Insteel Industries (NYSE:IIIN) has reported a decline in net earnings and sales for the third quarter of 2024, citing competitive pricing pressures and low-priced imports as key challenges. Net earnings dropped to $6.6 million, or $0.34 per share, from $10.6 million, or $0.54 per share, in the same period last year. Net sales fell by 12% to $145.8 million, largely due to a 16.3% decrease in average selling prices, though partially offset by a 5.1% increase in shipments. Despite these challenges, the company remains optimistic about the future, expecting a positive demand outlook and planning to reduce conversion costs and increase operating hours.
Key Takeaways
- Net earnings for Q3 2024 fell to $6.6 million, or $0.34 per share.
- Net sales decreased by 12% to $145.8 million due to lower selling prices.
- Shipments increased by 5.1%, partially offsetting the sales decline.
- The company faces pricing pressures and competition from low-priced imports.
- Positive market recovery is anticipated, with demand expected to rise.
- Insteel aims to decrease conversion costs and boost operating hours.
- The company has $97.7 million in cash and no debt, positioning it well for growth.
- Capital expenditures for 2024 have been reduced to approximately $25 million.
Company Outlook
- Market conditions are expected to improve, with a positive demand outlook.
- The Infrastructure Investment and Jobs Act is seen as a beneficial factor for the industry.
- Insteel anticipates the impact of the IIJA to be felt in 2024 and 2025.
Bearish Highlights
- Competitive pricing pressures and low-priced imports pose ongoing challenges.
- Inflation and project costs are creating additional hurdles for the industry.
Bullish Highlights
- The company is optimistic about the positive effects of the Infrastructure Investment and Jobs Act on demand.
- Private demand, especially in the residential sector, is expected to remain strong.
- Insteel is investing in advanced technology to improve products and reduce costs.
Misses
- Average selling prices decreased by 16.3%, significantly impacting net sales.
- Volume shipments have not met expectations due to labor market challenges.
Q&A Highlights
- H. Woltz commented on nationwide increases in labor costs and their varied impact across different markets.
- The company is confident that new investments will yield returns above the cost of capital.
- Insteel is actively addressing the potential impact of a change in administration on the steel industry and is hopeful for a resolution.
In summary, Insteel Industries is navigating a challenging market environment but remains poised to capitalize on upcoming opportunities, particularly those arising from federal infrastructure initiatives. With a strong cash position and no debt, the company is strategically adjusting its operations and investments to align with anticipated market improvements and demand growth.
InvestingPro Insights
Insteel Industries (IIIN) has demonstrated resilience in a tough market, underpinned by a strong balance sheet and a commitment to returning value to shareholders. According to the latest data from InvestingPro, the company holds a market capitalization of $629.04 million and a P/E ratio of 25.96, reflecting investor confidence in its long-term strategy despite short-term headwinds.
InvestingPro Tips for Insteel underscore the company's financial prudence and shareholder-friendly policies. The company not only holds more cash than debt, ensuring a robust liquidity position, but it also pays a significant dividend to shareholders, with a noteworthy dividend yield of 7.89%. This commitment to shareholder returns is reinforced by a history of maintaining dividend payments for an impressive 20 consecutive years.
Moreover, the company's ability to cover interest payments with its cash flows further solidifies its financial stability. While analysts anticipate a sales decline in the current year, they also predict the company will remain profitable, which is crucial for sustaining dividend payments and investing in future growth.
InvestingPro provides additional insights into Insteel Industries, with a total of 9 tips available to help investors make informed decisions. For those interested in a deeper analysis, you can explore these tips and more using coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
Key InvestingPro Data metrics also reveal a complex picture: with a revenue decline of 24.8% over the last twelve months as of Q2 2024, the company's challenges are quantifiable. However, the company's solid gross profit margin of 9.84% suggests it retains a degree of pricing power or operational efficiency even in these difficult times. The price/book ratio of 1.83 indicates that the stock may be reasonably valued in relation to its net assets.
In summary, while Insteel Industries faces industry-wide challenges, the company's strong financial health and dedication to shareholder value present a silver lining for investors looking to the future. With a positive demand outlook and strategic adjustments underway, Insteel is poised to navigate the current market environment effectively.
Full transcript - Insteel Industries (IIIN) Q3 2024:
Operator: Good morning, all. Thank you for joining us for the Insteel Industries Third Quarter 2024 Earnings Call. My name is Carly, and I will be coordinating your call today. [Operator Instructions] I will now hand over to your host, H. Woltz, CEO of Insteel Industries, to begin.
H. Woltz: Good morning. Thank you for your interest in Insteel, and welcome to our third quarter of 2024 conference call, which will be conducted by Scot Jafroodi, our Vice President, CFO and Treasurer, and me. Before we begin, let me remind you that some of the comments made on our presentation are considered to be forward-looking statements that are subject to various risks and uncertainties which could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC. During Q3, we experienced a continuation of sluggish market conditions, although momentum increased steadily to the point that we began ramping up operating hours to manage lead times, primarily in our welded wire reinforcement business. While we're not pleased with our Q3 results, patience is the only viable strategy for us since we're unable to create demand and competitors who believe that reducing prices will stimulate demand or result in market share gains are simply mistaken. We've noted that market lethargy is not limited to reinforcing markets following reduced estimates for producers of cement, steel, aggregates and other construction materials. The better news is that we believe market conditions are recovering and that the longer term outlook for demand is quite positive. We look forward to attaining higher operating rates, lower costs, improved revenue and margins that we believe will be supported by market conditions. I'm going to turn the call over to Scot to comment on our financial results for the quarter and the macro environment, and then I'll pick it back up to discuss our business outlook.
Scot Jafroodi: Thank you, H. And good morning to everyone joining us on the call. As reported in our release earlier today, our third quarter results were negatively affected by the narrowing of spreads between selling prices and raw material costs relative to the prior year quarter. The reduction in spread has more than offset the favorable impact of higher shipments in the current year. As a result, Insteel's net earnings for the third quarter of fiscal 2024 fell to $6.6 million or $0.34 per share from $10.6 million or $0.54 per share a year ago. Net sales for the quarter declined 12% to $145.8 million, driven by a 16.3% decrease in average selling prices, partially offset by a 5.1% increase in shipments. On a sequential basis, average selling prices fell by 5.3% while shipments rose 20.8%. Competitive pricing pressures within our welded wire reinforcing markets and the growing impact of low price PC strand imports continue to pressure selling prices. Furthermore, steel scrap prices trended down during the quarter, which has created additional headwinds for AFPs. Despite the decline in selling prices, our shipments benefited this quarter from a strengthening demand environment for our products and increased activity across our construction end markets. Throughout each month of the quarter, our year-over-year shipments were higher than the prior year. However, we did experience several challenges as unfavorable weather conditions and the growing influence of low price imports in certain of our PC strand markets negatively impacted shipments. Furthermore, we actively worked throughout the quarter to ramp up operating schedules at certain of our facilities to fully meet an improving order book and reduce delivery lead times. Gross profit decreased to $15.4 million from $20.4 million in the prior year quarter and gross margin narrowed to 10.6% from 12.3%, primarily due to lower spreads between selling prices and raw material costs, which offset the benefit of higher shipments. After rebounding in the second quarter following a January price increase, spreads again came under pressure in the current period, with the year-over-year decline in ASPs outpacing the reduction in our inventory carrying values. As we move into the fourth quarter, we anticipate spreads to remain near current levels as selling prices continue to face downward pressure. Unit conversion costs for the third quarter improved both year-over-year and sequentially from the second quarter but remain elevated due to lower operating levels. As we enter our fourth quarter, we expect to make further progress in reducing our conversion costs as we continue ramping up operating schedules in response to improving market conditions and leveraging our recent capital investments. SG&A expense for the quarter remained unchanged at $7.9 million, representing a 5.4% of net sales compared to 4.8% of net sales in the previous year. An increase in depreciation expense combined with the relative year-over-year change in the cash rented value of life insurance policies were offset by lower compensation expense under our return on capital based incentive plan, which was negatively impacted by weaker year-to-date results. Our effective tax rate for the quarter rose to 24.7% from 22% a year ago. The increase was largely driven by the effect of a discrete tax item, which had an amplified impact on the rate due to the lower pretax earnings. Looking ahead to the balance of the year, we expect our effective rate to run close to 23% subject to the level of pretax earnings, book tax differences, and the other assumptions and estimates that compose our tax provision calculation. Moving to the cash flow statement of the balance sheet. Cash flow from operations for the quarter generated $18.7 million of cash due mainly to net earnings and reduction in net working capital. This reduction was driven mostly by $10.4 million increase in accounts payable and accrued expenses as well as a $3.2 million decrease in inventories. Our inventory position at the end of the quarter represented 2.5 months of shipments on a forward-looking basis, calculated off of forecasted Q4 shipments, which is down slightly from 2.6 months at the end of the second quarter. In addition, the average unit cost of our inventories at the end of the third quarter was lower than our third quarter cost of sales. This is expected to have a favorable impact on spreads and margins in the fourth quarter as the lower cost materials consumed are reflected in cost of sales provided the average selling prices did not decrease to a greater extent. We incurred $3.2 million in capital expenditures in the quarter for a total of $17.5 million through the first nine months of our fiscal year. Based on our forecasted expenditures for the fourth quarter, we have reduced our full year target at $25 million from the previous communicated target to $30 million. H will provide more detail on this topic in his remarks. We continued our share buyback during the quarter, repurchasing $1 million of our common equity equal to approximately 30,000 shares. From a liquidity perspective, we ended the quarter with $97.7 million of cash on hand and were debt free with no borrowings outstanding on our $100 million revolving credit facility, providing us ample financial flexibility and ability to pursue any attractive growth opportunities that may develop. Turning to the macro indicators for our construction end markets. The latest reports for the Architectural Billings and Dodge Momentum Indexes, which are leading indicators for non-residential building construction, offer a mixed view of market conditions going forward. In May, the ABI declined to a score of 42.4, remaining well below the growth threshold of 50 as architectural firms report both a decrease in billings and a slowdown in new projects. On the other hand, the Dodge Momentum Index, which tracks non-residential building projects entering the planning phase, rose by 10.4% in June to 198.6. This represents a 7% increase year-over-year. The higher June reading was largely due to a 14.5% rise in the commercial component of the index, fueled by data center planning activity. Year-over-year, the commercial segment is up 25%. The latest May report from the US Department of Commerce shows that the monthly construction spending data remains strong. Total spending on a seasonally adjusted annual basis is up 6.4% from last year. Non-residential construction is up over 6.2% and public highway and street construction, which is one of the largest end use applications for our products, is up 9%. However, while construction spending remains elevated, US cement shipments, another measure that we track, continues to lag 2023 levels as shipments were down 8.1% in March and 4.4% for the calendar year. Finally, this week, the AIA released its semi-annual construction forecast for non-residential building construction for 2024 and 2025. Spending on non-residential buildings is projected to increase 7% for 2024, driven by strong gains in the industrial sector. However, the forecast also indicates that spending growth is expected to slow in 2025 with only 2% growth in overall spending projected. This concludes my prepared remarks. I'll now turn the call back over to H.
H. Woltz: Thank you, Scott. As we commented last quarter, the operating environment during fiscal 2024 has been difficult as we face headwinds, including declining steel prices, inventory liquidations by customers, the need to align our finished goods inventories to reflect lower shipments, and finally, the normal seasonal downturn in construction activity. We're glad to report that these adverse conditions seem to have run their course, and we are experiencing rising demand driven by market fundamentals as well as the capital investments made by the company in recent years. As we reported in Q2, shipments for Q3 were not impressive, but each month showed improvement as inventory positions through the supply chain improved and construction spending and employment telegraphed improving market conditions. We believe the slow and steady demand improvements we've experienced recently will continue into our fourth quarter. Backlogs in our welded wire reinforcement business have lengthened to an uncomfortable degree due to compressed operating schedules that were dictated by weak order entry and shipments earlier in the year together with more robust order entry activity. And we're ramping up operating hours at several facilities to respond to more robust demand. Hiring continues to be difficult in view of low unemployment rates in most markets, but conditions have improved considerably since hiring challenges peaked. As Scott mentioned and as we stated in the last couple of earnings calls, we are increasingly affected by low priced imported PC strand from producers in a variety of countries that appear to be circumventing the Section 232 tariff on hot rolled steel by downstreaming. Continuing the trend that began last year, the average unit value of imported PC strand is lower than the domestic market price for wire rod, the raw material from which we produce PC strand. The industry is carefully scrutinizing strand imports and will pursue any trade actions that are justified. We are also working with the administration to demonstrate that the differential treatment of hot rolled wire rod and PC strand with respect to the Section 232 tariff is undermining the intent of the tariff and damaging the very constituency the tariff was intended to benefit. We're optimistic about the impact on our markets of the Infrastructure Investment and Jobs Act, although, at this point, it's difficult to point to specific projects that have affected demand. With respect to IIJA, the secretary of transportation has acknowledged delays of multiple years between appropriations and increased demand for construction services and materials. The administration has also been clear that it views IIJA as a new way of funding infrastructure investment and not as a stimulus program. In other words, it does not appear to surprise the administration that the impact of the legislation on infrastructure spending thus far is muted. Meanwhile, of course, inflation is impacting project costs and jeopardizing the viability of some projects. Despite these obstacles, we believe that IIJA funds will ultimately be allocated to projects and spent as intended, with a beneficial impact on our industry. Turning to CapEx. While we had previously indicated that CapEx for 2024 would come in at approximately $30 million, we've scaled back our view based on actual expenditures through the third quarter and expectations for the balance of the year. We have not, however, canceled projects that have been approved previously. We expect to come in closer to $25 million based on actual experience. As we stated earlier, elevated CapEx for 2023 and 2024 does not imply a permanent step up in our CapEx expectations. On an ongoing basis, we would expect CapEx to range closer to depreciation and amortization and to be elevated in years we elect to expand capacity or incorporate new technology into our facilities through equipment replacement. As a reminder, the CapEx amounts for 2023 and 2024 are heavily influenced by the addition of three new production lines at our welded wire reinforcement plants and the addition of a production line at a PC strand plant. The scale of these additions should be viewed as unusual and not a recurring event. The investments we're making in state-of-the-art technology will expand our product capabilities and favorably impact our cash cost of production. We believe that companies failing to take advantage of significant technological innovations will become increasingly uncompetitive. As you know, Insteel continues to be debt free and has substantial flexibility to make decisions for the long-term best interest of its customers and shareholders. Looking ahead, we're aware of the substantial risk related to the future performance of the US economy and are monitoring the environment. In any event, we're well positioned to aggressively pursue actions to maximize shipments and optimize our costs, and to pursue attractive growth opportunities both organic and through acquisition. This concludes our prepared remarks, and we'll now take your questions. Carly, would you please explain the procedure for asking questions?
Operator: [Operator Instructions] Our first question comes from Julio Romero of Sidoti. Julio, your line is now open.
Julio Romero: Thanks. Hey, good morning, H and Scott. Maybe just to start on demand, you sound much more optimistic about improving conditions. You talked about trying to ramp up operating hours. Just maybe talk about what you're seeing across your end markets, either from inquiries or orders that kind of gives you optimism that demand is indeed improving.
H. Woltz: Well, both our forecast and our order entry rate cause us to be optimistic about where we see things going. But as I stated in my remarks, we've seen a steady and slow improvement in our order intake and in conditions in the market. I don't mean to imply that we expect to see a big pop. It's more slow and steady. And as you know, we had scaled back operating hours pretty substantially to reflect earlier business conditions, which is partly a way of explaining why our backlog and lead times have expanded. It's partly due to the curtailed and truncated operating hours that we implemented earlier in the year and partly due to increasing order entry rates.
Julio Romero: Yeah, understood. You talked about scaling hours back. You talked about the challenge of kind of retaining and attracting qualified folks. Talk about maybe how you're tackling the challenge at this point?
H. Woltz: Well, I think it's typical of what you read in most stories about current labor markets that you hire five or six and maybe, maybe two or three of them are still with you in 60 or 90 days. And, of course, we have to train those people. And we have to teach them how to work safely. So it just -- it's just a challenging environment. I don't know that we operate in any labor market that has an unemployment rate over 4%. And so there are fewer people to choose from. There are fewer people who really appreciate or enjoy industrial kinds of work. And it's difficult and it's not just a matter -- it's not just a matter of compensation. I think it goes deeper than that.
Julio Romero: Got it. And you gave us some preliminary fiscal '25 thoughts, which is certainly helpful and welcomed. And you mentioned it's difficult to kind of point to specific projects at this point that have boosted -- that have received a demand boost from the IIJA. Do you expect that to eventually be the case, that -- when the Infrastructure Act does benefit Insteel, the impact will be clear, that you would be able to point to specific projects? And then secondly, the big question is, when do you think that'll happen? Would fiscal '25 be that year?
H. Woltz: The answer to the first part, Julio, is no. I don't expect that we're going to see projects fall into the marketplace with a big banner on them that says funded by IIJA. The nature of the products that we supply just is inconsistent with that. I think that we'll begin to see impact of IIJA in 2024 and 2025. But I'm not sure that we'll be able to talk to you and say 10% of our shipments were related to IIJA. I just don't think it's that transparent.
Julio Romero: Yeah, that makes sense. I'll pass it on at this point. Thanks so much.
H. Woltz: Thank you.
Operator: Our next question comes from Kevin Gainey of Thompson Davis. Kevin, your line is now open.
Kevin Gainey: Hey, gentlemen. Congrats on the quarter. I kind of wanted to -- you guys have already kind of talked about public demand, but maybe if we could go into private demand, how you're thinking about that underlying over the next few months and maybe into '25.
H. Woltz: I think a lot of that, Kevin, is going to be dependent on the interest rate environment that we're in. Surely, if there is cuts going forward, that could generate some demand in that private commercial segment, but it's too early to tell right now. And when you speak of private, are you also speaking of residential?
Kevin Gainey: Yeah, yeah. Residential, non-res. Yeah, both.
H. Woltz: So it seems that the outlook for residential is reasonably bullish. And I would say less uncertain than the outlook for private commercial. And if we were to get interest rate reductions, I think clearly be very supportive of both segments of private construction spending.
Kevin Gainey: Since you guys kind of brought up the rate talk, have you found that any of your customers have changed the timing of projects for that anticipation of rate cuts?
H. Woltz: Yes, we have. And it is -- it's clear in the number of times that we refloat projects that developers and owners who are on the edge about starting a project, they're looking at two things. They're looking at sharply higher costs over the last couple of years just due to the inflationary environment. And they're looking at higher financing costs. And some have elected to try to wait that out. I don't think the projects are dead. But when you re-quote a project four times, I mean, there's a clear message there, and we've seen that.
Kevin Gainey: That sounds exhausting. And then maybe one final one, as you guys talk about ramping up the business, what kind of confidence do you have in the ability to keep at those higher operating levels?
H. Woltz: Well, okay. So the business is both seasonal and it's cyclical. Okay? And I think the seasonality is certainly not going to go away. And that April through really October, November timeframe is when construction really reaches its peak level for whatever cycle we're in. So I don't see -- I don't see that we're going -- we're not expecting any change in seasonality. I think that the underlying level of demand for the products that we produce is extremely solid, although we've gone through a period of inventory correction. And unfortunately, there's no good objective data for us to look at to say that this is -- that this much of our business has been affected by inventory corrections. It's more information that comes from follow reports and from just the feel of the business than it is objective data. But the seasonality is not going to change the cyclicality. I think we've probably seen the worst of the downcycle.
Kevin Gainey: Sounds good. I appreciate you guys taking my questions.
H. Woltz: Thank you.
Operator: Thank you so much. Our next question is from Tyson Bauer of lenders KC Capital. Tyson, your line is now open.
Tyson Bauer: Good morning, gentlemen.
H. Woltz: Good morning, Tyson.
Tyson Bauer: We talked about, we ran into the PC import situation in prior years where we have to try to get the trade actions and have to have people in the administration that actually are listening to you to get those trade actions to go through. Probably difficult in an election year and possible changes as we go forth, especially with some of the judgments that are placed against some of the agencies. My focus is really more on the welded wire reinforcement type products. Is that more of a domestic capacity issue within the industry, that there's too much slack capacity that is putting pressure on your ability to price? Historically, you've always kind of been a price leader. Have you -- has that diminished somewhat in which other competitors, maybe like a Nucor (NYSE:NUE) or somebody else has a little more influence that you have to react to?
H. Woltz: Well, first, let me just remind you that we have multiple product lines within our welded wire reinforcement business. It probably will come as no surprise that the more commodity-like make to stock products have been under more pressure than the make to order products. The make to stock products largely are light commercial and housing related and they're highly seasonal. So the way that the business works is that producers build significant inventories of finished goods based on their outlook for demand in the busier parts of the year. And if you go through three or four months and fail to meet your shipment objectives, then there can be widespread panic in the market that results in a lot of price cutting. And that's some of what we've seen that I think some of the participants in the industry have built inventories that far exceed the needs of the market. And they've been unloading those products. That's much less a problem in the make-to-order engineered applications that we produce.
Tyson Bauer: Okay. And with your new capacity lines coming online and greater automation, do you tend to focus more on your own fixed cost absorption, meaning that you're more prone to consider volume impacts and less focus on pricing yourselves?
H. Woltz: No.
Tyson Bauer: When you talk about labor increases, is that specific to certain product lines and locations or are you making a general statement company-wide?
H. Woltz: Well, it's company wide. But company-wide is rolled up from ten separate labor markets that we compete in. So I would say that the forces that have affected labor costs are the same nationwide. But the degree to which it has affected our company varies with each labor market that we're in. But as a general statement, all labor markets have been affected and are more costly by a wide margin today than they were previously. And actually, I don't consider that a bad thing. Okay? Our position is that we're going to be competitive in every market that we operate in. And I don't think that we're going to find that we have competitors who have substantially lower labor costs. So I think the playing field is leveled.
Tyson Bauer: Okay. You talked about the somewhat disappointing volume shipments. You thought it'd be even greater, especially with seasonal impact year-over-year type metrics. As we've learned through the years, you don't necessarily ever get a catch up quarter per se, things just kind of get pushed to the right. Is that what you're seeing in this scenario also? Is that we may be ramping up and better, but don't expect kind of that pig in the python situation where we're going to get an outsized quarter?
H. Woltz: Yeah, I don't think there's a whole lot of catching up that goes on. One of the problems that we see, and again, it's very hard to quantify, but it's obvious that our customers' customers also have challenges in the labor market. We have customers who have products that have been sold to contractors, but the contractors have insufficient labor to get those products in the ground. And therefore, we have customers whose yards have filled up, and that is affecting their ability to produce and to purchase from Insteel because they have nowhere to put finished goods, although the finished goods they have on their sites are generally sold to specific projects. So I think, to every extent possible that weather allows, contractors will -- and our customers will extend the season as far as they can in order to finish up projects. But I think you're also right that what we don't ship this year will be shipped next year. It's not a question of building a big backlog that you can blow out in the down part of the year. The business just doesn't work that way.
Tyson Bauer: Okay. And last question for me. Given your outlook, given improvements in your demand metrics that you're seeing currently, as management and as a Board member, how do you go about converting that outlook and those increases in demand that you're expecting with your capacity expansion and turning that into shareholder return?
H. Woltz: Well, I think it's just as we've stated in the past, that all the new investments that we've made have a component -- a return component of cost reduction as well as capacity expansion. And I think the reality is, if there's no market or if there's an insufficient market, we're not going to realize the part of that return that is based on increased demand and increased capacity until such time as we see better market conditions. And also, as I've said on multiple occasions, you don't choose your time to start these investments off. The lead time is a year and a half to two years in some cases, to make these additions. And you have to have some confidence that you can think of the long term implications of the investments or you're probably in the wrong business.
Tyson Bauer: Okay. But you still have your dividend policy. You still have your share buybacks, given the longer nature that where you think you could be within a year, two years, and operating results should then, with historical multiples, create that return on capital and -- of capital for your shareholders?
H. Woltz: Yes. We're confident that the investments that we've made will return greater than the cost of the capital that's invested in them or we wouldn't have made the investments.
Tyson Bauer: Sounds great. Thanks a lot, gentlemen.
Operator: Thank you very much. [Operator Instructions] Our next question comes from Julio Romero of Sidoti. Go ahead.
Julio Romero: Great. Thanks, guys, for taking the follow-up question. Tyson touched on it a little bit. We are in an election year. Some investors have a potential -- change in administration is kind of top of mind, particularly when it comes to the steel industry. Just how should we be thinking about the impact from a change or no change in administration at Insteel? And any reason to maybe have optimism that either of the possible outcomes would be more amenable to expanding Section 232 to your end product?
H. Woltz: It's hard to know what an incoming Trump administration may do with respect to Section 232, although Trump implemented 232 and his people were very sympathetic to the problem that we described to them. But when we described it to the Trump administration, it was hypothetical. Today, we can demonstrate and quantify the impact of the hypothetical problem that we described in 2019 and '20 has actually come to pass. And with the Biden administration, we actually had a group that was organized by our suppliers, and we went to Washington and we talked through the fact that this differential treatment of PC strand and hot rolled wire rod with respect to 232 was having an extremely detrimental impact on our suppliers. And it was our suppliers who were to be the beneficiary of 232. So it is -- they're very sympathetic to the problem. There is adequate data to demonstrate what's exactly happened. But the real-life fact of the matter is, it takes a presidential proclamation to add PC strand to 232. And that's a heavy lift, regardless of the underlying facts that support the addition. We believe that our current situation is the result of a mistake that was made by the administration. And we're positioning our request as you need to just fix the mistake that was made. And I have an underlying belief that we will get this fixed. It's a question of whether we can do it with the Biden administration in place or whether it's the next administration. But the underlying logic is so compelling that I find it hard to believe we won't get it fixed.
Julio Romero: Really helpful color, H. Much appreciated. Thank you.
Operator: Thank you very much. We currently have no further questions, so I'll hand back to H. Woltz for closing remarks.
H. Woltz: Okay, thank you, Carly. And thanks to all of you who joined the call today. We appreciate your interest in the company. And we would encourage you to give us a call back if you have any questions. And if not, we'll look forward to talking to you next quarter. Thank you.
Operator: Thank you. This concludes today's call. Thank you to everyone for joining us. You may now disconnect your lines.
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