Valmont Industries (VMI) 10-Q 2004 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 26, 2004
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number: 1-31429

Valmont Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	47-0351813
(State or other jurisdiction of incorporation or organization )	(I.R.S. Employer Identification No.)
One Valmont Plaza, Omaha, Nebraska (Address of principal executive offices)	68154-5215 (Zip Code)

(Registrant’s telephone number, including area code)

402-963-1000

(Former name, former address and former fiscal year, if changed since last report)

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 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 þ          No o

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).      Yes þ          No o

23,877,237

Outstanding shares of common stock as of July 14, 2004

          Index is located on page 2.

          Total number of pages 34.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Statements of Operations for the thirteen and twenty-six weeks ended June 26, 2004 and June 28, 2003		3
	Condensed Consolidated Balance Sheets as of June 26, 2004 and December 27, 2003		4
	Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended June 26, 2004 and June 28, 2003		5
	Notes to Condensed Consolidated Financial Statements		6-20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21-28
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		28
Item 4.	Controls and Procedures		28
PART II. OTHER INFORMATION
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		28
Item 5.	Other Information		29
Item 6.	Exhibits and Reports on Form 8-K		29
Signatures			30
Computation of Ratio of Earnings to Fixed Charges Ratio
Section 302 Certificate of Chief Executive Officer
Section 302 Certificate of Chief Financial Officer
Section 906 Certification of Chief Executive Officer and Chief Financial Officer
Pro Forma Financial Information
Unaudited Combined Financial Statements

2

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 26,			June 28,			June 26,			June 28,
		2004			2003			2004			2003
		(Dollars in thousands, except per share amounts)
		(Unaudited)
Net sales		$	266,013		$	200,666		$	481,910		$	407,960
Cost of sales			199,933			149,178			364,550			303,619
	Gross profit		66,080			51,488			117,360			104,341
Selling, general and administrative expenses			47,071			37,757			86,602			75,559
	Operating income		19,009			13,731			30,758			28,782
Other income (deductions):
	Interest expense		(4,067	)		(2,631	)		(6,465	)		(5,316	)
	Interest income		419			317			695			551
	Debt prepayment expenses		(9,860	)		—			(9,860	)		—
	Miscellaneous		(274	)		(117	)		(260	)		(155	)
			(13,782	)		(2,431	)		(15,890	)		(4,920	)
Earnings before income taxes, minority interest and equity in earnings (losses) of nonconsolidated subsidiaries			5,227			11,300			14,868			23,862
Income tax expense (benefit):
	Current		6,081			3,699			11,926			6,842
	Deferred		(4,154	)		415			(6,470	)		1,920
			1,927			4,114			5,456			8,762
Earnings before minority interest and equity in earnings (losses) of nonconsolidated subsidiaries			3,300			7,186			9,412			15,100
Minority interest			(718	)		(717	)		(1,173	)		(988	)
Equity in earnings (losses) of nonconsolidated subsidiaries			230			(102	)		74			(452	)
	Net earnings	$	2,812		$	6,367		$	8,313		$	13,660
Earnings per share — Basic:
	Earnings per share — Basic	$	0.12		$	0.27		$	0.35		$	0.57
Earnings per share — Diluted:
	Earnings per share — Diluted	$	0.12		$	0.26		$	0.34		$	0.56
Cash dividends per share		$	0.080		$	0.080		$	0.160		$	0.155
Weighted average number of shares of common stock outstanding (000 omitted)			23,866			23,786			23,856			23,832
Weighted average number of shares of common stock outstanding plus dilutive potential common shares (000 omitted)			24,413			24,300			24,466			24,345

See accompanying notes to condensed consolidated financial statements.

3

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

				June 26,			December 27,
				2004			2003
				(Dollars in thousands)
				(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	29,699		$	33,345
	Receivables, net				177,677			151,765
	Inventories				159,433			116,475
	Prepaid expenses				8,703			8,622
	Refundable and deferred income taxes				10,949			10,903
		Total current assets			386,461			321,110
Property, plant and equipment, at cost					481,612			448,678
	Less accumulated depreciation and amortization				271,989			258,575
		Net property, plant and equipment			209,623			190,103
Goodwill					94,821			56,022
Other intangible assets, net					55,300			14,358
Other assets					30,828			23,204
			Total assets	$	777,033		$	604,797
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current installments of long-term debt			$	1,217		$	15,009
	Notes payable to banks				11,913			15,500
	Accounts payable				77,635			63,256
	Accrued expenses				62,852			55,856
	Dividends payable				1,911			1,921
		Total current liabilities			155,528			151,542
Deferred income taxes					19,752			22,748
Long-term debt, excluding current installments					301,886			134,653
Minority interest in consolidated subsidiaries					8,598			8,244
Other noncurrent liabilities					21,818			22,116
Shareholders’ equity:
	Preferred stock				—			—
	Common stock of $1 par value				27,900			27,900
	Retained earnings				310,949			306,920
	Accumulated other comprehensive loss				(3,406	)		(2,147	)
	Treasury stock				(64,880	)		(65,975	)
	Unearned restricted stock				(1,112	)		(1,204	)
		Total shareholders’ equity			269,451			265,494
		Total liabilities and shareholders’ equity		$	777,033		$	604,797

See accompanying notes to condensed consolidated financial statements.

4

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

				Twenty-Six Weeks Ended
				June 26,			June 28,
				2004			2003
				(Dollars in thousands)
				(Unaudited)
Cash flows from operations:
	Net earnings			$	8,313		$	13,660
	Adjustments to reconcile net earnings to net cash flows from operations:
		Depreciation and amortization			18,713			17,012
		(Gain)/loss on sale of property, plant and equipment			(58	)		569
		Equity in (earnings)/losses in nonconsolidated subsidiaries			(74	)		452
		Minority interest			1,173			988
		Deferred income taxes			(6,470	)		1,920
		Other adjustments			184			1,289
		Changes in assets and liabilities:
			Receivables		(12,668	)		3,615
			Inventories		(27,368	)		8,199
			Prepaid expenses		681			(2,386	)
			Accounts payable		5,552			(3,436	)
			Accrued expenses		4,075			(19,770	)
			Other noncurrent liabilities		(299	)		446
			Income taxes payable		3,873			6,339
		Net cash flows from operations			(4,373	)		28,897
Cash flows from investing activities:
	Purchase of property, plant & equipment				(6,188	)		(10,666	)
	Acquisitions, net of cash acquired				(119,562	)		—
	Investment in nonconsolidated subsidiary				(2,450	)		(735	)
	Proceeds from sale of property and equipment				872			63
	Proceeds from minority interests				(720	)		—
	Other, net				644			212
		Net cash flows from investing activities			(127,404	)		(11,126	)
Cash flows from financing activities:
	Net borrowings (payments) under short-term agreements				(12,021	)		8,462
	Proceeds from long-term borrowings				239,000			118
	Principal payments on long-term obligations				(89,127	)		(11,906	)
	Dividends paid				(3,830	)		(3,461	)
	Proceeds from exercises under stock plans				893			416
	Debt issuance costs				(5,923	)		—
	Purchase of common treasury shares:
		Stock repurchase program			—			(2,997	)
		Stock plan exercises			(533	)		(276	)
		Net cash flows from financing activities			128,459			(9,644	)
Effect of exchange rate changes on cash and cash equivalents					(328	)		1,001
		Net change in cash and cash equivalents			(3,646	)		9,128
Cash and cash equivalents — beginning of period					33,345			19,514
Cash and cash equivalents — end of period				$	29,699		$	28,642

See accompanying notes to condensed consolidated financial statements.

5

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

1. Summary of Significant Accounting Policies

Condensed Consolidated Financial Statements

     The Condensed Consolidated Balance Sheet as of June 26, 2004 and the Condensed Consolidated Statements of Operations for the thirteen and twenty-six week periods ended June 26, 2004 and June 28, 2003 and the Condensed Consolidated Statements of Cash Flows for the thirteen and twenty-six week periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments (which include normal recurring adjustments) have been made to present fairly the financial statements as of June 26, 2004 and for all periods presented.

     Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s December 27, 2003 Annual Report to shareholders. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December 27, 2003. The results of operations for the periods ended June 26, 2004 are not necessarily indicative of the operating results for the full year.

Stock Plans

     The Company maintains stock-based compensation plans approved by the shareholders, which provide that the Compensation Committee of the Board of Directors may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards and bonuses of common stock. At June 26, 2004, 1,385,227 shares of common stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in capitalization.

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

6

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The Company accounts for those plans under the recognition and measurement principles of APB Opinion 25,Accounting for Stock Issued to Employees, and related Interpretations. No stock-based compensation cost is reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of FASB Statement No. 123,Accounting for Stock-Based Compensation, to stock-based employee compensation.

		Thirteen Weeks Ended				Twenty-Six Weeks Ended
		June 26,		June 28,		June 26,		June 28,
		2004		2003		2004		2003
Net earnings
Net earnings as reported		$	2,812	$	6,367	$	8,313	$	13,660
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			390		535		812		1,283
Pro forma net earnings		$	2,422	$	5,832	$	7,501	$	12,377
Earnings per share
As reported: Basic		$	0.12	$	0.27	$	0.35	$	0.57
	Diluted	$	0.12	$	0.26	$	0.34	$	0.56
Pro forma: Basic		$	0.10	$	0.25	$	0.31	$	0.52
	Diluted	$	0.10	$	0.24	$	0.31	$	0.51

2. Acquisitions

     On April 16, 2004, the Company acquired all the outstanding shares of Newmark International, Inc. (Newmark), a manufacturer of concrete and steel pole structures serving primarily the electrical utility industry. The results of Newmark are included in the condensed consolidated financial statements of the Company since that date. The total cost of the acquisition (including transaction costs) was $110,219 in cash, plus the assumption of $11,506 of interest-bearing debt. The following table summarizes the estimated values of the assets acquired and liabilities assumed at the date of the acquisition. The Company has not yet completed the purchase price allocation process, so the final purchase price allocation may vary from the table below:

		At
		April 16,
		2004
Current assets		$	31,280
Property, plant and equipment			30,392
Intangible assets			40,479
Goodwill			32,588
	Total assets acquired	$	134,739
Current liabilities			(17,614	)
Deferred income taxes			(4,194	)
Long-term debt			(2,712	)
	Total liabilities assumed		(24,520	)
	Net assets acquired	$	110,219

7

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Of the $40,479 of acquired intangible assets, $11,111 was assigned to trademarks and trade names that are not subject to amortization. The assets that make up the remainder of the acquired intangible assets are customer relationships of $26,440 (20-year useful life), patents and proprietary technology of $1,969 (weighted average useful life of 14.7 years), computer software of $959 (7-year useful life). The goodwill related to the acquisition was assigned to the Concrete Support Structures segment.

     On May 24, 2004, the Company acquired all the outstanding shares of W.J. Whatley, Inc. (Whatley), a manufacturer of fiberglass poles primarily serving the street and area lighting market. Whatley’s operations are included in the Company’s condensed consolidated financial statements since the acquisition date. The total purchase price amounted to $9,343 in cash (including transaction costs). Goodwill of $6,250 was recognized as part of the purchase price allocation and is assigned to the Engineered Support Structures segment.

     The Company’s summary proforma results of operations for the thirteen and twenty-six weeks ended June 26, 2004 and June 28, 2003, assuming that the transactions occurred at the beginning of the periods presented are as follows:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 26,		June 28,		June 26,		June 28,
	2004		2003		2004		2003
Net sales	$	268,768	$	219,842	$	508,904	$	448,025
Net income		3,152		6,442		8,526		13,683
Earnings per share — diluted	$	0.13	$	0.27	$	0.35	$	0.56

3. Goodwill and Intangible Assets

Amortized Intangible Assets

     The components of amortized intangible assets at June 26, 2004 and December 27, 2003 were as follows:

	As of June 26, 2004
					Weighted
	Gross Carrying		Accumulated		Average
	Amount		Amortization		Life
Customer Relationships	$	39,327	$	3,503		17 years
Proprietary Software & Database		2,609		1,101		6 years
Patents & Proprietary Technology		1,989		30		14 years
Non-compete Agreements		149		1		5 years
	$	44,074	$	4,635

	As of December 27, 2003
	Gross Carrying		Accumulated
	Amount		Amortization		Life
Customer Relationships	$	11,500	$	2,634		12  years
Proprietary Software & Database		1,650		908		5 years
	$	13,150	$	3,542

8

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Amortization expense for intangible assets during the second quarter of 2004 and 2003 was $771 and $322, respectively. Amortization expense for intangible assets for the twenty-six weeks ended June 26, 2004, and June 28, 2003 was $1,093 and $644, respectively. Estimated amortization expense related to amortized intangible assets is as follows:

	Estimated
	Amortization
	Expense
2004		2,522
2005		3,060
2006		2,813
2007		2,730
2008		2,730
2009		2,713

Non-amortized intangible assets

     Under the provisions of SFAS 142, intangible assets with indefinite lives are not amortized. The carrying value of the PiRod and Newmark trade names are $4,750 and $11,111, respectively. The Newmark amount arose from the acquisition and the PiRod amount has not changed in the thirteen or twenty-six weeks ended June 26, 2004.

Goodwill

     The carrying amount of goodwill as of June 26, 2004 was as follows:

	Engineered
	Support			Concrete Support
	Structures			Structures		Coatings		Irrigation		Tubing
	Segment			Segment		Segment		Segment		Segment		Total
Balance December 27, 2003	$	12,587		$	—	$	42,192	$	981	$	262	$	56,022
Acquisitions		6,250			32,588		—		—		—		38,838
Foreign Currency Translation		(39	)		—		—		—		—		(39	)
Balance June 26, 2004	$	18,798		$	32,588	$	42,192	$	981	$	262	$	94,821

4. Cash Flows

     The Company considers all highly liquid temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Cash payments for interest and income taxes (net of refunds) for the twenty-six weeks ended were as follows:

	June 26,		June 28,
	2004		2003
Interest	$	5,417	$	5,324
Income Taxes		7,990		175

9

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Earnings Per Share

     The following table provides a reconciliation between Basic and Diluted earnings per share:

					Dilutive
			Basic		Effect of		Diluted
			EPS		Stock Options		EPS
Thirteen weeks ended
	June 26, 2004:
		Net earnings	$	2,812		—	$	2,812
		Shares outstanding		23,866		547		24,413
		Per share amount	$	0.12		—	$	0.12
Thirteen weeks ended
	June 28, 2003:
		Net earnings	$	6,367		—	$	6,367
		Shares outstanding		23,786		514		24,300
		Per share amount	$	0.27		.01	$	0.26
Twenty-six weeks ended
	June 26, 2004:
		Net earnings	$	8,313		—	$	8,313
		Shares outstanding		23,856		610		24,466
		Per share amount	$	0.35		.01	$	0.34
Twenty-six weeks ended
	June 28, 2003:
		Net earnings	$	13,660		—	$	13,660
		Shares outstanding		23,832		513		24,345
		Per share amount	$	0.57		.01	$	0.56

6. Comprehensive Income

     Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and liabilities are translated at the exchange rates in effect on the balance sheet dates. Currency translation adjustment is the Company’s only component of other comprehensive income.

	Thirteen Weeks					Twenty-Six Weeks
	Ended					Ended
	June 26,			June 28,		June 26,			June 28,
	2004			2003		2003			2003
Net earnings	$	2,812		$	6,367	$	8,313		$	13,660
Currency translation adjustment		(317	)		3,659		(1,259	)		4,949
Total comprehensive income	$	2,495		$	10,026	$	7,054		$	18,609

7. Business Segments

     The Company reports its businesses as five reportable segments:

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

10

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Concrete Support Structures: The Company added this reportable segment in the second quarter of fiscal 2004 as a result of the April 2004 acquisition of Newmark. This segment consists of the manufacture of engineered concrete structures primarily for the utility industry;

     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; and

     Tubing: This segment consists of the manufacture of tubular products.

     In addition to these five reportable segments, the Company has other businesses that individually are not more than 10% of consolidated sales. These businesses, which include wind energy development, machine tool accessories and industrial fasteners, are reported in the “Other” category.

     In the first quarter of fiscal 2004, the Company changed its methodology regarding the reporting of net corporate expense, which is now reported separately rather than allocated to the respective reportable segments. The Company believes this provides for better reporting of the operational performance of its segments. Net corporate expense is net of certain service-related expenses that are allocated to business units generally on the basis of employee headcounts and sales dollars. Figures for 2003 have been reclassified to conform to the 2004 presentation.

			Thirteen Weeks Ended				Twenty-Six Weeks Ended
			June 26,		June 28,		June 26,		June 28,
			2004		2003		2004		2003
Sales:
	Engineered Support Structures segment:
		Lighting & Traffic	$	70,373	$	62,434	$	128,684	$	119,011
		Utility		24,089		14,877		49,891		39,185
		Wireless Communication		25,616		16,098		40,939		27,093
				120,078		93,409		219,514		185,289
	Concrete Support Structures segment			16,575		—		16,575		—
	Coatings segment			23,568		23,556		46,224		50,718
	Irrigation segment			87,582		71,344		167,681		146,913
	Tubing segment			24,096		14,015		41,419		30,476
	Other			4,503		4,461		8,863		9,077
				276,402		206,785		500,276		422,473
Intersegment Sales:
	Coatings			3,880		2,509		7,562		5,561
	Irrigation			11		114		163		141
	Tubing			5,351		2,922		8,666		7,550
	Other			1,147		574		1,975		1,261
				10,389		6,119		18,366		14,513
Net Sales
	Engineered Support Structures			120,078		93,409		219,514		185,289
	Concrete Support Structures			16,575		—		16,575		—
	Coatings			19,688		21,047		38,662		45,157
	Irrigation			87,571		71,230		167,518		146,772
	Tubing			18,745		11,093		32,753		22,926
	Other			3,356		3,887		6,888		7,816
Consolidated Net Sales			$	266,013	$	200,666	$	481,910	$	407,960

11

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 26,			June 28,			June 26,			June 28,
		2004			2003			2004			2003
Operating Income
	Engineered Support Structures	$	5,967		$	4,682		$	7,408		$	8,745
	Concrete Support Structures		1,755			—			1,755			—
	Coatings		2,601			1,488			3,067			3,568
	Irrigation		12,008			9,665			23,853			20,780
	Tubing		3,421			1,601			5,506			3,468
	Other		(593	)		(525	)		(1,085	)		(874	)
	Net corporate expense		(6,150	)		(3,180	)		(9,746	)		(6,905	)
Total Operating Income		$	19,009		$	13,731		$	30,758		$	28,782

8. Guarantor/ Non-Guarantor Financial Information

     On May 4, 2004, the Company completed a $150,000,000 offering of 6 7/8% Senior Subordinated Notes. The Notes are guaranteed, jointly and severally, on a senior subordinated basis by certain of our current and future direct and indirect domestic subsidiaries (collectively the “Guarantors”), excluding its other current domestic and foreign subsidiaries which do not guarantee the debt collectively referred to as the “Non-Guarantors”.

12

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Condensed consolidated financial information for the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries is as follows:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Thirteen Weeks Ended June 26, 2004

		Parent			Guarantors			Non-Guarantors			Eliminations			Total
Net Sales		$	163,969		$	44,085		$	76,701		$	(18,742	)	$	266,013
Cost of Sales			126,924			35,024			56,712			(18,727	)		199,933
	Gross Profit		37,045			9,061			19,989			(15	)		66,080
Selling, general and administrative expenses			26,462			6,613			13,996			—			47,071
	Operating income		10,583			2,448			5,993			(15	)		19,009
Other income (deductions):
	Interest expense		(3,827	)		(5	)		(271	)		36			(4,067	)
	Interest income		41			—			414			(36	)		419
	Debt prepayment expenses		(9,860	)		—			—			—			(9,860	)
	Miscellaneous		(26	)		93			(341	)		—			(274	)
			(13,672	)		88			(198	)		—			(13,782	)
Earnings before income taxes, minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries			(3,089	)		2,536			5,795			(15	)		5,227
Income tax expense:
	Current		3,156			804			2,121			—			6,081
	Deferred		(4,330	)		238			(62	)		—			(4,154	)
			(1,174	)		1,042			2,059			—			1,927
Earnings before minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries			(1,915	)		1,494			3,736			(15	)		3,300
Minority interest			—			—			(718	)		—			(718	)
Equity in earnings/(losses) of nonconsolidated subsidiaries			4,742			—			—			(4,512	)		230
	Net earnings	$	2,827		$	1,494		$	3,018		$	(4,527	)	$	2,812

13

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Twenty-Six Weeks Ended June 26, 2004

		Parent				Guarantors			Non-Guarantors			Eliminations			Total
Net Sales		$	309,675			$	65,319		$	139,857		$	(32,941	)	$	481,910
Cost of Sales			240,031				53,529			103,984			(32,994	)		364,550
	Gross Profit		69,644				11,790			35,873			53			117,360
Selling, general and administrative expenses			50,015				10,889			25,698			—			86,602
	Operating income		19,629				901			10,175			53			30,758
					��
Other income (deductions):
	Interest expense		(6,030	)			(10	)		(504	)		79			(6,465	)
	Interest income		84				1			689			(79	)		695
	Debt prepayment expenses		(9,860	)			—			—			—			(9,860	)
	Miscellaneous		(18	)			93			(335	)					(260	)
			(15,824	)			84			(150	)		—			(15,890	)
Earnings before income taxes, minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries			3,805				985			10,025			53			14,868
Income tax expense:
	Current		7,969				(143	)		4,100			—			11,926
	Deferred		(6,532	)			542			(480	)		—			(6,470	)
			1,437				399			3,620			—			5,456
Earnings before minority interest, and equity in earnings/(losses) of nonconsolidated subsidiaries			2,368				586			6,405			53			9,412
Minority interest			—				—			(1,173	)		—			(1,173	)
Equity in (earnings)/losses of nonconsolidated subsidiaries			5,892				—			—			(5,818	)		74
	Net earnings	$	8,260			$	586		$	5,232		$	(5,765	)	$	8,313

14

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Thirteen Weeks Ended June 28, 2003

			Parent			Guarantors			Non-Guarantors			Eliminations			Total
Net Sales			$	123,865		$	24,125		$	66,026		$	(13,350	)	$	200,666
	Cost of Sales			93,668			20,423			48,316			(13,229	)		149,178
		Gross Profit		30,197			3,702			17,710			(121	)		51,488
	Selling, general and administrative expenses			22,241			4,671			10,845			—			37,757
		Operating income		7,956			(969	)		6,865			(121	)		13,731
	Other income (deductions):
		Interest expense		(2,319	)		(8	)		(405	)		101			(2,631	)
		Interest income		104			—			314			(101	)		317
		Miscellaneous		29			1			(147	)		—			(117	)
				(2,186	)		(7	)		(238	)		—			(2,431	)
	Earnings before income taxes, minority interest, and equity in earnings/ (losses) of nonconsolidated subsidiaries			5,770			(976	)		6,627			(121	)		11,300
	Income tax expense:
		Current		2,190			(545	)		2,054			—			3,699
		Deferred		444			130			(159	)		—			415
				2,634			(415	)		1,895			—			4,114
	Earnings before minority interest, and equity in earnings/ (losses) of nonconsolidated subsidiaries			3,136			(561	)		4,732			(121	)		7,186
	Minority interest			—			—			(717	)		—			(717	)
	Equity in losses of nonconsolidated subsidiaries			3,352			—			—			(3,454	)		(102	)
		Net earnings	$	6,488		$	(561	)	$	4,015		$	(3,575	)	$	6,367

15

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Twenty-Six Weeks Ended June 28, 2003

		Parent			Guarantors			Non-Guarantors			Eliminations			Total
Net Sales		$	267,311		$	48,184		$	118,090		$	(25,625	)	$	407,960
Cost of Sales			199,804			41,593			87,755			(25,533	)		303,619
	Gross Profit		67,507			6,591			30,335			(92	)		104,341
Selling, general and administrative expenses			45,310			9,655			20,594			—			75,559
	Operating income		22,197			(3,064	)		9,741			(92	)		28,782
Other income (deductions):
	Interest expense		(4,646	)		(17	)		(856	)		203			(5,316	)
	Interest income		215			—			539			(203	)		551
	Miscellaneous		67			13			(235	)		—			(155	)
			(4,364	)		(4	)		(552	)		—			(4,920	)
Earnings before income taxes, minority interest, and equity in earnings/ (losses) of nonconsolidated subsidiaries			17,833			(3,068	)		9,189			(92	)		23,862
Income tax expense:
	Current		5,391			(1,703	)		3,154			—			6,842
	Deferred		1,719			447			(246	)		—			1,920
			7,110			(1,256	)		2,908			—			8,762
Earnings before minority interest, and equity in earnings/ (losses) of nonconsolidated subsidiaries			10,723			(1,812	)		6,281			(92	)		15,100
Minority interest			—			—			(988	)		—			(988	)
Equity in losses of nonconsolidated subsidiaries			3,029			—			—			(3,481	)		(452	)
	Net earnings	$	13,752		$	(1,812	)	$	5,293		$	(3,573	)	$	13,660

16

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS

June 26, 2004

			Parent			Guarantors		Non-Guarantors			Eliminations			Total
ASSETS
Current assets:
	Cash and cash equivalents		$	1,571		$	3,777	$	24,351		$	—		$	29,699
	Receivables, net			69,443			26,504		81,907			(177	)		177,677
	Inventories			74,775			36,520		48,658			(520	)		159,433
	Prepaid expenses			2,705			940		5,058			—			8,703
	Refundable and deferred income taxes			9,162			1,493		294			—			10,949
		Total current assets		157,656			69,234		160,268			(697	)		386,461
Property, plant and equipment, at cost				316,065			69,157		96,390			—			481,612
	Less accumulated depreciation and amortization			193,289			20,498		58,202			—			271,989
	Net property, plant and equipment			122,776			48,659		38,188			—			209,623
Goodwill				20,370			63,335		11,116			—			94,821
Other intangible assets				—			53,759		1,541			—			55,300
Investment in subsidiaries and intercompany accounts				336,407			36,690		(5,177	)		(367,920	)		—
Other assets				32,083			—		645			(1,900	)		30,828
		Total assets	$	669,292		$	271,677	$	206,581		$	(370,517	)	$	777,033
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current installments of long-term debt		$	1,057		$	39	$	121		$	—		$	1,217
	Notes payable to banks			—			—		11,913			—			11,913
	Accounts payable			22,166			12,315		43,154			—			77,635
	Accrued expenses			38,586			5,677		18,766			(177	)		62,852
	Dividends payable			1,911			—		—			—			1,911
		Total current liabilities		63,720			18,031		73,954			(177	)		155,528
Deferred income taxes				15,488			1,770		2,494			—			19,752
Long-term debt, excluding current installments				296,384			107		7,295			(1,900	)		301,886
Minority interest in consolidated subsidiaries				—			—		8,598			—			8,598
Other noncurrent liabilities				20,323			—		1,495			—			21,818
Shareholders’ equity:
		Common stock of $1 par value		27,900			14,249		21,435			(35,684	)		27,900
		Additional paid-in capital		—			179,195		55,411			(234,606	)		—
		Retained earnings		311,469			58,325		39,305			(98,150	)		310,949
		Accumulated other comprehensive loss		—			—		(3,406	)		—			(3,406	)
		Treasury stock		(64,880	)		—		—			—			(64,880	)
		Unearned restricted stock		(1,112	)		—		—			—			(1,112	)
		Total shareholders’ equity		273,377			251,769		112,745			(368,440	)		269,451
		Total liabilities and shareholders’ equity	$	669,292		$	271,677	$	206,581		$	(370,517	)	$	777,033

17

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 27, 2003

			Parent			Guarantors		Non-Guarantors			Eliminations			Total
ASSETS
Current assets:
	Cash and cash equivalents		$	1,982		$	612	$	30,751		$	—		$	33,345
	Receivables, net			60,935			17,660		73,269			(99	)		151,765
	Inventories			62,290			15,659		39,100			(574	)		116,475
	Prepaid expenses			2,978			451		5,193			—			8,622
	Refundable and deferred income taxes			9,784			933		186			—			10,903
		Total current assets		137,969			35,315		148,499			(673	)		321,110
Property, plant and equipment, at cost				313,542			38,926		96,210			—			448,678
	Less accumulated depreciation and amortization			183,524			18,748		56,303			—			258,575
	Net property, plant and equipment			130,018			20,178		39,907			—			190,103
Goodwill				20,370			30,747		4,905			—			56,022
Other intangible assets				—			14,358		—			—			14,358
Investment in subsidiaries and intercompany accounts				190,685			50,271		4,073			(245,029	)		—
Other assets				26,430			—		174			(3,400	)		23,204
Deferred income taxes				—			2,757		—			(2,757	)		—
		Total assets	$	505,472		$	153,626	$	197,558		$	(251,859	)	$	604,797
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current installments of long-term debt		$	14,843		$	61	$	105		$	—		$	15,009
	Notes payable to banks			—			—		15,500			—			15,500
	Accounts payable			15,340			7,893		40,023			—			63,256
	Accrued expenses			34,240			4,587		17,128			(99	)		55,856
	Dividends payable			1,921			—		—			—			1,921
		Total current liabilities		66,344			12,541		72,756			(99	)		151,542
Deferred income taxes				22,641			—		2,864			(2,757	)		22,748
Long-term debt, excluding current installments				128,191			120		9,742			(3,400	)		134,653
Minority interest in consolidated subsidiaries				—			—		8,244			—			8,244
Other noncurrent liabilities				20,081			—		2,035			—			22,116
Shareholders’ equity:
		Common stock of $1 par value		27,900			14,248		21,429			(35,677	)		27,900
		Additional paid-in capital		—			68,978		46,340			(115,318	)		—
		Retained earnings		307,494			57,739		36,295			(94,608	)		306,920
		Accumulated other comprehensive loss		—			—		(2,147	)		—			(2,147	)
		Treasury stock		(65,975	)		—		—			—			(65,975	)
		Unearned restricted stock		(1,204	)		—		—			—			(1,204	)
		Total shareholders’ equity		268,215			140,965		101,917			(245,603	)		265,494
		Total liabilities and shareholders’ equity	$	505,472		$	153,626	$	197,558		$	(251,859	)	$	604,797

18

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twenty-Six Weeks Ended June 26, 2004

				Parent			Guarantors			Non-Guarantors			Eliminations			Total
Cash flows from operations:
	Net earnings			$	8,260		$	586		$	5,232		$	(5,765	)	$	8,313
	Adjustments to reconcile net earnings to net cash flows from operations:
		Depreciation and amortization			11,701			3,552			3,460			—			18,713
		(Gain)/ Loss on sale of property, plant and equipment			(21	)		3			(40	)		—			(58	)
		Equity in (earnings)/losses of nonconsolidated subsidiaries			(74	)		—			—			—			(74	)
		Minority interest			—			—			1,173			—			1,173
		Deferred income taxes			(6,532	)		542			(480	)		—			(6,470	)
		Other adjustments			282			—			(98	)		—			184
		Changes in assets and liabilities:
			Receivables		(7,847	)		4,251			(9,150	)		78			(12,668	)
			Inventories		(12,517	)		(5,644	)		(9,727	)		520			(27,368	)
			Prepaid expenses		273			235			173			—			681
			Accounts payable		3,735			(748	)		2,565			—			5,552
			Accrued expenses		4,336			(1,685	)		1,501			(77	)		4,075
			Other noncurrent liabilities		858			—			(1,157	)		—			(299	)
			Income taxes payable		(1,533	)		3,610			1,796			—			3,873
		Net cash flows from operations			921			4,702			(4,752	)		(5,244	)		(4,373	)
Cash flows from investing activities:
	Purchase of property, plant and equipment				(3,612	)		(569	)		(2,007	)		—			(6,188	)
	Acquisitions, net of cash acquired				(119,562	)		—			—			—			(119,562	)
	Investment in nonconsolidated subsidiary				(2,450	)		—			—			—			(2,450	)
	Proceeds from sale of property, plant and equipment				64			—			808			—			872
	Proceeds from minority interests				—			—			(720	)		—			(720	)
	Other, net				(20,786	)		10,573			7,113			3,744			644
		Net cash flows from investing activities			(146,346	)		10,004			5,194			3,744			(127,404	)
Cash flows from financing activities:
	Net repayments under short-term agreements				—			(8,675	)		(3,346	)		—			(12,021	)
	Proceeds from long-term borrowings				239,000			—			—			—			239,000
	Principal payments on long-term obligations				(84,593	)		(2,866	)		(3,168	)		1,500			(89,127	)
	Dividends paid				(3,830	)		—			—			—			(3,830	)
	Proceeds from exercises under stock plans				893			—			—			—			893
	Debt issuance costs				(5,923	)		—			—			—			(5,923	)
	Purchase of common treasury shares:												��
		Stock plan exercises			(533	)		—			—			—			(533	)
		Net cash flows from financing activities			145,014			(11,541	)		(6,514	)		1,500			128,459
	Effect of exchange rate changes on cash and cash equivalents				—			—			(328	)		—			(328	)
	Net change in cash and cash equivalents				(411	)		3,165			(6,400	)		—			(3,646	)
	Cash and cash equivalents — beginning of year				1,982			612			30,751			—			33,345
	Cash and cash equivalents — end of year			$	1,571		$	3,777		$	24,351		$	—		$	29,699

19

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Twenty-Six Weeks Ended June 28, 2003

				Parent			Guarantors			Non-Guarantors			Eliminations			Total
Cash flows from operations:
	Net earnings			$	13,752		$	(1,812	)	$	5,293		$	(3,573	)	$	13,660
	Adjustments to reconcile net earnings to net cash flows from operations:
		Depreciation and amortization			11,263			2,560			3,189			—			17,012
		(Gain)/Loss on sale of property, plant and equipment			24			(5	)		550			—			569
		Equity (earnings)/losses of nonconsolidated subsidiaries			452			—			—			—			452
		Minority interest			—			—			988			—			988
		Deferred income taxes			1,719			447			(246	)		—			1,920
		Other adjustments			383			—			906			—			1,289
		Changes in assets and liabilities:
			Receivables		(2,394	)		3,183			2,636			190			3,615
			Inventories		9,985			2,740			(4,986	)		460			8,199
			Prepaid expenses		(280	)		(49	)		(2,057	)		—			(2,386	)
			Accounts payable		3,147			(8,459	)		1,876			—			(3,436	)
			Accrued expenses		(16,875	)		(1,759	)		(946	)		(190	)		(19,770	)
			Other noncurrent liabilities		112			—			334			—			446
			Income taxes payable		(578	)		4,018			2,899			—			6,339
		Net cash flows from operations			20,710			864			10,436			(3,113	)		28,897
Cash flows from investing activities:
	Purchase of property, plant and equipment				(5,998	)		(558	)		(4,110	)		—			(10,666	)
	Investment in nonconsolidated subsidiary				(735	)		—			—			—			(735	)
	Proceeds from sale of property, plant and equipment				40			20			3			—			63
	Other, net				(1,305	)		273			(1,869	)		3,113			212
		Net cash flows from investing activities			(7,998	)		(265	)		(5,976	)		3,113			(11,126	)
Cash flows from financing activities:
	Net borrowings under short-term agreements				—			—			8,462			—			8,462
	Proceeds from long-term borrowings				118			—			—			—			118
	Principal payments on long-term obligations				(11,448	)		(90	)		(368	)		—			(11,906	)
	Dividends paid				(3,461	)		—			—			—			(3,461	)
	Proceeds from exercises under stock plans				416			—			—			—			416
	Purchase of common treasury shares:
		Stock repurchase program			(2,997	)		—			—			—			(2,997	)
		Stock plan exercises			(276	)		—			—			—			(276	)
		Net cash flows form financing activities			(17,648	)		(90	)		8,094			—			(9,644	)
Effect of exchange rate changes on cash and cash equivalents					—			—			1,001			—			1,001
Net change in cash and cash equivalents					(4,936	)		509			13,555			—			9,128
Cash and cash equivalents — beginning of year					8,166			691			10,657			—			19,514
Cash and cash equivalents — end of year				$	3,230		$	1,200		$	24,212		$	—		$	28,642

20

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

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

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

     We report our businesses as five reportable segments. See Note 7 to the Condensed Consolidated Financial Statements. In the first quarter of fiscal 2004, we changed our methodology for reporting net corporate expense in the segment reporting. Starting in 2004, we are reporting net corporate expense separately rather than allocating net corporate expense to the operating segments, as we believe this provides for better reporting of the operations of our segments. Figures for 2003 have been reclassified to conform to the 2004 presentation.

     The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial position. This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related notes.

Results of Operations

     Dollars in thousands, except per share amounts

			Thirteen Weeks Ended									Twenty-Six Weeks Ended
			June 26,			June 28,			% Incr.			June 26,			June 28,			% Incr.
			2004			2003			(Decr)			2004			2003			(Decr)
Consolidated
	Net sales		$	266,013		$	200,666			32.6	%	$	481,910		$	407,960			18.1	%
	Gross profit			66,080			51,488			28.3	%		117,360			104,341			12.5	%
		as a percent of sales		24.8	%		25.7	%					24.4	%		25.6	%
	SG&A expense			47,071			37,757			24.7	%		86,602			75,559			14.6	%
		as a percent of sales		17.7	%		18.8	%					18.0	%		18.5	%
	Operating income			19,009			13,731			38.4	%		30,758			28,782			6.9	%
		as a percent of sales		7.1	%		6.8	%					6.4	%		7.1	%
	Net interest expense			3,648			2,314			57.6	%		5,770			4,765			21.1	%
	Effective tax rate			36.9	%		36.4	%					36.7	%		36.7	%
	Net earnings			2,812			6,367			-55.8	%		8,313			13,660			-39.1	%
	Earnings per share			0.12			0.26			-53.8	%		0.34			0.56			-39.3	%

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			Thirteen Weeks Ended									Twenty-Six Weeks Ended
			June 26,			June 28,			% Incr.			June 26,			June 28,			% Incr.
			2004			2003			(Decr)			2004			2003			(Decr)
Infrastructure businesses:
	Engineered Structures segment
		Net sales		120,078			93,409			28.6	%		219,514			185,289			18.5	%
		Operating income		5,967			4,682			27.4	%		7,408			8,745			-15.3	%
	Concrete Structures segment
		Net sales		16,575			—			NM			16,575			—			NM
		Operating income		1,755			—			NM			1,755			—			NM
	Coatings segment
		Net sales		19,688			21,047			-6.5	%		38,662			45,157			-14.4	%
		Operating income		2,601			1,488			74.8	%		3,067			3,568			-14.0	%
Total Infrastructure businesses:
		Net sales		156,341			114,456			36.6	%		274,751			230,446			19.2	%
		Operating income		10,323			6,170			67.3	%		12,230			12,313			-0.7	%
Agricultural businesses:
	Irrigation segment
		Net sales		87,571			71,230			22.9	%		167,518			146,772			14.1	%
		Operating income		12,008			9,665			24.2	%		23,853			20,780			14.8	%
	Tubing segment
		Net sales		18,745			11,093			69.0	%		32,753			22,926			42.9	%
		Operating income		3,421			1,601			113.7	%		5,506			3,468			58.8	%
Total Agricultural businesses:
		Net sales		106,316			82,323			29.1	%		200,271			169,698			18.0	%
		Operating income		15,429			11,266			37.0	%		29,359			24,248			21.1	%
Other
		Net sales		3,356			3,887			-13.7	%		6,888			7,816			-11.9	%
		Operating loss		(593	)		(525	)		-13.0	%		(1,085	)		(874	)		-24.1	%
Net corporate expense				(6,150	)		(3,780	)		-93.4	%		(9,746	)		(6,905	)		-41.1	%

Overview

     In the second quarter of 2004, we completed two acquisitions. On April 16, 2004, we completed the purchase of Newmark International, Inc. (Newmark), a manufacturer of concrete and steel pole structures mainly for the utility industry. The purchase price was approximately $110.2 million in cash (including transaction costs), plus the assumption of approximately $11.5 million in interest-bearing debt. On May 24, 2004, we completed the purchase of W.J. Whatley, Inc. (Whatley), a manufacturer of fiberglass poles principally for outdoor lighting applications. The purchase price for the Whatley shares was approximately $9.3 million in cash (including transaction costs), plus the assumption of approximately $0.7 million in interest-bearing debt. The results of these operations are included in our consolidated results starting on the closing dates of the acquisitions. The funds used for these acquisitions were borrowed through our existing credit facilities.

     On May 4, 2004, we refinanced our long-term credit facilities. This refinancing included the issuance of $150 million in senior subordinated notes at a fixed interest rate of 6.875% per annum and a new $225 million bank financing arrangement consisting of a $75 million term loan and a new $150 million revolving credit facility. The proceeds from these new facilities were used to prepay our fixed rate promissory notes, repay a $43 million bridge loan than was taken to fund part of the Newmark acquisition and terminate our old

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revolving credit agreement. This refinancing resulted in a pre-tax charge to earnings of approximately $9.9 million ($6.1 million after tax) in expenses associated with the prepayment of the promissory notes and the write-off of unamortized deferred financing costs related to the old revolving credit facility.

     The net sales increase on a quarterly and year-to-date basis in 2004, as compared with 2003, resulted from the acquisitions of Newmark and Whatley in 2004 and improved sales in the Irrigation and Tubing segments and the Utility product line in the Engineered Support Structures (ESS) segment. These increases were offset by slightly lower sales in the Coatings segment. Sales volume increases in the Irrigation, Tubing and ESS segments in 2004 were also the result of generally higher selling prices. In response to rapidly rising steel costs throughout the first two quarters of this year, we increased our selling prices where possible to offset the impact of higher steel costs. We estimate that the net negative impact of rising steel prices on gross profit was approximately $2.5 million and $4.0 million for the thirteen and twenty-six weeks ended June 26, 2004, respectively. The main reasons for the increase in steel prices have persisted in the second quarter of 2004; large increases in steel production in China (which has driven up prices of steel producing inputs, such as scrap steel and coke) and overall shortages of steel producing inputs that restricted supply and caused rapid, unprecedented pricing increases and availability issues. In some cases, steel producers have broken existing contracts or surcharges have been added to contracts. The increase in selling, general and administrative (SG&A) spending for the quarterly and year-to-date basis in 2004 relates to the addition of Newmark and Whatley this year ($2.5 million), increased employee incentives in 2004 (approximately $3.5 million) as compared with 2003, severance costs associated with an administrative headcount reduction in Europe ($1.2 million), higher sales commissions ($0.7 million) and currency translation effects ($0.5 million and $1.7 million for the quarter and year-to-date, respectively).

     Interest expense increased in the second quarter of 2004 as compared with 2003, due to increased borrowing levels this year, due mainly to the Newmark and Whatley acquisitions. Our share of the earnings in our nonconsolidated subsidiaries improved from last year, due to improvement in the operations of our Mexican joint venture, which manufactures utility and wireless communication structures, and in the operations of our irrigation distributor in Argentina.

Engineered Support Structures (ESS) Segment

     General — In the ESS segment, sales improved in all regions and product lines. In the second quarter, operating income improved over 2003 due mainly to improvement in gross margins and sales volumes in the North American utility and specialty product lines and further growth in sales and earnings in China, offset to an extent by lower profitability in the Lighting and Traffic product line. On a year-to-date basis, 2004 operating income was lower than 2003, mainly due to extremely competitive pricing in our Utility product line in the first quarter that began in 2003 and continued into early 2004. SG&A expenses in 2004 were higher than 2003 on a quarterly and year-to-date basis by approximately $2.6 and $4.5 million, respectively. This increase was due principally to currency translation effects ($0.4 million and $1.3 million), for the quarter and year-to-date, respectively), higher sales commissions related to the increase in sales, and expenses associated with administrative workforce reductions and reorganizing in Europe ($1.2 million).

     Lighting and Traffic — In North America, sales of lighting and traffic products for the second quarter were up but with lower profitability as compared with 2003. Gross profit margins were down compared with last year, mainly due to increases in steel prices. Sales that are funded by government spending have relatively long lead times and, due to contractual provisions, we were not able to fully recover our increase in steel cost. Order flows and backlogs remain solid in both the commercial lighting and the government-funded transportation structures markets. Federal legislation on road and highway spending programs has not yet been enacted, but the current bill funding has been extended on a short-term basis. We anticipate that new legislation will be passed in the near future, but further delays could impact the market, at least in the short-term.

     In Europe, lighting sales were higher than 2003, both on a quarterly and year-to-date basis. However, 2004 quarterly and year-to-date profitability fell by approximately $0.8 million and $1.6 million, respectively,

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as compared with 2003 levels. The decrease in earnings was due to increased SG&A spending related to severance charges associated with reductions in administrative employment levels ($1.2 million).

     Utility — Utility product sales in North America for 2004 are improved as compared with 2003, both on a quarterly and year-to-date basis. Market conditions are improving, as utility companies and independent power producers have been increasing spending for transmission, distribution and substation structures. In 2003, our order rates fell early in the year, as market pricing became extremely competitive due to relatively weak market conditions and a number of new competitors. We did not follow pricing down, which resulted in low order entry levels and sales in the second quarter of 2003. In 2004, competitive conditions have improved, resulting in higher sales than at this time in 2003. Market pricing has continued to improve over the last several quarters and second quarter margins this year are higher than 2003. Year-to-date margins, however, are still down from 2003 levels.

     In China, utility structures sales continues to grow, reflecting the overall growth of the Chinese economy and its electrical energy needs. We believe that, as China increases its electrical generation and transmission capabilities, the demand for utility structures will continue to grow.

     Specialty Structures — Sales in our North American Specialty Structures product line in the second quarter improved by $4.7 million from last year, due to higher sales of wireless communication structures and components and increased sales of sign structures. General market conditions are improving in wireless communication. Quotations, orders and sales all are improved over 2003, as carriers have improved their financial performance and are increasing spending for structures and components to improve their networks and overall service levels. Profitability of the North American specialty structures business improved by $1.4 million and $3.2 million for the thirteen and twenty-six weeks ended June 26, 2004, respectively, as compared with the same periods last year. Most of the improvement in earnings relates to increased sales volumes and factory productivity, which resulted in increased gross profit margins. In addition, year-to-date SG&A expenses were $0.7 million lower than in 2003, due to cost cutting measures taken last year. Sales of wireless communication poles in China increased from 2003 by $3.7 million and $6.4 million on a quarterly and year-to-date basis, respectively. China’s continued actions to build out their wireless networks to accommodate growing demand for wireless communication services is driving demand for wireless communication poles.

Concrete Support Structures Segment

     This segment includes the operations of Newmark since the closing of the acquisition on April 16, 2004. Similar to the Utility product line in the ESS segment, utility companies are increasing their spending for electrical utility structures in Newmark’s markets, which is mainly in the southern U.S. The operating income for the period from April 16 through June 26, 2004 includes approximately $0.8 million in charges related to depreciation and amortization expenses resulting from the allocation of the purchase price of the acquisition in excess of the assets acquired and liabilities assumed.

Coatings Segment

     For the second quarter of 2004, sales in our galvanizing facilities improved by nearly 15% from the second quarter of 2003. This increase includes improved internal demand from the ESS and Irrigation segments, resulting from sales growth in those businesses in 2004. For the twenty-six weeks ended June 26, 2004, total galvanizing sales were slightly ahead of the same period in 2003. The second quarter sales increase was associated with improvement in the U.S. industrial economy, which resulted in improved demand for galvanizing services. The increase in galvanizing sales was offset by decreased sales in our anodizing businesses, mostly related to lower sales to our largest anodizing customer. The increase in the 2004 second quarter operating income compared with the second quarter of 2003 related to the increase in galvanizing sales and production volumes and the associated operating efficiencies realized through increased volume. The operating income improvement in the galvanizing business was partially offset by lower profitability in our anodizing businesses related to lower sales volumes. SG&A spending in this segment was essentially unchanged from 2003 levels, both on a quarterly and year-to-date basis.

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Irrigation Segment

     On a quarterly and year-to-date basis, sales in the Irrigation segment were up due to improved sales in North America, with international sales volumes relatively flat after taking into account currency translation effects. In North America, the sales increase mainly came through favorable market conditions and, to a lesser degree, pricing increases as a result of rising steel costs. North American market conditions were bolstered by relatively good agricultural commodity prices, low interest rates and a favorable government farm program, all resulting in solid demand for mechanized irrigation equipment and related service parts. Some buying decisions we believe were impacted by rising prices related to steel prices; these buying decisions were accelerated to avoid anticipated future price increases. North American operating income for the thirteen and twenty-six weeks ended June 26, 2004 was up as compared with the same periods in 2003, mainly due to improved sales volumes. Gross profit as a percent of sales was down slightly compared with 2003, due mainly to sales price increases taken to recover increased steel costs. Factory performance improved in 2004, benefiting from increases in sales and production levels, which helped offset increased steel costs. SG&A spending in North America was modestly increased over the 2003 on a quarterly and year-to-date basis.

     In International markets, 2004 second quarter sales were comparable to 2003. In Brazil, the agricultural economy continues to be favorable, with relatively good agricultural commodity prices and favorable government-sponsored financing programs to fund purchases of irrigation equipment. Sales and operating income in Brazil were down from record second quarter levels in 2003, as slowdowns in the timing of government funding of purchases resulted in shipping delays. Also, a more competitive pricing environment and rising steel prices have negatively impacted gross profit margins. In South Africa, sales and profits are lower than 2003, both on a quarterly and year-to-date basis, mainly due to weaker local crop prices. Increased sales and profits in Europe and Australia helped somewhat offset lower profitability in Brazil. SG&A spending in our international operations in the second quarter of 2004 was higher than 2003, due to effects of currency translation and employee separation costs. Our overall international irrigation operating income in the second quarter was lower than 2003, while year-to-date operating income this year was slightly lower than 2003.

Tubing Segment

     The increase in Tubing sales for the second quarter and the year-date 2004 as compared with last year was due to increased sales and production volume of approximately 30% and 15%, respectively (including increased internal production volume for the Irrigation and ESS segments), as well as sales price increases associated with increased steel costs. Increases in the amount of tubing sold in 2004 are related to improving industrial production levels in the U.S., favorable market conditions in the agricultural economy and some buying by customers attempting to avoid future price increases. In addition, we believe that we have gained some sales due to steel shortages of some of our competitors. The increase in 2004 operating income as compared with 2003 is due to increased sales volume and improved factory operations associated with higher production levels and factory expense control. SG&A spending was up $1.0 million for the second quarter and the year-to-date periods ended June 26, 2004 as compared with the same periods last year due mainly to increased employee incentives of approximately $0.7 million associated with increased profitability.

Other

     This includes our industrial fastener business, our machine tool accessories operation in France and the development costs associated with our wind energy structure initiative. The main reason for the decrease in profitability this year was weak demand for machine tools in Europe. Wind energy development efforts are continuing; expenses were slightly lower this year as compared with the second quarter and year-to-date periods ended June 28, 2003.

Net Corporate Expense

     Increased net corporate expenses in 2004 as compared with 2003 are mainly related to approximately $2 million in increased employee incentives due to improved operating earnings this year. The increase in net

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corporate expense was also impacted in 2004 by compliance costs associated the Sarbanes-Oxley Act of 2002 and increased expenses to improve our procurement organization.

Liquidity and Capital Resources

Cash Flows

     Working Capital and Operating Cash Flows — Net working capital was $229.4 million at June 26, 2004, as compared with $169.6 million at December 27, 2003. The ratio of current assets to current liabilities was 2.48:1 at June 26, 2004, as compared with 2.12:1 at December 27, 2003. The increase in net working capital relates to approximately $20.9 million of working capital that was acquired in the Newmark and Whatley acquisitions. Operating cash flow was a net outflow of $4.4 million for the twenty-six week period ended June 26, 2004, as compared with a net inflow of $28.9 million for the same period in 2003. The main reasons for the lower 2004 operating cash flows were lower net income (including a $6.1 million after-tax charge to earnings related to premiums we paid upon prepayment of our promissory notes) and increased receivables and inventories. The increase in receivables related directly to the increase in sales we realized in the second quarter of 2004. Overall, our receivables as a percentage of net sales is similar to past experience. The increase in inventory is associated with overall increased sales levels and the current steel industry operating environment. Backlogs are approximately 25% higher than at the end of 2003, with the larger increases in the ESS and Tubing segments. Accordingly, we have increased our inventories to satisfy this increased sales demand. In addition, current conditions in steel industry continue to be challenging, as prices have risen sharply this year, lead times to acquire material have extended and availability has become a larger concern than in the past. In response, we have been increasing our steel inventories to help ensure we have material to meet our shipping commitments to our customers and to more closely match our inventory stocks with sales backlogs.

     Investing Cash Flows — Capital spending the twenty-six weeks ended June 26, 2004 was $6.2 million, as compared with $10.7 million for the same period in 2003. In addition, we invested $2.5 million in our Mexican nonconsolidated joint venture in 2004 to provide additional capital to support that business going forward. In the second quarter of 2004, we completed the acquisitions of Newmark and Whatley for an aggregate purchase price of $119.6 million in cash, plus assumed interest-bearing debt of $12.2 million.

     Financing Cash Flows — Our total interest-bearing debt increased from $165.2 as of December 27, 2003 to $315.0 as of June 16, 2004. The increase in borrowings was related to funding the Newmark and Whatley acquisitions, which was an aggregate of $131.8 million (including debt assumed as part of the acquisitions) and the increase in working capital, especially inventories.

Sources of Financing and Capital

     We have historically funded our growth, capital spending and acquisitions through a combination of operating cash flows and debt financing. We have an internal long-term objective to maintain long-term debt as a percent of capital at or below 40%. At June 26, 2004, our long-term debt to invested capital ratio was 47.8%.

     Our debt financing at June 26, 2004 consisted mainly of long-term debt. We also maintain certain short-term bank lines of credit totaling $26 million, $15.2 million which was unused at June 26, 2004. As a result of the Newmark acquisition and to take advantage of a favorable interest rate environment, we refinanced our major long-term credit facilities on May 4, 2004. The refinancing includes $150 million in subordinated senior notes and a new $225 million bank financing arrangement consisting of a $150 million revolving credit facility and a $75.0 million term loan. The proceeds were used to repay the old revolving credit facility, the bridge loan obligation incurred to fund part of the Newmark acquisition and to prepay $79.0 million of promissory notes. The prepaid promissory notes contained yield maintenance provisions that required us to pay as a prepayment premium approximately $9.6 million in addition to the $79.0 million in debt, plus approximately $0.7 million in accrued interest.

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     The $150 million senior subordinated notes bear interest at 6.875% per annum and are due in May 2014. We may repurchase the notes after five years at specified prepayment premiums and these notes are guaranteed by certain of our U.S. subsidiaries. The new $150 million revolving credit agreement carries an interest rate spread over the LIBOR of 75 to 175 basis points, depending on our ratio of debt to earnings before taxes, interest, depreciation and amortization (EBITDA). At June 26, 2004, we had $50 million outstanding under the revolving credit agreement at a rate of 2.325% per annum. The revolving credit agreement contains certain financial covenants that limit our additional borrowing capability under the agreement. At June 26, 2004, we have the ability to borrow an additional $28.9 million under this facility.

     The $75 million term loan accrues interest based on the LIBOR plus a spread of 75 to 175 basis points, depending on our debt to EBITDA ratio, and requires quarterly principal payments beginning in 2005 through 2009. The annualized principal payments beginning in 2005 in millions are: $3.8, $11.2, $18.8, $26.2, and $15.0. The effective interest rate on this loan at June 26, 2004 was 2.6875% per annum.

     While our long-term debt to capital ratio is in excess of our 40% objective after the effect of our refinancing, we believe our cash flows will enable us to reduce our debt levels to 40% over the next 18 to 24 months. This estimate is dependent on our level of acquisition activity and steel industry availability and pricing issues, which are causing us to carry more inventory than we customarily maintain.

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 obligations. These obligations as of June 26, 2004 are summarized as follows, in millions of dollars:

Contractual Obligations	Total		2004		2005-2006		2007-2008		After 2008
Long-term debt	$	301.3	$	0.4	$	21.2	$	47.1	$	232.6
Capital leases		1.8		0.1		0.4		0.3		1.0
Unconditional purchase obligations		10.9		10.0		0.9		—		—
Operating leases		28.5		4.1		12.9		8.3		3.2
Total contractual cash obligations	$	342.5	$	14.6	$	35.4	$	55.7	$	236.8

     Long-term debt principally consists of the $150 million senior subordinated notes, the $75 million term loan and the $150 million revolving credit agreement ($50 million was outstanding at June 26, 2004). Obligations under these agreements could be accelerated in event of non-compliance with 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.

     As of June 26, 2004, our interest obligations associated with our long-term debt and capital leases are as follows (in millions of dollars):

2004	$	7.3
2005-2006		28.6
2007-2008		26.7
After 2008		60.5

     Unconditional purchase obligations relate to purchase orders for aluminum and zinc for periods up to one year. We believe the quantities under contract are reasonable in light of normal fluctuations in business levels and we expect to use the commodities under contract during the contract period.

Off Balance Sheet Arrangements

     There have been no changes in our off balance sheet arrangements as described on pages 28-29 in our Form 10-K for the fiscal year ended December 27, 2003.

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Outlook for Remainder of 2004

     We expect favorable sales and earnings comparisons in the second half of the year. We anticipate tight steel supplies and pricing pressure for the foreseeable future; however, our backlogs are growing and we have increased our steel inventories to help cover these customer commitments. In our Engineered Support Structures Segment, we expect sales gains across all product lines. Demand for concrete utility structures is strengthening and we expect Newmark to continue to perform well. We believe profitability in our coatings segment will improve. In our irrigation business, our results will depend on conditions in the new fall selling season, and the trends are unclear at this time. In our tubing business, we expect continued strong operating performance. Overall, we believe business conditions are improving, and this should result in a stronger performance in the second half of the year.

Critical Accounting Policies

     There have been no changes in the Company’s critical accounting policies during the quarter ended June 26, 2004.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

     There have been no material changes in the company’s market risk during the second quarter ended June 26, 2004. For additional information, refer to the section “Risk Management” on page 29 of our Form 10-K for the fiscal year ended December 27, 2003.

Item 4. Controls and Procedures

     The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures provide reasonable assurance that such disclosure controls and procedures are effective in timely providing them with material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic Securities and Exchange Commission filings. There have been no significant changes in the Company’s internal controls over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, such internal controls.

PART II. OTHER INFORMATION

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Issuer Purchases of Equity Securities

						(c) Total Number of		(d) Maximum Number
						Shares Purchased as		of Shares that May
						Part of Publicly		Yet Be Purchased
		(a) Total Number of		(b) Average Price		Announced Plans or		Under the Plans or
Period		Shares Purchased		paid per Share		Programs		Programs
March 28, 2004 to April 24, 2004			—		—		—		—
April 25, 2004 to May 29, 2004			19,051		20.79		—		—
May 30, 2004 to June 26, 2004			—				—		—
	Total		19,051		20.79		—		—

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     During the second quarter, the only shares reflected above were those delivered to the Company by employees as part of stock option exercises, either the cover the purchase price of the option or the related taxes payable by the employee as part of the option exercise. The price paid per share was the market price at the date of exercise.

Item 5. Other Information

     On July 26, 2004, the Company’s Board of Directors authorized a quarterly cash dividend on common stock of 8.0 cents per share, payable October 15, 2004, to stockholders of record September 24, 2004. The indicated annual dividend rate is 32 cents per share.

     The unaudited pro forma combined condensed financial statements, which give effect to the acquisition of Newmark by the Company for the twenty-six weeks ended June 26, 2004 are attached hereto as Exhibit 99.1. The unaudited combined financial statements for Newmark for the three months ended March 31, 2004 are attached hereto as Exhibit 99.2.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits

Exhibit No.		Description
	12.1	Computation of Ratio of Earnings to Fixed Charges
	31.1	Section 302 Certificate of Chief Executive Officer
	31.2	Section 302 Certificate of Chief Financial Officer
	32.1	Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
	99.1	Pro Forma Financial Information
	99.2	Unaudited Combined financial statements for Newmark International, Inc. and Pfleiderer Leasing USA, Inc. for the three months ended March 31, 2004

     (b) Reports on Form 8-K

     The Company has filed or furnished the following Form 8-K’s since the beginning of the second quarter:

     1. Form 8-K filed April 16, 2004 including certain audited financial information of Newmark, certain unaudited pro forma condensed combined financial data, and risk factors relating to Valmont Industries, Inc.

     2. Form 8-K furnished on April 19, 2004 including the Company’s press release with earnings information on the Company’s quarter ended March 27, 2004.

     3. Form 8-K filed April 20, 2004 including the Company’s press release announcing the offer of $150,000,000 of senior subordinated notes.

     4. Form 8-K furnished July 20, 2004 including the Company’s press release with earnings information on the Company’s quarter ended June 26, 2004.

     5. Form 8-K filed August 2, 2004 including audited consolidated financial statements for Valmont Industries, Inc., its guarantor subsidiaries and its non-guarantor subsidiaries for the fiscal year ended December 27, 2003.

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SIGNATURES

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

VALMONT INDUSTRIES, INC.

(Registrant)

/s/ TERRY J. MCCLAIN

Terry J. McClain

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

Dated this 2nd day of August, 2004.

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