume irrigation products such as drip, tape and micro
sprays. Today, we have leveraged our water management expertise
by putting our irrigation equipment to good use in other sectors,
the most important of which is waste water treatment. Through the
use of center pivots, liquid waste from agriculture, industry and
municipal treatment facilities can be applied to the land where
chemical and biological actions convert the organic material to
plant nutrients.
1997 Annual Report
3
38
Infrastructure Development
If you drive on just about any road...past the barricades and
around the temporary detours...you realize just how much
infrastructure development activity is taking place around the
world. This vast economy includes new road construction, upgraded
signage, enhanced traffic controls and better lighting to increase
efficiency; more outdoor lighting at commercial businesses to
improve safety; expanding electrical transmission and distribution
systems; and new poles and towers to support the demand for
wireless communication. All this translates into a growing demand
for our products and services for the foreseeable future.
We have a competitive advantage in both our pole and tower
businesses through our ability to leverage manufacturing and
engineering capabilities not only among major product
groups...lighting, utility and wireless communication...but also
among our plants around the world. This enables us to take
advantage of the growing demand in the infrastructure development
markets.
It was estimated in 1993 that nearly $70 billion would be needed
annually to meet highway capital investment needs in this country
alone. Although highway spending has increased each year since
then, less than $40 billion has been spent annually. Federal,
state and local governments are now faced with the reality that
spending for infrastructure must increase for ongoing maintenance
and to relieve congestion created by a rising population. Valmont
manufactures the structures for lighting, signage and traffic
signals that are necessary to address this problem.
Deregulation in the utility industry and an increasing world
demand for electricity at competitive rates have created new
opportunities for us to serve our utility customers. In response,
we have formed strategic alliances with utilities to jointly seek
more effective ways for them to deliver power at the lowest
possible cost.
Even though the developed countries of the world are well into
building out their wireless communication systems, projections
show that the number of cell phone subscribers will continue to
grow steadily in the years ahead. Countries such as Brazil and
China present great opportunities as they begin to rapidly expand
their systems. In the developing world, countries will often
switch to a wireless network, skipping hard-wired systems.
People
Throughout our history it is our ability to attract the best
people in our industries that enabled us to create the leadership
positions we enjoy around the world today. One of the greatest
challenges we face going forward is finding and retaining top
talent. Our growth in the future will not be limited by the
opportunities of the markets in which we participate but rather by
our ability to build an organization to take advantage of these
opportunities. This includes our distribution channels through
which we go to market. I am proud to say we have the finest
employees, dealers and representatives in the marketplace...our
greatest competitive advantage.
1997 Annual Report
4
39
PULL QUOTE:
"One
competitive advantage
we have in the global
marketplace is our
ability to leverage
our engineering,
manufacturing and
marketing capabilities
around the world."
Global Markets - Global Growth
Valmont competes in the global market. As we are creating a
worldwide network of plants and capabilities, let me emphasize
that we are being prudent in our international investment
strategies. We are planting "seeds of opportunity" by making
limited investments until we have established ourselves and better
understand these new markets.
Increasing shareholder value through profitable sales growth
remains our strategic objective. While North America continues to
be our strongest, most developed market, we must continue to
expand our presence in the international arena.
We will retain our leadership positions only by meeting the
challenges that impact our core industries today and in the
future. At Valmont, we welcome these challenges. Through the
talent, hard work and dedication of our people around the world,
we aim to continue to be the global leader in providing efficient
water management for agriculture and supplying highly engineered
poles, towers and services for infrastructure development.
PHOTO:
MOGENS C. BAY SIGNATURE:
Mogens C. Bay
Chairman & Chief Executive Officer
1997 Annual Report
5
40
PIE CHART:
Industry 27%
Agriculture 65%
Household & Municipalities 8%
Agriculture currently uses 65% of the world's fresh water.
Irrigation consumes 80% to 90% of the water supplies in some
countries. There is no alternative to the efficient management of
water in the future.
GRAPHS:
Irrigation and Coatings Products
Net Sales ($ In Millions)
Operating Income ($ In Millions)
Until recently, fresh water was considered cheap and plentiful,
but now is recognized as valuable and scarce. Efficient water
management through the use of Valmont's type of mechanized
irrigation equipment can save as much as 50% of the water needed
compared to less efficient irrigation methods. The center pivots
on the fields in Brazil shown at the right help increase
production and lower labor costs while conserving scarce water
resources.
VALLEY LOGO:
..."The Most Trusted
Name In Irrigation"
6
41
Valmont Industries, Inc. and Subsidiaries
LEFT SIDE WATER MANAGEMENT ILLUSTRATIONS:
Top to bottom:
Valley center pivot
Precise application of water
Valley linear move
Valley modular control panel
Water Management
________________________________________
Efficient water management is absolutely essential to the
continued economic growth of the nations of the world. It is
predicted that global food production must double in the next
thirty years to satisfy the needs of a growing world population
that is undergoing a dramatic improvement in their diets. These
forces are driving the need for higher production of feed grains
worldwide.
The increase in food production must take place without an
increase in the number of acres farmed, as actual tillable acreage
has decreased over the past thirty years and continues to be
overtaken by urban development. The realities of finite supplies
of land and fresh water are additional challenges to increasing
food production. Agriculture uses over 65% of the world's
available fresh water. In some countries, this climbs to as high
as 80% to 90%. Because irrigated farmland is twice as productive
as non-irrigated, efficient water management through mechanized
irrigation equipment must play a major role in helping to feed
this hungry world.
Unfortunately, all irrigation is not equally efficient. Most of
the world continues to use a form of irrigation that began in
ancient Egypt...flooding the field with water. This type of
irrigation, referred to as "flood" or "gravity flow," can waste
more than 50% of the water put onto the field and cause
environmental damage due to soil erosion and chemical run-off.
Modern mechanized irrigation delivers the precise amount of water,
fertilizer and chemicals that growing plants need, exactly at the
time they need it. Mechanized irrigation is scheduled and
controlled so the water applied fills the root zone, without
"leaching" down to the groundwater or running off the end of the
field.
Irrigation Technology
The answer to the challenge of doubling food and fiber production
without using more land or water lies in technology.
By using tubes that drop down from the overhead pipe to minimize
loss of water due to wind or by using fabric "socks" that trail
the moving system dispensing water in a slow trickle, growers
today have truly begun to practice efficient water management
through the precise application of water.
As the technology leader, Valmont pioneered the use of
computerized controls in mechanized irrigation that enhances the
capabilities and sophistication of existing and new equipment.
Modern technology allows a farmer to monitor and control dozens of
systems from a home computer or cell phone. Continuous research
and development in this area will bring numerous new product
introductions and enhancements over the coming years.
1997 Annual Report
7
42
PHOTO:
Vincent T. Corso
Group President and
Chief Operating Officer
Irrigation and Coatings Group
WATER MANAGEMENT ILLUSTRATION:
Farmers can monitor and control their pivots from their home
computer or through the use of radio and phone communications.
Water Management
(continued)
________________________________________
PULL QUOTE:
"Valmont is
the leading
manufacturer of
mechanized
irrigation equipment.
We are focused
on manufacturing
superior products
that differentiate
us from the
competition
and improving
the processes,
procedures and
tools that make
us the low cost
producer."
The introduction of another new product, the Universal Linear, has
been very successful, with installations on four continents.
Rather than pivoting around a fixed point in the center of a
field, the Universal Linear moves from one end of a rectangular
field to the other, pivoting at each end of the field.
The Universal Linear is ideal for smaller and rectangular fields
or irregular shaped ones. This innovative design increases the
range of fields that can be successfully irrigated using Valmont
equipment worldwide.
Recently, Valmont introduced a chemical application device called
Accu-Pulse. This precision applicator is a separate line on a
center pivot or linear move machine that is installed beneath the
main water pipe to apply chemicals with the precision that is
superior to aerial application or other traditional spraying
methods.
Initial trials of this technology indicate that the amount of
chemicals applied to the crops could be less than usually
recommended. This represents a savings to the farmer by lowering
chemical costs and, at the same time, protecting the environment
by avoiding over-application.
Another growing market opportunity is the need to find alternative
means to distribute treated municipal, industrial and agricultural
wastewater. Valmont's PolySpan(TM) technology, where a polyethylene
sleeve lines the main pipeline, allows efficient irrigation
equipment to distribute corrosive wastewater. This "re-use" of
water will play an even greater role in the future in the U.S. as
well as around the world.
1997 Annual Report
8
43
BRAZIL ILLUSTRATION:
Valmont Irrigation Manufacturing Plant
Uberaba, Brazil
________________________________________
Value-Added Distribution
Valley dealers are crucial to the continuous introduction of new
technology to mechanized irrigation. They receive intensive
training that allows them to provide unrivaled service and
consulting expertise to their customers.
Valley dealers offer their products and services at nearly 500
locations worldwide, providing advice, mechanized irrigation
equipment and replacement parts. The Valley dealer organization
has helped make Valmont the clear world leader with the most
extensive and well-equipped system for delivering irrigation
products. For markets outside the U.S., Valmont manufactures a
sizeable portion of the irrigation pipe and structural parts
overseas, with gearboxes, controls, nozzles and other components
shipped from the United States.
Prepared for the Future
As a manufacturer, Valmont continues to make significant
improvements in production efficiency. Much of this success has
been due to the work of self-directed teams throughout the
Company. Initiated more than seven years ago, these teams
continually improve processes and products.
Major worldwide economic and population trends are helping drive
Valmont's irrigation business. Valmont technology will play an
ever-increasing role in the efficient management of precious fresh
water, while helping produce the food necessary to feed the
growing population worldwide.
Coatings
Valmont's experience in galvanizing its steel products has led to
the formation of a separate Coatings Division that is growing
rapidly. The Company currently has four coatings facilities in
the United States that apply high quality, hot-dipped galvanizing
to steel products as a long-lasting protective coating.
The Coatings Division provides custom finish coatings for products
and components manufactured by other companies in addition to many
of Valmont's products. Because of its extensive process
capabilities, Valmont can handle steel up to 60 feet long in
virtually any shape or configuration.
A study by the National Bureau of Standards of the aging
infrastructure in the United States estimated corrosion costs to
be over 4% of the Gross National Product. Based on this estimate,
the cost of corrosion in the U.S. today exceeds $200 billion per
year, 15% of which could be saved by better utilization of
existing technology. Galvanizing is a proven technology for
corrosion protection that supports expanding infrastructure
growth.
The construction of new facilities and acquisitions have placed
Valmont as an industry leader and one of the highest volume
galvanizers in North America. Future growth will support both
internal requirements and the expanding commercial coatings
market.
PIVOT ILLUSTRATION:
The Valley Universal Linear allows smaller fields to receive the
same benefits from mechanized irrigation as larger fields. A 4-
wheel ditch feed Universal Linear is shown here.
9
44
TRANSMISSION POLE ILLUSTRATION:
GRAPHS:
Industrial Products
Net Sales ($ In Millions)
Operating Income ($ In Millions)
Valmont designs and manufactures poles, towers and structures for
lighting & traffic, utility and communication applications. For
the utility industry, Valmont builds steel electrical
transmission structures (top left), steel distribution poles and
substation structures. Fluted, turn-of-the-century light poles
(right) are a popular new product that come in a wide variety of
designs such as the one shown here in downtown Chicago.
CHICAGO LIGHTPOLE ILLUSTRATION:
10
45
Valmont Industries, Inc. and Subsidiaries
Infrastructure Development
________________________________________
LEFT SIDE INFRASTRUCTURE DEVELOPMENT ILLUSTRATIONS:
Top to bottom:
Lighting & traffic control poles
Steel electrical distribution pole
Wireless communication tower installation
Rolled cylinder pressure vessel
Infrastructure development is presenting opportunities on every
continent. While the markets found in developing countries hold
promise for the future, today they are being outpaced by those in
the more highly industrialized nations that continue to build new
roads, bridges, airports, industrial centers, utility networks,
communication systems and countless other projects. The United
States remains Valmont's strongest market.
Valmont long ago adopted a global approach to producing products
which support various infrastructure development industries. That
strategy continues to bear fruit around the world. The most
intense competition in overseas markets comes from local and
regional competitors, as opposed to U.S. companies. By leveraging
worldwide engineering and manufacturing capabilities, Valmont is
able to remain competitive, while offering a wide range of
products, applications, coatings and designs that are unmatched
anywhere in the world.
Lighting and Traffic Signal Poles
Road and highway construction and modernization continue unabated
across the United States as federal, state and local governments
attempt to improve traffic flow and relieve congestion through
more effective signage, enhanced traffic signaling and better
lighting. New and upgraded lighting can also be found in many
commercial business parking lots and malls, providing a greater
level of customer safety and overall security.
In Western Europe, most countries are undertaking infrastructure
improvement projects. Demand is growing for high quality, long-
lasting lighting and traffic structures. Valmont is meeting these
market needs through its new product development process.
Decorative poles are also being installed at record rates in the
U.S. and around the world. In a move to enhance their important
tourism industry, European municipalities are eager to install
"fluted" light poles, combining the latest in illumination
technology and modern contemporary design. These structures are
manufactured using a proprietary, patented process that enables
Valmont to provide the highest quality products in the industry.
1997 Annual Report
11
46
PHOTO:
Gary L. Cavey
Group President and
Chief Operating Officer
Industrial Products Group
PARIS LIGHTPOLE ILLUSTRATION:
Valmont manufactures steel and aluminum light poles and wireless
communication structures as part of its eight-plant pan-European
operation. This decorative aluminum light pole is in Paris,
France.
Valmont Industries, Inc. and Subsidiaries
Infrastructure Development
(continued)
________________________________________
PULL QUOTE:
"Our engineering team
is developing
cutting-edge
technology for
designing our products,
enhancing productivity
and expanding
our search for
new ideas,
products and
production techniques."
Valmont's historic strength of producing lighting and traffic
signal poles to quickly meet the customers' changing demands has
been enhanced with significant investments in upgrading existing
facilities and opening new plants.
In North America, aluminum poles were formerly produced only in
Canada and shipped to wherever they were needed. Now, these poles
are also being made in Indiana, a move that has more than doubled
Valmont's North American aluminum pole capacity. The aluminum
pole facility located in Rive-de-Gier, France, has also been
expanded.
Sports lighting continues to be a major opportunity for pole
sales. New lighting structures have been installed at the
University of Nebraska Memorial Stadium, Le Stade de France where
the World Soccer Cup will take place in 1998, Shanghai Stadium in
China and other major locations around the world.
While Asia offers excellent market potential for the long-term, it
also presents a number of challenges. In China, for example,
doing business is much more complex than in many other countries.
Valmont has made steady progress in China using a strategy based
on superior product quality and customer service. The plant in
Shanghai was expanded this past year to produce large poles to
take advantage of opportunities in high mast lighting and wireless
communication markets in that region.
Utility
The utility industry is experiencing growth and change all over
the world. Deregulation and mergers in the United States are
driving the installation of new electrical transmission and
distribution structures. Additionally, due to their strength,
durability and positive environmental characteristics, steel poles
are replacing wooden poles as the installed cost of a steel pole
becomes competitive with wood.
Valmont has partnered with many utility companies and formed
strategic alliances to provide a single source solution to any and
all of their pole needs. This ensures Valmont's utility customers
receive the finest quality structures in the world and that these
structures are readily available at a competitive price.
1997 Annual Report
12
47
COAX BLOCKS ILLUSTRATION:
Valmont Microflect provides a complete line of over 1,500
components for the wireless communication industry, such as the
stackable Coax Blocks shown here.
________________________________________
Wireless Communication
The wireless industry continues to enjoy tremendous growth with
many countries outpacing the U.S. in the adoption of new
technologies. In developing countries, it is sometimes more
economical to install a nationwide network of poles and towers for
cellular and PCS networks than it is to install thousands of miles
of wires on poles.
Although the pace of growth in the United States has slowed
somewhat in the past year, industry experts predict continued
expansion of cellular and PCS usage in the U.S. for the next
several years. Valmont is pursuing opportunities in wireless
communication markets around the world through a network of sales
offices, joint ventures and agents.
Some local communities are beginning to limit the number of
structures that can be erected for wireless communication.
Because many of the older towers and poles cannot be retrofitted
to accommodate multiple users, new highly engineered structures
are being designed to handle more than one wireless service
provider, thus avoiding a forest of poles and towers in local
skylines.
Other communities are insisting providers utilize "camouflage"
techniques, making the poles blend into surrounding trees or other
structures. A wide variety of these unique structures have been
designed and built by Valmont and can be found around the world.
These stealth-like poles include a white pine "tree pole" at Mt.
Vernon near Washington, DC and a "palm tree" in southern
California. Other innovative camouflaged wireless structures have
been installed in Japan, Portugal and the United Kingdom.
Fabricated Products
Valmont designs and manufactures an extensive range of tubular
steel products to exacting customer specifications. The Company's
high-tech manufacturing capabilities ensure the precise placement
of unique bends, holes, shapes and other custom engineered
applications and delivery to customers exactly when promised. A
new high-speed mill at the Valley, Nebraska site produces tubing
at extremely precise tolerances that greatly expands the range of
products available to customers.
Valmont also produces larger industrial fabricated products such
as rolled and welded steel cylinders that other companies make
into heat exchangers and pressure vessels. In addition, the
Company distributes a wide variety of fastener products and
fabricates grating for commercial and industrial applications.
PULL QUOTE:
"There are vast
opportunities for Valmont in the
international
marketplace. We believe it is important
to have a local
presence in the
markets we serve."
PHOTO:
E. Robert Meaney
President and
Chief Operating Officer
Valmont International
PALM TREE POLE ILLUSTRATION:
Valmont builds a variety of camouflaged structures for the
wireless communication industry such as this "palm tree" pole in
southern California.
1997 Annual Report
13
48
PHOTO:
Terry J. McClain
Senior Vice President and
Chief Financial Officer
Valmont Industries, Inc. and Subsidiaries
Financial Objectives and Results
________________________________________
PULL QUOTE:
"Increasing
trendline earnings
while exceeding our
cost of capital
creates value for
our shareholders."
We measure our performance against many standards. Financially,
we have selected three principal factors that tell just how well
we are managing the Company and the money invested in it. The
goals we have established for earnings growth, return on invested
capital and long-term debt leverage are appropriate for the
industries in which we participate, yet challenging enough to
demand the very best talents and performance of our management
team.
Goal: Increase trendline earnings 15% per year
1997 Result: 19.8%
Valmont's goal is to increase trendline earnings by 15% each year.
By trendline, we mean "on average," over the course of several
years and under normal industry conditions. The diversity of our
two core industries...efficient water management for agriculture
and infrastructure development...and our ability to leverage
worldwide engineering and manufacturing capabilities allows us to
"level out" the ups and downs of the markets we serve. Although
we have an excellent earnings track record, there may be years, or
quarters within years, when we do not achieve our targets. But
over the long run we expect to report earnings that produce
trendline growth of 15% or more.
GRAPH:
Net Earnings
*Before asset valuation charge
1997 Annual Report
14
49
________________________________________
Goal: Achieve a minimum 10% after-tax Return on Invested Capital
1997 Result: 14.6%
Return on Invested Capital is net operating income after-tax as a
percent of invested capital. We define Invested Capital as total
assets less non-interest bearing current liabilities.
We believe that we create value for our shareholders when our
returns consistently exceed our cost of capital. We calculate
Valmont's cost of capital to be about 10% after-tax. We apply
this concept to individual new projects as well as to our existing
investments.
GRAPH:
Return on Invested Capital
*Before asset valuation charge
Goal: Maintain Long-Term Debt as a percent of Invested Capital at
less than 40%
1997 Result: 10.4%
Given the financial characteristics of our Company, we can
comfortably operate at a debt to capitalization ratio of up to
40%. Today we have a relatively low ratio. We have excellent
financial capacity to expand our business through internal growth
and acquisitions.
GRAPH:
Long-Term Debt
As A Percent of
Invested Capital
Total Value Impact
________________________________________
Total Value Impact (TVI) is a value-based measurement that we use
to determine the payments in our annual executive incentive plan.
TVI is net operating income after tax less a capital charge. Our
management group is paid a portion of the improvement in TVI from
one year to the next. Growing earnings in excess of the cost of
capital has a strong correlation to increases in shareholder
value. By understanding this correlation, our managers make better
operating and capital investment decisions which translate into
increased returns for our shareholders.
1997 Annual Report
15
50
Valmont Industries, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
________________________________________
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of the Company's consolidated results of operations and financial
position. This discussion should be read in conjunction with the
Consolidated Financial Statements and related Notes.
[Download Table]
Fiscal 1997 Compared to Fiscal 1996
(Dollars in thousands, except per share amounts) 1997 Change 1996
_____________________________________________________________________________
Net sales $ 622,506 (3.4) % $ 644,531
Cost of sales 453,326 (4.1) % 472,463
Gross profit 169,180 (1.7) % 172,068
Selling, general and administrative expenses 107,190 (10.4) % 119,624
Asset valuation charge _ _ 15,800
Operating income 61,990 69.2 % 36,644
Interest expense, net 2,831 (21.5) % 3,608
Miscellaneous (215) _ 12
Income tax expense 21,400 81.4 % 11,800
Net earnings 37,544 76.7 % 21,248
Earnings per share:
Basic 1.36 74.4 % 0.78
Diluted 1.33 75.0 % 0.76
Net sales of $622.5 million in 1997 were 3.4% lower than the
$644.5 million attained in 1996. Excluding sales of Valmont
Electric, which the Company sold in early 1997, sales increased
11.9%. The Industrial Products segment, excluding Valmont
Electric, reported 1997 sales volume of $375.2 million, an
increase of 10.6% over 1996 sales of $339.1 million. Sales
improved in each of the four major product categories: lighting
and traffic, utility, wireless communication, and fabricated
products. Infrastructure modernization, and continued road and
highway construction and improvements accounted for the domestic
sales increase. Internationally, sales were up in local
currencies due to a strong light pole demand and sales of new
products; however these sales decreased when translated into U.S.
dollars due to the strengthening of the U.S. dollar.
The Irrigation Products segment sales of $241.7 million in 1997
exceeded 1996 sales volume of $212.5 million by 13.7%. Sales grew
in both the domestic and international markets. The U.S. market
was driven by continued strong farm income, and the conversion to
center pivot and linear move irrigation from less efficient
methods. Early in 1997, the Company became the majority investor
in a new irrigation manufacturing company in Brazil, which led to
a significant increase in sales in the Latin American region.
Additionally, sales were strong in Western Europe, the Middle
East, Australia and southern Africa.
Gross profit was $169.2 million in 1997, a decrease of $2.9
million from the 1996 gross profit of $172.1 million. Gross
profit as a percentage of sales increased from 26.7% in 1996 to
27.2% in 1997. The reduction in gross profit is due to the lower
sales level, and the percentage increase resulted primarily from
the sale of the ballast business, which had a lower gross profit
margin than the Company as a whole.
1997 Annual Report
16
51
As a percent of sales, Selling, general and administrative (SG&A)
expenses were 17.2% in 1997 compared to 18.6% in 1996. SG&A
expenses in 1997 were $107.2 million compared to $119.6 million in
1996. The decrease in SG&A expense as a percent of sales resulted
from the sale of the ballast business in early 1997, and from
leverage of SG&A expenses in other parts of the Company.
An asset valuation charge of $15.8 million was recorded in 1996 to
reduce the carrying value of assets in the ballast business. This
business was sold in January of 1997, for approximately the
adjusted carrying value of $25 million.
Net interest expense decreased in 1997 by $0.8 million to $2.8
million due to lower debt levels. At the end of 1997, long-term
debt had decreased by $1.5 million from the debt level at 1996
year-end, and notes payable to banks decreased from $24.0 million
at the end of 1996 to $18.5 million for year-end 1997.
For 1997 the effective tax rate was 36.3% which is lower than the
expected federal and state tax rate due to nontaxable interest
income and foreign sales corporation tax benefits. The effective
income tax rate for 1997 did not vary significantly from the
effective tax rate in 1996.
For the reasons discussed above, earnings increased to $37.5
million in 1997 from $31.3 million prior to the asset valuation
charge in 1996, and $21.2 million after the asset valuation charge
in 1996, increases of 19.8% and 76.7%, respectively. Basic
earnings per share increased to $1.36 per share in 1997 from $1.15
and $0.78 per share, pre-charge and after-charge respectively,
which are increases of 18.3% and 74.4%. Diluted earnings per
share increased to $1.33 per share in 1997 from $1.12 and $0.76
per share, pre-charge and after-charge respectively, which are
increases of 18.8% and 75.0%.
GRAPHS:
Segment Sales
* Industrial Products
* Irrigation Products
Gross Profit As A Percent of Net Sales
SG&A Expense As A Percent of Net Sales
1997 Annual Report
17
52
Valmont Industries, Inc. a
Management's Discussion and Analysis
(continued)
________________________________________
[Download Table]
Fiscal 1996 Compared to Fiscal 1995
(Dollars in thousands, except per share amounts) 1996 Change 1995
_____________________________________________________________________________
Net sales $ 644,531 18.3 % $ 544,642
Cost of sales 472,463 18.2 % 399,691
Gross profit 172,068 18.7 % 144,951
Selling, general and administrative expenses 119,624 16.0 % 103,120
Asset valuation charge 15,800 _ % _
Operating income 36,644 (12.4) % 41,831
Interest expense, net 3,608 2.8 % 3,511
Miscellaneous 612 (91.4) % 139
Income tax expense 11,800 (13.9) % 13,700
Net earnings 21,248 (14.2) % 24,759
Earnings per share:
Basic 0.78 (15.2) % 0.92
Diluted 0.76 (15.6) % 0.90
Valmont's net sales in 1996 increased $99.9 million over its sales
for 1995. Industrial Products segment revenues rose primarily as
a result of strong demand for light poles and communication towers
in North America, and sales in Europe were up due to acquisitions
made at the beginning of the year. Sales of poles and towers for
the wireless communication market continued to grow in 1996, and
the 1995 acquisition of Microflect substantially improved the
Company's position in this expanding market. The ballast business
experienced a small increase in sales for the year 1996 compared
to 1995.
Irrigation Products segment sales increased to $212.5 million in
1996 from $162.7 million in 1995 as good crop yields and commodity
prices resulted in strong farm income, prompting U.S. farmers to
purchase irrigation equipment. Sales to international markets,
primarily Western Europe, South America and southern Africa, rose
as a result of increasing demand for grain and grain products, low
grain inventories, and strong commodity prices.
Gross profit increased $27.1 million or 18.7% in 1996 to $172.1
million, and as a percent of sales increased to 26.7% in 1996 from
26.6% in 1995. The Irrigation Products segment gross profit
increased as a result of a favorable pricing environment, cost
reductions and productivity improvements. Industrial Products
segment gross profit increased as the impact of higher sales
volume for engineered metal structures more than offset a gross
profit decline in the ballast business.
Selling, general and administrative (SG&A) expenses in 1996 were
$119.6 million compared to $103.1 million in 1995. In 1996, SG&A
expense as a percent of sales was 18.6% compared to the prior
year's 18.9%. The increase in SG&A expenses was made to support
the higher sales volumes in 1996 and to invest in market and
product development.
In the fourth quarter of 1996, a pre-tax valuation charge of $15.8
million was recorded to reduce the carrying value of the net
assets in the ballast business. The reduced carrying value
approximated the expected sales price of this business.
1997 Annual Report
18
53
________________________________________
For 1996 and 1995, net interest expense was $3.6 million and $3.5
million, respectively. The increase resulted from higher short-
term debt levels. At the end of 1996, long-term debt had
decreased by $7.1 million from the debt level at 1995 year-end,
and short-term debt was up from $3.5 million at the end of 1995 to
$24.0 million for year-end 1996.
The effective tax rate was essentially the same at 35.6% in 1995
and 35.7% in 1996.
For the reasons outlined above, the Company's earnings in 1996
prior to the asset valuation charge were $31.3 million or $21.2
million after the valuation charge, compared to $24.8 million for
1995, an increase of 26.6% prior to the charge and a 14.2%
decrease after the charge. Basic earnings per share were $1.15
prior to the charge and $0.78 after the charge compared to basic
earnings per share of $0.92 for 1995. Diluted earnings per
share were $1.12 prior to the charge and $0.76 after the charge
compared to diluted earnings per share of $0.90 for 1995. The pre-
charge basic earnings per share were up 25.0% and the after-charge
basic earnings per share decreased by 15.2%. For diluted earnings
per share, 1996 was up 24.4% on a pre-charge basis and down by
15.6% on an after-charge basis.
Liquidity and Capital Resources
Net working capital of $94.4 million at the end of 1997 increased
from $81.4 million at the end of 1996. The ratio of current
assets to current liabilities was 1.8:1 at the end of 1997
compared to 1.6:1 at the end of 1996.
Available short-term credit facilities through bank lines of
credit were $47 million at the end of 1997 compared to $41 million
at the end of 1996. On December 27, 1997, $34 million of these
credit facilities were unused.
GRAPHS:
Net Interest Expense ($ In Millions)
Working Capital ($ In Millions)
Long-Term Debt As A Percent of Invested Capital
1997 Annual Report
19
54
Valmont Industries, Inc. and Subsidiaries
Management's Discussion and Analysis
(continued)
________________________________________
The Company's growth has been financed through a combination of
cash provided from operations and to a lesser degree through debt
financing. Cash provided from operating activities was $23.3
million in 1997 and $19.8 million in 1996. The Company's
objective is to maintain long-term debt as a percent of invested
capital below 40%. At the end of 1997, long-term debt as a
percent of invested capital was 10.4% as compared to 12.3% at the
end of 1996.
In October of 1997, the Company entered into a Revolving Credit
Agreement with a group of banks. Under the terms of the
agreement, the Company may borrow up to the equivalent of $100
million in multiple currencies. This facility is unsecured and
any outstanding principal balance is due on June 30, 2002. The
outstanding principal balance may be paid down at any time without
penalty or additional funds may be borrowed up to the maximum
limit. On December 27, 1997, the outstanding principal balance
was $5 million.
The Company believes cash flows from operations, available credit
facilities and the capital structure now in place will be adequate
for 1998 planned capital expenditures, for dividends and other
financial commitments, and for the Company to pursue opportunities
to expand its markets and businesses.
Capital Expenditures
In 1997, the Company invested $39.1 million, or a $3.5 million
increase from the $35.6 million invested in 1996, in property,
plant and equipment. Major additions included new facilities in
Creuzier-le-Neuf, France, Siedlce, Poland, and Uberaba, Brazil,
and expansion of manufacturing capabilities and capacities at the
plants in Brenham, Texas, Elkhart, Indiana, Valley, Nebraska, and
Rive-de-Gier, France. These expenditures were made to increase
capacity for manufacturing of engineered metal structures and to
access irrigation markets with improved service.
Year 2000
The Company recognizes the need to ensure that its operations will
not be adversely impacted by Year 2000 software issues.
Processing errors potentially arising from calculations using the
Year 2000 date are a known risk. The costs or consequences of
incomplete or untimely resolution of Year 2000 issues by the
Company or third parties could have a material adverse effect on
the Company. The Company is actively addressing these software
issues to minimize these risks. The additional cost of achieving
Year 2000 compliance over the cost of normal software upgrades and
replacements is estimated to be immaterial and will be incurred
throughout the fiscal years of 1998 and 1999.
Outlook For 1998
As the Company begins 1998, sales order backlogs were $125.6
million, compared to $133.6 at the start of 1997. This slight
decrease is primarily the result of the sale of the ballast
business in early 1997 and a seasonal change in irrigation order
flow.
The public's concern for safety, together with the need to improve
the world's streets and highways, should continue to enhance
demand for lighting and traffic structures. Demand for electrical
transmission, substation and distribution products is expected to
remain strong as utility customers proceed through deregulation.
While the accelerating demand for the Company's communication
poles, towers and components slowed during 1997, the market
drivers for these products are expected to remain in place and to
produce sales opportunities in U.S. and international markets.
All these factors point to continued sales opportunities for the
Industrial Products segment.
1997 Annual Report
20
55
___________________________________
Several years of relatively high net farm income, resulting from a
strong demand for grain products is expected to drive sales of the
Company's center pivot and linear move irrigation equipment.
Additionally, water management policies should encourage farmers
to convert from less efficient methods of irrigation. As the
population of irrigation equipment already in the field ages, the
replacement and spare parts markets should continue to expand.
These drivers are influencing the markets around the world and
should result in improved sales of irrigation products in the
upcoming year.
Overall, the Company's performance can be influenced by
developments in national and world economies and other factors;
however, management feels that the markets the Company serves
provide ample opportunities for growth in the future.
Management's Discussion and Analysis contains forward looking
statements which reflect management's current view and estimates
of future economic and market circumstances, industry conditions,
company performance and financial results. The statements are
based on many assumptions and factors including operating
efficiencies, availability and price of raw materials,
availability and market acceptance of new products, product
pricing, domestic and international competitive environments,
actions and policy changes of domestic and international
governments, and other risks described from time to time in
Valmont's reports to the Securities and Exchange Commission. Any
changes in such assumptions or factors could produce significantly
different results.
GRAPHS:
Capital Expenditures ($ In Millions)
Total Assets ($ In Millions)
Number of Employees
1997 Annual Report
21
56
Valmont Industries, Inc. and Subsidiaries
[Download Table]
Selected Eleven-Year Financial Data
________________________________________
(Dollars in thousands, except per share amounts) 1997 1996 1995
_____________________________________________________________________________
Operating Data
Net sales $622,506 $644,531 $544,642
Earnings (loss) from continuing operations 37,544 21,248 24,759
Earnings from discontinued operations _ _ _
Cumulative effect of accounting change _ _ _
__________________________________
Net earnings (loss) $37,544 $21,248 $24,759
__________________________________
Depreciation and amortization $16,437 $ 14,832 $12,361
Capital expenditures 39,115 35,559 34,772
Per Share Data
Earnings (loss): Basic $1.36 $ 0.78 $0.92
Diluted 1.33 0.76 0.90
Cash dividends 0.21875 0.1875 0.15
Shareholders' equity 7.49 6.41 5.87
Financial Position
Working capital $94,416 $81,403 $80,993
Property, plant and equipment, net 140,834 120,579 113,532
Total assets 368,052 341,648 308,710
Long-term debt, including current installments 28,060 29,573 36,687
Shareholders' equity 207,102 175,231 159,256
Invested capital 270,400 243,905 215,318
Key Financial Measures
Return on beginning shareholders' equity 21.4% 13.3% 18.0%
Return on invested capital 14.6% 9.7% 12.5%
Long-term debt as a percent of invested capital 10.4% 12.1% 17.3%
Year-End Data
Shares outstanding (000) 27,641 27,330 27,120
Approximate number of shareholders 5,400 4,400 3,900
Number of employees 3,751 4,868 4,166
Per share amounts and number of shares reflect the two-for-one
stock splits in 1988, 1989 and 1997.
All amounts include pooling-of-interests method of accounting for
the purchase of Microflect.
1997 Annual Report
22
57
________________________________________
[Download Table]
1994 1993 1992 1991 1990 1989 1988 1987
________________________________________________________________________________
$501,740 $464,274 $445,481 $446,543 $461,789 $443,444 $439,569 $291,350
18,887 7,551 11,671 (8,822) 11,373 16,818 12,301 5,672
_ 4,637 3,564 2,134 5,474 4,602 3,639 3,172
_ (4,910) _ _ _ _ _ _
________________________________________________________________________________
$18,887 $7,278 $15,235 $(6,688) $16,847 $21,420 $15,940 $8,844
________________________________________________________________________________
$11,018 $10,907 $12,585 $11,285 $9,887 $7,608 $7,788 $7,057
23,535 17,089 8,353 11,539 20,607 17,470 9,750 7,432
$0.70 $0.27 $0.57 $(0.25) $0.63 $0.81 $0.62 $0.36
0.69 0.27 0.56 (0.25) 0.63 0.81 0.62 0.36
0.15 0.145 0.13 0.13 0.13 0.11 .085 0.075
5.10 4.52 4.43 4.06 4.42 3.94 3.26 2.77
$88,278 $87,793 $68,551 $69,143 $66,302 $72,811 $58,786 $44,986
89,201 75,501 78,150 84,144 81,675 71,872 53,135 53,785
283,443 261,275 286,076 291,041 291,163 268,216 225,461 203,674
43,242 44,076 69,735 81,698 63,003 66,774 47,337 52,780
137,582 121,841 118,428 108,142 117,200 104,069 84,163 68,591
197,591 180,961 200,501 205,618 191,255 180,464 138,392 128,561
15.5% 6.1% 14.1% (5.7%) 16.2% 25.5% 23.2% 14.4%
10.2% 5.9% 7.8% (1.9%) 9.2% 11.0% 11.2% 6.1%
21.9% 24.4% 34.8% 39.7% 32.9% 37.0% 34.2% 41.1%
26,990 26,972 26,750 26,620 26,494 26,412 25,828 24,748
3,800 3,800 3,500 3,500 2,800 1,600 1,500 1,100
3,946 4,152 4,532 4,478 4,524 4,255 3,569 3,598
1997 Annual Report
23
58
Valmont Industries, Inc. and Subsidiaries
[Download Table]
Consolidated Statements of Operations
_______________________________________
Three-year period ended December 27, 1997
(Dollars in thousands, except per share amounts)
1997 1996 1995
_______________________________________________________________________________
Net sales $622,506 $644,531 $544,642
Cost of sales 453,326 472,463 399,691
Gross profit 169,180 172,068 144,951
Selling, general and administrative expenses 107,190 119,624 103,120
Asset valuation charge _ 15,800 _
_______________________________________________
Operating income 61,990 36,644 41,831
_______________________________________________
Other income (deductions):
Interest expense (3,731) (3,952) (4,331)
Interest income 900 344 820
Miscellaneous (215) 112 139
_______________________________________________
(3,046) (3,596) (3,372)
_______________________________________________
Earnings before income taxes 58,944 33,048 38,459
_______________________________________________
Income tax expense (benefit):
Current 14,400 19,970 13,713
Deferred 7,000 (8,170) (13)
_______________________________________________
21,400 11,800 13,700
_______________________________________________
Net earnings $37,544 $21,248 $24,759
_______________________________________________
Earnings per share
Basic $1.36 $0.78 $0.92
_______________________________________________
Diluted $1.33 $0.76 $0.90
_______________________________________________
Cash dividends per share $0.21875 $0.1875 $0.15
_______________________________________________
See accompanying notes to consolidated financial statements.
1997 Annual Report
24
59
[Download Table]
Consolidated Balance Sheets
_____________________________
December 27, 1997 and December 28, 1996
(Dollars in thousands)
1997 1996
_______________________________________________________________________________
Assets
Current assets:
Cash and cash equivalents $ 11,505 $ 9,483
Receivables, less allowance for doubtful
receivables of $2,132 in 1997 and $2,299 in 1996 110,531 82,224
Inventories 79,444 73,359
Assets held for sale _ 26,903
Prepaid expenses 3,388 2,356
Deferred income taxes 13,062 16,521
_______________________________
Total current assets 217,930 210,846
_______________________________
Property, plant and equipment, at cost 258,478 228,247
Less accumulated depreciation and amortization 117,644 107,668
_______________________________
Net property, plant and equipment 140,834 120,579
_______________________________
Other assets:
Investments in nonconsolidated affiliates 4,730 4,307
Other 4,558 5,916
_______________________________
Total other assets 9,288 10,223
_______________________________
Total assets $ 368,052 $ 341,648
_______________________________
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt $ 7,317 $ 7,693
Notes payable to banks 18,545 24,007
Accounts payable 48,717 43,699
Accrued expenses 47,380 52,678
Dividends payable 1,555 1,366
_______________________________
Total current liabilities 123,514 129,443
_______________________________
Deferred income taxes 9,038 9,531
Long-term debt, excluding current installments 20,743 21,880
Minority interest in consolidated subsidiaries 3,957 2,250
Other noncurrent liabilities 3,698 3,313
Shareholders' equity:
Preferred stock of $1 par value.
Authorized 500,000 shares; none issued _ _
Common stock of $1 par value.
Authorized 36,000,000 shares; issued 27,900,000
shares in 1997 ,(13,950,000 shares in 1996) 27,900 13,950
Additional paid-in capital 838 6,458
Retained earnings 179,360 153,146
Currency translation adjustment (966) 1,737
_______________________________
207,132 175,291
Less:
Cost of common shares in treasury-
259,031 in 1997 (569,216 in 1996) 8 18
Unearned restricted stock 22 42
_______________________________
Total shareholders' equity 207,102 175,231
_______________________________
Total liabilities and shareholders' equity $ 368,052 $ 341,648
_______________________________
See accompanying notes to consolidated financial statements.
1997 Annual Report
25
60
Valmont Industries, Inc. and Subsidiaries
[Download Table]
Consolidated Statements of Cash Flows
________________________________________
Three-year period ended December 27, 1997
(Dollars in thousands)
1997 1996 1995
________________________________________________________________________________
Cash flows from operations:
Net earnings $ 37,544 $ 21,248 $ 24,759
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 16,437 14,832 12,361
Other adjustments 1,385 580 (102)
Changes in assets and liabilities:
Receivables (32,040) (16,484) (2,681)
Inventories (7,671) (16,270) (9,742)
Prepaid expenses (1,081) (1,217) 261
Accounts payable 7,154 10,120 1,486
Accrued expenses (4,297) 15,022 3,444
Other noncurrent liabilities 769 (394) (1,226)
Income taxes 5,147 (7,594) 64
___________________________________________
Net cash provided by operations 23,347 19,843 28,624
___________________________________________
Cash flows from investing activities:
Purchase of property, plant
and equipment (39,115) (35,559) (34,772)
Purchase of minority interest (627) _ _
Acquisitions _ (1,255) _
Investment in nonconsolidated
affiliate (377) _ _
Proceeds from investment by
minority shareholders 1,959 97 1,677
Change in other assets 924 (1,246) 1,461
Proceeds from sale of assets
held for sale 26,903 _ _
Proceeds from sale of property
and equipment 289 858 212
Other, net (3) (260) 418
___________________________________________
Net cash used in investment
activities (10,047) (37,365) (31,004)
___________________________________________
Cash flows from financing activities:
Net borrowings (repayments)
under short-term agreements (4,550) 20,630 1,754
Proceeds from long-term borrowings 7,172 1,942 _
Principal payments on long-term
obligations (7,856) (8,142) (7,489)
Dividends paid (5,838) (4,762) (3,612)
Distributions of pooled company _ _ (2,063)
Proceeds from exercises under stock plans 3,067 2,073 1,193
Purchase of common treasury shares (3,273) (1,732) (535)
___________________________________________
Net cash provided (used)
in financing activities (11,278) 10,009 (10,752)
___________________________________________
Net increase (decrease) in cash
and cash equivalents 2,022 (7,513) (13,132)
Cash and cash equivalents -
beginning of year 9,483 16,996 30,128
___________________________________________
Cash and cash equivalents -
end of year $ 11,505 $ 9,483 $ 16,996
___________________________________________
See accompanying notes to consolidated financial statements.
1997 Annual Report
26
61
[Enlarge/Download Table]
Consolidated Statements of Shareholders' Equity
_______________________________________________
Three-year period ended December 27, 1997
(Dollars in thousands, except per share amounts)
Additional Unearned Total
Common paid-in Retained Currency Treasury restricted shareholders'
Stock capital earnings translation Stock stock equity
___________________________________________________________________________________________________
Balance at
December 31, 1994 $13,950 $4,285 $118,076 $2,001 $ (648) $ (82) $137,582
Net earnings _ _ 24,759 _ _ _ 24,759
Cash dividends
($0.15 per share) _ _ (3,763) _ _ _ (3,763)
Cash distributions
of pooled company _ _ (2,063) _ _ _ (2,063)
Currency translation
adjustment _ _ _ 1,688 _ _ 1,688
Purchase of 42,498
common shares _ _ _ _ (535) _ (535)
Stock options exercised;
158,392 shares issued _ 34 _ _ 1,159 _ 1,193
Tax benefit from exercise
of stock options _ 338 _ _ _ _ 338
Stock awards;
14,000 shares issued _ 37 _ _ _ 20 57
_________________________________________________________________________
Balance at
December 30, 1995 13,950 4,694 137,009 3,689 (24) (62) 159,256
Net earnings _ _ 21,248 _ _ _ 21,248
Cash dividends
($0.1875 per share) _ _ (5,111) _ _ _ (5,111)
Currency translation
adjustment _ _ _ (1,952) _ _ (1,952)
Purchase of 97,444
common shares _ _ _ _ (1,732) _ (1,732)
Stock options exercised;
280,000 shares issued _ 335 _ _ 1,738 _ 2,073
Tax benefit from exercise
of stock options _ 1,023 _ _ _ _ 1,023
Stock awards;
27,824 shares issued _ 406 _ _ _ 20 426
_________________________________________________________________________
Balance at
December 28, 1996 13,950 6,458 153,146 1,737 (18) (42) 175,231
Net earnings _ _ 37,544 _ _ _ 37,544
Cash dividends
($0.21875 per share) _ _ (6,027) _ _ _ (6,027)
Currency translation
adjustment _ _ _ 2,703) _ _ (2,703)
Purchase of 154,039
common shares _ _ _ _ (3,273) _ (3,273)
Sale of 43,914
common shares _ 905 _ _ _ _ 905
Stock options exercised;
393,164 shares issued _ (216) _ _ 3,283 _ 3,067
Tax benefit from exercise
of stock options _ 1,796 _ _ _ _ 1,796
Stock awards;
27,146 shares issued _ 542 _ _ _ 20 562
Two-for-one
stock split 13,950 (8,647) (5,303) _ _ _ _
_________________________________________________________________________
Balance at
December 27, 1997 $27,900 $838 $179,360 $(966) $(8) $(22) $207,102
_________________________________________________________________________
See accompanying notes to consolidated financial statements.
1997 Annual Report
27
62
Valmont Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
__________________________________________
Three-year period ended December 27, 1997
(Dollars in thousands, except per share amounts)
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
Valmont Industries, Inc. (the Company) and its wholly and majority-
owned subsidiaries. Investments in 20% to 50% owned affiliates
are accounted for on the equity method, and investments in less
than 20% owned affiliates are accounted for on the cost method.
All significant intercompany items have been eliminated. Certain
acquisitions and divestitures, and the accounting principles
followed, are described in Note 14.
Operations
The Company designs, manufactures and distributes agricultural
irrigation equipment, engineered metal structures, and fabricated
products.
Fiscal Year
The Company operates on a 52/53 week fiscal year basis with each
year ending on the last Saturday in December. Accordingly, the
Company's fiscal years 1997, 1996 and 1995 ended on December 27,
December 28 and December 30, respectively, and each of these
fiscal years consisted of 52 weeks.
Inventories
At December 27, 1997 approximately 64% of inventory is valued at
the lower of cost, determined on the basis of the last-in, first-
out (LIFO) method or market. All other inventory is valued at the
lower of cost, determined on the basis of the first-in, first-out
(FIFO) method or market.
The excess of replacement cost of inventories over the LIFO value
is approximately $11,000 and $10,400 at December 27, 1997 and
December 28, 1996, respectively.
Impairment of Long-Lived Assets
In 1996 the Company adopted the Statement of Financial Accounting
Standards No. 121, (SFAS 121), "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed Of"
(Note 14). SFAS 121 prescribes that an impairment loss be
recognized if the carrying amount of an asset may not be
recoverable and exceeds estimated future undiscounted cash flows
of the asset. A recognized impairment loss reduces the carrying
amount of the asset to its estimated future discounted cash flows.
There was no effect on the Company in the adoption of this
standard as of the beginning of fiscal 1996.
Property, Plant and Equipment and Other Assets
Property, plant and equipment are recorded at historical cost.
The Company uses the straight-line method in computing
depreciation and amortization for financial reporting purposes and
generally uses accelerated methods for income tax purposes. The
annual provisions for depreciation and amortization have been
computed principally in accordance with the following ranges of
asset lives: buildings 15 to 40 years; machinery and equipment 3
to 12 years; intangibles 3 to 40 years.
Income Taxes
The Company uses the asset and liability method to calculate
deferred income taxes. Deferred tax assets and liabilities are
recognized on temporary differences between the financial
statement and the tax basis of assets and liabilities using
enacted tax rates. The effect of tax rate changes on deferred tax
assets and liabilities is recognized in income during the period
that includes the enactment date.
1997 Annual Report
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63
________________________________________
Foreign Currency Translations
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. Cumulative translation adjustments are
included as a separate component of shareholders' equity.
Earnings Per Share
Share and per share information have been adjusted to give effect
to the two-for-one stock split effected in the form of a dividend
on May 30, 1997. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No.128 "Earnings Per Share," which requires companies to present
basic earnings per share and diluted earnings per share, and
accordingly all prior periods have been restated. (Note 9).
Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted
accounting principles.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement No. 130, "Reporting Comprehensive Income," that
will be effective in 1998. The Company anticipates minimal impact
from the adoption of this statement.
Also in June 1997, the FASB issued Statement No. 131, "Disclosure
about Segments of an Enterprise and Related Information," that
will be effective in 1998. The Company currently complies with
most provisions of the statement and additional disclosure
required by the Statement is expected to be minimal.
(2) Cash Flow Supplementary Information
The Company considers all highly liquid temporary cash investments
purchased with a maturity of three months or less to be cash
equivalents. Cash payments for interest and income taxes (net of
refunds) were as follows:
1997 1996 1995
______________________________________________________________________
Interest $ 3,268 $ 3,824 $ 4,456
Income taxes 16,373 17,904 11,591
(3) Asset Valuation Charge
During 1996, the Company initiated a plan to dispose of its
ballast business. In January 1997, the Company sold this business
for approximately $25,000. As a result, the Company recorded a
pretax asset valuation charge of $15,800 ($10,100 after tax) in
the fourth quarter of 1996 to reduce the value of the net assets
of the ballast business to the sales price, net of expenses.
"Assets held for sale" in the balance sheet as of December 28,
1996 of $26,903 represents the carrying value of the net assets of
the ballast business. (Note 14).
(4) Property, Plant and Equipment
Property, plant and equipment, at cost, consists of the following:
1997 1996
_______________________________________________________
Land and improvements $ 12,661 $ 9,592
Buildings and improvements 65,495 56,818
Machinery and equipment 131,939 109,915
Transportation equipment 4,343 4,000
Office furniture and equipment 23,387 21,300
Construction in progress 20,653 26,622
____________________________
$ 258,478 $ 228,247
____________________________
The Company also leases certain facilities, machinery, computer
equipment and transportation equipment under operating leases with
unexpired terms ranging from one to eight years. Rental expense
for operating leases amounted to $4,920, $4,963 and $4,638 for
fiscal 1997, 1996 and 1995, respectively.
1997 Annual Report
29
64
Valmont Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(continued)
__________________________________________
Minimum lease payments under operating leases expiring subsequent
to December 27, 1997 are:
Fiscal Year Ending
1998 $ 3,150
1999 5,220
2000 4,676
2001 4,395
2002 3,049
Subsequent 2,409
___________
Total minimum lease payments $ 22,899
___________
(5) Bank Credit Arrangements
The Company maintains various lines of credit for short-term
borrowings totaling $47,000. The interest rates charged on these
lines of credit vary in relation to the banks' cost of funds. The
unused borrowings under the lines of credit were $34,000 at
December 27, 1997. The lines of credit can be modified at any
time at the option of the banks. The Company pays facility fees
of 1/8 of 1% in connection with $13,000 of its lines of credit,
and pays no fees in connection with the remaining lines of credit.
The weighted average interest rate on short-term borrowings was
5.7% at December 27, 1997 and 6.5% at December 28, 1996.
(6) Income Taxes
Income tax expense (benefit) consists of:
1997 1996 1995
_______________________________________________________________________
Current: Federal $ 11,423 $ 16,914 $ 10,919
State 940 1,086 954
Foreign 2,037 1,970 1,840
___________________________________________
14,400 19,970 13,713
___________________________________________
Deferred: Federal 5,963 (7,006) (11)
State 529 (392) (2)
Foreign 508 (772) _
___________________________________________
7,000 (8,170) (13)
___________________________________________
$ 21,400 $ 11,800 $ 13,700
___________________________________________
The reconciliations of the statutory Federal income tax rate and
the effective tax rates follow:
1997 1996 1995
_______________________________________________________________________
Statutory Federal
income tax rate 35.0 % 35.0 % 35.0 %
State income taxes,
net of Federal benefit 1.9 % 2.1 % 1.6 %
Other (0.6 %) (1.4 %) (1.0 %)
___________________________________________
36.3 % 35.7 % 35.6 %
___________________________________________
The tax effects of temporary differences that give rise to
deferred tax assets and liabilities at December 27, 1997 are
presented below:
1997 1996
________________________________________________________________________
Deferred tax assets:
Accrued expenses and allowances $ 11,920 $ 20,223
Allowance for doubtful receivables 166 311
Inventory capitalization 1,273 1,622
___________________________
Total deferred tax assets 13,359 22,156
___________________________
Deferred tax liabilities:
Plant and equipment 9,578 9,713
Lease transactions 1,586 1,682
Warranty accrual 1,373 1,373
Other 1,678 3,245
___________________________
Total deferred tax liabilities 14,215 16,013
___________________________
Net deferred tax assets (liabilities) $ (856) $ 6,143
___________________________
No valuation allowance for deferred tax assets has been provided
since all tax benefits are more likely than not to be used to
offset future taxable income.
(7) Long-Term Debt
1997 1996
________________________________________________________________________
9.40% to 12.77% promissory notes,
unsecured (a) $ 14,750 $ 19,250
Promissory note, secured (b) 2,165 4,762
Revolving credit agreement (c) 5,000 _
3.0% to 9.25% notes 6,145 5,561
___________________________
Total long-term debt 28,060 29,573
Less current installments of
long-term debt 7,317 7,693
___________________________
Long-term debt,
excluding current installments $ 20,743 $ 21,880
___________________________
1997 Annual Report
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65
________________________________________
(a) The promissory notes payable are due in varying annual
principal installments through 2001. The notes are subject to
prepayment in whole or in part with or without premium as
specified in the agreements.
(b) The promissory note totaling 12.9 million French francs is
due in 1998. The interest rate on the note is variable based on 6-
month PIBOR (Paris Interbank Offering Rate), or can be fixed at
the Company's option. At December 27, 1997 the effective interest
rate was 4.63%. The note is secured by the common stock of
Sermeto, S.A., a subsidiary of the Company.
(c) The revolving credit facility is an unsecured agreement
with a group of banks for a maximum of $100,000. The facility has
a termination date of June 30, 2002. The funds borrowed may be
repaid at any time without penalty, or additional funds may be
borrowed up to the facility limit. The Company may choose from
the following three interest rate alternatives: the higher of
prime rate and the Federal Funds Rate plus 0.50%; the applicable
Eurodollar rate plus a leverage ratio-based spread (which at
December 27, 1997 was 0.175%); or up to $50,000 at a rate
determined through a competitive bid process. The effective
interest rate at December 27, 1997 was 6.18%.
The agreements place certain restrictions on working capital,
capital expenditures, payment of dividends, purchase of Company
stock and additional borrowings. The amount of retained earnings
at December 27, 1997 not restricted as to payment of cash
dividends and purchase of the Company's capital stock under the
most restrictive provisions of the agreements was approximately
$90,000.
The minimum aggregate maturities of long-term debt for each
of the four years following 1998 are: $5,175, $4,010, $2,736 and
$5,494.
(8) Stock Plans
The Company maintains stock-based compensation plans approved
by the shareholders which provide that the Compensation Committee
of the Board of Directors may grant incentive stock options,
nonqualified stock options, stock appreciation rights, restricted
stock awards and bonuses of common stock. Under the plans the
Company may grant options or other stock awards to its employees
for up to 5,400,000 shares of common stock. The optioned shares
are subject to changes in capitalization.
Under the plans, the exercise price of each option equals the
market price at the time of the grant. Options vest beginning on
the first anniversary of the grant in equal amounts over three to
six years or on the fifth anniversary of the grant. Expiration of
grants is from six to ten years from the date of grant.
The Company applies APB Opinion 25 in accounting for its
fixed stock compensation plans. Accordingly, no compensation cost
has been recognized for the fixed plans in 1995, 1996 or 1997.
Had compensation cost been determined on the basis of fair value
pursuant to Statement of Financial Accounting Standards No. 123,
net income and earnings per share would have been reduced as
follows:
1997 1996 1995
_________________________________
Net income
As reported $ 37,544 $ 21,248 $ 24,759
Pro forma 36,584 20,561 24,699
Primary earnings per share
As reported: Basic $ 1.36 $ 0.78 $ 0.92
Diluted 1.33 0.76 0.90
Pro forma: Basic $ 1.33 $ 0.75 $ 0.91
Diluted 1.30 0.73 0.90
1997 Annual Report
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66
Valmont Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(continued)
__________________________________________
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1995 and
1996: dividend yield of 1.03%; expected volatility of 28%; risk-
free interest rate of 6.11%; and expected lives of 2.5 years from
vesting date. For the year 1997 the following assumptions were
used: dividend yield of 1.03%; expected volatility of 29%; risk-
free interest rate of 5.75%; and expected lives of 2.7 years from
vesting date.
Following is a summary of the activity of the stock plans during
1995, 1996 and 1997:
Weighted
Average
Number of Exercise
Shares Price
______________________________________________________________
Outstanding at December 31, 1994 1,567,548 $ 7.62
Granted 403,000 11.68
Exercised (158,392) (6.79)
Forfeited (22,114) (9.25)
__________________________
Outstanding at December 30, 1995 1,790,042 $ 8.61
__________________________
Options exercisable at
December 30, 1995 756,376 $ 6.96
__________________________
Weighted average fair value of
options granted during 1995 $ 3.67
__________________________
Weighted
Average
Number of Exercise
Shares Price
______________________________________________________________
Outstanding at December 30, 1995 1,790,042 $ 8.61
Granted 414,030 18.64
Exercised (280,000) ( 7.41)
Forfeited (57,098) ( 5.57)
__________________________
Outstanding at December 28, 1996 1,866,974 $ 11.11
__________________________
Options exercisable at
December 28, 1996 825,306 $ 8.33
__________________________
Weighted average fair value of
options granted during 1996 $ 6.24
__________________________
Weighted
Average
Number of Exercise
Shares Price
______________________________________________________________
Outstanding at December 28, 1996 1,866,974 $ 11.11
Granted 443,414 21.48
Exercised (308,876) ( 7.43)
Forfeited (76,850) (14.34)
__________________________
Outstanding at December 27, 1997 1,924,662 $ 13.96
__________________________
Options exercisable at
December 27, 1997 919,801 $ 10.22
__________________________
Weighted average fair value of
options granted during 1997 $ 6.56
__________________________
Following is a summary of the status of stock options outstanding
at December 27, 1997:
[Download Table]
Outstanding and Exercisable By Price Range
Options Outstanding Options Exercisable
________________________________________________ ________________________
Weighted
Average Weighted Weighted
Exercise Remaining Average Average
Price Contractual Exercise Exercise
Range Number Life Price Number Price
________________________________________________ ________________________
$ 5.50- 9.13 725,119 5.13 years $ 8.26 589,926 $ 8.24
9.63-12.25 390,733 7.51 years 11.65 232,049 11.74
15.88-19.50 408,400 8.85 years 18.73 70,446 17.81
19.88-21.38 33,410 5.48 years 20.58 27,380 20.48
21.78-21.78 367,000 9.95 years 21.78 _ _
________________________________________________ ________________________
1,924,662 919,801
________________________________________________ ________________________
1997 Annual Report
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67
________________________________________
(9) Earnings Per Share
The FASB issued SFAS 128, "Earnings Per Share" (EPS), which
is effective for 1997 financial statements. SFAS 128 requires
dual presentation of Basic and Diluted EPS, as well as restatement
of EPS for all periods for which an income statement or summary of
earnings is presented. The following table provides a
reconciliation between Basic and Diluted EPS.
_________________________________________________________________________
Basic Dilutive Effect Diluted
EPS of Stock Options EPS
_________________________________________________________________________
1995:
Net earnings $ 24,759 _ $ 24,759
Shares 27,018 459 27,477
Per share amount $ 0.92 _ $ 0.90
1996:
Net earnings $ 21,248 _ $ 21,248
Shares 27,308 751 28,059
Per share amount $ 0.78 _ $ 0.76
1997:
Net earnings $ 37,544 _ $ 37,544
Shares 27,521 686 28,207
Per share amount $ 1.36 _ $ 1.33
(10) Employee Retirement Savings Plan
Established under Internal Revenue Code Section 401(k), the
Valmont Employee Retirement Savings Plan is available to all
eligible employees. Participants can elect to contribute up to
15% of annual pay, on a pre-tax and/or after-tax basis. The
Company may also make basic, matching and/or supplemental
contributions to the Plan. In addition, the Company has a defined
contribution plan covering the employees of Microflect;
contributions under this plan are based primarily on the
performance of the business unit and employee compensation. The
1997, 1996 and 1995 Company contributions to these plans amounted
to approximately $5,400, $5,000 and $4,700, respectively.
(11) Research and Development
Research and development costs are charged to operations in the
year incurred. Research and development expenses determined in
accordance with FASB Statement No. 2, "Accounting for Research and
Development Costs" were approximately $3,700 in 1997, $3,900 in
1996, and $2,800 in 1995.
(12) Disclosures About the Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, receivables,
accounts payable, notes payable to banks and accrued expenses
approximates fair value because of the short maturity of these
instruments. The fair values of each of the Company's long-term
debt instruments are based on the amount of future cash flows
associated with each instrument discounted using the Company's
current borrowing rate for similar debt instruments of comparable
maturity. The fair value estimates are made at a specific point
in time and the underlying assumptions are subject to change based
on market conditions. At December 27, 1997, the carrying amount
of the Company's long-term debt was $28,060 with an estimated fair
value of approximately $29,000. At December 28, 1996, the
carrying amount of the Company's long-term debt was $29,573 with
an estimated fair value of approximately $30,000.
1997 Annual Report
33
68
Valmont Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(continued)
__________________________________________
(13) Stockholders' Right Plan
In December 1995 the Company's Board of Directors declared a
dividend of one preferred stock purchase right ("Right") for each
outstanding share of common stock. The Right becomes exercisable
ten days after a person (other than Robert B. Daugherty and his
related persons and entities) acquires or commences a tender offer
for 15% or more of the Company's common stock. Each Right
entitles the holder to purchase one one-thousandth of a share of a
new series of preferred stock at an exercise price of $100,
subject to adjustment. The Right expires on December 19, 2005 and
may be redeemed at the option of the Company at $0.01 per Right,
subject to adjustment. Under certain circumstances, if (i) any
person becomes an Acquiring Person or (ii) the Company is acquired
in a merger or other business combination, each holder of a Right
(other than the Acquiring Person) will have the right to receive,
upon exercise of the Right, shares of common stock (of the Company
under (i) and of the acquiring company under (ii)) having a value
of twice the exercise price of the Right.
(14) Divestiture and Acquisitions
In January 1997, the Company sold the common stock of Valmont
Electric, Inc. for approximately $25,000. In accordance with SFAS
121, the net assets of Valmont Electric were reduced to fair
market value and reclassified on the December 28, 1996, balance
sheet as "Assets held for sale." (Note 3).
In February 1996, the Company purchased a majority interest in
Telec Centre S.A., a small French manufacturer of communication
towers. In March 1996, the Company purchased a majority interest
in Gibo-Conimast GmbH, a German manufacturer and distributor of
pole structures for the lighting market.
In July, 1995, Microflect Company, Inc. was merged with and became
a wholly-owned subsidiary of the Company pursuant to the terms of
an agreement and Plan of Merger under which the Company exchanged
3,900,000 shares of its common stock for all of the outstanding
common stock of Microflect. The merger qualified as a tax-free
reorganization and was accounted for as a pooling of interests.
Accordingly, the Company's consolidated financial statements
include the results of Microflect for all periods presented.
(15) Business Segments
The Company's business activities are currently classified into
the following industry segments:
* Industrial Products - The manufacture and distribution
of engineered metal structures and fabricated products.
* Irrigation Products - The manufacture and distribution
of agricultural irrigation equipment and related products.
Financial information concerning the Company's business segments
is summarized on the following page and is considered an integral
part of this note.
1997 Annual Report
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69
[Download Table]
Business Segment Information
______________________________
Summary by Business Segments
(Dollars in thousands)
1997 1996 1995
_______________________________________________________________________________
Operating Results
Net Sales:
Industrial Products $ 380,788 $ 432,050 $ 381,898
Irrigation Products 241,718 212,481 162,744
____________________________________________
Total $ 622,506 $ 644,531 $ 544,642
Operating Income:
Industrial Products $ 40,361 $ 36,591 $ 35,924
Irrigation Products 33,976 29,766 18,736
____________________________________________
Total 74,337 66,357 54,660
General Corporate Expense, Net (12,347) (13,913) (12,829)
Asset Valuation Charge _ (15,800) _
Interest Expense, Net (2,831) (3,608) (3,511)
Miscellaneous (215) 12 139
____________________________________________
Earnings before income taxes $ 58,944 $ 33,048 $ 38,459
____________________________________________
Identifiable Assets:
Industrial Products $ 250,645 $ 248,227 $ 234,818
Irrigation Products 96,893 65,326 51,792
Corporate 20,514 28,095 22,100
____________________________________________
Total $ 368,052 $ 341,648 $ 308,710
____________________________________________
Capital Expenditures:
Industrial Products $ 28,894 $ 26,808 $ 30,200
Irrigation Products 8,694 8,720 4,204
Corporate 1,527 31 368
____________________________________________
Total $ 39,115 $ 35,559 $ 34,772
____________________________________________
Depreciation and Amortization:
Industrial Products $ 11,678 $ 11,259 $ 8,727
Irrigation Products 4,273 3,080 2,923
Corporate 486 493 711
____________________________________________
Total $ 16,437 $ 14,832 $ 12,361
____________________________________________
Summary by Geographical Area:
Net Sales:
United States $ 463,717 $ 511,516 $ 447,685
Europe 69,037 77,605 64,745
Other 89,752 55,410 32,212
____________________________________________
Total $ 622,506 $ 644,531 $ 544,642
____________________________________________
Operating Income:
United States $ 66,519 $ 58,424 $ 47,543
Europe 5,386 4,775 4,936
Other 2,432 3,158 2,181
____________________________________________
Total $ 74,337 $ 66,357 $ 54,660
____________________________________________
Identifiable Assets:
United States $ 264,111 $ 261,785 $ 228,681
Europe 73,960 64,819 64,790
Other 29,981 15,044 15,239
____________________________________________
Total $ 368,052 $ 341,648 $ 308,710
____________________________________________
Net sales by business segment are to unaffiliated customers. Net
sales by geographical area are based on destination of sales.
Operating income by business segment is based on net sales less
identifiable operating expenses. Operating income by geographical
area is based on destination of sales less appropriate expense
allocations.
Corporate assets consist of cash, deferred income taxes,
investment in nonconsolidated affiliates, and administrative
buildings and equipment. Identifiable assets by geographical area
are based on location of facilities.
1997 Annual Report
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70
Valmont Industries, Inc. and Subsidiaries
[Download Table]
Quarterly Financial Data
(unaudited)
__________________________
Three-year period ended December 27, 1997
(Dollars in thousands, except per share amounts)
Net Earnings (Loss)
Net Gross Per Share Stock Price Dividends
Sales Profit Amount Basic Diluted High Low Declared
________________________________________________________________________________
1997
First $165,418 $ 44,616 $ 8,954 $0.33 $0.32 $22.63 $ 8.63 $0.05000
Second 159,100 44,144 9,893 0.36 0.35 22.38 18.50 0.05625
Third 136,015 37,746 7,857 0.28 0.28 21.88 19.00 0.05625
Fourth 161,973 42,674 10,840 0.39 0.38 23.88 19.00 0.05625
________________________________________________________________________________
Year $622,506 $169,180 $37,544 $1.36 $1.33 $23.88 $18.50 $0.21875
________________________________________________________________________________
1996
First $148,914 $ 39,999 $ 6,946 $ .26 $ .25 $15.07 $12.13 $0.03750
Second 166,849 43,913 8,501 .32 .30 17.00 14.75 0.05000
Third 148,048 40,583 6,578 .24 .24 18.00 14.13 0.05000
Fourth 180,720 47,573 (777)1 (.03)1 (.03)1 19.75 16.88 0.05000
________________________________________________________________________________
Year $644,531 $172,068 $21,2481 $.78(1)$.76(1)$19.75 $12.13 $0.18750
________________________________________________________________________________
1995
First $142,223 $ 34,877 $ 5,694 $ .21 $ .21 $10.75 $ 8.13 $0.03750
Second 133,418 34,948 6,691 .25 .25 11.00 9.75 0.03750
Third 128,269 35,099 5,271 .20 .19 12.13 10.37 0.03750
Fourth 140,732 40,027 7,103 .26 .25 13.00 11.75 0.03750
________________________________________________________________________________
Year $544,642 $144,951 $24,759 $ .92 $ .90 $13.00 $ 8.13 $0.15000
________________________________________________________________________________
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.
Per share amounts have been adjusted for the 2-for-1 stock split
effected in the form of a dividend on May 30, 1997.
1 After a pre-tax asset valuation charge of assets of $15,800,
($10,100 after tax or $0.36 per share). (Note 3).
1997 Annual Report
36
71
Valmont Industries, Inc. and Subsidiaries
Report of Independent Accountants
_________________________________
To the Board of Directors and Shareholders of Valmont Industries, Inc.
We have audited the accompanying consolidated balance sheets of
Valmont Industries, Inc. and subsidiaries as of December 27, 1997
and December 28, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits. The financial
statements of the Company for the year ended December 30, 1995
were audited by other auditors whose report, dated February 16,
1996, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the 1997 and 1996 consolidated financial
statements present fairly, in all material respects, the financial
position of Valmont Industries, Inc. and subsidiaries as of
December 27, 1997 and December 28, 1996, and the results of their
operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP SIGNATURE:
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 6, 1998
1997 Annual Report
37
72
Valmont Industries, Inc. and Subsidiaries
Report of Management
____________________
The consolidated financial statements of Valmont Industries, Inc.
and Subsidiaries and the other information contained in the Annual
Report were prepared by and are the responsibility of management.
The statements have been prepared in accordance with generally
accepted accounting principles and necessarily include amounts
based on management's best estimates and judgments.
In fulfilling its responsibilities, management relies on a system
of internal controls which provide reasonable assurance that the
financial records are reliable for preparing financial statements
and maintaining accountability of assets. Internal controls are
designed to reduce the risk that material errors or irregularities
in the financial statements may occur and not be timely detected.
These systems are augmented by written policies, careful selection
and training of qualified personnel, an organizational structure
providing for the division of responsibilities and a program of
financial, operational and systems audits. The Company also has a
business ethics policy which requires employees to maintain high
ethical standards in the conduct of Company business.
The Audit Committee, composed of non-employee directors is
responsible for recommending to the Board of Directors, subject to
ratification by shareholders, the independent accounting firm to
be retained each year. The Audit Committee meets regularly, and
when appropriate separately, with the independent certified public
accountants, management and the internal auditors to review
company performance. The independent certified public
accountants, internal auditors, and the Audit Committee have
unrestricted access to each other in the discharge of their
responsibilities.
MOGEN C. BAY SIGNATURE:
Mogens C. Bay
Chairman and Chief Executive Officer
TERRY J. MCCLAIN SIGNATURE:
Terry J. McClain
Senior Vice President and Chief Financial Officer
1997 Annual Report
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73
Officers and Management
_______________________
Corporate
______________________________
Office of the President
Mogens C. Bay
Chairman and Chief Executive Officer
Gary L. Cavey
Group President and Chief Operating Officer
Industrial Products Group
Vincent T. Corso
Group President and Chief Operating Officer
Irrigation & Coatings Group
Joseph M. Goecke
President
North American Irrigation Division
Terry J. McClain
Senior Vice President and
Chief Financial Officer
E. Robert Meaney
President and Chief Operating Officer
Valmont International
Corporate Officers
Mogens C. Bay
Chairman and Chief Executive Officer
Thomas P. Egan, Jr.
Vice President
Corporate Counsel and Secretary
Terry J. McClain
Senior Vice President and
Chief Financial Officer
Brian C. Stanley
Vice President
Investor Relations and Controller
Mark E. Treinen
Vice President
Business Development
Groups and Divisions
______________________________
Industrial Products Group
Gary L. Cavey
Group President and Chief Operating Officer
Leonard M. Adams
Vice President
Operations, North America
James R. Callaway
General Manager
Communication Products
John R. Foley
General Manager
Fabricated Products
Gerald A. Roessner
Group Controller
Richard M. Sampson
Vice President
Marketing & Sales
Thomas F. Sanderson
General Manager
Lighting & Traffic Products
Thomas J. Sutko
General Manager
Utility Products
Valmont International
E. Robert Meaney
President and Chief Operating Officer
Jan Driessens
President - Europe
Mark C. Jaksich
Division Controller
Cheyenne Yu
General Manager - China
Irrigation & Coatings Group
Vincent T. Corso
Group President and Chief Operating Officer
Joseph M. Goecke
President
North American Irrigation Division
Richard T. Andrulis
Vice President and General Manager
Parts Operations
James J. Eiting
Vice President
Sales
Hector A. Haget
Vice President
Marketing & Engineering
Dennis G. Thome
Vice President
Operations
Terry Lammert
Group Controller
Dennis E. Schwieger
Vice President and General Manager
International Irrigation
Richard D. Berkland
Vice President - Marketing & Sales
International Irrigation
Jeffrey Briggs
President
Coatings Division
Richard S. Cornish
Vice President
Operations
1997 Annual Report
39
74
Valmont Industries, Inc. and Subsidiaries
Board of Directors
__________________
PHOTO:
(from left)
Allen F. Jacobson
Lloyd P. Johnson
Charles M. Harper
Kenneth E. Stinson
Mogens C. Bay
Robert B. Daugherty
Thomas F. Madison
Robert G. Wallace
John E. Jones
Walter Scott, Jr.
Board of Directors
______________________________
Mogens C. Bay
Chairman and Chief Executive Officer
Valmont Industries, Inc.
Director since 1993
Robert B. Daugherty
Founder and Chairman Emeritus
Valmont Industries, Inc.
Director since 1947
Charles M. Harper
Former Chairman and CEO
RJR Nabisco Holdings Corp. and ConAgra, Inc.
Director since 1979
Allen F. Jacobson
Retired Chairman and CEO
3M Company
Director since 1976
Lloyd P. Johnson
Retired Chairman of the Board
Norwest Corporation
Director since 1991
John E. Jones
Retired Chairman, President and CEO
CBI Industries, Inc.
Director since 1993
Thomas F. Madison
President, MLM Partners
Chairman of the Board
Communications Holdings, Inc.
Director since 1987
Walter Scott, Jr.
Chairman and President
Peter Kiewit Sons', Inc.
Director since 1981
Kenneth E. Stinson
Chairman and CEO
Kiewit Construction Group Inc.
Director since 1996
Robert G. Wallace
Retired Executive Vice President
Phillips Petroleum Co.
Director since 1984
Audit Committee
Walter Scott, Jr., Chairman
John E. Jones
Robert G. Wallace
Compensation Committee
Allen F. Jacobson, Chairman
Charles M. Harper
Lloyd P. Johnson
Thomas F. Madison
1997 Annual Report
40
75
(INSIDE BACK COVER)
Shareholder Information
_______________________
Corporate Headquarters
Valmont Industries, Inc.
Omaha, Nebraska USA
(402) 359-2201
Independent Public Accountants
Deloitte & Touche LLP
Omaha, Nebraska USA
Legal Counsel
McGrath, North, Mullin & Kratz, P.C.
Omaha, Nebraska USA
Stock Transfer Agent and Registrar
First National Bank of Omaha
Trust Department
One First National Center
Omaha, Nebraska 68102-1596 USA
(402) 341-0500
Notices regarding changes of address and inquiries regarding lost
dividend checks, lost or stolen certificates and transfers of
stock, should be directed to the transfer agent.
Annual Meeting
The annual meeting of Valmont's shareholders will be held at 2:00
p.m.
on Monday, April 27, 1998, at Joslyn Art Museum, 2200 Dodge
Street,
Omaha, Nebraska USA
Stock Trading
Valmont's common stock trades on the Nasdaq Stock Market under the
symbol VALM. Current share price and related information can be
found in the financial section of many daily newspapers.
Availability of 10-K Report
A copy of Valmont's 1997 Annual Report on Form 10-K may be
obtained by calling or writing:
Investor Relations Department
Valmont Industries, Inc.
P.O. Box 358
Valley, Nebraska 68064 USA
Phone: (402) 359-2201
Fax: (402) 343-0668
Availability of Quarterly Results
Valmont's most recent Quarterly News Releases are available on the
internet at www.valmont.com under the heading "Valmont News."
Stock Held in "Street Name"
Valmont maintains a direct mailing list to ensure that
shareholders with stock held in broker accounts receive
information on a timely basis. If you would like your name added
to this list, please direct your request to:
Investor Relations Department
Valmont Industries, Inc.
P.O. Box 358
Valley, Nebraska 68064 USA
Phone: (402) 359-2201
Fax: (402) 343-0668
Shareholder and Investor Relations
Valmont maintains an active investor relations program to keep
shareholders and potential investors informed about the Company.
Comments and inquiries are welcome and should be directed to:
Investor Relations Department
Valmont Industries, Inc.
P.O. Box 358
Valley, Nebraska, 68064 USA
Phone: (402) 359-2201
Fax: (402) 343-0668
Market Makers
The following firms make a market in Valmont Industries, Inc.
common stock as of March 1998:
Dain Rauscher Inc.
George K. Baum & Company
Herzog, Heine, Geduld, Inc.
Huntleigh Securities Corporation
Kirkpatrick Pettis Inc.
Lehman Brothers Inc.
Knight Securities, L.P.
Visit Valmont's Homepage
Our internet site (www.valmont.com) contains information about our
company and our products.
We aggressively participate in specific markets within two major
global economies: water management and infrastructure
development. First, we are the world leader in manufacturing
efficient irrigation equipment for agriculture... increasing crop
yields and conserving scarce water resources to meet the world's
growing demand for food through efficient water management.
Second, we are the world's leading producer of engineered poles,
towers, structures and other products and components for various
industries including lighting, utility and communication...
improving the world's infrastructure. In the future, we will grow
by leveraging our strengths. We will take new products and
technologies into existing markets and we will leverage our
current products and technologies in new markets. This is how we
create value for all Valmont shareholders.
76
(BACK COVER)
Valmont Industries, Inc.
P.O. Box 358 - Valley, Nebraska 68064 USA
402-359-2201 - Fax 402-343-0668
www.valmont.com
77
Dates Referenced Herein and Documents Incorporated by Reference
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