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VALMONT INDUSTRIES INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) 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. 34 -------------------------------------------------------------------------------- Table of Contents Results of Operations Dollars in millions, except per share amounts Thirteen Weeks Ended Twenty-six Weeks Ended June 28, June 29, % Incr. June 28, June 29, % Incr. 2014 2013 (Decr.) 2014 2013 (Decr.) Consolidated Net sales $ 842.6 $ 878.7 (4.1 )% $ 1,594.3 $ 1,698.3 (6.1 )% Gross profit 220.5 261.5 (15.7 )% 427.5 496.8 (13.9 )% as a percent of sales 26.2 % 29.8 % 26.8 % 29.3 % SG&A expense 115.7 117.2 (1.3 )% 223.9 234.4 (4.5 )% as a percent of sales 13.7 % 13.3 % 14.0 % 13.8 % Operating income 104.8 144.3 (27.4 )% 203.6 262.5 (22.4 )% as a percent of sales 12.4 % 16.4 % 12.8 % 15.5 % Net interest expense 6.7 6.2 8.1 % 13.2 13.0 1.5 % Effective tax rate 34.1 % 34.1 % 34.4 % 32.7 % Net earnings $ 64.0 $ 89.6 (28.6 )% $ 120.0 $ 167.1 (28.2 )% Diluted earnings per share $ 2.38 $ 3.33 (28.5 )% $ 4.46 $ 6.22 (28.3 )% Engineered Infrastructure Products Net sales $ 286.2 $ 228.5 25.3 % $ 495.1 $ 422.7 17.1 % Gross profit 73.9 64.8 14.0 % 128.4 118.4 8.4 % SG&A expense 45.3 42.2 7.3 % 86.1 83.1 3.6 % Operating income 28.6 22.6 26.5 % 42.3 35.3 19.8 % Utility Support Structures Net sales $ 212.0 $ 227.9 (7.0 )% $ 426.2 $ 467.2 (8.8 )% Gross profit 45.9 62.1 (26.1 )% 98.0 128.0 (23.4 )% SG&A expense 19.6 20.0 (2.0 )% 38.9 39.7 (2.0 )% Operating income 26.3 42.1 (37.5 )% 59.1 88.3 (33.1 )% Coatings Net sales $ 70.4 $ 79.4 (11.3 )% $ 137.6 $ 154.3 (10.8 )% Gross profit 25.3 29.1 (13.1 )% 48.6 52.2 (6.9 )% SG&A expense 9.5 5.5 72.7 % 18.9 15.2 24.3 % Operating income 15.8 23.6 (33.1 )% 29.7 37.0 (19.7 )% Irrigation Net sales $ 219.9 $ 270.2 (18.6 )% $ 432.6 $ 514.9 (16.0 )% Gross profit 62.9 87.0 (27.7 )% 127.6 163.5 (22.0 )% SG&A expense 21.3 22.9 (7.0 )% 42.9 44.8 (4.2 )% Operating income 41.6 64.1 (35.1 )% 84.7 118.7 (28.6 )% Other Net sales $ 54.1 $ 72.7 (25.6 )% $ 102.8 $ 139.2 (26.1 )% Gross profit 12.4 18.3 (32.2 )% 24.7 34.4 (28.2 )% SG&A expense 4.1 5.3 (22.6 )% 7.8 10.6 (26.4 )% Operating income 8.3 13.0 (36.2 )% 16.9 23.8 (29.0 )% Net corporate expense Gross profit $ 0.1 $ 0.1 NM $ 0.2 $ 0.3 NM SG&A expense 16.0 21.3 (24.9 )% 29.3 41.0 (28.5 )% Operating loss (15.9 ) (21.2 ) 25.0 % (29.1 ) (40.7 ) 28.5 % NM=Not meaningful 35 -------------------------------------------------------------------------------- Table of Contents Overview On a consolidated basis, the decrease in net sales in the second quarter and first half 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 second quarter and first half of fiscal 2014, as compared with fiscal 2013, were as follows: Second quarter Total EIP Utility Coatings Irrigation Other Sales-2013 $ 878.7 $ 228.5 $ 227.9 $ 79.4 $ 270.2 $ 72.7 Volume (44.1 ) 11.0 2.0 (8.3 ) (46.5 ) (2.3 ) Pricing/mix (20.6 ) (0.6 ) (17.8 ) 1.6 (0.9 ) (2.9 ) Acquisitions/Divestiture 38.9 50.1 - - - (11.2 ) Currency translation (10.3 ) (2.8 ) (0.1 ) (2.3 ) (2.9 ) (2.2 ) Sales-2014 $ 842.6 $ 286.2 $ 212.0 $ 70.4 $ 219.9 $ 54.1 Year-to-date Total EIP Utility Coatings Irrigation Other Sales-2013 $ 1,698.3 $ 422.7 $ 467.2 $ 154.3 $ 514.9 $ 139.2 Volume (109.5 ) 9.3 (25.6 ) (10.3 ) (75.8 ) (7.1 ) Pricing/mix (16.9 ) (0.1 ) (13.9 ) 0.3 0.6 (3.8 ) Acquisitions/Divestiture 54.9 73.1 - - - (18.2 ) Currency translation (32.5 ) (9.9 ) (1.5 ) (6.7 ) (7.1 ) (7.3 ) Sales-2014 $ 1,594.3 $ 495.1 $ 426.2 $ 137.6 $ 432.6 $ 102.8 Volume effects are estimated based on a physical production or sales measure, 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"), and DS SM A/S, which was renamed Valmont SM. We acquired Locker in February 2013, Armorflex in December 2013, and Valmont SM in March 2014. All of these acquisitions are reported in the Engineered Infrastructure Products segment. In the "Other" category, the sales reduction of $18.2 million in the first half 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 second quarter and first half 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 Second quarter $ (1.7 ) $ (0.4 ) $ - $ (0.6 ) $ (0.5 ) $ (0.3 ) $ 0.1 Year-to-date $ (3.8 ) $ (0.9 ) $ (0.4 ) $ (0.8 ) $ (1.3 ) $ (0.9 ) $ 0.5 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 and an unfavorable sales mix, reduced sales volumes and slightly higher raw material costs in 2014, as compared with 2013. 36 -------------------------------------------------------------------------------- Table of Contents Selling, general and administrative (SG&A) spending in the second quarter and first half of fiscal 2014, as compared with the same periods in 2013, decreased mainly due to the following factors: º • º decreased employee incentive accruals of $9.7 million and $15.3 million, respectively, due to lower operating results; º • º currency translation effects of $0.7 million and $3.4 million, respectively, due to the strengthening of the U.S. dollar primarily against the Australian dollar, Brazilian Real, and South Africa Rand; º • º lower expenses associated with the Delta Pension Plan of $0.9 million and $1.9 million, respectively; and º • º EMD was deconsolidated in December 2013, which resulted in reduced expenses of $1.2 million and $2.4 million, respectively. The above reductions in SG&A were partially offset by the following: º • º 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; º • º the acquisition of Valmont SM in March 2014 and Armorflex in December 2013 included combined expenses in the second quarter and first half of fiscal 2014 of $4.4 million and $5.9 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 acquisition of Valmont SM. 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 second quarter of fiscal 2014, as compared with 2013, due to slightly higher interest expense and lower interest income due to less cash on hand due to the stock repurchase program and the Valmont SM acquisition. Net interest expense was consistent in the first half of 2014 and 2013. The increase in other expense in the first half 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 $3.5 million. The remaining increase is related to foreign exchange transaction losses due to currency volatility. The decrease in other expense in the second quarter of 2014, as compared with 2013, was due to a larger increase in deferred compensation assets of $1.2 million and foreign exchange transaction gains due to currency volatility. Our effective income tax rate in the second quarter of fiscal 2014 was comparable with the same period in fiscal 2013. The year-to-date effective tax rate in fiscal 2014 was higher than 2013, mainly due to 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 increased research and development tax credits in the U.S. The 2014 effective tax rate was also negatively affected by the unrealized loss in our investment in EMD being capital in nature and not resulting in an income tax benefit. After consideration of these factors, the effective tax rate for the first half of 2013 and 2014 were comparable at approximately 34%. Earnings in non-consolidated subsidiaries were lower in fiscal 2014, as compared with 2013, with minimal activity in 2014. In 2013, the balance was minimal due to the sale of our 49% owned manganese materials operation in February 2013. There was no significant gain or loss on the sale. 37 -------------------------------------------------------------------------------- Table of Contents Our cash flows provided by operations were approximately $91.9 million in the first half of fiscal 2014, as compared with $175.6 million provided by operations in 2013. The decrease in operating cash flow in the first half of fiscal 2014 was the result of decreased net earnings and higher net working capital, as compared with 2013. Engineered Infrastructure Products (EIP) segment The increase in net sales in the second quarter and first half 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 ($50.1 million and $73.1 million). Global lighting sales in the second quarter and first half of fiscal 2014 were slightly improved compared to the same period in fiscal 2013. In the second quarter and first half of fiscal 2014, sales volumes in the U.S. were slightly higher in both the transportation and lighting markets as construction and installation activity picked up after first quarter delays caused by harsh weather conditions as compared to 2013. 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 second quarter and first half of 2014 as compared to 2013 due to the harsh weather conditions from the first quarter lingering into the second quarter. Sales in Europe increased primarily due to the positive impact of currency translation. Increased volumes in the U.K. were offset by volume decreases in other regional areas. In the Asia Pacific region, sales improved in the second quarter and first half of fiscal 2014 over 2013 due in part to the India plant that is now fully operational and higher demand in the Philippines. Highway safety product sales improved in the second quarter and first half of 2014 compared to 2013, due to the acquisition of Armorflex in December 2013 (approximately $2.8 million and $4.1 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 negative currency translation effects of $1.0 million and $2.8 million, respectively. Communication product line sales were up in the second quarter and first half of fiscal 2014, as compared with the same period in fiscal 2013. On a regional basis, North America sales in the second quarter and first half of fiscal 2014 increased over the same period in fiscal 2013. The increase in North American sales was mainly attributable to higher wireless communication structures sales due to the continued build out of wireless networks, offset by decreased communication component sales resulting from a large customer temporarily curtailing spending. In China, sales of wireless communication structures in the second quarter and first half 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 second quarter and first half of 2014, as compared with 2013, primarily due to the negative impact of currency translation of $2.9 million and $7.9 million and lower volumes. The volume decrease was primarily related to the slowdown in mining sector investment in Australia and was 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 second quarter and first half 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 $5.7 million and $7.7 million, respectively, offset somewhat by unfavorable currency translation effects of $0.4 million and $0.9 million, respectively. The increase in SG&A spending in the second quarter and first half of 2014 were due to costs related to the Armorflex and Valmont SM acquisitions totaling $4.4 million and $5.9 million, respectively. These increased costs in the second quarter and first half of 2014 were offset by currency effects of $0.3 million and $1.5 million and lower incentive costs of $0.9 million and $1.6 million, respectively. 38 -------------------------------------------------------------------------------- Table of Contents Utility Support Structures (Utility) segment In the Utility segment, the sales decrease in the second quarter of 2014 as compared with 2013, was due primarily to 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 both the second quarter and first half 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. For the three-months ended June 30, 2014, as compared to the same period in 2013, international utility structures sales increased due to higher sales volumes. For the first half of 2014, as compared to 2013, international utility structures sales decreased due to lower sales volumes. Operating income in the second quarter and first half of 2014, as compared with 2013, decreased due to lower sales volumes, reduced leverage of fixed costs, and increased depreciation expense on plant capacity added in 2013. SG&A expense decreased in the second quarter and first half of 2014, as compared with 2013, due to lower incentive compensation tied to lower operating income. This SG&A decrease was partially offset by higher employee compensation due to increased headcount to support increased business levels in the second half of 2013 and capacity expansion to meet projected long-term growth. Coatings segment Coatings segment sales decreased in the second quarter and first half of 2014, as compared with 2013, due to: º • º 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; and º • º lower sales volumes in North America for galvanizing services, attributable to unfavorable winter weather conditions that affected our customers into early second quarter. The decrease in segment operating income in the second quarter and first half of 2014, as compared with 2013, was mainly due to the $4.6 million gain recognized on the sale of an Australian galvanizing operation in the second quarter of fiscal 2013. Operating income was also lower in the second quarter and first half of 2014, as compared with 2013, due to the lower sales volumes in both Australia and North America. Irrigation segment The decrease in Irrigation segment net sales in the second quarter and first half 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 22% 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. 39 -------------------------------------------------------------------------------- Table of Contents In international markets, sales improved in the second quarter and first half of fiscal 2014, as compared with 2013, mainly due to increased activity in Brazil, Middle East, and Australia. On balance, sales in other international regions (excluding China) in the second quarter and first half of fiscal 2014 were slightly higher or comparable to the same periods of a strong fiscal 2013. Operating income for the segment declined in the second quarter and first half 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 second quarter and first half of fiscal 2014, as compared with 2013, related to reduced employee incentives of $1.9 million and $2.5 million, respectively, offset partially by increased product development spending. Additionally, SG&A expense decreased in the second quarter and first half of fiscal 2014, as compared to 2013, due to lower bad debt provisions for international receivables of $1.3 million and $1.4 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 second quarter and first half of fiscal 2014, as compared with 2013, was mainly due lower sales volumes due primarily to the deconsolidation of EMD in December 2013 (approximately $11.2 million and $18.2 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 and sales mix compared to 2013. Operating income in the second quarter and first half of fiscal 2014 was lower than the same period in 2013, due to lower grinding media sales volumes and currency translation effects. Net corporate expense Net corporate expense in the second quarter and first half of fiscal 2014 decreased over the same period in fiscal 2013. These decreases were mainly due to: º • º lower employee incentives associated with reduced net earnings ($4.7 million and $7.6 million, respectively); º • º lower compensation and employee benefit costs ($0.6 million and $2.4 million, respectively); º • º decreased expenses associated with the Delta Pension Plan ($0.9 million and $1.9 million, respectively); and º • º partial offset by increased deferred compensation plan expense ($1.2 million and $0, respectively). The deferred compensation expense recorded within corporate expense has a corresponding offset by the same amount in other income (expense). Liquidity and Capital Resources Cash Flows Working Capital and Operating Cash Flows-Net working capital was $1,096.3 million at June 28, 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 $91.9 million in fiscal 2014, as compared with $175.6 million in fiscal 2013. The decrease in operating cash flow in 2014 was the result of lower net earnings and higher working capital in 2014, as compared with 2013. Investing Cash Flows-Capital spending in the first half of fiscal 2014 was $47.0 million, as compared with $54.3 million for the same period in 2013. The most significant capital spending projects 40 -------------------------------------------------------------------------------- Table of Contents 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 $100 million. In 2013, investing cash flows included proceed from asset sales of $39.1 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 of 2014 and $53.2 million paid for the Locker acquisition in 2013. Financing Cash Flows-Our total interest-bearing debt increased slightly to $496.2 million at June 28, 2014 from $490.1 million at December 28, 2013. Financing cash flows changed from a use of approximately $10.6 million in the first half of fiscal 2013 to a use of approximately $90.4 million in the first half of fiscal 2014. The main reason for the increase related to the purchase of treasury shares in the second quarter of 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 June 28, 2014, we have acquired 490,172 shares for approximately $77.1 million under this share repurchase program. As of July 22, 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 1,039,092 shares for $159.5 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 July 15, 2014. We have historically funded our growth, capital spending and acquisitions through a combination of operating cash flows and debt financing. We have an internal long-term objective to maintain long-term debt as a percent of invested capital at or below 40%. At June 28, 2014, our long-term debt to invested capital ratio was 21.7%, as compared with 22.3% at December 28, 2013. Subject to our level of acquisition activity and steel industry operating conditions (which could affect the levels of inventory we need to fulfill customer commitments), we plan to maintain this ratio below 40% in 2014. Our debt financing at June 28, 2014 consisted primarily of long-term debt. We also maintain certain short-term bank lines of credit totaling $115.1 million, $98.5 million of which was unused at June 28, 2014. Our long-term debt principally consists of: º • º $450 million face value ($460 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. These notes are guaranteed by certain of our subsidiaries. º • º $400 million revolving credit agreement with a group of banks. We may increase the credit facility by up to an additional $200 million at any time, subject to participating banks increasing the amount of their lending commitments. The interest rate on our borrowings will be, at our option, either: º (a) º LIBOR (based on a 1, 2, 3 or 6 month interest period, as selected by us) plus 125 to 225 basis points (inclusive of facility fees), depending on our ratio of debt to earnings before taxes, interest, depreciation and amortization (EBITDA), or; 41 -------------------------------------------------------------------------------- Table of Contents º (b) º the higher of º • º The higher of (a) the prime lending rate and (b) the Federal Funds rate plus 50 basis points plus in each case, 25 to 100 basis points (inclusive of facility fees), depending on our ratio of debt to EBITDA, or º • º LIBOR (based on a 1 week interest period) plus 125 to 225 basis points (inclusive of facility fees), depending on our ratio of debt to EBITDA. At June 28, 2014 and December 28, 2013, we had no outstanding borrowings under the revolving credit agreement. The revolving credit agreement has a termination date of August 15, 2017, and contains certain financial covenants that may limit our additional borrowing capability under the agreement. At June 28, 2014, we had the ability to borrow $382.3 million under this facility, after consideration of standby letters of credit of $17.7 million associated with certain insurance obligations and international sales commitments. 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: º • º Interest-bearing debt is not to exceed 3.5X EBITDA of the prior four quarters; and º • º EBITDA over the prior four quarters must be at least 2.5X our interest expense over the same period. At June 28, 2014, we were in compliance with all covenants related to the debt agreements. The key covenant calculations at June 28, 2014 were as follows: Interest-bearing debt $ 496,171 EBITDA-last four quarters 505,269 Leverage ratio 0.98 EBITDA-last four quarters $ 505,269 Interest expense-last four quarters 32,788 Interest earned ratio 15.41 42 -------------------------------------------------------------------------------- Table of Contents The calculation of EBITDA-last four quarters (June 29, 2013 through June 28, 2014) is as follows: |