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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
               THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]

                   For the Fiscal Year Ended December 26, 1998
                           Commission File No. 0-3701
                            
(Mark one)

ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 2002

OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number 0-3701
Valmont Industries, Inc.
                            ------------------------
             (Exact Name
(Exact name of Registrantregistrant as Specifiedspecified in its Charter)

          Delaware                                  47-0351813
- ---------------------------------        -------------------------------
  (State or Other Jurisdiction           (I.R.S. Employer Identification
of Incorporation or Organization)                    Number)

      Valley, Nebraska                                          68064
      ----------------                                        ----------
(Address of Principal Executive Offices)                      (Zip Code)

Registrant's Phone Number, Including Area Code:  (402) 359-2201

           Securities Registered Pursuant to Section 12(g) of the Act:
                      Valmont Industries, Inc. Common Stock
                      -------------------------------------
           $1.00 Par Value - Traded NASDAQ Stock Market (Symbol VALM)
           ----------------------------------------------------------
                                (Title of Class)
                                ----------------charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)		47-0351813
(I.R.S. Employer
Identification No.)

One Valmont Plaza,
Omaha, Nebraska
(Address of Principal Executive Offices)

68154-5215
(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class


Name of exchange on which registered
Common Stock $1.00 par valueNew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:None
        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 twelve12 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 ninety90 days. Yes Xý No -----    -----

At March 5, 1999 there were outstanding 24,528,973 common shares of the Company.
The aggregate market value of the voting stock held by non-affiliates of the
Company on March 5, 1999 was $198,421,000.o
        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

                       o
        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o
        At March 3, 2003 there were outstanding 23,885,273 common shares of the Company. The aggregate market value of the voting stock held by non-affiliates of the Company on March 3, 2003 was $282,063,000.
DOCUMENTS INCORPORATED BY REFERENCE
        Portions of the Company's annual report to shareholders for the fiscal year
ended December 26, 1998 (the "Annual Report") are incorporated by reference in
Parts I and II, and portions of the Company's proxy statement for its annual meeting of shareholders to be held on April 26, 199928, 2003 (the "Proxy Statement") are incorporated by reference in Part III.

                                                                 Page 1 of  203
                                                                           -----
                                                     
Index to Exhibits, Page 57
VALMONT INDUSTRIES, INC.
Annual Report Pursuant to Section 13 ----
or 15(d)
of the Securities and Exchange Act of 1934
For the Fiscal Year Ended December 28, 2002
TABLE OF CONTENTS


Page
PART I
Item 1.Business3
Item 2.Properties13
Item 3.Legal Proceedings14
Item 4.Submission of Matters to a Vote of Security Holders14

PART II



Item 5.Market for Registrant's Common Equity and Related Stockholder Matters15
Item 6.Selected Financial Data15
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations16
Item 7A.Quantitative and Qualitative Disclosures About Market Risk27
Item 8.Financial Statements and Supplementary Data27
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure49

PART III



Item 10.Directors and Executive Officers of the Registrant50
Item 11.Executive Compensation50
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters50
Item 13.Certain Relationships and Related Transactions50
Item 14Controls and Procedures50

PART IV



Item 15.Exhibits, Financial Statement Schedules, and Reports on Form 8-K51
2

PART I
Item
ITEM 1.    BUSINESS.
(a)  General Description of Business
        Valmont Industries, Inc., a Delaware Corporation, (togetherwas incorporated on March 8, 1946 and together with its subsidiaries the(the "Company" or "Valmont") is engaged in infrastructurethe Poles, Wireless Communication, Coatings, Irrigation, and irrigationTubing businesses. The Infrastructure segment involves the manufacture and distribution
of engineered metal structures for the lighting, utility and wireless
communication industries. The Irrigation segment involves the manufacture and
distribution of agricultural irrigation equipment and related products and
services. The description of Valmont's businesses set forth on pages 6 through
21 of the Company's Annual Report is incorporated herein by reference. The Company entered the Irrigation and Tubing market in 1953 from its manufacturing location in Valley, Nebraska. The InfrastructurePoles segment began producing and marketing engineered metal structures in the early 1960's. The Wireless Communication segment began in 1995 with the purchase of Microflect in Salem, Oregon. The Coatings segment began as a separate division in 1997 with the first stand-alone coatings plant in West Point, Nebraska.
Valmont has grown internally and by acquisition. Valmontacquisition and has also divested certain businesses. Valmont's business expansions during the past five years include (i) the acquisition of Microflect Company, Inc. in 1995, a manufacturer
and installer of microwave communication structures, (ii) the 1996 acquisitions
of TelecCentre, S.A., a French manufacturer of communication towers, and of
Valmont Mastbau, KG, a German manufacturer and distributor of pole structures
for the lighting market, (iii) completion of the construction in 1997 of a new
galvanizing plant in West Point, Nebraska, (iv) the acquisition in 1997 of a 70%
interest in Valmont Services Irrigacao, Ltd., a Brazilian manufacturer of
mechanized irrigation equipment, (v) the acquisition of two galvanizing
facilities in Tualatin, Oregon and in Lindon, Utah in January of 1998, (vi) the
expansion of facilities in Siedlce, Poland during 1997 and (vii) the acquisition
of two additional galvanizing facilities in California and Oklahoma and the
purchase of Cascade Earth Sciences, Ltd., a firm providing consulting services
for environmental and wastewater management projects during 1998.include:
1998•Acquisition of Coatings segment facilities in Tualatin, Oregon, Lindon, Utah, Long Beach, California and Tulsa, Oklahoma
•Expansion of the Poles segment facility in Siedlce, Poland
•Acquisition of Cascade Earth Sciences, Ltd., a firm providing consulting services for environmental and wastewater management projects headquartered in Albany, Oregon

1999

•

Acquisition of two retail irrigation outlets in California and Colorado
•Investment in an irrigation manufacturing facility in McCook, Nebraska
•Formation of a 60% owned irrigation manufacturing and distribution joint venture in the Republic of South Africa

2000

•

Acquisitions of four coatings facilities in Minneapolis, Minnesota, Chicago, Illinois, Los Angeles, California, and Sioux City, Iowa
•Acquisition of an aluminum pole manufacturing plant in Farmington, Minnesota
•Acquisition of a Tubing business in Waverly, Nebraska
•Formation of a 49% owned Poles segment manufacturing facility in Monterrey, Mexico
•Acquisitions of minority interests in irrigation dealers and distributors in Kansas and Argentina
•Investment in poles manufacturing facility in Jasper, Tennessee
•Investment in aluminum extrusion equipment for making aluminum poles in Elkhart, Indiana

2001

•

Acquisition of PiRod Holdings, Inc. and subsidiary (PiRod), a manufacturer of towers, components and poles located in Plymouth, Indiana.
        Divestitures during the past five years include the January 1997 cash1999 sale of the stock of Valmont Electric, Inc.,an investment in an irrigation technology development business, and the 2000 divestitures of a lighting ballast manufacturing business.


     rolled cylinder business in Tulsa, Oklahoma and a composite pole plant in Gunnison, Utah.
(b)  Operating Segments
        The Company's business activities are currently classified into the
following operating segments:

     Infrastructure -Company reports its businesses as five reportable segments organized on a worldwide product basis:
3
        In addition to these twofive reportable segments, the Company has several other businesses that do not fit within the reportable segments listed above, andindividually are not individually more than 10% of combined netconsolidated sales. These businesses include
custom coatings, steel tubing, pressure vessels, machine tool accessories and
industrial fasteners.
     The amountsAmounts of revenues, operating income and total assets attributable to each segment for each of the last three years areis set forth on page 45in Note 17 of the Annual Report and incorporated herein by reference.


                                       2
Company's financial statements on pages 47-48.
(c)  Narrative Description of Business 

     PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED.
        Information concerning the principal products produced and services rendered, markets, competition and distribution methods for each of the Company's five reporting segments is set forth below.
Poles Segment:
        The information calledPoles segment manufactures and markets engineered metal structures in two broad product lines:
        Products Produced—This product line includes steel and aluminum poles and structures to which lighting and traffic control fixtures are attached for a wide range of outdoor lighting applications, such as streets, highways, parking lots, sports stadiums and commercial and residential developments. The demand for these products is partly driven by this itemconsumers' desire for well-lit streets, highways, parking lots and common areas to help make these areas safer at night and support trends toward more active lifestyles and 24-hour convenience. In addition to safety, customers want products that are visually appealing. In Europe, we are a leader in decorative lighting poles, which are attractive as well as functional. We are expanding our decorative product sales in North America and China. Traffic poles are structures to which traffic signals are attached and aid the orderly flow of automobile traffic. While standard designs are available, poles are often engineered to customer specifications to ensure the proper function and safety of the structure. Product engineering takes into account factors such as weather (e.g. wind, ice) and the products loaded on the structure (e.g. lighting fixtures, traffic signals, signage) to determine the design of the pole.
        Markets—The key markets for our lighting and traffic products are transportation and commercial lighting. The transportation markets include street and highway lighting and traffic control, much of which is hereby incorporateddriven by referencegovernment spending programs. For example, the U.S. government funds highway and road improvement through the Federal Highway Bill (also known as TEA-21). This program provides funding to pages 11improve the nation's roadway system, which includes roadway lighting and traffic control enhancements. Matching funding from the various states may be required as a condition of federal funding. The current federal highway bill expires in September 2003 and, while legislation must be passed and approved at that time to continue funding, we believe that such government funding will continue. In North America, governments desire to improve road and highway systems by reducing traffic congestion. In the United States, there are approximately 4 million miles of public roadways, with approximately 24% carrying over 80% of the traffic. Accordingly, the need to improve traffic flow through 21traffic controls, sign structures, intelligent message systems and lighting is a priority for many communities. Transportation markets in other areas of the world are also heavily funded by local and national governments.
        The commercial lighting market is mainly funded privately and includes lighting for applications such as parking lots, shopping centers, sports stadiums and business parks. The commercial lighting market is driven by macro economic factors such as general economic growth rates, interest rates and the commercial construction economy.
        Competition—In the Lighting and Traffic product line there are numerous competitors in the U.S., most of which are relatively small companies. Companies compete on the basis of price, product quality, reliable delivery or unique product features. For example, some competitors offer decorative products, which not all competitors are capable of manufacturing. Some of these competitors offer products that we currently do not manufacture, such as concrete or fiberglass poles. These competitive factors also apply to European markets. There are many competitors in the European market, as most countries have several manufacturers of lighting and traffic poles, many of which compete primarily on the basis of price. In the Chinese market, there are a large number of local competitors, many of which
4

are small companies who use pricing as their main strategy, especially for standard lighting poles. In China, we are most competitive in markets where product and service quality are highly valued or in products that require more engineering content than what local competitors can provide.
        Our competitive strategy is to provide high value to the customer at a reasonable price. We compete on the basis of product quality, high levels of customer service and reliable, timely delivery of the product.
        Distribution Methods—Transportation market sales are generally through independent, commissioned sales agents. These agents represent Valmont as well as lighting fixture companies and sell other related products. Sales are typically to electrical distributors, who provide the pole, fixtures and other equipment to the end user as a complete package. Commercial lighting sales are normally effected through Valmont sales employees, who work on a salary plus incentive, although some sales are made through independent, commissioned sales agents. Sales to the commercial lighting market are primarily to lighting fixture manufacturers, who package the pole and fixture for their customer.
        Products Produced—The Utility product line includes pole structures for the transmission and distribution of electrical power. Our products help move electrical power from where it is produced to where it is used. We manufacture steel tapered poles for high-voltage transmission lines, substations (which transfer high-voltage electricity to low voltage transmission) and electrical distribution (which carry electricity from the substation to the end-user). Utility structures can be very large, so product design engineering is important to the function and safety of the structure. Our engineering process takes into account weather and loading conditions, such as wind speeds, ice loads and the power lines attached to the structure, in order to arrive at the final design.
        Markets—Our sales in this product line are mostly in the United States, but we see China as a growing market. In the U.S., the key drivers in the utility business are capacity in the electrical transmission grid, industrial growth and deregulation in the utility industry. According to the Edison Electric Institute, the electrical transmission grid in the U.S. operates near capacity in many areas, due to increasing electrical consumption and lack of investment over the past 25 years. The expected increase in electrical consumption also should require substantial investment in new electricity generation capacity in the U.S. and around the world. Furthermore, deregulation and privatization of electrical utilities should require grid systems to interconnect. All of these factors are expected to increase demand for electrical utility structures to transport electricity from source to user. Sales may take place on bid project basis or through strategic alliance relationships with certain customers.
        Competition—In the Utility product line, there are also a number of competitors. Companies compete on the basis of price, quality, service and engineering expertise. Utility sales are often through a competitive bid process, whereby the lowest bidder will be awarded the contract, provided the competitor meets all other qualifying criteria. In weak markets, price is a more important criterion in a bid process. Also, when the Wireless Communication pole market is weak (as it was in 2002), we see these manufacturers also competing in the Utility product line.
        Our competitive strategy is to provide high value to the customer at a reasonable price. We compete on the basis of product quality, high levels of customer service and reliable, timely delivery of the product.
        Distribution Methods—Products are normally sold through commissioned sales agents or sold directly to electrical utilities and independent power producers.
Wireless Communication Segment:
        Products Produced—In our Wireless Communication segment, we manufacture and sell a broad range of structures (poles and towers) and components serving the wireless communication industry. A typical wireless communication cell site will mainly consist of:
5
        For a given cell site, we provide poles, towers and components. We offer a wide range of structures to our customers, including:
        Structures are engineered and designed to customer specifications, which include factors such as the number of antennas on the structure and wind conditions. Due to the size of these structures, design is important to ensure it meets performance and safety specifications. We do not provide any installation services on structures we sell, except in certain non-U.S. locations, where installations are subcontracted with a third party.
        Markets—The main market for our products has been the wireless telephone industry, although we also sell products to state governments for two-way radio communication. Over the past number of years, the main market driver has been the growth of subscribers to wireless telephone services. The number of wireless phone subscribers has increased substantially worldwide. According to the Cellular Telecommunications and Internet Association (CTIA), cell phone subscribers in the U.S grew from 6.4 million in 1991 to over 130 million in 2002, an annual compounded growth rate of 32%. In general, as the number of users and the usage of wireless devices by these users increase, more cell sites and, accordingly, more structures, antennas and components should result. While demand for structures and components during 2002 was substantially lower than the late 1990's and 2000, we believe long-term growth will be driven by:
        There are two broad customer groups for our products:
        Infrastructure costs can be substantial for these customers, so access to capital is important to their ability to fund future infrastructure needs. Many of these companies have experienced a reduced access to capital in recent years, due to the downturn in equity prices for telecommunication stocks. Accordingly, their infrastructure spending has been curtailed. We believe that infrastructure spending will eventually increase, in order to improve and maintain service levels demanded by users.
        Competition—There are a number of competitors in the U.S. market, although some have exited the business in recent years due to difficult market conditions. Since market conditions have been weak and ample manufacturing capacity has been available, pricing has become extremely competitive in recent years and we believe it is the main strategy for most of our competitors. We compete on the basis of product quality, service quality and design capability, although we must also remain price competitive to gain orders.
6

        Distribution Methods—Sales and distribution activities are normally handled through a direct sales force.
Coatings Segment:
        Services Rendered—In our Coatings segment, we add finishes to metals that inhibit corrosion, extend service lives and enhance physical attractiveness of a wide range of materials and products. Among the services provided include:
        In our Coatings segment, we take unfinished products from our customers and return them with a galvanized, anodized or painted finish. Galvanizing is a process that protects steel with a zinc coating that is bonded to the product surface to inhibit rust and corrosion. Anodizing is a process applied to aluminum that oxidizes the surface of the aluminum in a controlled manner, which protects the aluminum from corrosion and allows the material to be dyed into a variety of colors. We also paint products using powder coating and e-coating technology (where paint is applied through an electrical charge) for a number of industries and markets.
        Markets—Markets for our products are varied and we are not substantially dependent on any one industry for a large share of sales. Demand for coatings services generally follows the industrial U.S. economy, as all of our operations are in the U.S. Galvanizing is used in a wide variety of industrial applications where corrosion protection of steel is desired. While markets are varied, our markets for anodized or painted products are more directly dependent on consumer markets than industrial markets.
        Competition—The Coatings industry is very fragmented, with a large number of competitors. Most of these competitors are relatively small, privately held companies who compete on the basis of price and personal relationships with their customers. Our strategy is to compete on the basis of quality of the coating finish, and timely delivery of the coated product back to the customer. We also use the production capacity at our network of plants to assure that the customer receives quality service.
        Distribution Methods—The coatings market is very fragmented and regional, with numerous small competitors. Due to freight costs, a galvanizing location has an effective service area of approximately 500 miles. While we believe that we are the largest custom galvanizer in North America, our sales are a small percentage of the total market. Sales and customer service are provided directly to the user by a direct sales force, generally assigned to each specific location.
Irrigation Segment:
        Products Produced—In our Irrigation segment, we manufacture and distribute mechanical irrigation equipment and related service parts under the "Valley" brand name. A Valmont irrigation system is an electricity-powered machine that propels itself around a farm field and applies water and chemicals to crops. Water and, in some instances, chemicals are applied through sprinklers attached to a pipeline that is supported by a series of towers, each of which is propelled via a drive train and tires. A standard irrigation machine (also known as a "center pivot") rotates in a circle, although we also manufacture and distribute center pivot extensions that can irrigate corners of square and rectangular farm fields as well as conform to irregular field boundaries (referred to as a "corner" machine). Our irrigation machines can also irrigate fields by moving up and down the field as opposed to rotating in a circle (referred to as a "linear" machine). Irrigation machines can be configured to irrigate fields in size from 4 acres to over 500 acres, with a standard size in the U.S. configured for a 160-acre tract of ground. One of the key components of our irrigation machine is the control system. This is the part of the machine that allows the machine to be operated in the manner preferred by the grower, such as the on/off timing, individual field sector control, rate and depth of water and chemical application, by
7
computer control or remote control. The irrigation machine used in international markets is substantially the same as the one produced for the North American market.
        There are other forms of irrigation available to farmers, the most prevalent being flood irrigation and drip irrigation. In flood irrigation, water is applied through a pipe or canal at the top of the field and allowed to run down the field by gravity. Drip irrigation involves plastic pipe or tape resting on the surface of the field or buried a few inches below ground level, with water being applied gradually. We estimate that center pivot and linear irrigation comprises one-third of the irrigated acreage in North America. International markets use predominantly flood irrigation, although all forms are used to some extent.
        Markets—Market drivers in North American and international markets are essentially the same. Since the purchase of an irrigation machine is a capital expenditure, the decision is based on the expected return on investment. The benefits a grower may realize through investment in mechanical irrigation include improved yields through better irrigation, cost savings through reduced labor and operating costs and lower water and energy usage. The purchase decision also is affected by current and expected net farm income, commodity prices, interest rates and the status of government support programs. In many international markets, financing the purchase of mechanized irrigation machines can be more challenging than in the U.S. and affect market growth in that area.
        The main sources of demand for mechanized irrigation come from the following sources:
        One of the key drivers in our Irrigation segment worldwide is that the usable water supply is limited. We estimate that:
        We believe these facts, along with the trend of a growing worldwide population and improving diets, reflects the need to use water more efficiently while increasing food production to feed this growing population. We believe that mechanized irrigation can improve water application efficiency by 40-90% compared with traditional irrigation methods, such as flood irrigation, by applying water near the root zone and reducing water runoff. Furthermore, reduced water runoff improves water quality in nearby rivers, aquifers and streams, thereby providing benefits in addition to conservation of water.
        Competition—In North America, there are a number of entities that provide irrigation products and services to agricultural customers, with five main participants in the mechanized irrigation business. Participants compete for sales on the basis of price, product innovation and features, product durability and reliability, quality and capabilities of the local dealer and service. Pricing can become very competitive, especially in periods where market demand is low. In international markets, our competitors are mainly local companies, most of which are privately owned. Competitive factors are similar to those in North America, although pricing tends to be a more prevalent competitive strategy in international markets. Since competition in international markets is local, we believe local manufacturing capability is important to competing effectively in international markets and we have that capability in key regions.
        Distribution Methods—We market our irrigation machines and service parts through independent dealers. There are approximately 200 dealers in North America, with another 130 dealers serving international markets. The dealer determines the grower's requirements, designs the configuration of the machine, installs the machine (including providing ancillary products such as providing water and electrical power to the machine) and provides after-sales service. Our dealer network is supported and trained by our technical and sales teams. Our international dealers are supported through our regional
8

headquarters in South America, South Africa, Western Europe, Australia, China and the Middle East as well as the home office in Valley, Nebraska.
Tubing Segment:
        Products Produced—Our Tubing segment produces light-wall welded steel tubing for various customers and industries. We produce tubing in diameters from3/4" to 16" and in wall thicknesses from1/32" to9/32". Our operations are located in Valley and Waverly, Nebraska and virtually all sales are in North America.
        Markets—The tubing industry, broadly defined, is in excess of $1 billion annually in the U.S. Our Tubing business specializes in products that require some additional engineering or fabrication to meet our customers' needs. Our markets and customers are varied. In addition to supplying tubing to our Irrigation segment operations in Valley, Nebraska, our tubing is used in such products as grain handling systems, pneumatic tube delivery systems used in the healthcare industry, fire protection systems for office buildings and warehouses, automotive products and exercise equipment.
        Competition—The industrial tubing business is large and with many competitors, some of which have a much larger share of the total market than us. Many tubing companies compete on the basis of price and specialize in standard products and long production runs. We compete in certain niches in the tubing market, on the basis of high quality and customer service. We specialize in products that require additional fabrication, shaping and cutting operations. Pricing can be very competitive and is impacted by fluctuations in hot rolled steel prices.
        Distribution Methods—Our products are distributed through a combination of commissioned sales agents and a direct sales force.
General
        Certain information generally applicable to the Company's Annual Report.

     SUPPLIERS AND AVAILABILITY OF RAW MATERIALS.reporting segment is set forth below.
        Hot rolled steel coil, zinc and other carbon steel products are the primary raw materials utilized in the manufacture of finished products for the Industrial
Products and Irrigation Productsall segments. These essential items are purchased from steel mills, zinc producers and steel service centers and are readily available. It is not likely that key raw materials would be unavailable for extended periods.

     PATENTS, LICENSES, FRANCHISES AND CONCESSIONS.
        Valmont has a number of patents for its manufacturing machinery, poles and irrigation designs. The Company also has a number of registered trademarks. Management believes the loss of any individual patent would not have a material adverse effect on the financial condition of the Company.

     SEASONAL FACTORS IN BUSINESS.
        Sales in the Company's irrigation segment can be somewhat seasonal based upon the agricultural growing season and the infrastructure construction season. CUSTOMERS.Sales of mechanized irrigation equipment and tubing to farmers are traditionally higher during the spring and fall and lower in the summer. Sales of infrastructure products are traditionally higher during prime construction seasons and lower in the winter.
        The Company is not dependent for a material part of its business upon a single customer, or upon very few customers, thecustomers. The loss of any one of whichcustomer would not have a material adverse effect on the financial condition of the Company.


     BACKLOG.
        The backlog of orders for the principal products manufactured and marketed was approximately $106.3$128.0 million at the end of the 19982002 fiscal year and $125.6$167.8 million at the closeend of 1997.the 2001 fiscal year. It
9
is anticipated that most of the backlog of orders will be filled during fiscal year 1999.2003. At year end,year-end, the backlog by segment was as follows (dollar amounts in millions):

                                                         Dec. 26,          Dec. 27,
                                                           1998               1997
                                                        ---------         ---------
 

Infrastructure                                          $   70.3              86.2
Irrigation                                                  21.1              30.7
Other                                                       14.9               8.7
                                                          ------             -----
                                                        $  106.3             125.6
                                                          ------             -----
                                                          ------             -----



                                        3


     COMPETITIVE CONDITIONS.
     In the Infrastructure segment, Valmont is a major manufacturer and supplier
of engineered metal structures to the lighting and traffic, utility and wireless
communication industries. The Irrigation segment involves the development,
manufacture and distribution of mechanized irrigation equipment and related
products for both the U.S. and international markets. The Company believes it is
the world's leading manufacturer of mechanized irrigation systems. The Company
delivers a broad line of custom engineered tubular steel products and
manufactures and distributes fasteners. In addition, the Company supplies custom
coating services. The key competitive strategy used by the Company in each
segment is one of high quality and service.

     RESEARCH ACTIVITIES.
 
 Dec. 28
2002
 Dec. 29,
2001
Poles $87.1 $120.7
Wireless Communication  11.2  16.6
Coatings  0.0  0.0
Irrigation  23.8  25.2
Tubing  5.8  5.2
Other  .1  .1
  
 
  $128.0 $167.8
  
 
        The information called for by this item is hereby incorporated by reference
to the "Research and Development" on page 43included in the Company's Annual Report.

     ENVIRONMENTAL DISCLOSURE.financial statements on page 44 of this report.
        The Company is subject to various federal, state and local laws and regulations pertaining to environmental protection and the discharge of materials into the environment. Although the Company continues to incur expenses and to make capital expenditures related to environmental protection, it does not anticipate that future expenditures will materially impact the financial condition of the Company.

     NUMBER OF EMPLOYEES.
        At December 26, 1998,28, 2002, the number of employees was 3,869.

     GEOGRAHPIC AREAS.Company had 5,234 employees.
        Valmont's international sales activity encompasses approximately ninetyover one hundred foreign countries. The information called for by this item is hereby
incorporated by reference to "Summary by Geographical Area"included in Note 17 of the Company's financial statements on page 4548 of this report.
        The Company makes available, free of charge through its Internet web site at http://www.valmont.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.
Risk Factors
        In addition to the factors discussed elsewhere in this report, the following risk factors describe various risks that may affect Valmont's business, financial condition and operations.
Increase in steel prices and reduced availability of steel will increase our operating costs and likely reduce our profitability.
        Hot rolled steel coil and other carbon steel products constitute approximately one-third of the cost of manufacturing our products. The price of steel that we use in our manufacturing processes is highly competitive and sometimes volatile. The following factors increase the cost and availability of steel for us:
10
        Increases in the prices of our products may not fully recover our additional steel costs and generally lag behind increases in steel prices. Consequently, an increase in steel prices will increase our operating costs and likely reduce our profitability. For example, rising steel prices in 2002 put pressure on margins, especially in our Poles segment and Tubing segment. The U.S. steel market was volatile in 2001 resulting in a number of major U.S. steel mills either going out of business or operating under bankruptcy. Also, recent U.S. government trade and tariff actions have reduced the availability and increased the cost of steel imported from outside the U.S. These actions could result in reduced overall supplies of steel in the market, extend lead times to acquire steel and increase our purchase cost of steel.
Increase in energy prices will increase our operating costs and likely reduce our profitability.
        We use energy to manufacture our products. Our operating costs increase if energy costs rise, which occurred in 2001 because of additional energy usage caused by severe winter weather conditions and higher oil and natural gas prices. During periods of higher energy costs, we may not be able to recover our operating cost increases through price increases without reducing demand for our products. As a result, increases in energy prices will increase our operating costs and likely reduce our profitability.
Downturns in the agricultural industry result in a slower, and possibly a negative, rate of growth in irrigation equipment and tubing sales.
        The end-users of our mechanized irrigation equipment and a substantial portion of our tubing are farmers, and, as a result, sales of those products are affected by economic changes in the agriculture industry. Farm income decreases when commodity prices, acreage planted, crop yields, government subsidies and export levels decrease. Furthermore, uncertainty as to future government agricultural policies causes indecision on the part of farmers. These factors may cause farmers to delay capital expenditures for farm equipment. Consequently, downturns in the agricultural industry, such as occurred in 2001, result in a slower, and possibly a negative, rate of growth in irrigation equipment and tubing sales.
Construction activity declines in the lighting, utility and wireless communications industries result in reduced product sales.
        We manufacture and distribute engineered metal structures for the lighting, utility and wireless communications industries. Our Coatings segment serves construction-related industries. Because our products primarily are used in infrastructure construction, sales in these businesses are strongly influenced by construction activity, which historically has been cyclical. Construction activity by our private and government customers is strongly affected by and can decline because of:
11
        Construction activity declines in the lighting, utility and wireless communications industries result in reduced product sales. In 2002, wireless communication sales in North America were 40% lower than in 2001. Wireless carriers and build-to-suit companies continue to be plagued by lack of capital and inventories of uninstalled structures.
Increase in our indebtedness requires use of more of our cash flow for debt payments and increases the risk of non-compliance with our loan covenants.
        We have funded most of our acquisitions either through operating cash flows or borrowing additional funds. For example, when we acquired PiRod, Inc. on March 30, 2001, we paid $33.4 million to retire PiRod's long-term debt and we were more leveraged in 2001 than in the prior few years. Increased leverage:
        Increased leverage could also make compliance with certain covenants in our debt agreements more difficult. For example, we may need to borrow more money in the future. However, the covenants in our debt agreements may limit our ability to do so. If we breach the covenants in our debt agreements, our lenders could declare the amounts we owe immediately due and payable, which would significantly reduce the cash available for business operations.
We may lose some of our foreign investment or our foreign sales and profits may be reduced because of risks of doing business in foreign markets.
        We are an international manufacturing company with operations around the world. At December 28, 2002, we operated 32 manufacturing plants, located on five continents, and sold our products in more than 100 countries. In 2002, international sales accounted for approximately 20% of our total sales. We expect that international sales will continue to account for a significant percentage of our net sales into the foreseeable future. Accordingly, our foreign business operations and our foreign sales and profits are subject to the following potential risks:
        As a result, we may lose some of our foreign investment or our foreign sales and profits may be reduced because of risks of doing business in foreign markets. In 2001, we recorded a $1.0 million impairment charge in our investment in our irrigation distributor in Argentina, due to the economic problems in the Argentine economy.


ITEM 2.    PROPERTIES.
        The Company's primary plant and offices are located on a 352 acre site near
Valley, Nebraska, which is approximately twenty miles west of Omaha, Nebraska.
336 of the acres are owned in fee. The other 16 acres are leased on a yearly
basis from the Union Pacific Railroad Company, which serves the Company's
primary plant, and which is entitled to terminate the lease on a one-year notice
in the event that the land is required for railroad operations. The Valley,
Nebraska location is used in common as the primary facilities by Irrigation
segment and certain Infrastructure segment administrative and operating
personnel. The Infrastructure segment's other significant properties are
administrative, manufacturing and distribution facilities at Elkhart, Indiana,
Tulsa, Oklahoma and Brehnam, Texas. The Oklahoma facility has 350,000 square
feet under roof on 24 acres of land whereas the Texas facility is located on 109
acres and has eight buildings, with 318,000 square feet under


                                       4



roof. Additionally the infrastructure segment leases office and plant facilities
in Salem, Oregon under long-term leases. Overseas the Infrastructure segment has
four locations in France, and one plant in each of the following countries: the
Netherlands; Germany; Poland; and China. The Irrigation segment in addition to
its operations at Valley, Nebraska, operates a mechanized irrigation facility in
Uberaba, Brazil consisting of 135,000 square feet and a manufacturing facility
for irrigation systems in Madrid, Spain. Currently under construction is a
310,000 square feet manufacturing facility in McCook, Nebraska, that will
produce mechanized irrigation system components. The protective coatings
division operates a 50,000 square foot facility in West Point, Nebraska and
rents galvanizing facilities in Tualatin, Oregon, and Lindon, Utah; these two
sites are 68,000 square feet and 36,000 square feet, respectively. During 1998
two additional coating plants were acquired thatcorporate headquarters are located in Long Beach,
California and Tulsa, Oklahoma.a leased facility in Omaha, Nebraska, under a lease expiring in March 2003. Further discussion of this lease may be found in Part II. Item 7. The Company operates other facilities as set
forth on page 8headquarters of the Company's Annual Report,operating segments are located in Valley, Nebraska, except for Wireless Communication, which information is incorporated herein by reference.


Itemlocated in Plymouth, Indiana. The principal operating locations of the Company are listed below.

Owned,
Leased
Principal Activities
Poles Segment Locations
Berrechid, MoroccoOwnedManufacture of steel poles for lighting and traffic
Brenham, TexasOwnedManufacture of steel poles for lighting and traffic and utility
Charmeil, FranceOwnedManufacture of steel poles for lighting and traffic and utility
Elkhart, IndianaOwnedManufacture of steel and aluminum poles for lighting and traffic
Farmington, MinnesotaOwnedManufacture of aluminum poles for lighting and traffic
Gelsenkirchen, GermanyLeasedManufacture of steel poles for lighting and traffic
Jasper, TennesseeLeasedManufacture of steel poles for lighting and traffic and utility
Maarheeze, The NetherlandsOwnedManufacture of steel poles for lighting and traffic
Rive-de-Gier, FranceOwnedManufacture of aluminum poles
Shanghai, ChinaLeasedManufacture of steel poles for lighting and traffic and utility
Siedlce, PolandLeasedManufacture of steel poles
St. Julie, Quebec, CanadaLeasedManufacture of aluminum poles
Tulsa, OklahomaOwnedManufacture of steel poles for lighting and traffic and utility
Valley, NebraskaOwnedManufacture of steel poles for lighting and traffic and utility

Wireless Communication Segment Locations



Brenham, TexasOwnedManufacture of steel poles for wireless communication
Charmeil, FranceOwnedManufacture of steel poles for wireless communication
Jasper, TennesseeLeasedManufacture of steel poles for wireless communication
Plymouth, IndianaOwnedManufacture of wireless communication structures and components
Salem, OregonLeasedManufacture of wireless communication structures and components
Shanghai, ChinaOwnedManufacture of steel poles for wireless communication
Valley, NebraskaOwnedManufacture of steel poles for wireless communication structures

Coatings Segment Locations



Chicago, IllinoisOwnedGalvanizing services
Lindon, UtahLeasedGalvanizing services
Long Beach, CaliforniaLeasedGalvanizing services
Los Angeles, CaliforniaOwnedAnodizing services
Minneapolis, MinnesotaOwnedPainting and anodizing services
Sioux City, IowaOwnedGalvanizing services
Tualatin, OregonLeasedGalvanizing services
Tulsa, OklahomaOwnedGalvanizing services
Valley, NebraskaOwnedGalvanizing services
West Point, NebraskaOwnedGalvanizing services
13

Irrigation Segment Locations



Albany, OregonLeasedWater and soil management services
Dubai, United Arab EmiratesOwnedManufacture of irrigation equipment
Johannesburg, South AfricaLeasedManufacture of irrigation equipment
Madrid, SpainOwnedManufacture of irrigation equipment
McCook, NebraskaOwnedManufacture of irrigation equipment
Uberaba, BrazilOwnedManufacture of irrigation equipment
Valley, NebraskaOwnedManufacture of irrigation equipment

Tubing Segment Locations



Valley, NebraskaOwnedManufacture of steel tubing
Waverly, NebraskaOwnedManufacture of steel tubing

Other Locations



Creuzier-le-neuf, FranceOwnedManufacture of industrial covers and conveyors
Salem and Portland, OregonLeasedDistribution of industrial fasteners

ITEM 3.  PENDING    LEGAL PROCEEDINGS.
        The Company is involvednot a party to, nor is any of its property subject to, any material legal proceedings. The Company is from time to time engaged in a limited number of legal actions. Management
believes thatroutine litigation incidental to the ultimate resolution of all pending litigation will not have a
material adverse effect on the Company's financial condition.


Itembusiness.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     There
        No matters were not any matters submitted for stockholderto a vote of stockholders during the fourth quarter of 1998.


EXECUTIVE OFFICERS OF THE COMPANY2002.
Executive Officers of the Company
        The executive officers of the Company at December 26, 1998,28, 2002, their ages, positions held, and the business experience of each during the past five years are, as follows:
14

PART II


Item
ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCKEQUITY AND RELATED STOCKHOLDER MATTERS.


Item
        The Company's common stock, previously listed and trading on the Nasdaq National Market under the symbol "VALM", was approved for listing on the New York Stock Exchange (NYSE) and began trading under the symbol "VMI" on August 30, 2002. There were approximately 5,500 shareholders of Company common stock at December 28, 2002. Other stock information required by this item is included in "Quarterly Financial Information (unaudited)" on page 49 of this report.

ITEM 6.    SELECTED FINANCIAL DATA.


ItemDATA
SELECTED FIVE-YEAR FINANCIAL DATA
 
 2002
 2001
 2000
 1999
 1998
 
 
 (Dollars in thousands, except per share amounts)

 
Operating Data            
 Net sales $854,898 872,380 846,129 639,869 630,858 
 Operating income  70,289 65,021 67,256 50,176 47,752 
 Cumulative effect of accounting change  (500)— — — — 
 Net earnings $33,629 26,693 30,400 26,367 27,636 
 Depreciation and amortization $33,942 36,324 30,270 21,949 19,843 
 Capital expenditures  13,942 25,652 46,456 37,783 29,667 

Per Share Data
 
 
 
 
 
 
 
 
 
 
 
 
 Earnings:            
  Basic $1.40 1.10 1.31 1.09 1.04 
  Diluted  1.37 1.09 1.28 1.08 1.02 
 Cash dividends  .29 0.26 0.26 0.26 0.25 
 Shareholders' equity  10.13 9.23 8.23 7.30 7.12 

Financial Position
 
 
 
 
 
 
 
 
 
 
 
 
 Working capital $154,112 145,550 145,575 98,588 99,466 
 Property, plant and equipment, net  193,175 209,580 208,272 173,920 157,447 
 Total assets  578,571 588,897 600,135 419,335 406,957 
 Long-term debt, including current installments  166,391 198,008 205,472 108,622 96,218 
 Shareholders' equity  242,020 225,811 191,911 170,488 175,913 
 Invested capital  451,753 472,229 479,609 321,096 317,708 

Key Financial Measures
 
 
 
 
 
 
 
 
 
 
 
 
 Return on beginning shareholders' equity  14.9%13.9%17.8%15.0%13.3%
 Return on invested capital  9.7%8.6%10.9%9.8%10.3%
 Long-term debt as a percent of invested capital  36.8%41.9%42.8%33.8%30.3%

Year End Data
 
 
 
 
 
 
 
 
 
 
 
 
 Shares outstanding (000)  23,883 24,477 23,320 23,354 24,721 
 Approximate number of shareholders  5,500 5,500 5,500 5,500 5,500 
 Number of employees  5,234 5,342 5,503 3,948 3,869 
15

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     The information called for by items 5, 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward-Looking Statements
        Management's discussion and 7 is hereby incorporated by
referenceanalysis, and other sections of this annual report, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to the following captioned paragraphs (at the pages indicated)uncertainty and changes in circumstances. 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, actions and policy changes of domestic and foreign governments and other risks described from time to time in the Company's Annual Report:



                                                                  Page(s) In
                                                                    Annual
  Item   Caption in Annual Report                                   Report
  ----   ------------------------                                 ----------


    5    Stock Trading                                                48
    5    Stock Market Price and Dividends Declared                    46
    5    Approximate Number of Shareholders                         34 - 35
    5&6  Selected Eleven Year Financial Data                        34 - 35
    7    Management's Discussion and Analysis                       29 - 33




    7Areports to the Securities and Exchange Commission are examples of factors, among others, that could cause results to differ materially from those described in the forward-looking statements.
        The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial position. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes.
 
 2002
 2001
 Change 2002-2001
 2000
 Change 2001-2000
 
 
 Dollars in millions, except per share amounts

 
Consolidated              
  Net sales $854.9 $872.4 -2.0%$846.1 3.1%
  Gross profit  231.5  217.6 6.4% 211.9 2.7%
   as a percent of sales  27.1% 24.9%   25.0%  
  SG&A expense  161.2  152.6 5.6% 144.6 5.5%
   as a percent of sales  18.9% 17.5%   17.1%  
  Operating income  70.3  65.0 8.1% 67.3 -3.3%
   as a percent of sales  8.2% 7.5%   7.9%  
  Net interest expense  10.7  16.0 -33.4% 16.0 0.1%
  Effective tax rate  36.5% 36.9%   36.0%  
  Net earnings  33.6  26.7 26.0% 30.4 -12.2%
  Earnings per share  1.37  1.09 25.7% 1.28 -14.8%
Infrastructure businesses:              
 Poles segment:              
  Net sales  359.2  354.0 1.5% 310.0 14.2%
  Operating income  34.2  34.1 0.2% 21.7 57.4%
 Wireless Communication segment              
  Net sales  77.5  121.6 -36.3% 92.6 31.3%
  Operating income (loss)  (3.0) (1.6)-90.5% 2.3 -167.5%
 Coatings segment              
  Net sales  96.0  99.2 -3.2% 94.1 5.4%
  Operating income  10.7  9.4 14.0% 13.5 -30.3%
Total Infrastructure businesses:              
  Net sales  532.7  574.8 -7.3% 496.7 15.7%
  Operating income  41.9  41.9 0.0% 37.5 12.0%
Agricultural businesses:              
 Irrigation segment              
  Net sales  264.7  238.6 10.9% 283.6 -15.9%
  Operating income  24.0  15.5 55.6% 21.2 -27.2%
 Tubing segment              
  Net sales  45.4  42.4 7.1% 43.3 -2.1%
  Operating income  6.5  5.8 11.4% 7.6 -23.5%
Total Agricultural businesses:              
  Net sales  310.1  281.0 10.4% 326.9 -14.0%
  Operating income  30.5  21.3 43.6% 28.8 -26.2%
Other              
  Net sales  12.1  16.7 -27.5% 22.6 -26.1%
  Operating income (loss)  (2.1) 1.8 -216.7% 1.1 77.4%
16
RESULTS OF OPERATIONS
FISCAL 2002 COMPARED WITH FISCAL 2001
        The sales decrease in 2002 as compared with 2001 was primarily due to lower sales in the Wireless Communication segment, offset somewhat by sales increases in the Irrigation, Poles and Tubing segments. The increase in gross profit as a percent of sales was due to improved margins in all segments, particularly in the Irrigation segment. Margins were enhanced through improved factory productivity and cost control throughout most of our businesses. In addition, the 2002 gross profit margin improvement was aided by a $1.2 million gain on sale of a production facility in the Coatings segment and the 2001 gross profit was negatively impacted by the inventory write-off of $1.5 million in the Wireless Communication segment. Hot-rolled steel prices rose sharply during the first half of 2002 before prices declined somewhat in the fourth quarter. The gross profit impact of these increases was not significant, as we were able to manage these increases through sales price increases and advance purchase contracts.
        The increase in selling, general and administrative (SG&A) expenses was due to increases in employee incentives and a supplemental match of employee 401K contributions totaling $10 million due to improved earnings and return on invested capital. In addition, 2002 included a full year of expenses of PiRod, which was acquired on March 30, 2001 and an increase in wind energy development expenses of $1.6 million as compared with 2001. These increases were offset to some extent by the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142) in 2002, when we stopped amortizing goodwill and indefinite-lived intangible assets. The impact of SFAS 142 in 2002 was a reduction in SG&A expenses of $3.7 million.
        Net interest expense decreased significantly in 2002, due mainly to our reduction of interest-bearing debt. We also benefited from lower interest rates on our variable rate debt. The positive impact of lower interest rates was $2.3 million in 2002.
        Our effective tax rate was slightly lower in 2002 than 2001, due to increased tax credits associated with research and development activities and the elimination of goodwill amortization. Losses in nonconsolidated subsidiaries narrowed by $1.0 million, due mainly to a lower net loss in our Mexican pole joint venture. In 2001, we recorded a $1.0 million impairment charge in our investment in our irrigation distributor in Argentina, due to the economic problems in the Argentine economy. In 2002, we recognized a $1.1 million impairment charge in our investment in a nonconsolidated irrigation segment operation. This impairment charge was due to a reduced market demand for irrigation products in that operation's market area.
        In North America, sales of lighting and traffic products were modestly higher as compared with 2001. Government programs to develop and upgrade road, highway and traffic control systems helped support sales demand in the lighting and traffic product line. Commercial lighting sales were stable, as new alliance relationships with certain lighting fixture manufacturers offset overall weaker market demand and lower levels of commercial construction. Sales of aluminum pole products (such as flag poles) were improved over 2001. Utility product sales in North America were lower than in 2001, as demand for steel transmission, substation and distribution poles weakened steadily throughout 2002. Utility companies and independent power producers are delaying plans to develop new electrical generation due to a slow U.S. economy and financing constraints, which is resulting in lower demand for our products. We entered 2002 with a large backlog in utility, which helped sustain sales through the first half of 2002. However, market conditions this year led to lower sales volumes in the second half of the year. Over the long term, we believe the key market drivers of increasing electricity consumption, overall economic growth, lack of electrical transmission capacity and deregulation of the electrical utility industry provide a solid basis for future sales. In 2002, rising steel prices throughout much of the year and a competitive pricing environment, especially in the utility product line in the second half of the year put some pressure on margins, but factory productivity improvements helped minimize the impact of these conditions on operating income. SG&A spending was comparable to
17
2001, as lower incentive payments were offset by start up spending in our new plant in Morocco and increased depreciation charges.
        In Europe, sales were modestly higher than in 2001. Market conditions improved during the year. We expanded our sales presence in Europe and started up a factory in Morocco. Profitability in Europe improved mainly through improved factory performance. In our China operation, sales were stable in China and export sales improved over 2001. Profitability also improved over 2001.
        In 2002, sales in North America were 40% lower than in 2001. Wireless carriers and build-to-suit companies continue to be plagued by lack of capital and inventories of uninstalled structures. We recognized these conditions as indications of market weakness and took actions to reduce expenses, consolidate product offerings and organize operations in line with then current market conditions. Despite the large sales decrease, operating profit only fell by $1.4 million from 2001. Factory costs were reduced by over 40% and SG&A spending was reduced by over 30% this year, which helped minimize the operating income impact from the lower sales volumes. We believe that, over time, carriers will have to add structures and antennas to improve service and keep up with the continuing growth in number of subscribers and airtime usage by subscribers. With the 2002 cost reductions, we believe we are positioned to take advantage of the eventual recovery of this market. In addition to reducing the cost structure of the business, this segment is using its engineering and design expertise to work with the Poles segment in developing products for the sign structure business. We have successfully delivered our first steel sign structures and are scheduled to deliver aluminum sign structures in 2003.
        Sales of communication poles in China were slightly lower than our record sales of 2001. China, however, is continuing the buildout of its wireless phone infrastructure, which helped support sales. This unit continues to contribute profitably to the performance of the Wireless Communication segment.
        Sales in the Coatings segment were down slightly from 2001. This business generally reflects the industrial U.S. economy and the weak U.S. economic growth resulted in sluggish sales. Earnings improved over 2001 due to reduced amortization of goodwill (due to the adoption of SFAS 142) of $2.4 million and a sale of a production facility that resulted in a gain of $1.2 million. However, fixed factory and SG&A expenses continued notwithstanding the lower sales volumes, including lower sales to the Poles and Wireless Communication segments. The impact of these reduced sales on operating income was approximately $2.6 million, but was partially offset by lower zinc and natural gas costs.
        The increase in Irrigation segment sales was due to improved market conditions in most markets. In North America, improved crop prices and generally dry growing conditions resulted in stronger market demand for mechanized irrigation machines and related service parts. Profitability in North America improved due to sales volume increases, a stronger pricing environment, effective management of steel costs and more efficient factory performance. SG&A expenses increased approximately $4 million as compared with 2001 due to increased compensation costs (including higher employee incentives) and increases in promotional spending.
        International sales and profits were at record levels in 2002, as most markets were stronger as compared with 2001. In addition to the increases in volume, profits were enhanced by improved pricing in most markets. Latin America, Brazil and South Africa were the main contributors to the increase in sales and profitability. Latin America sales improved due to development of new markets in the region and higher sales in Mexico, which were driven by improved crop prices and government subsidies. In Brazil, 2001 sales were down due to government-imposed electricity and water restrictions caused by drought. In 2002, these restrictions were lifted, resulting in improved market demand and pricing. In South Africa, dry growing conditions, improved crop prices and expanded sales efforts led to increased sales and profits. Our strategy of manufacturing and distribution presence in major markets has put us in a good position to compete effectively on a local basis and minimize the impacts of exchange rates on our sales and profitability.
18

        Tubing segment product demand was similar to 2001, due to the sluggish U.S. industrial economy. Steel prices increased dramatically during the first half of 2002 before falling somewhat in the fourth quarter. In addition to the effective management of higher steel prices, we were able to pass some of these price increases along to our customers, which accounted for much of the net sales increase as compared with 2001. Improved factory performance and favorable product mix were the main reasons for the increase in operating income in 2002.
        Our Other businesses include manufacture of machine tool accessories, distribution of industrial fasteners and wind energy development. The main reason for the reduced aggregate earnings of these operations in 2002 was $2.4 million spent on developing a structure for the wind energy industry, as compared with $0.8 million spent in 2001. Sales and profits in the machine tool accessory business were also lower than 2001 by $1.0 million due to lower customer demand this year, which mainly serves the automotive industry.
RESULTS OF OPERATIONS
FISCAL 2001 COMPARED WITH FISCAL 2000
        The sales increase was due to sales increases in the Infrastructure businesses offset by sales decreases in the Agricultural businesses. The increase in Wireless Communication segment sales was attributable to the PiRod acquisition, which was completed on March 30, 2001.
        In 2001, gross profit as a percent of sales was virtually unchanged from 2000. Higher margins in the Poles segment essentially offset lower margins in the other segments. Selling, general and administrative expenses (SG&A) as a percent of sales increased in 2001 due to lower sales in the Irrigation and Wireless Communication segments. While expenses were reduced in these segments, sales decreased more than expenses. The decrease in operating income was due to improved profits in the Poles segment which partially offset profitability decreases in the other segments.
        Net interest expense was essentially unchanged between 2001 and 2000. While interest-bearing debt was reduced in 2001, average borrowing levels were higher than in 2000. The effect on interest expense from these higher borrowing levels was offset by declining interest rates throughout most of 2001 on our variable interest rate debt. Declining interest rates resulted in a positive impact on interest expense of $2.5 million in 2001.
        Our effective tax rate increased from 36.0% in 2000 to 36.9% in 2001. The rate increase was mainly associated with taxes related to distributions from foreign entities and increased goodwill amortization expenses that were not tax-deductible.
        Losses in nonconsolidated subsidiaries increased in 2001 due to unprofitable operations in our Mexican joint venture and an impairment charge of $1 million in an investment in an irrigation distributor in Argentina. The Mexico performance related to poor local market demand for pole products in the second half of 2001 and start-up production inefficiencies. The Argentina writedown was prompted by the recent difficulties encountered in the Argentine economy.
        Net earnings decreased 12% to $26.7 million in 2001 from $30.4 million in 2000. Diluted earnings per share decreased 15% from $1.28 to $1.09. The percentage drop in earnings per share was more than the decrease in net earnings due to the additional shares outstanding in 2001 related to the shares issued as part of the PiRod acquisition.
        The improvement in sales and operating profit was attributable to strong performance in North America. North America sales in lighting and traffic products were up due to government funding for the U.S. highway program, where the emphasis on safety and traffic control drove demand for our street, area and highway lighting products as well as traffic poles and sign structures. Sales in the
19
commercial lighting market also improved slightly over 2000, as increased alliances with lighting fixture OEM's helped maintain order rates despite a slowdown in commercial construction activity. Utility product sales also improved substantially over 2000. As electric utility companies and independent power producers have been adding new capacity, our transmission, substation and distribution poles are needed to bring this newly generated electricity from the generation source to users. The operating profit improvement in North America was in part due to the improved sales volumes as well as margin enhancements associated with improved manufacturing productivity, stable material prices and effective utilization of capacity expansions. We closed our composite pole facility in late 2000, which contributed to the 2001 operating profit improvement. This facility recorded a loss of $1.7 million in 2000.
        In Europe, lighting sales were down 6% as compared with 2000. Preparations for local elections in France increased sales early in the year, but the European economy weakened throughout the remainder of 2001, lowering market demand for lighting structures. Despite the lower sales, operating profit was slightly improved, the result of factory and SG&A expense control and improved operations. Sales and profits in China were similar to 2000.
        The sales and operating profit of the Wireless Communication segment for 2001 include the operations of PiRod after its acquisition at the end of the first quarter. If PiRod's sales are excluded from 2001, worldwide sales would have been down 12%. Sales in North America (without PiRod) were down 18% from 2000, with market demand slowing more dramatically as 2001 progressed. This was due to the general slowdown of the economy and particularly the slumping telecommunications industry, which hampered our customers' ability to sustain funding of its strong network buildout of 2000. Furthermore, the installation of many of the structures sold in 2000 was delayed, which also reduced demand for new structures. Sales of components, which are parts that attach antennas to structures such as poles, towers and buildings, were relatively stable. Components were used to support subscriber growth and bandwidth demand by allowing more antennas to be installed on existing structures. This reduction in market demand for structures (especially towers) resulted in a drop in gross profit margins and operating income in 2001. Unfavorable manufacturing fixed cost coverage in our Nebraska and Oregon plants due to the lower production volumes reduced 2001 operating profit by approximately $3 million. We elected in the fourth quarter to eliminate some overlapping product lines between the PiRod and Valmont/Microflect brands, resulting in a pretax $1.5 million inventory valuation charge. PiRod was accretive to net income and neutral to earnings per share in 2001. Sales of communication poles in China improved over 2000, as a continuing wireless network buildout drove increased demand.
        The sales increase in the Coatings segment related to a significant sales improvement at one location, where we provide coating and assembly services to a large customer. Aside from this location, sales were down 12%. Furthermore, galvanizing services provided to the Irrigation segment were down from 2000, due to lower production levels in that segment and further transfer of Irrigation production to its McCook, Nebraska facility, which galvanizes its own production. The reduction in operating income in 2001 mainly related to reduced fixed cost coverage due to the generally lower production levels, an operating income reduction of approximately $4 million. Higher energy prices also negatively impacted 2001 profitability by approximately $1 million.
        Sales in the Irrigation segment were lower, both in North American and International markets. Weak commodity prices, high input costs for farmers related to energy prices and uncertainty over future U.S. farm policy all contributed to weaker market conditions in North America. As a result, management reduced employment and planned spending levels in early 2001. North American operating profit was down as compared to 2000, but improved pricing discipline, customer service improvements and the spending reductions taken early in the year resulted in an improved operating profit percentage.
20
        Sales and profits in international markets were lower in 2001, mainly due to poor market conditions in Brazil. Government imposed electricity and water restrictions brought about by drought reduced farmers' ability to obtain permits to irrigate, which reduced demand for irrigation machines. The combined impact on operating profit of lower sales and margin was $3 million. Sales and profits in other international markets in total were similar to 2000. Our strategy of local manufacturing and distribution in international markets has enabled it to remain competitive, despite the continued strength of the U.S. dollar.
        The Tubing segment recorded slightly lower sales than in 2000, due to a weaker U.S. economy. Sales to the Irrigation segment fell, due to lower Irrigation sales and transfer of production to its McCook facility, which produces its own tubing. These lower production levels resulted in unfavorable manufacturing fixed cost coverage, estimated at $1 million. Pricing competition due to a weakening U.S. economy and falling steel prices resulted in further margin pressure. SG&A spending was reduced in light of weaker sales and margins to mitigate the impact of lower margins on operating profit.
LIQUIDITY AND CAPITAL RESOURCES
        Net working capital was $154.1 million at fiscal year-end 2002, as compared with $145.6 million at year-end 2001. The ratio of current assets to current liabilities was 2.09:1 as of December 28, 2002, as compared with 2.05:1 at December 29, 2001. Working capital was up due to increased inventories. Irrigation segment inventories are up due to stronger sales demand in late 2002 as compared with 2001 and anticipated sales increases in 2003. In the Poles and Tubing segments, we increased our stocks of hot-rolled steel late in the year to guard against potential availability problems associated with turmoil in the U.S. steel industry. Operating cash flow was $69.5 million in 2002, as compared with $109.8 million in 2001. The stronger operating cash flow in 2001 related principally to substantial reductions in inventory that year, since our inventories were at relatively high levels in 2000. This inventory increase in 2000 also was the main reason for the relatively low operating cash flow in 2000 (approximately $11 million). The average annual operating cash flow for 2000 through 2001 was approximately $60 million.
        Capital spending was $13.9 million in 2002, down from the $25.7 million that was spent in 2001. Our depreciation and amortization expenses for 2002 and 2001 were $33.9 million and $36.3 million, respectively. Our capital spending is at low levels from recent history, as we have not made any substantial capacity additions in the past two years. We made no acquisitions in 2002. In 2001, $33.4 million cash was expended as part of the PiRod acquisition, which was completed on March 30, 2001. We do not expect that capital spending will remain at the 2002 level in the future, but we do not anticipate that capital spending will exceed depreciation expense in the foreseeable future. We currently expect capital spending to be $15 to $20 million in 2003.
        Strong operational cash flow, combined with lower capital spending and the lack of acquisitions, enabled us to reduce interest-bearing debt from $209.3 million at December 29, 2001 to $169.5 million at December 28, 2002.
        We have historically funded our growth, capital spending and acquisitions by a combination of operating cash flows and debt financing. Our long-term objective is to maintain long-term debt as a percent of capital below 40%, although we may exceed that percentage from time to time for major strategic purposes, such as acquisitions. At year-end 2002, long-term debt was 36.8% of invested capital, down from 41.9% at year-end 2001. Barring significant acquisition activity, we expect that our long-term debt to invested capital ratio to remain at or below 40% in 2003.
        Our debt financing consists of a combination of short-term credit facilities and long-term debt. The short-term credit facilities are with various banks and amounted to $21.1 million at the ending of 2002 as compared with $36.0 million at the end of 2001. On December 28, 2002, $21.1 million of these short-term credit facilities were available.

        The major components of our long-term debt include a revolving credit agreement with a group of banks and a long-term unsecured credit facility with an insurance company. Under the revolving credit agreement, we may borrow up to $150 million in multiple currencies. The facility is unsecured and any outstanding principal balance is due in August 2006. The outstanding balance may be paid down at any time and additional funds may be borrowed up to the $150 million maximum. At December 28, 2002, the outstanding principal balance was $56.0 million, compared with $77.5 million at the end of fiscal 2001. Our borrowings under the unsecured facility with an insurance company are $90 million. The annual principal payments due under this facility are in varying amounts starting in 2002 and ending in 2012. The principal may be prepaid at any time, subject to applicable yield maintenance provisions. We also have certain minor long-term borrowings, including capital lease arrangements. Debt covenants under the revolving credit agreement and the unsecured facility with an insurance company require us to maintain certain leverage and fixed charge ratios for the duration of the agreements. At the end of fiscal 2002, we were in compliance with all debt covenants.
        In 2001, the Board of Directors authorized the repurchase of up to 1.5 million shares of our common stock. As of December 28, 2002, 806,400 shares had been repurchased under this authorization for a total of $13.9 million.
        Our priorities in use of future free cash flows are as follows:
        In the event of a sharp decrease in demand for our products, resulting profitability reductions would reduce our operating cash flows and affect our ability to grow. Likewise, low profitability or operating losses could impact our compliance with key long-term debt covenants, which could ultimately result in default of these debt agreements and acceleration of payments due. These factors could come from a number of sources, such as a prolonged depression in the U.S. farm economy, a substantial reduction in government (including state and local) funding of the federal highway program and a prolonged U.S. economic recession.
        We have future financial obligations related to (1) payment of principal and interest on interest-bearing debt, including capital lease obligations and (2) various operating leases and (3) purchase obligations. These obligations as of December 28, 2002 are summarized as follows, in millions of dollars:
Contractual Obligations
 Total
 2003
 2004-2005
 2006-2007
 After 2007
Long-term debt $164.4 $10.5 $33.4 $74.6 $45.9
Capital leases  2.0  0.3  0.4  0.4  0.9
Unconditional purchase obligations  10.8  10.8  —  —  —
Operating leases  32.8  7.0  11.6  8.7  5.5
  
 
 
 
 
Total contractual cash obligations $210.0 $28.6 $45.4 $83.7 $52.3
        Long-term debt principally consists of the revolving credit agreement and the unsecured credit facility with an insurance company. Obligations under these agreements could be accelerated in event of non-compliance with loan covenants.
        Unconditional purchase obligations relate to purchase orders for aluminum and zinc for periods up to one year. These obligations also include steel held by us on consignment from certain vendors. 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.
22

        We have operating lease obligations to unaffiliated parties on leases of certain production and office facilities and equipment. These leases are in the normal course of business and generally contain no substantial obligations for us at the end of the lease contracts. The most significant operating leases are the lease of our corporate headquarters office building in Omaha, Nebraska and a lease of company aircraft. On the corporate headquarters lease, we lease the entire office complex and sublease other office space in the complex to outside parties. The current lease obligation expires in 2003, at which time we may elect to 1) renew the lease at a negotiated rate and duration; 2) purchase the facility from the bank for $35 million; or 3) terminate the lease. In the event that we terminate the lease and the facility is sold for less than $35 million, we are obligated to pay the difference between the sales price and $35 million to the owner. The lease of our airplane expires in 2010. Our options at the end of that lease are similar to the corporate headquarters lease, except that the purchase option at the end of the lease is approximately $5.5 million. We are in the process of reviewing these leases in light of FAS Interpretation 46 ("Consolidation of Variable Interest Entities"), which was finalized in January 2003. While we have not yet completed our evaluation of these leases under the provisions of this Interpretation, we may be required to capitalize one or both of the leases in our financial statements. We have not yet determined the financial impact of this Interpretation on us, but it appears that if we are required to capitalize these leases, we would record the assets and related long-term debt on our balance sheet, recognize annual depreciation expense and record the lease payments as interest expense. The pre-tax impact on earnings if we are required to capitalize both leases on our financial statements would be the amount of the annual depreciation, which we estimate to be approximately $1.0 million to $2.0 million. The impact of capitalizing these leases on the balance sheet would be increases in the amount of property, plant and equipment and long-term debt, which would also increase our long-term debt to total invested capital ratio.
        We also have certain commercial commitments related to contingent events that could create a financial obligation for us that did not meet the requirements for balance sheet recognition at yearend 2002. These commitments at December 28, 2002 are as follows (in millions of dollars):
 
  
 Commitment Expiration Period
Other Commercial Commitments
 Total Amounts Committed
 2003
 2004-2005
 2006-2007
 Thereafter
Standby Lines of Credit $3.5 $3.5  — — —
Guarantees  6.6  1.7  4.9 — —
  
 
 
 
 
Total commercial commitments $10.1 $5.2 $4.9 — —
        The above commitments include $4.2 in loan guarantees of non-consolidated subsidiaries in Argentina and Mexico and are in proportion to our ownership percentage of these companies or are accompanied by a guarantee from the majority owner to us. We also maintain standby letters of credit for contract performance on certain sales contracts. As the likelihood of nonperformance under these commitments was not considered to be probable, they are not recognized on the balance sheet at December 28, 2002.
        Certain key materials we use are commodities traded in worldwide markets and are subject to fluctuations in price. The most significant materials are steel, aluminum, zinc and natural gas. In 2002, hot-rolled steel prices increased significantly in the first half of the year before decreasing somewhat later in the year. In 2001, natural gas prices were very volatile. Our main strategies in managing these risks are a combination of fixed price purchase contracts with our vendors to minimize the impact of volatility in prices and sales price increases where possible.
        Market Risk—The principal market risks affecting us are exposure to interest rates and foreign currency exchange rates. We normally do not use derivative financial instruments to hedge these exposures, nor do we use derivatives for trading purposes.
        Interest Rates—We manage interest expense using a mix of fixed and variable rate debt. Assuming average interest rates and borrowings on variable rate debt, a hypothetical 10% change in interest rates
23

would have an impact on interest expense of approximately $0.2 million in 2002 and $0.6 million in 2001.
        Foreign Exchange—Exposure to transactions denominated in a currency other than the entity's functional currency are not material, and therefore the potential exchange losses in future earnings, fair value and cash flows from these transactions are immaterial.
        We manage our investment risk in foreign operations by borrowing in the functional currencies of the foreign entities where appropriate. The following table indicates the change in the recorded value of our investments at year-end assuming a hypothetical 10% change in the value of the U.S. Dollar.
 
 2002
 2001
 
 (in millions)

Europe $3.0 $2.7
South America  0.6  0.3
Asia  1.0  0.5
South Africa  0.3  0.2
        In 2003, we expect the Poles segment sales to be essentially flat with 2002. Lighting and traffic structure sales are expected to increase, offset by lower utility structure sales. Backlogs in utility products are over 60% lower than last year and we do not anticipate the market will improve in 2003. Wireless Communication sales were slow at the start of 2003 and we do not expect 2003 sales to be any better than 2002. Coatings sales will follow the general industrial economy in the U.S., so if there is any improvement in the U.S. economy, we should see some improvement in demand for coatings services.
        Irrigation sales look to be moderately improved in 2003, as compared with 2002. Overall dry growing conditions, government farm programs and improved commodity prices should result in higher sales in North America. In the international markets, the political situation in the Middle East is somewhat unknown, although war or unrest in the region would likely result in lower sales in 2003.
        Overall, we expect to grow earnings modestly in 2003. We will continue our focus on looking for new growth opportunities through internal initiatives or acquisitions, improving our cost structure and using free cash flows to reduce interest-bearing debt. We were generally pleased with our performance in 2002, especially in light of a difficult overall economic environment. However, we believe there is opportunity for improvement in each of our businesses and we intend to grow and leverage our products, markets and competencies going forward.
CRITICAL ACCOUNTING POLICIES
        The following accounting policies involve judgments and estimates used in preparation of the consolidated financial statements. There is a substantial amount of management judgment used in preparing financial statements. We must make estimates on a number of items, such as provisions for bad debts, warranties, contingencies, impairments of long-lived assets, and inventory obsolescence. We base our estimates on our experience and on other assumptions that we believe are reasonable under the circumstances. Further, we re-evaluate our estimates from time to time and as circumstances change. Actual results may differ under different assumptions or conditions. The selection and application of our critical accounting policies are discussed periodically with our audit committee.
        In determining an allowance for accounts receivable that will not ultimately be collected in full, we consider:
24
        If our customer's financial condition were to deteriorate, resulting in an impairment in their ability to make payment, additional allowances may be required.
        All of our businesses must meet certain product quality and performance criteria. We rely on historical product claims data to estimate the cost of product warranties at the time revenue is recognized. In determining the accrual for the estimated cost of warranty claims, we consider our experience with:
        In addition to known claims or warranty issues, we estimate future claims on recent sales. The key assumption in our estimate is the rate we apply to those recent sales, which is based on historical claims experience. If this estimate changed by 50%, the impact of operating income would be approximately $1 million. If our cost to repair a product or the number of products subject to warranty claims is greater than we estimated, then we would have to increase our accrued cost for warranty claims.
        We use the last-in first-out (LIFO) method to determine the value of the majority of our inventory. The remainder of our inventory is valued on a first-in first-out (FIFO) basis. In periods of rising costs to produce inventory, the LIFO method will result in lower profits than FIFO, because higher more recent costs are recorded to cost of goods sold than under the FIFO method. Conversely, in periods of falling costs to produce inventory, the LIFO method will result in higher profits than the FIFO method.
        In 2002, we experienced higher costs to produce inventory than in 2001, due mainly to higher costs for steel and other commodities. This resulted in higher cost of goods sold (and lower operating income) of approximately $2.6 million than if all of our inventory had been valued on the FIFO method.
        We write down slow-moving and obsolete inventory by the difference between the value of the inventory and our estimate of the reduced value based on potential future uses, the likelihood that overstocked inventory will be sold and the expected selling prices of the inventory. If our ability to realize value on slow-moving or obsolete inventory is less favorable than assumed, additional write-downs of the inventory may be required.
        Our long-lived assets consist primarily of property, plant and equipment and intangible assets that were acquired in business acquisitions. We have assigned useful lives to our property, plant and equipment and certain intangible assets which range from 3 to 40 years.
        We annually evaluate our reporting units for goodwill impairment during the third fiscal quarter, which coincides with our strategic planning process. We value our reporting units using after-tax cash flows from operations (less capital expenditures) discounted to present value. The key assumptions are the discount rate and the annual free cash flow. We also use sensitivity analysis to determine the impact of changes in discount rates and cash flow forecasts on the valuation of the reporting units. As allowed for under SFAS 142, we can rely on our previous valuations for the annual impairment testing provided that the following criteria for each reporting unit are met: (1) the assets and liabilities that make up the reporting unit have not changed significantly since the most recent fair value determination; and (2) the most recent fair value determination resulted in an amount that exceeded the carrying amount of the reporting unit by a substantial margin.
25

        In the case of most of our reporting units, the above criteria have been met and no further evaluation was required. In regard to the Wireless Communication segment, an evaluation was performed in the third quarter of 2002 and we concluded that no impairment was evident. We will continue to monitor the goodwill associated with the Wireless Communication segment. If our assumptions about intangible assets change as a result of events or circumstances, and we believe the assets may have declined in value, then we may record impairment charges, resulting in lower profits. For example, in 2001 we determined through this process that the company's investment in an Argentine irrigation distributor was impaired, due to recent difficulties in Argentina's economy, and we wrote down the value of the investment by $1 million. In 2002, we determined that our investment in an irrigation dealer in North America was impaired, which resulted in a writedown of $1.1 million.
        Our employees are periodically granted stock options by the Compensation Committee of the Board of Directors. As allowed under generally accepted accounting principles (GAAP), we do not record any compensation expense on the income statement with respect to options granted to employees and directors. Alternatively, under GAAP, we could have recorded a compensation expense based on the fair value of employee stock options. As described in Note 8 in the Consolidated Financial Statements, had we recorded a fair value-based compensation expense for stock options, earnings per share would have been $0.10 to $0.12 less than what was reported for the 2000, 2001 and 2002 fiscal years.
        We record a valuation allowance to reduce our deferred tax assets to an amount that is more likely than not to be realized. While future taxable income and tax-planning strategies are considered in assessing the need for the valuation allowance, if a deferred tax asset is estimated to be not fully realizable in the future, a valuation allowance to decrease the amount of the deferred tax asset would decrease net income in the period the determination was made. Likewise, should we subsequently determine that we would be able to realize all or part of a net deferred tax asset in the future, an adjustment reducing the valuation allowance would increase net earnings in the period such determination was made. At December 28, 2002, we had approximately $2.5 million in deferred tax assets related mainly to tax credit carryforwards that we believe do not require a valuation allowance based on the facts and circumstances available today. If circumstances change in the future, we may be required to establish a valuation allowance on these assets, resulting in an increase in income tax expense and a reduction in net income.
        In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This standard establishes criteria for recognizing costs and liabilities related to activities such as employee termination costs, contract termination costs and costs associated with consolidating facilities and relocating employees. Specifically, costs and liabilities related to qualifying exit or disposal activities are recognized and measured at fair value when incurred, with subsequent adjustment in future periods. This standard is applicable to exit or disposal activities initiated after December 31, 2002. This standard is not expected to have a significant effect on our financial statements.
        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45 establishes disclosure to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also establishes that, for guarantees initiated after December 31, 2002, a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The fair value of this obligation is also required to be adjusted in the financial statements of the guarantor in subsequent periods. We do not expect FIN 45 to have a significant impact on our financial statements.
26

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). FIN 46 addresses consolidation by business enterprises of variable interest entities, which have one or both of the following characteristics:
        FIN 46 is effective for us at the beginning of the third quarter 2003 and we are in the process of evaluating the impact of this Interpretation on our financial statements. FIN 46 could result in us capitalizing our leases on the corporate headquarters office building and company aircraft (seeOff-Balance Sheet Arrangements above). The pre-tax impact on earnings if we are required to capitalize both leases on our financial statements would be the amount of the annual depreciation, which we estimate to be approximately $1.0 million to $2.0 million. The impact of capitalizing these leases on the balance sheet would be increases in the amount of property, plant and equipment and long-term debt, which would also increase our long-term debt to total invested capital ratio.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKRISK.
        The information called for by item 7Arequired is hereby incorporated by reference
toincluded under the captioned paragraph, Risk Management, in the Company's Annual Report"Risk Management" on Page 32.


Itempages 23-24 of this report.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
        The following consolidated financial statements calledof the Company and its subsidiaries are included herein as listed below:
Consolidated Financial Statements
Independent Auditors' Report28
Consolidated Balance Sheets—December 28, 2002 and December 29, 200130
Consolidated Statements of Operations—Three-Year Period Ended December 28, 200229
Consolidated Statements of Shareholders' Equity—Three-Year Period Ended December 28, 200232
Consolidated Statements of Cash Flows—Three-Year Period Ended December 28, 200231
Notes to Consolidated Financial Statements—Three-Year Period Ended December 28, 200233-48
27

INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Valmont Industries, Inc.
Omaha, Nebraska
        We have audited the accompanying consolidated balance sheets of Valmont Industries, Inc. and subsidiaries as of December 28, 2002 and December 29, 2001, and the related consolidated statements of operations, shareholders' equity and cash flows for by this itemeach of the three years in the period ended December 28, 2002. These financial statements are hereby incorporated by
reference to the Company's Annual Report as set forth on pages 36 through 45,
together with the independent auditors' report on page 47. The supplemental
quarterly financial information is incorporated herein by reference to page 46responsibility of the Company's Annual Report


Itemmanagement. Our responsibility is to express an opinion on these financial statements based on our audits.
        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Valmont Industries, Inc. and subsidiaries as of December 28, 2002 and December 29, 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 2002 in conformity with accounting principles generally accepted in the United States of America.
        As discussed in Note 1, in 2002 the Company changed its method of accounting for goodwill and other intangibles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 14, 2003


Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-year period ended December 28, 2002
(Dollars in thousands, except per share amounts)
 
 2002
 2001
 2000
 
Net sales $854,898 $872,380 $846,129 

Cost of sales
 
 
623,422
 
 
654,759
 
 
634,246
 
  
 
 
 
 Gross profit  231,476  217,621  211,883 
Selling, general and administrative expenses  161,187  152,600  144,627 
  
 
 
 
 Operating income  70,289  65,021  67,256 
  
 
 
 
Other income (deductions):          
 Interest expense  (11,722) (17,080) (17,396)
 Interest income  1,048  1,050  1,376 
 Miscellaneous  (337) (524) (1,198)
  
 
 
 
   (11,011) (16,554) (17,218)
  
 
 
 

Earnings before income taxes, minority interest and equity in losses of nonconsolidated subsidiaries and cumulative effect of change in accounting principle
 
 
59,278
 
 
48,467
 
 
50,038
 
  
 
 
 

Income tax expense:
 
 
 
 
 
 
 
 
 
 
 Current  17,777  14,073  17,500 
 Deferred  3,860  3,827  500 
  
 
 
 
   21,637  17,900  18,000 
  
 
 
 

Earnings before minority interest and equity in losses of nonconsolidated subsidiaries and cumulative effect of change in accounting principle
 
 
37,641
 
 
30,567
 
 
32,038
 

Minority interest (after tax)
 
 
(1,170
)
 
(509
)
 
(1,221
)
Equity in losses of nonconsolidated subsidiaries (after tax)  (2,342) (3,365) (417)
Cumulative effect of change in accounting principle  (500) —  — 
  
 
 
 
 Net earnings $33,629 $26,693 $30,400 
  
 
 
 
Earnings per share:          
 Basic $1.40 $1.10 $1.31 
  
 
 
 
 Diluted $1.37 $1.09 $1.28 
  
 
 
 
Cash dividends per share $0.29 $0.26 $0.26 
  
 
 
 
See accompanying notes to consolidated financial statements.
29

Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 28, 2002 and December 29, 2001
(Dollars in thousands, except per share amounts)
 
 2002
 2001
 
ASSETS       
Current assets:       
 Cash and cash equivalents $19,514 $24,522 
 Receivables, less allowance for doubtful receivables of $3,957 in 2002 and $4,842 in 2001  132,697  134,632 
 Inventories  120,837  108,962 
 Prepaid expenses  4,868  4,763 
 Refundable and deferred income taxes  17,012  11,719 
  
 
 
  Total current assets  294,928  284,598 
  
 
 
Property, plant and equipment, at cost  415,828  404,559 
 Less accumulated depreciation and amortization  222,653  194,979 
  
 
 
  Net property, plant and equipment  193,175  209,580 
  
 
 
Goodwill  55,671  55,889 
Other intangible assets  15,646  16,934 
Other assets  19,151  21,896 
  
 
 
  Total assets $578,571 $588,897 
  
 
 

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities:       
 Current installments of long-term debt $10,849 $11,062 
 Notes payable to banks  3,149  11,319 
 Accounts payable  55,198  57,027 
 Accrued expenses  69,828  58,042 
 Dividends payable  1,792  1,598 
  
 
 
  Total current liabilities  140,816  139,048 
  
 
 
Deferred income taxes  18,240  15,065 
Long-term debt, excluding current installments  155,542  186,946 
Other noncurrent liabilities  15,371  15,947 
Minority interest in consolidated subsidiaries  6,582  6,080 

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; issued 27,900,000 shares		  27,900  27,900 
 Additional paid-in capital  —  — 
 Retained earnings  289,105  264,854 
 Accumulated other comprehensive income  (10,049) (11,957)
  
 
 
   306,956  280,797 

Less:
 
 
 
 
 
 
 
 Cost of common shares in treasury—4,016,515 shares in 2002 (3,422,166 shares in 2001)  64,936  54,986 
  
 
 
  Total shareholders' equity  242,020  225,811 
  
 
 
  Total liabilities and shareholders' equity $578,571 $588,897 
  
 
 
See accompanying notes to consolidated financial statements.
30

Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-year period ended December 28, 2002
(Dollars in thousands)
 
 2002
 2001
 2000
 
Cash flows from operations:          
 Net earnings $33,629 $26,693 $30,400 
 Adjustments to reconcile net earnings to net cash flows from operations:          
  Depreciation and amortization  33,942  36,324  30,270 
  Other adjustments  751  (370) 2,360 
  Goodwill impairment charges  500  —  — 
  Equity in losses in nonconsolidated subsidiaries  2,342  3,365  417 
  Minority interest in net losses of consolidated subsidiaries  1,170  509  1,221 
  Changes in assets and liabilities:          
   Receivables  3,774  10,234  (26,593)
   Inventories  (10,172) 35,714  (40,894)
   Prepaid expenses  (235) 946  (667)
   Accounts payable  284  (12,513) 13,840 
   Accrued expenses  10,625  (1,160) 2,632 
   Other noncurrent liabilities  (809) (586) (411)
   Income taxes  (6,348) 10,683  (1,591)
  
 
 
 
    Net cash flows from operations  69,453  109,839  10,984 
  
 
 
 

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 Purchase of property, plant and equipment  (13,942) (25,652) (46,456)
 Purchase of minority interest  (855) —  — 
 Acquisitions, net of cash acquired  —  (34,079) (63,173)
 Proceeds from sale of property and equipment  2,961  341  276 
 Proceeds from sale of investment  —  63  319 
 Proceeds from sale to minority shareholder  1,253  —  — 
 Proceeds from investments by minority shareholders  —  (105) — 
 Other, net  (3,143) (2,288) (759)
  
 
 
 
    Net cash flows from investing activities  (13,726) (61,720) (109,793)
  
 
 
 

Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 Net borrowings (repayments) under short-term agreements  (8,171) (26,416) 23,871 
 Proceeds from long-term borrowings  1,249  30,216  105,961 
 Principal payments on long-term obligations  (33,070) (42,718) (14,472)
 Dividends paid  (6,758) (6,308) (6,056)
 Proceeds from exercises under stock plans  8,591  1,256  2,573 
 Purchase of common treasury shares:          
  Stock repurchases  (14,250) (1,373) (2,322)
  Stock plan exercises  (6,898) (186) (1,647)
  
 
 
 
    Net cash flows from financing activities  (59,307) (45,529) 107,908 
  
 
 
 
 Effect of exchange rate changes on cash and cash equivalents  (1,428) (1,244) (859)
  
 
 
 
 Net change in cash and cash equivalents  (5,008) 1,346  8,240 
 Cash and cash equivalents—beginning of year  24,522  23,176  14,936 
  
 
 
 
 Cash and cash equivalents—end of year $19,514 $24,522 $23,176 
  
 
 
 
See accompanying notes to consolidated financial statements.
31

Valmont Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three-year period ended December 28, 2002
(Dollars in thousands, except per share amounts)
 
 Common stock
 Additional paid-in capital
 Retained earnings
 Accumulated other comprehensive income
 Treasury stock
 Unearned restricted stock
 Total shareholders' equity
 
Balance at December 25, 1999  27,900  1,043  220,506  (5,113) (73,808) (40) 170,488 
Comprehensive income:                      
 Net earnings  —  —  30,400  —  —  —  30,400 
 Currency translation adjustment  —  —  —  (1,835) —  —  (1,835)
                    
 
  Total comprehensive income  —  —  —  —  —  —  28,565 
Cash dividends ($0.26 per share)  —  —  (6,048) —  —  —  (6,048)
Purchase of treasury shares:                      
 Stock repurchase program, 140,200 shares  —  —  —  —  (2,322) —  (2,322)
 Stock plan exercises, 83,927 shares  —  —  —  —  (1,647) —  (1,647)
Stock options exercised; 175,536 shares issued  —  (1,130) —  —  3,188  —  2,058 
Tax benefit from exercise of stock options  —  516  —  —  —  —  516 
Stock awards; 14,000 shares issued  —  42  —  —  232  27  301 
  
 
 
 
 
 
 
 
Balance at December 30, 2000  27,900  471  244,858  (6,948) (74,357) (13) 191,911 
Comprehensive income:                      
 Net earnings  —  —  26,693  —  —  —  26,693 
 Currency translation adjustment  —  —  —  (5,009) —  —  (5,009)
                    
 
  Total comprehensive income  —  —  —  —  —  —  21,684 
Cash dividends ($0.26 per share)  —  —  (6,383) —  —  —  (6,383)
Issuance of 1,215,333 shares in connection With PiRod Acquisition  —  —  (1,078) —  20,361  —  19,283 
Purchase of treasury shares:                      
 Stock repurchase program, 103,500 shares  —  —  —  —  (1,373) —  (1,373)
 Stock plan exercises, 11,326 shares  —  —  —  —  (197) —  (197)
Stock options exercised; 38,734 shares issued  —  (543) 764  —  268  —  489 
Tax benefit from exercise of stock options  —  67  —  —  —  —  67 
Stock awards; 19,754 shares issued  —  5  —  —  312  13  330 
  
 
 
 
 
 
 
 
Balance at December 29, 2001 $27,900 $— $264,854 $(11,957)$(54,986)$— $225,811 
Comprehensive income:                      
 Net earnings  —  —  33,629  —  —  —  33,629 
 Currency translation adjustment  —  —  —  1,908  —  —  1,908 
                    
 
  Total comprehensive income  —  —  —  —  —  —  35,537 
Cash dividends ($0.29 per share)  —  —  (6,952) —  —  —  (6,952)
Purchase of treasury shares:                      
 Stock repurchases, 820,932 shares  —  —  —  —  (14,250) —  (14,250)
 Stock plan exercises, 291,935 shares  —  —  —  —  (6,898) —  (6,898)
Stock options exercised; 507,723 shares issued  —  (1,975) (2,426) —  10,916  —  6,515 
Tax benefit from exercise of stock options  —  1,882  —  —  —  —  1,882 
Stock awards; 18,795 shares issued  —  93  —  —  282  —  375 
  
 
 
 
 
 
 
 
Balance at December 28, 2002 $27,900 $— $289,105 $(10,049)$(64,936)$— $242,020 
  
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
32

Valmont Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three-year period ended December 28, 2002
(Dollars in thousands, except per share amounts)
(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        The consolidated financial statements include the accounts of Valmont Industries, Inc. and its wholly and majority-owned subsidiaries (the Company). Investments in 20% to 50% owned affiliates are accounted for by the equity method and investments in less than 20% owned affiliates are accounted for by the cost method. All significant intercompany items have been eliminated. Certain 2001 items have been reclassified to conform with 2002 presentation.
        The Company operates on52/53 week fiscal years with each year ending on the last Saturday in December. Accordingly, the Company's fiscal years ended December 28, 2002 and December 29, 2001 consisted of 52 weeks. The Company's fiscal year ended December 30, 2000 consisted of 53 weeks.
        At December 28, 2002, approximately 54% of inventory is valued at the lower of cost, determined on the last-in, first-out (LIFO) method, or market. All other inventory is valued at the lower of cost, determined on the first-in, first-out (FIFO) method or market. The excess of replacement cost of inventories over the LIFO value is approximately $9,600 and $7,000 at December 28, 2002 and December 29, 2001, respectively.
        Property, plant and equipment are recorded at historical cost. The Company uses the straight-line method in computing depreciation and amortization for financial reporting purposes and generally uses accelerated methods for income tax purposes. The annual provisions for depreciation and amortization have been computed principally in accordance with the following ranges of asset lives: buildings 15 to 40 years, machinery and equipment 3 to 12 years, and intangible assets 3 to 40 years.
        An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future undiscounted cash flows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair value. In 2002, the Company recognized an impairment loss of $1.1 million related to its nonconsolidated investment of an irrigation dealership in North America. In 2001, the Company recognized an impairment loss of $1.0 million related to its nonconsolidated investment in Argentina.
33
        Effective December 30, 2001, the Company adopted Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets." This standard established new accounting and reporting requirements for goodwill and other intangible assets. Under SFAS 142, all amortization of goodwill and intangible assets with indefinite lives ceased effective December 30, 2001. Also, recorded goodwill was tested for impairment by comparing the fair value to its carrying value. Based on the initial impairment test, the Company recorded a cumulative effect of change in accounting principle of $0.5 million loss related to its investment in a consulting business in the Irrigation segment that provides environmental and wastewater management consulting services.
        The Company uses the asset and liability method to calculate deferred income taxes. Deferred tax assets and liabilities are recognized on temporary differences between financial statement and tax bases of assets and liabilities using enacted tax rates. The effect of tax rate changes on deferred tax assets and liabilities is recognized in income during the period that includes the enactment date.
        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. Cumulative translation adjustments are included as a separate component of accumulated other comprehensive income. These translation adjustments are the Company's only component of other comprehensive income.
        Revenue is recognized upon shipment of the product or delivery of the service to the customer, which coincides with passage of title and risk of loss to the customer.
        Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.
        The Company accounts for employee stock options under APB 25. Since all options are granted at option prices equal to the market price on the date of grant, no compensation expense is recorded on the Statement of Earnings. Note 8 to the Consolidated Financial Statements provides a detailed discussion of the Company's stock option plans.
        In June, 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This standard establishes criteria for recognizing costs and liabilities related to activities such as employee termination costs, contract termination costs and costs associated with consolidating facilities and relocating employees. Specifically, costs and liabilities related to qualifying exit or disposal activities shall be recognized and
34
measured at fair value when incurred, with subsequent adjustment in future periods. This standard is applicable to exit or disposal activities initiated after December 31, 2002. This standard is not expected to have a significant effect on the Company's financial statements.
        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45 establishes disclosure to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also establishes that, for guarantees initiated after December 31, 2002, a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The fair value of this obligation is also required to be adjusted in the financial statements of the guarantor in subsequent periods. FIN 45 is not expected to have a significant impact on the Company's financial statements.
        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). FIN 46 addresses consolidation by business enterprises of variable interest entities, which have one or both of the following characteristics:
        FIN 46 is effective at the beginning of the third quarter 2003 and the Company is in the process of evaluating the impact of this Interpretation on its financial statements. FIN 46 could result in the capitalization of the lease on the corporate headquarters office building and company aircraft. The pre-tax impact on earnings if we are required to capitalize both leases on our financial statements would be the amount of the annual depreciation, which we estimate to be approximately $1.0 million to $2.0 million. The impact of capitalizing these leases on the balance sheet would be increases in the amount of property, plant and equipment and long-term debt.
(2)    CASH FLOW SUPPLEMENTARY INFORMATION
        The Company considers all highly liquid temporary cash investments purchased with a 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) were as follows:
 
 2002
 2001
 2000
Interest $11,701 $18,263 $16,020
Income taxes  26,233  8,020  18,560
35
(3)    PROPERTY, PLANT AND EQUIPMENT
        Property, plant and equipment, at cost, consists of the following:
 
 2002
 2001
Land and improvements $20,984 $20,499
Buildings and improvements  111,084  104,906
Machinery and equipment  224,390  206,889
Transportation equipment  6,336  6,132
Office furniture and equipment  44,290  42,484
Construction in progress  8,744  23,649
  
 
  $415,828 $404,559
  
 
        The Company leases certain facilities, machinery, computer equipment and transportation equipment under operating leases with unexpired terms ranging from one to nine years. Rental expense for operating leases amounted to $11,395, $11,912 and $11,301 for fiscal 2002, 2001 and 2000, respectively.
        Minimum lease payments under operating leases expiring subsequent to December 28, 2002 are:
Fiscal year ending   
 2003 $7,014
 2004  6,093
 2005  5,521
 2006  4,628
 2007  4,056
Subsequent  5,465
  
Total minimum lease payments $32,777
  
(4)    GOODWILL AND INTANGIBLE ASSETS
        Under SFAS 142, all amortization of goodwill and intangible assets with indefinite lives ceased effective December 30, 2001. Also, recorded goodwill was tested for impairment by comparing the fair value to its carrying value. Fair value was determined using a discounted cash flow methodology.
        The Company's annual impairment testing on its reporting units was performed during the third quarter of 2002. As a result of that testing, it was determined the goodwill and other intangible assets on the Company's Consolidated Balance Sheet at December 28, 2002 were not impaired.
Amortized Intangible Assets
        The components of amortized intangible assets at December 28, 2002 are as follows:
 
 As of December 28, 2002
 
 Gross Carrying Amount
 Accumulated Amortization
 Life
Customer Relationships $11,500 $1,677 12 years
Proprietary Software & Database  1,650  577 5 years
  
 
  
  $13,150 $2,254  
  
 
  
36
        Amortization expense for intangible assets was $1,288 for the fifty-two week period ended December 28, 2002. Estimated annual amortization expense related to amortized intangible assets is as follows:
 
 Estimated Amortization Expense
2003 $1,288
2004  1,288
2005  1,288
2006  1,040
2007  958
        Under the provisions of SFAS 142, intangible assets with indefinite lives are not amortized. The carrying value of the PiRod trade name is $4,750 and has not changed in the fifty-two weeks ended December 28, 2002.
        The carrying amount of goodwill as of December 28, 2002 is as follows:
 
 Poles
Segment
 Wireless
Comm.
Segment
 Coatings
Segment
 Irrigation
Segment
 Tubing
Segment
 Total
 
Balance December 29, 2001 $6,513 $5,441 $42,192 $1,481 $262 $55,889 
Impairment charge  —  —  —  (500) —  (500)
Foreign Currency Translation  —  —  —  —  —  — 
Balance December 28, 2002  282  —  —  —  —  282 
  
 
 
 
 
 
 
  $6,795 $5,441 $42,192 $981 $262 $55,671 
  
 
 
 
 
 
 
37
         The effect of the adoption of SFAS 142 on net earnings and earnings per share is as follows:
 
 Year Ended December 28, 2002
 Year Ended December 29, 2001
 Year Ended December 30, 2000
Reported net earnings $33,629 $26,693 $30,400
Add back: Goodwill amortization, net of tax  —  2,789  2,289
  
 
 
Adjusted net earnings $33,629  29,482 $32,689
Add back: Cumulative effect of change in accounting principle  500  —  —
  
 
 
Adjusted net earnings before cumulative effect of change in accounting principle $34,129 $29,482 $32,689
  
 
 
Basic earnings per share:         
Reported basic earnings per share $1.40 $1.10 $1.31
Add back: Goodwill amortization  —  0.11  0.10
  
 
 
Adjusted basic earnings per share $1.40 $1.21 $1.41
Add back: Cumulative effect of change in accounting principle  0.02  —  —
  
 
 
Adjusted basic earnings per share before cumulative effect of change in accounting principle $1.42 $1.21 $1.41
  
 
 
Diluted earnings per share:         
Reported diluted earnings per share $1.37 $1.09 $1.28
Add back: Goodwill amortization  —  0.11  .10
  
 
 
Adjusted diluted earnings per share $1.37 $1.20 $1.38
Add back: Cumulative effect of change in accounting principle  0.02  —  —
  
 
 
Adjusted diluted earnings per share before cumulative effect of change in accounting principle $1.39 $1.20 $1.38
  
 
 
(5)    BANK CREDIT ARRANGEMENTS
        The Company maintains various lines of credit for short-term borrowings totaling $21,097. The interest rates charged on these lines of credit vary in relation to the banks' costs of funds. The unused borrowings under the lines of credit were $21,074 at December 28, 2002. The lines of credit can be modified at any time at the option of the banks. The Company pays no fees in connection with these lines of credit. In addition to the lines of credit, the Company also maintains other short-term bank loans. The weighted average interest rate on short-term borrowings was 7.32% at December 28, 2002 and 4.8% at December 29, 2001.
38

(6)    INCOME TAXES
        Income tax expense (benefit) consists of:
 
 2002
 2001
 2000
 
Current:          
 Federal $12,874 $9,684 $12,961 
 State  1,192  1,082  1,274 
 Foreign  3,711  3,307  3,265 
  
 
 
 
  $17,777 $14,073 $17,500 
  
 
 
 

Deferred:
 
 
 
 
 
 
 
 
 
 
 Federal $3,351 $4,326 $1,424 
 State  348  214  75 
 Foreign  161  (713) (999)
  
 
 
 
  $3,860 $3,827 $500 
  
 
 
 
  $21,637 $17,900 $18,000 
  
 
 
 
        The reconciliations of the statutory Federal income tax rate and the effective tax rate follows:
 
 2002
 2001
 2000
 
Statutory Federal income tax rate 35.0%35.0%35.0%
State income taxes, net of Federal benefit 2.0%2.2%2.6%
Carryforwards, credits and changes in valuation allowances (1.7)%(2.1)%(2.4)%
Other 1.2%1.8%0.8%
  
 
 
 
  36.5%36.9%36.0%
  
 
 
 
        Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's net deferred income tax liabilities are as follows:
 
 2002
 2001
Deferred income tax assets:      
 Accrued expenses and allowances $22,561 $21,860
 Operating loss and tax credit carryforwards  1,494  1,727
 Inventory capitalization  1,810  1,726
  
 
 Total deferred income tax assets $25,865 $25,313
  
 

Deferred income tax liabilities:
 
 
 
 
 
 
 Property, plant and equipment $14,707 $10,817
 Lease transactions  5,699  4,996
 Other liabilities  12,664  12,845
  
 
 Total deferred income tax liabilities  33,070  28,658
  
 
 Net deferred income tax liabilities $7,205 $3,345
  
 
        At December 28, 2002, and at December 29, 2001, management of the Company reviewed recent operating results and projected future operating results. The Company's belief that realization of its net deferred tax assets is more likely than not is based on, among other factors, changes in operations that have occurred in recent years, as well as available tax planning strategies. The currency translation
39

adjustments in accumulated other comprehensive income are not adjusted for income taxes as they relate to indefinite investments in non-US subsidiaries.
        Provision has not been made for United States income taxes on a portion of the undistributed earnings of the Company's foreign subsidiaries (approximately $31,418 and $25,383 at December 28, 2002 and December 29, 2001, respectively), either because any taxes on dividends would be offset substantially by foreign tax credits or because the Company intends to reinvest those earnings. Such earnings would become taxable upon the sale or liquidation of these foreign subsidiaries or upon remittance of dividends. It is not practicable to estimate the amount of the deferred tax liability on such earnings.
(7)    LONG-TERM DEBT
 
 2002
 2001
6.80% to 8.08% promissory notes, unsecured(a) $90,000 $100,000
Revolving credit agreement(b)  56,000  77,500
IDR Bonds(c)  8,500  8,500
3.0% to 6.50% notes  11,891  12,008
  
 
 Total long-term debt  166,391  198,008
Less current installments of long-term debt  10,849  11,062
  
 
 Long-term debt, excluding current installments $155,542 $186,946
  
 
        The lending agreements place certain restrictions on working capital, capital expenditures, payment of dividends, purchase of Company stock and additional borrowings. Under the most restrictive covenants of the agreements at December 28, 2002, the Company may make payments of cash dividends and purchases of shares of Company common stock authorized for repurchase by the Board of Directors in 2001 up to $21,975. The company is in compliance with all debt covenants at December 28, 2002.
        The minimum aggregate maturities of long-term debt for each of the four years following 2003 are: $19,353, $14,459, $70,483 and $4,492.
40

(8)    STOCK PLANS
        The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Compensation Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards and bonuses of common stock. At December 28, 2002, 1,710,335 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.
        Under the plans, the exercise price of each option equals the market price at the time of the grant. Options vest beginning on the first anniversary of the grant in equal amounts over three to six years or on the fifth anniversary of the grant. Expiration of grants is from six to ten years from the date of grant.
        The Company applies APB Opinion 25 in accounting for its fixed stock compensation plans. Accordingly, no compensation cost has been recognized for the fixed plans in 2002, 2001 or 2000. Had compensation cost been determined on the basis of fair value pursuant to Statement of Financial Accounting Standards No. 123, net earnings and earnings per share would have been reduced as follows:
 
 2002
 2001
 2000
Net earnings         
 As reported $33,629 $26,693 $30,400
 Deduct: Total stock-based employee Compensation expense determined under Fair value based method for all awards, Net of related tax effects $2,823 $2,712 $2,461
  
 
 
 Pro forma $30,806 $23,981 $27,939
  
 
 

Earnings per share
 
 
 
 
 
 
 
 
 
 As reported: Basic $1.40 $1.10 $1.31
  
 
 
                       Diluted $1.37 $1.09 $1.28
  
 
 
 Pro forma:  Basic $1.29 $0.99 $1.20
  
 
 
                       Diluted $1.25 $0.98 $1.18
  
 
 
        The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2002, 2001 and 2000:
 
 2002
 2001
 2000
Expected volatility 46% 50% 46%
Risk-free interest rate 1.95% 3.84% 4.81%
Expected life from vesting date 2.9 yrs. 2.6 yrs. 2.6 yrs
Dividend yield 1.48% 1.54% 1.46%
41
         Following is a summary of the activity of the stock plans during 2000, 2001 and 2002:
 
 Number of Shares
 Weighted Average Exercise Price
 
Outstanding at December 25, 1999 2,931,916 $15.93 
Granted 620,376  19.44 
Exercised (175,536) (11.52)
Forfeited (251,410) (18.04)
  
 
 
Outstanding at December 30, 2000 3,125,346 $16.70 
  
 
 
Options exercisable at December 30, 2000 1,536,263 $15.76 
  
 
 
Weighted average fair value of options granted during 2000   $7.54 
    
 

 

 
Number of Shares

 
Weighted Average Exercise Price

 
Outstanding at December 30, 2000 3,125,346 $16.70 
Granted 533,800  14.70 
Exercised (38,734) (12.26)
Forfeited (155,568) (18.35)
  
 
 
Outstanding at December 29, 2001 3,464,844 $16.37 
  
 
 
Options exercisable at December 29, 2001 2,089,299 $16.41 
  
 
 
Weighted average fair value of options granted during 2001   $5.92 
    
 

 

 
Number of Shares

 
Weighted Average Exercise Price

 
Outstanding at December 29, 2001 3,464,844 $16.37 
Granted 597,101  20.96 
Exercised (507,723) (12.63)
Forfeited (85,434) (17.93)
  
 
 
Outstanding at December 28, 2002 3,468,788 $17.67 
  
 
 
Options exercisable at December 28, 2002 2,074,549 $17.34 
  
 
 
Weighted average fair value of options granted during 2002   $8.88 
    
 
42
         Following is a summary of the status of stock options outstanding at December 28, 2002:
 
Outstanding and Exercisable By Price Range
 
Options Outstanding
 Options Exercisable
 
Exercise Price Range
 Number
 Weighted Average Remaining Contractual Life
 Weighted Average Exercise Price
 Number
 Weighted Average Exercise Price
 $6.00-15.88 1,163,131 6.69 years $13.97 657,950 $13.82
  16.00-19.73 1,186,631 6.26 years  17.63 866,133  17.67
  19.97-25.23 1,119,026 7.15 years  21.56 550,466  21.04
    
      
   
    3,468,788      2,074,549   
    
      
   
(9)    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
2002:        
 Net earnings $33,629 — $33,629
 Shares outstanding  23,947 609  24,556
 Per share amount $1.40 — $1.37

2001:
 
 
 
 
 
 
 
 
 Net earnings $26,693 — $26,693
 Shares outstanding  24,280 244  24,524
 Per share amount $1.10 — $1.09

2000:
 
 
 
 
 
 
 
 
 Net earnings $30,400 — $30,400
 Shares outstanding  23,276 498  23,774
 Per share amount $1.31 — $1.28
        At the end of fiscal years 2002, 2001, and 2000, there were 0.4 million, 2.0 million, and 1.2 million options outstanding, respectively, with exercise prices exceeding the market value of common stock that were therefore excluded from the computation of shares contingently issuable upon exercise of the options.
(10)    TREASURY STOCK
        During 1998, the Board of Directors authorized management to repurchase up to 5.4 million shares of the Company's common stock. Repurchased shares are recorded as "Treasury Stock" and result in a reduction of "Shareholders' Equity." When treasury shares are reissued, the Company uses the last-in, first-out method, and the difference between the repurchase cost and reissuance price is charged or credited to "Additional Paid-In Capital." As of December 29, 2001, a total of 4.8 million shares had been purchased for $79,160.
        In December of 2001, the Company's Board of Directors cancelled the above authorization and reauthorized management to repurchase 1.5 million shares of the Company's common stock. As of December 28, 2002, a total of 0.8 million shares had been repurchased at a cost of $13,931.
43

(11)    EMPLOYEE RETIREMENT SAVINGS PLAN
        Established under Internal Revenue Code Section 401(k), the Valmont Employee Retirement Savings Plan ("VERSP") is available to all eligible employees. Participants can elect to contribute up to 15% of annual pay, on a pretax and/or after-tax basis. The Company may also make basic, matching and/or supplemental contributions to the Plan. In 2001, the defined contribution plan covering the employees of Microflect was merged into the VERSP plan. In addition, the Company has a money purchase pension plan and a profit sharing plan covering the employees of PiRod, Inc., which were merged into the VERSP plan in 2002. The 2002, 2001 and 2000 Company contributions to these plans amounted to approximately $5,700, $6,200 and $6,300, respectively.
        The Company also offers a fully-funded, non-qualified deferred contribution plan for certain Company executives who otherwise would be limited in making pretax contributions into VERSP under Internal Revenue Service regulations. The invested assets and related liabilities to these participants were $9.8 million and $11.0 million at December 28, 2002 and December 29, 2001, respectively. Such amounts are included in "Other assets" and "Other noncurrent liabilities" on the Consolidated Balance Sheets.
(12)    RESEARCH AND DEVELOPMENT
        Research and development costs are charged to operations in the year incurred. These costs are a component of "Selling, general & administrative expenses" on the income statement. Research and development expenses were approximately $5,400 in 2002, $3,900 in 2001, and $4,400 in 2000.
(13)    DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
        The carrying amount of cash and cash equivalents, receivables, accounts payable, notes payable to banks and accrued expenses approximate fair value because of the short maturity of these instruments. The fair values of each of the Company's long-term debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company's current borrowing rate for similar debt instruments of comparable maturity. The fair value estimates are made at a specific point in time and the underlying assumptions are subject to change based on market conditions. At December 28, 2002, the carrying amount of the Company's long-term debt was $166,391 with an estimated fair value of approximately $173,932.
(14)    GUARANTEES
        In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also requires that, at the time a company issues a guarantee, the recognition of an initial liability for the fair value, or market value, of the obligations it assumes under the guarantee and must disclose that information in its interim and annual financial statements. The provisions related to recognizing a liability at inception of the guarantee for the fair value of the guarantor's obligations does not apply to product warranties or to guarantees accounted for as derivatives. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002.
        The Company has guaranteed the repayment of two bank loans of certain nonconsolidated equity investees. The guarantees continue until the loans, including accrued interest and fees have been paid in full. The maximum amount of the guarantees may vary, but is limited to the sum of the total due and unpaid principal amounts, accrued and unpaid interest and any other related expenses. As of December 28, 2002, the maximum amount of the guarantees was approximately $4.2 million. These
44

loan guarantees are in proportion to our ownership percentage of these companies or are accompanied by a guarantee from the majority owner to the Company. In connection with certain operating leases, the Company issued residual value guarantees. These guarantees provide that, if the Company does not purchase the leased property from the lessor at the end of the lease term, the Company is liable to the lessor for an amount equal to the shortage (if any) between the proceeds from the sale of the property and an agreed value. As of December 28, 2002, the maximum amount of the residual value guarantees was approximately $40 million. The Company believes that proceeds from the sale of properties under operating leases would exceed the payment obligation and therefore no liability to the Company currently exists.
        The Company's product warranty accrual reflects management's best estimate of probable liability under its product warranties. Historical product claims data is used to estimate the cost of product warranties at the time revenue is recognized.
        Changes in the product warranty accrual for the years ended December 28, 2002 and December 29, 2001 were as follows:
 
 2002
 2001
 
Balance, beginning of period $6,568 $6,045 
Payments made  (7,559) (7,706)
Change in liability for warranties issued during the period  7,720  8,406 
Change in liability for preexisting warranties  (279) (177)
  
 
 
Balance, end of period $6,450 $6,568 
  
 
 
(15)    STOCKHOLDERS' RIGHT PLAN
        Each share of common stock carries with it one half preferred stock purchase right ("Right"). The Right becomes exercisable ten days after a person (other than Robert B. Daugherty and his related persons and entities) acquires or commences a tender offer for 15% or more of the Company's common stock. Each Right entitles the holder to purchase one one-thousandth of a share of a new series of preferred stock at an exercise price of $100, subject to adjustment. The Right expires on December 19, 2005 and may be redeemed at the option of the Company at $.01 per Right, subject to adjustment. Under certain circumstances, if (i) any person becomes an Acquiring Person or (ii) the Company is acquired in a merger or other business combination, each holder of a Right (other than the Acquiring Person) will have the right to receive, upon exercise of the Right, shares of common stock (of the Company under (i) and of the acquiring company under (ii)) having a value of twice the exercise price of the Right.
(16)    ACQUISITIONS
        On March 30, 2001, the Company's wireless communication segment acquired all the outstanding shares of PiRod Holdings, Inc. and subsidiary (PiRod), a manufacturer of towers, components and poles located in Plymouth, Indiana. The Company issued 1.2 million shares of Company common stock and $33.4 million of cash was paid to retire PiRod long-term debt. The excess of purchase price over fair value of net assets acquired was $5.4 million and was recorded as goodwill. Intangible assets arising from the transaction are being amortized over their estimated useful lives. The Company's summary proforma results of operations for the fifty-two and fifty-three week periods ended December 29, 2001
45

and December 30, 2000, respectively, assuming the transaction occurred at the beginning of the periods presented are as follows:
 
 Fifty-two and Fifty-three Weeks Ended
 
 December 29, 2001
 December 30, 2000
Net sales $887,508 $929,906
Net earnings  27,676  36,436
Earnings per share—diluted  1.11  1.46
        During 2000 the Company's Irrigation segment invested $6.6 million cash in the investment in a new irrigation equipment manufacturing plant in the United Arab Emirates; a majority ownership in an irrigation products distribution joint venture located in China; and in minority positions in an irrigation dealership located in Kansas and an irrigation products distribution operation in Argentina. The Coatings segment invested $40.8 million in facilities located in Illinois, Minnesota, California and Iowa. The Poles segment invested $12.7 million in an aluminum pole manufacturer in Minnesota and a minority interest in a joint venture in Mexico. The Tubing segment invested $3.1 million in a tubing business in Nebraska. The excess of purchase price over fair value of net assets acquired in 2000 was $33 million.
        All acquisitions have been accounted for under the purchase method of accounting. The results of operations of the acquired businesses are included in the consolidated financial statements from the dates of acquisition.
(17)    BUSINESS SEGMENTS
        The Company has aggregated its businesses into five reportable segments:
        In addition to these five reportable segments, the Company has other businesses that individually are not more than 10% of consolidated sales. These businesses, which include wind energy development, machine tool accessories and industrial fasteners, are reported in the "Other" category. Prior period information is presented in accordance with the current reportable segment structure.
        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. All Corporate expenses and assets are allocated to the business segments. Intersegment sales prices are both cost and market based.

Summary by Business Segments
 
 2002
 2001
 2000
 
SALES:          
 Poles:          
  Lighting & Traffic $231,894 $218,122 $211,374 
  Utility  127,312  135,876  98,677 
  
 
 
 
   Poles segment  359,206  353,998  310,051 
  Wireless Communication:          
   Structures  47,030  80,451  63,399 
   Components  30,460  41,107  29,180 
  
 
 
 
    Wireless Communication segment  77,490  121,558  92,579 
 Coatings segment  111,704  116,245  116,115 
 Irrigation segment  264,844  238,657  291,148 
 Tubing segment  57,716  51,881  58,515 
 Other  16,974  20,153  27,130 
  
 
 
 
    Total  887,934  902,492  895,538 
INTERSEGMENT SALES:          
 Poles—Lighting  —  —  71 
 Coatings  15,669  17,048  21,968 
 Irrigation  162  78  7,583 
 Tubing  12,326  9,513  15,218 
 Other  4,879  3,473  4,569 
  
 
 
 
    Total  33,036  30,112  49,409 
NET SALES:          
 Poles segment:          
  Lighting & Traffic  231,894  218,122  211,303 
  Utility  127,312  135,876  98,677 
  
 
 
 
    Poles segment  359,206  353,998  309,980 
 Wireless Communication segment:          
  Structures  47,030  80,451  63,399 
  Components  30,460  41,107  29,180 
  
 
 
 
    Wireless Communication segment  77,490  121,558  92,579 
 Coatings segment  96,035  99,197  94,147 
 Irrigation segment  264,682  238,579  283,565 
 Tubing segment  45,390  42,368  43,297 
 Other  12,095  16,680  22,561 
  
 
 
 
    Total $854,898 $872,380 $846,129 
  
 
 
 
OPERATING INCOME (LOSS):          
 Poles segment  34,171  34,095  21,657 
 Wireless Communication segment  (2,958) (1,553) 2,301 
 Coatings segment  10,710  9,391  13,466 
 Irrigation segment  24,050  15,452  21,218 
 Tubing segment  6,459  5,800  7,579 
 Other  (2,143) 1,836  1,035 
  
 
 
 
    Total  70,289  65,021  67,256 
Interest expense, net  (10,674) (16,030) (16,020)
Miscellaneous  (337) (524) (1,198)
  
 
 
 
Earnings before income taxes, minority interest, and equity in losses of nonconsolidated subsidiaries and cumulative effect of change in accounting principle $59,278 $48,467 $50,038 
  
 
 
 
47
TOTAL ASSETS:          
 Poles $202,046 $202,933 $210,525 
 Wireless Communication  85,161  102,541  62,487 
 Coatings  101,736  104,675  105,069 
 Irrigation  148,373  140,527  177,541 
 Tubing  31,432  29,079  31,522 
 Other  9,823  9,142  12,991 
  
 
 
 
    Total $578,571 $588,897 $600,135 
  
 
 
 
CAPITAL EXPENDITURES:          
 Poles $4,269 $14,678 $24,864 
 Wireless Communication  986  1,776  1,911 
 Coatings  5,428  2,063  4,260 
 Irrigation  2,032  4,721  14,853 
 Tubing  1,061  2,283  432 
 Other  166  131  136 
  
 
 
 
    Total $13,942 $25,652 $46,456 
  
 
 
 
DEPRECIATION AND AMORTIZATION:          
 Poles $13,987 $12,303 $10,012 
 Wireless Communication  3,894  4,325  829 
 Coatings  5,153  7,800  7,624 
 Irrigation  8,740  9,816  9,147 
 Tubing  2,072  2,054  1,917 
 Other  96  26  741 
  
 
 
 
    Total $33,942 $36,324 $30,270 
  
 
 
 
Summary by Geographical Area by Location of Valmont Facilities:
 
 2002
 2001
 2000
NET SALES:         
 United States $687,802 $725,643 $689,353
 France  50,826  52,593  55,379
 Other  116,270  94,144  101,397
  
 
 
    Total $854,898 $872,380 $846,129
  
 
 
OPERATING INCOME:         
 United States $55,605 $54,610 $56,648
 France  2,537  2,551  3,279
 Other  12,147  7,860  7,329
  
 
 
    Total $70,289 $65,021 $67,256
  
 
 
LONG-LIVED ASSETS:         
 United States $250,870 $274,501 $258,384
 France  12,807  11,806  13,443
 Other  19,966  17,992  15,249
  
 
 
    Total $283,643 $304,299 $287,076
  
 
 
        No single customer accounted for more than 10% of net sales in 2002, 2001, or 2000. Net sales by geographical area are based on the location of the facility producing the sales.
        Operating income by business segment and geographical areas are based on net sales less identifiable operating expenses and allocations.
        Long-lived assets consist of property, plant and equipment, net of depreciation, goodwill and other assets. Long-lived assets by geographical area are based on location of facilities.
48
QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands, except per share amounts)
 
  
  
 Net Earnings
  
  
  
 
  
  
  
 Per Share
 Stock Price
  
 
 Net
Sales
 Gross
Profit
  
 Dividends
Declared
 
 Amount
 Basic
 Diluted
 High
 Low
2002                        
 First $208,648 $55,233 $6,769 $0.28 $0.28 $21.40 $14.15 $0.065
 Second  225,090  61,082  10,306  0.43  0.42  21.40  16.61  0.075
 Third  205,504  54,803  8,050  0.33  0.32  25.15  18.32  0.075
 Fourth  215,656  60,358  8,504  0.36  0.35  25.50  17.24  0.075
  
 
 
 
 
 
 
 
Year $854,898 $231,476 $33,629 $1.40 $1.37 $25.50 $14.15 $0.29
  
 
 
 
 
 
 
 

2001
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First $204,267 $49,738 $4,791 $0.20 $0.20 $20.69 $14.50 $0.065
 Second  232,889  59,232  8,468  0.34  0.34  18.30  14.12  0.065
 Third  209,287  53,134  6,951  0.28  0.28  18.16  12.12  0.065
 Fourth  225,937  55,517  6,483  0.26  0.26  16.38  12.51  0.065
  
 
 
 
 
 
 
 
Year $872,380 $217,621 $26,693 $1.10 $1.09 $20.69 $12.12 $0.26
  
 
 
 
 
 
 
 

2000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First $196,838 $49,901 $7,529 $0.32 $0.32 $20.25 $14.50 $0.065
 Second  224,876  57,241  9,065  0.39  0.38  20.00  15.94  0.065
 Third  201,676  51,075  6,885  0.30  0.29  21.69  17.13  0.065
 Fourth  222,739  53,666  6,921  0.30  0.29  21.69  13.88  0.065
  
 
 
 
 
 
 
 
Year $846,129 $211,883 $30,400 $1.31 $1.28 $21.69 $13.88 $0.26
  
 
 
 
 
 
 
 
        Earnings per share are computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per share may not equal the total for the year.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
        None.


                                       7



PART III


Item
ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.


Item 11. EXECUTIVE COMPENSATION.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
        Except for the information relating to the executive officers of the Company set forth in Part I of this 10-K Report, the information called for by items 10, 11, 12 and 13 is hereby incorporated by reference to the sections entitled "Certain Shareholders", "Election of Directors", "Summary Compensation Table", "Stock Option Grants in Fiscal Year 1998"2002", "Options Exercised in Fiscal Year 19982002 and Fiscal Year End Values", and "Long-Term Incentive Plans",Plans-Awards in Fiscal Year 2002" in the Proxy Statement.

ITEM 11.    EXECUTIVE COMPENSATION.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
        Incorporated herein by reference to "Certain Shareholders" on page 4 of the Company's Proxy Statement for the 2003 Annual Shareholders' Meeting.
Equity Compensation Plan Information
        The following table provides information about the Company's stock that may be issued upon exercise of options, warrants and "Section
16(a) Beneficial Ownership Reporting Compliance"rights under existing equity compensation plans as of December 28, 2002.
 
 Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
 Weighted-average exercise price of outstanding options, warrants and rights
(b)
 Number of securities remaining available for future issuance under equity compensation (including securities plans reflected in column (a))
(c)
Equity compensation plans approved by security holders 3,468,788 17.67 1,710,335

Equity compensation plans not approved by security holders
 
—
 
 
 
—

 
 

 
 
 

Total
 
3,468,788
 
 
 
1,710,335

 
 

 
 
 

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

ITEM 14.    CONTROLS AND PROCEDURES.
        Within the 90 days prior to the date of this report, 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-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures provide reasonable assurance that such disclosure controls and procedures are effective in timely providing them with material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's Proxy
Statement.



                                     periodic Securities and Exchange Commission filings. Since the date of the evaluation, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect such internal controls.


PART IV


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.



(a)(1)(2)
ITEM 15.    EXHIBITS, FINANCIAL STATEMENTS.  See index to financial statement schedules
              on page F-1.


(a)(3)        EXHIBITS.  See exhibit index, incorporated herein by reference.


(b)STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.  The Company filed no reports on Form 8-K
              during the past fiscal quarter.


                                       8



                    VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements and Consolidated Financial Statement
Schedules


Consolidated Financial Statements

     The following consolidated financial statements of Valmont Industries, Inc.
and subsidiaries have been incorporated by reference to pages 36 to 45 of the
Company's Annual Report to Shareholders for the year ended December 26, 1998:

          Independent Auditors' Reports - Page 47 of the annual report.

          Consolidated Balance Sheets - December 26, 1998 and December 27, 1997

          Consolidated Statements of Operations - Three-Year Period Ended
          December 26, 1998

          Consolidated Statements of Shareholders' Equity - Three-Year Period
          Ended December 26, 1998

          Consolidated Statements of Cash Flows - Three-Year Period Ended
          December 26, 1998

          Notes to Consolidated Financial Statements - Three- Year Period Ended
          December 26, 1998



                                                                    Page
                                                                    ----

(a)(1)(2)Financial Statements and Schedules.



The following consolidated financial statements of the Company and its subsidiaries are included herein as listed below:

    Consolidated Financial Statements
Independent Auditors' Report28
Consolidated Balance Sheets—December 28, 2002 and December 29, 200130
Consolidated Statements of Operations—Three-Year Period Ended December 28, 200229
Consolidated Statements of Shareholders' Equity—Three-Year Period Ended December 28, 200232
Consolidated Statements of Cash Flows—Three-Year Period Ended December 28, 200231
Notes to Consolidated Financial Statements—Three-Year Period Ended December 28, 200233-48



The following financial statement schedule of the Company is included herein:





Consolidated Financial Statement Schedule Supporting Consolidated Financial Statement

Independent Auditors' Report on Financial Statement Schedule52
SCHEDULE II  -  II—Valuation and Qualifying Accounts            F-4
53



All other schedules have been omitted as the required information is inapplicable or the information is included in the consolidated financial statements or related notes.

Separate financial statements of the registrant have been omitted because the registrant meets the requirements which permit omission.

(a)(3)

Exhibits.
Index to Exhibits, Page 57


(b)

Reports on Form 8-K
The Company filed no reports on Form 8-K during the fiscal quarter ended December 28, 2002.




     All other schedules have been omitted as the required information is
inapplicable or the information is included in the consolidated financial
statements or related notes.

     Separate financial statements of the Registrant have been omitted because
the Registrant meets the requirements which permit omission.

                                       F-1












                                       9

51

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Valmont Industries, Inc.
        We have audited the consolidated financial statements of Valmont Industries, Inc. and Subsidiaries (the Company) as of December 26, 199828, 2002 and December 27,
1997,29, 2001, and for each of the three years in the period ended December 26,1998,28, 2002, and have issued our report thereon dated February 5, 1999; such financial statements14, 2003 (which report expresses an unqualified opinion and report are includedincludes an explanatory paragraph relating to the change in your 1998 Annual Report to Shareholdersmethod of accounting for goodwill and are
incorporated herein by reference.intangible assets). Our audits also included the financial statement schedule of the Company listed in Item 1415 of this Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 5, 1999






                                   F-2







                                       10
14, 2003

Schedule II
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
                             (Dollars
(Dollars in thousands)

                                          Balance at  Charged to  Deductions  Balance at
                                          beginning   profit and    from        close
                                          of period      loss      reserves*  of period
                                          ---------   ----------  ----------  ---------


Fifty-two weeks ended December 26, 1998
 Reserve deducted in balance sheet from
     the asset to which it applies -
       Allowance for doubtful receivables  $ 2,132     1,522           233      3,421
                                           -------     -----         -----      -----
                                           -------     -----         -----      -----

Fifty-three weeks ended December 27, 1997
 Reserve deducted in balance sheet from
     the asset to which it applies -
       Allowance for doubtful receivables  $ 2,299      194            361      2,132
                                           -------     -----         -----      -----
                                           -------     -----         -----      -----

Fifty-two weeks ended December 28, 1996
 Reserve deducted in balance sheet from
     the asset to which it applies -
       Allowance for doubtful receivables  $ 2,941      796          1,438      2,299
                                           -------     -----         -----      -----
                                           -------     -----         -----      -----




*The
 
 Balance at beginning of period
 Charged to profit and loss
 Deductions from reserves*
 Balance at close of period
Fifty-two weeks ended December 28, 2002
Reserve deducted in balance sheet from the asset to which it applies—
Allowance for doubtful receivables		 $4,842 745 1,630 3,957
  
 
 
 
Fifty-two weeks ended December 29, 2001
Reserve deducted in balance sheet from the asset to which it applies—
Allowance for doubtful receivables		 $3,505 3,700 2,363 4,842
  
 
 
 
Fifty-three weeks ended December 30, 2000
Reserve deducted in balance sheet from the asset to which it applies—
Allowance for doubtful receivables		 $3,203 1,887 1,585 3,505
  
 
 
 
*
The deductions from reserves are net of recoveries.

                                              F-4







                                       11

53

SIGNATURES

     The Registrant.
        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Omaha, State of Nebraska, on the 24th28th day of March,1999.


                                   Valmont Industries, Inc.


                                   By: /S/Mogens C. Bay
                                       ----------------------------------
                                         Mogens C. Bay
                                         March, 2003.
VALMONT INDUSTRIES, INC.


By:

/s/  MOGENS C. BAY      
Mogens C. Bay
Chief Executive Officer
        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Valmont
Industries, Inc.the registrant and in the capacities indicated on the dates indicated.

/S/
/s/  MOGENS C. BAY      
Mogens C. Bay		Director, Chairman and Chief Executive Officer (Principal Executive Officer)3/28/03
Date

/s/  TERRY J. MCCLAIN      
Terry J. McClain

Senior Vice President and Chief Financial Officer (Principal Financial Officer)

3/28/03
Date

/s/  MARK C. JAKSICH      
Mark C. Jaksich

Vice President and Controller (Principal Accounting Officer)

3/28/03
Date

Robert B. Daugherty*
Walter Scott, Jr.*
Thomas F. Madison*
Charles D. Peebler, Jr.*
John E. Jones*
Kenneth E. Stinson*
Stephen R. Lewis, Jr.*
        * Mogens C. Bay                                               3/24/99
- --------------------------          Director, President and   -----------
    Mogens C. Bay                   Chief Executive Officer       Date
                                    (Principal Executive
                                    Officer)
/S/ Terry J. McClain                                            3/24/99
- --------------------------          Vice President and        -----------
    Terry J. McClain                Chief Financial Officer       Date
                                    (Principal Financial
                                    Officer)
/S/ Brian C. Stanley                                            3/24/99
- --------------------------          Vice President - Investor  ----------
    Brian C. Stanley                Relations & Controller        Date
                                    (Principal Accounting
                                    Officer)





Robert B. Daugherty*                               John E. Jones *
Charles M. Harper*                                 Thomas F. Madison*
Allen F. Jacobson*                                 Walter Scott, Jr.*
Lloyd P. Johnson *                                 Kenneth E. Stinson*
Robert G. Wallace *                                Charles D. Pebbler, Jr.*
                                                   Bruce Rhode*

*Mogens C. Bay, by signing his name hereto, signs the Annual Report on behalf of each of the directors indicated on this 24th28th day of March, 1999.2003. A Power of Attorney authorizing Mogens C. Bay to sign the Annual Report of Form 10-K on behalf of each of the indicated directors of Valmont Industries, Inc. has been filed herein as Exhibit 24.

                                              
                          By  /S/
By/s/  MOGENS C. BAY      
Mogens C. Bay
Attorney-in-Fact
54

CERTIFICATIONS
I, Mogens C. Bay, -------------------------
                                  Mogens C. Bay
                                Attorney-in-Fact


                                       12



                                INDEX TO EXHIBITS

     This Exhibit Index relates to exhibits filed as a part ofcertify that:
        1.    I have reviewed this Report.
Numbers are assigned to exhibits in accordance with Item 601 of Regulation S-K.
Page numbers relate to the pages in the sequential numbering system where the
exhibits can be found (for those exhibits which are not incorporated by
reference).



Exhibit 3(i)   - The Company's Certificate of Incorporation, as amended.
                 This document was filed with the Company's Quarterly Report on
                 Form 10-Q for the quarter ended March 28, 1998 and is
                 incorporated herein by reference.

Exhibit 3(ii)  - The Company's By-Laws, as amended.                    Page  15

Exhibit 4(i)   - Rights Agreement dated as of December 19, 1995 between
                 the Company and First National Bank of Omaha as Rights Agent.
                 This document was filed with the Company's Current Report on
                 Form 8-K dated December 19, 1995 and is incorporated herein by
                 reference.

Exhibit 4(ii)  - Certificate of Adjustment dated May 30, 1997 to Rights
                 Agreement dated as of December 19, 1995. This document was
                 filed as Exhibit 4(b) with the Company's Annual Reportannual report on Form 10-K of Valmont Industries, Inc.;
        2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
        3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, fiscal year ended December 27, 1997the periods presented in this annual report;
        4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
            a)    Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is incorporated hereinmade known to us by reference.


Exhibit 4(iii) -others within those entities, particularly during the period in which this annual report is being prepared;
            b)    Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
            c)    Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
        5.    The Company's Credit Agreementregistrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
            a)    All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
            b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
        6.    The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with The Bank of New
                 York dated October 7, 1997 as amended.                 Page 31


Exhibit 10(i)  - The Company's 1988 Stock Planregard to significant deficiencies and certain amendments.
                 This document was filed as Exhibit 10(a) with the Company's
                 Annual Reportmaterial weaknesses.
Date:March 28, 2003



/s/  MOGENS C. BAY      
Mogens C. Bay
Chairman and Chief Executive Officer
55
I, Terry J. McClain, certify that:
        1.    I have reviewed this annual report on Form 10-K for fiscal year ended December 27,
                 1997 and is incorporated herein by reference.

Exhibit 10(ii) - The Company's 1996 Stock Plan. This document was filed
                 as Exhibit 10(e)of Valmont Industries, Inc.;
        2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the Company's Annual Reportperiod covered by this annual report;
        3.    Based on Form 10-Kmy knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the fiscal year ended December 30, 1995periods presented in this annual report;
        4.    The registrant's other certifying officers and is incorporated
                 herein by reference.

Exhibit 10(iii) - The Valmont Executive Incentive Plan. This document
                 was Filed as Exhibit 10(c)I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
            a)    Designed such disclosure controls and procedures to ensure that material information relating to the Company's Annual Reportregistrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
            b)    Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
            c)    Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on Form 10-Kour evaluation as of the Evaluation Date;
        5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
            a)    All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the fiscal year ended December 30, 1995registrant's auditors any material weaknesses in internal controls; and is
                 incorporated herein by reference.

Exhibit 10(iv) -
            b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
        6.    The Amended Unfunded Deferred Compensation Plan for
                 Nonemployee Directors. This document was filed as Exhibit 10.1registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the Company's Quarterly Report on Form 10-Q for the quarter
                 ended September 28, 1998date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and is incorporated herein by
                 reference.


                                       13


Exhibit 13 -  The Company's Annual Report to Shareholders
              for its fiscal year ended December 26, 1998..............Page 148

Exhibit 21 -  Subsidiaries of the Company..............................Page 201

Exhibit 23 -  Consent of Deloitte and Touche LLP.......................Page 202

Exhibit 24 -  Power of Attorney........................................Page 203

Exhibit 27 -  Financial Data Schedule..................................Page 204material weaknesses.
Date:March 28, 2003



/s/  TERRY J. MCCLAIN      
Terry J. McClain
Senior Vice President and Chief Financial Officer
56

INDEX TO EXHIBITS
Exhibit 3(i)—The Company's Certificate of Incorporation, as amended. This document was filed as Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1998 and is incorporated herein by reference.

Exhibit 3(ii)

—

The Company's By-Laws, as amended. This document was filed as Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 1998 and is incorporated herein by reference.

Exhibit 4(iii)

—

The Company's Amended and Restated Credit Agreement with The Bank of New York dated August 21, 2001. This document was filed as Exhibit 4.1 on Form 8-K dated September 19, 2001 and is incorporated herein by reference.

Exhibit 4(iv)

—

The Company's Credit Agreement with Prudential Insurance Company of America dated September 10, 1999. This document was filed as Exhibit 4(iii) to the Company's Annual Report on Form 10-K for the year ended December 25, 1999 and is incorporated herein by this reference.

Exhibit 10(i)*

—

The Company's 1988 Stock Plan and certain amendments.

Exhibit 10(ii)

—

The Company's 1996 Stock Plan. This document was filed as Exhibit 10(ii) to the Company's Annual Report on Form 10-K for the year ended December 25, 1999 and is incorporated herein by this reference.

Exhibit 10(iii)

—

The Company's 1999 Stock Plan. This document was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 27, 1999 and is incorporated herein by reference.

Exhibit 10(iv)

—

The Company's 2002 Stock Plan. This document was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2002 and is incorporated herein by this reference.

Exhibit 10(v)

—

The Valmont Executive Incentive Plan, as amended. This document was filed as Exhibit 10(iv) to the Company's Annual Report on Form 10-K for the year ended December 30, 2000 and is incorporated herein by this reference.

Exhibit 10(vi)

—

The Amended Unfunded Deferred Compensation Plan for Nonemployee Directors. This document was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1998 and is incorporated herein by reference.

Exhibit 10(vii)

—

VERSP Restoration Plan. This document was filed as Exhibit 10 to the Company's Registration Statement on Form S-8 (333-64170) and is incorporated herein by this reference.

Exhibit 21*

—

Subsidiaries of the Company.

Exhibit 23*

—

Consent of Deloitte and Touche LLP.

Exhibit 24*

—

Power of Attorney.

Exhibit 99.1*

—

Section 906 Certifications
        Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with respect to Valmont Industries'the registrant's long-term debt are not filed with this Form 10-K. Valmont will furnish a copy of such long-term debt agreements to the Securities and Exchange Commission upon request.
        Management contracts and compensatory plans are set forth as exhibits 10(i) through 10(iv)10(v).


                                       14

        * Filed herewith.