IIIN Insteel Industries Inc

Insteel Industries Inc. (NYSE: IIIN) (“Insteel” or the “Company”), the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications, today announced financial results for its third quarter of fiscal 2024 ended June 29, 2024.

Third Quarter 2024 Highlights

• Net earnings of $6.6 million, or $0.34 per share
• Net sales of $145.8 million
• Gross profit of $15.4 million, or 10.6% of net sales
• Operating cash flow of $18.7 million
• Net cash balance of $97.7 million and no debt outstanding as of June 29, 2024
• Improving macroeconomic and business outlooks

Third Quarter 2024 Results

Net earnings for the third quarter of fiscal 2024 decreased to $6.6 million, or $0.34 per share, from $10.6 million, or $0.54 per share, for the same period a year ago. Despite higher shipments, Insteel’s third quarter results were unfavorably impacted by narrower spreads between selling prices and raw material costs relative to the prior year quarter.

Net sales decreased 12.0% to $145.8 million from $165.7 million in the prior year quarter, driven by a 16.3% decrease in average selling prices partially offset by a 5.1% increase in shipments. The decline in net sales was primarily due to lower selling prices, attributed to competitive pricing pressures in welded wire reinforcing (“WWR”) markets and the impact of low-priced PC strand imports. Despite the negative impact of revenues from declining selling prices, we believe improving demand for our reinforcing products validates the view that inventories have largely corrected, which should lead to higher shipments going forward. Ramping up operating hours to accommodate improved demand continues to be challenging, however. On a sequential basis, shipments increased by 20.8% from the second quarter of fiscal 2024, while average selling prices declined by 5.3%. Gross profit decreased to $15.4 million from $20.4 million in the prior year quarter, and gross margin narrowed to 10.6% from 12.3% due to lower spreads between selling prices and raw material costs, partially offset by higher shipments.

Operating activities generated $18.7 million of cash during the quarter compared with $23.8 million in the prior year quarter due to a combination of a reduction in net earnings and the relative change in net working capital. Net working capital provided $7.8 million in the current year, driven by an increase in payables and a reduction in inventories, compared to $9.6 million in the prior year quarter.

Nine Month 2024 Results

Net earnings for the first nine months of fiscal 2024 were $14.6 million, or $0.75 per share, compared with $26.8 million, or $1.37 per share, for the same period a year ago. Earnings for the prior year period benefited from a $3.3 million, or $0.13 per share, gain on the sale of property, plant and equipment.

Net sales decreased to $394.9 million from $491.7 million for the prior year period, driven by a 20.4% decrease in average selling prices partially offset by a 1.0% increase in shipments. Gross profit decreased to $37.4 million from $51.4 million in the same period a year ago, and gross margin narrowed to 9.5% from 10.5% due to lower spreads and higher operating costs partially offset by higher shipments.

Operating activities generated $42.0 million of cash compared with $103.3 million in the prior year period due to a combination of a reduction in net earnings and the relative change in net working capital. Net working capital provided $13.6 million of cash in the current year, driven by the reduction in inventories and receivables, compared to $67.1 million in the prior year period.

Capital Allocation and Liquidity

Capital expenditures for the first nine months of fiscal 2024 decreased to $17.5 million from $26.6 million for the prior year period and are expected to total up to $25.0 million in 2024, primarily focused on expenditures to 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 $97.7 million of cash and no borrowings outstanding on its $100.0 million revolving credit facility.

Outlook

“Improving conditions in our markets require that we continue ramping up operating hours at certain WWR plants to manage lead times and maximize shipments. As has been the case for several quarters, it is difficult to attract and retain qualified people in our plants, which is necessary to expand operating hours," commented H.O. Woltz III, Insteel’s President and CEO. “As we move into the fourth fiscal quarter, selling prices and spreads may remain under pressure, particularly where we compete with imported PC strand which is entering the US market at prices lower than the domestic wire rod price. We continue to work with the Administration to resolve certain trade-related anomalies that contribute to this problem. In addition, we remain committed to enhancing our competitive position by leveraging recent capital investments to optimize operations, expand our product line and lower our cash cost of production."

Woltz continued, "Looking ahead to fiscal 2025, we are optimistic about our business outlook. Easing inflation and the potential for lower interest rates will help drive demand in both our commercial and residential end markets, while the infrastructure related portion of our business should begin to benefit from federal 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 third 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

 

Nine Months Ended

 

 

June 29,

 

July 1,

 

June 29,

 

July 1,

 

 

2024

 

2023

 

2024

 

2023

 

Net sales

$

145,775

 

$

165,714

 

$

394,894

 

$

491,664

 

Cost of sales

 

130,387

 

 

145,347

 

 

357,521

 

 

440,249

 

Gross profit

 

15,388

 

 

20,367

 

 

37,373

 

 

51,415

 

Selling, general and administrative expense

 

7,879

 

 

7,924

 

 

22,121

 

 

22,556

 

Other expense (income), net

 

15

 

 

(24

)

 

2

 

 

(3,423

)

Interest expense

 

19

 

 

20

 

 

76

 

 

67

 

Interest income

 

(1,245

)

 

(1,097

)

 

(4,051

)

 

(2,284

)

Earnings before income taxes

 

8,720

 

 

13,544

 

 

19,225

 

 

34,499

 

Income taxes

 

2,155

 

 

2,979

 

 

4,589

 

 

7,710

 

Net earnings

$

6,565

 

$

10,565

 

$

14,636

 

$

26,789

 

 

 

Net earnings per share:

Basic

$

0.34

 

$

0.54

 

$

0.75

 

$

1.37

 

Diluted

 

0.34

 

 

0.54

 

 

0.75

 

 

1.37

 

 

Weighted average shares outstanding:

Basic

 

19,500

 

 

19,488

 

 

19,502

 

 

19,506

 

Diluted

 

19,568

 

 

19,548

 

 

19,579

 

 

19,565

 

 

Cash dividends declared per share

$

0.03

 

$

0.03

 

$

2.59

 

$

2.09

 

 

INSTEEL INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

(Unaudited)

 

 

June 29,

 

March 30,

 

December 30,

 

September 30,

 

July 1,

 

 

2024

 

2024

 

2023

 

2023

 

2023

Assets Current assets: Cash and cash equivalents

$

97,745

 

$

83,945

 

$

85,615

 

$

125,670

 

$

91,740

 

Accounts receivable, net

 

61,234

 

 

55,549

 

 

43,354

 

 

63,424

 

 

66,363

 

Inventories

 

89,379

 

 

92,530

 

 

94,142

 

 

103,306

 

 

133,126

 

Other current assets

 

8,766

 

 

7,675

 

 

8,706

 

 

6,453

 

 

6,406

 

Total current assets

 

257,124

 

 

239,699

 

 

231,817

 

 

298,853

 

 

297,635

 

Property, plant and equipment, net

 

127,889

 

 

127,534

 

 

129,300

 

 

120,014

 

 

118,788

 

Intangibles, net

 

5,528

 

 

5,716

 

 

5,903

 

 

6,090

 

 

6,278

 

Goodwill

 

9,745

 

 

9,745

 

 

9,745

 

 

9,745

 

 

9,745

 

Other assets

 

14,329

 

 

14,533

 

 

13,803

 

 

12,811

 

 

12,936

 

Total assets

$

414,615

 

$

397,227

 

$

390,568

 

$

447,513

 

$

445,382

 

  Liabilities and shareholders' equity Current liabilities: Accounts payable

$

34,827

 

$

25,409

 

$

23,852

 

$

34,346

 

$

38,075

 

Accrued expenses

 

9,888

 

 

7,975

 

 

9,585

 

 

11,809

 

 

12,984

 

Total current liabilities

 

44,715

 

 

33,384

 

 

33,437

 

 

46,155

 

 

51,059

 

Other liabilities

 

23,885

 

 

23,222

 

 

23,536

 

 

19,853

 

 

19,257

 

Commitments and contingencies Shareholders' equity: Common stock

 

19,445

 

 

19,467

 

 

19,448

 

 

19,454

 

 

19,433

 

Additional paid-in capital

 

85,599

 

 

85,332

 

 

84,425

 

 

83,832

 

 

83,150

 

Retained earnings

 

241,254

 

 

236,105

 

 

230,005

 

 

278,502

 

 

273,460

 

Accumulated other comprehensive loss

 

(283

)

 

(283

)

 

(283

)

 

(283

)

 

(977

)

Total shareholders' equity

 

346,015

 

 

340,621

 

 

333,595

 

 

381,505

 

 

375,066

 

Total liabilities and shareholders' equity

$

414,615

 

$

397,227

 

$

390,568

 

$

447,513

 

$

445,382

 

 

INSTEEL INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

 

July 1,

 

June 29,

 

July 1,

 

 

2024

 

2023

 

2024

 

2023

Cash Flows From Operating Activities: Net earnings

$

6,565

 

$

10,565

 

$

14,636

 

$

26,789

 

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

 

3,837

 

 

3,262

 

 

11,412

 

 

9,835

 

Amortization of capitalized financing costs

 

12

 

 

13

 

 

38

 

 

45

 

Stock-based compensation expense

 

508

 

 

421

 

 

1,903

 

 

1,534

 

Deferred income taxes

 

869

 

 

488

 

 

3,638

 

 

(991

)

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

 

26

 

 

3

 

 

50

 

 

(3,321

)

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

 

-

 

 

(122

)

 

(1,029

)

 

(854

)

Net changes in assets and liabilities: Accounts receivable, net

 

(5,685

)

 

(489

)

 

2,190

 

 

15,283

 

Inventories

 

3,151

 

 

3,366

 

 

13,927

 

 

64,528

 

Accounts payable and accrued expenses

 

10,367

 

 

6,706

 

 

(2,492

)

 

(12,745

)

Other changes

 

(912

)

 

(458

)

 

(2,295

)

 

3,223

 

Total adjustments

 

12,173

 

 

13,190

 

 

27,342

 

 

76,537

 

Net cash provided by operating activities

 

18,738

 

 

23,755

 

 

41,978

 

 

103,326

 

  Cash Flows From Investing Activities: Capital expenditures

 

(3,235

)

 

(11,204

)

 

(17,460

)

 

(26,604

)

Increase in cash surrender value of life insurance policies

 

(45

)

 

(75

)

 

(443

)

 

(402

)

Proceeds from sale of property, plant and equipment

 

1

 

 

4

 

 

4

 

 

9,924

 

Proceeds from surrender of life insurances policies

 

20

 

 

15

 

 

25

 

 

358

 

Net cash used for investing activities

 

(3,259

)

 

(11,260

)

 

(17,874

)

 

(16,724

)

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

 

96

 

 

113

 

 

230

 

 

255

 

Principal payments on long-term debt

 

(96

)

 

(113

)

 

(230

)

 

(255

)

Cash dividends paid

 

(584

)

 

(583

)

 

(50,359

)

 

(40,668

)

Payment of employee tax withholdings related to net share transactions

 

(101

)

 

(9

)

 

(262

)

 

(196

)

Cash received from exercise of stock options

 

-

 

 

97

 

 

428

 

 

191

 

Financing costs

 

-

 

 

(13

)

 

-

 

 

(177

)

Repurchases of common stock

 

(994

)

 

(403

)

 

(1,836

)

 

(2,328

)

Net cash used for financing activities

 

(1,679

)

 

(911

)

 

(52,029

)

 

(43,178

)

  Net increase (decrease) in cash and cash equivalents

 

13,800

 

 

11,584

 

 

(27,925

)

 

43,424

 

Cash and cash equivalents at beginning of period

 

83,945

 

 

80,156

 

 

125,670

 

 

48,316

 

Cash and cash equivalents at end of period

$

97,745

 

$

91,740

 

$

97,745

 

$

91,740

 

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

$

2,543

 

$

1,521

 

$

3,267

 

$

5,466

 

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

 

2,624

 

 

843

 

 

2,624

 

 

843

 

Restricted stock units and stock options surrendered for withholding taxes payable

 

101

 

 

9

 

 

262

 

 

196

 

IIIN – E

View source version on businesswire.com: https://www.businesswire.com/news/home/20240718483722/en/

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