Valmont Industries, Inc.

With me today are Steve Konieski, President and Chief Executive Officer, Mark Jaksic, Executive Vice President and Chief Financial Officer, and Tim Francis, Senior Vice President and Corporate Controller. This morning, Steve will provide a summary of our third quarter results, and Mark will provide additional details on financial performance. A slide presentation will accompany today's discussion. and a link to access the document is located on the homepage of our website at valmont.com. Please download the slide deck to follow along with today's call. A replay will be available for the next seven days and instructions for accessing it are included in the press release which is also located on our website. 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 this call. I would now like to turn the call over to our President and Chief Executive Officer, Steve Koniewski.

Thank you, Renee. Good morning, everyone, and thank you for joining us. I would like to start with slide three, which provides a recap of our third quarter. Net sales of $690.3 million grew 1.7% compared to last year, despite a very challenging market environment in agriculture and unfavorable currency impacts of 1.3%. Sales were led by strong wireless communication and transportation demand in North American markets, revenue from acquisitions, and sustained pricing discipline across the portfolio. Moving to segment highlights, and starting with the engineered support structure segment, third quarter sales of $268.1 million increased 6.6% over last year. When excluding currency translation impacts, sales increased 8.9%. Lighting and traffic structure sales were higher this quarter. In North America, continued strong demand from state and local government spending to improve roads and highways drove sales growth. This demand has supported our higher backlogs and a favorable pricing environment. And lead times across the industry remain extended. Globally, sales of wireless communication structures and components grew more than 30% this quarter. and are more than 25% higher on a year-to-date basis. We have benefited from very strong order flow, particularly in North America markets, where sales grew approximately 70% this quarter compared to last year. As expected, robust demand from ongoing investments in 4G and 5G site preparation are driving sales growth, along with revenue from our recent acquisitions of Larson Camouflage and Connected Wireless. Thank you. Thank you. Sales of our small cell solutions are more than three times higher than last year, supporting our market expansion strategy to provide integrated technology solutions to our customers. Sales of access systems this quarter decreased due to lower volumes and unfavorable currency translation. In the utility support structure segment, sales of $205 million decreased 6.1% compared to last year. Favorable pricing was more than offset by lower volumes from less available market capacity in China and slightly lower production levels in our North American facilities. Rapid increases in demand are being driven by transmission project acceleration across North America to replace aging infrastructure and greater regulatory pressure to replace wood structures with materials that can more effectively withstand heat, like steel and concrete. In the North American transmission market alone, we estimate a 10% increase in the market size this year from project acceleration, evidenced by our receipt of a second purchase order for the large 500 kV project we announced last quarter. The sudden increase in demand has led to factory capacity constraints in our North America facilities. Further, our inability during the quarter to access approximately $10 million of capacity from China also impacted our ability to meet the increase in additional demand. As mentioned, we are taking immediate steps to add capacity only to our existing North America facilities, which we expect to utilize towards the end of the first quarter of 2020. Sales in international markets this quarter were lower from smaller project sizes of solar tracker solutions and lower revenues in the offshore wind business. We are very pleased with the progress of our solar tracker business, although some significant projects have recently moved this year into 2020. Turning to the coating segment, third quarter sales of $93 million grew 2.8%, led by sales from recent acquisitions and pricing discipline, although lower volumes in external markets decreased sales late in the quarter. We know that our coatings business can be an indicator of overall industrial production trends. So we are monitoring these markets closely for any more changes. Turning to the irrigation segment, global sales of $144.1 million were 2.9% higher compared to last year. In North America, sales of $82.8 million grew 6% despite a very challenging agricultural market and trade environment, as well as lower industrial tubing sales and the usual seasonal market slowdown. While macro market conditions are still weighing on farmer sentiment, sales of pivots, aftermarket parts, and technology solutions were higher. Like others, we are awaiting the outcomes of the fall harvest and any related changes to commodity prices that could impact demand. Record sales of our AgSense technology solutions during the quarter grew our total number of connected devices by 6% to over 91,000. Global technology leadership remains a primary focus, and we are strategically investing in research and development, strengthening our global technology sales team, and integrating the voice of the customer. As a reminder, we are investing an additional $4 million in research and development activities in the irrigation segment this year. International irrigation revenues of $61.3 million were 1% below last year. Higher project sales in the Middle East region and solid demand from Brazil were more than offset by lower sales in the Asia-Pacific region. Historical drought conditions in Australia and the lowest net farm income levels there since 2014 led to substantially lower volumes. Softness in the New Zealand markets from policy uncertainty and spring flooding muted demand in that region. I would now like to turn the call over to Mark for the financial review.

Thank you, Steve, and good morning, everyone. My comments on the third quarter of 2019 profitability are based on comparisons to 2018's adjusted results, as outlined in the press release. Turning to slide four, third quarter operating income of $63.9 million, or 9.3% of sales, was 1% above last year. More raw material prices this year drove lower LIFO expense, which is presented separately from segment operating results. reported segment operating income was lower, most notably in the irrigation segment. Coatings and ESS operating income were slightly lower than last year, as well as the profitability of the international portion of the utility segment. Third quarter diluted earnings per share of $1.85, increased 1.6% over 2018, suggested EPS of 182. without the 24 cent impact of the non-recurring losses in our access system projects, diluted earnings per share for the quarter would have increased 14.8%. Turning now to segment operating results in slide five, the engineered support structure segment operating income of 21.8 million decreased 4% from 2018. The strong continuing trends in North American lighting and traffic and wireless communication sales contributed to positive segment profitability comparisons The international ESS poll operations on balance reported improved results over 2018, in part due to the restructuring actions we undertook last year. These positive outcomes were offset by poor operating performance in the excess systems product line, in large part due to a non-recurring loss in the third quarter of approximately $7.5 million associated with two projects. These projects were in a new product line for us that was launched at the end of 2017, and costs during the project installation phase were substantially higher than we originally anticipated. We have no additional orders in this product line, which we have exited, and we will not incur any fixed capital write-offs from exiting this market. Overall, we are very pleased with the continued pricing discipline across the segment, more favorable product mix from higher volumes and wireless communication, along with the cost savings associated with the capacity reductions in the Asia Pacific region last year. Turning to slide six, the utility support structure segment operating income of $20.4 million was flat with the third quarter of 2018. Improvements from pricing actions were muted somewhat by operational inefficiencies as we started producing large 500 kV orders which impacted segment sales as well as profitability. Moreover, less capacity was available from our China operations to help meet this market demand. We also incurred startup expenses in our concrete distribution pole facility in Florida, which is now in operation. Lower profitability in our developing international operations also weighed on operating income. As mentioned last quarter, we continue to see strong market activity for solar tracker solutions, and the profitability of this business improved in Q3 as compared to Q2. We expect sales and profit improvement in 2020 as we begin to recognize manufacturing synergies and the planned expansion of this product line into North American markets. In the coating segment on slide seven, operating income of $13.8 million decreased 3.7% compared to 2018. Pricing discipline across the segment and higher internal volumes in North America were more than offset by lower external volumes that mainly had occurred throughout the quarter and one-time integration-related expenses associated with the United Galvanizing acquisition earlier this year. On balance, despite lower volumes, the coatings business continues to perform well, but we are monitoring trends related to U.S. industrial production figures and possible effects on demand going forward. Turning to the irrigation segment on slide 8, operating income of $18.2 million, Thank you for joining us. as the market leader to make strategic investments in our advanced technology solutions, including the Prospera Partnership, which we announced earlier this year. Turning to cash and the balance sheet highlights on slide nine, as expected, we recognize very strong operating cash flows of $239 million this year, including $125 million in the third quarter. Our heightened focus on working capital optimization continues to be a priority for the management team, including a meaningful decrease in inventories this quarter. We have also been able to make improvements in receivables including negotiated down payments on certain larger contracts which is helping drive expected cash flows for the year to exceed 1.2 times net earnings. A summary of capital deployment is on slide 10. Year-to-date capital spending was $72 million up from $49 million in 2018. As we've mentioned all year, most of the increase is due to investments in a structures facility in Poland, a concrete utility distribution pool facility in Florida, and expanding the capabilities of our irrigation factory in the United Arab Emirates. Full year capital spending is still expected to be between $90 and $100 million. During the quarter, we returned $25 million of capital to shareholders through share repurchases and dividends, ending the quarter with $327 million of cash. Our effective tax rate for the quarter was 24.8% in line with our expectations. Let me now turn to slide 11 for an update to our 2019 outlook. Based on the third quarter results, which were lower than our expectations, and our outlook on the fourth quarter, we are adjusting our EPS expectations for the year to be between $7.05 and $7.45. In the ESS and utility support structure segment, North America market conditions are strong and should drive improved sales and operating income in these segments over Q4 of 2018. However, the operational and capacity matters mentioned earlier have tempered our profitability improvements in this segment as compared to our prior projections. The poor Q3 operating performance in the Access Systems product line including the $0.24 per share project losses incurred will not be recovered in Q4. In addition, we are expecting unfavorable comparisons in the coating segment as the slowdown we experienced in late Q3 is expected to continue into this quarter so far. In the irrigation segment, we are expecting unfavorable comparisons to Q4 2018 mainly as a result to international project sales we had last year that will not repeat this year. With that, I will now turn the call back over to Steve.