Insteel(US:IIIN)2026-01-15 17:10Financial Performance - Net sales for the first quarter of 2026 increased 23.3% to $159.9 million from $129.7 million in the prior year quarter, driven by an 18.8% increase in average selling prices and a 3.8% increase in shipments[85]. - Gross profit for the first quarter of 2026 increased 89.5% to $18.1 million, representing 11.3% of net sales, compared to $9.5 million or 7.3% of net sales in the prior year quarter[86]. - Net earnings for the first quarter of 2026 rose to $7.6 million ($0.39 per share) from $1.1 million ($0.06 per share) in the prior year quarter, primarily due to increased gross profit and lower restructuring charges[92]. Expenses - Selling, general and administrative expenses increased 11.1% to $8.8 million, or 5.5% of net sales, from $7.9 million, or 6.1% of net sales in the prior year quarter[87]. - The effective income tax rate decreased to 21.0% from 26.1% in the prior year quarter, driven by a reduction in the valuation allowance on deferred tax assets[91]. Cash Flow and Capital Expenditures - Cash used for operating activities was $701,000 during the first quarter of 2026, primarily due to a net increase in working capital[96]. - Investing activities used $1.6 million of cash during the first quarter of 2026, significantly lower than $73.9 million in the prior year, mainly due to the EWP and OWP acquisitions[99]. - Financing activities used $20.7 million of cash during the first quarter of 2026, including $20.0 million for dividend payments[101]. - The company expects cash and cash equivalents, along with cash generated from operating activities, to be sufficient for working capital and capital expenditures in both the short- and long-term[104]. Acquisitions - The company acquired Engineered Wire Products, Inc. for an adjusted purchase price of $67.0 million and O'Brien Wire Products of Texas, Inc. for $5.1 million[81][82]. Market Conditions - Demand in the company's markets is seasonal and cyclical, with higher shipments and profitability typically in the third and fourth quarters[106]. - Inflation did not materially impact sales or earnings during the first quarter of fiscal 2026, but future increases in raw material costs remain uncertain[107]. - The company anticipates strong performance for the remainder of fiscal 2026, driven by positive customer sentiment and demand in core markets[111]. - Approximately 10% of the company's revenues are directly affected by import competition, with concerns about the significant steel price premium in the U.S.[112]. Cost Management - The company is focused on managing expenses, realizing synergies from acquisitions, and improving productivity to minimize operating costs[113]. - A 10% increase in the price of wire rod would have resulted in a $9.8 million decrease in pre-tax earnings, assuming no change in selling prices[116]. Financing and Credit - The company has a $100.0 million revolving credit facility, with $98.7 million of borrowing capacity available as of December 27, 2025[103]. - Future borrowings under the credit facility are subject to variable interest rates, making them sensitive to changes in interest rates[117]. - The company has not typically hedged foreign currency exposures, as such transactions have not been material historically[118].