Valmont Industries Inc (VMI) 2016 Q1 法說會逐字稿

Good morning, my name is Kayla and I will be your conference operator today. At this time I would like to welcome everyone to the Valmont Industries, Inc first-quarter earnings call.

(Operator Instructions)

I would now like to turn today's call over to Mr. Jeff Laudin, Manager Investor Relations. Please go ahead, sir.

Thank you, Kayla. Welcome to the Valmont Industries' first-quarter 2016 earnings conference call.

With me today are Mogens Bay, Chairman and Chief Executive Officer; Mark Jaksich, Executive Vice President and Chief Financial Officer; Tim Francis, Vice President and Corporate Controller; and David LeBlanc, President of the Engineered Support Structure Segment.

Before we begin, please note: This conference call is subject to our disclosure on forward-looking statements, which applies to today's discussion, 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 call over to our Chairman and Chief Executive Officer, Mogens Bay.

Thank you, Jeff, and good morning, everyone. Thank you for joining us.

The quality of first-quarter earnings improved, with double-digit operating profit of 10.5% versus 8.6% a year ago. Earnings per share rose 13%, driven by the benefits of the 2015 restructuring, plus ongoing cost reductions and productivity improvements. Our end markets, however, remained challenged, with little sign of recovery in the near term. Sales, which declined 11% this quarter, were negatively impacted by sharply lower steel costs, negative foreign currency translations, and lower volumes.

Let me turn to the performance by segment. In the utilities support structure segment, sales declined 18% from last year. About half of the decline is a result of lower volume, and the other half is attributable to a significantly lower steel cost impact on revenue. Efforts to control what we can control led to an improvement in operating income of 10.2% of sales, up from 8.7% of sales in 2015.

As a reminder, we initiated a price increase last year; and while we saw our hit rate decline initially, it is now commensurate with prior levels. This, coupled with our restructuring and productivity improvement efforts, has also resulted in an improvement in the quality of our backlog. We expect second-quarter revenue to be about 10% higher than it was in the first quarter, and we expect to continue to deliver double-digit operating income. As such, we remain confident in our ability to deliver 200 basis points of improvement in operating income this year off the 2015 base.

Turning to the coatings segment, lower internal volumes in North America were largely offset by the effect of an acquisition completed in the fourth quarter of last year, resulting in flat year-over-year North American sales. Meanwhile, continued weakness in Australia pressured sales below last year's level. Segment operating income improved slightly, despite the lower sales, helped by restructuring benefits, including plant consolidations implemented last year.

Our newly carved out energy and mining segment continues to face a very difficult market environment, but we are making strategic moves to strengthen our position. In the access system businesses, we are diversifying our customer base, and expanding further into civil and architectural markets. Early results of our efforts are encouraging. In the Donhad grinding media business, we continue to drive productivity improvements to offset some of the weakness from the depressed mining market in Australia.

At Valmont SM, we continued to see solid demand for structures and rotor housings for offshore wind farms. But those product lines servings the oil and gas industry remain very weak. Given our expertise in large, heavy, complex steel structures, we are focusing on leveraging our capabilities to expand into other verticals.

In our irrigation segment, North American activity levels continued to face downward pressure as a result of declining net farm income. In the international markets, projects in the Middle East and eastern Europe offset market weakness in other regions.

We are not seeing any indications that the irrigation market will improve in the near term. Second-quarter results will be very dependent on volume from storm damage, which is unpredictable.

On a positive note, the quality of earnings remain very good. Productivity improvements, cost take-outs, and effective price management resulted in operating profit of 18.3%. As well, we are continuing to invest in new technologies and product development. In general, we have not seen a meaningful disruption in pricing in North America, although multi-system deals and projects continue to be very competitive.

In the interest of increasing senior leadership visibility and providing greater transparency into our businesses, last year we began including our segment leaders on the call. Today, David LeBlanc, who is Group President of Engineered Support Structures, is here to provide the quarterly update on that segment. Many of you met David at our recent investor day in New York.

David?

Thank you, Mogens, and good morning, everyone.

Q1 2016 at engineered support structures was a solid quarter and a good start to the year. While sales were basically even with prior year, operating profit showed healthy expansion versus 2015.

Positive sales trends in the Asia-Pacific region, particularly wireless communication build-outs in China and Australia, and improving infrastructure investment in India, helped offset a number of headwinds. Those headwinds included a large European export order in 2015 that did not repeat, stagnant market conditions in the US telecom segment, and revenue compression from raw material deflation. An additional bright spot for the segment were solid US lighting markets, particularly those exposed to commercial construction where markets remained strong, while currency translation negatively impacted sales by $5.6 million in the quarter.

Segment operating income improved to 8% of sales compared to 5.3% last year. This expansion reflected last year's restructuring efforts, lower input costs, and improved manufacturing productivity.

As we look forward, we expect to continue to make progress expanding our profitability, but at a substantially lower rate of improvement than we saw in Q1. We don't expect the gains in material margins to repeat, and we face more challenging overall comps through the course of the year.

We also expect that the drivers of our improvement will shift some. Our US businesses drove two-thirds of our margin expansion in Q1. In Q2 and beyond, we expect the majority of our profitability gains to occur outside the US as our improvement programs around the world gather momentum, prior-year comps in Europe soften, and material gains in the US subside.

Our overall markets look to be stable, quoting activity in the US remains solid, and our US lighting and traffic backlog is healthy. The market drivers for our Asian businesses are expected to remain intact, while our European businesses are prepared for a stagnant economic backdrop.

Rapidly rising steel prices pose a risk for ESS, as end-market pricing takes some time to adjust. While near-term global steel pricing is likely to rise, the medium to longer term is less clear, with global steel capacity utilization still in the upper 60%s to lower 70% range. Our teams around the world are very actively managing in getting out in front of this dynamic on both the purchasing and pricing side.

Execution in this overall low-growth environment remains critical. Our teams remain focused on driving a number of manufacturing cost-reduction projects, along with steadily improving our commercial productivity.

In summary, our first-quarter progress at ESS was very encouraging. And I'll now turn the call over to Mark.

Thank you, David. Good morning, everyone.

Starting with sales, the 11% decrease was due to a combination of volume of 4%, pricing and sales mix of 4%, and foreign currency translation of 3%. The volume impact was largely seen in the utility support structures, irrigation, and energy and mining segments.

The most significant pricing and mix effects were realized in the utility support structures segment, which accounted for about half of the decrease in segment sales this quarter. Sales pricing in this market is somewhat related to fluctuations in steel prices. As such, significantly lower steel prices versus the same period in 2015 had a negative effect on our revenue.

Gross profit margin for the Company was 27% in 2016, up 230 basis points year over year. All segments, except energy and mining, reported improved gross profit margins, which resulted from lower raw material prices and operational improvements in our factories, including the positive effects related to our 2015 restructuring actions.

We are starting to see some upward momentum in steel prices as we enter the second quarter, and lead times have extended for some grades and types of steel. We continue to monitor movements in steel and other key inputs, and are working with our key suppliers to assure effective operations.

With respect to our international operations, the strengthening US dollar continued to serve as a headwind. The effect on sales and operating income in the first quarter was approximately $20 million and $1 million, respectively.

SG&A spending was down from 2015, largely as a result of our cost-reduction efforts and, to a lesser extent, FX translation effects. Operating income of $62.4 million was up 8% from last year, and was 10.5% of sales.

Our effective tax rate was 32.3% in 2016, an improvement over 2015's rate of 35%. For FY16, we estimate our effective tax rate will be 33%.

Operating cash flows for the quarter were strong at $80.5 million, as compared with $55.5 million last year. The improvement resulted from improvements in working capital management and a delay in the annual contribution payment to our UK pension plan.

Capital spending was approximately $14 million, resulting in free cash flow of $66.5 million, well in excess of net earnings. We expect annual CapEx to be around $70 million, which includes the build-out of a galvanizing facility at an existing structure's manufacturing site in Brenham, Texas. This galvanizer, which is on space vacated by utility as part of last year's restructuring, is expected to be operational later this year.

Regarding other capital deployment activities, we repurchased $17 million of our shares under the current reauthorization. As of today, we have $164 million remaining under this authorization, which does not have an expiration date.

Turning to the balance sheet, our balance sheet remains strong. Our leverage ratio at the end of the quarter was 2.7 times adjusted EBITDA, well within our debt covenant. Our leverage level is appropriate for the cyclical nature of our businesses, while providing room to pursue investments in growth in our core businesses, including new product development, market expansion, and acquisitions.

Cash at the end of the quarter was $388 million, about $300 million of which resides outside the US. As we have communicated, our cash priorities are to support our current businesses through working capital and capital spending as needed, acquire companies that strengthen or are closely adjacent to our existing businesses, pay dividends at 15% of net earnings over time, and repurchase shares.

Finally, we are reaffirming our annual guidance for EPS growth of 12% to 15% off 2015's suggested EPS of $5.63 per share.

I'll now turn the call back over to Mogens.

Thank you, Mark.

The first-quarter results demonstrated the positive impact of last year's restructuring, and our ongoing effort to lower cost and improve productivity while enduring the persistent difficult macro environment. We are monitoring steel costs very closely. Recently we have seen increased steel prices, both in China and in North America.

As I've said before, we are not overly concerned with the level of cost of steel, as long as it is getting to where it is going in an orderly fashion. In such an environment, we can usually manage our margin profile pretty well. However, if steel spikes, we can see margin pressure as we work through the unprotected portion of our backlog. And conversely, if steel drops rapidly, we can see margin compression as a result of steel in our inventory being priced higher than the current market.

And with that, we are ready to take your questions.

Kayla, if you would like to cumulate the queue, we are ready for that.

Absolutely.

(Operator Instructions)

Julian Mitchell.

Hello, thank you. Just a first question, maybe for Mark around the gross margin trend.

As you said that grew over 200 points year on year in Q1. Is there any way you could parse out I guess the difference in there in terms of the drivers of material costs versus productivity?

Sure. Yes, Julian. I would say that on the whole, the effect of lower raw material prices that were in excess of what we had to give back in sales pricing and the effects of productivity were about equal in that regard. So both of them had a good contribution towards that margin expansion.

Thank you. And then Mogens, maybe on the utility business, the pricing or price mix, I know it is lumpy but it seemed perhaps slightly less negative than most of the quarters you have seen in the past 12 months,18 months.

Are you seeing any change in demand conditions in utility at all, or is it just lumpiness quarter to quarter? And specifically if you were seeing any shifting conditions around that small projects versus large projects and the backlog you have, the visibility there.

I would say that in general the market is probably pretty flat. I think pricing has firmed a little, and that is mainly evidenced by, or should be evidenced by the extension in backlog -- no, in lead times.

The industry lead time has probably extended by a couple of weeks. We have most of second quarter in the backlog and pretty good visibility to the second quarter.

I would say that the mix between large and small projects is still very much geared toward smaller projects. There is some talk about larger projects, but probably not until going into next year. I would say that the environment has not deteriorated from what we saw last year, and I think our productivity improvements and cost take out is what basically has driven our better performance.

Great. Thank you.

Craig Bibb.

Hi. You noted in the press release that the tubing revenues were down a lot. This is the first quarter you've reported with these segments. How much was US irrigation down, or just irrigation by itself?

I would say without breaking out the tubing business, but the tubing business is the one that will see the biggest impact on revenue from lower steel cost prices. So if the whole segment was down 9%, and the irrigation business was probably down more in the 7% range.

Okay. And international is about the same?

Yes. In local currency slightly down translated into US dollars.

And then you also call that the China wireless tower business. It looked like it was up in the quarter. Do you have visibility through the remainder of the year?

Yes. This is David LeBlanc. Visibility is decent, I mean as far as the China market provides.

We have decent visibility through Q2 at least. Second half is a little bit more challenging, but the overall dynamic that we saw in Q1 this point still looks to be similar for the rest of the year.

Which is a nice positive in China because the China economy in general has been softening. So it is nice to have a niche market there that has helped our activity level in China.

Great. Thanks a lot.

It's more than just China. It's east of India and Australia as well for the telecom space.

All right. Thank you.

(Operator Instructions)

Brent Thielman.

Good morning.

Good morning.

Mogens, on the international activity in irrigation, are these more one-off project opportunities or maybe indicative of broader demand within the regions where we can think about some better volume going forward?

I would say that if you look at the base business in markets that have been well-established for a long time, let me use Brazil, South Africa, Australia as an example, those markets are seeing some of the same pressures as we are seeing in North America. Brazil even more so as a result of the declining value of the real.

But the project business is by definition kind of one offs. And I was pleasantly surprised to see the level of activity in Eastern Europe and the Middle East despite all the political and all the issues surrounding there.

I was in Dubai a few weeks back and I was very pleased with activity levels we see there. But they are projects and as I have always said from quarter to quarter they can be there or not be there, but we benefited from them for sure in the first quarter.

Okay. And then just -- thinking about M&A, it looks like you've got the costs aligned, restructuring is successful here. Any thoughts? Are you thinking a little bit more about M&A over other allocation?

The answer is yes. As we went through restructuring we still were working on our pipeline for acquisitions.

There has not been a lot of activity, but as Mark pointed out, we have between cash on the balance sheet and our revolver we have about $1 billion available. So we will probably step up activities in the acquisitions side, but stay disciplined to not just creating EPS accretion but also seeing our way to beat our cost of capital.

David Rose.

Good morning and thank you for taking my call. If we can spend a little time on the irrigation side, given 40% of operating income in the quarter was from there.

Just a better sense of the margins given what you saw in the quarter was, and I think Julian's question was largely based on the entire Company, but maybe if you can break down what you saw in terms of productivity gains, waste, fixed costs, absorption, or purchasing from a margin component. And then walk us through how we should think about margin pressure in irrigation particularly from steel, because that is a shorter lead time, smaller inventory so you'd be impacted more quickly.

So maybe you can help us better understand the pricing dynamic as well, given that last quarter you reduced prices slightly because of lower steel prices? And does that imply that you have to raise them in order to maintain margins?

That was a lot of questions.

Sorry. They are broken out so I can get my additional question.

I will try to give you an overall picture. As we've said before, the biggest risk to profitability and the downside in irrigation is if pricing discipline disappears in the market. And I am mostly talking North America.

But we continue to see very competitive environment for projects, for multi-system deals, both in North America and internationally. But overall, pricing discipline has been pretty much in place.

I would say that the improvement in the quality of earnings despite a downdraft in revenue is really focused on significant productivity improvements. Not so much restructuring and cost take out because the irrigation business, we have been through that so many times so we took out cost very quickly when the markets contracted.

Some benefit from lower steel cost, but I'd say less that than productivity improvements. And I think that if steel moves up here in the next quarter or so -- this is a fairly low quarter from a revenue standpoint, the second quarter.

So it's more important what happens to steel going into the third and fourth quarter of this year. But I would say that the productivity through the plants, cost take out is the main driver for the quality of earnings.

Ryan Connors.

Great. Thank you. For my question I just wanted to talk a little more about irrigation domestically, and when you hosted your analyst day back in February one of the things you talked about was it was still a little early in the quote/unquote selling season to really opine on the market and how it was shaping up. So now that we do sit here in the heart of the selling season, can you just give us a characterization of the market, what you are hearing back from your channel on how things are shaping up here?

I would say that the market is kind of coming to an end for this year. Second quarter is when it really slows down. And I would say that there has been no change in the external environment.

We still see downward pressure on the revenue side also going into the second quarter. The wild card in the second quarter, as you know, is going to be storm damage. But the underlying business, there is nothing out there that says that, that will get any better.

We always say that then when you move into the third and fourth quarter it all depends on acreage planted and the expectations for net farm income, and even there unless we had a production problem somewhere in the world or a major shift in demand, we have healthy ending inventories and I don't see much change. So I would say for the rest of this year unless something changes over the summer time, more of the same.

Okay. And then just one quick item is on the highway market, any update on the guardrail business? I know last year you talked about the fact that you were a reseller for one of your partners who had the legal issues there and that, that was a headwind last year. Any update on that front?

I am going to have David address that. And remember that our guardrail business is in Australia and New Zealand.

Yes, for the most part as Mogens said, it is an A/NZ focused business. And that business for us is stable in Q1. I think that the supply chain challenge out of the US was a problem for us last year.

During the first quarter this year it was a much more fluid supply chain. That helped us serve otherwise stable markets with a better supply chain.

That was a contributor to better margins for that business in Q1. So the dynamics around US issues and as they affect us and where we compete went away for this year and was an overall positive for us.

Schon Williams.

Thanks. This is Schon. How are you doing today? I'm going to take advantage of having David on the call here.

Could you just talk a little bit about maybe US wireless? I think the comment on the call was still a bit stagnant.

Maybe just talk about when does that market start to perk back up? And then also just any thoughts on when we'd start to see the highway portion of the lighting business start to really ramp?

Yes Schon. As it relates to US telecom, it's primarily related to one large carrier who has redirected most of their CapEx into financing and paying for a pretty large acquisition. So I think that dynamic started last year where there was a heavy pullback from that carrier.

And that same dynamic is continuing on into this year. So we are not seeing any bounce back from that. That has been sort of the defining feature of the US telecom space.

It is down and it is staying down from that level. Yes, the second question relative to the highway bill. Long term we think that, that is going to help us.

In the short term where it does affect us. It is going to be I think somewhat limited in that most of the projects that affect us would be longer cycle, beyond a one-year time plan type of project.

So we are seeing better quoting activity. We do think that, that is a support for 2017, but we don't expect a huge uplift from that in 2016.

Nathan Jones.

Good morning, everyone. Mogens, you talked about some of the sources of the improved margin, and one of the things you talked about was improved productivity. I know you've talked about things like in the utility business the planning of the flow through -- of the material through the plant maybe was not as good as it could be.

Can you talk about what the sources are of those productivity improvement? How you feel about execution within each of the businesses, things of that nature?

Let me address it in a broader sense under the label of lean; and we had been on a lean journey for awhile. I would say the irrigation business is probably one that is the furthest down and has seen the most benefit.

Utility has had a laser sharp focus on that over the last 12 months, 18 months, and they are seeing great improvement. One measure is fully loaded cost per hour in our utility plants, and we have seen a constant reduction in that number and that is one of the measurements we are looking at.

But it is all aspects of lean. The productivity improvement we have seen in the utility business is impressive. And the way they are loading the plant centrally, filling the low cost plants first, and how they are centralizing their steel purchasing, doing more mill direct, all of these things have helped with the improved earnings picture.

That improved earnings picture is not a result of better pricing. It is a result of better productivity.

I guess my second question then on utility, you talked about having raised prices last year, a lower initial hit rate but that going back to where it was before now. Is there a thought of maybe repeating that exercise? Or do you think you are tapped out on your ability to raise prices there now?

I would say being back at the [headwind] we had is a nice place to be. We have seen an improvement in the quality of our backlog. Whether we can do that one more time, it is possible.

The trick in the business is that if we want to own more -- if we want to gain more of the business, we have to earn it not buy it. And therefore the better we become at running our plants, and we are seeing great projects, will give us opportunities to probably continue to increase that hit rate.

Brian Drab.

Good morning. I just wanted to ask on the utility segment. The commentary over the last year or so has been -- you have been seeing volumes hold up and be flat essentially, but we saw, if I heard correctly a negative 8% move in volume in the quarter. Was that a surprise relative to your expectation?

Not really because going into the first quarter we had a pretty good feel for what volume would be. I would say there was maybe one or two projects that moved into the second quarter that we had expected in the first quarter.

But otherwise when we talk about volume, one of the things -- and we always talk about capacity in this business. When it comes to hours worked, we are pretty flat with what we had last year.

But structures tend to be smaller and therefore lower steel when your volume goes out the plant, but they tend to be more labor intensive. As I also mentioned, we expect the rebound in revenue on that business going into the second quarter, which is reflected in our current backlog.

And Mogens, do you think that, that business for the full year ends up flat in terms of volume with that rebound?

Yes, I think about flat. The biggest change in the utility business this year is going to be the quality of earnings.

Jon Braatz.

Good morning, Mogens.

Good morning.

Mogens, over the past year you have taken on a lot of cost and restructured, certain areas cut capacity. I guess my question is what kind of revenue levels can the Company support given the current dynamics of the Company and without adding additional cost per se? I'm trying to get a sense of maybe what the leverage opportunity should we see revenues begin to increase.

I would say a lot. In the irrigation business we can go back to the levels we had two or three years ago, no problem. We can ramp that up.

In the utility business we did not get rid of equipment, we moved the equipment to other plants. So the question there is ramp up shifts, adding welding stations, adding more people so we can absorb quite a bit of expansion there.

In the pole businesses we are not in a situation where we need to even think about adding capacity. So I would say from a capacity addition standpoint, that is not going to be a problem even with a significant increase in revenue.

Okay. So, when we look back, I think it was in 2013, your peak operating margins were 14.5% or 14.3% or something like that. Do you think you have now positioned the Company such that when the revenues come back that you can exceed -- I don't want to put a number to it -- or make you put a number to it, but do you think you are in a position now to exceed that type of operating margin?

Yes.

Kevin Bennett.

Thanks. Good morning, everybody.

Good morning, Kevin.

Mogens, just one question for you. In the release you stated that you think for the rest of the year revenues will be more in line with last year. And I am just curious what gives you confidence in that statement given I guess what is going on in energy, in mining, and irrigation?

Well, you know any given quarter you have to look into the crystal ball and see based on what we know today where do we think we are going to be. And we think that in our forecast for the year we don't have an increase in irrigation revenue. We have some business units that are going to do better revenue-wise. But on balance, and not exactly quarter by quarter, but on balance for the next three quarters we feel pretty confident that revenues are going to be approximately what they were in 2015.

Okay. Can you give us a little bit more detail about what will drive that? I assume David's segment is one, but is that higher steel prices?

Again, what do you think drives that? Is it your comp on a year-over-year basis?

We are not forecasting any impact currently of steel price increases. There may be some, but in our forecast it is not a major impact.

We do forecast that the irrigation business will not continue to decline in the second half of the year. Second half of last year was lower quite a bit from the year before.

So actually in most segments we expect a pretty flat environment. Can that move a few percentage points up and down? Yes.

And per quarter? Yes also. But as we look at it today in total we expect it to be about in line for the nine months with last year.

Craig Bibb.

Maybe a little bit of a summary one. It looks like you have green shoots that USS margins have improved, you're looking at 200 basis points there. Did that business bottom last year?

I did not hear the first part of your question. Was it ESS?

For USS, did the business bottom last year or where you past the bottom?

I think so. Yes. I think as we said revenue maybe pretty flat, but all our internal efforts to improve the quality of the business will drive improved profitability. And what we see out there is not a market that will continue to decline.

Schon Williams.

Thanks. Maybe Mark, could you just clarify maybe the thoughts around share repurchase? Operating cash flow was actually quite robust this quarter, but this was the slowest rate of repurchase in awhile.

I am just trying to think about -- at this point are there higher priorities on the list, and share repurchases maybe a little bit lower down the list at this point?

Schon, I would say the first quarter cash flows if you look back historically, were probably a little bit stronger than we normally would have in a first quarter. But that is always a bit of a balancing act as far as all of the different possibilities for uses of cash.

And so it is one of those things where there is just a fair amount of judgment that goes into where we are in terms of share repurchase day to day, week to week. Then there are some days -- there have been some days where the trading volumes work pretty well.

So that affects our ability to buy shares a little bit as well. So no, we still plan to continue to be in the market to buy back shares.

The pace at which we do that is going to vary somewhat over time. We try to be as opportunistic as we can, and so those numbers may bounce around a little bit. But we're certainly continuing to -- and planning to continue on with share repurchases.

Brian Drab.

Just quickly I want to follow up on gross margin and just make sure I understand it. Have the cost gains -- cost take-out gains already happened for the most part of the year, or will we see those maybe put some upward pressure on margin as we move through the year?

And specifically can you say whether gross margin -- how should we think about gross margin for the utility segment specifically and overall as we move from first quarter into second quarter in particular, given also these price and input cost dynamics you talked about?

If you recall we talked about cost take out of about $30 million, of which $8 million we'd already benefited from in 2015. So yes, there will be a little more difficult comparison as we get in towards the second half of the year.

But offsetting that is probably getting more traction on the productivity improvements and operating in this new footprint and continued focus on cost take out. I think we mentioned either at the investor day or at another occasion that we continue to look for instance at in Australia can we further take cost out by consolidating back office activities such as receivable management, invoicing, treasury functions, et cetera, et cetera.

So we have a sharper focus on continuing to find ways to take cost out as we had last year, but the main restructuring is behind us. But that does not mean that our commitment to find other ways to reduce cost is also behind us.

There are no more questions at this time. I hand the call back over to you presenters.

Thanks, Kayla. This concludes our call, and we thank you for joining us today. The 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 Kayla will read our forward-looking disclosure statement.

Included in this discussion were 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 assumption.

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, 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 statements included in this discussion is made as of the date of this discussion, and the Company does not undertake to update any forward-looking statements. You may now disconnect, and have a great day.