10-Q

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

FORM 10-Q

(MARK ONE)
/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 2002
OR
/ /	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: 0-3701

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)
402-963-1000 (Registrant's telephone number, including area code)
(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 /x/    No / /

24,050,645
Outstanding shares of common stock as of April 25, 2002

Index is located on page 2.

Total number of pages 17.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Statements of Operations for the thirteen weeks ended March 30, 2002 and March 31, 2001	3
	Condensed Consolidated Balance Sheets as of March 30, 2002 and December 29, 2001	4
	Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended March 30, 2002 and March 31, 2001	5
	Notes to Condensed Consolidated Financial Statements	6-11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12-15
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	15
PART II.	OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Other Information	16
Item 6.	Exhibits and Reports on Form 8-K	16
SIGNATURES		17

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

			Thirteen Weeks Ended
			March 30, 2002			March 31, 2001
Net sales			$	208,648		$	204,267
Cost of sales				153,415			154,529
	Gross profit			55,233			49,738
Selling, general and administrative expenses				39,313			36,982
	Operating income			15,920			12,756
Other income (deductions):
	Interest expense			(3,199	)		(4,709	)
	Interest income			335			262
	Miscellaneous			(306	)		(411	)
				(3,170	)		(4,858	)
Earnings before income taxes, minority interest, equity in earnings (losses) of nonconsolidated subsidiaries and cumulative effect of change in accounting principle				12,750			7,898
Income tax expense (benefit):
	Current			5,727			50
	Deferred			(1,004	)		2,870
				4,723			2,920
	Earnings before minority interest, equity in earnings (losses) of nonconsolidated subsidiaries and cumulative effect of change in accounting principle			8,027			4,978
Minority interest (after tax)				20			51
Equity in earnings (losses) of nonconsolidated subsidiaries (after tax)				(778	)		(238	)
Cumulative effect of change in accounting principle (Note 3)				(500	)		—
	Net earnings		$	6,769		$	4,791
	Earnings per share—Basic:
	Earnings before cumulative effect of change in accounting principle		$	0.30		$	0.20
	Cumulative effect of change in accounting principle			(0.02	)		—
		Earnings per share—Basic	$	0.28		$	0.20
	Earnings per share—Diluted:
	Earnings before cumulative effect of change in accounting principle		$	0.30		$	0.20
	Cumulative effect of change in accounting principle			(0.02	)		—
		Earnings per share—Diluted	$	0.28		$	0.20
Cash dividends per share			$	0.065		$	0.065
Weighted average number of shares of common stock outstanding (000 omitted)				24,033			23,495
Weighted average number of shares of common stock outstanding plus dilutive potential common shares (000 omitted)				24,344			23,860

See accompanying notes to condensed consolidated financial statements.

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

			March 30, 2002			December 29, 2001
ASSETS
Current assets:
	Cash and cash equivalents		$	19,006		$	24,522
	Receivables, net			130,876			134,632
	Inventories, net			113,881			108,962
	Prepaid expenses			5,107			4,763
	Refundable and deferred income taxes			11,536			11,719
		Total current assets		280,406			284,598
Property, plant and equipment, at cost				404,260			404,559
	Less accumulated depreciation and amortization			198,984			194,979
		Net property, plant and equipment		205,276			209,580
Goodwill				55,371			55,889
Other intangible assets				16,599			16,934
Other assets				21,447			21,896
		Total assets	$	579,099		$	588,897
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current installments of long-term debt		$	11,074		$	11,062
	Notes payable to banks			15,886			11,319
	Accounts payable			59,576			57,027
	Accrued expenses			57,180			58,042
	Dividends payable			1,592			1,598
		Total current liabilities		145,308			139,048
Deferred income taxes				13,878			15,065
Long-term debt, excluding current installments				174,494			186,946
Minority interest in consolidated subsidiaries				6,028			15,947
Other noncurrent liabilities				15,792			6,080
Shareholders' equity:
	Preferred stock			—			—
	Common stock of $1 par value			27,900			27,900
	Retained earnings			269,957			264,854
	Accumulated other comprehensive loss			(12,745	)		(11,957	)
	Treasury stock			(61,513	)		(54,986	)
		Total shareholders' equity		223,599			225,811
		Total liabilities and shareholders' equity	$	579,099		$	588,897

See accompanying notes to condensed consolidated financial statements.

4

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

			Thirteen Weeks Ended
			March 30, 2002			March 31, 2001
Net cash flows from operations			$	14,727		$	(4,918	)
Cash flows from investing activities:
	Purchase of property, plant & equipment			(3,753	)		(6,173	)
	Acquisitions, net of cash acquired			—			(33,107	)
	Proceeds from sale of property and equipment			341			22
	Other, net			(857	)		954
		Net cash flows from investing activities		(4,269	)		(38,304	)
Cash flows from financing activities:
	Net borrowings under short-term agreements			4,653			33,201
	Proceeds from long-term borrowings			369			—
	Principal payments on long-term obligations			(12,784	)		(2,100	)
	Dividends paid			(1,593	)		(1,598	)
	Proceeds from exercises under stock plans			338			432
	Purchase of common treasury shares:
		Stock repurchase program		(6,791	)		—
		Stock plan exercises		(77	)		(186	)
		Net cash flows from financing activities		(15,885	)		29,749
Effect of exchange rate changes on cash and cash equivalents				(89	)		(431	)
		Net decrease in cash and cash equivalents		(5,516	)		(13,904	)
Cash and cash equivalents—beginning of period				24,522			23,176
Cash and cash equivalents—end of period			$	19,006		$	9,272

See accompanying notes to condensed consolidated financial statements.

5

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

1.    Condensed Consolidated Financial Statements

        The Condensed Consolidated Balance Sheet as of March 30, 2002 and the Condensed Consolidated Statements of Operations for the thirteen week periods ended March 30, 2002 and March 31, 2001 and the Condensed Consolidated Statements of Cash Flows for the thirteen 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 March 30, 2002 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 29, 2001 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 29, 2001. The results of operations for the period ended March 30, 2002 are not necessarily indicative of the operating results for the full year.

2.    Acquisition

        On March 30, 2001, the Company's Wireless Communication segment acquired all of the outstanding shares of PiRod Holdings, Inc. and subsidiary (PiRod), a manufacturer of towers, components and poles for the wireless communication industry located in Plymouth, Indiana. As part of the transaction, which was accounted for under the purchase method of accounting, 1.2 million shares of Company common stock were issued and $33.4 million cash was paid to retire PiRod long-term debt. The excess of purchase price over fair value of net assets acquired was $4.6 million and was recorded to goodwill. Intangible assets with finite lives are being amortized over their estimated useful lives. The Company's summary proforma results of operations for the thirteen weeks ended March 31, 2001 assuming the transaction occurred at the beginning of the 2001 fiscal year are as follows:

	Thirteen weeks ended March 31, 2001
Net sales	$	219,365
Net earnings		5,037
Earnings per share—diluted		0.20

3.    Goodwill and Intangible Assets

        Effective December 30, 2001 the Company adopted Statement of Financial Accounting Standards No. 142 (SFAS 142) Goodwill and Other Intangible Assets. This standard establishes new accounting and reporting requirements for goodwill and other intangible assets. Under SFAS 142, all amortization of goodwill and intangible assets with indefinite lives ceased effective December 30, 2001. Also, recorded goodwill was tested for impairment by comparing the fair value to its carrying value. Fair value was determined using a discounted cash flow methodology. This impairment test is required to be performed at adoption of SFAS 142 and at least annually thereafter. On an ongoing basis (absent any

6

impairment indicators), impairment testing will be performed during the third quarter, in connection with the Company's strategic planning process.

        Based on the initial impairment test, the Company determined that the goodwill associated with a consulting business in the Irrigation segment was impaired. Accordingly, a charge of $0.5 million ($0.02 per diluted share) was recorded on the Condensed Consolidated Statement of Operations for the thirteen weeks ended March 30, 2002. This impairment, in accordance with the provisions of SFAS 142, was classified as a cumulative effect of a change in accounting principle.

Amortized Intangible Assets

        The components of amortized intangible assets at March 30, 2002 are as follows:

	As of March 30, 2002
	Gross Carrying Amount		Accumulated Amortization		Life
Customer Relationships	$	11,500	$	971	12 years
Proprietary Software & Database		1,650		330	5 years
	$	13,150	$	1,301

        Amortization expense for intangible assets during the first quarter of 2002 was $335. Estimated amortization expense related to amortized intangible assets is as follows:

	Estimated Amortization Expense
2002	$	1,288
2003		1,288
2004		1,288
2005		1,288
2006		1,040
2007		958

Non-amortized intangible assets

        Under the provisions of SFAS 142, intangible assets with indefinite lives are not amortized. The carrying value of the PiRod trade name is $4,750 and has not changed in the thirteen weeks ended March 30, 2002.

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Goodwill

        The carrrying amount of goodwill as of March 30, 2002 is as follows:

	Poles Segment			Wireless Comm Segment		Coatings Segment		Irrigation Segment			Tubing Segment		Total
Balance December 29, 2001	$	6,513		$	5,441	$	42,192	$	1,481		$	262	$	55,889
Impairment charge		—			—		—		(500	)		—		(500	)
Foreign Currency Translation		(18	)		—		—		—			—		(18	)
Balance March 30, 2002	$	6,495		$	5,441	$	42,192	$	981		$	262	$	55,371

        The effect of the adoption of SFAS 142 on net earnings and earnings per share is as follows:

	Thirteen Weeks Ended
	March 30, 2002		March 31, 2001
Reported net earnings	$	6,769	$	4,791
Add back: Goodwill amortization		—		792
Adjusted net earnings	$	6,769	$	5,583
Add back: Cumulative effect of change in accounting principle		500		—
Adjusted net earnings before cumulative effect of change in accounting principle	$	7,269	$	5,583
Basic earnings per share:
Reported basic earnings per share	$	0.28	$	0.20
Add back: Goodwill amortization		—		0.03
Adjusted basic earnings per share	$	0.28	$	0.23
Add back: Cumulative effect of change in accounting principle		0.02		—
Adjusted basic earnings per share before cumulative effect of change in accounting principle	$	0.30	$	0.23
Diluted earnings per share:
Reported diluted earnings per share	$	0.28	$	0.20
Add back: Goodwill amortization		—		0.03
Adjusted diluted earnings per share	$	0.28	$	0.23
Add back: Cumulative effect of change in accounting principle		0.02		—
Adjusted diluted earnings per share before cumulative effect of change in accounting principle	$	0.30	$	0.23

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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 thirteen weeks ended were as follows:

	March 30, 2002		March 31, 2001
Interest	$	3,178	$	5,050
Income Taxes		6,160		2,396

5.    Earnings Per Share

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

		BASIC EPS		DILUTIVE EFFECT OF STOCK OPTIONS	DILUTED EPS
Thirteen weeks ended March 30, 2002:
	Net earnings	$	6,769	—	$	6,769
	Shares outstanding		24,033	311		24,344
	Per share amount	$	0.28	—	$	0.28
Thirteen weeks ended March 31, 2001:
	Net earnings	$	4,791	—	$	4,791
	Shares outstanding		23,495	365		23,860
	Per share amount	$	0.20	—	$	0.20

6.    Comprehensive Income

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

	Thirteen Weeks Ended
	March 30, 2002			March 31, 2001
Net earnings	$	6,769		$	4,791
Currency translation adjustment		(788	)		(1,630	)
Total comprehensive income	$	5,981		$	3,161

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7.    Business Segments

        Beginning with the third quarter of fiscal 2001, the Company reports its businesses as five reportable segments organized on a worldwide product basis:

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

        Wireless Communication:    This segment consists of the manufacture of towers, poles and components for the wireless telephone industry.

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

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

        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

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development, 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:

				Thirteen Weeks Ended
				March 30, 2002			March 31, 2001
Sales:
	Poles segment:
		Lighting & Traffic		$	50,612		$	48,096
		Utility			38,270			31,685
	Poles segment				88,882			79,781
	Wireless Communication segment:
		Structures			6,029			6,268
		Components			11,027			15,141
	Wireless Communication segment				17,056			21,409
	Coatings segment				27,549			27,819
	Irrigation segment				65,360			64,566
	Tubing segment				13,878			14,030
	Other				4,108			5,754
				$	216,833			213,359
Intersegment Sales:
	Coatings				4,294			5,143
	Irrigation				56			188
	Tubing				2,844			2,726
	Other				991			1,035
					8,185			9,092
Net Sales
	Poles			$	88,882			79,781
	Wireless Communication				17,056			21,409
	Coatings				23,255			22,676
	Irrigation				65,304			64,378
	Tubing				11,034			11,304
	Other				3,117			4,719
			Consolidated Net Sales	$	208,648		$	204,267
Operating Income
	Poles			$	7,374		$	4,841
	Wireless Communication				(2,361	)		(553	)
	Coatings				2,244			2,501
	Irrigation				7,290			3,571
	Tubing				1,562			1,778
	Other				(189	)		618
			Total Operating Income	$	15,920			12,756

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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 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.

        Beginning with the third quarter of 2001, the Company reports its businesses as five reportable segments. See Note 7 to the Condensed Consolidated Financial Statements.

Results of Operations

Consolidated

        The net sales increase is due to the acquisition of PiRod on March 30, 2001. Without PiRod's first quarter 2002 sales, sales would have been down 1.4% for the first quarter of 2002 as compared to 2001. Improved sales in the Poles segment partially offset sharply lower sales in the Wireless Communication segment.

        Gross profit as a percent of sales for the first quarter of 2002 improved to 26.5% from 24.3% for the same period in 2001. Improved margins in the Irrigation and Poles segments more than offset reduced gross margins in the Coatings segment. Selling, general and administrative (SG&A) expenses for the quarter increased due to the acquisition of PiRod at the end of the first quarter of 2001. Otherwise, higher SG&A expenses in the Poles segment due to higher sales volumes were offset by lower spending in the Irrigation and Wireless Communication segments. Operating income for the quarter was $15.9 million, as compared to $12.8 million in 2001, an increase of 24.8%. The improvement in operating income was led by stronger profitability in the Irrigation and Poles segment, offset somewhat by lower earnings in the Wireless Communication segment.

        Net interest expense was $2.9 million in the first quarter of 2002, as compared to $4.4 million in 2001, due to lower average borrowings in 2002 and lower interest rates on our variable rate debt. The positive impact on the first quarter of 2002 interest expenses due to lower rates is approximately $0.7 million. The effective tax rate was 37.0% in the first quarter of 2002 and 2001.

        Net earnings rose from $4.8 million in 2001 to $6.8 million in 2002, an increase of 41.3%. Earnings per share increased 40% from $0.20 to $0.28 per share in 2002. The strong percentage increases in net earnings and earnings per share in the first quarter of 2002 as compared to 2001 were partly due to the fact that the first quarter of 2001 was relatively weak, especially in the Irrigation segment. Earnings per share grew slightly slower than net earnings due to a higher number of shares outstanding in 2002, mainly associated with the shares issued as part of the PiRod acquisition.

        Included in the 2002 Condensed Consolidated Statement of Operations is the impact of the adoption of SFAS No. 142, Goodwill and Intangible Assets. Under this pronouncement, intangibles with a indefinite life (including goodwill) will no longer be amortized but tested on an annual basis for impairment. Upon adoption, we determined that the intangibles associated with a consulting business in the Irrigation segment were impaired. Accordingly, a charge to earnings (recorded as a cumulative effect of a change in accounting principle) of $0.5 million was recorded in the first quarter of 2002. In addition, in the first quarter of 2002, we ceased amortization of goodwill and intangible assets with

12

indefinite lives, which increased operating income and net income by $0.8 million. The net impact of this pronouncement was an increase in net earnings in the first quarter of 2002 by $0.3 million ($0.01 per basic and diluted share):

Reduced amortization expenses	$	0.8 million
Cumulative effect of change in accounting principle		(0.5) million
Net impact	$	0.3 million

        On an annualized basis, the implementation of this pronouncement is expected to increase 2002 earnings as compared to 2001 by approximately $3 million, or $0.12 per basic and diluted share.

Poles Segment

        Net sales increased 11.4% to $88.9 million for the first quarter from $79.8 million for the same period in 2001. The sales increase was attributable to continued strong sales in North America. Lighting and Traffic sales increased due to continued funding from government programs. Sales also benefited from generally favorable winter weather conditions, which helped our ability to ship products. Utility structure sales likewise were improved over 2001. Strong order flow from our utility alliance partners, partly due to replace storm-damaged poles, and a strong sales backlog at the beginning of the year resulted in record quarterly sales of utility structures.

        Operating income in the Poles segment improved 52.3% to $7.4 million in the first quarter of 2002, mainly due to the strong sales performance in North America. Aside from the impact of improved volumes, operating profit in North America was enhanced by improved factory performance and leverage of fixed manufacturing and SG&A expenses.

        In Europe, lighting sales and profitability were down as compared to the first quarter of 2001, when local elections in France led to higher than normal market demand. In addition, weaker economic conditions in Western Europe also have reduced market demand in the first quarter of 2002. In China, sales and profitability increased, the result of improved local and export demand.

Wireless Communication Segment

        Sales in the Wireless Communication segment were down 20.3% as compared to the first quarter 2001, which did not include PiRod. Excluding PiRod's first quarter 2002 sales, sales would have decreased 54.2% from 2001. Market conditions in the wireless industry continue to be very weak, with U.S. infrastructure buildout by carriers and build-to-suit companies greatly curtailed due to restricted financing capability. These lower sales volumes resulted in lower operating profit in the first quarter of 2002. We are addressing these issues through widespread cost reductions and downsizing. Factory and SG&A spending is down $3 million as compared with the first quarter of 2001 through cost reductions and business downsizing actions that began in 2001 and continued into this year. We are currently focusing on reducing costs, rationalizing product line offerings and continuing the effective integration of PiRod and Valmont/Microflect.

Coatings Segment

        Sales in the Coatings segment were up 2.6% as compared to the first quarter of 2001. The sales increase was attributable to coatings and assembly services being provided to a large customer at one location. Sales were down 13% for the quarter if sales to this large customer are excluded. This segment is closely tied to the industrial economy in the U.S., which was weaker than the first quarter of 2001. Also, internal galvanizing volumes related to the Wireless Communication segment are down substantially due to reduced production levels in that segment.

        Operating profit was down 10.3% for the quarter when compared to 2001. Reduced production volumes and certain fixed manufacturing expenses that were incurred notwithstanding lower production

13

levels resulted in an estimated reduction in gross profit and operating income of $1.8 million. This impact was partially offset by a $1.1 million positive effect of lower natural gas prices in the first quarter of 2002 as compared to 2001. This segment's results were also helped by the elimination of goodwill amortization in 2002, which improved operating profit by $0.6 million over the first quarter of 2001.

Irrigation Segment

        Irrigation segment sales increased 1.4% over the first quarter of 2001, as the sales increase in North America offset sales decreases in international markets. In North America, farmers' input costs associated with energy prices eased this year and stronger commodity prices in the Pacific Northwest resulted in a stronger market and higher sales. International sales were down mainly due to reduced shipments into Middle Eastern markets this year. The Brazilian market, while improving, also recorded lower sales than in the first quarter of 2001. Increased sales in Latin America, Western Europe and South Africa helped offset the decreases in Brazil and the Middle East.

        Operating income more than doubled, increasing from $3.6 million in the first quarter of 2001 to $7.3 million this year. Most of the improvement was in North America, where the main factors in the improvement were stronger factory operating performance and reduced SG&A expense levels. The downsizing that occurred in the first quarter of 2001 and improved North American sales resulted in better factory productivity and higher gross profits. Inventory levels in North America decreased more than $7 million from last year, so the increased sales this year resulted in higher factory production levels. These factors contributed to most of $2.6 million increase in gross profit dollars and improved gross profit as a percent of sales. SG&A levels are below the first quarter of 2001 due to the downsizing of the administrative workforce in 2001 ($0.5 million) and overall lower SG&A spending.

Tubing Segment

        The Tubing segment recorded a sales decrease of 2.4% in the first quarter 2002, as compared to the same period in 2001. This segment follows the general industrial economy in the U.S., where market demand was weaker than the first quarter of 2001. Operating income is down 12.1% when compared to 2001, due to slightly lower gross profit margins and a modest shift in the product mix. This business was impacted by the very volatile conditions in the steel industry but was able to maintain solid profitability despite a difficult operating environment.

Liquidity and Capital Resources

        Net working capital was $135.1 million at the end of the first quarter of 2002, as compared to $145.6 million at the end of fiscal 2001. The ratio of current assets to current liabilities was 1.93:1 at March 30, 2002, as compared to 2.05:1 at December 29, 2001. Cash generated from operations cash flow was $14.7 million in the first quarter of 2002, as compared to $4.9 million used by operations in the first quarter of 2001. The improvement in operating cash flow was due to increased earnings and better working capital management this quarter.

        Capital spending was $3.8 million in the first quarter of 2002, as compared to $6.2 million expended for the same period in 2001. In addition, $33.4 million cash was expended as part of the PiRod acquisition, which was completed on March 30, 2001.

        We have historically funded our 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%. At the end of the first quarter of 2002, long-term debt as a percent of capital was 40.3%, as compared to 41.9% at December 29, 2001. We have temporarily exceeded this self-imposed objective to take advantage of opportunities to grow and improve the Company over the long-term, such as acquisitions and manufacturing capacity additions. The reduction of this percentage is the result of strong operating cash flow and lower capital spending and acquisition activity this year. The resulting free cash flows have been used to pay down long-term debt. Unless we

14

engage in significant acquisition activity, we expect our long-term debt to capital ratio to be under 40% by the end of fiscal 2002.

        Our debt financing consists of a combination of short-term credit facilities and long-term debt. Our revolving line of credit is for a maximum of $150 million, with outstanding borrowings of $65 million at March 30, 2002. The short-term credit facilities are with various banks and amounted to $31.0 and $36.0 million as of March 30, 2002 and December 29, 2001, respectively. On March 30, 2002, $19.8 million of these credit facilities were unused.

        In December 2001, the Board of Directors authorized the repurchase from time to time of up to 1.5 million shares of the company's common stock. This authorization replaced the authorization made in 1998. As of March 30, 2002, 450,000 shares have been repurchased under this authorization.

        We believe that operating cash flows, available credit facilities and the current capital structure will be adequate for 2002 planned capital spending, dividends and other financial commitments, as well as to take advantage of opportunities to expand our markets and businesses. There have been no material changes to our financial obligations, contractual obligations or other commercial commitments disclosed in our Form 10-K for the fiscal year ended December 29, 2001.

Outlook for 2002

        For the 2002 fiscal year, we expect sales to be slightly below last year's levels, mainly due to continued weakness in the wireless communication industry. We expect quarterly earnings during 2002 to increase over last year, with the first quarter comparison being the strongest of the year due to a weak first quarter of 2001.

        We expect to see continued good performance in the Poles segment, although we have recently seen an order rate decline in our utility business. We have been able to convert sales increases into improved profits through improving factory performance, cost reductions and management of SG&A spending. One significant uncertainty is steel prices. If prices rise substantially and suddenly, it could hurt profitability in the short-term. So far, we have not been materially affected by steel price fluctuations.

        In the Wireless Communication segment, it is unclear when the market will turn around. At this time, we expect market conditions to remain weak through the remainder of 2002. Our efforts will continue to focus on integrating the PiRod and Valmont/Microflect businesses and controlling our cost structure.

        In the Coatings and Tubing businesses, we expect 2002 sales to be similar to 2001, barring a strong improvement in their industries and the general economy. We will continue to focus on cost reductions and improving our operations to be well-positioned when these industries improve.

        In the Irrigation segment, we expect no substantial changes in the market for the balance of 2002. The actions taken in the first quarter of 2001 have improved our cost structure and enabled us to improve our operating performance despite little sales growth.

        As to our balance sheet, we expect to continue to use operating cash flows to keep paying down our debt. Our capital spending will be less than the last four years, when we added substantial manufacturing capacity and acquired several businesses.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        There have been no material changes in the company's market risk during the first quarter ended March 30, 2002. For additional information, refer to the section "Risk Management" on page 46 of the Company's Annual Report to Stockholders, for the fiscal year ended December 29, 2001.

15

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION

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

        Valmont's annual meeting of stockholders was held on April 29, 2002. The stockholders elected three directors to serve three-year terms, approved the Valmont 2002 Stock Plan, and ratified the appointment of Deloitte & Touch LLP to audit the Company's financial statements for fiscal 2002. For the annual meeting there were 24,477,834 shares outstanding and eligible to vote of which 21,347,106 were present at the meeting in person or by proxy. The tabulation for each matter voted upon at the meeting was as follows:

Election of Directors:

	For	Withheld	Abstain
Mogens C. Bay	19,013,008	2,334,098	-0-
John E. Jones	21,272,666	74,440	-0-
Walter Scott Jr.	21,269,258	74,848	-0-

Proposal to approve the Valmont 2002 Stock Plan:
	For	16,225,310
	Against	2,453,543
	Withheld	2,563,929
	Abstain	104,324
Proposal to ratify the appointment of Deloitte & Touche LLP as independent accountants for fiscal 2002:
	For	20,927,026
	Against	409,262
	Withheld	-0-
	Abstain	10,818

ITEM 5. OTHER INFORMATION

        On April 29, 2002, the Company's Board of Directors authorized a quarterly cash dividend on common stock of 7.5 cents per share, payable July 15, 2002, to stockholders of record June 28, 2002. The indicated annual dividend rate is 30 cents per share.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

Exhibit No.	Description
10.1	Valmont 2002 Stock Plan

(b)

Reports on Form 8-K

        None filed during the quarter ended March 30, 2002.

16

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 8th day of May, 2002.

17

QuickLinks

INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

EX-10.1

Exhibit 10.1

                             VALMONT 2002 STOCK PLAN


                                    SECTION 1

                                NAME AND PURPOSE

          1.1  NAME. The name of the plan shall be the Valmont 2002 Stock Plan
(the "Plan").

          1.2. PURPOSE OF PLAN. The purpose of the Plan is to foster and promote
the long-term financial success of the Company and increase stockholder value by
(a) motivating superior performance by means of stock incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Company by Employees and (c) enabling the Company to attract and retain the
services of a management team responsible for the long-term financial success of
the Company.

                                    SECTION 2

                                   DEFINITIONS

          2.1  DEFINITIONS. Whenever used herein, the following terms shall have
the respective meanings set forth below:

          (a)  "Act" means the Securities Exchange Act of 1934, as amended.

          (b)  "Award" means any Option, Stock Appreciation Right, Restricted
               Stock, Stock Bonus, or any combination thereof granted under the
               Plan, including Awards combining two or more types of Awards in a
               single grant.

          (c)  "Board" means the Board of Directors of the Company.

          (d)  "Code" means the Internal Revenue Code of 1986, as amended.

          (e)  "Committee" means the Compensation Committee of the Board, which
               shall consist of two or more members, each of whom shall be a
               "non-employee director" within the meaning of Rule 16b-3 as
               promulgated under the Act.

          (f)  "Company" means Valmont Industries, Inc., a Delaware corporation
               (and any successor thereto) and its Subsidiaries.

          (g)  "Director Award" means an award of Stock and an annual Award of a
               Nonstatutory Stock Option granted to each Eligible Director
               pursuant to Section 7.1 without any action by the Board or the
               Committee.

          (h)  "Eligible Director" means a person who is serving as a member of
               the Board and who is not an Employee.

          (i)  "Employee" means any employee of the Company or any of its
               Subsidiaries.

          (j)  "Fair Market Value" means, on any date, the average of the
               high and low sales prices of the Stock as reported on the
               National Association of Securities Dealers Automated Quotation
               system (or on such other recognized market or quotation system
               on which the trading prices of the Stock are traded or quoted
               at the relevant time) on such date. In the event that there
               are no Stock transactions reported on such system (or such
               other system) on such



               date, Fair Market Value shall mean the average of the high and
               low sale prices on the immediately preceding date on which
               Stock transactions were so reported.

          (k)  "Option" means the right to purchase Stock at a stated price for
               a specified period of time. For purposes of the Plan, an Option
               may be either (i) an Incentive Stock Option within the meaning of
               Section 422 of the Code or (ii) a Nonstatutory Stock Option.

          (l)  "Participant" means any person designated by the Committee to
               participate in the Plan.

          (m)  "Plan" means the Valmont 2002 Stock Plan, as in effect from time
               to time.

          (n)  "Restricted Stock" shall mean a share of Stock granted to a
               Participant subject to such restrictions as the Committee may
               determine.

          (o)  "Stock" means the Common Stock of the Company, par value $1.00
               per share.

          (p)  "Stock Appreciation Right" means the right, subject to such terms
               and conditions as the Committee may determine, to receive an
               amount in cash or Stock, as determined by the Committee, equal to
               the excess of (i) the Fair Market Value, as of the date such
               Stock Appreciation Right is exercised, of the number shares of
               Stock covered by the Stock Appreciation Right being exercised
               over (ii) the aggregate exercise price of such Stock Appreciation
               Right.

          (q)  "Stock Bonus" means the grant of Stock as compensation from the
               Company in lieu of cash salary or bonuses otherwise payable to
               the Participant, and stock issued for service awards and other
               similar employee recognition programs.

          (r)  "Subsidiary" means any corporation or partnership in which the
               Company owns, directly or indirectly, 50% or more of the total
               combined voting power of all classes of stock of such corporation
               or of the capital interest or profits interest of such
               partnership.

          2.2  GENDER AND NUMBER. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.

                                    SECTION 3

                          ELIGIBILITY AND PARTICIPATION

          Except as otherwise provided in Sections 5.1 and 7.1, the only persons
eligible to participate in the Plan shall be those Employees selected by the
Committee as Participants.


                                      -2-



                                    SECTION 4

                             POWERS OF THE COMMITTEE

          4.1 POWER TO GRANT. The Committee shall determine the Participants to
whom Awards shall be granted, the type or types of Awards to be granted, and the
terms and conditions of any and all such Awards. The Committee may establish
different terms and conditions for different types of Awards, for different
Participants receiving the same type of Awards, and for the same Participant for
each Award such Participant may receive, whether or not granted at different
times.

          4.2 ADMINISTRATION. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company, and to make all other determinations necessary or
advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding, and conclusive for all purposes and upon all persons.

                                    SECTION 5

                              STOCK SUBJECT TO PLAN

          5.1 NUMBER. Subject to the provisions of Section 5.3, the number of
shares of Stock subject to Awards (including Director Awards) under the Plan may
not exceed 1,700,000 shares of Stock. The shares to be delivered under the Plan
may consist, in whole or in part, of treasury Stock or authorized but unissued
Stock, not reserved for any other purpose. The maximum number of shares of Stock
with respect to which Awards may be granted to any one Employee under the Plan
is 40% of the aggregate number of shares of Stock available for Awards under
Section 5.1. A maximum of 20% of the shares of Stock available for issuance
under the Plan may be issued as Restricted Stock or Stock Bonuses. In addition,
a maximum of 50,000 shares available for issuance under the Plan may be issued
to non-employee consultants.

          5.2 CANCELLED, TERMINATED OR FORFEITED AWARDS. Any shares of Stock
subject to an Award which for any reason are cancelled, terminated or otherwise
settled without the issuance of any Stock shall again be available for Awards
under the Plan. In the event that an Award is exercised through the delivery of
Stock or in the event that withholding tax liabilities arising from such Award
are satisfied by the withholding of Stock by the Company, the number of shares
available for Awards under the Plan shall be increased by the number of shares
surrendered or withheld.

          5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any Stock dividend
or Stock split, recapitalization (including, without limitation, the payment of
an extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate transaction or event, (i) the aggregate number of shares of Stock
available for Awards under Section 5.1 and (ii) the number of shares and
exercise price with respect to Options and the number, prices and dollar value
of other Awards, shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. If, pursuant to the preceding sentence, an
adjustment is made to the number of shares of Stock authorized for issuance


                                      -3-



under the Plan, a corresponding adjustment shall be made with respect to
Director Awards granted pursuant to Section 7.1.

                                    SECTION 6

                                  STOCK OPTIONS

          6.1 GRANT OF OPTIONS. Options may be granted to Participants at such
time or times as shall be determined by the Committee. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Nonstatutory
Stock Options. The Committee shall have complete discretion in determining the
number of Options, if any, to be granted to a Participant. Each Option shall be
evidenced by an Option agreement that shall specify the type of Option granted,
the exercise price, the duration of the Option, the number of shares of Stock to
which the Option pertains, the exercisability (if any) of the Option in the
event of death, retirement, disability or termination of employment, and such
other terms and conditions not inconsistent with the Plan as the Committee shall
determine. Options may also be granted in replacement of or upon assumption of
options previously issued by companies acquired by the Company by merger or
stock purchase, and any options so replaced or assumed may have the same terms
including exercise price as the options so replaced or assumed.

          6.2 OPTION PRICE. Nonstatutory Stock Options and Incentive Stock
Options granted pursuant to the Plan shall have an exercise price which is not
less than the Fair Market Value on the date the Option is granted.

          6.3 EXERCISE OF OPTIONS. Options awarded to a Participant under the
Plan shall be exercisable at such times and shall be subject to such
restrictions and conditions as the Committee may impose, subject to the
Committee's right to accelerate the exercisability of such Option in its
discretion. Notwithstanding the foregoing, no Option shall be exercisable for
more than ten years after the date on which it is granted.

          6.4 PAYMENT. The Committee shall establish procedures governing the
exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full in cash or cash equivalents,
including by personal check, at the time of exercise or pursuant to any
arrangement that the Committee shall approve. The Committee may, in its
discretion, permit a Participant to make payment (i) by tendering, either by
actual delivery of shares or by attestation, shares of Stock already owned by
the Participant valued at its Fair Market Value on the date of exercise (if such
Stock has been owned by the Participant for at least six months) or (ii) by
electing to have the Company retain Stock which would otherwise be issued on
exercise of the Option, valued at its Fair Market Value on the date of exercise.
As soon as practicable after receipt of a written exercise notice and full
payment of the exercise price, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Stock. The
Committee may permit a Participant to elect to pay the exercise price upon the
exercise of an Option by irrevocably authorizing a third party to sell shares of
Stock (or a sufficient portion of the shares) acquired upon exercise of the
Option and remit to the Company a sufficient portion of the sale proceeds to pay
the entire exercise price and any required tax withholding resulting from such
exercise.

          6.5 INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to
the contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to


                                      -4-



cause any Incentive Stock Option previously granted to fail to qualify for the
Federal income tax treatment afforded under Section 421 of the Code.

          6.6 REPLACEMENT OPTIONS. The Committee may grant a replacement option
(a "Replacement Option") to any Employee who exercises all or part of an option
granted under this Plan using Qualifying Stock (as herein defined) as payment
for the purchase price. A Replacement Option shall grant to the Employee the
right to purchase, at the Fair Market Value as of the date of said exercise and
grant, the number of shares of stock equal to the sum of the number of whole
shares (i) used by the Employee in payment of the purchase price for the option
which was exercised and (ii) used by the Employee in connection with applicable
withholding taxes on such transaction. A Replacement Option may not be exercised
for six months following the date of grant, and shall expire on the same date as
the option which it replaces. Qualifying Stock is stock which has been owned by
the Employee for at least six months prior to the date of exercise and has not
been used in a stock-for-stock swap transaction within the preceding six months.

                                    SECTION 7

                                 DIRECTOR AWARDS

          7.1 AMOUNT OF AWARD. Each Eligible Director shall receive a
non-discretionary Award of 2,000 shares of stock each year; such Award shall be
made annually on the date of and following completion of the Company's annual
stockholders' meeting (commencing with the 2002 annual stockholders' meeting).
Each Eligible Director shall be issued a common stock certificate for such
number of shares. Termination of the director's services for any reason other
than (i) death, (ii) retirement from the Board at mandatory retirement age, or
(iii) resignation or failure to stand for re-election, in any such case with the
prior approval of the Board, will result in forfeiture of the Stock. If the
Stock is forfeited, the director shall return the number of forfeited shares of
Stock, or equivalent value, to the Company. The number of shares of Stock
awarded to an Eligible Director annually shall be appropriately adjusted in the
event of any stock changes as described in Section 5.3. In addition, each
Eligible Director shall receive a non-discretionary Award of a Nonqualified
Stock Option for 4,000 shares of Stock exercisable at the Fair Market Value of
the Company's common stock on the date of grant; such Award shall be made
annually on the date of and following completion of the Company's annual
stockholders' meeting (commencing with the 2002 annual stockholders' meeting).
The number of nonqualified options awarded to a director shall be appropriately
adjusted in the event of any stock changes as described in Section 5.3.

          7.2 NO OTHER AWARDS. An Eligible Director shall not receive any other
Award under the Plan.

                                    SECTION 8

                            STOCK APPRECIATION RIGHTS

          8.1 SAR'S IN TANDEM WITH OPTIONS. Stock Appreciation Rights may be
granted to Participants in tandem with any Option granted under the Plan, either
at or after the time of the grant of such Option, subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine. Each Stock Appreciation Right shall only be exercisable to the
extent that the corresponding Option is exercisable, and shall terminate upon
termination or exercise of the corresponding Option.


                                      -5-



Upon the exercise of any Stock Appreciation Right, the corresponding Option
shall terminate.

          8.2 OTHER STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may
also be granted to Participants separately from any Option, subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine.


                                      -6-



                                    SECTION 9

                                RESTRICTED STOCK

          9.1 GRANT OF RESTRICTED STOCK. The Committee may grant Restricted
Stock to Participants at such times and in such amounts, and subject to such
other terms and conditions not inconsistent with the Plan as it shall determine.
Each grant of Restricted Stock shall be subject to such restrictions, which may
relate to continued employment with the Company, performance of the Company, or
other restrictions, as the Committee may determine. Each grant of Restricted
Stock shall be evidenced by a written agreement setting forth the terms of such
Award.

          9.2 REMOVAL OF RESTRICTIONS. The Committee may accelerate or waive
such restrictions in whole or in part at any time in its discretion.

                                   SECTION 10

                                  STOCK BONUSES

          10.1 GRANT OF STOCK BONUSES. The Committee may grant a Stock Bonus to
a Participant at such times and in such amounts, and subject to such other terms
and conditions not inconsistent with the Plan, as it shall determine.

                                   SECTION 11

                AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

          11.1 GENERAL. The Board may from time to time amend, modify or
terminate any or all of the provisions of the Plan, subject to the provisions of
this Section 11.1. The Board may not change the Plan in a manner which would
prevent outstanding Incentive Stock Options granted under the Plan from being
Incentive Stock Options without the written consent of the optionees concerned.
Furthermore, the Board may not make any amendment which would (i) materially
modify the requirements for participation in the Plan, (ii) increase the number
of shares of Stock subject to Awards under the Plan or to any one Employee
pursuant to Section 5.1, or (iii) change the minimum exercise price for stock
options as provided in Section 6.2, in each case without the approval of a
majority of the outstanding shares of Stock entitled to vote thereon. No
amendment or modification shall affect the rights of any Employee with respect
to a previously granted Award, nor shall any amendment or modification affect
the rights of any Eligible Director pursuant to a previously granted Director
Award.

          11.2 TERMINATION OF PLAN. No further Options shall be granted under
the Plan subsequent to December 31, 2012, or such earlier date as may be
determined by the Board.

                                   SECTION 12

                            MISCELLANEOUS PROVISIONS

          12.1 NONTRANSFERABILITY OF AWARDS. Except as otherwise provided by the
Committee, Awards under the Plan are not transferable, except by will or by the
laws of descent and distribution.

          12.2 BENEFICIARY DESIGNATION. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named


                                      -7-



contingent or successively) to whom any benefit under the Plan is to be paid or
by whom any right under the Plan is to be exercised in case of his death. Each
designation will revoke all prior designations by the same Participant shall be
in a form prescribed by the Committee, and will be effective only when filed in
writing with the Company. In the absence of any such designation, Awards
outstanding at death may be exercised by the Participant's surviving spouse, if
any, or otherwise by his estate.

          12.3 NO GUARANTEE OF EMPLOYMENT OR PARTICIPATION. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary. No Employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Awards.

          12.4 TAX WITHHOLDING. The Company shall have the power to withhold, or
require a Participant or Eligible Director to remit to the Company, an amount
sufficient to satisfy federal, state, and local withholding tax requirements on
any Award under the Plan, and the Company may defer issuance of Stock until such
requirements are satisfied. The Committee may, in its discretion, permit a
Participant to elect, subject to such conditions as the Committee shall impose,
(i) to have shares of Stock otherwise issuable under the Plan withheld by the
Company or (ii) to deliver to the Company previously acquired shares of Stock,
in each case having a Fair Market Value sufficient to satisfy all or part of the
Participant's estimated total federal, state and local tax obligation associated
with the transaction.

          12.5 CHANGE OF CONTROL. On the date of a Change of Control, all
outstanding options and stock appreciation rights shall become immediately
exercisable and all restrictions with respect to Restricted Stock shall lapse.
"Change of Control" shall mean:

          (i)   The acquisition (other than from the Company) by any person,
                entity or "group", within the meaning of Section 13(d)(3) or
                14(d)(2) of the Act (excluding any acquisition or holding by (i)
                the Company or its subsidiaries, (ii) any employee benefit plan
                of the Company or its subsidiaries which acquires beneficial
                ownership of voting securities of the Company and (iii) Robert
                B. Daugherty, his successors and assigns and any tax-exempt
                entity established by him) of beneficial ownership (within the
                meaning of Rule 13d-3 promulgated under the Act) of 50% or more
                of either the then outstanding shares of common stock or the
                combined voting power of the Company's then outstanding voting
                securities entitled to vote generally in the election of
                directors; or

          (ii)  Individuals who, as of the date hereof, constitute the Board (as
                of the date hereof the "Incumbent Board") cease for any reason
                to constitute at least a majority of the Board, provided that
                any person becoming a director subsequent to the date hereof
                whose election, or nomination for the election by the Company's
                stockholders, was approved by a vote of at least a majority of
                the directors then comprising the Incumbent Board shall be, for
                purposes of this Plan, considered as though such person were a
                member of the Incumbent Board; or

          (iii) Consummation of a reorganization, merger or consolidation,
                approved by the stockholders of the Company, in which the
                Company is not the surviving entity and with respect to which
                persons who were the stockholders of the Company immediately
                prior to such reorganization, merger or consolidation do not,
                immediately thereafter, own more than 50% of the combined voting
                power entitled


                                      -8-



                to vote generally in the election of directors of the
                reorganized, merged or consolidated company's then outstanding
                voting securities, or a liquidation or dissolution of the
                Company or of the sale of all or substantially all of the assets
                of the Company.

          12.6  AGREEMENTS WITH COMPANY. An Award under the Plan shall be
                subject to such terms and conditions, not inconsistent with the
                Plan, as the Committee may, in its sole discretion, prescribe.
                The terms and conditions of any Award to any Participant shall
                be reflected in such form of written document as is determined
                by the Committee or its designee.

          12.7 COMPANY INTENT. The Company intends that the Plan comply in all
respects with Rule 16b-3 under the Act, and any ambiguities or inconsistencies
in the construction of the Plan shall be interpreted to give effect to such
intention.

          12.8 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
shares of Stock shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or securities exchanges as
may be required.

          12.9 EFFECTIVE DATE. The Plan shall be effective upon its adoption by
the Board subject to approval by the Company's stockholders at the 2002 annual
stockholders' meeting.

          12.10 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.


                                      -9-