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 first quarter of
fiscal 2024 ended December 30, 2023.
First Quarter 2024
Highlights
- Net sales of $121.7 million
- Gross profit of $6.3 million, or 5.2% of net sales
- Net income of $1.1 million, or $0.06 per share
- Operating cash flow of $21.8 million
- Payment of special cash dividend totaling $48.6 million, or
$2.50 per share
- Net cash balance of $85.6 million and no debt outstanding as of
December 30, 2023
- Favorable demand profile with improving market fundamentals and
macroeconomics outlook
First Quarter 2024
Results
Net earnings for the first quarter of fiscal 2024 decreased to
$1.1 million, or $0.06 per share, from earnings of $11.1 million,
or $0.57 per share, in the same period a year ago. Net earnings for
the prior year quarter include a $3.3 million, or $0.13 per share
gain on the sale of property, plant and equipment. Insteel’s first
quarter results were unfavorably impacted by the narrowing of
spreads between selling prices and raw material costs, together
with elevated unit manufacturing costs on lower production
levels.
Net sales decreased 27.1% to $121.7 million from $166.9 million
in the prior year quarter, driven entirely by a decrease in average
selling prices. Shipment volume during the period was essentially
unchanged from the prior year and benefited from recovering demand
from our residential construction markets, offsetting weakness in
infrastructure and commercial construction markets. On a sequential
basis, shipments declined 16.1% from the fourth quarter of fiscal
2023, reflecting the typical seasonal slowdown in construction
activity, while average selling prices fell 7.9%. Gross margin
narrowed to 5.2% from 10.7% in the prior year quarter due to the
reduction in spreads between selling prices and raw material costs
together with higher operating costs that reflect lower production
volumes.
Operating activities generated $21.8 million of cash during the
quarter compared to $33.0 million in the prior year as both periods
benefited from the relative changes in working capital. Working
capital provided $16.3 million in the current quarter, driven by
the reduction in receivables and inventories, while providing $17.8
million in the prior year quarter.
Capital Allocation and
Liquidity
Capital expenditures for the first quarter of fiscal 2024
increased to $12.3 million from $8.2 million in the prior year
quarter. 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.
On December 22, 2023, Insteel paid a special cash dividend
totaling $48.6 million, or $2.50 per share, in addition to its
regular quarterly cash dividend of $0.03 per share and ended the
quarter with $85.6 million of cash and no borrowings outstanding on
its $100.0 million revolving credit facility.
Outlook
“We stated during the Q4 2023 earnings call that our first
quarter would be difficult in view of higher inventory carrying
values, competitive pricing pressure, the need to reduce finished
goods inventories, and the normal seasonal downturn in construction
activity. While all of these factors affected our first quarter
results, we are glad to report that we have reached the point where
the carrying value of raw materials approximates replacement cost
and finished goods inventories are more appropriately aligned with
our business level. With pricing turning upward and inventory
liquidations substantially complete, we believe that we are past
some of the headwinds that adversely affected results during 2023
and the first quarter of 2024. As we look toward the remainder of
fiscal 2024, we anticipate stronger market fundamentals and look
forward to increasing contributions from the capital investments we
have made,” commented H.O. Woltz III, Insteel’s President and
CEO.
Mr. Woltz further commented, “Customer sentiment remains mostly
positive, and the macroeconomic outlook is improving with the
apparent end of the recent rising interest rate cycle.
Additionally, we are optimistic about increased demand from
spending associated with the Infrastructure Investment and Jobs Act
as we progress through the fiscal year. Regardless of the
circumstances, we will remain focused on navigating market
conditions, strengthening our leadership positions across our
product lines, and optimizing our operations to position Insteel
for long-term success.”
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to
discuss its first 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
December 30,
December 31,
2023
2022
Net sales
$
121,725
$
166,899
Cost of sales
115,455
149,113
Gross profit
6,270
17,786
Selling, general and administrative expense
6,367
7,126
Other income, net
(22
)
(3,342
)
Interest expense
29
24
Interest income
(1,659
)
(440
)
Earnings before income taxes
1,555
14,418
Income taxes
423
3,295
Net earnings
$
1,132
$
11,123
Net earnings per share: Basic
$
0.06
$
0.57
Diluted
0.06
0.57
Weighted average shares outstanding: Basic
19,497
19,525
Diluted
19,573
19,584
Cash dividends declared per share
$
2.53
$
2.03
INSTEEL INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (In thousands)
(Unaudited)
December 30,
December 31,
September 30,
2023
2022
2023
Assets Current assets: Cash and cash equivalents
$
85,615
$
42,638
$
125,670
Accounts receivable, net
43,354
68,789
63,424
Inventories
94,142
171,185
103,306
Other current assets
8,706
5,599
6,453
Total current assets
231,817
288,211
298,853
Property, plant and equipment, net
129,300
107,178
120,014
Intangibles, net
5,903
6,653
6,090
Goodwill
9,745
9,745
9,745
Other assets
13,803
11,969
12,811
Total assets
$
390,568
$
423,756
$
447,513
Liabilities and shareholders' equity Current
liabilities: Accounts payable
$
23,852
$
30,801
$
34,346
Accrued expenses
9,585
14,112
11,809
Total current liabilities
33,437
44,913
46,155
Other liabilities
23,536
18,169
19,853
Commitments and contingencies Shareholders' equity: Common stock
19,448
19,451
19,454
Additional paid-in capital
84,425
82,082
83,832
Retained earnings
230,005
260,118
278,502
Accumulated other comprehensive loss
(283
)
(977
)
(283
)
Total shareholders' equity
333,595
360,674
381,505
Total liabilities and shareholders' equity
$
390,568
$
423,756
$
447,513
INSTEEL INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended
December 30,
December 31,
2023
2022
Cash Flows From Operating Activities: Net earnings
$
1,132
$
11,123
Adjustments to reconcile net earnings to net cash provided by
operating activities: Depreciation and amortization
3,709
3,350
Amortization of capitalized financing costs
13
16
Stock-based compensation expense
398
130
Deferred income taxes
3,348
(1,378
)
Gain on sale and disposition of property, plant and equipment
-
(3,324
)
Increase in cash surrender value of life insurance policies over
premiums paid
(675
)
(363
)
Net changes in assets and liabilities: Accounts receivable, net
20,070
12,857
Inventories
9,164
26,469
Accounts payable and accrued expenses
(12,921
)
(21,520
)
Other changes
(2,404
)
5,646
Total adjustments
20,702
21,883
Net cash provided by operating activities
21,834
33,006
Cash Flows From Investing Activities: Capital
expenditures
(12,268
)
(8,200
)
Increase in cash surrender value of life insurance policies
(122
)
(81
)
Proceeds from sale of property, plant and equipment
3
9,920
Proceeds from surrender of life insurance policies
5
-
Net cash (used for) provided by investing activities
(12,382
)
1,639
Cash Flows From Financing Activities: Proceeds from
long-term debt
67
67
Principal payments on long-term debt
(67
)
(67
)
Cash dividends paid
(49,191
)
(39,501
)
Payment of employee tax withholdings related to net share
transactions
(20
)
-
Cash received from exercise of stock options
243
94
Repurchases of common stock
(539
)
(916
)
Net cash used for financing activities
(49,507
)
(40,323
)
Net decrease in cash and cash equivalents
(40,055
)
(5,678
)
Cash and cash equivalents at beginning of period
125,670
48,316
Cash and cash equivalents at end of period
$
85,615
$
42,638
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for: Income taxes, net
$
8
$
187
Non-cash investing and financing activities: Purchases of property,
plant and equipment in accounts payable
1,846
1,520
Restricted stock units and stock options surrendered for
withholding taxes payable
20
-
IIIN – E
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version on businesswire.com: https://www.businesswire.com/news/home/20240118035983/en/
Scot Jafroodi Vice President, Chief Financial Officer and
Treasurer Insteel Industries Inc. (336) 786-2141
Insteel Industries (NYSE:IIIN)
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Insteel Industries (NYSE:IIIN)
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