Jeff Laudin - Manager, IR Mogens Bay - Chairman and CEO Mark Jaksich - CFO and EVP Steve Kaniewski - President, Utility Support Structure Segment

Julian Mitchell - Credit Suisse Craig Bibb - CJS Securities Brent Thielman - D. A. Davidson Ryan Connors - Boenning & Scattergood Schon Williams - BB&T Capital Markets Nathan Jones - Stifel, Nicolaus Brian Drab - William Blair Jon Braatz - Kansas City Capital Associates

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 Utility 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 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 focused areas before turning the call over to Steve, who will provide an overview of our Utility 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 of 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 1 segment posting sales growth. Operating income as a percent of the 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 comparable 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 U.S., 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's; markets remain constrained by low levels of government investment in infrastructure projects. Operating income for this segment improved. Turning to the Coatings segment, North America’s 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 remain 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 persistent 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 AgSense 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 with auctions and lower input cost 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 cost have served to offset the impact on price declines, where they took place. With that, I'll turn the call to Steve Kaniewski, who is our Group President for the Utility Support Structure segment, and he will provide more insight into his business.

Thank you, Mogens, and good morning, everyone. In the Utility Support Structure segment, sales declined 7% from a year ago. Most of the decline reflects lower steel cost 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 and 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 5 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, the best in site capabilities and costs. We modified our purchasing processes in order to maximize mill direct purchases as oppose 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 slow 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’m 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 utility support structures volumes were essentially offset by a decrease in irrigation. The most significant pricing and mix effect was in the utility 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 cost and operational 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 Structure 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 expectations are for steel cost 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 Structure segment, where we expect negative comparisons. We are raising steel prices - sales prices in light of steel cost increases and will continue to make improvements on our supply chain and operations to proactively mitigate the effects of higher steel costs on our results. We continue 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 continue to reduce cost 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 U.S. tax credits for research and development. For the fiscal year 2016, our estimate on our effective tax rate is to be about 32%. Operating cash flows to 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 flows to exceed net earnings for the 2015 fiscal year. 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 structures manufacturing site in Brenham, Texas. The space was vacated by utility as part of their streamlining efforts last year. The galvanizers 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 a $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 in high return capital spending as needed, acquire companies and strengthen or closely adjacent to our existing businesses, pay dividends at 15% of net earnings over time and repurchase shares. I will now turn the call back over to Mogens.

Thank you, Mark. 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 cost 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 system and galvanize operations by consolidating more facilities and headcount reductions. This would result in mostly cash restructuring charges 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 strengths, in Asia Wireless, offshore wind and North American lighting. The utility market is firm. Our tons shipped are higher than last year. Our coatings business in North America has been running at level similar to last year. The irrigation business is understandably weak given farmers reluctance to make capital investments at this point of 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 costs be at current levels, but it excludes the forthcoming restructuring in Australia. And with that, I will turn call over to the operator, and we will take your questions. Thank you.

[Operator Instructions] Our first question comes from the line of Nathan Jones from Stifel.

Good morning, Nathan.

Yes. If we could just start off talking about the price cost balance sheet. You are obviously seeing 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 coating. So I was hoping, if we could start with irrigation, I understand you have a captive distribution network, so how much of the price cause 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 the potential demand destruction from raising prices to customers?

Well, let me first say in general, that steel is a minor part of the cost picture in irrigation, probably 15% to 20%, so it doesn’t have the impact, it will have in our structural businesses. Second, we have made a lot of progress across the supply chain to drive down cost of other components going into the irrigation business. And in general, even though, there can’t be some very short-term disruptions, steel will usually being able to pass on to the market place overtime. 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 that we have in the second quarter, but that’s just seasonal. We still expect the good comparison with last year’s third 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’ve 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, favorably 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 attractively overtime, and we expect to be able to do that again. It looks like current estimates are that even though steel increase quite significantly during the first half of this year, it’s not settling down and our expectation is that it’ll remain at above 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’re 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 I think that's already on the kettles. But again, historically, we have not had any issues with passing on zinc price increases, and we don't see anything in our forecasted financials for the rest of this year that would have a negative impact from zinc.

Our next question comes from Craig Bibb with CJS Securities.

Good morning. This is actually Robert Magid [ph] filling in for Craig today.

Morning, Robert.

Could you give us an update on the backlog in USS, and perhaps if any large orders were delayed at 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 '13 or '14, 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's 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's 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 to 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.

Our next question comes from Julian Mitchell from Credit Suisse.

Hi. Good morning.

Good morning, Julian.

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

Well, I think you can see price here for maybe a couple of 100 basis points. But I don't think you will see it 6 to 9 months, you will 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 you seem - the free cash flow seemed to be hurt by a large outflow for working capital in the first half. I just wondered sort of what drove that, and how quickly that reverses.

Yes. Julian, this is Mark. The first quarter's operating cash flows are actually were pretty strong. I think there were around $80 million, but historically has been pretty strong for us. Second quarter is not a 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 the 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 to second half of the year.

Our next question is from Brian Drab from William Blair.

Hi. Good morning.

Good morning, Brian.

First, just wanted to start on the restructuring. Mogens, can you talk any more specifically about the number of plans 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 plans 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're expecting from these incremental actions, how much of that do you expect to recognize in fiscal 2016?

Okay. I’ll start with the last part of your question. We expect to realize very little in '16, because a lot of the expenses are [timestamp 25.45] also into the fourth quarter. We expect all of it to see that in 2017. So it's a 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 4; 3 in the access systems side of the business, and 1 in galvanizing, where we are consolidating into other facilities. So I think over the last year or so, we are probably reduced our footprint in Australia from a number of facilities by more than 10 facilities, and we will end up at about 30.

We’ll end up at 26.

We'll end up 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 basis that we have in those businesses.

Okay. Thanks for that detail. And then I guess, I'm 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 wonder if you can just give us any more help there. I'm assuming that, despite being able to offset some of the steel pressure that we should still expect operating margin probably to have some pressure on it in the near term. And then, if you could give us any help on the other segments, I think, it's pretty clear how to model ESS, given the previous question, but just kind of operating margin for the segments in rational?

Well, 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 are 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.

Our next question is from Schon Williams from BB&T Capital Markets.

Hi, good morning.

Good morning, Schon.

I wonder the Coatings segment had a pretty significant sequential improvement in revenues. I mean, just much more 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 call out, I mean, whether a pattern or whether some price increases that went through in the quarter that normally don't happen this time of the year or I don't know anything from a volume standpoint that you called out?

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

Okay. Yes, I was talking about kind of on a sequential basis, which should account for American, but we can maybe get into a little bit more offline. 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 where - if you could just give a little bit of color on where we are with those, that would be helpful?

Okay. 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 pressuring margins in the Utility business, because of the escalators and de-escalators that are [timestamp -30.30] how we do contracts at the Utility business. But otherwise, I'll have Steve talk about it.

Hi, Schon. The effect of competitive pressure is still pretty market 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've introduced a number of new products over the past number of quarters, but the lifecycle 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.

Our next question comes from Ryan Connors from Boenning and Scattergood.

Great. Thanks for taking my call.

Good morning, Ryan.

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 the spike like this in steel have on the project pipeline. Did 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's not really a change in behavior that we see from rising or declining steel price to any major degree. On some other very small structures, there may be some stocking programs that they may time, but it is a very small part of the business. On the project-base business, with the time lines, 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 not really are product cost. So it tends to be minimal.

Got it. And then, my other question just had to do with irrigation. Obviously, we're in a down cycle or depressed market, but you still did $150 million plus in sales in the quarter. So that's a fair number of pivots. Can you just talk about the composition of demand right now? I mean, who's buying? Is it mostly replacement demand right now? Or what's the makeup of the market right now?

Ryan, this is Mark. I don't think it has changed very much. I can't give you the exact numbers, but over time, we have kind of 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 kind of about 50%, but I think it's 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 and surprisingly good activity in Brazil, which is a country that's dealing with lots of both economic and political headwinds, but phenomenal financing and the general robustness of agriculture there has performed better than I would have expected.

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

Good morning, everyone. Steve, I've got a question for you. There's been a growing consolidation front 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, may be, will continue, might be impacting your business?

Okay, Jon. We've 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, 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 rebid an alliance contract. But we've been successful in maintaining all of those through this process. And we've been competitive and be able to keep those customers. So it does vary. And we'll just keep an eye on it. And we know that we can be competitive, and if there really is a push to re-price, we feel we're capable of handling that.

Okay. Thank you, Steve.

Our next question is from Brent Thielman from D.A. Davidson.

Hi, good morning.

Good morning.

On ESS, you mentioned that was the 1 segment that grew this quarter, is your expectation you will see revenue grow there in the second half, albeit at lower margin?

Let me - I think the answer is yes. The answer is yes.

Okay. And then, the irrigation business is 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, I guess, thoughts on implementing any additional restructuring initiatives in front of those declines?

Well, I think that the irrigation business over decades, because they've 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 will - we are actually surviving through this downturn in much better shape that I have expressed my concerns about on previous calls, because even though pricing is competitive, we've been able to offset some of that competitiveness with better productivity, better supply chain management, and until now, also, lower steel cost. So I think, we'll continue to probably do a good job and doing that. And I don't see apart from constantly looking for cost takeouts through operations, I don't see any major restructuring coming.

We now have a follow-up question from Nathan Jones from Stifel.

Hi, guys. Couple of questions for Steve. Steve, I know we've had an absence of large projects for your business over the last couple of 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've 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 '17, and we’ve 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 Valmont's striking capacity out? Can you talk about how much in terms of, volume, tons of capacity you’ve reduced, and what your understanding is of what capacity has been taken out elsewhere in the industry?

Well, as was mentioned on some earlier calls, one way to think our capacity is to adjust your shifts and the number of stands that you met. And so the combination of taking out the facilities last year as well as then adjusting shifts work 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's really being done in the existing facilities by just changing shifts and adding people to the stands. From a competitive perspective, we've heard a number of our competitors basically doing the same thing, albeit, it lagged a little bit to our own activity.

We also have a follow-up question from Brian Drab from William Blair.

I've got a few maybe for Steve here just on the Utility segment. First, following up on Nathan's question that he just asked, these large projects, if they hit or you're successful bidding on these, where does this fall on the spectrum of kind of - at the low end of the spectrum, this is business as usual, large projects, there are some large projects this year, and there'll 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's really just along the historical trend line. We always were successful in capturing a certain percentage of these large projects and then a certain percentage in the bid market as well. And so, they're 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's 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, hasn't been mentioned really at all in 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 Utility business today and probably will for several years at least to come? And could you - I've been studying this, but [timestamp 42.21] my sense is that a lot of investors don't have all the details here and appreciate - appreciation for the nuances within this order. I wonder, if you want to take the opportunity to kind of explain how this - why it's driving smaller projects, what kind of 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'll just kind of 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 hasn't had a FERC project, their boards would have challenged them to go out and analyze their cost, benchmark it across the industry to make sure that if there was 1 in their service territory they wanted to go out and get it, that they could, they have the ability to do that. And 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 cost, 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 kind of 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 kind of a new normal that is just going to be a competitive marketplace, and you're going to have to provide value and good cost, and I think, we're in a good position to do that.

And 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 control and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors can affect 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 of 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.