Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nyse  >  Valmont Industries, Inc.    VMI

VALMONT INDUSTRIES, INC.

(VMI)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

VALMONT INDUSTRIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

10/28/2020 | 04:03pm EST
Management's discussion and analysis contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on assumptions that management has made in
light of experience in the industries in which the Company operates, as well as
management's perceptions of historical trends, current conditions, expected
future developments and other factors believed to be appropriate under the
circumstances. These statements are not guarantees of performance or results.
They involve risks, uncertainties (some of which are beyond the Company's
control) and assumptions. Management believes that these forward-looking
statements are based on reasonable assumptions. Many factors could affect the
Company's actual financial results and cause them to differ materially from
those anticipated in the forward-looking statements. These factors include,
among other things, the continuing and developing effects of COVID-19 including
the effects of the outbreak on the general economy and the specific effects on
the Company's business and that of its customers and suppliers, risk factors
described from time to time in the Company's reports to the Securities and
Exchange Commission, as well as future economic and market circumstances,
industry conditions, company performance and financial results, operating
efficiencies, availability and price of raw materials, availability and market
acceptance of new products, product pricing, domestic and international
competitive environments, and actions and policy changes of domestic and foreign
governments.
This discussion should be read in conjunction with the financial statements and
notes thereto, and the management's discussion and analysis included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 28,
2019. Segment net sales in the table below and elsewhere are presented net of
intersegment sales. See Note 8 of our condensed consolidated financial
statements for additional information on segment sales and intersegment sales.
                                       23
--------------------------------------------------------------------------------

Results of Operations (Dollars in millions, except per share amounts)

                                                 Thirteen weeks ended                                        Thirty-nine weeks ended
                                September 26,         September            % Incr.           September 26,        September 28,          % Incr.
                                     2020              28, 2019            (Decr.)                2020                2019               (Decr.)
Consolidated
Net sales                       $     734.0$   690.3                  6.3  %       $   2,097.0$  2,083.4                  0.7  %
Gross profit                          190.7              173.3                 10.0  %             560.9               516.1                  8.7  %
as a percent of sales                  26.0  %            25.1  %                                   26.7  %             24.8  %
SG&A expense (1)                      129.3              112.2                 15.2  %             389.1          $    339.0                 14.8  %
as a percent of sales                  17.6  %            16.3  %                                   18.6  %             16.3  %
Operating income                       61.5               61.1                  0.7  %             171.8               177.1                 (3.0) %
as a percent of sales                   8.4  %             8.9  %                                    8.2  %              8.5  %
Net interest expense                   10.0                9.0                 11.1  %              28.6                27.2                  5.1  %

Effective tax rate                     23.0  %            24.5  %                                   26.9  %             24.7  %
Net earnings                    $      39.3$    38.0                  3.4  %       $     104.9$    113.9                 (7.9) %
Diluted earnings per share      $      1.84$    1.75                  5.1  %       $      4.89$     5.22                 (6.3) %
Engineered Support Structures
(ESS)
Net sales                       $     255.0$   266.5                 (4.3) %       $     731.2$    752.0                 (2.8) %
Gross profit                           71.3               62.4                 14.3  %             201.4               177.8                 13.3  %
SG&A expense                           45.8               40.5                 13.1  %             155.2               122.6                 26.6  %
Operating income                       25.5               21.9                 16.4  %              46.2                55.2                (16.3) %
Utility Support Structures
(Utility)
Net sales                       $     272.5$   204.2                 33.4  %       $     723.9$    656.5                 10.3  %
Gross profit                           54.7               44.0                 24.3  %             156.1               133.6                 16.8  %
SG&A expense                           28.8               23.7                 21.5  %              80.8                72.2                 11.9  %
Operating income                       25.9               20.3                 27.6  %              75.3                61.4                 22.6  %
Coatings
Net sales                       $      68.7$    76.9                (10.7) %       $     200.0$    228.3                (12.4) %
Gross profit                           22.6               24.0                 (5.8) %              64.2                71.7                (10.5) %
SG&A expense                           10.2               10.1                  1.0  %              30.6                32.7                 (6.4) %
Operating income                       12.4               13.9                (10.8) %              33.6                39.0                (13.8) %
Irrigation
Net sales                       $     137.8$   142.7                 (3.4) %       $     441.9$    446.6                 (1.1) %
Gross profit                           42.2               42.9                 (1.6) %             139.2               133.0                  4.7  %
SG&A expense                           27.5               24.7                 11.3  %              78.5                73.1                  7.4  %
Operating income                       14.7               18.2                (19.2) %              60.7                59.9                  1.3  %

Net corporate expense
SG&A                            $      17.0$    13.2                 28.8  %       $      44.0$     38.4                 14.6  %
Operating loss                        (17.0)             (13.2)               (28.8) %             (44.0)              (38.4)               (14.6) %

(1) The thirty-nine weeks ended September 26, 2020 includes impairment of goodwill and intangible assets.

                                       24
--------------------------------------------------------------------------------

Overview

On a consolidated basis, net sales were higher in the third quarter and first
three quarters of 2020, as compared to the same periods in 2019, due to higher
sales in the Utility segment that was partially offset by lower sales in ESS,
Coatings, and Irrigation segments. The change in net sales in the third quarter
and first three quarters of fiscal 2020, as compared with the same periods in
2019, is as follows:
                                                         Third quarter
                                      Total      ESS     Utility   Coatings    Irrigation
      Sales - 2019                  $ 690.3$ 266.5$ 204.2$    76.9$     142.7
      Volume                           60.0     (17.2)     83.2        (8.9)          2.9
      Pricing/mix                     (16.8)      2.5     (17.2)          -          (2.1)
      Acquisition/(divestiture)         2.3         -       1.7           -           0.6
      Currency translation             (1.8)      3.2       0.6         0.7          (6.3)
      Sales - 2020                  $ 734.0$ 255.0$ 272.5$    68.7$     137.8



                                                    Year-to-date
                                 Total       ESS     Utility   Coatings   Irrigation
Sales - 2019                  $  2083.4$ 752.0$ 656.5$  228.3$     446.6
Volume                             50.9     (20.8)     76.2      (22.3)         17.8
Pricing/mix                       (16.2)      5.7     (11.9)      (3.6)         (6.4)
Acquisition/(divestiture)           4.6       2.6       3.5          -          (1.5)
Currency translation              (25.7)     (8.3)     (0.4)      (2.4)        (14.6)
Sales - 2020                  $ 2,097.0$ 731.2$ 723.9$  200.0$     441.9



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 result in operating
income changes.

Average steel prices for both hot rolled coil and plate were lower in North America and China in the third quarter and first three quarters of 2020, as compared to 2019, contributing to lower cost of sales and improved gross profit.

The Company acquired the following businesses:


•In the first quarter of 2020, we acquired the remaining 49% of AgSense that the
Company did not own (Irrigation).
•In the first quarter of 2020, we acquired 16% of the remaining 25% of Convert
Italia that the Company did not own (Utility).
•Energia Solar Do Brasil ("Solbras") in the second quarter of 2020, a leading
provider of solar energy solutions for agriculture (Irrigation).

COVID-19 Impact on Financial Results and Liquidity


We are considered an essential business because of the products and services
that serve critical infrastructure sectors as defined by many governments around
the world. All our manufacturing facilities are open and fully operational as of
September 26, 2020. Our manufacturing facilities in Argentina, France, Malaysia,
New Zealand, Philippines, and South Africa were temporarily closed for part of
of the first half of 2020 due to government mandates. We continue to monitor
incidence of COVID-19 on a continuous basis, particularly in areas reporting
recent increases in infection. To protect the
                                       25
--------------------------------------------------------------------------------

safety, health and well-being of employees, customers, suppliers and communities, CDC and WHO guidelines are being followed in all facilities.


We generated strong cash flows from operating activities during the first three
quarters of 2020 and expect cash flows from operating activities, net of capital
expenditures, to be in excess of net earnings for the full fiscal 2020 year. Our
main focus is to maintain liquidity to support the working capital needs of our
operations and maintain our investment grade credit rating.

The ultimate magnitude of COVID-19, including the extent of its impact on the
Company's financial and operational results, cash balances and available
borrowings on our line of credit, will be determined by the length of time the
pandemic continues, its effect on the demand for the Company's products and
services and supply chain, as well as the effect of governmental regulations
imposed in response to the pandemic.

Currency Translation


  In the third quarter and first three quarters of 2020, we realized a decrease
in operating profit, as compared with 2019, due in part to currency translation
effects associated with a stronger U.S. dollar against most foreign currencies.
The breakdown of this effect by segment was as follows:

                           Total     ESS     Utility   Coatings    Irrigation    Corporate
        Third quarter     $ (1.4)  $    -   $  (0.2)$     0.1$      (1.3)  $       -

        Year-to-date      $ (2.7)$ (0.6)  $     -   $    (0.2)$      (1.9)  $       -


Gross Profit, SG&A, and Operating Income


  At a consolidated level, gross profit as a percent of sales was higher in the
third quarter and first three quarters of 2020, as compared with the same
periods in 2019, due to lower raw material costs across the Company, improved
selling prices across our infrastructure businesses, and improved volumes for
the Irrigation segment and associated operating leverage of fixed costs. In the
third quarter of 2020 as compared to 2019, gross profit was higher for ESS and
Utility but lower for Coatings and Irrigation. On a year-to-date basis, gross
profit improved for the ESS, Utility, and Irrigation segments in 2020, but was
lower for Coatings due to lower sales volumes.
  SG&A expenses increased in the third quarter and first three quarters of 2020,
as compared to the same periods in 2019. The increase was due to recording a
partial impairment of goodwill and tradename for the Access Systems business,
higher compensation related costs including sales commissions for the North
American infrastructure businesses, higher incentives due to improved
operations, and restructuring activities. These increases were partially offset
by lower travel costs, foreign currency translation effects, and reduced SG&A
deferred compensation expense in the first three quarters of 2020 (offset by an
increase of the same amount in other expense).

  In the third quarter of 2020, as compared to the third quarter of 2019,
operating income was higher in the Utility and ESS segments and lower for the
Irrigation and Coatings segments. The overall increase in operating income in
the third quarter can be attributed to higher utility sales volumes and an
approximate $7.0 million loss recognized on certain access systems projects in
2019 that did not recur. Operating income decreased in the first three quarters
of 2020 as compared to the same period in 2019, due to the goodwill and
tradename impairment for the Access Systems business, certain restructuring
activities, and lower volumes for the Coatings businesses. The decrease was
partially offset by lower raw material costs and improved sales volumes in the
Irrigation and Utility segments.

Net Interest Expense and Debt


  Net interest expense in the third quarter and first three quarters of 2020 was
higher than the same periods in 2019. Interest income was lower in the third
quarter and first three quarters of 2020, as compared to 2019, due to lower
interest rates.



                                       26
--------------------------------------------------------------------------------

Other Income/Expenses


  The change in other income/expenses in the third quarter and first three
quarters of 2020, as compared to 2019, was due to the change in valuation of
deferred compensation assets which resulted in additional other income of $0.5
million and reduced other income of $3.7 million, respectively. This amount is
shown as "Gain on investments (unrealized)" on the condensed consolidated
statements of earnings. The change related to deferred compensation assets are
offset by an opposite change of the same amount in SG&A expense. The remaining
change was due to fluctuations in foreign currency transaction gains/losses that
was less favorable in 2020.

Income Tax Expense

  Our effective income tax rate in the third quarter and first three quarters of
2020 was 23.0% and 26.9%, compared to 24.5% and 24.7% in the third quarter and
first three quarters of 2019. On a year-to-date basis, the increase in the
effective tax rate is a result of the partial impairment of goodwill and
tradename for the Access Systems business that is not fully tax deductible. An
increase in the U.K. corporate tax rate effective in the third quarter of 2020
provided a one time deferred tax benefit of $1.5 million reducing the effective
tax rate.

  Earnings attributable to noncontrolling interests was lower in the third
quarter and first three quarters of 2020, as compared to 2019. The decrease can
be attributed to the acquisition of the remaining noncontrolling interests of
AgSense and partial acquisition of the noncontrolling interest of Convert in the
first quarter of 2020.

Cash Flows from Operations

  Our cash flows provided by operations was $273.0 million in the first three
quarters of fiscal 2020, as compared with $239.2 million provided by operations
in the first three quarters of 2019. The increase in operating cash flow in the
first three quarters of 2020, as compared with 2019, was due to improved working
capital management. Working capital is higher primarily due to an increase in
cash balances.

ESS segment

  Net sales were lower in the third quarter and first three quarters of 2020 as
compared to 2019, primarily driven by lower sales volumes. Lighting, traffic,
and highway safety product sales and access systems sales volumes were lower in
the third quarter of 2020 as compared to 2019, while communication product sales
volumes were higher. In the first three quarters of 2020, sales were higher for
the lighting, traffic, and highway safety and communication products businesses
and lower for access systems.
   Global lighting, traffic, and highway safety product sales in the third
quarter and first three quarters of 2020 was modestly lower by $9.7 million and
higher by $4.6 million, as compared to the same periods in fiscal 2019. Sales
volumes decreased in North America in the third quarter of 2020, attributable to
higher shipments in the third quarter of 2019 resulting from the recovery from a
flood event in early 2019 at one of our facilities. On a year-to-date basis,
sales volumes in North America increased due to strong backlogs in
transportation markets. Europe sales volumes were lower in the third quarter and
first three quarters due to the ceasing of operations in Morocco, the temporary
plant shutdown and continued slower markets in France due to COVID-19, and
unfavorable foreign currency translation effects. Lighting, traffic, and highway
safety product sales in the Asia-Pacific region decreased in the third quarter
and first three quarters of 2020, as compared to 2019, due primarily to
continued market weakness in India attributed to COVID-19.
Communication product line sales were higher by $2.3 million and $1.1 million in
the third quarter and first three quarters of 2020, as compared with the same
periods in 2019. Communication product sales in Europe improved due to an
increase in volume in the U.K. and Asia-Pacific sales volumes increased
marginally. In North America, communication product sales volumes decreased in
the third quarter and first three quarters of 2020 due to lower demand for
communication components.
Access Systems product line net sales decreased in the third quarter and first
three quarters of 2020, as compared to 2019, by $5.0 million and $22.9 million.
The product line exited selling detention center systems and portions of the
industrial product line which contributed to the sales decline along with
unfavorable foreign currency translation effects. For the first half of 2020,
subdued construction spending in Australia also contributed to a decrease in
sales volume.
                                       27
--------------------------------------------------------------------------------


Gross profit was higher in the third quarter and first three quarters of 2020,
as compared to 2019, due to lower cost of raw materials across the segment and
an approximate $7.0 million loss recognized on certain access systems projects
in the third quarter of 2019 that did not recur. SG&A spending was higher in the
third quarter of 2020 versus 2019 due to higher sales commissions and incentives
due to improved operations in North America. For the first three quarters of
2020, SG&A also increased due to recording a partial goodwill and tradename
impairment for the Access Systems business of $16.6 million, Operating income
decreased in the first three quarters of 2020 due to the goodwill and tradename
impairment of the Access Systems business, partially offset by lower raw
material costs for all businesses and a loss recorded on certain access systems
projects in third quarter of 2019.

Utility segment

  In the Utility segment, sales increased in the third quarter and first three
quarters of 2020, as compared with 2019, due to large project work for the
international solar tracking solutions product line and improved sales volumes
for steel and concrete structures in North America. A number of our sales
contracts in North America contain provisions that tie the sales price to
published steel index pricing at the time our customer issues their purchase
order. This resulted in a decrease to the average selling prices for our steel
utility structures product line for the third quarter and first three quarters
of 2020, as compared with 2019.
  Offshore and solar tracking solutions sales increased in the third quarter and
first three quarters of 2020, as compared to 2019, due to a large increase in
sales volumes in the third quarter. The increase for both businesses can be
attributed to large projects in the third quarter of 2020.
  Gross profit increased in the third quarter and first three quarters of 2020,
as compared to 2019, due to higher sales volumes and its associated operating
leverage of fixed costs. In addition, the business incurred approximately $3.0
million of inspection costs during 2019 to finalize the requirements from a 2015
commercial settlement. Partially offsetting that 2019 charge was a $2.8 million
impairment of a facility in 2020 that is classified as an asset held for sale.
SG&A expense was higher in the third quarter and first three quarters of 2020,
as compared with 2019, due to higher incentives due to improved operating
results in North America and a $2.7 million allowance recognized in third
quarter 2020 against an international accounts receivable. The increase in
operating income for the third quarter 2020, as compared with 2019, is primarily
due to higher sales volumes. The improvement in operating income margin in 2020
versus 2019 is also attributed to disciplined product pricing; gross profit
margins increased as lower raw material costs was slightly more than the effect
on net sales from lower average selling prices.
Coatings segment
  Coatings segment sales decreased in the third quarter and first three quarters
of 2020, as compared to the same periods in 2019, due to lower volumes in North
America and Asia, reduced sales pricing attributed to lower zinc costs, and
unfavorable foreign currency translation. Sales volumes decreased in North
America in the third quarter and first three quarters of 2020, as compared to
2019, due primarily to decreased industrial production attributed largely to the
economic impacts from COVID-19. In Asia-Pacific region, sales volumes improved
in Australia, which were more than offset by decreased volumes in Asia that were
impacted by the continued slowdown caused by the economic impacts from COVID-19.
Sales pricing also declined in Asia-Pacific due to lower zinc costs and customer
mix.
  SG&A expense was flat for the third quarter and lower in the first three
quarters of 2020, as compared to 2019, due to one-time expenses associated with
a legal settlement in 2019. Operating income was lower in the third quarter and
first three quarters of 2020, compared to the same periods in 2019, due to sales
volume decreases in North America and Asia and the associated operating
deleverage of fixed costs.

Irrigation segment

  The decrease in Irrigation segment net sales in the third quarter and first
three quarters of 2020, as compared to 2019, is primarily due to unfavorable
foreign currency translation effects (primarily Brazil real) that were partially
offset by sales volume improvements in international markets. Brazil, Australia,
and Argentina drove the sales volume improvements for international irrigation
along with the acquisition of Solbras, which was partially offset by unfavorable
currency translation effects from a weaker Brazil real and South African rand.
In North America, slightly higher sales volumes for systems was more than offset
by decrease in sales volumes of other products, including industrial tubing. For
the first three quarters of 2020, sales of technology-related products and
services continue to increase, as growers continued adoption of technology to
reduce costs and enhance profitability.
                                       28
--------------------------------------------------------------------------------

  SG&A was higher in the third quarter and first three quarters of 2020, as
compared to 2019, due to higher product development expenses. Operating income
for the segment decreased in the third quarter due to higher product development
expenses and unfavorable currency translation effects. Operating income
increased in the first three quarters of 2020 over 2019, as a result of lower
raw material costs and higher sales volumes in international markets.
  Net corporate expense
Corporate SG&A expense was higher in the third quarter and first three quarters
of 2020, as compared to 2019. The increase the third quarter is attributed to
higher incentive accruals related to improved business performance. The increase
in the first three quarters of 2020 is due to higher incentive expense,
partially offset by the change in valuation of deferred compensation assets
which resulted in lower expense of $3.7 million. The change in deferred
compensation plan assets is offset by the same amount in other income/expenses.

Liquidity and Capital Resources
Cash Flows
Working Capital and Operating Cash Flows-Net working capital was $934.2 million
at September 26, 2020, as compared to $918.4 million at December 28, 2019. The
increase in net working capital in 2020 is attributed to an increase in cash
balances. Cash flow provided by operations was $273.0 million in the first three
quarters of 2020, as compared with $239.2 million in the first three quarters of
2019. The increase in operating cash flows in 2020, as compared to 2019, was
primarily the result of improved working capital management.
Investing Cash Flows-Capital spending in the first three quarters of fiscal 2020
was $71.0 million, as compared to $72.0 million for the same period in 2019. The
decrease in investing cash outflows in the first three quarters quarter of 2020,
as compared to 2019, can be attributed to a reduction in cash paid for
acquisitions. We expect our capital expenditures to be between $85.0 million and
$95.0 million for fiscal 2020.
Financing Cash Flows-Our total interest-bearing debt was $795.9 million at
September 26, 2020 and $787.5 million at December 28, 2019. Financing cash
outflows were $110.0 million and $82.7 million in the first three quarters of
2020 and 2019, respectively. The increase in financing cash outflows in the
first three quarters of 2020, as compared to 2019, was due to the higher amounts
paid to purchase noncontrolling interests and lower net borrowings.
Guarantor Summarized Financial Information

We are providing the following information in compliance with Rule 3-10 and Rule
13-01 of Regulation S-X with respect to our two 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"). The Parent is the Issuer
of the notes and consolidates all Guarantors.

The financial information of Issuer and Guarantors is presented on a combined
basis with intercompany balances and transactions between Issuer and Guarantors
eliminated. The Issuer's or Guarantors' amounts due from, amounts due to, and
transactions with non-guarantor subsidiaries are separately disclosed.

Combined financial information is as follows:





                                       29
--------------------------------------------------------------------------------

Supplemental Combined Parent and Guarantors Financial Information

 For the thirteen and thirty-nine weeks ended September 26, 2020 and September
                                    28, 2019
                                                     Thirteen weeks ended                         Thirty-nine weeks ended
                                               September 26,        September 28,                                    September 28,
Dollars in thousands                               2020                 2019             September 26, 2020              2019
Net sales                                     $    438,947$  433,533$        1,377,294$  1,314,108
Gross Profit                                          115,116             114,538                     385,314               340,645
Operating income                                       35,261              44,846                     149,866               137,343
Net earnings                                           13,760              24,083                      87,235                82,349
Net earnings attributable to Valmont
Industries, Inc.                                       13,759              24,083                      87,249                82,349



       Supplemental Combined Parent and Guarantors Financial Information
                    September 26, 2020 and December 28, 2019

                                                                 September 26,         December 28,
Dollars in thousands                                                 2020                  2019
Current assets                                                  $    777,934$    728,457
Noncurrent assets                                                    374,796               354,173
Current liabilities                                                  295,544               312,984
Noncurrent liabilities                                             1,121,280             1,076,491
Noncontrolling interest in consolidated subsidiaries                   1,585                     -


Included in noncurrent assets is a due from non-guarantor subsidiaries
receivable of $83,977 and $54,915 at September 26, 2020 and December 28, 2019.
Included in noncurrent liabilities is a due to non-guarantor subsidiaries
payable of $262,680 and $249,056 at September 26, 2020 and December 28, 2019.
Financing and Capital
The Board of Directors authorized the purchase of $250 million of the Company's
shares without an expiration date in October 2018. The share purchases will be
funded from available working capital and short-term borrowings and will be made
subject to market and economic conditions. We are not obligated to make any
share repurchases under the share repurchase program and we may discontinue the
share repurchase program at any time. Share repurchases were temporarily
suspended at the end of the first quarter of 2020 until September 2020 as a
precaution to preserve liquidity. We acquired 251,136 treasury shares for
approximately $28.0 million under our share repurchase program during the first
three quarters of 2020. As of September 26, 2020, we have approximately $176.4
million open under this authorization to repurchase shares in the future.

  Our capital allocation philosophy announcement included 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., BBB- rating
by Fitch Rating Services, and BBB+ rating by Standard and Poor's Rating
Services. We expect to maintain a leverage ratio which will support our current
investment grade debt rating.

                                       30
--------------------------------------------------------------------------------

Our debt financing at September 26, 2020 is primarily long-term debt consisting
of:
•$450 million face value ($436.5 million carrying value) of senior unsecured
notes that bear interest at 5.00% per annum and are due in October 2044.
•$305 million face value ($297.6 million carrying value) of unsecured notes that
bear interest at 5.25% per annum and are due in October 2054.
•We are allowed to repurchase the notes at specified prepayment premiums. Both
tranches of these notes are guaranteed by certain of our subsidiaries.

  At September 26, 2020 and December 28, 2019, we had $41.9 million and $29.0
million outstanding borrowings under our revolving credit agreement,
respectively. The revolving credit agreement contains certain financial
covenants that may limit our additional borrowing capability under the
agreement. At September 26, 2020, we had the ability to borrow $542.6 million
under this facility, after consideration of standby letters of credit of $15.5
million associated with certain insurance obligations and international sales
commitments. We also maintain certain short-term bank lines of credit totaling
$134.2 million, $120.0 million of which was unused at September 26, 2020.

Our senior unsecured notes and revolving credit agreement each contain
cross-default provisions which permit the acceleration of our indebtedness to
them if we default on other indebtedness that results in, or permits, the
acceleration of such other indebtedness.
The debt agreements contain covenants that require us to maintain certain
coverage ratios and may limit us with respect to certain business activities,
including capital expenditures. The debt agreements allow us to add estimated
EBITDA from acquired businesses for periods we did not own the acquired
business. The debt agreements also provide for an adjustment to EBITDA, subject
to certain limitations, for non-cash charges or gains that are non-recurring in
nature.
Our key debt covenants are as follows:
•Leverage ratio - Interest-bearing debt is not to exceed 3.5X Adjusted EBITDA
(or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four
quarters; and
•Interest earned ratio - Adjusted EBITDA over the prior four quarters must be at
least 2.5X our interest expense over the same period.

  At September 26, 2020, we were in compliance with all covenants related to the
debt agreements. The key covenant calculations at September 26, 2020 were as
follows (in 000's):

                 Interest-bearing debt                  $ 795,937
                 Adjusted EBITDA-last four quarters       344,627
                 Leverage ratio                              2.31

                 Adjusted EBITDA-last four quarters     $ 344,627
                 Interest expense-last four quarters       40,748
                 Interest earned ratio                       8.46


                                       31
--------------------------------------------------------------------------------

The calculation of Adjusted EBITDA-last four quarters (October 29, 2019 through
September 26, 2020) is as follows. The last four quarters information ended
September 26, 2020 is calculated by taking the full fiscal year ended December
28, 2019, subtracting the first three quarters ended September 28, 2019, and
adding the first three quarters ended September 26, 2020.
             Net cash flows from operations                  $ 341,430
             Interest expense                                   40,748
             Income tax expense                                 50,613
             Impairment of property, plant and equipment        (2,811)
             Impairment of goodwill and intangible assets      (16,638)
             Change in investment                                   85
             Deferred income tax benefit                         6,908
             Noncontrolling interest                            (2,481)
             Stock-based compensation                          (11,434)
             Pension plan expense                                5,532
             Contribution to pension plan                       18,433
             Changes in assets and liabilities                (112,236)
             Other                                               1,351
             EBITDA                                            319,500
             Cash restructuring expenses                         5,678

             Impairment of goodwill and intangible assets       16,638
             Impairment of property, plant and equipment         2,811

             Adjusted EBITDA                                 $ 344,627



        Net earnings attributable to Valmont Industries, Inc.$ 144,778
        Interest expense                                            40,748
        Income tax expense                                          50,613
        Depreciation and amortization expense                       83,361
        EBITDA                                                     319,500
        Cash restructuring expenses                                  5,678

        Impairment of goodwill and intangible assets                16,638
        Impairment of property, plant, and equipment                 2,811
        Adjusted EBITDA                                          $ 344,627



Our businesses are cyclical, but we have diversity in our markets from a
product, customer and a geographical standpoint. We have demonstrated the
ability to effectively manage through business cycles and maintain liquidity. We
have consistently generated operating cash flows in excess of our capital
expenditures. Based on our available credit facilities, recent issuance of
senior unsecured notes and our history of positive operational cash flows, we
believe that we have adequate liquidity to meet our needs.
  We have cash balances of $443.1 million at September 26, 2020, approximately
$221.7 million is held in our non-U.S. subsidiaries. If we distributed our
foreign cash balances certain taxes would be applicable. At September 26, 2020,
we have a liability for foreign withholding taxes and U.S. state income taxes of
$3.3 million and $0.8 million, respectively.

Financial Obligations and Financial Commitments

There have been no material changes to our financial obligations and financial commitments as described on page 34-35 in our Form 10-K for the fiscal year ended December 28, 2019.

                                       32

--------------------------------------------------------------------------------


Off Balance Sheet Arrangements
There have been no material changes in our off balance sheet arrangements as
described on page 35 in our Form 10-K for the fiscal year ended December 28,
2019.
Critical Accounting Policies
There were no changes in our critical accounting policies as described on pages
37-40 in our Form 10-K for the fiscal year ended December 28, 2019 during the
nine months ended September 26, 2020, with the exception of the change in method
of accounting for certain inventory, previously accounted for on the LIFO basis,
so that now all inventory is valued on the FIFO basis.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
  There were no material changes in the company's market risk during the quarter
ended September 26, 2020. For additional information, refer to the section "Risk
Management" in our Form 10-K for the fiscal year ended December 28, 2019.

© Edgar Online, source Glimpses

All news about VALMONT INDUSTRIES, INC.
01/12VALMONT INDUSTRIES : Unit Forms JV With Kusto Group to Advance Agriculture in Ka..
MT
01/12VALMONT INDUSTRIES : Valley® Irrigation and Kusto Group® Form Joint Venture to E..
BU
2020VALMONT INDUSTRIES, INC. : Ex-dividend day for
FA
2020INSIDER TRENDS : Insider at Valmont Industries Makes Tax Sale Interrupting 90-Da..
MT
2020INSIDER TRENDS : Insider at Valmont Industries Sells Stock for Taxes Interruptin..
MT
2020VALMONT INDUSTRIES : Board Declares Quarterly Dividend
BU
2020INSIDER TRENDS : Insider at Valmont Industries Acquires Stock Via Conversion of ..
MT
2020INSIDER TRENDS : Insider at Valmont Industries Acquires Stock Via Option/Derivat..
MT
2020INSIDER TRENDS : Insider at Valmont Industries Acquires Stock Via Option/Derivat..
MT
2020INSIDER TRENDS : Valmont Industries Insider Exercises Options Derivative Securit..
MT
More news