Valmont Industries Inc (VMI) 2009 Q2 法說會逐字稿

Ladies and gentlemen, I am Laurie and I will be your conference operator. I would like to welcome everyone to the Valmont Industries earnings conference call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions) At this time it is my pleasure to turn the call over to Mr. Jeff Laudin. Please go ahead, sir.

Thank you, Laurie. Welcome to the Valmont Industries second quarter conference call. With me today are Mogens Bay, Chairman and Chief Executive Officer, Terry McClain, Senior Vice President and Chief Financial Officer and Mark Jaksich, Vice President and Corporate Controller.

Before we begin, please note: this discussion is subject to our disclosure on forward-looking statements which applies to today's talk and will be read in full at the end of the call. The instructions for accessing a replay of the call can be found in our press release. I would now like to turn the floor over to the Chairman and Chief Executive Officer, Mogens Bay.

Thank you, Jeff and good morning, everyone. Thank you for joining us, and let me begin with some second quarter highlights. Operating income increased 10% and was 13.9% of slightly higher sales. Net earnings rose 19%. These are record second quarter results for Valmont.

Utility structures' revenue nearly doubled and operating income reached 23.8% of segment sales. The irrigation sales decreased 37% from the record 2008 levels and operating income declined 65% but was still nearly 10% of sales. Inventory and long-term debt were reduced by approximately $65 million and $68 million, respectively.

I will now turn to the quarter by segments. I will begin with the utility support structure segment which had sales of $199 million and operating million of $47.5 million. This resulted from very good volume leverage and lower steel costs.

This was an exceptional quarter for our North American utility business. As was the case in the first quarter, we were able to leverage Valmont's large pole facilities, even outside of our utility business to drastically increase volume as a result of a significant backlog going into this year.

We do expect a favorable comparison also for the second half of this year, but not nearly to the extent we have seen so far. Neither the third nor fourth quarter will approach our first two quarters in revenue or profitability. We believe that the utility industry will continue to be a very strong market for Valmont as utilities step up their investments in the nation's transmission and distribution grids.

I will caution, though, against making quarterly predictions based on recent results as a great part of the utility business comes in large orders and can lead to uneven or lumpy quarter-by-quarter performance. I will also caution against making trendline projections year-over-year for some of the same reasons.

Utilities will evaluate their capital spending and timing based on economic factors, right-of-way considerations and many other factors but over time, we expect continued significant investments on the part of this country's utilities.

So, in summary for the utility business, we encourage our investors to focus on the size of the opportunity in this business going forward rather than its precise timing, which cannot be predicted. We are in a unique position within the industry, being able to leverage a global network of manufacturing facilities to quickly react to changing demands.

Turning to the Engineered Support Structures segment, sales were 4% low at $183 million. Operating income decreased 22% to $14 million. Segment profitability fell, largely due to volume deleverage and competitive pricing pressures. Global sales to the lighting and traffic and commercial lighting markets were lower. Offset to some degree by sales to Valmont's Utility division and the impact of acquisitions.

In North America, commercial lighting sales were lower due to the recession's impact on growth and development and in particular, weakness in the real estate market. Sales of products for the transportation market were weak reflecting budgets' shortfalls in many state and local municipalities. The specialty structure's business improved in North America, mostly due to the acquisition in 2008 of Site Pro, a wireless components company. In the Chinese market, sales of specialties products were similar to last year's level while the sales of utility structures decreased.

In Europe, total sales of lighting and traffic products were higher. Lower results in France and Eastern Europe were offset by better results in other European locations plus the impact of acquisitions.

We remain positive on the long term outlook for infrastructure. Infrastructure spending is important for economies to stimulate growth and development. Several large stimulus programs have been announced in some of our major world markets. In particular, we have our eye on Washington as an important driver for our North American business will be an extension or renewal of the US Federal Highway Bill, which expires this year.

In the irrigation segment, sales were 37% lower at $101 million. The irrigation segment operating income decreased 65% to $9.8 million and was 9.7% of sales. Volume deleverage of operating cost was the primary reason for the decline in profitability.

Farmers have cut back on spending in response to lower commodity prices and the global economic recession. Large plantings and lower crop prices have led to expectations of lower farm income in 2009. These factors resulted in sharply lower sales of irrigation equipment this year when compared to the record sales levels achieved in 2008.

While current market conditions are weak, the drivers for renewed growth in demand for the irrigation equipment are quite compelling. Global population growth will lead to the need for more food, and to meet the demand for more food, farmers will have to become more productive, especially concerning the use of water. Mechanized irrigation equipment improves farm productivity and uses much less water than flood irrigation or surface flow irrigation. We are bullish on the long term prospects of our irrigation business.

In the coatings segment, second quarter sales were 23% lower at $30 million due to broad based weakness in the industrial economy. Operating income declined 30%, but was still a healthy 22% of sales as a result of reducing costs to match the size of the business.

Turning to auto financial measures, we earlier this year indicated that we were not satisfied with our relatively high inventory levels going into the year. We are pleased to report a $65 million reduction in inventory during the second quarter. Interest bearing debt is down $68 million from the end of first quarter. Depreciation and amortization for the quarter was $10.9 million and capital expenditures were $10.5 million.

Before turning to our outlook for the rest of the year, you may recall that in recent years, we've had to wrestle with steel price volatility. The past 12 months have been a roller closer in prices. Recently, steel costs have started to firm yet again. As the steel industry adjusts capacity and steel pricing firms, lead times can also extend. Big changes in steel costs impact our cost and revenue picture.

For the third quarter, we currently expect an unfavorable earnings comparison. The irrigation segment results both as it relates to revenue and operating income will be substantially below last year's exceptional third quarter. With continued weakness in most of our other markets, we do not expect utilities' anticipated improved performance to be able to fully offset irrigation's decline in earnings.

Our outlook for the full year of 2009's results has improved since our first quarter's earnings call. We expect revenue comparisons to be unfavorable for the second half, mainly as a result of lower input costs, particularly steel compared to the same period of 2008, and unfavorable volume compared in irrigation and coatings. However, we now expect net earnings for the year to be modestly higher than last year's record earnings.

We have leadership positions in very attractive markets. When economic conditions improve, we should be well positioned to benefit from global infrastructure and agriculture growth. Our industry, product line and geographic diversification have allowed us to produce record results during the current worldwide economic recession. Our ability to allocate capacity among our global network of power plants allows us to serve whichever market has the highest demand. We will continue to be prudent in our management of capital and maintain a conservative financial profile.

This concludes the prepared portion of our remarks, and I would now like to now take your questions.

Thank you very much. (Operator Instructions) We will take our first question from Arnie Ursaner with CJS Securities.

Hi, good morning, Mogens.

Good morning, Arnie.

I want to focus most of my questions on the utility support structures segment and get a couple of things clarified to maybe get a better feel for the future in this segment.

You mentioned two very large projects that shipped in the first half of this year. Can you give us any feel for the backlog number you had at the beginning the year, the current backlog number and focus on those two key large projects. So perhaps -- to the extent that one time, I think the more you can help us understand them, the better we can build a model going forward.

Morning Arnie, and yes, I don't think I mentioned two large projects, I mentioned several large projects. But to put things in perspective, at the end of the year our backlog in the utility business was about $380 million. At the end of the second quarter, it was slightly more than half of that.

So, we ship -- we got good order flow in the first half, but we shipped, as you know, $373 million. And that is a result of a number of large projects being delivered during that particular period of time. Because of our capacity opportunities, as we have softness in the lighting business, we were able to get more products out in the second half than normally would have been the case.

So, when we look at the third and the fourth quarter, if you look at the first half, revenue were up close to 80% compared to the first half of last year. We would not expect revenue in the second half to grow more than about one-fourth of that; so probably 15% to 20%. That's how I would like to put it in perspective.

That is very, very helpful, thank you.

And I may add to that that -- also remember that steel prices are now much lower than they were a year ago. And therefore, even though we may see good volume increase, it will be tempered somewhat by the results of lower steel costs in the second half of this year.

As a follow up to that, what percent roughly of this backlog or of your shipments are coming from wind or solar or new kind of emerging opportunities for a transmission buildout?

For the year in total, I'd say less than 10%.

Okay. So it is not like you had two sizeable wind projects that are getting completed and are gone. This is more ongoing business levels?

That is correct.

Okay. And your competitor reported results today in a similar business and showed a decline. I know you prefer probably not to comment on competitors, but you are showing exceptional growth, your number one competitor is showing declines. Are you gaining share? Are they having capacity issues? How do you help us understand the difference between the two of you at this stage?

Well, you're right. I have enough trouble understanding fully our own business, let alone any of our competitors. But it does indicate what I talked about that this is a very uneven business. We happen to have large projects that came through on the first half of this year, and we could have competitors that may have large projects coming through in a different timeframe.

And the 190 million of backlog or so that you currently have, how much of that is expected to ship in the back half of the year?

I would guess most of it. And the backlog is little more than 200..

Okay. One more final question, if I can. In the Chinese market, you shift that, and that is included in your Engineered Support Structure, yet China is going through a major buildout of its wind and solar and energy and also building out a major 3G network. Can you comment on why -- your view why utility product sales were lower in China this quarter?

Well, let's start with wireless, you talked about. Those sales were up. The same situation is in China as you have here, that you have fairly large orders that may fall in one quarter or another.

I also think what we are up against in China is that this is a country that has been very used to lattice type utility lines. And we are going through a process of introducing poles as opposed to lattice types, and that takes time.

So I wouldn't say that our revenue over time in China completely will reflect whatever growth rate there may be in the Chinese utility business. It is as much a reflection of how successful will we be in convincing Chinese utilities to use more poles as opposed to lattice structures.

Thank you very much. I will jump back in queue.

Our next question comes from Tom Hayes from Piper Jaffray.

Good morning, great quarter, guys. I was just wondering if you provide a little detail in the utility segment regarding volume versus price split? What drove that almost 100% year-over-year increase?

Well, it is difficult to do precisely because it depends a lot about the mix and at what time did we buy steel, and at what times did we get the orders. But in general, as you could imagine, with steel prices being on the roller coaster it has been and steel being the major cost component in our utility business, we will see significant changes in revenue that will not necessarily mean the same changes in volume. You can see a situation where if steel drops in half, you may see revenue go down by 30%, and volume may not change.

Okay. And then secondly, you had mentioned in the engineer support segment some increased price competition. I wonder if you could provide a little more clarity on that one?

Well, it is what you would expect to find in soft markets. People are more hungry to get business, and we will see that in all our markets. The lighting and traffic business, not only in this country but around the world has been effected like any other business by the global recession. And therefore, competitors are being more aggressive in filling their capacity. So we will -- and are seeing what we would expect, more price competition when the markets are soft.

Okay, just lastly then, as far as the irrigation segment, I understand that demand remains weak. Are you seeing any pricing pressure that would be outside of normal range?

No, I wouldn't say so. I would say the pricing behavior on this industry is pretty much what we have seen over time. It is still very weak demand. It is very difficult to forecast when that may change. As you know and generally, farmers' balance sheet are in pretty good shape. So it becomes a question of when do they feel that the general economic environment would lead them it make new capital investments.

The unique part of the current global recession is that it is driven by liquidity. So it affects basically all business, because no business can operate without liquidity. We have been very fortunate that the North American utility business became real strong at a time when most businesses weakened.

Great. Thank you again for the clarity on the utilities segment. That's it.

Thank you.

Our next question comes from Michael Coleman with Sterne Agee.

Good morning.

Good morning, Michael.

You've covered the utility but in terms of irrigation, you've already cycled down somewhat in the last couple of quarters. Would you still expect to see the normal seasonal pattern of down 20% from the second to the third quarter or because you have already cycled down, do you think that seasonal pattern might be a little bit less this year?

I will see if I understand your question correctly. When we look at the third quarter, I want to remind people that last year's third quarter was exceptional. You ought to go back and look at the third quarter of the year before that and year before that to get a better feel for the seasonal effect of the third quarter.

Last year we had very large backlogs at the end of the second quarter that we had not been able to ship. And therefore, third quarter became an exceptional quarter.

Right. Right. So if you throw out last year and use the previous three or four years, the average decline from the second to the third quarter is 20%. And the question is, because you have already come down 37%, you have cycled down to $100 million in revenue from $160 million.

Yes.

Do you actually see a bit of a less of a seasonal -- then the 20% from the second to third quarter?

We expect about the same seasonal relative performance.

Okay. Just two other things. Minority interest in the first quarter was a 2% contribution. And this quarter, I think it was about a $0.03 drag. Could you talk about the drivers? Or what is going on with the minority interest and what accounts for that?

Yes, Michael. This is Mark Jaksich. The biggest contributor to that was our joint venture in Turkey which is a 49% minority interest in that, and earnings in that business were quite good. And so roughly half of that goes to the minority interest line. That was the biggest contributor. And that was a business that we did not establish until the third quarter last year, so it was not in the comparisons.

Okay, thank you, one more question. On your corporate overhead, it moved up in the quarter from the first quarter. The variability on your corporate overhead on a quarter-to-quarter basis, can you talk about how it is tied to either profitability or your stock price. And the question is, if your stock price continues to go higher, do we walk that corporate estimate up from its current levels for the back half of the year, or do we keep it at the, say $12 million?

Yes, there is -- Michael, this is Mark again. There is -- first of all, regarding incentives, there are some long term incentive plans that are performance share plans and so when you monetize the performance shares, it is based on average stock price. And the average stock price towards the tail end of the second quarter was a quite a bit higher than the first quarter, so that would cause a goodly part of that increase.

The other thing you should be aware of also is that our deferred compensation plan has assets in it that are on the company's balance sheet. In the second quarter, the stock market improved, so the return on those assets went up. There is a corresponding liability that goes on the balance sheet as well. And so the increased net liability hits the corporate overhead as well. And that was about $1 million in the second quarter.

Okay. Thank you.

We will take our next question today from Ned Borland with Next Generation Equity.

Good morning, guys. Most of my questions have been answered. Just a follow up on irrigation. Can you give us a sense of how the business did geographically, international versus domestic?

Well, we had significant declines in both areas, and I would say that the -- let me look here. The decline was larger in North America than it was internationally.

Okay. And then on -- I think your comments on China, maybe I misread them, but have you seen any benefit from the stimulus activity over there yet?

That's -- you read that the Chinese stimulus plan has been pretty effective, and that's probably true. A lot of money is being put into the Chinese infrastructure. But keep in mind that the size of our business in China compared to the Chinese economy is basically immeasurable.

And I think we are more dependant on our ability to convince customers in China to buy our type of products as opposed to what they are used to buying. So I would say that the stimulus, per se, I don't think we can directly correlate to our business. But certainly, a positive economic environment in a relative sense that we are seeing in China can only be beneficial for us going forward also.

Okay. On then on coatings was the decline mostly price driven or tonnage driven?

It was both.

Both.

Zinc prices were down and volume was down.

Did you see any differences in tonnage as you went throughout the quarter since it is a real time economic business?

No. We are not seeing any pickup that would indicate that there is some better economic times out in the industrial economy.

Then finally, on the debt reduction and cash flow, is debt reduction going to continue to be a priority for cash or could we perhaps hear about an acquisition or two by the end of the year?

Well, I would say that our priorities for cash have not changed. We will continue to pay down debt. If an acquisition comes by that will be a good fit, we will take a look at it. But there are none on the drawing board right now that I would anticipate what would come to pass before the end of the year.

Okay. Thank you.

Thank you.

We will go next to Brent Thielman with DA Davidson.

Good morning, congratulations on a great quarter.

Thank you.

I was just hoping you could provide what acquisitions contributed during the quarter as well as the currency impact on sales?

Yes, Brent, this is Mark Jaksich. On the acquisitions that took place after the end of the second quarter last year. So they are not necessarily in the comparisons. There was a contribution to the operating income of about $2.7 million. And currency translation didn't have a large impact on operating income. It was about $0.5 million negative as the average dollar rates were a little bit stronger compared to last year.

Okay, perfect. Then, on the, I guess relative to ESS and utility support segment business. Were you continuing to execute on North American utility towers with your ESS segment and if so, do you expect that to continue going forward?

Yes, we will continue to use capacity from North American ESS.

Okay, perfect. Thanks very much.

Our next question today comes from Jon Braatz with Kansas City Capital.

Good morning, Mogens.

Good morning, Jon.

When we spoke maybe about three months ago, grain prices were much higher. When you talk to your agricultural or your irrigation dealers, has the farmer's attitude changed at all, as it looks like it is going to be a big harvest and prices are down considerably. Has that attitude changed at all? Are they growing a little bit more pessimistic?

I wouldn't say so. I haven't heard any change in attitude. Commodity prices have softened a little, but it's partly because growing conditions have been good. So farmers will get more bushels and they may get a little less per bushel. But we won't detect any change in attitude until later this fall, if it is going to happen.

Okay, okay. Mark, couple of questions. You mentioned the acquisition impact on operating income. What might have -- what might that be in revenue? And also, I notice there was in your other income figure there is a $1.6 million gain, if you want to call it. And what was that related to?

First, to your question on the revenue on the acquisition. That was in the neighborhood of $20 million.

$20 million?

Yes.

Okay, and that was all in the engineered supports division, correct?

That's correct.

Okay.

Now, on the other income side. There was a prior question regarding the corporate spending and the increase in the other income was related to the returns that we have on the assets that are in our deferred accounts --

I am sorry, okay. I remember that one, okay.

-- foreign exchange transaction; gains and losses.

Okay. Very good. Well then, if we look at the organic revenue growth on the ESS, we were down by maybe about 15%, something like that, in that area? If we strip out the acquisition? Okay. That's it, thank you very much.

Thank you, Jon.

Our next question comes from Steve Gambuzza with Longbow Capital.

Good morning.

Good morning, Steve.

I was wondering if you could comment on the inventory reduction that you experienced in the quarter. If you could give some sense for what segments really drove that inventory reduction? And how you would expect inventory working capital to trend for the balance of the year given your sales outlook.

This is Terry McClain. Basically, it was across all segments. Probably more in the pole business and the ESS group and in utilities. And we would expect -- I think that our management has done a good job I think of bringing inventory levels down and we would expect probably further reduction, but and not substantial like you have seen in this quarter.

Okay. And would you say, given the reductions across the board, it seems like that inventory reduction probably weighed on some of the reported margins across the various segments and that head wind should fade prospectively?

There may have been some margin pressure between competitive pricing and relatively expensive inventory. There may have been some margin pressure there. If you are asking is that going to be relieved? I think it all depends on what is going to happen with the pricing environment. As Mogens mentioned earlier in the softer markets, pricing competitiveness is always pretty tough. I think it is hard to conclude that right now.

Okay, and then in terms the engineer support structure segment, it looks like there was a decent sequential improvement in the profitability versus the margin report in the first quarter. Is that kind of a seasonal pick up, or I know there was some kind of internal initiatives in place to raise profitability. Could you just comment on what drove the increase?

In general, I'd say that in the North American ESS segment, we are making progress in addressing some of the operational issues we had late last year and going into this year. And we will expect the effect of the progress to start showing up in the results going forward.

Thank you very much for your time.

Our next question today will come from James Bank with Sidoti and Company.

Good morning.

Good morning, James.

Yes, just wanted to talk about the long term growth within your utility business. I think we can all appreciate the capital spending that is going on for the transmission grid here at home. The Edison Electric Institute more or less pegs CapEx about $84 billion in 2010, basically flat from what is going to be spent in '09. So is there a lag effect to how it impacts your utility business, or is there another avenue of growth for you all in regard to pricing; potentially market share? I was wondering if you can elaborate on that.

And as I said in my prepared remarks, I would caution against making trend line projections, even year-over-year in the utility business. Utilities are living in the same environment economically as the rest of us, and they are looking at their capital spending and looking at their projects. And some projects that were planned for early next year may be postponed, some may not. So, it is not easy.

I would say it is impossible for us to predict to what extent the utility capital expenditures will go up or down over the next 12 months. But, with whoever we talk to that are involved in the utility business and follow the utility business, they are pretty convinced that capital expenditures for transmission and distribution over the next number of years will see an upward trend.

Okay. In regard to irrigation, I am just trying to decipher the variance. C&H reported this morning that its combine tractors were up more or less double-digits in North America. And I think the North America ag sector was up single digits. And I'm trying to figure out what is the difference is between their equipment sales in that group and the irrigation sales. I was wondering if you could help me with that.

I would like to figure that out too. It is -- the most difficult business to predict short term is the irrigation business. And that's why we size to the current level, we are prepared for whenever it grows again. But over time, it has been a business where when we are on the up side, the peaks are higher than the previous one. And in the downcycles, the trough is higher than the previous one.

So, I cannot predict or give you any comfort in relative relationship between tractor sales and pivot sales. Except in a broader sense when farmers start spending money again, they will look at irrigation as well as well as other capital investments.

Okay. And lastly, on your engineer support structure group. I guess in your long experience there, I was wondering if you could you give me a good case or best case and worst case scenario in regards to the timing of this elusive new Highway Act.

Every time there has been a new highway bill. Let's start with the good news. At higher funding levels higher than the previous bill. When you look at the previous several bills, there has not been a new bill in place when the current bill expires. I think this time is going to be no different.

The question is going to be, are they going to extend the current bill's funding at current levels until a new bill is in place? If I had to venture a guess, it would be yes. And if I had to venture a guess as to when we will have a new highway bill, it would be sometime in 2010.

Okay, terrific. That's all I have. Thank you.

Thank you, James.

(Operator Instructions) We will return at this time for a follow up from Arnie Ursaner with CJS Securities.

Hi, can you speak about the FERC rules related to market redesign technology upgrade or MRTU? How are you seeing that impact your utility business?

We are not seeing any impact on that in our utility business.

Okay. People like Pacific Gas have talked about 50% or almost 75% increases for the next two to three years from that. We can follow up off line.

Yes. I can't add much color to that question.

Okay, and there is a major project or build out from transmission coming down from British Columbia. It may involve as much as 3,000 megawatts. Are you planning to participate or are you being encouraged to participate in that project yet?

We -- I would say we are probably participating in or like to participate in every major utility transmission project in North America. Our ability to win those projects is a different story, and time will show how successful we are going to be at that.

I will say in general though that that business probably will become more competitive short term. Steel prices are coming down, there is not as much activity as we saw at the end of last year currently. So it will be a more competitive business, I think.

A follow up to the questions you have been asked by several others, trying to understand the -- you have indicated in engineer support, you have taken some of your excess demand from utility and run it trough ESS. And in Q1, it has a fairly meaning negative hold back on earnings.

You mentioned that your transfer pricing was pretty low. We saw a fairly sizeable increase this quarter in ESS margin versus Q1. And I am trying to get a feel for if your business normalizes and you tend to not use the capacity in ESS, really a two part question, how much can margins improve in ESS as you stop doing the internal transfer? And alternatively, your 22% and 23% margin USS is extraordinarily high, how much should we expect that to come back down?

Let me first talk about the performance of ESS. I would not overestimate the impact on the operating income percent of profitability in ESS from the utility intersegment sales. I think the improvement that we hope to see in that business will come from better market conditions; running it better, solving some the internal problems we have.

Your second question is what do we expect to see in this business? In the past, that business has been solidly double-digit operating income, and we expect to return to that.

Talk about perhaps ending or exiting the year on ESS at something approaching a 9% or 9.5% margin. Without a highway bill is that still a reasonable goal?

It's a goal.

Okay, and with a highway bill in 2010, do we get back to low double-digits?

Well, I would hope so. Now, a highway bill, we tend to be late in the sequence of expenditures on the highway bill. And the last thing going into the projects is signs, lighting and signals. But we also expect spillover from the current highway bill.

So I think we are not going to see a big up or down between the highway bills. I hope not, we haven't in the past. But I would expect that this business will return to double-digit operating income.

And another aspect of the business that we should not forget about is the commercial lighting side of it, which has been very soft. But despite that we are working on a path to get back to double-digit operating income.

I am trying to understand the magnitude of the one time nature of the Q1 and Q2 margin in USS. Historically, you have been in more the mid-teens; 13.5, 14.6, and yet we are running materially above that. With volumes softening from extraordinarily strong levels of Q1 and 2, are you more likely to be -- is it somewhere in the middle that we should be thinking about the margin on USS, or returning more towards the historic levels?

We have seen the beauty of leverage by having plants running at full capacity, and we should not underestimate that. And I would say that over time, if we can maintain a middle double-digit operating income in the utility business like 15%, 16% that would be very solid performance.

Laurie, are there any more questions in queue?

Yes, we will take today's final questions from Brent Thielman at DA Davidson.

Sorry, guys, my questions were just answered. Thanks.

Okay. Thank you, Laurie. At this time this concludes our call, and we thank you for joining us today. This message will be available for playback on the internet or by phone for the next week. We look forward to speaking to you again next quarter. And at this time, Laurie will read our forward-looking statements.

Thank you. Included in the discussion are 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 Valmont 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.

As you listen to and consider these comments, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties, some of which are beyond Valmont's control, and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont'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 Valmont'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 material and availability and market acceptance of new products, product pricing, domestic and international competitive environments and actions and policy changes of domestic and foreign governments.

The company cautions that any forward-looking statement included in the discussion is made as of the date of this discussion, and the company does not undertake to update any forward-looking statement.

Gentlemen, do you have any follow up comments? Thank you very much, ladies and gentlemen for joining today's conference. This does conclude your call. You may now disconnect.