Insteel Industries, Inc. (NYSE:IIIN) Q4 2023 Earnings Call Transcript

Tyson Bauer: Okay. You talked about the competitive pricing. The supply seems to be obviously very adequate within the domestic marketplace. Yes, we’re spending $60 million over a 2-year period to expand capacity through 3 more production lines and other — I’m sure there’s maintenance included in that and other things. Kind of break down what your return expectations are for that $60 million in regards to increased opportunities of revenue versus maybe just getting a better handle on your cost and the cost per unit as production going forward.

H. Woltz: Well, I can’t quantify those components but you have identified correctly that the investments that we are making have both the potential for increasing revenue and significantly reducing the cash cost of production of products that we’re currently producing. So as a general return expectation, I can tell you that we would expect these investments to return in excess of our cost of capital, we don’t try to push up further than that. And I’ll also tell you Tyson that just to repeat, what we’ve said in our last conference call, you don’t get to pick your time for starting these investments off. There’s 1.5 year to 2-year lead time to get these things done, they are — the projects that we have undertaken are critical to the future of the company and I would argue, deserve these investments — deserved to be made regardless of the market outlook because they’re critical going forward.

Tyson Bauer: Right; especially given the equipment time line and such forth. Your balance sheet obviously easily supports a $2 special dividend, what we’ve seen here recently. The question is, does your general outlook or as you exhibited a year ago, even though the cash used for working capital drain some of that balance, you were able to look on a 3-, 4-year horizon to justify that special dividend. Same parameters this go around, you have the cash; the outlook may be a little weaker for Q1. But overall, you’re generally positive in the outlook that would be supportive.

H. Woltz: Yes. I mean, you well know because you’re familiar with the company that we’ve never claimed to have great insight to what happens 2, 3, 4 quarters out. But we don’t see a train wreck coming our way in 2024 or 2025. We think that while there may be a downturn, there are a lot of countervailing factors that would support the non-residential construction market. And so we’re not — we don’t feel like the sky is falling.

Tyson Bauer: Okay. Do you — have you come to a point where we’re reviewing operational adjustments in where you look at whether we should be really protecting market share versus margin protection? Or are you looking at the margin will kind of settle itself out with the inventory adjustments. Thus, it’s more important to protect your market share.

H. Woltz: No. I mean, as I stated in my prepared comments that we expect to be competitive in the market on a consistent basis and we will be. Our customers expect that of us. We expected of ourselves and we’re not going to hold an umbrella over the market. I think we have the cost structure to compete with anyone. As I said, we don’t want to be price setters. We think the tactic of lowering prices is naive to say the least. But nevertheless, there’s a market out there and we’re going to compete and we’ll let the results fall out where they are but we’re not going to hold an umbrella over the market.

Tyson Bauer: Okay. And last question for me; probably directed to Scot, the monthly trends in the last two quarters. We’ve had the front-end month show a good recovery from the previous quarter. And then the rest of the quarter kind of falls below expectations. We had a good April. We had a good July and then all of a sudden, we have this rapid decline for various reasons that you’ve explained. Anything unique that you can see that would have created that impact or is that just how the numbers worked out?