ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Forward‑Looking Statements
Management’s discussion and analysis, and other sections of this annual report, contain 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.
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial position. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes.
General
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2016
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2015
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Change
2016 - 2015
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2014
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Change
2015 - 2014
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Dollars in millions, except per share amounts
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Consolidated
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Net sales
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$
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2,521.7
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$
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2,618.9
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(3.7
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)%
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$
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3,123.1
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(16.1
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)%
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Gross profit
|
656.2
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621.0
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5.7
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%
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808.1
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(23.2
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)%
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as a percent of sales
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26.0
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%
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23.7
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%
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25.9
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%
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SG&A expense
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412.7
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489.3
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(15.7
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)%
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450.4
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8.6
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%
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as a percent of sales
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16.4
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%
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18.7
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%
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14.4
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%
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Operating income
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243.5
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131.7
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84.9
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%
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357.7
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(63.2
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)%
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as a percent of sales
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9.7
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%
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5.0
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%
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11.5
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%
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Net interest expense
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41.3
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41.3
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—
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%
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30.7
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34.5
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%
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Effective tax rate
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19.1
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%
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51.0
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%
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33.4
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%
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Net earnings attributable to Valmont Industries, Inc
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173.2
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40.1
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331.9
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%
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184.0
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(78.2
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)%
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Diluted earnings per share
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$
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7.63
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$
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1.71
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346.2
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%
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$
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7.09
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(75.9
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)%
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Engineered Support Structures Segment
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Net sales
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$
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764.5
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$
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748.4
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2.2
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%
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$
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735.0
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1.8
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%
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Gross profit
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210.8
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191.6
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10.0
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%
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194.2
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(1.3
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)%
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SG&A expense
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139.4
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132.0
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5.6
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%
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128.2
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3.0
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%
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Operating income
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71.4
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59.6
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19.8
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%
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66.0
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(9.7
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)%
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Energy & Mining Segment
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Net sales
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$
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314.5
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$
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333.2
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(5.6
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)%
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$
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443.7
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(24.9
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)%
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Gross profit
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57.0
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53.4
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6.7
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%
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93.8
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(43.1
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)%
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SG&A expense
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45.1
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72.1
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(37.4
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)%
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52.5
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37.3
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%
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Operating income
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11.9
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(18.7
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)
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163.6
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%
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41.3
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(145.3
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)%
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Utility Support Structures Segment
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Net sales
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$
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630.8
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$
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673.3
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(6.3
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)%
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$
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822.6
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(18.1
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)%
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Gross profit
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133.8
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116.0
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15.3
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%
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172.0
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(32.6
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)%
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SG&A expense
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64.7
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78.2
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(17.3
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)%
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76.9
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1.7
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%
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Operating income
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69.1
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|
|
37.8
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82.8
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%
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95.1
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(60.3
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)%
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Coatings Segment
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|
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Net sales
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$
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243.9
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$
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255.5
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(4.5
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)%
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$
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278.4
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(8.2
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)%
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Gross profit
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77.8
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|
79.8
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(2.5
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)%
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98.1
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(18.7
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)%
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SG&A expense
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31.2
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52.4
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(40.5
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)%
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|
37.1
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41.2
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%
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Operating income
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46.6
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|
27.4
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70.1
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%
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61.0
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(55.1
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)%
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Irrigation Segment
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Net sales
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$
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568.0
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$
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605.8
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(6.2
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)%
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$
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839.7
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(27.9
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)%
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Gross profit
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175.8
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183.5
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(4.2
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)%
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|
248.1
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(26.0
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)%
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SG&A expense
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88.0
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99.0
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(11.1
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)%
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|
96.6
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|
2.5
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%
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Operating income
|
87.8
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|
84.5
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|
3.9
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%
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|
151.5
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(44.2
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)%
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Other
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Net sales
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$
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—
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$
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2.7
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(100.0
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)%
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$
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3.7
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|
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(27.0
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)%
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Gross profit
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—
|
|
|
(3.1
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)
|
|
(100.0
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)%
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|
1.7
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|
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(282.4
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)%
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SG&A expense
|
—
|
|
|
6.7
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|
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(100.0
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)%
|
|
3.2
|
|
|
109.4
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%
|
Operating income
|
—
|
|
|
(9.8
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)
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(100.0
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)%
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(1.5
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)
|
|
553.3
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%
|
Net corporate expense
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|
|
|
|
|
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Gross profit
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$
|
1.0
|
|
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$
|
(0.2
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)
|
|
600.0
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%
|
|
$
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0.2
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|
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(200.0
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)%
|
SG&A expense
|
44.3
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|
|
48.9
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(9.4
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)%
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|
55.9
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(12.5
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)%
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Operating loss
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(43.3
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)
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(49.1
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)
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(11.8
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)%
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(55.7
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)
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(11.8
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)%
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RESULTS OF OPERATIONS
FISCAL 2016 COMPARED WITH FISCAL 2015
Overview
As discussed below, the Company's reported net earnings for the year ended December 31, 2016 was impacted by a decrease in net sales ($97.2 million) and restructuring expenses (pre-tax $12.4 million). Reported net earnings for the year ended December 26, 2015 included restructuring expenses (pre-tax $39.9 million) and impairments of goodwill and intangible assets (pre-tax $42.0 million).
On a consolidated basis, the decrease in net sales in 2016, as compared with 2015, reflected lower sales in all reportable segments except for the Engineered Support Structures segment. In fiscal 2016, the Company had 53 weeks of operations while fiscal 2015 and 2014 had 52 weeks of operations. The estimated impact on the company's results of operations due to the extra week in fiscal 2016 was additional net sales of approximately $50 million and additional net earnings of approximately $3 million.
The changes in net sales in 2016, as compared with 2015, was due to the following factors:
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Total
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ESS
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Energy & Mining
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Utility
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Coatings
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Irrigation
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Other
|
Sales - 2015
|
$
|
2,618.9
|
|
$
|
748.4
|
|
$
|
333.2
|
|
$
|
673.3
|
|
$
|
255.5
|
|
$
|
605.8
|
|
$
|
2.7
|
|
Volume
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(13.4
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)
|
36.8
|
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(9.5
|
)
|
1.5
|
|
(10.0
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)
|
(29.5
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)
|
(2.7
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)
|
Pricing/mix
|
(60.8
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)
|
(9.8
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)
|
(3.7
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)
|
(44.0
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)
|
(4.5
|
)
|
1.2
|
|
—
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|
Acquisitions
|
5.9
|
|
—
|
|
—
|
|
—
|
|
5.9
|
|
—
|
|
—
|
|
Currency translation
|
(28.9
|
)
|
(10.9
|
)
|
(5.5
|
)
|
—
|
|
(3.0
|
)
|
(9.5
|
)
|
—
|
|
Sales - 2016
|
$
|
2,521.7
|
|
$
|
764.5
|
|
$
|
314.5
|
|
$
|
630.8
|
|
$
|
243.9
|
|
$
|
568.0
|
|
$
|
—
|
|
Volume effects are estimated based on a physical production or sales measure. Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the product sold. Accordingly, pricing and mix changes do not necessarily directly result in operating income changes.
Restructuring Plan
In 2016, we executed a restructuring plan in Australia/New Zealand focused primarily on closing and consolidating locations within the Energy and Mining and Coatings segments as well as closing a structures facility in Canada (the "2016 Plan"). We incurred approximately $7.8 million of restructuring expense consisting of $5.0 million in cost of goods sold and $2.8 million in selling, general, and administrative expense in 2016. The Plan was substantially completed at year-end 2016.
In April 2015, our Board of Directors authorized a broad restructuring plan (the "2015 Plan") to respond to the market environment in certain of our businesses. During 2016, we incurred approximately
$4.6
million of restructuring expense to complete the 2015 Plan consisting of $4.1 million in selling, general, and administrative expense with the remainder recorded in cost of goods sold.
Inclusive of both the 2016 and 2015 Plans, operating income in 2016 was reduced due to restructuring expense by segment as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
ESS
|
Energy & Mining
|
Utility
|
Coatings
|
Irrigation
|
Corporate
|
|
|
|
|
|
|
|
|
|
Full year
|
$
|
(12.4
|
)
|
$
|
(3.1
|
)
|
$
|
(5.2
|
)
|
$
|
(0.5
|
)
|
$
|
(0.9
|
)
|
$
|
(0.5
|
)
|
$
|
(2.2
|
)
|
Currency Translation
In 2016, we realized a decrease in operating profit of $1.6 million, as compared with 2015, due to currency translation effects. On average, the U.S. dollar strengthened against most currencies and in particular against the Australian dollar, Brazilian Real, Euro, and South African Rand, resulting in less operating profit in U.S. dollar terms. The breakdown of this effect by segment was as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
ESS
|
Energy & Mining
|
Utility
|
Coatings
|
Irrigation
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Corporate
|
|
|
|
|
|
|
|
|
|
Year-to-date
|
$
|
(1.6
|
)
|
$
|
(0.5
|
)
|
$
|
(0.6
|
)
|
$
|
—
|
|
$
|
(0.2
|
)
|
$
|
(0.3
|
)
|
$
|
—
|
|
Gross Profit, SG&A, and Operating Income
At a consolidated level, the improvement in gross margin (gross profit as a percent of sales) in 2016, as compared with 2015, was due to restructuring activities undertaken in 2015 and the $17 million Utility segment commercial settlement recognized in 2015. Gross profit increased in 2016, as compared to 2015, for all operating segments except for Coatings and Irrigation. Gross profit decreased for Coatings and Irrigation primarily due to lower volumes and unfavorable currency translation effects. Reduced average selling prices also resulted in a decline in gross profit for the Coatings segment.
The Company incurred $6.8 million of restructuring expense in 2016 within selling, general and administrative (SG&A) expenses, compared to $18.2 million in 2015. Excluding restructuring expense, the Company saw a decrease in SG&A in 2016 of $65.2 million, as compared with 2015, mainly due to the following factors:
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|
•
|
$42.0 million of goodwill and intangible impairments recorded in 2015 which did not recur in 2016;
|
|
|
•
|
reduced doubtful account provisions of $11.1 million, principally in the Irrigation segment;
|
|
|
•
|
currency translation effects of $4.7 million (lower SG&A) due to the strengthening of the U.S. dollar primarily against the Australian dollar, Brazilian real, and South African rand;
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|
|
•
|
reversal of $3.2 million of a contingent consideration liability to the former owners of Pure Metal Galvanizing in 2016; and
|
|
|
•
|
reductions due to exiting a business development activity, lower project expenses, reduced discretionary spending, and benefits from restructuring activities undertaken in 2015.
|
The above reductions were partially offset by the following increases in SG&A expenses in 2016 as compared with 2015:
|
|
•
|
increased incentive expenses due to improved operating performance of $13.6 million;
|
|
|
•
|
higher deferred compensation expenses of $1.5 million, which was offset by a decrease of the same amount of other expense; and
|
|
|
•
|
increased pension expenses of $2.5 million.
|
In 2016 as compared to 2015, operating income improved for all operating segments. The increase in operating income is primarily attributable to reduced expenses for restructuring activities and the associated benefits of the restructuring activities, no goodwill or intangible asset impairments in 2016, lower doubtful account provisions, and reduced overall SG&A spending.
Net Interest Expense and Debt
Net interest expense in 2016, as compared to 2015, was consistent due to minimal changes in short and long-term borrowings.
Other Expense
The increase in other income in 2016 is a result of the reversal of a contingent liability provision, approximately $16.6 million, out of "Other noncurrent liabilities." This liability was originally recorded as part of the Delta purchase accounting in 2010 to address a certain contingent liability. The statutes of limitation have expired and we now determine this matter to be remote.
Income Tax Expense
Our effective income tax rates were 19.1% and 51.0% in 2016 and 2015. Fiscal 2016 includes $30.6 million of deferred income tax benefit attributable to the re-measurement of the deferred tax asset related to the Company's U.K. defined benefit pension plan. In addition, in fiscal 2016 we recorded a $9.9 million valuation allowance against a tax credit for which we believe we are not likely to receive the benefit. Excluding these items as well as the impact of the reversal of the contingent liability of $16.6 million that is not taxable, our effective tax rate would have been 30.8%. The fiscal 2015 rate is unusually high primarily due to the APAC Coatings and Access Systems goodwill impairments recorded that are not deductible for tax purposes. In addition, U.K. corporate tax rates were collectively reduced from 20% to 18% in 2015. Accordingly, we reduced the value of our deferred tax assets associated with net operating loss carryforwards and certain timing differences by $7.1 million, with a corresponding increase in deferred income tax expense. Excluding these items, our effective tax rate would have been 32.0% in fiscal 2015.
Noncontrolling Interests
Earnings attributable to noncontrolling interest was flat in 2016 as compared to 2015.
Cash Flows from Operations
Our cash flows provided by operations were approximately $219.2 million in 2016, as compared with $272.3 million provided by operations in 2015. The decrease in operating cash flow in 2016, as compared with 2015, was the result of higher net working capital and a reduction in noncurrent liabilities that was partially offset by improved net earnings.
Engineered Support Structures (ESS) segment
The increase in sales in 2016 as compared with 2015 was primarily due to improved volumes in our Asia-Pacific Structures businesses. The volume increase was partially offset by unfavorable currency translation effects and lower average selling prices mostly attributed to average lower cost of steel.
Global lighting and traffic, and roadway product sales in 2016 were higher compared to the same periods in fiscal 2015. Sales volumes in the U.S. were higher in the commercial and OEM markets (steel and aluminum), and modestly lower in the transportation markets. We expect the 2015 long-term U.S. highway bill to provide an uplift to the transportation market demand sometime in 2017. Sales in Canada decreased in 2016 as compared to 2015, from lower volumes due to less large projects and unfavorable currency translation. Sales in Europe were lower in 2016 compared to 2015, due to unfavorable currency translation effects and lower volumes primarily related to a large project in the Middle East in 2015. The domestic markets in general remain subdued in Europe, as economic conditions have curtailed infrastructure investment. In the Asia-Pacific ("APAC") region, sales were higher in 2016, as compared to 2015, due primarily to improved investment activity in Australia and overall market growth in India. Roadway product sales decreased in 2016 due to lower volumes and unfavorable currency translation effects.
Communication product line sales were lower in 2016, as compared with 2015. North America communication structure and component sales decreased, due to lower market demand. In China, sales of wireless communication structures in 2016 increased over the same period in 2015 as the investment levels by the major wireless carriers have remained strong and we have increased our market share through better sales coverage. In Australia, sales for wireless communication structures improved in 2016 due to higher demand from the national broadband network build out.
Gross profit, as a percentage of sales, and operating income for the segment were higher in 2016, as compared with 2015, due to margin expansion from lower average raw material costs, growth in the Asia-Pacific telecommunication business, and lower costs resulting from the 2015 restructuring activities. These increases were partially offset by unfavorable currency translation effects and lower sales volumes in Europe and the North American wireless communication businesses. Favorable LIFO inventory valuation reserve adjustments were approximately $4 million lower in 2016 as compared to 2015. SG&A spending in 2016 increased over the same period in 2015 due primarily to increased commissions owed on the higher telecommunication sales in the Asia-Pacific region and higher compensation costs.
Energy & Mining (E&M) segment
The decrease in sales in 2016, as compared to 2015, was primarily due to unfavorable currency translation effects, and modestly lower pricing.
Access systems product line sales in 2016 were lower when compared to 2015. The sales decrease was primarily due to the negative impact of currency translation effects and lower sales prices in Asia. The decrease in sales price is primarily related to fewer oil and gas related construction projects in the APAC region.
Offshore and other complex structures sales increased in 2016 as compared to 2015. The increase can be attributed to volume improvements primarily in the wind tower product line. Oil and gas product activity continues to be slow due to low oil prices that caused some previously planned projects to be postponed.
Grinding media sales were down in 2016 as compared to 2015, primarily due to lower volumes. Currency translation effects also negatively affected year-to-date sales in 2016 as compared to 2015. The volume decreases are primarily related to the continued slowdown in the Australia mining sector.
Operating income was higher for the segment in 2016, as compared to 2015, primarily due to goodwill and trade name impairment charges in 2015 associated with the Access Systems reporting unit totaling $24.6 million. In addition, the improvement was driven by a number of restructuring actions undertaken to improve our cost structure in our Access Systems business, including facility closures. The increase in operating income was partially offset by lower sales prices in the access systems business and unfavorable currency translation effects. SG&A expense decreased due to the 2015 goodwill and trade name impairments not recurring in 2016, currency translation effects, and a lower fixed cost structure arising from restructuring activities undertaken.
Utility Support Structures (Utility) segment
In the Utility segment, sales decreased in 2016 as compared with 2015, due mainly to decreased average selling prices tied to the lower cost of steel and lower international sales volumes. Declining cost of steel during the second half of 2015 and first quarter of 2016 contributed to lower average selling prices for the first three quarters of 2016. A number of our sales contracts contain provisions that tie the sales price to published steel index pricing at the time our customer issues their purchase order.
In North America, sales volumes in tons for steel utility structures were higher in 2016, as compared with 2015, while concrete sales volumes in tons decreased during 2016. International utility structures sales volumes were lower in 2016 as compared to 2015.
Gross profit as a percentage of sales improved in 2016, as compared to 2015, due to a number of actions taken in 2015 to improve our cost structure and operational efficiency in this segment, including certain restructuring activities involving facility closures. In addition, the segment recorded a $17.0 million reserve in the fourth quarter of 2015 for a commercial settlement with a large customer that requires ongoing quality monitoring. SG&A expense was lower in 2016, as compared with 2015, primarily due to the benefits realized from the 2015 restructuring activities. Operating income increased in 2016, as compared with 2015, primarily due to lower restructuring costs and the related improved cost structure realized in 2016 and the commercial settlement recorded in 2015.
Coatings segment
Coatings segment sales in North America decreased in 2016, as compared with 2015, due to lower volumes and less favorable sales pricing mostly due to mix. The decrease was partially offset by the acquisition of American Galvanizing that accounted for $5.9 million of sales. Coatings sales in the Asia-Pacific region were lower in 2016 due to reduced volumes, lower pricing and sales mix, and unfavorable currency translation effects primarily related to the strengthening of the U.S. dollar against the Australian dollar and Malaysian Ringgit.
SG&A expense was lower in 2016, as compared to 2015, due to $17.3 million of goodwill and trade name impairment charges recorded in 2015 associated with the APAC Coatings reporting unit. In addition, the contingent consideration liability to the former owners of Pure Metal Galvanizing (PMG), payable in calendar 2018, was reduced in 2016 by $3.2 million, due to changes in the estimated earnings over the earn out period. The decrease was partially offset by
the SG&A of American Galvanizing, acquired in the fourth quarter of 2015. Operating income was higher in 2016, as compared with 2015, due primarily to the impairment charges in 2015 not recurring in 2016, the reduction in the PMG contingent consideration liability in 2016, and income from the American Galvanizing acquisition. These increases were partially offset by reduced volumes in North America and Asia Pacific and less favorable sales mix.
Irrigation segment
The decrease in Irrigation segment net sales in 2016, as compared with 2015, was mainly due to sales volume decreases in North America for both the irrigation and tubing businesses and unfavorable currency translation effects for our international irrigation business. Volume increases for international irrigation partially offset the decrease. In fiscal 2016, net farm income in the United States is expected to decrease 17.2% from the levels of 2015, due in part to lower market prices for corn and soybeans. The 2016 estimate represents the third consecutive year of a decrease in estimated net farm income. We believe this reduction contributed to lower demand for irrigation machines in North America in 2016 as compared with 2015. In international markets, sales volumes increased in 2016 over 2015 due to volume improvements in all regions except for Australia and China. The volume improvements were partially offset by unfavorable currency translation effects of $9.5 million primarily related to the South African rand and Brazilian real.
SG&A was lower in 2016 as compared with 2015, and is primarily attributed to approximately $10.5 million of lower provisions for uncollected international receivables. In 2015, the Company recorded a provision of approximately $8.0 million primarily related to delinquent receivables with a Chinese municipal entity. In addition, currency translation and lower overall discretionary spending contributed to lower SG&A. The decreases were partially offset by increased compensation and incentive expenses due primarily to improved international irrigation operations. Operating income for the segment improved in 2016 over 2015, due to lower provisions for uncollected international receivables and lower discretionary spending, partially offset by lower volumes and a higher LIFO inventory reserve due to higher steel prices in 2016.
Other
Due to the business reorganization that occurred in the fourth quarter of 2015, there are no longer business operations included in Other.
Net corporate expense
Net corporate expense in 2016 decreased compared to 2015. The decrease was mainly due to the following:
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•
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lower restructuring expenses of $4.5 million;
|
|
|
•
|
lower compensation expenses of $3.8 million due primarily to lower employment levels; and
|
|
|
•
|
reduced discretionary spending.
|
The above decreases were partially offset by approximately $7.7 million of higher incentive costs in 2016 due to improved operations, $2.5 million of higher pension expense for the Delta Pension Plan, and increased deferred compensation expenses of $1.5 million, which was offset by the same amount of other expense.
FISCAL 2015 COMPARED WITH FISCAL 2014
Overview
As discussed below, the Company's reported net earnings for the year ended December 26, 2015 was impacted by the decrease in net sales ($504.2 million), restructuring expense (pre-tax $39.9 million), and impairments of goodwill and intangible assets (pre-tax $42.0 million).
On a consolidated basis, the decrease in net sales in 2015, as compared with 2014, reflected lower sales in all reportable segments except for the Engineered Support Structures segment. The changes in net sales in 2015, as compared with 2014, was due to the following factors:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
ESS
|
Energy & Mining
|
Utility
|
Coatings
|
Irrigation
|
Other
|
Sales - 2014
|
$
|
3,123.1
|
|
$
|
735.0
|
|
$
|
443.7
|
|
$
|
822.6
|
|
$
|
278.4
|
|
$
|
839.7
|
|
$
|
3.7
|
|
Volume
|
(302.7
|
)
|
22.4
|
|
(49.7
|
)
|
(65.8
|
)
|
(18.5
|
)
|
(190.1
|
)
|
(1.0
|
)
|
Pricing/mix
|
(86.9
|
)
|
(3.8
|
)
|
(6.9
|
)
|
(76.3
|
)
|
12.5
|
|
(12.4
|
)
|
—
|
|
Acquisitions
|
73.6
|
|
44.9
|
|
15.4
|
|
—
|
|
2.2
|
|
11.1
|
|
—
|
|
Currency translation
|
(188.2
|
)
|
(50.1
|
)
|
(69.3
|
)
|
(7.2
|
)
|
(19.1
|
)
|
(42.5
|
)
|
—
|
|
Sales - 2015
|
$
|
2,618.9
|
|
$
|
748.4
|
|
$
|
333.2
|
|
$
|
673.3
|
|
$
|
255.5
|
|
$
|
605.8
|
|
$
|
2.7
|
|
Volume effects are estimated based on a physical production or sales measure. Since products we sell are not uniform in nature, pricing and mix relate to a combination of changes in sales prices and the attributes of the product sold. Accordingly, pricing and mix changes do not necessarily directly result in operating income changes.
Acquisitions included DS SM A/S (renamed Valmont SM), AgSense LLC, Shakespeare, and American Galvanizing. We acquired Valmont SM in March 2014, AgSense in August 2014, Shakespeare in October 2014, and American Galvanizing in October 2015. Shakespeare is reported in the Engineered Support Structures segment, Valmont SM is recorded in the Energy & Mining segment, AgSense is reported in the Irrigation segment, and American Galvanizing is reported in the Coatings segment. Average steel index prices for both hot rolled coil and plate decreased substantially in North America in 2015 as compared to 2014. Decreases in sales pricing and volumes offset the increase in gross profit realized from the lower steel prices.
Restructuring Plan
In April 2015, our Board of Directors authorized a broad restructuring plan (the "Plan") including up to $60 million of expenses to respond to the market environment in certain of our businesses. During 2015 we incurred approximately
$39.9
million of restructuring expense consisting of $21.7 million cost of goods sold and $18.2 million in selling, general, and administrative expense. The decrease in gross profit in 2015 due to restructuring expense by segment is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
Total
|
ESS
|
Energy & Mining
|
Utility
|
Coatings
|
Irrigation
|
Other
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
Full year
|
$
|
(21.7
|
)
|
$
|
(4.1
|
)
|
$
|
(6.4
|
)
|
$
|
(4.5
|
)
|
$
|
(6.0
|
)
|
$
|
(0.7
|
)
|
$
|
—
|
|
$
|
—
|
|
The decrease in 2015 operating income due to restructuring expense by segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
ESS
|
Energy & Mining
|
Utility
|
Coatings
|
Irrigation
|
Other
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
Full year
|
$
|
(39.9
|
)
|
$
|
(9.3
|
)
|
$
|
(7.1
|
)
|
$
|
(5.2
|
)
|
$
|
(6.6
|
)
|
$
|
(1.3
|
)
|
$
|
(4.0
|
)
|
$
|
(6.4
|
)
|
Goodwill and Trade Name Impairment
The Company recognized a $16.2 million impairment of goodwill on the APAC Coatings reporting unit during fiscal 2015, which represented all of the remaining goodwill on this reporting unit. The goodwill impairment was a result of difficulties in the Australian market over the last couple of years, including a general slowdown in manufacturing. The Company also recorded a $1.1 million impairment of the Industrial Galvanizing trade name (in the Coatings segment) and a $5.8 million impairment of the Webforge trade name (in the Energy and Mining segment) during 2015. In the fourth quarter of 2015, the Company recorded an $18.8 million goodwill impairment of its Access Systems reporting unit due to continued downward pressure on oil and natural gas prices which in turn reduces the prospects for new oil and gas exploration primarily in Australia and Southeast Asia.
Currency Translation
In 2015, we realized a decrease in operating profit of $17.3 million, as compared with 2014, due to currency translation effects. On average, the U.S. dollar strengthened against most currencies and in particular against the Australian dollar, Brazilian Real, Euro, and South Africa Rand, resulting in less operating profit in U.S. dollar terms. The breakdown of this effect by segment was as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
ESS
|
Energy & Mining
|
Utility
|
Coatings
|
Irrigation
|
Other
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
Year-to-date
|
$
|
(17.3
|
)
|
$
|
(3.4
|
)
|
$
|
(5.5
|
)
|
$
|
0.2
|
|
$
|
(1.9
|
)
|
$
|
(7.6
|
)
|
$
|
—
|
|
$
|
0.9
|
|
Gross Profit, SG&A, and Operating Income
The decrease in gross margin (gross profit as a percent of sales) in fiscal 2015, as compared with 2014, was due to a combination of lower sales prices, unfavorable sales mix, restructuring charges, and reduced sales volumes in 2015. This was partially offset by gross margin from acquisitions and a reduction of LIFO inventory layers in 2015.
Selling, general and administrative (SG&A) expense in 2015 increased from 2014, primarily due to the following factors:
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•
|
acquisition of Valmont SM, AgSense, Shakespeare, and American Galvanizing with expenses of $12.7 million;
|
|
|
•
|
increased doubtful account provisions of $11.1 million, principally in the irrigation segment;
|
|
|
•
|
expenses incurred related to the restructuring plan of $18.2 million; and
|
|
|
•
|
impairment of goodwill and trade names of $42.0 million.
|
The above increases in SG&A were partially offset by the following:
|
|
•
|
currency translation effects of $23.5 million due to the strengthening of the U.S. dollar primarily against the Australian dollar, Brazilian Real, Euro, and South African Rand;
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|
|
•
|
decreased employee incentive accruals and other compensation costs of $10.2 million, due to lower operating results;
|
|
|
•
|
lower expenses associated with the Delta Pension Plan of $3.2 million, and;
|
|
|
•
|
reduced deferred compensation expenses of $2.6 million, which is offset by the same amount of other expense.
|
The decrease in operating income on a reportable segment basis in 2015, as compared to 2014, was due to reduced operating performance in all segments. The decrease in operating income is primarily attributable to lower volumes and sales prices, restructuring expenses, impairment charges, and currency translation effects.
Net Interest Expense and Debt
Net interest expense increased in 2015, as compared with 2014, primarily due to additional long-term debt borrowed in the third quarter of 2014. In addition, interest income decreased due to less cash on hand for investment due to the share buyback program.
The approximate $38.7 million in costs associated with refinancing of debt recognized in 2014 is due to the Company's repurchasing through partial tender of $199.8 million in aggregate principal amount of a portion of the 6.625% senior unsecured notes due 2020. This expense was comprised of the following:
• Cash prepayment expenses of approximately $41.2 million; less
• Recognition of $4.4 million of the proportionate unamortized premium originally recorded upon the issuance of the 2020 notes; plus
• Recognition of approximately $2.0 million of expense comprised of the proportionate amount of the write-offs of unamortized loss on cash flow hedge and deferred financing costs.
Other Expense
The decrease in other expense in 2015, as compared with 2014, was due to the difference in investment income from the Company's shares of Delta EMD. In 2014, we recorded a non-cash mark to market loss of $3.8 million due to the decrease in fair value of the shares. In 2015, we received a $5.0 million special dividend that was fully offset by a non-cash mark to market loss; the EMD investment then appreciated approximately $0.5 million in 2015. An additional contributing factor was more favorable foreign currency transaction gains/losses due to currency exchange rate changes. These improvements were partially offset by reduced market performance of deferred compensation assets of $2.6 million.
Income Tax Expense
Our effective income tax rate in fiscal 2015 of 51.0%, respectively, was higher when compared with the same periods in fiscal 2014 of 33.4%. The increase primarily relates to the APAC Coatings and Access Systems goodwill impairments recorded in 2015 that are not deductible for tax purposes. In addition, U.K. corporate tax rates were collectively reduced from 20% to 18%. Accordingly, we reduced the value of our deferred tax assets associated with net operating loss carryforwards and certain timing differences by $7.1 million, with a corresponding increase in income tax expense.
Earnings attributable to noncontrolling interest was lower in 2015, as compared with 2014, due to the write-off of the remaining interest in a joint venture.
Cash Flows from Operations
Our cash flows provided by operations were approximately $272.3 million in 2015, as compared with $174.1 million provided by operations in 2014. The increase in operating cash flow in 2015 was the result of improved net working capital, partially offset by lower net earnings, compared with 2014.
Engineered Support Structures (ESS) segment
The increase in net sales in 2015 as compared with 2014 was primarily due to the acquisition of Shakespeare in October 2014 and improved volumes in certain regions. The increases were partially offset by unfavorable currency translation effects.
Global lighting, traffic, and roadway product sales in 2015 were lower compared to 2014. Sales volumes in the U.S. were higher in the commercial steel and aluminum markets and lower in the transportation markets. Sales volumes in Canada decreased in 2015 as compared to 2014, due to unfavorable currency impacts that were partially offset by slightly higher volumes. Sales in Europe were lower in 2015 compared to 2014, due to unfavorable currency translation effects that were partially offset by higher volumes relating to a large project in the Middle East that concluded in the second quarter. The domestic markets in general remain subdued in Europe. In the Asia Pacific region, sales were slightly lower in 2015 as compared to 2014, due to lower investment activity in both China and Australia.
Highway safety product sales decreased in 2015 as compared to 2014, due to unfavorable foreign currency translation. An increase in sales volume and price due to improved highway project activity in Australia and New Zealand offset some of the unfavorable foreign currency translation.
Communication product line sales were higher in 2015, as compared with 2014. North America communication structure sales decreased, primarily due to one customer who significantly reduced its 4G wireless network build out in 2015
compared with 2014. Communication component sales were slightly higher in 2015 due to continued expansion of the customer base. In China, sales of wireless communication structures in 2015 increased over the same period in 2014 as the investment levels by the major wireless carriers remained strong due to the 4G network build out. In Australia, sales for wireless communication structures were down for the year but started to improve in the fourth quarter as the anticipated national broadband network build out began.
The increase in SG&A spending in 2015 was due to the Shakespeare acquisition totaling $7.0 million and restructuring charges of $5.2 million. These increases were partially offset by currency translation effects. Operating income for the segment in 2015 was lower, as compared with to 2014, due to restructuring charges of $9.3 million and unfavorable currency translation effects of $3.4 million. Due to the rapid decreases in steel prices during 2015, our North American lighting and traffic businesses in general were able to hold on to higher sales prices which improved gross margin and partially offset the lower operating income. In addition, lower steel prices led to reduced LIFO inventory reserves and higher profits that were offset by revaluing the remaining FIFO inventory. Lastly, the acquisition of Shakespeare contributed nine additional months in 2015 (as compared to 2014) accounting for additional operating income of approximately $4.0 million.
Energy & Mining (E&M) segment
The decrease in net sales in 2015 as compared with 2014 was primarily due to unfavorable currency translation effects and reduced volumes, offset partially by two additional months of business in 2015 for Valmont SM.
Access systems product line sales decreased in 2015 as compared with 2014, primarily due to the negative impact of currency translation effects and lower volumes. The volume decrease was primarily related to the slowdown in mining sector investment in Australia, weaker market conditions in China, and fewer oil and gas related construction projects.
Offshore structures sales were down $43.4 million in 2015, as compared to 2014. The decrease is impacted by unfavorable currency translation effects and reduced volumes partially offset by two additional months of sales in 2015. A delay in wind energy product introduction by our customers has resulted in some projects being delayed. An additional factor contributing to the sales decrease is the continuation of low oil prices that has resulted in lower sales for our customers in the exploration industry.
Grinding media sales were down in 2015 as compared with 2014, due to the negative impact of currency translation effects. Volumes were relatively flat year-over-year.
Operating income for the segment in 2015 was lower, as compared with 2014, due to goodwill and trade name impairments totaling $24.6 million, restructuring charges of $7.1 million, and unfavorable currency translation effects of $5.5 million. The remainder of the decrease can be attributed to the reversal of the Locker earn-out liability in 2014 of approximately $4.0 million, and lower volumes and sales mix in the offshore structures and access systems businesses. SG&A spending increased in 2015 as a result of the goodwill and trade name impairments, restructuring costs, and two additional months of Valmont SM expenses being partially offset by currency translation effects.
Utility Support Structures (Utility) segment
In the Utility segment, sales decreased in 2015 as compared with 2014, due to lower sales volume, a decrease in average selling prices, most notably for our steel products, and an unfavorable sales mix. Our mix of revenue from very large transmission projects in 2015 was unfavorable to 2014. A backlog including some very large transmission projects at year-end 2013 provided for the more favorable mix of large transmission projects revenue in first quarter of 2014. Declining price of steel during 2015 and a competitive pricing environment also contributed to lower average selling prices in 2015 compared to 2014. In North America, sales volumes in tons for both steel and concrete utility structures were down in 2015, as compared with 2014. The pricing environment in North America continues to be very competitive. In 2015 as compared to 2014, international utility structures sales decreased due to lower volumes in export markets and unfavorable currency translation effects.
SG&A expense increased slightly in 2015, as compared with 2014, primarily due to restructuring costs. Operating income in 2015, as compared with 2014, decreased due to lower volumes, reduced sales margins, restructuring costs, and reduced leverage of fixed costs. In addition, the segment recorded a $17.0 million reserve in the fourth quarter of 2015 for a commercial settlement with a large customer that requires ongoing quality monitoring. While we initiated a number of actions to improve our cost structure in this segment, including certain restructuring activities, the full effect will be realized as these initiatives become fully implemented in 2016.
Coatings segment
Coatings segment sales in North America decreased in 2015, as compared with 2014, due to lower sales volumes and currency translation effects related to the strengthening of the U.S. dollar against the Canadian dollar. Intercompany sales volumes in North America were down as well. Those decreases were partially offset by higher average selling prices in 2015 as compared to 2014. Coatings sales in Asia Pacific decreased primarily due to currency translation effects related to the strengthening of the U.S. dollar against the Australian dollar. In addition, continued weak demand in Australia led to the lower volumes that were partially offset by price increases to recover higher costs of zinc. Sales in Asia were down slightly in 2015, due to currency translation effects.
SG&A expense increased in 2015, as compared to the same periods in 2014, primarily due to recording an impairment charge on the goodwill and trade name associated with the APAC Coatings reporting unit totaling $17.3 million. Operating income was lower in 2015, as compared with 2014, due to restructuring costs primarily in Australia, impairment charges, lower sales volumes, unfavorable currency impacts, and reduced leverage of fixed costs in both Australia and North America. Additionally, $3.0 million business interruption insurance proceeds were received in 2014 related to a 2013 fire at one of our North American facilities.
Irrigation segment
The decrease in Irrigation segment net sales in 2015, as compared with 2014, was mainly due to sales volume decreases in both North American and International markets. In calendar 2015, net farm income in the United States is estimated by the USDA to have decreased 38% from the levels of 2014, due in part to lower market prices for corn and soybeans. We believe this reduction contributed to lower demand for irrigation machines in North America in 2015, as compared with 2014. In addition, sales volume from storm damage in the United States was exceptionally high in 2014. For the tubing business, sales volumes were down due to lower price of steel and lower volumes in 2015. In international markets, Irrigation sales decreased in 2015, as compared with 2014, primarily due to reduced volumes in Brazil, Eastern Europe, Australia, and the Middle East and unfavorable currency translation effects in Brazil and South Africa.
SG&A was higher in 2015, as compared with 2014. This was due to increased provisions for uncollected international receivables of approximately $8.0 million, the majority of which was a specific allowance recorded for delinquent receivables with a Chinese municipal entity. AgSense which operated for seven additional months in 2015, provided additional SG&A totaling $3.1 million. These increases were partially offset by currency translation reductions of $3.6 million, lower incentives and reduced discretionary spending. Operating income for the segment declined in 2015 over 2014, due to sales volume decreases and associated operating deleverage of fixed operating costs, unfavorable currency impacts, and increased SG&A expense. These reductions were partially offset by the operating income of AgSense that was acquired in August 2014, lower average steel purchase prices, and reduced factory spending to adjust to the lower sales volumes.
Other
This unit includes industrial fasteners operations and a product under development that ended in 2015. The decrease in sales in 2015, as compared with 2014, was due primarily to lower volumes. Operating income in 2015 was lower than the same periods in 2014, due primarily to reduced sales volumes and approximately $4 million of restructuring costs.
Net corporate expense
Net corporate expense in 2015 decreased over the same periods in fiscal 2014. These decreases were mainly due to the following, which were offset partially by restructuring expenses of $6.4 million:
|
|
•
|
decreased employee incentive accruals of $8.7 million, due to reduced operating results;
|
|
|
•
|
lower expenses associated with the Delta Pension Plan of $3.3 million; and
|
|
|
•
|
reduced deferred compensation expenses of $2.6 million, which was offset by the same amount of other expense.
|
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Working Capital and Operating Cash Flows
-Net working capital was $903.4 million at
December 31, 2016
, as compared with $860.3 million at
December 26, 2015
. The increase in net working capital in 2016 mainly resulted from a higher cash on hand and reduced accrued expenses primarily due to a lower warranty accrual. Operating cash flow was $219.2 million in
2016
, as compared with $272.3 million in
2015
and $174.1 million in 2014. The decrease in operating cash flow in 2016, as compared to 2015, was due to less favorable working capital changes including receivables, accrued expenses primarily due to a reduced warranty accrual, and other noncurrent liabilities due primarily to the reversal of a contingent liability related to the Delta acquisition. The decreases were partially offset by higher net earnings and a lower pension contribution in 2016 as compared to 2015. The increase in operating cash flow in 2015, as compared with 2014, mainly was the result of lower current accounts receivable and improved working capital overall, partially offset by lower net earnings.
Investing Cash Flows
-Capital spending in fiscal
2016
was $57.9 million, as compared with $45.5 million in fiscal
2015
and $73.0 million in fiscal 2014. Capital spending projects in 2016 included construction of a new galvanizing operation in Texas and investments in machinery and equipment across all businesses. We expect our capital spending for the 2017 fiscal year to be approximately $70 million. Investing cash flows included $12.8 million paid for American Galvanizing in 2015 and $185.7 million paid for Valmont SM, AgSense and Shakespeare Composite acquisitions in 2014.
Financing Cash Flows
-Our total interest‑bearing debt decreased to $756.4 million at
December 31, 2016
, from $759.0 million at
December 26, 2015
. During 2016, 2015, and 2014, we acquired approximately 0.4 million shares, 1.4 million shares and 2.7 million shares for approximately $53.8 million, $169.0 million, and $395.0 million, respectively, under the share repurchase program.
Capital Allocation Philosophy
We have historically funded our growth, capital spending and acquisitions through a combination of operating cash flows and debt financing. On May 13, 2014, our Board of Directors approved and publicly announced a capital allocation philosophy with the following priorities for Valmont's capital:
•
working capital and capital expenditure investments necessary for future sales growth;
•
dividends on common stock in the range of 15% of the prior year's fully diluted net earnings;
•
acquisitions;
•
return of capital to shareholders through share repurchases.
We also announced our intention to manage our capital structure to maintain our investment grade debt rating. Our most recent ratings were Baa3 by Moody's Investors Services, Inc. and BBB+ by Standard and Poor's Rating Services. We would be willing to allow our debt rating to fall to Baa3 or BBB- to finance a special acquisition or other opportunity. We expect to maintain a ratio of debt to invested capital which will support our current investment grade debt rating.
The Board of Directors in May 2014 authorized the purchase of up to $500 million of the Company's outstanding common stock from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. In February 2015, the Board of Directors authorized an additional $250 million of share purchases, without an expiration date. The purchases will be funded from available working capital and short-term borrowings and will be made subject to market and economic conditions. We are not obligated to make any repurchases and may discontinue the program at any time. As of December 31, 2016, we have acquired approximately 4.6 million shares for approximately $617.8 million under these share repurchase programs.
Sources of Financing
Our debt financing at
December 31, 2016
consisted primarily of long‑term debt. During 2014, the Company issued $500 million of new notes and repurchased by partial tender $199.8 million in aggregate principal amount of the 2020 notes. Our long‑term debt as of December 31, 2016, principally consists of:
|
|
•
|
$250.2 million face value ($253.8 million carrying value) of senior unsecured notes that bear interest at 6.625% per annum and are due in April 2020.
|
|
|
•
|
$250 million face value ($248.9 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044.
|
|
|
•
|
$250 million face value ($246.8 million carrying value) of senior unsecured notes that bear interest at 5.25% per annum and are due in October 2054.
|
|
|
•
|
We are allowed to repurchase the notes subject to the payment of a make-whole premium. All three tranches of these notes are guaranteed by certain of our subsidiaries.
|
On October 17, 2014, we entered into a First Amendment to our Credit Agreement with JPMorgan Chase Bank, as Administrative Agent, and the other lenders party thereto, dated as of August 15, 2012, which increased the committed unsecured revolving credit facility from $400 million to $600 million and extends the maturity date from August 15, 2017 to October 17, 2019. Under the amended credit agreement, up to $25 million is available for swingline loans, up to $75 million is available for letters of credit and up to $200 million is available for borrowings in foreign currencies. We may increase the revolving credit facility by up to an additional $200 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:
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|
(a)
|
LIBOR (based on a 1, 2, 3 or 6 month interest period, as selected by us) plus 100 to 162.5 basis points, depending on the credit rating of our senior debt published by Standard & Poor's Rating Services and Moody's Investors Service, Inc.; or
|
(b) the higher of
|
|
•
|
the prime lending rate,
|
|
|
•
|
the Federal Funds rate plus 50 basis points, and
|
|
|
•
|
LIBOR (based on a 1 month interest period) plus 100 basis points (inclusive of facility fees),
|
Plus, in each case, 0 to 62.5 basis points, depending on the credit rating of our senior debt published by Standard & Poor's Rating Services and Moody's Investors Service, Inc.
A commitment fee is also required under the revolving credit facility which accrues at 10 to 27.5 basis points, depending on the credit rating of our senior debt published by Standard and Poor's Rating Services and Moody's Investor Services, Inc., on the average daily unused portion of the commitment under the revolving credit facility.
At
December 31, 2016
, we had no outstanding borrowings under the revolving credit facility. The revolving credit facility has a maturity date of August 17, 2019 and contains certain financial covenants that may limit our additional borrowing capability under the agreement. At
December 31, 2016
, we had the ability to borrow $584.6 million under this facility, after consideration of standby letters of credit of $15.4 million associated with certain insurance obligations. We also maintain certain short‑term bank lines of credit totaling $109.4 million; $109.4 million of which was unused at December 31, 2016.
Our senior unsecured notes and revolving credit agreement each contain cross-default provisions which permit the acceleration of our indebtedness to them if we default on other indebtedness that results in, or permits, the acceleration of such other indebtedness.
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. These debt agreements allow us to add estimated EBITDA from acquired businesses for periods we did not own the acquired businesses. The debt agreements also provide for an adjustment to EBITDA, subject to certain specified limitations, for non-cash charges or gains that are non-recurring in nature. For 2016, our covenant calculations do not include any estimated EBITDA from acquired businesses.
Our key debt covenants are as follows:
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|
•
|
Interest-bearing debt is not to exceed 3.50x Adjusted EBITDA of the prior four quarters; and
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|
|
•
|
Adjusted EBITDA over the prior four quarters must be at least 2.50x our interest expense over the same period.
|
At
December 31, 2016
, we were in compliance with all covenants related to these debt agreements. The key covenant calculations at
December 31, 2016
were as follows:
|
|
|
|
|
Interest-bearing debt
|
$
|
756,392
|
|
Adjusted EBITDA-last four quarters
|
326,629
|
|
Leverage ratio
|
2.32
|
|
|
|
Adjusted EBITDA-last four quarters
|
326,629
|
|
Interest expense-last four quarters
|
44,409
|
|
Interest earned ratio
|
7.36
|
|
The calculation of Adjusted EBITDA-last four quarters is presented under the column for fiscal
2016
in footnote (b) to the table "Selected Five-Year Financial Data" in Item 6 - Selected Financial Data.
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 for fiscal 2017 and beyond.
We have not made any provision for U.S. income taxes in our financial statements on approximately $424.2 million of undistributed earnings of our foreign subsidiaries, as we intend to reinvest those earnings. Of our cash balances of $399.9 million at
December 31, 2016
, $329.5 million is held in entities outside the United States. If we need to repatriate foreign cash balances to the United States to meet our cash needs, income taxes would be paid to the extent that those cash repatriations were undistributed earnings of our foreign subsidiaries. The determination of the additional U.S. federal and state income taxes or foreign withholding taxes have not been provided, as the determination is not practicable.
FINANCIAL OBLIGATIONS AND FINANCIAL COMMITMENTS
We have future financial obligations related to (1) payment of principal and interest on interest‑bearing debt, (2) Delta pension plan contributions, (3) operating leases and (4) purchase obligations. These obligations at
December 31, 2016
were as follows (in millions of dollars):
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|
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|
|
|
|
|
|
|
|
|
|
|
|
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Contractual Obligations
|
Total
|
|
2017
|
|
2018-2019
|
|
2020-2021
|
|
After 2021
|
Long‑term debt
|
$
|
763.0
|
|
|
$
|
0.9
|
|
|
$
|
1.6
|
|
|
$
|
251.7
|
|
|
$
|
508.8
|
|
Interest
|
907.8
|
|
|
42.5
|
|
|
84.9
|
|
|
65.7
|
|
|
714.7
|
|
Delta pension plan contributions
|
149.3
|
|
|
26
|
|
|
27.4
|
|
|
27.4
|
|
|
68.5
|
|
Operating leases
|
97.2
|
|
|
21.5
|
|
|
29.8
|
|
|
19.0
|
|
|
26.9
|
|
Unconditional purchase commitments
|
38.9
|
|
|
38.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total contractual cash obligations
|
$
|
1,956.2
|
|
|
$
|
129.8
|
|
|
$
|
143.7
|
|
|
$
|
363.8
|
|
|
$
|
1,318.9
|
|
Long‑term debt mainly consisted of $750.2 million principal amount of senior unsecured notes. At
December 31, 2016
, we had no outstanding borrowings under our bank revolving credit agreement. Obligations under these agreements may be accelerated in event of non‑compliance with debt covenants. The Delta pension plan contributions are related to the current 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 commitments relate to purchase orders for zinc, aluminum and steel, all of which we plan to use in 2017, and certain capital investments planned for 2017. 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
December 31, 2016
, we had approximately $18.5 million of various long‑term liabilities related to certain income tax, environmental, and other matters. These items are not scheduled above because we are unable to make a reasonably reliable estimate as to the timing of any potential payments.
OFF BALANCE SHEET ARRANGEMENTS
We have operating lease obligations to unaffiliated parties on leases of certain production and office facilities and equipment. These leases are in the normal course of business and generally contain no substantial obligations for us at the end of the lease contracts. We also maintain standby letters of credit for contract performance on certain sales contracts.
MARKET RISK
Changes in Prices
Certain key materials we use are commodities traded in worldwide markets and are subject to fluctuations in price. The most significant materials are steel, aluminum, zinc and natural gas. Over the last several years, prices for these commodities have been volatile. The volatility in these prices was due to such factors as fluctuations in supply and demand conditions, government tariffs and the costs of steel‑making inputs. Steel is most significant for our utility support structures segment where the cost of steel has been approximately 50% of the net sales, on average. Assuming a similar sales mix, a hypothetical 20% change in the price of steel would have affected our net sales from our utility support structures segment by approximately $54 million for the year ended December 31, 2016.
We have also experienced volatility in natural gas prices in the past several years. Our main strategies in managing these risks are a combination of fixed price purchase contracts with our vendors to reduce the volatility in our purchase prices and sales price increases where possible. We use natural gas swap contracts on a limited basis to mitigate the impact of rising gas prices on our operating income.
Risk Management
Market Risk—The principal market risks affecting us are exposure to interest rates, foreign currency exchange rates and natural gas. We normally do not use derivative financial instruments to hedge these exposures (except as described below), nor do we use derivatives for trading purposes.
Interest Rates—Our interest‑bearing debt at
December 31, 2016
was mostly fixed rate debt. In the third quarter of 2014, the Company executed a derivative contract to lock in the treasury rate on $125 million of the $250 million aggregate principal amount of the Company's 5.00% Senior Notes due 2044 (the "2044 Notes") and a second derivative contract to lock in the base interest rate on $125 million of the $250 million aggregate principal amount of the Company's 5.25% Senior Notes due 2054 (the "2054 Notes"). These derivatives were settled in the third quarter of 2014. Our notes payable and a small portion of our long-term debt accrue interest at a variable rate. Assuming average interest rates and borrowings on variable rate debt, a hypothetical 10% change in interest rates would have affected our interest expense in 2016 and 2015 by approximately $0.1 million. Likewise, we have excess cash balances on deposit in interest‑bearing accounts in financial institutions. An increase or decrease in interest rates of ten basis points would have impacted our annual interest earnings in 2016 and 2015 by approximately $0.3 million.
Foreign Exchange—Exposures to transactions denominated in a currency other than the entity’s functional currency are not material, and therefore the potential exchange losses in future earnings, fair value and cash flows from these
transactions are not material. From time to time, as market conditions indicate, we will enter into foreign currency contracts to manage the risks associated with anticipated future transactions and current balance sheet positions that are in currencies other than the functional currencies of our operations. At
December 31, 2016
, the Company had a few open foreign currency forward contracts, the most significant of which is a one-year foreign currency forward contract which qualified as a net investment hedge, in order to mitigate foreign currency risk on a portion of our foreign subsidiary investments denominated in British pounds. The forward contract has a maturity date of May 2017 and a notional amount to sell British pounds and receive $44.0 million. The unrealized gain recorded at December 31, 2016 is $6.9 million and is included in Other Current Assets on the Consolidated Balance Sheets.
At December 26, 2015, the Company had a number of open foreign currency forward contracts, including one related to the interest payments on an intercompany note between two entities with two different functional currencies. The notional amount of this forward contract to sell Australian dollars was $36.6 million and the contract was settled in January 2016. At December 27, 2014, the Company had a number of open foreign currency forward contracts, including some related to a large sales contract that was settled in Canadian dollars. The notional amount for these forward contracts to sell Canadian dollars was $14.8 million and were settled over the first nine months of 2015. Much of our cash in non-U.S. entities is denominated in foreign currencies, where fluctuations in exchange rates will impact our cash balances in U.S. dollar terms. A hypothetical 10% change in the value of the U.S. dollar would impact our reported cash balance by approximately $28.7 million in 2016 and $25.2 million in 2015.
We manage our investment risk in foreign operations by borrowing in the functional currencies of the foreign entities where appropriate. The following table indicates the change in the recorded value of our most significant investments at year-end assuming a hypothetical 10% change in the value of the U.S. Dollar.
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|
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|
2016
|
|
2015
|
|
(in millions)
|
Australian dollar
|
$
|
20.4
|
|
|
$
|
22.3
|
|
Chinese renminbi
|
12.3
|
|
|
12.6
|
|
Danish krone
|
10.9
|
|
|
11.4
|
|
U.K. pound
|
9.6
|
|
|
7.4
|
|
Canadian dollar
|
5.9
|
|
|
5.5
|
|
Euro
|
5.4
|
|
|
4.4
|
|
Brazilian real
|
3.4
|
|
|
2.2
|
|
Commodity risk—Natural gas is a significant commodity used in our factories, especially in our Coatings segment galvanizing operations, where natural gas is used to heat tanks that enable the hot-dipped galvanizing process. Natural gas prices are volatile and we mitigate some of this volatility through the use of derivative commodity instruments. Our current policy is to manage this commodity price risk for 0-50% of our U.S. natural gas requirements for the upcoming 6-12 months through the purchase of natural gas swaps based on NYMEX futures prices for delivery in the month being hedged. The objective of this policy is to mitigate the impact on our earnings of sudden, significant increases in the price of natural gas. At
December 31, 2016
, we have open natural gas swaps for
60,000
MMBtu.
CRITICAL ACCOUNTING POLICIES
The following accounting policies involve judgments and estimates used in preparation of the consolidated financial statements. There is a substantial amount of management judgment used in preparing financial statements. We must make estimates on a number of items, such as provisions for bad debts, warranties, contingencies, impairments of long-lived assets, and inventory obsolescence. We base our estimates on our experience and on other assumptions that we believe are reasonable under the circumstances. Further, we re-evaluate our estimates from time to time and as circumstances change. Actual results may differ under different assumptions or conditions. The selection and application of our critical accounting policies are discussed annually with our audit committee.
Allowance for Doubtful Accounts
In determining an allowance for accounts receivable that will not ultimately be collected in full, we consider:
|
|
•
|
age of the accounts receivable
|
|
|
•
|
customer credit history
|
|
|
•
|
customer financial information
|
|
|
•
|
reasons for non-payment (product, service or billing issues).
|
If our customer's financial condition was to deteriorate, resulting in an impaired ability to make payment, additional allowances may be required. As the Company’s international Irrigation business has grown, the exposure to potential losses in international markets has also increased. These exposures can be difficult to estimate, particularly in areas of political instability, or with governments with which the Company has limited experience, or where there is a lack of transparency as to the current credit condition of governmental units. Receivables that are not reasonably expected to be realized in cash within the next twelve months are classified as long-term receivables within other assets. As of
December 31, 2016
, the Company had approximately $9 million in delinquent accounts receivable with Chinese municipal entities with a specific allowance recorded against it based on our estimation of what will not be fully collected. The Company’s allowance for doubtful accounts related to both current and long-term accounts receivables is $19.0 million at
December 31, 2016
.
Warranties
All of our businesses must meet certain product quality and performance criteria. We rely on historical product claims data to estimate the cost of product warranties at the time revenue is recognized. In determining the accrual for the estimated cost of warranty claims, we consider our experience with:
|
|
•
|
costs to correct the product problem in the field, including labor costs
|
|
|
•
|
costs for replacement parts
|
|
|
•
|
other direct costs associated with warranty claims
|
|
|
•
|
the number of product units subject to warranty claims
|
In addition to known claims or warranty issues, we estimate future claims on recent sales. The key assumptions in our estimates are the rates we apply to those recent sales (which is based on historical claims experience) and our expected future warranty costs for products that are covered under warranty for an extended period of time. Our provision for various product warranties was approximately $26.5 million at
December 31, 2016
. If our estimate changed by 50%, the impact on operating income would be approximately $13.3 million. If our cost to repair a product or the number of products subject to warranty claims is greater than we estimated, then we would have to increase our accrued cost for warranty claims.
Inventories
We use the last-in first-out (LIFO) method to determine the value of approximately
38%
of our inventory. The remaining 62% of our inventory is valued on a first-in first-out (FIFO) basis. In periods of rising costs to produce inventory, the LIFO method will result in lower profits than FIFO, because higher more recent costs are recorded to cost of goods sold than under the FIFO method. Conversely, in periods of falling costs to produce inventory, the LIFO method will result in higher profits than the FIFO method.
In 2016 and 2014, we experienced higher average costs to produce inventory than in the prior year, due mainly to higher cost for steel and steel-related products. This resulted in higher costs of goods sold of approximately $3.0 million in 2016 and $2.0 million in 2014, than if our entire inventory had been valued on the FIFO method. In 2015, we experienced lower costs to produce inventory than in the prior year, due mainly to lower cost for steel and steel‑related products. This resulted in lower cost of goods sold (and higher operating income) in 2015 of approximately $12.0 million, than had our entire inventory been valued on the FIFO method.
We write down slow-moving and obsolete inventory by the difference between the value of the inventory and our estimate of the reduced value based on potential future uses, the likelihood that overstocked inventory will be sold and the
expected selling prices of the inventory. If our ability to realize value on slow-moving or obsolete inventory is less favorable than assumed, additional inventory write downs may be required.
Depreciation, Amortization and Impairment of Long-Lived Assets
Our long-lived assets consist primarily of property, plant and equipment, goodwill and intangible assets acquired in business acquisitions. We have assigned useful lives to our property, plant and equipment and certain intangible assets ranging from 3 to 40 years. In 2015, we determined that our galvanizing operation in Melbourne Australia would not generate sufficient cash flows on an undiscounted cash flow basis to recover its carrying value. We had the fixed assets valued by an appraisal firm and recognized an impairment of approximately $4.1 million. Other impairment losses were recorded in 2015 as facilities were closed and future plans for certain fixed assets changed in connection with our restructuring plans.
We identified thirteen reporting units for purposes of evaluating goodwill and we annually evaluate our reporting units for goodwill impairment during the third fiscal quarter, which usually coincides with our strategic planning process. We assess the value of our reporting units using after-tax cash flows from operations (less capital expenses) discounted to present value and as a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA). The key assumptions in the discounted cash flow analysis are the discount rate and the projected cash flows. We also use sensitivity analysis to determine the impact of changes in discount rates and cash flow forecasts on the valuation of the reporting units. As allowed for under current accounting standards, we rely on our previous valuations for the annual impairment testing provided that the following criteria for each reporting unit are met: (1) the assets and liabilities that make up the reporting unit have not changed significantly since the most recent fair value determination and (2) the most recent fair value determination resulted in an amount that exceeded the carrying amount of the reporting unit by a substantial margin.
Our most recent impairment test during the third quarter of 2016 showed that the estimated fair value of all of our reporting units exceeded their respective carrying value, so no goodwill was impaired. Our offshore and other complex steel structures reporting unit with $13.3 million of goodwill, is the reporting unit with the least amount of cushion between its estimated fair value and its carrying value. In the impairment model, we are forecasting steady sales growth in 2018 to 2020 of the other complex steel structures to offset the decline in fiscal 2016 sales from offshore oil and gas structures. If this reporting unit is not able to build out a backlog of other steel structure projects during 2017 to construct and deliver in fiscal 2018, an interim impairment test may be required before the next annual impairment test. After the sales growth rate, the discount rate is the second most sensitive assumption used in the impairment model. A hypothetical 1% change in the discount rate would increase/decrease the fair value of this reporting unit by approximately $10 million.
If our assumptions on discount rates and future cash flows change as a result of events or circumstances, and we believe these assets may have declined in value, then we may record impairment charges, resulting in lower profits
.
Our reporting units are all cyclical and their sales and profitability may fluctuate from year to year. The Company continues to monitor changes in the global economy that could impact future operating results of its reporting units. If such conditions arise, the Company will test a given reporting unit for impairment prior to the annual test. In the evaluation of our reporting units, we look at the long-term prospects for the reporting unit and recognize that current performance may not be the best indicator of future prospects or value, which requires management judgment.
In fiscal 2015, we recognized a $16.2 million impairment charge which represented all of the goodwill on the APAC Coatings reporting unit. The forecast for lower prices for oil and natural gas required an interim step 2 test for our Access Systems reporting unit during the fourth quarter of 2015. We recognized an $18.7 million impairment of goodwill as a result of that test.
Our indefinite‑lived intangible assets consist of trade names. We assess the values of these assets apart from goodwill as part of the annual impairment testing. We use the relief-from-royalty method to evaluate our trade names, under which the value of a trade name is determined based on a royalty that could be charged to a third party for using the trade name in question. The royalty, which is based on a reasonable rate applied against estimated future sales, is tax-effected and discounted to present value. The most significant assumptions in this evaluation include estimated future sales, the royalty rate and the after-tax discount rate. For our evaluation purposes, the royalty rates used vary between 0.5% and 1.5% of sales and the after-tax discount rate of 13.0% to 16.0%, which we estimate to be the after-tax cost of capital for such assets.
Our trade names were tested for impairment in the third quarter of 2016 where we determined no trade names were impaired. Two of our trade names, Webforge (in the Energy and Mining segment) and Industrial Galvanizing (in the Coatings segment), were estimated to have a fair value lower than carrying value during the 2015 impairment tests. As such, we recognized a $5.8 million impairment of the Webforge trade name and a $1.1 million impairment of the Industrial Galvanizing trade name.
Income Taxes
We record valuation allowances to reduce our deferred tax assets to amounts that are more likely than not to be realized. We consider future taxable income expectations and tax-planning strategies in assessing the need for the valuation allowance. If we estimate a deferred tax asset is not likely to be fully realized in the future, a valuation allowance to decrease the amount of the deferred tax asset would decrease net earnings in the period the determination was made. Likewise, if we subsequently determine that we are able to realize all or part of a net deferred tax asset in the future, an adjustment reducing the valuation allowance would increase net earnings in the period such determination was made.
At
December 31, 2016
, we had approximately $104.4 million in deferred tax assets relating to tax credits and loss carryforwards, with a valuation allowance of $81.9 million, including $62.2 million in valuation allowances remaining in the Delta entities related to capital loss carryforwards, which are unlikely ever to be realized. If circumstances related to our deferred tax assets change in the future, we may be required to increase or decrease the valuation allowance on these assets, resulting in an increase or decrease in income tax expense and a reduction or increase in net income. For example, we recorded a full $9.9 million valuation allowance against a tax credit asset in fiscal 2016 as we determined it is not more likely than not these credits will be utilized before they expire.
All foreign subsidiaries are considered permanently invested at
December 31, 2016
. We have not made any U.S. income tax provision in our financial statements for $424.2 million of undistributed earnings of our foreign subsidiaries, as we intend to reinvest those earnings. Foreign subsidiaries considered permanently invested had total cash of $329.5 million at
December 31, 2016
. If circumstances change and we determine that we are not permanently invested, we would need to record income tax expense in our financial statements for the resulting income tax that would be paid upon repatriation. It is not practical to determine the amount of the income tax that would be owed upon repatriation of foreign cash.
We are subject to examination by taxing authorities in the various countries in which we operate. The tax years subject to examination vary by jurisdiction. We regularly consider the likelihood of additional income tax assessments in each of these taxing jurisdictions based on our experiences related to prior audits and our understanding of the facts and circumstances of the related tax issues. We include in current income tax expense any changes to accruals for potential tax deficiencies. If our judgments related to tax deficiencies differ from our actual experience, our income tax expense could increase or decrease in a given fiscal period.
Pension Benefits
Delta Ltd. maintains a defined benefit pension plan for qualifying employees in the United Kingdom. There are no active employees as members in the plan. Independent actuaries assist 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. Key assumptions are based on the following factors:
|
|
•
|
Discount rate is based on the yields available on AA-rated corporate bonds with durational periods similar to that of the pension liabilities.
|
|
|
•
|
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 the yield available on AA rated corporate bonds. The long-term expected returns on equities are based on historic performance over the long-term.
|
|
|
•
|
Inflation is based on the estimated change in the consumer price index (“CPI”) or the retail price index (“RPI”), depending on the relevant plan provisions.
|
For 2017, we will modify the method used to estimate the interest cost components of the net periodic pension expense. The new method uses the full yield curve approach to estimate the interest cost by applying the specific spot rates along the yield curve used to determine the present value of the benefit plan obligations to relevant projected cash outflows for the corresponding year. Prior to 2017, the interest cost components were determined using a single weighted-average discount rate. The change does not affect the measurement of the total benefit plan obligation at year-end as the change in
interest cost will be offset by an equivalent but opposite change in the actuarial gains and losses recorded in other comprehensive income (loss).
The discount rate used to measure the defined benefit obligation was 2.80% at December 31, 2016. The following tables present the key assumptions used to measure pension expense for
2017
and the estimated impact on
2017
pension expense relative to a change in those assumptions:
|
|
|
|
Assumptions
|
Pension
|
Discount rate
|
2.50
|
%
|
Expected return on plan assets
|
4.22
|
%
|
Inflation - CPI
|
2.25
|
%
|
Inflation - RPI
|
3.15
|
%
|
|
|
|
|
|
Assumptions
In Millions of Dollars
|
Increase
in Pension
Expense
|
0.5% decrease in discount rate
|
$
|
0.3
|
|
0.25% decrease in expected return on plan assets
|
$
|
1.4
|
|
0.25% increase in inflation
|
$
|
1.5
|
|
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required is included under the captioned paragraph, “MARKET RISK” on page 37 of this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements of the Company and its subsidiaries are included herein as listed below:
|
|
|
|
Page
|
Consolidated Financial Statements
|
|
|
|
Consolidated Statements of Earnings—Three-Year Period Ended December 31, 2016
|
|
Consolidated Statements of Comprehensive Income—Three-Year Period Ended December 31, 2016
|
|
Consolidated Balance Sheets—December 31, 2016 and December 26, 2015
|
|
Consolidated Statements of Cash Flows—Three-Year Period Ended December 31, 2016
|
|
Consolidated Statements of Shareholders’ Equity—Three-Year Period Ended December 31, 2016
|
|
Notes to Consolidated Financial Statements—Three-Year Period Ended December 31, 2016
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Valmont Industries, Inc.
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of Valmont Industries, Inc. and subsidiaries (the “Company”) as of
December 31, 2016
and
December 26, 2015
, and the related consolidated statements of earnings, comprehensive income, shareholders’ equity, and cash flows for each of the three fiscal years in the period ended
December 31, 2016
. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Valmont Industries, Inc. and subsidiaries as of
December 31, 2016
and
December 26, 2015
, and the results of their operations and their cash flows for each of the three fiscal years in the period ended
December 31, 2016
, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of
December 31, 2016
, based on the criteria established in
Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 28, 2017
expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 28, 2017
Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Three-year period ended
December 31, 2016
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Product sales
|
$
|
2,255,860
|
|
|
$
|
2,338,132
|
|
|
$
|
2,824,456
|
|
Services sales
|
265,816
|
|
|
280,792
|
|
|
298,687
|
|
Net sales
|
2,521,676
|
|
|
2,618,924
|
|
|
3,123,143
|
|
Product cost of sales
|
1,682,355
|
|
|
1,804,055
|
|
|
2,118,687
|
|
Services cost of sales
|
183,078
|
|
|
193,836
|
|
|
196,339
|
|
Total cost of sales
|
1,865,433
|
|
|
1,997,891
|
|
|
2,315,026
|
|
Gross profit
|
656,243
|
|
|
621,033
|
|
|
808,117
|
|
Selling, general and administrative expenses
|
412,739
|
|
|
447,368
|
|
|
450,401
|
|
Impairment of goodwill and intangible assets
|
—
|
|
|
41,970
|
|
|
—
|
|
Operating income
|
243,504
|
|
|
131,695
|
|
|
357,716
|
|
Other income (expenses):
|
|
|
|
|
|
Interest expense
|
(44,409
|
)
|
|
(44,621
|
)
|
|
(36,790
|
)
|
Interest income
|
3,105
|
|
|
3,296
|
|
|
6,046
|
|
Costs associated with refinancing of debt
|
—
|
|
|
—
|
|
|
(38,705
|
)
|
Other
|
18,254
|
|
|
2,637
|
|
|
(4,084
|
)
|
|
(23,050
|
)
|
|
(38,688
|
)
|
|
(73,533
|
)
|
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries
|
220,454
|
|
|
93,007
|
|
|
284,183
|
|
Income tax expense (benefit):
|
|
|
|
|
|
Current
|
65,748
|
|
|
42,569
|
|
|
89,643
|
|
Deferred
|
(23,685
|
)
|
|
4,858
|
|
|
5,251
|
|
|
42,063
|
|
|
47,427
|
|
|
94,894
|
|
Earnings before equity in earnings of nonconsolidated subsidiaries
|
178,391
|
|
|
45,580
|
|
|
189,289
|
|
Equity in earnings of nonconsolidated subsidiaries
|
—
|
|
|
(247
|
)
|
|
29
|
|
Net earnings
|
178,391
|
|
|
45,333
|
|
|
189,318
|
|
Less: Earnings attributable to noncontrolling interests
|
(5,159
|
)
|
|
(5,216
|
)
|
|
(5,342
|
)
|
Net earnings attributable to Valmont Industries, Inc.
|
$
|
173,232
|
|
|
$
|
40,117
|
|
|
$
|
183,976
|
|
Earnings per share:
|
|
|
|
|
|
|
Basic
|
$
|
7.68
|
|
|
$
|
1.72
|
|
|
$
|
7.15
|
|
Diluted
|
$
|
7.63
|
|
|
$
|
1.71
|
|
|
$
|
7.09
|
|
Cash dividends declared per share
|
$
|
1.500
|
|
|
$
|
1.500
|
|
|
$
|
1.375
|
|
See accompanying notes to consolidated financial statements.
Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three-year period ended
December 31, 2016
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Net earnings
|
$
|
178,391
|
|
|
$
|
45,333
|
|
|
$
|
189,318
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
Unrealized translation gains (losses)
|
(58,315
|
)
|
|
(96,694
|
)
|
|
(82,275
|
)
|
Gain/(loss) on hedging activities:
|
|
|
|
|
|
Unrealized gain on net investment hedge, net of tax of $2,646
|
4,226
|
|
|
—
|
|
|
—
|
|
Amortization cost included in interest expense
|
74
|
|
|
74
|
|
|
594
|
|
Realized (gain) loss included in net earnings
|
—
|
|
|
(3,130
|
)
|
|
983
|
|
Unrealized gain (loss) on cash flow hedges
|
—
|
|
|
2,855
|
|
|
4,837
|
|
|
4,300
|
|
|
(201
|
)
|
|
6,414
|
|
Actuarial (loss) on defined benefit pension plan, net of tax expense (benefit) of ($25,778) in 2016, ($10,732) in 2015, and ($3,450) in 2014
|
(24,141
|
)
|
|
(40,274
|
)
|
|
(13,709
|
)
|
Other comprehensive income (loss)
|
(78,156
|
)
|
|
(137,169
|
)
|
|
(89,570
|
)
|
Comprehensive income (loss)
|
100,235
|
|
|
(91,836
|
)
|
|
99,748
|
|
Comprehensive loss (income) attributable to noncontrolling interests
|
(6,144
|
)
|
|
(832
|
)
|
|
(2,520
|
)
|
Comprehensive income (loss) attributable to Valmont Industries, Inc.
|
$
|
94,091
|
|
|
$
|
(92,668
|
)
|
|
$
|
97,228
|
|
See accompanying notes to consolidated financial statements.
Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 2016
and
December 26, 2015
(Dollars in thousands, except shares and per share amounts)
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
399,948
|
|
|
$
|
349,074
|
|
Receivables, less allowance of $10,250 in 2016 and $10,055 in 2015
|
439,342
|
|
|
466,443
|
|
Inventories
|
350,028
|
|
|
340,672
|
|
Prepaid expenses, restricted cash, and other assets
|
57,297
|
|
|
46,137
|
|
Refundable income taxes
|
6,601
|
|
|
24,526
|
|
Total current assets
|
1,253,216
|
|
|
1,226,852
|
|
Property, plant and equipment, at cost
|
1,105,736
|
|
|
1,081,056
|
|
Less accumulated depreciation and amortization
|
587,401
|
|
|
548,567
|
|
Net property, plant and equipment
|
518,335
|
|
|
532,489
|
|
Goodwill
|
321,110
|
|
|
336,916
|
|
Other intangible assets, net
|
144,378
|
|
|
170,197
|
|
Other assets, less allowance for doubtful receivables of $8,741 in 2016 and $10,953 in 2015
|
154,692
|
|
|
125,928
|
|
Total assets
|
$
|
2,391,731
|
|
|
$
|
2,392,382
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Current installments of long-term debt
|
$
|
851
|
|
|
$
|
1,077
|
|
Notes payable to banks
|
746
|
|
|
976
|
|
Accounts payable
|
177,488
|
|
|
179,983
|
|
Accrued employee compensation and benefits
|
72,404
|
|
|
70,354
|
|
Accrued expenses
|
89,914
|
|
|
105,593
|
|
Dividends payable
|
8,445
|
|
|
8,571
|
|
Total current liabilities
|
349,848
|
|
|
366,554
|
|
Deferred income taxes
|
35,803
|
|
|
35,669
|
|
Long-term debt, excluding current installments
|
754,795
|
|
|
756,918
|
|
Defined benefit pension liability
|
209,470
|
|
|
179,323
|
|
Deferred compensation
|
44,319
|
|
|
48,417
|
|
Other noncurrent liabilities
|
14,910
|
|
|
40,290
|
|
Shareholders’ equity:
|
|
|
|
Preferred stock of $1 par value -
|
|
|
|
|
|
Authorized 500,000 shares; none issued
|
—
|
|
|
—
|
|
Common stock of $1 par value -
|
|
|
|
|
|
Authorized 75,000,000 shares; 27,900,000 issued
|
27,900
|
|
|
27,900
|
|
Additional paid-in capital
|
—
|
|
|
—
|
|
Retained earnings
|
1,874,722
|
|
|
1,729,679
|
|
Accumulated other comprehensive income (loss)
|
(346,359
|
)
|
|
(267,218
|
)
|
Cost of treasury stock, common shares of 5,379,106 in 2016 and 5,042,775 in 2015
|
(612,781
|
)
|
|
(571,920
|
)
|
Total Valmont Industries, Inc. shareholders’ equity
|
943,482
|
|
|
918,441
|
|
Noncontrolling interest in consolidated subsidiaries
|
39,104
|
|
|
46,770
|
|
Total shareholders’ equity
|
982,586
|
|
|
965,211
|
|
Total liabilities and shareholders’ equity
|
$
|
2,391,731
|
|
|
$
|
2,392,382
|
|
See accompanying notes to consolidated financial statements.
Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-year period ended
December 31, 2016
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Cash flows from operating activities:
|
|
|
|
|
|
Net earnings
|
$
|
178,391
|
|
|
$
|
45,333
|
|
|
$
|
189,318
|
|
Adjustments to reconcile net earnings to net cash flows from operations:
|
|
|
|
|
|
Depreciation and amortization
|
82,417
|
|
|
91,144
|
|
|
89,328
|
|
Noncash loss on trading securities
|
586
|
|
|
4,555
|
|
|
3,795
|
|
Increase in restricted cash - pension plan trust
|
(13,652
|
)
|
|
—
|
|
|
—
|
|
Impairment of property, plant and equipment
|
1,099
|
|
|
19,836
|
|
|
—
|
|
Impairment of goodwill & intangible assets
|
—
|
|
|
41,970
|
|
|
—
|
|
Non-cash debt refinancing costs
|
—
|
|
|
—
|
|
|
(2,478
|
)
|
Stock-based compensation
|
9,931
|
|
|
7,244
|
|
|
6,730
|
|
Change in fair value of contingent consideration
|
(3,242
|
)
|
|
—
|
|
|
(4,300
|
)
|
Defined benefit pension plan expense (benefit)
|
1,870
|
|
|
(610
|
)
|
|
2,638
|
|
Contribution to defined benefit pension plan
|
(1,488
|
)
|
|
(16,500
|
)
|
|
(18,173
|
)
|
Loss on sale of property, plant and equipment
|
631
|
|
|
2,327
|
|
|
392
|
|
Equity in earnings in nonconsolidated subsidiaries
|
—
|
|
|
247
|
|
|
(29
|
)
|
Deferred income taxes
|
(23,685
|
)
|
|
4,858
|
|
|
5,251
|
|
Changes in assets and liabilities (net of acquisitions):
|
|
|
|
|
|
Receivables
|
24,622
|
|
|
50,267
|
|
|
907
|
|
Inventories
|
(11,461
|
)
|
|
3,296
|
|
|
21,458
|
|
Prepaid expenses
|
1,138
|
|
|
10,844
|
|
|
(13,594
|
)
|
Accounts payable
|
104
|
|
|
(6,805
|
)
|
|
(34,321
|
)
|
Accrued expenses
|
(12,207
|
)
|
|
8,918
|
|
|
(34,778
|
)
|
Other noncurrent liabilities
|
(23,880
|
)
|
|
(1,764
|
)
|
|
1,755
|
|
Income taxes payable (refundable)
|
7,994
|
|
|
7,107
|
|
|
(39,803
|
)
|
Net cash flows from operating activities
|
219,168
|
|
|
272,267
|
|
|
174,096
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchase of property, plant and equipment
|
(57,920
|
)
|
|
(45,468
|
)
|
|
(73,023
|
)
|
Proceeds from sale of assets
|
5,126
|
|
|
3,249
|
|
|
2,489
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
(12,778
|
)
|
|
(185,710
|
)
|
Other, net
|
(255
|
)
|
|
6,826
|
|
|
(619
|
)
|
Net cash flows from investing activities
|
(53,049
|
)
|
|
(48,171
|
)
|
|
(256,863
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
Net payments under short-term agreements
|
(200
|
)
|
|
(12,853
|
)
|
|
(4,472
|
)
|
Proceeds from long-term borrowings
|
—
|
|
|
68,000
|
|
|
652,211
|
|
Principal payments on long-term borrowings
|
(2,006
|
)
|
|
(69,098
|
)
|
|
(357,858
|
)
|
Settlement of financial derivatives
|
—
|
|
|
—
|
|
|
4,981
|
|
Dividends paid
|
(34,053
|
)
|
|
(35,357
|
)
|
|
(32,443
|
)
|
Dividends to noncontrolling interest
|
(2,938
|
)
|
|
(2,634
|
)
|
|
(2,919
|
)
|
Purchase of noncontrolling interest
|
(11,009
|
)
|
|
—
|
|
|
—
|
|
Debt issuance fees
|
—
|
|
|
—
|
|
|
(7,644
|
)
|
Proceeds from exercises under stock plans
|
11,153
|
|
|
13,075
|
|
|
14,572
|
|
Excess tax benefits from stock option exercises
|
—
|
|
|
1,699
|
|
|
4,264
|
|
Purchase of treasury shares
|
(53,800
|
)
|
|
(168,983
|
)
|
|
(395,045
|
)
|
Purchase of common treasury shares—stock plan exercises
|
(2,305
|
)
|
|
(13,854
|
)
|
|
(15,403
|
)
|
Net cash flows from financing activities
|
(95,158
|
)
|
|
(220,005
|
)
|
|
(139,756
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
(20,087
|
)
|
|
(26,596
|
)
|
|
(19,604
|
)
|
Net change in cash and cash equivalents
|
50,874
|
|
|
(22,505
|
)
|
|
(242,127
|
)
|
Cash and cash equivalents—beginning of year
|
349,074
|
|
|
371,579
|
|
|
613,706
|
|
Cash and cash equivalents—end of period
|
$
|
399,948
|
|
|
$
|
349,074
|
|
|
$
|
371,579
|
|
See accompanying notes to consolidated financial statements.
Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Three-year period ended
December 31, 2016
(Dollars in thousands, except shares and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
Additional
paid-in
capital
|
|
Retained
earnings
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Treasury
stock
|
|
Noncontrolling
interest in
consolidated
subsidiaries
|
|
Total
shareholders’
equity
|
Balance at December 28, 2013
|
$
|
27,900
|
|
|
$
|
—
|
|
|
$
|
1,562,670
|
|
|
$
|
(47,685
|
)
|
|
$
|
(20,860
|
)
|
|
$
|
22,821
|
|
|
$
|
1,544,846
|
|
Net earnings
|
—
|
|
|
—
|
|
|
183,976
|
|
|
—
|
|
|
—
|
|
|
5,342
|
|
|
189,318
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(86,748
|
)
|
|
—
|
|
|
(2,822
|
)
|
|
(89,570
|
)
|
Cash dividends declared ($1.375 per share)
|
—
|
|
|
—
|
|
|
(35,036
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,036
|
)
|
Dividends to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,919
|
)
|
|
(2,919
|
)
|
Acquisition of DS SM
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,309
|
|
|
9,309
|
|
Acquisition of AgSense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,333
|
|
|
16,333
|
|
Addition of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
508
|
|
|
508
|
|
Purchase of treasury shares; 2,711,149 shares acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(395,045
|
)
|
|
—
|
|
|
(395,045
|
)
|
Stock plan exercises; 97,974 shares acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,403
|
)
|
|
—
|
|
|
(15,403
|
)
|
Stock options exercised; 194,627 shares issued
|
—
|
|
|
(10,994
|
)
|
|
7,052
|
|
|
—
|
|
|
18,514
|
|
|
—
|
|
|
14,572
|
|
Tax benefit from stock option exercises
|
—
|
|
|
4,264
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,264
|
|
Stock option expense
|
—
|
|
|
4,461
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,461
|
|
Stock awards; 22,010 shares issued
|
—
|
|
|
2,269
|
|
|
—
|
|
|
—
|
|
|
2,498
|
|
|
—
|
|
|
4,767
|
|
Balance at December 27, 2014
|
27,900
|
|
|
—
|
|
|
1,718,662
|
|
|
(134,433
|
)
|
|
(410,296
|
)
|
|
48,572
|
|
|
1,250,405
|
|
Net earnings
|
—
|
|
|
—
|
|
|
40,117
|
|
|
—
|
|
|
—
|
|
|
5,216
|
|
|
45,333
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(132,785
|
)
|
|
—
|
|
|
(4,384
|
)
|
|
(137,169
|
)
|
Cash dividends declared ($1.50 per share)
|
—
|
|
|
—
|
|
|
(34,816
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,816
|
)
|
Dividends to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,634
|
)
|
|
(2,634
|
)
|
Purchase of treasury shares; 1,435,488 shares acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(168,983
|
)
|
|
—
|
|
|
(168,983
|
)
|
Stock plan exercises; 112,995 shares acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,854
|
)
|
|
—
|
|
|
(13,854
|
)
|
Stock options exercised; 169,493 shares issued
|
—
|
|
|
(12,895
|
)
|
|
5,716
|
|
|
—
|
|
|
20,254
|
|
|
—
|
|
|
13,075
|
|
Tax benefit from stock option exercises
|
—
|
|
|
1,699
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,699
|
|
Stock option expense
|
—
|
|
|
5,137
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,137
|
|
Stock awards; 10,329 shares issued
|
—
|
|
|
6,059
|
|
|
—
|
|
|
—
|
|
|
959
|
|
|
—
|
|
|
7,018
|
|
Balance at December 26, 2015
|
27,900
|
|
|
—
|
|
|
1,729,679
|
|
|
(267,218
|
)
|
|
(571,920
|
)
|
|
46,770
|
|
|
965,211
|
|
Net earnings
|
—
|
|
|
—
|
|
|
173,232
|
|
|
—
|
|
|
—
|
|
|
5,159
|
|
|
178,391
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(79,141
|
)
|
|
—
|
|
|
985
|
|
|
(78,156
|
)
|
Cash dividends declared ($1.50 per share)
|
—
|
|
|
—
|
|
|
(33,921
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,921
|
)
|
Dividends to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,938
|
)
|
|
(2,938
|
)
|
Purchase of noncontrolling interest
|
—
|
|
|
(137
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,872
|
)
|
|
(11,009
|
)
|
Purchase of treasury shares; 441,494 shares acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53,800
|
)
|
|
—
|
|
|
(53,800
|
)
|
Stock plan exercises; 16,777 shares acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,305
|
)
|
|
—
|
|
|
(2,305
|
)
|
Stock options exercised; 109,893 shares issued
|
—
|
|
|
(7,614
|
)
|
|
5,732
|
|
|
—
|
|
|
13,035
|
|
|
—
|
|
|
11,153
|
|
Stock option expense
|
—
|
|
|
5,782
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,782
|
|
Stock awards; 15,700 shares issued
|
—
|
|
|
1,969
|
|
|
—
|
|
|
—
|
|
|
2,209
|
|
|
—
|
|
|
4,178
|
|
Balance at December 31, 2016
|
$
|
27,900
|
|
|
$
|
—
|
|
|
$
|
1,874,722
|
|
|
$
|
(346,359
|
)
|
|
$
|
(612,781
|
)
|
|
$
|
39,104
|
|
|
$
|
982,586
|
|
See accompanying notes to consolidated financial statements.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Valmont Industries, Inc. and its wholly and majority‑owned subsidiaries (the Company). The investment in Delta EMD Pty. Ltd ("EMD") is recorded at fair value subsequent to its deconsolidation in 2013. Investments in other
20%
to
50%
owned affiliates and joint ventures are accounted for by the equity method. Investments in less than
20%
owned affiliates are accounted for by the cost method. All intercompany items have been eliminated.
Cash overdrafts
Cash book overdrafts totaling
$18,734
and
$15,536
were classified as accounts payable at
December 31, 2016
and
December 26, 2015
, respectively. The Company’s policy is to report the change in book overdrafts as an operating activity in the Consolidated Statements of Cash Flows.
Segments
The Company has five reportable segments based on its management structure. Each segment is global in nature with a manager responsible for segment operational performance and allocation of capital within the segment. Reportable segments are as follows:
ENGINEERED SUPPORT STRUCTURES: This segment consists of the manufacture of engineered metal structures and components for the global lighting and traffic, wireless communication, and roadway safety;
UTILITY SUPPORT STRUCTURES: This segment consists of the manufacture of engineered steel and concrete structures for the global utility industry;
ENERGY AND MINING: This segment consists of the manufacture of access systems applications, forged steel grinding media, and offshore oil and gas and wind energy structures.
COATINGS: This segment consists of galvanizing, anodizing and powder coating services on a global basis; and
IRRIGATION: This segment consists of the manufacture of agricultural irrigation equipment and related parts and services for the global agricultural industry as well as tubular products for industrial customers.
In addition to these
five
reportable segments, there are other businesses and activities that individually are not more than
10%
of consolidated sales. These operations include the distribution of industrial fasteners in years prior to 2016. These operations collectively are reported in the “Other” category.
Fiscal Year
The Company operates on a
52
or
53
week fiscal year with each year ending on the last Saturday in December. Accordingly, the Company’s fiscal year ended
December 31, 2016
consisted of 53 weeks. The Company's fiscal years ended
December 26, 2015
and December 27, 2014 consisted of
52
weeks. The estimated impact on the company's results of operations due to the extra week in fiscal 2016 was additional net sales of approximately $50,000 and additional net earnings of approximately $3,000.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
Accounts receivable are reported on the balance sheet net of any allowance for doubtful accounts. Allowances are maintained in amounts considered to be appropriate in relation to the outstanding receivables based on age of the receivable,
economic conditions and customer credit quality. As the Company’s international Irrigation business has grown, the exposure to potential losses in international markets has also increased. These exposures can be difficult to estimate, particularly in areas of political instability, or with governments with which the Company has limited experience, or where there is a lack of transparency as to the current credit condition of governmental units. As of
December 31, 2016
, the Company had approximately $8,741 in delinquent accounts receivable with Chinese municipal entities with a specific allowance recorded against it based on our estimation of what will not be fully collected. The Company’s allowance for doubtful accounts related to both current and long-term accounts receivables was $18,991 at
December 31, 2016
.
Inventories
Approximately
38%
and
39%
of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market as of
December 31, 2016
and
December 26, 2015
, respectively. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. Finished goods and manufactured goods inventories include the costs of acquired raw materials and related factory labor and overhead charges required to convert raw materials to manufactured and finished goods. The excess of replacement cost of inventories over the LIFO value is approximately
$38,047
and
$35,075
at
December 31, 2016
and
December 26, 2015
, respectively.
Long-Lived Assets
Property, plant and equipment are recorded at historical cost. The Company generally uses the straight-line method in computing depreciation and amortization for financial reporting purposes and accelerated methods for income tax
purposes. The annual provisions for depreciation and amortization have been computed principally in accordance with the following ranges of asset lives: buildings and improvements
15
to
40
years, machinery and equipment
3
to
12
years, transportation equipment
3
to
24
years, office furniture and equipment
3
to
7
years and intangible assets
5
to
20
years. Depreciation expense in fiscal
2016
,
2015
and
2014
was
$66,482
,
$72,805
and
$73,395
, respectively.
An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its estimated fair value. The Company recognized a $4,151 impairment of the Melbourne galvanizing site's equipment in 2015 as the Company determined that our galvanizing operation in Melbourne, Australia would not generate sufficient cash flows on an undiscounted cash flow basis to recover its carrying value. Other impairment losses were recorded in 2016 and 2015 as facilities were closed and future plans for certain fixed assets changed in connection with the Company's restructuring plans.
The Company evaluates its reporting units for impairment of goodwill during the third fiscal quarter of each year, or when events or changes in circumstances indicate the carrying value may not be recoverable. Reporting units are evaluated using after-tax operating cash flows (less capital expenditures) discounted to present value. Indefinite‑lived intangible assets are assessed separately from goodwill as part of the annual impairment testing, using a relief-from-royalty method. If the underlying assumptions related to the valuation of a reporting unit’s goodwill or an indefinite‑lived intangible asset change materially before or after the annual impairment testing, the reporting unit or asset is evaluated for potential impairment. In these evaluations, management considers recent operating performance, expected future performance, industry conditions and other indicators of potential impairment. Please see footnote 7 for details of impairments recognized during 2015.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company uses the asset and liability method to calculate deferred income taxes. Deferred tax assets and liabilities are recognized on temporary differences between financial statement and tax bases of assets and liabilities using enacted tax rates. The effect of tax rate changes on deferred tax assets and liabilities is recognized in income during the period that includes the enactment date.
Warranties
The Company's provision for product warranty reflects management's best estimate of probable liability under its product warranties. Estimated future warranty costs are recorded at the time a sale is recognized. Future warranty liability is determined based on applying historical claim rate experience to units sold that are still within the warranty period. In addition, the Company records provisions for known warranty claims.
Pension Benefits
Certain expenses are incurred in connection with a defined benefit pension plan. In order to measure expense and the related benefit obligation, various assumptions are made including discount rates used to value the obligation, expected return on plan assets used to fund these expenses and estimated future inflation rates. These assumptions are based on historical experience as well as current facts and circumstances. An actuarial analysis is used to measure the expense and liability associated with pension benefits.
Derivative Instrument
The Company may enter into derivative financial instruments to manage risk associated with fluctuation in interest rates, foreign currency rates or commodities. Where applicable, the Company may elect to account for such derivatives as either a cash flow, fair value, or net investment hedge.
Comprehensive Income (Loss)
Comprehensive income (loss) includes net income, currency translation adjustments, certain derivative-related activity and changes in net actuarial gains/losses from a pension plan. Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. The components of accumulated other comprehensive income (loss) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustments
|
|
Gain on Hedging Activities
|
|
Defined Benefit Pension Plan
|
|
Accumulated Other Comprehensive Income (Loss)
|
Balance at December 26, 2015
|
$
|
(191,928
|
)
|
|
$
|
3,678
|
|
|
$
|
(78,968
|
)
|
|
$
|
(267,218
|
)
|
Current-period comprehensive income (loss)
|
(59,300
|
)
|
|
4,300
|
|
|
(24,141
|
)
|
|
(79,141
|
)
|
Balance at December 31, 2016
|
$
|
(251,228
|
)
|
|
$
|
7,978
|
|
|
$
|
(103,109
|
)
|
|
$
|
(346,359
|
)
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Revenue is recognized upon shipment of the product or delivery of the service to the customer, which coincides with passage of title and risk of loss to the customer. Customer acceptance provisions exist only in the design stage of our products. Acceptance of the design by the customer is required before the product is manufactured and delivered to the customer. We are not entitled to any compensation solely based on design of the product and we do not recognize any revenue associated with the design stage. No general rights of return exist for customers once the product has been delivered. Shipping and handling costs associated with sales are recorded as cost of goods sold. Sales discounts and rebates are estimated based on past experience and are recorded as a reduction of net sales in the period in which the sale is recognized. Service revenues predominantly consist of coatings services provided by our Coatings segment to its customers. Revenue from our offshore and other complex steel structures products is recognized using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated contract cost.
Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the reported amounts of revenue and expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.
Equity Method Investments
The Company has equity method investments in non-consolidated subsidiaries which are recorded within "Other assets" on the Consolidated Balance Sheet.
Treasury Stock
Repurchased shares are recorded as “Treasury Stock” and result in a reduction of “Shareholders’ Equity.” When treasury shares are reissued, the Company uses the last-in, first-out method, and the difference between the repurchase cost and re-issuance price is charged or credited to “Additional Paid-In Capital.”
In May 2014, the Company announced a capital allocation philosophy which covered a share repurchase program. Specifically, the Board of Directors authorized the purchase of up to
$500,000
of the Company's outstanding common stock from time to time over
twelve months
at prevailing market prices, through open market or privately-negotiated transactions. In February 2015, the Board of Directors authorized an additional purchase of up to
$250,000
of the Company's outstanding common stock with no stated expiration date. As of
December 31, 2016
, we have acquired
4,588,131
shares for approximately
$617,800
under this share repurchase program.
Research and Development
Research and development costs are charged to operations in the year incurred. These costs are a component of “Selling, general and administrative expenses” on the Consolidated Statements of Earnings. Research and development expenses were approximately
$8,300
in
2016
,
$11,600
in
2015
, and
$13,900
in
2014
.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This standard is effective for interim and annual reporting periods beginning after December 15, 2017, and can be adopted either retrospectively or as a cumulative effect adjustment as of the date of adoption. Early adoption is permitted for interim and annual periods beginning after December 15, 2016. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations and financial position but expects to adopt it as a cumulative effect adjustment in fiscal 2018.
In July 2015, the FASB issued ASU 2015-11,
Simplifying the Measurement of Inventory
. Under this ASU, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. The Company does not believe this inventory measurement change will have a significant effect on its valuation of inventory upon adoption in fiscal 2017.
In April 2015, the FASB issued ASU 2015-03,
Simplifying the Presentation of Debt Issuance Costs,
which provides guidance requiring debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability and further clarification guidance allows the cost of securing a revolving line of credit to be recorded as a deferred asset regardless of whether a balance is outstanding. The Company retrospectively adopted this guidance and reclassified approximately $7,000 of debt issuance cost for its long-term debt (excluding its revolving line of credit) to direct reduction of long-term debt instead of an other asset in the consolidated balance sheet for December 26, 2015.
In February 2016, the FASB issued ASU 2016-02,
Leases
, which provides revised guidance on leases requiring lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018 and is to be applied on a modified retrospective transition. The Company is currently evaluating the effect of adopting this new accounting guidance but expects the adoption will result in a significant increase in total assets and liabilities.
In March 2016, the FASB issued ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting,
which provides revised guidance for employee share-based compensation payments. The ASU requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) be recognized as income tax expense or benefit in the income statement. It also states excess tax benefits to be classified along with other income tax cash flows as an operating activity whereas currently it is classified within a financing cash flow activity. ASU 2016-09 is effective prospectively for interim and annual reporting periods beginning after December 15, 2016.
The Company early adopted this guidance prospectively in the second quarter of 2016 which resulted in an income tax benefit of approximately $355 in fiscal 2016.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In August 2016, the FASB issued ASU 2016-15,
Classification of Certain Cash Receipts and Cash Payments in the Statement of Cash Flows
, which provides more specific guidance on cash flow presentation for certain transactions. ASU 2016-15 is effective for interim periods and fiscal years beginning after December 15, 2017, with early adoption permitted. We do not expect the provisions of this new standard will have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04,
Simplifying the Test for Goodwill Impairment,
which eliminates Step 2 from the goodwill impairment test. ASU 2017-04 is effective for periods and fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company will consider early adopting this standard prior to the annual goodwill impairment test in the third quarter of 2017.
(2) ACQUISITIONS
Acquisitions of Businesses
On September 30, 2015, the Company purchased American Galvanizing for
$12,778
in cash, net of cash acquired, plus assumed liabilities. American Galvanizing operates a custom galvanizing operation in New Jersey with annual sales of approximately $8,000. In the purchase price allocation, goodwill of
$3,019
and
$2,178
of customer relationships, trade name and other intangible assets were recorded. Goodwill is not deductible for tax purposes. This business is included in the Coatings segment and was acquired to expand the Company's geographic presence in the Northeast United States. The purchase price allocation was finalized in the first quarter of 2016. Proforma disclosures were omitted as this business did not have a significant impact on the Company's 2015 or 2016 financial results.
On March 3, 2014, the Company purchased
90%
of the outstanding shares of DS SM A/S, which was renamed Valmont SM. Valmont SM is a manufacturer of heavy complex steel structures for a diverse range of industries including wind energy, offshore oil and gas, and electricity transmission. Valmont SM operates
two
manufacturing locations in Denmark and its operations are reported in the Energy and Mining segment. The purchase price paid for the business at closing (net of
$56
cash acquired) was
$120,483
, including the payoff of an intercompany note payable by Valmont SM to its prior affiliates. The purchase was subject to an earn-out clause that was contingent on meeting future operational metrics for which
no
liability has been established based on expectations. The earn-out clause expired on December 31, 2016 and no earn-out payment was made. The acquisition, which was funded by cash held by the Company, was completed to participate in markets for wind energy, oil and gas exploration, power transmission and other related infrastructure projects and to increase the Company's geographic footprint in Europe. The Company also funded a portion of the acquisition with an intercompany note payable. The excess purchase price over the fair value of assets resulted in goodwill, which is not deductible for tax purposes.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(2) ACQUISITIONS (Continued)
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of acquisition, which was finalized in the fourth quarter of 2014.
|
|
|
|
|
|
|
|
At March 3, 2014
|
Current assets
|
|
$
|
73,421
|
|
Property, plant and equipment
|
|
85,638
|
|
Intangible assets
|
|
30,340
|
|
Goodwill
|
|
16,803
|
|
Total fair value of assets acquired
|
|
$
|
206,202
|
|
Current liabilities
|
|
47,754
|
|
Deferred income taxes
|
|
19,715
|
|
Intercompany note payable
|
|
37,448
|
|
Long-term debt
|
|
8,941
|
|
Total fair value of liabilities assumed
|
|
113,858
|
|
Non-controlling interests
|
|
9,309
|
|
Net assets acquired
|
|
$
|
83,035
|
|
Based on the fair value assessments, the Company allocated
$30,340
of the purchase price to acquired intangible assets. The following table summarizes the major classes of Valmont SM's acquired intangible assets and the respective weighted average amortization periods:
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Weighted Average Amortization Period (Years)
|
Trade Names
|
|
$
|
11,470
|
|
|
Indefinite
|
Backlog
|
|
3,145
|
|
|
1.5
|
Customer Relationships
|
|
15,725
|
|
|
12.0
|
Total Intangible Assets
|
|
$
|
30,340
|
|
|
|
On October 6, 2014, the Company acquired Shakespeare Composite Structures (Shakespeare) for
$48,272
in cash, plus assumed liabilities. Shakespeare is a manufacturer of fiberglass reinforced composite structures and products with
two
manufacturing facilities in South Carolina. Shakespeare's annual sales were approximately
$55,000
and its operations are included in the Engineered Support Structures segment. The acquisition of Shakespeare was completed to expand our product offering of composite structure solutions. The fair value measurement process and purchase price allocation for Shakespeare was finalized in the third quarter of 2015.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(2) ACQUISITIONS (Continued)
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the Shakespeare acquisition (goodwill is deductible for tax purposes):
|
|
|
|
|
|
|
|
At October 6, 2014
|
Current assets
|
|
$
|
12,532
|
|
Property, plant and equipment
|
|
10,694
|
|
Intangible assets
|
|
13,500
|
|
Goodwill
|
|
15,416
|
|
Total fair value of assets acquired
|
|
$
|
52,142
|
|
Current liabilities
|
|
3,870
|
|
Net assets acquired
|
|
$
|
48,272
|
|
Based on the fair value assessments, the Company allocated
$13,500
of the purchase price to acquired intangible assets. The following table summarizes the major classes of Shakespeare acquired intangible assets and the respective weighted-average amortization periods:
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Weighted Average Amortization Period (Years)
|
Trade Names
|
|
$
|
4,000
|
|
|
Indefinite
|
Customer Relationships
|
|
9,500
|
|
|
12.0
|
Total Intangible Assets
|
|
$
|
13,500
|
|
|
|
On August 25, 2014, the Company acquired
51%
of AgSense, LLC (AgSense) for
$17,000
in cash. AgSense operates in South Dakota and is the creator of global WagNet network which provides growers with a more complete view of their entire farming operation by tying irrigation decision making to field, crop and weather conditions. In the measurement of fair values of assets acquired and liabilities assumed, goodwill of
$17,193
and
$16,083
of customer relationships, trade name and other intangible assets were recorded. A portion of the goodwill was deductible for tax purposes. AgSense is included in the Irrigation Segment. The fair value measurement process and purchase price allocation for AgSense were finalized in the second quarter of 2015.
Acquisitions of Noncontrolling Interests
In April 2016, the Company acquired the remaining
30%
of IGC Galvanizing Industries (M) Sdn Bhd that it did not own for
$5,841
. In June 2016, the Company acquired
5.2%
of the remaining
10%
of Valmont SM that it did not own for
$5,168
. As these transactions were for acquisitions of part or all of the remaining shares of consolidated subsidiaries with no change in control, they were recorded within shareholders' equity and as a financing cash flow in the Consolidated Statements of Cash Flows.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(3) RESTRUCTURING ACTIVITIES
2016 Plan
In July 2016, the Company identified a restructuring plan (the "2016 Plan") in Australia/New Zealand focused primarily on closing and consolidating locations within the Energy and Mining and Coatings segments. In the fourth quarter of 2016, the Company decided to close a structures facility in Canada. The 2016 Plan was mostly completed by the end of the fiscal year. During the last six months of fiscal 2016, the Company recorded the following pre-tax expenses from the 2016 Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy & Mining
|
|
Coatings
|
|
ESS
|
|
Other/ Corporate
|
|
TOTAL
|
Severance
|
|
$
|
665
|
|
|
$
|
69
|
|
|
$
|
955
|
|
|
$
|
—
|
|
|
$
|
1,689
|
|
Other cash restructuring expenses
|
|
1,490
|
|
|
—
|
|
|
767
|
|
|
—
|
|
|
2,257
|
|
Asset impairments/net loss on disposals
|
|
887
|
|
|
—
|
|
|
212
|
|
|
—
|
|
|
1,099
|
|
Total cost of sales
|
|
3,042
|
|
|
69
|
|
|
1,934
|
|
|
—
|
|
|
5,045
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
175
|
|
|
236
|
|
|
174
|
|
|
—
|
|
|
585
|
|
Other cash restructuring expenses
|
|
1,961
|
|
|
—
|
|
|
—
|
|
|
234
|
|
|
2,195
|
|
Total selling, general and administrative expenses
|
|
2,136
|
|
|
236
|
|
|
174
|
|
|
234
|
|
|
2,780
|
|
Consolidated total
|
|
$
|
5,178
|
|
|
$
|
305
|
|
|
$
|
2,108
|
|
|
$
|
234
|
|
|
$
|
7,825
|
|
2015 Plan
In April 2015, the Company's Board of Directors authorized a broad restructuring plan (the "2015 Plan") of up to
$60,000
to respond to the market environment in certain businesses. The following pre-tax expenses were recognized in 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESS
|
|
Energy & Mining
|
|
Utility
|
|
Coatings
|
|
Irrigation
|
|
Other/ Corporate
|
|
TOTAL
|
Severance
|
|
$
|
2,305
|
|
|
$
|
2,112
|
|
|
$
|
1,555
|
|
|
$
|
508
|
|
|
$
|
724
|
|
|
$
|
—
|
|
|
$
|
7,204
|
|
Other cash restructuring expenses
|
|
1,467
|
|
|
882
|
|
|
1,853
|
|
|
175
|
|
|
—
|
|
|
—
|
|
|
4,377
|
|
Asset impairments/net loss on disposals
|
|
333
|
|
|
3,361
|
|
|
1,142
|
|
|
5,291
|
|
|
—
|
|
|
—
|
|
|
10,127
|
|
Total cost of sales
|
|
4,105
|
|
|
6,355
|
|
|
4,550
|
|
|
5,974
|
|
|
724
|
|
|
—
|
|
|
21,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
2,951
|
|
|
714
|
|
|
404
|
|
|
270
|
|
|
423
|
|
|
1,957
|
|
|
6,719
|
|
Other cash restructuring expenses
|
|
—
|
|
|
—
|
|
|
238
|
|
|
336
|
|
|
—
|
|
|
1,142
|
|
|
1,716
|
|
Asset impairments/net loss on disposals
|
|
2,223
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130
|
|
|
7,356
|
|
|
9,709
|
|
Total selling, general and administrative expenses
|
|
5,174
|
|
|
714
|
|
|
642
|
|
|
606
|
|
|
553
|
|
|
10,455
|
|
|
18,144
|
|
Consolidated total
|
|
$
|
9,279
|
|
|
$
|
7,069
|
|
|
$
|
5,192
|
|
|
$
|
6,580
|
|
|
$
|
1,277
|
|
|
$
|
10,455
|
|
|
$
|
39,852
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(3) RESTRUCTURING ACTIVITIES (Continued)
During fiscal 2016, the Company recognized the following pre-tax restructuring expense (all cash) of
$4,581
related to the 2015 Plan:
|
|
•
|
Utility segment recognized
$528
(cost of sales)
|
|
|
•
|
ESS segment recognized
$1,040
(SG&A)
|
|
|
•
|
Coatings segment recognized
$602
(SG&A)
|
|
|
•
|
Irrigation segment recognized
$468
(SG&A)
|
|
|
•
|
Corporate recorded
$1,943
(SG&A)
|
The 2015 Plan contemplated that the Company may have to recognize an impairment of goodwill in its APAC galvanizing reporting unit, dependent on future financial projections factoring the restructuring activities taking place in that reporting unit. The Company recognized
$17,300
of impairments in the APAC galvanizing reporting unit during fiscal 2015 which was comparable to the amount included in the
$60,000
original estimate.
Change in the liabilities recorded for the restructuring plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 26, 2015
|
|
Recognized Restructuring Expense
|
|
Costs Paid or Otherwise Settled
|
|
Balance at December 31, 2016
|
Severance
|
|
$
|
1,307
|
|
|
$
|
3,660
|
|
|
$
|
(3,370
|
)
|
|
$
|
1,597
|
|
Other cash restructuring expenses
|
|
1,426
|
|
|
7,647
|
|
|
(4,492
|
)
|
|
4,581
|
|
Total
|
|
$
|
2,733
|
|
|
$
|
11,307
|
|
|
$
|
(7,862
|
)
|
|
$
|
6,178
|
|
A significant change in market conditions in any of the Company's segments may affect the Company's assessment of the restructuring activities.
(4) CASH FLOW SUPPLEMENTARY INFORMATION
The Company considers all highly liquid temporary cash investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the fifty-three weeks ended
December 31, 2016
, and the fifty-two weeks ended
December 26, 2015
, and
December 27, 2014
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
2014
|
Interest
|
$
|
45,683
|
|
|
$
|
44,974
|
|
$
|
32,601
|
|
Income taxes
|
48,203
|
|
|
33,046
|
|
111,174
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(5) INVENTORIES
Inventories consisted of the following at
December 31, 2016
and
December 26, 2015
:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Raw materials and purchased parts
|
$
|
143,659
|
|
|
$
|
162,977
|
|
Work-in-process
|
27,291
|
|
|
25,644
|
|
Finished goods and manufactured goods
|
217,125
|
|
|
187,126
|
|
Subtotal
|
388,075
|
|
|
375,747
|
|
Less: LIFO reserve
|
38,047
|
|
|
35,075
|
|
|
$
|
350,028
|
|
|
$
|
340,672
|
|
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Land and improvements
|
$
|
85,724
|
|
|
$
|
79,450
|
|
Buildings and improvements
|
325,813
|
|
|
323,469
|
|
Machinery and equipment
|
564,171
|
|
|
565,771
|
|
Transportation equipment
|
22,423
|
|
|
17,774
|
|
Office furniture and equipment
|
77,453
|
|
|
77,054
|
|
Construction in progress
|
30,152
|
|
|
17,538
|
|
|
$
|
1,105,736
|
|
|
$
|
1,081,056
|
|
The Company leases certain facilities, machinery, computer equipment and transportation equipment under operating leases with unexpired terms ranging from one to fifteen years. Rental expense for operating leases amounted to
$24,756
,
$25,546
, and
$28,580
for fiscal
2016
,
2015
, and
2014
, respectively.
Minimum lease payments under operating leases expiring subsequent to
December 31, 2016
are:
|
|
|
|
|
Fiscal year ending
|
|
2017
|
$
|
21,459
|
|
2018
|
16,904
|
|
2019
|
12,874
|
|
2020
|
11,355
|
|
2021
|
7,656
|
|
Subsequent
|
26,910
|
|
Total minimum lease payments
|
$
|
97,158
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(7) GOODWILL AND INTANGIBLE ASSETS
Amortized Intangible Assets
The components of amortized intangible assets at
December 31, 2016
and
December 26, 2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Weighted
Average
Life
|
Customer Relationships
|
$
|
191,316
|
|
|
$
|
111,342
|
|
|
13 years
|
Proprietary Software & Database
|
3,616
|
|
|
3,056
|
|
|
8 years
|
Patents & Proprietary Technology
|
6,434
|
|
|
3,420
|
|
|
11 years
|
Other
|
3,713
|
|
|
3,668
|
|
|
3 years
|
|
$
|
205,079
|
|
|
$
|
121,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2015
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Weighted
Average
Life
|
Customer Relationships
|
$
|
201,801
|
|
|
$
|
101,614
|
|
|
13 years
|
Proprietary Software & Database
|
3,571
|
|
|
2,966
|
|
|
8 years
|
Patents & Proprietary Technology
|
6,815
|
|
|
3,421
|
|
|
11 years
|
Other
|
3,752
|
|
|
3,671
|
|
|
3 years
|
|
$
|
215,939
|
|
|
$
|
111,672
|
|
|
|
Amortization expense for intangible assets was $
15,935
, $
18,339
and $
18,414
for the fiscal years ended
December 31, 2016
,
December 26, 2015
and
December 27, 2014
, respectively.
Estimated annual amortization expense related to finite‑lived intangible assets is as follows:
|
|
|
|
|
|
Estimated
Amortization
Expense
|
2017
|
$
|
15,063
|
|
2018
|
13,434
|
|
2019
|
12,694
|
|
2020
|
11,634
|
|
2021
|
9,586
|
|
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
December 31, 2016
and
December 26, 2015
were as follows:
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(7) GOODWILL AND INTANGIBLE ASSETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
December 26,
2015
|
|
Year Acquired
|
Webforge
|
$
|
8,624
|
|
|
$
|
10,430
|
|
|
2010
|
Valmont SM
|
8,765
|
|
|
8,919
|
|
|
2014
|
Newmark
|
11,111
|
|
|
11,111
|
|
|
2004
|
Ingal EPS/Ingal Civil Products
|
7,032
|
|
|
8,504
|
|
|
2010
|
Donhad
|
5,305
|
|
|
6,415
|
|
|
2010
|
Shakespeare
|
4,000
|
|
|
4,000
|
|
|
2014
|
Industrial Galvanizers
|
2,201
|
|
|
2,662
|
|
|
2010
|
Other
|
13,747
|
|
|
13,889
|
|
|
|
|
$
|
60,785
|
|
|
$
|
65,930
|
|
|
|
In its determination of these intangible assets as indefinite‑lived, the Company considered such factors as its expected future use of the intangible asset, legal, regulatory, technological and competitive factors that may impact the useful life or value of the intangible asset and the expected costs to maintain the value of the intangible asset. The Company expects that these intangible assets will maintain their value indefinitely. Accordingly, these assets are not amortized.
The Company's trade names were tested for impairment separately from goodwill in the third quarter of 2016. The values of the trade names were determined using the relief-from-royalty method. The Company determined that the value of its trade names were not impaired.
The decrease in certain trade names in 2016 was solely due to currency translation effects.
In 2015, the Company recorded a
$5,830
impairment of the Webforge trade name (in Energy and Mining segment) and a
$1,100
impairment of the Industrial Galvanizing trade name (in Coatings segment).
Goodwill
The carrying amount of goodwill by segment as of
December 31, 2016
and
December 26, 2015
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
Support Structures
Segment
|
|
Energy and Mining Segment
|
|
Utility
Support
Structures
Segment
|
|
Coatings
Segment
|
|
Irrigation
Segment
|
|
Total
|
Gross Balance at December 26, 2015
|
$
|
101,275
|
|
|
$
|
99,829
|
|
|
$
|
75,404
|
|
|
$
|
75,941
|
|
|
$
|
19,359
|
|
|
$
|
371,808
|
|
Accumulated impairment losses
|
—
|
|
|
(18,670
|
)
|
|
—
|
|
|
(16,222
|
)
|
|
—
|
|
|
(34,892
|
)
|
Balance at December 26, 2015
|
101,275
|
|
|
81,159
|
|
|
75,404
|
|
|
59,719
|
|
|
19,359
|
|
|
336,916
|
|
Foreign currency translation
|
(6,961
|
)
|
|
(8,947
|
)
|
|
—
|
|
|
(150
|
)
|
|
252
|
|
|
(15,806
|
)
|
Balance at December 31, 2016
|
$
|
94,314
|
|
|
$
|
72,212
|
|
|
$
|
75,404
|
|
|
$
|
59,569
|
|
|
$
|
19,611
|
|
|
$
|
321,110
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(7) GOODWILL AND INTANGIBLE ASSETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
Support Structures Segment
|
|
Energy and Mining Segment
|
|
Utility
Support
Structures
Segment
|
|
Coatings
Segment
|
|
Irrigation
Segment
|
|
Total
|
Balance at December 27, 2014
|
$
|
107,868
|
|
|
$
|
106,770
|
|
|
$
|
75,404
|
|
|
$
|
75,533
|
|
|
$
|
19,536
|
|
|
$
|
385,111
|
|
Impairment
|
—
|
|
|
(18,670
|
)
|
|
—
|
|
|
(16,222
|
)
|
|
—
|
|
|
(34,892
|
)
|
Acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
3,019
|
|
|
—
|
|
|
3,019
|
|
Foreign currency translation
|
(4,856
|
)
|
|
(6,941
|
)
|
|
—
|
|
|
(2,611
|
)
|
|
(177
|
)
|
|
(14,585
|
)
|
Divestiture of business
|
(1,737
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,737
|
)
|
Balance at December 26, 2015
|
$
|
101,275
|
|
|
$
|
81,159
|
|
|
$
|
75,404
|
|
|
$
|
59,719
|
|
|
$
|
19,359
|
|
|
$
|
336,916
|
|
During the second quarter of 2015, the Company divested of a small business in its ESS segment. The goodwill allocated to that business was
$1,737
and was required to be written off based on the selling price of the divested business.
The Company’s annual impairment test of goodwill was performed during the third quarter of 2016 and it was determined that the goodwill on the consolidated balance sheet was not impaired.
In fiscal 2015, the Company recognized a
$16,222
impairment charge which represented all of the goodwill on the APAC Coatings reporting unit. The forecast for lower prices for oil and natural gas required an interim step 2 test for our Access Systems reporting unit during the fourth quarter of 2015. Accordingly, the Company recorded a
$18,670
impairment of Access System's goodwill.
(8) BANK CREDIT ARRANGEMENTS
The Company maintains various lines of credit for short-term borrowings totaling
$109,424
at
December 31, 2016
. As of
December 31, 2016
and December 26, 2015,
$0
and
$199
was outstanding, respectively. The interest rates charged on these lines of credit vary in relation to the banks’ costs of funds. The unused and available borrowings under the lines of credit were
$109,424
at
December 31, 2016
. The lines of credit can be modified at any time at the option of the banks. The Company pays no fees in connection with these lines of credit. In addition to the lines of credit, the Company also maintains other short-term bank loans. The weighted average interest rate on short-term borrowings was
5.23%
at
December 26, 2015
. Other notes payable of
$746
and
$777
were outstanding at
December 31, 2016
and
December 26, 2015
, respectively.
(9) INCOME TAXES
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
United States
|
$
|
136,682
|
|
|
$
|
99,175
|
|
|
$
|
168,975
|
|
Foreign
|
83,772
|
|
|
(6,168
|
)
|
|
115,208
|
|
|
$
|
220,454
|
|
|
$
|
93,007
|
|
|
$
|
284,183
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(9) INCOME TAXES (Continued)
Income tax expense (benefit) consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Current:
|
|
|
|
|
|
Federal
|
$
|
41,539
|
|
|
$
|
23,130
|
|
|
$
|
52,588
|
|
State
|
5,467
|
|
|
4,431
|
|
|
5,059
|
|
Foreign
|
19,123
|
|
|
15,077
|
|
|
32,443
|
|
|
66,129
|
|
|
42,638
|
|
|
90,090
|
|
Non-current:
|
(381
|
)
|
|
(69
|
)
|
|
(447
|
)
|
Deferred:
|
|
|
|
|
|
Federal
|
8,504
|
|
|
3,382
|
|
|
447
|
|
State
|
202
|
|
|
(333
|
)
|
|
1,376
|
|
Foreign
|
(32,391
|
)
|
|
1,809
|
|
|
3,428
|
|
|
(23,685
|
)
|
|
4,858
|
|
|
5,251
|
|
|
$
|
42,063
|
|
|
$
|
47,427
|
|
|
$
|
94,894
|
|
The reconciliations of the statutory federal income tax rate and the effective tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Statutory federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
1.7
|
|
|
3.1
|
|
|
1.8
|
|
Carryforwards, credits and changes in valuation allowances
|
2.9
|
|
|
(0.1
|
)
|
|
(0.4
|
)
|
Foreign tax rate differences
|
(4.8
|
)
|
|
(5.7
|
)
|
|
(4.4
|
)
|
Changes in unrecognized tax benefits
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
Domestic production activities deduction
|
(2.0
|
)
|
|
(3.8
|
)
|
|
(1.6
|
)
|
Goodwill impairment
|
—
|
|
|
11.3
|
|
|
—
|
|
UK tax rate reduction
|
1.0
|
|
|
7.7
|
|
|
—
|
|
Reversal of contingent liability
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
UK defined benefit pension plan
|
(14.6
|
)
|
|
—
|
|
|
—
|
|
Other
|
2.3
|
|
|
3.6
|
|
|
3.2
|
|
|
19.1
|
%
|
|
51.0
|
%
|
|
33.4
|
%
|
Fiscal 2016 includes
$32,450
of deferred income tax benefit attributable to the re-measurement of the deferred tax asset related to the Company's U.K. defined benefit pension plan. This item arose from a 2016 international legal reorganization executed to better reflect the Company's operational business strategies. The Company considered many factors in effecting this realignment, including streamlining treasury functions, creating a platform for future growth, and capital allocation considerations. In addition, in fiscal 2016 the Company recorded a
$9,888
valuation allowance against a tax credit which is not more likely than not to be realized. In 2016 and 2015, the Company was required to remeasure its U.K. deferred income tax assets to account for a change in the U.K. corporate tax rate. The Company recorded deferred income tax expense of
$1,860
and
$7,120
for this change in U.K. tax rates. The reversal of a
$16,591
contingent non-current liability in 2016 is not taxable.
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company’s net deferred income tax liabilities are as follows:
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(9) INCOME TAXES (Continued)
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Deferred income tax assets:
|
|
|
|
Accrued expenses and allowances
|
$
|
16,549
|
|
|
$
|
18,320
|
|
Accrued insurance
|
1,071
|
|
|
1,408
|
|
Tax credits and loss carryforwards
|
104,439
|
|
|
130,743
|
|
Defined benefit pension liability
|
80,425
|
|
|
32,278
|
|
Inventory allowances
|
1,385
|
|
|
911
|
|
Accrued warranty
|
9,436
|
|
|
12,818
|
|
Deferred compensation
|
37,988
|
|
|
36,672
|
|
Gross deferred income tax assets
|
251,293
|
|
|
233,150
|
|
Valuation allowance
|
(81,923
|
)
|
|
(90,837
|
)
|
Net deferred income tax assets
|
169,370
|
|
|
142,313
|
|
Deferred income tax liabilities:
|
|
|
|
Work in progress
|
2,161
|
|
|
3,087
|
|
Property, plant and equipment
|
37,961
|
|
|
41,147
|
|
Intangible assets
|
50,405
|
|
|
54,162
|
|
Other liabilities
|
6,164
|
|
|
3,517
|
|
Total deferred income tax liabilities
|
96,691
|
|
|
101,913
|
|
Net deferred income tax asset/(liability)
|
$
|
72,679
|
|
|
$
|
40,400
|
|
Deferred income tax assets (liabilities) are presented as follows on the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
Balance Sheet Caption
|
2016
|
|
2015
|
Other assets
|
$
|
108,482
|
|
|
$
|
76,069
|
|
Deferred income taxes
|
(35,803
|
)
|
|
(35,669
|
)
|
Net deferred income tax asset/(liability)
|
$
|
72,679
|
|
|
$
|
40,400
|
|
Management of the Company has reviewed recent operating results and projected future operating results. The Company's belief that realization of its net deferred tax assets is more likely than not is based on, among other factors, changes in operations that have occurred in recent years and available tax planning strategies. At
December 31, 2016
and
December 26, 2015
respectively, there were
$104,439
and
$130,743
relating to tax credits and loss carryforwards.
Valuation allowances have been established for certain losses that reduce deferred tax assets to an amount that will, more likely than not, be realized. The deferred tax assets at
December 31, 2016
that are associated with tax loss and tax credit carryforwards not reduced by valuation allowances expire in periods starting 2017.
Uncertain tax positions included in other non-current liabilities are evaluated in a two-step process, whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more likely than not recognition threshold, the Company would recognize the largest amount of tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(9) INCOME TAXES (Continued)
The following summarizes the activity related to our unrecognized tax benefits in
2016
and
2015
, in thousands:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Gross unrecognized tax benefits—beginning of year
|
$
|
3,876
|
|
|
$
|
4,268
|
|
Gross decreases—tax positions in prior period
|
99
|
|
|
(173
|
)
|
Gross increases—current‑period tax positions
|
695
|
|
|
687
|
|
Settlements with taxing authorities
|
(105
|
)
|
|
(361
|
)
|
Lapse of statute of limitations
|
(1,165
|
)
|
|
(545
|
)
|
Gross unrecognized tax benefits—end of year
|
$
|
3,400
|
|
|
$
|
3,876
|
|
There are approximately
$1,210
of uncertain tax positions for which reversal is reasonably possible during the next 12 months due to the closing of the statute of limitations. The nature of these uncertain tax positions is generally the computation of a tax deduction or tax credit. During 2016, the Company recorded a reduction of its gross unrecognized tax benefit of
$1,165
with
$810
recorded as a reduction of income tax expense, due to the expiration of statutes of limitation in the United States. During 2015, the Company recorded a reduction of its gross unrecognized tax benefit of
$545
, with
$511
recorded as a reduction of its income tax expense, due to the expiration of statutes of limitation in the United States. In addition to these amounts, there was an aggregate of
$192
and
$280
of interest and penalties at
December 31, 2016
and
December 26, 2015
, respectively. The Company’s policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Earnings.
The Company files income tax returns in the U.S. and various states as well as foreign jurisdictions. Tax years 2013 and forward remain open under U.S. statutes of limitation. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was
$3,328
and
$3,813
at
December 31, 2016
and
December 26, 2015
, respectively.
All foreign subsidiaries are considered permanently invested at
December 31, 2016
. Provision has not been made for United States income taxes on the undistributed earnings of the Company’s foreign subsidiaries (approximately
$424,000
at
December 31, 2016
and
$415,000
at
December 26, 2015
, respectively) because the Company intends to reinvest those earnings. Such earnings would become taxable upon the sale or liquidation of these foreign subsidiaries or upon remittance of dividends. The determination of the additional U.S. federal and state income taxes or foreign withholding taxes have not been provided, as the determination is not practicable. Furthermore, the currency translation adjustments in “Accumulated other comprehensive income (loss)” are not adjusted for income taxes as they relate to indefinite investments in foreign subsidiaries.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(10) LONG-TERM DEBT
Long-term debt is as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
December 26,
2015
|
5.00% senior unsecured notes due 2044(a)
|
$
|
250,000
|
|
|
$
|
250,000
|
|
5.25% senior unsecured notes due 2054(b)
|
250,000
|
|
|
250,000
|
|
Unamortized discount on 5.00% and 5.25% senior unsecured notes (a)(b)
|
(4,360
|
)
|
|
(4,405
|
)
|
6.625% senior unsecured notes due 2020(c)
|
250,200
|
|
|
250,200
|
|
Unamortized premium on 6.625% senior unsecured notes(c)
|
3,557
|
|
|
4,518
|
|
Revolving credit agreement (d)
|
—
|
|
|
—
|
|
IDR Bonds(e)
|
8,500
|
|
|
8,500
|
|
Other notes
|
4,395
|
|
|
6,228
|
|
Debt issuance costs
|
(6,646
|
)
|
|
(7,046
|
)
|
Long-term debt
|
755,646
|
|
|
757,995
|
|
Less current installments of long-term debt
|
851
|
|
|
1,077
|
|
Long-term debt, excluding current installments
|
$
|
754,795
|
|
|
$
|
756,918
|
|
______________________________________________
|
|
(a)
|
The
5.00%
senior unsecured notes due 2044 include an aggregate principle amount of
$250,000
on which interest is paid and an unamortized discount balance of
$1,120
at December 31, 2016. The notes bear interest at
5.000%
per annum and are due on October 1, 2044. The discount will be amortized and recognized as interest expense as interest payments are made over the term of the notes. The notes may be repurchased prior to maturity in whole, or in part, at any time at
100%
of their principal amount plus a make-whole premium and accrued and unpaid interest. These notes are guaranteed by certain subsidiaries of the Company.
|
|
|
(b)
|
The
5.25%
senior unsecured notes due 2054 include an aggregate principle amount of
$250,000
on which interest is paid and an unamortized discount balance of
$3,240
at December 31, 2016. The notes bear interest at
5.250%
per annum and are due on October 1, 2054. The discount will be amortized and recognized as interest expense as interest payments are made over the term of the notes. The notes may be repurchased prior to maturity in whole, or in part, at any time at
100%
of their principal amount plus a make-whole premium and accrued and unpaid interest. These notes are guaranteed by certain subsidiaries of the Company.
|
|
|
(c)
|
The
6.625%
senior unsecured notes due 2020, following a partial tender offer in September 2014, include a remaining aggregate principal amount of
$250,200
on which interest is paid and an unamortized premium balance of $3,557 at December 31, 2016. The notes bear interest at
6.625%
per annum and are due on April 1, 2020. In September 2014, the Company repurchased by partial tender
$199,800
in aggregate principal amount of these notes and incurred cash prepayment expenses of approximately
$41,200
. In addition,
$4,439
of the unamortized premium was recognized as income which is the proportionate amount of debt that was repaid. The remaining premium will be amortized against interest expense as interest payments are made over the term of the notes. The notes may be repurchased prior to maturity in whole, or in part, at any time at
100%
of their principal amount plus a make-whole premium accrued and unpaid interest. These notes are guaranteed by certain subsidiaries of the Company.
|
|
|
(d)
|
On October 17, 2014, the Company entered into a First Amendment to our Credit Agreement with JPMorgan Chase Bank, as Administrative Agent, and the other lenders party thereto, dated as of August 15, 2012, which increased the committed unsecured revolving credit facility from
$400,000
to
$600,000
and extended the maturity date from August 15, 2017 to October 17, 2019. The Company may increase the credit facility by up to an additional
$200,000
at any time, subject to lenders increasing the amount of their commitments. The interest rate on our borrowings will be, at our option, either:
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(10) LONG-TERM DEBT (Continued)
|
|
(i)
|
LIBOR (based on a 1, 2, 3 or 6 month interest period, as selected by the Company)
plus
100
to
162.5
basis points, depending on the credit rating of the our senior debt published by Standard & Poor's Rating Services and Moody's Investors Service, Inc., or;
|
|
|
•
|
the
prime lending rate
,
|
|
|
•
|
the
Federal Funds rate
plus
50
basis points, and
|
|
|
•
|
LIBOR (based on a
1 month
interest period) plus
100
basis points,
|
plus, in each case,
0
to
62.5
basis points, depending on the credit rating of our senior debt published by Standard & Poor's Rating Services and Mood's Investors Service, Inc.
At December 31, 2016, the Company had
no
outstanding borrowings under the revolving credit facility. The revolving credit facility has a maturity date of October 17, 2019 and contains certain financial covenants that may limit additional borrowing capability under the agreement. At December 31, 2016, the Company had the ability to borrow
$584,600
under this facility, after consideration of standby letters of credit of
$15,400
associated with certain insurance obligations. We also maintain certain short-term bank lines of credit totaling
$109,400
,
$109,400
of which was unused at December 31, 2016.
|
|
(e)
|
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 on June 1, 2025. The effective interest rates at
December 31, 2016
and
December 26, 2015
were
1.48%
and
1.22%
respectively.
|
The lending agreements include certain maintenance covenants, including financial leverage and interest coverage. The Company was in compliance with all financial debt covenants at
December 31, 2016
. The minimum aggregate maturities of long-term debt for each of the five years following
2016
are:
$894
,
$890
,
$749
,
$250,954
and
$762
.
The obligations arising under the
5.00%
senior unsecured notes due 2044, the
5.25%
senior unsecured notes due 2054, the
6.625%
senior unsecured notes due 2020, and the revolving credit facility are guaranteed by the Company and its wholly-owned subsidiaries PiRod, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc., and Valmont Queensland Pty. Ltd.
(11) STOCK-BASED COMPENSATION
The Company maintains stock‑based compensation plans approved by the shareholders, which provide that the Compensation Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, non-vested stock awards and bonuses of common stock. At
December 31, 2016
,
706,298
shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization. The Company’s policy is to issue shares upon exercise of stock options from treasury shares held by the Company.
Under the stock option plans, the exercise price of each option equals the market price at the time of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over
three
to
six
years or on the fifth anniversary of the grant. Expiration of grants is from
six
to
ten
years from the date of grant. The Company recorded
$5,782
,
$5,137
and
$4,461
of compensation expense (included in selling, general and administrative expenses) in the
2016
,
2015
and
2014
fiscal years, respectively. The associated tax benefits recorded in the
2016
,
2015
and
2014
fiscal years was
$2,197
,
$1,952
and
$1,695
, respectively.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(11) STOCK-BASED COMPENSATION (Continued)
At
December 31, 2016
, the amount of unrecognized stock option compensation expense, to be recognized over a weighted average period of
2.15
years, was approximately
$9,872
.
The Company uses a binomial option pricing model to value its stock options. The fair value of each option grant made in
2016
,
2015
and
2014
was estimated using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Expected volatility
|
33.88
|
%
|
|
34.13
|
%
|
|
32.27
|
%
|
Risk-free interest rate
|
1.83
|
%
|
|
1.58
|
%
|
|
1.43
|
%
|
Expected life from vesting date
|
3.0 yrs
|
|
|
3.0 yrs
|
|
|
3.0 yrs
|
|
Dividend yield
|
1.13
|
%
|
|
0.94
|
%
|
|
0.75
|
%
|
Following is a summary of the activity of the stock plans during
2014
,
2015
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding at December 28, 2013
|
795,221
|
|
|
$
|
99.29
|
|
|
|
|
|
Granted
|
177,717
|
|
|
132.94
|
|
|
|
|
|
Exercised
|
(194,627
|
)
|
|
(71.67
|
)
|
|
|
|
|
Forfeited
|
(9,716
|
)
|
|
(126.23
|
)
|
|
|
|
|
Outstanding at December 27, 2014
|
768,595
|
|
|
$
|
113.72
|
|
|
4.74
|
|
$
|
15,983
|
|
Options vested or expected to vest at December 27, 2014
|
746,974
|
|
|
$
|
113.06
|
|
|
4.69
|
|
15,981
|
|
Options exercisable at December 27, 2014
|
450,539
|
|
|
$
|
97.29
|
|
|
3.59
|
|
15,944
|
|
The weighted average per share fair value of options granted during
2014
, was $
33.94
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding at December 27, 2014
|
768,595
|
|
|
$
|
113.72
|
|
|
|
|
|
Granted
|
291,708
|
|
|
104.89
|
|
|
|
|
|
Exercised
|
(169,493
|
)
|
|
74.37
|
|
|
|
|
|
Forfeited
|
(41,201
|
)
|
|
137.02
|
|
|
|
|
|
Outstanding at December 26, 2015
|
849,609
|
|
|
$
|
117.42
|
|
|
5.18
|
|
$
|
4,536
|
|
Options vested or expected to vest at December 26, 2015
|
818,300
|
|
|
$
|
117.61
|
|
|
5.13
|
|
4,456
|
|
Options exercisable at December 26, 2015
|
409,068
|
|
|
$
|
119.43
|
|
|
3.74
|
|
3,376
|
|
The weighted average per share fair value of options granted during
2015
was $
27.91
.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(11) STOCK-BASED COMPENSATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding at December 26, 2015
|
849,609
|
|
|
$
|
117.42
|
|
|
|
|
|
Granted
|
85,092
|
|
|
151.37
|
|
|
|
|
|
Exercised
|
(109,893
|
)
|
|
101.69
|
|
|
|
|
|
Forfeited
|
(31,635
|
)
|
|
129.36
|
|
|
|
|
|
Outstanding at December 31, 2016
|
793,173
|
|
|
$
|
122.77
|
|
|
4.78
|
|
$
|
16,640
|
|
Options vested or expected to vest at December 31, 2016
|
774,139
|
|
|
$
|
124.18
|
|
|
4.75
|
|
16,200
|
|
Options exercisable at December 31, 2016
|
469,844
|
|
|
$
|
123.75
|
|
|
3.96
|
|
9,056
|
|
The weighted average per share fair value of options granted during
2016
was $
40.00
.
Following is a summary of the status of stock options outstanding at
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and Exercisable By Price Range
|
Options Outstanding
|
|
Options Exercisable
|
Exercise Price
Range
|
|
Number
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
Number
|
|
Weighted
Average
Exercise
Price
|
$83.94 - 105.44
|
|
347,914
|
|
|
5.06 years
|
|
$
|
100.47
|
|
|
162,533
|
|
|
$
|
95.93
|
|
$110.33 - 132.84
|
|
147,717
|
|
|
4.95 years
|
|
132.17
|
|
|
94,517
|
|
|
132.44
|
|
$136.42 - 151.90
|
|
297,542
|
|
|
4.36 years
|
|
144.18
|
|
|
212,794
|
|
|
141.15
|
|
|
|
793,173
|
|
|
|
|
|
|
469,844
|
|
|
|
In accordance with shareholder-approved plans, the Company grants stock under various stock‑based compensation arrangements, including non-vested stock and stock issued in lieu of cash bonuses. Under such arrangements, stock is issued without direct cost to the employee. In addition, the Company grants restricted stock units. The restricted stock units are settled in Company stock when the restriction period ends. During fiscal
2016
,
2015
and
2014
, the Company granted non-vested stock and restricted stock units to directors and certain management employees as follows (which are not included in the above stock plan activity tables):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Shares issued
|
58,961
|
|
|
47,038
|
|
|
35,885
|
|
Weighted‑average per share price on grant date
|
$
|
150.48
|
|
|
$
|
108.97
|
|
|
$
|
136.91
|
|
Recognized compensation expense
|
$
|
4,069
|
|
|
$
|
4,511
|
|
|
$
|
3,978
|
|
At
December 31, 2016
the amount of deferred stock‑based compensation granted, to be recognized over a weighted‑average period of
1.86
years, was approximately
$11,896
.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(12) EARNINGS PER SHARE
The following table provides a reconciliation between Basic and Diluted earnings per share (EPS):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
Dilutive
Effect of
Stock
Options
|
|
Diluted EPS
|
2016:
|
|
|
|
|
|
Net earnings attributable to Valmont Industries, Inc.
|
$
|
173,232
|
|
|
$
|
—
|
|
|
$
|
173,232
|
|
Weighted average shares outstanding (000's)
|
22,562
|
|
|
147
|
|
|
22,709
|
|
Per share amount
|
$
|
7.68
|
|
|
$
|
0.05
|
|
|
$
|
7.63
|
|
2015:
|
|
|
|
|
|
Net earnings attributable to Valmont Industries, Inc.
|
$
|
40,117
|
|
|
$
|
—
|
|
|
$
|
40,117
|
|
Weighted average shares outstanding (000's)
|
23,288
|
|
|
117
|
|
|
23,405
|
|
Per share amount
|
$
|
1.72
|
|
|
$
|
0.01
|
|
|
$
|
1.71
|
|
2014:
|
|
|
|
|
|
Net earnings attributable to Valmont Industries, Inc.
|
$
|
183,976
|
|
|
$
|
—
|
|
|
$
|
183,976
|
|
Weighted average shares outstanding (000's)
|
25,719
|
|
|
213
|
|
|
25,932
|
|
Per share amount
|
$
|
7.15
|
|
|
$
|
0.06
|
|
|
$
|
7.09
|
|
Basic and diluted net earnings and earnings per share in fiscal 2016 included a deferred income tax benefit of
$30,590
(
$1.35
per share) primarily attributable to the re-measurement of the deferred tax asset related to the Company's U.K. defined benefit pension plan. In addition, fiscal 2016 included
$9,888
(
$0.44
per share) recorded as a valuation allowance against a tax credit asset. Finally, fiscal 2016 included the reversal of a contingent liability that was recognized as part of the Delta purchase accounting of
$16,591
(
$0.73
per share) which was not taxable. Fiscal 2015 included impairments of goodwill and intangible assets of
$40,140
after-tax (
$1.72
per share), asset impairments arising from restructuring activities of
$14,545
after-tax (
$0.62
per share), and
$13,622
of cash restructuring expenses (
$0.58
per share). Fiscal 2014 included costs associated with refinancing of our long-term debt of
$24,171
after tax (
$0.93
per share).
Earnings per share are computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per share may not equal the total for the year primarily due to the share buyback program that began in the second quarter of 2014.
At the end of fiscal years
2016
,
2015
, and
2014
there were approximately
197,303
,
426,338
, and
449,000
outstanding stock options, respectively, with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share, respectively.
(13) EMPLOYEE RETIREMENT SAVINGS PLAN
Established under Internal Revenue Code Section 401(k), the Valmont Employee Retirement Savings Plan (“VERSP”) is a defined contribution plan available to all eligible employees. Participants can elect to contribute up to
50%
of annual pay, on a pretax and/or after-tax basis. The Company also makes contributions to the Plan and a non-qualified deferred compensation plan for certain Company executives. The
2016
,
2015
and
2014
Company contributions to these plans amounted to approximately
$10,900
,
$11,700
and
$12,600
respectively.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(13) EMPLOYEE RETIREMENT SAVINGS PLAN (Continued)
The Company sponsors a fully‑funded, non-qualified deferred compensation plan for certain Company executives who otherwise would be limited in receiving company contributions into VERSP under Internal Revenue Service regulations. The invested assets and related liabilities of these participants were approximately
$35,784
and
$37,963
at
December 31, 2016
and
December 26, 2015
, respectively. Such amounts are included in “Other assets” and “Deferred compensation” on the Consolidated Balance Sheets. Amounts distributed from the Company’s non-qualified deferred compensation plan to participants under the transition rules of section 409A of the Internal Revenue Code were approximately
$5,317
and
$2,439
at
December 31, 2016
and
December 26, 2015
, respectively. All distributions were made in cash.
(14) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, receivables, accounts payable, notes payable to banks and accrued expenses approximate fair value because of the short maturity of these instruments. The fair values of each of the Company’s long-term debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company’s current borrowing rate for similar debt instruments of comparable maturity (Level 2). The fair value estimates are made at a specific point in time and the underlying assumptions are subject to change based on market conditions. At
December 31, 2016
, the carrying amount of the Company’s long-term debt was
$755,646
with an estimated fair value of approximately
$731,633
. At
December 26, 2015
, the carrying amount of the Company’s long-term debt was
$757,995
with an estimated fair value of approximately
$724,020
.
For financial reporting purposes, 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 is used. 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 of
$35,784
(
$37,963
in
2015
) represent mutual funds, invested in debt and equity securities, classified as trading securities, considering the employee’s ability to change investment allocation of their deferred compensation at any time. The Company's remaining ownership in Delta EMD Pty. Ltd. (JSE:DTA) of
$2,016
(
$4,734
in
2015
) is recorded at fair value at
December 31, 2016
. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input. These securities are included in Other Assets on the Consolidated Balance Sheets.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(14) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using:
|
|
Carrying Value
December 31, 2016
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Trading Securities
|
$
|
37,800
|
|
|
$
|
37,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using:
|
|
Carrying Value
December 26,
2015
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Trading Securities
|
$
|
42,697
|
|
|
$
|
42,697
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(15) DERIVATIVE FINANCIAL INSTRUMENTS
The Company manages risk from foreign currency rate risk related to foreign currency denominated transactions and from natural gas supply pricing. From time to time, the Company manages these risks using derivative financial instruments. Some of these derivative financial instruments are marked to market and recorded in the Company’s consolidated statements of earnings, while others may be accounted for as a fair value, cash flow, or net investment hedge. Derivative financial instruments have credit risk and market risk. To manage credit risk, the Company only enters into derivative transactions with counterparties who are recognized, stable multinational banks.
Natural Gas Prices:
Natural gas supplies to meet production requirements of production facilities are purchased at market prices. Natural gas market prices are volatile and the Company effectively fixes prices for a portion of its natural gas usage requirements of certain of its U.S. facilities through the use of swaps. These contracts reference physical natural gas prices or appropriate NYMEX futures contract prices. While there is a strong correlation between the NYMEX futures contract prices and the Company’s delivered cost of natural gas, the use of financial derivatives may not exactly offset the change in the price of physical gas. The contracts are traded in months forward and settlement dates are scheduled to coincide with gas purchases during that future period. The financial effects of these derivatives in 2016 and 2015 were minimal.
Interest Rate Fluctuations:
In prior years, the Company executed contracts to lock in the treasury rate related to the issuance of each of their unsecured notes due in 2020, 2044, and 2054. These contracts were executed to hedge the risk of potential fluctuations in the treasury rates which would change the amount of net proceeds received from the debt offering. As the benchmark rate component of the fixed rate debt issuance and the cash flow hedged risk is based on that same benchmark, each was deemed an effective hedge at inception. The settlement with each of the counterparties was recorded in accumulated other comprehensive income and at December 31, 2016, the Company has a
$3,557
deferred loss and a
$4,360
deferred gain remaining in accumulated other comprehensive loss related to the past settlement of these forward contracts. The amount is amortized as a reduction of interest expense (for the deferred gain) or an increase in interest expense (for the deferred loss) over the term of the debt.
Foreign Currency Fluctuations:
The Company operates in a number of different foreign countries and may enter into business transactions that are in currencies that are different from a given operation’s functional currency. In certain cases, the Company may enter into foreign currency exchange contracts to manage a portion of the foreign exchange risk associated with a receivable or payable denominated in a foreign currency, a forecasted transaction or a series of forecasted transactions denominated in a foreign currency, or an investment in foreign operations with a different functional currency.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(15) DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
At
December 31, 2016
, the Company had a couple of open foreign currency forward contracts, which are generally accounted for as cash flow hedges if hedge accounting is utilized. In the second quarter of 2016, the Company entered into a one-year foreign currency forward contract which qualified as a net investment hedge, in order to mitigate foreign currency risk on a portion of our foreign subsidiary investments denominated in British pounds. The forward contract has a maturity date of May 2017 and a notional amount to sell British pounds and receive
$44,000
dollars. The unrealized gain recorded at December 31, 2016 is
$6,872
and is included in Other Current Assets on the Consolidated Balance Sheets. No ineffectiveness has resulted from the hedge and the balance is recorded in the Consolidated Statements of Other Comprehensive Income within gain/(loss) on hedging activities. When the forward contract matures, the realized gain (loss) will be deferred in Other Comprehensive Income where it will remain until the net investments in our British subsidiaries are divested.
At
December 26, 2015
, the Company had
one
open forward contract related to interest payments on a large intercompany note denominated in Australian dollars. The interest from these notes are used to fund the delta pension plan in the United Kingdom with a functional currency of the British pound. The derivative was accounted for as a cash flow hedge and had a notional amount to sell Australian dollars of
$36,590
, which was settled in January 2016. Total gains on the forward contract related to the intercompany note interest payments in fiscal 2015 was
$1,821
.
(16) GUARANTEES
The Company’s product warranty accrual reflects management’s best estimate of probable liability under its product warranties. Historical product claims data is used to estimate the cost of product warranties at the time revenue is recognized.
The Company recorded a
$17,000
provision in the fourth quarter of 2015 for a commercial settlement with a large customer that requires ongoing quality monitoring. Changes in the product warranty accrual, which is recorded in “Accrued expenses”, for the years ended
December 31, 2016
and
December 26, 2015
, were as follows:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Balance, beginning of period
|
$
|
36,653
|
|
|
$
|
19,760
|
|
Payments made
|
(20,355
|
)
|
|
(11,203
|
)
|
Change in liability for warranties issued during the period
|
9,565
|
|
|
28,608
|
|
Change in liability for pre-existing warranties
|
675
|
|
|
(512
|
)
|
Balance, end of period
|
$
|
26,538
|
|
|
$
|
36,653
|
|
(17) COMMITMENTS & CONTINGENCIES
Various claims and lawsuits are pending against Company and certain of its subsidiaries. The Company cannot fully determine the effect of all asserted and unasserted claims on its consolidated results of operations, financial condition, or liquidity. Where asserted and unasserted claims are considered probable and reasonably estimable, a liability has been recorded. We do not expect that any known lawsuits, claims, environmental costs, commitments, or contingent liabilities will have a material adverse effect on our consolidated results of operations, financial condition, or liquidity.
The Company established a provision in 2010 to address a pre-acquisition contingency which arose from the Delta acquisition and was recognized as part of the purchase accounting. The applicable statutes of limitations have expired and the Company determined this contingent liability is remote. Therefore in 2016, the Company reduced "Other noncurrent liabilities" by
$16,591
, the amount of the provision, and recognized “Other" income.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(18) DEFINED BENEFIT RETIREMENT PLAN
Delta Ltd., a wholly-owned subsidiary of the Company, is the sponsor of the Delta Pension Plan ("Plan"). The Plan 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
no
active employees as members at
December 31, 2016
.
Funded Status
The Company recognizes the overfunded or underfunded status of the pension plan as an asset or liability. The funded status represents the difference between the projected 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 (if applicable) and inflation. Plan assets are measured at fair value. Effective with year-end 2015, the Company early adopted the practical expedient accounting guidance that permits an entity to measure defined benefit plan assets and obligations using the month-end closest to the entity's fiscal year-end consistently going forward. The pension plan obligation recorded on the balance sheet as of December 26, 2015 was measured based on the pension plan assets and obligation as of December 31, 2015. Because the pension plan is denominated in British pounds sterling, the Company used exchange rates of
$1.492
/£ and
$1.234
/£ to translate the net pension liability into U.S. dollars at
December 26, 2015
and
December 31, 2016
, respectively. The net funded status of
$209,470
at December 31, 2016 is recorded as a noncurrent liability.
Projected Benefit Obligation and Fair Value of Plan Assets
—The accumulated benefit obligation (ABO) is the present value of benefits earned to date, assuming no future compensation growth. As there are no active employees in the plan, the ABO is equal to the PBO. The underfunded ABO represents the difference between the PBO and the fair value of plan assets. Changes in the PBO and fair value of plan assets for the pension plan for the period from
December 27, 2014
to December 31, 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected
Benefit
Obligation
|
|
Plan
Assets
|
|
Funded
status
|
Fair Value at December 27, 2014
|
$
|
692,283
|
|
|
$
|
542,159
|
|
|
$
|
(150,124
|
)
|
Employer contributions
|
—
|
|
|
16,500
|
|
|
|
Interest cost
|
24,614
|
|
|
—
|
|
|
|
Actual return on plan assets
|
—
|
|
|
(306
|
)
|
|
|
Benefits paid
|
(18,346
|
)
|
|
(18,346
|
)
|
|
|
Actuarial loss
|
28,130
|
|
|
—
|
|
|
|
Currency translation
|
(29,232
|
)
|
|
(21,881
|
)
|
|
|
Fair Value at December 31, 2015
|
$
|
697,449
|
|
|
$
|
518,126
|
|
|
$
|
(179,323
|
)
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(18) DEFINED BENEFIT RETIREMENT PLAN (Continued)
Changes in the PBO and fair value of plan assets for the pension plan for the period from December 31, 2015 to December 31, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected
Benefit
Obligation
|
|
Plan
Assets
|
|
Funded
status
|
Fair Value at December 31, 2015
|
$
|
697,449
|
|
|
$
|
518,126
|
|
|
$
|
(179,323
|
)
|
Employer contributions
|
—
|
|
|
1,426
|
|
|
|
Interest cost
|
23,496
|
|
|
—
|
|
|
|
Actual return on plan assets
|
—
|
|
|
80,538
|
|
|
|
Benefits paid
|
(17,792
|
)
|
|
(17,792
|
)
|
|
|
Actuarial loss
|
125,765
|
|
|
—
|
|
|
|
Currency translation
|
(132,781
|
)
|
|
(95,631
|
)
|
|
|
Fair Value at December 31, 2016
|
$
|
696,137
|
|
|
$
|
486,667
|
|
|
$
|
(209,470
|
)
|
Pre-tax amounts recognized in accumulated other comprehensive income (loss) as of
December 31, 2016
and December 26, 2015 consisted of actuarial gains (losses):
|
|
|
|
|
Balance December 27, 2014
|
$
|
(55,953
|
)
|
Actuarial loss
|
(53,661
|
)
|
Currency translation gain
|
2,655
|
|
Balance December 26, 2015
|
(106,959
|
)
|
Actuarial loss
|
(66,957
|
)
|
Currency translation gain
|
17,038
|
|
Balance December 31, 2016
|
$
|
(156,878
|
)
|
The estimated amount to be amortized from accumulated other comprehensive income into net periodic benefit cost in 2017 is approximately
$2,840
.
Assumptions
—The weighted-average actuarial assumptions used to determine the benefit obligation at December 31, 2016 and December 31, 2015 were as follows:
|
|
|
|
|
|
|
Percentages
|
2016
|
|
2015
|
Discount rate
|
2.80
|
%
|
|
3.75
|
%
|
Salary increase
|
N/A
|
|
|
N/A
|
|
CPI inflation
|
2.25
|
%
|
|
2.15
|
%
|
RPI inflation
|
3.15
|
%
|
|
3.25
|
%
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(18) DEFINED BENEFIT RETIREMENT PLAN (Continued)
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 the fair value of plan assets. 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 the net periodic pension expense for the fiscal years ended December 31, 2016 and December 26, 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Net Periodic Benefit Cost:
|
|
|
|
Interest cost
|
23,496
|
|
|
24,614
|
|
Expected return on plan assets
|
(22,986
|
)
|
|
(25,224
|
)
|
Amortization of actuarial loss
|
1,360
|
|
|
—
|
|
Net periodic benefit expense (benefit)
|
$
|
1,870
|
|
|
$
|
(610
|
)
|
Assumptions
—The weighted-average actuarial assumptions used to determine expense are as follows for fiscal 2016 and 2015:
|
|
|
|
|
|
|
|
Percentages
|
|
2016
|
|
2015
|
Discount rate
|
3.75
|
%
|
|
3.65
|
%
|
Expected return on plan assets
|
5.15
|
%
|
|
5.00
|
%
|
CPI Inflation
|
2.15
|
%
|
|
2.10
|
%
|
RPI Inflation
|
3.35
|
%
|
|
3.20
|
%
|
The discount rate is based on the yields of AA-rated corporate bonds with durational periods similar to that of the pension liabilities. 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. Inflation is based on expected changes in the consumer price index or the retail price index in the U.K. depending on the relevant plan provisions.
Cash Contributions
The Company completed negotiations with Plan trustees in 2016 regarding annual funding for the Plan. The annual contributions into the Plan are
$12,340
(/£
10,000
) per annum as part of the Plan’s recovery plan, along with a contribution to cover the administrative costs of the Plan of approximately
$1,357
(/£
1,100
) per annum. The Company deferred its 2016 recovery plan contribution payment of £
10,000
, placing it into a restricted cash account. The restriction will release before March 31, 2017, when the Company contributes the £
10,000
to the Plan.
Benefit Payments
The following table details expected pension benefit payments for the years 2017 through 2026:
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(18) DEFINED BENEFIT RETIREMENT PLAN (Continued)
|
|
|
|
|
|
2017
|
$
|
16,650
|
|
2018
|
17,200
|
|
2019
|
17,800
|
|
2020
|
18,250
|
|
2021
|
18,900
|
|
Years 2022 - 2026
|
104,000
|
|
Asset Allocation Strategy
The investment strategy for pension plan assets is to maintain a diversified portfolio consisting of
•
Long-term fixed‑income securities that are investment grade or government‑backed in nature;
•
Common stock mutual funds in U.K. and non-U.K. companies, and;
|
|
•
|
Diversified growth funds, which are invested in a number of investments, including common stock, fixed income funds, properties and commodities.
|
The Plan, as required by U.K. law, has an independent trustee that sets investment policy. The general strategy is to invest approximately
50%
of the assets of the plan in common stock mutual funds and diversified growth funds, with the remainder of the investments in long-term fixed income securities, including corporate bonds and index-linked U.K. gilts. The trustees regularly consult with representatives of the plan sponsor and independent advisors on such matters.
The pension plan investments are held in a trust. The weighted‑average maturity of the corporate bond portfolio was
13
years at December 31, 2016.
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. The fair value recorded by the Plan is calculated using net asset value (NAV) for each investment.
Corporate Bonds
—Corporate bonds and debentures consist of fixed income securities issued by U.K. corporations. The fair value recorded by the Plan is calculated using NAV for each investment.
Corporate Stock
—This investment category consists of common and preferred stock, including mutual funds, issued by U.K. and non-U.K. corporations. The fair value recorded by the Plan is calculated using NAV for each investment, except for one small holding that is actively traded.
Diversified growth funds
- This investment category consists of diversified investment funds, whose holdings include common stock, fixed income funds, properties and commodities of U.K. and non-U.K. securities. The fair value recorded by the Plan is calculated using NAV for each investment.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(18) DEFINED BENEFIT RETIREMENT PLAN (Continued)
At December 31, 2016 and December 31, 2015, the pension plan assets measured at fair value on a recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
Quoted Prices in
Active Markets
for Identical
Inputs (Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
Plan assets at fair value:
|
|
|
|
|
|
|
|
Temporary cash investments
|
$
|
1,900
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,900
|
|
Corporate stock
|
480
|
|
|
—
|
|
|
—
|
|
|
480
|
|
Total plan net assets at fair value
|
$
|
2,380
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,380
|
|
Plan assets at NAV:
|
|
|
|
|
|
|
|
Index-linked gilts
|
|
|
|
|
|
|
|
|
135,141
|
|
Corporate bonds
|
|
|
|
|
|
|
|
|
83,834
|
|
Corporate stock
|
|
|
|
|
|
|
|
|
165,338
|
|
Diversified growth funds
|
|
|
|
|
|
|
|
99,974
|
|
Total plan assets at NAV
|
|
|
|
|
|
|
484,287
|
|
Total plan assets
|
|
|
|
|
|
|
$
|
486,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
Quoted Prices in
Active Markets
for Identical
Inputs (Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
Plan assets at fair value:
|
|
|
|
|
|
|
|
Temporary cash investments
|
$
|
4,673
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,673
|
|
Corporate stock
|
508
|
|
|
—
|
|
|
—
|
|
|
508
|
|
Total plan net assets at fair value
|
$
|
5,181
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,181
|
|
Plan assets at NAV:
|
|
|
|
|
|
|
|
Index-linked gilts
|
|
|
|
|
|
|
|
123,257
|
|
Corporate bonds
|
|
|
|
|
|
|
|
100,701
|
|
Corporate stock
|
|
|
|
|
|
|
|
172,456
|
|
Diversified growth funds
|
|
|
|
|
|
|
|
116,531
|
|
Total plan assets at NAV
|
|
|
|
|
|
|
512,945
|
|
Total plan assets
|
|
|
|
|
|
|
$
|
518,126
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(19) BUSINESS SEGMENTS
The Company has
five
reportable segments based on its management structure. Each segment is global in nature with a manager responsible for segment operational performance and the allocation of capital within the segment. Net corporate expense is net of certain service‑related expenses that are allocated to business units generally on the basis of employee headcounts and sales dollars.
Reportable segments are as follows:
ENGINEERED SUPPORT STRUCTURES:
This segment consists of the manufacture of engineered structures and components for the global lighting and traffic, wireless communication, and roadway safety industries;
ENERGY AND MINING:
This segment, all outside of the United States, consists of the manufacture of access systems applications, forged steel grinding media, on and off shore oil, gas, and wind energy structures;
UTILITY SUPPORT STRUCTURES:
This segment consists of the manufacture of engineered steel and concrete structures for the global utility industry;
COATINGS:
This segment consists of galvanizing, anodizing and powder coating services on a global basis; and
IRRIGATION:
This segment consists of the manufacture of agricultural irrigation equipment and related parts and services for the global agricultural industry and tubular products for industrial customers.
In addition to these
five
reportable segments, the Company had other businesses and activities that individually are not more than
10%
of consolidated sales. Due to the business reorganization that occurred in the fourth quarter of 2015, there are no longer business operations included in Other.
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.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(19) BUSINESS SEGMENTS (Continued)
Summary by Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
SALES:
|
|
|
|
|
|
Engineered Support Structures segment:
|
|
|
|
|
|
Lighting, Traffic, and Roadway Products
|
$
|
632,455
|
|
|
$
|
600,280
|
|
|
$
|
648,352
|
|
Communication Products
|
168,070
|
|
|
171,173
|
|
|
161,618
|
|
Engineered Support Structures segment
|
800,525
|
|
|
771,453
|
|
|
809,970
|
|
Energy and Mining segment:
|
|
|
|
|
|
|
|
|
Offshore and Other Complex Steel Structures
|
107,824
|
|
|
103,068
|
|
|
146,432
|
|
Grinding Media
|
83,110
|
|
|
96,442
|
|
|
116,056
|
|
Access Systems
|
131,703
|
|
|
138,349
|
|
|
181,495
|
|
Energy and Mining segment
|
322,637
|
|
|
337,859
|
|
|
443,983
|
|
Utility Support Structures segment:
|
|
|
|
|
|
Steel
|
541,295
|
|
|
578,996
|
|
|
714,427
|
|
Concrete
|
90,256
|
|
|
95,581
|
|
|
110,589
|
|
Utility Support Structures segment
|
631,551
|
|
|
674,577
|
|
|
825,016
|
|
Coatings segment
|
289,481
|
|
|
302,385
|
|
|
333,853
|
|
Irrigation segment
|
575,204
|
|
|
612,201
|
|
|
846,326
|
|
Other
|
—
|
|
|
7,247
|
|
|
10,108
|
|
Total
|
2,619,398
|
|
|
2,705,722
|
|
|
3,269,256
|
|
INTERSEGMENT SALES:
|
|
|
|
|
|
Engineered Support Structures
|
36,013
|
|
|
23,003
|
|
|
74,963
|
|
Energy and Mining
|
8,105
|
|
|
4,652
|
|
|
295
|
|
Utility Support Structures
|
769
|
|
|
1,239
|
|
|
2,451
|
|
Coatings
|
45,604
|
|
|
46,912
|
|
|
55,418
|
|
Irrigation
|
7,231
|
|
|
6,430
|
|
|
6,609
|
|
Other
|
—
|
|
|
4,562
|
|
|
6,377
|
|
Total
|
97,722
|
|
|
86,798
|
|
|
146,113
|
|
NET SALES:
|
|
|
|
|
|
Engineered Support Structures segment
|
764,512
|
|
|
748,450
|
|
|
735,007
|
|
Energy and Mining segment
|
314,532
|
|
|
333,207
|
|
|
443,688
|
|
Utility Support Structures segment
|
630,782
|
|
|
673,338
|
|
|
822,565
|
|
Coatings segment
|
243,877
|
|
|
255,473
|
|
|
278,435
|
|
Irrigation segment
|
567,973
|
|
|
605,771
|
|
|
839,717
|
|
Other
|
—
|
|
|
2,685
|
|
|
3,731
|
|
Total
|
$
|
2,521,676
|
|
|
$
|
2,618,924
|
|
|
$
|
3,123,143
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(19) BUSINESS SEGMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
OPERATING INCOME (LOSS):
|
|
|
|
|
|
Engineered Support Structures
|
$
|
71,398
|
|
|
$
|
59,592
|
|
|
$
|
66,024
|
|
Energy and Mining
|
11,851
|
|
|
(18,762
|
)
|
|
41,342
|
|
Utility Support Structures
|
69,077
|
|
|
37,847
|
|
|
95,118
|
|
Coatings
|
46,596
|
|
|
27,369
|
|
|
60,921
|
|
Irrigation
|
87,835
|
|
|
84,537
|
|
|
151,508
|
|
Other
|
—
|
|
|
(9,802
|
)
|
|
(1,535
|
)
|
Corporate
|
(43,253
|
)
|
|
(49,086
|
)
|
|
(55,662
|
)
|
Total
|
243,504
|
|
|
131,695
|
|
|
357,716
|
|
Interest expense, net
|
(41,304
|
)
|
|
(41,325
|
)
|
|
(30,744
|
)
|
Costs associated with refinancing of debt
|
—
|
|
|
—
|
|
|
(38,705
|
)
|
Other
|
18,254
|
|
|
2,637
|
|
|
(4,084
|
)
|
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries
|
$
|
220,454
|
|
|
$
|
93,007
|
|
|
$
|
284,183
|
|
|
|
|
|
|
|
TOTAL ASSETS:
|
|
|
|
|
|
Engineered Support Structures
|
$
|
610,366
|
|
|
$
|
611,201
|
|
|
$
|
640,132
|
|
Energy and Mining
|
364,658
|
|
|
396,366
|
|
|
500,407
|
|
Utility Support Structures
|
410,448
|
|
|
422,021
|
|
|
470,720
|
|
Coatings
|
274,666
|
|
|
270,793
|
|
|
301,707
|
|
Irrigation
|
313,982
|
|
|
310,967
|
|
|
360,883
|
|
Other
|
—
|
|
|
2,267
|
|
|
4,930
|
|
Corporate
|
417,611
|
|
|
378,767
|
|
|
443,176
|
|
Total
|
$
|
2,391,731
|
|
|
$
|
2,392,382
|
|
|
$
|
2,721,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL EXPENDITURES:
|
|
|
|
|
|
Engineered Support Structures
|
$
|
16,045
|
|
|
$
|
11,445
|
|
|
$
|
11,849
|
|
Energy and Mining
|
3,427
|
|
|
3,544
|
|
|
4,893
|
|
Utility Support Structures
|
3,411
|
|
|
11,815
|
|
|
9,014
|
|
Coatings
|
24,873
|
|
|
6,836
|
|
|
14,029
|
|
Irrigation
|
8,836
|
|
|
7,756
|
|
|
21,113
|
|
Other
|
—
|
|
|
1,396
|
|
|
1,181
|
|
Corporate
|
1,328
|
|
|
2,676
|
|
|
10,944
|
|
Total
|
$
|
57,920
|
|
|
$
|
45,468
|
|
|
$
|
73,023
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(19) BUSINESS SEGMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
DEPRECIATION AND AMORTIZATION:
|
|
|
|
|
|
Engineered Support Structures
|
$
|
21,048
|
|
|
$
|
22,810
|
|
|
$
|
22,363
|
|
Energy and Mining
|
17,425
|
|
|
20,733
|
|
|
22,146
|
|
Utility Support Structures
|
16,492
|
|
|
17,959
|
|
|
17,811
|
|
Coatings
|
12,883
|
|
|
12,962
|
|
|
14,615
|
|
Irrigation
|
12,097
|
|
|
11,746
|
|
|
10,471
|
|
Other
|
—
|
|
|
570
|
|
|
123
|
|
Corporate
|
2,472
|
|
|
4,364
|
|
|
1,799
|
|
Total
|
$
|
82,417
|
|
|
$
|
91,144
|
|
|
$
|
89,328
|
|
Summary by Geographical Area by Location of Valmont Facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
NET SALES:
|
|
|
|
|
|
United States
|
$
|
1,535,321
|
|
|
$
|
1,586,702
|
|
|
$
|
1,808,427
|
|
Australia
|
315,470
|
|
|
347,975
|
|
|
439,530
|
|
Denmark
|
99,719
|
|
|
98,628
|
|
|
146,432
|
|
Other
|
571,166
|
|
|
585,619
|
|
|
728,754
|
|
Total
|
$
|
2,521,676
|
|
|
$
|
2,618,924
|
|
|
$
|
3,123,143
|
|
|
|
|
|
|
|
LONG-LIVED ASSETS:
|
|
|
|
|
|
United States
|
$
|
568,085
|
|
|
$
|
575,737
|
|
|
$
|
609,005
|
|
Australia
|
216,416
|
|
|
259,326
|
|
|
316,382
|
|
Denmark
|
85,654
|
|
|
90,463
|
|
|
111,161
|
|
Other
|
268,360
|
|
|
240,004
|
|
|
292,466
|
|
Total
|
$
|
1,138,515
|
|
|
$
|
1,165,530
|
|
|
$
|
1,329,014
|
|
No single customer accounted for more than 10% of net sales in
2016
,
2015
, or
2014
. Net sales by geographical area are based on the location of the facility producing the sales and do not include sales to other operating units of the company. While Australia accounted for approximately
13%
of the Company's net sales in
2016
, no other foreign country accounted for more than 5% of the Company’s net sales.
Operating income by business segment are based on net sales less identifiable operating expenses and allocations and includes profits recorded on sales to other operating units of the company. Long-lived assets consist of property, plant and equipment, net of depreciation, goodwill, other intangible assets and other assets. Long-lived assets by geographical area are based on location of facilities.
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
The Company has three tranches of senior unsecured notes. All of the senior notes are guaranteed, jointly, severally, fully and unconditionally (subject to certain customary release provisions, including sale of the subsidiary guarantor, or sale of all or substantially all of its assets) 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. The Company is the issuer.
Consolidated financial information for the Company ("Parent"), the Guarantor subsidiaries and the Non-Guarantor subsidiaries is as follows:
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
1,126,985
|
|
|
$
|
390,756
|
|
|
$
|
1,195,812
|
|
|
$
|
(191,877
|
)
|
|
$
|
2,521,676
|
|
Cost of sales
|
837,616
|
|
|
285,924
|
|
|
932,609
|
|
|
(190,716
|
)
|
|
1,865,433
|
|
Gross profit
|
289,369
|
|
|
104,832
|
|
|
263,203
|
|
|
(1,161
|
)
|
|
656,243
|
|
Selling, general and administrative expenses
|
184,493
|
|
|
46,244
|
|
|
182,002
|
|
|
—
|
|
|
412,739
|
|
Operating income
|
104,876
|
|
|
58,588
|
|
|
81,201
|
|
|
(1,161
|
)
|
|
243,504
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(43,703
|
)
|
|
(10
|
)
|
|
(696
|
)
|
|
—
|
|
|
(44,409
|
)
|
Interest income
|
273
|
|
|
112
|
|
|
2,720
|
|
|
—
|
|
|
3,105
|
|
Other
|
1,480
|
|
|
77
|
|
|
16,697
|
|
|
—
|
|
|
18,254
|
|
|
(41,950
|
)
|
|
179
|
|
|
18,721
|
|
|
—
|
|
|
(23,050
|
)
|
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries
|
62,926
|
|
|
58,767
|
|
|
99,922
|
|
|
(1,161
|
)
|
|
220,454
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
Current
|
24,539
|
|
|
20,270
|
|
|
21,262
|
|
|
(323
|
)
|
|
65,748
|
|
Deferred
|
6,216
|
|
|
—
|
|
|
(29,901
|
)
|
|
—
|
|
|
(23,685
|
)
|
|
30,755
|
|
|
20,270
|
|
|
(8,639
|
)
|
|
(323
|
)
|
|
42,063
|
|
Earnings before equity in earnings of nonconsolidated subsidiaries
|
32,171
|
|
|
38,497
|
|
|
108,561
|
|
|
(838
|
)
|
|
178,391
|
|
Equity in earnings of nonconsolidated subsidiaries
|
141,061
|
|
|
66,128
|
|
|
—
|
|
|
(207,189
|
)
|
|
—
|
|
Net earnings
|
173,232
|
|
|
104,625
|
|
|
108,561
|
|
|
(208,027
|
)
|
|
178,391
|
|
Less: Earnings attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(5,159
|
)
|
|
—
|
|
|
(5,159
|
)
|
Net earnings attributable to Valmont Industries, Inc
|
$
|
173,232
|
|
|
$
|
104,625
|
|
|
$
|
103,402
|
|
|
$
|
(208,027
|
)
|
|
$
|
173,232
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the
Year ended December 26, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
1,169,674
|
|
|
$
|
423,928
|
|
|
$
|
1,238,609
|
|
|
$
|
(213,287
|
)
|
|
$
|
2,618,924
|
|
Cost of sales
|
890,242
|
|
|
332,847
|
|
|
987,729
|
|
|
(212,927
|
)
|
|
1,997,891
|
|
Gross profit
|
279,432
|
|
|
91,081
|
|
|
250,880
|
|
|
(360
|
)
|
|
621,033
|
|
Selling, general and administrative expenses
|
194,335
|
|
|
45,549
|
|
|
207,484
|
|
|
—
|
|
|
447,368
|
|
Impairment of goodwill and intangible assets
|
—
|
|
|
—
|
|
|
41,970
|
|
|
—
|
|
|
41,970
|
|
Operating income
|
85,097
|
|
|
45,532
|
|
|
1,426
|
|
|
(360
|
)
|
|
131,695
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(43,552
|
)
|
|
—
|
|
|
(1,069
|
)
|
|
—
|
|
|
(44,621
|
)
|
Interest income
|
9
|
|
|
103
|
|
|
3,184
|
|
|
—
|
|
|
3,296
|
|
Other
|
(2,374
|
)
|
|
60
|
|
|
4,951
|
|
|
—
|
|
|
2,637
|
|
|
(45,917
|
)
|
|
163
|
|
|
7,066
|
|
|
—
|
|
|
(38,688
|
)
|
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries
|
39,180
|
|
|
45,695
|
|
|
8,492
|
|
|
(360
|
)
|
|
93,007
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
Current
|
863
|
|
|
23,261
|
|
|
18,446
|
|
|
(1
|
)
|
|
42,569
|
|
Deferred
|
10,042
|
|
|
(6,224
|
)
|
|
1,040
|
|
|
—
|
|
|
4,858
|
|
|
10,905
|
|
|
17,037
|
|
|
19,486
|
|
|
(1
|
)
|
|
47,427
|
|
Earnings before equity in earnings of nonconsolidated subsidiaries
|
28,275
|
|
|
28,658
|
|
|
(10,994
|
)
|
|
(359
|
)
|
|
45,580
|
|
Equity in earnings of nonconsolidated subsidiaries
|
11,842
|
|
|
(39,418
|
)
|
|
(247
|
)
|
|
27,576
|
|
|
(247
|
)
|
Net earnings
|
40,117
|
|
|
(10,760
|
)
|
|
(11,241
|
)
|
|
27,217
|
|
|
45,333
|
|
Less: Earnings attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(5,216
|
)
|
|
—
|
|
|
(5,216
|
)
|
Net earnings attributable to Valmont Industries, Inc
|
$
|
40,117
|
|
|
$
|
(10,760
|
)
|
|
$
|
(16,457
|
)
|
|
$
|
27,217
|
|
|
$
|
40,117
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the
Year ended December 27, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
1,392,509
|
|
|
$
|
496,326
|
|
|
$
|
1,456,053
|
|
|
$
|
(221,745
|
)
|
|
$
|
3,123,143
|
|
Cost of sales
|
1,040,808
|
|
|
371,639
|
|
|
1,124,813
|
|
|
(222,234
|
)
|
|
2,315,026
|
|
Gross profit
|
351,701
|
|
|
124,687
|
|
|
331,240
|
|
|
489
|
|
|
808,117
|
|
Selling, general and administrative expenses
|
196,987
|
|
|
49,171
|
|
|
204,243
|
|
|
—
|
|
|
450,401
|
|
Operating income
|
154,714
|
|
|
75,516
|
|
|
126,997
|
|
|
489
|
|
|
357,716
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(34,267
|
)
|
|
(5
|
)
|
|
(2,518
|
)
|
|
—
|
|
|
(36,790
|
)
|
Interest income
|
38
|
|
|
359
|
|
|
5,649
|
|
|
—
|
|
|
6,046
|
|
Costs associated with refinancing of debt
|
(38,705
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38,705
|
)
|
Other
|
2,021
|
|
|
(511
|
)
|
|
(5,594
|
)
|
|
—
|
|
|
(4,084
|
)
|
|
(70,913
|
)
|
|
(157
|
)
|
|
(2,463
|
)
|
|
—
|
|
|
(73,533
|
)
|
Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries
|
83,801
|
|
|
75,359
|
|
|
124,534
|
|
|
489
|
|
|
284,183
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
Current
|
30,330
|
|
|
25,277
|
|
|
33,898
|
|
|
138
|
|
|
89,643
|
|
Deferred
|
(1,474
|
)
|
|
1,866
|
|
|
4,859
|
|
|
—
|
|
|
5,251
|
|
|
28,856
|
|
|
27,143
|
|
|
38,757
|
|
|
138
|
|
|
94,894
|
|
Earnings before equity in earnings of nonconsolidated subsidiaries
|
54,945
|
|
|
48,216
|
|
|
85,777
|
|
|
351
|
|
|
189,289
|
|
Equity in earnings of nonconsolidated subsidiaries
|
129,031
|
|
|
19,509
|
|
|
63
|
|
|
(148,574
|
)
|
|
29
|
|
Net earnings
|
183,976
|
|
|
67,725
|
|
|
85,840
|
|
|
(148,223
|
)
|
|
189,318
|
|
Less: Earnings attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(5,342
|
)
|
|
—
|
|
|
(5,342
|
)
|
Net earnings attributable to Valmont Industries, Inc
|
$
|
183,976
|
|
|
$
|
67,725
|
|
|
$
|
80,498
|
|
|
$
|
(148,223
|
)
|
|
$
|
183,976
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Net earnings
|
$
|
173,232
|
|
|
$
|
104,625
|
|
|
$
|
108,561
|
|
|
$
|
(208,027
|
)
|
|
$
|
178,391
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
Unrealized translation gains (losses)
|
—
|
|
|
49
|
|
|
(58,364
|
)
|
|
—
|
|
|
(58,315
|
)
|
Gain (loss) on hedging activity:
|
|
|
|
|
|
|
|
|
|
Unrealized gain on net investment hedge
|
4,226
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,226
|
|
Amortization cost included in interest expense
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
|
4,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,300
|
|
Actuarial gain (loss) in defined benefit pension plan liability
|
—
|
|
|
—
|
|
|
(24,141
|
)
|
|
—
|
|
|
(24,141
|
)
|
Equity in other comprehensive income
|
(83,252
|
)
|
|
—
|
|
|
—
|
|
|
83,252
|
|
|
—
|
|
Other comprehensive income (loss)
|
(78,952
|
)
|
|
49
|
|
|
(82,505
|
)
|
|
83,252
|
|
|
(78,156
|
)
|
Comprehensive income (loss)
|
94,280
|
|
|
104,674
|
|
|
26,056
|
|
|
(124,775
|
)
|
|
100,235
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(6,144
|
)
|
|
—
|
|
|
(6,144
|
)
|
Comprehensive income (loss) attributable to Valmont Industries, Inc.
|
$
|
94,280
|
|
|
$
|
104,674
|
|
|
$
|
19,912
|
|
|
$
|
(124,775
|
)
|
|
$
|
94,091
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the
Year ended December 26, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Net earnings
|
$
|
40,117
|
|
|
$
|
(10,760
|
)
|
|
$
|
(11,241
|
)
|
|
$
|
27,217
|
|
|
$
|
45,333
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
Unrealized translation gains (losses)
|
—
|
|
|
(15,166
|
)
|
|
(81,528
|
)
|
|
—
|
|
|
(96,694
|
)
|
|
—
|
|
|
(15,166
|
)
|
|
(81,528
|
)
|
|
—
|
|
|
(96,694
|
)
|
Gain (loss) on cash flow hedge:
|
|
|
|
|
|
|
|
|
|
Amortization cost included in interest expense
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
Realized (gain) loss included in net earnings
|
(3,130
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,130
|
)
|
Unrealized gain on cash flow hedges
|
2,855
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,855
|
|
|
(201
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(201
|
)
|
Actuarial gain (loss) in defined benefit pension plan liability
|
—
|
|
|
—
|
|
|
(40,274
|
)
|
|
—
|
|
|
(40,274
|
)
|
Equity in other comprehensive income
|
(132,584
|
)
|
|
—
|
|
|
—
|
|
|
132,584
|
|
|
—
|
|
Other comprehensive income (loss)
|
(132,785
|
)
|
|
(15,166
|
)
|
|
(121,802
|
)
|
|
132,584
|
|
|
(137,169
|
)
|
Comprehensive income (loss)
|
(92,668
|
)
|
|
(25,926
|
)
|
|
(133,043
|
)
|
|
159,801
|
|
|
(91,836
|
)
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(832
|
)
|
|
—
|
|
|
(832
|
)
|
Comprehensive income (loss) attributable to Valmont Industries, Inc.
|
$
|
(92,668
|
)
|
|
$
|
(25,926
|
)
|
|
$
|
(133,875
|
)
|
|
$
|
159,801
|
|
|
$
|
(92,668
|
)
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the
Year ended December 27, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Net earnings
|
$
|
183,976
|
|
|
$
|
67,725
|
|
|
$
|
85,840
|
|
|
$
|
(148,223
|
)
|
|
$
|
189,318
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
Unrealized translation gains (losses)
|
—
|
|
|
(51,536
|
)
|
|
(30,739
|
)
|
|
—
|
|
|
(82,275
|
)
|
|
—
|
|
|
(51,536
|
)
|
|
(30,739
|
)
|
|
—
|
|
|
(82,275
|
)
|
Gain (loss) on cash flow hedge:
|
|
|
|
|
|
|
|
|
|
Amortization cost included in interest expense
|
594
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
594
|
|
Realized (gain) loss included in net earnings
|
983
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
983
|
|
Unrealized gain on cash flow hedges
|
4,837
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,837
|
|
|
6,414
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,414
|
|
Actuarial gain (loss) in defined benefit pension plan liability
|
—
|
|
|
—
|
|
|
(13,709
|
)
|
|
—
|
|
|
(13,709
|
)
|
Equity in other comprehensive income
|
(93,162
|
)
|
|
—
|
|
|
—
|
|
|
93,162
|
|
|
—
|
|
Other comprehensive income (loss)
|
(86,748
|
)
|
|
(51,536
|
)
|
|
(44,448
|
)
|
|
93,162
|
|
|
(89,570
|
)
|
Comprehensive income
|
97,228
|
|
|
16,189
|
|
|
41,392
|
|
|
(55,061
|
)
|
|
99,748
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(2,520
|
)
|
|
—
|
|
|
(2,520
|
)
|
Comprehensive income attributable to Valmont Industries, Inc.
|
$
|
97,228
|
|
|
$
|
16,189
|
|
|
$
|
38,872
|
|
|
$
|
(55,061
|
)
|
|
$
|
97,228
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
67,225
|
|
|
$
|
6,071
|
|
|
$
|
326,652
|
|
|
$
|
—
|
|
|
$
|
399,948
|
|
Receivables, net
|
134,351
|
|
|
60,522
|
|
|
244,469
|
|
|
—
|
|
|
439,342
|
|
Inventories
|
126,669
|
|
|
45,457
|
|
|
182,056
|
|
|
(4,154
|
)
|
|
350,028
|
|
Prepaid expenses, restricted cash, and other assets
|
13,271
|
|
|
880
|
|
|
43,146
|
|
|
—
|
|
|
57,297
|
|
Refundable income taxes
|
6,601
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,601
|
|
Total current assets
|
348,117
|
|
|
112,930
|
|
|
796,323
|
|
|
(4,154
|
)
|
|
1,253,216
|
|
Property, plant and equipment, at cost
|
547,076
|
|
|
153,596
|
|
|
405,064
|
|
|
—
|
|
|
1,105,736
|
|
Less accumulated depreciation and amortization
|
352,960
|
|
|
76,776
|
|
|
157,665
|
|
|
—
|
|
|
587,401
|
|
Net property, plant and equipment
|
194,116
|
|
|
76,820
|
|
|
247,399
|
|
|
—
|
|
|
518,335
|
|
Goodwill
|
20,108
|
|
|
110,561
|
|
|
190,441
|
|
|
—
|
|
|
321,110
|
|
Other intangible assets
|
184
|
|
|
35,953
|
|
|
108,241
|
|
|
—
|
|
|
144,378
|
|
Investment in subsidiaries and intercompany accounts
|
1,279,413
|
|
|
901,758
|
|
|
1,089,369
|
|
|
(3,270,540
|
)
|
|
—
|
|
Other assets
|
43,880
|
|
|
—
|
|
|
110,812
|
|
|
—
|
|
|
154,692
|
|
Total assets
|
$
|
1,885,818
|
|
|
$
|
1,238,022
|
|
|
$
|
2,542,585
|
|
|
$
|
(3,274,694
|
)
|
|
$
|
2,391,731
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current installments of long-term debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
851
|
|
|
$
|
—
|
|
|
$
|
851
|
|
Notes payable to banks
|
—
|
|
|
—
|
|
|
746
|
|
|
—
|
|
|
746
|
|
Accounts payable
|
52,272
|
|
|
15,732
|
|
|
109,484
|
|
|
—
|
|
|
177,488
|
|
Accrued employee compensation and benefits
|
34,508
|
|
|
7,243
|
|
|
30,653
|
|
|
—
|
|
|
72,404
|
|
Accrued expenses
|
30,261
|
|
|
15,242
|
|
|
44,411
|
|
|
—
|
|
|
89,914
|
|
Dividends payable
|
8,445
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,445
|
|
Total current liabilities
|
125,486
|
|
|
38,217
|
|
|
186,145
|
|
|
—
|
|
|
349,848
|
|
Deferred income taxes
|
22,481
|
|
|
—
|
|
|
13,322
|
|
|
—
|
|
|
35,803
|
|
Long-term debt, excluding current installments
|
751,251
|
|
|
—
|
|
|
3,544
|
|
|
—
|
|
|
754,795
|
|
Defined benefit pension liability
|
—
|
|
|
—
|
|
|
209,470
|
|
|
—
|
|
|
209,470
|
|
Deferred compensation
|
39,476
|
|
|
—
|
|
|
4,843
|
|
|
—
|
|
|
44,319
|
|
Other noncurrent liabilities
|
3,642
|
|
|
5
|
|
|
11,263
|
|
|
—
|
|
|
14,910
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
Common stock of $1 par value
|
27,900
|
|
|
457,950
|
|
|
648,683
|
|
|
(1,106,633
|
)
|
|
27,900
|
|
Additional paid-in capital
|
—
|
|
|
159,414
|
|
|
1,107,536
|
|
|
(1,266,950
|
)
|
|
—
|
|
Retained earnings
|
1,874,722
|
|
|
646,749
|
|
|
603,338
|
|
|
(1,250,087
|
)
|
|
1,874,722
|
|
Accumulated other comprehensive income (loss)
|
(346,359
|
)
|
|
(64,313
|
)
|
|
(284,663
|
)
|
|
348,976
|
|
|
(346,359
|
)
|
Treasury stock
|
(612,781
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(612,781
|
)
|
Total Valmont Industries, Inc. shareholders’ equity
|
943,482
|
|
|
1,199,800
|
|
|
2,074,894
|
|
|
(3,274,694
|
)
|
|
943,482
|
|
Noncontrolling interest in consolidated subsidiaries
|
—
|
|
|
—
|
|
|
39,104
|
|
|
—
|
|
|
39,104
|
|
Total shareholders’ equity
|
943,482
|
|
|
1,199,800
|
|
|
2,113,998
|
|
|
(3,274,694
|
)
|
|
982,586
|
|
Total liabilities and shareholders’ equity
|
$
|
1,885,818
|
|
|
$
|
1,238,022
|
|
|
$
|
2,542,585
|
|
|
$
|
(3,274,694
|
)
|
|
$
|
2,391,731
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 26, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
62,281
|
|
|
$
|
4,008
|
|
|
$
|
282,785
|
|
|
$
|
—
|
|
|
$
|
349,074
|
|
Receivables, net
|
130,741
|
|
|
66,387
|
|
|
269,315
|
|
|
—
|
|
|
466,443
|
|
Inventories
|
132,222
|
|
|
38,379
|
|
|
173,064
|
|
|
(2,993
|
)
|
|
340,672
|
|
Prepaid expenses, restricted cash, and other assets
|
9,900
|
|
|
766
|
|
|
35,471
|
|
|
—
|
|
|
46,137
|
|
Refundable income taxes
|
24,526
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,526
|
|
Total current assets
|
359,670
|
|
|
109,540
|
|
|
760,635
|
|
|
(2,993
|
)
|
|
1,226,852
|
|
Property, plant and equipment, at cost
|
541,536
|
|
|
132,864
|
|
|
406,656
|
|
|
—
|
|
|
1,081,056
|
|
Less accumulated depreciation and amortization
|
334,471
|
|
|
69,956
|
|
|
144,140
|
|
|
—
|
|
|
548,567
|
|
Net property, plant and equipment
|
207,065
|
|
|
62,908
|
|
|
262,516
|
|
|
—
|
|
|
532,489
|
|
Goodwill
|
20,108
|
|
|
110,562
|
|
|
206,246
|
|
|
—
|
|
|
336,916
|
|
Other intangible assets
|
238
|
|
|
40,959
|
|
|
129,000
|
|
|
—
|
|
|
170,197
|
|
Investment in subsidiaries and intercompany accounts
|
1,239,228
|
|
|
813,779
|
|
|
939,177
|
|
|
(2,992,184
|
)
|
|
—
|
|
Other assets
|
40,067
|
|
|
—
|
|
|
85,861
|
|
|
—
|
|
|
125,928
|
|
Total assets
|
$
|
1,866,376
|
|
|
$
|
1,137,748
|
|
|
$
|
2,383,435
|
|
|
$
|
(2,995,177
|
)
|
|
$
|
2,392,382
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current installments of long-term debt
|
$
|
215
|
|
|
$
|
—
|
|
|
$
|
862
|
|
|
$
|
—
|
|
|
$
|
1,077
|
|
Notes payable to banks
|
—
|
|
|
—
|
|
|
976
|
|
|
—
|
|
|
976
|
|
Accounts payable
|
66,723
|
|
|
13,680
|
|
|
99,580
|
|
|
—
|
|
|
179,983
|
|
Accrued employee compensation and benefits
|
32,272
|
|
|
6,347
|
|
|
31,735
|
|
|
—
|
|
|
70,354
|
|
Accrued expenses
|
31,073
|
|
|
22,802
|
|
|
51,718
|
|
|
—
|
|
|
105,593
|
|
Dividends payable
|
8,571
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,571
|
|
Total current liabilities
|
138,854
|
|
|
42,829
|
|
|
184,871
|
|
|
—
|
|
|
366,554
|
|
Deferred income taxes
|
9,686
|
|
|
—
|
|
|
25,983
|
|
|
—
|
|
|
35,669
|
|
Long-term debt, excluding current installments
|
751,765
|
|
|
—
|
|
|
5,153
|
|
|
—
|
|
|
756,918
|
|
Defined benefit pension liability
|
—
|
|
|
—
|
|
|
179,323
|
|
|
—
|
|
|
179,323
|
|
Deferred compensation
|
43,485
|
|
|
—
|
|
|
4,932
|
|
|
—
|
|
|
48,417
|
|
Other noncurrent liabilities
|
4,145
|
|
|
—
|
|
|
36,145
|
|
|
—
|
|
|
40,290
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
Common stock of $1 par value
|
27,900
|
|
|
457,950
|
|
|
648,683
|
|
|
(1,106,633
|
)
|
|
27,900
|
|
Additional paid-in capital
|
—
|
|
|
159,414
|
|
|
1,107,536
|
|
|
(1,266,950
|
)
|
|
—
|
|
Retained earnings
|
1,729,679
|
|
|
541,917
|
|
|
354,727
|
|
|
(896,644
|
)
|
|
1,729,679
|
|
Accumulated other comprehensive income
|
(267,218
|
)
|
|
(64,362
|
)
|
|
(210,688
|
)
|
|
275,050
|
|
|
(267,218
|
)
|
Treasury stock
|
(571,920
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(571,920
|
)
|
Total Valmont Industries, Inc. shareholders’ equity
|
918,441
|
|
|
1,094,919
|
|
|
1,900,258
|
|
|
(2,995,177
|
)
|
|
918,441
|
|
Noncontrolling interest in consolidated subsidiaries
|
—
|
|
|
—
|
|
|
46,770
|
|
|
—
|
|
|
46,770
|
|
Total shareholders’ equity
|
918,441
|
|
|
1,094,919
|
|
|
1,947,028
|
|
|
(2,995,177
|
)
|
|
965,211
|
|
Total liabilities and shareholders’ equity
|
$
|
1,866,376
|
|
|
$
|
1,137,748
|
|
|
$
|
2,383,435
|
|
|
$
|
(2,995,177
|
)
|
|
$
|
2,392,382
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
173,232
|
|
|
$
|
104,625
|
|
|
$
|
108,561
|
|
|
$
|
(208,027
|
)
|
|
$
|
178,391
|
|
Adjustments to reconcile net earnings to net cash flows from operations:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
27,096
|
|
|
13,316
|
|
|
42,005
|
|
|
—
|
|
|
82,417
|
|
Noncash loss on trading securities
|
—
|
|
|
—
|
|
|
586
|
|
|
—
|
|
|
586
|
|
Increase in restricted cash - pension plan trust
|
—
|
|
|
—
|
|
|
(13,652
|
)
|
|
—
|
|
|
(13,652
|
)
|
Impairment of property, plant and equipment
|
—
|
|
|
—
|
|
|
1,099
|
|
|
—
|
|
|
1,099
|
|
Stock-based compensation
|
9,931
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,931
|
|
Change in fair value of contingent consideration
|
—
|
|
|
—
|
|
|
(3,242
|
)
|
|
—
|
|
|
(3,242
|
)
|
Defined benefit pension plan expense (benefit)
|
—
|
|
|
—
|
|
|
1,870
|
|
|
—
|
|
|
1,870
|
|
Contribution to defined benefit pension plan
|
—
|
|
|
—
|
|
|
(1,488
|
)
|
|
—
|
|
|
(1,488
|
)
|
(Gain) loss on sale of property, plant and equipment
|
165
|
|
|
103
|
|
|
363
|
|
|
—
|
|
|
631
|
|
Equity in earnings in nonconsolidated subsidiaries
|
(141,061
|
)
|
|
(66,128
|
)
|
|
—
|
|
|
207,189
|
|
|
—
|
|
Deferred income taxes
|
6,216
|
|
|
—
|
|
|
(29,901
|
)
|
|
—
|
|
|
(23,685
|
)
|
Changes in assets and liabilities (net of acquisitions):
|
|
|
|
|
|
|
|
|
|
Receivables
|
(3,610
|
)
|
|
5,865
|
|
|
22,367
|
|
|
—
|
|
|
24,622
|
|
Inventories
|
5,554
|
|
|
(7,078
|
)
|
|
(11,097
|
)
|
|
1,160
|
|
|
(11,461
|
)
|
Prepaid expenses
|
(1,250
|
)
|
|
(114
|
)
|
|
2,502
|
|
|
—
|
|
|
1,138
|
|
Accounts payable
|
(14,452
|
)
|
|
2,052
|
|
|
12,504
|
|
|
—
|
|
|
104
|
|
Accrued expenses
|
1,423
|
|
|
(6,664
|
)
|
|
(6,966
|
)
|
|
—
|
|
|
(12,207
|
)
|
Other noncurrent liabilities
|
(2,333
|
)
|
|
5
|
|
|
(21,552
|
)
|
|
—
|
|
|
(23,880
|
)
|
Income taxes payable (refundable)
|
32,873
|
|
|
(16,567
|
)
|
|
(8,312
|
)
|
|
—
|
|
|
7,994
|
|
Net cash flows from operating activities
|
93,784
|
|
|
29,415
|
|
|
95,647
|
|
|
322
|
|
|
219,168
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
(9,031
|
)
|
|
(22,320
|
)
|
|
(26,569
|
)
|
|
—
|
|
|
(57,920
|
)
|
Proceeds from sale of assets
|
44
|
|
|
102
|
|
|
4,980
|
|
|
—
|
|
|
5,126
|
|
Other, net
|
(633
|
)
|
|
(5,085
|
)
|
|
5,785
|
|
|
(322
|
)
|
|
(255
|
)
|
Net cash flows from investing activities
|
(9,620
|
)
|
|
(27,303
|
)
|
|
(15,804
|
)
|
|
(322
|
)
|
|
(53,049
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net payments under short-term agreements
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
|
(200
|
)
|
Principal payments on long-term borrowings
|
(215
|
)
|
|
—
|
|
|
(1,791
|
)
|
|
—
|
|
|
(2,006
|
)
|
Dividends paid
|
(34,053
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,053
|
)
|
Purchase of noncontrolling interest
|
—
|
|
|
—
|
|
|
(11,009
|
)
|
|
—
|
|
|
(11,009
|
)
|
Dividends to noncontrolling interest
|
—
|
|
|
—
|
|
|
(2,938
|
)
|
|
—
|
|
|
(2,938
|
)
|
Proceeds from exercises under stock plans
|
11,153
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,153
|
|
Purchase of treasury shares
|
(53,800
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53,800
|
)
|
Purchase of common treasury shares - stock plan exercises
|
(2,305
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,305
|
)
|
Net cash flows from financing activities
|
(79,220
|
)
|
|
—
|
|
|
(15,938
|
)
|
|
—
|
|
|
(95,158
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
(49
|
)
|
|
(20,038
|
)
|
|
—
|
|
|
(20,087
|
)
|
Net change in cash and cash equivalents
|
4,944
|
|
|
2,063
|
|
|
43,867
|
|
|
—
|
|
|
50,874
|
|
Cash and cash equivalents—beginning of year
|
62,281
|
|
|
4,008
|
|
|
282,785
|
|
|
—
|
|
|
349,074
|
|
Cash and cash equivalents—end of period
|
$
|
67,225
|
|
|
$
|
6,071
|
|
|
$
|
326,652
|
|
|
$
|
—
|
|
|
$
|
399,948
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
Year ended December 26, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
40,117
|
|
|
$
|
(10,760
|
)
|
|
$
|
(11,241
|
)
|
|
$
|
27,217
|
|
|
$
|
45,333
|
|
Adjustments to reconcile net earnings to net cash flows from operations:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
29,433
|
|
|
12,611
|
|
|
49,100
|
|
|
—
|
|
|
91,144
|
|
Noncash loss on trading securities
|
—
|
|
|
—
|
|
|
4,555
|
|
|
—
|
|
|
4,555
|
|
Impairment of property, plant and equipment
|
7,486
|
|
|
542
|
|
|
11,808
|
|
|
—
|
|
|
19,836
|
|
Impairment of goodwill & intangibles assets
|
—
|
|
|
—
|
|
|
41,970
|
|
|
—
|
|
|
41,970
|
|
Stock-based compensation
|
7,244
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,244
|
|
Defined benefit pension plan expense (benefit)
|
—
|
|
|
—
|
|
|
(610
|
)
|
|
—
|
|
|
(610
|
)
|
Contribution to defined benefit pension plan
|
—
|
|
|
—
|
|
|
(16,500
|
)
|
|
—
|
|
|
(16,500
|
)
|
(Gain) loss on sale of property, plant and equipment
|
983
|
|
|
319
|
|
|
1,025
|
|
|
—
|
|
|
2,327
|
|
Equity in earnings in nonconsolidated subsidiaries
|
(11,842
|
)
|
|
39,418
|
|
|
247
|
|
|
(27,576
|
)
|
|
247
|
|
Deferred income taxes
|
10,042
|
|
|
(6,224
|
)
|
|
1,040
|
|
|
—
|
|
|
4,858
|
|
Changes in assets and liabilities (net of acquisitions):
|
|
|
|
|
|
|
|
|
|
Receivables
|
27,576
|
|
|
3,547
|
|
|
19,144
|
|
|
—
|
|
|
50,267
|
|
Inventories
|
(4,364
|
)
|
|
18,130
|
|
|
(12,698
|
)
|
|
2,228
|
|
|
3,296
|
|
Prepaid expenses
|
2,337
|
|
|
(172
|
)
|
|
8,679
|
|
|
—
|
|
|
10,844
|
|
Accounts payable
|
6,831
|
|
|
(1,970
|
)
|
|
(11,666
|
)
|
|
—
|
|
|
(6,805
|
)
|
Accrued expenses
|
(16,485
|
)
|
|
17,713
|
|
|
7,366
|
|
|
324
|
|
|
8,918
|
|
Other noncurrent liabilities
|
177
|
|
|
—
|
|
|
(1,941
|
)
|
|
—
|
|
|
(1,764
|
)
|
Income taxes payable (refundable)
|
7,895
|
|
|
(306
|
)
|
|
(482
|
)
|
|
—
|
|
|
7,107
|
|
Net cash flows from operating activities
|
107,430
|
|
|
72,848
|
|
|
89,796
|
|
|
2,193
|
|
|
272,267
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
(14,362
|
)
|
|
(7,718
|
)
|
|
(23,388
|
)
|
|
—
|
|
|
(45,468
|
)
|
Proceeds from sale of assets
|
3,996
|
|
|
302
|
|
|
(1,049
|
)
|
|
—
|
|
|
3,249
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
(12,778
|
)
|
|
—
|
|
|
—
|
|
|
(12,778
|
)
|
Other, net
|
72,866
|
|
|
(50,447
|
)
|
|
(13,400
|
)
|
|
(2,193
|
)
|
|
6,826
|
|
Net cash flows from investing activities
|
62,500
|
|
|
(70,641
|
)
|
|
(37,837
|
)
|
|
(2,193
|
)
|
|
(48,171
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net payments under short-term agreements
|
—
|
|
|
—
|
|
|
(12,853
|
)
|
|
—
|
|
|
(12,853
|
)
|
Proceeds from long-term borrowings
|
68,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68,000
|
|
Principal payments on long-term borrowings
|
(68,213
|
)
|
|
—
|
|
|
(885
|
)
|
|
—
|
|
|
(69,098
|
)
|
Dividends paid
|
(35,357
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,357
|
)
|
Intercompany dividends
|
26,115
|
|
|
—
|
|
|
(26,115
|
)
|
|
—
|
|
|
—
|
|
Dividends to noncontrolling interest
|
—
|
|
|
—
|
|
|
(2,634
|
)
|
|
—
|
|
|
(2,634
|
)
|
Proceeds from exercises under stock plans
|
13,075
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,075
|
|
Excess tax benefits from stock option exercises
|
1,699
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,699
|
|
Purchase of treasury shares
|
(168,983
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(168,983
|
)
|
Purchase of common treasury shares - stock plan exercises
|
(13,854
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,854
|
)
|
Net cash flows from financing activities
|
(177,518
|
)
|
|
—
|
|
|
(42,487
|
)
|
|
—
|
|
|
(220,005
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
(356
|
)
|
|
(26,240
|
)
|
|
—
|
|
|
(26,596
|
)
|
Net change in cash and cash equivalents
|
(7,588
|
)
|
|
1,851
|
|
|
(16,768
|
)
|
|
—
|
|
|
(22,505
|
)
|
Cash and cash equivalents—beginning of year
|
69,869
|
|
|
2,157
|
|
|
299,553
|
|
|
—
|
|
|
371,579
|
|
Cash and cash equivalents—end of period
|
$
|
62,281
|
|
|
$
|
4,008
|
|
|
$
|
282,785
|
|
|
$
|
—
|
|
|
$
|
349,074
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(20) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
Year ended December 27, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
183,976
|
|
|
$
|
67,725
|
|
|
$
|
85,840
|
|
|
$
|
(148,223
|
)
|
|
$
|
189,318
|
|
Adjustments to reconcile net earnings to net cash flows from operations:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
24,509
|
|
|
12,926
|
|
|
51,893
|
|
|
—
|
|
|
89,328
|
|
Non-cash loss on trading securities
|
—
|
|
|
—
|
|
|
3,795
|
|
|
—
|
|
|
3,795
|
|
Non-cash debt refinancing costs
|
(2,478
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,478
|
)
|
Stock-based compensation
|
6,730
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,730
|
|
Defined benefit pension plan expense
|
—
|
|
|
—
|
|
|
2,638
|
|
|
—
|
|
|
2,638
|
|
Contribution to defined benefit pension plan
|
—
|
|
|
—
|
|
|
(18,173
|
)
|
|
—
|
|
|
(18,173
|
)
|
Change in fair value of contingent consideration
|
—
|
|
|
—
|
|
|
(4,300
|
)
|
|
—
|
|
|
(4,300
|
)
|
(Gain) loss on sale of property, plant and equipment
|
145
|
|
|
143
|
|
|
104
|
|
|
—
|
|
|
392
|
|
Equity in earnings in nonconsolidated subsidiaries
|
(129,031
|
)
|
|
(19,509
|
)
|
|
(63
|
)
|
|
148,574
|
|
|
(29
|
)
|
Deferred income taxes
|
(1,474
|
)
|
|
1,866
|
|
|
4,859
|
|
|
—
|
|
|
5,251
|
|
Changes in assets and liabilities (net of acquisitions):
|
|
|
|
|
|
|
|
|
|
Receivables
|
(19,136
|
)
|
|
40,186
|
|
|
(20,143
|
)
|
|
—
|
|
|
907
|
|
Inventories
|
5,094
|
|
|
15,317
|
|
|
1,047
|
|
|
—
|
|
|
21,458
|
|
Prepaid expenses
|
(2,352
|
)
|
|
429
|
|
|
(11,671
|
)
|
|
—
|
|
|
(13,594
|
)
|
Accounts payable
|
(2,260
|
)
|
|
(5,212
|
)
|
|
(26,849
|
)
|
|
—
|
|
|
(34,321
|
)
|
Accrued expenses
|
(21,448
|
)
|
|
(9,590
|
)
|
|
(3,740
|
)
|
|
—
|
|
|
(34,778
|
)
|
Other noncurrent liabilities
|
622
|
|
|
—
|
|
|
1,133
|
|
|
—
|
|
|
1,755
|
|
Income taxes payable
|
(24,945
|
)
|
|
(19,417
|
)
|
|
4,559
|
|
|
—
|
|
|
(39,803
|
)
|
Net cash flows from operating activities
|
17,952
|
|
|
84,864
|
|
|
70,929
|
|
|
351
|
|
|
174,096
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
(41,260
|
)
|
|
(2,823
|
)
|
|
(28,940
|
)
|
|
—
|
|
|
(73,023
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(185,710
|
)
|
|
—
|
|
|
(185,710
|
)
|
Proceeds from sale of assets
|
43
|
|
|
126
|
|
|
2,320
|
|
|
—
|
|
|
2,489
|
|
Other, net
|
34,735
|
|
|
(73,799
|
)
|
|
38,796
|
|
|
(351
|
)
|
|
(619
|
)
|
Net cash flows from investing activities
|
(6,482
|
)
|
|
(76,496
|
)
|
|
(173,534
|
)
|
|
(351
|
)
|
|
(256,863
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net payments under short-term agreements
|
—
|
|
|
—
|
|
|
(4,472
|
)
|
|
—
|
|
|
(4,472
|
)
|
Proceeds from long-term borrowings
|
652,540
|
|
|
—
|
|
|
(329
|
)
|
|
—
|
|
|
652,211
|
|
Principal payments on long-term obligations
|
(356,994
|
)
|
|
—
|
|
|
(864
|
)
|
|
—
|
|
|
(357,858
|
)
|
Settlement of financial derivative
|
4,981
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,981
|
|
Dividends paid
|
(32,443
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,443
|
)
|
Intercompany dividends
|
116,995
|
|
|
(36,600
|
)
|
|
(80,395
|
)
|
|
—
|
|
|
—
|
|
Intercompany interest on long-term note
|
—
|
|
|
648
|
|
|
(648
|
)
|
|
—
|
|
|
—
|
|
Intercompany capital contribution
|
(143,000
|
)
|
|
—
|
|
|
143,000
|
|
|
—
|
|
|
—
|
|
Dividends to noncontrolling interest
|
—
|
|
|
—
|
|
|
(2,919
|
)
|
|
—
|
|
|
(2,919
|
)
|
Debt issuance fees
|
(7,644
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,644
|
)
|
Proceeds from exercises under stock plans
|
14,572
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,572
|
|
Excess tax benefits from stock option exercises
|
4,264
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,264
|
|
Purchase of treasury shares
|
(395,045
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(395,045
|
)
|
Purchase of common treasury shares - stock plan exercises
|
(15,403
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,403
|
)
|
Net cash flows from financing activities
|
(157,177
|
)
|
|
(35,952
|
)
|
|
53,373
|
|
|
—
|
|
|
(139,756
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
(56
|
)
|
|
(19,548
|
)
|
|
—
|
|
|
(19,604
|
)
|
Net change in cash and cash equivalents
|
(145,707
|
)
|
|
(27,640
|
)
|
|
(68,780
|
)
|
|
—
|
|
|
(242,127
|
)
|
Cash and cash equivalents—beginning of year
|
215,576
|
|
|
29,797
|
|
|
368,333
|
|
|
—
|
|
|
613,706
|
|
Cash and cash equivalents—end of year
|
$
|
69,869
|
|
|
$
|
2,157
|
|
|
$
|
299,553
|
|
|
$
|
—
|
|
|
$
|
371,579
|
|
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three-year period ended December 31, 2016
(Dollars in thousands, except per share amounts)
(21) QUARTERLY FINANCIAL DATA (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
Per Share
|
|
Stock Price
|
|
Dividends
|
|
Net Sales
|
|
Profit
|
|
Amount
|
|
Basic
|
|
Diluted
|
|
High
|
|
Low
|
|
Declared
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
$
|
596,605
|
|
|
$
|
160,968
|
|
|
$
|
32,969
|
|
|
$
|
1.45
|
|
|
$
|
1.45
|
|
|
$
|
125.69
|
|
|
$
|
96.50
|
|
|
$
|
0.375
|
|
Second
|
640,249
|
|
|
175,117
|
|
|
42,026
|
|
|
1.86
|
|
|
1.85
|
|
|
145.94
|
|
|
117.10
|
|
|
0.375
|
|
Third
|
610,247
|
|
|
155,023
|
|
|
28,173
|
|
|
1.25
|
|
|
1.24
|
|
|
139.62
|
|
|
125.60
|
|
|
0.375
|
|
Fourth (1)
|
674,575
|
|
|
165,135
|
|
|
70,064
|
|
|
3.12
|
|
|
3.10
|
|
|
156.05
|
|
|
120.65
|
|
|
0.375
|
|
Year
|
$
|
2,521,676
|
|
|
$
|
656,243
|
|
|
$
|
173,232
|
|
|
$
|
7.68
|
|
|
$
|
7.63
|
|
|
$
|
156.05
|
|
|
$
|
96.50
|
|
|
$
|
1.50
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
$
|
670,398
|
|
|
$
|
165,454
|
|
|
$
|
30,739
|
|
|
$
|
1.29
|
|
|
$
|
1.28
|
|
|
$
|
130.26
|
|
|
$
|
117.56
|
|
|
$
|
0.375
|
|
Second (2)
|
682,123
|
|
|
169,548
|
|
|
27,873
|
|
|
1.19
|
|
|
1.19
|
|
|
128.26
|
|
|
118.09
|
|
|
0.375
|
|
Third (3)
|
632,575
|
|
|
156,751
|
|
|
12,066
|
|
|
0.52
|
|
|
0.52
|
|
|
121.23
|
|
|
97.44
|
|
|
0.375
|
|
Fourth (4)
|
633,828
|
|
|
129,280
|
|
|
(30,561
|
)
|
|
(1.34
|
)
|
|
(1.34
|
)
|
|
117.94
|
|
|
93.99
|
|
|
0.375
|
|
Year
|
$
|
2,618,924
|
|
|
$
|
621,033
|
|
|
$
|
40,117
|
|
|
$
|
1.72
|
|
|
$
|
1.71
|
|
|
$
|
130.26
|
|
|
$
|
93.99
|
|
|
$
|
1.50
|
|
Earnings per share are computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per share may not equal the total for the year.
_______________________________
|
|
(1)
|
The fourth quarter of 2016 included a deferred income tax benefit of
$30,590
(
$1.35
per share)
|
primarily attributable to the re-measurement of the deferred tax asset related to the Company's U.K. defined benefit pension plan. In addition, fiscal 2016 included
$9,888
(
$0.44
per share) recorded as a valuation allowance against a tax credit asset. Finally, the fourth quarter of 2016 included the reversal of a contingent liability that was recognized as part of the Delta purchase accounting of
$16,591
(
$0.73
per share).
(2) The second quarter of 2015 included costs associated with the restructuring plan (the "2015 Plan") that was
approved by the Board of Directors in April 2015 of
$9,828
after tax (
$0.42
per share).
(3) The third quarter of 2015 included costs associated with the Plan of
$6,310
after tax (
$0.27
per share) and non-
cash impairments of goodwill and trade names of
$13,370
after tax (
$0.58
per share).
|
|
(4)
|
The fourth quarter of 2015 included costs associated with the Plan of
$11,521
after tax (
$0.50
per share) and non-cash impairments of goodwill and intangibles of $
7,130
and
$19,640
after tax (combined
$1.16
per
|
share) related to our APAC Coatings and Access Systems businesses, respectively. In addition, the Company recorded a one time increase in its warranty reserve related to one large utility project of
$11,135
after tax (
$0.50
per share) and an increase to the bad debt allowance for a large international irrigation receivable of
$5,110
after tax (
$0.21
per share). Lastly, U.K. corporate tax rates were collectively reduced from
20%
to
18%
which reduced the value of our deferred tax assets associated with net operating loss carryforwards and certain timing differences which increased the Company's tax expense by
$7,120
(
$0.31
per share).