Valmont Industries Inc (VMI) 2016 Q2 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. second quarter earnings call.

(Operator Instructions)

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

Thank you, Kayla. Welcome to the Valmont Industries second 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 Steve Kaniewski, President of the Utilities Support Structures 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 floor over to our Chairman and Chief Executive Officer, Mogens Bay.

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

I trust that you've all read the press release. Today, I will address our second-quarter performance highlights and provide an update on our focus areas, before turning the call over to Steve who will provide an overview of our utilities segment.

As a reminder, we have made it a practice of including our business Presidents on our calls from time to time to provide a deeper dive into our portfolio businesses. Following Steve's update, Mark will provide an overview financials and our capital deployment efforts. With that, let me turn to second-quarter highlights.

Our performance this quarter improved, with operating profit increasing despite only one segment posting sales growth. Operating income as a percent of sales were solidly double digit at 11.2%, earnings per share rose 15% above last year's adjusted earnings. A lower tax rate contributed about $0.04 of the $0.24 earnings-per-share improvement. Last year's restructuring coupled with ongoing cost reductions and productivity improvements are having a meaningful impact on our results.

Since the first quarter, little has changed to modify our outlook for weak end markets. To improve performance, we must remain operationally lean and expand our market coverage, which we have been doing.

Now let me spend a moment on segment performance. In the Engineered Support Structure segment, sales were basically flat, with the quality of earnings improved to double-digit levels driven by lower factory and raw material costs. Sales in North America were lower due to the sluggishness in the wireless communication market in the US and weaker lighting market in Canada.

Sales improved in the Asia-Pacific region, driven by increased wireless communication sales in China and in Australia and higher sales in India, a small but a growing market for us. In the EMEA region, sales were similar to last year as markets remain constrained by lower levels of government investment in infrastructure projects. Operating income for this segment improved.

Turning to the Coatings segment. North America sales rose mostly due to the American galvanizing acquisitions which we closed last October. Sales to outside customers were modestly higher, while internal volumes were lower.

Asia-Pacific sales further decreased as a result of the weak improvement. Also in this segment, operating income improved.

In the energy and mining segment, a better mix of wind structures and rotor housings for wind turbines boosted Valmont [SM] sales. [Grinding] media sales were down due to weak mining in Australia, while access systems and offshore construction remained challenged by the weak global oil and gas markets. In this segment, operating income was down.

In the irrigation segment, North America activity levels contracted as farmers were reluctant to invest capital under the prospect of lower net farm income. And as you know, our domestic irrigation business is strongly correlated with net farm income levels.

Our international sales were flat with last year. Still, we are encouraged by the performance giving consistent weak global crop prices. Our efforts to build strong dealers in important agricultural regions around the world has led to a solid business with a good mix of project activity. The accents platform, which is remote monitoring and control technology, continues to see solid uptake in our global rollout which we initiated last year.

The quality of earnings in the irrigation segment remains high. Cost reductions and lower input costs contributed to operating income as a percentage of sales of 18.2%.

While the environment remains very competitive as demand is constrained, there has not been a meaningful disruption in industry pricing in North America. Lower average input costs have served to offset the impact on price declines where they took place.

With that, I'll turn the call over to Steve Kaniewski, who is our Group President for the Utilities Support Structures segment, and he will provide more insight into his business.

Thank you, Mogens, and good morning, everyone.

In the Utilities Support Structures segment, sales declined 7% from a year ago. Most of the decline reflects lower steel costs and its impact on reducing revenue.

Volumes were in fact higher, most prominently with smaller structures and projects. The quality of segment earnings improved 370 basis points, with operating income increasing to 11.6% from 7.9% last year.

Demand is solid in our market today. The drivers of great reliability, the regulatory push for improved interconnection, and increased renewable mandates are driving demand. Industry competitiveness remains strong, however, we believe our unique capabilities in manufacturing excellence, project management, and a range of product offerings set us apart from the competition.

Lead times in the industry have moved out some, by about five weeks on average year-over-year, reflecting increased demand and manufacturing rationalization within the industry. Our move to raise prices in the bid market has been effective, and we have returned to historical hit rates.

The improvement in the segment's operating performance is being driven by actions our team initiated last year. As you will recall, we consolidated manufacturing facilities and centralized our sales and operations planning process, allowing us to optimize production that best suits site capabilities and costs.

We modified our purchasing processes in order to maximize mill direct purchases as opposed to more costly service centers. We are aggressively addressing freight costs, managing both inbound and outbound expenses. Lean manufacturing techniques are employed across the entire business, allowing for improved flow and accentuating our cost reduction initiatives across the segment including the back office.

Given recent steel price increases, I would like to explain the pricing mechanism in the utility industry. Since steel is a significant portion of cost, we have mechanisms in place to share the risk of cost fluctuations in the steel market with our customers and regularly modify prices to account for those fluctuations. While it is possible to experience some dislocations in the short term, long term, the effect on margins is neutral as prices adjust with our customers to match market prices.

To conclude, the actions taken by the team have allowed us to improve margins meaningfully from last year. I am proud of their accomplishments, and this should allow us to continue to deliver these improved results and position us well for the future. Now I turn the call over to Mark.

Thank you, Steve, and good morning, everyone.

Starting with earnings per share, about $0.15 of the $0.24 improvement over adjusted 2015 results was due to improved pretax earnings. We also benefited from lower shares outstanding due to share repurchases, and a lower tax rate.

Drilling down into results. The 6% sales decrease for the second quarter was mainly due to a combination of pricing and sales mix of 4% and foreign currency translation of 2%.

In the aggregate, volume changes were minor as increased Utilities Support Structures volumes were essentially offset by a decrease in Irrigation. The most significant pricing and mix affect was in the Utilities segment, which Steve described in his earlier comments.

Gross profit margin for the Company was 27.4% in 2016, an increase of 140 basis points over adjusted 2015 second quarter. The improvement resulted from lower average raw material costs and operational and supply chain improvements in our factories, including the positive effects related to the 2015 restructuring actions.

On a segment basis, the most significant improvement in gross profit percentage was in the Engineered Support Structures segment. When we reported to you last quarter, steel prices were starting to increase. Prices continued to increase throughout the quarter, in some cases indexes rose nearly 40% throughout the quarter but have recently leveled off.

The impact of rising steel prices on our second-quarter results was not significant, due to supply arrangements and inventories in place to meet sales demand. Our expectation is for steel costs to be relatively stable for the balance of the year.

With that assumption, we are expecting some sequential headwinds in our gross profit margins in the third quarter, most notably in the Engineered Support Structures segment where we expect negative comparisons. We are raising sales prices in light of steel cost increases, and will continue to make improvements in our supply chain and operations to proactively mitigate the effects of higher steel costs on our results.

We continued to see some pressure on quarterly comparisons associated with currency, albeit at a much lower rate than last year. For the quarter, the impact on sales and operating income was approximately $10 million and $1 million respectively.

SG&A was down from 2015, as we continued to reduce costs as part of our restructuring initiatives. Operating income was $71.8 million, up 5% from last year before restructuring charges and was 11.2% of sales.

We saw an improvement in our effective tax rate this quarter, which was 30.6% as compared with 32.1% in 2015. This was due mainly to a stronger mix of earnings from international operations and US tax credits for research and development. For FY16, our estimate on our effective tax rate is to be about 32%.

Operating cash flows through the first half of 2016 were solid at $94 million. Year-to-date, capital spending was approximately $26 million, resulting in free cash flow of $68 million. Our current projections call for free cash flow to exceed net earnings for the FY15.

We continue to expect capital spending to be around $65 million in 2016. As a reminder, we are building a galvanizing facility at our existing structure's manufacturing site in Brenham, Texas. This space was vacated by Utility as part of their streamlining efforts last year. The galvanizer is expected to be operational later this year.

Regarding other capital deployment activities, we repurchased $12 million of shares during the quarter under the current authorization. As of today, we have $153 million remaining under the authorization which does not have an expiration date.

We have a strong balance sheet. Our debt to adjusted EBITDA was 2.65 times, well within our debt covenant which is 3.5 times.

Cash at the end of the quarter was $344 million, $278 million of which is outside the United States. Our cash priorities remain to support our current businesses through working capital and high-return 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.

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

Thank you, Mark.

The second-quarter results reflect the positive impact of last year's restructuring and our current efforts to manage what is within our control. We continue to implement activities to drive down costs and improve productivity.

We have previously discussed with you our intention to evaluate the consolidation of back office activities and operations in Australia. This analysis has now been completed, and has resulted in a plan to further restructure our access systems and galvanizing operations by consolidating more facilities and headcount reductions.

This will result in a mostly cash restructuring charge of $4.7 million recognized for the remainder of the year, but with a very fast payback. We expect to realize $5 million in lower fixed and compensation expenses during 2017 as a result of these activities.

There has not been a meaningful change in our end markets. There are pockets of strength in Asia wireless, offshore wind, and North American lighting. The utility market is firm, our tonnes shipped are higher than last year.

Our Coatings business in North America has been running at levels similar to last year. The Irrigation business is understandably weak, given farmer's reluctance to make capital investments at this point in time.

This is the outlook that forms the basis of our guidance. We are reaffirming 2016 guidance for earnings per share improvement of 12% to 15% from 2015's adjusted per-share earnings of $5.63.

This includes our assumption that steel will see reduced volatility and cost near current levels. But it excludes the forthcoming restructuring in Australia.

And with that, I will turn the call over to the operator and we will take your questions. Thank you.

(Operator Instructions)

Nathan Jones, Stifel.

If we could just start off talking about the price/cost balance here. We've obviously seen very steep rises in steel prices, very steep rises in zinc prices. You talked about some gross margin pressure in ESS, but no talk of that in Irrigation or in Coatings. So I thought we could start with Irrigation. I understand you have a captive distribution network, so how much of the price costs -- the increase in costs you pass through -- is really up to you? How do you think about balancing -- passing that increased steel cost through to the distributors with a potential demand destruction from raising prices to customers?

Let me first say in general that steel is a minor part of the cost picture on the Irrigation -- probably 15% to 20%. So it does not have the impact that it will have in our structural businesses. Second, we have made a lot of progress across the supply chain to drive down costs of other components going into the Irrigation business. And in general, even though there can be some very short-term disruptions, steel we've usually been able to pass on to the marketplace over time. And every competitor in this business are in the same position that we are in.

We will probably see in the third quarter a lower quality of earnings than we have in the second quarter, but that's just seasonal. We still expect a good comparison with last year's the quarter. But in the Irrigation business, I don't think steel price is going to be that big of a deal. But on that subject, you just heard Steve talk about how it's managed in the Utility business, which is unique. The biggest impact is going to be in the Engineered Support Structure business. Because you have a good size backlog, federally funded projects, you cannot go back and change any prices. So you can have a quarter or two before these dislocations get settled down.

But if history is any guidance, we have been able to pass on steel prices fairly effectively over time, and we expect to be able to do that again. It looks like current estimates are that, even though steel increased quite significantly during the first half of this year, it is now settling down. And our expectation is that it will remain at about the current level for the rest of the year.

And then within the Coatings business, zinc prices are up close to 50% as well. You are in a fairly weak demand environment, especially outside of the United States. How do you approach passing that increased zinc cost through to customers versus potential demand destruction from higher prices there?

Well I don't think you're going to see demand destruction. You can have some competitive issues depending on using lower cost zinc that is already in the kettles. But again, historically, we have not had any issues with passing on zinc price increases and we do not see anything in our forecast or financials for the rest of the year that would have a negative impact from zinc.

Craig Bibb, CJS Securities.

Good morning. This is actually Robert Magic filling in for Craig today. Could you give us an update on the backlog in USS? And perhaps if any large orders were delayed out of Q2?

Sure. This is Steve. Our backlog remains pretty strong; it's up year over year. In terms of large orders, what we are seeing as we look out at 2017 is a similar picture to 2016. So there are a few large projects on the slate, not nearly to the levels of 2013 or 2014, but still a good healthy mix of projects. What you tend to see right now is more of a small- to medium-size type of project structure that is out there right now. But again, our tonnage and hours of production are pretty healthy at this point.

Thank you. And can you also give us an update on your acquisition pipeline and where your focus is these days?

Yes. On the acquisition side, we continue to have an active acquisition pipeline, nothing that we are ready to announce or anything that is close to being ready to announce. Pricing has still been pretty high, and as you know, we stay pretty disciplined on not looking for just EPS accretion but looking for beating our cost of capital. If markets continue to be fairly weak, one could expect that price expectations for acquisitions would also moderate, and hopefully that will take place. So we are active; lots of conversations taking place; but pricing is still fairly lofty.

Julian Mitchell, Credit Suisse.

Good morning.

I just wanted to circle back on the ESS steel price impact. So I guess if I look back to, let's say, 2008 and 2011 -- the last time you had a big steel price jump -- the ESS margin went down maybe 200 or 300 basis points -- the operating margin. Is that the order of magnitude you think we could see in the next 6 to 9 months before you offset the cost and pass it to customers?

I think you can see pressure for maybe a couple hundred basis points, but I don't think you'll see it 6 to 9 months. You'll more likely see it 3 to 6 months. That is, with the assumption that steel has settled into a new level.

Got it. Thank you.

And then the free cash flow seemed to be hurt by a large outflow for working capital in the first half. I just wondered what drove that and how quickly that reverses?

Julian, this is Mark. The first quarter operating cash flows actually were pretty strong -- I think were around $80 million, which historically has been pretty strong for us. The second quarter is not as strong, and sequentially we had an interest payment on our debt which was $20 million. Sequentially, sales were up between first and second quarter, which drove some increase in receivables. And our inventories are higher in part because of inventory we took on hand to help protect ourselves against rising steel prices. So if you take all that into consideration, our cash flows on a quarter-by-quarter basis do fluctuate somewhat, but we expect good cash flows the second half of the year.

Brian Drab, William Blair.

Good morning.

First, just wanted to start on the restructuring. Mogens, can you talk any more specifically about the number of plants that you are consolidating or closing in Australia in energy and mining and Coatings? And maybe just give us a more complete picture of how many plants are there in that region? And how many will we have after this program is executed? And then also, of the $5 million in annual savings that you are expecting from these incremental actions, how much of that do you expect to recognize in FY16?

Okay. Let's start with the last part of your question. We expect to realize very little in 2016 because a lot of the expenses are spread also into the fourth quarter. We expect all of it to see that in 2017, so it is less than a year, or about a year payback. We are probably going to end up within access system and galvanizing to lower our number of facilities by four: three in the access system side of the business and one in galvanizing, where we are consolidating into other facilities.

So I think over the last year or so, we have probably reduced our footprint in Australia from a number of facilities by more than 10 facilities, and we will end up with about 30 -- we will end up at 26 facilities at the end of it. A lot of those are small facilities and we have been able to consolidate some of those without giving up the ability to serve the customer bases that we have in those businesses.

Okay, thanks for that detail. And then I am still really not sure at this point how to model going forward the operating margins for Utility in particular for the back half of the year. I'm wondering if you can just give us any more help there. I am assuming that, despite being able to offset some steel pressure, that we should still expect operating margin probably to have some pressure in the near term? And then if you could give us any help on the other segments, I think it is pretty clear how to model ESS given the previous question. But just operating margin for the segments and rationale.

In the Utility segment, we actually expect the operating margin to remain about where it is now. So a good solid improvement over last year's levels. In ESS -- yes, we just talked about that and I think for certain in the third quarter we're going to have an unfavorable comparison in earnings in ESS, and hopefully that will turn around in the fourth quarter. Irrigation is more a question of seasonality than it is quality of earnings as a result of pricing. In the third quarter, which is the weakest quarter, we're going to have less factory absorption and that's going to translate into lower margins like we had last year in the third quarter and the years before that. And in the Coatings business, we expect to continue to see margins about where they are now, with low margins in Asia-Pacific and higher margins in North America.

Schon Williams, BB&T Capital Markets.

Good morning.

I wonder if -- the Coatings segment had a pretty significant sequential improvement in revenues -- seasonally much stronger than what we normally would have seen out of that business. I just wanted to see if you would -- is there anything you would call out? Were there some price increases that went through in the quarter that normally don't happen this time of year? Or anything from a volume standpoint that you'd call out?

Well probably part of it was the acquisition of American Galvanizing. Otherwise I don't see anything particular. You'll see a slight increase in custom revenue and a slight decrease in internal revenues, but nothing out of the ordinary.

Okay. Yes -- I was talking about on a sequential basis, which should account for American, but that's fine. We can maybe get into it a little bit more off line. The other thing -- just on Utility -- when should we actually expect to see pricing turn positive there on a year-over-year basis? How quickly can you pass that through? And then any comment you can give on -- you talked at length about some new product rollouts in that division. If you could just give a little bit of color on where we are with those, that would be helpful.

I'll turn it over to Steve. But just in general, he addressed the pricing issue and how steel is less of an effect in price [range] margins in the Utility business because of the escalators or de-escalators that are inherent in how we do contracts in the Utility business. But otherwise, I will have Steve talk about it.

Hello, Schon.

The affect of competitive pressure is still pretty marked out in the marketplace right now. So we do see the ability to continue to raise price as being fairly limited until the market becomes even more robust or there is more capacity taken offline. We don't believe in our forecasting that, that will happen anytime soon. So we are just working on what we control, and what we control is our operating performance, our pricing discipline. And as you mentioned with new products, we have introduced a number of new products over the past number of quarters. But the life cycle of products in the utility industry is pretty long, and so it takes a while to get traction. But those products have gained good market acceptance over the past couple of quarters.

Ryan Connors, Boenning & Scattergood.

Thanks for taking my call.

I wanted to discuss the escalation of steel prices from a bit of a different angle, in the USS Utility business in particular. And that is, you talked about the impacts on your margins in terms of individual contracts, but what impact does a spike like this in steel have on the project pipeline? Do some customers back away or defer projects and wait to see whether steel comes back down? Or is there any impact on the cadence of project activity?

Good morning, Ryan.

No. There is not really a change in behavior that we see from rising or declining steel price to any major degree. On some of the very small structures, there may be some stocking programs that they may time, but it is very small part of the business. From the project base business, with the timelines and again with our overall structures only being about 10% to 15% of the project cost for Utility, the bigger movers are in construction and right of way issues and not really our product costs. So it tends to be minimal.

Got it. And then my other question just had to do with Irrigation. Obviously we are in a downcycle, a depressed market, but you still did $150 million-plus in sales in the quarter. So that is a fair number of pivots. Can you just talk about the composition of demand right now? Who is buying? Is it mostly replacement demand right now? Or what is the makeup of the market right now?

Ryan, this is Mogens.

I don't think it has changed very much. I can't give you the exact numbers, but over time we have been one-third new development, one-third conversion, and one-third replacement. And when corn and other commodities were very high, the new market portion of it approached 50%, but I think it is settling down to the more traditional combination. Internationally, as I said, the international market has actually been performing better than what I would have expected. We have good activity levels throughout the world, and we have actually seen good -- surprisingly good -- activity in Brazil, which is a country that is dealing with lots of both economic and political headwinds. But FINAME financing and the general robustness of agriculture there has performed better than I would have expected.

Jon Braatz, Kansas City Capital.

Morning, everyone. Steve, I have got a question for you.

There has been a growing consolidation trend within the utility industry. We saw that here in Kansas. Is that impacting you at all in terms of doing business with the same customers? Do you have to reach out to different people? Just curious about how the consolidation trend in the utility industry, which we think maybe will continue, might be impacting your business.

Hey, Jon.

We have had very good relationships with virtually all of the major utilities that are in North America, and so we have also noticed how the mergers and acquisitions pipeline has really kicked in. What we tend to see is very different each merger by merger. One may leave a unit to operate independently, and so therefore we see no change in behavior. In other cases, they will consolidate the purchasing groups, and in some cases we may have to re-bid an alliance contract. But we have been successful in maintaining all of those through this process, and we have been competitive and be able to keep those customers. So it does vary, and we will just keep an eye on it. We know that we can be competitive, and if there really is a push to try and get new prices we feel we are capable of handling that.

Thank you, Steve.

Brent Thielman, D.A. Davidson.

Good morning.

On ESS, as you mentioned, that was the one segment that grew this quarter. Is it your expectation you will see revenue grow there in the second half, albeit at a lower margin?

I think the answer is yes. The answer is yes.

Okay. And then with the Irrigation business still under some pressure, how do you feel about the cost position today, assuming we're going to continue to see some pressure on revenue there? And thoughts on implementing any additional restructuring initiatives in front of those declines?

I think that the Irrigation business over decades, because they have always been cyclical and they have been very good at adjusting cost to market conditions without cutting off investments in the future. And I don't see us having any major restructuring as a result of a continued weakness in that market.

We are actually surviving through this downturn in much better shape than I have expressed my concerns about on previous calls. Because even though pricing is competitive, we have been able to offset some of that competitiveness with better productivity, better supply chain management, and until now, also lower steel costs. So I think we will continue to probably do a good job in doing that, and I don't see, apart from constantly looking for cost takeout through operations, I don't see any major restructuring coming.

Thank you.

Nathan Jones, Stifel.

Hello, guys. A couple questions for Steve.

Steve, I know we have had an absence of large projects for your business over the last couple years, few years. There are a few large projects scheduled to potentially come to market in 2017. Can you comment on the outlook for those projects, and whether or not you have seen any RFQs or anything like that for those yet?

Yes, Nathan, we have seen a couple of the RFQs already come out. So we have already bid a number of those. There is expectations of awards later in the quarters, the third and fourth quarter. Then there is a couple of projects that are later in 2017, and we have not yet seen those RFQs come out. Although there is a lot of discussion with those customers at this point.

And then can you talk about, in Valmont's taking capacity out, can you talk about how much in terms of volume, tonnes of capacity you have reduced and what your understanding is of what capacity has been taken out elsewhere in the industry?

As was mentioned on some earlier calls, one way to take out capacity is to adjust your shifts and the number of stands that you man. And so the combination of taking out the facilities last year as well as then adjusting shiftwork, really allowed us to tune in our capacity to match demand. And we continue to do that now as we add capacity back in to meet this increased production. It is really being done in the existing facilities by just changing shifts and adding people to stands. From a competitive perspective, we have heard a number of our competitors basically doing the same thing, albeit it lagged a little bit to our own activities.

Brian Drab, William Blair.

I have got a few, maybe for Steve here just on the Utilities segment.

First, following up on Nathan's questions that he just asked -- these large projects, if they hit or you are successful bidding on these, where does this fall on the spectrum of at the low end of the spectrum this is business as usual? Large projects? There are some large projects this year and there will be some next year? To the high end of the spectrum, where those wins would represent a material step function up in Utility revenue?

It is really just along the historical trend line. We always were successful in capturing a certain percentage of those large projects, and then a certain percentage in the bid market as well. And so they are nice to have projects because you can tend to tune your capacity and your engineering and drafting resources towards those, so you get some efficiencies. But from a revenue perspective, if it is really at the historical trend, it would most likely be relatively flat.

Okay, got it.

And then, Steve, you mentioned FERC 1000 in that order briefly at the Analyst Day, it hasn't been mentioned really at all on any of the conference calls. Am I correct in concluding that this is really one of the major factors that will be affecting -- that is affecting the Utility business today and probably will for several years at least to come? And could you -- I have been studying this; my sense is that a lot of investors don't have all the details here and appreciation for the nuances within this order. I'm wondering if you want to take the opportunity to explain why it is driving smaller projects -- what happens and how has it affected the bidding process, and who are the entities that are being affected and how it trickles down to you?

Okay. I will just answer it on a general pattern. FERC 1000 was intended to create a competitive market within the utility transmission industry. And to that end, I believe it has been successful and really is now baked into the mentality of almost all of our customers. So even if a customer has not had a FERC project, their Boards would have challenged them to go out and analyze their costs, benchmark it across the industry to make sure that if there was one in their service territory or they wanted to go out and get it, that they have the ability to do that. So you saw all of the customers really take a hard look at cost, their engineering specifications, what kind of selection of product meant for construction costs. And so part of our broad array of products is to help address that market in any which way that, that customer believes they can be competitive in the marketplace.

There was at least an initial movement towards lower voltage classes as people work through the idea of having to get competitive before going into some big projects. But I think what you see now is really a settling down in the market and a new normal that is just going to be a competitive marketplace, and you're going to have to provide value and good costs. And I think we are in a good position to do that.

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

Thank you, 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.

Included in this 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 controls and assumptions.

Although Management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors can effect Valmont's actual financial results and can 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 the date of this discussion. And the Company does not undertake to update any forward-looking statements. That concludes today's conference call. You may now disconnect. Have a great day.