Renee Campbell - Director, Investor Relations and Corporate Communications Stephen Kaniewski - President and Chief Executive Officer Mark Jaksich - Executive Vice President and Chief Financial Officer Timothy Francis - Vice President and Corporate Controller Jeff Laudin - Manager of Investor Relations

Brent Thielman - D.A. Davidson & Co.

Good morning. My name is Natalia and I will be your conference operator today. At this time, I would like to welcome everyone to the Valmont Industries, Inc., Fourth Quarter 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Renee Campbell, Director, Investor Relations and Corporate Communications. Please go ahead.

Thank you, Natalia. Good morning, everyone, and welcome to the Valmont Industries' Fourth Quarter 2017 Earnings Conference Call. We apologize for the technical delay this morning. With me today are Steve Kaniewski, President and Chief Executive Officer; Mark Jaksich, Executive Vice President and Chief Financial Officer; Tim Francis, Vice President and Corporate Controller; and Jeff Laudin, Manager of Investor Relations. 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 this call. The instructions for accessing a replay of this call are included in our press release which can be found on the Investor Relations page on our website. I would now like to turn the call over to our President and Chief Executive Officer, Steve Kaniewski.

Good morning, everyone, and thank you for joining us. I presume you have all read the press release and reviewed the earnings slide deck on our website. Before I begin my prepared remarks, I would like to take a moment to thank my predecessor Mogens Bay. Mogens was Chief Executive of Valmont for 24 years. Through many cycles in the business, Valmont performed well and experienced nearly 15% total shareholder return. He kept the Company focused on healthy return on invested capital and focused the business on markets, where we could participate with vigor. Mogens will remain as Executive Chairman of the Board, and on behalf of Valmont’s employees, shareholders, and stakeholders we thank you. With that, today I will provide an overview of fourth quarter and full-year 2017 results, and Mark will provide an overview of the financial results, followed by an outlook for 2018. Before we begin, I would like to remind everyone that we would be hosting an Investor Day for members of the Institutional Investment Community on Tuesday, March 6 in New York. Our Senior Leadership Team including segment presidents will provide an in-depth overview of the business and drivers, as well as growth strategy, outlook, and capital allocation plans. Live audio webcast and presentation of the event will be available on the Investor Relations page of our website. With that, I will begin with fourth quarter highlights. Revenue was $715 million, an increase of 6% over last year. We saw sales growth in our Utility, Irrigation, and Coatings businesses. Flat revenues in our Engineered Support Structures, and lower sales in the grinding media business, which is in the process of being divested. Operating income results were mixed. We had improved profitability in our Irrigation and Utility businesses and the Coatings business is rebounding nicely. The two biggest challenges we faced during the quarter were continued steel and zinc inflation, and a $3.4 million unfavorable swing and profitability in the grinding media business. Profitability in our Engineered Support Structures business was particularly impacted by steel costs rising faster than our ability to recover price in the market. During the fourth quarter, we changed our management reporting structure and accordingly our segment reporting structure to reflect the pending divestiture of the grinding media business and initiatives to lessen our dependence on the oil and gas end markets. Our Offshore Structures business will be more focused on the end markets for wind and utility structures. The business is now included in the Utility Support Structures segment. Access Systems is now being reported in the Engineered Support Structures segment. We see current and future opportunities to bring new products into markets served by this segment, such as architectural sunscreens and modular detention system. Moving to our 2017 full-year results. We are encouraged that the 9% revenue growth this year represented the first full-year of growth since 2013. While overall market trends improved over the past year, we were challenged with steady increases in steel and zinc costs, and our ability to quickly recover these costs in the market. I will now move to our fourth quarter segment highlights. Starting with the Engineered Support Structures segment, sales increased 2.4%. Favorable growth in our Highway Safety business in Australia was supported by ongoing government investments to improve road safety, and was a major contributor to the sales increase. Globally, lighting and traffic sales were mixed and challenged. In North America, a decline in non-residential construction reduced demand for commercial lighting. In Europe, sales were up slightly. Access Systems sales were similar to last year. Increased sales on architectural products produced by the Access System business offset continued muted demand in the mining and oil and gas industries. Wireless communication sales were flat in North America and down in China. Government efforts in China to reduce pollution through mandated industry shutdowns, disrupted our telecom business. A spike in steel costs could not be a pass along in price, which made us reluctant to bid aggressively for what work remains. Operating income for the segment was 6.5% of sales. Profitability was impacted by numerous steel cost increases throughout the quarter, which we were not always able to recover fully to price, particularly in highly competitive markets. In Utility Support Structures, sales increased 14% over last year, driven by continued strong North American demand and price recovery of increased steel costs. These markets continued to be well supported by investments in renewable energy sources and grid reliability. We are now seeing lead times extend to over 30 weeks, partly due to immediate demand for hurricane replacement structures. International sales were lower than last year as a result of a large project in Europe that did not repeat. Operating income was 11.7% of sales driven by increased volumes, improved productivity, and better SG&A leverage in the quarter. In the Coatings segment, sales increased 10%. North America revenue improved from higher internal demand and pricing actions to recover historically high zinc costs. In the Asia Pacific region, improved demand and continued market recovery lead to higher sales, particularly in Australia. Segments profitability improved to 17% of sales, largely from price recovery of higher zinc costs and favorable SG&A comparisons. In the Irrigation segment, revenues were 9.4% higher compared to last year, as we recognized another strong quarter of international growth aided by project demand. Sales in North America were comparable to last year, reflecting little change in end market drivers year-over-year. Operating income was 12.2% of sales. Pricing discipline and factory productivity with the additional volume during the quarter contributed to the higher profitability. I will now turn the call over to Mark.

Thank you, Steve, and good morning, everyone. Before discussing the fourth quarter results, I'd like to touch on the Q4 transition effects from the Tax Cuts and Jobs Act or TCJA. As a result, we recorded tax expense of $41.9 million or a $1.84 per diluted share this quarter consisting of first, $20.4 million of expense associated with remeasurement of net U.S. deferred tax assets, and a 21% federal rate as compared with the prior 35% rate. And secondly, $21.5 million of expense to taxes of unremitted earnings and foreign subsidiaries, including anticipated withholding taxes on foreign dividends. As previously disclosed, we estimate that the effects of TCJA will result in our global future tax rate to be around 25% taking into account the lower U.S. marginal rates net of the effects such as the elimination of the manufacturers’ deduction and limitations on deductibility of compensation. It’s important to note that 2017 Q4 adjustments and estimated future effects of the TCJA were based on the enacted law that are subject to IRS and Treasury Department final regulations. We will keep you updated during 2018 as these details become clear. My comments on the fourth quarter and total year revert to adjusted results, which are detailed in the Reg G disclosure at the end of the press release. Earnings per share for the quarter were $1.67, up 4% from $1.61 in 2016. As Steve mentioned earlier, we realigned our segments in the fourth quarter. The tables included in the press release and slide deck provided results for all periods in the new segment reporting format. The 6% sales increase over 2016 was mainly due to higher pricing in improved sales mix of 4% in part due to pricing actions in light of higher raw material costs and currency translation of about 2%. On a segment basis, sales increases were realized in the Utility Support Structures, Irrigation and Coatings segments with lower sales reported in grinding media in the other category. While in the aggregate, volumes were flat with 2016. Q4 2016 was 14 weeks in duration as opposed to 13 weeks in 2017. Operating margins decreased by 50 basis points compared to last year and mostly to rising raw material costs, including steel, zinc, and aluminum, which led to the increase in LIFO expense as well. Aside from the LIFO effects, the impacts of inflation were largely recovered through sales pricing actions and productivity improvements in our factories. Fourth quarter operating income was $63.7 million, comparable with last year. On a segment basis Utility Support Structures, Irrigation and Coatings, all reported improved operating profit, while Engineered Support Structures and grinding media reported unfavorable comparisons. Our tax rate for the quarter exclusive of the TCJA expense was 25.6%, a bit lower than last year due to some state income tax planning actions during the quarter and the positive effects from the stock option activity. On balance, the positive effect from a lower tax rate largely offset the LIFO effect that reduced operating margins. Turning to total year results, we realized 8.9% improvement in sales over 2016 about evenly split between sales price mix improvements and volume increases. We realized improved sales across all reportable segments and made headway as the year progressed and offsetting an inflationary raw material cost environment, the sales pricing actions and cost productivity. Operating income increased by 4% over 2016 in line with the volume growth in sales. Utility, Irrigation and Coatings, all improve their operating income over 2016 while the ESS in grinding media profitability lag last year. Turning to cash flows, total year operating cash flows were $145.7 million, compared with $219.2 million last year and capital spending was $55.3 million in fiscal 2017 as compared with $57.9 million in 2016. Free cash flow of $90.4 million this year was less than our goal of one times adjusted net earnings attributable to the following. First, increased working capital to support the sales growth, the increase in inventories included advance purchase of steel in the fourth quarter of 2017 to help protect margins in light of rising costs. Receivable balances were higher as well although turns for the year were modestly improved over 2016. Secondly, we either required 2018 pension plan contribution of $14 million in the fourth quarter of 2017 to realize certain cash tax benefits. Despite the free cash flow impact of the inventory purchase in the pension plan contribution, these actions will be beneficial to operations and cash flows going forward. Regarding other capital deployment activities, we did not repurchase any shares during the quarter under the current authorization, which does not have an expiration date. We have $132 million remaining under this authorization and will continue to be opportunistic in our share repurchase activity. Our return on invested capital for the year was 10.3%, which exceeded our 8.5% after tax cost of capital and our stated long-term financial goal of 10%. Let me now turn to our outlook for 2018, which is summarized on Slide 14 in the slide deck. We expect sales growth of 7% for the year. The increase in sales is related to pricing actions in light of raw material inflation, volume growth and about 2% related to foreign currency translation. The sales guidance excludes any impact from the divestiture of the grinding media business or any potential acquisitions. On a segment basis, we're expecting improved sales across all segments with the strongest outlooks in utility and the international side of irrigation. We expect growth in North America irrigation will continue to be muted in the short run by stable, but relatively low net farm income. Local economic growth as anticipated to drive improved sales in Coatings and ESS. With respect to operating income, we're looking for about a net 50 basis point improvement in operating margins. We expect to continue to see inflationary pressures in our key input commodities such as steel, zinc and aluminum and we plan to manage the impacts on operating income through a combination of sales price recovery, cost containment through strategic raw material purchases and productivity enhancements. Our outlook does not take into account effects from potential tariffs and quotas from the U.S. Department of Commerce under the Section 232, which was communicated this week in the press as far as reports to the President. We expect our tax rate for 2018 to be approximately 25%, as compared to a 28.1% rate in 2017, which excludes the 2017 transition expense associated with the TCJA. 2018 tax rate expectations are based on current tax laws and expected geographic sources of our pretax profits. We expect 2018 GAAP earnings per share to be approximately $7.70. Adjusted earnings per share is projected in approximately 8% per share, which excludes the costs of the restructuring actions mentioned earlier. Our guidance also does not include the effect of M&A activity or the associated sale of the grinding media business. We expect free cash flow of around one times net earnings and after tax return on invested capital to exceed 10%. Our balance sheet remains strong with manageable leverage and solid free-cash flow. Cash going into 2018 was $483 million most of which is outside the United States in our long-term interest bearing debt is $754 million. One of the outcomes of the tax law change is the improved mobility of cash. Potential foreign cash repatriation is being reviewed along with growth initiatives and other capital allocation considerations. We remain committed to maintaining in the investment grade credit rating and our cash priorities are unchanged. With that, I will now turn the call back over to Steve.

Thank you, Mark. Looking ahead to 2018, we expect to see positive sales and earnings growth during the year. As we called out in the press release, we have initiated the restructuring program in 2018. The program is a result of efforts to drive continued productivity improvements despite increases in volume, simplifying our operating structure and continued shared service efforts. While it may touch select sites across the company, the majority will be incurred in the global ESS segment as we continue to realign our business to meet the marketplace. We expect a positive result of these actions to build as the year progresses. Turning to the segments, our outlook in Engineered Support Structures has meant. We anticipate some global growth including markets in France, Australia and India. In North America uncertainty and an infrastructure bill, softening non-residential construction, and an inflationary raw material environment have muted our expectations. In response, we have stepped up our market growth initiatives and have been aggressive in announcing price increases designed to recover raw material inflation. In China, telecom demand in particular will remain challenge during the first half of the year. In Utility, we are seeing an increased momentum in the market related to ongoing investments in grid hardening and connecting renewable energy sources. Lead times are extending, reflecting increased demand and tightening capacity. We are also expecting non-traditional growth through new products and we will expand more on these opportunities at our Investor Day. Our Offshore Structures business is in the transition as we move to reduce our exposure to oil and gas investments. We view the Utility segment as being in a better position to define and develop growth opportunities in wind and around the utility structures for the European markets. In our Coatings business, we expect growth in line with general economic conditions and input cost inflation to be recovered by price increases and improve productivity. In North America, internal volumes are expected to grow faster than in 2017, resulting in a lower margin mix for the segment of reflecting improved profitability for the Company. International markets, particularly Australia have rebounded from earlier depressed levels. We expect volume to remain healthy and continue to see the benefits from earlier restructuring activities. Sales in Irrigation are expected to increase. End market drivers in North America remain muted, but we agree with most industry participants that the markets have trust. In January, we held our North American Irrigation Sales meeting for over 700 representatives from our dealer network attended. Of note, we heard from our dealers that while there is continued pressure on net farm income, there is also increasing concern over farm labor availability, which could assist both pivot and technology sales, simply put there are not enough bodies on the farm to perform the work associated with traditional flood and drip irrigation. We believe our industry leading technology solutions could encourage replacement and flood conversion purchases by growers, who would otherwise defer purchase decisions while awaiting an improved market environment. On the international side of the business, we expect strong growth by way of project opportunities in developing economies and continued growth in our core markets. This aligns with government's desire for food self-sufficiency and foreign sources of capital. Our new product development releases continued to do well. Specifically, our new ICON series of digital control panels have far exceeded internal estimates. To summarize our thoughts about the upcoming 2018 year, we are in the midst of a significant operations transformation, creating regional back office shared service centers, and combining plant operations across our ESS and Utility segments. We will detail this effort more during our Investor Day presentation. Our teams are energized by opportunities to expand our total addressable market through moving into market adjacencies, new product development, and taking our existing products into new geographies. We have a strong acquisition funnel in each operating segments that along with our focus on return on invested capital should allow us to deliver inorganic growth along with long-term shareholder value. We are committed to price leadership and we will remain disciplined as we expand our total available market and recover inflation of input costs. Lastly, the long-term drivers in infrastructure and agriculture remain strong and continue to provide runway for growth and increased profitability.

Thank you, Steve. Natalia, you may now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Brent Thielman with D. A. Davidson.

Hi, thank you. Good morning.

Good morning.

Hey Mark, that the free cash flow, obviously were lighter than we expected and what you tend to see in the fourth quarter. You talked about some of the factors there. Could we see some catch up here in the first half of 2018 or should sort of follow the typical seasonality you can see there?

No, I would say, we would Brent. In fourth quarter, we did have a bit of a spike in receivables, but that wasn't anything particularly unusual. I think it was just a timing as far as receipts. I think subsequent to the end of the year, we have seen a drop in receivables. So I would expect that to normalize as the years goes along.

Okay. And then on ESS, I guess you're offering what I would characterize as the less enthusiastic view of the non-res market in North America just compared to sort other companies we cover in that space. Can you just talk about maybe some of the challenges you see there, the slower growth, is it mostly on the commercial side or kind of a lack of follow through on the state and local side? Just kind of help us frame up the outlook there?

Yes, Brent, it's both of those factors. So the commercial side of the business has been softening from our perspective both the channel partners that we have in this space as well as our own direct sales. We tend to see that occurring. And then the DOT work that is out there is still pretty patchy as people wait to see there's constant rhetoric about every couple weeks about an infrastructure bill and every time they bring that up, people kind of just want to sit on their hands. So until a little more clarity develops around that I think we will still see markets kind of where they're at, which is not particularly robust. And then you have the cost inflation on top of that that some people will sit on the sidelines to see if that will abate to some degree.

Next question please, Natalia. End of Q&A

[Operator Instructions] There are no further questions. Are there any closing remarks?

No. Thank you. This concludes our call and we thank you for joining us today. This message will be available for playback on our website or by phone for the next week. We look forward to speaking to you again next quarter. Natalia will now read the forward-looking statements.

Included in this discussion, our forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on assumptions that management has made in light of experience in the industries in which Valmont operates, as well as management's perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. As you listen to and consider these comments, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties, some of which are beyond Valmont's control and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect in 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 materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in discussion is made as of the date of this discussion and the Company does not undertake to update any forward-looking statement. This concludes today's conference. You may now disconnect.