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MOUNT AIRY, N.C.--(BUSINESS WIRE)--Apr 20, 2023--
Insteel Industries Inc. (NYSE: IIIN) today announced financial results for its second quarter ended April 1, 2023.
Second Quarter 2023 Results
Net earnings for the second quarter of fiscal 2023 decreased to $5.1 million, or $0.26 per share, from $39.0 million, or $1.99 per diluted share, in the same period a year ago. Earnings for the second quarter were unfavorably impacted by narrower spreads between selling prices and raw material costs, lower shipments and higher manufacturing costs relative to the prior year quarter.
Net sales decreased 25.4% to $159.1 million from $213.2 million in the prior year quarter, driven by customer destocking activities following a protracted period of supply constraints and uncertainty that resulted in inventory accumulation throughout the supply chain. Average selling prices decreased 14.5% and shipments declined by 12.8%. Shipments for the current year quarter were also negatively affected by usual winter weather conditions in several of Insteel’s markets, which impeded construction activity. On a sequential basis, average selling prices decreased 9.4% from the first quarter while shipments increased 5.2% due to the normal seasonal demand upturn.
Gross profit decreased to $13.3 million from $57.1 million in the prior quarter, and gross margin narrowed to 8.3% from 26.8% due to lower spreads between selling prices and raw material costs together with reduced shipments and higher operating costs that reflect lower production volumes and general inflationary trends. The spread compression was driven by the consumption of higher cost inventory purchased in prior periods, together with competitive pricing pressures.
Operating activities generated $46.6 million of cash during the quarter compared with $6.3 million in the prior year quarter due to the relative changes in net working capital. Net working capital provided $39.7 million in the current year quarter, driven by the reduction in inventories and receivables, while using $32.6 million of cash in the prior year quarter.
Six Month 2023 Results
Net earnings for the first six months of fiscal 2023 were $16.2 million, or $0.83 per share, compared with $62.1 million, or $3.17 per diluted share, for the same period a year ago. Earnings for the current 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 $326.0 million from $391.7 million for the prior year period, driven by an 11.4% decrease in shipments and a 6.0% decrease in average selling prices. Gross profit decreased to $31.0 million from $99.4 million in the same period a year ago, and gross margin narrowed to 9.5% from 25.4% due to lower spreads, reduced shipments and higher operating costs.
Operating activities generated $79.6 million of cash compared with $20.1 million in the prior year period due to the relative net change in net working capital. Net working capital provided $57.5 million in the current year, driven by the reduction in inventories and receivables, while using $54.0 million of cash in the prior year period.
Capital Allocation and Liquidity
Capital expenditures for the first six months of fiscal 2023 increased to $15.4 million from $8.6 million for the prior year period. Capital outlays for fiscal 2023 are expected to total up to approximately $30.0 million, 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 $80.2 million of cash and no borrowings outstanding on its $100.0 million revolving credit facility.
Outlook
“The sharp downward reset in steel prices, together with concerted customer destocking activities, was painful for Insteel. Fortunately, we believe these headwinds have nearly run their course, and we are encouraged by the outlook for shipment volumes and margins as we enter the second half of fiscal 2023,” commented H.O. Woltz III, Insteel’s President and CEO. “We are also pleased to see strong activity in private nonresidential construction markets, the primary demand driver for our products, as well as indications that the housing market is recovering and its downturn may be less severe than we feared. All things considered, we expect 2023 to be a good year for the Company, despite a difficult start.”
Woltz continued, “Up to this point, there has been little tangible impact on our business from the Infrastructure Investment and Jobs Act, although we expect this federal spending to stimulate demand in infrastructure markets over the coming months. During the quarter, we made considerable progress toward completing several capital projects focused on broadening our product offering, expanding our capacity and reducing operating costs. We expect increasing contributions from these investments over the remainder of the year.”
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 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, 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 Engineered Structural Mesh (“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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands except for per share data)(Unaudited)
Three Months Ended
Six Months Ended
April 1,
April 2,
April 1,
April 2,
2023
2022
2023
2022 Net sales
$
159,051
$
213,209
$
325,950
$
391,668
Cost of sales
145,789
156,140
294,902
292,235
Gross profit
13,262
57,069
31,048
99,433
Selling, general and administrative expense
7,506
7,202
14,632
19,483
Restructuring recoveries, net
-
(365
)
-
(318
)Other income, net
(57
)
(11
)
(3,399
)
(16
)Interest expense
23
23
47
45
Interest income
(747
)
(10
)
(1,187
)
(24
)Earnings before income taxes
6,537
50,230
20,955
80,263
Income taxes
1,436
11,213
4,731
18,117
Net earnings
$
5,101
$
39,017
$
16,224
$
62,146
Net earnings per share:Basic
$
0.26
$
2.00
$
0.83
$
3.19
Diluted
0.26
1.99
0.83
3.17
Weighted average shares outstanding:Basic
19,503
19,492
19,514
19,487
Diluted
19,562
19,623
19,573
19,615
Cash dividends declared per share
$
0.03
$
0.03
$
2.06
$
2.06
INSTEEL INDUSTRIES INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands)
(Unaudited)
(Unaudited)
April 1,
December 31,
October 1,
April 2,
2023
2022
2022
2022AssetsCurrent assets:Cash and cash equivalents
$
80,156
$
42,638
$
48,316
$
69,725
Accounts receivable, net
65,874
68,789
81,646
80,690
Inventories
136,492
171,185
197,654
127,049
Other current assets
5,357
5,599
7,716
5,340
Total current assets
287,879
288,211
335,332
282,804
Property, plant and equipment, net
111,946
107,178
108,156
107,159
Intangibles, net
6,465
6,653
6,847
7,256
Goodwill
9,745
9,745
9,745
9,745
Other assets
12,189
11,969
11,665
13,594
Total assets
$
428,224
$
423,756
$
471,745
$
420,558
Liabilities and shareholders' equityCurrent liabilities:Accounts payable
$
36,936
$
30,801
$
46,796
$
58,459
Accrued expenses
8,153
14,112
15,800
15,357
Total current liabilities
45,089
44,913
62,596
73,816
Long-term debt
-
-
-
-
Other liabilities
18,157
18,169
19,405
21,595
Commitments and contingenciesShareholders' equity:Common stock
19,441
19,451
19,478
19,439
Additional paid-in capital
82,708
82,082
81,997
79,613
Retained earnings
263,806
260,118
289,246
228,537
Accumulated other comprehensive loss
(977
)
(977
)
(977
)
(2,442
)Total shareholders' equity
364,978
360,674
389,744
325,147
Total liabilities and shareholders' equity
$
428,224
$
423,756
$
471,745
$
420,558
INSTEEL INDUSTRIES INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)
Three Months Ended
Six Months Ended
April 1,
April 2,
April 1,
April 2,
2023
2022
2023
2022Cash Flows From Operating Activities:Net earnings
$
5,101
$
39,017
$
16,224
$
62,146
Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
3,223
3,640
6,573
7,345
Amortization of capitalized financing costs
16
16
32
33
Stock-based compensation expense
983
830
1,113
1,102
Deferred income taxes
(101
)
1,100
(1,479
)
1,116
Gain on sale of property, plant and equipment and assets held for sale
-
(622
)
(3,324
)
(608
)Gain from life insurance proceeds
-
(364
)
-
(364
)Increase in cash surrender value of life insurance policies over premiums paid
(369
)
-
(732
)
-
Net changes in assets and liabilities:Accounts receivable, net
2,915
(7,128
)
15,772
(12,773
)Inventories
34,693
(45,491
)
61,162
(48,000
)Accounts payable and accrued expenses
2,069
20,036
(19,451
)
6,805
Other changes
(1,965
)
(4,715
)
3,681
3,264
Total adjustments
41,464
(32,698
)
63,347
(42,080
)Net cash provided by operating activities
46,565
6,319
79,571
20,066
Cash Flows From Investing Activities:Capital expenditures
(7,200
)
(7,779
)
(15,400
)
(8,617
)(Increase) decrease in cash surrender value of life insurance policies
(246
)
459
(327
)
35
Proceeds from sale of assets held for sale
-
6,928
-
6,934
Proceeds from sale of property, plant and equipment
-
-
9,920
-
Proceeds from life insurance claims
-
1,456
-
1,456
Proceeds from surrender of life insurance policies
343
42
343
106
Net cash (used for) provided by investing activities
(7,103
)
1,106
(5,464
)
(86
) Cash Flows From Financing Activities:Proceeds from long-term debt
75
88
142
133
Principal payments on long-term debt
(75
)
(88
)
(142
)
(133
)Cash dividends paid
(584
)
(583
)
(40,085
)
(39,993
)Payment of employee tax withholdings related to net share transactions
(187
)
(137
)
(187
)
(192
)Cash received from exercise of stock options
-
-
94
46
Financing costs
(164
)
-
(164
)
-
Repurchases of common stock
(1,009
)
-
(1,925
)
-
Net cash used for financing activities
(1,944
)
(720
)
(42,267
)
(40,139
) Net increase (decrease) in cash and cash equivalents
37,518
6,705
31,840
(20,159
)Cash and cash equivalents at beginning of period
42,638
63,020
48,316
89,884
Cash and cash equivalents at end of period
$
80,156
$
69,725
$
80,156
$
69,725
Supplemental Disclosures of Cash Flow Information:Cash paid during the period for:Income taxes, net
$
3,945
$
17,970
$
4,132
$
18,053
Non-cash investing and financing activities:Purchases of property, plant and equipment in accounts payable
2,123
372
2,123
372
Restricted stock units and stock options surrendered for withholding taxes payable
187
137
187
192
IIIN – E
View source version on businesswire.com:https://www.businesswire.com/news/home/20230420005058/en/
CONTACT: Scot Jafroodi
Vice President,
Chief Financial Officer and Treasurer
Insteel Industries Inc.
(336) 786-2141
KEYWORD: NORTH CAROLINA UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: OTHER CONSTRUCTION & PROPERTY MANUFACTURING COMMERCIAL BUILDING & REAL ESTATE CONSTRUCTION & PROPERTY OTHER MANUFACTURING STEEL
SOURCE: Insteel Industries Inc.
Copyright Business Wire 2023.
PUB: 04/20/2023 06:30 AM/DISC: 04/20/2023 06:32 AM
http://www.businesswire.com/news/home/20230420005058/en