IIIN Insteel Industries Inc

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 second quarter of fiscal 2024 ended March 30, 2024.

Second Quarter 2024 Highlights

• Net earnings of $6.9 million, or $0.35 per diluted share
• Net sales of $127.4 million
• Gross profit of $15.7 million, or 12.3% of net sales
• Operating cash flow of $1.4 million
• Net cash balance of $83.9 million and no debt outstanding as of March 30, 2024
• Improving demand environment and easing macroeconomic headwinds

Second Quarter 2024 Results

Net earnings for the second quarter of fiscal 2024 increased to $6.9 million, or $0.35 per diluted share, from $5.1 million, or $0.26 per share, in the same period a year ago. Insteel’s results for the second quarter benefited from widening spreads between selling prices and raw material costs relative to the prior year quarter.

Net sales decreased 19.9% to $127.4 million from $159.1 million in the prior year quarter, driven by 17.3% decrease in average selling prices and a 3.2% decrease in shipments. Average selling prices continue to remain below the previous year’s levels due to a highly competitive pricing environment that has persisted for over a year, along with the growing impact of low-priced PC strand imports. On a sequential basis, average selling prices increased 2.7% from the first quarter, following price increases implemented during the current quarter to recover a rise in raw material costs. Shipments for the current quarter were unfavorably impacted by competitive pressure, weakness in the commercial construction market, and adverse weather conditions that reduced construction activity. Sequentially, shipments increased 1.9% from the first quarter due to the expected seasonal demand upturn.

Gross profit increased to $15.7 million from $13.3 million in the prior year quarter, and gross margin widened to 12.3% from 8.3% due to higher spreads between selling prices and raw material costs, which were partially offset by lower shipments. The widening spreads were driven by selling price increases in the current quarter and the consumption of lower cost inventory.

Operating activities generated $1.4 million of cash during the quarter compared with $46.6 million in the prior year quarter primarily due to the relative changes in net working capital. Net working capital used $10.5 million of cash in the current year quarter, driven by an increase in receivables, while providing $39.7 million of cash in the prior year quarter.

Six Month 2024 Results

Net earnings for the first six months of fiscal 2024 were $8.1 million, or $0.41 per share, compared with $16.2 million, or $0.83 per share, for the same period a year ago.

Net sales decreased to $249.1 million from $326.0 million for the prior year period, driven by a 22.4% decrease in average selling prices and a 1.6% decrease in shipments. Gross profit decreased to $22.0 million from $31.0 million in the same period a year ago, and gross margin narrowed to 8.8% from 9.5% due primarily to lower spreads.

Capital Allocation and Liquidity

Capital expenditures for the first six months of fiscal 2024 decreased to $14.2 million from $15.4 million in the comparable prior year period. Capital outlays for fiscal 2024 are expected to total up to approximately $30.0 million, primarily focused on expenditures to modernize our facilities and information systems, advance the growth of the engineered structural mesh business and to support cost and productivity improvement initiatives in addition to recurring maintenance needs.

Insteel ended the quarter debt-free with $83.9 million of cash and no borrowings outstanding on its $100.0 million revolving credit facility.

Outlook

“We are encouraged by the improving business conditions we see as inventories appear to have corrected and seasonal forces begin to work in our favor, causing us to ramp up operating hours at most of our plants to maintain acceptable lead times. While our second quarter results benefited from the stabilization of selling prices and the consumption of lower cost inventory, shipment growth is required for the Company to demonstrate substantially improved financial performance. We are well prepared to meet higher levels of demand following the substantial capital investments we have made in recent years to broaden our product line and reduce the cash cost of production,” commented H.O. Woltz III, Insteel’s President and CEO.

Mr. Woltz further commented, “Looking ahead to the second half of the fiscal year, we anticipate growing momentum across our business driven by the seasonal upturn in construction activity, continued recovery in demand from our customers, and an improving macroeconomic outlook. We also remain optimistic about the expected growth in infrastructure construction, which will be driven in part by the spending associated with the Infrastructure Investment and Jobs Act.”

Conference Call

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its second quarter 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.

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 several 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 in our Annual Report on Form 10-K for the year ended September 30, 2023 and may be updated from time to time in our other filings with the U.S. Securities and Exchange Commission (the “SEC”).

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: 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; 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 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 September 30, 2023, 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) (Unaudited)      

Three Months Ended

 

Six Months Ended

March 30,

 

April 1,

 

March 30,

 

April 1,

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

  Net sales

$

127,394

 

$

159,051

 

$

249,119

 

$

325,950

 

Cost of sales

 

111,679

 

 

145,789

 

 

227,134

 

 

294,902

 

Gross profit

 

15,715

 

 

13,262

 

 

21,985

 

 

31,048

 

Selling, general and administrative expense

 

7,875

 

 

7,506

 

 

14,242

 

 

14,632

 

Other expense (income), net

 

9

 

 

(57

)

 

(13

)

 

(3,399

)

Interest expense

 

28

 

 

23

 

 

57

 

 

47

 

Interest income

 

(1,147

)

 

(747

)

 

(2,806

)

 

(1,187

)

Earnings before income taxes

 

8,950

 

 

6,537

 

 

10,505

 

 

20,955

 

Income taxes

 

2,011

 

 

1,436

 

 

2,434

 

 

4,731

 

Net earnings

$

6,939

 

$

5,101

 

$

8,071

 

$

16,224

 

    Net earnings per share: Basic

$

0.36

 

$

0.26

 

$

0.41

 

$

0.83

 

Diluted

 

0.35

 

 

0.26

 

 

0.41

 

 

0.83

 

  Weighted average shares outstanding: Basic

 

19,508

 

 

19,503

 

 

19,503

 

 

19,514

 

Diluted

 

19,594

 

 

19,562

 

 

19,584

 

 

19,573

 

  Cash dividends declared per share

$

0.03

 

$

0.03

 

$

2.56

 

$

2.06

 

  INSTEEL INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)      

(Unaudited)

 

 

 

(Unaudited)

March 30,

 

December 30,

 

September 30,

 

April 1,

 

2024

 

 

 

2023

 

 

 

2023

 

 

 

2023

 

Assets Current assets: Cash and cash equivalents

$

83,945

 

$

85,615

 

$

125,670

 

$

80,156

 

Accounts receivable, net

 

55,549

 

 

43,354

 

 

63,424

 

 

65,874

 

Inventories

 

92,530

 

 

94,142

 

 

103,306

 

 

136,492

 

Other current assets

 

7,675

 

 

8,706

 

 

6,453

 

 

5,357

 

Total current assets

 

239,699

 

 

231,817

 

 

298,853

 

 

287,879

 

Property, plant and equipment, net

 

127,534

 

 

129,300

 

 

120,014

 

 

111,946

 

Intangibles, net

 

5,716

 

 

5,903

 

 

6,090

 

 

6,465

 

Goodwill

 

9,745

 

 

9,745

 

 

9,745

 

 

9,745

 

Other assets

 

14,533

 

 

13,803

 

 

12,811

 

 

12,189

 

Total assets

$

397,227

 

$

390,568

 

$

447,513

 

$

428,224

 

  Liabilities and shareholders' equity Current liabilities: Accounts payable

$

25,409

 

$

23,852

 

$

34,346

 

$

36,936

 

Accrued expenses

 

7,975

 

 

9,585

 

 

11,809

 

 

8,153

 

Total current liabilities

 

33,384

 

 

33,437

 

 

46,155

 

 

45,089

 

Other liabilities

 

23,222

 

 

23,536

 

 

19,853

 

 

18,157

 

Commitments and contingencies Shareholders' equity: Common stock

 

19,467

 

 

19,448

 

 

19,454

 

 

19,441

 

Additional paid-in capital

 

85,332

 

 

84,425

 

 

83,832

 

 

82,708

 

Retained earnings

 

236,105

 

 

230,005

 

 

278,502

 

 

263,806

 

Accumulated other comprehensive loss

 

(283

)

 

(283

)

 

(283

)

 

(977

)

Total shareholders' equity

 

340,621

 

 

333,595

 

 

381,505

 

 

364,978

 

Total liabilities and shareholders' equity

$

397,227

 

$

390,568

 

$

447,513

 

$

428,224

 

  INSTEEL INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)  

Three Months Ended

 

Six Months Ended

March 30,

 

April 1,

 

March 30,

 

April 1,

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Cash Flows From Operating Activities: Net earnings

$

6,939

 

$

5,101

 

$

8,071

 

$

16,224

 

Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization

 

3,866

 

 

3,223

 

 

7,575

 

 

6,573

 

Amortization of capitalized financing costs

 

13

 

 

16

 

 

26

 

 

32

 

Stock-based compensation expense

 

997

 

 

983

 

 

1,395

 

 

1,113

 

Deferred income taxes

 

(579

)

 

(101

)

 

2,769

 

 

(1,479

)

Loss (gain) on sale and disposition of property, plant and equipment

 

24

 

 

-

 

 

24

 

 

(3,324

)

Increase in cash surrender value of life insurance policies over premiums paid

 

(383

)

 

(369

)

 

(1,058

)

 

(732

)

Net changes in assets and liabilities: Accounts receivable, net

 

(12,195

)

 

2,915

 

 

7,875

 

 

15,772

 

Inventories

 

1,612

 

 

34,693

 

 

10,776

 

 

61,162

 

Accounts payable and accrued expenses

 

62

 

 

2,069

 

 

(12,859

)

 

(19,451

)

Other changes

 

1,021

 

 

(1,965

)

 

(1,383

)

 

3,681

 

Total adjustments

 

(5,562

)

 

41,464

 

 

15,140

 

 

63,347

 

Net cash provided by operating activities

 

1,377

 

 

46,565

 

 

23,211

 

 

79,571

 

  Cash Flows From Investing Activities: Capital expenditures

 

(1,957

)

 

(7,200

)

 

(14,225

)

 

(15,400

)

Increase in cash surrender value of life insurance policies

 

(247

)

 

(246

)

 

(369

)

 

(327

)

Proceeds from sale of property, plant and equipment

 

-

 

 

-

 

 

3

 

 

9,920

 

Proceeds from surrender of life insurance policies

 

-

 

 

343

 

 

5

 

 

343

 

Net cash used for investing activities

 

(2,204

)

 

(7,103

)

 

(14,586

)

 

(5,464

)

  Cash Flows From Financing Activities: Proceeds from long-term debt

 

67

 

 

75

 

 

134

 

 

142

 

Principal payments on long-term debt

 

(67

)

 

(75

)

 

(134

)

 

(142

)

Cash dividends paid

 

(584

)

 

(584

)

 

(49,775

)

 

(40,085

)

Payment of employee tax withholdings related to net share transactions

 

(141

)

 

(187

)

 

(161

)

 

(187

)

Cash received from exercise of stock options

 

185

 

 

-

 

 

428

 

 

94

 

Financing costs

 

-

 

 

(164

)

 

-

 

 

(164

)

Repurchases of common stock

 

(303

)

 

(1,009

)

 

(842

)

 

(1,925

)

Net cash used for financing activities

 

(843

)

 

(1,944

)

 

(50,350

)

 

(42,267

)

  Net (decrease) increase in cash and cash equivalents

 

(1,670

)

 

37,518

 

 

(41,725

)

 

31,840

 

Cash and cash equivalents at beginning of period

 

85,615

 

 

42,638

 

 

125,670

 

 

48,316

 

Cash and cash equivalents at end of period

$

83,945

 

$

80,156

 

$

83,945

 

$

80,156

 

  Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Income taxes, net

$

716

 

$

3,945

 

$

724

 

$

4,132

 

Non-cash investing and financing activities: Purchases of property, plant and equipment in accounts payable

 

1,824

 

 

2,123

 

 

1,824

 

 

2,123

 

Restricted stock units and stock options surrendered for withholding taxes payable

 

141

 

 

187

 

 

161

 

 

187

 

IIIN – E

View source version on businesswire.com: https://www.businesswire.com/news/home/20240425910597/en/

Scot Jafroodi Vice President, Chief Financial Officer and Treasurer Insteel Industries Inc. (336) 786-2141