Insteel Industries Inc. (NYSE: IIIN) (“Insteel” or the
“Company), the largest manufacturer of steel wire reinforcing
products for concrete construction applications in the United
States, today announced financial results for its fourth quarter
and fiscal year ended September 30, 2023.
Fourth Quarter 2023
Highlights
- Net sales of $157.5 million
- Gross profit of $14.0 million, or 8.9% of net sales
- Net income of $5.6 million, or $0.29 per share
- Operating cash flow of $38.6 million
- Net cash balance of $125.7 million and no debt outstanding as
of September 30, 2023
Fourth Quarter 2023
Results
Net earnings for the fourth quarter of fiscal 2023 were $5.6
million, or $0.29 per share, compared to $24.3 million, or $1.24
per share, in the same period a year ago. Despite improved demand,
Insteel’s fourth quarter results were unfavorably impacted by
narrower spreads between selling prices and raw material costs and
higher unit manufacturing costs relative to the prior year
quarter.
Net sales decreased 24.3% to $157.5 million from $208.0 million
in the prior year quarter, reflecting a 27.8% decrease in average
selling prices partially offset by a 4.9% increase in shipments.
Average selling prices were negatively affected by persistent
competitive pricing pressures and the downward trend in steel
prices that has been observed throughout most of fiscal 2023.
Shipments for the quarter benefited from improved order activity
following the completion of customer destocking that had suppressed
demand during most of the fiscal year. On a sequential basis,
average selling prices decreased 6.6% from the third quarter, while
shipments increased 1.8%.
Gross profit decreased to $14.0 million from $39.8 million in
the prior year quarter, and gross margin narrowed to 8.9% from
19.1% resulting from the continued spread compression between
selling prices and raw material costs and higher plant operating
costs due to lower production volumes resulting from inventory
reduction measures undertaken by the Company. Insteel’s net
earnings for the prior year quarter reflect a $0.5 million decrease
in the cash surrender value of life insurance policies, which
increased selling, general and administrative expense, and
decreased net earnings per share by $0.02.
Operating activities generated $38.6 million of cash during the
fourth quarter compared to using $9.4 million in the prior year
quarter due to the relative changes in working capital. Working
capital provided $28.6 million of cash in the current year, driven
by a reduction in inventory, while using $34.8 million the prior
year.
Fiscal 2023 Results
Net earnings for fiscal 2023 decreased to $32.4 million, or
$1.66 per diluted share, from a record $125.0 million, or $6.37 per
diluted share, in the prior year. Earnings for the current year
benefited from a $3.3 million, or $0.13 per share, gain on the sale
of property, plant and equipment.
Net sales decreased 21.5% to $649.2 million from $826.8 million
in the prior year driven by a 17.1% decrease in average selling
prices and a 5.3% decrease in shipments. Gross profit decreased to
$65.4 million from $197.3 million in the same period a year ago,
and gross margin narrowed to 10.1% from 23.9% due to lower spreads,
reduced shipments and higher operating costs.
Operating activities generated $142.2 million of cash compared
to $5.7 million in the prior year due to relative changes in
working capital. Working capital provided $95.6 million in the
current year, driven by a reduction inventories and receivables,
while using $134.3 million in the prior year.
Capital Allocation and
Liquidity
Capital expenditures for fiscal 2023 increased to $30.7 million
from $15.9 million in the prior year and are expected to total up
to approximately $30 million in fiscal 2024 including expenditures
primarily to advance the growth of our engineered structural mesh
business and to support cost and productivity improvement
initiatives as well as recurring maintenance requirements.
Insteel ended the year with a record $125.7 million of cash and
no borrowings outstanding on its $100.0 million revolving credit
facility.
Outlook
“In the wake of record financial results in the previous year,
fiscal year 2023 presented a highly challenging business
environment that required rebalancing our supply chain, a
significant downward reset of steel prices and ongoing weakness in
the residential construction market. In the face of these
substantial headwinds, we are encouraged by the improving
underlying demand for our products during the fourth quarter
despite the current competitive landscape,” commented H.O. Woltz
III, Insteel’s President and CEO. “Looking ahead to fiscal 2024, we
are aware of the risks associated with higher interest rates and
the implications for the broader U.S. economy and, ultimately, our
end markets. Moreover, leading indicators and industry forecasts
for nonresidential building construction are signaling a slowdown
in activity from the elevated levels of recent years. Nevertheless,
we remain cautiously optimistic as customer sentiment is mostly
positive, and spending associated with the Infrastructure
Investment and Jobs Act is expected to accelerate as we progress
through fiscal 2024 and help drive demand.”
Mr. Woltz further commented, “During the fourth quarter, we
successfully commissioned one of our recent capital projects, with
the remaining two projects expected to be completed in the first
half of fiscal 2024. These strategic investments in our facilities
will allow us to broaden our product offering and expand our
capacity while reducing the cash cost of operations.”
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to
discuss its fourth quarter and 2023 fiscal year end financial
results. A live webcast of this call can be accessed on Insteel’s
website at https://investor.insteel.com and will be archived for
replay until the next quarterly conference call.
About Insteel
Insteel is the nation’s largest manufacturer of steel wire
reinforcing products for concrete construction applications.
Insteel manufactures and markets prestressed concrete strand and
welded wire reinforcement, including engineered structural mesh
(“ESM”), concrete pipe reinforcement and standard welded wire
reinforcement. Insteel’s products are sold primarily to
manufacturers of concrete products and concrete contractors for
use, primarily, in nonresidential construction applications.
Headquartered in Mount Airy, North Carolina, Insteel operates ten
manufacturing facilities located in the United States.
Cautionary Note Regarding
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. When used in this news release, the
words “believes,” “anticipates,” “expects,” “estimates,” “appears,”
“plans,” “intends,” “may,” “should,” “could” 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 a number of risks and
uncertainties, 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 are
updated from time to time in our filings with the U.S. Securities
and Exchange Commission (the “SEC”), in particular in our Annual
Report on Form 10-K for the year ended October 1, 2022.
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 future operations or financial
performance; however, they include, but are not limited to, the
following: the impact of COVID-19 on the economy, demand for our
products and our operations, including the measures taken by
governmental authorities to address it, which may precipitate or
exacerbate other risks and/or uncertainties; general economic and
competitive conditions in the markets in which we operate; 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;
fluctuations in the cost and availability of our primary raw
material, hot-rolled 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 United States 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 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; and the
“Risk Factors” discussed in our Annual Report on Form 10-K for the
year ended October 1, 2022 and in other filings made by us with the
SEC.
INSTEEL INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands except for per share
data)
Three Months Ended Year
Ended (Unaudited) (Unaudited) (Unaudited)
September 30, October 1, September 30,
October 1,
2023
2022
2023
2022
Net sales
$ 157,524
$ 207,991
$ 649,188
$ 826,832
Cost of sales
143,541
168,196
583,790
629,522
Gross profit
13,983
39,795
65,398
197,310
Selling, general and administrative expense
8,129
8,330
30,685
36,048
Restructuring recoveries, net
-
-
-
(318)
Other expense (income), net
-
103
(3,423)
88
Interest expense
20
23
87
91
Interest income
(1,422)
(216)
(3,706)
(326)
Earnings before income taxes
7,256
31,555
41,755
161,727
Income taxes
1,630
7,249
9,340
36,716
Net earnings
$ 5,626
$ 24,306
$ 32,415
$ 125,011
Net earnings per share: Basic
$ 0.29
$ 1.24
$ 1.66
$ 6.41
Diluted
0.29
1.24
1.66
6.37
Weighted average shares outstanding: Basic
19,499
19,558
19,504
19,517
Diluted
19,568
19,628
19,566
19,629
Cash dividends declared per share
$ 0.03
$ 0.03
$ 2.12
$ 2.12
INSTEEL INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited) September 30, July 1,
October 1,
2023
2023
2022
Assets Current assets: Cash and cash equivalents
$ 125,670
$ 91,740
$ 48,316
Accounts receivable, net
63,424
66,363
81,646
Inventories
103,306
133,126
197,654
Other current assets
6,453
6,406
7,716
Total current assets
298,853
297,635
335,332
Property, plant and equipment, net
120,014
118,788
108,156
Intangibles, net
6,090
6,278
6,847
Goodwill
9,745
9,745
9,745
Other assets
12,811
12,936
11,665
Total assets
$ 447,513
$ 445,382
$ 471,745
Liabilities and shareholders' equity Current
liabilities: Accounts payable
$ 34,346
$ 38,075
$ 46,796
Accrued expenses
11,809
12,984
15,800
Total current liabilities
46,155
51,059
62,596
Other liabilities
19,853
19,257
19,405
Commitments and contingencies Shareholders' equity: Common stock
19,454
19,433
19,478
Additional paid-in capital
83,832
83,150
81,997
Retained earnings
278,502
273,460
289,246
Accumulated other comprehensive loss
(283)
(977)
(977)
Total shareholders' equity
381,505
375,066
389,744
Total liabilities and shareholders' equity
$ 447,513
$ 445,382
$ 471,745
INSTEEL INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended Year Ended (Unaudited)
(Unaudited) (Unaudited) September 30,
October 1, September 30, October 1,
2023
2022
2023
2022
Cash Flows From Operating Activities: Net earnings
$ 5,626
$ 24,306
$ 32,415
$ 125,011
Adjustments to reconcile net earnings to net cash provided by (used
for) operating activities: Depreciation and amortization
3,469
3,509
13,304
14,486
Amortization of capitalized financing costs
12
16
57
65
Stock-based compensation expense
891
1,034
2,425
2,429
Deferred income taxes
1,229
(297)
238
327
Loss (gain) on sale and disposition of property, plant and
equipment and assets held for sale
50
115
(3,271)
(480)
Increase in cash surrender value of life insurance policies over
premiums paid
-
-
(531)
-
Gain from life insurance proceeds
-
-
-
(364)
Net changes in assets and liabilities: Accounts receivable, net
2,939
(471)
18,222
(13,729)
Inventories
29,820
(5,207)
94,348
(118,605)
Accounts payable and accrued expenses
(4,204)
(29,161)
(16,949)
(1,964)
Other changes
(1,281)
(3,288)
1,942
(1,506)
Total adjustments
32,925
(33,750)
109,785
(119,341)
Net cash provided by (used for) operating activities
38,551
(9,444)
142,200
5,670
Cash Flows From Investing Activities: Capital
expenditures
(4,098)
(3,649)
(30,702)
(15,900)
Decrease (increase) in cash surrender value of life insurance
policies
249
349
(476)
1,361
Proceeds from sale of assets held for sale
-
-
-
6,934
Proceeds from sale of property, plant and equipment
-
-
9,924
-
Proceeds from surrender of life insurance policies
-
-
358
110
Proceeds from life insurance claims
-
-
-
1,456
Net cash used for investing activities
(3,849)
(3,300)
(20,896)
(6,039)
Cash Flows From Financing Activities: Proceeds from
long-term debt
68
46
323
266
Principal payments on long-term debt
(68)
(46)
(323)
(266)
Cash dividends paid
(584)
(584)
(41,252)
(41,162)
Cash received from exercise of stock options
48
-
239
1,650
Financing costs
-
-
(177)
-
Payment of employee tax withholdings related to net share
transactions
(236)
(197)
(432)
(483)
Repurchases of common stock
-
(1,204)
(2,328)
(1,204)
Net cash used for financing activities
(772)
(1,985)
(43,950)
(41,199)
Net increase (decrease) in cash and cash equivalents
33,930
(14,729)
77,354
(41,568)
Cash and cash equivalents at beginning of period
91,740
63,045
48,316
89,884
Cash and cash equivalents at end of period
$ 125,670
$ 48,316
$ 125,670
$ 48,316
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for: Income taxes, net
$ 2,368
$ 11,485
$ 7,834
$ 41,483
Non-cash investing and financing activities: Purchases of property,
plant and equipment in accounts payable
1,301
946
1,301
946
Restricted stock units and stock options surrendered for
withholding taxes payable
236
197
432
483
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231019310867/en/
Scot Jafroodi Vice President, Chief Financial Officer and
Treasurer Insteel Industries Inc. (336) 786-2141
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