Good day ladies and gentlemen, and welcome to your Insteel Industries second quarter 2010 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 be given at that time. (Operator Instructions). And as a reminder, this is being recorded. I'd now like to introduce Mr. H.Woltz. Please go ahead, sir.

Thank you, good morning and thank you for your interest in Insteel, and welcome to our second quarter 2010 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'll now turn it over to Mike to review our second quarter financial results in the macro environment, and then will follow-up to comment more on market conditions, the PC strand trade cases and our business outlook.

Thank you. H. As we reported earlier this morning, Insteel returned to profitability during the second quarter of fiscal 2010 and further strengthened its financial position despite the continuation of challenging business condition. Net earnings for the quarter ended April 3rd, were $1.6 million or $0.09 per share, compared with the net loss of $16.4 million or $0.94 per share for the same period last year. The prior year loss for the quarter includes the pretax charge of $16.1 million or $0.58 per share after tax for inventory write-downs to reduce the carrying value of inventory to the lower cost-to-market, excluding these write-downs; the year ago loss would have been $0.36 per share. Insteel results for the second quarter were favorably impacted by higher shipment wider spreads between selling prices and raw material cost, lower unit conversion cost and the lower effective income tax rate. Net sales for the quarter increased 3.7% from the prior year driven by 34.7% increase in shipment, which more than offset at 23% decrease in average selling prices. On a sequential basis, net sales rose 26.9% from the first quarter of fiscal 2010. Despite the adverse weather conditions that we experienced during the quarter, Q2 shipments were up 25.7% sequentially from Q1. The sequential increase in shipments were significantly higher than the usual seasonal improvement we experienced between Q1 and Q2 which prior to 2009 had ranged from 8% to 13% over the previous five years. We believe the larger increase this year was driven by customer inventory restocking and hedge buying in anticipation to future price increases, which more than offset the negative impact of the unusually severe winter weather in most of our markets. Even with the pickup in volume for the quarter, our Q2 shipments were still anywhere from 27% to 36%…

Thank you, Mike. Despite operating at less than 50% of capacity and encountering challenging weather conditions, shipments for our second quarter exceeded expectations by a considerable margin. Our analysis of the drivers of stronger shipping performance would indicate that inventory restocking and purchasing in advance of potential price increase announcements together with the favorable impact of the pending trade cases against China were responsible for the uptick, rather than any recovery of underlying real demand. You may recall that shipments during our first quarter were unexpectedly weak as customers reacted to slow business conditions and the normal lull surrounding the holiday season by reducing inventories to the full extent possible. We believe that customers return to work after the holidays facing unsustainably lean inventories and beginning in early January, a widely held sentiment that the significant upward momentum in steel scrap prices would continue for the foreseeable future. A combination of these factors in our estimation drove purchasers not only to replenish inventory to levels adequate to meet production requirements, but also to increases purchases to hedge against the potential for rising transaction prices. Given the pattern of incoming orders through the second quarter and continuing into our third quarter, we see no signs of a recovery in real demand. In fact order entry across all of our product lines has been slow through the first three weeks of our third quarter. Despite weak demand for reinforcing products, steel scrap prices and wire rod prices have risen substantially over the last few months. Our wire rod suppliers have successfully increased transaction prices to recover rising steel scrap cost, aided by higher capability utilization rates following the closure of two mills in 2009 that represented approximately 20% of domestic production capacity. While construction market fundamentals are weak, it's important to note…

(Operator Instructions). Our first question comes from Tim Hayes from Davenport & Company. Mr. Hayes, your line is open. Tim Hayes – Davenport & Company: Good morning.

Good morning, Tim. Tim Hayes – Davenport & Company: A couple questions. Given there are so many moving parts, with the bad weather and pre-buying and the trade case, what would you expect for shipments for the upcoming quarter in terms of, relative to the normal seasonal uptick that you get? Do you think that we could actually see a below seasonal uptick because we had so much pre-buying in the fiscal second quarter?

Yes, I think that's possible Tim, that particularly January and February were far more robust than we expected. Tim Hayes – Davenport & Company: And when we look back, we're showing maybe an average sequential increase for the fiscal third quarter of low teens. Is that about the range that you have normally seen in the past?

It has actually fluctuated quite a bit over the past few years, due not only to market forces, but also inventory changes which have been a pretty significant factor. So I don't know that there is really a set percentage or a narrow range that we could really lock into because it has been pretty volatile. If you went back to earlier years, it's been in the low double digit range but the past two or three years have been pretty volatile. Tim Hayes – Davenport & Company: Sure. It is with only a few years of data from our end. And the markets that we've seen, it's tough to really get a good number from just a few years of data. The next question, in terms of the supply of wire rod, what's your expectations of the mills that have shut down? Might they, in your view, be inclined to restart, given the higher prices that we've seen?

I think that's possible for one of the two mills Tim. The mill in New Jersey as I understand it is being dismantled. That's a permanent closure. I think there is a possibility that the South Carolina facility could reopen at some point in time but it's not on our purchasing horizon at this point in time. Tim Hayes – Davenport & Company: And my final question. With as much cash as you have on the balance sheet, any plans to deploy that or do you still want to hold that back to get through these challenging times?

I think our first consideration is maintaining adequate financial flexibility to execute on any growth opportunities that may become available and at this point I would say we're more inclined to be comfortable where we are than to take any other action. Tim Hayes – Davenport & Company: All right. Thank you.

Thank you.

Our next question comes from Robert Kelly from Sidoti. Robert Kelly – Sidoti: Good morning guys.

Good morning Bob. Robert Kelly – Sidoti: Just had a question. You talked about the price increases that you're seeing on raw materials and how they are rising at a slower rate than your prices. So are January, February, March – are spreads widening?

Actually Bob, it's the other way around. Our price increases have actually lagged somewhat behind the increases for wire rod. Robert Kelly – Sidoti: Right. So what I'm trying to get a sense of, are March spreads narrower than January spreads or you're expecting some sort of compression going into 3Q?

Well our price increase announcements for our products really, I believe the first one was effective February 15th, March 15th, end of April. So we went through a sizable part of the second quarter without even having a price increase effective date through half the quarter. Robert Kelly – Sidoti: Right.

So I think we're going to have this FIFO impact going forward and I think the point that we try to convey in the prepared comments is just that it's a real struggle to get these prices up and we are making progress, but it is slow and it has been slower than our suppliers have been able to increase transaction prices to us. Robert Kelly – Sidoti: Right, I understand that. And the reason for that slower price improvement on your part is the competitive response? You have competitors that are trying to discount?

That's correct. Robert Kelly – Sidoti: Okay.

Or its not discount, just lag behind the effective dates that have been put out there by Insteel and other companies.

Yes, they may be approaching it from a standpoint of a lower carrying value in their inventories. Robert Kelly – Sidoti: Okay understood. Now, you will see a seasonal pickup. You've seen slowness in April. Is that on a sequential basis or year-over-year? How do you quantify slower demand in the first three weeks of April?

It's really about consistent with expectations which has been for lack luster demand. Robert Kelly – Sidoti: Right, so it is kind of on pace with your budget, not necessarily slowing down from what you've seen?

That's correct. Robert Kelly – Sidoti: Okay, thank you. Now, assuming you see the normal seasonal uptick, I mean weather had to be quite a bear in this 2Q. Does utilization get over and above 60% in the second half of the year? Is that kind of your expectation at this point?

Maybe somewhat Bob and it's really difficult to give an accurate answer on it. We could find ourselves in the mid-50s. Robert Kelly – Sidoti: Okay, understood. And that is kind of what you're budgeting for at this point?

In that range. Robert Kelly – Sidoti: Okay, great. Now, just on the tax rate, should we expect a 15% tax rate for the bulk of F10 or at least for the second half?

The year-to-date percentage will continue to fluctuate and we are been skewed by those factors that we mentioned in the release and in our comments and relating to the change in the adjustment in the refund amount. But on an incremental basis I think it would be reasonable to assume that it falls somewhere in the 38% to 40% range if we are just applying that to the quarterly pretax number that would probably be a reasonable assumption but due to those factors that I mentioned it's going to skew the year-to-date amount just the way calculation flow. Robert Kelly – Sidoti: Okay, thanks. And then just on – it seems like scrap prices have settled down in April a little bit. Do you see a little bit of sluggishness in your orders because of that? Is that the response you hear? Steel prices aren't moving up right now, and that is why you see the order flow slow down. Because I think that is kind of how you explained how the first fiscal quarter played out.

Could you just restate the question for me? Robert Kelly – Sidoti: You've seen a little bit of a plateau short-term with steel scrap. Does that translate into kind of a sluggish order book?

Well, I think probably we have more significance and that is just whatever over-purchasing was done during the second quarter, that those inventories at customers factories are going to be worked off at some point. I think it has a moderating impact on the order entry rate for April and May. Robert Kelly – Sidoti: Okay, got it. And then I don't know if you can get into this. You talked about how current volumes are 27% to 30% below where we were in 2006 to 2008. Where are we compared to last year, to F09, like the second half?

I don't know whether we want to draw a percentage range on that at this point just given the uncertainty. Robert Kelly – Sidoti: You're not far off the pace, though.

No. Robert Kelly – Sidoti: Okay.

We had – I mean looking back at last years trends we had I think we had a pretty healthy increase in volume from Q3 to Q4, Q3 was relatively low and then we had pick you in Q4. So, now we could see a similar pattern this year to the extent that these restocking in Q2 has pulled away some of the Q3 volume. We could see a similar trend or maybe more back end and again. Robert Kelly – Sidoti: Okay. Thanks guys.

Thank you.

Our next question comes from Nat Kellogg from Hudson Securities. Nat Kellogg – Hudson Securities: Morning guys how are doing?

Good, good morning Nat.

Good morning. Nat Kellogg – Hudson Securities: Just on the shipments – the imports that you guys are expecting to receive, I assume that is a price at given where the market is today, is relatively attractive.

That's correct. Nat Kellogg – Hudson Securities: And then just on the working capital side, I mean it looks like you guys are about as – ended the quarter about as lean as you could possibly go. So and I would assume that we'll see an increase in receivables and inventory and a decrease in payables over the next three months. Is that correct, if we are looking to know what capital is going to look like?

Yeah that's correct and as we mentioned part of this inventory increase is really timing and in nature where we had made some commitments that we thought would be here by the end of the quarter that's moved out a little later. Nat Kellogg – Hudson Securities: Okay. All right. That is helpful and so I think, you sort of referenced this with the FIFO issue. But even though you guys are maybe having a little bit of trouble getting the price increases through you would like, given where inventory pricing is likely to be. It wouldn't be unreasonable to assume some continued margin expansion going forward in the short term.

Yeah I mean as we have stated previously the FIFO effect is going to be there and as we push some more of this price increases through; it is going to have an impact. I mean it's just mathematical. Nat Kellogg – Hudson Securities: Right. Okay. And then just on the cash and the acquisition, you guys have, I think, steered the ship very nicely through this downturn. But I just, I can't imagine that if – I guess – here's my question. It doesn't seem like any of your competitors have been shaken free yet, and I can't imagine you're going to go through an 18 months that has been worse than the last 18 months. So, what is going to eventually spur one of these guys loose, shake one of these guys loose that you can do an acquisition, which I think obviously would make a lot of sense given where your capacity utilization is and given where industry pricing trends and all that kind of stuff. It seems like it would make a lot of sense and I just – what is going to be the catalyst going forward, because I can't imagine it or more pointed catalyst than we've had over the last 18 months.

Well I will just pointed that the last 18 months were preceded by 60 months that were pretty strong and I suspect that as Insteel did well during this period so did our competitors and depending on the uses of cash by far other companies that went into this downturn property and pretty solid financial shape. I would also point out that as we evaluate what we believe is the most imperative for the company not just now but it's been this way for several years is looking for growth opportunities and as we thin through that right now we really believe that, that we are in a long distance race here in terms of waiting for recovery in our markets that is difficult is as the last 18 months have been. I think we've the prospect for a difficult next 18 to 24 months as well and internally we're counseling patients and we are counseling evaluating these opportunities based on what the new reality in the market is rather than looking at trailing five years earnings. So, I think there is – I think the conditions are going to remain pretty harsh and that the fact that the companies have made up to this point doesn't necessarily mean that's it over for them and that things are going to get better. I would also point out that it's not just companies that may wind up with a balance sheet problem that open the door for opportunities. I think as forward thinking people look at these markets going forward the road to success could be some consolidation not necessarily just having to bail out of a difficult situation. So, we are going to try to be patient and look for opportunities. Nat Kellogg – Hudson Securities: Fair enough. Okay. That's helpful. All right well that's all I got. Thanks for the color, as always and I'll hop back in the queue. Thanks, guys.

Thanks Nat.

Thanks.

Our next questions comes from John Cawler from Oppenheimer. John Cawler – Oppenheimer: Good morning gentlemen. How are you?

Good morning. John Cawler – Oppenheimer: Two quick questions. I was wondering if you could highlight any areas of geographic strength or weakness and then sort of characterize the inventories in the channel. I think you sort of alluded to the fact that they are a little higher than what you normally might see, given a pre-buy?

In terms of geographic strength or weakness, that I don't think that there is a specific area that I would highlight as a less impacted by this downturn than another. The nature of our products means that the coastal areas are strong markets for Insteel and that would still be the case although customer serving those markets are effective on a relative basis just like they are everywhere else. So, I can't really point out any particular strength or weakness there. In terms of the inventories they are actually lower than would be normal given the delayed receipt of some of these offshore purchases that we made and the point we are trying to convey is that a we look toward the third quarter you will see an increase in the inventory levels but we are perfectly comfortable with who ever we expect to be. John Cawler – Oppenheimer: Okay. Great. Thanks very much.

(Operator Instructions). I am not showing any further question.

Okay. Well, we appreciate your interest in the company and look forward to the next conference call. Thank you.