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INSTEEL INDUSTRIES INC

INSTEEL INDUSTRIES INCIIINEarnings & Financial Report

NYSE · Materials · Steel Works, Blast Furnaces & Rolling & Finishing Mills

Insteel Industries Inc is a leading U.S. manufacturer of steel reinforcing products including welded wire reinforcement and steel fibers. It primarily serves non-residential construction, infrastructure, and precast concrete segments across North America, delivering high-performance reinforcement solutions for various construction projects.

What changed in INSTEEL INDUSTRIES INC's 10-K — 2022 vs 2023

Top changes in INSTEEL INDUSTRIES INC's 2023 10-K

102 paragraphs added · 111 removed · 80 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Leading Indicator Measures: Lagging Indicator Measures: ● Hazard management process training ● Leadership engagement ● Employee involvement ● Rolling 12-month Incident Recordable Rate ● Lost Time Rate ● Severity Rate – Days Away, Restricted, and Transferred (DART) 6 Performance Based Compensation Our production and skilled trades team members earn pay increases through our “Pay for Skills” program and share in productivity pay through our “Team Share” incentive program.
Leading Indicator Measures: Lagging Indicator Measures: ● Hazard management process training ● Leadership engagement ● Employee involvement ● Rolling 12-month Incident Recordable Rate ● Lost Time Rate ● Severity Rate – Days Away, Restricted, and Transferred (DART) Performance Based Compensation Our production and skilled trades team members earn pay increases through our “Pay for Skills” program and share in productivity pay through our “Team Share” incentive program.
Ultimately, the relative supply - demand balance in our markets and competitive dynamics determine whether our margins expand or contract during periods of rising or falling wire rod prices. 5 Competition We are the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Our markets are highly competitive based on price, quality and service.
Ultimately, the relative supply - demand balance in our markets and competitive dynamics determine whether our margins expand or contract during periods of rising or falling wire rod prices. Competition We are the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Our markets are highly competitive based on price, quality and service.
The delivery method selected is determined based on backhaul opportunities, comparative costs and customer service requirements. 4 Customers We sell our products to a broad range of customers that includes manufacturers of concrete products, and to a lesser extent, distributors, rebar fabricators and contractors.
The delivery method selected is determined based on backhaul opportunities, comparative costs and customer service requirements. 5 Customers We sell our products to a broad range of customers that includes manufacturers of concrete products, and to a lesser extent, distributors, rebar fabricators and contractors.
Backlog Backlog for our business is minimal due to the relatively short lead times that are required by our customers. We believe that the majority of our firm orders as of the end of fiscal 2022 will be shipped during the first quarter of fiscal 2023.
Backlog Backlog for our business is minimal due to the relatively short lead times that are required by our customers. We believe that the majority of our firm orders as of the end of fiscal 2023 will be shipped during the first quarter of fiscal 2024.
Our products are sold mainly to manufacturers of concrete products that are used primarily in nonresidential construction. For fiscal 2022, we estimate that approximately 85% of our sales were related to nonresidential construction and 15% were related to residential construction.
Our products are sold mainly to manufacturers of concrete products that are used primarily in nonresidential construction. For fiscal 2023, we estimate that approximately 85% of our sales were related to nonresidential construction and 15% were related to residential construction.
In fiscal 2022, we estimate that approximately 70% of our net sales were to manufacturers of concrete products and 30% were to distributors, rebar fabricators and contractors.
In fiscal 2023, we estimate that approximately 70% of our net sales were to manufacturers of concrete products and 30% were to distributors, rebar fabricators and contractors.
We did not have any customers that represented 10% or more of our net sales in fiscal years 2022, 2021 and 2020. The loss of a single customer or a few customers would not have a material adverse impact on our business.
We did not have any single customers that represented 10% or more of our net sales in fiscal years 2023, 2022 or 2021. The loss of a single customer or a few customers would not have a material adverse impact on our business.
U.S. government trade policies and trade actions by domestic wire rod producers can significantly impact the pricing and availability of imported wire rod, which during fiscal years 2022 and 2021 represented approximately 26% and 16%, respectively, of our total wire rod purchases.
U.S. government trade policies and trade actions by domestic wire rod producers can significantly impact the pricing and availability of imported wire rod, which during fiscal years 2023 and 2022 represented approximately 14% and 26%, respectively, of our total wire rod purchases.
Human Capital We value all our employees and their important role in the long-term success of the company. Our human capital strategy is centered around four key areas: Safe Operations, Performance Based Compensation, Equal Opportunity and Hiring and Retention. As of October 1, 2022, we had 964 employees, none of which were represented by labor unions.
Human Capital We value all our employees and their important role in the long-term success of the company. Our human capital strategy is centered around four key areas: Safe Operations, Performance Based Compensation, Equal Opportunity and Hiring and Retention. As of September 30, 2023, we had 884 employees, none of which were represented by labor unions.
Our salaried team members also have a compensation structure that rewards individual performance in addition to company performance. The Team Share incentive program is driven by variables that are controllable at the plant level. We believe a compensation structure, which rewards both individual initiative and team accomplishments, leads to higher levels of performance.
Our salaried team members also have a compensation structure that rewards individual performance in addition to company performance. The Team Share incentive program is driven by variables that are controllable at the plant level.
In response to illegally traded import competition from offshore PC strand suppliers, we have pursued trade cases, when necessary, as a means of ensuring that foreign producers were complying with the applicable trade laws and regulations. In 2003, we joined together with a coalition of domestic PC strand producers and filed petitions with the U.S.
Import competition is also a significant factor in certain segments of the PC strand and SWWR markets that are not subject to “Buy America” requirements. 6 In response to illegally traded import competition from offshore PC strand suppliers, we have pursued trade cases, when necessary, as a means of ensuring that foreign producers were complying with the applicable trade laws and regulations.
Based on the criteria specified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, we have one reportable segment.
Our concrete reinforcing products consist of two product lines: PC strand and WWR. Based on the criteria specified in Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting, we have one reportable segment.
Our growth strategy is focused on organic opportunities as well as strategic acquisitions in existing or related markets that leverage our infrastructure and core competencies in the manufacture and marketing of concrete reinforcing products. On March 16, 2020, we, through our wholly-owned subsidiary, IWP, purchased substantially all of the assets of Strand-Tech Manufacturing, Inc.
Our growth strategy is focused on organic opportunities as well as strategic acquisitions in existing or related markets that leverage our infrastructure and core competencies in the manufacture and marketing of concrete reinforcing products. Products Our operations are entirely focused on the manufacture and marketing of steel wire reinforcing products for concrete construction applications.
Environmental Matters We believe that we are in compliance in all material respects with applicable environmental laws and regulations. We have experienced no material difficulties in complying with legislative or regulatory standards and believe that these standards have not materially impacted our financial position or results of operations.
We have experienced no material difficulties in complying with legislative or regulatory standards and believe that these standards have not materially impacted our financial position or results of operations. However, laws and regulations may be changed, accelerated or adopted that impose significant operational restrictions and compliance requirements on us and which could negatively impact our operating results. See “Item 1A.
Equal Opportunity Our business depends on talented individuals who bring diverse skills, experiences and backgrounds.
We believe a compensation structure, which rewards both individual initiative and team accomplishments, leads to higher levels of performance. 7 Equal Opportunity Our business depends on talented individuals who bring diverse skills, experiences and backgrounds.
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(“STM”) for an adjusted purchase price of $19.4 million, which reflects certain post-closing adjustments (the “STM Acquisition”). STM was a leading manufacturer of PC strand for concrete construction applications. We acquired, among other assets, STM’s accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina and assumed certain of its accounts payable and accrued liabilities.
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In 2003, we joined together with a coalition of domestic PC strand producers and filed petitions with the U.S.
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Subsequent to the acquisition, we elected to consolidate our PC strand operations with the closure of the Summerville facility. Products Our operations are entirely focused on the manufacture and marketing of steel wire reinforcing products for concrete construction applications. Our concrete reinforcing products consist of two product lines: PC strand and WWR.
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Governmental Regulation and Environmental Matters We are subject to federal, state and local laws and regulations in the United States that could affect our business, including regulations relating to generating emissions, water discharges, waste and workplace safety. We believe that we are in compliance in all material respects with applicable environmental laws and regulations.
Removed
Import competition is also a significant factor in certain segments of the PC strand and SWWR markets that are not subject to “Buy America” requirements.
Added
Risk Factors”. We do not expect to incur material capital expenditures for environmental control facilities during fiscal 2024.
Removed
Although our future compliance with additional environmental requirements could necessitate capital outlays, we do not believe these expenditures would ultimately have a material adverse effect on our financial position or results of operations. We do not expect to incur material capital expenditures for environmental control facilities during fiscal 2023.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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There is also the risk of the theft of confidential information, intentional vandalism, industrial espionage and a variety of cyber-attacks that could compromise our internal technology system and infrastructure or result in data leaks in-house or at our third-party providers and business partners.
There is also the risk of theft of confidential information, intentional vandalism, industrial espionage and a variety of cyber-attacks that could compromise our internal technology system and infrastructure or result in data leaks in-house or at our third-party providers and business partners.
There are numerous factors that could cause the price of our common stock to fluctuate significantly, including: variations in our financial results; changes in our business outlook and expectations for the construction industry; changes in market valuations of companies in our industry; and announcements by us, our competitors or industry participants that may be perceived to impact our financial results. 10 We are increasingly dependent on information technology systems that are susceptible to certain risks, including cybersecurity breaches and data leaks, which could adversely impact our business.
There are numerous factors that could cause the price of our common stock to fluctuate significantly, including: variations in our financial results; changes in our business outlook and expectations for the construction industry; changes in market valuations of companies in our industry; and announcements by us, our competitors or industry participants that may be perceived to impact our financial results. 11 We are increasingly dependent on information technology systems that are susceptible to certain risks, including cybersecurity breaches and data leaks, which could adversely impact our business.
There is no assurance that future short supply conditions in raw material markets would result in similar outcomes, however. 8 Demand for our products is highly variable and difficult to forecast due to our minimal backlog and unanticipated changes that can occur in customer order patterns or inventory levels. Demand for our products is highly variable.
There is no assurance that future short supply conditions in raw material markets would result in similar outcomes, however. 9 Demand for our products is highly variable and difficult to forecast due to our minimal backlog and unanticipated changes that can occur in customer order patterns or inventory levels. Demand for our products is highly variable.
Prices for wire rod have become increasingly volatile in recent years driven by the higher degree of variability in raw material costs for rod producers, changes in trade policy and the tightening of domestic supply.
Prices for wire rod have become increasingly volatile in recent years driven by the higher degree of variability in raw material costs for rod producers, changes in trade policy and the fluctuation of domestic supply.
There may be other risks and uncertainties that are currently unknown to us or that we currently consider to be immaterial that could adversely affect our business, results of operations, financial condition and cash flows. 7 Industry Specific Risks Our business is cyclical and can be negatively impacted by prolonged economic downturns or tightening in the financial markets that reduce the level of construction activity and demand for our products.
There may be other risks and uncertainties that are currently unknown to us or that we currently consider to be immaterial that could adversely affect our business, results of operations, financial condition and cash flows. 8 Industry Specific Risks Our business is cyclical and can be negatively impacted by prolonged economic downturns, rising interest rates or tightening in the financial markets that reduce the level of construction activity and demand for our products.
As the labor market recovers from the effects of the COVID-19 pandemic, availability of qualified employees and competition for them has escalated, which has increased costs associated with attracting and retaining employees.
As the labor market continues to recover from the effects of the COVID-19 pandemic, availability of qualified employees and competition for them has escalated, which has increased costs associated with attracting and retaining employees.
Our business and operations are subject to risks related to climate change. The long-term effects of global climate change could present both physical risks and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable.
The long-term effects of global climate change could present both physical risks and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable.
Our shipments are typically lower in the first and second fiscal quarters due to the unfavorable impact of winter weather on construction activity during these periods and customer plant shutdowns associated with holidays. As a result, our cash flows may fluctuate from quarter to quarter due to these seasonal factors.
Financing Risks Our operations are subject to seasonal fluctuations that may impact our cash flows. Our shipments are typically lower in the first and second fiscal quarters due to the unfavorable impact of winter weather on construction activity during these periods and customer plant shutdowns associated with holidays.
General Risks Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as the ongoing COVID-19 pandemic.
General Risks Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as the COVID-19 pandemic. The COVID-19 pandemic negatively impacted the global economy, disrupted supply chains and created significant volatility and disruption of financial markets.
Our balance sheet includes intangible assets, including goodwill and other separately identifiable assets related to prior acquisitions, and we may acquire additional intangible assets in connection with future acquisitions.
Our financial results could be adversely impacted by the impairment of goodwill. Our balance sheet includes intangible assets, including goodwill and other separately identifiable assets related to prior acquisitions, and we may acquire additional intangible assets in connection with future acquisitions.
Tightening in the financial markets could adversely impact demand for our products by reducing the availability of financing to our customers and the construction industry as a whole and increasing the risk of payment defaults on our accounts receivable.
Rising interest rates or tightening in the financial markets could adversely impact demand for our products by increasing the cost of financing or reducing the availability of financing to our customers and the construction industry as a whole.
Additionally, we may face increased costs to respond to future water laws and regulations, and operations in areas with limited water availability may be impacted if droughts become more frequent or severe.
Additionally, we may face increased costs to respond to future water laws and regulations, and operations in areas with limited water availability may be impacted if droughts become more frequent or severe. Any such events could have a material adverse effect on our costs or results of operations.
Although we expect to finance our business requirements through internally generated funds or from borrowings under our $100 million revolving credit facility, we cannot provide any assurances these resources will be sufficient to support our business.
Our operations are capital intensive and require substantial recurring expenditures for the routine maintenance of our equipment and facilities. Although we expect to finance our business requirements through internally generated funds or from borrowings under our $100 million revolving credit facility, we cannot provide any assurances these resources will be sufficient to support our business.
We also use natural gas, diesel fuel, gasoline and electricity in our operations, all of which could face increased regulation as a result of climate change or other environmental concerns.
We believe that adaptation strategies to accommodate rising sea levels and other climate related phenomena could stimulate demand for our products to the extent that reinforced concrete products are essential to managing surface waters. 10 We also use natural gas, diesel fuel, gasoline and electricity in our operations, all of which could face increased regulation as a result of climate change or other environmental concerns.
Our capital resources may not be adequate to provide for our capital investment and maintenance expenditures if we were to experience a substantial downturn in our financial performance. Our operations are capital intensive and require substantial recurring expenditures for the routine maintenance of our equipment and facilities.
As a result, our cash flows may fluctuate from quarter to quarter due to these seasonal factors. Our capital resources may not be adequate to provide for our capital investment and maintenance expenditures if we were to experience a substantial downturn in our financial performance.
Certain of our products are used in the construction of highways, bridges and other infrastructure projects that are funded by federal, state and local governments. Reductions in the amount of funding for such projects or the period for which it is provided could have a material adverse impact on our business, results of operations, financial condition and cash flows.
Reductions in the amount of funding for such projects or the period for which it is provided, including as a result of budget uncertainty, the potential for U.S. Government shutdowns, the use of continuing resolutions and the federal debt ceiling, could have a material adverse impact on our business, results of operations, financial condition and cash flows.
Future prolonged periods of economic weakness or reduced availability of financing could have a material adverse impact on our business, results of operations, financial condition and cash flows. Our business can be negatively impacted by reductions in the amount and duration of government funding for infrastructure projects that reduce the level of construction activity and demand for our products.
Future prolonged periods of economic weakness, high interest rates or reduced availability of financing could have a material adverse impact on our business, results of operations, financial condition and cash flows.
The situation remains dynamic, and the ultimate duration and impact on our business are not known at this time. Our stock price can be volatile, often in connection with matters beyond our control. Equity markets in the U.S. have been increasingly volatile in recent years.
Our stock price can be volatile, often in connection with matters beyond our control. Equity markets in the U.S. have been increasingly volatile in recent years. During fiscal 2023, our common stock traded as high as $35.80 and as low as $24.00.
Furthermore, periods of extended inclement weather or associated flooding may inhibit construction activity utilizing our products and delay shipments of our products to customers. We believe that adaptation strategies to accommodate rising sea levels and other climate related phenomena could stimulate demand for our products to the extent that reinforced concrete products are essential to managing surface waters.
Furthermore, periods of extended inclement weather or associated flooding may inhibit construction activity utilizing our products and delay shipments of our products to customers.
Failures of technology or related systems, or an improper release of confidential information, could adversely impact our business or subject us to unexpected liabilities. Our financial results could be adversely impacted by the impairment of goodwill.
While we have taken reasonable steps to protect the Company from cybersecurity risks and security breaches, there can be no assurance that such events will not occur. Failures of technology or related systems, cybersecurity incidents, or improper release of confidential information, could adversely impact our business or subject us to unexpected liabilities, expenditures and recovery time.
Removed
Any such events could have a material adverse effect on our costs or results of operations. 9 Financing Risks Our operations are subject to seasonal fluctuations that may impact our cash flows.
Added
Our business can be negatively impacted by reductions in the amount and duration of government funding for infrastructure projects that reduce the level of construction activity and demand for our products. Certain of our products are used in the construction of highways, bridges and other infrastructure projects that are funded by federal, state and local governments.
Removed
The COVID-19 pandemic and any preventive or protective actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers and transportation networks, including business shutdowns or disruptions.
Added
Our business, financial condition and results of operations may be adversely impacted by the effects of inflation. The recent rise in inflation has increased the costs of labor, energy, operating supplies and raw materials.
Removed
While the U.S. economy has experienced a recovery from the conditions experienced at the onset of the COVID-19 pandemic, the emergence of new variants of COVID-19, labor shortages, supply chain disruptions, new or proposed legislation related to governmental spending, inflation and increases in interest rates have impacted, and will continue to impact, economic growth.
Added
If we are unable to pass these increases in costs to our customers it could adversely affect our business, financial condition and results of operations by increasing our overall cost structure. Our business and operations are subject to risks related to climate change.
Removed
Even after the COVID-19 pandemic has subsided, we may experience material adverse impacts to our business due to any resulting economic recession. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and the potential effect on our financial position, results of operations and cash flows.
Added
In the event of the renewed outbreak of COVID-19, the emergence of new variants or an outbreak of a different virus or disease, we could experience disruptions in our supply chain, operations, facilities and workforce which could negatively affect our results of operations, financial condition, cash flows and stock price.
Removed
During fiscal 2022, our common stock traded as high as $47.70 and as low as $26.02.

Item 2. Properties

Properties — owned and leased real estate

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We believe that our properties are in good operating condition and that our machinery and equipment have been well maintained. We also believe that our manufacturing facilities are suitable for their intended purposes and have capacities adequate to satisfy the current and projected demand for our products.
We own all of our real estate. We believe that our properties are in good operating condition and that our machinery and equipment have been well maintained. We also believe that our manufacturing facilities are suitable for their intended purposes and have capacities adequate to satisfy the current and projected demand for our products.
As of October 1, 2022, we operated ten manufacturing facilities located in Dayton, Texas; Gallatin, Tennessee; Hazleton, Pennsylvania; Hickman, Kentucky; Houston, Texas; Jacksonville, Florida; Kingman, Arizona; Mount Airy, North Carolina; Sanderson, Florida; and St. Joseph, Missouri. We own all of our real estate except for the office in Sugarloaf, Pennsylvania, which we lease.
Item 2. Properties. Our corporate headquarters and IWP’s sales and administrative offices are located in Mount Airy, North Carolina. As of September 30, 2023, we operated ten manufacturing facilities located in Dayton, Texas; Gallatin, Tennessee; Hazleton, Pennsylvania; Hickman, Kentucky; Houston, Texas; Jacksonville, Florida; Kingman, Arizona; Mount Airy, North Carolina; Sanderson, Florida; and St. Joseph, Missouri.
Removed
Item 2. Properties. Our corporate headquarters and IWP’s sales and administrative offices are located in Mount Airy, North Carolina. We also have an engineering and administrative office located in Sugarloaf, Pennsylvania.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Wagner, 63, has served as Senior Vice President, Chief Operating Officer since October 2020 and as Vice President and General Manager of the Concrete Reinforcing Products Business Unit of our subsidiary, Insteel Wire Products Company, since 1998. He joined us in 1992 serving in various other management roles. From 1977 until 1992, Mr.
Wagner, 64, has served as Senior Vice President, Chief Operating Officer since October 2020 and as Vice President and General Manager of the Concrete Reinforcing Products Business Unit of our subsidiary, Insteel Wire Products Company, since 1998. He joined us in 1992 serving in various other management roles. From 1977 until 1992, Mr.
Wagner served in various positions with Florida Wire and Cable, Inc., a manufacturer of PC strand and galvanized strand products, which was later acquired by us in 2000. James R. York, 64, has served as Senior Vice President, Sourcing and Logistics since October 2020, and as Vice President, Sourcing and Logistics since joining us in 2018.
Wagner served in various positions with Florida Wire and Cable, Inc., a manufacturer of PC strand and galvanized strand products, which was later acquired by us in 2000. James R. York, 65, has served as Senior Vice President, Sourcing and Logistics since October 2020, and as Vice President, Sourcing and Logistics since joining us in 2018.
Woltz III, 66, has served as Chief Executive Officer since 1991, as President since 1989 and has been employed by us and our subsidiaries in various capacities since 1978. He was named President and Chief Operating Officer in 1989.
Woltz III, 67, has served as Chief Executive Officer since 1991, as President since 1989 and has been employed by us and our subsidiaries in various capacities since 1978. He was named President and Chief Operating Officer in 1989.
Petelle 72 Vice President Administration, Secretary and Chief Legal Officer Richard T. Wagner 63 Senior Vice President and Chief Operating Officer James R. York 64 Senior Vice President, Sourcing and Logistics 11 H. O.
Southern 42 Vice President Administration, Secretary and Chief Legal Officer Richard T. Wagner 64 Senior Vice President and Chief Operating Officer James R. York 65 Senior Vice President, Sourcing and Logistics H. O.
Woltz served as President of Florida Wire and Cable, Inc., formerly a subsidiary of our Company, until its merger with Insteel Wire Products Company in 2002. Mr. Woltz has served as Chairman of the Board since 2009. Mark A.
Woltz served as President of Florida Wire and Cable, Inc., formerly a subsidiary of our Company, until its merger with Insteel Wire Products Company in 2002. Mr. Woltz has served as Chairman of the Board since 2009. 12 Scot R. Jafroodi, 54, has served as Vice President, Chief Financial Officer and Treasurer since January 2023.
Item 4. Mine Safety Disclosures . Not applicable. Information About Our Executive Officers Our executive officers are as follows: Name Age Position H. O. Woltz III 66 President, Chief Executive Officer and Chairman of the Board Mark A. Carano 53 Senior Vice President, Chief Financial Officer and Treasurer James F.
Item 4. Mine Safety Disclosures . Not applicable. Information About Our Executive Officers Our executive officers are as follows: Name Age Position H. O. Woltz III 67 President, Chief Executive Officer and Chairman of the Board Scot R. Jafroodi 54 Vice President, Chief Financial Officer and Treasurer Elizabeth C.
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Carano, 53, has served as Senior Vice President, Chief Financial Officer and Treasurer since October 2020 and as Vice President, Chief Financial Officer and Treasurer from May 2020 to October 2020. Prior to Insteel, Mr. Carano had been employed by Big River Steel, a privately-held manufacturer of steel products, having served as Chief Financial Officer since April 2019.
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Prior to 2023, he served as Vice President, Corporate Controller and Chief Accounting Officer from October 2020. He previously held the role of Corporate Controller and Chief Accounting Officer from February 2007 to October 2020 and Corporate Controller from July 2005 to February 2007.
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Prior to Big River Steel, he served in various senior management finance roles with Babcock & Wilcox Enterprises from June 2013 to October 2018. Mr. Carano also has 14 years of combined investment banking experience with Bank of America, Merrill Lynch, Deutsche Bank and First Union Securities. James F.
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Before joining us, he was a Senior Manager at BDO Seidman, LLP from June 2003 through June 2005 and, prior to that, had been employed for ten years at Deloitte & Touche USA, LLP, most recently as a Senior Manager. Elizabeth C. Southern, 42, has served as Vice President, Administration, Secretary and Chief Legal Officer since June 2023.
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Petelle, 72, has served as Vice President, Administration, Secretary and Chief Legal Officer since October 2020. He joined us in October 2006 and was elected Vice President and Assistant Secretary in November 2006 and Vice President, Administration and Secretary in January 2007.
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From 2011 to 2023, she served in various senior management roles with Hanesbrands Inc., a publicly-held apparel company, including Deputy General Counsel and Assistant Secretary and Vice President, Human Resources. Prior to that, Ms. Southern was an associate attorney at Womble Bond Dickinson (US) LLP. Richard T.
Removed
He was previously employed by Andrew Corporation, a publicly-held manufacturer of telecommunications infrastructure equipment, having served as Secretary from 1990 to May 2006, and Vice President - Law from 2000 to October 2006. Richard T.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The graph and table assume that $100 was invested on September 30, 2017 in our common stock and in each of the two indices and the reinvestment of all dividends. Cumulative total shareholder returns for our common stock, the Russell 2000 Index and the S&P Building Products Index are based on our fiscal year.
The graph and table assume that $100 was invested on September 29, 2018 in our common stock and in each of the two indices and the reinvestment of all dividends. Cumulative total shareholder returns for our common stock, the Russell 2000 Index and the S&P 500 Building Products Index are based on our fiscal year.
Item 5. Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “IIIN” and has traded on the NYSE since March 17, 2021. As of October 26, 2022, there were 467 shareholders of record.
Item 5. Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “IIIN” and has traded on the NYSE since March 17, 2021. As of October 24, 2023, there were 449 shareholders of record.
Stock Performance Graph The graph below compares the cumulative total shareholder return on our common stock with the cumulative total return of the Russell 2000 Index and the S&P Building Products Index for the five years ended October 1, 2022.
Additional information regarding our share repurchase authorization is discussed in Note 18 to our consolidated financial statements and incorporated herein by reference. 13 Stock Performance Graph The graph below compares the cumulative total shareholder return on our common stock with the cumulative total return of the Russell 2000 Index and the S&P 500 Building Products Index for the five years ended September 30, 2023.
On November 16, 2021, our Board of Directors approved a one-time special cash dividend of $2.00 per share that was paid on December 17, 2021.
On November 15, 2022, our Board of Directors approved a one-time special cash dividend of $2.00 per share that was paid on December 23, 2022. Issuer Purchases of Equity Securities There were not any repurchases of common stock during the quarter ended September 30, 2023.
Fiscal Year Ended September 30, 2017 September 29, 2018 September 28, 2019 October 3, 2020 October 2, 2021 October 1, 2022 Insteel Industries, Inc. $ 100.00 $ 142.87 $ 82.93 $ 76.42 $ 168.12 $ 120.44 Russell 2000 100.00 115.24 104.99 105.40 155.66 119.08 S&P Building Products 100.00 90.79 107.05 123.99 179.62 135.57 Item 6. Reserved.
Fiscal Year Ended September 29, 2018 September 28, 2019 October 3, 2020 October 2, 2021 October 1, 2022 September 30, 2023 Insteel Industries, Inc. $ 100.00 $ 58.05 $ 53.49 $ 117.67 $ 84.30 $ 110.87 Russell 2000 100.00 91.11 91.47 135.08 103.34 112.56 S&P 500 Building Products 100.00 117.91 136.56 197.83 149.31 199.59 Item 6. Reserved.
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Issuer Purchases of Equity Securities The following table summarizes the repurchases of common stock during the quarter ended October 1, 2022: (In thousands except share and per share amounts) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Program July 3, 2022 - August 6, 2022 - - - $ 24,756 (1) August 7, 2022 - September 3, 2022 25,763 $ 29.26 25,763 24,002 (1) September 4, 2022 - October 1, 2022 15,943 $ 28.20 15,943 23,552 (1) 41,706 41,706 (1) Under the $25.0 million share repurchase authorization announced on November 18, 2008, which continues in effect until terminated by the Board of Directors. 12 Additional information regarding our share repurchase authorization is discussed in Note 18 to our consolidated financial statements and incorporated herein by reference.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Investing Activities Investing activities used $6.0 million of cash in 2022 primarily due to capital expenditures ($15.9 million) partially offset by the receipt of proceeds from the sale of assets held for sale ($6.9 million), life insurance claims ($1.5 million) and a decrease in cash surrender value of life insurance policies ($1.4 million).
Investing activities used $6.0 million of cash in 2022 primarily due to capital expenditures ($15.9 million) partially offset by the receipt of proceeds from the sale of assets held for sale ($6.9 million), life insurance claims ($1.5 million) and a decrease in cash surrender value of life insurance policies ($1.4 million).
Regardless of the market dynamics, we continue to focus on those factors we control: closely managing and controlling our expenses; aligning our production schedules with demand in a proactive manner as there are changes in market conditions to minimize our operating costs; pursuing further improvements in the productivity and effectiveness of all our manufacturing, selling and administrative activities: and furthering our human capital strategy.
Regardless of the market dynamics, we continue to focus on those factors we control, including closely managing and controlling our expenses; aligning our production schedules with demand in a proactive manner as there are changes in market conditions to minimize our operating costs; pursuing further improvements in the productivity and effectiveness of all our manufacturing, selling and administrative activities: and furthering our human capital strategy.
Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays should future business conditions warrant that such actions be taken. Financing Activities Financing activities used $41.2 million of cash in 2022 and $30.9 million of cash in 2021.
Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays should future business conditions warrant that such actions be taken. Financing Activities Financing activities used $44.0 million of cash in 2023 and $41.2 million of cash in 2022.
We also expect gradually increasing contributions from the substantial investments we have made in our facilities in the form of reduced operating costs and additional capacity to support future growth. Finally, we will continue to pursue acquisitions opportunistically in our existing businesses that expand our penetration of markets we currently serve or expand our footprint.
We also expect increasing contributions from the substantial investments we have made in our facilities in recent years and expect to continue to make in the form of reduced operating costs and additional capacity to support future growth. Finally, we will continue to pursue acquisitions opportunistically to expand our penetration of markets we currently serve or expand our footprint.
Discussions of our financial condition and results of operations for the year ended October 2, 2021 compared to October 3, 2020 that have been omitted under this item can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended October 2, 2021 , which was filed with the SEC on October 27, 2021. 14 The table below presents a summary of our results of operations for fiscal 2022 and fiscal 2021.
Discussions of our financial condition and results of operations for the year ended October 1, 2022 compared to October 2, 2021 that have been omitted under this item can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended October 1, 2022 , which was filed with the SEC on October 27, 2022.
Results of Operations The following discussion and analysis of our financial condition and results of operations is for the year ended October 1, 2022 compared with the year ended October 2, 2021.
Results of Operations The following discussion and analysis of our financial condition and results of operations is for the year ended September 30, 2023 compared with the year ended October 1, 2022.
As of October 1, 2022, no borrowings were outstanding on the Credit Facility, $98.6 million of borrowing capacity was available and outstanding letters of credit totaled $1.4 million (see Note 8 to the consolidated financial statements). As of October 2, 2021, there were no borrowings outstanding on the Credit Facility.
As of September 30, 2023, no borrowings were outstanding on the Credit Facility, $98.5 million of borrowing capacity was available and outstanding letters of credit totaled $1.5 million (see Note 8 to the consolidated financial statements). As of October 1, 2022, there were no borrowings outstanding on the Credit Facility.
Impact of Inflation We are subject to inflationary risks arising from fluctuations in the market prices for our primary raw material, hot-rolled carbon steel wire rod, and, to a much lesser extent, labor, freight, energy and other consumables that are used in our manufacturing processes.
As of September 30, 2023, there were no borrowings outstanding. ● Capital Expenditures – As of September 30, 2023, we had contractual commitments for capital expenditures of $15.3 million. 18 Impact of Inflation We are subject to inflationary risks arising from fluctuations in the market prices for our primary raw material, hot-rolled carbon steel wire rod, and, to a much lesser extent, labor, freight, energy and other consumables that are used in our manufacturing processes.
The decrease in legal expense was primarily related to costs associated with trade matters incurred in the prior year. The decrease in employee benefits expense was due to a net gain on the settlement of life insurance policies ($364,000) in the current year.
The increase in employee benefits expense was due to a net gain on the settlement of life insurance policies ($364,000) in the prior year along with higher employee health insurance costs in the current year period.
Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories.
The Credit Facility provides for an accordion feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories.
Selling, General and Administrative Expense Selling, general and administrative expense (“SG&A expense”) increased 11.3% to $36.0 million, or 4.4% of net sales, in 2022 from $32.4 million, or 5.5% of net sales, in 2021 primarily due to relative year-over-year changes in the cash surrender value of life insurance policies ($3.4 million), higher compensation ($948,000), travel ($423,000) and insurance ($265,000) expense partially offset by the lower legal ($1.8 million) and employee benefit ($321,000) expense.
Selling, General and Administrative Expense Selling, general and administrative expense (“SG&A expense”) decreased 14.9% to $30.7 million, or 4.7% of net sales, in 2023 from $36.0 million, or 4.4% of net sales, in 2022 primarily due to lower compensation ($2.9 million), the relative year-over-year changes in the cash surrender value of life insurance policies ($2.4 million) and depreciation expense ($577,000) partially offset by higher employee benefit expense ($489,000).
Selected Liquidity and Capital Resources Data (Dollars in thousands) Year Ended October 1, October 2, 2022 2021 Net cash provided by operating activities $ 5,670 $ 69,878 Net cash used for investing activities (6,039 ) (17,805 ) Net cash used for financing activities (41,199 ) (30,877 ) Cash and cash equivalents 48,316 89,884 Net working capital 272,736 178,057 Total debt - - Percentage of total capital - - Shareholders' equity $ 389,744 $ 302,038 Percentage of total capital 100 % 100 % Total capital (total debt + shareholders' equity) $ 389,744 $ 302,038 Operating Activities Operating activities provided $5.7 million of cash in 2022 primarily from net earnings adjusted for non-cash items partially offset by an increase in working capital.
Selected Liquidity and Capital Resources Data (Dollars in thousands) Year Ended September 30, October 1, 2023 2022 Net cash provided by operating activities $ 142,200 $ 5,670 Net cash used for investing activities (20,896 ) (6,039 ) Net cash used for financing activities (43,950 ) (41,199 ) Cash and cash equivalents 125,670 48,316 Net working capital 252,698 272,736 Total debt - - Percentage of total capital - - Shareholders' equity $ 381,505 $ 389,744 Percentage of total capital 100 % 100 % Total capital (total debt + shareholders' equity) $ 381,505 $ 389,744 Operating Activities Operating activities provided $142.2 million of cash in 2023 primarily from net earnings adjusted for non-cash items together with a net decrease in working capital.
Off-Balance Sheet Arrangements We do not have any material transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons, as defined by Item 303(a)(4) of Regulation S-K of the SEC, that have or are reasonably likely to have a material current or future impact on our financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses. 17 Contractual Obligations In addition to our discussion and analysis surrounding our liquidity and capital resources, our contractual obligations and commitments as of October 1, 2022, include: ● Raw Material Purchase Commitments – See Note 12, “Commitments and Contingencies,” within our consolidated financial statements for further details concerning our non-cancelable raw material purchase commitments. ● Supplemental Employee Retirement Plan Obligations – See Note 11, “Employee Benefit Plans,” within our consolidated financial statements for further detail of our obligations and the timing of expected future payments under our supplemental employee retirement plan. ● Operating Leases – See Note 13, “Leases,” within our consolidated financial statements for further detail of our obligations and the timing of expected future payments, including a five-year maturity schedule. ● Debt Obligations and Interest Payments - See Note 8, “Long-Term Debt,” within our consolidated financial statements for further detail of our debt and the timing of expected future principal and interest payments.
Contractual Obligations In addition to our discussion and analysis surrounding our liquidity and capital resources, our contractual obligations and commitments as of September 30, 2023, include: ● Raw Material Purchase Commitments – See Note 12, “Commitments and Contingencies,” within our consolidated financial statements for further details concerning our non-cancelable raw material purchase commitments. ● Supplemental Employee Retirement Plan Obligations – See Note 11, “Employee Benefit Plans,” within our consolidated financial statements for further detail of our obligations and the timing of expected future payments under our supplemental employee retirement plan. ● Operating Leases – See Note 13, “Leases,” within our consolidated financial statements for further detail of our obligations and the timing of expected future payments, including a five-year maturity schedule. ● Debt Obligations and Interest Payments - See Note 8, “Long-Term Debt,” within our consolidated financial statements for further detail of our debt and the timing of expected future principal and interest payments.
The increase in spreads was driven by higher average selling prices ($282.0 million) partially offset by higher raw material costs ($181.9 million) and freight expense ($5.9 million).
The decrease in spreads was driven by lower average selling prices ($129.7 million) and an increase in freight expense ($1.4 million) partially offset by lower raw material costs ($25.4 million).
The cash surrender value of life insurance policies decreased $1.9 million in the current year compared with an increase of $1.5 million in the prior year due to the corresponding changes in the value of the underlying investments. The increase in compensation expense was largely driven by higher incentive and stock-based compensation expense.
The cash surrender value of life insurance policies increased $531,000 in the current year compared with a decrease of $1.9 million in the prior year due to the corresponding changes in the value of the underlying investments.
Statements of Operations – Selected Data (Dollars in thousands) Year Ended October 1, October 2, 2022 Change 2021 Net sales $ 826,832 40.0 % $ 590,601 Gross profit 197,310 62.3 % 121,548 Percentage of net sales 23.9 % 20.6 % Selling, general and administrative expense $ 36,048 11.3 % $ 32,388 Percentage of net sales 4.4 % 5.5 % Restructuring (recoveries) charges, net $ (318 ) (111.1% ) $ 2,868 Effective income tax rate 22.7 % 22.6 % Net earnings $ 125,011 87.7 % $ 66,610 2022 Compared with 2021 Net Sales Net sales increased 40.0% to $826.8 million in 2022 from $590.6 million in 2021, reflecting a 51.9% increase in selling prices partially offset by a 7.8% decrease in shipments.
Statements of Operations – Selected Data (Dollars in thousands) Year Ended September 30, October 1, 2023 Change 2022 Net sales $ 649,188 (21.5% ) $ 826,832 Gross profit 65,398 (66.9% ) 197,310 Percentage of net sales 10.1 % 23.9 % Selling, general and administrative expense $ 30,685 (14.9% ) $ 36,048 Percentage of net sales 4.7 % 4.4 % Other (income) expense, net $ (3,423 ) N/M $ 88 Interest income $ (3,706 ) N/M $ (326 ) Effective income tax rate 22.4 % 22.7 % Net earnings $ 32,415 (74.1% ) $ 125,011 "N/M" = not meaningful 2023 Compared with 2022 Net Sales Net sales decreased 21.5% to $649.2 million in 2023 from $826.8 million in 2022, reflecting a 17.1% decrease in selling prices along with a 5.3% decrease in shipments.
Working capital used $134.3 million of cash due to a $118.6 million increase in inventories, a $13.7 million increase in accounts receivable and a $2.0 million decrease in accounts payable and accrued expenses. The increase in inventories was the result of higher raw material purchases during 2022 together with higher average unit costs.
Working capital provided $95.6 million of cash due to a $94.3 million decrease in inventories and an $18.2 million reduction in accounts receivable partially offset by a $16.9 million decrease in accounts payable and accrued expenses. The decrease in inventories was primarily due to lower raw material purchases along with lower average unit costs.
In 2021, $31.3 million of cash was used for dividend payments (including a special cash dividend of $29.0 million, or $1.50 per share, and regular cash dividends totaling $2.3 million), which was partially offset by $1.1 million of proceeds from the exercise of stock options.
In 2023, $41.3 million of cash was used for dividend payments (including a special cash dividend of $38.9 million, or $2.00 per share, and regular cash dividends totaling $2.4 million) and $2.3 million for the repurchase of common stock.
The increase in accounts receivable was due to higher average selling prices.
The increase in inventories was the result of higher raw material purchases during 2022 together with higher average unit costs. The increase in accounts receivable was due to higher average selling prices.
The decrease in accounts payable and accrued expenses was primarily related to lower raw material purchases near the end of the current year. 16 Operating activities provided $69.9 million of cash in 2021 primarily from net earnings adjusted for non-cash items partially offset by an increase in working capital.
Operating activities provided $5.7 million of cash in 2022 primarily from net earnings adjusted for non-cash items partially offset by an increase in working capital. Working capital used $134.3 million of cash due to a $118.6 million increase in inventories, a $13.7 million increase in accounts receivable and a $2.0 million decrease in accounts payable and accrued expenses.
Our business strategy is focused on: (1) achieving leadership positions in our markets; (2) operating as the lowest cost producer in our industry; and (3) pursuing growth opportunities within our core businesses that further our penetration of the markets we currently serve or expand our footprint. 13 On March 16, 2020, we, through our wholly-owned subsidiary, IWP, purchased substantially all of the assets of STM for an adjusted purchase price of $19.4 million, which reflects certain post-closing adjustments.
Our business strategy is focused on: (1) achieving leadership positions in our markets; (2) operating as the lowest cost producer in our industry; and (3) pursuing growth opportunities within our core businesses that further our penetration of the markets we currently serve or expand our footprint. 14 Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
We may elect to adjust our operating activities as there are changes in the conditions in our construction end-markets, which could materially impact our cash requirements. While a downturn in the level of construction activity affects sales to our customers, it generally reduces our working capital requirements.
The decrease in accounts payable and accrued expenses was primarily related to lower raw material purchases near the end of the current year. 17 We may elect to adjust our operating activities as there are changes in the conditions in our construction end-markets, which could materially impact our cash requirements.
Capital expenditures are expected to total up to approximately $30.0 million in 2023, which include expenditures primarily to advance the growth of our engineered structural mesh business and to support cost and productivity improvement initiatives as well as recurring maintenance requirements.
Capital expenditures for both years focused on cost and productivity improvement initiatives in addition to recurring maintenance requirements. Capital expenditures are expected to total up to approximately $30.0 million in 2024, including expenditures to support costs and productivity initiatives, modernize our facilities and information systems and recurring maintenance requirements.
As of October 1, 2022, our cash and cash equivalents totaled $48.3 million compared with $89.9 million as of October 2, 2021.
Our principal capital requirements include funding working capital, capital expenditures, dividends and any share repurchases. As of September 30, 2023, our cash and cash equivalents totaled $125.7 million compared with $48.3 million as of October 1, 2022.
During 2022 and 2021, we were successful in implementing price increases sufficient to recover the escalation in our raw material costs that occurred over the course of each year. The timing and magnitude of any future increases in raw material costs and the impact on selling prices for our products is uncertain at this time.
Consequently, our financial results were adversely affected as we consumed higher cost inventory that was purchased in prior periods. During 2022, we were successful in implementing price increases sufficient to recover the escalation in our raw material costs that occurred over the course of the year.
Liquidity and Capital Resources Overview Our sources of liquidity include cash and cash equivalents, cash generated by operating activities and borrowing availability provided under our $100.0 million revolving credit facility (the “Credit Facility”). Our principal capital requirements include funding working capital, capital expenditures, dividends and any share repurchases.
Net Earnings Net earnings decreased to $32.4 million ($1.66 per share) in 2023 from $125.0 million ($6.37 per diluted share) in 2022, primarily due to the decrease in gross profit partially offset by lower SG&A expense and increased other income and interest income. 16 Liquidity and Capital Resources Overview Our sources of liquidity include cash and cash equivalents, cash generated by operating activities and borrowing availability provided under our $100.0 million revolving credit facility (the “Credit Facility”).
Gross Profit Gross profit increased 62.3% to $197.3 million, or 23.9% of net sales, in 2022 from $121.5 million, or 20.6% of net sales, in 2021. The year-over-year increase was primarily due to higher spreads between average selling prices and raw material costs ($94.2 million) partially offset by higher manufacturing costs ($9.2 million) and a decrease in shipments ($9.2 million).
The year-over-year decrease was primarily due to lower spreads between average selling prices and raw material costs ($105.7 million) along with a decrease in shipments ($11.8 million) and higher manufacturing costs ($14.4 million).
Working capital used $12.3 million of cash due to a $14.1 million increase in accounts receivable and a $10.1 million increase in inventories partially offset by an $11.9 million increase in accounts payable and accrued expenses. The increase in accounts receivable and inventories were due to the escalation in raw material costs and average selling prices during 2021.
The decrease in accounts receivable was largely driven by lower average selling prices. The decrease in accounts payable and accrued expenses was largely due to lower raw material purchases, lower unit costs and a reduction in accrued incentive plan expense.
Removed
STM was a leading manufacturer of PC strand for concrete construction applications. We acquired, among other assets, STM’s accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina and assumed certain of its accounts payable and accrued liabilities. Subsequent to the acquisition, we elected to consolidate our PC strand operations with the closure of the Summerville facility.
Added
The table below presents a summary of our results of operations for fiscal 2023 and fiscal 2022.
Removed
Impact of COVID-19 Despite the significant disruption in the U.S. and global economies, including supply chain challenges and labor market obstacles, COVID-19 has had a limited impact on our operations to date.
Added
The decrease in average selling prices was driven by competitive pricing pressures resulting from weakening demand for our products and declining raw material costs.
Removed
We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and the potential effect on our financial position, results of operations and cash flows. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Added
The decrease in shipments was due to reduced demand resulting from inventory management measures pursued by our customers during the fiscal year and a decrease in new project activity. 15 Gross Profit Gross profit decreased 66.9% to $65.4 million, or 10.1% of net sales, in 2023 from $197.3 million, or 23.9% of net sales, in 2022.
Removed
The increase in average selling prices was driven by price increases implemented in the current year to recover the escalation in raw material costs.
Added
The decrease in compensation expense was largely driven by lower incentive plan expense due to a decline in financial results in the current year.
Removed
The decrease in shipments was due to tight supply conditions for raw materials during the first half of the current year followed by inventory management measures pursued by our customers and weakness in residential construction activity in the latter half of the year.
Added
Other (Income) Expense, net Other income of $3.4 million for 2023 was primarily related to a net gain from the sale of property, plant and equipment ($3.3 million). Interest Income Interest income increased to $3.7 million due to an increase in cash and higher average interest rates.
Removed
Restructuring (Recoveries) Charges, Net Net restructuring recoveries of $318,000 were incurred in 2022 related to the closure of the Summerville, South Carolina facility, which had been acquired through the STM Acquisition, and the consolidation of our PC strand operations.
Added
Income Taxes Our effective income tax rate for 2023 decreased to 22.4% from 22.7% in 2022 due to changes in book versus tax differences.
Removed
Net restructuring recoveries in 2022 included a gain on sale of the Summerville facility ($622,000) partially offset by facility closure costs ($304,000). Net restructuring charges of $2.9 million were incurred in the prior year which included asset impairment charges ($1.4 million), facility closure costs ($1.0 million), equipment relocation costs ($423,000) and employee separation costs ($13,000).
Added
While a downturn in the level of construction activity affects sales to our customers, it generally reduces our working capital requirements. Investing Activities Investing activities used $20.9 million of cash in 2023 primarily due to capital expenditures ($30.7 million) partially offset by the receipt of proceeds from the sale of property, plant and equipment ($9.9 million).
Removed
Income Taxes Our effective income tax rate for 2022 increased to 22.7% from 22.6% in 2021 due to changes in book versus tax differences. 15 Net Earnings Net earnings increased to $125.0 million ($6.37 per diluted share) in 2022 from $66.6 million ($3.41 per diluted share) in 2021 primarily due to the increase in gross profit and the change in net restructuring (recoveries) charges partially offset by higher SG&A expense.
Added
In March 2023, we amended our credit agreement to extend the maturity date of the Credit Facility from May 15, 2024, to March 15, 2028 and replaced the London Inter-Bank Offered Rate with the Secured Overnight Financing Rate.
Removed
The increase in accounts payable and accrued expenses was primarily related to raw material purchases with higher unit costs near the end of the period and, to a lesser extent, increases in accrued salaries, wages and related expenses and income taxes.
Added
Off-Balance Sheet Arrangements We do not have any material transactions, arrangements, obligations (including contingent obligations) or other relationships with unconsolidated entities or other persons, as defined by Item 303(a)(4) of Regulation S-K of the SEC, that have or are reasonably likely to have a material current or future impact on our financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses.
Removed
Investing activities used $17.8 million of cash in 2021 primarily due to capital expenditures ($17.5 million) and an increase in the cash surrender value of life insurance policies ($0.4 million). Capital expenditures for both years focused on cost and productivity improvement initiatives in addition to recurring maintenance requirements.
Added
During 2023, we experienced a decline in wire rod prices primarily due to reductions in the cost of scrap for wire producers and a concurrent weakening in demand. Selling prices for our products fell in response to the softening demand and competitive pricing pressure.
Removed
In May 2019, we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since June 2010.
Added
The timing and magnitude of any future increases in raw material costs and the impact on selling prices for our products is uncertain at this time. Outlook Looking ahead to fiscal 2024, we are aware of the risks associated with higher interest rates and the implications for the broader U.S. economy and, ultimately, our end markets.
Removed
The new credit agreement, among other changes, extended the maturity date of the Credit Facility from May 13, 2020 to May 15, 2024 and provided for an accordion feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval.
Added
Nevertheless, we remain optimistic about demand in our private and public nonresidential construction markets as customer sentiment is mostly positive. Furthermore, the outlook for infrastructure construction remains favorable as federal spending associated with the Infrastructure Investment and Jobs Act is expected to accelerate as we progress through fiscal 2024 and help drive demand.
Removed
As of October 1, 2022, there were no borrowings outstanding. ● Capital Expenditures – As of October 1, 2022, we had contractual commitments for capital expenditures of $31.9 million.
Removed
Outlook Looking ahead to fiscal 2023, we are optimistic about demand in both our private and public nonresidential construction markets. Backlogs across our customer base remain solid and widely monitored leading market indicators in private nonresidential construction point to continued expansion.
Removed
Public nonresidential construction markets should benefit from incremental demand from both the strong financial position of state budgets and funding by the Infrastructure Investment and Jobs Act.
Removed
Weakness in the residential construction market and heightened uncertainty regarding the future direction of the overall economy are areas we are closely monitoring, but we believe our strong balance sheet and flexible operating model position us to navigate challenges we may encounter.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed7 unchanged
We monitor our underlying market risk exposures on an ongoing basis and believe we can modify or adapt our hedging strategies as necessary. 18 Commodity Prices We are subject to significant fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers.
We monitor our underlying market risk exposures on an ongoing basis and believe we can modify or adapt our hedging strategies as necessary. 19 Commodity Prices We are subject to significant fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers.
There were no forward contracts outstanding as of October 1, 2022. During 2022, a 10% increase or decrease in the value of the U.S. dollar relative to foreign currencies to which we are typically exposed would not have had a material impact on our financial position, results of operations or cash flows.
There were no forward contracts outstanding as of September 30, 2023. During 2023, a 10% increase or decrease in the value of the U.S. dollar relative to foreign currencies to which we are typically exposed would not have had a material impact on our financial position, results of operations or cash flows.
Based on our 2022 shipments and average wire rod cost reflected in cost of sales, a 10% increase in the price of wire rod would have resulted in a $48.5 million decrease in our annual pre-tax earnings (assuming there was not a corresponding change in our selling prices).
Based on our 2023 shipments and average wire rod cost reflected in cost of sales, a 10% increase in the price of wire rod would have resulted in a $42.8 million decrease in our annual pre-tax earnings (assuming there was not a corresponding change in our selling prices).
Interest Rates Although we did not have any balances outstanding on our Credit Facility as of October 1, 2022, future borrowings under the facility are subject to a variable rate of interest and are sensitive to changes in interest rates.
Interest Rates Although we did not have any balances outstanding on our Credit Facility as of September 30, 2023, future borrowings under the facility are subject to a variable rate of interest and are sensitive to changes in interest rates.

Other IIIN 10-K year-over-year comparisons