Good day, ladies and gentlemen. And welcome to the Insteel Industries' First Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow that time. (Operator Instructions) As a reminder, this call is being recorded. I would like to turn the call over today to H. O. Woltz. Mr. Woltz, you may begin.

Thank you. Good morning. Thank you for your interest in Insteel and welcome to our first quarter 2014 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 on today's call 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. All forward-looking statements are based on our current expectations and information that’s 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 the call over to Mike to review our first quarter financial results and the macro indicators for our construction end markets and then I’ll follow-up to comment more on market conditions and our business outlook.

Thank you, H. As we reported earlier this morning, Insteel's net earnings for the first quarter of fiscal 2014 rose to $2.7 million or $0.15 a share from $2.4 million or $0.13 a diluted share in the same period last year. Although, our results for the quarter remained depressed on an absolute basis, reflecting the historically low level of construction activity, this marks the fifth consecutive quarter in which we posted year-over-year improvement and our highest first quarter earnings in six years. Net sales for the quarter were up 1.5% from the prior year, driven by 6.4% increase in shipments, which is partially offset by a 4.6% reduction in average selling prices. On a sequential basis, shipments fell 11.3% from the fourth quarter due to the usual seasonal downturn from the onset of winter weather and drop off in construction activity, while average selling prices rose slightly during the quarter. Gross profit for the quarter rose to $9.1 million from $8.6 million a year ago and gross margins widen to 10.4% from 10% due to the increase in shipment and higher spreads between selling prices and raw material costs. Despite the seasonal drop off in shipments, gross profit rose $0.4 million sequentially from Q4 and gross margins increased 1.6% due to wider spreads. SG&A expense for the quarter fell $0.1 million from a year ago largely due to the relevant changes in the cash to render value of life insurance policies. Our effective income tax rate for the quarter was 36.6% versus 34.7% in the prior year, due to changes in permanent book versus tax differences. Going forward, our effective rate will continue to be subject to fluctuation based upon the level of future earning, changes in permanent book versus tax differences and adjustments to the other assumptions and estimates…

Thank you, Mike. As reflected in our release and in Mike's comments, we are encouraged by the continued improvement in market conditions during the first quarter. Recent industry statistics as well as most respected construction forecast for 2014 are consistent with our previously stated view that demand for our reinforcing products should gradually improve over the course of the year. Our capacity utilization level, however, has remained depressed, coming in at under 50% for Q1, and we suspect that our competitors were experiencing the same trend. As we’ve pointed out previously, we believe the reduced operating levels together with declining prices for hot-rolled wire rod, our primary raw material have been responsible for the highly competitive pricing environment that has affected our financial results for several quarters. Through much of 2013, declining prices for hot-rolled wire rod were driven by similar deterioration in prices for steel scrap. During our first fiscal quarter, however, steel scrap prices rose sharply resulting in price increase by wire rod producers that became effective in December and January. Consequently, we have announced price increases for our reinforcing products that are sufficient to recover these additional costs as well as increases in our freight costs. Several competitors have announced comparable increases. While we would prefer a stronger underlying demand fundamentals as the basis for pursuing price increases, we believe the magnitude of the wire rod increases will focus competitors on the need to recover rising costs. Going forward, higher transaction prices are essential to maintaining acceptable profit margins. With respect to CapEx, you may recall that we’ve just commissioned the new specialty engineered structural mesh production line at our North Carolina plant at the time of our last earnings call. We’ve continued to ramp up its operating rate and are pleased with customers acceptance of the…

Yes. (Operator Instructions) Our first question comes from Tyson Bauer from KC Capital. Your line is now open.

Gentlemen.

Good morning, Tyson.

Couple of quick questions, we’ve seen some increased activities states have taken to bolster their infrastructure spending. I think as Pennsylvania past a gas tax increases, there’s some rumbling at the federal level coming this fall that could happen also. In general and European, there were lot of these increases there to support increased activity where a lot of those just backfilling deficits for the funding that is currently going on in budgeting, that is a lot of times been replaced by general funds been drawn into those infrastructure committees.

Tyson, I think it varies depending on the specific state, but generally it appears that a lot of the revenue raising measures are clearly geared towards increased activity from the depressed level of recent years.

Okay. What leads me into -- you talked about the gradual increase and we were going to intend to put numbers on that. I would suggest a gradual means probably growing at 10% or less, accelerated growth to be over 10% in a given year. What’s it going to take to move gradual to accelerated, in your opinion?

I think it will really require a more pronounced recovery in the economy where we’re seeing some positive signs with the most recent quarterly report. It is the most, bit more significant uptick and also it’s more growth in the labor market.

And, Tyson, I think that there's just a tremendous amount of conservatives in that play in the private non-res sector where there's still a lot of uncertainty in the economy and political uncertainty exists. So, I think we have to get past that. And in addition, I think on the infrastructure and government-funded side of our markets, there just has to be a healthier level of spending commitment to see that come back. Your prior question concerning state efforts to bolster spending while it is difficult to quantify to a net impact in the governmental sector, it definitely is good news but the question, is it sufficient to really move the needle and it's hard to say. I think we're not going to be able to get past the point that there needs to be a more solid commitment by the federal government to support infrastructure spending. The rest of this is working around the edges of the problem.

Okay. And last question for me. If we have this general consensus of rising tide will be a gradual. Are some of these TIFIA -- projects that are upcoming, are those have been announced like in New York, New Jersey? Are those large enough to move the needle for you, if you're selected as a supplier or are they more or less one-offs?

No single project is going to have a substantial material impact on Insteel. It really takes on the cumulative nature because keep in mind that some of these large projects actually ship over 18 months or two years. So while on their own, they represent significant commitments. They are spread over a reasonable amount of time.

I think when you look at the TIFIA funding, the total potential volume coming out of that relative to the Map-21 authorization that would imply a pretty significant increase. But on an individual basis, these projects really won’t have a significant impact as H indicated, but when you roll it all up, it is pretty meaningful.

All right. Thank you, gentlemen.

Thank you.

Next question comes from Robert Kelly of Sidoti. Your line is now open.

Good morning, guys.

Good morning, Bob.

Good morning, Bob.

Just a question on the raw material increases that you’re seeing and if you’ve instituted or announced any price increases?

You mean the magnitude?

Yes.

Yeah. Okay. Generally speaking over the course of December and January, we’ve seen wire rod price increase announcements totaling $50 to $70 per ton, last night another one for $23 a ton was floated by a major wire rod producer. Our increases vary by product line to some respect, but if you said, it was in the neighborhood of $80 per ton then that would be big a good assumption.

Okay. So you are going to, you think you are going to recover all of the announced increase?

Well, we are certainly going to it, yes.

That’s your plan. Got it. Yes.

Yeah.

Fair one. As far as the commentary in the press release about consumer -- customer sentiment? Could you just talk a little bit about that? Is it optimism on the part of your customers or is it order flow hitting there, hitting their book?

No. I think that the outlook is generally more optimistic for our customers driven by better order books that we are seeing, we are seeing customers who reporting concrete two and three days a week, a year ago reporting four to five days a week and its spotty and its regional, but I think it’s -- there is no doubt that the trend is generally positive, it’s just -- it’s modest but positive.

Okay. Fair enough. And then during the final part of the prepared remarks, you talked about potential trade actions filed by -- was it wire rod players or your competitors, that’s just…

No. It's widely speculated in the industry that there will dumping and maybe countervailing duty cases filed by the domestic wire rod producers during the current quarter. There is no confirmation of that but it has been widely speculated for several months and I would say the chances are greater than 50% that it happens.

Okay. And then just taken that out of whole bed, assuming that we are successful, what does that do for Insteel as far as pricing, that -- would that benefit your pricing, if wire rod producers were to get a favorable ruling?

It's hard to say, but I would tell you that the constant downward drift of pricing in the wire rod market probably hasn’t really aided the fundamentals of our business.

Understood. Thanks guys.

Thanks, Bob.

Our next question comes from Chris Olin of Cleveland Research. Your line is now open.

Good morning.

Good morning, Chris.

Good morning.

I just wanted to touch a little bit about the news flow that’s been coming in with all this energy infrastructure investment going across the Gulf States and the LNG export facility. I’m just wondering do you expect that to have a -- which really impact on your business or do you have exposure to that?

Yeah. We keep our eye on those projects and can tell you that we expected they would have a beneficial impact on our market. The LNG facility should they be built are rather intensive users of our products and some of the other related project such as refineries and chemical instillations are pretty intensive in the use of prestressed concrete piling and other products that contain reinforcing materials and we generally consider it very positive for our business, although we can't quantify the impact.

Interesting. Would you estimate is it a second half ‘14 driver or would be more of 2015 issue?

One of the two I think would be likely, although I’ll probably put it in 2015 more than 2014. There seems to be a lot of political aspects to getting these projects off the ground.

Okay. Thanks a lot.

(Operator instructions) I’m not showing any question at this time. Please proceed with any further remarks.

Yeah. We appreciate your interest in the company. We encourage your follow-up, should questions emerge later on. Thank you.

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