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TABLE OF CONTENTS

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

Form 10-K

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

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

        Indicate by check mark 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 proxy statement for its annual meeting of shareholders to be held on April 28, 2003 (the "Proxy Statement") are incorporated by reference in Part III.

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

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PART I

ITEM 1.    BUSINESS.

(a)  General Description of Business

        Valmont Industries, Inc., a Delaware Corporation, was incorporated on March 8, 1946 and together with its subsidiaries (the "Company" or "Valmont") is engaged in the Poles, Wireless Communication, Coatings, Irrigation, and Tubing businesses. The Company entered the Irrigation and Tubing market in 1953 from its manufacturing location in Valley, Nebraska. The Poles 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 and has also divested certain businesses. Valmont's business expansions during the past five years include:

        Divestitures during the past five years include the 1999 sale of stock of an investment in an irrigation technology development business, and the 2000 divestitures of a rolled cylinder business in Tulsa, Oklahoma and a composite pole plant in Gunnison, Utah.

(b)  Operating Segments

        The Company reports its businesses as five reportable segments organized on a worldwide product basis:

        Poles:    This segment consists of the manufacture of engineered metal structures for the lighting and traffic and utility industries;

        Wireless Communication:    This segment consists of the manufacture of tower and pole structures and components for the wireless telephone industry;

        Coatings:    This segment consists of coatings services for industrial customers;

        Irrigation:    This segment consists of the manufacture of irrigation equipment and related parts and services to agricultural customers;

        Tubing:    This segment consists of the manufacture of tubular products for industrial customers.

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        In addition to these five reportable segments, the Company has other businesses that individually are not more than 10% of consolidated sales. Amounts of revenues, operating income and total assets attributable to each segment for each of the last three years is set forth in Note 17 of the Company's financial statements on pages 47-48.

(c)  Narrative Description of Business

        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 Poles segment manufactures and markets engineered metal structures in two broad product lines:

Lighting and Traffic:

        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 consumers' 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 driven by government 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 improve 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 traffic 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

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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.

Utility:

        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:

•

Pole or tower, which is a steel structure, usually 90-200 feet high;



•

Shelter, which is an enclosure where the radio equipment is located;

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•

Antennas, which are devices that receive and transmit data and voice information to and from wireless communications devices; and



•

Components, which are items that are used to mount antennas to the structure and connect cabling and other parts from the antennas to the shelter.

        For a given cell site, we provide poles, towers and components. We offer a wide range of structures to our customers, including:

•

Solid rod and tubular freestanding towers;



•

Guyed towers; and



•

Tapered poles

        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:

•

Subscriber growth (although at a lower rate of growth than the past);



•

Increased usage (more cell calls, plus growth in data communications rather than just voice communications);



•

New technologies, such as 3G (the third generation of wireless technology); and



•

Demand for improved emergency response systems, as part of the U.S. Homeland Security initiatives.

        There are two broad customer groups for our products:

•

Wireless carriers, which are companies that provide wireless services to subscribers. Carriers may work through project management groups to organize cell site development; and



•

Build-to-suit (BTS) companies, which are organizations that own cell sites and attach antennas from multiple carriers on the pole or tower structure. The BTS company then generates rental revenue from the wireless carriers who use that cell site.

        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.

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        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:

•

Hot-dipped Galvanizing



•

Anodizing



•

Powder Coating



•

E-Coating

        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

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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:

•

Conversion from flood irrigation;



•

Replacement of existing mechanized irrigation machines; and



•

Conversion from dryland farming

        One of the key drivers in our Irrigation segment worldwide is that the usable water supply is limited. We estimate that:

•

Only 3% of total worldwide water supplies is freshwater;



•

Of that 3%, only ¹/3 of freshwater is available to humans; and



•

Of that remaining ¹/3 and annual rainfalls and river flows, the largest use of that freshwater is for agricultural purposes

        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

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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 from ³/4" to 16" and in wall thicknesses from ¹/32" to ⁹/32". 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 reporting segment is set forth below.

Suppliers and Availability of Raw Materials.

        Hot rolled steel coil, zinc and other carbon steel products are the primary raw materials utilized in the manufacture of finished products for all 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 can be somewhat seasonal based upon the agricultural growing season and the infrastructure construction season. 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.

Customers.

        The Company is not dependent for a material part of its business upon a single customer, or upon very few customers. The loss of any one customer 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 $128.0 million at the end of the 2002 fiscal year and $167.8 million at the end of the 2001 fiscal year. It

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is anticipated that most of the backlog of orders will be filled during fiscal year 2003. At year-end, the backlog by segment was as follows (dollar amounts in millions):

Research Activities.

        The information called for by this item is included in the Company's financial statements on page 44 of this report.

Environmental Disclosure.

        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 28, 2002, the Company had 5,234 employees.

Geographic Areas.

        Valmont's international sales activity encompasses over one hundred foreign countries. The information called for by this item is included in Note 17 of the Company's financial statements on page 48 of this report.

Available Information

        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:

•

increased demand for steel which occurs when other industries purchase greater quantities of steel at times when we require more steel for manufacturing, which can result in higher prices and lengthen the time it takes to receive material from suppliers;

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•

increased freight costs, because our manufacturing sites are usually not located near the major steel manufacturers;



•

financial difficulties for our major steel suppliers could lead to reduced overall steel supply and result in higher costs for us and increased lead times to acquire material;



•

lower inventory levels at steel mills and steel service centers when major steel users, such as the automobile manufacturers, increase their steel orders, thereby reducing available inventory to meet our requirements;



•

international trade disputes, import duties and quotas because we import some steel for our domestic and foreign manufacturing facilities; and



•

greater potential for labor disputes because we purchase steel from several steel manufacturers and suppliers in the United States and in other countries.

        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:

•

weakness in the general economy, reducing funds available for construction;



•

a decrease in government spending as a consequence of budget changes or lower tax receipts;



•

interest rate increases increasing the cost of construction financing; and



•

adverse weather conditions slowing construction activity.

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        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:

•

requires the dedication of a portion of our expected cash flow to service our indebtedness, thereby reducing the amount of our expected cash flow available for business operations and new opportunities; and



•

increases our vulnerability to changes in economic and industry conditions which would require more funds for business operations at a time when our cash flow has been reduced.

        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:

•

political and economic instability where we have foreign business operations resulting in the reduction of the value of, or the loss of, our investment;



•

recessions in economies of countries in which we have business operations decreasing our international sales;



•

difficulties and costs of staffing and managing our foreign operations increasing our foreign operating costs and decreasing profits;



•

difficulties in enforcing our rights outside the U.S. for a number of our patents on our manufacturing machinery, poles and irrigation design; and



•

increases in tariffs, export controls, taxes and other trade barriers reducing our international sales and our profit on these sales.

        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.

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ITEM 2.    PROPERTIES.

        The Company's corporate headquarters are located in 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 headquarters of the Company's operating segments are located in Valley, Nebraska, except for Wireless Communication, which is located in Plymouth, Indiana. The principal operating locations of the Company are listed below.

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ITEM 3.    LEGAL PROCEEDINGS.

        The Company is not a party to, nor is any of its property subject to, any material legal proceedings. The Company is from time to time engaged in routine litigation incidental to the business.

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

        No matters were submitted to a vote of stockholders during the fourth quarter of 2002.

Executive Officers of the Company

        The executive officers of the Company at December 28, 2002, their ages, positions held, and the business experience of each during the past five years are, as follows:

        Mogens C. Bay, age 54, Chairman and Chief Executive Officer of the Company since January 1997.

        Terry J. McClain, age 55, Senior Vice President and Chief Financial Officer of the Company since January 1997.

        E. Robert Meaney, age 55, Senior Vice President of the Company since September 1998. President and Chief Operating Officer-Valmont International from February 1994 to September 1998.

        Ann F. Ashford, age 42, Vice President-Human Resources of the Company since December 1999. Vice President-Human Resources, PKS Information Services, Inc., from January 1998 to December 1999.

        Steven G. Branscombe, age 47, Vice President-Information Technology since October 2001. Senior Project Manager, IBM Corporation, from August 2000 to September 2001. Principal, American Management Systems, from June 1999 to July 2000. Vice President, PKS Information Services, Inc., from January 1997 to December 1998.

        Mark C. Jaksich, age 45, Vice President and Controller of the Company since February 2000. Director of Corporate Accounting of the Company from April 1998 to February 2000. Controller-Valmont International from July 1994 to April 1998.

        Walter P. Pasko, age 52, Vice President-Procurement since May 2002. Vice President-Purchasing and National Accounts, National Material Company, September 1997 to April 2002.

        P. Thomas Pogge, age 54, Vice President, General Counsel and Secretary of the Company since May 2001. Attorney in private practice from January 2000 to April 2001. Executive Vice President, General Counsel and Secretary, Transgenomic, Inc. from July 1997 to December 1999.

        Mark E. Treinen, age 47, Vice President-Business Development since January 1994.

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PART II

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

        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

SELECTED FIVE-YEAR FINANCIAL DATA

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

MANAGEMENT'S DISCUSSION AND ANALYSIS

Forward-Looking Statements

        Management's discussion and analysis, and other sections of this annual report, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to 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 reports 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.

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RESULTS OF OPERATIONS

FISCAL 2002 COMPARED WITH FISCAL 2001

Consolidated

        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.

Poles Segment

        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

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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.

Wireless Communication Segment

        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.

Coatings 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.

Irrigation Segment

        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.

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Tubing Segment

        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.

Other

        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

Consolidated

        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.

Poles Segment

        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

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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.

Wireless Communication Segment

        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.

Coatings Segment

        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.

Irrigation Segment

        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.

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        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.

Tubing Segment

        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

General

        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.

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        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:

•

Fund internal growth initiatives in core businesses;



•

Pay down interest-bearing debt;



•

Invest in acquisitions clearly connected to our core businesses or an existing competency; and



•

Return money to our shareholders through increased dividends or common stock repurchases at appropriate share prices.

        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.

Financial Obligations and Commercial Commitments

        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:

        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.

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Off-Balance Sheet Arrangements

        We have operating lease obligations to unaffiliated parties on leases of certain production and office facilities and equipment. These leases are in the normal course of business and generally contain no substantial obligations for us at the end of the lease contracts. 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):

        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.

Changes in Prices

        Certain key materials we use are commodities traded in worldwide markets and are subject to fluctuations in price. The most significant materials are steel, aluminum, zinc and natural gas. 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.

Risk Management

        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

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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.

2003 Outlook

        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.

Allowance for Doubtful Accounts

        In determining an allowance for accounts receivable that will not ultimately be collected in full, we consider:

•

age of the accounts receivable



•

customer credit history



•

customer financial information, and



•

reasons for non-payment (product, service or billing issues).

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        If our customer's financial condition were to deteriorate, resulting in an impairment in their ability to make payment, additional allowances may be required.

Warranties

        All of our businesses must meet certain product quality and performance criteria. We rely on historical product claims data to estimate the cost of product warranties at the time revenue is recognized. In determining the accrual for the estimated cost of warranty claims, we consider our experience with:

•

costs to correct the product problem in the field, including labor costs,



•

costs for replacement parts,



•

other direct costs associated with warranty claims, and



•

the number of product units subject to warranty claims.

        In addition to known claims or warranty issues, we estimate future claims on recent sales. The key 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.

Inventories

        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.

Depreciation, Amortization and Impairment of Long-Lived Assets

        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.

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        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.

Stock Options

        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.

Income Taxes

        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.

Recently Issued Accounting Standards

        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.

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        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:

1.

The equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, which is provided through other interests that will absorb some or all of the expected losses of the entity.



2.

The equity investors lack one or more of the following essential characteristics of a controlling financial interest:



a.

The direct or indirect ability to make decisions about the entity's activities through voting rights or similar rights



b.

The obligation to absorb the expected losses of the entity if they occur, which makes it possible for the entity to finance its activities



c.

The right to receive the expected residual returns of the entity if they occur, which is the compensation for the risk of absorbing the expected losses.

        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 (see Off-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 RISK.

        The information required is included under the captioned paragraph, "Risk Management" on pages 23-24 of this report.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

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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 each of the three years in the period ended December 28, 2002. These financial statements are the responsibility of the Company's management. 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

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Valmont Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Three-year period ended December 28, 2002

(Dollars in thousands, except per share amounts)

See accompanying notes to consolidated financial statements.

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Valmont Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 28, 2002 and December 29, 2001

(Dollars in thousands, except per share amounts)

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)