IIIN - Earnings call transcript Q3 2020 | Insteel Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Insteel Industries Third Quarter 2020 Conference Call. At this time, all participants' lines are in a listen-only mode. After speakers' presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded [Operator Instructions]. Today's call is being hosted by H. Executive Mark Chief CFO Vice and Treasurer. and President Officer Carano, and President, Woltz, like the to your now would I hand today, first conference Mr. speaker to over H. Woltz. Thank you. ahead, go Please sir.

H. Woltz

Insteel welcome for which first call, be earnings is company and conducted team. our the in Thank Treasurer XXXX Carano, will your and Mark call him President, morning. third quarter with you Insteel, Good to we Mark's and Vice to by and our earnings This the interest welcome CFO me.

today, confidently and that's and statements begin occurrence recent will on for the the on strongly anticipated to business XX review from call are obligation events performance to Insteel going and to like transforming conditions Insteel’s of call other information expectations we into made our were periodic new company those Before I'll All forward-looking or the of These some on our is forward. projected. our me I’d Gazmarian, risks cause for our reflect you the future of management results. orientation, Mike very of are the and work I based thank behalf our the today, to making call shareholder any to that Then for the currently that SEC. that more entire to uncertainties follow Board assume like Mark today's in described Directors, company available. to leadership developments. not Mike effective information. differ comments those on financial competitor comment team that I current to who various quarter CFO call On third the who the his wish are are to remind focused July to years up could Pertaining leave materially would on considered you be its served aware results the Mike, place unanticipated we or update will and faithfully turn integrity to markets, XXst. instrumental and as best over now in let premier with which these investors. good and be forward-looking statements We risk and subject statements, filings do the in actual factors to friendly

Mark Carano

us Great. H, call. I'm joining Thank participating morning to the my Insteel. of everyone pleased as be on you, to earnings first good and in call here CFO the

from the depressed in third reported results and ago the we was spreads year between and recovery the a earlier levels key of XXXX. of raw fiscal for As today, selling driver quarter the materials prices strong our

also to benefited strong the shipment year period. our from Additionally, prior growth performance relative

in gain increased charges a construction incremental share this $X.XX more level last to to benefit favorable quarter the a of as the the across and sequentially that was the from XX and return strong Shipments Excluding pricing pronounced. last more sequentially period. though last shipments from X.X% QX, was these for average of the by Strand-Tech prior business. and year activity acquisition the The decline was strand performance third declining was generally welded impact import increased XX% declining for XXXX. QX. that susceptible weather And sales of of XX.X% straight shipping pressure the for in more the competition, these import driven compared most from selling for of fell prices, construction XX% to exceeded Manufacturing which markets, benefit our remainder activity conditions declined X% which the shipments represents of which only tonnage in reinforcement of PC $X.XX and our the wire our our markets the prices rose standard for quarter X.X% sixth the rose year-over-year, susceptible our year. net from the In overall of quarter, offsetting were the certain the release, to represented earnings than a highest to about years, quarter referenced and from quarter, was in Partially from the those the second selling sequentially non-recurring of markets in markets X.X% share year double which last average competition, year

and strand previous the on negative spreads through and that on have a XXX the the conveyed government basis pursuing standard authorities, increase points those lesser aggressively import markets, our respectively and selling to profit equities PC we’ve U.S. we remains duties field As efforts the price Gross wire margin To prices. in million and or quarter optimistic trade average to increased million successful and year remain in gross and from for market with extent impact actions in remedying other low ago are a the from our a intense widened to competition continues wider markets mechanisms. welded level in the playing calls, to primarily $XX.X shipments. to these and due will X.X%, $X.X be XX.X% international

which consistently impact pricing the the selling the markets historically per depressed during remain XXXX sales from the $X.X average million Benchmark material from offset quarter. of year-over-year $X.X experienced change fiscal decreased the was from in the XXXX. downward last quarter we increase and pressure first as our from cash been surrender exceeded While margin the prices on year from ton XXX legal that two consumption quarter priced have rose a the Index levels levels sequential over that from gross two affect negative XXXX declined the Chicago second January ago policies by from the low in of Spreads last basis, per SG&A prior historically as costs, inventory normal The Current financial $XXX,XXX signaled can by of quarter gross spread above rod value more fiscal basis decline year. and to under to quarters in due these few a quarters for $XXX by Scrap profit expanded benefited raw primarily the to driven levels of were X.X% July the of the trends, points. $XXX,XXX over in a and comp our last expense last million months. incentive X.X% $XXX life insurance XXXX. rebound Shredded declining favorable quarter or net from in accruals ton partially in to costs fiscal

months Act. effective $XXX,XXX last of provisions NOL benefit Our to year related nine of to carry decreased the due in back XX.X% XX.X% the the to through year quarter rate the from tax first the CARES recorded

for first nine tax the of rate to XX.X%. Excluding as months the compared have year's been year would this effective the benefit, XX.X% our last

around Looking the our into our tax XX%, provision ahead the effective will pre-tax differences subject rate expect to of book we level the and other estimates tax of calculation. remainder run earnings, to assumptions factored year, and

We inventories by statement, reduction Moving sales cash an the flow timing activities million cash of months accounts related the forecast working end the of compared on with largely quarter. in of cost value end amounts on of purchases. overall shipments and months in sales. the carrying our the average balance hand outstanding driven concluded $X $XX.X sheet QX of to basis, or of earnings credit million we And quarter share $X.X payable quarter close cash a with the and X.X operating our for on QX, XXX% an material X.X to almost reflected of provided is $XXX unit second $XX.X quarter capital, million for million facility availability represented over which our to and the today. raw on combination revolving a no due for borrowings to at have relatively Based

As to outbreak. remain we resulting backlogs. markets busy expect to sustained But working be through the the visibility due XXXX quarter year, fourth as to remains we customers look strong from the COVID-XX the this uncertainty our ahead in our limited fiscal fiscal of their

Fortunately, our opportunities owing flexible strong opportunistically marketplace act as liquidity through mentioned to of today's condition as with earlier, and operating uncertain us any to and arise. combined our our positions flexibility navigate when, well model, financial

executing a balancing H. through adequate over meet and to expenditures strategies Our improvements capital strength, and to return financial the reinvesting to operating business returning while shareholders our pursuit cost support growth; the with capital of capital focused maintaining in call improve our three parameters our growth; model deployment remain disciplined on that objectives; manner. in I accelerate productivity back strategic the opportunities organic will to inorganic our turn now on

H. Woltz

demand Mark As shipment by patterns. to seasonal our reinforcing reflect products concrete growth more strong our the indicated, for year, normalized third relative and to prior underlying return favorable weather quarter driven results

transmission the our to industry benefited its well exposure was QX related our managing administrative recommended and to outbreak, products none from materially the We manufacturing our deemed were underlying demand raw procedures has also essential, financial at third prices. average costs between selling during facilities of operating plants, our material virus quarter. COVID our as affected alignment offices. by solid with our observing and we're entry Order restrictions the remained our In for robust. the With as pleased performance. and response for closer We CDC the COVID-XX

regulatory Although, we has abated. during cases saw had administrative COVID confirmed the week, and now responses, Midwest our Through beginning COVID-XX and largely offices. affecting some moderation the plants the company six which this in quarter, XX of reflecting the related Northeast

to have Fortunately, and XX there's recovered work. been employees only one hospitalization returned and

the recovering, plant. we to forward and is Our to hospitalized look back welcoming him employee

remain Although, the demand, do operating the predict to ultimate and eventually on to Should has customers fulfilling adjustments so normal the to business, prepared schedules operating our precipitous can on appropriate without as make statement, to are experience provided a minimal. safety we operations our people. We in unable off compromising we're drop general adhering customer impact virus requirements plans. of that the our a of impact our been we're we to committed the

plants elected the inventories standard pandemic While I'll quarter operations on Mexican the line. downtime impact weeks presentation. two not to due during of the our did affect products where later we comment were product goods levels at two trending imports to finished imports on this schedule QX, concerns reinforcing producing during excessive more of toward materially in

closing, we Customer know, Since certain engineering for Integration customers. delivered on at facility responsibilities Strand-Tech you will site the and facilities completed transferred proceeded a deployed and service immediately site for Insteel the been acquisition the Summerville March. of on fulfillment upon people smoothly closing, of transition have be assets renovating closure Insteel has is order Manufacturing plants. our As schedule. in equipment activities team and to in continuously our updating seamless other were practically the that Strand-Tech Summerville and plan

equipment QX first now into underway are process, transfers of which will continue fiscal XXXX. beginning The a

that's been has from Tennessee, process bottlenecks will efforts. received. process strand realize also of our this for Florida eliminate working and to Strand-Tech be up to with Insteel including production equipment facilities. The pleased that to expect Summerville of real other transaction, status integration the the Strand-Tech significant the very not and interest be property the PC leverage summary, point, customer We're at with used and level we're We listed operating will by the which assets, the Texas sale through of pleased retention disposing of we're In plants. utilized

As countries PC filed investigation On from preliminary a during determination strand producers, addition subsidies. filings, the Commission strand QX countervailing issued against to U.S. XXth, the which Turkey the we of scope The two June the of shifted petition representing to call, of PC behavior Trade illegal margins countries, U.S. Insteel April Commerce. alleging on the Xst, to Department in XXXX together against the mentioned in dumping the of XXXX, strand market investigation imports XX to injury and the the ranging anti-dumping alleged these total with entering PC period. XXX%, XX% petitions producers XX% over International duty other over in affirmative from reflects XXXX its egregious domestic

alleging and and tentatively by Mexico April November XX% other June that of XXXX. domestic Commission. out, point four an should procedural standard however, I May margins petition to welded found considerations Trade On producers milestones wire International cases the Insteel XXth, be the and the September dumping and anti-dumping value. reinforcing timeline Additional could XXX% Department are for of scheduled the and from of against impacted for at XXXX Commerce

is wire will This increased welded PC it'll a and For undersold screen a be the Mexican domestic the penetration case cases, since as Mexican involved has import only market protracted of period has substantially somewhat country standard time, imports similar follow filing. compressed significantly. in of timeline although, consequently, one reinforcement

We render August. of Commission expect preliminary determination its the middle to International by injury Trade of the

supported allocations to cases, believe As and the successful. made by the in the are extensive not outcome with analysis we possible predict be we the any cases cases litigation, expect to strongly the of and underlying it's these but facts

as due initially subject estimated likely through CapEx, CapEx to XXXX we of Last million the be indicated approximately quarter, $XX million would business. committing during move resolved investment engineered to revisions year. we that and Subsequently, QX. to to XXXX surrounding expenditures to we that have $XX for under Turning substantially questions an we our committed in structural delays forward move were project mesh

certainty XXXX approximately will to $XX now CapEx the While timing in outlays, believe with predict we at that we're million. unable come of

Our CapEx products, capabilities. our strategy supporting cash to business our reducing quality and the of production, be on engineered infrastructure mesh and of continues structural information costs our of improving the technology focused growth improving

reasonable into performance. QX, another we financial further As head expect shipments solid of and we quarter

and of the non-residential construction on increased as to construction. XXXX, conditions out sources private for however, public view are risks impact Looking uncertain created the for pandemic funding in of market

not this significant monitor We’ll consequences continue pursue as in to and Daniel, asking would activity market surprised our acquisition. concludes have This to costs. our pursuing conditions We’ll prepared please felt take some We see explain economic for appropriate in growth also of questions. be our to in actions the we’ll opportunities, and you and optimize vigilant now to aggressively downturn are the organic been softening your markets. closely both the through remarks, procedure questions. continue

Operator

first and from Company. Romero [Operator question Our Instructions] with comes Sidoti Julio

now Your open. line is

Julio Romero

been would changes highlighting? But impact I view? more It worth impact any can but again any the talk comments the minimal prepared uncertainty, environment, response, would about in what's you or talk in sounds competitive maybe biggest the you the just your about I guess biggest like to be anything maybe broadly start, or the impact, customer remarks. COVID-XX that say in is else appreciate

H. Woltz

been has impacts high. has our minimal been the on the concern While operations,

impact infections predicting operating facilities. their the We in rates of have who have customers their manufacturing difficulty based on

and We wind up conservative staffed completely that in vacancies been have if been which quarantine aren't shifts our and will month, or the or operating fall. a overall, say most at next be disruptions as uncertainty week people our had that around. us impact configurations work and neither right problem attention the But we've been Insteel’s we get because exactly operations to significant I'd the for clearly, this Insteel procedures nor own in customers exposed, been that manufacturing facilities that's they've maybe point, ensure what created say the with conditions and be that's can means in next in

demand that true say of don't long our typically we subject particularly daily So, I'd because while have a a change on now, basis. that's view is to right markets in everything

Julio Romero

of and would as residential couple public, Could on end manufacturers. I be areas And you what maybe that the talk sense from within talk to your of just up to any you holding kind you helpful? nonresidential I as steps project. within private customers, areas removed talk the concrete or point, have you But to guess know well? of that

H. Woltz

be robust. public has I to think Well, continued pretty construction

prior a aware, well funded that the distribution you’re also a have us. uncertainties of glide projects been robust those amount of the all path private on to tremendous most have work to has for quite nonres seen which center continue As and We've to market, appears the developed. long in side were

significant So, this area at any weakness I point. out can't of point

Julio Romero

was I from the I really quantify in I there, quarter hoping mean, you'd Strand-Tech was maybe strong really volumes the quarter? tonnage on then And impressed the there. incremental

Mark Carano

with acquisition. that's that disclosed but respect more we to with to historically, Julio, broadly, a Yes, that's actually, haven't the respect tonnage number also

H. Woltz

precisely certain to and really business accounts, we with accounts that those tonnage. us down pin care on the on for focused for of that we've Julio, was good certain were cases just taking it's at difficult incremental of the difficult it's part other Strand-Tech servicing, And really know Strand-Tech splitting it us is to but

Julio Romero

I guess retention another the has I way. guess just to mentioned maybe good. ask you pretty been customer

with the be maybe could If Strand-Tech, retention efforts customer speak to that would maybe you helpful?

H. Woltz

these key, good And making commitments transaction on it won't key a focus know competitive driver was with lives is their our our point. surprise up been pleased we retention on seen extent And market pricing we've we're that of that us. retention can stick that that with the to and delivery, with the to with accounts they'll making being done that you Well, for make easier this successful. has customer we've to this probably and

Operator

[Operator KC Instructions] from comes Our next question with Tyson Bauer Capital.

line now Your open. is

Tyson Bauer

lower It taking to this are of bonding state Does they're reading or increasing regarding for would activity. of that the help that your us out do lot you help a Transportation's sense, pattern and that lot project Can a states I’m appear they municipalities, Department of bonding? advantage bonding if oriented, fund that their headlines give outside a time. availability general of that is insulate at business, of current or of typically the rates continue particular of

H. Woltz

basis is Yes, have and strapped think We've I that state local for I that as of the own bond more federal level at for have and trend strapped become a these last mean, to tax years not is have municipalities the or absolutely. in on come been with dealt few prior DOTs try seen over new statewide funds and localities, many government. out of local the that And funds issues some their years. entities replace a this turned of funding the they may or financing, to have have fuel to

for think is I So, positive us. that the trend

know downturn fuel receipts be offset in I distributions what sufficient we serious federal it a that XXXX. and to believe Although, be in will don't would pretty

be remains think, it I seen. to

Tyson Bauer

the think technically September. of run fund trust out highway I in Doesn't money

your some Is in just taken understanding? be that to So the regards must action maintain.

H. Woltz

It is, yes.

Tyson Bauer

for may past fact into try stimulus? years? do availability that two the minimally of maintenance seen funding to the anticipate we've that, they you increase Or and you Would buy that

H. Woltz

Well, good questions.

context And I to damage our think say. there the has hard the in funding popular the whole to stimulus wrapped economy, this scenarios. level. that Washington. into in be will sort comes on focus the seems minimizing and of infrastructure of with these action before expect to the federal it's be, of program November infrastructure COVID considered election be the to that that fully in and But Whether isn't I'll or up recovery at emphasis be all if some surprised be after, would election very I I

Tyson Bauer

referencing your early, What when on on obviously or focused private it’s your do say backfill outlook, uncertainty business isolated portion whether or in probably the the current you most 'XX that it's and which not nonres activity? back of

H. Woltz

I would have both ear who occurring when private at news months our say risk out, talk to on are ground I bidding public there's nonres that to And both sectors. backlogs six activity that's XXXX. And point. concerns, for trying we But, and construction that to think in go the customers keep there’s to Tyson. this on eight we're mix

Tyson Bauer

companies design? Is Tilt you of those for big area. key it that area to or kind has for that's kind focus type which that's excel provide appears those on of to groceries stores and as into been greater DCs construction. of getting some or whether something doing, the a economy an that puts opposed up and manufacturing, home equation It and delivery-based, saving more are what the in at that cost that to you going be that construction has other that otherwise, much we're at that going people been taking companies of typically a buildings Amazon

H. Woltz

on Absolutely. this us year. a have great degree It's capitalized to and for a sweet we spot it

for your the opening in way pointed trend you a that that you in exactly comment believe also question. that out long reason the We run to has made

to very continue. we and it's So it robust expect

Tyson Bauer

too one, I don't time. much Last take up so

they on at under examined your should Is the cash Or outlook the you amount that built are a cash possible at Years having too level dividend put the opportunities arise? special past, there of got significant uncertain being of conservative end up. M&A and You more you a the board have focused year. 'XX in to consideration?

H. Woltz

the Well, on growth and our business our objective Tyson, opportunities organic for hasn't find position first both attractive that really to changed, acquisition. by is

have beyond conservative we’ll to with be that we seriously strategic is advantage to cash uncertainty. that a our balance we're cash sheet, on because that believe of hoard if operate all basis consider believe we we has But to required then the continue shareholders. conservative real not to is it in respect business going that will We said, this to that times with

Tyson Bauer

as things you, and hope and gentlemen. a And All all well the of dealing service years in Mike, thank right. pleasure, you Thank Michigan. you, for go real with I

Operator

questions the Woltz H. Thank call I this turn to now you. any would any time. back at further for I'm not showing closing over remarks. like to

H. Woltz

you at Thank Okay, if forward the you you. in to company and your thank we QX us back with with encourage call questions you. arise. interest look the We And to appreciate they speaking call.

Operator

today's Ladies and Thank participating. this concludes call. gentlemen, for you conference

disconnect. You may now

Insteel Industries (IIIN) 16 Jul 202020 Q3 Earnings call transcript