Valmont Industries Annual Report 2001

FY2001 Annual Report · Valmont Industries

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A n n u a l R e p o r t 2 0 0 1

Valmont is recognized throughout
the world as an industry leader
in engineered support
structures and services
for infrastructure, and irrigation
equipment for agriculture.

F I N A N C I A L H I G H L I G H T S

L E T T E R T O S H A R E H O L D E R S

AT A G L A N C E

I N F R A S T R U C T U R E

M A N AG E M E N T P E R S P E C T I V E S

P O L E S

W I R E L E S S C O M M U N I C AT I O N

C OAT I N G S

I R R I G AT I O N

T U B I N G

G L O B A L L O C AT I O N S

T H E VA L U E O F O U R G L O B A L I N V E S T M E N T

T O TA L VA L U E I M PA C T

F I N A N C I A L R E S U LT S

O F F I C E R S A N D M A N A G E M E N T

T H E B O A R D O F D I R E C T O R S

Financial Highlights

2001

Operating Results
Net sales
Operating income
Net earnings
Diluted earnings per share
Dividends per share
Total Value Impact (TVI)

Financial Position

Shareholders’ equity
Shareholders’ equity per share
Long-term debt as a % of invested capital

Operating Ratios

Gross proﬁt as a % of net sales
Operating income as a % of net sales
Net earnings as a % of net sales
Return on beginning equity
Return on invested capital

Year-End Data

Shares outstanding (000)
Approximate number of shareholders
Number of employees

2001

2000

1999

$0,00872.4
65.0
26.7
1.09
0.26
0.5

$00.0225.8
9.23
41.9%

24.9%
7.5%
3.1%
13.9%
8.6%

24,477
5,500
5,342

$00846.1
67.3
30.4
1.28
0.26
9.0

$00191.9
8.23
42.8%

25.0%
7.9%
3.6%
17.8%
10.9%

23,320
5,500
5,503

$00639.9
50.2
26.4
1.08
0.26
4.5

$00170.5
7.30
33.8%

27.0%
7.8%
4.1%
15.0%
9.8%

23,354
5,500
3,948

Corporate Vision

Valmont is recognized throughout the world as an industry leader

in engineered support structures and services for infrastructure,and water management for agriculture.

We grow our businesses by leveraging our existing products,markets and processes.

We recognize that our growth will only create shareholder value if,at the same time,we exceed our cost of capital.

Essential to our success is a company-wide commitment to customer service and innovation,

and the ability to be the best cost producer for all products and services we provide.

Recognizing that our employees are the cornerstone of our accomplishments,

we pride ourselves on being people of passion and integrity who excel and deliver results.

Net
Sales

Operating
Income

Diluted Earnings
Per Share

$$ 623623 631631 640640 846846 872872

$$ 62.062.0 47.847.8 50.250.2 67.367.3 65.065.0

$$ 1.331.33 1.021.02 1.081.08 1.281.28 1.091.09

9797 9898 9999 0000 0101

02 | 03

Letter to

Fellow Shareholders

The year 2001 was a year of rapid

change in a number of our markets.

This is nothing new for Valmont.

We grew up in the agricultural

Mogens C. Bay
Chairman and Chief Executive Officer

“As usual,the people at Valmont worked as a team,

made the necessary adjustments,accelerated cost

reduction programs,improved productivity and

safety,and pursued new business opportunities.

They deserve our gratitude.”

industry, where we learned early

The Irrigation Segment ran into

on to deal with cyclicality and

headwinds early in the year, both

unpredictability.

in the United States and South

How did we do this year? In total,

I would say we performed quite well

when evaluated in the context of a

severe economic slowdown in the

United States. Operating income

was down 3% and net earnings were

down 12% on a 3% increase in sales.

The leverage gained in our Poles

segment didn’t totally offset the

difficulties we experienced in the

segments where markets were weak.

America. Here at home, our largest

market, challenges included high

A highlight for us this year was the

input costs for farmers, low com-

addition of PiRod, a leader in the

modity prices and uncertainty

wireless communication industry,

over farm legislation. In Brazil the

to our business. In addition to their

government put restrictions on

unmatched reputation for customer

electricity and water use, and the

service, PiRod’s product line and

economy of Argentina continued to

geographic coverage complements

deteriorate. Bright spots included

ours at Valmont-Microﬂect. Myron

the Middle East, Africa and Australia.

Noble and his team have built an

Despite difficult domestic market

outstanding business and we are

conditions, the Irrigation division

pleased they decided to join us. At

As usual, the people at Valmont

improved gross proﬁt margins,

the time of the acquisition, we knew

worked as a team, made the neces-

reduced inventories signiﬁcantly,

that the prior robust growth rate of

sary adjustments, accelerated

and achieved record on-time and

this industry was not sustainable,

cost reduction programs, improved

complete delivery performance.

but we did not expect business con-

productivity and safety, and pursued

new business opportunities. They

deserve our gratitude.

In our Wireless Communications

Segment, the market for structures

softened in 2001 and at an accelerat-

Our Poles Segment had record

ing pace as the year progressed.

performance. Operating income

The general collapse of telecommuni-

increased 57% on 14% revenue

cations stocks brought with it a

growth. We beneﬁted from robust

sharply curtailed appetite for capital

utility, transportation and lighting

spending. However, component sales

markets and did an excellent job

to this industry remained fairly steady

of scheduling our manufacturing

as our customers added additional

facilities and leveraging our global

antennas to existing structures.

ditions to worsen as rapidly as they

did. I am pleased to report, though,

that PiRod was accretive to our

earnings in 2001. We believe that the

wireless communication industry

will rebound. The move toward more

voice and data transfer by wireless

means is irreversible.

network. Falling raw material prices

were also helpful. We are seeing the

beneﬁts of having a wide geographic

presence across several continents,

combined with a broad product line

serving several industries. This

diversity gives us great ﬂexibility.

04 | 05

“One thing I can say for certain:

We have strong positions in good businesses,great

people,and whatever the external environment,

we will make the appropriate adjustments to

maximize our performance.”

Our Coatings Segment suffered

through high energy costs early

in the year only to be followed by

the challenge of a slowing economy

during the second half. They did a

Over the past four years, we have

good job maintaining productivity

made substantial investments in our

levels and had some success in

businesses. We believe that these

expanding their customer base.

investments will serve us well going

Our Tubing Segment saw a drop in

revenue and experienced unfavorable

absorption of ﬁxed costs. Even so,

they delivered double digit operating

income as a percent of sales and an

excellent return on invested capital.

forward. Our Coatings division was

I mentioned in last year’s letter

built through greenﬁeld startups and

that we would focus on our balance

acquisitions. In our Pole business

sheet in 2001. We did. Since the

we added substantial capacity and

PiRod acquisition at the end of the

the timing was excellent. We could

ﬁrst quarter, we have reduced our

not have availed ourselves of the

debt by more than $70 million and

opportunities in the marketplace and

our total debt is now at a more

delivered the ﬁnancial performance

comfortable level.

in Poles without these investments.

Our businesses have great cash

In the Irrigation business, we

ﬂow characteristics. They should not

completed a brand new and highly

require major capital investments for

automated manufacturing facility in

some time, and, as we drive internal

McCook, Nebraska. Here the timing

growth, they will need only modest

was less than perfect. The facility

investments in working capital.

has delivered everything we expected

regarding increased productivity

and lower costs, but it will really

have a positive impact on the bottom

line only when market conditions

for irrigation equipment improve.

At that time, the proﬁt impact is

expected to be dramatic.

2002

It is not easy to predict how we will

fare in 2002, but my belief is our com-

pany will see improved earnings as

our Pole business should stay strong

The amount of cash ﬂow directed to

and our Coatings business should

each of the above is less important

beneﬁt from an eventual economic

than the priority with which we

recovery as should our Wireless

allocate capital.

Communication businesses.

We have four priorities for the free

It is also important for you to know

Regarding the Irrigation business,

cash ﬂow we generate:

that we will not acquire a business

there is presently some optimism in

1 Fund internal growth.

just for the sake of growth. We will

the U.S. agricultural market. However,

maintain a focused, disciplined

absent improved commodity prices

2 Reduce debt until we are comfort-

approach to growth. We will grow

I believe the signing of a new farm

ably under our self-imposed ratio

by leveraging one of our strengths–

bill this spring is necessary to sustain

of long term debt to total capital

a market position, a product line,

such optimism. Farmers need and

of 40% (at the end of 2001, it was

or a skill set.

deserve to know what the rules are

slightly less than 42%).

As 2001 came to a close, conﬁdence

going to be.

3 Pursue “click” acquisitions,

in U.S. ﬁnancial markets was shaken

Uncertainties include the current

i.e., businesses that build on

by incidents of improper accounting

precarious ﬁnancial state of the

our strengths and ﬁt neatly

and business practices. I am fortu-

U.S. steel industry, as well as very

into our existing businesses.

nate to have worked 23 years for a

limited visibility in the wireless

4 Return money to you in the

form of stock repurchases

or dividends.

company built on a solid foundation

communication industry.

of sound ethical behavior and a

straightforward, conservative ﬁnan-

cial philosophy. Terry McClain, our

Chief Financial Officer, and a 28-year

veteran at Valmont, wouldn’t hesitate

for a second to go to our Board of

Directors if he felt he was being

One thing I can say for certain: We

have strong positions in good busi-

nesses, great people, and whatever

the external environment, we will

make the appropriate adjustments

to maximize our performance.

lobbied to put an aggressive spin on

I thank you for your continued support.

our numbers. That is the kind of Chief

Financial Officer we and you want.

Sincerely,

Mogens C. Bay

Chairman and Chief Executive Officer

06 | 07

What Do We Do

at Valmont?

At Valmont,we do more than just manufacture products.

We design and build products that make life better for

people around the world.Our lighting and traffic poles

illuminate and beautify the world’s roadways and help

ensure the smooth,safe ﬂow of traffic.Our utility poles

help transmit and distribute power to millions of homes

and businesses worldwide.Our communication poles,

towers and components support the communication

demands of millions of wireless telephone users.Our

irrigation and water management products efficiently

deliver fresh water to crops and land–when and where

it is needed most.Our tubing products are key elements

of a variety of everyday products,everywhere.And our

coating services add the ﬁnal touch,extending product

life and quality.

That’s what we do at Valmont.We provide long-lasting,

highly engineered products–products that are

engineered for life.

We Improve
People’s Lives.

08 | 09

How are
Our Products Used?

Lighting and Traffic Poles
Illuminating Your Life

at a Glance

Our focus is on two key markets worldwide: highly

On-the-go lifestyles require products that enable activity any time of day or night. >> Around the world, Valmont brightens

the night with poles that support sports lighting for arenas and stadiums, area lighting for parking lots and public areas, and

decorative lighting that illuminate city streets and tourist venues.

Guiding the Way

engineered structures and coatings for infrastructure,

On today’s streets, improved safety and congestion relief are important for travelers and commuters. Valmont provides poles

and water management for agriculture.Our expertise

in design and engineering, combined with our

worldwide manufacturing network, enables us to

competitively deliver superior products that enhance

the quality of life for people around the world.

for street and area lighting, traffic control, signage, and mass transit lines to help travelers get quickly and safely from one point

to another. >> The world is there to be traveled, and Valmont poles are there with you, helping to safely guide the way.

Utility Poles
Energizing Your Life

How does electricity get from the power plant to your outlet? >> Across wires connected to Valmont transmission and

distribution poles. >> Valmont also designs and manufactures structures for substations where high voltage is transformed

to lower voltage for distribution. >> Around the world, Valmont provides the poles and structures that move electricity from

the power plant to where it is needed the most.

10 | 11

Wireless Communication
Connecting People

Irrigation
Feeding People

If you communicate with a cellular phone, chances are that Valmont products are involved. >> We design, manufacture and

Valmont is the undisputed world leader in mechanized irrigation equipment, which helps agricultural producers apply water

deliver monopoles, towers and other structures for cellular, PCS, broadcast, microwave and two-way communications. >>

more efficiently and effectively. >> Through our global plant network and worldwide dealer organization, we manufacture,

Valmont is an innovator in minimum visual impact structures–poles and cell sites that look like trees, church steeples, ﬂagpoles

deliver and service the world’s most innovative, high-quality irrigation equipment and services–from center pivots and corner

or other environmentally camouﬂaged structures, so sometimes you see them and sometimes you don’t. >> We also provide

extensions for large ﬁelds to linear machines for long or narrow ﬁelds to machines speciﬁcally designed for smaller ﬁelds. >>

the components used to attach antennas, cables and hardware to poles, towers and rooftops.

We offer the most complete integrated controls products in the industry – easy to use and highly reliable – and last year we

introduced Accu-Pulse, the ﬁrst precision chemical applicator mounted to irrigation equipment. >> Where there is ground to

be irrigated, Valmont has it covered.

Coatings
Extending Product Life

Tubing
Shaping Everyday Life

Would you like a blue ﬂashlight, a red light pole or a custom design on your skateboard? >> Valmont’s Coatings business

From small tubing for sprinkler systems to large-diameter tubing for grain augers, Valmont is dedicated to designing and

gives you such distinctive choices. >> We apply galvanizing, anodizing, powder coatings and integrated graphics that make

manufacturing the unique products our customers need. >> We provide a wide range of tubular steel products in a variety of

products last longer and look better. >> We custom coat items for manufacturers who want to increase the appeal, appearance

shapes and ﬁnishes for many applications. >> We are also known for crafting custom shapes for customers – because we

and longevity of their products, as well as our own poles, irrigation equipment and other structures.

believe that customer service shapes our success.

12 | 13

Engineered to Meet

Global Demand

While you may not notice them,Valmont poles and

structures are all around you.They deliver electricity,

light your way at night on highways and city streets,

and enable your wireless phone call.Our coatings

processes provide visual appeal and extend product

life.Every day,our infrastructure products impact

the lives of people around the world.We take that

very seriously–so every day we continually develop

forward-looking products like our new wind

energy structure,to ensure the quality of life for

future generations.

e
r
u
t
c
u
r
t
s
a
r
f
n
I

14 | 15

Poles

Lighting and Traffic
Lighting: Illuminating Your Life

It’s a simple fact: Better lighting

enhances safety. People want and

need safer roads and community

areas such as parks, stadiums,

shopping centers and parking lots.

So it is not surprising that even in

times of economic downturn such

as 2001, Valmont’s lighting and

traffic business was strong.

In addition to safety, people want

products that look good. As in

many industries today, Valmont’s

municipal, industrial and commercial

customers are concerned not only

with function and durability but

also with aesthetics. Valmont’s

engineers often collaborate with

architects and city planners to

design structures that achieve

just the right feel and appearance.

0.1

Management Perspective:
Poles Division

Valmont’s decorative poles enhance streetscapes, walkways and
other outdoor lighted environments.

In Europe, Valmont has long been

a line of new European-style

a leader in lining historic streets

decorative poles in the U.S., which

with visually pleasing poles that

has been enthusiastically received.

facilitate city beautiﬁcation. To

Our success with this product line

leverage this success, we launched

in Europe leads us to believe these

and other high-quality, custom-

designed lighting poles will be

a growing global source of sales

revenue for Valmont in the future.

Visually appealing lighting poles

are also in demand in China,

where urbanization efforts and

infrastructure investments remain

high. Because of our in-country

design, manufacturing and delivery

capabilities, Valmont is able to

provide high-quality pole products

in China. Our experience in manu-

facturing basic, lower-cost poles

also works in our favor in developing

countries where the demand for

attractive lighting must also ﬁt

within budget constraints.

Custom-designed lighting poles are a growing
market for Valmont.

“Our products, while highly engineered for complex applications, often appear

to be quite simple on the surface – poles for street and area lighting, traffic signals,
wireless communication and utility lines. Yet all around the world, these

poles are used to light the way, deliver electricity, increase connectivity and
highway safety–our products impact people’s lives, so we

take our position as an industry leader very seriously.”

Light

Mark Richards

D I V I S I O N P R E S I D E N T

Brighter Days Ahead

We expect our lighting business

to beneﬁt as the overall global

economy recovers. Developed

countries continually upgrade their

infrastructures, while developing

countries seek to increase trade

opportunities and exports through

investing in airport, marine port

and roadway facilities that require

extensive lighting. All around the

world, more active lifestyles drive

the need for improved lighting for

roads, parks and recreation areas

for nighttime activities.

251251 310310 354354

15.315.3 21.721.7 34.134.1

9999

0000 0101

9999

0000

0101

Net
Net
Sales
Sales

Operating
Operating
Income
Income

Dollars in Millions

16 | 17

Government Funding for Highway Construction
Leads to Increased Demand for Valmont's Products

36.736.7

39.139.1 42.442.4 45.345.3 51.151.1 51.851.8

57.757.7

9595

9696 9797 9898 9999 0000

0101

Dollars in Billions
Source: U.S. Department of Commerce. Construction
put-in-place. Seasonally adjusted annual rate in current dollars.

Traffic: Guiding the Way

In most areas of the world, govern-

Government spending on

How often have you felt frustrated

ment spending on national, state

infrastructure continues to be

waiting in traffic? The continual need

and local levels generally funds

a very signiﬁcant driver for the

to reduce congestion and improve

this industry. In the United States,

growth of Valmont’s pole products

safe traffic ﬂow is a key driver of

for example, federal spending

for traffic and highway lighting.

Valmont’s traffic structures business.

on highway infrastructure has

We believe opportunity for growth

increased in the range of three

also exists in other areas of the

to ﬁve percent per year.

world where improving road and

highway infrastructure promotes

trade and facilitates the movement

of goods to market.

“There are approximately four million miles of public roadways

in the U.S., of which 24 percent carry over 80 percent of the traffic. Because
of this, the need to increase efficiency by using traffic controls, sign

structures, intelligent message systems and lighting is a top priority for most

communities. With our eight pole plants in North America, we believe we
are well positioned to help meet many of these needs.”

Safe

18 | 19

Utility
Energizing Your Life

Growing Demand for Electricity Increases the Demand
for Valmont’s Utility Poles and Substation Products

Industrial growth and deregulation

is driving growth in our utility poles

business. The electrical transmission

grid in the U.S. already operates

near its capacity in several areas

due to increasing electricity con-

sumption. We expect substantial

investments will be necessary to

accommodate the level of reliability

that users have come to demand.

Over the next 10 years it is projected

that $500 billion in new electricity

generation capacity could come

online around the world. The United

States alone is expected to increase

generating capacity by approximately

20 percent during this time frame.

In both the U.S. and Europe, the

move toward deregulation and the

resulting consolidation of utilities

continues to create demand for our

transmission, substation and distri-

bution products to complete grid

systems and interconnect regions.

(Twh)
(Twh)

3,378
3,378

3,463 3,549
3,463

3,549 3,638

3,638 3,729

3,822
3,729 3,822

0000

0101

0202

0303

0404

0505

Source: Edison Electric Institute, DOE, Electric Power Monthly,
NERC, Banc of America Securities LLC estimates.

China alone has committed more

than $200 billion for infrastructure

improvements, especially in the

previously undeveloped western

region. In each of these regions,

the growing global demand for

electricity is driven by population

growth, industrialization, urbaniza-

tion of cities and infrastructure

improvement. Products like ours

are essential to future development,

and because of our global design,

production and delivery capabilities,

we believe we are positioned to

serve this growing demand.

More and more utilities are ﬁnding it cost-effective to switch from wood poles
to more reliable steel poles.

One of the tasks for each team is to

of the year, during which time we

apply an ‘outside in’ perspective to

focused on streamlining business

help us better deﬁne our customers’

processes. In China, we are broaden-

wants and needs. As a result of this

ing our product offerings, expanding

2001 Review

process, we have already begun

export sales and continuing to grow

To better serve our customers,

to see increased customer

our core domestic operations.

In developing countries, too,

an increased need for structures

this year we organized our utility,

service levels.

privatization efforts may result

to transport power to the user.

from the difficulties governments

face keeping pace with the demands

placed upon existing generation

and transmission systems. Often,

power is generated at the fuel

source–farther away from con-

sumers than in industrialized

nations–this means there is

Asia, the Middle East and Latin

America are projected to be the

top three fastest-growing markets

for future electricity consumption,

due to rapidly growing populations.

commercial lighting and trans-

portation groups into ‘Centers

of Excellence,’ each supported

by a dedicated team focused only

on serving its single market.

In each individual market, Valmont

Investments made to expand

expects to build upon its leadership

manufacturing capacity in 2000

position by focusing and coordinating

helped us achieve record sales and

our global sales and manufacturing

reinforce our leadership position

activities, and by further investing

in the industry in 2001. In Europe,

in process improvements.

demand was strong early due to

mayoral elections in France but

slowed during the second half

“We must keep focused on our customers’ needs. We must

continue to leverage our global production capabilities and distribution
channels. Our commitment to continuous improvement

will enable us to provide even better products and services to our customers
and improve people’s lives.”

Power

“Our long-term vision is built upon ﬁve critical success factors. We must focus on our customers
and provide them with the best possible products and services. We must be technology
driven and highly committed to reducing costs and improving quality. And we must
always think globally and act locally. In 2001, we measured and tracked our progress in these
areas – and we have already seen great improvement. By continuing to focus on these factors, we can
make our vision a reality.”

20 | 21

Wireless
Communication

Connecting People

The wireless communication indus-

try, while relatively young, is here

to stay. It is an industry currently

experiencing consolidation, pricing

pressures and a demanding cus-

tomer base. It is also an industry

that we expect will continue to grow.

Growth will be driven by attractive

calling plans, new services and

Projected Cell Site Growth

350,000
350,000

275,000
275,000

200,000
200,000

125,000
125,000

0101

0202

0303

0404

0505

0606

Source: CTIA

applications, and the desire to quickly

Long-term growth will be driven by

sites as are currently used by

and effectively communicate anytime

a combination of ongoing subscriber

existing technology. Additionally,

anywhere through wireless devices.

growth, increased usage, as well as

the increased need for better

To remain competitive, we are

the introduction of new technologies

emergency response systems

focused on improving our products,

such as 3G, the third generation of

will drive demand for structures

enhancing manufacturing efficiency,

wireless technology. It is projected

and components.

and providing faster delivery times.

that 3G technology will require three

to four times as many transmission

0.2

Management Perspective:
Wireless Communication Division

Talk

6868

9393

122122

(1.6)
(1.8) 2.32.3 (1.6)
(1.8)

9999 0000 0101

9999

0000 0101

Net
Net
Sales
Sales

Operating
Operating
Income
Income

Dollars in Millions

22 | 23

2001 Review

The downturn in the telecom-

munication industry during 2001 was

worsened by an excess of uninstalled

inventory owned by carriers and tower

rental companies. We responded by

downsizing our division, which better

aligned our cost structure to current

market conditions.

Despite a difficult business environ-

ment, the wireless communication

division moved forward with several

product and service innovations.

The engineering and development

Valmont’s broad line of components enables antennas and cables to be attached
to wireless communication structures.

of our new ﬂagpole cell silo is a

MVI products help overcome

enables us to better control product

strong addition to our minimum

many zoning issues with structures

scheduling, manufacturing and

visual impact (MVI) product line.

designed to blend into the sur-

delivery. The beneﬁts include a lower

rounding environment. To improve

investment in inventory, shorter lead

customer service, we fully

times for our customers and higher

implemented a new integrated

levels of customer service.

manufacturing resource planning

(MRP) computer system, which

The PiRod Purchase

In 2001, Valmont purchased and

integrated PiRod, Inc. into its

wireless communication business.

PiRod, which has an outstanding

reputation for customer service,

In the area of wireless component

engineering and manufacturing

products–used to attach antennas,

tower structures and components,

cables and hardware to poles,

strengthened our industry position

towers and rooftops–demand

as a leader in the wireless communi-

was steady in 2001. To increase

cation business. By integrating the

our opportunities in this area,

Conclusion

tower, monopole and components

Valmont plans to build on the strong

Although our market prospects

business of Microﬂect and PiRod,

Microﬂect and PiRod brands and

for 2002 are guarded, we believe the

we can streamline production and

service reputations and continually

wireless communication industry

achieve further economies of scale.

develop new products.

will recover. As the number of new

During the past year, PiRod

received certiﬁcation by the

Canadian Welding Bureau, which

now opens the Canadian market

for PiRod’s products, such as our

highly engineered equipment-

mounting platforms.

wireless subscribers grows, and

usage rates increase, so should

the sales of our products–and at

a fairly strong rate. We believe

the acquisition of PiRod better

positions Valmont for the future.

“Because of the strong growth of wireless communication around the world, Valmont’s structures
and component products have become an important part of the everyday fabric of newly mobile and
connected societies. We take great pride in this. It is gratifying to see the positive ways our products
improve lifestyles. It boils down to the fact that our products allow people to communicate

in a mobile mode –vitally important in today’s more complicated society.”

Listen

Myron Noble

P I R O D P R E S I D E N T

“The purchase of PiRod complements Valmont’s

wireless communication business with its

great reputation for customer
service and design capabilities.

Additionally, it broadens our tower

and component product lines, and
importantly, our customer base.”

Doug Kochenderfer

V I C E P R E S I D E N T A N D G E N E R A L M A N A G E R

VA L M O N T M I C R O F L E C T

24 | 25

Coatings

Extending Product Life

Simply put, we add ﬁnishes–

galvanizing, anodizing, and powder

coatings–to a wide variety of prod-

ucts. We coat products for a wide

variety of customers who have

come to rely on our processes to

add value to their products by

making them look uniquely better

and last longer. We also coat our

own Valmont infrastructure and

irrigation products.

Hot dip galvanizing makes steel products last longer.

Galvanizing, a process that

and other infrastructure products

protects steel with a zinc coating

helped us weather the general

that is bonded to the product surface

economic downturn as well as

to inhibit rust and corrosion, forms

higher prices for electricity and

the largest part of our coatings

natural gas–two important costs

business. This year we continued

of galvanizing.

to beneﬁt from strong infrastructure

spending. The demand for galvaniz-

ing guardrails, bridge sections, poles

Anodizing and powder coating

provide protective and decorative

coatings for aluminum and other

metal and non-metal products–

from ﬂashlights and computer

components to baseball bats and

cellular phones. While this business

was off slightly in 2001 due to the

impact of the economic downturn

in the technology industry, the

outlook for 2002 is improved.

To help counteract ﬂat sales in our

coatings business in 2001–due to

current economic conditions and

higher energy input prices–we acted

quickly by adjusting employment

levels commensurate with the

business activity. Meanwhile, we

are pleased to report that recent

acquisitions have enabled us to

make considerable progress in

attracting new customers during

the past year.

Valmont’s Coatings business is

service-based. The services we

provide are essential to a diverse

customer base, and increased

demand for customization of

colors and textures bodes well for

further sales growth opportunities

in the future.While galvanizing is a

capital-intensive business, inventory

requirements are low and our operat-

ing efficiencies allow good margins

and solid operating cash ﬂows. Also,

if business conditions warrant it, we

can adjust employment levels up and

down to match market demands.

In 2002 we look forward to an

improved economy and improved

margins from lower input costs.

As we grow, we will continue to

reﬁne our administrative processes

to ﬁnd ways of further improving

our results.

Valmont’s proprietary technologies allow
custom-designed ﬁnishes to be applied to
aluminum products, giving customers more
ﬁnish choices.

0.3

Management Perspective:
Coatings Division

3737

9494

9999

7.07.0 13.513.5 9.49.4

“For a relatively modest cost, we take a plain product and put a ﬁnish
on it that allows our customer to sell it at a higher value. For the

end user, that means more choices in the colors and patterns they want
and a longer-lasting product. For our customer, we are adding
value to their products at a reasonable price. Everyone wins.”

Protect

9999

0000 0101

9999

0000 0101

Net
Net
Sales
Sales

Operating
Operating
Income
Income

Dollars in Millions

“Valmont is the leading custom galvanizer in North America.

We achieved this position by working in partnership with our customers.
By recognizing and fulﬁlling their needs, we have been able to

create opportunities that might not have been attained otherwise.

The ability to leverage our business this way is a direct
result of our focus on processes and excellent

customer service.”

Jeffrey Briggs

D I V I S I O N P R E S I D E N T

26 | 27
01 | 02

Impacting Lives

Through Increased Food Production
and Safer, More Plentiful Water Supplies

Conserving water saves money.The result? More

plentiful food supplies and lower prices.Valmont’s

Valley® irrigation business is the largest supplier of

mechanized irrigation equipment and services in the

world.We have a global manufacturing presence and

a well-established worldwide dealer network.Because

we provide top-quality irrigation products in nearly

every agricultural market around the world,farmers

and consumers for generations to come will have

access to modern,efficient water management and

increased food production.

n
o
i
t
a
g
i
r
r
I

28 | 29

Irrigation

Usable Water Supply
is Limited

Feeding People

Irrigation has a tremendous impact

on our quality of life. In much of

the world, we are close to the limits

of arable land availability. As world

population and food needs grow,

we will all become even more

dependent on increased food

production from existing farmland.

Meeting increasing production

demand will mean using water in

smarter ways. Valley® mechanized

irrigation products put the priority

on more efficient water use–on

getting ‘more crops per drop.’ By

putting more water near the root

zone where crops can actually use

it, while simultaneously reducing

runoff, Valley equipment and

technology can improve water

application efficiency from

40 to 90 percent compared with

traditional irrigation methods.

0.4

Management Perspective:
Irrigation Division

“Our products lead to more efficient food production at lower

costs – food that often feeds the poorest part of the world’s population.
And our products help farmers make money, which beneﬁts

for other uses and for future generations.”

global economies. But what’s under-appreciated is that mechanized
irrigation reduces the burden on the world’s fresh
water supply by helping to keep it cleaner and more available

Water

Tom Spears

D I V I S I O N P R E S I D E N T

Reduced runoff also improves water

quality in nearby streams and rivers

that are the source of fresh water

for wildlife and human consumption.

Valley irrigation products and serv-

ices help farmers produce better

crops, improve yields and reduce

labor costs while at the same time

providing real conservation and

social beneﬁts.

Valmont is the recognized leader

in the design and manufacturing

of automated irrigation equipment.

Since the 1950s, we have manufac-

tured more than 100,000 systems,

most of which are still operating

today. Our products are known for

durability–it is not uncommon for

Valley equipment to last 25 to 30

Remote programming–a feature of Valley irrigation equipment–enables
precise control of water and chemical application timing, rates and depth.

years. Agricultural producers have

We are also innovators in the area of

industry – to recover, clean and

come to rely on this kind of quality

wastewater re-use, and we continue

re-use wastewater for agricultural

and on the unparalleled service

to explore business opportunities in

applications. We believe these

provided through our Valley

which our products are instrumental

types of projects demonstrate the

dealer network.

in conserving fresh water resources.

versatility of our equipment and the

During the past year, we have worked

wide range of growth opportunities

within the energy sector–particularly

available for us in the future.

the coal bed methane recovery

228228 284284 239239

24.124.1 21.221.2 15.515.5

“Our international business– only slightly down last year
despite globally depressed crop prices –will beneﬁt from a huge
opportunity that is just now being tapped: only four percent of

agriculture outside the U.S. is mechanically irrigated. And within the

U.S., history shows that agriculture moves in cycles, and upward
cycles release signiﬁcant pent-up demand for new

9999

0000 0101

9999

0000 0101

equipment and technologies.”

Net
Net
Sales
Sales

Operating
Operating
Income
Income

Dollars in Millions

30 | 31

2001 Review

During 2001, we took steps to

improve our service levels to our

dealers and customers. By the end

of the year we had shipped 99.6

percent of our domestic systems

on time, and 94 percent of our orders

were shipped and received without

problems. We improved our produc-

tion planning processes to enable

us to operate with much lower

inventories–extremely important

in ﬂuctuating markets.

Our advanced irrigation and water management equipment is designed to conserve
water and increase food production.

This year was also one of continued

a new universal linear machine

Valley innovation. For smaller ﬁelds

and, along with other innovations

in developing markets, we introduced

like smaller diameter (5 and 6-inch)

the mechanical ‘Spinner’ that does

pipe, we are expanding our product

not use electricity, running only on

offerings to meet the different needs

pressurized water. We also introduced

of different customers around the

world. All of these innovations

and improvements during 2001 help

ensure that Valley remains ‘The

Most Trusted Name in Irrigation.’™

“Valley dealers focus on serving
customers, whether that means

keeping equipment running during the dry, hot

growing seasons or providing the one-on-one training and advice that comes from personal experience. Many of our
dealerships are family operations, now in their second or third generations, and you would be hard pressed

to ﬁnd anyone who better understands the best way to irrigate local crops. That’s a true Valley advantage –
hometown experience and dedication.”

Food

Tubing

Shaping Everyday Life

Valmont’s tubing division is solidly

proﬁtable, with many of our products

used in ways that are not always

readily apparent. Our tubing products

are used, for example, in pneumatic

tube delivery systems within the

health care industry, in ﬁre protection

systems in office buildings and

warehouses, and within the recre-

ation industry by exercise equipment

producers. Customers often come

to Valmont with a request for a special

part or product and because of our

engineering and design expertise

we are able to build it for them.

Our tubing products business

is strongly impacted by the steel

industry and steel prices. During

2001, raw steel prices fell to 20-year

lows. As a result, more than 25 steel

producers sought some form of

bankruptcy protection–putting

Also in 2001 we created a distinct

tremendous pressure on selling

brand identity for Valmont tubular

prices for tubular products. We have

products, introduced via a new

responded by keeping our prices

Web site–an important vehicle for

competitive, monitoring inventory

customer contact and marketing

levels, and focusing on cost-reduc-

promotions. We expect our Internet

tion initiatives. Most importantly, we

marketing and communications pres-

have maintained close relationships

ence will be increasingly important

with our customers and suppliers

as we introduce new tubing product

during these difficult times.

lines and applications.

This year we implemented and intro-

Our Prospects for 2002

duced a successful new product line.

General economic conditions

Motorcycle enthusiasts appreciate

and the current health of the steel

that one of the most integral parts

industry are concerns. We expect

of a motorcycle –and one of the most

that steel prices will increase in

important design elements–is its

2002. Since inventories throughout

muffler. The cosmetic speciﬁcations

the supply chain appear very low,

for this product are arduous, with the

an increase in demand in 2002 will

ﬁnal step in fabrication being chrome

require a quick response. Our

plating. During 2001 we worked

production capabilities position

closely with one of our customers

us well for that.

to develop a motorcycle muffler case

component that we believe will allow

our customer to streamline produc-

tion and reduce costs.

0.5

Management Perspective:
Tubing Division

2929

4343

4242

4.64.6

7.67.6

5.85.8

9999

0000 0101

9999

0000 0101

Net
Net
Sales
Sales

Operating
Operating
Income
Income

Dollars in Millions

“Because of falling steel prices and a slowdown in the

economy, our 2001 ﬁnancial performance was below

that of 2000. Even so, we maintained a strong
market position while dealing with

these difficulties. We are ready for

growth and excited about our

prospects for the future.”

Leonard Adams

V I C E P R E S I D E N T A N D G E N E R A L M A N A G E R

32 | 33

Valmont Industries, Inc.

Global Presence

TULSA, OKLAHOMA, USA
Steel Poles and Galvanizing

TUALATIN, OREGON, USA
Galvanizing

SALEM, OREGON, USA
Wireless Communication Structures
and Components

ALBANY, OREGON, USA
Cascade Earth Sciences

LINDON, UTAH, USA
Galvanizing and Powder Coating

LOS ANGELES, CALIFORNIA, USA
Anodizing and Powder Coating

LONG BEACH, CALIFORNIA, USA
Galvanizing

SIOUX CITY, IOWA, USA
Galvanizing

WEST POINT, NEBRASKA, USA
Galvanizing

McCOOK, NEBRASKA, USA
Irrigation Equipment

OMAHA, NEBRASKA, USA
Corporate Headquarters

WAVERLY, NEBRASKA, USA
Steel Tubing

VALLEY, NEBRASKA, USA
Irrigation Equipment, Steel Poles,
Wireless Communication Towers,
Tubing and Galvanizing

BRENHAM, TEXAS, USA
Steel Poles

MONTERREY, MEXICO
Steel Poles

MINNEAPOLIS,
MINNESOTA, USA
Anodizing, Powder Coating
and E-Coating

FARMINGTON,
MINNESOTA, USA
Aluminum Poles

ST. JULIE, QUEBEC, CANADA
Steel and Aluminum Poles

ELKHART, INDIANA, USA
Steel and Aluminum Poles

PLYMOUTH, INDIANA, USA
Wireless Communication
Structures and Components

JASPER, TENNESSEE, USA
Steel Poles

CHICAGO, ILLINOIS, USA
Galvanizing

UBERABA, BRAZIL
Irrigation Equipment and
Communication Towers

MAARHEEZE, THE NETHERLANDS
Steel Poles

GELSENKIRCHEN, GERMANY
Steel Poles

SIEDLCE, POLAND
Steel Poles

SHANGHAI, CHINA
Steel Poles

CHARMEIL, FRANCE
Steel Poles

CREUZIER-LE-NEUF, FRANCE
Industrial Covers and Conveyers

RIVE-DE-GIER, FRANCE
Aluminum Poles

MADRID, SPAIN
Irrigation Equipment

BERRECHID, MOROCCO
Steel Poles

JOHANNESBURG, SOUTH AFRICA
Irrigation Equipment

Where

We Are

34 | 35

The Value of Our

Global Investment

TVI: Aligning Management Performance
with Shareholders’ Goals

“By developing and providing innovative

products based on local demands,our

opportunities for growth will continue.”

Bob Meaney
Senior Vice President International

One World

The advent of technology–tele-

Our infrastructure products help

In many of our markets, govern-

phones, fax machines, the Internet,

make the world a safer place.With

ments are enacting policies that

wireless communication devices–

an increasing population comes

require progressive water quality

has brought us all closer together

the need for safer highways and city

improvements and conservation

and made doing business globally

streets, recreation areas and other

efforts. We work directly with these

At Valmont, we never lose sight of

the fact that our shareholders are

our owners and deserve an excellent

return on their investment. Our job

is to manage the capital they invest

with us through a delicate balance of

risk and reasonable reward. We must

invest our capital in opportunities

that will allow our company to

prosper, outpace our competition

and earn a good return for our share-

holders.To motivate our managers

to think and act with shareholder

interests in mind we apply the con-

cept and performance measurement

tool of Total Value Impact (TVI).

Terry McClain
Senior Vice President and Chief Financial Officer

We then determine what it costs

What do we do with TVI?At Valmont

us to use the debt and equity of the

we use TVI to measure and reward

company to ﬁnance that invested

performance. If the results of an

capital. Next, we subtract the cost

investment, project or division do

of the capital, which for Valmont is

not grow TVI, we are not creating

8.5%, from the after-tax operating

value for our shareholders. When

both easier and essential to our

public places. Additional electricity

governments and with development

How does TVI work? TVI is a return

proﬁt. That leaves a residual, which

this happens, we believe it is time

success. Through international

transmission and distribution capac-

and aid agencies to emphasize and

on invested capital measure. From

we call TVI. From an accounting

to reassess the value, strategy or

commerce, we develop understand-

ity is also needed. Our strategy of

promote the advantages of mecha-

our income statement, we measure

perspective there is no TVI account,

management of that investment,

ings and partnerships that serve

manufacturing locally is key to our

nized irrigation. By developing and

after-tax operating proﬁt. From our

but from a ﬁnancial perspective, TVI

project or division. We want TVI

to make the world a better place.

success in growing global markets

providing innovative products based

balance sheet, we measure average

is a measure of the dollars returned

to be positive and grow.

where our lighting and traffic, and

on local demands, our opportunities

invested capital–essentially the

above normal expectations on our

utility structures are indispensable.

for growth will continue.

difference between assets and

productive assets.

Our products improve the quality of

people’s lives around the world–and

we strive to get them to market as

quickly and efficiently as possible–

always maintaining our high stan-

dards for quality. Central to this

approach is our global manufacturing

Cellular phones and other wireless

devices help keep people safer and

more connected at work, on the road

and at home. Again, our products

are essential to this technology.

In Conclusion

Global markets are critical to our

growth and success. Individual

markets evolve at different rates,

and our strategy of producing locally

strategy. With production facilities

Our irrigation products help feed

pays off on many levels. We are

in strategic locations worldwide and

the world.The need to conserve,

insulated from the pressures of

through global procurement, we are

re-use and maintain the quality of

competing in a single market, and

able to compete better, deliver faster

fresh water while increasing crop

as one market ebbs, another may

and maintain lower costs. We can

yields will drive the adoption of

be expanding. By having production

provide exemplary on-site customer

mechanized irrigation in almost

facilities in many areas of the world,

service and customize our products

every region of the world.

we can reach any area quickly and

to best meet the needs of each mar-

ket. And, by hiring local employees,

we contribute to and participate in

local economies and communities.

cost effectively–a distinct advan-

tage for our customers and our

shareholders.

As an incentive tool for our managers

atValmont, we prefer the TVI measure

of performance, with compensation

directly tied to results. It’s a good

way to encourage thinking about

both the short-term and long-term

effects of management decisions.

Our managers understand that they

must not only increase sales and

earnings, but they must also make

wise investment decisions.

non-interest bearing liabilities.

Simpliﬁed Example of TVI Shows how
an Investment can Create or Destroy Value
In this example, the TVI created in the ﬁrst year is invested in a machine

Year 1

Year 2 Investment Year 2 Investment
Creates $3 Sales
Creates No Sales
Increase
Increase

Sales
Expenses
Operating Proﬁt
Tax at 35%
Operating Proﬁt after Tax (NOPAT)

Assets
Non-Interest Bearing Liabilities
Average Invested Capital

Cost of Capital
Cost of Capital Dollars

TVI (NOPAT-cost of capital $)
Value Created (Lost)

from Capital Investment

$0050.00
(40.00)
10.00
(3.50)
6.50

50.00
40.00
10.00

8.5%
0.85

5.65

–

$0050.00
(40.00)
10.00
(3.50)
6.50

55.65
40.00
15.65

8.5%
1.33

5.17

$053.00
(40.00)
13.00
(4.55)
8.45

55.65
40.00
15.65

8.5%
1.33

7.12

$00(0.48)

$001.47

36 | 37
01 | 02

Financial Results

2001

s
l
a
i
c
n
a
n
i
F

F I N A N C I A L O B J E C T I V E S

M A N AG E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S

S E L E C T E D 1 1 - Y E A R F I N A N C I A L D ATA

C O N S O L I D AT E D S TAT E M E N T O F O P E R AT I O N S

C O N S O L I D AT E D B A L A N C E S H E E T S

C O N S O L I D AT E D S TAT E M E N T S O F C A S H F L O W S

C O N S O L I D AT E D S TAT E M E N T S

O F S H A R E H O L D E R S ’ E Q U I T Y

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S H E E T S

B U S I N E S S S E G M E N T I N F O R M AT I O N

Q UA R T E R LY F I N A N C I A L D ATA

I N D E P E N D E N T AU D I T O R S ’ R E P O R T

R E P O R T O F M A N AG E M E N T

O F F I C E R S A N D M A N AG E M E N T

S H A R E H O L D E R I N F O R M AT I O N

T H E B O A R D O F D I R E C T O R S

Financial

Objectives

We measure our performance against many standards.Financially,we

have selected three principal factors that tell just how well we are managing

the Company and the money invested in it.We have deliberately made

investments in our businesses in recent years.This is reﬂected in the down-

trend of our TVI and return on invested capital graphs.We believe these

metrics should improve as we realize the beneﬁts of these investments.

The goals we have established for growth,return on invested capital and

long term debt leverage are appropriate for the industries in which we

participate,yet challenging enough to demand the very best talents and

performance of our management teams.We have replaced our earnings

per share growth goal with a goal to grow TVI,which we believe is a more

meaningful measure of shareholder value creation.

Total
Value
Impact

Return on
Invested
Capital

Long-Term Debt
as a Percent
of Invested Capital

$$ 17.717.7 5.35.3

4.54.5

9.09.0

0.50.5

%% 15.415.4 10.310.3 9.89.8 10.910.9 8.68.6

%% 10.410.4 30.330.3 33.833.8 42.842.8 41.941.9

9797 9898 9999 0000 0101

Objective
Grow TVI from
year-to-year

Dollars in Millions

Objective
Achieve a
minimum 10%
after tax return
on invested capital

Objective
Maintain
long-term debt
as a percentage
of invested capital
at less than 40%

38 | 39 Management’s Discussion and Analysis

of Financial Condition and Results of Operations

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

(Dollars in millions)

Net Sales:

Infrastructure businesses:

Poles
Wireless Communication
Coatings

Total Infrastructure businesses

Agricultural businesses:

Irrigation
Tubing

Total Agricultural businesses

Other

Net Sales

Operating Income:

Infrastructure businesses:

Poles
Wireless Communication
Coatings

Total Infrastructure businesses

Agricultural businesses:

Irrigation
Tubing

Total Agricultural businesses

Other

Operating Income

1999

2000

Change
2000-1999

2001

Change
2001-2000

$ 251.0
68.2
$
37.0
$

$ 356.2

$ 228.2
29.4
$

$ 257.6

26.1

$ 639.9

$
$
$

$
$

15.3
(1.8)
7.0

20.5

24.1
4.6

28.7

1.0

50.2

$ 310.0
92.6
$
94.1
$

$ 496.7

$ 283.6
43.3
$

$ 326.9

22.5

$ 846.1

$
$
$

$
$

21.7
2.3
13.5

37.5

21.2
7.6

28.8

1.0

67.3

24.3%
35.8%
154.3%

39.4%

24.3%
47.5%

26.9%

-13.5%

32.2%

41.4%
NM
91.8%

82.5%

-12.1%
64.7%

0.2%

9.6%

34.0%

$ 354.0
$ 121.6
99.2
$

$ 574.8

$ 238.6
42.4
$

$ 281.0

16.6

$ 872.4

$
$
$

$
$

34.1
(1.6)
9.4

41.9

15.5
5.8

21.3

1.8

65.0

14.2%
31.3%
5.4%

15.7%

-15.9%
-2.1%

-14.1%

-26.1%

3.1%

57.4%
-167.5%
-30.3%

12.0%

-27.2%
-23.4%

-26.3%

77.4%

-3.3%

Results of Operations
Fiscal 2001 Compared with Fiscal 2000
Consolidated
Net sales in 2001 increased 3.1% over 2000 to $872.4 million. The sales increase was
due to sales increases in the Infrastructure businesses, offset by sales decreases in
the Agricultural businesses. The increase in Wireless Communication segment sales
was attributable to the PiRod acquisition, which was completed on March 30, 2001.

In 2001, gross proﬁt as a percent of sales was virtually unchanged from 2000. Higher
margins in the Poles segment essentially offset lower margins in the other segments.
Selling, general and administrative expenses (SG&A) as a percent of sales increased
in 2001 due to lower sales in the Irrigation, and Wireless Communication segments.
While expenses were reduced in these segments, sales decreased more than
expenses. Operating income decreased 3.3% as compared with 2000. Improved proﬁts
in the Poles segment partially offset proﬁtability decreases in the other segments.

Net interest expense was essentially unchanged between 2001 and 2000. While interest-
bearing debt was reduced in 2001, average borrowing levels were higher than in 2000.
The effect on interest expense from these higher borrowing levels was offset by
declining interest rates throughout most of 2001 on the Company’s variable interest
rate debt. Declining interest rates resulted in a positive impact on interest expense
of $2.5 million in 2001.

The Company’s effective tax rate increased from 36.0% in 2000 to 36.9% in 2001. The
rate increase was mainly associated with taxes related to distributions from foreign
entities and increased goodwill amortization expenses that were not tax-deductible.

Losses in nonconsolidated subsidiaries increased in 2001 due to unproﬁtable opera-
tions in the Company’s Mexican joint venture and a write down of $1 million in an
investment in an irrigation distributor in Argentina. The Mexico performance related
to poor local market demand for pole products in the second half of 2001 and start-up
production inefficiencies. The Argentina write down was prompted by the recent
difficulties encountered in the Argentine economy.

Net earnings decreased 12% to $26.7 million in 2001 from $30.4 million in 2000. Diluted
earnings per share decreased 15% from $1.28 to $1.09. The percentage drop in earnings
per share was more than the decrease in net earnings due to the additional shares
outstanding in 2001 related to the shares issued as part of the PiRod acquisition.

Poles Segment
The improvement in sales and operating proﬁt was attributable to strong performance
in North America. North American sales in lighting and traffic products were up due
to government funding for the U.S. highway program, where the emphasis on safety
and traffic control drove demand for the Company’s street, area and highway lighting
products as well as traffic poles and sign structures. Sales in the commercial lighting
market improved slightly over 2000, as increased alliances with lighting ﬁxture OEM’s
helped maintain order rates despite a slowdown in commercial construction activity.
Utility product sales also improved substantially over 2000. As electric utility companies
and independent power producers have been adding new capacity, the Company’s
transmission, substation and distribution poles are needed to bring this newly
generated electricity from the generation source to users. The operating proﬁt
improvement in North America was in part due to the improved sales volumes as well
as margin enhancements associated with improved manufacturing productivity,
stable material prices and effective utilization of capacity expansions. The Company
closed its composite pole facility in late 2000, which contributed to the 2001 operating
proﬁt improvement. This facility recorded a loss of $1.7 million in 2000.

Gross Proﬁt
as a Percent
of Net Sales

%% 27.027.0 25.025.0 24.924.9

9999 0000 0101

Segment
Sales

639.9
$$ 639.9

846.2
846.2

872.4
872.4

16.616.6
42.442.4
99.299.2

121.6
121.6

22.622.6
43.343.3

94.194.1

92.692.6

283.6
283.6

238.6
238.6

354.0
354.0

310.0
310.0

26.126.1
29.429.4
37.037.0
68.268.2

228.2
228.2

251.0
251.0

9999

0000

0101

Poles
Irrigation
Wireless Communications
Coatings
Tubing
Other

Dollars in Millions

40 | 41

In Europe, lighting sales were down 6% as compared with 2000. Preparations for local
elections in France increased sales early in the year, but the European economy
weakened throughout the remainder of 2001, lowering market demand for lighting
structures. Despite the lower sales, operating proﬁt was slightly improved, the result
of factory and SG&A expense control and improved operations. Sales and proﬁts in
China were similar to 2000.

SG&A Expense
as a Percent
of Net Sales

%% 19.219.2 17.117.1 17.517.5

Wireless Communication Segment
The sales and operating proﬁt of the Wireless Communication segment for 2001
include the operations of PiRod after its acquisition at the end of the ﬁrst quarter. If
PiRod’s sales are excluded from 2001, worldwide sales would have been down
12%. Sales in North America (without PiRod) were down 18% from 2000, with market
demand slowing more dramatically as 2001 progressed. This was due to the general
slowdown of the economy and particularly the slumping telecommunications industry
,
which hampered our customers’ ability to sustain funding of their strong network buildout
of 2000. Furthermore, the installation of many of the structures sold in 2000 was
delayed, which also reduced demand for new structures. Sales of components, which
are parts that attach antennas to structures such as poles, towers and buildings, were
relatively stable. Components were used to support subscriber growth and bandwidth
demand by allowing more antennas to be installed on existing structures. This reduction
in market demand for structures (especially towers) resulted in a drop in gross proﬁt
margins and operating income in 2001. Unfavorable manufacturing ﬁxed cost coverage
in the Company’s Nebraska and Oregon plants due to the lower production volumes
reduced 2001 operating proﬁt by approximately $3 million. The Company elected in the fourth quarter to eliminate some
overlapping product lines between the PiRod and Valmont/Microﬂect brands, resulting in a pretax $1.5 million inventory
valuation charge. PiRod was accretive to net income and neutral to earnings per share in 2001. Sales of communication
poles in China improved over 2000, as a continuing wireless network buildout drove increased demand.

9999 0000 0101

Coatings Segment
The sales increase in the Coatings segment related to a signiﬁcant sales improvement at one location, where the Company
is providing coating and assembly services to a large customer. Aside from this location, sales were down 12%.
Furthermore, galvanizing services provided to the Irrigation segment were down from 2000, due to lower production levels
in that segment and further transfer of Irrigation production to its McCook, Nebraska facility, which galvanizes its own
production. The reduction in operating income in 2001 mainly related to reduced ﬁxed cost coverage due to the generally
lower production levels, an operating income reduction of approximately $4 million. Higher energy prices also negatively
impacted 2001 proﬁtability by approximately $1 million.

Irrigation Segment
Sales in the Irrigation segment were lower, both in North American and International markets. Weak commodity prices,
high input costs for farmers related to energy prices and uncertainty over future U.S. farm policy all contributed to weaker
market conditions in North America. As a result, management reduced employment and planned spending levels in early
2001. North American operating proﬁt was down as compared with 2000, but improved pricing discipline, customer service
improvements and the spending reductions taken early in the year resulted in an improved operating proﬁt percentage.

Sales and proﬁts in international markets were lower in 2001, mainly due to poor market conditions in Brazil. Government
imposed electricity and water restrictions brought about by drought reduced farmers’ ability to obtain permits to irrigate,
which reduced demand for irrigation machines. The combined impact on operating proﬁt of lower sales and margin was
$3 million. Sales and proﬁts in other international markets in total were similar to 2000. The Company’s strategy of local
manufacturing and distribution in international markets has enabled it to remain competitive, despite the continued
strength of the U.S. dollar.

Tubing Segment
The Tubing segment recorded slightly lower sales than in 2000, due to a weaker U.S. economy. Sales to the Irrigation segment
fell, due to lower Irrigation sales and transfer of production to its McCook facility, which produces its own tubing. These lower
production levels resulted in unfavorable manufacturing ﬁxed cost coverage, estimated at $1 million. Pricing competition
due to a weakening U.S. economy and falling steel prices resulted in further margin pressure. SG&A spending was reduced
in light of weaker sales and margins to mitigate the impact of lower margins on operating proﬁt.

Fiscal 2000 Compared with Fiscal 1999
Consolidated
Net sales increased signiﬁcantly over 1999, due to acquisitions completed in 2000 (contributing $83 million in sales) and
growth in the Company’s base businesses. All segments in the Infrastructure and Agricultural businesses contributed to
the sales growth.

Gross proﬁt as a percent of sales fell from 27.0% in 1999 to 25.0% in 2000. As a group, acquisitions made in 2000 (four in the
Coatings segment, one in the Tubing segment and one in the Poles segment) experienced lower gross proﬁt and SG&A
expenses as a percent of sales than the Company’s base manufacturing businesses. Operating proﬁts of these businesses
as a percent of sales are similar to the remainder of the Company’s operations. The impact of acquisitions on gross proﬁt
and SG&A as a percent of sales was 0.7%. Otherwise, gross proﬁt percentages were lower in all segments, except the
Poles segment, where gross proﬁt margins were unchanged from 1999. Raw material price volatility early in the year and
increased natural gas prices late in the year also negatively impacted gross proﬁt margins. Aside from the impact from
acquisitions, the Company realized SG&A leverage as sales grew faster than spending in the base businesses. Operating
income increased slightly faster than sales. A decrease in operating income in the Irrigation segment was offset by
improved proﬁts in the other segments.

Net interest expense was $16.0 million in 2000, compared with $7.1 million in 1999. The higher interest expense was attributable
to higher average borrowings resulting from acquisitions and capital expenditures. Interest expense was also impacted by
rising U.S. interest rates in 2000 by an estimated $3 million.

The effective tax rate was 36.0% in 2000, compared with 36.9% in 1999. The lower tax rate in 2000 resulted primarily from
increased utilization of operating loss and tax credit carryforwards.

Net earnings increased 15.3% to $30.4 million and diluted earnings per share increased 18.5% to $1.28. The percentage
difference in earnings per share as compared with net earnings was attributable to the Company’s repurchase of shares
during 1999.

Poles Segment
North American lighting and traffic sales were strong in both the commercial and lighting and traffic markets. Lighting
and traffic market conditions were good due to continued government funding of the highway program and other government
spending programs. Rising interest rates during 2000 impacted real estate development and the general construction
economy, which slowed the growth in the commercial lighting market later in the year. Utility structure sales grew as utility
companies continue to invest in transmission and distribution infrastructure to meet growing electricity needs. This
strong sales activity and the effect of ongoing cost reduction and productivity programs resulted in proﬁtability growth in
North America.

In Europe, lighting sales increased in local currency terms, as general economic conditions in Europe were favorable.
Substantial raw material price increases and very competitive market conditions hampered proﬁtability in Europe. In China,
lighting and utility sales were up as the Company continued to penetrate local markets. In 2000, the Company invested in
a pole manufacturing joint venture with Grupo IMSA (a large diversiﬁed manufacturer based in Mexico) in Monterrey,
Mexico. The Company owns 49% of the joint venture and its ﬁnancial results are reported on the equity method.

Wireless Communication Segment
The sales increase was driven primarily by strong U.S. market conditions in 2000. Carriers and build to suit companies
were very active in building out their networks, which caused the increase in demand for structures and components. This
improved sales activity led to improved proﬁtability, although margins diminished due to unfavorable sales mix. In China,
communication poles sales and proﬁtability were improved over 1999. In 1999, the Company incurred a $1.9 million impairment
charge related to a communication tower facility in Europe.

Coatings Segment
Sales and proﬁtability grew due to acquisitions completed in the year 2000 (which contributed $51.4 million in sales) and
volume growth at existing facilities. Strong economic conditions in the U.S. during 2000 helped drive the increase in sales.
Operating proﬁt increased substantially in 2000, driven mainly by volume increases, acquisitions and operating leverage.
Operating proﬁt grew at a slower rate than sales due to production difficulties at one location throughout much of 2000 and
a sharp increase in energy prices in the fourth quarter of 2000.

42 | 43

Irrigation Segment
Sales increased both in North American and International markets. In North America, sales beneﬁted from dry weather
conditions early in the year, the effect of government support programs on net farm income, continued conversion of ﬂood
irrigation to center pivots and the full year impact from acquisitions completed in 1999. International sales were at record
levels with increased proﬁtability, despite a very strong U.S. dollar. Part of the international sales increase came from
large project sales to markets in the Middle East. Operating income in 1999 included a $2.8 million gain on the sale on an
investment. Otherwise, operating income was virtually unchanged from 1999. Proﬁtability did not grow as fast as sales
due to lower gross proﬁt margin as a percent of sales. Gross proﬁt margins were impacted by start up and ﬁxed costs in
the Company’s new facility in McCook, Nebraska, project sales to the Middle East which were at relatively low gross proﬁt
margins ($1.3 million gross margin impact), sharp increases in raw material prices in the ﬁrst half of the year of approximately
$2.2 million and competitive pricing conditions in North America. Good SG&A expense control helped to offset some of the
impacts of lower gross proﬁt margins.

Tubing Segment
Tubing sales increased over 1999, due to an acquisition made during 2000 (which contributed $6.6 million in sales) and
good market conditions driven by a strong U.S. economy. This strong sales performance likewise resulted in the increase
in operating income.

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.

Allowance for Doubtful Accounts
In determining an allowance for receivables that will not ultimately be collected in full, we consider:

> age of the accounts receivable

> customer credit history

> customer ﬁnancial information, and

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

If our customers’ ﬁnancial condition were to deteriorate, resulting in a reduction in their ability to make payment, additional
allowances may be required.

Warranties
We rely on historical product data to estimate the cost of product warranties at the time revenue is recognized. In determining
the accrual for the estimated cost of warranty claims, we consider our experience with:

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

> costs for replacement parts,

> other direct costs associated with warranty claims, and

> the number of product units subject to warranty claims.

If our cost to repair a product or the number of products subject to warranty claims is greater than we estimated, 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 2001, the Company experienced generally lower costs to produce inventory than in 2000, due in part to our lower costs
for steel and other commodities. This resulted in a reduction in the cost of goods sold of $1.4 million, and proﬁts reported
in our ﬁnancial statements in 2001 were higher than would otherwise have been reported had all the Company’s inventories
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 and Amortization of Long-Lived Assets
The Company’s long-lived assets consist primarily of property, plant and equipment and goodwill and intangible assets that
were acquired in business acquisitions. We believe the useful lives we assigned to these assets, which range from 3 to 40
years, are reasonable. If our assumptions about these 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.

Stock Options
Employees of the Company are periodically granted stock options by the Compensation Committee of the Board of Directors.
As allowed under generally accepted accounting principles (GAAP), the Company does not record any compensation
expense on the income statement with respect to options granted to employees. Alternatively, under GAAP, the Company
could have recorded a compensation expense based on the fair value of employee stock options. As described
in Note 7 in the Consolidated Financial Statements, had the Company recorded a fair value-based compensation expense
for stock options, earnings per share would have been $0.08 to $0.10 less than what was reported for the 1999, 2000 and 2001
ﬁscal years.

Income Taxes
The Company records a valuation allowance to reduce its 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 was estimated to be not fully realizable in the future, a valuation allowance to the deferred
tax asset would decrease net income in the period the determination was made. Likewise, should the Company subsequently
determine that it would be able to realize more than the net deferred tax asset in the future, an adjustment reducing the
valuation allowance would increase net earnings in the period such determination was made.

44 | 45

Liquidity and Capital Resources
Net working capital was $145.6 million at ﬁscal year-end 2001, or virtually unchanged
from year-end 2000. The ratio of current assets to current liabilities was 2.05:1 as
of December 29, 2001, as compared with 1.87:1 at December 30, 2000. Operating
cash ﬂow was $109.8 million in 2001, as compared with $11.0 million in 2000. The
strong operating cash ﬂow improvement was attributed to better working capital
management this year. Inventories were reduced steadily throughout the year in all
segments, particularly in the Irrigation and Wireless Communication segments.

Capital spending was $25.7 million in 2001, a sharp decrease from the $46.5 million
that was spent in 2000. The major capital projects this year included:

> Poles Segment–large pole capacity expansion, aluminum extruder and

business software;

and

Total
Assets

$$ 419419 600600 589589

> Irrigation Segment–manufacturing facility in the United Arab Emirates.

In addition, $33.4 million cash was expended as part of the PiRod acquisition, which
was completed on March 30, 2001.

The stronger operational cash ﬂow, combined with lower capital spending and
reduced cash for acquisitions, enabled the Company to reduce its interest-bearing
debt from $248.9 million at December 30, 2000 to $209.3 million at December 29, 2001.

9999 0000 0101

Dollars in Millions
Dollars in Millions

The Company has historically funded its growth, capital spending and acquisitions
by a combination of operating cash ﬂows and debt ﬁnancing. The Company’s long-term
objective is to maintain long-term debt as a percent of capital below 40%. The Company has temporarily exceeded its
self-imposed objective for major strategic purposes, such as acquisitions. At year-end 2001, long-term debt was 41.9%
of invested capital, down from 42.8% at year-end 2000. While long-term debt as a percent of capital was above the
Company’s stated objective, debt levels have been reduced in 2001 and the Company plans to meet this ﬁnancial objective
in 2002, barring signiﬁcant acquisition activity.

The Company’s 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 $36.0 million at the end of 2001 as compared with $55.4 million at
the end of 2000. On December 29, 2001, $29.5 million of these credit facilities were unused.

The major components of long-term debt include a 2001 revolving credit agreement with a group of banks and a long-term
unsecured credit facility with an insurance company. Under the revolving credit agreement, the Company 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 29, 2001, the outstanding principal balance was $77.5 million, compared with $90.0 million at the
end of ﬁscal 2000. The Company’s borrowings under the unsecured facility with an insurance company are $100 million, the
maximum under the agreement. The annual principal payments due under this facility are in varying amounts starting in
2002 and ending in 2012. The principal may be prepaid at any time, subject to applicable yield maintenance provisions. The
Company also has 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 the Company to maintain certain
leverage and ﬁxed charge coverage ratios for the duration of the agreements. At the end of ﬁscal 2001, the Company was in
compliance with all debt covenants.

Capital
Expenditures

Working
Capital

$$ 37.837.8 46.546.5 25.725.7

$$ 98.698.6 145.6

145.6
145.6 145.6

In December 2001, the Board of Directors authorized
the repurchase of up to 1.5 million shares of the
Company’s common stock. This authorization
replaced the authorization made in 1998. As of
December 29, 2001, no shares had been repurchased
under this authorization.

The Company’s 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 the Company’s core businesses; and

> Complete authorized common stock

repurchases.

9999 0000

0101

9999 0000 0101

In the event of a sharp decrease in demand for
the Company’s products, resulting proﬁtability
reductions would reduce its operating cash ﬂows and
affect its ability to grow. Likewise, low proﬁtability
or operating losses could impact the Company’s
.
compliance with key long-term debt covenants
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.

Dollars in Millions
Dollars in Millions

Financial Obligations and Commercial Commitments
The Company has 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 are sum-
marized as follows, in millions of dollars:

Contractual Obligations

Long-term debt and capital leases
Operating leases
Unconditional purchase obligations

Total contractual cash obligations

Total

$ 198.0
34.9
14.7

$ 247.6

2002

11.1
7.7
14.7

33.5

2003-2004

2005-2006

Thereafter

29.9
11.6
–

41.5

$ 107.0
6.8
–

$ 113.8

$
$

50.0
8.8
–

58.8

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.

The Company’s operating leases relate to obligations associated with outside 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 obli-
gations for the Company at the end of the lease contracts. The most signiﬁcant operating lease is the corporate office
building in Omaha, Nebraska, which is a lease with a U.S. bank. The Company makes lease payments on the entire office
complex and sub-leases approximately 75% of the total office space to outside parties. Substantially all of the office space
(95%) is occupied either by the Company or outside lessees. The current lease obligation is through 2003, at which time the
Company may elect to 1) renew the lease at a negotiated rate and duration; 2) purchase the facility from the bank for $35
million; or 3) terminate the lease. In the event that the Company terminates the lease and the facility is sold for less than $35
million, the Company is obligated to pay the difference between the sales price and $35 million to the bank.

46 | 47

Unconditional purchase obligations relate to purchase orders for aluminum, natural gas and zinc for periods up to one
year. The quantities under contract are reasonable in light of normal ﬂuctuations in business levels, so the Company
expects to use the commodities under contract during the contract period.

The Company also has certain commercial commitments related to contingent events that could create a ﬁnancial obligation
for the Company, which contingent ﬁnancial obligations do not meet the requirements for balance sheet recognition. These
commitments at December 29, 2001 are as follows (in millions of dollars):

Other Commercial
Commitments

Standby Lines of Credit
Guarantees

Total commercial commitments

Total Amounts
Committed

Commitment
Expiration Period
2002

4.4
2.0

6.4

4.4
2.0

6.4

The above commitments include $4.2 in loan guarantees of non-consolidated subsidiaries in Argentina and Mexico and are
in proportion to the Company’s ownership percentage in these companies. The Company also maintains standby letters of
credit for contract performance on certain sales contracts. As the likelihood of nonperformance under these commitments
was not considered to be probable, they are not recognized on the balance sheet at December 29, 2001.

Risk Management
Market Risk –The principal market risks affecting the Company are exposure to interest rates and foreign currency
exchange rates. The Company’s use of derivative ﬁnancial instruments to hedge these exposures is not material. The
Company does not use derivatives for trading purposes.

Interest Rates –The Company manages interest expense using a mix of ﬁxed and variable rate debt. Assuming average
interest rates and borrowings on variable rate debt, a hypothetical 10% change in interest rates would have an impact on
interest expense of $618 thousand in 2001 and $859 thousand in 2000.

Foreign Exchange – Exposure to transactions denominated in a currency other than the entity’s functional currency is not
material, and therefore the potential exchange losses in future earnings, fair value and cash ﬂows from these transactions
are immaterial.

The Company manages its 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 the Company’s investment at
year-end assuming a hypothetical 10% change in the value of the U.S. Dollar.

(in thousands)

Europe
South America
Asia
South Africa

2001

$ 2,719
334
466
198

2000

$ 2,555
672
532
308

Outlook for 2002
In the Poles segment, we expect continued sales and earnings growth. Backlogs are strong and the revenue drivers in
North America (U.S. government funding for the highway program and capacity additions for electricity generation)
remain favorable for 2002. We expect the Wireless Communication segment to remain weak in 2002. The key market drivers
in wireless technology (subscriber growth, network buildout to improve service and technological advances such as 3G)
remain positive in the long-term. However, it is not clear when wireless carriers and build-to-suit companies will resume
their buildout plans. In the meantime, we are focusing on integrating the Valmont/Microﬂect and PiRod products and
organizations to maximize the synergies as the result of the PiRod acquisition. We expect the Coatings segment will show
improved sales and proﬁts as the U.S. economy improves.

In the Irrigation segment, we are not expecting a substantial change in the North American market in 2002. The uncertain
status of the U.S. farm program, and agricultural markets that have been weak since 1998, likely will keep the market from
growing much in the coming year. However, if the market does improve, we believe we are well positioned to take advantage of
the opportunity. Our cost structure is in line with the size of the business, and our inventory levels are much lower than at this
time last year. Our international irrigation business is geographically diversiﬁed and our strategy of local manufacturing and
distribution in key markets allows us to be competitive despite the current strength of the U.S. dollar. We expect improvement
in the sales and proﬁtability of the Tubing segment when the U.S. economy gains strength.

We expect to continue to generate positive cash ﬂow and reduce interest-bearing debt, thereby reducing our ﬁnancial
leverage and positioning ourselves for growth as opportunities arise.

In summary, our outlook toward 2002 is optimistic. The Poles segment should remain strong and if the U.S. economy
strengthens we expect that our Coatings and Tubing segments will show improved sales and earnings. Barring a further
weakening of the agricultural or telecommunications markets, we believe the Company is positioned for improved earnings
in 2002.

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.

48 | 49

2001 Selected

11-Year Financial Data

(Dollars in thousands, except per share amounts)

Operating Data

Net sales
Earnings (loss) from continuing operations
Earnings from discontinued operations
Cumulative effect of accounting change

Net earnings (loss)

Depreciation and amortization
Capital expenditures

Per Share Data

Earnings (loss):

Basic
Diluted

Cash dividends
Shareholders' equity

Financial Position
Working capital
Property, plant and equipment, net
Total assets
Long-term debt, including current installments
Shareholders' equity
Invested capital

Key Financial Measures

Return on beginning shareholders' equity
Return on invested capital
Long-term debt as a percent of invested capital

Year End Data

Shares outstanding (000)
Approximate number of shareholders
Number of employees

2001

2000*

1999*

1998*

1997

1996

1995

1994

1993

1992

1991

872,380
26,693
–
–

26,693

36,324
25,652

1.10
1.09
0.26
9.23

145,550
209,580
588,897
198,008
225,811
472,229

13.9%
8.6%
41.9%

24,477
5,500
5,342

846,129
30,400
–
–

30,400

30,270
46,456

1.31
1.28
0.26
8.23

145,575
208,272
600,135
205,472
191,911
479,609

17.8%
10.9%
42.8%

23,320
5,500
5,503

639,869
26,367
–
–

26,367

21,949
37,783

1.09
1.08
0.26
7.30

98,588
173,920
419,335
108,622
170,488
321,096

15.0%
9.8%
33.8%

23,354
5,500
3,948

630,858
27,636
–
–

27,636

19,843
29,667

1.04
1.02
0.25
7.12

99,466
157,447
406,957
96,218
175,913
317,708

13.3%
10.3%
30.3%

24,721
5,500
3,869

622,506
37,544
–
–

37,544

16,437
39,115

1.36
1.33
0.22
7.49

94,416
140,834
368,052
28,060
207,102
270,400

21.4%
15.4%
10.4%

27,641
5,400
3,751

644,531
21,248
–
–

21,248

14,832
35,559

0.78
0.76
0.19
6.41

81,403
120,579
341,648
29,573
175,231
243,905

13.3%
10.3%
12.1%

27,330
4,400
4,868

544,642
24,759
–
–

24,759

12,361
34,772

0.92
0.90
0.15
5.87

80,993
113,532
308,710
36,687
159,256
215,318

18.0%
13.0%
17.0%

27,120
3,900
4,166

501,740
18,887
–
–

18,887

11,018
23,535

0.70
0.69
0.15
5.10

88,278
89,201
283,443
43,242
137,582
197,591

15.5%
10.7%
21.9%

26,990
3,800
3,946

464,274
7,551
4,637
(4,910)

7,278

10,907
17,089

0.27
0.27
0.15
4.52

87,793
75,501
261,275
44,076
121,841
180,961

6.1%
5.6%
24.4%

26,972
3,800
4,152

445,481
11,671
3,564
–

15,235

12,585
8,353

0.57
0.56
0.13
4.43

68,551
78,150
286,076
69,735
118,428
200,501

14.1%
7.4%
34.8%

26,750
3,500
4,532

446,543
(8,822)
2,134
–

(6,688)

11,285
11,539

(0.25)
(0.25)
0.13
4.06

69,143
84,144
291,041
81,698
108,142
205,618

(5.7%)
(1.9%)
39.7%

26,620
3,500
4,478

Per share amounts and number of shares reﬂect the two-for-one stock split 1997.

* In 2000, 1999, and 1998, freight costs have been reclassiﬁed to cost of goods sold.

50 | 51

Consolidated Statements of

Operations

Three-year period ended December 29, 2001

Consolidated

Balance Sheets

December 29, 2001 and December 30, 2000

(Dollars in thousands, except per share amounts)

Net sales
Cost of sales

Gross proﬁt

Selling, general and

administrative expenses

Operating income

Other income (deductions):

Interest expense
Interest income
Miscellaneous

Earnings before income taxes, minority

interest and equity in earnings (losses)
of nonconsolidated subsidiaries

Income tax expense (beneﬁt):

Current
Deferred

Earnings before minority interest and equity

in earnings (losses) of nonconsolidated subsidiaries

Minority interest (after tax)
Equity in earnings (losses) of nonconsolidated

subsidiaries (after tax)
Net earnings

Earnings per share:

Basic

Diluted

Cash dividends per share

See accompanying notes to consolidated ﬁnancial statements.

2001

872,380
654,759

217,621

152,600

65,021

(17,080)
1,050
(524)

(16,554)

48,467

14,073
3,827

17,900

30,567
(509)

(3,365)
26,693

1.10

1.09

0.26

2000

846,129
634,246

211,883

144,627

67,256

(17,396)
1,376
(1,198)

(17,218)

50,038

17,500
500

18,000

32,038
(1,221)

(417)
30,400

1.31

1.28

0.26

1999

639,869
467,123

172,746

122,570

50,176

(8,052)
913
(306)

(7,445)

42,731

16,700
(900)

15,800

26,931
(624)

60
26,367

1.09

1.08

0.26

Assets
Current assets:

Cash and cash equivalents
Receivables, less allowance for doubtful

receivables of $4,842 in 2001 and
$3,505 in 2000

Inventories
Prepaid expenses
Refundable and deferred income taxes

Total current assets

Property, plant and equipment, at cost

Less accumulated depreciation and amortization

Net property, plant and equipment

Goodwill and other assets

Total assets

Liabilities And Shareholders’ Equity
Current liabilities:

Current installments of long-term debt
Notes payable to banks
Accounts payable
Accrued expenses
Dividends payable

Total current liabilities

Deferred income taxes
Long-term debt, excluding current installments
Other noncurrent liabilities
Minority interest in consolidated subsidiaries
Shareholders’ equity:

Preferred stock of $1 par value.

Authorized 500,000 shares; none issued

Common stock of $1 par value.
Authorized 75,000,000 shares;
issued 27,900,000 shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income

Less:

Cost of common shares in treasury-

3,422,166 shares in 2001 (4,579,894 shares in 2000)

Unearned restricted stock

Total shareholders’ equity

2001

2000

24,522

23,176

134,632
108,962
4,763
11,719

284,598

404,559
194,979

209,580
94,719

140,396
130,682
5,814
12,991

313,059

384,686
176,414

208,272
78,804

588,897

600,135

11,062
11,319
57,027
58,042
1,598

3,496
43,462
63,005
56,005
1,516

139,048

167,484

15,065
186,946
15,947
6,080

15,419
201,976
16,612
6,733

–

27,900
–
264,854
(11,957)

280,797

54,986
–

225,811

27,900
471
244,858
(6,948)

266,281

74,357
13

191,911

Total liabilities and shareholders’ equity

588,897

600,135

See accompanying notes to consolidated ﬁnancial statements.

52 | 53

Consolidated Statements of

Cash Flows

Three-year period ended December 29, 2001

(Dollars in thousands)

Cash Flows from Operations:

Net earnings

Adjustments to reconcile net earnings to net cash

ﬂows from operations:
Depreciation and amortization
Other adjustments
Equity in (earnings) losses in nonconsolidated subsidiaries
Minority interest in net earnings of consolidated subsidiaries
Changes in assets and liabilities:

Receivables
Inventories
Prepaid expenses
Accounts payable
Accrued expenses
Other noncurrent liabilities
Income taxes

Net cash ﬂows from operations

Cash Flows from Investing Activities:

Purchase of property, plant and equipment
Acquisitions, net of cash acquired
Proceeds from sale of property and equipment
Proceeds from sale of investment
Proceeds from investments by minority shareholders
Other, net

Net cash ﬂows from investing activities

Cash Flows from Financing Activities:

Net borrowings (repayments) under short-term agreements
Proceeds from long-term borrowings
Principal payments on long-term obligations
Dividends paid
Proceeds from exercises under stock plans
Purchase of common treasury shares:

Stock repurchase program
Stock plan exercises

Net cash ﬂows from ﬁnancing activities

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents
Cash and cash equivalents–beginning of year

Cash and cash equivalents–end of year

See accompanying notes to consolidated ﬁnancial statements.

2001

2000

1999

26,693

30,400

26,367

36,324
(370)
3,365
509

10,234
35,714
946
(12,513)
(1,160)
(586)
10,683

109,839

(25,652)
(34,079)
341
63
(105)
(2,288)

(61,720)

(26,416)
30,216
(42,718)
(6,308)
1,256

(1,373)
(186)

(45,529)

(1,244)

1,346
23,176

24,522

30,270
2,360
417
1,221

(26,593)
(40,894)
(667)
13,840
2,632
(411)
(1,591)

10,984

(46,456)
(63,173)
276
319
–
(759)

(109,793)

23,871
105,961
(14,472)
(6,056)
2,573

(2,322)
(1,647)

107,908

(859)

8,240
14,936

23,176

21,949
(2,198)
(60)
624

5,567
(8,473)
(48)
4,340
9,007
1,225
5,635

63,935

(37,783)
(2,854)
114
8,294
1,374
(1,285)

(32,140)

(9,312)
75,060
(60,863)
(6,337)
637

(22,210)
(588)

(23,613)

(826)

7,356
7,580

14,936

Consolidated Statements of

Shareholder’s Equity

(Dollars in thousands, except per share amounts)

Three-year period ended December 29, 2001

Balance at December 26, 1998
Comprehensive income:

Net earnings
Currency translation adjustment

Total comprehensive income

Cash dividends ($0.26 per share)
Purchase of treasury shares:

Stock repurchase program, 1,406,200 shares
Stock plan exercises, 35,982 shares

Stock options exercised;
56,181 shares issued

Tax beneﬁt from exercise of stock options
Stock awards; 19,125 shares issued

Balance at December 25, 1999
Comprehensive income:

Net earnings
Currency translation adjustment

Total comprehensive income

Cash dividends ($0.26 per share)
Purchase of treasury shares:

Stock repurchase program, 140,200 shares
Stock plan exercises, 83,927 shares

Stock options exercised;
175,536 shares issued

Tax beneﬁt from exercise of stock options
Stock awards; 14,000 shares issued

Balance at December 30, 2000
Comprehensive income:

Net earnings
Currency translation adjustment

Total comprehensive income

Cash dividends ($0.26 per share)
Issuance of 1,215,333 shares in connection

with PiRod acquisition
Purchase of treasury shares:

Stock repurchase program, 103,500 shares
Stock plan exercises, 11,326 shares

Stock options exercised;
38,734 shares issued

Tax beneﬁt from exercise of stock options
Stock awards; 19,754 shares issued

Common
stock

Additional
paid-in
capital

Accumulated
other
Retained comprehensive Treasury
income
earnings

stock

Unearned
restricted shareholders’

Total

stock

equity

27,900 $ 1,280 $ 200,393 $ (1,423) $ (52,235) $

(2) $ 175,913

–
–

–
–
–

–
–

(404)
111
56

26,367
–

–
(6,254)

–
–

–
–
–

–
(3,690)

–
–

–
–
–

–
–

(22,210)
(588)

951
–
274

–
–

26,367
(3,690)

22,677
(6,254)

(22,210)
(588)

–
–
(38)

547
111
292

27,900 $ 1,043 $ 220,506 $ (5,113) $ (73,808) $

(40) $ 170,488

–
–

–
–
–

–
–

(1,130)
516
42

30,400
–

–
(6,048)

–
–

–
–
–

–
(1,835)

–
–

–
–
–

–
–

(2,322)
(1,647)

3,188
–
232

–
–

–
–
27

30,400
(1,835)

28,565
(6,048)

(2,322)
(1,647)

2,058
516
301

27,900 $

471 $ 244,858 $ (6,948) $ (74,357) $

(13) $ 191,911

–
–

–

–
–

–
–
–

–
–

–

–
–

(543)
67
5

26,693
–

–
(6,383)

(1,078)

–
–

764
–
–

–
(5,009)

–
–

–

–
–

–
–
–

–
–

20,361

(1,373)
(197)

268
–
312

–
–

–

–
–

–
–
13

26,693
(5,009)

21,684
(6,383)

19,283

(1,373)
(197)

489
67
330

Balance at December 29, 2001

27,900 $

– $ 264,854 $ (11,957) $ (54,986) $

– $ 225,811

See accompanying notes to consolidated ﬁnancial statements.

54 | 55 Notes

to Consolidated Financial Statements

Three-year period ended December 29, 2001

(Dollars in thousands, except per share amounts)

(1) Summary of Signiﬁcant Accounting Policies
Principles of Consolidation
The consolidated ﬁnancial statements include the accounts of Valmont Industries, Inc. and its wholly and majority-owned
subsidiaries (the Company). Investments in 20% to 50% owned affiliates are accounted for by the equity method and
investments in less than 20% owned affiliates are accounted for by the cost method. All signiﬁcant intercompany items
have been eliminated. Certain 2000 items have been reclassiﬁed to conform with 2001 presentation.

Operating Segments
> Poles: This segment consists of the manufacture of engineered metal structures for the lighting and traffic and

utility industries

> Wireless Communication:This segment consists of the manufacture of tower and pole structures and components

for the wireless telephone industry

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

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

agricultural customers

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

Fiscal Year
The Company operates on 52/53 week ﬁscal years with each year ending on the last Saturday in December. Accordingly,
the Company’s ﬁscal years ended December 29, 2001 and December 25, 1999 consisted of 52 weeks. The Company’s ﬁscal
year ended December 30, 2000 consisted of 53 weeks.

Inventories
At December 29, 2001, approximately 55% of inventory is valued at the lower of cost, determined on the last-in, ﬁrst-out
(LIFO) method, or market. All other inventory is valued at the lower of cost, determined on the ﬁrst-in, ﬁrst-out (FIFO)
method or market. The excess of replacement cost of inventories over the LIFO value is approximately $7,000 and $8,400 at
December 29, 2001 and December 30, 2000, respectively.

Long-Lived Assets
Property, plant and equipment are recorded at historical cost. The Company uses the straight-line method in computing
depreciation and amortization for ﬁnancial reporting purposes and generally uses accelerated methods for income tax
purposes. The annual provisions for depreciation and amortization have been computed principally in accordance with
the following ranges of asset lives: buildings 15 to 40 years, machinery and equipment 3 to 12 years, and intangible assets
3 to 40 years.

An impairment loss is recognized if the carrying amount of an asset may not be recoverable and exceeds estimated future
undiscounted cash ﬂows of the asset. A recognized impairment loss reduces the carrying amount of the asset to its fair
value. In ﬁscal 2001, the Company recognized an impairment loss of $1.0 million related to its nonconsolidated investment
in Argentina.

Income Taxes
The Company uses the asset and liability method to calculate deferred income taxes. Deferred tax assets and liabilities
are recognized on temporary differences between ﬁnancial statement and tax basis of assets and liabilities using enacted
tax rates. The effect of tax rate changes on deferred tax assets and liabilities is recognized in income during the period
that includes the enactment date.

Foreign Currency Translations
Results of operations for foreign subsidiaries are translated using the average exchange rates during the period. Assets and
liabilities are translated at the exchange rates in effect on the balance sheet dates. Cumulative translation adjustments are
included as a separate component of accumulated other comprehensive income. These translation adjustments are the
Company’s only component of other comprehensive income.

Revenue Recognition
Revenue is generally recognized upon shipment of the product or delivery of the service to the customer.

Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to prepare these ﬁnancial statements in conformity with
generally accepted accounting principles. Actual results could differ from those estimates.

Derivative Instruments
The Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 133, Accounting for Derivative
Instruments and Hedging Activities (as amended) in the ﬁrst quarter of 2001. Due to the Company’s limited use of derivative
instruments, the impact of implementing this Statement was insigniﬁcant.

Stock Options
The Company accounts for employee stock options under APB 25. Since all options are granted at option prices equal to
the market price on the date of grant, no compensation expense is recorded on the Statement of Earnings. Note 7 to the
Consolidated Financial Statements provides a detailed discussion of the Company’s stock option plans.

Recently Issued Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. In October 2001, the FASB approved the issuance of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 141 requires all business combinations entered
into subsequent to June 30, 2001 be accounted for using the purchase method of accounting. SFAS No. 142 provides that
goodwill and other intangible assets with indeﬁnite lives will not be amortized, but will be tested for impairment on an
annual basis. SFAS No. 144 addresses the accounting and reporting for impairment of long-lived assets. These standards
are effective for ﬁscal years beginning after December 15, 2001. The Company has not quantiﬁed the impact resulting from
the adoption of these standards.

(2) Cash Flow Supplementary Information
The Company considers all highly liquid temporary cash investments purchased with a maturity of three months or less at
the time of purchase to be cash equivalents. Cash payments for interest and income taxes (net of refunds) were as follows:

Interest
Income taxes

(3) Property, Plant and Equipment
Property, plant and equipment, at cost, consists of the following:

Land and improvements
Buildings and improvements
Machinery and equipment
Transportation equipment
Office furniture and equipment
Construction in progress

2001

$ 18,263
$ 8,020

2000

$ 16,020
$ 18,560

1999

$ 7,596
$ 9,718

2001

$ 20,499
104,906
206,889
6,132
42,484
23,649

$ 404,559

2000

$ 20,068
96,796
194,539
6,023
38,211
29,049

$ 384,686

The Company leases certain facilities, machinery, computer equipment and transportation equipment under operating
leases with unexpired terms ranging from one to nine years. Rental expense for operating leases amounted to $11,912,
$11,301 and $8,855 for ﬁscal 2001, 2000 and 1999, respectively.

56 | 57

Minimum lease payments under operating leases expiring subsequent to December 29, 2001 are:

Fiscal year ending

2002
2003
2004
2005
2006
Subsequent

Total minimum lease payments

$ 7,682
7,184
4,450
3,754
3,058
8,787

$ 34,915

Operating leases include the office complex at the Company’s headquarters in Omaha, Nebraska, which is a lease with
a U.S. bank. The Company makes lease payments on the entire office complex and leases other office space in the complex
to outside parties. The current lease obligation is through 2003, at which time the Company may elect to 1) renew the lease
at a negotiated rate and duration; 2) purchase the facility from the bank for $35 million; or 3) terminate the lease. In the
event that the Company terminates the lease and the facility is sold for less than $35 million, the Company is obligated to
pay the difference between the sales price and the $35 million to the bank.

(4) Bank Credit Arrangements
The Company maintains various lines of credit for short-term borrowings totaling $36,014. The interest rates charged on
these lines of credit vary in relation to the banks’ costs of funds. The unused borrowings under the lines of credit were
$29,455 at December 29, 2001. The lines of credit can be modiﬁed at any time at the option of the banks. The Company pays
no fees in connection with the lines of credit. In addition to the lines of credit, the Company also maintains other short-term
bank loans. The weighted average interest rate on short-term borrowings was 4.8% at December 29, 2001 and 6.5% at
December 30, 2000.

Income Taxes

(5)
Income tax expense (beneﬁt) consists of:

2001

2000

1999

Current:
Federal
State
Foreign

Deferred:
Federal
State
Foreign

$ 9,684
1,082
3,307

$ 14,073

$ 4,326
214
(713)

$ 3,827

$ 17,900

The reconciliations of the statutory Federal income tax rate and the effective tax rate follows:

Statutory Federal income tax rate
State income taxes,net of Federal beneﬁt
Carryforwards, credits and

changes in valuation allowances

Other

2001

35.0%
2.2%

(2.1%)
1.8%

36.9%

$ 12,961
1,274
3,265

$ 17,500

$ 1,424
75
(999)

500

$ 18,000

2000

35.0%
2.6%

(2.4%)
0.8%

36.0%

$ 11,989
927
3,784

$ 16,700

(168)
(29)
(703)

(900)

$ 15,800

1999

35.0%
2.2%

(0.7%)
0.5%

37.0%

Deferred income taxes reﬂect the net tax effects of (a) temporary differences between the carrying amounts of assets and
liabilities for ﬁnancial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax
credit carryforwards. The tax effects of signiﬁcant items comprising the Company’s net deferred income tax liabilities are
as follows:

Deferred income tax assets:

Accrued expenses and allowances
Operating loss and tax credit carryforwards
Inventory capitalization

Gross deferred income tax assets
Valuation allowance

Total deferred income tax assets

Deferred income tax liabilities:
Property, plant and equipment
Lease transactions
Other liabilities

Total deferred income tax liabilities

Net deferred income tax liabilities

2001

2000

$ 21,860
1,727
1,726

25,313
–

$ 25,313

10,817
4,996
12,845

28,658

$ 17,523
1,580
2,025

21,128
(900)

$ 20,228

12,763
3,673
7,314

23,750

$ 3,345

$ 3,522

At December 29, 2001, and at December 30, 2000, management of the Company reviewed recent operating results and
projected future operating results. The Company’s belief that realization of its net deferred tax assets is more likely than
not is based on, among other factors, changes in operations that have occurred in recent years, as well as available tax
planning strategies. If the Company is unable to generate sufficient taxable income in the future through operating results,
increases in the valuation allowance may be required through a charge to income. The currency translation adjustments in
accumulated other comprehensive income are not adjusted for income taxes as they relate to indeﬁnite investments in
non-US subsidiaries.

(6)

Long-Term Debt

9.40% promissory note, unsecured
6.80% to 8.08% promissory notes, unsecured (a)
Revolving credit agreement (b)
IDR Bonds (c)
3.0% to 6.50% notes

Total long-term debt
Less current installments of long-term debt

Long-term debt, excluding current installments

2001

–
100,000
77,500
8,500
12,008

198,008
11,062

$ 186,946

2000

$ 2,250
95,000
90,500
8,500
9,222

205,472
3,496

$ 201,976

(a)

The unsecured promissory notes are advances under a facility of $100,000. These notes payable are due in varying annual
principal installments through 2012. The notes are subject to prepayment in whole or in part with or without premium as
speciﬁed in the agreement.

(b) The revolving credit agreement is an unsecured facility with a group of banks for a maximum of $150,000. The facility has
a termination date of August 21, 2006. The funds borrowed may be repaid at any time without penalty, or additional funds
may be borrowed up to the facility limit. The Company may choose from the following three interest rate alternatives: the
higher of prime rate or Federal Funds Rate plus 0.5%, the applicable Eurodollar rate plus a leverage ratio-based spread
(which at December 29, 2001 was 0.75%) or up to $60,000 at a rate determined through a competitive bid process. The
effective interest rate at December 29, 2001 was 2.68% and at December 30, 2000 was 7.28%.

(c) The Industrial Development Revenue Bonds were issued to ﬁnance the construction of a manufacturing facility in Jasper,
Tennessee. Variable interest is payable until ﬁnal maturity June 1, 2025. The effective interest rate at December 29, 2001
was 1.70%.

58 | 59

The lending agreements place certain restrictions on working capital, capital expenditures, payment of dividends, purchase
of Company stock and additional borrowings. Under the most restrictive covenants of the agreements, the Company may
purchase 777,640 shares of Company common stock authorized for repurchase by the Board of Directors in 1998 and in
addition make payments of cash dividends and purchases of the Company’s capital stock of $12,000 in any ﬁscal year. The
Company is in compliance with all debt covenants.

The minimum aggregate maturities of long-term debt for each of the four years following 2002 are: $15,541, $14,320, $15,202
and $91,774.

(7) Stock Plans
The Company maintains stock-based compensation plans approved by the shareholders, which provide that the
Compensation Committee of the Board of Directors may grant incentive stock options, nonqualiﬁed stock options, stock
appreciation rights, restricted stock awards and bonuses of common stock. At December 29, 2001, 517,922 shares of common
stock remained available for issuance under the plans. Shares and options issued and available are subject to changes in
capitalization.

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

The Company applies APB Opinion 25 in accounting for its ﬁxed stock compensation plans. Accordingly, no compensation
cost has been recognized for the ﬁxed plans in 2001, 2000 or 1999. Had compensation cost been determined on the basis of
fair value pursuant to Statement of Financial Accounting Standards No. 123, net earnings and earnings per share would
have been reduced as follows:

Net earnings
As reported

Pro forma

Earnings per share

As reported:

Basic

Diluted

Pro forma:

Basic

Diluted

2001

2000

1999

$ 26,693

$ 23,981

1.10

1.09

0.99

0.98

$ 30,400

$ 27,939

1.31

1.28

1.20

1.18

$ 26,367

$ 24,441

1.09

1.08

1.01

1.00

The fair value of each option grant commencing with grants made in 1996 was estimated as of the date of grant using the
Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2001, 2000 and 1999:

Expected volatility
Risk-free interest rate
Expected life from vesting date
Dividend yield

2001

50%
3.84%
2.6 yrs.
1.54%

2000

46%
4.81%
2.6 yrs.
1.46%

1999

41%
6.43%
2.6 yrs
1.36%

Following is a summary of the activity of the stock plans during 1999, 2000 and 2001:

Outstanding at December 27, 1998
Granted
Exercised
Forfeited

Outstanding at December 25, 1999

Options exercisable at December 25, 1999

Weighted average fair value of options granted during 1999

Outstanding at December 25, 1999
Granted
Exercised
Forfeited

Outstanding at December 30, 2000

Options exercisable at December 30, 2000

Weighted average fair value of options granted during 2000

Outstanding at December 30, 2000
Granted
Exercised
Forfeited

Outstanding at December 29, 2001

Options exercisable at December 29, 2001

Weighted average fair value of options granted during 2001

Number
of Shares

2,180,096
870,047
(96,181)
(22,046)

2,931,916

1,348,234

Number
of Shares

2,931,916
620,376
(175,536)
(251,410)

3,125,346

1,536,263

Number
of Shares

3,125,346
533,800
(38,734)
(155,568)

3,464,844

2,089,299

Weighted
Average
Exercise
Price

$ 15.52
16.37
(9.89)
(19.09)

$ 15.93

$ 14.91

6.48

Weighted
Average
Exercise
Price

$ 15.93
19.44
(11.52)
(18.04)

$ 16.70

$ 15.76

7.54

Weighted
Average
Exercise
Price

$ 16.70
14.70
(12.26)
(18.35)

$ 16.37

$ 16.41

5.92

60 | 61

Following is a summary of the status of stock options outstanding at December 29, 2001:

Outstanding and Exercisable By Price Range

Options Outstanding

Options Exercisable

Exercise
Price Range

6.00-13.91
14.87-16.69
17.28-19.97
20.32-23.00

Number

988,147
1,112,792
1,003,480
360,425

3,464,844

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise
Price

6.06 years
7.26 years
7.47 years
5.46 years

11.79
16.25
19.07
21.79

Weighted
Average
Exercise
Price

10.35
16.23
19.17
21.76

Number

536,014
662,191
540,669
350,425

2,089,299

(8) Earnings Per Share
The following table provides a reconciliation between Basic and Diluted earnings per share (EPS).

2001:

Net earnings
Shares outstanding
Per share amount

2000:

Net earnings
Shares outstanding
Per share amount

1999:

Net earnings
Shares outstanding
Per share amount

Dilutive Effect of Diluted

Basic EPS Stock Options

EPS

$ 26,693
24,280
1.10

$ 30,400
23,276
1.31

$ 26,367
24,158
1.09

–
244
–

–
498
–

–
255
–

$ 26,693
24,524
1.09

$ 30,400
23,774
1.28

$ 26,367
24,413
1.08

Treasury Stock

(9)
During 1998, the Board of Directors authorized management to repurchase up to 5.4 million shares of the Company’s common
stock. Repurchased shares are recorded as “Treasury Stock” and result in a reduction of “Shareholders’ Equity.” When
treasury shares are reissued, the Company uses the last-in, ﬁrst-out method, and the difference between the repurchase cost
and reissuance price is charged or credited to “Additional Paid-In Capital.” As of December 29, 2001, a total of 4.8 million
shares had been purchased for $79,160 including 103,500 shares purchased during 2001 at a cost of $1,373.

In December of 2001, the Company’s Board of Directors cancelled the above authorization and reauthorized management
to repurchase 1.5 million shares of the Company’s common stock. At December 29, 2001, no shares had been repurchased
under this authorization.

(10) Employee Retirement Savings Plan
Established under Internal Revenue Code Section 401(k), the Valmont Employee Retirement Savings Plan (“VERSP”) is
available to all eligible employees. Participants can elect to contribute up to 15% of annual pay, on a pretax and/or after-tax
basis. The Company may also make basic, matching and/or supplemental contributions to the Plan. In 2001, the deﬁned
contribution plan covering the employees of Microﬂect was merged into the VERSP plan. In addition, the Company has a
money purchase pension plan and a proﬁt sharing plan covering the employees of PiRod, Inc.; contributions under these
plans are based primarily on the performance of the business unit and employee compensation. The 2001, 2000 and 1999
Company contributions to these plans amounted to approximately $6,200, $6,300 and $5,100, respectively.

The Company also offers a fully-funded, non-qualiﬁed deferred contribution plan for certain Company executives who
otherwise would be limited in making pretax contributions into VERSP under Internal Revenue Service regulations. The
invested assets and related liabilities to these participants were $11.0 million and $12.0 million at December 29, 2001 and
December 30, 2000, respectively. Such amounts are included in “Goodwill and other assets” and “Other noncurrent liabilities”
on the Consolidated Balance Sheets.

(11) Research and Development
Research and development costs are charged to operations in the year incurred. Research and development expenses
were approximately $3,900 in 2001, $4,400 in 2000, and $2,500 in 1999.

(12) Disclosures About the Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, receivables, accounts payable, notes payable to banks and accrued
expenses approximate fair value because of the short maturity of these instruments. The fair values of each of the
Company’s long-term debt instruments are based on the amount of future cash ﬂows associated with each instrument
discounted using the Company’s current borrowing rate for similar debt instruments of comparable maturity. The fair
value estimates are made at a speciﬁc point in time and the underlying assumptions are subject to change based on
market conditions. At December 29, 2001, the carrying amount of the Company’s long-term debt was $198,008 with an
estimated fair value of approximately $200,818.

(13) Stockholders’ Right Plan
Each share of common stock carries with it one half preferred stock purchase right ("Right"). The Right becomes exercisable
ten days after a person (other than Robert B. Daugherty and his related persons and entities) acquires or commences a
tender offer for 15% or more of the Company’s common stock. Each Right entitles the holder to purchase one one-thousandth
of a share of a new series of preferred stock at an exercise price of $100, subject to adjustment. The Right expires on
December 19, 2005 and may be redeemed at the option of the Company at $.01 per Right, subject to adjustment. Under
certain circumstances, if (i) any person becomes an Acquiring Person or (ii) the Company is acquired in a merger or other
business combination, each holder of a Right (other than the Acquiring Person) will have the right to receive, upon exercise
of the Right, shares of common stock (of the Company under (i) and of the acquiring company under (ii) having a value of
twice the exercise price of the Right.

(14) Acquisitions and Divestiture
On March 30, 2001, the Company’s Wireless Communication segment acquired all the outstanding shares of PiRod Holdings,
Inc. and subsidiary (PiRod), a manufacturer of towers, components and poles located in Plymouth, Indiana. The Company
issued 1.2 million shares of Company common stock and $33.4 million of cash was paid to retire PiRod long-term debt. The
excess of purchase price over fair value of net assets acquired was $6.5 million and was recorded as goodwill. The purchase
price allocation will be completed upon ﬁnalization of asset and liability valuations. Goodwill and other intangible assets
arising from the transaction are being amortized over their estimated useful lives. The Company’s summary proforma
results of operations for the ﬁfty-two and ﬁfty-three week periods ended December 29, 2001 and December 30, 2000,
respectively, assuming the transaction occurred at the beginning of the periods presented are as follows:

Net sales
Net earnings
Earnings per share–diluted

Fifty-two and Fifty-three Weeks Ended
December 30, 2000
December 29, 2001

$ 887,508
27,676
1.11

$ 929,906
36,436
1.46

62 | 63

During 2000 the Company’s Irrigation segment invested $6.6 million cash in the investment in a new irrigation equipment
manufacturing plant in the United Arab Emirates; a majority ownership in an irrigation products distribution joint venture
located in China; and in minority positions in an irrigation dealership located in Kansas and an irrigation products distribution
operation in Argentina. The Coatings segment invested $40.8 million in facilities located in Illinois, Minnesota, California
and Iowa. The Poles segment invested $12.7 million in an aluminum pole manufacturer in Minnesota and a minority interest in
a joint venture in Mexico. The Tubing segment invested $3.1 in a tubing business in Nebraska. The excess of purchase price
over fair value of net assets acquired in 2000 was $33 million.

During 1999 the Company’s Irrigation segment invested $2.9 million cash in two irrigation retail outlets. The excess of purchase
price over fair value of the net assets acquired has been recorded as goodwill and is being amortized over the estimated useful
life. During March of 1999, the Company sold a nonconsolidated investment in an irrigation-related business for $8.3 million and
realized a gain of $2.8 million.

All acquisitions have been accounted for under the purchase method, and the excess of purchase price over net assets
acquired is being amortized on a straight-line basis with lives ranging from 10-40 years. The results of operations of the
acquired businesses are included in the consolidated ﬁnancial statements from the dates of acquisition.

(15) Business Segments
Beginning in 2001, the Company has aggregated its businesses into ﬁve reportable segments:

> Poles: This segment consists of the manufacture of engineered metal structures for the lighting and traffic and

utility industries; and

> Wireless Communication: This segment consists of the manufacture of tower and pole structures and

components for the wireless telephone industry; and

Business Segment Information
Summary by Business Segments

Sales:

Poles:

Lighting & Traffic
Utility

Poles segment

Wireless Communication:

Structures
Components

Wireless Communication segment

Coatings segment

Irrigation segment

Tubing segment

Other

Total

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

Intersegment Sales:

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

to agricultural customers; and

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

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 pressure vessels, machine tool accessories and industrial fasteners,
are reported in the “Other” category. Prior period information is presented in accordance with the current reportable
segment structure.

The accounting policies of the reportable segments are the same as those described in Note 1. The Company evaluates
the performance of its business segments based upon operating income and invested capital. The Company does not
allocate interest expense, non-operating income and deductions or income taxes to its business segments. All Corporate
expenses and assets are allocated to the business segments. Intersegment sales prices are both cost and market based.

Included in Selling, General and Administrative Expenses in 1999 is a charge of $1,915 to write-down assets of a French
communication tower facility to fair value and to provide for other related costs including employee severance.
Management determined that this charge was appropriate after reviewing the decline in the European communication
tower market and the operating performance of this facility.

Poles–Lighting
Coatings
Irrigation
Tubing
Other

Total

Poles segment:

Lighting & Traffic
Utility

Poles segment

Net Sales:

Wireless Communication segment:

Structures
Components

Wireless Communication segment

Coatings segment

Irrigation segment

Tubing segment

Other

Total

2001

2000

1999

218,122
135,876

353,998

80,451
41,107

121,558

116,245

238,657

51,881

20,153

211,374
98,677

310,051

63,399
29,180

92,579

116,115

291,148

58,515

27,130

182,352
68,679

251,031

49,965
18,218

68,183

54,963

228,564

42,770

28,719

902,492

895,538

674,230

–
17,048
78
9,513
3,473

30,112

218,122
135,876

353,998

80,451
41,107

121,558

99,197

238,579

42,368

16,680

71
21,968
7,583
15,218
4,569

49,409

211,303
98,677

309,980

63,399
29,180

92,579

94,147

283,565

43,297

22,561

–
17,943
386
13,408
2,624

34,361

182,352
68,679

251,031

49,965
18,218

68,183

37,020

228,178

29,362

26,095

872,380

846,129

639,869

64 | 65

Business Segment Information (Continued)
Summary by Business Segments

Operating Income:

Poles segment

34,095

21,657

15,311

Summary by Geographical Area by Location of Valmont Facilities:
Net Sales:

2001

2000

1999

2001

2000

1999

Wireless Communication segment
Impairment charge

Total Wireless Communication segment

Coatings segment

Irrigation segment
Gain on sale of investment

Total Irrigation segment

Tubing segment

Other

Total

Interest expense, net
Miscellaneous

Earnings before income taxes, minority interest,

and equity in earnings (losses) of
nonconsolidated subsidiaries

Total Assets:

Poles
Wireless Communication
Coatings
Irrigation
Tubing
Other

Total

Capital Expenditures:
Poles
Wireless Communication
Coatings
Irrigation
Tubing
Other

Total

Depreciation and Amortization:

Poles
Wireless Communication
Coatings
Irrigation
Tubing
Other

Total

(1,553)
–

(1,553)

9,391

15,452
–

15,452

5,800

1,836

2,301
–

2,301

13,466

21,218
–

21,218

7,579

1,035

87
(1,915)

(1,828)

7,020

21,305
2,823

24,128

4,601

944

United States
France
Other

Total

Operating Income:

United States
France
Other

Total

65,021

67,256

50,176

Long-Lived Assets:

United States
France
Other

Total

725,643
52,593
94,144

689,353
55,379
101,397

502,545
56,580
80,744

872,380

846,129

639,869

54,610
2,551
7,860

65,021

274,501
11,806
17,992

56,648
3,279
7,329

67,256

258,384
13,443
15,249

41,630
1,066
7,480

50,176

167,081
14,724
17,497

304,299

287,076

199,302

No single customer accounted for more than 10% of net sales in 2001, 2000, or 1999. Net sales by geographical area are based on the location of the facility

producing the sales.

Operating income by business segment and geographical areas are based on net sales less identiﬁable operating expenses and allocations.

Long-lived assets consist of property, plant and equipment, net of depreciation, goodwill and other assets. Long-lived assets by geographical area are

based on location of facilities.

(16,030)
(524)

(16,020)
(1,198)

(7,139)
(306)

48,467

50,038

42,731

202,933
102,541
104,675
140,527
29,079
9,142

210,525
62,487
105,069
177,541
31,522
12,991

166,310
48,836
39,460
139,759
10,541
14,429

588,897

600,135

419,335

14,678
1,776
2,063
4,721
2,283
131

25,652

12,303
4,325
7,800
9,816
2,054
26

36,324

24,864
1,911
4,260
14,853
432
136

46,456

10,012
829
7,624
9,147
1,917
741

30,270

7,739
1,155
4,298
23,587
310
694

37,783

9,436
1,386
3,553
6,367
509
698

21,949

66 | 67

Quarterly Financial Data (Unaudited)
(Dollars in thousands, except per share amounts)

Net
Sales

Net Earnings

Gross
Proﬁt Amount Basic

Per Share

Diluted

High

Stock Price

Dividends
Low Declared

2001

First
Second
Third
Fourth

Year

2000

First
Second
Third
Fourth

Year

1999

First
Second
Third
Fourth

Year

$ 204,267 $ 49,738 $ 4,791 $
59,232
53,134
55,517
$ 872,380 $ 217,621 $ 26,693 $

232,889
209,287
225,937

8,468
6,951
6,483

$ 196,838 $ 49,901 $ 7,529 $
57,241
51,075
53,666
$ 846,129 $ 211,883 $ 30,400 $

224,876
201,676
222,739

9,065
6,885
6,921

$ 160,729 $ 40,398 $ 5,761 $
43,594
40,003
48,751
$ 639,869 $ 172,746 $ 26,367 $

169,457
144,766
164,917

6,902
5,692
8,012

0.20 $
0.34
0.28
0.26
1.10 $

0.32 $
0.39
0.30
0.30
1.31 $

0.23 $
0.28
0.24
0.34
1.09 $

0.20 $ 20.69 $ 14.50 $ 0.065
0.065
0.34
0.065
0.28
0.065
0.26
0.26
1.09 $ 20.69 $ 12.12 $

18.30
18.16
16.38

14.12
12.12
12.51

0.32 $ 20.25 $ 14.50 $ 0.065
0.065
0.38
0.065
0.29
0.065
0.29
0.26
1.28 $ 21.69 $ 13.88 $

20.00
21.69
21.69

15.94
17.13
13.88

0.23 $ 14.75 $ 11.25 $ 0.065
0.065
0.28
0.065
0.23
0.065
0.33
0.26
1.08 $ 18.25 $ 11.25 $

18.25
17.25
17.88

13.31
14.75
13.13

Earnings per share are computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per share may not equal the total

for the year.

Independent Auditors’ Report

To the Board of Directors and Shareholders of Valmont Industries, Inc.
Valley, Nebraska

We have audited the accompanying consolidated balance sheets of Valmont Industries, Inc. and subsidiaries as of
December 29, 2001 and December 30, 2000, and the related consolidated statements of operations, shareholders' equity
and cash ﬂows for each of the three years in the period ended December 29, 2001. 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 29, 2001 and December 30, 2000, and the results of their operations and their
cash ﬂows for each of the three years in the period ended December 29, 2001 in conformity with accounting principles generally
accepted in the United States of America.

Deloitte & Touche LLP
Omaha, Nebraska
February 8, 2002

Report of Management

The consolidated ﬁnancial statements of Valmont Industries, Inc. and subsidiaries and the other information contained in
the Annual Report were prepared by and are the responsibility of management. The statements have been prepared in
accordance with generally accepted accounting principles and necessarily include amounts based on management’s
best estimates and judgements.

In fulﬁlling its responsibilities, management relies on a system of internal controls which provide reasonable assurance
that the ﬁnancial records are reliable for preparing ﬁnancial statements and maintaining accountability of assets. Internal
controls are designed to reduce the risk that material errors or irregularities in the ﬁnancial statements may occur and not be
timely detected. These systems are augmented by written policies, careful selection and training of qualiﬁed personnel, an
organizational structure providing for the division of responsibilities and a program of ﬁnancial, operational and systems
audits. The Company also has a business ethics policy which requires employees to maintain high ethical standards in the
conduct of Company business.

The Audit Committee, composed of non-employee directors, is responsible for recommending to the Board of Directors,
subject to ratiﬁcation of shareholders, the independent accounting ﬁrm to be retained each year. The Audit Committee
meets regularly,and when appropriate separately, with the independent certiﬁed public accountants, management and the
internal auditors to review the ﬁnancial statements of the Company, the independence and performance of the Company’s
independent auditors, and the compliance by the Company with legal and regulatory requirements. The independent certiﬁed
public accountants, internal auditors, and the Audit Committee have unrestricted access to each other in the discharge
of their responsibilities.

Mogens C. Bay
Chairman and Chief Executive Officer

Terry J. McClain
Senior Vice President and Chief Financial Officer

68 | 02

Officers and

Management

The Board of

Directors

Corporate Headquarters
Valmont Industries, Inc.
One Valmont Plaza
Omaha, Nebraska 68154-5215 USA
402.963.1000

Independent Public Accountants
Deloitte & Touche LLP
Omaha, Nebraska USA

Legal Counsel
McGrath, North, Mullin & Kratz, P.C.
Omaha, Nebraska USA

Stock Transfer Agent
and Registrar
First National Bank of Omaha
Trust Department
One First National Center
Omaha, Nebraska 68102-1596 USA
402.633.3465

Notices regarding changes of address and
inquiries regarding lost or stolen certiﬁcates
and transfers of stock should be directed to
the transfer agent.

Annual Meeting
The annual meeting of Valmont’s
shareholders will be held at 2:00 p.m.
on Monday, April 29, 2002, at the Joslyn
Art Museum in Omaha, Nebraska USA.

Shareholder and
Investor Relations
Valmont’s common stock trades on
the Nasdaq National Market under
the symbol VALM.

Valmont’s most recent Quarterly News
Releases are available on the internet at
www.valmont.com under the heading
“The Company.”

Valmont maintains an active investor
relations program and mailing list to keep
shareholders and potential investors
informed about the Company. Comments
and inquiries are welcomed and should
be directed to Investor Relations.

A copy of Valmont’s 2001 Annual Report
on form 10-K may be obtained by calling
or writing Investor Relations:

Jeffrey S. Laudin
Investor Relations Department
Valmont Industries, Inc.
One Valmont Plaza
Omaha, Nebraska 68154-5215 USA
402.963.1000
Phone:
402.963.1198
Fax:

Corporate and
Staff Officers

Mogens C. Bay
Chairman and
Chief Executive Officer

Terry J. McClain
Senior Vice President and
Chief Financial Officer

E. Robert Meaney
Senior Vice President
International

Ann F. Ashford
Vice President
Human Resources

Steven G. Branscombe
Vice President
Information Systems

Mark C. Jaksich
Vice President
Corporate Controller

P. Thomas Pogge
Vice President
General Counsel
and Secretary

Mark E. Treinen
Vice President
Business Development

Poles Division

Mark R. Richards
President

Keith A. Huffman
Vice President
Global Operations

Wireless
Communication
Division

Myron Noble
President
PiRod

Richard M. Sampson
Vice President and
General Manager
Utility Products and Services

Doug Kochenderfer
Vice President
General Manager
Valmont Microﬂect

Thomas F. Sanderson
Vice President
Global Marketing and
Product Development

Thomas J. Sutko
Vice President and
General Manager
Commercial Lighting
and Transportation
Products and Services

Philippe Guidez
President
Europe/Middle East/Africa

Lionel Brenac
Vice President
Operations Europe/Middle
East/Africa

Klavs Guldager
General Manager
China/Asia/Paciﬁc

Coatings Division

Jeffrey Briggs
President

Richard S. Cornish
Vice President
Operations

Irrigation Division

Thomas D. Spears
President

Duane Bier
Vice President
Operations

James L. Brown
Director
North American Sales

William G. Loughman III
Vice President
Parts and Service

Terry Rahe
President
Cascade Earth Sciences

Tubing Division

Leonard M. Adams
Vice President
and General Manager

Market Makers
The following make a market in Valmont Industries, Inc. common stock as of February 2002:

Dain Rauscher Inc., Herzog, Heine, Geduld, Inc., Knight Securities, L.P., Spear, Leeds & Kellogg,

Sherwood Securities, Jeffries & Co., Fahnstock & Co., Inc.

Visit Valmont’s Web site: www.valmont.com

From left to right:
Thomas F. Madison
Mogens C. Bay
Kenneth E. Stinson
Robert B. Daugherty
John E. Jones
Walter Scott, Jr.
Charles D. Peebler, Jr.
Bruce Rohde

Mogens C. Bay
Chairman and
Chief Executive Officer
Valmont Industries, Inc.
Director since 1993

Robert B. Daugherty
Founder and
Chairman Emeritus
Valmont Industries, Inc.
Director since 1947

John E. Jones
Retired Chairman,
President and
Chief Executive Officer
CBI Industries, Inc.
Director since 1993

Bruce Rohde
Chairman and
Chief Executive Officer
ConAgra Foods, Inc.
Director since 1999

Walter Scott, Jr.
Chairman
Level 3 Communications, Inc.
Director since 1981

Kenneth E. Stinson
Chairman and
Chief Executive Officer
Peter Kiewit Sons, Inc.
Director since 1996

Thomas F. Madison
President, MLM Partners
Chairman of the Board
Communications Holdings, Inc.
Director since 1987

Charles D. Peebler, Jr.
Chairman Emeritus
True North Communications, Inc.
Director since 1999

Audit Committee
Walter Scott, Jr., Chairman
John E. Jones
Charles D. Peebler, Jr.

Compensation Committee
Thomas F. Madison, Chairman
Charles D. Peebler, Jr.

OneValmont Plaza

Omaha, Nebraska 68154-5215 USA

Phone 402.963.1000

Fax 402.963.1198