Valmont Industries, Inc. (VMI) Q1 2013 Earnings Report, Transcript and Summary

Good morning. My name is Jody, and I will be your conference operator today. At this time, I would like to welcome everyone to the Valmont Industries First Quarter 2013 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Jeff Laudin, Manager, Investor Relations. Please go ahead.

Thank you, Jody. Welcome to Valmont Industries' First Quarter 2013 Earnings Conference Call. With me today are Mogens Bay, Chairman and Chief Executive Officer; Richard Heyse, Executive 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 and Chief Executive Officer, Mogens Bay.

Good morning, everyone, and thank you for joining us. I trust that you have read the press release, so my commentary will focus on quarterly highlights and general trends in each of our businesses. The main drivers for our significantly-improved revenue and earnings were very strong sales growth in both the Utility Support Structures and Irrigation segments, and acquisition-driven sales growth. In addition to strong demand, we also saw margins in Utility and Irrigation improve. This improvement, combined with volume-driven fixed cost leverage led to significantly-increased operating margins in both businesses. Based on our current backlog and market activity, Utility sales and earnings should remain strong for the balance of the year. In addition, current levels of customer inquiries also support our positive outlook for next year and beyond. Utility orders shipped in the first quarter of 2013 were at improved pricing levels compared to the first quarter of last year. We believe the profitability of orders shipped in the first quarter is probably at the upper range of what can be expected currently. Operating margins will continue to fluctuate from quarter-to-quarter depending on projects shipped. The international utility markets were supported by increased sales in the Asia Pacific region and project demand. Our long-term focus in international utility markets is on increasing the acceptance of utility monopoles over traditional ladders towers. There are many places around the world where access to electricity cannot be taken for granted, so developing economies as well as developed economies will need more transmission infrastructure to support economic growth. We expect to be active participants in this very long-term opportunity. Our utility plants operated at high production and efficiency levels during the first quarter, and we continue to leverage our global capacity. We have a substantial amount of new capacity scheduled to come online over the next year in Tulsa, Oklahoma and Columbus, Nebraska. This additional capacity will help meet customer demand, maintain our high customer service levels in a growing market and leave some reserve for unplanned demand. These investments in capacity should support further growth in Valmont's Utility business in 2014 and beyond. Turning to the Irrigation segment, record backlogs at the end of last year led to the strength of first quarter sales. Supporting demand were high levels of farm income and the impact of last summer's drought in North America. We expect high levels of activity continuing through the second quarter. In the second half of the year, the size and conditions of the North American crop planted later this spring will drive expectations for farming in the fall and determine the outlook for the next selling season, which starts in the fall. In the Engineered Infrastructure Products segment, European and North American lighting and traffic product markets were constrained by weak public funding for infrastructure. However, we benefited from broad product line diversification within the segment. Demand from wireless communication customers, increased intercompany sales to Utility, as well as group activity levels in Webforge's Access Systems in the Asia Pacific region, supported results. As you know, we have been addressing cost and productivity in this segment to improve margins, in spite of the weak demand environment, particularly in the U.S. and Europe. We believe these efforts will support positive comparisons as the year progresses. We will continue looking for opportunities to further strengthen this business so it is appropriately positioned for the future. Coating sales rose primarily due to the impact of recent acquisitions. Demand fell in Australia in the beginning of the year, offset by increased internal demand in North America. We expect the performance of this business for the rest of the year will improve compared to the first quarter and revert to customary levels. As we have said in the past, our intent has been to divest of our Manganese businesses in South Africa acquired with the Delta Group a few years ago. During the quarter, we divested our minority interest in Manganese Metals Company, MMC. MMC was a nonconsolidated subsidiary and we realized $29 million in cash from the sale. We will continue to pursue the sale of our interest in Delta EMD. While there was a $1.5 million reduction in earnings in unconsolidated subsidiaries compared to last year from MMC, we realized a onetime tax benefit of $3.2 million as a consequence of the sale. There was no significant gain or loss on the sale. So the net effect of the MMC transaction for the quarter was a $0.06 earnings per share benefit. The 2 acquisitions, Pure Metal and Locker, added about $0.01 to earnings per share for the quarter. Turning to other financial measures, the tax rate for the quarter was lower at 31%, reflecting the onetime $3.2 million tax benefit related to the divestiture of the nonconsolidated subsidiary, MMC, that I just talked about. Our expectation is that long-term rates will be between 33% and 34%. The impact of currency translation on operating income this quarter was minimal. Inventories increased modestly compared to last year, mostly due to acquisitions. Depreciation and amortization for the quarter was $19.2 million and capital expenditures were $20.9 million. For the year 2013, we expect depreciation and amortization of about $75 million, and capital spending in excess of $100 million as we invest in capacity to support future business growth, which includes the Columbus and Tulsa Utility plants. Looking towards the remainder of 2013, we expect a continued strong performance in Utility. The Irrigation segment is on track to deliver a solid second quarter. Irrigation results in the second half of the year, as noted before, will be driven by summer growing conditions in the northern hemisphere, global commodity prices and the expectations of U.S. farm income. We expect our Coatings business to have improved operating margins for the balance of the year as the Australian market is picking up and the Canadian integration will be completed. In the Engineered Infrastructure Products segment, we expect positive profitability comparisons as a result of internal efforts to improve productivity as we realize additional sales. In summary, we believe that with a strong first quarter result, the continued strength in the Utility markets and the anticipated improvement in Engineered Infrastructure Products, it should be possible for us to exceed our February guidance, even if Irrigation results in the second half were to be below the 2012 record second quarter levels. And we will now take your questions.

[Operator Instructions] Your first question comes from the line of Nathan Jones from Stifel, Nicolaus. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Mogens, you talked before about maintaining the operating margins and I think last quarter, you did say that you thought 2013 would be higher than that, x the 2009 blip -- and I assume by this point, you know that the -- you're sold out for the year in terms of capacity. Based on your knowledge of the backlog and the mix of projects in it, is it possible for you to maintain the 19% margin level that you've achieved, on average, for the last quarter -- last 2 quarters? Or can you give us some guidance on where you expect margins to be for the year in that business?

Okay. As I've said before, I think margins can fluctuate from quarter-to-quarter depending on what kind of projects are going through and what price levels they were taken at. And as I mentioned, I don't think we should expect to be at 19% plus for the year. But previously, I've said I would expect mid-teen operating income margins through the cycle. And I would say that for this year, I would expect also on average, to deliver somewhere halfway between the 15% and the 20%. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And can you give me what your quarterly revenue capacity is in that business?

Well, I would say that last year, I think our total sales in that business was about $873 million. And I've told you that we add about $100 million a year in capacity. So round numbers, I would say, about 1/4 of $1 billion a quarter.

Our next question comes from the line of Julian Mitchell from Credit Suisse. Charles Clarke - Crédit Suisse AG, Research Division: It's Charlie for Julian. Just a question, continued comments about strength in Utility. Just a question, sequentially. It seems like you guys are operating at full capacity. Pricing got better sequentially but revenue's down a little bit, profit down a little bit. Just curious, is there anything, kind of, moving parts? I just figured, kind of, with additional capacity that you should see kind of a steady uptick in the revenues and the profit quarter-to-quarter.

Well, I would say that year-over-year, we will see an uptick in revenue, not necessarily every quarter. One part is just capacity, one part is how are projects released, when are they manufactured as compared to when they are delivered. So it's not like everything that's produced in the first quarter, necessarily is delivered in the first quarter. You can have overlaps from quarter-to-quarter. So I would look at it more as an annualized basis and say that we would probably expect revenues to be up at least $100 million that we added in capacity.

Your next question comes from the line of Arnie Ursaner from CJS Securities.

I just have a clarification on Paragraph 2 in your press release regarding the onetime items in the quarter. You mentioned at the beginning a $0.12 earnings per share benefit from the tax -- the tax change and at the end of it, you had a $0.07 benefit accounting for the above items. I just want to make sure I'm understanding the impact of the tax benefit and the impact of the acquisitions.

Yes. So as I said in my prepared remarks, there was a $1.5 million reduction in earnings from MMC compared to last year's first quarter. There was a $3.2 million benefit in the tax rate, which is the $0.12. So the net of those 2 is a benefit of $0.06. And on top of that about $0.01 from the Locker and the Pure Metals Galvanizing acquisition. So that clarified it for you?

Absolutely. It was -- I didn't include the $1.5 million negative impact which is -- that explains it.

Which brings up the fact that if I look at last year's numbers, we probably had earnings of about $0.20 a share from MMC that we are not going to have this year. But our earnings guidance, both in February and what we're going to talk about today, is excluding those $0.20. In other words, overcoming that headwind.

Okay. My second short question is on the full year revenue contribution, we ought to expect -- in other words, I guess I was thinking that the acquisitions had contributed more than they did in the quarter. Just remind us on what the full year revenue expectation is and earnings impact from the acquisitions?

Well, I think we mentioned when we bought the Locker Group, that it's about $80 million, and it was acquired during the first quarter. And the galvanizers in Canada, 3 fairly small galvanizers, maybe about $30 million in total.

Okay. So even in the -- okay, that makes sense. I guess I'll try one more quick one. Margin in Coating declined, is that related to Pure Metal or are there some other factors causing some margin inflation?

Well, there are a number of factors in the first quarter. One is just integration efforts with Pure Metal. Two, a slow start in Australia in the Coatings business this year, and we saw improvements in the month of March. So that's why we are more optimistic about where -- profitability levels in this segment going forward. And thirdly, we had some operational issues in North America, where we had a kettle failure in the last galvanizing plant that we had to work around.

What do you think your margin will be for the year?

Well, I would guess about 20%.

Your next question comes from the line of Brian Drab from William Blair. Brian Drab - William Blair & Company L.L.C., Research Division: Arnie asked my key questions here, so I'm going to my tier 2 questions. But -- looking at the other segment down year-over-year in revenue, can you talk about some of the more significant moving parts in that segment?

We had down revenue in the Donhad subsidiary in Australia, but fairly stable earnings on down revenue. And we had a slight down in revenue in the tubing business in North America, which is I guess, more seasonal. Brian Drab - William Blair & Company L.L.C., Research Division: Okay. So that's related -- the Donhad business is obviously related to the mining market and some slowdown in that market?

It could be. But I was pleased to see that on down revenue, they hang on to their profitability levels. Brian Drab - William Blair & Company L.L.C., Research Division: Okay. And then, the Locker Group acquisition, is this a company that was a partner of your Webforge business? Or can you talk a little bit about the background there?

No. It was an independent company that operated in some of the same markets and some adjacent markets in Australia. They also have a small plant in China and a plant in India. So we just expanded our access system footprint and product line in the Asia Pacific region. Brian Drab - William Blair & Company L.L.C., Research Division: Okay. And then, between the Locker Group and Webforge, do you have a pretty significant share of that industrial access now in that region?

Yes.

And the next question comes from the line of David Rose from Wedbush Capital.

I had a couple of follow-up questions. I'm hoping to get a little bit more granularity in the operational hiccups because everything else looks great, and it looks like it could even be better if I can understand the galvanizing plant failure and what that means on a quarterly basis, what you have to do to fix it? And then, if we can discuss the tubular constraint. As I understand it, you delivered -- you supply the Irrigation market with that, so is there excess capacity or additional capacity you have to add for the tubular business?

No. The tubing business, they do serve the agricultural markets, but they serve a number of industrial markets. And it just had a first quarter that was slightly below the first quarter of last year. This is not a business that grows a lot. It's a high quality of earnings business but it's not a high-growth business. And from quarter-to-quarter, you can see revenue move around. We don't have capacity constraints in that business.

Okay, that helps. And then, on the kettle failure, can you discuss where you are in terms of that being fixed and what that means going forward?

Yes. I think that the replacement kettle will be up either this month or next month, up and operating again. And it was in Tulsa, Oklahoma where we have 2 plants, so we were able to move capacity to some of the neighboring galvanizers we have, so we didn't affect customer service levels. But a kettle failure is not an inexpensive endeavor.

So does that imply by Q3, we should see normalized corrosion margins?

I would expect significantly improved margins already in Q2.

Your next question comes from the line of Jon Braatz from Kansas City Capital.

A couple of questions. What kind of benefit are you seeing on the raw material front? I know zinc has come down and steel doesn't seem to be going up in price. Can you talk a little bit about the raw material?

Well, I think the raw materials situation is actually quite stable. Steel costs -- steel costs have not moved very much. We don't expect it to move very much. And as I've always said, we don't mind steel moving one direction or another, as long as they don't do it too fast. But we see a pretty stable environment right now, both in North America and around the world. Zinc has been moving a little bit. Lately it's down a little bit, but it was up a few months ago. Energy prices have been moving up a little bit, which could put a little pressure on profitability in the Coatings business, natural gas in particular. But all in all, we have a pretty stable environment in our input costs.

Okay. Second question, in the Utility business, you mentioned that you're seeing good order levels and 2014 certainly looks to be reasonably strong. Are you -- can you see business beyond 2014, into '15 and '16? Are you seeing a quarter or an activity flow for that -- for those years? And then, secondly, are there any additional -- what can you tell us about your competitors in terms of expansion plans? Are they adding capacity, too, in the utility area?

Well, let me start with your last question. Well, clearly, when you have a market that is this strong, we're not the only one adding capacity. I think we were early in adding capacity over the last number of years when we saw this market strengthening. So therefore, we carved out a pretty significant market share, and our challenge is to hang on to that. But competitors in this market will also add capacity. I've heard that Thomas & Betts, which is now part of ABB, is adding some capacity and I would be surprised if they didn't and I would be surprised if other competitors didn't. On your first question, looking out further, well, whereas it is the business that has the best visibility to actual backlog, we don't have backlog going into 2015. But we are aware of the projects that are on the drawing boards from the major utilities, and we see great activity levels in '14 and great activity levels on projects with what we can see so far in '15.

Your next question comes from the line of Schon Williams from BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: I just want to maybe address Irrigation margins here. I mean, I think we talked last quarter about 20% kind of being the top end of your expectations for operating margins and clearly blew through that this quarter. And where should we think about either incremental margins for Irrigation? Or just on an absolute basis, where can we go from here? Should incremental margins be accelerating from here as you leverage some of that fixed cost infrastructure?

Well, I would say that we have probably seen -- or we are seeing profitability levels in this business that we haven't seen before right now, which is a result of very busy plants, good leverage and an okay pricing environment. So I think we'll see some of the same in the second quarter because we have a strong second quarter. Depending on what's going to happen in the second half, margins will reflect those activity levels. I mean, this is a business that leveraged very well going up and it will deleverage going down because we don't add a lot of SG&A and other costs on the way up. And so there isn't that much to take out when business softens. And as I talked about our guidance for the rest of the year, we don't know what the second half of the year is going to bring us in the Irrigation business. So all we can do is to model, not forecast, but model a scenario of a decline in earnings in the second half of this year compared to the record level second half of last year. And we think it's prudent to model it that way because commodity prices have softened and much of the conditions are better than they were a year ago. And despite that, we are confident in the guidance we gave you in the middle of February. And adding to that, the outperformance in the first quarter. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And then, just directionally, I mean Q2, you talked about Q2 potentially or almost a certainty at this point, being better than in Q1 on the Irrigation just in terms of volume. So directionally, you would expect margins to improve off of that 22% that you did in Q1?

I didn't say that. What I said was, we're going to have a strong second quarter. And since we were having a very strong first quarter, basically operating at full capacity, I would be pleased if the second quarter looks a lot like the first quarter. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. That's helpful. And then, if I could sneak one more in here. The unallocated corporate expenses, $19.5 million, up pretty significantly year-over-year even though the fact, last year, I think you had a bit of a -- there was a stamp tax and some other kind of a onetime-ish items in there. I mean, can you tell me a little bit about what's driving that number? Is it comp, is it something else?

I can, but Mark Jaksich can do a better job, so I'll turn it over to him.

Okay. A goodly share of that is incentives, and if you recall, a lot of our long-term -- our long-term incentives are driven off of share price. So the share price was substantially higher than it was this time last year, at least, through the first quarter. And so therefore, that's accounted for some larger incentive accruals. And as time goes on, we'll see how all that plays out. That's probably the largest piece of that. The other piece of it is, is that we do have some additional overhead expenses in corporate to support the business and so forth. And I wouldn't say that, that's particularly substantial, in any case, but just the whole notion of making sure that we have the right resources on hand to support the businesses for growth.

Your next question comes from the line of Brent Thielman from D.A. Davidson. Brent Thielman - D.A. Davidson & Co., Research Division: Mogens, can you comment on the international portion of your Utility business, particularly what the current pipeline looks like?

Yes, I can. It's a very insignificant portion of our Utility business. Less than 10%, I'd say closer to 5% for the year. Now in this quarter, it was a little larger than that because we had a couple of projects and we had good activity, particularly in Australia. So I would say that in -- the long-term opportunity, and I'm talking really long-term for increasing our international Utility business, is strong for all the macro drivers that I've talked about. But short term, this year, next year, the big engine is going to continue to be North America. Brent Thielman - D.A. Davidson & Co., Research Division: And that was the second part of my question. Can you talk a little bit more about what you might be targeting or at least thinking about in terms of your mix of capacity in North America and international over the longer term? Because it does seem like it's a pretty significant opportunity and it should support further growth.

Well, I think we already have good capacity in place internationally. Maybe it's used currently more for high-mast lighting. But we have plants that can make large poles, utility-type poles. In China, 3 plants. And we have the plant in India that we opened last year. We also have large pole capacity in our plant in France, and up to certain extents in our Morocco facilities. So I think on the international side, we are not going to be faced with capacity requirements in the short term, and I'd say over the next several years. We'll be able to handle that out of the current footprint. Brent Thielman - D.A. Davidson & Co., Research Division: And so it's more of just the conversion to the monopole, is that what you're saying?

Yes. Brent Thielman - D.A. Davidson & Co., Research Division: Okay. And Mogens, my second question is -- and I think I know how you're going to answer but I'll ask anyway. If you look at the multiples your stock is trading today, relative to the earnings your guidance implies for this year and then you kind of couple that with your general confidence in some of these longer-term themes in infrastructure and Irrigation, can you just update us on your current view of share repurchases as a potential avenue for capital deployment?

Well, first of all on your comments on the current share price in relationship to our earnings guidance, I was surprised to see the downdraft over the last few weeks, which was probably a result, to a great extent, of the softening in commodity prices. And I think the message that's important to take from our business is that whereas the Irrigation business is our original business -- it's a very important part of our business, we love the business, it's the business that probably has the best real long-term growth opportunities of all our businesses -- it's not our only business. We had 2 segments that this year, probably, will be about $1 billion. One is operating very well, the other is improving very well. And so I think that the fact that we can model a down percent [ph] in the Irrigation business and still show significant growth this year, is a testament to the benefit of our geographic and product line diversification. And we have seen that as you go through our history. You've seen our earnings and EBIT numbers continue to grow. But when you look below them, year from year, they don't come from the same businesses, but we have just been fortunate that the mix of those businesses has allowed us to continue to do that. Share repurchase, I would say, that we haven't done share repurchase for a long time. We sit on quite a bit of cash. We have great debt capacity. We look at acquisitions, we don't have anything that's hot right now, but we have lots of opportunities we are looking at. Our preference will be to use our cash to grow organically and to acquire in companies that would be good fit with us. If over time, we cannot find good use for the capital we require, we have an obligation to give it back to the shareholders either in the form of dividend or in the form of share repurchase. But it's not something that we are contemplating right now.

[Operator Instructions] Your next question comes from the line of Arnie Ursaner from CJS Securities.

So Mark, a quick follow-up. What are you - what's your view for corporate expense for the balance of the year, please?

Well, it depends a lot on the stock price and how that affects incentives and such. But I think historically, we told you it would be $12.5 million to $13.5 million per quarter. We're probably on the upper edge of that right now, I would say. But that's taking into account incentives and incentives of target and excluding nonrecurring-type items and other things that may get offset otherwise in the financial statements like it's for a compensation plan. So I'd say, base spending is probably at the upper edge of that, maybe a shade higher, depending on what other things we have that aren't anticipated at this time.

Okay. And then, on the intersegment sales, you had a pretty sizable jump. And I know in the past, what you have done when you have tremendous demand in Utility is move some of that into the EIP segment. Can you comment on what the -- first of all, did that in fact occur and was that a key part of intersegment? What was the impact on the EIP margin? How should we think about the EIP margin for the balance of the year or for the year?

Okay. Arnie, this is Mark again. That's true, most of that increase in the intersegment sales was additional sales that came out of EIP for the benefit of Utility. It did contribute to the improvement in the EIP segment, although there was some operational improvements through the system as well that contributed to it. So I don't think I would say that all of that improvement came out of Utility, but a share of it did. It's a little hard to isolate for sure how much, but it did contribute to that.

But in the past when you have had intersegment in that, you've accrued it at a lower margin. Am I incorrect in that assumption?

Inside the United States, that's true. But when you cross borders, like from China and so forth, those have to be at arm's length. And so in that particular case, the margins on those are a little bit higher. So -- but in any case, it's comparable to what our folks in the -- in Utility could acquire that product for themselves inside the States.

Okay. And EIP margin expectation for the year now that we're entering a seasonally positive trend and with the cost reduction efforts you've made?

I would say that -- this is Mogens. I would say that I stated in the past that I don't think we can get to double-digit margins without more help from the marketplace. But I think we can get close. And I would expect that second, third and fourth quarter would bring us much closer to that double-digit mark than we're seeing in the first quarter.

Okay. Final question for me is in China. I know you have made major investments over the years. And China Mobile announced a dramatic ramp in their 4G base station installations. China Unicom announced a $1.6 billion investments for 4G network. I'm a little surprised you're not seeing a pickup in demand in China for wireless communication poles.

Well, I was just in China last week. And I would say that wireless communication, we have been the dominant player early on in the introduction of monopoles into wireless communication. We have a lot of Chinese competitors now. It is still an important part of our business in China. But the China business is a tough business. It's not a high margin business. And I would say that there are lots of local competitors that are much more price aggressive than we like to be in that business. So we are a little selective as to the kind of businesses to take. The market is probably there. The question is, to what extent can we participate at profitability levels we'd be happy with.

Okay. Again, if I can make -- throw 1 more out, people question, on the Irrigation, your market shares internationally. Do you want to speak to that, please?

I think the international markets are very fragmented. It's a big world out there, I think we are going to see lots of growth opportunities. Over the last couple of years, I think the industry has seen more growth in North America than internationally. But I would say that international, it's a lot of project business and project businesses can throw numbers around quarter-to-quarter. But bottom line, this is a business that we pioneered 60 years ago. We've been the industry leader ever since. I have no intention of not continuing in that position. So whatever it takes for us to retain that position, we will.

Your next question comes from the line of Nathan Jones from Stifel, Nicolaus. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Could you quantify the impact on earnings in the quarter from the kettle failure, and any integration costs around the acquisition?

Yes, but let me put it in general and say all the things that affected Coatings' profitability, which is Australia's slow startup, the integration in Canada and the kettle failure, probably dropped operating income margins 3 points or 4 points. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: And on the corporate expense, do you expect that to go back to $13.5 million, roughly speaking, in the second quarter? Or will there be some increased corporate in the second quarter?

This is Mark again. When we speak of those ranges of corporate spending, that is taking into account incentives at target. And so anything that's above target, including things that affect the stock price, is going to cause an increase in the overall corporate spending. In addition to that, there are also -- if there are movements in our deferred compensation plan assets, those will be offset by liabilities increased for the same item, which also goes through corporate expense. So when you look at those particular items, it's not the actual spending itself, it would be the base level of spending at targets and excluding items that would be considered to be more or less one-offs. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Would that mean that at the moment, do you guys -- I mean, you're having great quarters, quarter after quarter, that you are operating above target at the moment and therefore, we should expect to see elevated corporate expense?

Yes. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And Mogens, one last question. Your implied guidance was about 10.25. You said now you expect to be able to beat that even if Irrigation's down. Are you prepared to quantify by how much you think you can beat it?

Well, Well, Irrigation is a big question mark in the second half. So the question is how much could it be down or could it not be down at all? But I think I mentioned earlier that our outperform in the first quarter, I'd be comfortable adding to the guidance we gave you in February.

[Operator Instructions] Your next question comes the line of Schon Williams from BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Just a quick follow-up on Utility. Can you just remind me, what's the exact timing of when some of the new facilities are coming online within Utility? And is it possible that we may see 1 or 2 quarters where we see that operating margins in that business actually dip as those facilities come online, as you have kind of large fixed costs come online with -- and then, maybe take some time to actually ramp up the volumes in those facilities? I'm just wondering if we should be building in a slight dip somewhere coming down the line?

No, I don't think the startup of the facility will necessarily result in a dip that you'd be able to measure in the overall scheme of $1 billion business. I think that we're going to see a slow startup in Columbus, Nebraska and it will only really be online by the end of the year. We may start the startup in the Tulsa, Oklahoma plant during the third and fourth quarter, but the real impact from a capacity standpoint, will be next year. So getting back to your questions on what does that mean for margins, I don't think it will mean a lot. But I would say that from quarter-to-quarter, you're going to see the margins move around in the span, probably, from 15% to 19%.

At this time, I will now turn the call back over to Mr. Jeff Laudin for closing comments.

Thank you, Jody. 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, Jody will read our forward-looking statement.