Good morning. My name is Rachel and I will be your conference operator today. At this time, I would like to welcome everyone to the Valmont Industries Third Quarter Earnings Conference 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, Mr. Laudin, you may begin your conference.

Thank you, Rachel. Welcome to the Valmont Industries third quarter 2008 earnings conference call. With me today are Mogens Bay, Chairman and Chief Executive Officer; Terry McClain, Senior Vice President and Chief Financial Officer and Mark Jaksich, Vice President and Corporate Controller. Before we begin, please note this discussion is subject to our disclosure on forward-looking statements which applies to today's talk and will be read in full at the end of the call. The instructions for accessing a replay of the call can be found in our press release. I would now like to turn the floor over to our Chairman, Mogens Bay.

Thank you, Jeff, and good morning everybody and thank you for joining us. Let me begin with third quarter highlights. First, sales were at record third quarter levels, increasing 33% with each segment achieving third quarter sales records. Second, operating income increased 64% and was 12.5% of sales. Third, net earnings increased 43%. Fourth, the company's backlog is at record levels. Before I review the results by segment, I'd like to make a few general comments about the current credit tightness and how it might impact Valmont. We'll start with our Engineered Support Structures segment. A large part of the North American business consists of highway projects. These projects are funded primarily through the highway bill at the federal level with secondary [ph] funding on the state level. The source of these funds is a combination of state and federal gasoline taxes. While some states may currently face budgetary issues, historically, highway spending continues to be funded because of the crucial need to maintain and upgrade highway infrastructure. Another benefit of highway funding has been to preserve the many jobs that infrastructure construction supports at the local level. In the utility business, utilities have historically had very good credit rating and ready access to credit. They can recover their investments through usage rights. A solid transmission grid is a must to support economic activity worldwide. We expect continued strong levels of utility investment in transmission and distribution infrastructure. In the irrigation business, in North America, the balance sheets of farmers are generally strong. Land values have increased and the farmer is not highly leveraged. To buy our equipment, most farmers borrow from their local banks or finance company specializing in lending for irrigation equipment. In conversations with ag bankers, they indicate that they would actually rather make loans for irrigation…

[Operator Instructions]. Our first question comes from Arnie Ursaner. Your line is open.

Hi, good morning. I guess my first question relates to the transmission and distribution piece of your business. Can you give us a little better feel for the types of orders you're seeing, the types of dialogue you're having and how much of your '09 expectations do you hope to have in place before you begin Europe '09 [ph]?

Let me start with conversations. I have actually this week met with two companies that are involved either on the engineering sides of transmission lines on the construction side. And both companies confirmed our view that the investments in the grids in North America will continue to be very strong. Our backlog is at record high and I would guess that when we enter 2009, I would guess that about half the year will be in the backlog.

And my second question relates generally to irrigation and your view going into the selling season in January and February and March. You mentioned obviously some detailed comments regarding input costs not coming down yet. Can you clarify a little bit about what they are? Because things like potash and some other things have come down a fair amount. And at what price levels do you except farmers to be impacted in their orders?

First of all, when I talk input cost, I talk input cost like fertilizers, which I don't think farmers have seen come down corresponding to what we've seen in commodity prices at the retail level. I think fuel cost will come down as we've seen prices at the gas pumps come down. And I don't think, if we see a slowdown short-term, it is no different from what we've in the past that there maybe an imbalance and farmers are little concern short-term they may postpone some of their purchases. I would expect that we will maybe see more of a compressed selling season then, because the farmers really don't need their equipment in place until planting next plan. And I think that if we see a slowdown, it has nothing to do with credit which is what we read about in the papers everyday is the main worldwide problem. I think it's just the farmers looking at commodity prices being reduced 20, 30% and just the emotional impact that has on short-term buying decisions.

Just one final question. I know you won't give any formal views about next year till probably February. But I'm also aware you've conducted a pretty extensive internal review of all of your business, looking out over five years. As we look out over the next few years, how much margin improvement do you believe you still have left in your business model?

How much what improvement?

Operating margin improvement you still think you can generate in your business module?

I can't answer that question because there are so many unknowns out there right now. But I can tell you that we are not slowing down in our efforts to continue to squeeze more quality out of our business as we have done in the past. But clearly, we are not going to see the speed of improvements going forward like we saw over the last five years.

Thank you very much.

Thank you, Arnie.

Thank you. Our next question comes from Ned Borland. Your line is open.

Good morning. First, a question on steel costs. Steel coming off about 25% in September. When do you expect to see some relief from steel, I mean given your backlogs are out and so forth?

Well, first of all, you have seen some spot prices come down. In general, you are not seeing steel price decreases like you're talking about. And... but if you look at the general economic slowdown, it should provide some opportunities for better steel costs. I would, though, also say that the consolidation in the steel industry over the last number of years have made them better prepared to face a slowdown in demand. In the past, there was a lot of dumping of steel that took place. Recently, we have seen if there is a slowdown in demand, they tend to take furnaces out for overhaul and maintenance et cetera, et cetera. But in general, I think we're going to see the steel industry give back some of the price increases that we saw last year. Exactly to the extent that will happen and the timing of it is still to be seen.

Okay. And then on irrigation, I know over the summer, your lead times at the dealers were way out there. Given we've just come through [ph] a sort of slow seasonal quarter, where do those lead times stand now relative to say last year or a couple of years ago?

They are back to normal.

Okay. And then the comments on the wind farms, I seem to remember that you guys were working on a wind structure, but you kind of shelved it. I mean is that what we are talking about now of these structures to --

No, that's not what we are talking about. We're talking about the effects wind farms will have on our transmission, distribution and substation business. Because if you take Texas as an example, the wind doesn't blow where the consumption takes place for electricity. So they will build wind farms in Western Texas and have to transport the electricity to Eastern Texas and to other parts of the country. So each time you put in a wind farm, you have a major investment also in transmission and distribution lines to get it hooked up with the main grid.

Okay, good. I just wanted to clarify that. And then do you have an organic sales growth number for the utility segment?

Yes, but we are not sharing it.

Okay. That's all I got. Thanks.

Thank you. Our next question comes from Jon Braatz. Your line is open sir.

Good morning, Mogens.

Good morning Jon.

Excuse me, a couple of question, would you go back and look at irrigation revenues in the third quarter as a percent of second quarter irrigation revenues? Over the past seven years it's averaged about 74% of second quarter revenues. This year it's about a 100% almost. Is that mostly related to the international side of the business? Or was the North American side of the business exceptionally strong? And that might give you a little bit applause and things that maybe you borrowed some tales form fourth quarter or may for next season? How do you look at that... how do you look at the strength of the third quarter revenues?

We saw strengths both internationally and in North America. And North American sales in the third quarter were exceptionally strong. I don't think it was pulling forward form the fourth quarter. It was more probably a result of the long lead times in the second quarter and therefore a late selling season.

Okay, okay alright, okay. Secondly when you look at the... we're in sort of in a deflationary environment, costs are coming down hopefully they have come downs still few months on. Will, you have to... when you look at 2009 begin the pass some of those costs savings onto your customers' this year you passed them on considerably and that enhanced your revenue growth. How do you look at sort of the deflationary environment in the raw material area in terms of an impact on your selling prices going forward into 2009?

Well if you have deflation in our input costs, yes, we will eventually have to give some of that back to the marketplace. Hopefully, it won't affect earnings but it certainly will reflect revenue.

Okay. When you look at 2008's revenue forecasts of about 25% something like that, how much of it might have been priced versus foreign exchange versus volume?

Well I would guess that inflation maybe half of it and the rest the combination of volume and acquisitions.

Okay, okay. All right, Mogens, thank you very much.

Thank you, Jon.

Thank you. [Operator Instructions]. Our next question comes from Brent Thielman. Your line is open.

Good morning and congratulation on the quarter.

Thank you Brent.

Just want to dig into the ESS [ph] margins a little bit I know you mentioned some expenses that they contributed to the lower margins year-over-year there. Was there any impact I guess related to the higher skill cost as well in those margin?

Yes there was. Because some of the backlog we have is funded by federal funds, quite a bit. And you cannot go back and renegotiate or have adjustments in your price depending on input cost. So, yes, we had a significant impact on the fact that input cost rose very rapidly and we had to fulfill a backlog at then resulting compressed margins.

And I guess as you see some relief as recently reasons to your guidance [ph] going forward. I mean do you expect pricing to catch up at this point, in terms I mean do you expect to see more margin impression here?

No, we will expect to get some relief and see margin expansions.

Okay, okay. And then on the DUS [ph] segment, I just want to be clear did you see any unit volume growth in the quarter?

In what segment?

In the ESS that segment. Utility spread really, sorry.

Utility, I think that most of our growth came from price and from the acquisition of PennSummit.

Okay, okay. And --

But we did additional capacity and that's where we got with the acquisition of PennSummit.

Right. And then on codlings I know you mentioned some pricing pressures there have you seen those pressure increase or I guess did you see in cost pull back quiet a bit? Any sense on pricing going forward here?

It's... we have seen sink reduce quiet a bit and we've not had to adjust pricing to that extends. Going forward, I would guess that it's not to realistic to expect operating income rates to continue at in the mid-20s.

Right, okay. Okay, thanks very much guys. Congratulations again.

Thanks Brent.

Thank you. Our next question comes from James Bank. Your line is open.

Hi good morning.

Good morning James.

I was wondering if I could just dig into that irrigation question little bit deeper. Can I assume then that your irrigation sales would be up in the fourth quarter since I guess you necessarily didn't pull anything from the fourth quarter and didn't pull anything for maybe next year?

I don't necessarily think you can make that assumption because as I pointed out in the talk, I think there maybe a little hesitation in the marketplace right now that is types of the lower commodity prices as supposed to sales moving from quarter-to-quarter in total for the irrigation segment. I expect revenue to be up in this quarter compared to the fourth quarter last year.

Okay, fair enough. And the inefficiencies in one of the North American plants, is this sort of that same plants that had the promises to the fourth quarter of '06?

No, no.

Okay. It's a different one.

We had one plant, though kind of the wheels went off the track for a little while and we're getting that fixed, but it did have an impact.

Okay. Could you give more clarity on what went wrong and what's being done about it?

No.

So --

I mean we had production issues, productivity issues in the plant and we've made some changes and hopefully that will fix the issue.

Okay. Terrific. My other questions have been answered. Thank you very much.

Thank you, James.

Thank you. Our next question comes from Arnie Ursaner. Your line is open. Arnie, your line is open.

Hi. Can you give us a sense of the currency impact please in the quarter?

Hold on a second, I want to ask Mark.

Yes, Arnie, the impact on currency for the quarter was about $1.5 million on the operating income side and I think about $8 million to $10 million on the sales side, give or take. Most of that was in present [ph] and to a lesser extent Europe and China.

Thanks. And on steel inventories, we've been keeping an eye on your company for several years. Obviously, when the pieces were rising, it made sense to keep what I would call excess inventories of steel, particularly when there was uncertainty about supply. Given much greater availability and declining prices, should we... I guess two specific questions. One is what was the tonnage increase you had in steel? And two, how much inventory would you be comfortable liquidating in this current environment?

Well I think what we keep an eye on closely is the inventory turns. And they really haven't change very much. So the higher inventories is a reflection on higher revenues either through the current businesses and acquisitions. Now in rapidly rising steel environment and an environment where we could have had supply issues, yes, we tend to be a little more conservative to make sure we are covered. And if the market hits the other way, we are going to try and we always try and minimize inventories and there is no difference going forward.

How much was your volume... tonnage volume up, let's say, year-over-year?

Arnie, I don't know that we have that answer right now. I might be able to get it. I would say very slightly maybe in terms of tonnage volume if you just look at the pure tonnage.

Thanks very much.

Thank you. [Operator Instructions]. Our next question comes from Michael Coleman. Your line is open.

Good morning. Could you talk about, you've had significant margin improvement over the last couple of years from 7.5% or so, 4 to 500 basis points of margin improvement. You talked about unusual times. The environment is going to have an impact and when and where is going to be difficult to say. But if we do go through a down cycle in your end markets, could you talk on a broad level your ability to maintain the significant margin improvement you've made over the last couple of years?

It's probably difficult to give you a precise answer because it depends on the business unit. Some business units, if volume goes down, will delever significantly and some will not. It depends on what can you take out of cost in any given business unit. Let me use it, the Coatings business as an example. That delevers pretty rapidly because you can't take zinc out of the cattle... out of the kettle or lower the temperature. In other businesses, you can lower your cost environment as volume goes down. But I do not expect us to revert to the kind of operating performance we had five years ago.

No, I wasn't suggesting that. But I mean you could conceivably maintain a significant portion of what you've achieved over the last couple of years, is that --

I would... unless the world falls apart, I would agree with you.

Okay. And I think you were recently... you have some revolvers that you're renegotiating and so forth. Could you just update us on the status of that?

Yes.

Yes. We have substantially completed our revolving credit agreement. In fact, it will be completed this week, so we got that process started. The revolver will be $280 million revolver. That will be replacing about a $18 million term loan plus a $150 million revolver.

Okay, thank you very much.

Thank you. There are no further questions at this time.

Thank you, Rachel. This concludes our call and we thank you for joining us today. This message will be available for playback on the Internet or by phone for the next week [ph]. We look forward to speaking to you again next quarter. At this time, Rachel 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 industry in which Valmont operates, as well as management's perceptions as historical trends, current conditions, expected future developments and other factors believed to be appropriate under to the circumstances. As you listen to, and consider these comments, you should understand that these statements are not guarantees or performance or result. They have involved risks, uncertainties, some of which are beyond Valmont's control and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont's actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include among other things, risk factors described from time-to-time in Valmont's reports to the Securities and Exchange Commission as well as future economic and market circumstances, industry conditions, company's performance and financial results, operating efficiency, available end-price of raw materiel, available end-market acceptance have new products, product pricing, domestic and international competitive environment and action and policy changes of domestic and foreign governments. The company cautions that any forward-looking statement included in this 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 call. You may now disconnect.