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. First Quarter Earnings Call. [Operator Instructions] I would now like to turn today's conference over to Mr. Jeff Laudin, Manager-Investor Relations. Please go ahead, sir.

Thank you, Kayla. Welcome to the Valmont Industries First Quarter 2017 Earnings Conference Call. With me today are Mogens Bay, Chairman and Chief Executive Officer; Steve Kaniewski, President and Chief Operating Officer; Mark Jaksich, Executive Vice President and Chief Financial Officer; and Tim Francis, Vice President and Corporate Controller. Before we begin, please note that 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, which is located in the Media Room link on our website. 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 you have all read the press release and reviewed the accompanying earnings slide deck. I would address first quarter highlights, then Steve will provide the update on segment performance and Mark will provide an overview of financial matters. With that let me turn to this period's highlights. Revenue in the first quarter increased nearly 7% to $637 million and made broad-based volume growth across all segments led by Utility Support Structures. Three of our five segments performed beyond our expectations, and two not quite up to our expectation. Our Utility Support Structure segment had a strong quarter with significant revenue growth and improvement in quality of earnings. I would caution however against extrapolating first quarter's 13% operating income as a percentage of sales. Projects do move from one quarter to another, and that significantly affect quarterly performance. Overall however, the quality of our Utility Support Structure business is clearly improving. The Irrigation segment showed good revenue growth and continued to live a strong quality of earnings despite higher input costs. This segment did offset the higher input cost through operational excellence. Looking forward, we are still faced with a very difficult agricultural economic environment with no indication of significant improvement in the short term. The Energy and Mining segment delivered significant improvement over last year's results but the quality of earnings in this segment is still very much affected by the weak energy and mining industries worldwide. Both the Engineered Support Structures segment and the Coatings segment were faced with rapidly increasing raw material cost, steel and zinc respectively. I always say that I'm not too concerned about the actual cost for steel, as long as it gets to where it's going in an orderly fashion. This last quarter saw rapid increases which makes it difficult to recover those at the marketplace in a very short term. Both segments operate in lots and geographically diverse markets and should continue to see good growth opportunities. On the whole, the team executed well in the first quarter and we are encouraged by strength and demand in several of our end markets. I will now turn the call over to Steve who will review the segment performance.

Thank you, Mogens and good morning everyone. During the quarter, steel and zinc costs rose quickly and stayed firm longer than expected but recently have shown signs of moderating. We have exercised our market leadership and expect to recover cost increases through price. However in some businesses, price recovery can lag or take longer than others. Over time, Valmont's value proposition of engineering, quality, lead times and product debt allows us to recoup changes in raw materials. In the Engineered Support Structures segment, sales grew 2%. Wireless communication, product demand remains strong driven by provider imperatives to improve coverage. China's rollout of 4G and Australia's national network expansion supports our international results. In North America, commercial lighting markets remain firm. We have yet to see a measurable pickup in demand from the highway bill but do expect to see improvement in the second half of the year. In EMEA sales fell mostly due to lower export sales to the Middle East. There has been no change in end market drivers in Europe, as infrastructure spending remains muted across the region. Our strategy to offset this weakness is to grow our markets in the Middle East where infrastructure spending is more robust. In Utility Support Structures, sales improved 21%, a continuation of the market growth have started last year. Volume increases, good mix, and minimal movement and utility project schedules supported growth. The markets remain robust and are being driven by reliability requirements and increase renewable project divisions being added to the grid. We believe these will be sustainable drivers throughout the year. Operating income for the segment was 13% of sales for the quarter, a highest quarterly performance since the first quarter of 2014 improving on price, volume and operational leverage. In the Coatings segment, sales rose with modest gains…

Thank you, Steve, and good morning everyone. First quarter reported earnings per share were $1.72 up 19% from $1.45 in 2016. Virtually all the improvement was due to increased earnings with negligible effect from shares outstanding. The effective currency translation or quarterly results was slightly positive but not significant. As mentioned in the previous comments, the vast majority of the sales increase over Q1 2016 was due to volume improvements. The largest share of the sales increase came from utilities support structures with sales gross growth also realized in irrigation and energy and mining. The increases in Engineered Support Structures and Coating sales were due to increase sales to other Valmont segments. This is a good example of how we leverage capabilities across geographies and segments to create a more effective global supply chain. Gross profit margins for the Company decreased by 130 basis points compared to last year, as steel and zinc cost rose during the quarter and were not yet fully recovered through productivity improvements and sales price increases. About half of this gross margins compression was due to like or counting effects and caused by the raw material inflation. In an effort of the right transparency, you will notice that we now breakup LIFO expense in the press release tables and this will provide better clarity for you. SG&A spending was comparable to 2016 and included $1.8 million into increase deferred compensation expense due to the required accounting for deferred compensation plan. This expense is offset in the income statement by an increase in gains and losses on investments. By holding SG&A relatively flat in relation to the sales increase, SG&A as a percent of sales improved by 80 basis points. First quarter operating income was $64.5 million roughly 3% higher over the same period in 2016.…

Thank you, Mark. The first quarter went well, with improved sales, operating income and net earnings. Our segment diversifications manifested with three segments performing well and two lagging pressured by raw materials. We are focused on end market demand and driving growth. Raw material price fluctuations will work back into price overtime. Our outlook for the year remains on track. We expect the improvement in most of our markets. We believe this plus executing on products and market growth strategies will more than offset challenges in those markets exposed to broader commodity cycles, like energy and mining and irrigation. Our regional economic challenges like Europe, accordingly we believe we are on track to deliver on our guidance for the year. At this time, I would like to turn it over to the operator to take your questions.

[Operator Instructions] Our first question comes from the line of Julian Mitchell from Credit Suisse.

Thanks, good morning. Just my first question would be I guess around the input cost impact. And just if you look at where steel and zinc prices are today, do you think that the LIFO swing in terms of the benefit to the cost in Q2 will be less than the 2.8 million swing you had in the first quarter.

Good morning Julian. This is Mark. Let me try to answer that question. The $2.8 million swing is really taking into consideration effect that we had a decrease in LIFO expense in the first quarter of last year we had slight increase in the second quarter. I think as we get into the second quarter, we had LIFO expense in the second quarter and so we will continue to have some LIFO effect on that but as the year goes on if prices retreat to some degree like we hope they will, and believe they will that will mitigate itself to some extent.

Understood, thank you. And then, my follow up would just be around balance sheet usage, you know, as you said, there was minimal, no buyback in Q1 not much embedded for the year as a whole, there is no debt due till 2020. So, what can you tell us about the M&A pipeline today and the attractiveness of deals and where multiples are?

Julian, this is Mogens. I would say that the activity level in the acquisition pipeline has increased. But as you know, predicting when an acquisition may happen is not easy as we never known if we get to an agreement on value and on other considerations. We stay very disciplined on not looking for EPS accretion but looking-forward terms on investment capital. But I would say overall, the activity level has stepped up.

Great, thank you.

Our next question comes from the line of Craig Bibb from CJS.

Good morning. Could you give us some more details on the 21% increase in revenue at USS, how much was price and volume, how much was margin structure?

Yes, good morning Craig. This is Steve. Almost all of the increase was related to volume and so that was just from end market pick up. All of our customers project activity all we’re spending upwards as compared to the same quarter last year.

Okay. And any large structure in there and what you see over the horizon?

I’m sorry what was that?

Any large structure in there, large projects.

In terms of the large projects we typically have one to two large projects that come through at any given time. There's no notable increase in large projects what we've been able to really adjust to and be much better from an efficiency perspective is the number of smaller projects that come through in the system basically by upgrades in IT, improvements in engineering capability. We've been able to now handle a lot of those projects no differently than we would with a large project.

Great. And in the press release you noticed that the order book was growing at ESS for lighting and traffic structures. Is that FAST Act or is that more non-resi construction?

It’s a combination of the two really it’s primarily commercial lighting has done very well and continues to grow the FAST Act of DOT again fairly moderate but nothing – that’s notable from what we’ve guided previously. We still expect really the second half of the year to see more increase in DOT the work.

Great, thanks a lot.

Our next question comes from the line of Nathan Jones from Stifel.

Good morning everyone. Just following up on the margin compression in ESS and coatings can you talk about what pricing actions you've taken so far what pricing actions you’re going to take in the second quarter and how we should expect to see the margin progress back up as you recover those increased costs?

Yes Nathan, this is Steve I’ll start with coatings, coatings as you know the zinc prices really stepped up particularly through the January and February timeframe. It’s tough to go out to the market right away when you see just a temporary spike we don't know if it is going to last once we see that it’s a sustainable increase we’ll go back to our markets and let them know what's coming and then affect the price increase. And we did do that through the first quarter you’ll start to see more of those affects as we now go through the rest of the year. In the Engineered Support Structures pricing as a general environment remains very competitive. And so there it’s really more of a price leadership position where we have to go and go back to the market both steel and zinc and talk to the customers, work with the customers overtime to see how this is having an effect on us in the pricing of our product. So that one tends to take a little bit longer and I would actually expect us to still have some compressions through the second quarter into that segment. And then working its way into the third and fourth quarter you know more moderate at that point.

You guys in the utility business took the step to increase pricing when demand was at a low point there are you intending to do the same kind of thinking in ESS and if that sacrifices and market share in the short-term that’s okay or how are you, how are you planning to look at that?

Yes we look at it much the same way we issued ourselves the market leader and as such we believe that we should get a fair price for services and the product we deliver. And so we look at that very strategically and by customer-by-customer to make sure that we don't suffer the one side of the business for the other. It’s a I think balancing act but I think we do a good job of it.

And I think this is Mogens adding that in the utility business it’s a very concentrated market in North America. In ESS you have plans all over the world and therefore by geography you have to decide how best to get the pricing up.

Okay. And then one follow-up on utility. You said late last year that you had started to see some pricing improvement you were talking about hey you know 21% increase in utility revenue being largely driven by volume. I would assume that that means pricing should be getting better or is expected to get maybe meaningfully better as we get fuller. Can you just talk about the pricing environment and what you're expecting for the rest of the year there?

Yes, it’s similar comment to ESS there’s still very competitive pricing out there particularly when a large projects will come up anybody would like to try and have good volume so the pricing is going to be very competitive. What we’re seeing is on balance improve because as with the volume increases a lot of the excess capacity that has been in the market and in 2015 and 2016 has been soaked up a little bit but there is still some excess out there. So again it will be selective we have pricing agreements with a number of a large customers so we won’t necessarily be moving on those so it’s more opportunistic than broad based.

Thanks very much.

Our next question comes from the line of Brian Drab from William Blair.

Good morning, thanks for taking my questions. Just quickly a couple of housekeeping questions was that $0.04 I'm estimating about a $0.04 gain on the investments in the quarter included in the previous guidance or how should we think about that?

Yes Brian, this is Mark. The $0.04 you’re referring to with respect to what now.

Your gain on investment in the quarter that you breaking out of the other items?

That's right because the deferred compensation matter is really as I said is offset by an increase in SG&A expense. The impact on the income statement is nil so it has no effect on earnings per share it just a geographical presentation matter.

Okay. So isn’t the gain though at different item than the deferred compensation the impact most.

The two separate but related items that the income statement offset each other.

Okay, got it. And then Mark is your expectation that working capital working would be a use of cash in the year or not a source of cash?

No I think yeah it depends a little bit on the amount of the sales growth because naturally sales increase everything else been equal receivables are going to be up to some degree but normally we do have a bit of an inventory build in the first quarter mostly related to our structures businesses it’s starting to move in to the heavier seasons of the second and third quarter. So normally the way our cash flows work is that first quarter typically isn’t that strong comparatively speaking. But as the year goes along with the cash flows typically improve over time. So that’s a basis for the new guidance.

The net working capital for the year though is it in your model use of cash or sources of cash for the full year?

Yes it would be a small use of cash.

Okay.

More or less in line with the amount of the sales increase we would expect to see over the course of the year.

Okay, thanks. And then just a couple quick questions on utility I think that in the last report you indicated utility should be up in the mid single digit range in 2017 have you said today yet – where we think we’ll be for the year given the strong performance in the first quarter it seems like maybe that could be I don’t know high single-digits or low double-digits for the year?

That was for the overall utility market that we said would be up about so when you look at all the customer base across the whole area we still believe that’s pretty solid and it really is based on our customers and whether projects move in or out as you know utility projects can be fairly volatile and they move from quarter-to-quarter and year-from-year. So, we’re fairly comfortable where we’re at right now.

Okay. And then just a question on the PyraMAX product it sounds like it’s gaining traction can you answer two questions on that product first of all what are – your margins on that product relative to the rest of the portfolio. I know you just said reached directionally and then what percent of the portfolio does PyraMAX account for today I guess it’s very small today but a couple years for now what it could be? Thanks.

Okay. So from a margin profile we don’t breakout individual products but let just say that it’s fairly comparable to the other product portfolio within the portfolio. And PyraMAX really is allowing us to grow to serve markets that we have out there particularly because it can replace lattice structures. So it’s been doing well we believe it will continue to do well. It’s not a complete replacement for lattice it is a product that within a lattice line allows the utility to really look at foundations, cost of construction at certain segments of the line and do those much more efficiently than they would be it another structure.

And no comment on what - how big this could be within the portfolio in a couple years I imagine you’re able to take some share from time…

We had operations for the product but nothing that we would disclose for how big we think is going to be a year or two or three from now onwards.

Okay, right. Thank you.

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

Good morning, everyone. Steve you mentioned that irrigation sales in Latin America were pretty strong I assume it maybe I shouldn’t assume it but soon as Brazil and Argentina and typically there's some government incentives of some sort. Do you expect those incentives to continue to be in place and maybe I'm using the wrong word incentive but do you think they will be there next year for the next growing season?

Yes in Brazil the financing scheme that set up there that’s now in the process of being rehash for the following year. We fully expect that that will be a go forward item – it’s the commodities, corn, soy and others are the one good source of foreign capital for Brazil and so even though the political environment maybe shaky they’re all pretty united in making sure that move forward. In Argentina there is not yet a natural financing program although there is now heavy talk about putting one in place similar to Brazil because they’ve seen that it’s been very effective in Brazil as well. So we expect like I said the Brazil ones to continue forward and other countries to potentially near it.

Okay. If Argentina would do that how substantial was that market opportunity?

Argentina is one of the bread-basket of the world and so it’s not been the best of economies for a number of reasons over the last decade or so. So we believe that if they did something like that it would have a meaningful improvement in the market for our products.

Jon this is Mogens let me add to just from a perspective if you look at South America, Brazil is the big market Argentina is a big opportunity but their government policies have not been to favorable towards agriculture until recently. So even though in Argentina we expect rapid growth and the percentage is not really moving the needle for a while.

Okay.

So Brazil is the big continue to be the biggest opportunity short-term in South America.

Okay. Elsewhere internationally were there any notable increases, decreases?

No it’s fairly broad based across all the markets.

Okay, all right. Thank you, Steve.

Our next question comes from the line of Brent Thielman from D. A. Davidson.

Thanks good morning. On utility have you seen any greater urgency from customers to start some of these larger jobs sooner than the timeline you discussed before I think was sort of late 2017, 2018?

Most of them there planning cycle tend to be long planning cycles permitting process take time regulatory approvals take time. So we don’t see anything that’s necessarily greater it just everything that was in the pipeline kind of moving through the pipeline.

Okay. And then kind of based on schedules, projects and conversations with customers. How would you characterize you level of visibility into next year at this point in that business I guess maybe relative to where you’ve been at this time over the last few years?

Yes we see out into future projects as they become into the planning cycle of our utilities that we service and for the most part we still see pretty good project activity nothing necessarily again by the large scale that you would have seen in 2013 that still fairly muted. But in terms of the ultimate drivers of reliability, bringing more solar and wind farms online but from a substation and transmission perspective at least right now those as well as some outside sources have confirmed that looks okay at this point.

Okay. And then any additional thoughts on the North American wireless business I know it’s what are many pieces in that segment but seems to be some pretty positive trends there?

Yes, last year it was definitely affected by the spectrum licensing auction and so most people sat on the sideline at least for the first part of the year actually probably well into the late part of the year. We see now pretty broad based everyone once again working on coverage, working on rollouts to increase technology. And so that’s been a fairly nice recovery within the telecom market as compared to last year.

Thank you.

Our next question comes from the line of Jose Garza from Gabelli.

Good morning, guys. I just had a question on the coatings business and do you expect that kind of dynamic that went on here in the first quarter to kind of continue throughout the year with lower external but higher intercompany?

No we have seen some of the custom work that we would normally have in the quarter expect to come back and get improve. The internal makes was just very heavily obviously the utility business but now we’re starting to see the custom fabrication market start to come back right. It’s still muted particularly in solar and the oil and gas parts of the business but from a general fabrication perspective it has improved slightly.

Okay. Do you expect volume increases on that throughout the course of the year?

Yes.

And on utility side I’m wondering if you could just give us more color on just kind of the lead time dynamics if you were to compare maybe from a quarter ago what’s going on there?

Lead times generally have moderated so they’re not increasing if you recall we talked about having somewhere in the range of about 26 weeks lead time on average. Those have moderated a few weeks to maybe the 23, 24 type timeframe from industry market perspective so not increasing further.

Okay. Thanks very much.

We now have a follow-up question from the line of Craig Bibb from CJS.

Just a follow-up on coatings so zinc prices were down about 12% in Q1 did zinc margins swing the other way in Q2 or how does that flow through?

Yes Craig, this is Mark. I’m not quite sure I understood your question because zinc price rose really throughout the first quarter.

May be 130 to 115.

Well that was recent I think that drop in zinc prices happened after the end of the quarter.

Right.

So but certainly as zinc prices fluctuate that will have some sort of a carry on affect on margins and some respects depending on ranges with customers that can be affected as well to some extent through sales pricing. But we didn’t any of the recent down tick a little bit in the zinc prices really didn’t have any impact on first quarter.

I guess the question is could it help second quarter?

Yes sure, it could everything else been equal that for sure and just like you have heard on the way up they would help a little bit on the way down.

Okay. And you guys have a new plant is that generating revenue now or is it ready to go?

It is but we’re still going through some start up phases in that business and so there was an element of that that contributed to some extent to the operating income dropped quarter-to-quarter.

But at this plant that plant is now full operational and servicing both internal and external customers.

I mean can you quantify what the margin hit from the low capacity plant was like a few days was pouring so?

Well I think if you look at the operating income drop in the first quarter the way the bracket that would be is there was been affect through the zinc pricing and also the mix effect, and also the start of the plant was – they were pretty similar across the street different major factors.

Okay. All right, thanks a lot.

We have another follow-up question from the line of Brian Drab from William Blair.

Hi thanks I’m just and looking at steel price a year ago versus at current prices whether you looking fourth quarter year-over-year or into the first quarter. I’m just wondering, you said that the 21% increase in utility was strictly driven by volume. Can you just help me reconcile then why wouldn't you have gotten some price - I would imagine you push there's some price given that's field dynamic?

I would say again the line share was volume. There was some price due to the effect of steel but our lead times were different back then. So if you go a year ago, first quarter versus this year, you have to offset and look at the steel pricing probably towards the more of the end of 2015 where it was pretty low at that point. So you look at that versus where we quoted in the October, November timeframe, they are pretty similar from a steel pricing perspective.

Okay. So you’re saying compare October, November in '16 more if closer the end of the year in 2015.

That’s correct.

Okay. I understand. And then I guess if I could just ask one question maybe to Mogens, there is lot of discussion every call around the smaller projects within utility and FERC 1000 regulation. I was wondering if you could just give us an update on how big a deal is this really for the utility segment and would this kind of change the game really in and would we ever see margins get back to where they were in the past or the segment approach to 1 billion in revenue in the past or has the game changed. Thanks.

First of all I think I said on numerous times, that I don’t think we’ll see 18%, 19% of revenue income that we hit back in 2013 which was the perfect storm, lower steel prices, capacity constraints et cetera, et cetera. And I have said that, through the cycle in the utility business, if we can operate between 10% and 15% operating income, we will be very happy and we would have a very good return on invested capital. So I think that's the reins at least in what we see currently and as far as we can look out in the future, where I think we’re going to be. Now when it comes to small projects, big projects, there has been a slowdown in big projects since those days, and at some point in time somewhat of that will come back again, but we are also adjusting to become more and more competitive in the smaller projects. I mean the smaller projects in the relative sense would require more drastic and engineering because of its fewer structures and more differences in products. They go through plans, less efficiently than last structures but we are getting much better at handling the smaller projects. So, when I talk about 10% to 15% operating income that is not dependent on large projects coming back to a great extent. That is dependent on the kind of mix we see now.

Okay. Thanks for that.

And there are no more questions at this time. I hand the call back over to the 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 disclosure on forward-looking statements.