Insteel Industries Inc. (NYSE: IIIN) today announced financial
results for its first quarter ended December 31, 2022.
First Quarter 2023
Results
Net earnings for the first quarter of fiscal 2023 decreased to
$11.1 million, or $0.57 per share, from record earnings of $23.1
million, or $1.18 per diluted share, in the same period a year ago.
Earnings for the current year quarter benefited from 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 lower shipments and the narrowing of spreads between
selling prices and raw material costs.
Net sales decreased 6.5% to $166.9 million from $178.5 million
in the prior year quarter primarily from a 10.0% decrease in
shipments partially offset by a 3.9% increase in average selling
prices. Shipments into nonresidential construction markets during
the first quarter were adversely affected by customer destocking
that reflects easing supply chain constraints together with the
ongoing weakness in the residential construction market. On a
sequential basis, shipments decreased 12.0% from the fourth quarter
of fiscal 2022, reflecting the usual seasonal slowdown in
construction activity, while average selling prices fell 8.8%.
Gross margin narrowed to 10.7% from 23.7% in the prior year
quarter due to the reduction in spreads between selling prices and
raw material costs together with a decrease in 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 primarily in fiscal
2022.
Operating activities generated $33.0 million of cash during the
quarter compared to $13.6 million in the prior year quarter due to
the relative changes in working capital. Working capital provided
$17.8 million in the current quarter, driven by the reduction in
receivables and inventories, while using $21.4 million in the prior
year quarter.
Capital Allocation and
Liquidity
Capital expenditures for the first quarter of fiscal 2023
increased to $8.2 million from $0.8 million in the prior year
quarter. 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.
On December 23, 2022, Insteel paid a special cash dividend
totaling $38.9 million, or $2.00 per share, in addition to its
regular quarterly cash dividend of $0.03 per share and ended the
quarter with $42.6 million of cash and no borrowings outstanding on
its $100.0 million revolving credit facility.
Outlook
“Following a year of record financial results, the first quarter
of fiscal 2023 was a period of transition as our supply chain
recovers from unprecedented constraints of the prior year,”
commented H.O. Woltz III, Insteel’s President and CEO. “As we move
into the second quarter, we expect our results will continue to be
affected by the consumption of higher cost inventories along with
the usual weather-related slowdown in construction activity.”
Woltz continued, “Throughout fiscal 2022, we mentioned the
favorable impact on gross margin of steadily increasing steel
prices matched against lower cost inventories under our first-in,
first-out (“FIFO”) accounting methodology. When steel prices
decline, we experience the flipside of the FIFO impact. Our
accounting methodology does not diminish the favorable outlook for
nonresidential construction markets or our financial performance
once the inventory pipeline has normalized. Customer sentiment
remains positive, and we expect to benefit from incremental demand
from projects funded by the Infrastructure Investment and Jobs Act
during the second half of fiscal 2023. Additionally, we should be
positively impacted by the completion of several capital projects
that will allow us to expand our capacity and reduce the cash cost
of production.”
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,
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 October 1, 2022 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: 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 SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands except for per share
data) (Unaudited)
Three Months Ended
December 31,
January 1,
2022
2022
Net sales
$
166,899
$
178,459
Cost of sales
149,113
136,095
Gross profit
17,786
42,364
Selling, general and administrative expense
7,126
12,281
Restructuring charges, net
-
47
Other income, net
(3,342
)
(5
)
Interest expense
24
22
Interest income
(440
)
(14
)
Earnings before income taxes
14,418
30,033
Income taxes
3,295
6,904
Net earnings
$
11,123
$
23,129
Net earnings per share: Basic
$
0.57
$
1.19
Diluted
0.57
1.18
Weighted average shares outstanding: Basic
19,525
19,411
Diluted
19,584
19,636
Cash dividends declared per share
$
2.03
$
2.03
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (In thousands)
(Unaudited)
December 31, January 1, October 1,
2022
2022
2022
Assets Current assets: Cash and cash equivalents
$
42,638
$
63,020
$
48,316
Accounts receivable, net
68,789
73,562
81,646
Inventories
171,185
81,558
197,654
Other current assets
5,599
8,664
7,716
Total current assets
288,211
226,804
335,332
Property, plant and equipment, net
107,178
103,442
108,156
Intangibles, net
6,653
7,460
6,847
Goodwill
9,745
9,745
9,745
Other assets
11,969
21,328
11,665
Total assets
$
423,756
$
368,779
$
471,745
Liabilities and shareholders' equity Current
liabilities: Accounts payable
$
30,801
$
35,369
$
46,796
Accrued expenses
14,112
27,205
15,800
Total current liabilities
44,913
62,574
62,596
Long-term debt
-
-
-
Other liabilities
18,169
20,185
19,405
Commitments and contingencies Shareholders' equity: Common stock
19,451
19,414
19,478
Additional paid-in capital
82,082
78,945
81,997
Retained earnings
260,118
190,103
289,246
Accumulated other comprehensive loss
(977
)
(2,442
)
(977
)
Total shareholders' equity
360,674
286,020
389,744
Total liabilities and shareholders' equity
$
423,756
$
368,779
$
471,745
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended December 31, January 1,
2022
2022
Cash Flows From Operating Activities: Net earnings
$
11,123
$
23,129
Adjustments to reconcile net earnings to net cash provided by
operating activities: Depreciation and amortization
3,350
3,705
Amortization of capitalized financing costs
16
16
Stock-based compensation expense
130
272
Deferred income taxes
(1,378
)
16
(Gain) loss on sale and disposition of property, plant and
equipment
(3,324
)
14
Increase in cash surrender value of life insurance policies over
premiums paid
(363
)
(115
)
Net changes in assets and liabilities: Accounts receivable, net
12,857
(5,645
)
Inventories
26,469
(2,509
)
Accounts payable and accrued expenses
(21,520
)
(13,231
)
Other changes
5,646
7,979
Total adjustments
21,883
(9,498
)
Net cash provided by operating activities
33,006
13,631
Cash Flows From Investing Activities: Capital
expenditures
(8,200
)
(838
)
Increase in cash surrender value of life insurance policies
(81
)
(308
)
Proceeds from sale of property, plant and equipment
9,920
6
Proceeds from surrender of life insurance policies
-
64
Net cash provided by (used for) investing activities
1,639
(1,076
)
Cash Flows From Financing Activities: Proceeds from
long-term debt
67
45
Principal payments on long-term debt
(67
)
(45
)
Cash dividends paid
(39,501
)
(39,410
)
Payment of employee tax withholdings related to net share
transactions
-
(55
)
Cash received from exercise of stock options
94
46
Repurchases of common stock
(916
)
-
Net cash used for financing activities
(40,323
)
(39,419
)
Net decrease in cash and cash equivalents
(5,678
)
(26,864
)
Cash and cash equivalents at beginning of period
48,316
89,884
Cash and cash equivalents at end of period
$
42,638
$
63,020
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for: Income taxes, net
$
187
$
83
Non-cash investing and financing activities: Purchases of property,
plant and equipment in accounts payable
1,520
497
Restricted stock units and stock options surrendered for
withholding taxes payable
-
55
IIIN – E
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version on businesswire.com: https://www.businesswire.com/news/home/20230119005034/en/
Scot Jafroodi Vice President, Chief Financial Officer and
Treasurer Insteel Industries Inc. (336) 786-2141
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