Insteel Industries Reports First Quarter 2024 Results
- Net sales of $121.7 million
- Gross profit of $6.3 million
- Net cash balance of $85.6 million and no debt outstanding
- Optimistic outlook for the remainder of fiscal 2024
- Net earnings decreased due to a decrease in average selling prices
- Gross margin narrowed to 5.2% from 10.7% in the prior year quarter
Insights
Insteel Industries Inc.'s first quarter fiscal 2024 report indicates a significant drop in net earnings and gross margin, which are critical metrics for investors. The decrease in net sales by 27.1% is primarily due to a reduction in average selling prices, not volume, which remained steady. This suggests that the market is experiencing price sensitivity, possibly due to increased competition or a surplus in supply. The narrowing of spreads between selling prices and raw material costs is a concern, as it reflects pressure on profitability. The operating cash flow remains strong at $21.8 million, which is a positive sign of operational efficiency despite the downturn in earnings.
The payment of a substantial special cash dividend may indicate confidence in the company's liquidity and long-term financial strategy. However, investors might be cautious about the sustainability of such payouts if profitability continues to be pressured. The capital allocation towards modernization and growth initiatives is a positive long-term investment, but the impact on short-term liquidity should be monitored closely, especially in light of the significant dividend payment.
The construction industry, which Insteel serves, is highly cyclical and sensitive to macroeconomic factors. The reported weakness in infrastructure and commercial construction markets could be indicative of broader economic trends or sector-specific challenges. However, the resilience in residential construction markets provides some balance. The seasonal downturn is expected, but the 16.1% sequential decline in shipments suggests a sharper than average slowdown, which stakeholders should consider when evaluating the company's near-term prospects.
Given the company's mention of improved market fundamentals and a positive macroeconomic outlook, it is crucial to analyze upcoming economic data and industry reports for signs of recovery or continued challenges. The optimism expressed by the company's CEO regarding the remainder of fiscal 2024 should be weighed against the potential risks of a volatile market environment and the effects of inflationary pressures on material costs and consumer demand.
The reference to the end of the rising interest rate cycle could have significant implications for Insteel and the broader market. Lower interest rates typically reduce borrowing costs and stimulate investment in construction projects, which could benefit Insteel's business. However, this must be balanced against the risk of inflation, which can erode purchasing power and increase operating costs.
The company's ability to align inventory with business levels and approximate raw material costs with replacement costs suggests effective inventory management, an important factor in maintaining operational flexibility. The macroeconomic outlook will be a critical determinant in assessing the sustainability of Insteel's recovery, as it affects consumer spending, investment in construction and ultimately, the demand for Insteel's products.
First Quarter 2024 Highlights
-
Net sales of
$121.7 million -
Gross profit of
$6.3 million 5.2% of net sales -
Net income of
$1.1 million $0.06 -
Operating cash flow of
$21.8 million -
Payment of special cash dividend totaling
$48.6 million $2.50 -
Net cash balance of
$85.6 million - 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
Net sales decreased
Operating activities generated
Capital Allocation and Liquidity
Capital expenditures for the first quarter of fiscal 2024 increased to
On December 22, 2023, Insteel paid a special cash dividend totaling
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
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
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
| 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
View source 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
Source: Insteel Industries Inc.
FAQ
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