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Edited Transcript of IIIN earnings conference call or presentation 18-Apr-19 2:00pm GMT

Q2 2019 Insteel Industries Inc Earnings Call

MOUNT AIRY Apr 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Insteel Industries Inc earnings conference call or presentation Thursday, April 18, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Howard Osler Woltz

Insteel Industries, Inc. - Chairman, President & CEO

* Michael C. Gazmarian

Insteel Industries, Inc. - VP, CFO & Treasurer

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Conference Call Participants

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* John Jay Koller

Oppenheimer + Close, LLC - Principal and Research Analyst

* Julio Alberto Romero

Sidoti & Company, LLC - Equity Analyst

* Lance F. James

RBC Global Asset Management (U.S.) Inc. - MD & Senior Portfolio Manager

* Philip Ross Gibbs

KeyBanc Capital Markets Inc., Research Division - VP and Equity Research Analyst

* Tyson Lee Bauer

Kansas City Capital Associates - Senior Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Insteel Industries Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. H. Woltz, President and CEO. Sir, you may begin.

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [2]

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Good morning. Thank you for your interest in Insteel, and welcome to our second quarter 2019 earnings call, which will be conducted by Mike Gazmarian, our Vice President, CFO and Treasurer; and me.

Before we begin, let me remind you that some of the comments made on today's call are considered to be forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC. All forward-looking statements are based on our current expectations and information that is currently available. We do not assume any obligation to update these statements in the future to reflect the occurrence of anticipated or unanticipated events or new information.

I'll now turn it over to Mike to review our second quarter financial results and outlook for our construction markets and then follow up to comment more on business conditions.

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Michael C. Gazmarian, Insteel Industries, Inc. - VP, CFO & Treasurer [3]

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Thank you, H., and good morning to everyone joining us on the call. As we reported earlier this morning, the second quarter of fiscal 2019 proved to be a disappointing period for Insteel in a highly challenging business environment. Our results for the quarter were unfavorably impacted by adverse weather condition across many of our markets and low-priced import competition, in addition to the usual seasonal lull and demand, together with the consumption of higher-cost inventory purchased in prior period. Excluding the nonrecurring gain related to the proceeds on an insurance claim, earnings per share for the quarter came in at $0.01 compared with $0.31 a year ago.

Shipments for the quarter rose 11.2% sequentially from the depressed level of Q1 but fell 13.9% year-over-year, primarily due to weather-related construction delays and a resulting inventory rebalancing measures taken by many of our customers, which have stretched out over an extended period. Shipping volumes were also adversely affected by low-priced import competition in our PC strand and standard welded wire reinforcement businesses, resulting from the Section 232 tariff program.

As we've discussed on recent calls, the tariffs have provided offshore competitors with a significant cost advantage relative to domestic producers by driving U.S. prices for hot-rolled steel wire rod, our primary raw material, substantially higher than world market levels. Not surprisingly, the steepest drop off in shipments for the quarter occurred in those markets that are the most susceptible to import competition, which, on a combined basis, were down almost 30% from a year ago and accounted for 85% of the overall year-over-year reduction in shipments, while the rest of our business was down 3.5%.

Average selling prices for the quarter were up 21% from a year ago, reflecting the series of increases we implemented over the course of last year in response to the run-up in raw material costs, but down 3.3% from the first quarter, primarily due to the import-related pricing pressures. ASPs for the markets that are the most sensitive to import competition decreased to a greater extent from Q1, falling 8.5% as compared to only a 0.8% decrease for the remainder of our business.

Gross profit for the quarter fell $8.4 million from a year ago, and gross margin narrowed 810 basis points due to the combination of lower spreads, higher manufacturing costs and the reduction in shipments. The spread compression was driven by the escalation in raw material costs, which exceeded the year-over-year increase in ASPs I alluded to earlier.

On a sequential basis, gross profit dropped $4 million from the first quarter, and gross margin decreased 420 basis points due to lower spreads, which more than offset the incremental contribution provided by the increase in shipments. The narrowing in spreads from the first quarter resulted from the reduction in ASPs, together with the consumption of higher cost material.

The raw material component on cost of sales, which accounted for over 70% of the total in the quarter, reflected peak costs associated with purchases that were made last fall. Going forward, we should benefit from a gradual reduction in these costs as more recent lower-price purchases are consumed from inventory.

SG&A expense for the quarter fell $0.9 million from a year ago, primarily due to lower incentive compensation expense under our return on capital plan driven by our weaker current year results and the relative year-over-year changes in the cash surrender value of life insurance policies, which rose $0.6 million this year, driven by the rebound in the financial market.

Other income for the quarter benefited from a $1 million gain on the proceeds from the insurance claim I referenced earlier related to the transformer outage and electrical fire at our Dayton facility last August.

Our effective tax rate through the first half of the year dropped to 23.9% from 24.8% for the same period last year, excluding the impact of the $3.7 million deferred tax remeasurement gain on the prior year amount. The lower rate reflects the net effect of the reduction in the statutory rate to 21% from 35% under the new tax law for all of this year as compared to only 3 quarters last year, less the elimination of the previous benefit provided by the Section 199 domestic production deduction, together with changes in permanent book-tax differences. Looking ahead to the remainder of the year, we currently expect our effective rate for fiscal 2019 to run in the range of 23% to 24%, subject to future adjustments related to the level of earnings, permanent book-tax differences and the other assumptions and estimates entering into our tax provision calculation.

Moving to the balance sheet and cash flow statement. Operating activities used $18 million of cash in the second quarter due to a working capital build that was largely driven by a $14.1 million increase in accounts receivable, and to a lesser extent, a $5.2 million reduction in accounts payable and accrued expenses and $1.9 million increase in inventories. Based on our Q3 sales forecast, our quarter-end inventory position represented 3.4 months of shipments compared to 4.1 months at the end of the first quarter.

As I indicated earlier, the average unit cost of inventory at the end of Q2 was lower than the beginning balance as well as Q2 cost of sales, which should favorably impact margins during the third quarter as the lower cost material is consumed, provided that ASPs do not fall to a greater extent. If we were to pro forma Q2 cost of sales to reflect the lower carrying value of quarter-end inventory, gross margin for the quarter would have come in about 400 basis points above the reported level.

In allocating our cash flow and managing the cyclical nature of our business, we continue to focus on 3 objectives: reinvesting in the business for growth and to improve our cost and productivity, maintaining adequate financial strength and flexibility and returning capital to our shareholders in a disciplined manner. Going forward, we will continue to balance these objectives in deploying capital and any excess cash balances.

Capital expenditures through the first half of the year totaled $8.1 million, down $1.2 million from last year, focused on cost and productivity improvement initiatives, in addition to recurring maintenance needs.

We ended the year with $0.5 million of cash on hand and $5.4 million of borrowings outstanding on our $100 million revolving credit facility, leaving us with $92.8 million of availability and ample financial flexibility.

Looking ahead to the remainder of the year, we expect improved conditions driven by the continued growth in our construction end markets and the usual seasonal factors which should support higher operating levels and lower cost at our facilities. We should also benefit from any weather-related deferral of business from earlier in the year. Considering the ongoing tightness in the labor market, however, with a number of unemployed construction workers at an all-time low, any favorable impact is likely to be gradual and occur over an extended period.

We're encouraged by the recent pickup in infrastructure construction, which is expected to continue after lagging other construction sectors through most of the recovery. State contract lightings continued to reflect favorable growth trends in March, particularly in certain of our larger markets, such as Texas, Florida and North Carolina. Lightings are a leading indicator for highway and bridge construction as contract awards impact our customers' order books and ultimately demand for our reinforcing products.

In the first 3 months of the year, 22 states have proposed increasing one or more types of fuel taxes and 20 states to file legislation to implement electrical vehicle registration fees to generate additional funding for transportation construction. Several states are also considering mileage-based user fee studies or pilot programs, while others have introduced legislation to utilize hauling for new revenue.

Following nearly 5 months of short-term extensions and the longest government shutdown in U.S. history, on February 15, the remaining federal spending bills for fiscal year 2019 were finally enacted. Passage of the legislation eliminates the cloud of uncertainty that had threatened to curtail project commitments and allows states to receive their full year spending authority, including the funding increases previously provided for in 2019. The new spending package increases federal highway funding another 2%, up to $45.3 billion, as authorized under the FAST Act, and provides for an additional $3.25 billion of supplemental funding from the general fund. As Congress and the President deliberate over the details of an infrastructure funding package, we're hopeful that a consensus can be reached that provides for a permanent revenue solution to the Highway Trust Fund.

The most recent reports for the Architectural Billings and Dodge Momentum Indexes, leading indicators to nonresidential building construction, have been somewhat mixed. Following 25 consecutive monthly increases, the ABI dropped to 47.8 in March, reducing a 3-month year-to-date average to 51.1 compared to 52.1 for all last year. The AIA indicated that contraction may have been somewhat weather related and that many indicators of future growth remain positive. The Dodge Momentum Index and other leading indicator for nonresidential building construction has leveled out since last fall, fluctuating within a relatively narrow range. The prior 3-month average as of March was up 3.5% from the same period last year. In its latest report, Dodge indicated that relatively healthy real estate market fundamentals and continued support for public projects should enable planning activity to remain close to recent levels for the near term.

I'll now turn the call back over to H.

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [4]

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Thank you. As Mike indicated, we're disappointed with our second quarter results, which were driven by weak shipping and production volumes that we attribute primarily to adverse weather conditions and growing import competition in certain markets. While we aren't happy with the Q2 results, we continue to believe that the underlying market fundamentals are reasonably strong and should support a significant rebound in demand during the second half of our year.

As we've mentioned on our last few earnings calls, our financial performance for 2019 should be viewed in the context of the administration's Section 232 tariff program initiated in March 2018, which imposed a 25% tariff on imports of certain steel products, including our primary raw material, hot-rolled steel wire rod, and that did not affect imports of most downstream steel products, including PC strand and welded wire reinforcement. In the aftermath of the tariff implementation, hot-rolled wire rod prices in the U.S. rose to levels that were 25% to 30% higher than the world market price, a gap which is persistent. Because of the hot steel content of many downstream products, including those produced by Insteel, the disparity between world market and U.S. steel prices has increasingly eroded the competitiveness of U.S. producers relative to offshore competitors. The imposition of the tariffs created chaotic conditions on our raw material markets as domestic suppliers implemented allocation policies, which proved to be highly disruptive to customers. In response, steel consumers who were concerned about inadequate domestic availability, including Insteel, were forced to contract for offshore material that was frequently at higher prices than domestic levels in order to fulfill their requirements.

Market conditions stabilized during our second quarter, reflecting the availability of import volumes and softer order books for domestic suppliers due to seasonally lower levels of activity in construction and industrial markets, although there continues to be a significant pricing gap relative to world market levels. Predictably, with no tariff affecting most downstream products, including PC strand -- most imported downstream products, including PC strand and welded wire reinforcement, these markets remain highly attractive to foreign producers. And import volumes have surged facilitated by substantial underselling which has severely compressed margins for domestic producers. Unfortunately, we are unaware of any knowledgeable steel trade policy analyst who predicts termination of the 232 tariff program in the near future, and many observers believe that the program will continue for the duration of this administration. Under any circumstance, it is imperative that the tariff be extended to downstream products derived from wire rod in order to eliminate the harsh penalty that the current Section 232 structure is imposing on producers of steel-intensive downstream products.

While our dialogue with the administration is ongoing, there's no way to predict whether our efforts to expand tariff coverage to our products will be successful. We are aware, however, that plants in our industry are being idled and layoffs are growing due to the ramp-up of import volumes that has been stimulated by the 232 tariff structure. These outcomes should be antithetical to an administration which is arguably more focused on job creation and restoring the U.S. manufacturing sector than any in recent memory. While we will continue to reassess our manufacturing strategy, our current plans are to compete, operate our plants and attain additional manufacturing efficiencies while we work toward resolving the tariff matter.

Turning to CapEx. We reported last quarter that our initial estimate for 2019 was $22 million, subject to revisions as we move through the year. Investments will continue to be targeted toward expanding our product capabilities, lowering the cash cost of production and updating technology, including our information systems. While we have no plans to defer or cancel investments, I should note that our CapEx estimates over time have tended to be conservative due to uncertain or extended deliveries for equipment and internal resource constraints that occasionally stretch out product timelines.

During the current quarter, we're bringing on a new engineered structural mesh production line that will increase capacity for certain niche products as well as contribute to substantial reductions in cash operating costs. Market conditions appear to be favorable and should support our planned ramp-up over the balance of the fiscal year.

Notwithstanding our tariff concerns, we will continue to be vigilant in pursuing attractive growth opportunities, both organic and through additional acquisitions, and remain focused on improving our operational effectiveness and realizing the anticipated benefits from the substantial investments we've made in our facilities to lower manufacturing cost, reduce lead times and improve quality.

This concludes our prepared remarks, and we'll now take your questions. Lauren, would you please explain the procedure for asking questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Phil Gibbs with KeyBanc Capital Markets.

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Philip Ross Gibbs, KeyBanc Capital Markets Inc., Research Division - VP and Equity Research Analyst [2]

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I appreciate your candid commentary. And it sounds like you're expecting 232 to last a bit longer, and this is clearly hurting your business and end user demand. I mean, how do you think this resolves itself, assuming there's no further downstream tariffs put on, on some of your products and customers? And I think new tariffs would definitely level the playing field for you, but this whole thing seems counterproductive, I think, for you and your clients. And this seems to me like

(technical difficulty)

somewhere. So where does this end?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [3]

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Well, I mean, I think you've posed the $64 question, for sure. And there's on the end -- there's considerable empathy for our position among the administration contacts that we've made. It's just very difficult to project whether that empathy will result in action or whether it won't. And if we could hazard a reasonable guess at that, we would, but we really just -- we don't know. But I would say, as I mentioned in the comments I made,-- that most people would tell you these tariffs will be in place for as long as this administration is in place. And if that's the case, then I can't see how we wouldn't be successful at some point in time in making the very reasonable case that our industry is fundamentally threatened and that good-paying, skilled manufacturing jobs are at risk and that action must be taken. So we will continue to press our case and make our argument, which is highly logical. And the optimist in me says that at some point, we will get this matter resolved. And if we don't, then -- in all adversity comes opportunity. And we will find where that opportunity lies for Insteel, and we'll take advantage of it.

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Philip Ross Gibbs, KeyBanc Capital Markets Inc., Research Division - VP and Equity Research Analyst [4]

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Well, it makes sense to me. I mean, I think it's a pretty easy case given the fact that construction activity is pretty much at a cyclic high, and you're talking about plants being idled. It doesn't really make much sense. You did talk a little bit about the FAST Act funding for infrastructure on the state level starting to come through. What's your opinion on the administration rekindling that trillion dollars of new multiyear spending that they outlined during the election time? Is this pie in the sky on your mind? Or is this realistic at some point?

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Michael C. Gazmarian, Insteel Industries, Inc. - VP, CFO & Treasurer [5]

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Yes. There seems to be a clear consensus for increased infrastructure spending, whether it's a $1 trillion or $2 trillion. But in the end, it all -- all it gets back to the -- this funding solution, and I think there are pretty substantial differences and views between the administration and Congress as far as where that increased funding would come from, how it would be generated. So I think that continues to be the biggest question.

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Operator [6]

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And our next question comes from Tyson Bauer with KC Capital.

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Tyson Lee Bauer, Kansas City Capital Associates - Senior Analyst [7]

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Mike, you talked about a 400 basis point differential for use, kind of the last end or the inventory turn cost-basis adjustments. As you increase volume in your seasonally stronger quarters, are there any other incremental improvements that would be created from those operating efficiencies?

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Michael C. Gazmarian, Insteel Industries, Inc. - VP, CFO & Treasurer [8]

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Yes. We would expect to see improved manufacturing cost during those quarters as we benefit from the usual seasonal pickup in demand as well as any deferral business from earlier in the year. So we should get a dual benefit, both from the lower raw material costs as well as the operating leverage benefit.

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Tyson Lee Bauer, Kansas City Capital Associates - Senior Analyst [9]

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Would that improvement be equivalent to that cost basis improvement or unable to say at this time?

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Michael C. Gazmarian, Insteel Industries, Inc. - VP, CFO & Treasurer [10]

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I'd say unable to say at this point. I don't believe it would be quite as substantial but depending on the magnitude of the volume increase that we experienced.

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Tyson Lee Bauer, Kansas City Capital Associates - Senior Analyst [11]

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Well, that leads in to the next question, volume implications. Is there a difference in your expectations now going forward between coastal and inland given the differential that you gave on the 30% decline on coastal versus 3%, I would assume, inland?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [12]

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I'm not so sure it's as easy to categorize it's coastal and inland. Let's just say import affected and not so import affected. But our strategy, our plan is we're going to compete with the imports, and we'll keep a close look on our cash cost of production. But we are not projecting significant deterioration on our volume as we look to the next couple of quarters.

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Tyson Lee Bauer, Kansas City Capital Associates - Senior Analyst [13]

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And in fact, I believe you mentioned a significant rebound in the second half, which, in part, comes just normally as your seasonal effect comes into this. Now in years past when we've had weather events, not only has your second half, but it typically bleeds into your first quarter of your next fiscal year. Is that kind of what you're looking at the next 3 quarters should have a positive impact as these deferral revenues work their way back into the system?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [14]

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I think you can definitely make that case, although we're notoriously poor predictors of the future.

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Michael C. Gazmarian, Insteel Industries, Inc. - VP, CFO & Treasurer [15]

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Assuming we can go through an extended stride, so more normalized weather conditions because I mean, this began early back in the first fiscal quarter, the December quarter, where there was record rainfall in a nationwide basis. And that led to loaded inventory levels that have -- so that continued into the second quarter, and it's just taken an extended period to work its way out.

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Tyson Lee Bauer, Kansas City Capital Associates - Senior Analyst [16]

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Mike, as you look at the cash management situation because of the inventory levels ballooning up relative to a year ago, how does that work its way through these last -- next couple of quarters? Will we see that work its way down, and we'll get a benefit these next 2 quarters?

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Michael C. Gazmarian, Insteel Industries, Inc. - VP, CFO & Treasurer [17]

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Yes. We'd expect to see that net working capital balance gradually decline over the course of the year with inventory dropping down. Now we will see -- with the increase in shipments, we will see a rise in receivables, but we believe it will be more than offset by the impact from the inventory reduction where we should be in borrowing mode just for a short stretch and debt-free by the end of the year, for sure.

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Tyson Lee Bauer, Kansas City Capital Associates - Senior Analyst [18]

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Okay. And one last question. It seems like PC strand obviously was affected more than your other products. If we were to strip out that PC strand, how affected is or give us a sense on your other products? Are they really as bad off as the overall number suggest? Or are we looking at a very weighted negative impact because of PC strand?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [19]

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Well, certainly, PC strand, because of its share of our total shipments, is the primary driver. But our standard welded wire reinforcement is also being affected significantly by imports from Canada, imports from Mexico, and for the first time in my 40-year career, imports of standard welded wire reinforcing from Turkey, if you can believe that. So these imports are definitely circumventing the 232 tariff. That's what's happening. And the standard welded wire reinforcement part of our shipments is smaller than PC strand, but the impact is no less noticeable on those -- on that market.

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Tyson Lee Bauer, Kansas City Capital Associates - Senior Analyst [20]

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Okay. And one last thing since it's in my backyard. Was the St. Jo affected by the floods in the Midwest? Or would you expect some increased activity due to that reconstruction effort in I-29 in the area of bridges in those?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [21]

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We were not adversely affected, although our people were on standby through that entire episode. And these disasters frequently result in some stimulative impact for demand for our products, and I would guess that this will also. Although I can't tell you I'm personally knowledgeable of any specific job that has come out of it at this point.

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Operator [22]

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Our next question comes from Lance James with RBC Global Asset Management.

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Lance F. James, RBC Global Asset Management (U.S.) Inc. - MD & Senior Portfolio Manager [23]

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A couple of questions. You've always been really top-notch operators, solid balance sheet, et cetera. And talking about the 232 tariffs, have you seen others of your domestic competition, either shutter their factories or have some distress? I'm just wondering whether, out of all this pain, there may be some additional acquisition opportunities for you.

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [24]

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It's a good question, and the answer is yes. We have seen facilities idled. Yes, we are aware of layoffs and likely more layoffs that are coming. And yes, we are aware of people who have going concerns or have concerns about being going concerns if this tariff issue persists. And I guess that's what I was alluding to when I said that if we're unsuccessful in gaining coverage for our products in the 232 tariff regime, then I think it's inevitable that there are other opportunities for us to grow, even in the face of the 232 adversity. We're here to stay, and we're solid. And we can weather this for however long that we have to, but some opportunity should come out of it, even in a worst-case scenario.

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Lance F. James, RBC Global Asset Management (U.S.) Inc. - MD & Senior Portfolio Manager [25]

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Great. And my other question is kind of more general, but it's -- what are your avenues of communication to -- because one would think that the administration would be very interested in your pain and job losses in the industry. But are your avenues of communication through the Senators in the states that you operate? Or is there an industry lobbying organization? Or how exactly are you able to communicate to try to get this resolved favorably?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [26]

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Well, because our industry has, over time, been so enormously affected by government policies, regulations and trade issues, we're highly organized as an industry to represent our concerns to Washington. So we definitely use that infrastructure in interacting with all of the relevant administration officials, USTR, Department of Commerce, White House itself. And I would mention that we have had significant support from our steel-producing vendors for solving this anomaly that exists that is causing the pain in the downstream steel-intensive product industry. So we have organized effectively, and we've had good access to the right people. It's just impossible to say whether it has been sufficient to get the problem solved.

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Operator [27]

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(Operator Instructions) Our next question comes from John Koller with Oppenheimer + Close.

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John Jay Koller, Oppenheimer + Close, LLC - Principal and Research Analyst [28]

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Sort of along the same lines, I'm curious since you continue to invest in PPD and improving efficiencies. If the tariffs were to stay in place and not be resolved at this point for downstream, how do you see your competitive position beyond this? Do you see a significant improvement? Or do you think it would be quickly -- the moat might be quickly filled in once things improve?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [29]

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Well, I mean, I think that our view of that would be, we will continue to make the investments that have clear, attractive returns. And that over time, the 232 tariff impact, this probably won't loom as a major factor in where Insteel position sorts out relative to competitors. We're going to strengthen the core manufacturing part of our business on an ongoing basis, and I would emphasize also invest in our information systems which help us toward that objective and that we intend to continue to increase the gap in operational effectiveness with our competitors.

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Operator [30]

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The next question comes from Julio Romero with Sidoti & Company.

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Julio Alberto Romero, Sidoti & Company, LLC - Equity Analyst [31]

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Appreciate you breaking out the pricing affected by imports versus non-import affected. Certainly, the tariff pressure continues to pressure your overall ASP, but you've been able to hold pricing relatively steady for the rest of your business. Just given where scrap prices have trended, how should we think about pricing going into the seasonally stronger summer months?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [32]

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Well, in terms of the way that Insteel approaches price and its product is going to be a factor of the way we see demand in our backlogs and our service levels, and that hasn't changed. It's always the same. In terms of hot-rolled steel prices, it's really difficult to project at this point whether those change as scrap changes or whether the disconnect that all of the steel producers have pursued with respect to scrap prices, whether they are successful in maintaining that. I really don't -- I don't have the answer to that, Julio.

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Julio Alberto Romero, Sidoti & Company, LLC - Equity Analyst [33]

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Okay. And can I ask if the regions that were affected by weather have seen any catch-up over the first few weeks of April at all?

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [34]

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Yes. I mean, shipment activity has definitely rebounded, but I wouldn't tell you that it's in any astonishing degree, but it has rebounded significantly from where we saw ourselves in the second quarter.

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Operator [35]

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And our next question is a follow-up from Phil Gibbs with KeyBanc Capital Markets.

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Philip Ross Gibbs, KeyBanc Capital Markets Inc., Research Division - VP and Equity Research Analyst [36]

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I appreciate the follow-up opportunity, but I'm all set.

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Operator [37]

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And I'm not showing any further questions in the queue, gentlemen. I'll now hand the call back to Mr. Woltz for any closing remarks.

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Howard Osler Woltz, Insteel Industries, Inc. - Chairman, President & CEO [38]

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Okay. Thank you. We appreciate your interest in Insteel and encourage your follow-up during the quarter, and we look forward to talking to you at the next earnings call. Thank you.

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Operator [39]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.