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

Thank you, Kevin. Good morning. Thank you for your interest in Insteel and welcome to our third 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, 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 the call over to Mike to review our third quarter financial results and the macro indicators for our construction end markets. 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 posted strong results for the third quarter of fiscal 2014, with net earnings rising to $5.8 million or $0.31 per diluted share, from $3.5 million or $0.19 a share in the second quarter and $3.3 million or $0.18 a share in the prior year quarter, excluding a net gain from insurance proceeds related to the fire at our Gallatin manufacturing facility, net earnings for the third quarter were $5.3 million or $0.28 per diluted share, the highest level since fiscal 2008, before the onset of the recession in the non-residential construction sector. Net sales for the quarter rose 16.8% from last year to a record high of $113 million driven by 16% increase in shipments, which also reached an all time high and a 0.7% increase in average selling prices. The previous highs however were not on a comparable basis, as they were achieved prior to our November 2010 acquisition of Ivy Steel & Wire. Since Ivy was generating over $200 million of revenues on a standalone basis in 2008, our pro forma combined revenues were approaching $600 million, which is still significantly higher than our current run rate. Although demand in our markets remains well under pre-recession levels, we are encouraged by the continued recovery in shipments, which have now risen year-over-year for five consecutive quarters, and in seven of the previous eight quarters. On a sequential basis, net sales were up 23.8% from the second quarter on a 25.2% increase in shipments, partially offset by a 1.1% reduction in average selling prices, driven by a less favorable product mix relative to Q2. Gross profit for the quarter improved to $14.3 million from $10.9 million a year ago, with gross margins widening 130 basis points to 12.6% from 11.3%,…

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 third quarter. These favorable trends are largely consistent with the various macro-indicators and forecasts for the construction sector, and our previously stated view that demand for our reinforcing product should improve over the next few quarters. While our capacity utilization improved to 58% in Q3, it remains depressed on an absolute basis relative to pre-recession levels, and we suspect that competitors are operating at comparable rates. Taken together, slow growth, capacity additions by certain competitors and concerns about the resilience of the construction recovery, have contributed to highly competitive pricing environment that prevails in our markets. We expect that these conditions will persist, until there are further meaningful improvements in demand. With that said, the pricing environment during our third quarter was relatively stable, reflecting growing demand for reinforcing products and lower volatility in pricing for our principal raw material, hot rolled wire rod, contributing to the more stable pricing environment has then reduced volatility in the steel scrap markets, which have traded at a narrow range over the past few months. We welcome the stability, and would like to see it continue. Ultimately, we would expect to see the opportunity to expand margins, as market conditions continue to improve, and capacity utilization rates rise, providing the industry with the opportunity to sell more selectively. As we reported previously, last January, a group of domestic wire rod producers filed anti-dumping and countervailing duty cases against China, which has been the primary source of imported wire rod to the U.S. market for the last two years. On July 8, the Department of Commerce published its preliminary determination in the CBD case, indicating subsidy rates between 10% and…

Certainly. (Operator Instructions). And our first question comes from Tim Moore of Rutabaga Capital. Your line is now open.

Yes thank you, appreciate it. Congratulations on the quarter's top line growth acceleration and the nice rise in utilization, but I was just wondering you know, with so much net cash now and your untapped revolver, as well as interest rates low, can you kind of may be share with us, if you give me consideration to may be doing a buyback and how you weight that against, maybe a strategic tuck-on acquisition?

Our view on that is consistent with past periods, where we view the number one objective of the company for use of its resources to be finding growth opportunities going forward. Once we believe that we have adequate liquidity to accommodate those; as you know, we have a buyback resolution in place. We also have a history of returning cash to shareholders through special dividends as warranted. So I don't think the company's position has changed at all, those are the priorities or the continuing priorities, and I think you can expect us to act in the future as we have in the past on those issues.

Great. Thank you.

Thank you. And our next question comes from Tyson Bauer of KC Capital. Your line is now open.

Good job gentlemen, and hopefully, better quarters ahead.

Thanks Tyson.

Couple of quick questions, we talked about the private there or non-public activity in the construction site. Do you have a sense of any pockets of greater strength and others, maybe on the commercial or institutional or industrial segments that you've seen a greater benefit, given the location of your manufacturing facilities?

I would say that disparity is more geographic than by construction. And I don't know that we have tremendous visibility into each construction segment, except for the data that's Department of Commerce oriented. Geographically, we continue to see Texas and the surrounding areas as the strongest market, but recovery elsewhere as well.

Okay. Nice segue with Texas you mentioned that in your answer. We are seeing more states independently not -- basically counting on the federal government to provide funding for infrastructure needs and doing special activities raising funds, doing their own bills that are more state oriented, and so, looking for matching federal funds, they seem to be the leader in the country of doing that. You are ideally located in Texas. Is that going to be a growing theme, if the best that we are hoping for on the federal policy is just to maintain previous spending levels, and they may do add on bills there specific to bridges or otherwise, but the general highway funding seems to be, best case scenario just maintaining. Will we see a greater percentage then going on to the states and the local municipalities to meet their infrastructure needs?

Yes. I mean, we would expect that to be an ongoing theme, where there has been a lot of situations and then the states really don't have a choice, because they can no longer defer certain outlays. So you're seeing a lot of alternative approaches being pursued to raise revenues through the various means and to the extent there is continued uncertainty at the federal level, we expect the states will get more aggressive.

We are also seeing a trend in the oil-energy markets, having to provide funding for states, as they use the infrastructure for a lot of their trucking needs in fracking operations and otherwise. Is that a pocket of strength that you're also participating in?

We believe we are benefiting from that, but it's difficult for us to get that granular and pinpoint like how much demand or consumption is driven by that specifically.

Tyson, I am sure you've read about some of the mega chemical projects that are underway in the shale oil geographies and those facilities do require a lot of underground infrastructure that consume our products. So to the extent that those facilities wouldn't be built or [indiscernible] for the fracking and the shale oil phenomenon, then we are definitely benefiting, although its impossible to quantify.

Okay. The higher shipments you had in the quarter obviously have a seasonal benefit there. Did you see any outsize increase, because we had the weather situation earlier in the year, or do you think what you saw was really reflective of the industry gaining some momentum, and that's what we should continue to see as we go forward?

Yeah, that sequential shipment increase of 25% that's significantly higher than what we would typically experience. So it is a combination of factors, whether there is definitely some effect from pent-up demand due to the adverse weather in the previous quarter, but the increase was above and beyond that, reflecting continued improvement in activity.

Okay. Last question, you talked about some of the industrial, the chemical plants, some of the other growth areas. Are you seeing a better adoption rate and better reception to your ESM product line, and do you think that will facilitate better margins as we go forward?

Yeah, we continue to make good progress with state DOTs and individual customers to adopt ESM as alternative means of reinforcing, and we expect growth out of that sector and I'd say, we are proceeding on the expected schedule.

Sounds great. Thanks a lot gentleman.

Thank you. (Operator Instructions). And we do have a question from Jon Evans of JWest. Your line is now open.

I am sorry. This may be a silly question, but especially in Texas, it seems like the cement companies and the readymix guys are getting pretty aggressive on pricing and start to push pricing. Does that give you any ability to have cover to push price for your product in Texas as opposed to other markets, or could you give us any insights into that?

I would say, it doesn't really give us any color. I think the same market for us is that are allowing the cement related industries to raise prices are positively affecting our business, but there is no direct linkage. So I would take that as a positive underlying fundamental of the market, but I wouldn't infer anything about our ability to price our product from it.

And then just relative to spreads, I mean, with what you see, relative to scrap pricing? Would you think spreads get better in Q3 as opposed to Q2? I mean, relatively or sequentially?

Well its hard to say and we make a habit of not forecasting spreads and margins, but if you go back to the comment that I made on what its going to take for us to see that opportunity to expand our margins, we are really going to need to see the industry operating at better levels of capacity utilization and I think that just implies the need for continued market improvement.

Got it, great. Thank you for the answers. I appreciate it.

Okay, thank you.

I am not showing any further questions at this time.

Okay. In that case, we appreciate your interest in Insteel, and we look forward to talking to you next quarter. 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.