-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LR6+Vw6Jp/INKKs7ub9hJ8qwLeYHJK4nc2BMttXnyKqByaAQJjgtmDkBHgJUYTmw onN++croMcgfIyq8FdqtQQ== 0000102729-97-000007.txt : 19970326 0000102729-97-000007.hdr.sgml : 19970326 ACCESSION NUMBER: 0000102729-97-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19970325 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALMONT INDUSTRIES INC CENTRAL INDEX KEY: 0000102729 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED STRUCTURAL METAL PRODUCTS [3440] IRS NUMBER: 470351813 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-03701 FILM NUMBER: 97561995 BUSINESS ADDRESS: STREET 1: PO BOX 358 STREET 2: HWY 275 CITY: VALLEY STATE: NE ZIP: 68064 BUSINESS PHONE: 4023592201 MAIL ADDRESS: STREET 1: P O BOX 358 - HIGHWAY 275 CITY: VALLEY STATE: NE ZIP: 68064-0358 FORMER COMPANY: FORMER CONFORMED NAME: VALLEY MANUFACTURING CO DATE OF NAME CHANGE: 19680822 10-K 1 ANNUAL REPORT FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the Fiscal Year Ended December 28, 1996 Commission File No. 0-3701 Valmont Industries, Inc. ------------------------ (Exact Name of Registrant as Specified in its Charter) Delaware 47-0351813 -------- ---------- (State or Other Jurisdiction (I.R.S. Employer Identification of Incorporation or Organization) Number) Valley, Nebraska 68064 ---------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Phone Number, Including Area Code: (402) 359-2201 Securities Registered Pursuant to Section 12(g) of the Act: Valmont Industries, Inc. Common Stock ------------------------------------- $1.00 Par Value - Traded NASDAQ Stock Market (Symbol VALM) ---------------------------------------------------------- (Title of Class) ---------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes X No --- --- At March 7, 1997 there were outstanding 13,697,814 common shares of the Company. The aggregate market value of the voting stock held by non- affiliates of the Company on March 7, 1997 was $401,879,000. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Documents Incorporated by Reference ----------------------------------- Portions of the Company's annual report to shareholders for the fiscal year ended December 28, 1996 (the "Annual Report") are incorporated by reference in Parts I and II, and portions of the Company's proxy statement for its annual meeting of shareholders to be held on April 28, 1997 (the "Proxy Statement") are incorporated by reference in Part III. Page 1 of 61 ----- Index to Exhibits, Page 15 ----- 1 PART I Item 1. Business. (a) General Description of Business Valmont Industries, Inc., a Delaware Corporation, (together with its subsidiaries the "Company") is engaged in industrial products and irrigation products businesses. The Industrial Products segment involves the manufacture and distribution of engineered metal structures and other fabricated products for industrial and commercial applications. The Irrigation Products segment involves the manufacture and distribution of agricultural irrigation equipment and related products. The description of Valmont's businesses set forth on pages 4 through 9 of the Company's Annual Report is incorporated herein by reference. The Company entered the Irrigation Products market in 1953 from its manufacturing location in Valley, Nebraska. The Industrial Products segment began producing and marketing engineered metal structures as a result of manufacturing support efforts for the irrigation business. Valmont has grown internally and by acquisition. Valmont has also divested certain businesses. Valmont's acquisitions include (i) an expansion into the French steel and aluminum structures market in 1989 with the acquisition of Sermeto, (ii) the acquisition in 1991 of Valmont Nederland B.V. (formerly Nolte Mastenfabriek B.V.), a Dutch manufacturer of steel poles structures, (iii) the acquisition in 1991 of an 80% interest in Lampadaires Feralux, Inc., a Canadian producer of aluminum pole structures, (iv) the acquisition in 1994 of the assets of Energy Steel Corporation of Tulsa, Oklahoma, a manufacturer of utility products, (v) the acquisition of Microflect Company, Inc. in 1995, a manufacturer and installer of microwave communication structures, and (vi) the 1996 acquisitions of TelecCentre, S.A., a French manufacturer of communication towers, and of Gibo-Conimast & Co. KG, a German manufacturer and distributor of pole structures for the lighting market. Divestitures include (i) the 1989 divestiture of the Gate City Steel service center business, (ii) the 1993 exit of the Gate City Steel steel reinforcing bar business,(iii) the 1993 sale of its investment in Inacom Corp., a national microcomputer reseller business initially established as a division of the Company, (iv) the sale in 1994 of the assets of Good-All Electric, Inc., a Colorado producer of cathodic protection rectifiers, and (v) the January 1997 cash sale of the stock of Valmont Electric, Inc., a lighting ballast manufacturing business. 2 (b) Industry Segments The Company classifies its operations into two business segments: Industrial Products - The manufacture and distribution of engineered metal structures and other fabricated products. Irrigation Products - The manufacture and distribution of agricultural irrigation equipment and related products. The amounts of revenues, operating income and identifiable assets attributable to each segment for each of the last three years are set forth on page 29 of the Annual Report and incorporated herein by reference. (c) Narrative Description of Business Principal Products Produced and Services Rendered. -------------------------------------------------- The information called for by this item is hereby incorporated by reference to pages 4 through 9 in the Company's Annual Report. Suppliers and Availability of Raw Materials. -------------------------------------------- Hot rolled steel coil and other carbon steel products are the primary raw materials utilized in the manufacture of finished products for the Industrial Products and Irrigation Products segments. These essential items are purchased from steel mills and steel service centers and are readily available. It is not likely that key raw materials would be unavailable for extended periods. Patents, Licenses, Franchises and Concessions. ---------------------------------------------- Valmont has a number of patents for its irrigation and ballast designs. The Company also has a number of registered trademarks. Management believes the loss of any individual patent would not have a material adverse effect on the financial condition of the Company. Seasonal Factors in Business. ----------------------------- Sales in the Company's irrigation segment can be somewhat seasonal based upon the agricultural growing season. 3 Customers. ---------- The Company is not dependent for a material part of its business upon a single customer, or upon very few customers, the loss of any one of which would have a material adverse effect on the financial condition of the Company. Backlog. -------- The backlog of orders for the principal products manufactured and marketed was approximately $133.6 million at the end of the 1996 fiscal year and $109.6 million at the close of 1995. It is anticipated that most of the backlog of orders will be filled during fiscal year 1997. At year end, the backlog by segment was as follows (dollar amounts in millions): Dec. 28, Dec. 30, 1996 1995 --------- --------- Industrial Products $98.7 84.3 Irrigation Products 34.9 25.3 --------- --------- $133.6 109.6 ====== ====== Competitive Conditions. ----------------------- In the Industrial Products segment, Valmont is a major manufacturer and supplier of engineered metal structures to the lighting and traffic, utility and wireless communication industries; the Company delivers a broad line of custom engineered tubular steel products and manufactures and distributes lighting ballasts, fasteners and grating. The Irrigation Products segment involves the development, manufacture and distribution of mechanized irrigation equipment for both the U.S. and international markets. The Company believes it is the world's leading manufacturer of mechanized irrigation systems. The key competitive strategy used by the Company in each segment is one of high quality and service. Research Activities. -------------------- The information called for by this item is hereby incorporated by reference to the "Research and Development" on page 27 in the Company's Annual Report. 4 Environmental Disclosure. ------------------------- The Company is subject to various federal, state and local laws and regulations pertaining to environmental protection and the discharge of materials into the environment. Although the Company continues to incur expenses and to make capital expenditures related to environmental protection, it does not anticipate that future expenditures will materially impact the financial condition of the Company. Number of Employees. -------------------- At December 28, 1996, the number of employees was 4,868. Financial Information about Foreign Operations and Export Sales. ---------------------------------------------------------------- Valmont's international sales activity encompasses approximately ninety foreign countries. The information called for by this item is hereby incorporated by reference to "Summary by Geographical Area" on page 29 in the Annual Report. Item 2. Properties. ----------- The Company's primary plant and offices are located on a 352 acre site near Valley, Nebraska, which is approximately twenty miles west of Omaha, Nebraska. 336 of the acres are owned in fee. The other 16 acres are leased on a yearly basis from the Union Pacific Railroad Company, which serves the Company's primary plant, and which is entitled to terminate the lease on a one-year notice in the event that the land is required for railroad operations. The Valley, Nebraska location is used in common as the primary facilities by Irrigation Products and certain Industrial Products administrative and operating personnel. The Industrial Products segment's other significant properties are administrative, manufacturing and distribution facilities at Tulsa, Oklahoma and Brehnam, Texas. The Oklahoma facility has 350,000 square feet under roof on 24 acres of land whereas the Texas facility is located on 109 acres and has 190,000 square feet under roof with another 122,000 square feet under construction. The Company's Microflect subsidiary leases office and plant facilities in Salem, Oregon under long-term leases.. Overseas the Industrial Products division has four locations in France and a newly constructed plant in Shanghai, China. The Company operates other facilities as set forth on the inside of the back cover of the Company's Annual Report, which information is incorporated herein by reference. 5 Item 3. Pending Legal Proceedings. -------------------------- The Company is involved in a limited number of legal actions. Management believes that the ultimate resolution of all pending litigation will not have a material adverse effect on the Company's financial condition. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- Not applicable. Executive Officers of the Company - --------------------------------- The executive officers of the Company at December 28, 1996, their ages, positions held, and the business experience of each during the past five years are, as follows: Robert B. Daugherty, Age 75, Chairman of the Board and Director of the Company continuously since March 1947. Mogens C. Bay, Age 48, President and Chief Executive Officer of the Company since August 1993 and Director of the Company since October 1993. From 1991 to August 1993 served as President and Chief Operating Officer of the Irrigation Division of the Company. Gary L. Cavey, Age 48, President and Chief Operating Officer, Industrial Products Group since June 1995. President, North American Operations - Industrial and Construction Products of the Company from July 1994 to June 1995. From 1985 to July 1994 served as Vice President Marketing of Industrial and Construction Products of the Company. Phillip C. Cooke, Age 49, became an executive officer as Senior Vice President - Human Resources as of January 17, 1997. Previously Consolidated Communications Systems and Services, Inc. President from 1992 until November 1996. Vincent T. Corso, Age 49, Group President and Chief Operating Officer- Irrigation & Coatings Group. Previously Vice President -Operations from June 1994 until December 1996. Previously served as Vice President - Corporate Manufacturing, Emerson Electric from 1992 to June 1994 and Vice President of Operations for Appleton Electric (a wholly owned subsidiary of Emerson Electric) from 1987 to 1992. Thomas P. Egan, Jr., Age 48, Vice President, Corporate Counsel and Secretary of the Company since 1984. Joseph M. Goecke, Age 59, President and Chief Operating Officer - Valmont Irrigation since August 1993. Vice President -Operations of the Company's Irrigation Division from 1991 to August 1993. 6 Lewis P. Hays, Age 55, President, Valmont Europe since January 1996. Corporate Vice President from June 1995 until January 1996. President and Chief Operating Officer, Industrial and Construction Products of the Company from 1985 to June 1995. Terry J. McClain, Age 49, Senior Vice President and Chief Financial Officer. Previously Vice President and Chief Financial Officer of the Company from January 1994 until December 1996. Vice President -Finance and Accounting of the Irrigation Division of the Company from 1990 to January 1994. E. Robert Meaney, Age 49, President and Chief Operating Officer - Valmont International since February 1994. Previously served as President Directeur General, Continental Can France, S.A. from 1989 to February 1994. Howard G. Sachs, Age 54, President and Chief Operating Officer - Valmont Electric, Inc. since October 1993. Previously Honeywell Keyboard Division Vice President and General Manager from 1991 to October 1993. Brian C. Stanley, Age 54, Vice President - Investor Relations and Controller of the Company since January 1994. Vice President and Treasurer of the Company since 1990. Mark E. Treinen Age 41, Vice President - Business Development since January 1994. Director of Business Development of the Company from 1991 until January 1994. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder ---------------------------------------------------------------- Matters. -------- Item 6. Selected Financial Data. ------------------------ 7 Item 7. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations. ---------------------- The information called for by items 5, 6 and 7 is hereby incorporated by reference to the following captioned paragraphs (at the pages indicated) in the Company's Annual Report: Page(s) In Annual Item Caption in Annual Report Report ---- ------------------------ ------ 5 Stock Trading 34 5 Stock Market Price and Dividends Declared 30 5 Approximate Number of Shareholders 16 - 17 5&6 Selected Eleven Year Financial Data 16 - 17 7 Management's Discussion and Analysis 10 - 15 Item 8. Financial Statements and Supplementary Data. -------------------------------------------- The financial statements called for by this item are hereby incorporated by reference to the Company's Annual Report as set forth on pages 18 through 29, together with the independent auditors' report on page 31. The supplemental quarterly financial information is incorporated herein by reference to page 30 of the Company's Annual Report. The independent auditors' report for the years ended December 30, 1995 and December 31, 1994 are incorporated herein by reference to exhibit 99 of this Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and --------------------------------------------------------------- Financial Disclosure. --------------------- None. PART III -------- Item 10. Directors and Executive Officers of the Registrant. --------------------------------------------------- 8 Item 11. Executive Compensation. ----------------------- Item 12. Security Ownership of Certain Beneficial Owners and Management. --------------------------------------------------------------- Item 13. Certain Relationships and Related Transactions. ----------------------------------------------- Except for the information relating to the executive officers of the Company set forth in Part I of this 10-K Report, the information called for by items 10, 11, 12 and 13 is hereby incorporated by reference to pages 4 through 15 of the Company's Proxy Statement. PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. ---------------------------------------------------------------- (a)(1)(2) Financial Statements. See index to financial statement schedules --------------------- on page F-1. (a)(3) Exhibits. See exhibit index, incorporated herein by reference. --------- (b) Reports on Form 8-K. The Company filed no reports on Form 8-K -------------------- during the past fiscal quarter. 9 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules Consolidated Financial Statements The following consolidated financial statements of Valmont Industries, Inc. and subsidiaries have been incorporated by reference to pages 18 to 31 of the Company's Annual Report to Shareholders for the year ended December 28, 1996: Independent Auditors' Reports - 1996 is on page 31 of the annual report. See Exhibit 99 for the Independent Auditors' Report for 1995 and 1994. Consolidated Balance Sheets - December 28, 1996 and December 30, 1995 Consolidated Statements of Operations - Three-Year Period Ended December 28, 1996 Consolidated Statements of Shareholders' Equity - Three-Year Period Ended December 28, 1996 Consolidated Statements of Cash Flows - Three-Year Period Ended December 28, 1996 Notes to Consolidated Financial Statements - Three- Year Period Ended December 28, 1996 Page ---- Consolidated Financial Statement Schedule Supporting Consolidated Financial Statement SCHEDULE II - Valuation and Qualifying Accounts F-4 All other schedules have been omitted as the required information is inapplicable or the information is included in the consolidated financial statements or related notes. Separate financial statements of the Registrant have been omitted because the Registrant meets the requirements which permit omission. F-1 10 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE ------------------------------------------------------------ To the Board of Directors and Shareholders of Valmont Industries, Inc. Valley, Nebraska We have audited the consolidated financial statements of Valmont Industries, Inc. and Subsidiaries (the Company) as of December 28, 1996, and for the year then ended, and have issued our report thereon dated February 7; such financial statements and report are included in the 1996 Annual Report to Shareholders of the Company and are incorporated herein by reference. Our audit also included the 1996 financial statement schedule of the Company listed in Item 14 of the Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, such 1996 financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Omaha, Nebraska February 7, 1997 F-2 11 INDEPENDENT AUDITORS' REPORT ----------------------------- The Board of Directors and Shareholders Valmont Industries, Inc.: Under date of February 16, 1996, we reported on the consolidated balance sheets of Valmont Industries, Inc. and subsidiaries as of December 30, 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the two-year period ended December 30, 1995, as contained in the 1996 Annual Report to Shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1996. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the consolidated financial statement schedule for the two-year period ended December 30, 1995, as listed in the accompanying index. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP Omaha, Nebraska February 16, 1996 F-3 12 Schedule II VALMONT INDUSTRIES, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts (Dollars in thousands)
Balance at Charged to Deductions Balance at beginning profit and from close of period loss reserves* of period --------- ---- --------- --------- Fifty-two weeks ended December 28, 1996 - Reserve deducted in balance sheet from the asset to which it applies - Allowance for doubtful receivables $ 2,941 796 1,438 2,299 ======= ===== ===== ===== Fifty-three weeks ended December 30, 1995 - Reserve deducted in balance sheet from the asset to which it applies - Allowance for doubtful receivables $ 2,798 684 541 2,941 ======= ===== ===== ===== Fifty-two weeks ended December 31, 1994 - Reserve deducted in balance sheet from the asset to which it applies - Allowance for doubtful receivables $ 2,605 908 715 2,798 ======= ===== ===== ===== *The deductions from reserves are net of recoveries.
F-4 13 SIGNATURES The Registrant. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Omaha, State of Nebraska, on the 24th day of March, 1997. Valmont Industries, Inc. /S/Mogens C. Bay By ___________________________ Mogens C. Bay Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Valmont Industries, Inc. and in the capacities indicated on the dates indicated. /S/ Mogens C. Bay 3/24/97 - -------------------------- Director, President and ----------- Mogens C. Bay Chief Executive Officer Date (Principal Executive Officer) /S/ Terry J. McClain 3/24/97 - -------------------------- Vice President and ----------- Terry J. McClain Chief Financial Officer Date (Principal Financial Officer) /S/ Brian C. Stanley 3/24/97 - -------------------------- Vice President - Investor ---------- Brian C. Stanley Relations & Controller Date (Principal Accounting Officer) Robert B. Daugherty* John E. Jones * Charles M. Harper* Thomas F. Madison* Allen F. Jacobson* Walter Scott, Jr.* Lloyd P. Johnson * Kenneth E. Stinson* Robert G. Wallace * *Mogens C. Bay, by signing his name hereto, signs the Annual Report on behalf of each of the directors indicated on this 24th day of March, 1997. A Power of Attorney authorizing Mogens C. Bay to sign the Annual Report of Form 10-K on behalf of each of the indicated directors of Valmont Industries, Inc. has been filed herein as Exhibit 24. /S/ Mogens C. Bay By ------------------------- Mogens C. Bay Attorney-in-Fact 14 INDEX TO EXHIBITS This Exhibit Index relates to exhibits filed as a part of this Report. Numbers are assigned to exhibits in accordance with Item 601 of Regulation S-K. Page numbers relate to the pages in the sequential numbering system where the exhibits can be found (for those exhibits which are not incorporated by reference). Exhibit 2(a) Agreement and Plan of Merger dated July 9, 1995 among the Company and Microflect Company, Inc. This document was filed with the Company's Current Report on Form 8-K dated July 31, 1995 and is incorporated herein by reference. Exhibit 2(b) Stock Purchase Agreement dated January 3, 1997 between Valmont Industries, Inc. and Chicago Miniature Lamp, Inc. This document was filed with the Company's Current Report on Form 8-K dated January 29, 1997 and is incorporated herein by reference. Exhibit 3(a) - The Company's Certificate of Incorporation, as amended. This document was filed with the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 1996 and is incorporated herein by reference. Exhibit 3(b) - The Company's By-Laws, as amended. This document was filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 and is incorporated herein by reference. Exhibit 4 - Rights Agreement dated as of December 19, 1995 between the Company and First National Bank of Omaha as Rights Agent. This document was filed with the Company's Current Report on Form 8-K dated December 19, 1995 and is incorporated herein by reference. Exhibit 10(a) - The Company's 1983 Stock Option Plan. This document was filed as Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 1992 and is incorporated herein by reference. Exhibit 10(b) - The Company's 1988 Stock Plan and certain amendments. This document was filed as Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 1992 and is incorporated herein by reference. Exhibit 10(c) - Fourth Amendment to the Company's 1988 Stock Plan. This document was filed as Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 and is incorporated herein by reference. Exhibit 10(d) - Valmont Industries, Inc. 1994 Incentive Bonus Plan. This document was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 24, 1994 and is incorporated herein by reference. Exhibit 10(e) - The Company's 1996 Stock Plan. This document was filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 and is incorporated herein by reference. 15 Exhibit 10(f) - The Valmont Executive Incentive Plan. This document was filed as Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 and is incorporated herein by reference. Exhibit 11 - Statement Regarding Computation of Per Share Earnings...Page 17 Exhibit 13 - The Company's Annual Report to Shareholders for its fiscal year ended December 28, 1996.............Page 18 Exhibit 21 - Subsidiaries of the Company.............................Page 56 Exhibit 23(a) - Consent of Deloitte and Touche LLP......................Page 57 Exhibit 23(b) - Consent of KPMG Peat Marwick LLP........................Page 58 Exhibit 24 - Power of Attorney.......................................Page 59 Exhibit 27 - Financial Data Schedule.................................Page 60 Exhibit 99 - Independent Auditors' Report of KPMG Peat Marwick LLP...Page 61 Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with respect to Valmont Industries' long-term debt are not filed with this Form 10-K. Valmont will furnish a copy of such long-term debt agreements to the Securities and Exchange Commission upon request. Management contracts and compensatory plans are set forth as exhibits 10(a) through 10(f). 16 EX-11 2 Exhibit 11 VALMONT INDUSTRIES, INC. AND SUBSIDIARIES Statement Re: Computation of Per Share Earnings (Dollars in thousands, except per share amounts)
1996 1995 1994 ---- ---- ---- Net earnings $ 21,248 24,759 18,887 ======== ====== ====== Average number of shares outstanding: Primary 14,016,766 13,733,286 13,615,004 Fully diluted 14,105,085 13,815,191 13,628,950 ========== ========== ========== Earnings per share: Primary $ 1.52 1.80 1.39 Fully diluted 1.51 1.79 1.39 ====== ==== ====
Earnings per share are determined by dividing net earnings by the weighted number of shares outstanding and equivalent common shares from dilutive stock options. 17 EX-13 3 Exhibit 13 Outside front cover: VALMONT LOGO: 1996 Annual Report Serving Infrastructure Development And Irrigated Agriculture Worldwide 18 INSIDE FRONT COVER: Contents Valmont Industries, Inc. and Subsidiaries www.valmont.com Letter to Shareholders 2 From the Chairman About Valmont 4 Industrial Products 6 Irrigation Products 8 International Financial Review 10 Management's Discussion and Analysis 16 Selected Eleven-Year Financial Data 18 Consolidated Statements of Operations 19 Consolidated Balance Sheets 20 Consolidated Statements of Cash Flows 21 Consolidated Statements of Shareholders' Equity 22 Notes to Consolidated Financial Statements 29 Business Segment Information 30 Quarterly Financial Data 31 Report of Independent Accountants 31 Report of Management 32 Board of Directors and Officers 34 Shareholder Information Valmont participates in two global economies...infrastructure development and food production. We design and manufacture poles, towers and structures for lighting, communication and utility applications, mechanized irrigation equipment to enhance food production and fabricated products for various industrial uses. Valmont operates 18 plants located in eight countries in North and South America, Europe and Asia and markets its products in more than 90 countries around the world. This Annual Report contains forward looking statements which reflect management's current views 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 environment, 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. 19 Financial Highlights Valmont Industries, Inc. and Subsidiaries GLOBE ILLUSTRATION: (Dollars in millions, except per share amounts) 1996 operating results and ratios are before a pre-tax asset valuation charge of $15.8 ($10.1 after-tax or $.72 per share).
1996 1995 1994 Operating Results Net sales $ 644.5 544.6 501.7 Net earnings 31.3 24.8 18.9 Earnings per share 2.24 1.80 1.39 Dividends per share .375 .30 .30 Financial Position Shareholders' equity $ 175.2 159.3 137.6 Shareholders' equity per share 12.82 11.74 10.20 Long-term debt as a % of invested capital 12.3% 17.3% 22.4% Operating Ratios Gross profit as a % of net sales 26.7% 26.6% 24.2% Operating income as a % of net sales 8.1% 7.7% 6.3% Net earnings as a % of net sales 4.9% 4.5% 3.8% Return on beginning equity 19.7% 18.0% 15.5% Return on invested capital 13.0% 11.7% 9.8% Year-End Data Shares outstanding (000) 13,665 13,560 13,495 Approximate number of shareholders 4,400 3,900 3,800 Number of employees 4,868 4,166 3,946
FOUR GRAPHS: 1996 Annual Report 1 20 Letter to Fellow Shareholders PHOTO OF MOGENS C. BAY: Mogens C. Bay Chairman and Chief Executive Officer Valmont Industries, Inc. Financial Objectives 1996 Results Increase trendline earnings 26.6% 15% per year. Achieve a minimum 13.0% 10% after-tax return on invested capital. Maintain long-term debt as a 12.3% percent of invested capital at less than 40%. GLOBE ILLUSTRATION: 1996 was another very good year at Valmont. We continued to profitably grow our two core businesses: serving irrigated agriculture and infrastructure development worldwide. Shortly after the end of the year, we sold our ballast business, Valmont Electric, for cash. Our financial results surpassed our objectives (prior to the fourth quarter Valmont Electric charge): After-tax earnings increased more than 26% to $31.3 million from record 1995 earnings of $24.8 million. Earnings per share grew to $2.24 from $1.80. Our after-tax return on invested capital rose to 13.0% from 11.7% the prior year. We were pleased to have the stock market recognize this performance and the Company's growth potential. Valmont's stock price increase together with dividends paid resulted in a total return to our shareholders of 68.5% during 1996. All the people at Valmont worldwide can take pride in these results and I thank them for their significant contributions to our company. They are creating our future. I also thank our distribution partners, our dealers and agents. They are our face in front of our customers...and they are second to none. Before I address the record performance of our core businesses, let me talk about the divestiture of Valmont Electric. We managed to improve this business from severe losses to the break-even level and reduced our invested capital as well, but the sale of Valmont Electric, in my opinion, was the most desirable action given the business alternatives. We were not happy taking a fourth quarter charge to earnings, but we could not see a way to improve this operation sufficiently to earn the return we expect from our business units. Serving Irrigated Agriculture Our irrigation business had an outstanding year. Sales were up about 30% and operating income up 60%. What impressed me the most was the fact that we achieved this with the same average capital invested as the prior year. The Irrigation Division's focus over the last few years on productivity improvements and improved market coverage is paying off. Our increased sales were not only a result of favorable market conditions in the U.S., but also strong demand worldwide. Our International sales grew three times faster than the U.S. business but from a much smaller base. We have by far the strongest leadership position in this market both in the U.S. and overseas. It is important that we protect our position and strengthen it where possible. Often industry leaders become complacent over time and take their leadership position for granted just to see it slip away. We are determined not to let that happen to Valmont. What will the future bring for our irrigation business?...Significant opportunities! The world's demand for food is expected to double over the next 30 years and this must be accomplished with no major additional land and water resources. Our industry must respond with ever more efficient ways to use water for plant growth and Valmont will remain on the leading edge to meet this challenge. Water conservation...which translates into efficient irrigation, which in turn translates into opportunities for Valmont...is one of the keys to increased food production. 1996 Annual Report 2 21 Serving Infrastructure Development Our Industrial Products Group serves a number of different markets with poles, towers and a variety of engineered steel products. These businesses had a good year in 1996, with sales increasing nicely although operating income grew at a slower rate. We prefer that operating income grow faster than revenue and usually we achieve this goal. In 1996, it did not happen for two reasons. First, we invested heavily in our sales, marketing and engineering organization in the U.S. We are seeing rapid growth in these markets and must ensure our organization is prepared to drive and support future expansion. Second, we experienced significant weakness in two major European markets. During the year we added manufacturing capacity at a number of facilities worldwide: large pole capacity in France and Oklahoma and small pole capacity in Texas. We also had a successful start-up of our plant in China and added two small acquisitions, one in Germany and one in France. In North America, even with heavy investments for the future, we still returned more than twice our cost of capital. Europe, on the other hand, had a challenging year. This was partly a result of weak markets in France and Germany and partly because we have not yet fully succeeded in integrating and leveraging the strengths of our various European organizations. These issues are being addressed in 1997 and I am confident that I can report progress to you a year from now. On the positive side, we expanded our product offerings in Europe and entered new markets such as wireless communication, thus minimizing the negative effect of the weak market conditions in our traditional markets. The total European market for poles and towers is as large, if not larger, than the U.S. market. Our challenge is to improve our return on invested capital. What will the future bring to our Industrial Products Group? Significant opportunities! The world's demand for lighting and traffic structures will continue to grow as infrastructure is put into place in developing countries and upgraded in areas such as the United States and Europe. Efficient use of the world's road systems is important in responding to increased population and higher standards of living. This means more lighting and more signage which translates into business opportunities for Valmont. We will also benefit from the world's increasing need to generate and distribute electrical power as we are a major manufacturer of transmission poles and substation structures for the utility industry. In addition, in this country we see the conversion from wood to steel electrical distribution poles as a significant opportunity in the years to come. In the wireless communication industry, which we serve with poles and towers, components and installation and maintenance services, the future is rapid global growth. This is a unique industry where growth is as fast in the developing world as it is in the industrialized world. Developing countries are moving from a limited communication infrastructure directly to wireless. Our challenge is to leverage the experience we gained in the United States into international markets. In 1996 we celebrated our 50th year as a company and Robert B. Daugherty, our founder, celebrated his 50th anniversary as Chairman. He announced his retirement as of year's end but, fortunately, will stay on as a member of our Board of Directors, so we will continue to benefit from his wisdom. We owe him immense gratitude for his leadership and friendship over the years and wish the Daughertys all the best in their retirement. The Future The key to Valmont's continued success as a leader in the global markets we serve is to execute a strategy that takes full advantage of our core business competencies: our knowledge of our markets and their potentials and our ability to leverage our engineering and manufacturing capabilities to serve customers across product lines and across continents. As we move forward, our greatest asset will remain the loyalty and dedication of our people. They are our finest competitive edge. /s/ MOGENS C. BAY Mogens C. Bay Chairman and Chief Executive Officer 1996 Annual Report 3 22 GLOBE ILLUSTRATION: TOWER ILLUSTRATION: Industrial Products Valmont is a worldwide leader in manufacturing a wide variety of highly engineered metal products to serve selected markets for infrastructure development. These products, consisting principally of steel and aluminum poles and towers, fall into four basic categories: lighting and traffic, utility, wireless communication and fabricated products. Each product is engineered to the customer's specifications using the latest in advanced, automated design and manufacturing techniques and equipment. Valmont also applies protective finishes to its products using hot- dip galvanizing and powder coating processes. With demand growing in every product line during 1996, the Industrial Products Group continued its planned expansion program to increase manufacturing capacity. A facility now under modification was added to the Elkhart, Indiana operation and a second expansion began at the Brenham, Texas facility to boost lighting and traffic pole production. Additional capacity was also put in place at the plant in Tulsa, Oklahoma to manufacture utility and wireless communication poles. By carefully matching capacity to demand, Valmont will ensure it remains the industry leader providing its customers with on-time delivery of quality products. Lighting and Traffic Signals Valmont is the leading manufacturer of lighting and traffic signal poles for government infrastructure development and light poles for outdoor commercial and industrial use. Federal, state and local governments trying to solve traffic congestion problems have found they can improve traffic flow by first adding better signals, more signage and upgraded lighting without starting new road construction. Improved safety and crime prevention are concerns shared by both the government and the private sector. The public will not patronize businesses and public facilities unless they are well illuminated and provide secure environments. Demand for lighting and traffic signal poles is expected to remain strong as cities renovate older areas and move into new ones, as the nation's roadways are expanded and made more efficient, and as commercial and industrial businesses upgrade existing lighting at current facilities and make improved lighting an integral part of new construction. Utility Valmont produces high-voltage steel transmission poles, structural components for electrical sub-stations and steel distribution poles for the utility industry. Deregulation currently underway throughout this industry has created a number of opportunities. Valmont is building lasting business relationships with its utility customers as they work their way through the effects of deregulation by sharing structural engineering capabilities with them. Greater energy consumption and an expanding grid system for sharing electrical power throughout the country is expected to continue to drive transmission pole demand. The conversion of wooden distribution poles (often called "telephone poles") to steel represents a vast market opportunity for the long-term. As the cost of wood continues to rise relative to steel, the economics of wood- to-steel conversion become more attractive to the utility industry. In addition, there are growing environmental concerns regarding disposal of old wooden poles because of the chemicals used to initially treat them. With some 3 to 5 million of these wooden poles being replaced each year, this market has the potential of $1 billion-plus in annual revenues. 1996 Annual Report 4 23 TWO GRAPHS: STREET LIGHT ILLUSTRATION: Wireless Communication The wireless communication industry continues to experience exponential growth as cellular phone and personal communication service (or PCS) providers expand their systems as rapidly as possible. Demand in this market is expected to continue to increase in North America as the wireless communication industry builds out existing systems and moves into new technologies and new markets. Opportunities in overseas markets are expected to grow well into the next century. Valmont has participated in this market for many years and is a recognized leader in providing tapered steel monopoles, guyed and self-supporting towers, antenna and wave guide attachment components, and a full line of related services. The Company also develops alternative structures (such as the "tree pole") for its customers to help expedite the permitting process in difficult zoning locations. As an added service to its customers, Valmont provides site installation, an array of system testing services and annual inspections. In addition, Valmont is also the world's leading producer of passive repeaters and designs and manufactures custom towers for microwave, television and UHF- VHF applications. Fabricated Products Valmont produces a wide variety of custom engineered tubular steel products for industrial and consumer use. Manufactured to precise specifications and delivered when promised, these products often become a part of other companies' just-in-time manufacturing processes. Tubing can be produced in a wide range of sizes, shapes, thicknesses, lengths and finishes as the customer desires and is used in products such as pneumatic conveyor tubes for hospitals and airports, health fitness exercise equipment, and heat exchangers for energy generation and textile processing. Valmont also manufactures large rolled and welded cylinders for the pressure vessel industry, distributes a full line of fasteners for segments of the construction and original equipment manufacturers (OEM) markets and fabricates steel and fiberglass grating that is used by a number of industries including high-tech manufacturing companies. Valmont engineers, manufactures and installs a wide variety of poles and towers to the exact specifications of its customers. Shown on page 4 is a self-supporting tower used by the wireless communication industry. Traffic signal pole arms like the one shown above can reach as far as 85 feet into an intersection to help effectively control the flow of traffic. 1996 Annual Report 5 24 Irrigation Products GLOBE ILLUSTRATION: Valley TM_The Most Trusted Name In Irrigation PIVOT ILLULSTRATION: Dean Schielke, from the Western Sprinklers' Valley TM dealership, makes the final adjustments to a new center pivot machine. Valmont has the largest mechanized irrigation dealer network and distribution system in the world. Valley TM dealers carry a full line of parts and provide "on the farm" customer service. Valmont is the world leader in the development, manufacture and distribution of center pivot and linear move irrigation equipment for agriculture. Since producing the first large- scale mechanized irrigation machine over 40 years ago, Valmont has built and maintained an extensive worldwide network of dealers who provide complete support services to customers across North America and in more than 40 countries around the world. Valmont has invested a considerable amount of time, effort and capital to develop its dealer network into the largest and most efficient in the industry. Valmont provides its dealers with continuous education and training programs in design, installation, new products and advanced irrigation technology. Valmont's shipping and transportation systems ensure the prompt delivery of custom designed mechanized irrigation equipment directly to the farmer's field as well as supplying a full line of Valley TM replacement parts. 1996 Annual Report 6 25 The successful implementation of a manufacturing strategy based on automated production processes and reduced cycle times has resulted in dramatically improved levels of quality and productivity. Capital projects implemented over the past three years have increased capacity and helped drive down costs. Valmont Irrigation has moved from a traditional factory layout and organization to a process that is called "Just In Time" based on cross-functional cells and employee involvement. A number of primary factors affect today's grain and fiber producers. A growing world population, improving diets and expanding world economies have all increased the demand for grain products. This increased demand, in combination with relatively low worldwide grain inventories, has recently resulted in elevated commodity prices and higher farm income. Improved farm income gives growers the ability to make new investments in products such as center pivot and linear move irrigation equipment that will increase their productivity. Center pivot and linear move machines can save water by as much as 50 percent compared to less efficient irrigation methods. At the same time, farmers must consider ways to lower labor and energy costs, conserve the limited amount of fresh water and reduce groundwater contamination. One of the most efficient ways to address these concerns is through precision farming. Valmont has led the industry in developing computerized controls and remote data-links that allow the precise application of water, fertilizer and chemicals when and where needed. This process greatly improves application efficiency by lowering labor and energy costs, by applying just the right amount of water needed to effectively feed the plant root zone and by reducing chemical and water runoff. Mechanized irrigation has demonstrated it can save labor, energy and water, making it one of the most efficient and productive operations in mechanized agriculture. Another important factor in this market is the growing need to replace older irrigation machines, many of which were installed during the 1970s. With newer equipment having the added benefit of enhanced computer technology, remote control operation and environmental improvements, a significant number of growers are expected to replace older equipment over the next five to ten years. There is also a growing market for highly reliable Valley TM irrigation replacement components and parts, which Valmont offers for its own equipment as well as those of other manufacturers. Valmont's leadership position in the industry encompasses all phases of the business_the product, the manufacturing process and the dealer distribution system. Coatings During the latter part of 1996, Valmont leveraged one of its core competencies to create a new coatings division within the Company to address the growing demand for quality protective coatings using galvanizing and powder coat processes. Valmont is recognized as one of the premier hot- dip galvanizers in the United States. A new galvanizing plant was built in West Point, Nebraska to support growing internal needs as well as an expanding custom galvanizing market. This plant began coating products in early 1997. In addition, Valmont is currently in the process of expanding its powder coating capability at a number of its plants to meet increased demand for this protective process. SPRINKLERS ILLUSTRATION: Valley TM center pivots apply just the right amount of water, chemicals and fertilizer at the right height above the crops so that only the plant's root zone is fed, thus increasing yields, conserving water, and reducing chemical and water runoff. TWO GRAPHS: 1996 Annual Report 7 26 International INTERNATIONAL MAP ILLUSTRATION: "Our strength lies in the ability to leverage our engineering and manufacturing capabilities to serve customers across product lines and across continents." Mogens C. Bay Chairman and CEO SUGARCANE FIELD ILLUSTRATION: Sugar cane growers worldwide depend on Valley TM irrigation equipment for increased production, low labor costs and high reliability. This sugar cane field is located on the island of Mauritius, east of Madagascar in the Indian Ocean. Valmont aggressively participates in the international marketplace through its worldwide dealer, sales and distribution networks and through its manufacturing presence in major geographical regions. The Company produces light poles at plants in Canada, France, Germany, the Netherlands, Poland and China; wireless communication towers and utility poles in France; and has irrigation facilities in Brazil and Spain. Valmont is able to leverage these worldwide manufacturing and distribution capabilities to take full advantage of opportunities regardless of the products or markets. Irrigation The nations of the world are facing a major challenge. Experts predict worldwide food production must double over the next 30 years, not only to feed an additional 2.6 billion people, but also to meet the growing demand for grain due to improving diets. Today, the amount of land used for agriculture worldwide is no greater than it was in 1960. In developing countries, only 20 percent of the arable land is irrigated, compared to 40 percent in developed countries. Valmont's center pivot and linear move irrigation equipment provides a solution to this worldwide challenge by helping farmers increase crop yields and conserve water at the same time. Valmont's broad-based dealer network and distribution system has allowed the Company to retain and strengthen its global leadership position in this industry. International marketing opportunities are especially strong in South America, western Europe and southern Africa. Valmont's new universal linear irrigation machine was designed for use on smaller fields and has become the product of choice in many markets, while center pivots and standard linears remain in high demand by larger producers. The worldwide need to increase food production is no longer a subject for debate...it is a fact of life that must be addressed by every developing country that intends to grow and prosper in the 21st century. The long-term outlook for mechanized irrigation is excellent as farmers study the advantages of center pivot and linear move irrigation equipment and come to accept this new technology as the most efficient way to increase production. 1996 Annual Report 8 27 CHINA PLANT ILLUSTRATION: Valmont Manufacturing Plant Shanghai, China Poles and Towers Valmont sells lighting and traffic poles, utility structures and wireless communication poles and towers in many international markets. In Europe, Valmont has taken a pan- European approach to organizing its sales efforts as it expands into new markets and introduces new products for sale in Europe and export markets. Two new companies were acquired in Europe during 1996 which expanded Valmont's market area in the lighting and wireless communication industry. Demand in the lighting market remains strong as governments make infrastructure improvements. For the wireless communication industry, demand is increasing as providers expand their operations in Europe, responding to privatization and more open markets. In addition to sales on the continent, Valmont has increased the export of products from its European plants. These exports include wireless communication poles to South America and the Middle East, utility poles to Asia, and decorative aluminum light poles to Asia and North Africa. In China, Valmont's plant in Shanghai completed its first full year of operation in 1996. This new plant enables Valmont to leverage its in-country capabilities as it expands its marketing and distribution systems and introduces new products and services. Patience and perseverance remain the keys to success in developing the Chinese market. The same is true throughout Asia as developing countries build new infrastructure to support economic growth. Valmont will be well positioned to respond to the many opportunities that will materialize in this vast marketplace in the years ahead. LIGHT POLES ILLUSTRATION: Valmont makes steel and aluminum light poles in every size and shape imaginable. These decorative light poles installed in Fleury-les-Aubrais, France were manufactured at one of Valmont's European facilities. 1996 Annual Report 9 28 Financial Review Valmont Industries, Inc. and Subsidiaries GLOBE ILLUSTRATION: 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 condition. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes.
Fiscal 1996 Compared To 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 income 12 (91.4)% 139 Income tax expense 11,800 (13.9)% 13,700 Net earnings 21,248 (14.2)% 24,759 Earnings per share 1.52 (15.6)% 1.80
Valmont's net sales in 1996 increased $99.9 million over its sales for 1995. Irrigation Products segment sales increased to $212.5 million in 1996 from $162.7 million 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 products, low grain inventories, and strong commodity prices. Industrial Products segment revenues rose primarily as a result of strong demand for communication towers and light poles in North America. In Europe, sales were up from 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 sales levels. 1996 Annual Report 10 29 Gross profit increased $27.1 million or 18.7% in 1996 to $172.1 million, and as a percentage 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 in 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 SG&A expense increase was 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 asset 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 fair market value of the net assets based on the expected sales price of this business. For 1996 and 1995, net interest expense was $3.6 million and $3.5 million, respectively. The increase results from higher short-term debt levels at lower average interest rates. 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 at year-end 1996. The effective tax rate was essentially the same at 35.6% in 1995 and 35.7% in 1996. For the reasons discussed above, the Company's earnings in 1996 prior to the asset valuation charge were $31.3 million or $21.2 million after the asset valuation charge compared to $24.8 million for 1995, an increase prior to the charge of 26.6% and a 14.2% decrease after the charge. Earnings per share were $2.24 prior to the charge and $1.52 after the charge compared to earnings per share of $1.80 for 1995. The pre-charge earnings per share were up 24.4% from 1995 and the after-charge earnings per share were off by 15.6%. LEGEND: THREE GRAPHS: 1996 Annual Report 11 30 Management's Discussion and Analysis Continued Valmont Industries, Inc. and Subsidiaries
Fiscal 1995 Compared To 1994 (Dollars in thousands , except per share amounts) 1995 Change 1994 Net sales $ 544,642 8.6 % $ 501,740 Cost of sales 399,691 5.1 % 380,254 Gross profit 144,951 19.3 % 121,486 Selling, general and administrative expenses 103,120 14.8 % 89,807 Operating income 41,831 32.0 % 31,679 Interest expense, net 3,511 (8.4)% 3,832 Miscellaneous income 139 (91.9)% 1,723 Income tax expense 13,700 28.2 % 10,683 Net earnings 24,759 31.1 % 18,887 Earnings per share 1.80 29.5 % 1.39
Valmont's net sales in 1995 increased $42.9 million over its sales for 1994. Industrial Products segment revenues rose primarily as a result of strong sales growth of pole and tower structures to the U.S. communication markets and the lighting markets in the United States and Europe. Communication structures for the wireless communication market led the growth with the acquisition of Microflect substantially improving the Company's position in this expanding market. The ballast business experienced sales similar to 1994 sales. Irrigation Products segment sales declined slightly to $162.7 million in 1995 from $164.0 million as unfavorable weather conditions during the spring and summer in the U.S. markets slowed demand. Sales to international markets, primarily Europe, South America and Africa, rose to offset much of the domestic market decline. Gross profit increased $23.5 million or 19.3% in 1995 to $145.0 million, and as a percentage of sales increased from 24.2% in 1994 to 26.6% in 1995. The Irrigation Products segment gross profit increased despite lower sales as a result of productivity improvements and lower steel prices. Industrial Products segment gross profit increased from sales increases in engineered metal structures and productivity increases in the ballast operation. A shift in the mix of products sold also impacted gross profit as a percentage of sales. SG&A expenses in 1995 were $103.1 million compared to $89.8 million in 1994. In 1995, SG&A expense as a percentage of sales was 18.9% compared to the prior year's 17.9%. The SG&A expense increase was to support the sales volume growth, for incentive accruals and for the development of various international markets to foster future sales growth. For 1995 and 1994, net interest expense was $3.5 million and $3.8 million, respectively. The decrease results from lower debt levels and lower interest rates on variable rate debt. At the end of 1995, long-term debt had decreased by $6.6 million from the debt level at 1994 year-end. Miscellaneous income of $1.7 million in 1994 decreased to $.1 million in 1995. The figure for 1994 included gains from the sale and disposal of excess property of $1.2 million. In 1995, the effective tax rate of 35.6% decreased from the 1994 effective rate of 36.1% primarily due to the relocation of businesses to states with lower tax rates and state tax incentives. For the reasons discussed above, the Company's earnings in 1995 were $24.8 million compared to $18.9 million for 1994, an increase of 31.1%. Earnings per share increased $.41 per share in 1995 to $1.80 per share, an increase of 29.5%. 1996 Annual Report 12 31 Liquidity and Capital Resources Net working capital of $81.4 million at the end of 1996 was relatively unchanged compared to $81.0 million of working capital at the end of 1995. The ratio of current assets to current liabilities was 1.6:1 at the end of 1996 compared to 1.8:1 at the end of 1995. The decrease resulted primarily from the increased short-term debt and the reduction of cash on hand at the end of 1996 due to capital expenditures in excess of depreciation and payments of scheduled installments of long-term debt. Available short-term credit facilities through bank lines of credit were $40.6 million at the end of 1996 compared to $54.6 million at the end of 1995. At the end of 1996, $18.4 million was unused. The Company's growth has been financed through a combination of cash provided from operations and short-term financing. Cash provided from operating activities amounted to $19.8 million in 1996 and $28.6 million in 1995. Net borrowings under short-term agreements were $20.6 million in 1996 and $1.8 million in 1995. At the end of 1996 long-term debt as a percent of invested capital was 12.3% as compared to 17.3% at the end of 1995, due to payment of scheduled installments. The Company's objective is to maintain long-term debt as a percent of invested capital at less than 40%. It is expected that the Company will incur additional long-term debt in 1997 to support growth and expansion plans and to refinance existing short-term borrowings. The Company believes cash flows from operations, short-term credit facilities, long-term debt capacity and its current equity capital structure will be adequate for 1997 planned capital expenditures, dividends and other financial commitments, and will allow the Company to pursue opportunities to expand its markets and businesses. 1996 Annual Report 13 32 Management's Discussion and Analysis Continued Valmont Industries, Inc. and Subsidiaries Capital Expenditures In 1996 the Company expended $35.6 million in property, plant and equipment, an $.8 million increase from the $34.8 million invested in 1995. Major additions included new facilities in Elkhart, Indiana, and West Point, Nebraska, to increase manufacturing capabilities and capacities. At the Valley, Nebraska, Brenham, Texas, and Tulsa, Oklahoma plants, additional capacity was also added. These capital expenditures are designed to enable the Company to reach new markets and customers, improve productivity and maintain up- to-date equipment and facilities. Recently Issued Accounting Pronouncements The Financial Accounting Standards Board (FASB) issued statement No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121), and statement No. 123, "Accounting for Stock- Based Compensation" (SFAS 123), both of which are effective for fiscal years beginning after December 15, 1995. In the case of SFAS 121, there was no effect of adoption at the beginning of 1996. However, an asset valuation charge was recorded in the fourth quarter of 1996 in compliance with the provisions of this pronouncement as described in Notes 3 and 13 to the financial statements. SFAS 123 requires that an employer's financial statements include certain disclosures about stock-based employee compensation arrangements regardless of the method used to account for such plans. The Company has complied with SFAS 123 in fiscal year 1996 by footnote disclosure in Note 8 to the financial statements. Outlook For 1997 As the Company begins 1997, order backlogs are above the prior year levels, $133.6 million for 1997 compared to $110.0 million a year ago. The driving forces for the irrigation markets are a growing world population, improving diets and expanding world economies. These factors have resulted in increased commodity prices, which in turn have given farmers the ability to make new investments in the Company's center pivot and linear move irrigation equipment. In addition, the conversion from less efficient irrigation methods to the Company's center pivot and linear move products is driven by the need to conserve the world's fresh water supply and reduce runoff of unused chemicals. With currently produced equipment having the added benefit of enhanced computer technology, remote control operation and environmental improvements, there has been an increase in the number of owners replacing older machines. The Company also offers replacement components and parts to a growing market of prior purchasers of irrigation products. The international market opportunities are strong in South America, western Europe and southern Africa. The long-term demand for mechanized irrigation equipment is expected to be good as countries throughout the world come to accept this technology as an efficient way to increase productivity. For the Industrial Products segment, the Company continued to increase its manufacturing capacity during 1996. Demand for lighting and traffic signal poles is expected to remain strong. Deregulation in the utility industry is currently underway. The Company's developed business relationships within this industry, as well as increasing energy consumption and expanding distribution networks, are expected to keep transmission pole demand at desirable levels. The conversion of wooden distribution poles to steel also represents increased market opportunities for the long-term. The rapid growth in the wireless communication industry continues to create demand for poles, towers, components and services. Both North America and overseas markets are expected to experience growth well into the next century. 1996 Annual Report 14 33 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 views 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 environment, 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. THREE GRAPHS: 1996 Annual Report 15 34
Selected Eleven-Year Financial Data Valmont Industries, Inc. & Subsidiaries (Dollars in thousands, except per share amounts) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 Operating Data Net sales $ 644,531 544,642 501,740 464,274 445,481 446,543 461,789 443,444 439,569 291,350 217,511 Earnings (loss) from continuing operations 21,248 24,759 18,887 7,551 11,671 (8,822) 11,373 16,818 12,301 5,672 67 Earnings from discontinued operations _ _ _ 4,637 3,564 2,134 5,474 4,602 3,639 3,172 2,321 Cumulative effect of accounting change _ _ _ (4,910) _ _ _ _ _ _ _ Net earnings (loss) $ 21,248 24,759 18,887 7,278 15,235 (6,688) 16,847 21,420 15,940 8,844 2,388 Depreciation and amortization $ 14,832 12,361 11,018 10,907 12,585 11,285 9,887 7,608 7,788 7,057 5,970 Capital expenditures 35,559 34,772 23,535 17,089 8,353 11,539 20,607 17,470 9,750 7,432 6,733 Per Share Data Earnings (loss): Continuing operations $ 1.52 1.80 1.39 .55 .87 (.65) .84 1.24 .94 .45 .01 Discontinued operations _ _ _ .34 .26 .15 .40 .34 .28 .25 .18 Cumulative effect of accounting change _ _ _ (.36) _ _ _ _ _ _ _ Net earnings (loss) $ 1.52 1.80 1.39 .53 1.13 (.50) 1.24 1.58 1.22 .70 .19 Cash dividends $ .375 .30 .30 .29 .26 .26 .26 .22 .17 .15 .15 Shareholders' equity 12.82 11.74 10.20 9.03 8.85 8.12 8.85 7.88 6.52 5.54 4.96 Financial Position Working capital $ 81,403 80,993 88,278 87,793 68,551 69,143 66,302 72,811 58,786 44,986 25,718 Property, plant and equipment, net 120,579 113,532 89,201 75,501 78,150 84,144 81,675 71,872 53,135 53,785 41,726 Total assets 341,648 308,710 283,443 261,275 286,076 291,041 291,163 268,216 225,461 203,674 137,799 Long-term debt, including current installments 29,573 36,687 43,242 44,076 69,735 81,698 63,003 66,774 47,337 52,780 25,798 Shareholders' equity 175,231 159,256 137,582 121,841 118,428 108,142 117,200 104,069 84,163 68,591 61,209 Invested capital 40,592 212,198 193,261 178,719 198,521 200,650 191,255 180,464 138,392 128,561 91,836 Key Financial Measures Return on beginning shareholders' equity 13.3% 18.0% 15.5% 6.1% 14.1% (5.7%) 16.2% 25.5% 23.2% 14.4% 4.0% Return on invested capital 8.8% 11.7% 9.8% 4.1% 7.7% (3.3%) 8.8% 11.9% 11.5% 6.9% 2.6% Long-term debt as a percent of invested capital 12.3% 17.3% 22.4% 24.7% 35.1% 40.7% 32.9% 37.0% 34.2% 41.1% 28.1% Year-End Data Shares outstanding (000) 13,665 13,560 13,495 13,486 13,375 13,310 13,247 13,206 12,914 12,374 12,346 Approximate number of shareholders 4,400 3,900 3,800 3,800 3,500 3,500 2,800 1,600 1,500 1,100 1,150 Number of employees 4,868 4,166 3,946 4,152 4,532 4,478 4,524 4,255 3,569 3,598 1,746
1996 earnings are after a pre-tax asset valuation charge of $15,800 ($10,100 after-tax or $.72 per share). Per share amounts and number of shares reflect the two-for- one stock splits in 1988 and 1989. Prior periods have been restated to include the 1995 acquisition of Microflect using the pooling of interests method of accounting. 1996 Annual Report 16 & 17 35
Consolidated Statements Of Operations Valmont Industries, Inc. and Subsidiaries Three-year period ended December 28, 1996 (Dollars in thousands, except per share amounts) 1996 1995 1994 Net sales $ 644,531 544,642 501,740 Cost of sales 472,463 399,691 380,254 Gross profit 172,068 144,951 121,486 Selling, general and administrative expenses 119,624 103,120 89,807 Asset valuation charge 15,800 _ _ Operating income 36,644 41,831 31,679 Other income (deductions): Interest expense (3,952) (4,331) (4,711) Interest income 344 820 879 Miscellaneous 12 139 1,723 (3,596) (3,372) (2,109) Earnings before income taxes 33,048 38,459 29,570 Income tax expense (benefit): Current 19,970 13,713 7,405 Deferred (8,170) (13) 3,278 11,800 13,700 10,683 Net earnings $ 21,248 24,759 18,887 Earnings per share $ 1.52 1.80 1.39 Cash dividends per share $ .375 .30 .30 Weighted average number of common and common equivalent shares outstanding (000) 14,017 13,733 13,615 See accompanying notes to consolidated financial statements.
1996 Annual Report 18 36
Consolidated Balance Sheets Valmont Industries, Inc. and Subsidiaries December 28, 1996 and December 30, 1995 (Dollars in thousands) 1996 1995 Assets Current assets: Cash and cash equivalents $ 9,483 16,996 Receivables, less allowance for doubtful receivables of $2,299 in 1996 and $2,941 in 1995 82,224 82,211 Deferred income taxes 16,521 8,524 Inventories 73,359 76,426 Assets held for sale 26,903 _ Prepaid expenses 2,356 1,670 Total current assets 210,846 185,827 Other assets: Investments in nonconsolidated affiliates 4,307 1,375 Other 5,916 7,976 Total other assets 10,223 9,351 Property, plant and equipment, at cost 228,247 222,255 Less accumulated depreciation and amortization 107,668 108,723 Net property, plant and equipment 120,579 113,532 Total assets $ 341,648 308,710 Liabilities and Shareholders' Equity Current liabilities: Current installments of long-term debt $ 7,693 7,950 Notes payable to banks 24,007 3,492 Accounts payable 43,699 46,900 Accrued expenses 52,678 45,475 Dividends payable 1,366 1,017 Total current liabilities 129,443 104,834 Deferred income taxes 9,531 10,543 Long-term debt, excluding current installments 21,880 28,737 Minority interest in consolidated subsidiaries 2,250 2,220 Other noncurrent liabilities 3,313 3,120 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 13,950,000 shares 13,950 13,950 Additional paid-in capital 6,458 4,694 Retained earnings 153,146 137,009 Currency translation adjustment 1,737 3,689 175,291 159,342 Less: Cost of common shares in treasury- 284,608 in 1996 (389,798 in 1995) 18 24 Unearned restricted stock 42 62 Total shareholders' equity 175,231 159,256 Total liabilities and shareholders' equity $ 341,648 308,710 See accompanying notes to consolidated financial statements.
1996 Annual Report 19 37
Consolidated Statements Of Cash Flows Valmont Industries, Inc. and Subsidiaries Three-year period ended December 28, 1996 (Dollars in thousands) 1996 1995 1994 Cash flows from operations: Net earnings $ 21,248 24,759 18,887 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 14,832 12,361 11,018 Other adjustments 580 (102) (198) Changes in assets and liabilities: Receivables (16,484) (2,681) (2,083) Inventories (16,270) (9,742) 11,195 Prepaid expenses (1,217) 261 169 Accounts payable 10,120 1,486 6,001 Accrued expenses 15,022 3,444 (2,151) Other noncurrent liabilities (394) (1,226) 2,088 Income taxes (7,594) 64 3,735 Total adjustments (1,405) 3,865 29,774 Net cash provided by operations 19,843 28,624 48,661 Cash flows from investing activities: Purchase of property, plant and equipment (35,559) (34,772) (23,535) Acquisitions (1,255) _ (2,034) Proceeds from investment by minority shareholder 97 1,677 _ Change in other assets (1,246) 1,461 (1,638) Proceeds from sale of property and equipment 858 212 2,334 Other, net (260) 418 334 Net cash used by investment activities (37,365) (31,004) (24,539) Cash flows from financing activities: Net borrowings (repayments) under short-term agreements 20,630 1,754 (1,688) Proceeds from long-term borrowings 1,942 _ 3,845 Principal payments on long-term obligations (8,142) (7,489) (5,802) Dividends paid (4,762) (3,612) (3,467) Distributions of pooled company _ (2,063) (1,102) Proceeds from exercises under employee stock plans 2,073 1,193 663 Purchase of common treasury shares (1,732) (535) (996) Net cash provided (used) in financing activities 10,009 (10,752) (8,547) Net increase (decrease) in cash and cash equivalents (7,513) (13,132) 15,575 Cash and cash equivalents - beginning of year 16,996 30,128 14,553 Cash and cash equivalents - end of year $ 9,483 16,996 30,128 See accompanying notes to consolidated financial statements.
1996 Annual Report 20 38
Consolidated Statements of Shareholders' Equity Valmont Industries, Inc. and Subsidiaries Three-year period ended December 28, 1996 (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 25, 1993 $ 13,950 1,951 105,529 557 (29) (117) 121,841 Net earnings _ _ 18,887 _ _ _ 18,887 Cash dividends ($.30 per share) _ _ (3,467) _ _ _ (3,467) Cash distributions of pooled company _ _ (1,102) _ _ _ (1,102) Reclassification of retained earnings, pooled company _ 1,771 (1,771) _ _ _ _ Currency translation adjustment _ _ _ 1,444 _ _ 1,444 Purchase of 62,718 common shares _ _ _ _ (996) _ (996) Stock options exercised; 64,575 shares issued _ 286 _ _ 377 _ 663 Tax benefit from exercise of stock options _ 173 _ _ _ _ 173 Stock awards; 7,000 shares issued _ 104 _ _ _ 135 139 Balance at December 31, 1994 13,950 4,285 118,076 2,001 (648) (82) 137,582 Net earnings _ _ 24,759 _ _ _ 24,759 Cash dividends ($.30 per share) _ _ (3,763) _ _ _ (3,763) Cash distributions of pooled company _ _ (2,063) _ _ _ (2,063) Currency translation adjustment _ _ _ 1,688 _ _ 1,688 Purchase of 21,249 common shares _ _ _ _ (535) _ (535) Stock options exercised; 79,196 shares issued _ 134 _ _ 1,159 _ 1,193 Tax benefit from exercise of stock options _ 338 _ _ _ _ 338 Stock awards; 7,000 shares issued _ 137 _ _ _ 120 157 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 ($.375 per share) _ _ (5,111) _ _ _ (5,111) Currency translation adjustment _ _ _ (1,952) _ _ (1,952) Purchase of 48,722 common shares _ _ _ _ (1,732) _ (1,732) Stock options exercised; 140,000 shares issued _ 335 _ _ 1,738 _ 2,073 Tax benefit from exercise of stock options _ 1,023 _ _ _ _ 1,023 Stock awards; 13,912 shares issued _ 406 _ _ _ 120 426 Balance at December 28, 1996 $ 13,950 6,458 153,146 1,737 (18) (42) 175,231 See accompanying notes to consolidated financial statements.
1996 Annual Report 21 39 Notes to Consolidated Financial Statements Valmont Industries, Inc. and Subsidiaries Three-year period ended December 28, 1996 (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. All significant intercompany items have been eliminated. In 1996, the Company purchased majority interests in Telec Centre, S.A. and Gibo-Conimast, GmbH. In 1994, the Company acquired the assets of Energy Steel Corporation of Tulsa, Oklahoma. These acquisitions are not considered significant and, therefore, pro forma consolidated financial information has been omitted (Note 13). Operations The Company manufactures and distributes agricultural irrigation equipment and related products and engineered metal structures, fabricated products and lighting ballasts. 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 1996, 1995 and 1994 ended on December 28, December 30 and December 31, respectively and contained 52 weeks, 52 weeks and 53 weeks respectively. Inventories At December 28, 1996 approximately 72% 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 $10,400 and $10,200 at December 28, 1996 and December 30, 1995, respectively. Impairment of Long-Lived Assets In 1996 the Company adopted 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 3). 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 (Note 13). There was no effect of adoption of this standard at the beginning of fiscal 1996. Property, Plant and Equipment Property, plant and equipment are stated at historical cost. Depreciation and amortization are provided on the straight- line method over the estimated useful lives of the respective assets. The range of lives of various assets follows: Land improvements 10 Years Buildings and improvements 15-39 Years Machinery and equipment 3-12 Years Transportation equipment 3-5 Years Office furniture and equipment 3-7 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 financial statements and tax bases of assets and liabilities using enacted tax rates. The effect of tax rate changes on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 1996 Annual Report 22 40 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 Earnings per share are based on the weighted average number of common shares outstanding and equivalent common shares from in-the-money stock options. The difference between primary and fully-diluted earnings per share is not material. Miscellaneous The miscellaneous caption of "Other income (deductions)" in the consolidated statements of operations contains gains and losses which are of an unusual or infrequent nature. Pre- tax gains from disposal of excess property amounting to $1,183 were included in 1994. 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. Actual results could differ from those estimates. (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: 1996 1995 1994 Interest $3,824 4,456 4,792 Income taxes 17,904 11,591 4,819 (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 pre-tax asset valuation charge of $15,800 ($10,100 after-tax) in the fourth quarter of 1996 to reduce 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. Operating loss for the ballast business of $620 is included in the Company's Industrial Products segment results for 1996. (4) Property, Plant and Equipment Property, plant and equipment, at cost, consists of the following: 1996 1995 Land and improvements $ 9,592 9,503 Buildings and improvements 56,818 54,959 Machinery and equipment 109,915 106,890 Transportation equipment 4,000 3,319 Office furniture and equipment 21,300 20,581 Construction in progress 26,622 27,003 $228,247 222,255 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 $4,963, $4,638 and $3,807 for fiscal 1996, 1995 and 1994, respectively. 1996 Annual Report 23 41 Minimum lease payments under operating leases expiring subsequent to December 28, 1996 are: Fiscal Year Ending 1997 $ 3,065 1998 2,833 1999 2,541 2000 2,154 2001 1,982 Subsequent 5,660 Total minimum lease payments $ 18,235 (5) Bank Credit Arrangements The Company maintains various lines of credit for short-term borrowings totaling $40,628. 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 $18,428 at December 28, 1996. The lines of credit can be modified at any time at the option of the banks. The Company pays facility fees of 1/8 to 1/5 of 1% (or equivalent balances) in connection with $23,000 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 6.5% at December 28, 1996 and 8.9% at December 30, 1995. (6) Income Taxes Income tax expense (benefit) consists of: 1996 1995 1994 Current: Federal $ 16,914 10,919 5,454 State 1,086 954 682 Foreign 1,970 1,840 1,269 19,970 13,713 7,405 Deferred: Federal (7,006) (11) 3,428 State (392) (2) 278 Foreign (772) _ (428) (8,170) (13) 3,278 $ 11,800 13,700 10,683 The reconciliations of the statutory Federal income tax rate and the effective tax rates follow: 1996 1995 1994 Statutory Federal income tax rate 35.0 % 35.0 % 35.0 % State income taxes, net of Federal benefit 2.1 % 1.6 % 2.4 % Other (1.4)% (1.0)% (1.3)% 35.7 % 35.6 % 36.1 % 1996 Annual Report 24 42 The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below: 1996 1995 Deferred tax assets: Accrued expenses and allowances $ 20,223 13,008 Allowance for doubtful receivables 311 400 Inventory capitalization 1,622 979 Total deferred tax assets 22,156 14,387 Deferred tax liabilities: Plant and equipment 6,274 5,448 Lease transactions 1,682 1,769 Warranty accrual 1,373 1,373 Business combination adjustments 3,439 3,439 Other 3,245 4,377 Total deferred tax liabilities 16,013 16,406 Net deferred tax assets (liabilities) $ 6,143 (2,019) 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 1996 1995 9.40% to 12.77% promissory notes, unsecured (a) $ 19,250 23,750 Promissory note, secured (b) 4,762 7,714 6.50% to 9.34% notes 5,561 5,223 Total long-term debt 29,573 36,687 Less current installments of long-term debt 7,693 7,950 Long-term debt, excluding current installments $ 21,880 28,737 (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 25.7 million French francs is due in two equal annual principal installments through 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 28, 1996 the effective interest rate was 3.78%. The note is secured by the common stock of Sermeto, S.A., a subsidiary of the Company. 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 28, 1996, 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 $58,000. The minimum aggregate maturities of long-term debt for each of the four years following 1997 are: $7,564, $5,254, $4,054 and $2,757. 1996 Annual Report 25 43 (8) Stock Plans The Company has three fixed employee 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 1983 Employee Incentive Stock Option Plan, the Company may grant options to its employees for up to 700,000 shares of common stock. Under the 1988 Stock Plan, the Company may grant options and other awards to its employees and directors for up to 1,200,000 shares of common stock. Under the 1996 Stock Plan, the Company may grant options and other awards to employees and directors for up to 800,000 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 have vesting schedules of four to seven years and vest either ratably after one year from date of grant or vest after five years from date of 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 or 1996. Had compensation cost been determined on the basis of fair value pursuant to Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation," net earnings and earnings per share would have been reduced as follows: 1996 1995 Net earnings: As reported $ 21,248 24,759 Pro forma $ 20,561 24,699 Earnings per share: As reported $ 1.52 1.80 Pro forma $ 1.47 1.80 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. Following is a summary of the status of the stock plans during 1994, 1995 and 1996: Weighted Average Number of Exercise Shares Price Outstanding at December 26, 1993 778,207 $ 14.82 Granted 152,000 16.25 Exercised (64,575) (10.27) Forfeited (81,858) (16.96) Outstanding at December 31, 1994 783,774 $ 15.24 Options exercisable at December 31, 1994 450,107 $ 12.70 Weighted Average Number of Exercise Shares Price Outstanding at January 1, 1995 783,774 $ 15.24 Granted 201,500 23.35 Exercised (79,196) (13.57) Forfeited (11,057) (18.50) Outstanding at December 30, 1995 895,021 $ 17.21 Options exercisable at December 30, 1995 378,188 $ 13.91 Weighted average fair value of options granted during 1995 $ 7.34 1996 Annual Report 26 44 Weighted Average Number of Exercise Shares Price Outstanding at December 31, 1995 895,021 $ 17.21 Granted 207,015 37.28 Exercised (140,000) (14.81) Forfeited (28,549) (11.13) Outstanding at December 28, 1996 933,487 $ 22.21 Options exercisable at December 28, 1996 412,653 $ 16.65 Weighted average fair value of options granted during 1996 $ 12.48 Following is a summary of the status of fixed options outstanding at December 28, 1996:
Outstanding and Exercisable By Price Range Options Outstanding Options Exercisable - ----------------------------------------------------------------- ------------------------- Weighted Average Exercise Remaining Weighted Average Weighted Average Price Range Number Contractual Life Exercise Price Number Exercise Price $ 5.91-12.00 123,050 1.85 years $ 10.67 118,050 $ 10.61 12.75-14.88 33,500 4.87 years 14.05 _ _ 16.25-16.25 123,300 7.96 years 16.25 81,970 16.25 18.25-18.25 242,333 5.99 years 18.25 150,521 18.25 18.50-22.50 30,789 4.48 years 20.10 3,792 19.60 23.75-23.75 173,500 8.98 years 23.75 57,855 23.75 24.50-37.38 22,350 7.01 years 31.81 _ _ 37.63-37.63 15,000 9.89 years 37.63 _ _ 38.00-38.00 169,484 9.93 years 38.00 284 38.00 39.00-39.00 181 .97 years 39.00 181 39.00 933,487 412,653
(9) Employee Retirement Savings Plan Established under Internal Revenue Code Section 401(k), the Valmont Employee Retirement Savings Plan is available to all eligible employees. The Company makes an annual basic contribution equal to $.25 on the dollar of the first 3% of each participant's annual pay. In addition, participants can elect to contribute up to 15% of annual pay, on a pre- tax and/or after-tax basis. The Company will match $.50 to $.75 on the dollar of the first 6% of the employee pre-tax contribution. The Company, at the discretion of the Board of Directors, may also pay a supplemental contribution of up to $.50 on the dollar of the first 6% of the participants' pre-tax contributions. 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 1996, 1995 and 1994 Company contributions to these plans amounted to approximately $5,000, $4,700 and $3,000, respectively. (10) Research and Development It is estimated that the research and development costs charged against earnings were approximately $3,900 in 1996, $2,800 in 1995, and $2,700 in 1994. 1996 Annual Report 27 45 (11) 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 28, 1996, the carrying amount of the Company's long-term debt was $29,573 with an estimated fair value of approximately $30,000. At December 30, 1995, the carrying amount of the Company's long- term debt was $36,687 with an estimated fair value of approximately $39,000. (12) 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 $.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. (13) 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 have been written down to fair market value and reclassified on the balance sheet as "Assets held for sale" at December 28, 1996 (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 1,950,000 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. (14) 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, fabricated products and lighting ballasts. 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. 1996 Annual Report 28 46
Business Segment Information Valmont Industries, Inc. and Subsidiaries (Dollars in thousands) 1996 1995 1994 Net Sales: Industrial Products $ 432,050 381,898 337,810 Irrigation Products 212,481 162,744 164,030 Less intersegment sales _ _ (100) Total $ 644,531 544,642 501,740 Operating Income: Industrial Products 36,591 35,924 23,638 Irrigation Products 29,766 18,736 17,742 Total 66,357 54,660 41,380 General Corporate Expense, Net (13,913) (12,829) (9,701) Asset Valuation Charge (15,800) _ _ Interest Expense Net (3,608) (3,511) (3,832) Miscellaneous 112 139 1,723 Earnings before income taxes $ 33,048 38,459 29,570 Identifiable Assets: Industrial Products 271,538 234,818 197,856 Irrigation Products 65,326 51,792 46,554 Corporate 4,784 22,100 39,033 Total $ 341,648 308,710 283,443 Capital Expenditures: Industrial Products 26,808 30,200 16,011 Irrigation Products 8,720 4,204 7,191 Corporate 131 368 333 Total $ 35,559 34,772 23,535 Depreciation and Amortization: Industrial Products 11,259 8,727 8,044 Irrigation Products 3,080 2,923 2,173 Corporate 493 711 801 Total $ 14,832 12,361 11,018 Summary by Geographical Area: Net Sales: United States 511,516 447,685 424,666 Europe 77,605 64,745 51,018 Other 55,410 32,21 226,056 Total $ 644,531 544,642 501,740 Operating Income: United States 58,424 47,543 34,830 Europe 4,775 4,936 3,248 Other 3,158 2,181 3,302 Total $ 66,357 54,660 41,380 Identifiable Assets: United States 261,785 228,681 216,320 Europe 64,819 64,790 62,334 Other 15,044 15,239 4,789 Total $ 341,648 308,710 283,443
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. 1996 Annual Report 29 47
Quarterly Financial Data (Unaudited) Valmont Industries, Inc. and Subsidiaries (Dollars in thousands, Net Gross Net Earnings (Loss) Stock Price Dividends except per share amounts) Sales Profit Amount Per Share High Low Declared 1996 First $ 148,914 39,999 6,946 .50 30.13 24.25 .075 Second 166,849 43,913 8,501 .61 34.00 29.50 .100 Third 148,048 40,583 6,578 .47 36.00 28.25 .100 Fourth 180,720 47,573 (777) 1 (.05) 1 39.50 33.75 .100 Year $ 644,531 172,068 21,248 1 1.52 1 39.50 24.25 .375 1995 First $ 142,223 34,877 5,694 .42 21.50 16.25 .075 Second 133,418 34,948 6,691 .49 22.00 19.50 .075 Third 128,269 35,099 5,271 .38 24.25 20.75 .075 Fourth 140,732 40,027 7,103 .51 26.00 23.50 .075 Year $ 544,642 144,951 24,759 1.80 26.00 16.25 .300 1994 First $ 117,671 26,756 3,583 .26 20.50 14.50 .075 Second 128,656 30,092 4,893 .36 17.00 13.50 .075 Third 118,500 29,420 4,647 .34 16.75 14.50 .075 Fourth 136,913 35,218 5,764 .42 17.50 15.75 .075 Year $ 501,740 121,486 18,887 1.39 20.50 13.50 .300 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. 1 After a pre-tax asset valuation charge of $15,800 ($10,100 after-tax or $.72 per share).
1996 Annual Report 30 48 Report of Independent Accountants To the Board of Directors and Shareholders of Valmont Industries, Inc. We have audited the accompanying consolidated balance sheet of Valmont Industries, Inc. and Subsidiaries as of December 28, 1996, and the related consolidated statements of operations, shareholders' equity and cash flows for the year 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 audit. The financial statements of the Company for the years ended December 30, 1995 and December 31, 1994 were audited by other auditors whose report, dated February 16, 1996, expressed an unqualified opinion on those statements. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the 1996 consolidated financial statements present fairly, in all material respects, the financial position of Valmont Industries, Inc. and subsidiaries as of December 28, 1996, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE DELOITTE & TOUCHE LLP Omaha, Nebraska February 7, 1997 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 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. /s/ MOGENS C. BAY /s/ TERRY J. MC CLAIN Mogens C. Bay Terry J. McClain Chairman and Chief Executive Officer Senior Vice President and Chief Financial Officer 1996 Annual Report 31 49 Board of Directors and Officers BOARD OF DIRECTOR AND OFFICERS PHOTO: (from left) Walter Scott, Jr., Robert G. Wallace, Charles M. Harper, Allen F. Jacobson, Kenneth E. Stinson, Mogens C. Bay, Thomas F. Madison, Robert B. Daugherty and John E. Jones 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 1 Former Chairman of the Board RJR Nabisco Holdings Corp. Director since 1979 Allen F. Jacobson 1 Retired Chairman and CEO 3M Company Director since 1976 Lloyd P. Johnson 1 Retired Chairman of the Board Norwest Corporation Director since 1991 John E. Jones 2 Retired Chairman, President and CEO CBI Industries, Inc. Director since 1993 Thomas F. Madison 1 President, MLM Partners Chairman of the Board Communications Holdings, Inc. Director since 1987 Walter Scott, Jr. 2 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 2 Retired Executive Vice President Phillips Petroleum Co. Director since 1984 1 Compensation Committee 2 Audit Committee Corporate Officers Mogens C. Bay* Chairman and Chief Executive Officer Phillip C. Cooke* Senior Vice President - Human Resources 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 Group and Division Officers Gary L. Cavey* Group President and Chief Operating Officer Industrial Products Group Leonard M. Adams Vice President - Operations, North America Industrial Products Group James R. Callaway President - Microflect Division Martin Ostransky Vice President - Installation Services Industrial Products Group Richard M. Sampson Vice President - Marketing & Sales Industrial Products Group Vincent T. Corso* Group President and Chief Operating Officer Irrigation & Coatings Group Joseph M. Goecke* President and Chief Operating Officer Valmont Irrigation James J. Eiting Vice President - Sales Valmont Irrigation Dennis E. Schwieger Vice President - Marketing & Sales Valmont Irrigation Dennis G. Thome Vice President - Operations Valmont Irrigation E. Robert Meaney* President and Chief Operating Officer International Division Jan Driessens President - Valmont Europe Richard D. Berkland Vice President - Marketing & Sales International Irrigation Winfield J. Weber Vice President - Marketing & Sales International Poles * Member, Office of the President 1996 Annual Report 32 50 INSIDE BACK COVER: Founder GLOBE ILLUSTRATION: ROBERT B. DAUGHERTY PHOTO: Robert B. Daugherty Founder and Chairman Emeritus Valmont Industries, Inc. As 1996 drew to a close and after 50 years with the Company, Robert B. Daugherty...ValmontOs founder and only chairman...decided that it was time to turn the management of the Company over to the leadership team he had put in place. What a magnificent 50 years it has been. It all started in a small cornfield just west of Valley, Nebraska, when a young Marine returning from World War II invested his life savings in a promising business opportunity called Valley Manufacturing Company, a small farm equipment manufacturer. A few years later, Mr. Daugherty was looking for ways to diversify the business when he came upon a strange contraption that propelled a long pipeline mounted on wheels around a field, sprinkler irrigating the crop as it went. It did not work very well when he purchased the patent rights from the inventor in the early 1950s, but it would soon revolutionize agriculture. Today, over 10 million acres are irrigated with Valley mechanized center pivot and linear move irrigation equipment in the U.S. and more than 90 other countries worldwide. Mr. Daugherty continued to find business opportunities wherever he looked. Not too many years after Valmont began to manufacture its own pipe for the irrigation equipment, they invented machinery to produce tapered light and traffic signal poles. Soon the Company was making products for the utility industry and, most recently, the wireless communication market. The Company changed its name to Valmont Industries in the late 1960s. At every step along the path to success, Mr. Daugherty was active throughout the business and civic community. Although he claims to be "retired" today, he is still very much involved in a number of projects and programs in the community. We are also fortunate that Mr. Daugherty will continue to provide wise counsel as a member of Valmont's Board of Directors. Mr. Daugherty built the Company on the principles of integrity, perseverance and the worth and dignity of the individual. The entire Valmont team thanks him for his leadership and keen eye for picking the right "opportunities" and for allowing us to walk this path with him for the past 50 years. BUILDING ILLUSTRATION: Valley Manufacturing Circa 1950s 1996 Annual Report 33 51 Shareholder Information Valmont Industries, Inc. and Subsidiaries 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 28, 1997, 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 ValmontOs 1996 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 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 6, 1997: Dain Bosworth Inc. George K. Baum & Company Herzog, Heine, Geduld, Inc. Huntleigh Securities Corporation Kirkpatrick Pettis Inc. Lehman Brothers Inc. Merrill Lynch, Pierce, Fenner & Smith Inc. Visit Valmont's Homepage at www.valmont.com 1996 Annual Report 34 52 OUTSIDE BACK COVER: A World Leader... Valmont Industries, Inc. & Subsidiaries INTERNATIONAL MAP ILLUSTRATION: GLOBE ILLUSTRATION: Brenham, Texas, USA Elkhart, Indiana, USA Salem, Oregon, USA Salt Lake City, Utah, USA Tulsa, Oklahoma, USA Valley, Nebraska, USA West Point, Nebraska, USA St. Hubert, Quebec, Canada Uberaba, Brazil Corporate Headquarters Omaha, Nebraska, USA Charmeil, France Cusset, France Lempdes, France Rive-de-Gier, France Gelsenkirchen, Germany Maarheeze, The Netherlands Madrid, Spain Shanghai, China We aggressively participate in specific markets within two major global economies: Food Production and Infrastructure Development. First, we are the world leader in manufacturing efficient irrigation equipment for agriculture...increasing crop yields and conserving scarce water resources. Second, we are the world's leading producer of engineered poles, towers and structures and other products and components for various industries including communication, lighting, and utility...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 leverage our current products and technologies in new markets. This is how we plan to create value for all Valmont shareholders. 53 VALMONT LOGO: GLOBE ILLUSTRATION: Valmont Industries, Inc. P.O. Box 358 Valley, Nebraska 68064 USA (402) 359-2201 Fax (402) 343-0668 www.valmont.com 54 EX-21 4 Exhibit 21 SUBSIDIARIES OF VALMONT INDUSTRIES, INC. State or Country Name of Subsidiary of Incorporation ------------------ ---------------- American Lighting Standards Corp. d/b/a Valmont/ALS Texas Best-All Electric, Inc. Nebraska CCC de Mexico, S.A. de C.V. Mexico Gate City Steel Corporation Delaware Gibo-Conimast & Co.KG Germany Golden State Irrigation, Inc. California InterAg Technologies, Inc. Delaware Lampadaires Feralux, Inc. Canada Microflect Company, Inc. Oregon NeuValco S.A. France NeuValco GmbH Germany Sermeto S.A. France Sermeto Iberica S.A. Spain Shanghai Valmont Special Steel Tube Co., Ltd. China TelecCentre, S.A. France Tubalco S.A. France VBT, Inc. Delaware Valmont DeEspana, S.A. Spain Valmont Electric, Inc. Delaware Valmont S.A. Spain Valmont Industries (Asia-Pacific) Ltd. Hong Kong Valmont Industries Holland B.V. The Netherlands Valmont International, L.L.C. Delaware Valmont International Corp. Texas Valmont International Inc. U. S. Virgin Islands Valmont Nederlands B.V. The Netherlands Valmont Northwest, Inc. Nebraska Valmont Polska Sp. zo.o Poland Valmont Service Centers, Inc. Nebraska Valmont World Trade, N.V. Netherlands Antilles 55 EX-23 5 Exhibit 23(a) DELOITTE & TOUCHE LLP (letterhead) 2000 First National Center Telephone 402-346-7788 Omaha, NE 68102-1578 Facsimile 402-346-0711 402-344-0372 INDEPENDENT AUDITORS' CONSENT - ----------------------------- We consent to incorporation by reference in Registration Statements No. 2-88663, 33-21680, 33-57117, and 333-02785 of Valmont Industries, Inc. on Form S-8 of our reports dated February 7, 1997 appearing in the Annual Report on Form 10-K of Valmont Industries, Inc. for the year ended December 28, 1996. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Omaha, Nebraska March 20, 1997 56 EX-23 6 Exhibit 23(b) KPMG Peat Marwick LLP (letterhead) Two Central Park Plaza Telephone 402-348-1450 Telefax 402-348-0152 Suite 1501 Omaha, NE 68102 233 South 13th Street Telephone 402-476-1216 Telefax 402-476-1944 Suite 1600 Lincoln, NE 68508-2041 ACCOUNTANTS' CONSENT -------------------- The Board of Directors Valmont Industries, Inc.: We consent to incorporation by reference in this Registration Statement (No. 33-21680) on Form S-8, Registration Statement (No. 2-88663) on Form S-8, Registration Statement (No. 333-02785) on Form S-8 and Registration Statement (No. 33-57117) on form S-8 of Valmont Industries, Inc. of our report dated February 16, 1996 relating to the consolidated balance sheet of Valmont Industries, Inc. and subsidiaries as of December 30, 1995 and the related consolidated statements of operations, shareholders' equity and cash flows and related consolidated financial statement schedule for each of the years in the two-year period ended December 30, 1995 which report appears in or is incorporated by reference in the December 28, 1996 Annual Report on Form 10-K of Valmont Industries, Inc. /s/ KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP Omaha, Nebraska March 19, 1997 57 EX-24 7 Exhibit 24 POWER OF ATTORNEY The undersigned Directors of Valmont Industries, Inc., a Delaware corporation, hereby constitute and appoint Mogens C. Bay as attorney-in-fact in their name, place and stead to execute Valmont's Annual Report on Form 10-K for the fiscal year ended December 28, 1996, together with any and all subsequent amendments thereof in their capacity as Chairman of the Board and hereby ratify all that said attorney-in-fact may do by virtue thereof. DATED this 26th day of February, 1997. /s/Robert B.Daugherty /s/John E. Jones ______________________________ ______________________________ Robert B. Daugherty, Director John E. Jones, Director /s/Charles M. Harper /s/Thomas F. Madison ______________________________ ______________________________ Charles M. Harper, Director Thomas F. Madison, Director /s/Allen F. Jacobson /s/Walter Scott, Jr. ______________________________ ______________________________ Allen F. Jacobson, Director Walter Scott, Jr., Director /s/Lloyd P. Johnson /s/Kenneth E. Stinson ______________________________ ______________________________ Lloyd P. Johnson, Director Kenneth E. Stinson, Director /s/Robert G. Wallace ______________________________ Robert G. Wallace, Director 58 EX-27 8
5 This schedule contains summary financial information extracted from SEC Form 10-K and is qualified in its entirety by reference to such financial statements. Exhibit 27 1000 YEAR DEC-28-1996 DEC-28-1996 9,483 0 82,224 0 73,359 210,846 228,247 107,668 341,648 129,443 0 0 0 13,950 161,281 341,648 644,531 644,531 472,463 472,463 135,424 0 3,596 33,048 11,800 21,248 0 0 0 21,248 1.52 0 Net of allowances of $2,299. 59
EX-99 9 Exhibit 99 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors Valmont Industries, Inc.: We have audited the accompanying consolidated balance sheets of Valmont Industries, Inc. and subsidiaries as of December 30, 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the two-year period ended December 30, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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 disclosure 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Valmont Industries, Inc. and subsidiaries as of December 30, 1995, and the results of their operations and their cash flows for each of the years in the two-year period ended December 30, 1995, in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP Omaha, Nebraska February 16, 1996 60 -----END PRIVACY-ENHANCED MESSAGE-----