Good morning, ladies and gentlemen, and welcome to the Insteel Industries Fourth Quarter 2020 Conference Call. At this time, all participants' lines are in a listen-only mode. Later we'll conduct a question-and-answer session [Operator Instructions]. As a reminder this conference is being recorded. I would now like to turn the conference over to your host Mr. H. Woltz, President and CEO of Insteel. Please go ahead sir.

Good morning. Thank you for your interest in Insteel and welcome to our fourth quarter 2020 earnings call which will be conducted by Mark Carano, our Senior Vice President, CFO and Treasurer and me. 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 will now turn the call over to Mark to review our financial results. Then I'll follow up to comment more on business conditions and other recent developments.

Thank you, H, and good morning to everyone joining us on the call. As we reported earlier today, the fourth quarter of fiscal 2020 proved to be a strong quarter for Insteel. Robust demand in our construction end markets in addition to a sustained recovery and spreads from depressed levels of year ago were the key drivers in our performance. Excluding the non-recurring charges referenced in our release. Net earnings rose to $0.38 per share as compared to a net loss of $0.09 per share last year. To note, the current year quarter also benefitted from having an extra week as compared to the prior year based on our fiscal calendar. Shipments for the quarter increased 27.7% from last year and 12.1% sequentially from Q3. The fourth quarter of fiscal 2020 was our highest quarterly shipment level in the company's history even excluding the extra week in the quarter and exceeding our previous high watermark in the third quarter of 2016. The fourth quarter shipping performance was driven by continued strength in construction activity across all our end markets as compared to last year with engineered structural mesh and PC strand leading the growth in the quarter. Average selling prices though remained under pressure and declined 4.6% from last year. But there are signs of improvements as sequentially average selling prices increased to 1.1% which represented the first increase in seven sequential quarters. As we've communicated in previous calls low priced import competition in the PC strand and standard welded wire markets respectively remain intense and continues to have a negative impact on our average selling prices combined, they represented approximately 30% of our fourth quarter revenue and experience an average selling price decline of 8% as compared to a decline of 3% for the balance of the business relative…

Thank you, Mark. As Mark indicated. Our fourth quarter results reflect strong shipment growth relative to the prior year driven by resilient non-residential construction markets. We also benefited from the closer alignment between raw material costs and average selling prices as reflected in the recovery of our gross margin which was distorted in the prior year by the downward spiral and steel prices and unexpected weak demand. Gross margin is trending closer to a normalized level following the relative stability we've seen recently in steel prices. We're pleased with the solid underlying demand for our products and our financial performance and we thank our Insteel teammates for their focus on working safely and execution excellence. During Q4, we continue to observe CDC recommended procedures for managing exposure to COVID-19 and its transmission at our plants and administrative offices. While we had staffing disruptions during the quarter related to quarantines none of our locations was materially affected by operating restrictions and most customers also experience normal operations subject to the same quarantine related staffing complications that effected Insteel. As of now we expect to continue fulfilling customer requirements and do not expect to surge of infections to affect our operating plans. During Q4, we completed the customer integration activities related to our Q2 acquisition of certain assets of Strand-Tech Manufacturing. We appreciate the confidence placed in Insteel by former Strand-Tech customers and are gratified that practically all of these relationships are ongoing and mutually beneficial. Our engineering team has been onsite at the Strand-Tech plant continuously updating and renovating equipment that will be deployed at other Insteel facilities. Commissioning activities are presently underway for the first two production lines that were relocated. These capacity additions were relating [ph] process bottlenecks and contribute to significant improvements in the unit cost of production…

[Operator Instructions] our first question comes from Julio Romero of Sidoti. Your line is open.

So I guess I wanted to start off what you're hearing from customers in regards maybe a level of concern about staying local funding and a potential drop off there. When does the timing of that potentially effect Insteel?

I think that's a $64 question for sure and as you might expect. There is a wide range of expectations among our customers from certain customers who have strong backlogs going through what would be our second fiscal quarter to certain customers wondering what they're going to do in January. I would say that's also been the circumstance for the last few months. So at this point, I'm not sure that we can give real good insightful guidance on how funding is going to impact on the order book going forward. I think it's going to be more of a month-to-month evaluation.

Got it. Maybe asked another way, I mean is assuming no benefit from this type of stimulus or whatever I mean. You know can they get through three, six, nine months without some type of stimulus for them.

I mean it sounds like the question is really how long is that pipeline? I would say it probably goes well into our second quarter. But I don't know that it would go into the third or fourth. And that's one man's opinion, okay that's not the result of any objective data analysis.

Okay, I appreciate it. That's helpful. On the engineered structural mesh side, can you talk about how much did ESM make up as a portion of your portfolio in fiscal 2020 and maybe how much growth you expect in 2021 either from a unit perspective or percentage perspective?

No, we don't disclose on that level of detail. But I can tell you that we're growing in solid double digits and expect to continue doing so.

Okay, got it and I guess on the $20 million and CapEx for 2021, would any of that like be necessarily catch up in terms of things missed out in fiscal 2020, just any color there?

Yes, I mean we reported for the last three or four quarters at least that we had a delay project and support of our ESM business. Where we had to work with an OEM vendor to resolve some unanticipated problems with a production line that we installed at our North Carolina facility and that took quite a while, it set us back a year. So those problems have been resolved and we're moving ahead with full force to put another line in that is we're preparing foundations now and expect that we'll see a Q2 or Q3 startup of that line in 2021. So we stayed on top of all routine customary sort of recurring maintenance needs. We did have a significant hole in our growth initiatives relative to this unanticipated delay and certainly as I said in the prepared comments. It's an opportunity cost. But right now we're looking forward. We're not looking behind and we're going to move with dispatch to bring this line up and get its product into the market.

Got it, that's helpful. I'll hop back into queue. Thank you.

Our next question comes from Tyson Bauer of KC Capital. Your line is open.

Just a follow-up on previous questioners topic. Do you have any hard numbers on the state and local muni bond activity as far as relative to maybe a year ago for seeing them take advantage of the lower interest rates and doing more principal bonds or any sense, any industry data that you have that you could give us a reference point?

We don't have any hard data, Tyson. But we are aware of increased activity at state and local level in financing infrastructure projects with bond proceeds and actually it's been ongoing for at least a couple of years. We view it as a very positive development. But unfortunately, I don't think we can tack [ph] down those numbers at this point.

You see, individual headlines of certain states and that, that seemed like they're growing that activity and taken advantage. But no real composite data that I've seen. You mentioned that you're starting to get some positive impact because of the trade actions due to - typically there is a retroactive date that importers would have to make up difference if there is an injury that is taken by domestic producers. As we go into 2021 that should grow depending on if you get favorable results or not, do you know what the retroactive dates are?

Well that question would require a very, very lengthy answer. Suffice it to say, that the retroactivity is generally associated with critical circumstances filings and as of this week, we have made those filings on approximately 10 or 12 of the 15 countries where we could support a critical circumstance finding or filing. The critical circumstances allegations will not be finally acted on until the very last part of the case in our third or fourth quarter. So I think the impact of the case is that the market risk has been elevated significant for importers of record, the uncertainty is significant and the financial consequences are meaningful. So I think that's the backdrop that has created some more favorable market circumstances for us. But as I said in the prepared comments, we have to win these cases for any of this to make any difference on an ongoing basis.

Correct, by your actions you've kind of made the shot across the [indiscernible] this past week.

Actually I would say that we fired a torpedo below the water line.

We'll go with that. Depending on how the election turns out. There could be immense consequences for capital gains, for private entities, companies, raising their tax, obligations for sale of their entities. Do you think that opens up or potentially opens up some more M&A opportunities before year end pending the election results?

Honestly, I don't think so Tyson. I don't think that the M&A opportunities that are out there for us are so much dependent upon those kinds of considerations. I think they're longer term than that.

Okay, in the past - when the weather has been poor, whether it's winter weather or wet weather. We've always kind of used that as push things to the right or otherwise - your fiscal fourth quarter pretty much as ideal weather for most of the country. Did that help the quarter results having that kind of favorable weather?

Yes, I think what we would say is that weather patterns have more normalized. I'm not so sure that we've had all kinds of hurricane activity that's disrupted the Gulf Coast and Texas markets. But relative to last year certainly it's a tremendous improvement. So yes, I'm always dubious of the weather excuse and I know that we've profit that on numerous occasions. But yes, we would certainly acknowledge that we welcome the return to normalized weather patterns. And there's no doubt, it helped us although we can't quantify and haven't really attempted to quantify.

Okay and last question. As we look at the uncertainty in some of the sectors impacted by those is it more the non-res commercial construction that gives you a little more pause on what's going to transpire in the next three, six, nine months. Or is it really the public spending aspect that is more of a wild card for you?

Right now I would tell you that, the public side of it is a larger question mark for us. As we're seeing on private non-res, we believe that a lot of the e-commerce driven construction that we have been [indiscernible] in 2020 will continue well in or through 2021, so I would say the bigger wild card is on public side.

All right, thank you gentlemen.

[Operator Instructions] I'm showing no further question at this time. I would like to turn the conference back to Mr. H. Woltz.

We appreciate your interest in Insteel. We thank you for your time this morning and we welcome your contacts going forward. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participation and have a wonderful day. You may now disconnect.