Insteel Industries Inc (IIIN) 2009 Q3 法說會逐字稿

Good day and welcome to this Insteel Industries third-quarter earnings conference call. Today's call is being recorded.

At this time I would like to turn the conference over to Mr. H.O. Woltz III, President and CEO of Insteel Industries. Please go ahead.

Thank you, Katie. Thank you for your interest in Insteel and welcome to our third-quarter 2009 conference 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 in our presentation are considered to be forward-looking statements. Forward-looking statements 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.

I will now turn it over to Mike to review the drivers of our third-quarter financial results and then follow up to comment more on market conditions and our business outlook.

Thank you, H. As we reported in this morning's press release, Insteel incurred a net loss of $1.7 million or $0.10 per share for the third quarter ended June 27, compared with net earnings of $16.9 million or $0.97 per diluted share for the same period last year.

The loss for the quarter includes a pretax charge of $2.9 million or $0.10 per share after tax for inventory writedowns to reduce the carrying value of inventory to the lower of cost or market, due to further declines in selling prices. In addition to the inventory writedowns, our financial results for the quarter were unfavorably impacted by reductions in shipments and average selling prices; the consumption of higher cost inventory that was purchased prior to the downward spiral in steel prices since the beginning of the fiscal year; and higher unit conversion costs resulting from reduced schedules at our manufacturing facilities.

Net sales for the quarter were down 45.4% from a year ago due to a 28.7% decline in shipments and a 23.4% decrease in average selling prices. On a sequential basis, shipments for the quarter were up 34.1% from the second quarter, which is significantly higher than the usual seasonal upturn we experience between the quarters.

To put it in perspective, over the past three years the change in shipments from Q2 to Q3 has ranged from a 0.2% decrease in 2007 to a 16.4% increase in 2006. We would attribute the additional pickup in volume this year to the completion of the customer inventory destocking that has been ongoing since the beginning of the fiscal year, rather than a pronounced recovery in our markets.

Average selling prices for the quarter were down 15.7% on a sequential basis from Q2 due to the continuation of weak market conditions, and are now down 34.7% on a cumulative basis from the peak levels of Q4 2008.

On a positive note, the drop-off in selling prices has been exceeded by the reduction in the prices for our primary raw material, hot-rolled steel wire rod. Although this widening in spreads has not been reflected in our current-year results due to the inventory writedowns and consumption of higher cost inventory, we expect it to become more apparent during the fourth quarter.

Gross profit for the quarter was $1.2 million compared with $30.9 million a year ago. The gross loss reflects the $2.9 million charge that I alluded to earlier for inventory writedowns. Where the bulk of the writedowns were incurred early in the quarter, we believe this issue is behind us, particularly in view of the recent indications that pricing may have bottomed out.

In addition to the inventory writedowns, spreads between average selling prices and raw material costs narrowed from the year-ago levels as a result of the matching of higher cost material in inventory with lower selling prices.

Our overall capacity utilization remained at depressed levels during the quarter, coming in at 42% versus 67% last year, although it was up subsequently from the 35% we had operated at in Q2. Total unit production for the quarter was down 37% from a year ago, but up 20% on a sequential basis from the second quarter.

On an overall basis, over half of the year-over-year reduction in gross profit was driven by the inventory writedown and narrowing in spreads, with the remainder of the decrease resulting from the reduced shipments and, to a much lesser extent, higher unit conversion costs resulting from the reduced operating levels. If we were to pro forma our Q3 results to reflect current selling prices for our products and replacement costs for wire rods, our gross margins would have approached the levels of recent years and we would have been profitable even at the reduced level of shipments.

SG&A expense for the quarter decreased $0.5 million or 10.7% from a year ago, primarily due to the drop-off in incentive compensation expense in the current year and, to a much lesser extent, lower travel expense which was partially offset by increases in bad debt expense and legal fees, most of which were related to the PC strand trade cases that H. will be commenting on.

Through the first nine months of the year, the average quarterly run rate for SG&A expense was $4.4 million, which was down about $0.3 million from the run rate for fiscal 2008.

Our overall effective income tax rate for the quarter, including the discussed component, rose to 41.5% versus 35.7% last year primarily due to a change in permanent book tax differences, which had an amplified impact on the effective rate for the quarter as a result of the lower pretax loss. On a year-to-date basis, the effective rate was 36.9%.

Moving to the cash flow statement and balance sheet, operating activities used $23.1 million of cash for the third quarter compared with $2.5 million a year ago, primarily due to the year-over-year changes in net working capital, which more than offset the current year loss. Net working capital provided $20.7 million in the current year quarter, primarily due to our inventory reduction initiatives. In the prior-year quarter, net working capital had risen $17.3 million largely due to the increases in receivables and inventories resulting from the escalation in raw material costs and selling prices.

Inventories at the end of Q3 were down $19.9 million or 36.1% from the previous quarter-end, or down $17 million if you exclude the $2.9 million in inventory writedowns. Unit inventories were reduced almost 23% during the quarter, while average unit values decreased 18% primarily due to the consumption of higher cost layers under FIFO accounting and the inventory writedown. On an overall basis, our average unit values for inventory were relatively close to replacement cost.

Based on our current forecasted run rate for the third quarter, our inventory position at the end of Q3 represents around three months of shipments.

The Other Charges line item within the operating activities section of the cash flow statement, which reflects the use of $1 million of cash for the quarter and $14.8 million year-to-date, is primarily related to the increase in income taxes receivable resulting from the current-year loss. As of the end of the quarter, income taxes receivable, which are reflected within Prepaid Expenses and Other on our balance sheet, amounted to $14.5 million.

Capital expenditures for the nine-month period were $1.7 million compared with $8.4 million for the same period last year and are expected to total less than $3 million for fiscal 2009.

We did not repurchase any shares of our stock during the quarter under our $25 million share repurchase authorization. Going forward, we will continue to be opportunistic in repurchasing shares, based on our business outlook, cash flow expectations, and the expected timing and funding requirements for any growth opportunities that may arise.

We ended the quarter debt free with $21.6 million of cash and cash equivalents.

Looking ahead to the fourth quarter, we expect gradual improvement in spreads and margins as the lower replacement costs from our raw materials begin to be reflected in cost of sales. As we indicated on our previous call, we also expect to see a gradually increasing impact from the $130 billion of construction spending provided for under the federal stimulus package, which includes $27.5 billion specifically targeted for highways and bridges. With highway and bridge construction driving around 35% of our revenues, the additional funding should mitigate the anticipated weakness in other categories in non-residential construction, particularly for commercial construction.

Up to this point, however, we do not believe that the stimulus has had a significant impact on our business, as the actual spending levels have been minimal. Although the federal Department of Transportation had obligated or made available almost $21 billion of funding for approved projects as of July 3, only $523 million had actually been paid out. We expect spending levels and the resulting impact from the stimulus to ratchet up during 2010 and '11.

In addition to the stimulus, the other significant driver of infrastructure-related spending over the next few years will be the new Federal Highway Spending Authorization, as the current five-year authorization -- known as SAFETEA-LU -- is set to expire in September. Unfortunately, the outcome is highly uncertain at this time, as there is a wide gap between the approaches that are being considered.

Representative Oberstar, chairman of the House Transportation Committee, has introduced legislation for a new six-year authorization that provides $450 billion in funding for highway construction, mass transit, and highway safety programs, as well as $50 billion for high-speed rail. The proposed funding for highways and transit would represent about a 40% increase over current funding levels.

The Obama administration, however, is pushing for a short-term, 18-month extension of the current authorization at existing funding levels, which would still require an additional $20 billion cash infusion to offset the projected deficit in the Federal Highway Trust Fund and ensure that sufficient funding was available through March 2011 for states to pay for ongoing projects. Yesterday, the Senate Environment and Public Works Committee indicated support for the President's plan to defer debate on new highway funding for 18 months and continue funding at the current levels.

Although there appears to be widespread support for increased infrastructure spending, there are differing views as to how it should be paid for and whether an increase in the Federal Fuel Tax or the imposition of user-based fees should be pursued in the current economic environment. We will be following these deliberations closely and hope to get better clarity on the probable outcome in the coming weeks.

I will now turn the call back over to H.

Thank you, Mike. During our third quarter, business conditions strengthened somewhat, resulting in rising shipments and operating volumes from the severely depressed levels of the previous two quarters. We believe the increased activity was driven by the winding down of destocking, together with normal seasonal influences that generally boost activity as we move into our third quarter. At this point, however, we see no evidence that the upturn is related to a recovery in the construction sector.

It appears that we are settling into a new market environment that may be characterized by a greater degree of stability as compared to our experience over the previous three quarters and which is likely to reflect depressed unit volume for the foreseeable future. Assuming that current conditions continue, we should be past the point of inventory carrying-value adjustments, so that during the fourth quarter our financial results will more closely reflect the new spread and volume environment. We expect to operate at a profit under these conditions, although our return on capital employed is likely to remain at reduced levels relative to recent years.

Concerning developments in the wire rod market, two US rod production facilities are in the process of being idled or closed, which between them represented approximately 20% of total domestic capacity. Wire rod leadtimes are lengthening, and we expect a general deterioration in service levels that seems to be customary whenever the mills work at higher levels of capacity utilization. Under these circumstances, we plan to increase rod inventory levels somewhat, to assure smooth operations at our plants.

Rod pricing is expected to rise during our fourth quarter, driven by rising scrap prices at least temporarily and higher capacity utilization rates, resulting from mill shutdowns rather than any recovery in demand. We plan to implement price increases in the near future to recover these higher raw material costs.

Operationally, we ramped up hours at several facilities during the third quarter in response to the strengthening in our order book, which increased our capacity utilization to 42% from 35% during the second quarter. We expect capacity utilization to rise again during our fourth quarter but to remain well under the levels at which we are typically operating this time of year.

Imports of Chinese PC strand continue to undersell the domestic industry by a wide margin, exacerbating concerns in this market. While the volume of Chinese imports entering the US has fallen off over the past few months, substantial unsold quantities that entered the market during the last half of 2008 have continued to exert downward pressure on pricing and resulted in lost sales.

As most of you know, on May 27, Insteel together with two other domestic producers of PC strand filed antidumping and countervailing duty cases against China. Some of you may have seen the press release on July 10 indicating that the International Trade Commission had voted affirmatively that the domestic PC strand industry was threatened with injury as a result of PC strand imports from China. The affirmative finding was an important first step in this process, since it assures that the investigation will proceed and that the process will be carried through to completion.

The next milestone in the case will be a preliminary finding by the Department of Commerce with respect to the subsidy allegations. Based on the filing date of the case, this finding should occur by August 26, assuming that Commerce does not postpone it, and by October 26 if it is postponed.

Should Commerce preliminarily find evidence of illegal subsidies, it would establish a countervailing duty margin. After notice, importers of record would be required to post cash deposits or bonds in the amount of the margin.

Following the preliminary subsidy finding, the next milestone will be Commerce's preliminary finding in the dumping case. This finding should occur by October 23 if Commerce does not elect postponement, and by December 23 if it is postponed. Should Commerce's preliminary finding indicate that there is evidence of dumping, it would calculate the approximate level of dumping and establish a preliminary duty margin. After notice, importers of record would be required to post cash deposits or bonds in the amount of the margin.

Commerce's final determinations with respect to the subsidy and dumping allegations could be made as early as December 2009, but no later than May 2010.

The last step in the case will be the final injury determination by the International Trade Commission, which could take place as early as sometime during our second fiscal quarter of 2010, but no later than the end of our third fiscal quarter.

As you can see, the timeline for pursuing these cases is lengthy, and it's virtually impossible to predict the eventual outcome. All we can say at this point is that we believe our case is strong, and we believe prospects are favorable that we'll prevail. We firmly believe that Chinese tactics in the US market have been in violation of US trade law and have caused material injury to domestic producers.

The first three quarters of fiscal 2009 have been a nightmare for Insteel and for the industry. We've emerged in a strong competitive position and look forward to moving into a more stable environment, despite our expectation that market conditions will remain weak for a protracted period.

We occupy strong positions in all of our markets, and we believe that we have world-class operating costs in all of our facilities and across all of our product lines. These attributes, together with our solid financial condition, should provide us with considerable flexibility over the next few quarters and position us to capitalize on any attractive growth opportunities that may arise.

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

(Operator Instructions) Nat Kellogg, Next Generation Research.

Hi, guys. Congratulations on a pretty nice quarter. Obviously, congrats on the cash flow generation.

Thanks.

Just a couple of quick questions here. I guess, H., a little bit -- could you guys talk a little bit on what kind of working capital investment you think you might need to make as you build up inventories again and as maybe sales tick higher, as receivables increase?

Are you referring back to my comment on service levels from the rod producers?

Yes, and just trying to figure out what cash might look like going forward. Obviously you guys have got a nice pretty nice cash balance right now. Just trying to think about what you guys are going to do with it over the next couple quarters, I guess.

Some of it I would assume, if you think rod prices are going to start rising again, that some of it will be consumed at inventory. Just trying to get a sense of how much of it you will need to invest in inventory, and how much you have left to buy back shares or do acquisitions, or just leave it on the balance sheet until the environment improves.

The question presumes a lot of underlying facts that we don't have right now, Nat. That -- rod price increases of between $40 a ton and $80 a ton have been announced. We don't know where that will really shake out, and we don't know exactly what the impact of our pricing activity will be.

I guess the part that I could speak to with some degree of confidence is just on the rod inventory side. It's going to be -- the build that we contemplate is going to be modest, in the range of $5 million to $6 million.

Okay, that's great. That's definitely very helpful. Then, just given the favorable ITC ruling that's been coming down -- I realize this is just preliminary and whatnot. But I'm just curious is -- how much you guys have heard or seen of customers beginning to sort of stockpile PC strand from the Chinese importers. If they are worried that they're eventually going to get knocked out of the market or pricing is going to rising a lot, I would assume that there may be some pre-buying ahead of the August and the October deadline.

Just curious if you guys have seen some of that; and if so, how serious that is.

I don't detect it. I think there is interest in the cases among the customer base, but there is plenty of PC strand available and no one is trying to insulate against a shortage, certainly.

Okay. Then on the discontinued ops stuff, that is, I assume, just related to that Virginia facility that you guys have.

That's correct.

And obviously the market for that, I assume, is relatively soft right now.

Yes, the real estate market is pretty tough right now, to say the least.

Okay, fair enough. Then, I think you guys have talked about the closures of the wire rod manufacturers. Have those -- those have actually happened yet? Or my understanding is they actually haven't quite closed. I was just curious if that has happened yet or those are expected to happen.

One of them happened as of July 12.

Okay.

And that mill is completely down. The other is scheduled to be down on September 12.

Okay. Then does that mean that you guys will be relying more on the import market? Or is there enough slack out there that this shouldn't have a material effect on your ability to get wire rod?

I think the closures are really commensurate with the decline in consumption of wire rod. So at this point we're not detecting any kind of short supply situation, so I think we feel okay.

Okay. Then just a last question; I guess it's a little bit on my first one. But obviously you guys are in great financial shape. Just sort of curious if you guys have got any thoughts on where your priorities are for use of cash, or whether you just feel like you would like to have a nice buffer here, given the fact that things are still pretty weak out there.

I think you can expect to see a continued conservative posture on the part of the Company, because I don't get the feeling that we're anywhere near out of the woods. And when I say we, I mean the economy, the financial markets. I think there is a lot of risk out there.

Okay. Fair enough. All right. Congrats again on a nice quarter, guys, and I will hop back in the queue. Thanks for taking my questions.

Robert Kelly, Sidoti.

Good morning. Thanks for taking the questions. Just a question on the dynamics of the wire rod pricing market. You had, I guess, supposed that prices have bottomed, I guess, for your raw material. Can we assume the same is for your selling prices?

I think so, Bob. It's early to say, but I think that we've been through a period where prices have fallen on a regular, consistent basis; and that is definitely turning around. I'm confident it will for wire rod, and I'm reasonably confident it will for our finished products as well.

The magnitude of the increases that are likely to be effective for wire rod are such that I can't see any rational player in our industry not trying to recover it.

Okay. It has -- a big theme you guys have referred to in the past has been the discipline of the market. Do you see that continuing from your competitors?

Well, we haven't seen a whole lot of discipline over the last few months, Bob. We would hope that we would going forward. But when we look at the whole pricing scenario as it's unfolded over the last few months, I really don't think it had to happen this way.

So I would say at this point we are hoping that we see that; but I would not characterize recent experience as having been highly disciplined.

I thought you referred to in past calls that your selling prices have fallen slower than wire rod raw materials. Is that still the case?

Yes, well that's still the case this year. In my comments I had mentioned that on a cumulative basis going back to the Q4 high point they are down 35% versus a larger reduction in wire rod costs.

Yes; just to clarify, I wouldn't say that that was a result of discipline in our industry.

Okay, understood. As far as should wire rod prices increase and your confidence in raising prices, are you at the point where you would need to be buying a whole lot of material? It sounds like as far as your inventory cutbacks, you may have some room to go as far as -- okay.

We have flexibility, Bob, that as a general statement we are purchasing about what we use. But we have some flexibility so that I think we are not in a corner where we just have to purchase.

Okay. Then you talked about the improvement in your order book in 3Q relative to 2Q. Are you seeing further progression or improvement in the current quarter relative to 3Q?

Yes.

As far as the cash flow story, is Insteel a user of cash in F10, assuming some sort of stabilization or modest deterioration in demand? Or are you still a cash flow generator next year?

We would expect to be a generator next year. We expect cash flow to remain positive barring any unforeseen spikes in prices. Obviously if there is a ramp-up in pricing similar to what we experienced last year, that would consume some working capital investment. But generally speaking if everything kind of just flatlined out at current levels, we would expect cash flow to trend positive.

That scenario is a high-class problem. All right. Thanks, guys.

We're just lucky that we have all our CapEx behind us and we are sitting in an awfully nice position in terms of having no pressing needs.

Tyson Bauer, Wealth Monitors Incorporated.

Good morning, gentlemen. Just following up on some of the questions on the ASP. It sounds like, with your expectations of better capacity utilization going sequentially into Q4, the question then becomes -- are you actually looking for a net increase in your ASP sequentially also?

Or are we still kind of balancing the lower cost inventories you have and that is still weeding its way through the marketplace? So we're not -- we're working our way to better margins, but by no means are we going to see a dramatic spike up.

I'm not sure on a sequential basis, because we did experience some deterioration in ASPs within the quarter. But relative to where we ended the quarter, I guess just given what's happened with wire rod pricing and our plans to get our prices up, we would -- I guess relative to current levels we would expect them to turn up during the quarter.

I would also point out that the rod price announcements that are out there are August announcements. So we're actually going to go through a significant part of the fourth fiscal quarter at about the same kind of run rate where we were in the third quarter.

Okay, so it's a better utilization, implying better unit movement. We should sequentially see an uptick at least on the top line going forward, then we will play with margins accordingly?

I would expect that to be the case, yes.

Yes.

Okay. The inventory levels downstream. How would you characterize? Is this kind of the bare-bones scenario still? In which, if we get some renewed activity on the infrastructure side we could see a doubling effect of they also building up a little bit of their inventories, plus what they are utilizing, similar to what you're going to do with getting in more wire rod?

How would you see that playing out in the next several quarters?

It's a very difficult question to answer because there is just no objective data other than what we have internally here. But my sense is that most of the excess inventories have been wrung out of the system. And I don't detect that anybody really wants to put themselves back in the position of holding a lot of steel that becomes speculative in nature.

I'm hopeful that we're at a steady state on that and that we don't see -- we just don't see a lot of bouncing around over the next couple quarters.

Okay. What gives you the confidence that we haven't seen the infrastructure boost as of yet? You believe that that is going to come, the money is there, that we are really going to see a dramatic effect from that part of the stimulus side of it, as opposed to that really just backfilling what is not going to be spent that would have been spent otherwise.

So how much of that do you think will actually be new? And what gives you the confidence that it's coming up here shortly?

I think you're right. The upturn from the stimulus will be somewhat offset by the other negative factors that are at play. All the deficits that you're reading about at the state level, and the actions being taken to cut back on spending -- there will definitely be an offset there.

And outside the infrastructure segment, just given the dismal outlook for commercial construction, there is going to be more ugliness in that segment as well.

So we would agree with your statement where there will be some offsets; and we don't expect there to be a dramatic upturn. Just based on the updated reports that are coming out on the spending, it's pretty apparent that it's been minimal at this point. I guess that is consistent with our experience and with what we are hearing.

We would expect -- at this point we would expect there to be kind of a gradual upturn beginning more in 2010 and continuing into 2011, rather than real dramatic bouncebacks.

The other factor is going to be how this Federal Highway Funding Authorization is resolved and whether we are looking at a longer-term fix that provides for a significant increase or whether it is just a short-term extension, which would create a lot of uncertainty and could result in project deferrals.

I think the reality is that for the stimulus and the highway build, the way that things are developing -- and it be hard to characterize it as extremely bullish for our industry.

Okay, and a lot of that money still has to be matched by municipalities or states or otherwise. It is not a blank chuck situation, kind of like normal federal spending on infrastructure is anyway. Is that still the case?

So really until we get these municipalities, states, other people into better financial shape, they may not seek to utilize that money, because they still have to match a portion themselves anyway.

I think you're right just on the normal highway funds. I think I recall reading somewhere that some of the stimulus funds are not subject to local funding matches in the case that the stimulus funds. It is just a question of getting them out there.

Okay, and last question for me, obviously on the PC strand we don't know ultimately what happens. But is it your thought that, should things turn out favorably for you, you could at least get back to the market share you had in '06 if not greater, if the playing ground was even?

Well, I mean, I think the first assumption you've got to make is market size. I think the market has shrunk probably in the range of one-third measured by units.

So your question said the market share; and I suppose market share, yes, we could get back to where we were. But it's a share of a much smaller pie.

Okay. Thanks a lot, gentlemen.

Tim Hayes, Davenport & Company.

Hey, good morning. Just had one question on your comment or on your outlook for private non-res construction. You mentioned that you see that softening. I wanted to know over what time frame is that? We certainly would share that view over the next one to two years.

I was curious. Over the next one to two quarters would there be any rebound in that market, now that destocking has ended and maybe the worst of the credit crunch is behind us?

Yes, we would expect some improvement. The improvement that we experienced within the quarter, where that sequential increase was higher than it typically is, we would attribute that as being a bounceback related to the end of destocking.

But I mean in terms of the next few quarters, I guess we would expect that higher level to continue. But in no way would we expect to be all the way back up to the 2008 or 2007 level, that it would settle out somewhere in between.

Right. Could you get any rebound, again if you just isolated the impact of the credit crunch and how bad it was a few months back?

I don't expect that.

Then just to clarify, if we do get at least a temporary or a short-term rebound, would it then -- do you then see it turning lower, say in fiscal -- later in fiscal '10 and on into fiscal '11?

You're still referring to private non-res?

That's correct.

I think that the bleakest outlook would be for commercial construction. In particular it's kind of a mixed view right now, where the largest declines are anticipated in that commercial construction segment in particular. In institutional with healthcare, educational, those segments are generally expected to hold up better; the declines would be more moderate where there would be some upside coming out of the stimulus spending.

Visibility continues to be pretty limited. I think most of the forecasts that you see out there from the major firms would reflect pretty severe weakening through 2009; and then as we get later into 2010, we could see some improvement later in the year; and then even more so in 2011. But visibility is pretty limited right now.

Okay. Thank you.

(Operator Instructions) [John Fuller], Oppenheimer + Close.

Good morning, gentlemen. My question relates to capital expenditures. I know in the quarter it was a nice and low number; and you mentioned in your commentary that the bulk of your CapEx is behind you. I was just wondering what you thought ongoing, if this was a decent level, normalized CapEx?

We have stated previously, and I think it's probably still the case, that the baseline maintenance CapEx for the Company is somewhere between $3 million and $5 million. And I think that is going to hold true going forward.

Okay, great. So this is just an inordinately low quarter.

Yes; I mean, intentionally so.

Then I was wondering if you could talk a little bit about possibilities given the current landscape, if you're seeing any stress among your competitors that you might be able to take advantage of.

It's hard to really know, given that most of our competitors are private or they are part of large multinational companies. It's hard to know exactly how everyone else is dealing with these conditions.

I would say that we're -- that I think our interest in growth opportunities is known widely and our ears are to the ground looking for opportunities all the time.

Okay, great, and last question. Are you seeing any big deterioration or large deterioration in receivables?

It's actually been pretty amazing that they've held up very well.

No significant issues.

Great. Thanks very much.

At this time there are no further questions in the queue. I would like to turn the conference back over to Mr. Woltz for any additional or closing remarks.

Thank you, Katie. We appreciate your interest in Insteel and your spending the time on the call today. Don't hesitate to follow up with us at your convenience. Thank you.

This concludes today's conference. We appreciate your participation.