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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. ý

        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 1, 2004 there were 23,846,804 of the Company's common shares outstanding. The aggregate market value of the voting stock held by non-affiliates of the Company based on the price the common shares were last sold on June 27, 2003 was $283,772,000.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Company's proxy statement for its annual meeting of shareholders to be held on April 26, 2004 (the "Proxy Statement"), to be filed within 120 days of the fiscal year ended December 27, 2003, are incorporated by reference in Part III.

Index to Exhibits, Page 65

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 27, 2003

TABLE OF CONTENTS

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PART I

Available Information

        We make available, free of charge through our Internet web site at http://www.valmont.com, our 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.

        We have also posted on our website our (1) Corporate Governance Principles, (2) charters for the Audit Committee, Compensation Committee, and Governance and Nominating Committee of the Board, (3) Code of Business Conduct, and (4) Code of Ethics for Senior Officers applicable to the Chief Executive Officer, Chief Financial Officer and Controller. Valmont shareholders may also obtain copies of these items at no charge by writing to: Investor Relations Department, Valmont Industries, Inc., One Valmont Plaza, Omaha, NE, 68154.

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 is engaged in the Engineered Support Structures, Coatings, Irrigation, and Tubing businesses. We entered the Irrigation and Tubing businesses in 1953 from our manufacturing location in Valley, Nebraska. The Engineered Support Structures segment began producing and marketing engineered metal structures in the early 1960's. The Coatings segment began as a separate division in 1997 with its first stand-alone coatings plant in West Point, Nebraska.

        We have grown internally and by acquisition and have also divested certain businesses. Our 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.

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        On February 23, 2004, we signed a definitive agreement to acquire Newmark International, Inc. (Newmark), a manufacturer of concrete and steel poles primarily for the utility industry. We agreed to purchase all the shares of Newmark for approximately $105 million in cash from Newmark's parent company, Pfleiderer AG of Neumarkt, Germany. Additionally, Newmark has approximately $10 million in interest-bearing debt. Newmark, whose sales exceed $75 million annually, has its headquarters in Birmingham, Alabama. The transaction has been approved by the boards of directors of both companies and is subject to the satisfaction of customary closing conditions, including review under the Hart-Scott-Rodino Antitrust Improvements Act.

(b)   Operating Segments

        We report our businesses as four reportable segments organized on a worldwide product basis:

        Engineered Support Structures:    This segment consists of the manufacture of engineered metal structures and components for the lighting and traffic, utility, and wireless communication industries, and for other specialty applications

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

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

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

        In 2003, we reorganized our management reporting structure. Our former Wireless Communication segment was combined with the Poles segment to form the Engineered Support Structures segment. These two segments have similarities in products, processes and skills and we believe this combination will result in better utilization of talents and capabilities of these two organizations and reduce costs. In addition to these four reportable segments, we have 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 our audited financial statements on pages 55-58.

(c)   Narrative Description of Business

        Information concerning the principal products produced and services rendered, markets, competition and distribution methods for each of our four reporting segments is set forth below. We consider the Engineered Support Structures and Coatings segments to be our Infrastructure businesses and our Irrigation and Tubing segments to be our Agricultural businesses.

Engineered Support Structures Segment:

        The Engineered Support Structures segment manufactures and markets engineered metal structures in three broad product lines:

        (1)    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 driven by commercial and residential construction and by consumers' desire for well-lit streets, highways, parking lots and common areas to help make these areas safer at night and to 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 leveraging this expertise to expand our

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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 the transportation and commercial lighting markets. 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 program. 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 program was extended through June 2004. While legislation must be enacted to continue Federal funding, we believe that such government funding will continue in some form. 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 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—Our competitive strategy in the Lighting and Traffic product line 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. 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 and unique product features. Some competitors offer decorative products, which not all competitors are capable of manufacturing. Some 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 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.

        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 made 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 customers.

        (2)    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

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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—Our competitive strategy in the Utility product line 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. There are many competitors. Companies compete on the basis of price, quality, service and engineering expertise. Utility sales are often made through a competitive bid process, whereby the lowest bidder is awarded the contract, provided the competitor meets all other qualifying criteria. In weak markets, price is a more important criterion in the bid process. When the wireless communication pole market is weak (as it was in 2002 and 2003), we see these manufacturers also competing in the Utility product line.

        Distribution Methods—Products are normally sold through commissioned sales agents or sold directly to electrical utilities and independent power producers.

        (3)    Specialty    

        Products Produced—In our Specialty product line, we manufacture and sell a broad range of structures (poles and towers) and components serving the wireless communication, highway sign, and low-voltage substation markets. Specialty products also include special use structures for a variety of applications.

        In the wireless communication market, a wireless communication cell site will mainly consist of:

•

Pole or tower, which is a steel structure, usually 90-1,000 feet high



•

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



•

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



•

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



•

Tapered and non-tapered poles

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•

Disguised products to minimize the visual impact on an area

        Structures are engineered and designed to customer specifications, which include factors such as the number of antennas on the structure and wind and soil conditions. Due to the size of these structures, design is important to ensure each structure 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.

        In the highway sign market, structures are either on the side of or span over a motorway and support items such as roadway directional signage and intelligent message systems. Structures sold may be either steel or aluminum and the product design may be in the form of a bent tube, tubular lattice or cantilevered. Like wireless communication structures, sign structures are engineered, with the design taking into consideration factors such as the weight and size of the signage being supported and wind, soil and other weather-related conditions.

        In the low-voltage substation market, structures are used in the conversion of high-voltage to low-voltage electricity. From the low-voltage substation, electricity is distributed to users. These structures tend to be lattice or wide flange beam in design and are engineered to customer specification to support expansion or replacement of electrical utility infrastructure.

        Markets—The main market for our products has been the wireless telephone industry, although we also sell products to state and federal governments for two-way radio communication, radar, broadcasting and security purposes. 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 nearly 150 million in 2003, an annual compounded growth rate of 30%. In the last five years, the annual compounded rate of subscriber growth was approximately 20%. 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 2003 was substantially lower than the late 1990's and 2000, we believe long-term growth should 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)



•

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

        There are two broad customer groups for our products:

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



•

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

        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 on network development has focused on upgrading technology rather than increasing the number of structures. We believe that infrastructure spending should eventually increase, in order to improve and maintain service levels demanded by users. We also believe that increased user demand will lead to an increase in the number of cell sites.

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        The market for sign structures generally is related to highway construction and desire for improved roadway signage and intelligent messaging for motorists to improve traffic flow. Specifications vary by state and the individual state highway departments are key contacts for the sales of these structures.

        The market for low-voltage substation structures is driven by the demand for improved electrical power generation and distribution.

        Competition—There are a number of competitors in the wireless communication market in the U.S., although some have exited the business or sought protection under bankruptcy laws 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. We also face a number of competitors when we compete for sign and low-voltage substation structure sales, most of which compete on a regional basis. Since we are relatively new in these markets, some of our competitors are more experienced in these markets than us.

        Distribution Methods—Sales and distribution activities are normally handled through a direct sales force. In the sale of sign structures, we work through the same commissioned sales agent organization as our Lighting and Traffic product line. These agents sell to construction contractors. In the low-voltage substation market, structures are sold directly to utility companies through the same sales channels as our Utility product line.

Coatings Segment:

        Services Rendered—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:

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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 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 our profitability is not substantially dependent on any one industry or customer. 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

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the coating finish, and timely delivery of the coated product to the customer. We also use the production capacity at our network of plants to assure that the customer receives quality service.

        Distribution Methods—Due to freight costs, a galvanizing location has an effective service area of an approximate 500-mile radius. 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 mechanized 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, offering control of such factors as on/off timing, individual field sector control, rate and depth of water and chemical application. We also offer growers options to control multiple irrigation machines through centralized computer control or mobile 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, two of 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 affects market growth in those areas.

        The main sources of demand for mechanized irrigation come from the following sources:

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Conversion from flood irrigation



•

Replacement of existing mechanized irrigation machines



•

Conversion from dryland farming

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

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Only 2.5% of total worldwide water supply is freshwater



•

Of that 2.5%, only 30% of freshwater is available to humans



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The largest user of that freshwater is agriculture

        We believe these factors, along with the trend of a growing worldwide population and improving diets, reflect 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 by applying water uniformly near the root zone and reducing water runoff. Furthermore, reduced water runoff improves water quality in nearby rivers, aquifers and streams, thereby providing environmental 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 four 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 service capabilities of the local dealer. 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 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 inches and in wall thicknesses from ¹/32 to ⁹/32 of an inch. Our operations are located in Valley and Waverly, Nebraska and virtually all sales are in North America.

        Markets—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

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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 each of our four reportable segments 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 usually readily available. While we may experience short-term disruptions and volatility, we do not believe that key raw materials would be unavailable for extended periods.

Patents, Licenses, Franchises and Concessions.

        We have a number of patents for our manufacturing machinery, poles and irrigation designs. We also have a number of registered trademarks. We do not believe the loss of any individual patent would have a material adverse effect on our financial condition.

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.

        We are not dependent for a material part of any segment's business upon a single customer or upon very few customers. The loss of any one customer would not have a material adverse effect on our financial condition.

Backlog.

        The backlog of orders for the principal products manufactured and marketed was approximately $161.8 million at the end of the 2003 fiscal year and $128.7 million at the end of the 2002 fiscal year. We anticipate that most of the backlog of orders will be filled during fiscal year 2004. At year-end, the backlog by segment was as follows (dollar amounts in millions):

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Research Activities.

        The information called for by this item is included in Note 12 of our audited financial statements on page 53 of this report.

Environmental Disclosure.

        We are subject to various federal, state and local laws and regulations pertaining to environmental protection and the discharge of materials into the environment. Although we continually incur expenses and make capital expenditures related to environmental protection, we do not anticipate that future expenditures should materially impact our financial condition.

Number of Employees.

        At December 27, 2003, we had 5,074 employees.

Geographic Areas.

        Our international sales activities encompass over 100 foreign countries. The information called for by this item is included in Note 17 of our audited financial statements on page 58 of this report.

Risk Factors

        In addition to the factors discussed elsewhere in this report, the following risk factors describe various risks that may affect our 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



•

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



•

lower steel production levels due to reduced production capacity for steel or shortages of materials needed to produce steel (such as coke and scrap steel) could result in reduced supplies of steel, resulting 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



•

fluctuation in foreign exchange rates can impact the relative cost of steel, and may affect the cost effectiveness of imported steel and limit our options in acquiring steel



•

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

        Increases in the sales prices of our products may not fully recover additional steel costs and generally lag 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 and late 2003

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put pressure on margins, especially in our Engineered Support Structures and Tubing segments. U.S. government trade and tariff actions have reduced the availability and increased the cost of steel imported from outside the U.S. in 2002 and 2003. While these tariffs were repealed in late 2003, the weakness of the U.S. dollar made procurement of steel from outside the U.S. less attractive. Furthermore, significant increases in steel production and consumption in China have resulted in some shortages in key steel-making materials (such as coke and scrap steel), which is impacting the production capability of other steel producers. As a result, steel supplies may become tighter and impact our ability to acquire steel and meet customer requirements on a timely basis.

        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 and 2003 due to 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. While we may hedge our exposure to higher prices via energy futures contracts, 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 and traffic, utility, and other specialty applications result in reduced product sales.

        We manufacture and distribute engineered metal structures for lighting and traffic, utility and other specialty applications. 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



•

adverse weather conditions slowing construction activity

        Construction activity declines in the lighting and traffic, utility and other specialty applications result in reduced product sales. In 2003, wireless communication sales in North America were 25% lower than in 2002. 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

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to retire PiRod's long-term debt and we were more leveraged in 2001 than in the prior few years. On February 23, 2004, we signed a definitive agreement to purchase all the shares of Newmark International, Inc. for approximately $105 million in cash, which will be borrowed. Additionally, Newmark has approximately $10 million in interest-bearing debt. 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



•

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

        As part of our senior debt agreements, we must maintain certain covenants related to our financial leverage. Increased leverage could also make compliance with certain covenants in our debt agreements more difficult. 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 cost of borrowing funds will likely increase or 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 27, 2003, we operated 32 manufacturing plants, located on five continents, and sold our products in more than 100 countries. In 2003, international sales accounted for approximately 25% 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



•

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 an 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 September, 2008. The headquarters of the Company's reporting segments are located in Valley, Nebraska. The principal operating locations of the Company are listed below.

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ITEM 3.    LEGAL PROCEEDINGS.

        We are not a party to, nor is any of our property subject to, any material legal proceedings. We are, 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 2003.

Executive Officers of the Company

        Our executive officers at December 27, 2003, their ages, positions held, and the business experience of each during the past five years are, as follows:

        Mogens C. Bay, age 55, Chairman and Chief Executive Officer since January 1997.

        Terry J. McClain, age 56, Senior Vice President and Chief Financial Officer since January 1997.

        E. Robert Meaney, age 56, Senior Vice President of the Company since September 1998.

        Ann F. Ashford, age 43, 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 48, 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.

        Mark C. Jaksich, age 46, Vice President and Controller since February 2000. Director of Corporate Accounting of the Company from April 1998 to February 2000.

        Walter P. Pasko, age 53, Vice President-Procurement since May 2002. Vice President-Purchasing and National Accounts, National Material Company, September 1997 to April 2002.

        P. Thomas Pogge, age 55, Vice President, General Counsel and Secretary 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 48, Vice President-Business Development since January 1994.

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PART II

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

        Our 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 and began trading under the symbol "VMI" on August 30, 2002. We had approximately 5,400 shareholders of common stock at December 27, 2003. Other stock information required by this item is included in "Quarterly Financial Information (unaudited)" on page 59 of this report.

ITEM 6.    SELECTED FINANCIAL DATA.

SELECTED FIVE-YEAR FINANCIAL DATA

(a)

Return on Invested Capital is calculated as Operating Income (after-tax) divided by the average of beginning and ending Invested Capital. Invested Capital represents Total Assets minus Accounts Payable, Accrued Expenses and Dividends Payable. Return on Invested Capital is one of our key operating ratios, as it allows investors to analyze our operating performance in light of the amount

17

of investment required to generate our operating profit. Return on Invested Capital is also a measurement used to determine management incentives. Return on Invested Capital is not a measure of financial performance or liquidity under generally accepted accounting principles (GAAP). Accordingly, Return on Invested Capital should not be considered in isolation or as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity. The table below shows how Invested Capital and Return on Invested Capital are calculated from our income statement and balance sheet.

(b)

Long-term debt as a percent of invested capital is calculated as the sum of Current portion of long-term debt and Long-term debt divided by Total Invested Capital. This is one of our key financial ratios in that it measures the amount of financial leverage on our balance sheet at any point in time. We also have covenants under our major debt agreements that relate to the amount of debt we carry. If those covenants are violated, we may incur additional financing costs or be required to pay the debt before its maturity date. We have an internal target to maintain this ratio at or below 40%. This ratio may exceed 40% from time to time for major strategic purposes, such as acquisitions. Long-term debt as a percent of capital is not a measure of financial performance or liquidity under GAAP. Accordingly, long-term debt as a percent of capital should not be considered in isolation or as a substitute for net earnings, cash flows from operations or other income or cash flow data prepared in accordance with GAAP or as a measure of our operating performance or liquidity. The calculation of this ratio is as follows:

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

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 Company cautions that any forward-looking statements included in this report are made as of the date of this report.

        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. As described in Item 1(b) above, we combined the Poles and Wireless Communication segments to form the Engineered Support Structures segment in 2003. All data for 2002 and 2001 have been reclassified to conform with the current segment structure.

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RESULTS OF OPERATIONS

FISCAL 2003 COMPARED WITH FISCAL 2002

Overview

        The sales decrease in 2003 as compared with 2002 was the result of lower sales in the Utility and Specialty product lines of the Engineered Support Structures (ESS) segment and the Coatings segment, offset somewhat by increased sales in the Lighting and Traffic product line in the ESS segment and the Irrigation segment. Due to a weakening of the U.S. dollar in relation to the Euro and the South African Rand, sales in dollar terms were positively impacted by $23.1 million. The sales decrease after taking into account the currency translation effect was 4.8%. Gross profit margins were lower in most segments, except that margins improved slightly in the Irrigation segment, mainly as a result of improved margins in the international markets. In particular, margins were significantly impacted by severe pricing pressure in the Utility product line. Lower sales in the Utility and Specialty product lines and the Coatings segment also resulted in lower coverage of fixed manufacturing costs, which further contributed to lower profitability. The decrease in Selling, General and Administrative (SG&A) expense was mainly due to a reduction of approximately $12.5 million in employee incentives and supplemental 401K matches this year. This decrease was directly related to the decrease in our profitability and return on invested capital this year. This decrease was offset to some extent by currency translation impacts related to a weaker U.S. dollar, which increased our expenses in dollar terms.

        The decrease in interest expense was principally related to lower average borrowing levels this year. Our capital spending and acquisition activity has continued to be lower than historical levels and our share repurchases this year were not significant. As a result, our free cash flows have been used to reduce our interest-bearing debt.

        Our effective tax rate was comparable to 2002, as there have been no major changes to tax rates or our general income tax position this year. Losses in nonconsolidated subsidiaries were lower in 2003 as compared with 2002, due to some improvement in our Irrigation segment joint ventures in Argentina and the U.S. In addition, in 2002 we recorded a $1.1 million impairment charge in our investment in our U.S. nonconsolidated subsidiary. Minority interest in earnings of consolidated subsidiaries was higher this year, mainly related to strong profitability gains in our Irrigation segment operations in Brazil and South Africa. Our ownership percentages in these locations are less than 100%.

        The Financial Accounting Standards Board (FAS) Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46), was revised in December 2003 and is applicable to public entities that have interests in variable interest entities for periods ending after December 15, 2003. Under FIN 46, the assets, liabilities and results of activities of variable interest entities are required to be reported in the consolidated financial statements of their primary beneficiaries. We assessed our relationships with variable interest entities and determined that we were the primary beneficiary in a variable interest entity related to our lease of transportation equipment. Accordingly, in the fourth quarter of 2003, we recorded a cumulative effect of a change in accounting of $0.4 million (net of related tax effects of $.2 million). In addition, we recorded a net increase to property, plant and equipment of $9.3 million and an increase to interest-bearing debt of $9.9 million.

        We generated solid operating cash flow during 2003 and 2002 and we used those cash flows to reduce our interest-bearing debt. Our long-term debt to invested capital ratio was reduced from 36.8% to 30.9% in 2003, which is comfortably within our internal goal of 40%.

Engineered Support Structures (ESS) Segment

        General—The sales decrease in the ESS segment related to lower sales in the Utility and Specialty product lines, offset somewhat by stronger sales in the Lighting and Traffic product line. The sales

20

decrease after taking into account currency translation effects was 10.1%. The decrease in operating income was the result of lower sales volumes and lower gross profit margins due to pricing pressures in the Specialty and Utility product lines and reduced coverage of fixed manufacturing costs related to lower sales volumes in those product lines. The impact on gross profit margins was offset somewhat by lower SG&A spending, mainly related to lower sales incentives and commissions associated with lower sales volumes. Our SG&A spending in Europe increased from 2002 due to our efforts to expand sales distribution and manufacturing in the region and expand our product offering in the Utility product line.

        Lighting and Traffic Products—In North America, lighting and traffic structure sales increased by 3.6% in 2003. Market demand continues to be driven by government spending programs and the need for improved street and highway lighting and traffic control. The commercial lighting sales in 2003 were essentially flat with 2002, as commercial construction and the related demand for area lighting for parking lots and common areas was somewhat weaker than in 2002. Building alliances with lighting fixture manufacturers helped us to maintain sales despite some softness in the overall market. Profitability in North America improved, principally due to increased sales. In Europe, sales increased 5.7% in local currency terms, as most of the sales increase related to efforts to expand our manufacturing presence and sales coverage in the region. Despite higher sales, profitability in Europe was lower than in 2002, due primarily to increased SG&A spending. The increase in spending related mostly to efforts to expand our sales presence and product offering in the region. While we expect these activities to contribute to future profitability, they are in their formative stages and have not yet generated the sales and profits that we expect. In China, sales are down slightly, but we are continuing to make progress in finding local market segments that are attractive and capitalize on export opportunities to generate sales and profits.

        Utility Products—Utility sales decreased 37.8% in North America compared with 2002. Market demand for steel poles for transmission and substations was somewhat lower than in 2002. Utility companies and independent power producers have reduced spending for electrical generation and transmission projects due to factors such as a lack of U.S. energy legislation and some financing constraints. The key factor that affected profitability was the severe pricing pressure in the marketplace throughout 2003. The pricing pressure resulted from some weakness in the market, combined with new competitors in the form of manufacturers who also compete for sales of pole structures in the wireless communication market. In the first quarter, our backlogs and sales fell as we attempted to maintain pricing. Our pricing was more aggressive in the second quarter and we were successful in increasing our order rate, although sales prices were substantially less than what we experienced in the last few years. Sales in the fourth quarter were similar to 2002, although at lower margin levels than in the past. The impact of pricing and unfavorable product mix on operating income was approximately $8.9 million in 2003. In China, our sales increased approximately $5.0 million in 2003 as compared with 2002. We have been successful in penetrating the utility market with transmission and substation products. China is investing large amounts of money in electrical generation and distribution, and we believe we are well positioned to take advantage of favorable trends in China to continue to grow our sales there in the future.

        Specialty Products—In North America, sales of specialty products were down as compared with 2002. Wireless carriers and build-to-suit companies continue to curtail spending on new structures for the wireless communication industry as they are focusing on cash flow and capital management. Structures and antennas being installed have generally been done so as to augment existing networks to improve coverage and service. While sales were lower and pricing remained very competitive, our factory and administrative costs were reduced by approximately $4.0 million this year which helped to minimize the impact of these lower sales on operating income. In 2003, this product line also began to manufacture overhead sign and low-voltage substation structures; while 2003 sales in these products were not material, we have been successful in achieving orders and are optimistic that these products

21

will help us grow our specialty product sales in the future. We continue to experience strong demand for wireless communication poles in China, as they continue to pursue buildout of their wireless networks. Sales and profitability in China were improved over 2002.

Coatings Segment

        The decrease in Coatings segment sales in 2003 as compared with 2002 was due to weakness in the industrial economy in the U.S. throughout 2003. In addition, the amount of business with our other locations was down this year, as lower sales in the Utility and Specialty product lines in the ESS segment also led to lower production levels in our galvanizing locations that serve those product lines. As a result of these factors, sales in our galvanizing locations were 14.4% lower than in 2002. Operating income decreased due to lower sales and gross margins, offset by reduced SG&A expenses. Our galvanizing operations have relatively high fixed costs. When production fluctuates, it can have a significant impact on earnings. The estimated total impact of the volume decrease on gross margin was $4.7 million. Gross margins were also impacted by approximately $1.1 million in higher workers compensation costs in 2003. Most of this increase occurred in our California operations, where the legal environment in the workers compensation area is difficult for employers. SG&A spending was lower this year, mostly related to a reduction in employee incentives. Operating income in 2002 included a $1.2 million gain on the sale of a facility in our Minnesota location.

Irrigation Segment

        Irrigation segment sales increased in both domestic and international markets. In North America, improved commodity prices, dry growing conditions in our main market areas, a generally favorable U.S. farm bill and low interest rates contributed to increased demand for mechanized irrigation machines and related service parts. The increase in sales and some improved pricing resulted in higher operating income in 2003.

        In the international marketplace (after considering currency translation impacts), sales were similar to 2002. Sales in the Middle East market were down substantially, as the war in Iraq impacted project sales in the region. In Brazil, we achieved record sales and profits, as market conditions were very strong. Good agricultural commodity prices and favorable government programs helped drive the strong sales demand and contributed to our excellent operating performance in 2003. In South Africa, sales in local currency terms were down slightly from our record sales in 2002, but profitability improved, due to improved operations management and pricing that led to improved gross margins. Good agricultural commodity prices and generally dry growing conditions helped maintain strong demand for mechanized irrigation machines in the region. Overall profitability in our international operations improved by 21%, about half of which was due to currency translation effects resulting from a weaker U.S. dollar, especially in relation to the South African Rand.

Tubing Segment

        In the Tubing segment, sales were slightly lower than last year, although sales were stronger in the fourth quarter as compared with 2002, reflecting some strengthening economic conditions in the U.S. This segment was impacted significantly by the steel market, as most of the cost of tubing is hot-rolled sheet steel. In the fourth quarter of 2003, steel prices started to rise and there is some concern about availability of steel in the near future. In these conditions, our sales tend to increase, as customers order more tubing to reduce the risk of future shortages and avoid future price increases. Operating income was down from 2002 due to some pricing pressures in commodity-type products and an unfavorable inventory adjustment. These impacts were offset to an extent by lower SG&A spending, mostly due to lower employee incentives this year.

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Other

        Our "Other" businesses include our machine tool accessory business in France, our industrial fastener business in the U.S. and wind energy development. Sales were up mostly due to currency translation impacts and profitability was down mainly due to higher spending on developing a new structure for the wind energy industry. Our spending on development activity was $2.8 million in 2003, as compared with $2.4 million in 2002. We have not yet made a commercial sale in this area, but remain somewhat optimistic for long-term success in this market.

FISCAL 2002 COMPARED WITH FISCAL 2001

Overview

        The sales decrease in 2002 as compared with 2001 was primarily due to lower sales in the Specialty and Utility product lines in the ESS segment, offset somewhat by sales increases in the Lighting and Traffic product line in the ESS segment and the Irrigation 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 Specialty product line. 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.

        Our operating cash flow reduction in 2002 as compared with 2001 related to the large reduction in inventories in 2001. In 2000, our inventories rose to historically high levels and this increase was largely reversed in 2001. The average operating cash flow in 2000 and 2001 was approximately $60 million. These improved cash flows and reduced capital expenditures were used to reduce interest-bearing debt. Our long-term debt to invested capital ratio improved from 41.9% to 36.8% in 2002 and was in line with our internal goal of 40%.

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Engineered Support Structures (ESS) Segment

        General—In the ESS segment, the decrease in sales related to lower sales in the Specialty and Utility product lines, offset by improved sales in the Lighting and Traffic product line. Despite lower sales volumes, gross profit margins were higher as compared with 2001 due to good factory productivity and cost control. SG&A spending was comparable to 2001, as lower incentive expense was offset by increased depreciation expenses and start up expenses associated with our new plant in Morocco.

        Lighting and Traffic Products—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. Gross profit margins in North America improved somewhat due to a more favorable sales mix in 2002. In Europe, sales were modestly higher than in 2001, due to some improvement in market conditions. We expanded our sales presence in Europe and started up a factory in Morocco. Gross margins and operating income 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.

        Utility Products—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 second half of the year put some pressure on gross profit margins, but factory productivity improvements helped minimize the impact of these conditions on operating income.

        Specialty Products—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, gross profit margins improved and 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 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. In addition to reducing the cost structure of the business, we are using our engineering and design expertise to develop products for the sign structure market. Sales of communication poles in China were slightly lower than our record sales of 2001. China, however, continued the buildout of its wireless phone infrastructure, which helped support sales. This unit continues to contribute profitably to the performance of the ESS 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

24

$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 ESS segment. The impact of these reduced sales on gross margins and 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 $4.0 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.

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 gross margins and 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.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

        Working Capital and Operating Cash Flows—Net working capital was $169.6 million at fiscal year-end 2003, as compared with $154.1 million at year-end 2002. The ratio of current assets to current liabilities was 2.12:1 as of December 27, 2003, as compared with 2.09:1 at December 28, 2002. Working capital was up due to increases in cash, receivables and a decrease in accrued expenses. The increase in receivables was due to currency translation effects ($8.0 million) and a stronger mix of international sales, which generally have longer payment terms than North American sales. On a regional basis, accounts receivable turns in 2003 are similar to 2002. Accrued expenses decreased due to much lower employee incentive accruals in 2003, due to our lower earnings and return on capital in 2003, as compared with 2002. Inventories were $8.9 million lower in 2003 as compared with 2002 (after currency translation effects). In late 2002, the ESS and Tubing segments increased their stocks of hot-rolled steel late in the year to guard against potential steel supply shortages in the U.S. We did not purchase as much material in advance this year. Also, the Specialty product line in the ESS segment continues to work on reducing its inventory levels due to lower sales demand. Operating cash flow was $59.8 million in 2003, as compared with $69.5 million in 2002 and $109.8 in 2001. The decrease in operating cash flow in 2003 as compared with 2002 related mainly to lower earnings in 2003. 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.

        Investing Cash Flows—Capital spending was $17.7 million in 2003, as compared with $13.9 million in 2002, and $25.7 million in 2001. Our depreciation and amortization expenses for 2003, 2002 and 2001 were $34.6 million, $33.9 million and $36.3 million, respectively. Our capital spending continues to be at historically low levels. Throughout much of the 1990's our capital spending was relatively high as we added manufacturing capacity in a number of areas, most notably our Irrigation segment factory in McCook, Nebraska and our ESS factory in Jasper, Tennessee. We have not made any substantial capacity additions in the past three years. In addition, we made a number of acquisitions from 1998 to 2001 that added capacity and allowed us to expand our market coverage. While no acquisitions were made in 2003 or 2002, $33.4 million cash was expended in 2001 as part of the PiRod acquisition, which was completed on March 30, 2001.

        Financing Cash Flows—Strong operational cash flow, combined with lower capital spending and reduced acquisition activity, enabled us to reduce interest-bearing debt by $16.3 million, $40.0 million and $38.9 million in 2003, 2002 and 2001, respectively. The 2001 debt reduction was achieved despite the $33.4 million we borrowed as part of the PiRod acquisition. The Board of Directors has authorized the repurchase of up to 1.5 million shares of our common stock. As of December 27, 2003, 972,100 shares had been repurchased under this authorization for a total of $17.2 million. We repurchased 165,700 shares in 2003 for a total of $3.4 million.

Sources of Financing and Capital

        We have historically funded our growth, capital spending and acquisitions by a combination of operating cash flows and debt financing. We have an internal long-term objective to maintain long-term debt as a percent of capital below 40%, although we may exceed that percentage from time to time for major strategic purposes, such as acquisitions. At year-end 2003, long-term debt was 30.9% of invested capital, down from 36.8% in 2002 and 41.9% at year-end 2001. On February 23, 2004, we signed a definitive agreement to purchase all the shares of Newmark International, Inc. for approximately $105 million in cash. Additionally, Newmark has approximately $10 million in interest-bearing debt. After this acquisition is completed, our long-term debt to capital ratio will likely exceed our stated internal goal of 40%. We are considering a number of alternatives regarding capital structure which we believe, together with our cash flow characteristics, will provide adequate capital resources for

26

necessary capital improvements and additional acquisition opportunities. While future capital spending (exclusive of acquisitions) likely will not remain at the levels spent in 2003 or 2002, we do not anticipate that capital spending (exclusive of acquisitions) will exceed depreciation expense in the foreseeable future.

        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 $25.5 million at the end of 2003 as compared with $21.1 million at the end of 2002. At December 27, 2003, $13.1 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 27, 2003, the outstanding principal balance was $40 million, compared with $56 million at the end of fiscal 2002. The interest rate we pay on the revolving credit line is based upon the London Interbank Offer Rate (LIBOR) plus a spread based on our financial leverage. At year-end 2003, the interest rate was 1.81%. The total borrowings available under the unsecured facility with an insurance company was $200 million at the end of 2003, with $80 million outstanding as of December 27, 2003. The principal payments made in 2003 totaled $10.0 million and future repayments due under this facility are in varying amounts, 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 2003, we were in compliance with all debt covenants.

        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



•

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 may 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 FINANCIAL COMMITMENTS

        We have future financial obligations related to (1) payment of principal and interest on interest-bearing debt, including capital lease obligations, (2) various operating leases and (3) purchase

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obligations. These obligations as of December 27, 2003 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.

        Capital leases relate to a production facility in France and office equipment in the U.S. Operating leases relate mainly to various production and office facilities and are in the normal course of business.

        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.

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 lease is the lease of our corporate headquarters office building in Omaha, Nebraska. On this lease, we lease the entire office complex and sublease other office space in the complex to outside parties. The lease payments are based on the London Interbank Offer Rate (LIBOR), plus a spread that varies depending on our financial leverage. The current lease obligation expires in 2008, at which time we may elect to 1) renew the lease at a negotiated rate and duration; 2) purchase the facility from the lessor 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. This lease also contains certain covenants that are similar to those in our revolving credit agreement, including covenants related to financial leverage and coverage of certain fixed charges. The estimated fair value of the residual value guarantee is $1.7 million, which we have classified on the balance sheet in "Other noncurrent liabilities". This lease was reviewed under the provisions of FAS Interpretation 46 ("Consolidation of Variable Interest Entities"), and we determined that we were not required to consolidate the lessor entity because we were not the primary beneficiary.

        We also have certain commercial commitments related to contingent events that could create a financial obligation for us. Except as noted below, these commitments at December 27, 2003 are as follows (in millions of dollars):

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        The above commitments include $7.1 million 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. As prescribed by the Financial Accounting Standards Board (FASB) Interpretation 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others' (FIN 45), the fair value of the guarantees entered into in 2003 was $1.1 million and is recorded in Other noncurrent liabilities on our December 27, 2003 balance sheet. We also maintain standby letters of credit for contract performance on certain sales contracts.

MARKET RISK

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. Over the last three years, hot-rolled steel prices have been volatile. In 2001, prices dropped significantly. In 2002, prices rose sharply early in the year before falling later in the year. Prices continued to fall somewhat in early 2003 before rising late in the year. The volatility in price was due to such factors as fluctuations in supply, government tariffs and fluctuation in the U.S. industrial economy. In 2001, natural gas prices were 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—Our interest-bearing debt is 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 would have an impact on interest expense of approximately $0.2 million in 2003 and $0.2 million in 2002.

        Foreign Exchange—Exposures 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.

2004 OUTLOOK

        In 2004, we expect ESS segment sales and profits to improve over 2003. Lighting and Traffic structure sales are expected to increase. While U.S. highway spending legislation has not yet been passed, we believe that such legislation will be passed and funding will continue in some form.

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However, delays and uncertainty over the timing, funding and size of a new highway legislation can affect the market for lighting and traffic structures, as customers may delay purchasing decisions until the parameters of the legislation are settled. We expect sales of Utility products in the U.S. to increase in 2004, but pricing pressures may persist. In Specialty products, the wireless communication market conditions are expected to be similar to 2003. As we gain product expertise and market knowledge in areas such as sign structures and low-voltage substation, we are optimistic that the product expansions will help us improve sales and profitability. Coatings sales tend to lag the general industrial economy, so we should see some improvement in demand for coatings services with sustained industrial production improvement in our market areas.

        Irrigation sales and profitability are expected to be higher in 2004, as compared with 2003. Overall dry growing conditions, government farm programs and improved commodity prices should result in higher sales in North America. In the international markets, we do not expect the markets to be quite as strong as they have been in Brazil and South Africa. However, our international coverage and regional manufacturing strategy should position us for any growth opportunities that arise.

        Overall, we expect earnings to improve over 2003. Backlogs are generally stronger than a year ago, and we are optimistic that we will experience moderate sales growth. We do have concern over the steel market at this time. We are seeing some increases in steel prices and if steel availability deteriorates, our lead times to acquire steel may be impacted and affect our ability to meet customer demands. We believe we are positioned well to deal with these challenges, but turbulence in the steel market will be a challenge for us in 2004. 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 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



•

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

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

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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



•

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 estimated rate changed by 50%, the impact on operating income would be approximately $1.5 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 had all our inventory 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 ranging 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 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

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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.

        In the case of most of our reporting units, the above criteria have been met and no further evaluation was required. 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 1 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 each of the 2001, 2002 and 2003 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 27, 2003, we had approximately $1.7 million in deferred tax assets related mainly to tax credit carryforwards, with a related valuation allowance of $0.6 million. If circumstances change in the future, we may be required to increase or decrease the valuation allowance on these assets, resulting in an increase or decrease in income tax expense and a reduction or increase in net income. At December 27, 2003, we had deferred tax assets of $2.2 million related to nonconsolidated subsidiaries which have been fully offset by a valuation adjustment.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        The information required is included under the captioned paragraph, "Risk Management" on page 29 of this report.

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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 27, 2003 and December 28, 2002, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three fiscal years in the period ended December 27, 2003. 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 27, 2003 and December 28, 2002, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 27, 2003 in conformity with accounting principles generally accepted in the United States of America.

        As discussed in Note 1, in 2003 the Company changed its method of accounting for variable interest entities and in 2002 the Company changed its method of accounting for goodwill and other intangibles.

DELOITTE & TOUCHE LLP

Omaha, Nebraska
February 27, 2004

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Valmont Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Three-year period ended December 27, 2003

(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 27, 2003 and 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 STATEMENTS OF CASH FLOWS

Three-year period ended December 27, 2003

(Dollars in thousands)