Valmont Industries
VMI
#2140
Rank
$9.48 B
Marketcap
$480.44
Share price
1.32%
Change (1 day)
47.02%
Change (1 year)

Valmont Industries - 10-Q quarterly report FY


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Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

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

Commission file number: 1-31429


Valmont Industries, Inc.

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

(Registrant’s telephone number, including area code)

402-963-1000


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

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

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

23,877,237


Outstanding shares of common stock as of July 14, 2004

          Index is located on page 2.

          Total number of pages 34.




VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

       
Page No.

 PART I. FINANCIAL INFORMATION
Item 1.
 Financial Statements:    
   Condensed Consolidated Statements of Operations for the thirteen and twenty-six weeks ended June 26, 2004 and June 28, 2003  3 
   Condensed Consolidated Balance Sheets as of June 26, 2004 and December 27, 2003  4 
   Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended June 26, 2004 and June 28, 2003  5 
   Notes to Condensed Consolidated Financial Statements  6-20 
  Management’s Discussion and Analysis of Financial Condition and Results of Operations  21-28 
  Quantitative and Qualitative Disclosure About Market Risk  28 
  Controls and Procedures  28 
 
 PART II. OTHER INFORMATION
  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities  28 
  Other Information  29 
  Exhibits and Reports on Form 8-K  29 
 Signatures  30 
 Computation of Ratio of Earnings to Fixed Charges Ratio
 Section 302 Certificate of Chief Executive Officer
 Section 302 Certificate of Chief Financial Officer
 Section 906 Certification of Chief Executive Officer and Chief Financial Officer
 Pro Forma Financial Information
 Unaudited Combined Financial Statements

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  
Thirteen Weeks EndedTwenty-Six Weeks Ended


June 26,June 28,June 26,June 28,
2004200320042003




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

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
            
June 26,December 27,
20042003


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

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
            
Twenty-Six Weeks Ended

June 26,June 28,
20042003


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

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 
1.Summary of Significant Accounting Policies
 
Condensed Consolidated Financial Statements

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

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

 
Stock Plans

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

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

                  
Thirteen Weeks EndedTwenty-Six Weeks Ended


June 26,June 28,June 26,June 28,
2004200320042003




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

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

      
At
April 16,
2004

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

                 
Thirteen Weeks EndedTwenty-Six Weeks Ended


June 26,June 28,June 26,June 28,
2004200320042003




Net sales
 $268,768  $219,842  $508,904  $448,025 
Net income
  3,152   6,442   8,526   13,683 
Earnings per share — diluted
 $0.13  $0.27  $0.35  $0.56 
 
3.Goodwill and Intangible Assets
 
Amortized Intangible Assets

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

             
As of June 26, 2004

Weighted
Gross CarryingAccumulatedAverage
AmountAmortizationLife



Customer Relationships
 $39,327  $3,503   17 years 
Proprietary Software & Database
  2,609   1,101   6 years 
Patents & Proprietary Technology
  1,989   30   14 years 
Non-compete Agreements
  149   1   5 years 
   
   
     
  $44,074  $4,635     
   
   
     
             
As of December 27, 2003

Gross CarryingAccumulated
AmountAmortizationLife



Customer Relationships
 $11,500  $2,634   12  years 
Proprietary Software & Database
  1,650   908   5 years 
   
   
     
  $13,150  $3,542     
   
   
     

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

     
Estimated
Amortization
Expense

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

Non-amortized intangible assets

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

Goodwill

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

                         
Engineered
SupportConcrete Support
StructuresStructuresCoatingsIrrigationTubing
SegmentSegmentSegmentSegmentSegmentTotal






Balance December 27, 2003
 $12,587  $  $42,192  $981  $262  $56,022 
Acquisitions
  6,250   32,588            38,838 
Foreign Currency Translation
  (39)              (39)
   
   
   
   
   
   
 
Balance June 26, 2004
 $18,798  $32,588  $42,192  $981  $262  $94,821 
   
   
   
   
   
   
 
 
4.Cash Flows

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

         
June 26,June 28,
20042003


Interest
 $5,417  $5,324 
Income Taxes
  7,990   175 

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
5.Earnings Per Share

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

               
Dilutive
BasicEffect ofDiluted
EPSStock OptionsEPS



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

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

                 
Thirteen WeeksTwenty-Six Weeks
EndedEnded


June 26,June 28,June 26,June 28,
2004200320032003




Net earnings
 $2,812  $6,367  $8,313  $13,660 
Currency translation adjustment
  (317)  3,659   (1,259)  4,949 
   
   
   
   
 
Total comprehensive income
 $2,495  $10,026  $7,054  $18,609 
   
   
   
   
 
 
7.Business Segments

     The Company reports its businesses as five reportable segments:

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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

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

                   
Thirteen Weeks EndedTwenty-Six Weeks Ended


June 26,June 28,June 26,June 28,
2004200320042003




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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                  
Thirteen Weeks EndedTwenty-Six Weeks Ended


June 26,June 28,June 26,June 28,
2004200320042003




Operating Income
                
 
Engineered Support Structures
 $5,967  $4,682  $7,408  $8,745 
 
Concrete Support Structures
  1,755      1,755    
 
Coatings
  2,601   1,488   3,067   3,568 
 
Irrigation
  12,008   9,665   23,853   20,780 
 
Tubing
  3,421   1,601   5,506   3,468 
 
Other
  (593)  (525)  (1,085)  (874)
 
Net corporate expense
  (6,150)  (3,180)  (9,746)  (6,905)
   
   
   
   
 
Total Operating Income
 $19,009  $13,731  $30,758  $28,782 
   
   
   
   
 
 
8.Guarantor/ Non-Guarantor Financial Information

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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Thirteen Weeks Ended June 26, 2004
                      
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

13


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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Twenty-Six Weeks Ended June 26, 2004

                      
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Thirteen Weeks Ended June 28, 2003

                       
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

15


Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Twenty-Six Weeks Ended June 28, 2003

                      
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS

June 26, 2004
                       
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 27, 2003

                       
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

18


Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twenty-Six Weeks Ended June 26, 2004
                        
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

19


Table of Contents

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Twenty-Six Weeks Ended June 28, 2003

                        
ParentGuarantorsNon-GuarantorsEliminationsTotal





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

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

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

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

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

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

Results of Operations

     Dollars in thousands, except per share amounts

                           
Thirteen Weeks EndedTwenty-Six Weeks Ended


June 26,June 28,% Incr.June 26,June 28,% Incr.
20042003(Decr)20042003(Decr)






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

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Thirteen Weeks EndedTwenty-Six Weeks Ended


June 26,June 28,% Incr.June 26,June 28,% Incr.
20042003(Decr)20042003(Decr)






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

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

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

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

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

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

 
Engineered Support Structures (ESS) Segment

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

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

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

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

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

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

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

 
Concrete Support Structures Segment

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

 
Coatings Segment

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

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Irrigation Segment

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

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

 
Tubing Segment

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

 
Other

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

 
Net Corporate Expense

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

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

Liquidity and Capital Resources

 
Cash Flows

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

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

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

 
Sources of Financing and Capital

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

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

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

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

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

FINANCIAL OBLIGATIONS AND FINANCIAL COMMITMENTS

     We have future financial obligations related to (1) payment of principal and interest on interest-bearing debt, including capital lease obligations, (2) various operating leases and (3) purchase obligations. These obligations as of June 26, 2004 are summarized as follows, in millions of dollars:

                     
Contractual ObligationsTotal20042005-20062007-2008After 2008






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

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

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

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

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

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

Off Balance Sheet Arrangements

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

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Outlook for Remainder of 2004

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

Critical Accounting Policies

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

 
Item 3.Quantitative and Qualitative Disclosure About Market Risk

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

 
Item 4.Controls and Procedures

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

PART II. OTHER INFORMATION

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

Issuer Purchases of Equity Securities
                  
(c) Total Number of(d) Maximum Number
Shares Purchased asof Shares that May
Part of PubliclyYet Be Purchased
(a) Total Number of(b) Average PriceAnnounced Plans orUnder the Plans or
PeriodShares Purchasedpaid per ShareProgramsPrograms





March 28, 2004
to April 24, 2004
            
April 25, 2004
to May 29, 2004
  19,051   20.79       
May 30, 2004
to June 26, 2004
             
 
Total
  19,051   20.79       
   
   
   
   
 

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

 
Item 5.Other Information

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

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

 
Item 6.Exhibits and Reports on Form 8-K

     (a) Exhibits

     
Exhibit No.Description


 12.1  Computation of Ratio of Earnings to Fixed Charges
 31.1  Section 302 Certificate of Chief Executive Officer
 31.2  Section 302 Certificate of Chief Financial Officer
 32.1  Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
 99.1  Pro Forma Financial Information
 99.2  Unaudited Combined financial statements for Newmark International, Inc. and Pfleiderer Leasing USA, Inc. for the three months ended March 31, 2004

     (b) Reports on Form 8-K

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

      1. Form 8-K filed April 16, 2004 including certain audited financial information of Newmark, certain unaudited pro forma condensed combined financial data, and risk factors relating to Valmont Industries, Inc.
 
      2. Form 8-K furnished on April 19, 2004 including the Company’s press release with earnings information on the Company’s quarter ended March 27, 2004.
 
      3. Form 8-K filed April 20, 2004 including the Company’s press release announcing the offer of $150,000,000 of senior subordinated notes.
 
      4. Form 8-K furnished July 20, 2004 including the Company’s press release with earnings information on the Company’s quarter ended June 26, 2004.
 
      5. Form 8-K filed August 2, 2004 including audited consolidated financial statements for Valmont Industries, Inc., its guarantor subsidiaries and its non-guarantor subsidiaries for the fiscal year ended December 27, 2003.

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SIGNATURES

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

 VALMONT INDUSTRIES, INC.
 (Registrant)
 
 /s/ TERRY J. MCCLAIN
 
 Terry J. McClain
 Senior Vice President and Chief Financial Officer
 (Principal Financial Officer)

Dated this 2nd day of August, 2004.

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