Investor Presentation February 13, 2017

Transcription

1 Investor Presentation February 13, 2017

2 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of When used in this presentation, the words believes, anticipates, expects, estimates, appears, plans, intends, may, should, could and similar expressions are intended to identify forwardlooking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are subject to a number of risks and uncertainties, and we can provide no assurances that such plans, intentions or expectations will be implemented or achieved. All forwardlooking statements are based on information that is current as of the date of this presentation. Many of these risks and uncertainties are discussed in detail in our filings with the U.S. Securities and Exchange Commission, in particular our Annual Report on Form 10-K for the year ended October 1, All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only to the respective dates on which such statements are made and we do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as may be required by law. 2

3 Business Overview Insteel Industries is the nation s largest manufacturer of steel wire reinforcing products for concrete construction applications. PC Strand 39% 2016 Sales by Product Line We manufacture and market a broad range of welded wire reinforcement ( WWR ) and prestressed concrete strand ( PC strand ) products. Welded Wire Reinforcement 61% Headquartered in Mount Airy, North Carolina, Insteel operates ten manufacturing facilities located in the United States (seven WWR plants and three PC strand plants). Our business strategy is focused on: achieving leadership positions in our markets. operating as the lowest cost producer. pursuing growth opportunities in our core businesses that further our penetration of the markets we currently serve or expand our footprint. 3

4 Business Overview Insteel s products are sold primarily to manufacturers of concrete products that are used in nonresidential construction. Sales by End Use Virtually all sales are in the U.S. (< 1% foreign in 2016). Residential Construction 15% Nonresidential Construction 85% Demand is both cyclical and seasonal. Shipments are usually higher in the third and fourth quarters of the fiscal year (April to September) when weather conditions are most conducive to construction activity, and lower in the first and second quarters. Distributors Rebar Fabricators Contractors 30% Sales by Customer Category Concrete Product Manufacturers 70% Insteel s customer base is diverse with minimal concentration. 4

5 Welded Wire Reinforcement ( WWR ) Produced as both standard and specially engineered reinforcing products for use in nonresidential and residential construction. Broad offering of WWR products includes: Engineered Structural Mesh - Engineered made-to-order reinforcing products that are used as the primary reinforcement in concrete elements or structures, frequently serving as a substitute for hotrolled rebar. Concrete Pipe Reinforcement - Engineered made-to-order reinforcing products that are used as the primary reinforcement in concrete pipe and box culverts for drainage and sewage systems, water treatment facilities and other related applications. Standard Welded Wire Reinforcement - Secondary reinforcing products made-to-stock in standard styles for crack control applications in residential and light nonresidential construction, including driveways, sidewalks and a wide range of slab-on-grade applications. 5

6 Engineered Structural Mesh ( ESM ) For many applications, ESM can serve as a lower cost and higher strength concrete reinforcing solution than hot-rolled rebar. Eliminates the labor intensive process of placing and hand-tying required for rebar, yielding significant cost savings and expediting the construction process. Fewer tons of steel are generally required when ESM is specified due to its superior yield strength (80,000 PSI for ESM versus 60,000 PSI for rebar). Continued conversion of rebar users to ESM represents substantial growth opportunity considering that estimated domestic production represents < 5% of rebar volume it could potentially replace. 6

7 Prestressed Concrete Strand ( PC Strand ) Seven-wire strand used to impart compression forces into precast concrete elements and structures, providing reinforcement for bridges, parking decks, buildings and other concrete structures. High tensile strength makes it possible to cast longer spans and thinner sections. PC strand is used for both pretensioned and posttensioned reinforcing applications. Pretensioned Strands are tensioned and anchored at the ends of a form. Anchors are released after the concrete has been placed and cured, creating compression forces within the element. Posttensioned Strands are tensioned after the concrete has been placed and cured. 7

8 Manufacturing Locations Hazleton, PA ESM, SWWR St. Joseph, MO ESM, CPR Kingman, AZ ESM, CPR Hickman, KY SWWR Mount Airy, NC ESM, CPR, SWWR Gallatin, TN PCS Dayton, TX ESM, CPR, SWWR Houston, TX PCS Sanderson, FL PCS Jacksonville, FL ESM, SWWR 8

9 Competitive Position Primary Competitors Welded Wire Reinforcement PC Strand Concrete Reinforcements Inc. Davis Wire Gerdau Ameristeel Keystone/Engineered Wire Products Nucor Oklahoma/Iowa Steel and Wire Wire Mesh Corp. Sumiden Wire Products Keystone Wire Mesh Corp. Imports Largest domestic producer of WWR and PC strand and only producer with a national market presence. Strong market leadership positions extend across all product lines/families. Ability to bundle WWR and PC strand products, which are used in combination for many concrete reinforcing applications. 9

10 Growth Strategy ($ Millions) $750 $600 $450 $300 > $700 Capacity at Current ASPs $150 $419 FY2016 Organic $0 Existing facilities capable of generating over $700 million of annualized revenues (at current ASPs) with minimal incremental capex required. Continued expansion of ESM business through further penetration of rebar market. Acquisitions Strategic opportunities in core WWR and PC strand businesses or related products sold into same markets. 10

11 Ivy Acquisition Wilmington Plant Closed May 2011 Insteel Ivy WWR Facilities Houston Plant Closed Dec 2010 In November 2010, Insteel acquired substantially all the assets associated with the WWR business of Ivy Steel & Wire, Inc. ( Ivy ) for $50.3 million. Ivy was previously the second largest producer of WWR in the U.S. behind Insteel and the largest producer of ESM and concrete pipe reinforcement with September 2010 TTM sales of $105.0 million ($229.8 million in CY 2008). Assets acquired include Ivy s facilities in Arizona, Florida, Missouri and Pennsylvania; equipment at a leased facility in Texas; and certain related inventories. 11

12 American Spring Wire Acquisition Insteel ASW Newnan Plant Closed Mar 2015 PC Strand Facilities In August 2014, Insteel acquired substantially all the assets associated with the PC strand business of American Spring Wire Corporation ( ASW ) for $33.5 million. ASW was previously the second largest producer of PC strand in the U.S. behind Insteel with June 2014 TTM sales of $67.8 million. Assets acquired include working capital, equipment at a leased facility in Texas and a facility in Georgia. 12

13 Ivy and ASW Acquisitions Strategic Rationale Substantial synergies: Plant consolidations and reconfiguration of manufacturing facilities. Elimination of redundant selling and administration activities. Improved manufacturing efficiencies. Lower raw material costs through increased purchasing leverage. Reduced freight expense to customers/from suppliers. Broadened our geographic footprint, positioning Insteel as the only producer with a national market presence. Enhanced our product and customer mix. Accelerated our initiatives to broaden the acceptance of ESM and further penetrate the rebar market. Minimal operational risk. 13

14 Financials Net Sales ($ Millions) $500 $450 $400 $350 $353.9 Ivy Acquisition Nov 2010 $336.9 $363.3 $363.9 ASW Acquisition Aug 2014 $409.0 $117.1 $447.5 $118.1 $418.5 $103.1 $300 $297.8 $106.3 $99.1 $97.9 $98.2 $250 $200 $74.4 $79.0 $104.3 $230.3 $61.1 $211.6 $56.2 $98.6 $93.6 $96.9 $113.2 $117.0 $115.6 $150 $100 $50 $0 $74.8 $77.3 $57.0 $50.4 $69.7 $66.0 $61.8 $62.0 $52.3 $41.2 $86.9 $52.3 $87.0 $82.9 $91.4 $84.8 $85.9 $87.2 $101.8 $110.6 $107.4 Q1 YTD $93.9 $92.4 $ Q1 Q2 Q3 Q4 14

15 Financials Shipments and Average Selling Prices ASW Acquisition Aug Ivy Acquisition Nov 2010 Index (2006 = 100) Shipments (Tons) Average Selling Price Per Ton 15

16 Financials Gross Profit Drivers % of 2016 Cost of Sales Freight 7% Conversion Cost 27% Raw Materials 66% Shipment and operating volumes Spreads Difference between selling price and raw material cost (steel wire rod) Unit conversion costs Impacted by operating volumes and cost management 16

17 Steel Scrap Price Trends ($/Ton) $350 $325 $329 $322 $300 $305 $275 $250 $260 $246 $280 $276 $276 $276 $266 $250 $240 $240 $236 $237 $284 $270 $283 $225 $228 $210 $218 $206 $200 $190 $196 $198 $184 $175 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Shredded Auto Scrap (Chicago) No. 1 Busheling Scrap (Tri-City) Steel scrap prices are typically correlated with prices for our raw material, hot-rolled steel wire rod, which we purchase from both domestic and offshore suppliers. Shredded scrap associated with low carbon rod is used to produce welded wire reinforcement; busheling scrap associated with high carbon rod is used to produce PC strand. 17

18 Financials Gross Profit (Annual) $ % 25% $ % $80 $ % 18.8% Gross Profit ($ Millions) $60 $40 $ % 9.4% $ % 10.8% $ % $ % $ % 10% Gross Margin % $20 4.7% $20.3 $22.5 5% $10.8 $ % Gross Profit Gross Margin % ( amounts are pro forma excluding inventory write-downs) 18

19 Financials Gross Profit (Quarterly) $35 35% Q2 09 Q1 11 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q1 09 Q3 09 Q1 10 Q4 10 Q1 12 Q2 10 Q3 10 Q2 12 Q3 12 Q4 12 Q4 09 Q2 11 Q3 11 Q4 11 Q1 13 Q4 13 Q1 14 Q2 15 Q2 13 Q3 13 Q2 14 Q1 15 Q3 14 Q4 14 Q3 15 Q1 16 Q2 16 Q1 17 Q4 15 Q4 16 Q3 08 Q4 08 Q3 16 $30 30% $25 25% $20 $15 $10 $5 20% 15% 10% 5% Gross Profit ($ Millions) Gross Margin % $0 ($5) 2007 $ % 2008 $ % 2009 $ % 2010 $ % 2011 $ % 2012 $ % 2013 $ % 2014 $ % 2015 $ % 2016 $ % Q1 YTD 2017 $ % 0% (5%) ($10) (10%) Gross Profit Gross Margin % ( amounts are pro forma excluding inventory write-downs) 19

20 Financials EBITDA (Annual) $100 25% 21.8% $80 $77.2 $ % 20% EBITDA ($ Millions) $60 $ % $ % 7.3% $ % $30.5 $ % $ % 15% 10% EBITDA Margin % $20 $ % $15.5 5% $0 1.3% $ % EBITDA EBITDA Margin % (Amounts are pro forma excluding discontinued operations, inventory write-downs, restructuring charges, acquisition costs, bargain purchase gain, gain on early extinguishment of debt, legal settlement, gain on insurance recoveries related to Gallatin fire, settlement of customer dispute and pension plan settlement loss). 20

21 Financials EBITDA (Quarterly) $35 30% $30 Q3 08 Q % $25 Q3 16 Q % $20 Q % EBITDA ($ Millions) $15 $10 $5 $0 ($5) Q1 07 Q2 07 Q $ % Q4 07 Q1 08 Q $ % Q1 09 Q $ % Q4 09 Q1 10 Q2 10 Q $ % Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q $ % 2012 $ % 2013 $ % 2014 $ % 2015 $ % Q1 16 Q $ % Q1 17 Q1 YTD 2017 $ % 10% 5% 0% (5%) (10%) EBITDA Margin % ($10) Q2 09 (15%) EBITDA EBITDA Margin % (Amounts are pro forma excluding discontinued operations, inventory write-downs, restructuring charges, acquisition costs, bargain purchase gain, gain on early extinguishment of debt, legal settlement, gain on insurance recoveries related to Gallatin fire, settlement of customer dispute and pension plan settlement loss). 21

22 Financials EBITDA Reconciliation Earnings before interest, taxes, depreciation and amortization ( EBITDA ) calculated as earnings from continuing operations before interest expense and income, other income, depreciation and amortization, stock-based compensation expense and income taxes, and excludes inventory write-downs, restructuring charges, acquisition costs, bargain purchase gain, gain on early extinguishment of debt and legal settlement. EBITDA (i) should not be considered as an alternative to net earnings (determined in accordance with GAAP) as an indicator of our financial performance, (ii) is not an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and (iii) is not indicative of funds available to fund our cash needs because of needed capital replacement or expansion, debt service obligations or other cash commitments and uncertainties. We have included EBITDA in the presentation because management believes that it provides investors with a supplemental measure of cash flow and the ability to assess Insteel s operating performance for the periods presented on a comparable basis excluding changes in our capital structure and effective tax rates. Fiscal Year Ended (13 weeks) (52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks) (52 weeks) (52 weeks) December 31, October 1, October 3, September 27, September 28, September 29, October 1, October 2, October 3, September 27, September 29, ($ in 000s) Earnings (Loss) from Continuing Ops $4,460 $37,245 $21,710 $16,641 $11,735 $1,809 $7,061 $458 ($20,940) $43,717 $24,284 Interest Expense , Interest Income (52) (166) (11) (10) (14) (21) (25) (102) (144) (721) (415) Other Expense (Income), Net (10) 183 (1,113) (1,907) 333 (188) (279) (291) (135) 85 4 Inventory Write-Downs ,333 25, Acquisition Costs Pension Plan Settlement Loss - 2, Restructuring Charges , , Bargain Purchase Gain (500) Gain on Early Extinguishment of Debt (425) Legal Settlement , Depreciation and Amortization 3,018 11,544 11,934 10,274 9,833 9,762 9,925 7,009 7,377 7,271 5,711 Stock-Based Comp Expense 257 2,439 2,298 2,661 2,161 2,208 2,747 2,258 2,036 1,759 1,258 Income Taxes 2,266 19,045 11,254 8,567 6, ,318 (38) (11,758) 24,457 14,013 EBITDA $10,021 $73,102 $46,741 $38,337 $30,545 $15,343 $29,177 $13,567 $3,018 $77,162 $45,447 22

23 Financials Net Earnings (Annual) ($ Per Diluted Share) $3.00 $2.50 $2.44 $2.00 $2.04 $1.50 $1.32 $1.13 $1.00 $0.89 $0.64 $0.50 $0.38 $0.16 $0.11 $0.00 ($0.50) ($0.24) (Amounts are pro forma excluding discontinued operations, inventory write-downs, restructuring charges, acquisition costs, bargain purchase gain, gain on early extinguishment of debt, legal settlement, gain on insurance recoveries related to Gallatin fire, settlement of customer dispute and pension plan settlement loss). 23

24 Financials Net Earnings (Quarterly) $1.20 ($ Per Diluted Share) 2008 $2.44 $1.00 $0.80 $0.96 $ $2.04 $0.71 Q1 YTD 2017 $0.23 $0.60 $0.40 $0.20 $ $1.32 $0.32 $0.27 $0.45 $0.28 $0.23 $ ($0.24) 2010 $ $ $ $ $0.89 $0.00 $0.16 $0.00 $0.09 $0.09 $0.23 $0.27 $0.04 $0.00 $0.02 $0.05 $0.05 $0.13 $0.20 $0.18 $0.13 $0.15 $0.20 $0.28 $ $1.13 $0.22 $0.10 $0.32 $0.50 $0.36 $0.38 $0.60 $0.23 ($0.20) ($0.09) ($0.03) ($0.18) ($0.40) ($0.36) Q1 Q2 Q3 Q4 (Amounts are pro forma excluding discontinued operations, inventory write-downs, restructuring charges, acquisition costs, bargain purchase gain, gain on early extinguishment of debt, legal settlement, gain on insurance recoveries related to Gallatin fire, settlement of customer dispute and pension plan settlement loss). 24

25 Financials Cash Flow $ Q ($ Millions) Sources (Uses) $259.4 $250 $200 $150 $100 $85.9 $70.8 $50 $53.9 $19.2 $13.1 $8.7 $0 Cash From Operating Activities (Continuing Operations) Other Capital Expenditures Ivy and ASW Acquisitions Payment of Cash Dividends Repayment of Debt Repurchases of Common Stock 25

26 Financials Capital Expenditures $30 ($ Millions) $25 $25.0 $20 $17.0 $15 $13.0 $10 $9.5 $7.9 $8.1 $9.0 $7.2 $5 $5.0 $2.4 $1.5 $ (F) Capital Expenditures Depreciation and Amortization Capital expenditures expected to increase to up to $25.0 million in increase driven by outlays related to expansion of Houston PC strand facility, further development of ESM manufacturing capabilities, and continued upgrades of production technology and information systems. 26

27 Financials Capital Structure $240 80% $210 70% Total Debt and Shareholders' Equity ($ Millions) $180 $150 $120 $90 $60 60% 50% 40% 30% 20% Total Debt to Total Capitalization (%) $30 10% $0 0% Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Total Debt Shareholders' Equity Total Debt to Total Capitalization As of December 31, 2016, Insteel was debt-free with $57.0 million of cash and cash equivalents, and no borrowings outstanding on $100.0 million revolving credit facility. 27

28 Dividend and Share Repurchase Programs Regular Quarterly Cash Dividend Currently paying regular quarterly cash dividend of $0.03 per share ($0.6 million). Special Cash Dividends Paid special cash dividends of $1.25 per share ($23.7 million) in January 2017, $1.00 per share ($18.6 million) in January 2016, $0.25 per share ($4.5 million) in December 2012 and $0.50 per share ($8.8 million) in October Share Repurchase Program Current $25.0 million share repurchase program was authorized in November During 2008, 913,000 shares were repurchased under previous authorizations for $8.7 million or approximately 5% of total shares outstanding as of beginning of year. 28

29 Construction Spending Value of Construction Put In Place (Not Seasonally Adjusted) ($ Billions and Y-O-Y % Change) $1,400 $1,200 $1,000 $800 $600 $400 $1, % $ % $ % $1, % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $1, % $ % $ % $1, % $ % $ % $1, % $ % $ % $200 $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ Private Nonresidential Public Private Residential Total construction spending for 2016 was up 4.5% from the prior year and has risen 47.4% since

30 Construction Spending $500 Value of Construction Put in Place (Not Seasonally Adjusted) ($ Billions) $420 $434 $456 $400 $360 $390 $370 $300 $301 $312 $279 $271 $276 $289 $286 $270 $323 $200 $100 $0 Private Nonresidential Public Private Residential Private construction spending for 2016 was up 6.4% from the prior year, with nonresidential up 7.8% and residential up 5.2% while public construction spending was down 1.0%. 30

31 Construction Spending 15% Value of Construction Put-in-Place (Seasonally-Adjusted Annual Rate) (Y-O-Y % Change) 10% 5% 0% -5% -10% Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Total Construction Private Residential Private Nonresidential Public Total construction spending for December 2016 (SAAR) was up 4.2% from the prior year with private nonresidential up 9.2%, private residential up 3.7% and public down 1.8%. 31

32 Construction Spending Total Nonresidential Value of Nonresidential Construction Put-in-Place (Not Seasonally Adjusted) December YTD 2016 ($ Billions and Y-O-Y % Change) Power Highway and Street Educational $91 (+1.9%) $89 (+6.2%) $95 (+3.1%) Manufacturing Commercial Office $75 (-4.3%) $74 (+10.9%) $69 (+24.9%) Transportation Health Care Lodging Sewage and Waste Disposal Amusement and Recreation Communication Water Supply Public Safety Conservation and Development Religious $43 (-6.1%) $41 (+1.7%) $27 (+24.8%) $22 (-8.8%) $22 (+9.6%) $20 (-3.9%) $12 (-9.4%) $8 (-7.4%) $8 (-4.0%) $4 (+1.9%) $0 $20 $40 $60 $80 $100 $120 Total nonresidential construction spending for 2016 rose 4.1% from a year ago to $699.7 billion. Strongest categories: office (+24.9%), lodging (+24.8%), commercial (+10.9%), amusement and recreation (+9.6%). 32

33 Construction Spending Public Highway and Street $92,000 $91,000 Value of Construction Put-in-Place (Not Seasonally Adjusted) (Trailing Twelve Month - $ Billions) Dec-16 $91,196 $90,000 $89,000 Dec-15 $89,402 $88,000 $87,000 $86,000 $85,000 $84,000 Dec-14 $84,487 $83,000 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Public highway and street construction spending for December 2016 (TTM) was up 2.0% from the prior year. 33

34 Construction Employment 8,000 Apr , % 7, % 7,000 (SAAR in 000s) 6,500 Jan , % 15.0% 6, % 5,500 Jan , % 5,000 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr % Construction Employment Unemployment Rate Construction employment in January 2017 was up 36,000 from the prior month and 170,000, or 2.6% from a year ago. Construction unemployment rate rose to 9.4% in January 2017 from 8.5% a year ago. 34

35 Architecture Billings Index Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Monthly Three-Month Average Architecture Billings Index ( ABI ) is a leading indicator for nonresidential building construction activity based on nine to twelve month lead time between architecture billings and construction spending. ABI rose to 55.9 in December 2016 from 50.6 the prior month. 35

36 Dodge Momentum Index 145 (Year 2000 = 100) Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Monthly Three Month Average Dodge Momentum Index ( DMI ) is a leading indicator for nonresidential building construction activity (excluding manufacturing) based on twelve-month lead time between reported projects in planning phase and construction spending. DMI for January 2017 was up 3.9% from the prior month and 21.8% from a year ago. 36

37 AIA Consensus Construction Forecast 9.0% 8.2% 8.0% 7.3% 7.0% 6.4% 6.3% 6.0% 5.6% 5.7% 5.6% 5.3% 5.6% 5.0% 4.9% 4.0% 4.2% 4.4% 4.1% 4.1% 3.5% 3.0% 2.4% 2.0% 1.0% 0.0% Consensus Dodge Data IHS Economics Moody's and Analytics Economy.com FMI Construct Connect Associated Builders and Contractors Wells Fargo Securities, LLC AIA Consensus Construction Forecast reflects the most recent nonresidential building construction forecasts for seven of the leading firms. Total nonresidential building construction forecasted to grow 5.6% in 2017 and 4.9% in

38 FAST Act $48 Total FAST Act Authorization to Federal Highway Administration ($ Billions) 6.0% 5.3% $47.3 $47 5.0% $46.2 $46 $ % $45 $ % $44 $43 $ % 2.2% 2.3% 2.4% 2.0% $42 1.0% $ Total Authorization Y-O-Y % Change 0.0% Fixing America s Surface Transportation Act (FAST Act) authorizes $305 billion of funding over a five-year period, including $226.2 billion for federal highway investment. First long-term surface transportation funding bill enacted in over a decade following series of 36 short-term extensions. Average annual funding represents 10% nominal increase over previous level. Improved funding visibility for states and municipalities should favorably impact project mix, increasing proportion of larger, longer-term projects requiring concrete reinforcing products. 38

39 Trump Infrastructure Proposal Trump infrastructure proposal would fund up to $1 trillion of spending over 10-year period through private sector financing. Tax credits for equity investors repaid with tax revenues generated by additional wage income and contractor profits. 39

40 Outlook Expect continued improvement in construction end-markets during 2017, which should support higher shipments and operating volumes, and lower unit conversion costs. Outlook for private nonresidential construction remains positive with continued growth in the economy. Increased impact from FAST Act together with higher spending at state and local level should spur growth in infrastructure construction. New administration s plans for increased infrastructure investment could drive additional demand growth in coming years. Continued recovery in housing market should also benefit certain segments within nonresidential construction. Recent capital investments should generate increasing contributions through cost reductions and additional capacity. New SWWR production line in Pennsylvania provides additional capacity to service Northeast market and allows for reduced manufacturing costs. First phase of Houston PC strand expansion expected to start-up by end of Q Provides additional capacity to service Texas market and expected to reduce annual operating costs by $5.0 million. 40

41 Summary Investment Considerations Strong positions in attractive fragmented markets. Modern manufacturing facilities and highly competitive cost structure. Significant growth potential of existing facilities through increased capacity utilization as market conditions improve. Highly variable cost structure advantageous during business downturns. Growth initiatives (organic and acquisitions). National scope of facilities and markets served. Financial strength and flexibility. Experienced management team. Import competition limited to PC strand business. Diversified customer base. Breadth of product lines and bundling capabilities. Raw material purchasing leverage volume and mix. Lack of legacy issues environmental, post-retirement or defined benefit plan obligations. 41