VALMONT INDUSTRIES INC - FORM 10-Q

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TABLE OF CONTENTS

Table of Contents

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

Form 10-Q


(Mark One)
ý		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2014
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-31429

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


Delaware (State or Other Jurisdiction of Incorporation or Organization)		47-0351813 (I.R.S. Employer Identification No.)
One Valmont Plaza,
Omaha, Nebraska		68154-5215
(Address of Principal Executive Offices)		(Zip Code)
(402) 963-1000 (Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)

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

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

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


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

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

24,605,848
Outstanding shares of common stock as of October 20, 2014

Table of Contents

VALMONT INDUSTRIES, INC.

INDEX TO FORM 10-Q

Page No.

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Statements of Earnings for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013	3
	Condensed Consolidated Statements of Comprehensive Income for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013	4
	Condensed Consolidated Balance Sheets as of September 27, 2014 and December 28, 2013	5
	Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended September 27, 2014 and September 28, 2013	6
	Condensed Consolidated Statements of Shareholders' Equity for the thirty-nine weeks ended September 27, 2014 and September 28, 2013	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47
PART II. OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 6.	Exhibits	49
Signatures		50

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(Unaudited)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended

	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Product sales	$	686,508		$	693,480		$	2,134,395		$	2,228,268
Services sales		79,160			84,552			225,612			248,053


Net sales		765,668			778,032			2,360,007			2,476,321
Product cost of sales		515,217			499,190			1,586,127			1,591,657
Services cost of sales		50,951			53,278			146,921			162,260


Total cost of sales		566,168			552,468			1,733,048			1,753,917


Gross profit		199,500			225,564			626,959			722,404
Selling, general and administrative expenses		111,697			115,663			335,532			350,048


Operating income		87,803			109,901			291,427			372,356


Other income (expenses):
Interest expense		(8,716	)		(8,149	)		(25,217	)		(24,364	)
Interest income		1,477			1,560			4,793			4,765
Costs associated with refinancing of debt		(38,705	)		—			(38,705	)		—
Other		(2,344	)		(584	)		(6,253	)		1,095


		(48,288	)		(7,173	)		(65,382	)		(18,504	)


Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries		39,515			102,728			226,045			353,852


Income tax expense (benefit):
Current		23,290			40,458			82,345			127,328
Deferred		(9,064	)		3,454			(4,034	)		(1,275	)


		14,226			43,912			78,311			126,053


Earnings before equity in earnings of nonconsolidated subsidiaries		25,289			58,816			147,734			227,799
Equity in earnings of nonconsolidated subsidiaries		(4	)		75			(34	)		548


Net earnings		25,285			58,891			147,700			228,347
Less: Earnings attributable to noncontrolling interests		(1,726	)		(2,402	)		(4,185	)		(4,726	)


Net earnings attributable to Valmont Industries, Inc.	$	23,559		$	56,489		$	143,515		$	223,621




Earnings per share:
Basic	$	0.93		$	2.12		$	5.48		$	8.40




Diluted	$	0.92		$	2.10		$	5.43		$	8.31




Cash dividends declared per share	$	0.375		$	0.250		$	1.000		$	0.725




Weighted average number of shares of common stock outstanding—Basic (000 omitted)		25,287			26,665			26,208			26,632




Weighted average number of shares of common stock outstanding—Diluted (000 omitted)		25,513			26,919			26,439			26,896

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended

	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Net earnings	$	25,285		$	58,891		$	147,700		$	228,347


Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized translation gain (loss)		(59,001	)		18,124			(33,495	)		(44,458	)
Realized loss included in net earnings during the period		—			—			—			(5,194	)
Unrealized gain/(loss) on cash flow hedge:
Amortization cost included in interest expense		383			100			450			300
Realized loss included in net earnings during the period		983			—			983			—
Gain on cash flow hedges		4,837			—			4,837			—
Actuarial gain (loss) in defined benefit pension plan		1,116			857			269			(37	)


Other comprehensive income (loss)		(51,682	)		19,081			(26,956	)		(49,389	)


Comprehensive income (loss)		(26,397	)		77,972			120,744			178,958
Comprehensive loss (income) attributable to noncontrolling interests		89			(2,156	)		(1,615	)		1,033


Comprehensive income (loss) attributable to Valmont Industries, Inc.	$	(26,308	)	$	75,816		$	119,129		$	179,991

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except shares and per share amounts)

(Unaudited)

	September 27, 2014			December 28, 2013

ASSETS
Current assets:
Cash and cash equivalents	$	452,218		$	613,706
Receivables, net		570,810			515,440
Inventories		384,645			380,000
Prepaid expenses		64,673			22,997
Refundable and deferred income taxes		64,438			65,697


Total current assets		1,536,784			1,597,840


Property, plant and equipment, at cost		1,138,421			1,017,126
Less accumulated depreciation and amortization		521,869			482,916


Net property, plant and equipment		616,552			534,210


Goodwill		374,144			349,632
Other intangible assets, net		199,819			170,917
Other assets		135,422			123,895


Total assets	$	2,862,721		$	2,776,494




LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt	$	188		$	202
Notes payable to banks		17,863			19,024
Accounts payable		209,996			216,121
Accrued employee compensation and benefits		94,459			122,967
Accrued expenses		93,483			71,560
Dividends payable		9,299			6,706


Total current liabilities		425,288			436,580


Deferred income taxes		76,607			78,924
Long-term debt, excluding current installments		768,611			470,907
Defined benefit pension liability		136,808			154,397
Deferred compensation		48,014			39,109
Other noncurrent liabilities		48,707			51,731
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
Retained earnings		1,687,536			1,562,670
Accumulated other comprehensive income (loss)		(72,071	)		(47,685	)
Treasury stock		(333,744	)		(20,860	)


Total Valmont Industries, Inc. shareholders' equity		1,309,621			1,522,025


Noncontrolling interest in consolidated subsidiaries		49,065			22,821


Total shareholders' equity		1,358,686			1,544,846


Total liabilities and shareholders' equity	$	2,862,721		$	2,776,494

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Thirty-nine Weeks Ended

	September 27, 2014			September 28, 2013
Cash flows from operating activities:
Net earnings	$	147,700		$	228,347
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization		64,460			57,417
Loss on investment		4,859			—
Non-cash debt refinancing costs		(2,478	)		—
Stock-based compensation		5,444			4,999
Change in fair value of contingent consideration		4,300			—
Defined benefit pension plan expense		2,003			4,870
Contribution to defined benefit pension plan		(18,245	)		(16,755	)
Gain on sale of property, plant and equipment		58			(5,060	)
Equity in earnings in nonconsolidated subsidiaries		34			(548	)
Deferred income taxes		(4,034	)		(1,275	)
Changes in assets and liabilities (net of acquisitions):
Receivables		(19,951	)		(757	)
Inventories		(4,152	)		(14,574	)
Prepaid expenses		(19,182	)		(7,041	)
Accounts payable		(21,082	)		1,161
Accrued expenses		(27,926	)		16,931
Other noncurrent liabilities		(6,409	)		2,510
Income taxes refundable		(22,702	)		(21,120	)


Net cash flows from operating activities		82,697			249,105


Cash flows from investing activities:
Purchase of property, plant and equipment		(63,412	)		(75,072	)
Proceeds from sale of assets		2,107			39,564
Acquisitions, net of cash acquired		(137,438	)		(53,152	)
Other, net		2,992			1,231


Net cash flows from investing activities		(195,751	)		(87,429	)


Cash flows from financing activities:
Net borrowings under short-term agreements		(1,065	)		3,439
Proceeds from long-term borrowings		652,540			274
Principal payments on long-term borrowings		(357,059	)		(508	)
Settlement of financial derivatives		4,837			—
Dividends paid		(23,357	)		(18,717	)
Dividends to noncontrolling interest		(1,340	)		(1,767	)
Debt issuance costs		(5,464	)		—
Proceeds from exercises under stock plans		12,824			15,064
Excess tax benefits from stock option exercises		3,916			4,630
Purchase of treasury shares		(316,296	)		—
Purchase of common treasury shares—stock plan exercises		(12,739	)		(14,644	)


Net cash flows from financing activities		(43,203	)		(12,229	)


Effect of exchange rate changes on cash and cash equivalents		(5,231	)		(20,207	)


Net change in cash and cash equivalents		(161,488	)		129,240
Cash and cash equivalents—beginning of year		613,706			414,129


Cash and cash equivalents—end of period	$	452,218		$	543,369

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands)

(Unaudited)

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

Balance at December 29, 2012	$	27,900	$	—		$	1,300,529		$	43,938		$	(22,455	)	$	57,098		$	1,407,010
Net earnings		—		—			223,621			—			—			4,726			228,347
Other comprehensive income (loss)		—		—			—			(43,630	)		—			(5,759	)		(49,389	)
Cash dividends declared		—		—			(19,412	)		—			—			—			(19,412	)
Dividends to noncontrolling interests		—		—			—			—			—			(1,767	)		(1,767	)
Acquisition of Locker		—		—			—			—			—			325			325
Stock plan exercises; 93,059 shares acquired		—		—			—			—			(14,644	)		—			(14,644	)
Stock options exercised; 192,377 shares issued		—		(9,629	)		9,361			—			15,332			—			15,064
Tax benefit from stock option exercises		—		4,630			—			—			—			—			4,630
Stock option expense		—		3,935			—			—			—			—			3,935
Stock awards; 9,801 shares issued		—		1,064			—			—			622			—			1,686


Balance at September 28, 2013	$	27,900	$	—		$	1,514,099		$	308		$	(21,145	)	$	54,623		$	1,575,785




Balance at December 28, 2013	$	27,900	$	—		$	1,562,670		$	(47,685	)	$	(20,860	)	$	22,821		$	1,544,846
Net earnings		—		—			143,515			—			—			4,185			147,700
Other comprehensive income (loss)		—		—			—			(24,386	)		—			(2,570	)		(26,956	)
Cash dividends declared		—		—			(25,950	)		—			—			—			(25,950	)
Dividends to noncontrolling interests		—		—			—			—			—			(1,340	)		(1,340	)
Acquisition of DS SM		—		—			—			—			—			9,232			9,232
Acquisition of AgSense		—		—			—			—			—			16,333			16,333
Addition of noncontrolling interest		—		—			—			—			—			404			404
Purchase of treasury shares; 2,126,392 shares acquired		—		—			—			—			(316,296	)		—			(316,296	)
Stock plan exercises; 83,431 shares acquired		—		—			—			—			(12,739	)		—			(12,739	)
Stock options exercised; 171,508 shares issued		—		(9,360	)		7,301			—			14,883			—			12,824
Tax benefit from stock option exercises		—		3,916			—			—			—			—			3,916
Stock option expense		—		3,767			—			—			—			—			3,767
Stock awards; 8,247 shares issued		—		1,677			—			—			1,268			—			2,945


Balance at September 27, 2014	$	27,900	$	—		$	1,687,536		$	(72,071	)	$	(333,744	)	$	49,065		$	1,358,686

See accompanying notes to condensed consolidated financial statements.

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed Consolidated Financial Statements

The Condensed Consolidated Balance Sheet as of September 27, 2014, the Condensed Consolidated Statements of Earnings and Comprehensive Income for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013, and the Condensed Consolidated Statements of Cash Flows and Shareholders' Equity for the thirty-nine week periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of September 27, 2014 and for all periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2013. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December 28, 2013. The results of operations for the period ended September 27, 2014 are not necessarily indicative of the operating results for the full year.

Inventories

Approximately 43% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market as of September 27, 2014 and December 28, 2013, 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 $47,380 and $45,204 at September 27, 2014 and December 28, 2013, respectively.

Inventories consisted of the following:

	September 27, 2014		December 28, 2013

Raw materials and purchased parts	$	185,573	$	179,576
Work-in-process		29,954		27,294
Finished goods and manufactured goods		216,498		218,334


Subtotal		432,025		425,204
Less: LIFO reserve		47,380		45,204


	$	384,645	$	380,000

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013, were as follows:

	Thirteen Weeks Ended				Thirty-nine Weeks Ended

	2014		2013		2014		2013
United States	$	4,844	$	66,143	$	141,635	$	253,564
Foreign		34,671		36,585		84,410		100,288


	$	39,515	$	102,728	$	226,045	$	353,852

Pension Benefits

The Company incurs expenses in connection with the Delta Pension Plan ("DPP"). The DPP was acquired as part of the Delta plc acquisition in fiscal 2010 and has no members that are active employees. 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.

The components of the net periodic pension expense for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013 were as follows:

	Thirteen Weeks Ended						Thirty-nine Weeks Ended

	2014			2013			2014			2013
Net periodic benefit expense:
Interest cost	$	7,274		$	6,535		$	21,783		$	19,593
Expected return on plan assets		(6,605	)		(4,910	)		(19,780	)		(14,723	)


Net periodic benefit expense	$	669		$	1,625		$	2,003		$	4,870

Stock Plans

The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Human Resource 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 September 27, 2014, 1,463,600 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Under the plans, the exercise price of each option equals the closing market price at the date of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the fifth anniversary of the grant.

Expiration of grants is from six to ten years from the date of grant. The Company's compensation expense (included in selling, general and administrative expenses) and associated income tax benefits related to stock options for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013, respectively, were as follows:

	Thirteen Weeks Ended				Thirty-nine Weeks Ended

	2014		2013		2014		2013
Compensation expense	$	1,242	$	1,308	$	3,767	$	3,935
Income tax benefits		478		504		1,450		1,515

Equity Method Investments

The Company has equity method investments in non-consolidated subsidiaries, which are recorded within "Other assets" on the Condensed Consolidated Balance Sheet. In February 2013, the Company sold its nonconsolidated investment in Manganese Materials Company Pty. Ltd. to the majority owner of the business for approximately $29,250. The profit on the sale was not significant, which included the recognition of $5,194 in currency translation adjustments previously recorded as part of "Accumulated other comprehensive income" on the Condensed Consolidated Balance Sheet. The Company also recognized certain deferred tax benefits of approximately $3,200 associated with the sale in the first quarter of fiscal 2013.

Fair Value

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

ASC 820 establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer 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.

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 $36,308 ($27,133 at December 28, 2013) represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with Accounting Standards Codification 320, Accounting for Certain Investments in Debt and Equity Securities, considering the employee's ability to change investment allocation of their deferred compensation at any time. The Company's ownership in Delta EMD Pty. Ltd. (JSE:DTA) of $8,295 and $13,910 is recorded at fair value at September 27, 2014 and December 28, 2013, respectively. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input.

			Fair Value Measurement Using:

	Carrying Value September 27, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading Securities	$	44,603	$	44,603	$	—	$	—

			Fair Value Measurement Using:

	Carrying Value December 28, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading Securities	$	41,043	$	41,043	$	—	$	—

Derivative Instruments

On September 22, 2014, the Company issued and sold $250,000 aggregate principal amount of the Company's 5.00% Senior Notes due 2044 (the "2044 Notes") and $250,000 aggregate principal amount of the Company's 5.25% Senior Notes due 2054 (the "2054 Notes"). During the third quarter of 2014, the Company executed a contract to lock in the treasury rate related to the issuance of the 2044 Notes and a second contract to lock in the base interest rate on the issuance of the 2054 Notes. These contracts, each for a notional amount of $125,000, 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, this was deemed an effective hedge at inception. On September 10, 2014, these contracts were settled with the Company receiving approximately $4,837

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

from the counterparties which was recorded in accumulated other comprehensive income and will be amortized as a reduction of interest expense over the term of the debt.

In conjunction with the repurchase through a partial tender offer of $199,800 of the Company's 6.625% Senior notes due 2020 (the "2020 Notes") during September 2014, the Company recognized $983 of expense, which is a proportionate amount of the unrealized loss on cash flow hedge with respect to the 2020 Notes recorded within other comprehensive income. This $983 is included in the costs associated with refinancing of debt in the condensed consolidated statement of earnings.

Comprehensive Income

Comprehensive income includes net earnings, 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. Accumulated other comprehensive income (loss) consisted of the following at September 27, 2014 and December 28, 2013:

	Foreign Currency Translation Adjustments			Unrealized Loss on Cash Flow Hedge			Defined Benefit Pension Plan			Accumulated Other Comprehensive Income

Balance at December 28, 2013	$	(20,165	)	$	(2,535	)	$	(24,985	)	$	(47,685	)
Current-period comprehensive income (loss)		(30,925	)		6,270			269			(24,386	)


Balance at September 27, 2014	$	(51,090	)	$	3,735		$	(24,716	)	$	(72,071	)

Subsequent Events

On October 6, 2014, the Company purchased the assets of Shakespeare Composite Structures (Shakespeare) for $48 million in cash, net of assumed liabilities. Shakespeare is a manufacturer of fiberglass reinforced composite structures and products, and the originator of the composite light pole, with two manufacturing facilities in South Carolina. Shakespeare's annual sales are approximately $55 million and it will be included in the Engineered Infrastructure Products Segment. The acquisition, which was funded by cash held by the Company, was completed to extend Valmont's leading product offerings in the lighting, traffic, and utility markets.

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. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2016 and is to be applied retrospectively. Early application is not permitted. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations and financial position.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(2) ACQUISITIONS

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's operations are reported in the Engineered Infrastructure Products Segment. Valmont SM's annual sales are approximately $190,000 and it operates two manufacturing locations in Denmark. 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 is subject to an earn-out clause that is contingent on meeting future operational metrics for which no liability has been established based on current expectations. Additionally, the fair value measurements are subject to a trade working capital adjustment that has not yet been finalized. 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.

The preliminary fair value measurement disclosed below is subject to management reviews and completion of the fair value measurements of the assets acquired and liabilities assumed. The Company expects the fair value measurement process and purchase price allocation to be completed in the fourth quarter of 2014 in conjunction with the finalization of the trade working capital settlement.

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

	At March 3, 2014

Current assets	$	73,421
Property, plant and equipment		85,645
Intangible assets		30,340
Goodwill		14,317


Total fair value of assets acquired	$	203,723


Current liabilities		50,953
Deferred income taxes		14,114
Intercompany note payable		37,448
Long-term debt		8,941


Total fair value of liabilities assumed		111,456
Non-controlling interests		9,232


Net assets acquired	$	83,035

The Company's Condensed Consolidated Statements of Earnings for the thirteen and thirty-nine weeks ended September 27, 2014 included net sales of $41,284 and $105,805 and net earnings of $2,466 and $6,568, respectively, resulting from Valmont SM's operations from March 3, 2014 to September 27,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(2) ACQUISITIONS (Continued)

2014. No proforma information for 2014 has been provided as it does not have a material effect on the financial statements.

Based on the preliminary 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

Trade Names	$	12,210	Indefinite
Backlog		3,145	1.5
Customer Relationships		14,985	15.0


Total Intangible Assets	$	30,340

On February 5, 2013, the Company purchased 100% of the outstanding shares of Locker Group Holdings Pty. Ltd. ("Locker"). Locker is a manufacturer of perforated and expanded metal for the non-residential market, industrial flooring and handrails for the access systems market, and screening media for applications in the industrial and mining sectors in Australia and Asia. Locker's operations are reported in the Engineered Infrastructure Products Segment. The acquisition, which was funded by cash held by the Company, was completed to expand our product offering and sales coverage for access systems and related products in Asia Pacific.

The purchase price paid for the business at closing (net of $116 cash acquired) was $53,152. In addition, a maximum of $7,911 additional purchase price could be paid to the sellers upon the achievement of certain gross profit and inventory targets over the two years following date of acquisition and the Company recognized an estimated liability of $7,178 at February 5, 2013. During 2014 and 2013, the Company made payments of approximately $2.3 million to the sellers with respect to achievement of these targets. The Company determined that the additional purchase price tied to a gross profit target for the twelve months ending February 2015 would not be achieved and therefore the additional purchase price with respect to that target will not be paid. As such, approximately $4.3 million of this liability was reversed and recognized against cost of goods sold during the third quarter of 2014.

On August 25, 2014, the Company acquired 51% of AgSense, LLC (AgSense) for $17 million 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 preliminary measurement of fair values of assets acquired and liabilities assumed, goodwill of $17,343 and $13,510 of customer relationships, trade name and other intangible assets were recorded. A portion of the goodwill is deductible for tax purposes. AgSense is included in the Irrigation Segment and the purchase price allocation is expected to be finalized in the fourth quarter of 2014.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(2) ACQUISITIONS (Continued)

In December 2013, the Company purchased 100% of the outstanding shares of Armorflex International Ltd. ("Armorflex") for $10,000. Armorflex is a company holding proprietary intellectual property for products serving the highway safety market. In the measurement of fair values of assets acquired and liabilities assumed, we recorded goodwill of $6,823 and an aggregate of $3,792 for customer relationships, patented technology and other intangible assets. The goodwill is not deductible for tax purposes. Armorflex is included in the Engineered Infrastructure Products segment and was acquired to expand the Company's highway safety product offerings in the Asia Pacific region. This acquisition did not have a significant effect on the Company's fiscal 2013 financial results.

The Company's Condensed Consolidated Statement of Earnings for the thirteen and thirty-nine weeks ended September 27, 2014 included net sales of $64,838 and $168,891 and net earnings of $8,185 and $13,760 resulting from the Valmont SM, AgSense, Locker, and Armorflex acquisitions. The pro forma effect of these acquisitions on the third quarter and first three quarters of the 2013 Statement of Earnings was as follows:

	Thirteen weeks Ended September 28, 2013		Thirty-nine weeks Ended September 28, 2013

Net sales	$	827,374	$	2,630,881
Net earnings	$	60,549	$	233,437
Earnings per share—diluted	$	2.25	$	8.68

(3) GOODWILL AND INTANGIBLE ASSETS

Amortized Intangible Assets

The components of amortized intangible assets at September 27, 2014 and December 28, 2013 were as follows:

	September 27, 2014

	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	203,018	$	86,175	13 years
Proprietary Software & Database		3,872		2,983	6 years
Patents & Proprietary Technology		12,694		8,258	8 years
Other		4,499		2,584	3 years


	$	224,083	$	100,000

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(3) GOODWILL AND INTANGIBLE ASSETS (Continued)

	December 28, 2013

	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Customer Relationships	$	177,495	$	76,024	13 years
Proprietary Software & Database		3,896		2,896	6 years
Patents & Proprietary Technology		11,334		7,239	8 years
Other		1,620		1,438	6 years


	$	194,345	$	87,597

Amortization expense for intangible assets for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013, respectively was as follows:

Thirteen Weeks Ended				Thirty-nine Weeks Ended

2014		2013		2014		2013
$	4,702	$	3,750	$	13,439	$	11,446

Estimated annual amortization expense related to finite-lived intangible assets is as follows:

	Estimated Amortization Expense

2014	$	19,489
2015		17,182
2016		16,719
2017		16,519
2018		14,863

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(3) GOODWILL AND INTANGIBLE ASSETS (Continued)

Non-amortized intangible assets

Intangible assets with indefinite lives are not amortized. The carrying values of trade names at September 27, 2014 and December 28, 2013 were as follows:

	September 27, 2014		December 28, 2013

Webforge	$	17,595	$	17,787	2010
Valmont SM		11,285		—	2014
Newmark		11,111		11,111	2004
Ingal EPS/Ingal Civil Products		9,286		9,387	2010
Donhad		7,006		7,082	2010
Industrial Galvanizers		4,073		4,117	2010
Other		15,380		14,685


	$	75,736	$	64,169

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 in the third quarter of 2014. The values of the trade names were determined using the relief-from-royalty method. Based on this evaluation, the Company determined that its trade names were not impaired.

Goodwill

The carrying amount of goodwill by segment as of September 27, 2014 and December 28, 2013 was as follows:

	Engineered Infrastructure Products Segment			Utility Support Structures Segment		Coatings Segment			Irrigation Segment			Other			Total

Balance at December 28, 2013	$	175,442		$	75,404	$	77,062		$	2,420		$	19,304		$	349,632
Acquisitions		14,317			—		—			17,343			—			31,660
Foreign currency translation		(6,194	)		—		(729	)		(18	)		(207	)		(7,148	)


Balance at September 27, 2014	$	183,565		$	75,404	$	76,333		$	19,745		$	19,097		$	374,144

The goodwill from acquisitions arose from the acquisition of Valmont SM in the first quarter, and the purchase of 51% ownership in AgSense in the third quarter of 2014. The Company's goodwill was tested for impairment during the third quarter of 2014. As a result of that testing, the Company determined that its goodwill was not impaired, as the valuation of the reporting units exceeded their respective carrying values. The Company continues to monitor changes in the global economy that

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(3) GOODWILL AND INTANGIBLE ASSETS (Continued)

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.

(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 thirty-nine weeks ended September 27, 2014 and September 28, 2013 were as follows:

	2014		2013

Interest	$	23,199	$	17,010
Income taxes		94,493		149,529

On May 13, 2014, the Company announced a new capital allocation philosophy which increased the dividend by 50% and covered a share repurchase program of up to $500 million of the Company's outstanding common stock to be acquired from time to time over twelve months at prevailing market prices, through open market or privately-negotiated transactions. As of September 27, 2014, the Company has acquired 2,126,392 shares for approximately $316.3 million.

(5) 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

Thirteen weeks ended September 27, 2014:
Net earnings attributable to Valmont Industries, Inc.	$	23,559	$	—		$	23,559
Shares outstanding		25,287		226			25,513
Per share amount	$	0.93	$	(0.01	)	$	0.92
Thirteen weeks ended September 28, 2013:
Net earnings attributable to Valmont Industries, Inc.	$	56,489	$	—		$	56,489
Shares outstanding		26,665		254			26,919
Per share amount	$	2.12	$	(0.02	)	$	2.10
Thirty-nine weeks ended September 27, 2014:
Net earnings attributable to Valmont Industries, Inc.	$	143,515	$	—		$	143,515
Shares outstanding		26,208		231			26,439
Per share amount	$	5.48	$	(0.05	)	$	5.43
Thirty-nine weeks ended September 28, 2013:
Net earnings attributable to Valmont Industries, Inc.	$	223,621	$	—		$	223,621
Shares outstanding		26,632		264			26,896
Per share amount	$	8.40	$	(0.09	)	$	8.31

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(5) EARNINGS PER SHARE (Continued)

Earnings per share are computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per share does not equal the total for the year primarily due to the share buyback program that began in the second quarter of 2014.

At September 27, 2014, there were 273,170 outstanding stock options with exercise prices exceeding the market price of common stock that were excluded from the computation of diluted earnings per share for the thirteen and thirty-nine weeks ending September 27, 2014. At September 28, 2013, there were 1,172 outstanding stock options with exercise prices exceeding the market price of common stock.

(6) LONG-TERM DEBT

	September 27, 2014			December 28, 2013

5.00% senior unsecured notes due 2044(a)	$	250,000		$	—
5.25% senior unsecured notes due 2054(b)		250,000			—
Unamortized discount on 5.00% and 5.25% senior unsecured notes(a and b)		(4,460	)		—
6.625% senior unsecured notes due 2020(c)		250,200			450,000
Unamortized premium on 6.625% senior unsecured notes(c)		5,650			11,241
Revolving credit agreement(d)		—			—
IDR Bonds(e)		8,500			8,500
Other notes		8,909			1,368


Total long-term debt		768,799			471,109
Less current installments of long-term debt		188			202


Long-term debt, excluding current installments	$	768,611		$	470,907

(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 $1,160 at September 27, 2014. 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 $3,300 at September 27, 2014. 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(6) LONG-TERM DEBT (Continued)

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 $5,650 at September 27, 2014. 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. These notes may be repurchased at specified prepayment premiums. 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 million to $600 million 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 million at any time, subject to lenders increasing the amount of their commitments. The interest rate on our borrowings will be, at our option, either:

(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 Company's senior debt published by Standard & Poor's Rating Services and Moody's Investors Service, Inc., or;

(ii)

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,

Plus, in each case, 0 to 62.5 basis points, depending on the credit rating of the Company's senior debt published by Standard & Poor's Rating Services and Moody's Investors Service, Inc.

At September 27, 2014, the Company had no outstanding borrowings under the revolving credit agreement. The revolving credit agreement contains certain financial covenants that may limit additional borrowing capability under the agreement. At October 21, 2014, the Company had the ability to borrow $582.4 million under this facility. Standby letters of credit totaling $17.6 million related to various insurance obligations were outstanding at October 21, 2014 and reduce the amount available to borrow under this agreement.

(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 June 1, 2025. The effective interest rates at September 27, 2014 and December 28, 2013 were .20% and 0.21%, respectively.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(6) LONG-TERM DEBT (Continued)

The lending agreements include certain maintenance covenants, including financial leverage and interest coverage. The Company was in compliance with all financial debt covenants at September 27, 2014. The minimum aggregate maturities of long-term debt for each of the five years following 2014 are: $1,262, $1,265, $1,050, $1,050 and $1,050.

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 Amended Credit Agreement are guaranteed by the Company and its wholly-owned subsidiaries PiRod, Inc., Valmont Coatings, Inc., Valmont Newmark, Inc., Valmont Group Pty. Ltd. and Valmont Queensland Pty. Ltd.

(7) BUSINESS SEGMENTS

The Company has four 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 INFRASTRUCTURE PRODUCTS: This segment consists of the manufacture of engineered metal structures and components for the global lighting and traffic, wireless communication, wind energy, offshore oil and gas, roadway safety and access systems applications;

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

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

In addition to these four reportable segments, the Company has other businesses and activities that individually are not more than 10% of consolidated sales. These include the manufacture of forged steel grinding media for the mining industry, tubular products for industrial customers, electrolytic manganese dioxide for disposable batteries and the distribution of industrial fasteners and are reported in the "Other" category.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(7) BUSINESS SEGMENTS (Continued)

Summary by Business

	Thirteen Weeks Ended						Thirty-nine Weeks Ended

	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
SALES:
Engineered Infrastructure Products segment:
Lighting, Traffic, and Roadway Products	$	158,977		$	171,991		$	462,707		$	480,648
Communication Products		45,952			38,674			119,456			102,067
Offshore Structures		41,284			—			105,805			—
Access Systems		48,686			49,618			139,745			151,874


Engineered Infrastructure Products segment		294,899			260,283			827,713			734,589
Utility Support Structures segment:
Steel		156,112			199,912			527,123			611,573
Concrete		25,073			29,508			81,819			85,728


Utility Support Structures segment		181,185			229,420			608,942			697,301
Coatings segment		86,735			89,009			254,063			272,052
Irrigation segment		174,288			175,120			606,938			690,002
Other		60,838			71,836			181,226			233,384


Total		797,945			825,668			2,478,882			2,627,328
INTERSEGMENT SALES:
Engineered Infrastructure Products segment		10,696			24,970			48,427			76,591
Utility Support Structures segment		626			489			2,146			1,199
Coatings segment		13,166			13,697			42,889			42,475
Irrigation segment		1			4			14			5
Other		7,788			8,476			25,399			30,737


Total		32,277			47,636			118,875			151,007
NET SALES:
Engineered Infrastructure Products segment		284,203			235,313			779,286			657,998
Utility Support Structures segment		180,559			228,931			606,796			696,102
Coatings segment		73,569			75,312			211,174			229,577
Irrigation segment		174,287			175,116			606,924			689,997
Other		53,050			63,360			155,827			202,647


Total	$	765,668		$	778,032		$	2,360,007		$	2,476,321




OPERATING INCOME:
Engineered Infrastructure Products segment	$	33,200		$	25,689		$	75,534		$	61,026
Utility Support Structures segment		16,975			41,491			76,107			129,767
Coatings segment		17,554			19,833			47,260			56,805
Irrigation segment		26,888			31,145			111,507			149,878
Other		6,211			9,978			23,104			33,790
Corporate		(13,025	)		(18,235	)		(42,085	)		(58,910	)


Total	$	87,803		$	109,901		$	291,427		$	372,356

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION

On September 22, 2014, the Company issued and sold $250,000 aggregate principal amount of the Company's 5.00% senior notes due 2044 and $250,000 aggregate principal amount of the Company's 5.25% senior notes due 2054. On September 22, 2014, the Company repurchased through a partial tender offer $199,800 in aggregate principal amount of the Company's 6.625% senior notes due 2020, and $250,200 of the notes remain outstanding following the conclusion of the tender offer. All of the notes are guaranteed, jointly, severally, fully and unconditionally by certain of the Company's current and future direct and indirect domestic and foreign subsidiaries (collectively the "Guarantors"), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt (collectively referred to as the "Non-Guarantors"). All Guarantors are 100% owned by the parent company.

In 2014, the Company classified "Equity in earnings of nonconsolidated subsidiaries" as an adjustment to reconcile net earnings to operating cash flows, as part of "Net cash flows from operating activities" in the Condensed Consolidating Statement of Cash Flows. In the 2013 Condensed Consolidating Statement of Cash Flows, these amounts were classified within "Other, net", as part of "Net cash flows from investing activities". The Company revised its presentation for 2013 with respect to the supplemental information included in this footnote in order to achieve comparability in the Condensed Consolidating Statements of Cash Flows.

The revisions consisted of recording the amounts previously reported in "Other, net" in cash flows from investing activities that were related to earnings from subsidiaries to "Equity in earnings of nonconsolidated subsidiaries" in cash flows from operating activities. Accordingly, the eliminations to reconcile consolidated net earnings are contained in the "Net cash flows from operating activities".

The "Non-Guarantor" and "Total" columns were not affected by any of these revisions. There was also no effect on the consolidated (total) net cash flows or any other statements in this footnote. The following is a reconciliation of the columns affected for 2013.

	Parent			Parent			Guarantor			Guarantor			Eliminations			Eliminations

	As previously reported			As revised			As previously reported			As revised			As previously reported			As revised
2013
Cash flows from operating activities:
Equity in earnings of nonconsolidated subsidiaries	$	(341	)	$	(121,211	)	$	—		$	(48,927	)	$	—		$	169,797
Net cash flows from operating activities		239,277			118,407			77,264			28,337			(166,675	)		3,122
Cash flows from investing activities:
Other, net		(68,447	)		52,423			(105,512	)		(56,585	)		166,675			(3,122	)
Net cash flows from investing activities		(107,989	)		12,881			(123,858	)		(74,931	)		166,675			(3,122	)

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

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 Thirteen weeks ended September 27, 2014

	Parent			Guarantors			Non- Guarantors			Eliminations			Total

Net sales	$	313,775		$	120,016		$	384,564		$	(52,687	)	$	765,668
Cost of sales		234,085			92,091			292,722			(52,730	)		566,168


Gross profit		79,690			27,925			91,842			43			199,500
Selling, general and administrative expenses		48,560			12,145			50,992			—			111,697


Operating income		31,130			15,780			40,850			43			87,803


Other income (expense):
Interest expense		(8,061	)		(11,288	)		(655	)		11,288			(8,716	)
Interest income		2			161			12,602			(11,288	)		1,477
Costs associated with refinancing of debt		(38,705	)		—			—			—			(38,705	)
Other		(196	)		(149	)		(1,999	)		—			(2,344	)


		(46,960	)		(11,276	)		9,948			—			(48,288	)


Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries		(15,830	)		4,504			50,798			43			39,515


Income tax expense (benefit):
Current		9,296			3,600			10,397			(3	)		23,290
Deferred		(12,430	)		(342	)		3,708			—			(9,064	)


		(3,134	)		3,258			14,105			(3	)		14,226


Earnings before equity in earnings of nonconsolidated subsidiaries		(12,696	)		1,246			36,693			46			25,289
Equity in earnings of nonconsolidated subsidiaries		36,255			17,026			—			(53,285	)		(4	)


Net earnings		23,559			18,272			36,693			(53,239	)		25,285
Less: Earnings attributable to noncontrolling interests		—			—			(1,726	)		—			(1,726	)


Net earnings attributable to Valmont Industries, Inc	$	23,559		$	18,272		$	34,967		$	(53,239	)	$	23,559

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirty-nine weeks ended September 27, 2014

	Parent			Guarantors			Non- Guarantors			Eliminations			Total

Net sales	$	1,069,059		$	380,327		$	1,072,560		$	(161,939	)	$	2,360,007
Cost of sales		785,898			283,443			826,120			(162,413	)		1,733,048


Gross profit		283,161			96,884			246,440			474			626,959
Selling, general and administrative expenses		146,514			37,806			151,212			—			335,532


Operating income		136,647			59,078			95,228			474			291,427


Other income (expense):
Interest expense		(23,427	)		(33,505	)		(1,790	)		33,505			(25,217	)
Interest income		28			496			37,774			(33,505	)		4,793
Costs associated with refinancing of debt		(38,705	)		—			—			—			(38,705	)
Other		1,625			(501	)		(7,377	)		—			(6,253	)


		(60,479	)		(33,510	)		28,607			—			(65,382	)


Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries		76,168			25,568			123,835			474			226,045


Income tax expense (benefit):
Current		38,489			11,813			31,914			129			82,345
Deferred		(6,601	)		1,325			1,242			—			(4,034	)


		31,888			13,138			33,156			129			78,311


Earnings before equity in earnings of nonconsolidated subsidiaries		44,280			12,430			90,679			345			147,734
Equity in earnings of nonconsolidated subsidiaries		99,235			42,929			—			(142,198	)		(34	)


Net earnings		143,515			55,359			90,679			(141,853	)		147,700
Less: Earnings attributable to noncontrolling interests		—			—			(4,185	)		—			(4,185	)


Net earnings attributable to Valmont Industries, Inc	$	143,515		$	55,359		$	86,494		$	(141,853	)	$	143,515

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirteen weeks ended September 28, 2013

	Parent			Guarantors			Non- Guarantors			Eliminations			Total

Net sales	$	331,525		$	161,432		$	366,522		$	(81,447	)	$	778,032
Cost of sales		238,692			121,870			273,317			(81,411	)		552,468


Gross profit		92,833			39,562			93,205			(36	)		225,564
Selling, general and administrative expenses		51,621			14,530			49,512			—			115,663


Operating income		41,212			25,032			43,693			(36	)		109,901


Other income (expense):
Interest expense		(7,724	)		(11,122	)		(425	)		11,122			(8,149	)
Interest income		18			242			12,422			(11,122	)		1,560
Other		1,422			9			(2,015	)		—			(584	)


		(6,284	)		(10,871	)		9,982			—			(7,173	)


Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries		34,928			14,161			53,675			(36	)		102,728


Income tax expense (benefit):
Current		19,473			7,419			13,631			(65	)		40,458
Deferred		(4,969	)		(360	)		8,783			—			3,454


		14,504			7,059			22,414			(65	)		43,912


Earnings before equity in earnings of nonconsolidated subsidiaries		20,424			7,102			31,261			29			58,816
Equity in earnings of nonconsolidated subsidiaries		36,065			6,542			—			(42,532	)		75


Net earnings		56,489			13,644			31,261			(42,503	)		58,891
Less: Earnings attributable to noncontrolling interests		—			—			(2,402	)		—			(2,402	)


Net earnings attributable to Valmont Industries, Inc	$	56,489		$	13,644		$	28,859		$	(42,503	)	$	56,489

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Thirty-nine weeks ended September 28, 2013

	Parent			Guarantors			Non- Guarantors			Eliminations			Total

Net sales	$	1,174,955		$	501,308		$	1,052,733		$	(252,675	)	$	2,476,321
Cost of sales		837,321			377,158			795,182			(255,744	)		1,753,917


Gross profit		337,634			124,150			257,551			3,069			722,404
Selling, general and administrative expenses		157,367			42,871			149,810			—			350,048


Operating income		180,267			81,279			107,741			3,069			372,356


Other income (expense):
Interest expense		(23,115	)		(35,696	)		(1,249	)		35,696			(24,364	)
Interest income		33			732			39,696			(35,696	)		4,765
Other		3,224			55			(2,184	)		—			1,095


		(19,858	)		(34,909	)		36,263			—			(18,504	)


Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries		160,409			46,370			144,004			3,069			353,852


Income tax expense (benefit):
Current		65,472			20,801			40,283			772			127,328
Deferred		(7,473	)		1,342			4,856			—			(1,275	)


		57,999			22,143			45,139			772			126,053


Earnings before equity in earnings of nonconsolidated subsidiaries		102,410			24,227			98,865			2,297			227,799
Equity in earnings of nonconsolidated subsidiaries		121,211			48,927			207			(169,797	)		548


Net earnings		223,621			73,154			99,072			(167,500	)		228,347
Less: Earnings attributable to noncontrolling interests		—			—			(4,726	)		—			(4,726	)


Net earnings attributable to Valmont Industries, Inc	$	223,621		$	73,154		$	94,346		$	(167,500	)	$	223,621

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirteen weeks ended September 27, 2014

	Parent			Guarantors		Non- Guarantors			Eliminations			Total

Net earnings	$	23,559		$	18,272	$	36,693		$	(53,239	)	$	25,285


Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized gains (losses) arising during the period		—			37,807		(96,808	)		—			(59,001	)
Unrealized loss on cash flow hedge:
Amortization cost included in interest expense		100			—		283			—			383
Realized loss included in net earnings during the period		983			—		—			—			983
Gain on cash flow hedges		4,837			—		—			—			4,837
Actuarial gain (loss) in defined benefit pension plan liability		—			—		1,116			—			1,116
Equity in other comprehensive income		(55,787	)		—		—			55,787			—


Other comprehensive income (loss)		(49,867	)		37,807		(95,409	)		55,787			(51,682	)


Comprehensive income		(26,308	)		56,079		(58,716	)		2,548			(26,397	)
Comprehensive income attributable to noncontrolling interests		—			—		89			—			89


Comprehensive income attributable to Valmont Industries, Inc.	$	(26,308	)	$	56,079	$	(58,627	)	$	2,548		$	(26,308	)

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirty-nine weeks ended September 27, 2014

	Parent			Guarantors		Non- Guarantors			Eliminations			Total

Net earnings	$	143,515		$	55,359	$	90,679		$	(141,853	)	$	147,700


Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized gains (losses) arising during the period					8,492		(41,987	)		—			(33,495	)
Unrealized loss on cash flow hedge:
Amortization cost included in interest expense		300			—		150			—			450
Realized loss included in net earnings during the period		983			—		—			—			983
Gain on cash flow hedges		4,837			—		—			—			4,837
Actuarial gain (loss) in defined benefit pension plan liability		—			—		269			—			269
Equity in other comprehensive income		(30,506	)		—					30,506			—


Other comprehensive income (loss)		(24,386	)		8,492		(41,568	)		30,506			(26,956	)


Comprehensive income		119,129			63,851		49,111			(111,347	)		120,744
Comprehensive income attributable to noncontrolling interests		—			—		(1,615	)		—			(1,615	)


Comprehensive income attributable to Valmont Industries, Inc.	$	119,129		$	63,851	$	47,496		$	(111,347	)	$	119,129

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirteen weeks ended September 28, 2013

	Parent		Guarantors		Non- Guarantors			Eliminations			Total

Net earnings	$	56,489	$	13,644	$	31,261		$	(42,503	)	$	58,891


Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized gains (losses) arising during the period		—		30,221		(12,097	)		—			18,124
Unrealized loss on cash flow hedge:
Amortization cost included in interest expense		100		—		—			—			100
Actuarial gain (loss) in defined benefit pension plan liability		—		—		857			—			857
Equity in other comprehensive income		19,227		—		—			(19,227	)		—


Other comprehensive income (loss)		19,327		30,221		(11,240	)		(19,227	)		19,081


Comprehensive income		75,816		43,865		20,021			(61,730	)		77,972
Comprehensive income attributable to noncontrolling interests		—		—		(2,156	)		—			(2,156	)


Comprehensive income attributable to Valmont Industries, Inc.	$	75,816	$	43,865	$	17,865		$	(61,730	)	$	75,816

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Thirty-nine weeks ended September 28, 2013

	Parent			Guarantors		Non- Guarantors			Eliminations			Total

Net earnings	$	223,621		$	73,154	$	99,072		$	(167,500	)	$	228,347


Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized gains (losses) arising during the period		—			57,707		(102,165	)		—			(44,458	)
Realized (loss) included in net earnings during the period		—			—		(5,194	)		—			(5,194	)
Unrealized loss on cash flow hedge:
Amortization cost included in interest expense		300			—		—			—			300
Actuarial gain (loss) in defined benefit pension plan liability		—			—		(37	)		—			(37	)
Equity in other comprehensive income		(43,930	)		—		—			43,930			—


Other comprehensive income (loss)		(43,630	)		57,707		(107,396	)		43,930			(49,389	)


Comprehensive income		179,991			130,861		(8,324	)		(123,570	)		178,958
Comprehensive income attributable to noncontrolling interests		—			—		1,033			—			1,033


Comprehensive income attributable to Valmont Industries, Inc.	$	179,991		$	130,861	$	(7,291	)	$	(123,570	)	$	179,991

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS
September 27, 2014

	Parent			Guarantors		Non-Guarantors			Eliminations			Total

ASSETS
Current assets:
Cash and cash equivalents	$	153,921		$	3,663	$	294,634		$	—		$	452,218
Receivables, net		158,080			78,808		333,922			—			570,810
Inventories		130,039			65,194		189,412			—			384,645
Prepaid expenses		6,948			759		56,966			—			64,673
Refundable and deferred income taxes		46,233			6,396		11,809			—			64,438


Total current assets		495,221			154,820		886,743			—			1,536,784


Property, plant and equipment, at cost		555,552			126,438		456,431			—			1,138,421
Less accumulated depreciation and amortization		316,637			66,509		138,723			—			521,869


Net property, plant and equipment		238,915			59,929		317,708			—			616,552


Goodwill		20,108			107,542		246,494			—			374,144
Other intangible assets		306			44,847		154,666			—			199,819
Investment in subsidiaries and intercompany accounts		1,477,670			1,489,054		564,888			(3,531,612	)		—
Other assets		44,958			—		90,464			—			135,422


Total assets	$	2,277,178		$	1,856,192	$	2,260,963		$	(3,531,612	)	$	2,862,721




LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt	$	188		$	—	$	—		$	—		$	188
Notes payable to banks		—			—		17,863			—			17,863
Accounts payable		59,365			16,720		133,911			—			209,996
Accrued employee compensation and benefits		49,004			5,508		39,947			—			94,459
Accrued expenses		35,806			6,223		51,454			—			93,483
Dividends payable		9,299			—		—			—			9,299


Total current liabilities		153,662			28,451		243,175			—			425,288


Deferred income taxes		2,575			28,649		45,383			—			76,607
Long-term debt, excluding current installments		760,130			507,362		8,481			(507,362	)		768,611
Defined benefit pension liability		—			—		136,808			—			136,808
Deferred compensation		41,629			—		6,385			—			48,014
Other noncurrent liabilities		9,561			—		39,146			—			48,707
Shareholders' equity:
Common stock of $1 par value		27,900			457,950		254,982			(712,932	)		27,900
Additional paid-in capital		—			150,286		1,034,236			(1,184,522	)		—
Retained earnings		1,687,536			608,558		505,735			(1,114,293	)		1,687,536
Accumulated other comprehensive income (loss)		(72,071	)		74,936		(62,433	)		(12,503	)		(72,071	)
Treasury stock		(333,744	)		—		—			—			(333,744	)


Total Valmont Industries, Inc. shareholders' equity		1,309,621			1,291,730		1,732,520			(3,024,250	)		1,309,621


Noncontrolling interest in consolidated subsidiaries		—			—		49,065			—			49,065


Total shareholders' equity		1,309,621			1,291,730		1,781,585			(3,024,250	)		1,358,686


Total liabilities and shareholders' equity	$	2,277,178		$	1,856,192	$	2,260,963		$	(3,531,612	)	$	2,862,721

Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, 2013

	Parent			Guarantors		Non-Guarantors			Eliminations			Total

ASSETS
Current assets:
Cash and cash equivalents	$	215,576		$	49,053	$	349,077		$	—		$	613,706
Receivables, net		139,179			108,646		267,615			—			515,440
Inventories		132,953			70,231		176,816			—			380,000
Prepaid expenses		4,735			932		17,330			—			22,997
Refundable and deferred income taxes		41,167			8,351		16,179			—			65,697


Total current assets		533,610			237,213		827,017			—			1,597,840


Property, plant and equipment, at cost		522,734			125,764		368,628			—			1,017,126
Less accumulated depreciation and amortization		300,066			61,520		121,330			—			482,916


Net property, plant and equipment		222,668			64,244		247,298			—			534,210


Goodwill		20,108			107,542		221,982			—			349,632
Other intangible assets		346			48,461		122,110			—			170,917
Investment in subsidiaries and intercompany accounts		1,417,425			1,367,308		518,059			(3,302,792	)		—
Other assets		30,759			—		93,136			—			123,895


Total assets	$	2,224,916		$	1,824,768	$	2,029,602		$	(3,302,792	)	$	2,776,494




LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt	$	188		$	—	$	14		$	—		$	202
Notes payable to banks		—			—		19,024			—			19,024
Accounts payable		62,153			20,365		133,603			—			216,121
Accrued employee compensation and benefits		76,370			13,713		32,884			—			122,967
Accrued expenses		28,362			7,315		35,883			—			71,560
Dividends payable		6,706			—		—			—			6,706


Total current liabilities		173,779			41,393		221,408			—			436,580


Deferred income taxes		18,983			29,279		30,662			—			78,924
Long-term debt, excluding current installments		470,175			514,223		732			(514,223	)		470,907
Defined benefit pension liability		—			—		154,397			—			154,397
Deferred compensation		32,339			—		6,770			—			39,109
Other noncurrent liabilities		7,615			—		44,116			—			51,731
Shareholders' equity:
Common stock of $1 par value		27,900			457,950		254,982			(712,932	)		27,900
Additional paid-in capital		—			150,286		891,236			(1,041,522	)		—
Retained earnings		1,562,670			565,193		517,703			(1,082,896	)		1,562,670
Accumulated other comprehensive income		(47,685	)		66,444		(115,225	)		48,781			(47,685	)
Treasury stock		(20,860	)		—		—			—			(20,860	)


Total Valmont Industries, Inc. shareholders' equity		1,522,025			1,239,873		1,548,696			(2,788,569	)		1,522,025


Noncontrolling interest in consolidated subsidiaries		—			—		22,821			—			22,821


Total shareholders' equity		1,522,025			1,239,873		1,571,517			(2,788,569	)		1,544,846


Total liabilities and shareholders' equity	$	2,224,916		$	1,824,768	$	2,029,602		$	(3,302,792	)	$	2,776,494

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-nine Weeks Ended September 27, 2014

	Parent			Guarantors			Non-Guarantors			Eliminations			Total

Cash flows from operating activities:
Net earnings	$	143,515		$	55,359		$	90,679		$	(141,853	)	$	147,700
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization		17,094			9,804			37,562			—			64,460
Loss on investment		—			—			4,859			—			4,859
Non-cash debt refinancing costs		(2,478	)		—			—			—			(2,478	)
Stock-based compensation		5,444			—			—			—			5,444
Change in fair value of contingent consideration		—			—			4,300			—			4,300
Defined benefit pension plan expense		—			—			2,003			—			2,003
Contribution to defined benefit pension plan		—			—			(18,245	)		—			(18,245	)
Gain on sale of property, plant and equipment		37			(30	)		51			—			58
Equity in earnings in nonconsolidated subsidiaries		(99,235	)		(42,929	)		—			142,198			34
Deferred income taxes		(6,601	)		1,324			1,243			—			(4,034	)
Changes in assets and liabilities (net of acquisitions):
Receivables		(18,901	)		29,838			(30,888	)		—			(19,951	)
Inventories		2,914			5,036			(12,102	)		—			(4,152	)
Prepaid expenses		(2,213	)		173			(17,142	)		—			(19,182	)
Accounts payable		(2,788	)		(3,643	)		(14,651	)		—			(21,082	)
Accrued expenses		(18,654	)		(9,296	)		24			—			(27,926	)
Other noncurrent liabilities		2,061			—			(8,470	)		—			(6,409	)
Income taxes payable (refundable)		(16,149	)		(225	)		(6,328	)		—			(22,702	)


Net cash flows from operating activities		4,046			45,411			32,895			345			82,697


Cash flows from investing activities:
Purchase of property, plant and equipment		(35,925	)		(1,972	)		(25,515	)		—			(63,412	)
Proceeds from sale of assets		8			127			1,972			—			2,107
Acquisitions, net of cash acquired		—			—			(137,438	)		—			(137,438	)
Other, net		36,954			(15,989	)		(17,628	)		(345	)		2,992


Net cash flows from investing activities		1,037			(17,834	)		(178,609	)		(345	)		(195,751	)


Cash flows from financing activities:
Net borrowings under short-term agreements		—			—			(1,065	)		—			(1,065	)
Proceeds from long-term borrowings		652,540			—			—			—			652,540
Principal payments on long-term borrowings		(356,994	)		—			(65	)		—			(357,059	)
Settlement of financial derivative		4,837			—			—			—			4,837
Dividends paid		(23,357	)		—			—			—			(23,357	)
Intercompany dividends		116,995			(18,533	)		(98,462	)		—			—
Dividends to noncontrolling interest		—			—			(1,340	)		—			(1,340	)
Intercompany interest on long-term note		—			(54,398	)		54,398			—			—
Debt issuance costs		(5,464	)		—			—			—			(5,464	)
Intercompany capital contribution		(143,000	)		—			143,000			—			—
Proceeds from exercises under stock plans		12,824			—			—			—			12,824
Excess tax benefits from stock option exercises		3,916			—			—			—			3,916
Purchase of treasury shares		(316,296	)		—			—			—			(316,296	)
Purchase of common treasury shares—stock plan exercises:		(12,739	)		—			—			—			(12,739	)


Net cash flows from financing activities		(66,738	)		(72,931	)		96,466			—			(43,203	)


Effect of exchange rate changes on cash and cash equivalents		—			(36	)		(5,195	)		—			(5,231	)


Net change in cash and cash equivalents		(61,655	)		(45,390	)		(54,443	)		—			(161,488	)
Cash and cash equivalents—beginning of year		215,576			49,053			349,077			—			613,706


Cash and cash equivalents—end of period	$	153,921		$	3,663		$	294,634		$	—		$	452,218

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

(8) GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-nine Weeks Ended September 28, 2013

	Parent			Guarantors			Non-Guarantors			Eliminations			Total

Cash flows from operations:
Net earnings	$	223,621		$	73,154		$	99,072		$	(167,500	)	$	228,347
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization		15,252			9,620			32,545			—			57,417
Stock-based compensation		4,999			—			—			—			4,999
Defined benefit pension plan expense		—			—			4,870			—			4,870
Contribution to defined benefit pension plan		—			—			(16,755	)		—			(16,755	)
Gain on sale of property, plant and equipment		354			37			(5,451	)		—			(5,060	)
Equity in earnings of nonconsolidated subsidiaries		(121,211	)		(48,927	)		(207	)		169,797			(548	)
Deferred income taxes		(7,473	)		1,342			4,856			—			(1,275	)
Changes in assets and liabilities:
Receivables		8,737			3,552			(13,046	)		—			(757	)
Inventories		3,146			(5,556	)		(12,164	)		—			(14,574	)
Prepaid expenses		(1,148	)		290			(6,183	)		—			(7,041	)
Accounts payable		(11,968	)		(2,992	)		16,121			—			1,161
Accrued expenses		17,944			(148	)		(865	)		—			16,931
Other noncurrent liabilities		5,987			—			(3,477	)		—			2,510
Income taxes payable (refundable)		(19,833	)		(2,035	)		(77	)		825			(21,120	)


Net cash flows from operations		118,407			28,337			99,239			3,122			249,105


Cash flows from investing activities:
Purchase of property, plant and equipment		(41,034	)		(18,381	)		(15,657	)		—			(75,072	)
Proceeds from sale of assets		1,492			35			38,037			—			39,564
Acquisitions, net of cash acquired		—			—			(53,152	)		—			(53,152	)
Other, net		52,423			(56,585	)		8,515			(3,122	)		1,231


Net cash flows from investing activities		12,881			(74,931	)		(22,257	)		(3,122	)		(87,429	)


Cash flows from financing activities:
Net borrowings under short-term agreements		—			—			3,439			—			3,439
Proceeds from long-term borrowings		—			—			274			—			274
Principal payments on long-term borrowings		(187	)		—			(321	)		—			(508	)
Dividends paid		(18,717	)		—			—			—			(18,717	)
Intercompany dividends		—			20,133			(20,133	)		—			—
Dividend to noncontrolling interests		—			—			(1,767	)		—			(1,767	)
Proceeds from exercises under stock plans		15,064			—			—			—			15,064
Excess tax benefits from stock option exercises		4,630			—			—			—			4,630
Purchase of common treasury shares—stock plan exercises		(14,644	)		—			—			—			(14,644	)


Net cash flows from financing activities		(13,854	)		20,133			(18,508	)		—			(12,229	)


Effect of exchange rate changes on cash and cash equivalents		—			(5,556	)		(14,651	)		—			(20,207	)


Net change in cash and cash equivalents		117,434			(32,017	)		43,823			—			129,240
Cash and cash equivalents—beginning of year		40,926			83,203			290,000			—			414,129


Cash and cash equivalents—end of period	$	158,360		$	51,186		$	333,823		$	—		$	543,369

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

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

This discussion should be read in conjunction with the financial statements and 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, 2013. Segment sales in the table below are presented net of intersegment sales.

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Results of Operations

Dollars in millions, except per share amounts

	Thirteen Weeks Ended									Thirty-nine Weeks Ended

	September 27, 2014			September 28, 2013			% Incr. (Decr.)			September 27, 2014			September 28, 2013			% Incr. (Decr.)
Consolidated
Net sales	$	765.7		$	778.0			(1.6	)%	$	2,360.0		$	2,476.3			(4.7	)%
Gross profit		199.5			225.6			(11.6	)%		627.0			722.4			(13.2	)%
as a percent of sales		26.1	%		29.0	%					26.6	%		29.2	%
SG&A expense		111.7			115.7			(3.5	)%		335.5			350.0			(4.1	)%
as a percent of sales		14.6	%		14.9	%					14.2	%		14.1	%
Operating income		87.8			109.9			(20.1	)%		291.4			372.4			(21.8	)%
as a percent of sales		11.5	%		14.1	%					12.3	%		15.0	%
Net interest expense		7.2			6.6			9.1	%		20.4			19.6			4.1	%
Refinancing costs		38.7			—			NM			38.7			—			NM
Effective tax rate		36.0	%		42.8	%					34.6	%		35.6	%
Net earnings	$	23.6		$	56.5			(58.2	)%	$	143.5		$	223.6			(35.8	)%
Diluted earnings per share	$	0.92		$	2.10			(56.2	)%	$	5.43		$	8.31			(34.7	)%
Engineered Infrastructure Products
Net sales	$	284.2		$	235.3			20.8	%	$	779.3		$	658.0			18.4	%
Gross profit		76.9			67.6			13.8	%		205.3			186.0			10.4	%
SG&A expense		43.7			41.9			4.3	%		129.8			125.0			3.8	%
Operating income		33.2			25.7			29.2	%		75.5			61.0			23.8	%
Utility Support Structures
Net sales	$	180.6		$	228.9			(21.1	)%	$	606.8		$	696.1			(12.8	)%
Gross profit		36.5			61.8			(40.9	)%		134.5			189.8			(29.1	)%
SG&A expense		19.5			20.3			(3.9	)%		58.4			60.0			(2.7	)%
Operating income		17.0			41.5			(59.0	)%		76.1			129.8			(41.4	)%
Coatings
Net sales	$	73.6		$	75.3			(2.3	)%	$	211.2		$	229.6			(8.0	)%
Gross profit		26.7			28.7			(7.0	)%		75.3			80.9			(6.9	)%
SG&A expense		9.1			8.9			2.2	%		28.0			24.1			16.2	%
Operating income		17.6			19.8			(11.1	)%		47.3			56.8			(16.7	)%
Irrigation
Net sales	$	174.3		$	175.1			(0.5	)%	$	606.9		$	690.0			(12.0	)%
Gross profit		49.1			52.9			(7.2	)%		176.7			216.3			(18.3	)%
SG&A expense		22.3			21.7			2.8	%		65.2			66.4			(1.8	)%
Operating income		26.8			31.2			(14.1	)%		111.5			149.9			(25.6	)%
Other
Net sales	$	53.0		$	63.4			(16.4	)%	$	155.8		$	202.6			(23.1	)%
Gross profit		10.3			14.9			(30.9	)%		35.0			49.2			(28.9	)%
SG&A expense		4.1			4.9			(16.3	)%		11.9			15.4			(22.7	)%
Operating income		6.2			10.0			(38.0	)%		23.1			33.8			(31.7	)%
Net corporate expense
Gross profit	$	—		$	(0.1	)		NM		$	0.2		$	0.2			NM
SG&A expense		13.0			18.1			(28.2	)%		42.3			59.1			(28.4	)%
Operating loss		(13.0	)		(18.2	)		28.6	%		(42.1	)		(58.9	)		28.5	%

NM=Not meaningful

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Overview

On a consolidated basis, the decrease in net sales in the third quarter and first three quarters of fiscal 2014, as compared with 2013, reflected lower sales in all reportable segments except for the Engineered Infrastructure Products (EIP) segment. The changes in net sales in the third quarter and first three quarters of fiscal 2014, as compared with fiscal 2013, were as follows:

	Third quarter

	Total			EIP			Utility			Coatings			Irrigation			Other
Sales—2013	$	778.0		$	235.3		$	228.9		$	75.3		$	175.1		$	63.4
Volume		(26.1	)		(1.0	)		(22.0	)		(5.1	)		0.9			1.1
Pricing/mix		(21.7	)		4.4			(26.4	)		3.4			(2.0	)		(1.1	)
Acquisitions/Divestiture		33.6			43.9			—			—			0.6			(10.9	)
Currency translation		1.9			1.6			0.1			—			(0.3	)		0.5


Sales—2014	$	765.7		$	284.2		$	180.6		$	73.6		$	174.3		$	53.0

	Year-to-date

	Total			EIP			Utility			Coatings			Irrigation			Other
Sales—2013	$	2,476.3		$	658.0		$	696.1		$	229.6		$	690.0		$	202.6
Volume		(126.3	)		8.3			(38.1	)		(15.4	)		(75.0	)		(6.1	)
Pricing/mix		(48.0	)		4.3			(49.7	)		3.7			(1.4	)		(4.9	)
Acquisitions/Divestiture		88.5			117.0			—			—			0.6			(29.1	)
Currency translation		(30.5	)		(8.3	)		(1.5	)		(6.7	)		(7.3	)		(6.7	)


Sales—2014	$	2,360.0		$	779.3		$	606.8		$	211.2		$	606.9		$	155.8

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 Locker Group Holdings ("Locker"), Armorflex International Ltd. ("Armorflex"), AgSense LLC, and DS SM A/S, which was renamed Valmont SM. We acquired Locker in February 2013, Armorflex in December 2013, AgSense in August 2014, and Valmont SM in March 2014. All of these acquisitions are reported in the Engineered Infrastructure Products segment, except for AgSense which is reported in the Irrigation segment. In the "Other" category, the sales reduction of $10.9 million and $29.1 million in the third quarter and first three quarters of 2014 reflects the deconsolidation of Delta EMD Pty. Ltd. ("EMD") in December 2013, following the reduction of our ownership in the operation to below 50%.

In the third quarter and first three quarters of fiscal 2014, we realized a decrease in operating profit, as compared with fiscal 2013, due to currency translation effects. On average, the U.S. dollar strengthened in particular against the Australian dollar, Brazilian Real and South Africa Rand, resulting in less operating profit in U.S. dollar terms. The breakdown of this effect by segment was as follows:

	Total			EIP			Utility			Coatings			Irrigation			Other			Corporate

Third quarter	$	0.1		$	0.1		$	—		$	—		$	—		$	—		$	—
Year-to-date	$	(3.7	)	$	(0.8	)	$	(0.3	)	$	(0.8	)	$	(1.3	)	$	(0.9	)	$	0.4

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The decrease in gross margin (gross profit as a percent of sales) in fiscal 2014, as compared with 2013, was due to a combination of lower sales prices, unfavorable sales mix, reduced sales volumes and slightly higher raw material costs in 2014, as compared with 2013.

Selling, general and administrative (SG&A) spending in the third quarter and first three quarters of fiscal 2014, as compared with the same periods in 2013, decreased mainly due to the following factors:

•: decreased employee incentive accruals of $6.8 million and $22.1 million, respectively, due to lower operating results;
•: lower expenses associated with the Delta Pension Plan of $1.0 million and $2.9 million, respectively; and
•: EMD was deconsolidated in December 2013, which resulted in reduced expenses of $1.1 million and $3.5 million, respectively.

The above reductions in SG&A were partially offset by the following:

•: the sale of one of our galvanizing facilities in Australia resulted in a gain of $4.6 million in the second quarter of 2013, which was reported as a reduction of SG&A expense, and;
•: the acquisition of AgSense in August 2014, Valmont SM in March 2014, and Armorflex in December 2013 included combined expenses in the third quarter and first three quarters of fiscal 2014 of $4.0 million and $9.9 million, respectively.

The decrease in operating income on a reportable segment basis in 2014, as compared to 2013, was due to reduced operating performance in the Utility, Irrigation, and Coatings segments. The EIP segment showed improved operating performance in 2014 compared to 2013, primarily due to the acquisitions of Valmont SM and Armorflex. The "Other" category reported reduced operating performance in 2014 compared to 2013, mainly due to lower grinding media sales.

Net interest expense increased slightly in the third quarter and first three quarters of fiscal 2014, as compared with 2013, due to slightly higher interest expense due to additional long-term debt issued in the third quarter.

The approximate $38.7 million in costs associated with refinancing of debt is due to the Company's repurchase 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.

The increase in other expense in the third quarter and first three quarters of 2014, as compared with 2013, was mainly attributable to recording the change (loss) in fair value of the Company's investment in EMD of $1.4 million and $4.9 million, respectively. $1.3 million in lower appreciation of the deferred compensation assets in the third quarter and first three quarters of 2014 as compared to 2013 also contributed to the higher other expense.

Our effective income tax rate in the third quarter of fiscal 2014 was lower than the same period in fiscal 2013, principally due to a lowering of the U.K. income tax rates in 2013. In the third quarter of fiscal 2013, U.K. tax rates were collectively reduced from 23% to 20%. Accordingly, we reduced the value of our deferred tax assets associated with net operating loss carryforwards and certain timing

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differences by $8.3 million in the third quarter of fiscal 2013, with a corresponding increase in income tax expense. The year-to-date effective tax rate in fiscal 2014 was slightly lower than 2013, mainly due to lower U.K. tax rates discussed above, offset by approximately $3.2 million of non-cash tax benefits associated with the first quarter 2013 sale of our nonconsolidated investment in South Africa and $1.0 million of higher research and development tax credits in the U.S in 2013.

Earnings in non-consolidated subsidiaries were lower in fiscal 2014, as compared with 2013, with a small amount of activity in 2014. In February 2013, the Company sold its 49% ownership interest in a manganese materials operation. There was no significant gain or loss on the sale.

Our cash flows provided by operations were approximately $82.7 million in the first three quarters of fiscal 2014, as compared with $249.1 million provided by operations in 2013. The decrease in operating cash flow in the first three quarters of fiscal 2014 was the result of the cash prepayment expenses related to the refinancing of debt, decreased net earnings, and higher net working capital, as compared with 2013.

Engineered Infrastructure Products (EIP) segment

The increase in net sales in the third quarter and first three quarters of fiscal 2014 as compared with 2013 was mainly due to the acquisition of Valmont SM in early March 2014 and Armorflex in December 2013 ($43.9 million and $112.6 million).

Global lighting. traffic, and roadway product sales in the third quarter and first three quarters of fiscal 2014 improved compared to the same period in fiscal 2013. In the third quarter and first three quarters of fiscal 2014, sales volumes in the U.S. were slightly higher in the transportation markets as construction and installation activity continue to show slight improvement over 2013. However, the transportation market continues to be challenging, due in part to the lack of long-term U.S. federal highway funding legislation. Sales volumes in Canada were down in the third quarter and first three quarters of 2014 as compared to 2013 due to project delays, lower government spending, and increased competition. Sales in Europe were lower in the third quarter of fiscal 2014 and slightly lower year-to-date compared to the same periods in fiscal 2013. Decreased volumes in France were offset to an extent by volume increases in the U.K and favorable currency impacts. In the Asia Pacific region, sales were lower in the third quarter of fiscal 2014 over 2013 due to softer market conditions in Australia, partially offset by growth in India. Highway safety product sales improved in the third quarter and first three quarters of 2014 compared to 2013, due to the acquisition of Armorflex in December 2013 (approximately $2.6 million and $6.7 million, respectively) and modestly improved market conditions in Australia and New Zealand due to more highway construction projects this year. This improvement is offset somewhat by unfavorable year-to-date currency translation effects of $2.7 million.

Communication product line sales were higher in the third quarter and first three quarters of fiscal 2014, as compared with the same periods in fiscal 2013. On a regional basis, North America sales in the third quarter and first three quarters increased. The year-to-date increase in North American sales was mainly attributable to higher wireless communication structures sales due to the continued build out of wireless networks, partially offset by decreased communication component sales resulting from a large customer temporarily curtailing spending. In China, sales of wireless communication structures in the third quarter and first three quarters of fiscal 2014 were higher than the same periods in fiscal 2013. Chinese wireless carriers are increasing investment in 4G upgrades, as the government began issuing licenses in late 2013.

Access systems product line sales decreased in the third quarter and first three quarters of 2014, as compared with 2013, primarily due to the negative impact of currency translation year-to-date of $7.5 million and lower volumes. The volume decrease was primarily related to the slowdown in mining sector investment in Australia and weaker market conditions in China. The volume decrease was

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partially offset by the full 2014 effect of the Locker acquisition (approximately $4.5 million) that was acquired in February 2013.

Operating income for the segment in the third quarter and first three quarters of fiscal 2014 increased, as compared with the same period of fiscal 2013, due primarily to operating profit generated from the acquisitions of Valmont SM and Armorflex of $4.8 million and $12.5 million, respectively, and the reversal of the Locker earn-out liability in the third quarter of fiscal 2014 of approximately $4.3 million. The earn-out reversal was recorded against product cost of sales in the condensed consolidated statements of earnings.

The increase in SG&A spending in the third quarter and first three quarters of 2014 were due to costs related to the Armorflex and Valmont SM acquisitions totaling $3.7 million and $9.6 million, respectively. These increased costs in the third quarter and first three quarters of 2014 were offset by lower incentive costs of $1.1 million and $2.7 million, respectively. Currency effects also reduced SG&A expense for the three quarters ended September 27, 2014 approximately $1.3 million.

Utility Support Structures (Utility) segment

In the Utility segment, the sales decrease in the third quarter and first three quarters of 2014, as compared with 2013, was due to lower sales volume and a decline in the percentage of sales from very large transmission projects which changed the mix of utility structure sales between the reporting periods. In North America, sales volumes in tons for steel utility structures were down in the first three quarters of 2014, as compared with 2013, offset by increases in sales volume for concrete structures. We believe industry supply and demand are now more aligned as compared with this time in 2013, as we and our competitors have increased production capacity to meet demand. We believe this has resulted in increased price competition for certain portions of the market where orders are awarded based on competitive bidding. In the third quarter of 2014, as compared to 2013, international utility structures sales increased due to higher sales volumes. For the nine months ended September 27, 2014, as compared to the same period in 2013, international utility structures sales decreased due to lower sales volumes.

SG&A expense decreased approximately $1 million in the third quarter and first three quarters of 2014, as compared with 2013, primarily due to lower incentive compensation tied to lower operating income offset by higher employee compensation due to increased headcount to support capacity expansion to meet projected long-term growth. Operating income in the third quarter and first three quarters of 2014, as compared with 2013, decreased due to lower sales, reduced leverage of fixed costs, and increased depreciation expense on plant capacity added in 2013.

Coatings segment

Coatings segment sales decreased in the third quarter and first three quarters of 2014, as compared with 2013, due to lower sales volumes in the Asia Pacific region and currency translation effects related to the strengthening of the U.S. dollar against the Australian dollar. More specifically, weak demand in Australia led to decreases in volumes offset somewhat by improved sales volumes in Asia. In the third quarter of fiscal 2014, U.S. sales were relatively flat as compared to the same period in fiscal 2013. On a year-to-date basis, the lower sales volumes in North America for galvanizing services were attributable to unfavorable winter weather conditions that affected our customers into early second quarter.

Operating income was also lower in the third quarter and first three quarters of 2014, as compared with 2013, due to the lower sales volumes, unfavorable currency impacts, and reduced leverage of fixed costs in both Australia and North America. The decrease in segment operating income in the first three quarters of 2014, as compared with 2013, was also due to the $4.6 million gain recognized on the sale of an Australian galvanizing operation in the second quarter of fiscal 2013. The decrease in segment

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operating income in the third quarter and first three quarters of 2014, as compared to the same periods in 2013, was partially offset by approximately $2.5 million of business interruption insurance proceeds received related to a 2013 fire at one of our North American facilities which was recorded against Service Cost of Sales in the Condensed Consolidated Statement of Earnings.

Irrigation segment

The decrease in Irrigation segment net sales in the third quarter and first three quarters of fiscal 2014, as compared with 2013, was mainly due to sales volume decreases in the North American market. The decrease in North America was offset to an extent by increased sales volumes in international markets. In North America, lower expected net farm income in 2014, as compared with 2013, and much lower sales backlogs at the beginning of the year resulted in lower sales of irrigation equipment in 2014, as compared with 2013. In fiscal 2014, net farm income in the United States is expected to decrease 13.8% from the record levels of 2013, 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 2014, as compared with 2013. In international markets, sales improved in the third quarter and first three quarters of fiscal 2014, as compared with 2013, mainly due to increased activity in Brazil, Middle East, and Australia.

Operating income for the segment declined in the third quarter and first three quarters of fiscal 2014 over 2013, due to the sales volume decrease and associated operating deleverage of fixed operating costs. The primary reasons for the slight decrease in SG&A expense in the first three quarters of fiscal 2014, as compared with 2013, related to reduced employee incentives of $3.5 million, offset by increased product development spending and increased employee headcount in the international business. Additionally, SG&A expense decreased in the third quarter and first three quarters of fiscal 2014, as compared to 2013, due to lower bad debt provisions for international receivables of $0.7 million and $2.1 million, respectively, and exchange rate translation effects.

Other

This unit includes the grinding media, industrial tubing, and industrial fasteners operations. The decrease in sales in the third quarter and first three quarters of fiscal 2014, as compared with 2013, was mainly due lower sales volumes due to the deconsolidation of EMD in December 2013 (approximately $10.9 million and $29.1 million, respectively), lower sales volumes in the grinding media operations and exchange rate translation effects. Grinding media volumes were negatively affected by less favorable Australian mining industry demand. Tubing sales in 2014 were slightly lower due to lower volumes compared to 2013. Operating income in the third quarter and first three quarters of fiscal 2014 was lower than the same period in 2013, due to lower grinding media sales volumes, the deconsolidation of EMD in 2013, and currency translation effects.

Net corporate expense

Net corporate expense in the third quarter and first three quarters of fiscal 2014 decreased over the same period in fiscal 2013. These decreases were mainly due to:

•: lower employee incentives associated with reduced net earnings ($2.1 million and $9.7 million, respectively);
•: lower compensation and employee benefit costs ($1.4 million and $3.8 million, respectively);
•: decreased expenses associated with the Delta Pension Plan ($1.0 million and $2.9 million, respectively); and
•: decreased deferred compensation plan expense ($1.3 million and $1.3 million, respectively). The deferred compensation expense recorded within corporate expense has a corresponding offset by the same amount in other income (expense).

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Liquidity and Capital Resources

Cash Flows

Working Capital and Operating Cash Flows—Net working capital was $1,111.5 million at September 27, 2014, as compared with $1,161.3 million at December 28, 2013. The decrease in net working capital in 2014 mainly resulted from decreased cash on hand due to the acquisition of Valmont SM and cash used in the share repurchase program. Cash flow provided by operations was $82.7 million in fiscal 2014, as compared with $249.1 million in fiscal 2013. The decrease in operating cash flow in 2014 was the result of the cash prepayment expenses related to the 2014 refinancing activities, lower net earnings and higher working capital in 2014, as compared with 2013.

Investing Cash Flows—Capital spending in the first three quarters of fiscal 2014 was $63.4 million, as compared with $75.1 million for the same period in 2013. The most significant capital spending projects in 2014 included certain investments in machinery and equipment across all businesses. We expect our capital spending for the 2014 fiscal year to be approximately $85 million. In 2013, investing cash flows included proceeds from asset sales of $39.6 million, principally consisting of $29.2 million received from the sale of our 49% owned non-consolidated subsidiary in South Africa and $8.2 million received from the sale of the Western Australia galvanizing operation. Investing cash flows also includes $120.5 million paid for the Valmont SM acquisition in the first quarter and $17.0 million paid for 51% of Agsense in the third quarter of 2014 and $53.2 million paid for the Locker acquisition in 2013.

Financing Cash Flows—Our total interest-bearing debt increased to $786.7 million at September 27, 2014 from $490.1 million at December 28, 2013 as a result of the issuance of $500 million face value of long-term unsecured notes and the repurchase by partial tender of $199.8 million of the 2020 senior notes. Financing cash flows changed from a use of approximately $12.2 million in the first three quarters of fiscal 2013 to a use of approximately $43.2 million in the first three quarters of fiscal 2014. In addition to the third quarter 2014 refinancing activities, the Company purchased $316.3 million of treasury shares in 2014 resulting from the recently announced share repurchase program.

Financing and Capital

On May 13, 2014, we announced a new capital allocation philosophy which covered both the quarterly dividend rate as well as a share repurchase program. Specifically, the Board of Directors 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. 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 September 27, 2014, we have acquired 2,126,392 shares for approximately $316.3 million under this share repurchase program. As of October 20, 2014, the date as of which we report on the cover of this Form 10-Q the number of outstanding shares of our common stock, we have acquired a total of 2,425,892 shares for $356.4 million under the share repurchase program.This philosophy also authorizes dividends on common shares in the range of 15% of the prior year's fully diluted net earnings; the most recent quarterly dividend was $0.375 per share paid on October 15, 2014.

Our debt financing at September 27, 2014 consisted primarily of long-term debt. During the third quarter of 2014, the Company issued $500 million of new notes and repurchased by partial tender

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$199.8 million in aggregate principal amount of the 2020 notes. Our long-term debt principally consists of:

•: $250.2 million face value ($255.8 million carrying value) of senior unsecured notes that bear interest at 6.625% per annum and are due in April 2020. We are allowed to repurchase the notes at specified prepayment premiums.
•: $250 million face value ($248.8 million carrying value) of senior unsecured notes that bear interest at 5.00% per annum and are due in October 2044. We are allowed to repurchase the notes at specified prepayment premiums.
•: $250 million face value ($246.7 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.
•: All three tranches of these notes are guaranteed by certain of our subsidiaries.

Our capital allocation philosophy is focused on maintaining our investment grade debt rating. Our most recent rating were Baa2 by Moody's Investors Services, Inc. and BBB+ rating 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. Otherwise, we expect to maintain a ratio of debt to invested capital which will support our current investment grade debt rating.

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 credit facility by up to an additional $200 million at any time, subject to lenders increasing the amount of their commitments. The interest rate on our borrowings will be, at our option, either:

(a)

LIBOR (based on a 1, 2, 3 or 6 month interest period, as selected by us) plus 100 to 162.5 basis points, depending on the credit rating of the Company's 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,

Plus, in each case, 0 to 62.5 basis points, depending on the credit rating of the Company's senior debt published by Standard & Poor's Rating Services and Moody's Investors Service, Inc.

At September 27, 2014 and December 28, 2013, we had no outstanding borrowings under the revolving credit agreement. The revolving credit agreement contains certain financial covenants that may limit our additional borrowing capability under the agreement. At October 21, 2014, we had the ability to borrow $582.4 million under this facility, after consideration of standby letters of credit of $17.6 million associated with certain insurance obligations and international sales commitments. We also maintain certain short-term bank lines of credit totaling $111.8 million, $94.8 million of which was unused at September 27, 2014.

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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. Our key debt covenants are as follows:

•: Interest-bearing debt is not to exceed 3.5X EBITDA of the prior four quarters; and
•: EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period.

At September 27, 2014, we were in compliance with all covenants related to the debt agreements. The key covenant calculations at September 27, 2014 were as follows:


Interest-bearing debt	$	786,662
EBITDA—last four quarters		434,815
Leverage ratio		1.81
EBITDA—last four quarters	$	434,815
Interest expense—last four quarters		30,877
Interest earned ratio		14.08

The calculation of EBITDA-last four quarters (September 28, 2013 through September 27, 2014) is as follows:


Net cash flows from operations	$	230,034
Interest expense		30,877
Income tax expense		110,038
Deconsolidation of subsidiary		(12,011	)
Impairment of property, plant and equipment		(12,161	)
Loss on investment		(4,859	)
Debt refinancing expense		2,478
Acquisition earn-out release		(4,300	)
Deferred income tax benefit		12,901
Noncontrolling interest		(1,431	)
Equity in earnings of nonconsolidated subsidiaries		253
Stock-based compensation		(6,958	)
Pension plan expense		(3,702	)
Contribution to pension plan		19,109
Valmont SM EBITDA—Sept. 28, 2013—March 3, 2014		11,038
Changes in assets and liabilities		64,308
Other		(799	)


EBITDA	$	434,815




Net earnings attributable to Valmont Industries, Inc.	$	198,383
Interest expense		30,877
Income tax expense		110,038
Depreciation and amortization expense		84,479
Valmont SM EBITDA—Sept. 28, 2013—March 3, 2014		11,038


EBITDA	$	434,815

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During the third quarter of 2014, we incurred $38,705 of costs associated with refinancing of debt. This category of expense is not in the definition of EBITDA for debt covenant calculation purposes per our debt agreements. As such, it has not been added back in the EBITDA reconciliation to cash flows from operation or net earnings for the four quarters between September 28, 2013 and September 27, 2014.

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 not made any provision for U.S. income taxes in our financial statements on approximately $608.9 million of undistributed earnings of our foreign subsidiaries, as we intend to reinvest those earnings. Of our cash balances at September 27, 2014, approximately $294.5 million is held in entities outside the United States with approximately $94 million specifically held within consolidated Delta Ltd., a wholly-owned subsidiary of the Company. Delta Ltd. sponsors a defined benefit pension plan and therefore, the Company is allowed to dividend out Delta Ltd.'s available cash only as long as that dividend does not negatively impact Delta Ltd.'s ability to meet its annual contribution requirements of the pension plan. We believe that the cash payments Delta Ltd. receives from its intercompany notes will provide sufficient funds to meet the pension funding requirements but additional analysis on pension funding requirements would have to be performed prior to the repatriation of the $94 million of Delta Ltd.'s cash balances.

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 income taxes that we would pay if cash were repatriated depends on the amounts to be repatriated and from which country. If all of our cash outside the United States were to be repatriated to the United States, we estimate that we would pay approximately $34.1 million in income taxes to repatriate that cash.

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 September 27, 2014 were as follows (in millions of dollars):

Contractual Obligations	Total		Remaining 2014		2015 - 2016		2017 - 2018		After 2018

Long-term debt	$	768.8	$	0.2	$	2.5	$	2.1	$	764
Interest		1,002.5		10.7		85.3		85.3		821.2
Delta pension plan contributions		136.8		—		36.2		36.2		64.4
Operating leases		97.9		6.9		40.0		22.1		28.9
Acquisition earn-out payments		4.7		—		—		4.7		—
Unconditional purchase commitments		82.0		22.0		60.0		—		—


Total contractual cash obligations	$	2,092.7	$	39.8	$	224.0	$	150.4	$	1,678.5

Long-term debt mainly consists of three tranches of senior unsecured notes. On September 22, 2014, the Company issued and sold $250.0 million aggregate principal amount of the Company's 5.00% senior notes due 2044 and $250.0 million aggregate principal amount of the Company's 5.25% senior notes due 2054. On September 22, 2014, the Company repurchased through a partial tender offer $199.8 million in aggregate principal amount of the company's 6.625% senior notes due 2020, and

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$250.2 million of the notes remain outstanding following the conclusion of the tender offer. At September 27, 2014, we had no outstanding borrowings under our bank revolving credit agreement (which was amended on October 17, 2014 to extend the maturity to 2019 and increase potential borrowings to $600 million). 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.

Acquisition earn-out payments relate to anticipated payments to the prior owners of Pure Metal Galvanizing (PMG) and Locker, as a portion of the consideration paid for these entities is contingent in nature. The earn-out arrangements generally relate to the meeting of certain profitability targets. Locker's target period ends in February 2015 and PMG's ends in December 2017. During 2014, the Company made payments of approximately $2.3 million to the sellers of Locker with respect to achievement of those targets. The Company determined during the third quarter of 2014 that the Locker gross profit target for the twelve months ending February 2015 would not be achieved and therefore the additional purchase price with respect to this target will not be paid. As such, approximately $4.3 milllion of this liability was reversed and recognized against cost of goods sold for the third quarter 2014.

Unconditional purchase commitments relate to purchase orders for zinc, aluminum and steel, all of which we plan to use within the next year, and certain capital investments planned for the next year. 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 September 27, 2014, we had approximately $44.4 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

There have been no changes in our off balance sheet arrangements as described on page 38 in our Form 10-K for the fiscal year ended December 28, 2013.

Critical Accounting Policies

There have been no changes in our critical accounting policies as described on pages 39-43 in our Form 10-K for the fiscal year ended December 28, 2013 during the quarter ended September 27, 2014.

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 27, 2014. For additional information, refer to the section "Risk Management" in our Form 10-K for the fiscal year ended December 28, 2013.

Item 4. Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934 is (1) accumulated and communicated to management,

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including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

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

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PART II. OTHER INFORMATION

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

Issuer Purchases of Equity Securities

Period		Average Price paid per share

June 29, 2014 to July 26, 2014	703,020	$	149.80	703,020	317,602,000
July 27, 2014 to August 30, 2014	699,200		145.16	699,200	216,109,000
August 31, 2014 to September 27, 2014	234,000		138.48	234,000	183,704,000


Total	1,636,220	$	146.20	1,636,220	183,704,000

(1): On May 13, 2014, we announced a new capital allocation philosophy which covered both the quarterly dividend rate as well as a share repurchase program. Specifically, the Board of Directors 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. As of September 27, 2014, we have acquired 2,126,392 shares for approximately $316.3 million under this share repurchase program.

Item 6. Exhibits

(a): Exhibits

		Exhibit No.			Description

			31.1		Section 302 Certificate of Chief Executive Officer
			31.2		Section 302 Certificate of Chief Financial Officer
			32.1		Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
			101		The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended September 27, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information.

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SIGNATURES

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


		VALMONT INDUSTRIES, INC. (Registrant)
		/s/ MARK C. JAKSICH Mark C. Jaksich Executive Vice President and Chief Financial Officer

Dated this 29th day of October, 2014.

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Index of Exhibits

		Exhibit No.			Description

			31.1		Section 302 Certificate of Chief Executive Officer
			31.2		Section 302 Certificate of Chief Financial Officer
			32.1		Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
			101		The following financial information from Valmont's Quarterly Report on Form 10-Q for the quarter ended September 27, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders' Equity, (vi) Notes to Condensed Consolidated Financial Statements and (vii) document and entity information.

Attached files

VALMONT INDUSTRIES INC Reports

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