Insteel Industries Inc (IIIN) 2023 Q4 法說會逐字稿

Hello, everyone, and welcome to Insteel Industries Fourth Quarter 2023 Earnings Call. My name is [Runo], and I will be operating your call today. (Operator Instructions) I will now hand over to your host and CEO, H. Woltz. Please go ahead.

大家好，歡迎參加 Insteel Industries 2023 年第四季財報電話會議。我的名字是[Runo]，今天我將接聽您的電話。 （操作員指示）我現在將會議交給主持人兼執行長 H. Woltz。請繼續。

Good morning. Thank you for your interest in Insteel, and welcome to our fourth quarter 2023 conference call, which will be conducted by Scot Jafroodi, our Vice President, CFO and Treasurer; and me. Before we begin, let me remind you that some of the comments made in our presentation are considered to be forward-looking statements that are subject to various risks and uncertainties and which could cause actual results to differ materially from those projected.

早安.感謝您對 Insteel 的關注，歡迎參加我們的 2023 年第四季度電話會議，該電話會議將由我們的副總裁、首席財務官兼財務主管 Scot Jafroodi 主持；和我。在開始之前，請允許我提醒您，我們在演示中提出的一些評論被認為是前瞻性陳述，這些陳述受到各種風險和不確定性的影響，可能導致實際結果與預測結果有重大差異。

These risk factors are described in our periodic filings with the SEC. 2023 was challenging for the company in view of inventory accumulations throughout the supply chain and a significant downward reset in steel prices that occurred following several quarters of extreme supply tightness and significant market price escalations. We believe these headwinds have about run their course, and we continue to be optimistic about the underlying level of demand for our products. I'm going to call -- turn the call over to Scot to comment on our financial results for the quarter and the macro environment. And then I'll pick it back up to discuss our business outlook.

我們定期向 SEC 提交的文件中描述了這些風險因素。鑑於整個供應鏈的庫存累積以及在幾個季度供應極度緊張和市場價格大幅上漲後鋼價大幅下調，2023年對該公司來說充滿挑戰。我們相信這些逆風即將結束，我們繼續對我們產品的潛在需求水準持樂觀態度。我要打電話給 Scot，對我們本季的財務表現和宏觀環境發表評論。然後我會重新討論我們的業務前景。

Thank you, H, and good morning to everyone joining us on the call. As highlighted in our press release earlier today, our performance in the fourth quarter of fiscal 2023, reflects the continued pressure of narrow spreads between selling prices and raw material costs following with elevated unit conversion costs. As a result, net earnings for the fourth quarter fell to $5.6 million or $0.29 a share from $24.3 million or $1.24 per diluted share a year ago. Our net sales for the quarter of base headwinds, declining 24.3% from last year on a 27.8% decrease in average selling prices, although this was partially offset by a 4.9% increase in shipments.

謝謝你，H，祝所有加入我們電話的人早安。正如我們今天早些時候發布的新聞稿中所強調的，我們 2023 財年第四季度的業績反映了單位轉換成本上升後銷售價格與原材料成本之間價差縮小的持續壓力。結果，第四季淨利潤從一年前的 2,430 萬美元或稀釋後每股 1.24 美元降至 560 萬美元或每股 0.29 美元。我們本季的淨銷售額較去年下降 24.3%，平均售價下降 27.8%，但出貨量成長 4.9% 部分抵銷了這一影響。

On a sequential basis, average selling prices declined 6.6%, while shipments were 1.8% higher. The ongoing challenges of the competitive pricing environment, the persistent downward trend in steel scrap prices and the growing influence of low-priced imported PC strand all contributed to a decline in our average selling prices during the fourth quarter. As I've mentioned in previous calls, our product is most exposed to the residential construction market has experienced the largest decline in average selling prices, a trend that continued throughout our fourth quarter.

平均售價季減 6.6%，而出貨量成長 1.8%。競爭性定價環境的持續挑戰、廢鋼價格的持續下降以及低價進口預力鋼絞線影響力的加大，都導致我們第四季的平均售價下降。正如我在先前的電話會議中提到的，我們的產品最受住宅建築市場的影響，平均售價下降幅度最大，這一趨勢在我們第四季持續存在。

Despite the weakening in our ASPs, our shipping volume exhibited modest improvement during the fourth quarter. Many customers are currently experiencing favorable or improving business conditions and the majority have now normalized their inventory levels following their destocking efforts that suppress demand for much of fiscal 2023. However, it is important to highlight that our shipments came in below our internal forecast, primarily due to project delays, weakness in the nonresidential construction market and the negative effect of adverse weather conditions in certain of our markets during the quarter.

儘管我們的平均售價疲軟，但我們的貨運量在第四季度略有改善。許多客戶目前正經歷有利或改善的業務狀況，並且大多數客戶在去庫存努力抑制了2023 財年大部分時間的需求之後，現在已經使庫存水平正常化。然而，需要強調的是，我們的發貨量低於我們的內部預測，主要是由於專案延誤、非住宅建築市場疲軟以及本季某些市場惡劣天氣條件的負面影響。

Gross profit for the fourth quarter fell $25.8 million from a year ago, and gross margin narrowed to 8.9% from 19.1% due to a combination of lower spreads and higher overall unit conversion costs partially offset by year-over-year increase in shipments. On a sequential basis, gross profit decreased $6.4 million from the third quarter and gross margin decreased 340 basis points as the drop-off in average selling prices exceeded the reduction in our raw material costs. Throughout fiscal 2023, our spreads have been consistently pressured by the steady decline in average selling prices have more than offset the benefit realized from the consumption of lower-priced rod inventory.

第四季毛利較去年同期下降 2,580 萬美元，毛利率從 19.1% 收窄至 8.9%，原因是利差下降和整體單位轉換成本上升，但部分被出貨量較去年同期成長所抵銷。與第三季相比，毛利環比下降了 640 萬美元，毛利率下降了 340 個基點，因為平均售價的下降幅度超過了原物料成本的下降幅度。在整個 2023 財年，我們的價差一直受到平均銷售價格穩定下降的壓力，這遠遠抵消了消耗低價棒庫存所帶來的收益。

As we're looking ahead to the first quarter of fiscal 2024, margins are most likely to remain under pressure in the near term due to the current competitive landscape that continues to exert downward pressure on selling prices. During our fourth quarter, we experienced an increase in our unit conversion costs compared to both the previous year and the third quarter. This was due to reduced operating volumes at select plants as we implemented inventory reduction measures during the quarter. This resulted in weakened cost absorption and an overall increase in unit conversion costs. As we move into our first quarter, we expect unit growth costs to remain elevated based on anticipated operating levels, which will be impacted by the onset of the seasonal downturn in demand as well as a continuation of the general inflationary trends that we have experienced throughout 2023.

展望 2024 財年第一季度，由於當前的競爭格局繼續對銷售價格施加下行壓力，利潤率在短期內很可能繼續面臨壓力。在第四季度，與去年和第三季度相比，我們的單位轉換成本有所增加。這是由於我們在本季實施了庫存減少措施，導致部分工廠的營業量減少。這導致成本吸收減弱和單位轉換成本整體增加。當我們進入第一季時，我們預計單位成長成本將根據預期的營運水平保持較高水平，這將受到需求季節性下降以及我們整個經歷的總體通膨趨勢持續的影響。2023 年。

SG&A expense for the quarter decreased to $8.1 million or 5.2% of net sales from $8.3 million or 4% of net sales last year. The dollar decrease primarily resulted from the relative year-over-year change in the cash surrender value of life insurance policies along with lower depreciation expense, partially offset by higher compensation costs. Our effective tax rate for the quarter was largely unchanged at 22.5%, down slightly from 23% last year. Looking ahead to next year, we expect our effective rate will remain steady at around 22%, subject to the level of pretax earnings, book tax differences and the other assumptions and estimates that compose our tax provision calculation.

本季的 SG&A 費用從去年的 830 萬美元（佔淨銷售額的 4%）下降至 810 萬美元（佔淨銷售額的 5.2%）。美元下降主要是由於人壽保險保單現金退保價值的相對同比變化以及折舊費用的降低，部分被較高的賠償成本所抵消。本季的有效稅率基本保持不變，為 22.5%，略低於去年的 23%。展望明年，我們預計有效利率將穩定在 22% 左右，具體取決於稅前收益水準、帳面稅差異以及構成我們稅務撥備計算的其他假設和估計。

Moving to the cash flow statement and balance sheet. We are pleased to report cash flow from operations generated $38.6 million of cash for the quarter and $142.2 million for the year, primarily due to our working capital reduction driven by a planned decrease in inventories. Our inventory position at the end of the quarter represented 3.3 months of shipments on a forward-looking basis calculated off of our forecasted Q1 shipments, compared with 3.2 months at the end of the third quarter. Additionally, it's worth noting our inventories at the end of the fourth quarter were valued at an average unit cost that was lower than our fourth quarter cost of sales.

轉向現金流量表和資產負債表。我們很高興地報告，本季營運現金流產生 3,860 萬美元，全年產生 1.422 億美元，這主要是由於計劃減少庫存導致我們的營運資本減少。根據我們預測的第一季出貨量計算，本季末我們的庫存狀況相當於 3.3 個月的出貨量，而第三季末為 3.2 個月。此外，值得注意的是，我們第四季末的庫存以平均單位成本估值，低於第四季的銷售成本。

We incurred $4.1 million in capital expenditures in the fourth quarter for a total of $30.7 million for the year. It was primarily targeted at broadening our product offering, expanding capacity and reducing operating costs. Looking ahead to fiscal 2024, we expect capital expenditures to total $30 million. H will provide more detail on this topic in his remarks. From a liquidity perspective, we ended the quarter with a record $125.7 million of cash on hand, and we're debt-free with no borrowings outstanding on our $100 million revolving credit facility, providing us with ample liquidity and financial flexibility.

第四季我們的資本支出為 410 萬美元，全年資本支出總額為 3,070 萬美元。它的主要目標是擴大我們的產品範圍、擴大產能並降低營運成本。展望 2024 財年，我們預期資本支出總額將達到 3,000 萬美元。 H 將在他的演講中提供有關此主題的更多詳細資訊。從流動性角度來看，本季末我們手頭現金達到創紀錄的1.257 億美元，而且我們沒有債務，1 億美元的循環信貸額度沒有未償還借款，這為我們提供了充足的流動性和財務靈活性。

Along with our focus on making ongoing investments in the business, our financial strength has allowed us to continue to return capital to shareholders. In fiscal year 2023, we returned $43.6 million to shareholders through a combination of dividends and share buybacks. This included a $2 per share special dividend as well as our regular quarterly dividend, making the third consecutive year that we have paid a special dividend of a lease $1.50 per share. Moreover, we repurchased approximately 8,000 shares of our common equity equivalent to $2.3 million through our share buyback program.

除了我們專注於對業務進行持續投資之外，我們的財務實力使我們能夠繼續向股東返還資本。 2023 財年，我們透過股利和股票回購相結合的方式向股東返還 4,360 萬美元。這包括每股 2 美元的特別股息以及我們的定期季度股息，這使得我們連續第三年支付每股 1.50 美元的特別股息。此外，我們也透過股票回購計畫回購了約 8,000 股普通股，價值 230 萬美元。

Turning to the macro indicators of our construction end markets. The most recent construction spending data continues to show strength. For the first 8 months of the calendar year, total construction spending on a seasonally adjusted annual basis is up 7.4% from last year. Nonresidential construction spending was up almost 18% with public highway and street construction, one of the larger end uses for our products up over 12%. However, while construction spending remains elevated, U.S. cement shipments and other measure that we track continue to lag 2022 levels as shipments were down 1.8% for July and 2.2% for the first 7 months of the calendar year. The most recent reports for the Architectural Billing and Dodge Momentum Indexes, leading indicators for nonresidential building construction implied softening business conditions in the coming year as high interest rates and tighter lending standards appear to have an impact on construction markets.

轉向我們建築終端市場的宏觀指標。最新的建築支出數據繼續顯示強勁。今年前 8 個月，經季節性調整後的年度建築支出總額比去年增加 7.4%。非住宅建築支出增加了近 18%，其中公共高速公路和街道建設（我們產品的較大最終用途之一）增加了 12% 以上。然而，儘管建築支出仍然較高，但我們追蹤的美國水泥出貨量和其他指標繼續落後於 2022 年的水平，7 月出貨量下降 1.8%，今年前 7 個月下降 2.2%。建築帳單和道奇動量指數（非住宅建築施工領先指標）的最新報告暗示，由於高利率和更嚴格的貸款標準似乎對建築市場產生了影響，未來一年的商業狀況將會疲軟。

In September, the ABI dropped to 44.8%, the lowest score reported since December 2020. The score is well below the growth threshold of 50% that would indicate a significant decline in billings and marked a downturn in business conditions at architectural firms. The Dodge Momentum Index, which tracks nonresidential building projects going in the planning rose 3% in September up to 182.5%. However, year-over-year, the index is 5% lower. Dodge noted that the year-to-date trends would indicate an overall decline in commercial planning and that going into 2024 planning levels will depend on improvement of financial conditions.

9 月份，ABI 降至 44.8%，為 2020 年 12 月以來報告的最低分數。該分數遠低於 50% 的成長門檻，這表明營業額大幅下降，並標誌著建築公司業務狀況的下滑。追蹤規劃中的非住宅建築項目的道奇動量指數在 9 月上漲了 3%，達到 182.5%。然而，該指數較去年同期下降了 5%。道奇指出，今年迄今的趨勢顯示商業規劃總體下降，而進入 2024 年規劃水準將取決於財務狀況的改善。

In Dodge's August report, it was noted that weaker market fundamentals continue to under mine planning growth as tightening lending standards and the higher interest rate environment are beginning to impact both the commercial and institutional segments. This concludes my prepared remarks. I will now turn the call back over to H.

道奇八月份的報告指出，隨著貸款標準收緊和利率環境上升開始影響商業和機構領域，市場基本面疲軟持續影響礦場規劃成長。我準備好的發言到此結束。我現在將把電話轉回給 H.

Thank you, Scot. We're pleased to have experienced an uptick in shipments year-over-year during the fourth quarter. Most of the improvement originated with shipments into our housing-related markets, which was unexpected. Shipments into infrastructure and other commercial applications were weak in a continuation of the phenomenon we've experienced throughout the year where customers seem to be busier than their suppliers.

謝謝你，斯科特。我們很高興第四季的出貨量年增。大部分改善源自於對我們住房相關市場的發貨，這是出乎意料的。基礎設施和其他商業應用的出貨量疲弱，這是我們全年經歷的現象的延續，即客戶似乎比供應商更忙。

Inventory liquidations by customers of both finished goods and reinforcing material would explain market conditions, although we lack objective data to support such a claim. We believe, however, that consumption of reinforcing products is at an attractive level and that we're maintaining market share. (inaudible) in the base of softer order entry rates was our best course of action. Declining prices for metals has likely had a negative impact on the motivation of our customers to rebuild inventories. While Insteel is not a price setter, we recognize the need to be competitive consistently. The fact remains, however, that lower prices do not stimulate demand, so the tactic is questionable from a business perspective.

客戶對成品和增強材料的庫存清算可以解釋市場狀況，儘管我們缺乏客觀數據來支持這種說法。然而，我們相信，增強產品的消費處於有吸引力的水平，並且我們正在保持市場份額。 （聽不清楚）在訂單輸入率較軟的基礎上是我們最好的行動方案。金屬價格下跌可能對我們的客戶重建庫存的動機產生負面影響。雖然 Insteel 不是價格製定者，但我們認識到保持競爭力的必要性。然而，事實仍然是，較低的價格並不能刺激需求，因此從商業角度來看，這項策略是值得懷疑的。

We've mentioned before that declining steel prices create a headwind for Insteel earnings, which has clearly been the case over the last year during a period of significant reductions in steel scrap and hot-rolled pricing. We believe the downward slide has about run its course finally and that steel prices are likely to rise in coming months. Weaker-than-expected demand in Q4 caused us to continue reducing finished goods inventories, inventory levels, and we incurred the associated negative impact on operating costs. Our plants experienced unfavorable impact of lower volume while also feeling substantial inflationary pressures for all purchases, including energy, labor, spare parts and operating supplies.

我們之前提到過，鋼價下跌對鋼鐵公司的獲利造成了不利影響，去年廢鋼和熱軋價格大幅下降期間的情況顯然就是這樣。我們認為，下行趨勢最終將結束，未來幾個月鋼價可能會上漲。第四季的需求弱於預期，導致我們繼續減少產成品庫存、庫存水平，並對營運成本產生了相關的負面影響。我們的工廠遭受了銷售下降的不利影響，同時也感受到了所有採購的巨大通膨壓力，包括能源、勞動力、備件和營運用品。

We believe that internal inventory corrections should be complete during the first quarter and that we should resume operations at a rate more in line with the incoming orders. Nevertheless, Q1 will be another lackluster quarter as we complete inventory liquidations and as we contend with growing imports of low-priced PC strand. Our expectations for the balance of fiscal 2024 are for a much stronger performance. We're optimistic about the impact on our markets of the infrastructure investment and Jobs Act although it is difficult to point to specific projects that have affected demand.

我們認為，內部庫存調整應該在第一季完成，並且我們應該以更符合新訂單的速度恢復營運。然而，隨著我們完成庫存清理以及應對低價 PC 線進口不斷增長的問題，第一季將是另一個黯淡的季度。我們對 2024 財年剩餘時間的預期是業績更強勁。我們對基礎設施投資和就業法案對我們市場的影響持樂觀態度，儘管很難指出影響需求的具體項目。

There are indications that implementation of IIJA and traditional federal transportation spending may not focus so much on our infrastructure and mobility network as the administration targets for funding its green priorities. According to DOT data, only 35% of traditional fiscal 2022 federal highway funding has been obligated and just 11% has turned into outlays. And with respect to IIJA the Secretary of Transportation has acknowledged "the delays of 1, 2, 3 or more years between when funding is appropriated and authorized and when those dollars are assigned to a project."

有跡象表明，IIJA 和傳統聯邦交通支出的實施可能不會像政府為其綠色優先事項提供資金的目標那樣過度關注我們的基礎設施和交通網絡。根據 DOT 數據，2022 財年傳統聯邦公路資金中只有 35% 已履行，只有 11% 轉化為支出。關於 IIJA，交通部長承認「從撥付和授權資金到將這些資金分配給計畫之間存在 1 年、2 年、3 年或更長時間的延遲」。

Meanwhile, of course, inflation is impacting project costs and higher cost is jeopardizing the viability of some projects. Despite these obstacles, we believe that IIJA funds will ultimately be allocated to projects and spent as intended with a beneficial impact on our industry. The question is when, not if. Turning to CapEx. We indicated in prior calls and press releases that our CapEx would step up in 2023, reflecting investments in 3 new production lines as well as recurring expenditures to maintain our facilities and information systems. We ended fiscal 2023 with $30.7 million of CapEx and invested in 3 new production lines as well as upgrades to our information systems and maintenance of our facilities. Because of component shortages related to supply chain problems, only one of the 3 production lines was in operation at the end of the fourth quarter. We expect the other 2 to come online during Q1 and Q2 of 2024.

當然，同時，通貨膨脹正在影響專案成本，而成本上升正在危及某些專案的可行性。儘管存在這些障礙，我們相信 IIJA 資金最終將分配給專案並按預期使用，對我們的行業產生有益的影響。問題是何時，而不是是否。轉向資本支出。我們在先前的電話會議和新聞稿中表示，我們的資本支出將在 2023 年增加，反映了對 3 條新生產線的投資以及維護我們的設施和資訊系統的經常性支出。截至 2023 財年，我們的資本支出為 3,070 萬美元，投資了 3 條新生產線以及資訊系統升級和設施維護。由於供應鏈問題導致零件短缺，截至第四季末，3條生產線中只有一條在營運。我們預計另外 2 個將在 2024 年第一季和第二季上線。

The investments we are making in state-of-the-art technology will expand our product capabilities and favorably impact our cash cost of production. We expect CapEx for 2024 to come in at approximately $30 million as we continue to modernize our facilities and information systems invest for growth and invest to lower our cash cost of production. As pointed out in the release, the company completed fiscal 2023 debt free with more than $125 million of cash on hand. Consistent with the actions taken by the Board of Directors in recent years, we will evaluate the capital needs of the company, and we'll have information about any return of capital to shareholders following our November Board meeting.

我們對最先進技術的投資將擴大我們的產品能力，並對我們的現金生產成本產生有利的影響。我們預計 2024 年的資本支出約為 3,000 萬美元，因為我們將繼續對設施和資訊系統進行現代化投資，以實現成長並降低現金生產成本。正如新聞稿中指出的，該公司在 2023 財年實現了無負債，手頭現金超過 1.25 億美元。根據董事會近年來採取的行動，我們將評估公司的資本需求，並將在 11 月的董事會會議後獲得有關向股東返還資本的資訊。

Looking ahead, we're aware of rising risk related to the future performance of the U.S. economy, and we're monitoring the environment. We believe that in addition to elevated interest rates, heightened conservatism among customers that are concerned about the macro environment could be contributing to the slow market recovery. In any event, we're well positioned to aggressively pursue actions to maximize shipments and optimize our costs and to pursue attractive growth opportunities, both organic and through acquisition. This concludes our prepared remarks, and we'll now take your questions. Bernard, would you please explain the procedure for asking questions?

展望未來，我們意識到與美國經濟未來表現相關的風險不斷上升，我們正在監控環境。我們認為，除了利率上升之外，客戶對宏觀環境的擔憂加劇也可能導致市場復甦緩慢。無論如何，我們都處於有利位置，可以積極採取行動，最大限度地提高出貨量並優化我們的成本，並尋求有吸引力的成長機會，無論是有機成長還是透過收購。我們準備好的發言到此結束，現在我們將回答你們的問題。伯納德，您能解釋一下提問的程序嗎？

(Operator Instructions) We have our first question coming through. It comes from Julio Romero from Sidoti Company.

（操作員說明）我們有第一個問題。它來自 Sidoti 公司的 Julio Romero。

Maybe to start the -- so to start on maybe selling prices, you'd mentioned a number of factors that affected pricing during the quarter, competitive pressures, scrap pricing trending downward and the import pressure on the PC strand side. Could you maybe rank order those factors for us in terms of what was most impactful during the quarter?

也許從銷售價格開始，您提到了本季影響定價的許多因素、競爭壓力、廢品定價趨勢下降以及 PC 線方面的進口壓力。您能否根據本季最有影響力的因素對我們進行排序？

Julio, I would tell you, it's just mainly competitive pricing pressures pretty much across the board. And if you were to take a snapshot of contemporaneous purchases and sales, we don't have a margin collapse on our hands. What we have is a significant reset in pricing throughout the supply chain and the inventory impact and flows of inventory through cost of sales has been something we just -- we've been unable to get ahead of.

胡里歐，我想告訴你，這主要是全面的競爭性定價壓力。如果你對同期的購買和銷售進行快照，我們不會遇到利潤率崩潰的情況。我們所面臨的是整個供應鏈定價的重大重置，庫存影響以及庫存流向銷售成本一直是我們無法超越的事情。

Understood. And the competitive pressure would that be both on the domestic and the imported side?

明白了。那麼競爭壓力是否會來自國內和進口雙方呢？

Yes. I would tell you it's pretty much across the board.

是的。我會告訴你，這幾乎是全面的。

Okay. No, that's helpful. Maybe just on the import competition on the PC strand side, can you maybe just talk about that a little bit? And how much more of the recent growing influence of those imports have been to freight costs coming down versus other factors?

好的。不，這很有幫助。也許只是關於PC鏈方面的進口競爭，您能簡單談談嗎？與其他因素相比，最近這些進口日益增長的影響對貨運成本下降有多大影響？

Yes. I don't know that we can actually quantify it for you. And we've seen this coming. And now it's here that there were a few factors that insulated our market from lower-priced imports, including freight rates that skyrocketed during the '21, '22 period. All of that is normalized, and we're now seeing we're seeing significant import action. And keep in mind that we do get a forward look at this because customers who are purchasing import materials generally do so 2, 3, 4 months ahead of taking receipts. So we know what's going on in that market. At that of the imports actually hitting the U.S. market. So that's what we're seeing. It certainly began in earnest towards the end of Q4. We'll see it in Q1, and we'll see -- so I'll pursue additional trade cases sometime in 2024.

是的。我不知道我們實際上可以為您量化它。我們已經看到了這一點。現在，有一些因素使我們的市場免受低價進口商品的影響，其中包括 21 年、22 年間運費飆升。所有這些都已正常化，我們現在看到重大的進口行動。請記住，我們確實對此進行了前瞻性研究，因為購買進口材料的客戶通常會在收到收據前 2、3、4 個月進行購買。所以我們知道那個市場正在發生什麼事。實際進入美國市場的進口產品。這就是我們所看到的。這確實是在第四季末開始的。我們會在第一季看到這一點，所以我將在 2024 年的某個時候尋求更多的貿易案例。

Very helpful. And then just I'll squeeze one in on demand, if I could. Just speak to what you're hearing or seeing from your customers in terms of maybe what they're seeing on the private nonresidential demand side.

很有幫助。然後，如果可以的話，我會根據需要擠入一份。只需談談您從客戶那裡聽到或看到的情況，也許他們在私人非住宅需求方面看到了什麼。

Well, we don't necessarily know whether it's private, nonresidential or whether it's public nonresidential. But if you wrap those 2 families together and let's just say non-risk construction, our customers are busy that they're regionally, there are always some winners and losers, but it's remarkable that the level of quotations and the level of shipments and backlog that our customers had is generally positive. Regionally, there are definitely some differences. But as a general statement, I think consumption of our products is better than the market indicators, what have you believe at this point.

嗯，我們不一定知道它是私人、非住宅還是公共非住宅。但如果你把這兩個家庭放在一起，我們就說無風險建設，我們的客戶很忙，他們在區域內，總是有一些贏家和輸家，但值得注意的是報價水平、出貨量和積壓水平我們的客戶總體上是積極的。從地區來看，肯定存在一些差異。但總的來說，我認為我們產品的消費量比市場指標好，此時您相信什麼？

(Operator Instructions) Our next question comes from Tyson Bauer from KC Capital.

（操作員說明）我們的下一個問題來自 KC Capital 的 Tyson Bauer。

Congratulations on doing your part to fight against inflation and pricing. So the Fed appreciates that and hopefully, as the shareholders stay with us and work our way through this as we get toward the end of it. When we have price pressures on imports, sometimes that can also lead to advantages for you and purchasing supply of wire rod from foreign sources. Has that not presented itself as an opportunity this go around? Or are you seeing opportunities in that regard?

恭喜您為對抗通貨膨脹和價格上漲做出了自己的貢獻。因此，聯準會對此表示讚賞，並希望股東們能夠與我們同在，並在我們接近尾聲時努力解決這個問題。當我們面臨進口價格壓力時，有時這也能為您帶來優勢，從國外採購線材供應。這不是一個機會嗎？或者您在這方面看到了機會嗎？

Well, keep in mind that all of our raw material purchases are subject to the Section 232 tariff of 25%, which has had the impact of certainly making offshore purchases less attractive. The other reality of offshore purchases is extraordinarily long lead times which create risk for us that is not particularly attractive at the present time. So I would say that our offshore material purchases are probably at a low ebb at this point.

請記住，我們所有的原材料採購均需繳納 25% 的第 232 條關稅，這無疑會降低離岸採購的吸引力。離岸採購的另一個現實是交貨時間非常長，這給我們帶來了風險，而目前這種風險並不特別有吸引力。所以我想說，我們的離岸材料採購目前可能處於低潮。

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

好的。您談到了有競爭力的定價。國內市場供應顯然非常充足。是的，我們在 2 年內花費 6000 萬美元透過另外 3 條生產線和其他方式擴大產能 - 我確信其中包括維護和其他內容。稍微細分一下你對這 6000 萬美元的回報預期是多少，因為收入增加的機會與更好地控制你的成本和未來生產的單位成本有關。

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

好吧，我無法量化這些組成部分，但您已經正確地認識到，我們正在進行的投資既有增加收入的潛力，也有可能顯著降低我們目前生產的產品的現金生產成本。因此，作為一般回報預期，我可以告訴您，我們預計這些投資的回報將超過我們的資本成本，我們不會試圖進一步提高。我還要告訴你，泰森，重複一下我們在上次電話會議中所說的，你無法選擇開始這些投資的時間。完成這些事情需要 1.5 年到 2 年的準備時間，我們所進行的專案對公司的未來至關重要，我認為值得進行這些投資，無論情況如何市場前景，因為它們對未來至關重要。

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

正確的。特別是考慮到設備時間軸等。您的資產負債表顯然很容易支持 2 美元的特別股息，正如我們最近在這裡看到的那樣。問題是，您的整體前景是否像您一年前所展示的那樣，即使用於營運資本的現金耗盡了部分餘額，您也能夠從3 年、4 年的角度來看，證明該特別股息是合理的。周圍的參數相同，你有現金，第一季的前景可能會稍微弱一些。但總體而言，您對前景普遍持樂觀態度，這將是有利的。

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

是的。我的意思是，你很清楚，因為你熟悉這家公司，我們從未聲稱對 2、3、4 個季度後發生的事情有深刻的洞察力。但我們認為 2024 年或 2025 年不會出現火車失事的情況。我們認為，雖然可能會出現低迷，但有許多抵銷因素可以支持非住宅建築市場。所以我們沒有──我們不覺得天塌下來了。

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

好的。您是否已經到了我們正在審查營運調整的地步，您會考慮我們是否應該真正保護市場份額而不是利潤保護？或者您是否認為利潤會隨著庫存調整而自行解決。因此，保護您的市場份額更為重要。

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

不，我的意思是，正如我在準備好的評論中所說，我們希望能夠持續地在市場上保持競爭力，而我們也會這樣做。我們的客戶對我們有這樣的期望。我們對自己的期望是，我們不會為市場提供保護傘。我認為我們的成本結構可以與任何人競爭。正如我所說，我們不想成為價格製定者。我們認為，降價策略至少可以說是天真的。但儘管如此，市場還是存在的，我們將進行競爭，我們會讓結果自然而然地發生，但我們不會為市場提供保護傘。

Okay. And last question for me. probably directed to Scot, the monthly trends in the last 2 quarters. We've had the front-end month show a good recovery from the previous quarter. And then the rest of the quarter kind of falls below expectations. We had a good April. We had a good July and then all of a sudden, we have this rapid decline for various reasons that you've explained. Anything unique that you can see that would have created that impact or is that just how the numbers worked out?

好的。還有我的最後一個問題。可能是針對 Scot，過去兩個季度的月度趨勢。我們的前端月表現較上一季有良好的復甦。然後本季剩餘時間的表現將低於預​​期。我們度過了一個美好的四月。我們度過了一個美好的七月，然後突然之間，由於您所解釋的各種原因，我們的業績迅速下降。您能看到的任何獨特的東西都會產生這種影響，或者這就是數字的結果嗎？

There's nothing unique there. That's just how it worked out for the quarter.

那裡沒有什麼獨特的。這就是本季的情況。

Okay. But that anticipation is for the rest of this year, we're going to start out kind of as we ended and probably just kind of stay tight or stable until we get into the next year's seasonally stronger quarters.

好的。但這種預期是針對今年剩餘時間的，我們將以結束時的方式開始，並且可能會保持緊張或穩定，直到我們進入明年季節性強勁的季度。

But I think the influences that we're dealing with right now, Tyson, are related to reducing inventory and the impact on our plants. And certainly, I mean, the level of volume that's out there isn't particularly impressive anyway. But we have exacerbated that impact with our inventory reduction after which are clearly called for, but nevertheless, they're painful. So I think that, that -- that's a big driver of what you're seeing.

但我認為，泰森食品，我們現在正在應對的影響與減少庫存以及對我們工廠的影響有關。當然，我的意思是，無論如何，現有的數量水平並不是特別令人印象深刻。但我們透過減少庫存加劇了這種影響，之後明確要求，但儘管如此，它們是痛苦的。所以我認為，這是你所看到的一個重要驅動因素。

We currently have no further questions. So I would like to hand the call back to H. Woltz to closing remarks.

目前我們沒有進一步的問題。因此，我想將會議交還給 H. Woltz，讓其致閉幕詞。

Okay. Thank you. We appreciate your interest in the company. We look forward to talking to you next quarter, and we encourage you to follow up with us if you have continuing questions. Thank you.

好的。謝謝。我們感謝您對公司的興趣。我們期待下個季度與您交談，如果您還有疑問，我們鼓勵您與我們聯繫。謝謝。

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.

女士們、先生們，今天的電話會議到此結束。感謝您的加入。現在您可以斷開線路。謝謝。