10-Q 1 a2199482z10-q.htm 10-Q

Table of Contents

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



Form 10-Q

(Mark One)    

ý

 

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

For the quarterly period ended June 26, 2010

Or

o

 

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

For the transition period from                             to                              

Commission file number 1-31429

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

Delaware
(State or other jurisdiction of
incorporation or organization)
  47-0351813
(I.R.S. Employer
Identification No.)

One Valmont Plaza,
Omaha, Nebraska
(Address of principal executive offices)

 

68154-5215
(Zip Code)

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


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



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

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

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

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

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

26,338,222
Outstanding shares of common stock as of July 20, 2010


VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

 
   
  Page No.  

PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements:

       

 

Condensed Consolidated Statements of Operations for the thirteen and twenty-six weeks ended June 26, 2010 and June 27, 2009

    3  

 

Condensed Consolidated Balance Sheets as of June 26, 2010 and December 26, 2009

    4  

 

Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended June 26, 2010 and June 27, 2009

    5  

 

Condensed Consolidated Statements of Shareholders' Equity for the twenty-six weeks ended June 26, 2010 and June 27, 2009

    6  

 

Notes to Condensed Consolidated Financial Statements

    7-31  

Item 2.

 

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

    32-41  

Item 3.

 

Quantitative and Qualitative Disclosure about Market Risk

    41  

Item 4.

 

Controls and Procedures

    41  


PART II. OTHER INFORMATION


 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    43  

Item 5.

 

Other Information

    43  

Item 6.

 

Exhibits

    43  

Signatures

    44  

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

 
  Thirteen Weeks Ended   Twenty-Six Weeks Ended  
 
  June 26,
2010
  June 27,
2009
  June 26,
2010
  June 27,
2009
 

Net sales

  $ 481,559   $ 498,810   $ 848,961   $ 953,964  

Cost of sales

    352,913     354,129     619,585     680,967  
                   
 

Gross profit

    128,646     144,681     229,376     272,997  

Selling, general and administrative expenses

    91,345     75,265     160,425     145,262  
                   
 

Operating income

    37,301     69,416     68,951     127,735  
                   

Other income (expenses):

                         
 

Interest expense

    (8,429 )   (3,976 )   (14,391 )   (8,260 )
 

Interest income

    1,092     284     1,448     616  
 

Other

    47     1,608     (30 )   (190 )
                   

    (7,290 )   (2,084 )   (12,973 )   (7,834 )
                   

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries

    30,011     67,332     55,978     119,901  
                   

Income tax expense (benefit):

                         
 

Current

    17,252     19,266     23,958     31,566  
 

Deferred

    (5,570 )   2,785     (2,830 )   7,740  
                   

    11,682     22,051     21,128     39,306  
                   

Earnings before equity in earnings (losses) of nonconsolidated subsidiaries

    18,329     45,281     34,850     80,595  

Equity in earnings (losses) of nonconsolidated subsidiaries

    805     (71 )   919     495  
                   
 

Net earnings

    19,134     45,210     35,769     81,090  
                   

Less: Earnings attributable to noncontrolling interests

    (2,019 )   (980 )   (2,191 )   (996 )
                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 17,115   $ 44,230   $ 33,578   $ 80,094  
                   

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

  $ 0.66   $ 1.70   $ 1.29   $ 3.09  
                   

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

  $ 0.65   $ 1.69   $ 1.27   $ 3.05  
                   

Cash dividends per share

  $ 0.165   $ 0.150   $ 0.315   $ 0.280  
                   

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

    26,087     25,943     26,059     25,928  
                   

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

    26,448     26,223     26,434     26,224  
                   

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

 
  June 26,
2010
  December 26,
2009
 
       

ASSETS

             

Current assets:

             
 

Cash and cash equivalents

  $ 314,373   $ 180,786  
 

Receivables, net

    376,005     259,521  
 

Inventories

    296,634     210,611  
 

Prepaid expenses and other current assets

    39,943     22,143  
 

Refundable and deferred income taxes

    35,930     42,361  
           
   

Total current assets

    1,062,885     715,422  
           

Property, plant and equipment, at cost

    821,701     675,446  
 

Less accumulated depreciation and amortization

    (396,567 )   (392,358 )
           
   

Net property, plant and equipment

    425,134     283,088  
           

Goodwill

    291,610     178,320  

Other intangible assets, net

    188,916     96,378  

Other assets

    61,012     28,961  
           
   

Total assets

  $ 2,029,557   $ 1,302,169  
           
     

LIABILITIES AND SHAREHOLDERS' EQUITY

             

Current liabilities:

             
 

Current installments of long-term debt

  $ 270   $ 231  
 

Notes payable to banks

    9,752     11,900  
 

Accounts payable

    202,587     118,210  
 

Accrued employee compensation and benefits

    49,254     66,611  
 

Accrued expenses

    94,380     55,921  
 

Dividends payable

    4,346     3,944  
           
   

Total current liabilities

    360,589     256,817  
           

Deferred income taxes

    81,696     49,281  

Long-term debt, excluding current installments

    517,913     160,251  

Defined benefit pension liability

    116,816      

Deferred compensation

    22,704     19,013  

Other noncurrent liabilities

    50,585     8,500  

Shareholders' equity:

             
 

Preferred stock

             
   

Authorized 500,000 shares; none issued

         
 

Common stock of $1 par value

             
   

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

    27,900     27,900  
 

Retained earnings

    795,797     767,398  
 

Accumulated other comprehensive income (loss)

    (13,513 )   16,953  
 

Treasury stock

    (25,510 )   (25,990 )
           
   

Total Valmont Industries, Inc. shareholders' equity

    784,674     786,261  
           
 

Noncontrolling interest in consolidated subsidiaries

    94,580     22,046  
           
   

Total shareholders'equity

    879,254     808,307  
           
   

Total liabilities and shareholders' equity

  $ 2,029,557   $ 1,302,169  
           

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 
  Twenty-six Weeks Ended  
 
  June 26,
2010
  June 27,
2009
 

Cash flows from operating activities:

             
 

Net earnings

  $ 35,769   $ 81,090  
 

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

             
   

Depreciation and amortization

    24,580     21,710  
   

Stock-based compensation

    3,168     2,993  
   

Loss on sales of property, plant and equipment

    123     345  
   

Equity in earnings of nonconsolidated subsidiaries

    (919 )   (495 )
   

Deferred income taxes

    (2,830 )   7,740  
   

Other

    19     (239 )
   

Changes in assets and liabilities, net of the effects of acquisitions:

             
     

Receivables

    (32,071 )   (5,356 )
     

Inventories

    (6,110 )   65,061  
     

Prepaid expenses

    61     (10,369 )
     

Accounts payable

    11,386     (6,923 )
     

Accrued expenses

    1,669     (13,234 )
     

Other noncurrent liabilities

    7,896     (993 )
     

Income taxes payable/refundable

    11,241     (5,732 )
           
       

Net cash flows from operating activities

    53,982     135,598  
           

Cash flows from investing activities:

             
 

Purchase of property, plant and equipment

    (11,025 )   (24,550 )
 

Proceeds from sale of assets

    96     74  
 

Acquisitions (net of cash acquired of $198,810)

    (245,310 )    
 

Dividends to noncontrolling interests

    (3,477 )   (289 )
 

Other, net

    1,516     (68 )
           
       

Net cash flows from investing activities

    (258,200 )   (24,833 )
           

Cash flows from financing activities:

             
 

Net payments under short-term agreements

    (2,148 )   (1,917 )
 

Proceeds from long-term borrowings

    491,000     10,001  
 

Principal payments on long-term obligations

    (133,228 )   (88,628 )
 

Dividends paid

    (7,892 )   (6,813 )
 

Debt issuance costs

    (3,858 )    
 

Proceeds from exercises under stock plans

    3,197     3,126  
 

Excess tax benefits from stock option exercises

    1,216     1,446  
 

Purchase of treasury shares

    (877 )    
 

Purchase of common treasury shares—stock plan exercises

    (1,961 )   (2,146 )
           
       

Net cash flows from financing activities

    345,449     (84,931 )
           

Effect of exchange rate changes on cash and cash equivalents

    (7,644 )   1,861  
           

Net change in cash and cash equivalents

    133,587     27,695  

Cash and cash equivalents—beginning of year

    180,786     68,567  
           

Cash and cash equivalents—end of period

  $ 314,373   $ 96,262  
           

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands)

(Unaudited)

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

Balance at December 27, 2008

  $ 27,900   $   $ 624,254   $ (533 ) $ (27,490 ) $ 16,845   $ 640,976  

Comprehensive income:

                                           
 

Net earnings

            80,094             996     81,090  
 

Currency translation adjustment

                10,244         830     11,074  
                                           
   

Total comprehensive income

                            92,164  

Cash dividends ($0.28 per share)

            (7,351 )               (7,351 )

Stock plan exercises; 33,481 shares purchased

                    (2,146 )       (2,146 )

Stock options exercised; 121,345 shares issued

        (4,439 )   4,717         2,848         3,126  

Tax benefit from exercise of stock options

          1,446                     1,446  

Stock option expense

        2,040                     2,040  

Stock awards; 9,746 shares issued

        953             436         1,389  
                               

Balance at June 27, 2009

  $ 27,900   $   $ 701,714   $ 9,711   $ (26,352 ) $ 18,671   $ 731,644  
                               

Balance at December 26, 2009

 
$

27,900
 
$

 
$

767,398
 
$

16,953
 
$

(25,990

)

$

22,046
 
$

808,307
 

Comprehensive income:

                                         
 

Net earnings

            33,578             2,191     35,769  
 

Currency translation adjustment

                (30,466 )       (4,189 )   (34,655 )
                                           
   

Total comprehensive income

                            1,114  

Cash dividends ($0.315 per share)

            (8,293 )               (8,293 )

Dividends to noncontrolling interests

                        (3,477 )   (3,477 )

Purchase of noncontrolling interest

        (1,875 )               (1,520 )   (3,395 )

Acquisition of Delta plc

                        79,529     79,529  

Purchase of 12,351 treasury shares

                    (877 )       (877 )

Stock options exercised; 72,075 shares issued

        (2,509 )   3,114         2,668         3,273  

Stock plan exercises; 27,230 shares purchased

                    (1,961 )       (1,961 )

Tax benefit from exercise of stock options

        1,216                     1,216  

Stock option expense

        2,457                     2,457  

Stock awards; 9,088 shares issued

        711             650         1,361  
                               

Balance at June 26, 2010

  $ 27,900   $   $ 795,797   $ (13,513 ) $ (25,510 ) $ 94,580   $ 879,254  
                               

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

1. Summary of Significant Accounting Policies

    Condensed Consolidated Financial Statements

        The Condensed Consolidated Balance Sheet as of June 26, 2010, the Condensed Consolidated Statements of Operations for the thirteen and twenty-six week periods ended June 26, 2010 and June 27, 2009, the Condensed Consolidated Statements of Cash Flows and Shareholders' Equity for the twenty-six week periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of June 26, 2010 and for all periods presented.

        Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2009. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December 26, 2009. The results of operations for the period ended June 26, 2010 are not necessarily indicative of the operating results for the full year.

    Inventories

        At June 26, 2010, approximately 35.1% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value was approximately $47,000 and $39,500 at June 26, 2010 and December 26, 2009, respectively.

        Inventories consisted of the following:

 
  June 26,
2010
  December 26,
2009
 

Raw materials and purchased parts

  $ 160,850   $ 112,911  

Work-in-process

    23,930     20,217  

Finished goods and manufactured goods

    158,993     117,032  
           

Subtotal

    343,773     250,160  

LIFO reserve

    47,139     39,549  
           

Net inventory

  $ 296,634   $ 210,611  
           

    Stock Plans

        The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Compensation Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

stock. At June 26, 2010, 1,092,207 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.

        Under the plans, the exercise price of each option equals the market price at the date of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the fifth anniversary of the grant. Expiration of grants is from six to ten years from the date of grant. The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock option for the thirteen and twenty-six weeks ended June 26, 2010 and June 27, 2009, respectively, were as follows:

 
  Thirteen Weeks
Ended
June 26, 2010
  Thirteen Weeks
Ended
June 29, 2009
  Twenty-six Weeks
Ended
June 26, 2010
  Twenty-six Weeks
Ended
June 29, 2009
 

Compensation expense

  $ 1,229   $ 1,020   $ 2,457   $ 2,040  

Income tax benefits

    467     393     934     785  

    Fair Value

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

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

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

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

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

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

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

        Trading Securities: The assets and liabilities recorded for the investments held in the Valmont Deferred Compensation Plan represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification 320, Accounting for Certain

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)


Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.

 
   
  Fair Value Measurement Using:  
 
  Carrying Value
June 26,
2010
  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         
 

Trading Securities

  $ 17,352   $ 17,352   $   $  

 

 
   
  Fair Value Measurement Using:  
 
  Carrying Value
December 26,
2009
  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Assets:

                         
 

Trading Securities

  $ 15,653   $ 15,653   $   $  

    Recently Issued Accounting Pronouncements

        In fiscal 2010, the Company implemented the provisions of updated ASC Topic 860, Transfers and Servicing, which significantly changed the accounting for transfers of financial assets. The update to ASC 860 eliminated the qualifying special purpose entity ("QSPE") concept, established conditions for reporting a transfer of a portion of a financial asset as a sale, clarified the financial-asset derecognition criteria, revised how interests retained by the transferor in a sale of financial assets initially are measured, and removed the guaranteed mortgage securitization recharacterization provisions. The implementation of this new accounting guidance had no impact on the Company's condensed consolidated financial statements for the fiscal period ended June 26, 2010.

2. Acquisition of Delta plc

        On March 10, 2010, the Company commenced a cash offer for all of the issued and to be issued ordinary share capital of Delta, plc. ("Delta") a public limited company incorporated in Great Britain, and listed on the London Stock Exchange (LSE: DLTA). The acquisition was completed on May 12, 2010 and the Company now owns 100% of the ordinary shares of Delta. The price paid per share was 185 pence in cash for each Delta share, or £284,463, or $436,736 based on the contracted average exchange rate of $1.5353 / £. Delta has manufacturing operations employing over 2,500 people in Australia, Asia, South Africa and the United States. Delta's businesses include engineered steel products, galvanizing services and manganese materials. The Company financed the acquisition with the net proceeds from an April 2010 sale of $300 million of senior notes at an interest rate of 6.625% per annum, cash balances of $83 million and borrowings under the Company's revolving credit agreement. The factors that contributed to a purchase price resulting in the recognition of goodwill, non-deductable for tax purposes, for the acquisition of Delta were to increase the Company's business

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

2. Acquisition of Delta plc (Continued)


presence in the Asia Pacific region, add to its current business activities in the galvanizing and support structures product lines and provide growth opportunities in businesses that are not directly related to the Company's current product offerings.

        The Company incurred $11.9 and $14.1 million of expenses (reported as "Selling, general and administrative expenses") in the thirteen and twenty-six week periods ended June 26, 2010, respectively, related to the Delta acquisition. These expenses included amounts paid for investment banking fees, due diligence costs and other direct expenses related to the purchase of the Delta shares. From a segment reporting standpoint, these expenses were reported as part of "Net corporate expense".

        The fair value measurement was preliminary at June 26, 2010, subject to the completion of the valuation of one of Delta's reporting units and further management reviews and assessments of the preliminary fair values of the assets acquired and liabilities assumed. The Company expects the fair value measurement process to be completed in the third quarter of 2010.

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

 
  At May 12,
2010
 

Current assets

  $ 406,544  

Property, plant and equipment

    162,435  

Other long-term assets

    28,136  

Intangible assets

    100,716  

Goodwill

    118,398  
       
 

Total fair value of assets acquired

  $ 816,229  
       

Current liabilities

    106,255  

Defined benefit pension liability

    118,725  

Deferred income taxes

    35,871  

Other non-current liabilities

    39,113  

Non-controlling interests

    79,529  
       
 

Total fair value of liabilities assumed and non-controlling interests

    379,493  
       
 

Net assets acquired

  $ 436,736  
       

        Delta disposed of the shares of its subsidiary UPC Holdings, Inc. in December 2000 for approximately $100 million. The buyer caused UPC Holdings to dispose of its assets in January 2001. The IRS in 2005 established that the buyer had a tax liability on the asset sale of $47 million (exclusive of penalties and interest). During 2009-2010, the Internal Revenue Service issued summons requesting documentation related to the UPC Holdings transactions. The summons state that they were issued in connection with UPC's unsatisfied tax liability and Delta's potential transferee liability. Documents have been provided to the IRS in response to the summons. Based on an evaluation of this matter at the May 12, 2010 date of acquisition, the Company established a provision in the amount of $20 million

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

2. Acquisition of Delta plc (Continued)


to address certain legal and factual uncertainties, which amount is included in "Other non-current liabilities".

        The Company's Condensed Consolidated Statements of Operations for the period ended June 26, 2010 included $74,165 and $3,633 of net sales and net earnings resulting from Delta's operations from May 12, 2010 until June 26, 2010.

        The Company's pro forma results of operations for the thirteen and twenty-six weeks ended June 27, 2009 and June 26, 2010, assuming that the acquisition occurred at the beginning of 2009 was as follows:

 
  Thirteen Weeks
Ended
June 26, 2010
  Thirteen Weeks
Ended
June 27, 2009
  Twenty-six Weeks
Ended
June 26, 2010
  Twenty-six Weeks
Ended
June 27, 2009
 

Net sales

  $ 545,195   $ 634,837   $ 1,041,379   $ 1,204,130  

Net earnings

    29,578     51,506     37,985     77,637  

Earnings per share—diluted

  $ 1.14   $ 1.96   $ 1.46   $ 2.99  

        Based on the preliminary results of an independent valuation, the Company allocated $100,716 of the purchase price to acquired intangible assets. The following table summarizes the major classes of Delta acquired intangible assets and the respective weighted-average amortization periods:

 
  Amount   Weighted
Average
Amortization
Period
(Years)

Trade Names

  $ 36,540   Indefinite

Customer Relationships

    58,188   12.0

Proprietary Technology

    5,988     5.0
         

  $ 100,716    
         

3. Goodwill and Intangible Assets

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

3. Goodwill and Intangible Assets (Continued)

    Amortized Intangible Assets

        The components of amortized intangible assets at June 26, 2010 and December 26, 2009 were as follows:

 
  As of June 26, 2010    
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Weighted
Average
Life

Customer Relationships

  $ 153,339   $ 31,686   13 years

Proprietary Software & Database

    2,625     2,503   6 years

Patents & Proprietary Technology

    9,297     1,565   8 years

Non-compete Agreements

    1,655     930   6 years
             

  $ 166,916   $ 36,684    
             

 

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

Customer Relationships

  $ 97,289   $ 27,559   14 years

Proprietary Software & Database

    2,627     2,434   6 years

Patents & Proprietary Technology

    3,466     1,257   13 years

Non-compete Agreements

    1,704     823   6 years
             

  $ 105,086   $ 32,073    
             

        Amortization expense for intangible assets for the thirteen and twenty-six weeks ended June 26, 2010 and June 27, 2009, respectively was as follows:

Thirteen Weeks
Ended
June 26, 2010
  Thirteen Weeks
Ended
June 27, 2009
  Twenty-six Weeks
Ended
June 26, 2010
  Twenty-six Weeks
Ended
June 27, 2009
 
$2,734   $ 2,070   $ 4,774   $ 4,115  

 

 
  Estimated
Amortization
Expense
 

2010

  $ 11,771  

2011

    13,728  

2012

    13,680  

2013

    12,783  

2014

    12,360  

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

3. Goodwill and Intangible Assets (Continued)

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

    Non-amortized intangible assets

        Intangible assets with indefinite lives are not amortized. The carrying values of trade names at June 26, 2010 and December 26, 2009 were as follows:

 
  June 26,
2010
  December 26,
2009
 

Webforge

  $ 16,156   $  

Newmark

    11,111     11,111  

Ingal

    8,527      

Donhad

    6,437      

PiRod

    4,750     4,750  

Industrial Galvanizers

    4,488      

Other

    7,215     7,504  
           

  $ 58,684   $ 23,365  
           

        The Webforge, Ingal, Donhad and Industrial Galvanizers trade names were acquired as part of the Delta acquisition. The other trade names were tested for impairment separately from goodwill at that time in the third quarter of 2009. The values of the trade names were determined using the relief-from-royalty method. Based on this evaluation, the Company determined that its trade names were not impaired.

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

3. Goodwill and Intangible Assets (Continued)

    Goodwill

        The carrying amount of goodwill as of June 26, 2010 was as follows:

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

Balance December 26, 2009

  $ 55,338   $ 77,141   $ 43,777   $ 2,064   $   $ 178,320  

Acquisition

                    118,398     118,398  

Foreign currency translation

    (1,693 )               (3,415 )   (5,108 )
                           

Balance June 26, 2010

  $ 53,645   $ 77,141   $ 43,777   $ 2,064   $ 114,983   $ 291,610  
                           

4. Cash Flows

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

 
  June 26,
2010
  June 27,
2009
 

Interest

  $ 9,534   $ 8,759  

Income taxes

    11,869     34,550  

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

5. Earnings Per Share

        The following table reconciles Basic and Diluted earnings per share (EPS):

 
  Basic EPS   Dilutive Effect of
Stock Options
  Diluted EPS  

Thirteen weeks ended June 26, 2010:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 17,115       $ 17,115  
 

Shares outstanding

    26,087     361     26,448  
 

Per share amount

  $ 0.66     (.01 ) $ 0.65  

Thirteen weeks ended June 27, 2009:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 44,230       $ 44,230  
 

Shares outstanding

    25,943     280     26,223  
 

Per share amount

  $ 1.70     (.01 ) $ 1.69  

Twenty-six weeks ended June 26, 2010:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 33,578       $ 33,578  
 

Shares outstanding

    26,059     375     26,434  
 

Per share amount

  $ 1.29     (.02 ) $ 1.27  

Twenty-six weeks ended June 27, 2009:

                   
 

Net earnings attributable to Valmont Industries, Inc. 

  $ 80,094       $ 80,094  
 

Shares outstanding

    25,928     296     26,224  
 

Per share amount

  $ 3.09     (.04 ) $ 3.05  

        At June 26, 2010 there were 455,153 of outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share for the thirteen and twenty-six weeks ended June 26, 2010. At June 27, 2009 there were 188,127 of outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share for the thirteen and twenty-six weeks ended June 27, 2009.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

6. Long-term Debt

 
  June 26, 2010   December 26, 2009  

6.625% Senior Unsecured Notes(a)

  $ 300,000   $  

6.875% Senior Subordinated Notes(b)

    150,000     150,000  

Revolving credit agreement(c)

    58,000      

IDR Bonds(d)

    8,500     8,500  

1.75% to 3.485% notes

    1,683     1,982  
           
 

Total long-term debt

    518,183     160,482  

Less current installments of long-term debt

    270     231  
           
 

Long-term debt, excluding current installments

  $ 517,913   $ 160,251  
           

(a)
The $300 million of senior unsecured notes bear interest at 6.625% per annum and are due in April 2020. These notes may be repurchased at specified prepayment premiums. These notes and the senior subordinated notes are guaranteed by certain subsidiaries of the Company.

(b)
The $150 million of senior subordinated notes bear interest at 6.875% per annum and are due in May 2014. All or part of the notes may be repurchased at the following redemption prices (stated as a percentage of face value):

 
  Redemption
Price
 

Until May 1, 2011

    102.292 %

From May 1, 2011 until May 1, 2012

    101.146 %

After May 1, 2012

    100.000 %
(c)
The revolving credit agreement is with a group of banks for up to $280 million. The Company may increase the credit agreement by up to an additional $100 million at any time, subject to the participating banks increasing the amount of their lending commitments. The interest rate on outstanding borrowings is, at the Company's option, either:

(i)
LIBOR (based on a 1, 2, 3 or 6 month interest period, as selected by the Company) plus 125 to 200 basis points (inclusive of facility fees), depending on the Company's ratio of debt to EBITDA, or;

(ii)
the higher of

The higher of (a) the prime lending rate and (b) the Federal Funds rate plus 50 basis points plus, in each case, 25 to 100 basis points (inclusive of facility fees), depending on the Company's ratio of debt to EBITDA, or

LIBOR (based on a 1 week interest period) plus 125 to 200 basis points (inclusive of facility fees), depending on the Company's ratio of debt to EBITDA

            At June 26, 2010, the Company had $58,000 in outstanding borrowings under the revolving credit agreement, at a weighted average annual interest rate of 1.55%, not including facility fees.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

6. Long-term Debt (Continued)

    The revolving credit agreement has a termination date of October 16, 2013 and contains certain financial covenants that may limit additional borrowing capability under the agreement. At June 26, 2010, the Company had the ability to borrow an additional $198.6 million under this facility.

(d)
The Industrial Development Revenue Bonds were issued to finance the construction of a manufacturing facility in Jasper, Tennessee. Variable interest is payable until final maturity June 1, 2025. The effective interest rates at June 26, 2010 and December 26, 2009 were 0.47% and 0.52%, respectively.

        The lending agreements include certain maintenance covenants, including financial leverage and interest coverage. The Company was in compliance with all debt covenants at June 26, 2010.

        The minimum aggregate maturities of long-term debt for each of the four years following 2010 are: $303, $248, $58,249 and $150,255.

7. Defined Benefit Retirement Plan

        The Company's subsidiary, Delta plc ("Delta") provides defined benefit retirement income to eligible employees in the United Kingdom. Pension retirement benefits to qualified employees are 1.67% of final salary per year of service upon reaching the age of 65 years. This Plan has less than ten active members.

Funded Status

        The Company recognizes the overfunded or underfunded status of our pension plan as an asset or liability. The funded status represents the difference between the pension benefit obligation (PBO) and the fair value of the plan assets. The PBO is the present value of benefits earned to date by plan participants, including the effect of assumed future salary increases and inflation. Plan assets are measured at fair value. At the date of the Delta acquisition (May 12, 2010), the Company determined fair value of the PBO and plan assets. Because the pension plan is denominated in British pounds sterling, the Company used exchange rates of $1.5353/£ and $1.4959/£ to translate the net pension liability into U.S. dollars at May 12, 2010 and June 26, 2010, respectively.

        Projected Benefit Obligation and Fair Value of Plan Asset at date of Delta acquisition—The accumulated benefit obligation (ABO) is the present value of benefits earned to date. The underfunded ABO represents the difference between the projected benefit obligation (PBO) and the fair value of plan assets. The PBO, ABO, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of the fair value of the plan assets were as follows at May 12, 2010:

Underfunded Accumulated Benefit Obligation
Thousands of Dollars
  May 12, 2010  

Projected benefit obligation

  $ (469,780 )

Fair value of plan assets

    351,055  
       

Underfunded accumulated benefit obligation

  $ (118,725 )
       

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

7. Defined Benefit Retirement Plan (Continued)

        Assumptions—The weighted-average actuarial assumptions used to determine the benefit obligation at May 12, 2010 were as follows:

Percentages
  2010  

Discount rate

    5.60 %

Salary increase

    4.70 %

Inflation

    3.70 %

Expense

        Pension expense is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets that recognizes changes in fair value over a five-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it can have the effect of delaying the recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Differences in actual experience in relation to assumptions are not recognized in net earnings immediately, but are deferred and, if necessary, amortized as pension expense.

        The components of our net periodic pension expense were as follows for the period from May 12, 2010 to June 26, 2010:

Thousands of Dollars
   
 

Net Periodic Benefit Cost:

       
 

Service cost

  $ 33  
 

Interest cost

    3,217  
 

Expected return on plan assets

    (2,113 )
       

Net periodic benefit expense

  $ 1,137  
       

        Assumptions—The weighted-average actuarial assumptions used to determine expense are as follows for fiscal 2010:

Percentages
   
 

Discount rate

    5.60 %

Expected return on plan assets

    5.51 %

Salary increase

    4.70 %

Inflation

    3.70 %

        The discount rate is based on the annualized yield on the iBoxx over the 15-year AA-rated corporate bonds index with cash flows generally matching the Plan's expected benefit payments. The expected return on plan assets is based on our asset allocation mix and our historical return, taking into account current and expected market conditions.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

7. Defined Benefit Retirement Plan (Continued)

Cash Contributions

        Employer contributions to the pension plan have been set at $9,427 (£6.3 million) per annum in accordance with the Plan's 10-year recovery plan, along with a contribution to cover the administrative costs of the Plan of approximately $1,496 (£1.0 million) per annum.

Benefit Payments

        The following table details expected pension benefit payments for the years 2010 through 2019:

Thousands of Dollars
   
 

2010

  $ 5,589  

2011

    9,100  

2012

    9,454  

2013

    9,822  

2014

    10,207  

Years 2015-2019

    57,321  

Asset Allocation Strategy

        The investment strategy for pension plan assets is to maintain a diversified portfolio mainly in long-term fixed-income securities that are investment grade or government-backed in nature. Most of the participants in the plan are inactive or retired individuals and this investment policy is designed to generally match our long-term benefit payment expectations. The plan, as required by U.K. law, has an independent trustee that sets investment policy and consults with management and independent advisors regularly on such matters.

        The pension plan investments are held in a trust. Most of the pension plan assets are invested in fixed income securities. The debt portfolio is also broadly diversified and invested primarily in U.K. Treasury and corporate securities. The weighted-average maturity of the debt portfolio was 12 years at June 26, 2010.

Fair Value Measurements

        The pension plan assets are valued at fair value. The following is a description of the valuation methodologies used for the investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

        Index-linked gilts—Index-linked gilts are U.K. government-backed securities consisting of bills, notes, bonds, and other fixed income securities issued directly by the U.K. Treasury or by government-sponsored enterprises.

        Corporate Bonds—Corporate bonds and debentures consist of fixed income securities issued by U.K. corporations.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

7. Defined Benefit Retirement Plan (Continued)

        Corporate Stock—This investment category consists of common and preferred stock issued by U.K. and non-U.K. corporations.

        These assets are pooled investment funds whereby the underlying investments can be valued using quoted market prices. As the fair values of the pooled investment funds themselves are not publicly quoted, they are classified as Level 2 investments.

        At May 12, 2010, the pension plan assets measured at fair value on a recurring basis were as follows:

Thousands of Dollars
  Quoted Prices in Active Markets for Identical Inputs (Level 1)   Significant Other Observable Inputs (Level 2)   Significant Unobservable Inputs (Level 3)   Total  

Plan net assets:

                         
 

Temporary cash investments

  $   $   $   $  
 

Index-linked gilts

        39,456         39,456  
 

Corporate bonds

        294,117         294,117  
 

Corporate stock

        15,550         15,550  
 

Other investments

        1,933         1,933  
                   

Total plan net assets at fair value

  $   $ 351,056   $   $ 351,055  
                   

8. Business Segments

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

        Reportable segments are as follows:

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

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

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

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Business Segments (Continued)

        DELTA:    This segment consists of the operations of Delta plc, which was purchased by Valmont on May 12, 2010. The primary product lines in this segment are engineered steel products for industrial access systems and road safety, galvanizing, and manganese materials.

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

        In the fourth quarter of 2009, the Company reorganized its management structure and redefined its Utility segment to include Utility support structure activities on a global basis. Previously, sales of utility support structures outside of North America were reported as part of the ESS segment. This management structure change should help the Company better serve the global utility support structure market. Information presented for 2009 has been reclassified to conform to the 2010 presentation. The Company will reassess the composition of the Delta segment at the end of fiscal 2010 and make any appropriate changes to its reportable segment structure at that time.

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

8. Business Segments (Continued)

 
  Thirteen Weeks Ended   Twenty-Six Weeks Ended  
 
  June 26, 2010   June 27, 2009   June 26, 2010   June 27, 2009  

Sales:

                         
 

Engineered Support Structures segment:

                         
   

Lighting & Traffic

  $ 106,478     115,545   $ 194,589     218,648  
   

Communication Structures

    28,248     34,895     47,143     67,828  
                   
     

Engineered Support Structures segment

    134,726     150,440     241,732     286,476  
 

Utility Support Structures segment

                         
   

Steel

    99,836     173,727     198,909     322,299  
   

Concrete

    13,003     42,501     27,158     77,889  
                   
     

Utility Support Structures segment

    112,839     216,228     226,067     400,188  
 

Coatings segment

    33,407     28,600     61,337     58,612  
 

Irrigation segment

    112,160     101,047     220,799     204,109  
 

Delta segment

    74,165         74,165      
 

Other

    24,832     17,439     47,121     36,760  
                   
     

Total

    492,129     513,754     871,221     986,145  

Intersegment Sales:

                         
 

Engineered Support Structures segment

    674     5,088     1,776     10,765  
 

Utility Support Structures segment

    336     528     635     1,086  
 

Coatings segment

    6,096     6,188     11,860     12,331  
 

Irrigation segment

    3     9     6     14  
 

Delta segment

                 
 

Other

    3,461     3,131     7983     7,985  
                   
     

Total

    10,570     14,944     22,260     32,181  

Net Sales:

                         
 

Engineered Support Structures segment

    134,052     145,352     239,956     275,711  
 

Utility Support Structures segment

    112,503     215,700     225,432     399,102  
 

Coatings segment

    27,311     22,412     49,477     46,281  
 

Irrigation segment

    112,157     101,038     220,793     204,095  
 

Delta segment

    74,165         74,165      
 

Other

    21,371     14,308     39,138     28,775  
                   
     

Total

  $ 481,559   $ 498,810   $ 848,961   $ 953,964  
                   

Operating Income (Loss):

                         
 

Engineered Support Structures segment

  $ 8,073   $ 11,580   $ 10,684   $ 18,002  
 

Utility Support Structures segment

    11,942     49,843     26,648     90,318  
 

Coatings segment

    7,586     6,393     12,118     12,384  
 

Irrigation segment

    16,596     9,800     31,994     21,770  
 

Delta segment

    7,213         7,213      
 

Other

    5,201     3,493     9,465     7,096  
 

Net corporate expense

    (19,310 )   (11,693 )   (29,171 )   (21,835 )
                   
     

Total

  $ 37,301   $ 69,416   $ 68,951   $ 127,735  
                   

22


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

9. Guarantor/Non-Guarantor Financial Information

        On April 8, 2010, the Company issued $300,000,000 of senior unsecured notes at a coupon interest rate of 6.625% per annum. The notes are guaranteed, jointly, severally, fully and unconditionally by certain of the Company's current and future direct and indirect domestic and foreign subsidiaries (collectively the "Guarantors"), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the "Non-Guarantors"). All Guarantors are 100% owned by the parent company.

        On May 4, 2004, the Company completed a $150,000,000 offering of 67/8% Senior Subordinated Notes. The Notes are guaranteed, jointly, severally, fully and unconditionally, on a senior subordinated basis by the Guarantors.

        Subsequent to the issuance of the Company's consolidated financial statements on Form 10-K on February 23, 2010, management identified certain errors in the presentation of the condensed consolidated balance sheet contained in this footnote as of December 26, 2009. The errors were the result of (i) a historical accounting policy to record currency translation adjustments only in the subsidiary ledgers and not in the Parent accounts; (ii) a historical accounting policy not to record non-earnings related transactions (e.g. cash dividends, stock options and stock compensation) in the Parent equity accounts; (iii) a bookkeeping error in the beginning 2008 equity balance that was also subsequently carried forward to 2009; and (iv) not correctly reflecting investments in certain subsidiaries in each of the appropriate entities. Accordingly, the previously presented condensed consolidated balance sheet as of December 26, 2009 has been corrected. The "Guarantors" and "Total" columns are not impacted by any of these corrections. These adjustments did not affect the consolidated financial statements for the periods presented.

        The impact to the December 26, 2009 condensed consolidated balance sheet is as follows:

 
  As previously reported   As corrected  

Parent:

             
 

Investment in subsidiaries and intercompany accounts

  $ 672,135   $ 644,836  

Total assets

    1,131,254     1,103,955  

Retained earnings

    811,650     767,398  

Accumulated other comprehensive income

        16,953  

Total Valmont Industries, Inc. shareholders' equity

    813,560     786,281  

Total liabilities and shareholders' equity

    1,131,254     1,103,955  

Non-Guarantors:

             
 

Investment in subsidiaries and intercompany accounts

  $ (34,722 ) $ (9,725 )

Total assets

    475,882     500,879  

Additional paid-in capital

    139,577     131,580  

Retained earnings

    158,724     191,718  

Total Valmont Industries, Inc. shareholders' equity

    318,748     343,271  

Total liabilities and shareholders' equity

    475,882     500,879  

Eliminations:

             
 

Investment in subsidiaries and intercompany accounts

  $ (711,318 ) $ (709,016 )

Total assets

    (711,318 )   (709,016 )

Additional paid-in capital

    (321,119 )   (313,122 )

Retained earnings

    (372,205 )   (361,198 )

Accumulated other comprehensive income

        (16,953 )

Total Valmont Industries, Inc. shareholders' equity

    (711,318 )   (709,016 )

Total liabilities and shareholders' equity

    (711,318 )   (709,016 )

        The "Guarantors" and "Total" columns have not been impacted by any of the foregoing. There was no impact on the consolidated financial statements for the periods presented.

23


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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

        Condensed consolidated financial information for the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Thirteen Weeks Ended June 26, 2010

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Net sales

  $ 217,433   $ 68,299   $ 228,568   $ (32,741 ) $ 481,559  

Cost of sales

    161,324     51,803     172,746     (32,960 )   352,913  
                       
 

Gross profit

    56,109     16,496     55,822     219     128,646  

Selling, general and administrative expenses

    46,088     11,206     34,051         91,345  
                       
 

Operating income

    10,021     5,290     21,771     219     37,301  
                       

Other income (expense):

                               
 

Interest expense

    (7,929 )   (187 )   (313 )       (8,429 )
 

Interest income

    101     27     964         1,092  
 

Other

    64     (525 )   508         47  
                       

    (7,764 )   (685 )   1,159         (7,290 )
                       

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

    2,257     4,605     22,930     219     30,011  
                       

Income tax expense (benefit):

                               
 

Current

    8,240     1,766     7,246         17,252  
 

Deferred

    (4,503 )   (256 )   (811 )       (5,570 )
                       

    3,737     1,510     6,435         11,682  
                       

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

    (1,480 )   3,095     16,495     219     18,329  

Equity in earnings/(losses) of nonconsolidated subsidiaries

    18,595     4,326     362     (22,478 )   805  
                       

Net Earnings

    17,115     7,421     16,856     (22,259 )   19,134  

Less: Earnings attributable to noncontrolling interests

            (2,019 )       (2,019 )
                       
 

Net Earnings attributable to Valmont Industries, Inc. 

  $ 17,115   $ 7,421   $ 14,838   $ (22,259 ) $ 17,115  
                       

24


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Twenty-six Weeks Ended June 26, 2010

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Net sales

  $ 416,521   $ 132,763   $ 360,060   $ (60,383 ) $ 848,961  

Cost of sales

    308,597     100,732     271,289     (61,033 )   619,585  
                       
 

Gross profit

    107,924     32,031     88,771     650     229,376  

Selling, general and administrative expenses

    81,780     22,639     56,006         160,425  
                       
 

Operating income

    26,144     9,392     32,765     650     68,951  
                       

Other income (expense):

                               
 

Interest expense

    (13,683 )   (187 )   (521 )       (14,391 )
 

Interest income

    112     27     1,309         1,448  
 

Other

    222     (500 )   248         (30 )
                       

    (13,349 )   (660 )   1,036         (12,973 )
                       

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

    12,795     8,732     33,801     650     55,978  
                       

Income tax expense (benefit):

                               
 

Current

    11,043     3,360     9,555         23,958  
 

Deferred

    (2,918 )   (285 )   373         (2,830 )
                       

    8,125     3,075     9,928         21,128  
                       

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

    4,670     5,657     23,873     650     34,850  

Equity in earnings/(losses) of nonconsolidated subsidiaries

    28,908     4,326     362     (32,677 )   919  
                       

Net Earnings

    33,578     9,983     24,235     (32,027 )   35,769  

Less: Earnings attributable to noncontrolling interests

            (2,191 )       (2,191 )
                       
 

Net Earnings attributable to Valmont Industries, Inc. 

  $ 33,578   $ 9,983   $ 22,044   $ (32,027 ) $ 33,578  
                       

25


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Thirteen Weeks Ended June 27, 2009

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Net Sales

  $ 254,326   $ 136,506   $ 146,577   $ (38,599 ) $ 498,810  

Cost of Sales

    184,621     98,858     109,411     (38,761 )   354,129  
                       
 

Gross profit

    69,705     37,648     37,166     162     144,681  

Selling, general and administrative expenses

    39,405     14,243     21,617         75,265  
                       
 

Operating income

    30,300     23,405     15,549     162     69,416  
                       

Other income (expense):

                               
 

Interest expense

    (3,709 )   (6 )   (261 )       (3,976 )
 

Interest income

    22         262         284  
 

Other

    1,248     40     320         1,608  
                       

    (2,439 )   34     321         (2,084 )
                       

Earnings before income taxes, minority interest and equity in earnings/(losses) of nonconsolidated subsidiaries

    27,861     23,439     15,870     162     67,332  
                       

Income tax expense:

                               
 

Current

    7,373     8,171     3,722         19,266  
 

Deferred

    2,980     452     (647 )       2,785  
                       

    10,353     8,623     3,075         22,051  
                       

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

    17,508     14,816     12,795     162     45,281  

Equity in earnings/(losses) of nonconsolidated subsidiaries

    26,560             (26,631 )   (71 )
                       
 

Net earnings

    44,068     14,816     12,795     (26,469 )   45,210  

Less: Earnings attributable to noncontrolling interests

            (980 )       (980 )
                       

Net Earnings attributable to Valmont Industries, Inc. 

  $ 44,068   $ 14,816   $ 11,815   $ (26,469 ) $ 44,230  
                       

26


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Twenty-Six Weeks Ended June 27, 2009

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Net Sales

  $ 507,885   $ 257,176   $ 271,326   $ (82,423 ) $ 953,964  

Cost of Sales

    370,372     190,291     204,066     (83,762 )   680,967  
                       
 

Gross profit

    137,513     66,885     67,260     1,339     272,997  

Selling, general and administrative expenses

    77,175     28,280     39,807         145,262  
                       
 

Operating income

    60,338     38,605     27,453     1,339     127,735  
                       

Other income (expense):

                               
 

Interest expense

    (7,672 )   (13 )   (575 )       (8,260 )
 

Interest income

    29     1     586         616  
 

Other

    1,096     103     (1,389 )       (190 )
                       

    (6,547 )   91     (1,378 )       (7,834 )
                       

Earnings before income taxes, minority interest and equity in earnings/(losses) of nonconsolidated subsidiaries

    53,791     38,696     26,075     1,339     119,901  
                       

Income tax expense:

                               
 

Current

    12,776     13,935     4,855         31,566  
 

Deferred

    6,611     331     798         7,740  
                       

    19,387     14,266     5,653         39,306  
                       

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

    34,404     24,430     20,422     1,339     80,595  

Equity in earnings/(losses) of nonconsolidated subsidiaries

    44,351             (43,856 )   495  
                       
 

Net earnings

    78,755     24,430     20,422     (42,517 )   81,090  

Less: Earnings attributable to noncontrolling interests

            (996 )       (996 )
                       

Net Earnings attributable to Valmont Industries, Inc

  $ 78,755   $ 24,430   $ 19,426   $ (42,517 ) $ 80,094  
                       

27


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED BALANCE SHEETS
June 26, 2010

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

ASSETS

                               

Current assets:

                               
 

Cash and cash equivalents

  $ 17,537   $ 21,230   $ 275,606   $   $ 314,373  
 

Receivables, net

    93,813     36,430     245,762         376,005  
 

Inventories

    75,318     38,043     183,273         296,634  
 

Prepaid expenses

    5,339     737     33,867         39,943  
 

Refundable and deferred income taxes

    16,738     7,426     11,766         35,930  
                       
   

Total current assets

    208,745     103,866     750,274         1,062,885  
                       

Property, plant and equipment, at cost

    411,982     94,622     315,097         821,701  
 

Less accumulated depreciation and amortization

    265,215     47,541     83,811         396,567  
                       
   

Net property, plant and equipment

    146,767     47,081     231,286         425,134  
                       

Goodwill

    20,108     107,542     163,960         291,610  

Other intangible assets

    903     71,316     116,697         188,916  

Intercompany Note Receivable

    443,702             (443,702 )    

Investment in subsidiaries and intercompany accounts

    599,908     550,748     13,923     (1,164,579 )    

Other assets

    28,343         32,669         61,012  
                       
   

Total assets

  $ 1,448,476   $ 880,553   $ 1,308,809   $ (1,608,281 ) $ 2,029,557  
                       

LIABILITIES AND SHAREHOLDERS' EQUITY

                               

Current liabilities:

                               
 

Current installments of long-term debt

  $ 187   $   $ 83   $   $ 270  
 

Notes payable to banks

        6     9,746         9,752  
 

Accounts payable

    42,858     12,185     147,544         202,587  
 

Accrued expenses

    58,060     24,842     60,732         143,634  
 

Dividends payable

    4,346                 4,346  
                       
   

Total current liabilities

    105,451     37,033     218,105         360,589  
                       

Deferred income taxes

    15,727     24,564     41,405         81,696  

Long-term debt, excluding current installments

    517,517     443,702     396     (443,702 )   517,913  

Other noncurrent liabilities

    25,107         164,998         190,105  

Shareholders' equity:

                               
 

Common stock of $1 par value

    27,900     14,249     62,512     (76,761 )   27,900  
 

Additional paid-in capital

        181,542     184,466     (366,008 )    
 

Retained earnings

    795,797     179,463     555,860     (735,323 )   795,797  
 

Accumulated other comprehensive income (loss)

    (13,513 )       (13,513 )   13,513     (13,513 )
 

Treasury stock

    (25,510 )               (25,510 )
                       
   

Total Valmont Industries, Inc. shareholders' equity

    784,674     375,254     789,325     (1,164,579 )   784,674  
                       

Noncontrolling interest in consolidated subsidiaries

            94,580         94,580  
                       
 

Total shareholders' equity

    784,674     375,254     883,905     (1,164,579 )   879,254  
                       
 

Total liabilities and shareholders' equity

  $ 1,448,476   $ 880,553   $ 1,308,809   $ (1,608,281 ) $ 2,029,557  
                       

28


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED BALANCE SHEETS
December 26, 2009

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

ASSETS

                               

Current assets:

                               
 

Cash and cash equivalents

  $ 82,017   $ 1,666   $ 97,103   $   $ 180,786  
 

Receivables, net

    75,202     48,655     135,664         259,521  
 

Inventories

    77,708     42,822     90,081         210,611  
 

Prepaid expenses

    3,309     455     18,379         22,143  
 

Refundable and deferred income taxes

    26,306     7,120     8,935         42,361  
                       
   

Total current assets

    264,542     100,718     350,162         715,422  
                       

Property, plant and equipment, at cost

    408,411     94,139     172,896         675,446  
 

Less accumulated depreciation and amortization

    257,632     44,272     90,454         392,358  
                       
   

Net property, plant and equipment

    150,779     49,867     82,442         283,088  
                       

Goodwill

    20,108     107,542     50,670         178,320  

Other intangible assets

    985     74,319     21,074         96,378  

Investment in subsidiaries and intercompany accounts

    644,836     73,905     (9,725 )   (709,016 )    

Other assets

    22,705         6,256         28,961  
                       
   

Total assets

  $ 1,103,955   $ 406,351   $ 500,879   $ (709,016 ) $ 1,302,169  
                       

LIABILITIES AND SHAREHOLDERS' EQUITY

                               

Current liabilities:

                               
 

Current installments of long-term debt

  $ 187   $   $ 44   $   $ 231  
 

Notes payable to banks

        13     11,887         11,900  
 

Accounts payable

    36,608     13,611     67,991         118,210  
 

Accrued expenses

    61,129     17,836     43,567         122,532  
 

Dividends payable

    3,944                 3,944  
                       
   

Total current liabilities

    101,868     31,460     123,489         256,817  
                       

Deferred income taxes

    32,389     9,620     7,272         49,281  

Long-term debt, excluding current installments

    159,698         553         160,251  

Other noncurrent liabilities

    23,739         3,774         27,513  

Shareholders' equity:

                               
 

Common stock of $1 par value

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

Additional paid-in capital

        181,542     131,580     (313,122 )    
 

Retained earnings

    767,398     169,480     191,718     (361,198 )   767,398  
 

Accumulated other comprehensive income

    16,953         16,953     (16,953 )   16,953  
 

Treasury stock

    (25,990 )               (25,990 )
                       
   

Total Valmont Industries, Inc shareholders' equity

    786,261     365,271     343,745     (709,016 )   786,261  
                       

Noncontrolling interest in consolidated subsidiaries

            22,046         22,046  
                       
 

Total shareholders' equity

    786,261     365,271     365,791     (709,016 )   808,307  
                       
 

Total liabilities and shareholders' equity

  $ 1,103,955   $ 406,351   $ 500,879   $ (709,016 ) $ 1,302,169  
                       

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty-Six Weeks Ended June 26, 2010

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Cash flows from operations:

                               
 

Net earnings

  $ 33,578   $ 9,983   $ 24,235   $ (32,027 ) $ 35,769  
   

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

                               
     

Depreciation

    9,994     6,372     8,214         24,580  
     

Stock-based compensation

    3,168                 3,168  
     

Loss on sales of property, plant and equipment

    7     7     109         123  
     

Equity in losses of nonconsolidated subsidiaries

    (557 )       (362 )       (919 )
     

Deferred income taxes

    (2,918 )   (285 )   373         (2,830 )
     

Other adjustments

            19         19  
     

Changes in assets and liabilities:

                               
       

Receivables

    (18,581 )   12,224     (25,714 )       (32,071 )
       

Inventories

    2,390     4,779     (12,629 )   (650 )   (6,110 )
       

Prepaid expenses

    (2,030 )   (281 )   2,372         61  
       

Accounts payable

    6,250     (1,426 )   6,562         11,386  
       

Accrued expenses

    (2,419 )   7,007     (2,919 )       1,669  
       

Other noncurrent liabilities

    (341 )         8,237         7,896  
       

Income taxes payable/refundable

    (4,178 )   14,923     496         11,241  
                       
         

Net cash flows from operations

    24,363     53,303     8,993     (32,677 )   53,982  
                       

Cash flows from investing activities:

                               
 

Purchase of property, plant and equipment

    (5,469 )   (589 )   (4,967 )       (11,025 )
 

Proceeds from sale of property and equipment

    10     3     83         96  
 

Acquisitions, gross of cash acquired

        (436,736 )   (7,383 )       (444,119 )
 

Cash acquired through acquisitions

            198,809         198,809  
 

Dividends to minority interests

            (3,477 )       (3,477 )
 

Other, net

    14,520     (40,113 )   (5,568 )   32,677     1,516  
                       
         

Net cash flows from investing activities

    9,061     (477,435 )   177,497     32,677     (258,200 )
                       

Cash flows from financing activities:

                               
 

Net repayments under short-term agreements

        (6 )   (2,142 )       (2,148 )
 

Proceeds from long-term borrowings

    491,000                   491,000  
 

Principal payments on long-term obligations

    (133,228 )               (133,228 )
 

Debt issue fees

    (3,858 )                     (3,858 )
 

Activity under intercompany note

    (443,702 )   443,702              
 

Dividends paid

    (7,892 )               (7,892 )
 

Proceeds from exercises under stock plans

    3,197                 3,197  
 

Excess tax benefits from stock option exercises

    1,216                 1,216  
 

Purchase of treasury shares

    (2,676 )       1,799         (877 )
 

Purchase of common treasury shares—stock plan exercises

    (1,961 )               (1,961 )
                       
         

Net cash flows from financing activities

    (97,904 )   443,696     343         345,449  
                       

Effect of exchange rate changes on cash and cash equivalents

            (7,644 )       (7,644 )
                       

Net change in cash and cash equivalents

    (64,480 )   19,564     178,503         133,587  

Cash and cash equivalents—beginning of year

    82,017     1,666     97,103         180,786  
                       

Cash and cash equivalents—end of period

    17,537     21,230     275,606         314,373  
                       

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty-Six Weeks Ended June 27, 2009

 
  Parent   Guarantors   Non-Guarantors   Eliminations   Total  

Cash flows from operating activities:

                               
 

Net earnings

  $ 78,755   $ 24,430   $ 20,422   $ (42,517 ) $ 81,090  
 

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

                               
   

Depreciation and amortization

    9,241     6,326     6,143         21,710  
   

Stock based compensation

    2,993                 2,993  
   

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

    (11 )   54     302         345  
   

Equity in (earnings)/losses of nonconsolidated subsidiaries

    (495 )               (495 )
   

Deferred income taxes

    6,611     331     798         7,740  
   

Other adjustments

            (239 )       (239 )
   

Payment of deferred compensation

                               
   

Changes in assets and liabilities:

                               
     

Receivables

    (5,683 )   (10,591 )   10,918         (5,356 )
     

Inventories

    34,236     16,376     14,449         65,061  
     

Prepaid expenses

    (1,029 )   86     (9,426 )       (10,369 )
     

Accounts payable

    133     (3,502 )   (3,554 )       (6,923 )
     

Accrued expenses

    (6,121 )   (1,346 )   (5,767 )       (13,234 )
     

Other noncurrent liabilities

    (1,821 )       828         (993 )
     

Income taxes payable

    (3,913 )       (1,819 )       (5,732 )
                       
   

Net cash flows from operating activities

    112,896     32,164     33,055     (42,517 )   135,598  
                       

Cash flows from investing activities:

                               
 

Purchase of property, plant and equipment

    (12,647 )   (5,088 )   (6,815 )       (24,550 )
 

Dividends to noncontrolling interests

            (289 )       (289 )
 

Proceeds from sale of assets

    20     14     40         74  
 

Other, net

    12,500     (26,908 )   (28,177 )   42,517     (68 )
                       
   

Net cash flows from investing activities

    (127 )   (31,982 )   (35,241 )   42,517     (24,833 )
                       

Cash flows from financing activities:

                               
 

Net borrowings (repayments) under short-term agreements

        (6 )   (1,911 )       (1,917 )
 

Proceeds from long-term borrowings

            10,001         10,001  
 

Principal payments on long-term obligations

    (88,505 )   (10 )   (113 )       (88,628 )
 

Dividends paid

    (6,813 )               (6,813 )
 

Proceeds from exercises under stock plans

    3,126                 3,126  
 

Excess tax benefits from stock option exercises

    1,446                 1,446  
 

Purchase of common treasury shares—stock plan exercises

    (2,146 )               (2,146 )
                       
   

Net cash flows from financing activities

    (92,892 )   (16 )   7,977         (84,931 )
                       
 

Effect of exchange rate changes on cash and cash equivalents

            1,861         1,861  
                       
 

Net change in cash and cash equivalents

    19,877     166     7,652         27,695  
 

Cash and cash equivalents—beginning of year

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

Cash and cash equivalents—end of period

  $ 38,866   $ 1,699   $ 55,727   $   $ 96,262  
                       

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

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

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

        This discussion should be read in conjunction with the financial statements and the notes thereto, and the management's discussion and analysis, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2009. We aggregate our businesses into four reportable segments. See Note 7 to the Condensed Consolidated Financial Statements.

        In the fourth quarter of 2009, we reorganized our Utility Support Structures reporting structure to include oversight of sales and operating income of utility structures on a world-wide basis. Accordingly, we have changed our segment reporting to match our internal reporting structure. Previously, sales and operating profit associated with utility support structure sales outside of North America were included in the Engineered Support Structures segment. Financial information for 2009 has been reclassified to conform to the 2010 presentation. In the second quarter of 2010, we acquired Delta plc. In our segment reporting structure, Delta's financial information is presented in the "Delta segment".

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Table of Contents

Results of Operations

    Dollars in thousands, except per share amounts

 
  Thirteen Weeks Ended   Twenty-six Weeks Ended  
 
  June 26,
2010
  June 27,
2009
  % Incr.
(Decr.)
  June 26,
2010
  June 27,
2009
  % Incr.
(Decr.)
 

Consolidated

                                     
 

Net sales

  $ 481,559   $ 498,810     -3.5 % $ 848,961   $ 953,964     -11.0 %
 

Gross profit

    128,646     144,681     -11.1 %   229,376     272,997     -16.0 %
   

as a percent of sales

    26.7 %   29.0 %         27.0 %   28.6 %      
 

SG&A expense

    91,345     75,265     21.4 %   160,425     145,262     10.4 %
   

as a percent of sales

    19.0 %   15.1 %         18.9 %   15.2 %      
 

Operating income

    37,301     69,416     -46.3 %   68,951     127,735     -46.0 %
   

as a percent of sales

    7.7 %   13.9 %         8.1 %   13.4 %      
 

Net interest expense

    7,337     3,692     98.7 %   12,943     7,644     69.3 %
 

Effective tax rate

    38.9 %   32.7 %         37.7 %   32.8 %      
 

Net earnings attributable to Valmont Industries, Inc. 

    17,115     44,230     -61.3 %   33,578     80,094     -58.1 %
 

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

  $ 0.65   $ 1.69         $ 1.27   $ 3.05        

Engineered Support Structures segment

                                     
 

Net sales

  $ 134,052   $ 145,352     -7.8 % $ 239,956   $ 275,711     -13.0 %
 

Gross profit

    34,536     38,350     -9.9 %   62,440     70,234     -11.1 %
 

SG&A expense

    26,463     26,770     -1.1 %   51,756     52,232     -0.9 %
 

Operating income

    8,073     11,580     -30.3 %   10,684     18,002     -40.7 %

Utility Support Structures segment

                                     
 

Net sales

  $ 112,503   $ 215,700     -47.8 % $ 225,432   $ 399,102     -43.5 %
 

Gross profit

    27,365     69,272     -60.5 %   57,839     126,265     -54.2 %
 

SG&A expense

    15,423     19,429     -20.6 %   31,191     35,947     -13.2 %
 

Operating income

    11,942     49.843     -76 %   26,648     90,318     -70.5 %

Coatings segment

                                     
 

Net sales

  $ 27,311   $ 22,412     21.9 % $ 49,477   $ 46,281     6.9 %
 

Gross profit

    11,157     9,958     12.0 %   18,814     19,437     -3.2 %
 

SG&A expense

    3,571     3,565     0.2 %   6,696     7,053     -5.1 %
 

Operating income

    7,586     6,393     18.7 %   12,118     12,384     -2.1 %

Irrigation segment

                                     
 

Net sales

  $ 112,157   $ 101,038     11.0 % $ 220,793   $ 204,095     8.2 %
 

Gross profit

    30,754     21,935     40.2 %   59,131     46,151     28.1 %
 

SG&A expense

    14,158     12,135     16.7 %   27,137     24,381     11.3 %
 

Operating income

    16,596     9,800     69.3 %   31,994     21,770     47.0 %

Delta

                                     
 

Net sales

  $ 74,165   $     NA   $ 74,165   $     NA  
 

Gross profit

    18,270         NA     18,270         NA  
 

SG&A expense

    11,057         NA     11,057         NA  
 

Operating income

    7,213         NA     7,213         NA  

Other

                                     
 

Net sales

  $ 21,371   $ 14,308     49.4 % $ 39,138   $ 28,775     36.0 %
 

Gross profit

    7,256     5,279     37.5 %   13,442     11,006     22.1 %
 

SG&A expense

    2,055     1,786     15.1 %   3,977     3,910     1.7 %
 

Operating income

    5,201     3,493     48.9 %   9,465     7,096     33.4 %

Net Corporate expense

                                     
 

Gross profit

  $ (692 ) $ (113 )   512.4 % $ (560 ) $ (96 )   483.3 %
 

SG&A expense

    18,618     11,580     60.8 %   28,611     21,739     31.6 %
 

Operating loss

    (19,310 )   (11,693 )   65.1 %   (29,171 )   (21,835 )   33.6 %

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    Acquisition of Delta plc

        On March 4, 2010, we made an offer to acquire all the ordinary shares of Delta plc ("Delta"), a public company traded on the London Stock exchange under the symbol "DLTA". The offer price was £1.85 per ordinary share, with a total estimated purchase price of $436.7 million. To manage the foreign exchange risk associated with the offer, we executed a forward foreign exchange contract with a multinational bank, whereby, if the acquisition was completed, the required British pound sterling would be delivered to us at a fixed exchange rate of $1.5353/£ to complete the acquisition. In accordance with takeover rules in the United Kingdom, we established funding for the purchase price and related acquisition costs by a combination of $264 million in restricted cash (comprised of cash balances of $83 million and $181 million in borrowings under our revolving credit agreement) and a $200 million bank bridge loan commitment. In April 2010, we issued $300 million of senior unsecured notes, terminated the bridge loan and reduced our revolving credit agreement borrowings to approximately $85 million. We completed the acquisition on May 12, 2010 and we now own 100% of Delta's ordinary shares.

        We began consolidating Delta's financial results in our consolidated financial statements beginning on May 12, 2010. Delta's sales and operating income included in our consolidated results were $74.2 million and $7.2 million, respectively, for both the second quarter and year-to-date periods ended June 26, 2010.

        In the second quarter and first half of 2010, certain expenses were incurred in our condensed consolidated statement of operations that were associated with the Delta acquisition. These expenses included:

    SG&A expenses of $11.9 million and $14.1 million, respectively, related to acquisition costs such as investment banking fees, due diligence costs and other expenses directly associated with the acquisition. These costs, under applicable accounting standards, are required to be recorded as expenses as incurred.

    Interest expenses aggregating $2.4 million and $5.1 million, respectively related to fees and expenses to establish the bridge loan and borrowing costs incurred to finance the acquisition.

        The after-tax impact of these expenses on our net earnings for the quarter and year-to-date periods ended June 26, 2010 was approximately $12.0 million and $15.3 million, respectively.

    Overview

        On a consolidated basis, the sales decreases in the second quarter and year-to-date periods ended June 26, 2010, as compared with the same periods of 2009, were mainly due to a combination of lower sales unit volumes and lower average selling prices. These decreases were offset somewhat by currency translation effects (approximately $2.2 million and $10.5 million, respectively), as the U.S. dollar, on average, was weaker in relation to the Canadian dollar, Brazilian real and South Africa rand in 2010, as compared with 2009. For the company as a whole our second quarter and year-to-date 2010 sales unit volumes were approximately 11% lower in 2010 than 2009. On a reportable segment basis, the most significant sales unit volume decrease was in the Utility Support Structures ("Utility") segment, offset somewhat by increased unit sales volumes in the Irrigation and Coatings segments. Lower unit sales prices and unfavorable sales mix also contributed the lower net sales recorded in the first half and second quarter of 2010, as compared with 2009. Sales price decreases in 2010, as compared with 2009, resulted from a combination of weaker sales demand in most of our businesses and falling steel prices throughout much of 2009. Second quarter and year-to-date sales in 2010 also included $74.2 million reported by Delta plc ("Delta"), a formerly publicly-traded company in the U.K., which was acquired on May 12, 2010. In our segment reporting structure, Delta's financial information was presented as the "Delta" segment.

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        The gross profit margin (gross profit as a percent of sales) in 2010 was slightly lower than 2009, for both the second quarter and year-to-date periods ended June 26, 2010. These decreases in gross profit margins were mainly due to lower gross margins in the Utility segment, where we were impacted by lower sales volumes, a more competitive pricing environment and an unfavorable sales mix. During 2010, we experienced rising steel costs, whereas last year, steel costs were falling. Approximately 35% of our inventory is valued using the last-in first-out (LIFO) method of inventory valuation. In periods of rising prices, we report lower gross profit and operating income under the LIFO inventory valuation as compared with average cost or first-in first-out methods. In the second quarter and first half of 2010, we recorded $4.1 million and $7.6 million of expense due to LIFO, which reduced 2010 gross profit.

        Selling, general and administrative (SG&A) spending for the second quarter and first half of fiscal 2010, as compared with the same periods in 2009, increased due to the following factors:

    Transaction-related expenses associated with the Delta transaction ($11.9 million and $14.1 million, respectively). These expenses were related to investment banking fees, due diligence costs and other direct costs associated with the acquisition. These expenses are reported as part of "General corporate expense";

    Delta's SG&A expenses from May 12, 2010 to June 26, 2010 of $11.1 million were included in 2010 consolidated second quarter and year-to-date SG&A expenses.

        These increases were somewhat offset by lower employee incentive expenses in 2010, as compared with 2009 (approximately $2.2 million and $5.1 million, respectively), lower sales commissions related to lower net sales in 2010, as compared with 2009 (approximately $0.7 million and $1.7 million, respectively) and other expense reductions in 2010 associated with lower sales and profitability this year, as compared with 2009. In the aggregate, exclusive of the SG&A expenses related to Delta's operations and its expenses incidental to its acquisition, SG&A spending was down approximately $6.9 million and $10.0 million, respectively for the second quarter and year-to-date periods ended June 26, 2010 as compared with the same periods in 2009.

        On a reportable segment basis, all segments except the Irrigation and Coatings segments reported lower operating income in the second quarter of 2010, as compared with 2009. On a year-to-date basis, the Irrigation segment was the only reportable segment to report improved operating income in 2010, as compared with 2009.

        The increase in net interest expense in the second quarter and year-to-date periods ended June 26, 2010, as compared with the same periods in 2009, was mainly due to interest associated with the $300 million in senior unsecured notes issued in April 2010 and approximately $0.5 million and $2.9 million, respectively, of bank fees incurred related to providing the required bridge loan funding commitment for the Delta acquisition. Excluding the impact of financing costs incidental to the Delta acquisition, net interest expense was lower in 2010, as compared with 2009, due to average lower borrowing levels in 2010, as compared with 2009. "Other" income was lower in the second quarter of 2010, as compared with 2009, mainly due to lower investment income related to our non-qualified deferred compensation plan this year (approximately $0.8 million) and foreign currency transaction gains incurred in 2009 that did not repeat in 2010.

        The increase in the effective income tax rate in the second quarter and year-to-date period ended June 26, 2010, as compared with the same periods in 2009, was mainly due to the non-deductibility of a portion of the Delta acquisition expenses incurred in 2010. Our cash flows provided by operations were approximately $54.0 million in the first half of 2010, as compared with $135.6 million in the first half of 2009. Lower net earnings in 2010, as compared with 2009, and the significant decrease in inventories recorded in the first half of 2009 were the main reasons for the lower operating cash flow in 2010.

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    Engineered Support Structures (ESS) segment

        The decrease in net sales in the second quarter and first half of 2010, as compared with the same period in 2009, was mainly due to lower sales volumes and lower sales prices in both the lighting and communication structures product lines. In the Lighting product line in the second quarter, lower sales in international markets were offset to a degree by improved sales in North America. The increase in North American sales in the second quarter of 2010, as compared with the same period in 2009, was due to stronger customer demand for lighting and traffic poles in the transportation market channel, while sales were lower in the commercial market channel. Year-to-date sales unit volumes in North America in 2010 were comparable with 2009. In the transportation market, the sales improvement this quarter was the result of better order flow in 2010 over a very weak first half of 2009. Despite the increase in transportation sales, we believe sales demand was dampened by the lack of a long-term federal highway funding legislation and state budget deficits, as the lack of long-term funding legislation does not give the various states ample visibility to implement long-term initiatives. Furthermore, highway spending sponsored under the federal program requires the various states to provide part of required funding. Many states are in budget deficits, which may constrain their ability to access federal matching funds to implement roadway projects. The commercial lighting market remains weak, due to continued softness in the commercial and residential construction markets. In Europe, sales were lower in the second quarter and first half of 2010, as compared with 2009. As most economies in Europe are weak, governments have cut spending (including for infrastructure projects) to cope with budgetary deficits. The decrease in European lighting sales in 2010, as compared with 2009, was also related to certain project sales in developing markets in 2009 that did not repeat in 2010. Lighting structure sales in China, while a relatively small portion of global lighting sales, improved in 2010, as compared with 2009, due to increased sales efforts.

        Sales in the communication structures product line were lower in the second quarter and first half of 2010, as compared with 2009, in both North America and China. In North America, general slowness in the wireless communication structures market, severe winter weather conditions and lower sign structure sales all contributed to lower sales this year. In China, sales of wireless communication structures likewise were lower in 2010, as compared with 2009. In 2010, annual supply contracts with the various carriers are being settled later than in the past and we believe there is some continuing coordination of the wireless networks in China that is impacting network development at this time.

        Operating income in the ESS segment was lower in the second quarter and first half of 2010, as compared with 2009, due mainly to lower lighting and wireless communication sales volumes and pricing pressures due to weak market conditions. The impact of lower sales on operating profit was mitigated to an extent by factory operational improvements. SG&A expenses were lower in 2010, as compared with 2009, due to various cost containment actions in the segment this year.

    Utility Support Structures (USS) segment

        In the USS segment, the sales decrease in 2010, as compared with 2009, was due to the combination of lower sales unit volumes in the U.S. and lower average unit selling prices. The decrease in unit sales (in tons) in the second quarter and first half of 2010 in the U.S. was approximately 40%. The record sales performance realized in 2009 was in part related to the large backlog at the end of the 2008 fiscal year, which was the result of substantial order intake in the last half of 2008. At the end of fiscal 2009, our sales order backlog was less than half of the year-end 2008 backlog. During 2009 and continuing into 2010, the economic recession in the U.S. resulted in a drop in electricity demand. Accordingly, our customers reduced their purchases of structures and delayed scheduled projects. In addition, price competition became more significant, especially in light of falling steel prices throughout most of 2009 and generally lower levels of transmission and substation spending this year by utility companies. In international markets, sales in the second quarter and first half of 2010 improved over 2009, the result of increased project sales into new markets, offset by lower sales volumes in China.

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        The decrease in operating income in 2010, as compared with 2009, was a result of lower sales volumes, lower average selling prices and an unfavorable sales mix. The decrease in SG&A expenses in the second quarter and first half of 2010, as compared with the same periods in 2009, primarily resulted from lower employee incentives related to the decrease in operating income this year (approximately $1.6 million and $3.0 million, respectively) and decreased commissions (approximately $1.0 million and $1.7 million, respectively) due to lower net sales this year.

    Coatings segment

        Net sales in the Coatings segment increased in the second quarter and first half of 2010, as compared with 2009, resulted mainly from improved sales unit volumes. Galvanizing unit volumes in 2010 were approximately 7% higher in the second quarter of 2010 as compared with the same period in 2009. On a year-to-date basis, galvanizing unit volumes in 2010 were comparable to 2009. We attribute the increase in sales demand to slightly stronger industrial economic conditions in our geographic market areas.

        The increase in segment operating income in the second quarter of 2010, as compared with the same period in 2009, was due to improved sales volumes and the associated operating leverage, offset somewhat by rising zinc costs that were not recovered through sales price increases. Increases in the average cost of zinc in the second quarter and first half of 2010, as compared with 2009, amounted to approximately $1.5 million and $3.2 million, respectively. These cost increases were largely offset by factory efficiencies and increased sales volume. SG&A expenses for the segment in 2010 were comparable with 2009.

    Irrigation segment

        Irrigation segment net sales in the second quarter and first half of 2010 improved, as compared with the same periods in 2009, due to stronger sales volumes in North America and currency translation effects on international sales (approximately $2.2 million and $5.6 million, respectively). In North America, we believe improved demand for irrigation equipment in 2010 over a weak 2009 resulted from improvement in grower sentiment and expected net farm income. North American sales of service parts in 2010 lagged 2009, which we believe was due to generally wet weather conditions throughout much of the U.S. this year. Wet weather conditions generally results in less utilization of irrigation machines and, accordingly, lower sales of service parts. In international markets, sales unit volumes were slightly lower in 2010, as compared with 2009, due mainly to lower multi-system project sales in 2010, offset somewhat by stronger market conditions in Latin America, Europe and Australia.

        Operating income for the segment improved in 2010 over 2009, due to improved sales unit volumes in North America, lower raw material prices and a stronger international sales mix. SG&A expenses increased mainly due to the costs associated with business development activities.

    Delta segment

        The Delta segment includes the consolidated operations of Delta plc from May 12, 2010 forward. Included in the operating income for the quarter ended June 26, 2010 was approximately $2.0 million of depreciation and amortization expenses associated with the allocation of purchase price of the business to tangible assets and finite-lived intangible assets. Delta's operations include the following product lines:

    Galvanizing services, similar to that provided by our Coatings segment;

    Engineered steel products, including steel structural grating for industrial and architectural application, poles for lighting, utility and wireless communication applications, grinding media for the mining industry and highway safety products;

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    Manganese dioxide, mainly for use in disposable batteries

Other

        This unit mainly includes our industrial tubing and fasteners operations. The increase in sales and operating income in 2010, as compared with 2009, primarily was due to improved sales demand for tubing products.

    Net corporate expense

        Net corporate expense increased in the second quarter and first half of 2010, as compared with 2009, due to expenses incurred in relation to the Delta acquisition (approximately $11.9 million and $14.1 million, respectively). This increase was somewhat offset by lower employee incentive accruals (approximately $2.8 million and $4.9 million, respectively) and other decreases in discretionary spending.

Liquidity and Capital Resources

    Cash Flows

        Working Capital and Operating Cash Flows—Net working capital was $702.3 million at June 26, 2010, as compared with $458.6 million at December 26, 2009. The increase in net working capital in 2010 mainly resulted from the Delta acquisition of $300.3, offset to a degree by cash on hand used to fund part of the Delta acquisition. Operating cash flow was $54.0 million for the first half of 2010, as compared with $135.6 million for the same period in 2009. The decrease in operating cash flow in 2010 mainly was the result of lower net earnings 2010, as compared with 2009 and the significant cash flow generated in 2009 through inventory reductions. Accounts receivable turnover in 2010 was comparable with 2009.

        Investing Cash Flows—Capital spending in the first half of 2010 was $11.0 million, as compared with $24.6 million in 2009. We expect our capital spending for the 2010 fiscal year to be approximately $45 million. Investing cash flows for fiscal 2010 included $237.8 million related to the Delta, net of cash on Delta's balance sheet at May 12, 2010 and an aggregate of approximately $7.5 million associated with increasing our ownership interest in West Coast Engineering, Ltd. from 70% to 80% and the additional purchase price paid to the former shareholders of Stainton related to the performance of the operation after its acquisition in November 2008.

        Financing Cash Flows—Our total interest-bearing debt increased from $172.4 million at December 26, 2009 to $527.9 million as of March 27, 2010. The increase in borrowings in the first half of 2010 was predominantly associated with the $300 million of senior unsecured notes and borrowings under our revolving credit agreement to finance a portion of the Delta acquisition.

    Sources of Financing and Capital

        We have historically funded our growth, capital spending and acquisitions through a combination of operating cash flows and debt financing. We have an internal long-term objective to maintain long-term debt as a percent of invested capital at or below 40%. At June 26, 2010, our long-term debt to invested capital ratio was 31.0%, as compared with 15.2% at December 26, 2009. Subject to our level of acquisition activity and steel industry operating conditions (which could affect the levels of inventory we need to fulfill customer commitments), we plan to maintain this ratio below 40% in 2010.

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        Our debt financing at June 26, 2010 consisted primarily of long-term debt. We also maintain certain short-term bank lines of credit totaling $49.8 million, $45.5 million of which was unused at June 26, 2010. Our long-term debt principally consists of:

    $150 million of senior subordinated notes that bear interest at 6.875% per annum and are due in May 2014. We are allowed to repurchase the notes at specified prepayment premiums. These notes are guaranteed by certain of our subsidiaries. We are allowed to repurchase all or a portion of the notes at the following redemption prices (stated as a percentage of face value):

 
  Redemption
Price
 

Until May 1, 2011

    102.292 %

From May 1, 2011 until May 1, 2012

    101.146 %

After May 1, 2012

    100.000 %
    $300 million of senior unsecured notes that bear interest at 6.625% per annum and are due in April 2020. We are allowed to repurchase the notes at specified prepayment premiums. These notes are guaranteed by the same subsidiaries as our senior subordinated notes.

    $280 million revolving credit agreement with a group of banks. We may increase the credit facility by up to an additional $100 million at any time, subject to participating banks increasing the amount of their lending commitments. The interest rate on our borrowings will be, at our option, either:

    (a)
    LIBOR (based on a 1, 2, 3 or 6 month interest period, as selected by us) plus 125 to 200 basis points (inclusive of facility fees), depending on our ratio of debt to earnings before taxes, interest, depreciation and amortization (EBITDA), or;

    (b)
    the higher of

      The higher of (a) the prime lending rate and (b) the Federal Funds rate plus 50 basis points plus in each case, 25 to 100 basis points (inclusive of facility fees), depending on our ratio of debt to EBITDA, or

      LIBOR (based on a 1 week interest period) plus 125 to 200 basis points (inclusive of facility fees), depending on our ratio of debt to EBITDA

        At June 26, 2010, we had $58.0 million in outstanding borrowings under the revolving credit agreement, at a weighted average annual interest rate of 1.55%, not including facility fees. These outstanding borrowings were associated with funding requirements related to the proposed Delta acquisition. The revolving credit agreement has a termination date of October 16, 2013 and contains certain financial covenants that may limit our additional borrowing capability under the agreement. At June 26, 2010, we had the ability to borrow an additional $198.6 million under this facility.

        These debt agreements contain covenants that require us to maintain certain coverage ratios and may limit us with respect to certain business activities, including capital expenditures. Our key debt covenants are that interest-bearing debt is not to exceed 3.75x EBITDA of the prior four quarters and that our EBITDA over our prior four quarters must be at least 2.50x our interest expense over the same period. At June 26, 2010, we were in compliance with all covenants related to these debt

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agreements. The key covenant calculations at June 26, 2010 were as follows (including Delta on a pro forma basis, as per our covenants):

Interest-bearing debt

    527,935  

EBITDA—last 12 months

    295,469  

Leverage ratio

    1.79  

EBITDA—last 12 months

   
295,469
 

Interest expense—last 12 months

    22,058  

Interest earned ratio

    13.40  

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

Financial Obligations and Financial Commitments

        Other than our additional borrowings under our senior unsecured notes and revolving credit agreement related to the Delta acquisition, there have been no material changes to our financial obligations and financial commitments as described beginning on page 37 in our Form 10-K for the year ended December 26, 2009. Our financial commitments at June 26, 2010 were as follows:

Contractual Obligations
  Total   2010   2011-2012   2013-2014   After 2014  

Long-term debt

  $ 518.3   $ 0.1   $ 0.6   $ 208.5   $ 309.1  

Interest

    243.5     15.6     62.3     55.8     109.8  

Delta pension plan contributions

    98.2         21.8     21.8     54.6  

Operating leases

    84.2     8.8     24.0     15.8     35.6  

Unconditional purchase commitments

    6.0     6.0              
                       

Total contractual cash obligations

  $ 950.2   $ 30.5   $ 108.7   $ 301.9   $ 509.1  
                       

        Long-term debt principally consisted of $150.0 million of senior subordinated notes and $300.0 million of senior unsecured notes. At June 26, 2010, we had $58.0 million of outstanding borrowings under our bank revolving credit agreement. We also had various other borrowing arrangements aggregating $10.3 million at June 26, 2010. Obligations under these agreements may accelerate in event of non-compliance with covenants. The Delta pension plan contributions are related to agreed-upon cash funding commitments to the plan with the plan's trustees. Operating leases relate mainly to various production and office facilities and are in the normal course of business.

        Unconditional purchase obligations relate to purchase orders for zinc, aluminum and steel, all of which we plan to use in 2010. We believe the quantities under contract are reasonable in light of normal fluctuations in business levels and we expect to use the commodities under contract during the contract period.

        At June 26, 2010, we had approximately $38.7 million of various long-term liabilities that were recorded at fair value related to the Delta acquisition and $2.3 million of various unrecognized income tax benefits. These items are not scheduled above because we are unable to make a reasonably reliable estimate as to the timing of any potential payments.

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Off Balance Sheet Arrangements

        There have been no changes in our off balance sheet arrangements as described on page 37 in our Form 10-K for the fiscal year ended December 26, 2009.

Critical Accounting Policies

        There have been no changes in our critical accounting policies as described on pages 39-41 on our Form 10-K for the fiscal year ended December 26, 26, 2009 during the quarter ended June 26, 2010. Due to the acquisition of Delta plc in the second quarter of 2010, we have added the following as a critical accounting policy:

        Pension Benefits—In connection with our acquisition of Delta plc in the 2nd quarter of fiscal 2010, we assumed the obligations of its defined benefit pension plan for qualifying employees in the United Kingdom. We use third-party actuaries to assist us in properly measuring the liabilities and expenses associated with accounting for pension benefits to eligible employees. In order to use actuarial methods to value the liabilities and expenses, we must make several assumptions. The critical assumptions used to measure pension obligations and expenses are the discount rate and expected rate of return on pension assets.

        We evaluate our critical assumptions at least annually, and selected assumptions are based on the following factors:

    Discount rate is based on an annualized yield on the iBoxx over 15-year AA-rated bond index.

    Expected return on plan assets is based on our asset allocation mix and our historical return, taking into consideration current and expected market conditions. Most of the assets in the pension plan are invested in corporate bonds, the expected return of which are estimated based on risk-free bonds ("gilts" in the U.K.), plus a risk premium of 75 to 125 basis points. The long-term expected returns on equities are based on historic performance over the long-term.

The following tables present the key assumptions used to measure pension expense for 2010 and the estimated impact on 2010 pension expense relative to a change in those assumptions:

Assumptions
  Pension  

Discount rate

    5.60 %

Expected return on plan assets

    5.51 %

Inflation

    3.70 %

 

Assumptions
In Millions of Dollars
  Increase
in Pension
Expense
 

1.00% decrease in discount rate

  $ 0.6  

1.00% decrease in expected return on plan assets

  $ 2.1  

1.00% increase in inflation

  $ 1.5  

Item 3.    Quantitative and Qualitative Disclosure about Market Risk

        There were no material changes in the company's market risk during the quarter ended June 26, 2010. For additional information, refer to the section "Risk Management" beginning on page 38 in our Form 10-K for the fiscal year ended December 26, 2009.

Item 4.    Controls and Procedures

        The Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer,

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of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. We acquired Delta plc ("Delta") in the second quarter of 2010, and it represented approximately 39% of our total assets as of June 26, 2010. As the acquisition occurred in the second quarter of 2010, the scope of our assessment of the effectiveness of internal control over financial reporting does not include Delta. This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934 is (1) accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

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

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PART II. OTHER INFORMATION

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

Issuer Purchases of Equity Securities

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

March 28, 2010 to April 24, 2010

    4,013   $ 85.81          

April 25, 2010 to May 29, 2010

    900   $ 79.30          

May 30, 2010 to June 26, 2010

                 
                   
 

Total

    4,913   $ 84.62          
                   

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

Item 5.    Other Information

        On April 27, 2010, the Company's Board of Directors declared a quarterly cash dividend on common stock of 16.5 cents per share, which was paid on July 15, 2010, to stockholders of record June 25, 2010. The indicated annual dividend rate is 66 cents per share.

Item 6.    Exhibits

(a)
Exhibits

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

 

31.2

 

Section 302 Certificate of Chief Financial Officer

 

32.1

 

Section 906 Certifications of Chief Executive Officer and Chief Financial Officer

 

101

 

The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended June 26, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Shareholders' Equity, (v) Notes to Condensed Consolidated Financial Statements (tagged as blocks of text).

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SIGNATURES

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

    VALMONT INDUSTRIES, INC.
(Registrant)

 

 

/s/ TERRY J. MCCLAIN

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

Dated this 2nd day of August, 2010.

 

 

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Index of Exhibits

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

 

31.2

 

Section 302 Certificate of Chief Financial Officer

 

32.1

 

Section 906 Certifications of Chief Executive Officer and Chief Financial Officer

 

101

 

The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended June 26, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Shareholders' Equity, (v) Notes to Condensed Consolidated Financial Statements (tagged as blocks of text).

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