UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended |
or
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ______. |
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip code) |
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |
| Non-Accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
| Common Stock (No Par Value) | |
| Title of Class | Number of Shares Outstanding as of July 16, 2025 |
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Unaudited Financial Statements | |
| Consolidated Statements of Operations and Comprehensive Income | 3 | |
| Consolidated Balance Sheets | 4 | |
| Consolidated Statements of Cash Flows | 5 | |
| Consolidated Statements of Shareholders' Equity | 6 | |
| Notes to Consolidated Financial Statements | 7 | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 18 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 25 |
| Item 4. | Controls and Procedures | 26 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 26 |
| Item 1A. | Risk Factors | 26 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 26 |
| Item 5. | Other Information | 27 |
| Item 6. | Exhibits | 27 |
| SIGNATURES | 28 | |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
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INSTEEL INDUSTRIES INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME |
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(In thousands, except per share amounts) |
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(Unaudited) |
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Three Months Ended |
Nine Months Ended |
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June 28, |
June 29, |
June 28, |
June 29, |
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2025 |
2024 |
2025 |
2024 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
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Cost of sales |
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Gross profit |
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Selling, general and administrative expense |
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Restructuring charges, net |
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Acquisition costs |
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Other (income) expense, net |
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Interest expense |
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Interest income |
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Earnings before income taxes |
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Income taxes |
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Net earnings |
$ | $ | $ | $ | ||||||||||||
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Net earnings per share: |
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Basic |
$ | $ | $ | $ | ||||||||||||
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Diluted |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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Cash dividends declared per share |
$ | $ | $ | $ | ||||||||||||
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Comprehensive income |
$ | $ | $ | $ | ||||||||||||
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See accompanying notes to consolidated financial statements. |
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INSTEEL INDUSTRIES INC. AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEETS |
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(In thousands) |
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(Unaudited) |
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June 28, |
September 28, |
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2025 |
2024 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
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Accounts receivable, net |
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Inventories |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Intangibles, net |
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Goodwill |
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Other assets |
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Total assets |
$ | $ | ||||||
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Liabilities and shareholders' equity |
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Current liabilities: |
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Accounts payable |
$ | $ | ||||||
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Accrued expenses |
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Total current liabilities |
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Other liabilities |
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Commitments and contingencies |
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Shareholders' equity: |
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Common stock |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
( |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
$ | $ | ||||||
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See accompanying notes to consolidated financial statements. |
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INSTEEL INDUSTRIES INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(In thousands) |
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(Unaudited) |
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Nine Months Ended |
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June 28, |
June 29, |
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2025 |
2024 |
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Cash Flows From Operating Activities: |
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Net earnings |
$ | $ | ||||||
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Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of capitalized financing costs |
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Stock-based compensation expense |
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Deferred income taxes |
( |
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Asset impairment charges |
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Loss on sale and disposition of property, plant and equipment |
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Increase in cash surrender value of life insurance policies over premiums paid |
( |
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Net changes in assets and liabilities (net of assets and liabilities acquired): |
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Accounts receivable, net |
( |
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Inventories |
( |
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Accounts payable and accrued expenses |
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Other changes |
( |
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Total adjustments |
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Net cash provided by operating activities |
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Cash Flows From Investing Activities: |
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Acquisition of businesses |
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Capital expenditures |
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Increase in cash surrender value of life insurance policies |
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Proceeds from sale of assets held for sale |
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Proceeds from sale of property, plant and equipment |
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Proceeds from surrender of life insurance policies |
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Net cash used for investing activities |
( |
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Cash Flows From Financing Activities: |
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Proceeds from long-term debt |
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Principal payments on long-term debt |
( |
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Cash dividends paid |
( |
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Payment of employee tax withholdings related to net share transactions |
( |
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Cash received from exercise of stock options |
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Repurchases of common stock |
( |
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Net cash used for financing activities |
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Net decrease in cash and cash equivalents |
( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
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Supplemental Disclosures of Cash Flow Information: |
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Cash paid during the period for: |
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Income taxes, net |
$ | $ | ||||||
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Non-cash investing and financing activities: |
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Purchases of property, plant and equipment in accounts payable |
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Restricted stock units and stock options surrendered for withholding taxes payable |
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See accompanying notes to consolidated financial statements. |
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INSTEEL INDUSTRIES INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY |
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(In thousands) |
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(Unaudited) |
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Accumulated |
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Additional |
Other |
Total |
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Common Stock |
Paid-In |
Retained |
Comprehensive |
Shareholders' |
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Shares |
Amount |
Capital |
Earnings |
Loss |
Equity |
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For the three and nine months ended June 28, 2025 |
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Balance at September 28, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
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Net earnings |
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Compensation expense associated with stock-based plans |
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Repurchases of common stock |
( |
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) | ( |
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Cash dividends declared |
( |
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Balance at December 28, 2024 |
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Net earnings |
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Vested and released restricted stock units |
( |
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Compensation expense associated with stock-based plans |
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Repurchases of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
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Restricted stock units and stock options surrendered for withholding taxes payable |
( |
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Cash dividends declared |
( |
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Balance at March 29, 2025 |
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Net earnings |
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Stock options exercised, net |
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Compensation expense associated with stock-based plans |
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Repurchases of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
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Restricted stock units and stock options surrendered for withholding taxes payable |
( |
) | ( |
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Cash dividends declared |
( |
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Balance at June 28, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
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For the three and nine months ended June 29, 2024 |
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Balance at September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
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Net earnings |
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Stock options exercised, net |
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Compensation expense associated with stock-based plans |
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Repurchases of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
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Restricted stock units and stock options surrendered for withholding taxes payable |
( |
) | ( |
) | ||||||||||||||||||||
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Cash dividends declared |
( |
) | ( |
) | ||||||||||||||||||||
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Balance at December 30, 2023 |
( |
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Net earnings |
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Stock options exercised, net |
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Vested and released restricted stock units |
( |
) | ||||||||||||||||||||||
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Compensation expense associated with stock-based plans |
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Repurchases of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
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Restricted stock units and stock options surrendered for withholding taxes payable |
( |
) | ( |
) | ||||||||||||||||||||
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Cash dividends declared |
( |
) | ( |
) | ||||||||||||||||||||
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Balance at March 30, 2024 |
( |
) | ||||||||||||||||||||||
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Net earnings |
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Vested and released restricted stock units |
( |
) | ||||||||||||||||||||||
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Compensation expense associated with stock-based plans |
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Repurchases of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
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Restricted stock units and stock options surrendered for withholding taxes payable |
( |
) | ( |
) | ||||||||||||||||||||
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Cash dividends declared |
( |
) | ( |
) | ||||||||||||||||||||
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Balance at June 29, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
|
See accompanying notes to consolidated financial statements |
INSTEEL INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) on a basis consistent with that used in the Annual Report on Form 10-K for the year ended September 28, 2024 (“2024 Form 10-K”) filed by us with the Securities and Exchange Commission. These statements include all normal recurring adjustments necessary to present fairly the consolidated balance sheets and the statements of operations and comprehensive income, cash flows and shareholders’ equity for the periods indicated. The September 28, 2024 consolidated balance sheet was derived from audited consolidated financial statements but does not include all the disclosures required by GAAP. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2024 Form 10-K. The results of operations for the periods indicated are not necessarily indicative of the results that may be expected for the full fiscal year or any future periods.
On October 21, 2024, we, through our wholly-owned subsidiary, Insteel Wire Products Company (“IWP”), purchased substantially all of the assets, other than cash and accounts receivable, of Engineered Wire Products, Inc. (“EWP”) and certain related assets of Liberty Steel Georgetown, Inc. (“LSG”). See Note 3 to the consolidated financial statements for additional information.
On November 26, 2024, we, through our wholly-owned subsidiary IWP, purchased certain assets of O’Brien Wire Products of Texas, Inc. (“OWP”). See Note 3 to the consolidated financial statements for additional information.
(2) Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. ASU No. 2023-07 requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The ASU requires all annual disclosures currently required by Topic 280 to be included in interim periods and is applicable to entities with a single reportable segment. ASU No. 2023-07 will be effective for us in fiscal 2025 for annual reporting and in the first quarter of fiscal 2026 for interim reporting. Retrospective application is required for all prior periods presented in the financial statements. The adoption of this update will not have a material impact on our consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. ASU No. 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income tax paid. ASU No. 2023-09 will become effective for us in fiscal 2026. The adoption of this update will not have a material impact on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. ASU No. 2024-03 does not change or remove existing expense disclosure requirements but requires disaggregated disclosures about certain expense categories and captions, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. ASU No. 2024-03 will become effective for us in fiscal 2028 and in the first quarter of fiscal 2029 for interim reporting. Retrospective application is permitted. We are currently evaluating the impact of the ASU on our disclosures within the consolidated financial statements.
(3) Business Combinations
Acquisitions have been accounted for as business purchases pursuant to FASB Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).
Engineered Wire Products, Inc.
On October 21, 2024, we purchased substantially all of the assets, other than cash and accounts receivable, of EWP and certain related assets of LSG (the “EWP Acquisition”) for an adjusted purchase price of $
EWP was a leading manufacturer of welded wire reinforcement (“WWR”) products for use in nonresidential and residential construction. Under the terms of the EWP Acquisition, Insteel acquired EWP’s inventories, production equipment and production facilities located in Upper Sandusky, Ohio and Warren, Ohio. Insteel also acquired certain equipment from LSG located in Georgetown, South Carolina, but the Georgetown facility was excluded from the acquisition. EWP retained its accounts receivable and accounts payable. The EWP Acquisition was funded with cash on hand. The EWP Acquisition will expand our geographic footprint and is expected to strengthen our competitive position within the Midwest market.
Following is a summary of our final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed as of the acquisition date:
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(In thousands) |
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Assets acquired: |
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Inventories |
$ | |||
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Other current assets |
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Property, plant and equipment |
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Intangible assets: |
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Customer relationships |
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Non-competition agreement |
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Trade name |
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Patent |
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Right-of-use assets |
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Total assets acquired |
$ | |||
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Liabilities assumed: |
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Accrued expenses |
$ | |||
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Current operating lease liabilities |
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Non-current operating lease liabilities |
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Total liabilities assumed |
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Net assets acquired |
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Adjusted purchase price |
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Goodwill |
$ |
In connection with the EWP Acquisition, we acquired certain intangible assets that will be amortized based on their estimated useful lives of
Following the EWP Acquisition, net sales of the former EWP facilities for the three- and nine-month periods ended June 28, 2025 were approximately $
The following unaudited supplemental pro forma financial information reflects our combined results of operations had the EWP Acquisition occurred at the beginning of fiscal 2024. The pro forma information reflects certain adjustments related to the EWP Acquisition, including adjusted amortization and depreciation expense based on the fair values of the assets acquired and adjustments to interest income. The pro forma information does not reflect any potential operating efficiencies or cost savings that may result from the EWP Acquisition. Accordingly, this pro forma information is for illustrative purposes and is not intended to represent the actual results of operations of the combined company that would have been achieved had the EWP Acquisition occurred at the beginning of fiscal 2024, nor is it intended to indicate future results of operations. The pro forma combined results of operations for the three- and nine-month periods ending June 28, 2025, and June 29, 2024 are as follows:
|
Three Months Ended |
Nine Months Ended |
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June 28, |
June 29, |
June 28, |
June 29, |
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(In thousands) |
2025 |
2024 |
2025 |
2024 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
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Earnings before income taxes |
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Net earnings |
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Restructuring charges. In connection with the EWP acquisition, we elected to consolidate our WWR operations through the closure of the Warren facility and through the redeployment of equipment to our other WWR production facilities. Production at the Warren facility ceased in November 2024, and its orders were distributed to our remaining WWR facilities. During the three months ended June 28, 2025, we agreed to sell the Warren facility for net consideration of $
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Employee |
Equipment |
Facility |
|
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Separation Costs |
Relocation Costs |
Closure Costs |
Asset
Impairments |
Total |
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(In thousands) |
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Restructuring charges, net |
$ | $ | $ | $ | $ | |||||||||||||||
|
Cash payments |
( |
) | ( |
) | ( |
) | ||||||||||||||
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Non-cash charges |
( |
) | ( |
) | ||||||||||||||||
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Liability as of December 28, 2024 |
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Restructuring charges, net |
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Cash payments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
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Non-cash charges |
( |
) | ( |
) | ||||||||||||||||
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Liability as of March 29, 2025 |
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Restructuring charges, net |
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Cash payments |
( |
) | ( |
) | ( |
) | ||||||||||||||
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Non-cash charges |
( |
) | ( |
) | ||||||||||||||||
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Liability as of June 28, 2025 |
$ | $ | $ | $ | $ | |||||||||||||||
As of June 28, 2025, we recorded a liability of $
Acquisition costs. Under the provisions of ASC 805, acquisition and integration costs are recorded as expenses in the period in which such costs are incurred rather than included as components of consideration transferred. During the three- and nine-month periods ended June 28, 2025, we recorded $
O’Brien Wire Products of Texas, Inc.
On November 26, 2024, we purchased certain assets of OWP for a purchase price of $
Following is a summary of our final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed as of the acquisition date:
|
(In thousands) |
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|
Assets acquired: |
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|
Inventories |
$ | |||
|
Property, plant and equipment |
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Intangible assets: |
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Customer relationships |
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Non-competition agreement |
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Total assets acquired |
$ | |||
|
Liabilities assumed: |
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Total liabilities assumed |
$ | |||
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Net assets acquired |
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|
Purchase price |
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|
Goodwill |
$ |
In connection with the OWP Acquisition, we acquired certain intangible assets that will be amortized based on their estimated useful lives of
Following the OWP acquisition, the net sales resulting from this acquisition were managed through our existing WWR facilities and cannot be quantified separately because of our integration efforts. Additionally, we are unable to prepare pro forma financial information due to the unavailability of certain historical financial data. Disclosing this information is considered impractical, and it would not significantly differ from the results presented in our consolidated financial statements for the three- and nine-month periods ending June 28, 2025, and June 29, 2024.
Restructuring charges. In connection with the OWP Acquisition, we elected to consolidate our WWR operations through the redeployment of OWPs equipment and inventory to our other facilities. Following is a summary of the restructuring activity during the three- and nine-month periods ended June 28, 2025:
|
Equipment |
Facility |
Asset |
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|
Relocation Costs |
Closure Costs |
Impairments |
Total |
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|
(In thousands) |
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|
Restructuring charges, net |
$ | $ | $ | $ | ||||||||||||
|
Cash payments |
( |
) | ( |
) | ||||||||||||
|
Non-cash charges |
( |
) | ( |
) | ||||||||||||
|
Liability as of December 28, 2024 |
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Restructuring charges, net |
||||||||||||||||
|
Cash payments |
( |
) | ( |
) | ( |
) | ||||||||||
|
Non-cash charges |
( |
) | ( |
) | ||||||||||||
|
Liability as of March 29, 2025 |
||||||||||||||||
|
Restructuring charges, net |
( |
) | ||||||||||||||
|
Cash payments |
( |
) | ( |
) | ( |
) | ||||||||||
|
Non-cash charges |
||||||||||||||||
|
Liability as of June 28, 2025 |
$ | $ | $ | $ | ||||||||||||
As of June 28, 2025, we recorded a liability of $
Acquisition costs. There were acquisition-related costs recorded during the three-month period ended June 28, 2025. During the nine-month period ended June 28, 2025, we recorded $
(4) Revenue Recognition
We recognize revenues when performance obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. We enter into contracts that pertain to products, which are accounted for as separate performance obligations and typically one year or less in duration. We do not exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. We present revenue net of amounts collected from customers for sales tax.
Variable consideration that may affect the total transaction price, including contractual discounts, rebates, returns and credits, are included in net sales. Estimates for variable consideration are based on historical experience, anticipated performance and management's judgment and are updated as of each reporting date. Shipping and related expenses associated with outbound freight are accounted for as fulfillment costs and included in cost of sales. We do not have significant financing components. Contract costs are not significant and are recognized as incurred.
Our net sales by product line are as follows:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
June 28, |
June 29, |
June 28, |
June 29, |
|||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Welded wire reinforcement |
$ | $ | $ | $ | ||||||||||||
|
Prestressed concrete strand |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
Contract assets primarily relate to our rights to consideration for products that are delivered but not billed as of the reporting date and are reclassified to receivables when the customer is invoiced. Contract liabilities primarily relate to performance obligations that are to be satisfied in the future and arise when we collect from the customer in advance of shipments. Contract assets and liabilities were not material as of June 28, 2025, and September 28, 2024.
Accounts receivable includes amounts billed and currently due from customers stated at their net estimated realizable value. Customer payment terms are generally 30 days. We maintain an allowance for credit losses to provide for the estimated receivables that will not be collected, which is based upon our assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables. Past-due trade receivable balances are written off when our collection efforts have been unsuccessful.
(5) Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used to measure fair value are as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
As of June 28, 2025, and September 28, 2024, we held financial assets that are required to be measured at fair value on a recurring basis, which are summarized below:
|
(In thousands) |
Total |
Quoted Prices in Active Markets (Level 1) |
Observable Inputs (Level 2) |
|||||||||
|
As of June 28, 2025: |
||||||||||||
|
Current assets: |
||||||||||||
|
Cash equivalents |
$ | $ | $ | |||||||||
|
Other assets: |
||||||||||||
|
Cash surrender value of life insurance policies |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
|
As of September 28, 2024: |
||||||||||||
|
Current assets: |
||||||||||||
|
Cash equivalents |
$ | $ | $ | |||||||||
|
Other assets: |
||||||||||||
|
Cash surrender value of life insurance policies |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
Cash equivalents, which include all highly liquid investments with original maturities of three months or less, are classified as Level 1 of the fair value hierarchy. The carrying amount of our cash equivalents, which consist of investments in money market funds, approximates fair value due to their short maturities. Cash surrender value of life insurance policies are classified as Level 2. The fair value of the life insurance policies was determined by the underwriting insurance company’s valuation models and represents the guaranteed value we would receive upon surrender of these policies as of the reporting date.
As of June 28, 2025, and September 28, 2024, we had nonfinancial assets that were required to be measured at fair value on a nonrecurring basis other than the assets that were acquired from EWP, OWP and assets classified as held for sale during the three- and nine-month periods ended June 28, 2025 (see Note 3 to the consolidated financial statements). The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these financial instruments.
(6) Intangible Assets
The primary components of our intangible assets and the related accumulated amortization are as follows:
|
(In thousands) |
Weighted- Average Useful Life (Years) |
Gross |
Accumulated Amortization |
Net Book Value |
||||||||||||
|
As of June 28, 2025: |
||||||||||||||||
|
Customer relationships |
$ | $ | ( |
) | $ | |||||||||||
|
Developed technology and know-how |
( |
) | ||||||||||||||
|
Non-competition agreements |
( |
) | ||||||||||||||
|
Trade name |
( |
) | ||||||||||||||
|
Patents |
( |
) | ||||||||||||||
| $ | $ | ( |
) | $ | ||||||||||||
|
As of September 28, 2024: |
||||||||||||||||
|
Customer relationships |
$ | $ | ( |
) | $ | |||||||||||
|
Developed technology and know-how |
( |
) | ||||||||||||||
|
Non-competition agreements |
( |
) | ||||||||||||||
| $ | $ | ( |
) | $ | ||||||||||||
Amortization expense for intangibles was $
(7) Stock-Based Compensation
Under our equity incentive plan, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 11, 2025, the shareholders of the Company approved the 2025 Equity Incentive Plan of Insteel Industries Inc. (the “2025 Plan”), which authorizes the issuance of up to
Stock option awards. Under our equity incentive plan, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under these plans generally vest over years and expire years from the date of the grant. Compensation expense associated with stock options was $
The following table summarizes stock option activity:
|
Contractual |
Aggregate |
|||||||||||||||
|
Options |
Weighted |
Term - Weighted |
Intrinsic |
|||||||||||||
|
Outstanding |
Average |
Average |
Value |
|||||||||||||
|
(in thousands) |
Exercise Price |
(in years) |
(in thousands) |
|||||||||||||
|
Outstanding at September 28, 2024 |
$ | |||||||||||||||
|
Granted |
||||||||||||||||
|
Exercised |
( |
) | $ | |||||||||||||
|
Outstanding at June 28, 2025 |
||||||||||||||||
|
Vested and anticipated to vest in the future at June 28, 2025 |
||||||||||||||||
|
Exercisable at June 28, 2025 |
||||||||||||||||
Stock option exercises include “net exercises” for which the optionee received shares of common stock equal to the intrinsic value of the options (fair market value of common stock on the date of exercise less exercise price) reduced by any applicable withholding taxes.
Restricted stock units. Restricted stock units (“RSUs”) granted under our equity incentive plan are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally year from the date of the grant for RSUs granted to directors and years from the date of the grant for RSUs granted to employees. RSUs do not have voting rights. Compensation expense associated with RSUs was $
As of June 28, 2025, there was $
The following table summarizes RSU activity:
|
Weighted |
||||||||
|
Restricted |
Average |
|||||||
|
Stock Units |
Grant Date |
|||||||
|
(Unit amounts in thousands) |
Outstanding |
Fair Value |
||||||
|
Balance, September 28, 2024 |
$ | |||||||
|
Granted |
||||||||
|
Vested |
( |
) | ||||||
|
Balance, June 28, 2025 |
||||||||
(8) Income Taxes
Effective income tax rate. Our effective income tax rate was
Deferred income taxes. As of June 28, 2025, and September 28, 2024, we recorded a deferred tax liability (net of valuation allowance) of $
The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we no longer believe it is more likely than not that they will be fully realized. As of June 28, 2025, and September 28, 2024, we recorded a valuation allowance of $
Uncertainty in income taxes. We establish contingency reserves for material, known tax exposures based on our assessment of the estimated liability that would be incurred in connection with the settlement of such matters. As of June 28, 2025, we had no material, known tax exposures that required the establishment of contingency reserves for uncertain tax positions.
We file U.S. federal, state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to remain subject to examination.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation and deductions for domestic research and development expenditures. The Company is currently evaluating OBBBA; however, it is not expected to have a material impact on the Company’s consolidated financial statements.
(9) Employee Benefit Plans
Supplemental retirement benefit plan. We have Supplemental Retirement Benefit Agreements (each, a “SRBA”) with certain of our employees (each, a “Participant”). Under the SRBAs, if the Participant remains in continuous service with us for a period of at least
Net periodic pension cost for the SRBAs consists of the following components included in selling, general and administrative expense:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
June 28, |
June 29, |
June 28, |
June 29, |
|||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Interest cost |
$ | $ | $ | $ | ||||||||||||
|
Service cost |
||||||||||||||||
|
Net periodic pension cost |
$ | $ | $ | $ | ||||||||||||
(10) Long-Term Debt
Revolving Credit Facility. We have a $
Interest rates on the Credit Facility are based upon (1) an index rate that is established at the highest of the prime rate,
Our ability to borrow available amounts under the Credit Facility will be restricted or eliminated in the event of certain covenant breaches, events of default or if we are unable to make certain representations and warranties provided for under the terms of the Credit Facility. We are required to maintain a fixed charge coverage ratio of not less than
Amortization of capitalized financing costs associated with the Credit Facility was $
(11) Earnings Per Share
The computation of basic and diluted earnings per share attributable to common shareholders is as follows:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
June 28, |
June 29, |
June 28, |
June 29, |
|||||||||||||
|
(In thousands, except per share amounts) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Net earnings |
$ | $ | $ | $ | ||||||||||||
|
Basic weighted average shares outstanding |
||||||||||||||||
|
Dilutive effect of stock-based compensation |
||||||||||||||||
|
Diluted weighted average shares outstanding |
||||||||||||||||
|
Net earnings per share: |
||||||||||||||||
|
Basic |
$ | $ | $ | $ | ||||||||||||
|
Diluted |
$ | $ | $ | $ | ||||||||||||
Options and RSUs that were antidilutive and not included in the dilutive earnings per share calculation amounted to
(12) Share Repurchases
On November 18, 2008, our Board of Directors approved a share repurchase authorization to buy back up to $
(13) Other Financial Data
Balance sheet information:
|
June 28, |
September 28, |
|||||||
|
(In thousands) |
2025 |
2024 |
||||||
|
Accounts receivable, net: |
||||||||
|
Accounts receivable |
$ | $ | ||||||
|
Less allowance for credit losses |
( |
) | ( |
) | ||||
|
Total |
$ | $ | ||||||
|
Inventories: |
||||||||
|
Raw materials |
$ | $ | ||||||
|
Work in process |
||||||||
|
Finished goods |
||||||||
|
Total |
$ | $ | ||||||
|
Other current assets: |
||||||||
|
Prepaid insurance |
$ | $ | ||||||
|
Income taxes receivable |
||||||||
|
Other |
||||||||
|
Total |
$ | $ | ||||||
|
Other assets: |
||||||||
|
Cash surrender value of life insurance policies |
$ | $ | ||||||
|
Assets held for sale |
||||||||
|
|
||||||||
|
Capitalized financing costs, net |
||||||||
|
Other |
||||||||
|
Total |
$ | $ | ||||||
|
Property, plant and equipment, net: |
||||||||
|
Land and land improvements |
$ | $ | ||||||
|
Buildings |
||||||||
|
Machinery and equipment |
||||||||
|
Construction in progress |
||||||||
|
Less accumulated depreciation |
( |
) | ( |
) | ||||
|
Total |
$ | $ | ||||||
|
Accrued expenses: |
||||||||
|
Salaries, wages and related expenses |
$ | $ | ||||||
|
Income taxes |
||||||||
|
|
||||||||
|
Customer rebates |
||||||||
|
Property taxes |
||||||||
|
Deferred compensation |
||||||||
|
State sales and use taxes |
||||||||
|
Sales allowance reserves |
||||||||
|
Other |
||||||||
|
Total |
$ | $ | ||||||
|
Other liabilities: |
||||||||
|
Deferred compensation |
$ | $ | ||||||
|
Deferred income taxes |
||||||||
|
|
||||||||
|
Total |
$ | $ | ||||||
(14) Business Segment Information
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: prestressed concrete strand and welded wire reinforcement. Based on the criteria specified in ASC Topic 280, Segment Reporting, we have reportable segment.
(15) Contingencies
We are involved in lawsuits, claims, investigations and proceedings, including commercial, environmental and employment matters, which arise in the ordinary course of business. We do not expect the ultimate outcome or cost to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, particularly under the caption “Outlook” below. When used in this report, the words “believes,” “anticipates,” “expects,” “estimates,” “appears,” “plans,” “intends,” “may,” “should,” “could,” “outlook,” “continues,” “remains” and similar expressions are intended to identify forward-looking 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 numerous risks and uncertainties and involve certain assumptions. Actual results may differ materially from those expressed in forward-looking statements, and we can provide no assurances that such plans, intentions or expectations will be implemented or achieved. Many of these risks and uncertainties are discussed in detail and, where appropriate, updated in our filings with the U.S. Securities and Exchange Commission (“SEC”), in particular in our Annual Report on Form 10-K for the fiscal year ended September 28, 2024 (our “2024 Annual Report”). You should carefully review these risks and uncertainties.
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.
It is not possible to anticipate and list all risks and uncertainties that may affect our business, future operations or financial performance; however, they include, but are not limited to, the following:
|
● |
general economic and competitive conditions in the markets in which we operate, including uncertainty over global trade policies and the financial impact of related tariffs and retaliatory tariffs; |
|
● |
changes in the spending levels for nonresidential and residential construction and the impact on demand for our products; |
|
● |
changes in the amount and duration of transportation funding provided by federal, state and local governments and the impact on spending for infrastructure construction and demand for our products; |
|
● |
the cyclical nature of the steel and building material industries; |
|
● |
credit market conditions and the relative availability of financing for us, our customers and the construction industry as a whole; |
|
● |
the impact of rising interest rates on the cost of financing for our customers; |
|
● |
fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, from domestic and foreign suppliers; |
|
● |
competitive pricing pressures and our ability to raise selling prices in order to recover increases in raw material or operating costs; |
|
● |
changes in U.S. or foreign trade policy affecting imports or exports of steel wire rod or our products; |
|
● |
unanticipated changes in customer demand, order patterns and inventory levels; |
|
● |
the impact of fluctuations in demand and capacity utilization levels on our unit manufacturing costs; |
|
● |
our ability to further develop the market for engineered structural mesh (“ESM”) and expand our shipments of ESM; |
|
● |
legal, environmental, economic or regulatory developments that significantly impact our business or operating costs; |
|
● |
unanticipated plant outages, equipment failures or labor difficulties; |
|
● |
the impact of cybersecurity breaches and data leaks; and |
|
● |
the risks and uncertainties discussed under “Risk Factors” in our 2024 Annual Report and in other filings made by us with the SEC. |
Overview
Insteel Industries Inc. (“we,” “us,” “our,” “the Company” or “Insteel”) is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. We manufacture and market prestressed concrete strand (“PC strand”) and welded wire reinforcement (“WWR”), including ESM, concrete pipe reinforcement and standard welded wire reinforcement. Our products are sold primarily to manufacturers of concrete products that are used in nonresidential construction. We market our products through sales representatives who are our employees. We sell our products nationwide across the U.S. and, to a much lesser extent, into Canada, Mexico and Central and South America, shipping them primarily by truck, using common or contract carriers. 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.
On October 21, 2024, we, through our wholly-owned subsidiary, Insteel Wire Products Company (“IWP”), purchased substantially all of the assets, other than cash and accounts receivable, of Engineered Wire Products, Inc. (“EWP”) and certain related assets of Liberty Steel Georgetown, Inc. (“LSG”) for an adjusted purchase price of $67.0 million (the “EWP Acquisition”). EWP was a leading manufacturer of WWR products for use in nonresidential and residential construction. We acquired EWP’s inventories, production equipment, production facilities located in Upper Sandusky, Ohio and Warren, Ohio and certain equipment from LSG located in Georgetown, South Carolina. Subsequent to the acquisition, we elected to consolidate our WWR operations with the closure of the Warren facility and relocation of certain equipment to our existing WWR facilities.
On November 26, 2024, we, through our wholly-owned subsidiary IWP, purchased certain assets of O’Brien Wire Products of Texas, Inc. (“OWP”) for a purchase price of $5.1 million (the “OWP Acquisition”). OWP was a manufacturer of WWR products for use in nonresidential and residential construction. We acquired certain of OWP’s inventories and all of the production equipment. Subsequent to the acquisition, we elected to consolidate our WWR operations with the relocation of certain acquired equipment from OWP to our existing WWR facilities.
Results of Operations
Statements of Operations – Selected Data
(Dollars in thousands)
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
June 28, |
June 29, |
June 28, |
June 29, |
|||||||||||||||||||||
|
2025 |
Change |
2024 |
2025 |
Change |
2024 |
|||||||||||||||||||
|
Net sales |
$ | 179,886 | 23.4 | % | $ | 145,775 | $ | 470,262 | 19.1 | % | $ | 394,894 | ||||||||||||
|
Gross profit |
30,772 | 100.0 | % | 15,388 | 64,830 | 73.5 | % | 37,373 | ||||||||||||||||
|
Percentage of net sales |
17.1 | % | 10.6 | % | 13.8 | % | 9.5 | % | ||||||||||||||||
|
Selling, general and administrative expense |
$ | 10,607 | 34.6 | % | $ | 7,879 | $ | 29,294 | 32.4 | % | $ | 22,121 | ||||||||||||
|
Percentage of net sales |
5.9 | % | 5.4 | % | 6.2 | % | 5.6 | % | ||||||||||||||||
|
Restructuring charges, net |
$ | 843 |
N/M |
$ | - | $ | 2,201 |
N/M |
$ | - | ||||||||||||||
|
Acquisition costs |
27 |
N/M |
- | 325 |
N/M |
- | ||||||||||||||||||
|
Interest income |
(472 | ) | (62.1% | ) | (1,245 | ) | (1,574 | ) | (61.1% | ) | (4,051 | ) | ||||||||||||
|
Effective income tax rate |
23.3 | % | 24.7 | % | 23.4 | % | 23.9 | % | ||||||||||||||||
|
Net earnings |
$ | 15,159 | 130.9 | % | $ | 6,565 | $ | 26,470 | 80.9 | % | $ | 14,636 | ||||||||||||
|
"N/M" = not meaningful |
Third Quarter of Fiscal 2025 Compared to Third Quarter of Fiscal 2024
Net Sales
Net sales for the third quarter of 2025 increased 23.4% to $179.9 million from $145.8 million in the prior year quarter, reflecting an 11.7% increase in average selling prices and a 10.5% increase in shipments. The increase in average selling prices was driven by price increases implemented to recover the escalation in raw material costs. The increase in shipments was primarily due to incremental volume generated from our acquisitions completed earlier in the year and improved demand in our construction end markets.
Gross Profit
Gross profit for the third quarter of 2025 increased 100.0% to $30.8 million, or 17.1% of net sales, from $15.4 million, or 10.6% of net sales, in the prior year quarter due to higher spreads between average selling prices and raw material costs ($16.1 million) and an increase in shipments ($1.7 million) partially offset by higher manufacturing costs ($2.4 million). The increase in spreads was driven by higher average selling prices ($17.9 million) partially offset by an increase in freight expense ($1.0 million) and higher raw material costs ($780,000).
Selling, General and Administrative Expense
Selling, general and administrative expense (“SG&A expense”) for the third quarter of 2025 increased 34.6% to $10.6 million, or 5.9% of net sales, from $7.9 million, or 5.4% of net sales, in the prior year quarter primarily due to higher compensation expense ($2.7 million) and amortization expense associated with intangible assets ($292,000) partially offset by the relative year-over-year change in the cash surrender value of life insurance policies ($487,000). The increase in compensation expense was largely driven by higher incentive plan expense due to our improved financial results in the current year quarter. The increase in amortization expense was primarily attributed to the intangible assets that were acquired in connection with our first quarter acquisitions. The cash surrender value of life insurance policies increased $458,000 in the current year quarter compared with a decrease of $29,000 in the prior year quarter due to the corresponding changes in the value of the underlying investments.
Restructuring Charges, Net
Restructuring charges of $843,000 were incurred in the third quarter of 2025 related to the closure of the Warren, Ohio facility, which had been acquired through the EWP Acquisition, and expenses related to the consolidation of our WWR operations. Restructuring charges included $408,000 for asset impairment charges, $267,000 for equipment relocation costs and $168,000 for facility closure costs.
Interest Income
Interest income decreased $773,000 from the prior year quarter due to lower average cash balances and interest rates.
Income Taxes
Our effective tax rate for the third quarter of 2025 decreased to 23.3% from 24.7% for the prior year quarter primarily due to changes in state income taxes treated as discrete in the prior year period.
Net Earnings
Net earnings for the third quarter of 2025 increased to $15.2 million ($0.78 per share) from $6.6 million ($0.34 per share) in the prior year quarter primarily due to the increase in gross profit partially offset by higher SG&A expense, restructuring charges and lower interest income.
First Nine Months of Fiscal 2025 Compared to First Nine Months of Fiscal 2024
Net Sales
Net sales for the first nine months of 2025 increased 19.1% to $470.3 million from $394.9 million in the prior year period, reflecting a 16.5% increase in shipments and a 2.2% increase in average selling prices. The increase in shipments was driven by increased demand in our construction end markets compared to the prior year and the incremental volume generated from our current year acquisitions. The increase in average selling prices was driven by price increases implemented to recover the escalation in raw material costs.
Gross Profit
Gross profit for the first nine months of 2025 increased 73.5% to $64.8 million, or 13.8% of net sales, from $37.4 million, or 9.5% of net sales, in the prior year period. The year-over-year increase was primarily due to higher spreads between average selling prices and raw material costs ($19.3 million), an increase in shipments ($6.8 million) and other material costs and adjustments ($3.3 million) partially offset by higher manufacturing costs ($2.0 million). The increase in spreads was driven by lower raw material costs ($13.0 million) and higher average selling prices ($7.3 million) partially offset by an increase in freight expense ($1.0 million).
Selling, General and Administrative Expense
SG&A expense for the first nine months of 2025 increased 32.4% to $29.3 million, or 6.2% of net sales, from $22.1 million, or 5.6% of net sales, in the prior year period primarily due to higher compensation expense ($4.9 million), the relative year-over-year change in the cash surrender value of life insurance policies ($877,000), higher amortization expense associated with intangible assets ($810,000) and an increase in employee benefit expense ($485,000). The increase in compensation expense was largely driven by higher incentive plan expense due to our improved financial results in the current year period. The cash surrender value of life insurance policies increased $152,000 in the current year period compared to $1.0 million in the prior year period due to the corresponding changes in the value of the underlying investments. The increase in amortization expense was primarily attributed to the intangible assets that were acquired in connection with our first quarter acquisitions. The increase in employee benefit expense was primarily related to higher employee health insurance expense in the current year period.
Restructuring Charges, Net
Restructuring charges of $2.2 million were incurred in the first nine months of 2025 related to the closure of the Warren, Ohio facility, which had been acquired through the EWP Acquisition, and expenses related to the consolidation of our WWR operations. Restructuring charges included $1.0 million for asset impairment charges, $604,000 for facility closure costs, $345,000 for equipment relocation costs and $251,000 for employee separation costs.
Acquisition Costs
Acquisition costs of $325,000 were incurred in the first nine months of 2025 for legal, accounting and other professional fees related to the EWP Acquisition and the OWP Acquisition.
Interest Income
Interest income decreased $2.5 million due to lower average cash balances and interest rates.
Income Taxes
Our effective tax rate for the first nine months of 2025 decreased to 23.4% from 23.9% for the prior year period primarily due to changes in book versus tax differences.
Net Earnings
Net earnings for the first nine months of 2025 increased to $26.5 million ($1.35 per diluted share) from $14.6 million ($0.75 per share) in the prior year period primarily due to the increase in gross profit partially offset by higher SG&A expense, lower interest income, restructuring charges and acquisition costs.
Liquidity and Capital Resources
Selected Financial Data
(Dollars in thousands)
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Nine Months Ended |
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June 28, |
June 29, |
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2025 |
2024 |
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Net cash provided by operating activities |
$ | 44,170 | $ | 41,978 | ||||
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Net cash used for investing activities |
(78,811 | ) | (17,874 | ) | ||||
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Net cash used for financing activities |
(23,232 | ) | (52,029 | ) | ||||
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Net working capital |
173,817 | 212,409 | ||||||
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Total debt |
- | - | ||||||
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Percentage of total capital |
- | - | ||||||
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Shareholders' equity |
$ | 356,208 | $ | 346,015 | ||||
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Percentage of total capital |
100.0 | % | 100.0 | % | ||||
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Total capital (total debt + shareholders' equity) |
$ | 356,208 | $ | 346,015 | ||||
Operating Activities
Operating activities provided $44.2 million of cash during the first nine months of 2025 primarily from net earnings adjusted for non-cash items partially offset by a net increase in working capital. Working capital, net of adjustments for assets and liabilities acquired, used $0.2 million of cash due to a $24.9 million increase in accounts receivable and a $17.9 million increase in inventories partially offset by a $42.6 million increase in accounts payable and accrued expenses. The increase in accounts receivable was largely driven by higher average selling prices combined with an increase in shipments. The increase in inventories was the result of higher raw material purchases near the end of the period together with higher average unit costs. The increase in accounts payable and accrued expenses was related to higher raw material purchases near the end of the period, higher unit costs and an increase in accrued salaries, wages and related expenses.
Operating activities provided $42.0 million of cash during the first nine months of 2024 primarily from net earnings adjusted for non-cash items together with a net decrease in working capital. Working capital provided $13.6 million of cash due to a $13.9 million decrease in inventories and a $2.2 million reduction in accounts receivable partially offset by a $2.5 million decrease in accounts payable and accrued expenses. The decrease in inventories was primarily due to lower average unit costs. 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 a reduction in accrued salaries, wages and related expenses.
We may elect to adjust our operating activities as there are changes in our construction end-markets, which could materially impact our cash requirements. While a downturn in the level of construction activity adversely affects sales to our customers, it generally reduces our working capital requirements.
Investing Activities
Investing activities used $78.8 million of cash during the first nine months of 2025 compared to $17.9 million during the prior year period primarily due to the EWP Acquisition ($67.0 million) and the OWP Acquisition ($5.1 million) partially offset by lower capital expenditures ($11.0 million). Capital expenditures decreased to $6.5 million from $17.5 million in the prior year period and are expected to total up to approximately $11.0 million for fiscal 2025. Capital expenditures for fiscal 2025 are to support costs and productivity initiatives as well as recurring maintenance requirements.
Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays when warranted based on business conditions.
Financing Activities
Financing activities used $23.2 million of cash during the first nine months of 2025 compared to $52.0 million during the prior year period. During the first nine months of 2025, $21.2 million of cash was used for dividend payments (including a special dividend of $19.4 million, or $1.00 per share, and regular quarterly dividends totaling $1.8 million, or $0.09 per share) and $2.0 million for the repurchase of common stock. During the first nine months of 2024, $50.4 million of cash was used for dividend payments (including a special dividend of $48.6 million, or $2.50 per share, and regular quarterly dividends totaling $1.8 million, or $0.09 per share) and $1.8 million for the repurchase of common stock.
Cash Management
Our cash is principally concentrated at one major financial institution, which at times exceeds federally insured limits. We invest excess cash primarily in money market funds, which are highly liquid securities that bear minimal risk.
Credit Facility
We have a $100.0 million revolving credit facility (the “Credit Facility”) that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. 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. 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. As of June 28, 2025, no borrowings were outstanding on the Credit Facility, $98.7 million of borrowing capacity was available and outstanding letters of credit totaled $1.3 million (see Note 10 to the consolidated financial statements).
We believe that, in the absence of significant unanticipated funding requirements, cash and cash equivalents, cash generated by operating activities and the borrowing availability provided under the Credit Facility will be sufficient to satisfy our expected requirements for working capital, capital expenditures, dividends and share repurchases, if any, in both the short- and long-term. We also expect to have access to the amounts available under the Credit Facility as required. However, should we experience future reductions in our operating cash flows due to weakening conditions in our construction end-markets and reduced demand from our customers, we may need to curtail capital and operating expenditures, cease dividend payments, delay or restrict share repurchases and/or realign our working capital requirements.
Should we determine, at any time, that we require additional short-term liquidity, we would evaluate the alternative sources of financing potentially available to provide such funding. There can be no assurance that any such financing, if pursued, would be obtained, or if obtained, would be adequate or on terms acceptable to us. However, we believe that our strong balance sheet, flexible capital structure and borrowing capacity available to us under our Credit Facility position us to meet our anticipated liquidity requirements for the foreseeable future, including the next 12 months.
Seasonality and Cyclicality
Demand in our markets is both seasonal and cyclical, driven by the level of construction activity, but can also be impacted by fluctuations in the inventory positions of our customers. Shipments are seasonal, typically reaching their highest level when weather conditions are the most conducive to construction activity. As a result, assuming normal seasonal weather patterns, shipments and profitability are usually higher in the third and fourth quarters of the fiscal year and lower in the first and second quarters. Construction activity and demand for our products are cyclical based on overall economic conditions, although there can be significant differences between the relative strength of nonresidential and residential construction for extended periods.
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 rates, freight, energy and other consumables that are used in our manufacturing processes. We have generally been able to adjust our selling prices to pass through increases in these costs or offset them through various cost reduction and productivity improvement initiatives. However, our ability to raise our selling prices depends on market conditions and competitive dynamics, and there may be periods during which we are unable to fully recover increases in our costs. During the first nine months of 2025, we were successful in implementing price increases sufficient to recover the escalation in our raw material costs that occurred over the course of the period. The timing and magnitude of any future increases in our raw material costs and the selling prices for our products are uncertain at this time.
Contractual Obligations
There have been no material changes in our contractual obligations and commitments as disclosed in our 2024 Annual Report other than those which occur in the ordinary course of business.
Critical Accounting Estimates
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information. The preparation of our financial statements requires the application of these accounting principles in addition to certain estimates and judgments based on current available information, actuarial estimates, historical results and other assumptions believed to be reasonable. These estimates, assumptions and judgments are affected by our application of accounting policies, which are discussed in our 2024 Annual Report. Estimates are used for, but not limited to, determining the net carrying value of trade accounts receivable, inventories, recording self-insurance liabilities and other accrued liabilities. Actual results could differ from these estimates. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” included in our 2024 Annual Report for further information regarding our critical accounting policies and estimates. As of June 28, 2025, none of our accounting estimates were deemed to be critical for the accounting periods presented, which is consistent with our assessment of critical accounting estimates disclosed in our 2024 Annual Report.
Recent Accounting Pronouncements
Refer to Note 2 of the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report for recently issued accounting pronouncements including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.
Outlook
As we enter the fourth quarter of fiscal 2025, we remain confident in our business outlook. Demand for our reinforcing products has improved, and recent acquisitions are making a meaningful contribution to our performance. Customer sentiment remains positive, even as broader macroeconomic indicators for construction suggest a more cautious environment. In the near term, we expect favorable conditions to support increased shipments, improved operating rates, and lower unit manufacturing costs across our facilities. Looking ahead, the outlook for public nonresidential construction remains strong, supported by ongoing federal investment through the Infrastructure Investment and Jobs Act, which is expected to drive elevated project activity through the remainder of 2025 and beyond.
As noted last quarter, a positive development from the Trump Administration’s recent trade actions was the expansion of Section 232 tariffs to include derivative steel products such as PC strand, helping to mitigate the impact of low-priced PC strand imports that have challenged the U.S. market since 2018. The Administration’s unexpected decision in June to double the tariff to 50% provides further support in leveling the competitive playing field, although the basis for calculating the tariff has changed and the Section 232 steel tariff will apply only to the “steel content” of the tariffed product. There is considerable ambiguity surrounding the language and intent of the Executive Order that needs to be resolved by the Administration. Higher tariffs together with recent reductions in domestic wire rod capacity, have tightened North American supply and added upward pressure on raw material costs. Looking ahead, we are closely monitoring the evolving trade landscape which could affect offshore purchases of capital equipment, spare parts, and operating supplies. Given this uncertainty, we remain focused on disciplined pricing strategies and active management of our tariff exposure, to the extent we can forecast tariff exposure. The sharp escalation in costs we have experienced for raw materials and other operating inputs will require our industry to increase selling prices to recover higher costs. We believe we will be successful in this effort.
Regardless of the market dynamics, we continue to focus on those factors we control, including closely managing and controlling our expenses; realizing synergies from our recent acquisitions; aligning our production schedules with demand in a proactive manner as there are changes in market conditions to minimize our operating costs; and pursuing further improvements in the productivity and effectiveness of all our manufacturing, selling and administrative activities. 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. Looking ahead, we will continue to evaluate acquisition opportunities that enhance our presence in markets we currently serve or expand our geographic footprint.
The statements contained in this section are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our cash flows and earnings are subject to fluctuations resulting from changes in commodity prices, interest rates and foreign exchange rates. We manage our exposure to these market risks through internally established policies and procedures and, when appropriate, the use of derivative financial instruments. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe we can modify or adapt our hedging strategies as necessary.
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 negotiate quantities and pricing for both domestic and foreign wire rod purchases for varying periods (most recently monthly for domestic suppliers), depending upon market conditions, to manage our exposure to price fluctuations and to ensure adequate availability of material consistent with our requirements. We do not use derivative commodity instruments to hedge our exposure to changes in prices as such instruments are not currently available for wire rod. Our ability to acquire wire rod from foreign sources on favorable terms is impacted by fluctuations in foreign currency exchange rates, foreign taxes, duties, tariffs, quotas and other trade actions. Although changes in our wire rod costs and selling prices tend to be correlated, in weaker market environments, we may be unable to fully recover increased wire rod costs through higher selling prices, which would reduce our earnings and cash flows. Additionally, when raw material costs decline, our financial results may be negatively impacted if the selling prices for our products decrease to an even greater extent and if we are consuming higher cost material from inventory. Based on our shipments and average wire rod cost reflected in cost of sales for the first nine months of 2025, a 10% increase in the price of wire rod would have resulted in a $27.0 million decrease in our 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 June 28, 2025, future borrowings under the facility are subject to a variable rate of interest and are sensitive to changes in interest rates.
Foreign Exchange Exposure
We have not typically hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars, as such transactions have not been material historically. We will occasionally hedge firm commitments for certain equipment purchases that are denominated in foreign currencies. The decision to hedge any such transactions is made by us on a case-by-case basis. There were no forward contracts outstanding as of June 28, 2025.
Item 4. Controls and Procedures
We have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 28, 2025. This evaluation was conducted under the supervision and with the participation of management, including our principal executive officer and our principal financial officer. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Further, they concluded that our disclosure controls and procedures were effective to ensure that information is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 28, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in lawsuits, claims, investigations and proceedings, including commercial, environmental and employment matters, which arise in the ordinary course of business. We do not anticipate that the ultimate costs to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors
During the quarter ended June 28, 2025, there have been no material changes from the risk factors set forth under Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 29, 2025, and Part I, Item 1A. “Risk Factors” in our 2024 Annual Report. You should carefully consider these factors in addition to the other information set forth in this report which could materially affect our business, financial condition or future results. The risks and uncertainties described in this report, our Quarterly Report for the quarter ended March 29, 2025, and in our 2024 Annual Report, as well as other reports and statements that we file with the SEC, are not the only risks and uncertainties facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, results of operations or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes the repurchases of common stock during the quarter ended June 28, 2025.
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(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 |
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For the three months ended June 28, 2025 |
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March 30, 2025 - May 3, 2025 |
1,200 | $ | 32.85 | 1,200 | $ | 17,608 (1) | ||||||||||
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May 4, 2025 - May 31, 2025 |
5,102 | 35.46 | 5,102 | $ | 17,427 (1) | |||||||||||
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June 1, 2025 - June 28, 2025 |
100 | 34.82 | 100 | $ | 17,423 (1) | |||||||||||
| 6,402 | 6,402 | |||||||||||||||
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(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. |
Additional information regarding our share repurchase authorization is discussed in Note 12 to our consolidated financial statements and incorporated herein by reference.
Item 5. Other Information
Insider Adoption or Termination of Trading Arrangements
During the fiscal quarter ended June 28, 2025, of our directors or Section 16 officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.
Item 6. Exhibits
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2.1 |
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3.1 |
Restated Articles of Incorporation for the Company (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 filed on May 2, 1985). |
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3.2 |
Articles of Amendment to the Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated May 3, 1988). |
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3.3 |
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3.4 |
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3.5 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101 |
The following financial information from the Quarterly Report on Form 10-Q of Insteel Industries Inc. for the quarter ended June 28, 2025, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended June 28, 2025, and June 29, 2024, (ii) the Consolidated Balance Sheets as of June 28, 2025, and September 28, 2024, (iii) the Consolidated Statements of Cash Flows for the nine months ended June 28, 2025, and June 29, 2024, (iv) the Consolidated Statements of Shareholders’ Equity for the three and nine months ended June 28, 2025, and June 29, 2024, and (v) the Notes to Consolidated Financial Statements. |
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104 |
The cover page from our Quarterly Report on Form 10-Q for the quarter ended June 28, 2025, formatted in iXBRL and contained in Exhibit 101. |
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Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 1-09929. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INSTEEL INDUSTRIES INC. | ||
| Registrant |
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Date: July 17, 2025 |
By: |
/s/ Scot R. Jafroodi |
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Scot R. Jafroodi |
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Vice President, Chief Financial Officer and Treasurer |
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(Duly Authorized Officer and Principal Financial Officer) |