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INSTEEL INDUSTRIES, INC.

(IIIN)
  Report
Real-time Estimate Cboe BZX  -  03:05:47 2023-02-01 pm EST
30.70 USD   +2.37%
01/19Insteel Industries Reports Lower Fiscal Q1 Profit, Net Sales -- Shares Fall
MT
01/19INSTEEL INDUSTRIES INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
AQ
01/19Transcript : Insteel Industries, Inc., Q1 2023 Earnings Call, Jan 19, 2023
CI
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Insteel Industries Reports Fourth Quarter and Fiscal 2022 Results

10/20/2022 | 06:31am EST

Insteel Industries Inc. (NYSE: IIIN) today announced financial results for its fourth quarter and fiscal year ended October 1, 2022.

Fourth Quarter 2022 Results

Net earnings for the fourth quarter of fiscal 2022 were $24.3 million, or $1.24 per diluted share, compared to $25.2 million, or $1.28 per share, in the same period a year ago. Net sales increased 21.4% to $208.0 million from $171.3 million in the prior year quarter.

Insteel’s fourth quarter results benefitted from widening spreads between selling prices and raw material costs due to a 26.1% increase in average selling prices from the prior year quarter, implemented to recover rising raw material and operating costs. Ongoing weakness in residential construction activity combined with the negative impact of inventory management measures implemented by many of our customers led to a 3.7% reduction in shipments. On a sequential basis, fourth quarter average selling prices decreased 2.6% due primarily to weakness in residential markets, and shipments decreased 6.0%.

Gross margin decreased 420 basis points to 19.1% from 23.3% in the prior year quarter primarily due to lower shipment volumes and higher plant operating costs. Insteel’s net earnings for the current year quarter reflect a $0.5 million decrease in the cash surrender value of life insurance policies, which increased selling, general and administrative expense, and decreased net earnings per share by $0.02.

Operating activities used $9.4 million of cash during the fourth quarter compared to generating $4.4 million in the prior year quarter due to the relative changes in working capital. Working capital used $34.8 million of cash in the current year compared to using $24.2 million the prior year.

Fiscal 2022 Results

Fiscal 2022 annual revenue and net earnings are the highest on record for the Company. Net earnings increased to $125.0 million, or $6.37 per diluted share, from $66.6 million, or $3.41 per diluted share, in the prior year. Net sales increased 40.0% to $826.8 million from $590.6 million in the prior year driven by a 51.9% increase in average selling prices offset by a 7.8% decrease in shipments.

Gross margin expanded to 23.9% from 20.6% due to the wider spreads. Insteel’s net earnings for fiscal 2022 reflect a $1.9 million decrease in cash surrender value of life insurance policies, which decreased fiscal 2022 net earnings per diluted share by $0.07. Net earnings for the prior year period reflect $1.5 million increase in cash surrender value of life insurance policies and $2.9 million of restructuring charges and acquisition costs related to the Company’s acquisition of substantially all the assets of Strand-Tech Manufacturing, Inc., which, in the aggregate, decreased fiscal 2021 net earnings per diluted share by $0.05.

Operating activities generated $5.7 million of cash compared to $69.9 million in the prior year due to relative changes in working capital. Working capital used $134.3 million in the current year compared to using $12.3 million in the prior year.

Capital Allocation and Liquidity

Capital expenditures for fiscal 2022 decreased to $15.9 million from $17.5 million in the prior year and are expected to total up to approximately $30 million in fiscal 2023 including expenditures primarily to advance the growth of our engineered structural mesh business and to support cost and productivity improvement initiatives as well as recurring maintenance requirements.

Insteel ended the year debt-free with $48.3 million of cash and no borrowings outstanding on its $100.0 million revolving credit facility.

Outlook

“Fiscal 2022 was a record year of financial performance for Insteel, meaningfully exceeding our previous record achieved in fiscal 2021. Our financial results were particularly gratifying in view of the difficult operating conditions experienced at times over the last twelve months. including raw material shortfalls, labor availability challenges and residential construction market weakness,” commented H.O. Woltz III, Insteel’s President and CEO. “We appreciate the contributions of our dedicated employees who persevered through many challenges and our supplier base that supported the Company, allowing us to deliver consistently for customers.”

Mr. Woltz added, “As we look ahead to fiscal 2023, we remain optimistic about demand in our non-residential construction markets, which represent a substantial majority of our sales. Backlogs across our customer base remain solid and third-party non-residential construction indices point to continued expansion. In addition, incremental demand from projects funded by the Infrastructure Investment and Jobs Act should materialize during 2023, contributing positively to the overall demand environment. While weakness in the residential construction markets and heightened uncertainty regarding the future direction of the overall economy are areas we are closely monitoring, our strong balance sheet and flexible operating model position us to navigate any softness we may encounter.”

Conference Call

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its fourth quarter and 2022 fiscal year end 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 (“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 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 2, 2021.

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 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 2, 2021 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 Year Ended
(Unaudited) (Unaudited) (Unaudited)
October 1, October 2, October 1, October 2,

2022

 

2021

 

2022

 

2021

 
Net sales

$

207,991

 

$

171,258

 

$

826,832

 

$

590,601

 

Cost of sales

 

168,196

 

 

131,339

 

 

629,522

 

 

469,053

 

Gross profit

 

39,795

 

 

39,919

 

 

197,310

 

 

121,548

 

Selling, general and administrative expense

 

8,330

 

 

7,321

 

 

36,048

 

 

32,388

 

Restructuring charges (recoveries), net

 

-

 

 

68

 

 

(318

)

 

2,868

 

Other expense (income), net

 

103

 

 

(9

)

 

88

 

 

114

 

Interest expense

 

23

 

 

23

 

 

91

 

 

96

 

Interest income

 

(216

)

 

(6

)

 

(326

)

 

(21

)

Earnings before income taxes

 

31,555

 

 

32,522

 

 

161,727

 

 

86,103

 

Income taxes

 

7,249

 

 

7,370

 

 

36,716

 

 

19,493

 

Net earnings

$

24,306

 

$

25,152

 

$

125,011

 

$

66,610

 

 
 
Net earnings per share:
Basic

$

1.24

 

$

1.30

 

$

6.41

 

$

3.44

 

Diluted

 

1.24

 

 

1.28

 

 

6.37

 

 

3.41

 

 
Weighted average shares outstanding:
Basic

 

19,558

 

 

19,386

 

 

19,517

 

 

19,344

 

Diluted

 

19,628

 

 

19,612

 

 

19,629

 

 

19,534

 

 
Cash dividends declared per share

$

0.03

 

$

0.03

 

$

2.12

 

$

1.62

 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
(Unaudited)
October 1, July 2, October 2,

2022

2022

2021

Assets
Current assets:
Cash and cash equivalents

$

48,316

 

$

63,045

 

$

89,884

 

Accounts receivable, net

 

81,646

 

 

81,175

 

 

67,917

 

Inventories

 

197,654

 

 

192,447

 

 

79,049

 

Other current assets

 

7,716

 

 

6,998

 

 

10,056

 

Total current assets

 

335,332

 

 

343,665

 

 

246,906

 

Property, plant and equipment, net

 

108,156

 

 

108,265

 

 

105,624

 

Intangibles, net

 

6,847

 

 

7,051

 

 

7,668

 

Goodwill

 

9,745

 

 

9,745

 

 

9,745

 

Other assets

 

11,665

 

 

12,322

 

 

20,767

 

Total assets

$

471,745

 

$

481,048

 

$

390,710

 

 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable

$

46,796

 

$

77,159

 

$

49,443

 

Accrued expenses

 

15,800

 

 

17,877

 

 

19,406

 

Total current liabilities

 

62,596

 

 

95,036

 

 

68,849

 

Long-term debt

 

-

 

 

-

 

Other liabilities

 

19,405

 

 

21,088

 

 

19,823

 

Commitments and contingencies
Shareholders' equity:
Common stock

 

19,478

 

 

19,506

 

 

19,408

 

Additional paid-in capital

 

81,997

 

 

81,349

 

 

78,688

 

Retained earnings

 

289,246

 

 

266,511

 

 

206,384

 

Accumulated other comprehensive loss

 

(977

)

 

(2,442

)

 

(2,442

)

Total shareholders' equity

 

389,744

 

 

364,924

 

 

302,038

 

Total liabilities and shareholders' equity

$

471,745

 

$

481,048

 

$

390,710

 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended Year Ended
(Unaudited) (Unaudited) (Unaudited)
October 1, October 2, October 1, October 2,

2022

2021

2022

2021

Cash Flows From Operating Activities:
Net earnings

$

24,306

 

$

25,152

 

$

125,011

 

$

66,610

 

Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:
Depreciation and amortization

 

3,509

 

 

3,693

 

 

14,486

 

 

14,521

 

Amortization of capitalized financing costs

 

16

 

 

16

 

 

65

 

 

65

 

Stock-based compensation expense

 

1,034

 

 

814

 

 

2,429

 

 

1,988

 

Deferred income taxes

 

(297

)

 

(82

)

 

327

 

 

(118

)

Asset impairment charges

 

-

 

 

-

 

 

-

 

 

1,415

 

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

 

115

 

 

-

 

 

(480

)

 

125

 

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

 

-

 

 

-

 

 

-

 

 

(1,533

)

Gain from life insurance proceeds

 

-

 

 

-

 

 

(364

)

 

-

 

Net changes in assets and liabilities:
Accounts receivable, net

 

(471

)

 

(8,568

)

 

(13,729

)

 

(14,100

)

Inventories

 

(5,207

)

 

(7,891

)

 

(118,605

)

 

(10,086

)

Accounts payable and accrued expenses

 

(29,161

)

 

(7,751

)

 

(1,964

)

 

11,891

 

Other changes

 

(3,288

)

 

(969

)

 

(1,506

)

 

(900

)

Total adjustments

 

(33,750

)

 

(20,738

)

 

(119,341

)

 

3,268

 

Net cash provided by (used for) operating activities

 

(9,444

)

 

4,414

 

 

5,670

 

 

69,878

 

 
Cash Flows From Investing Activities:
Capital expenditures

 

(3,649

)

 

(3,819

)

 

(15,900

)

 

(17,500

)

Decrease (increase) in cash surrender value of life insurance policies

 

349

 

 

(105

)

 

1,361

 

 

(416

)

Proceeds from sale of assets held for sale

 

-

 

 

-

 

 

6,934

 

 

79

 

Proceeds from surrender of life insurance policies

 

-

 

 

5

 

 

110

 

 

32

 

Proceeds from life insurance claims

 

-

 

 

-

 

 

1,456

 

 

-

 

Net cash used for investing activities

 

(3,300

)

 

(3,919

)

 

(6,039

)

 

(17,805

)

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

 

46

 

 

67

 

 

266

 

 

297

 

Principal payments on long-term debt

 

(46

)

 

(67

)

 

(266

)

 

(297

)

Cash dividends paid

 

(584

)

 

(582

)

 

(41,162

)

 

(31,294

)

Cash received from exercise of stock options

 

-

 

 

648

 

 

1,650

 

 

1,082

 

Payment of employee tax withholdings related to net share transactions

 

(197

)

 

(504

)

 

(483

)

 

(665

)

Repurchases of common stock

 

(1,204

)

 

-

 

 

(1,204

)

 

-

 

Net cash used for financing activities

 

(1,985

)

 

(438

)

 

(41,199

)

 

(30,877

)

 
Net (decrease) increase in cash and cash equivalents

 

(14,729

)

 

57

 

 

(41,568

)

 

21,196

 

Cash and cash equivalents at beginning of period

 

63,045

 

 

89,827

 

 

89,884

 

 

68,688

 

Cash and cash equivalents at end of period

$

48,316

 

$

89,884

 

$

48,316

 

$

89,884

 

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

$

11,485

 

$

5,925

 

$

41,483

 

$

16,799

 

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

 

946

 

 

501

 

 

946

 

 

501

 

Restricted stock units and stock options surrendered for withholding taxes payable

 

197

 

 

504

 

 

483

 

 

665

 

IIIN – E


ę Business Wire 2022
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Financials (USD)
Sales 2023 739 M - -
Net income 2023 55,0 M - -
Net cash 2023 92,9 M - -
P/E ratio 2023 10,7x
Yield 2023 0,40%
Capitalization 583 M 583 M -
EV / Sales 2023 0,66x
EV / Sales 2024 0,55x
Nbr of Employees 964
Free-Float 95,1%
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Technical analysis trends INSTEEL INDUSTRIES, INC.
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Income Statement Evolution
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Mean consensus BUY
Number of Analysts 2
Last Close Price 29,99 $
Average target price 38,00 $
Spread / Average Target 26,7%
EPS Revisions
Managers and Directors
Howard Osler Woltz Director
Scot R. Jafroodi Controller
Richard T. Wagner Chief Operating Officer & Senior Vice President
James F. Petelle Secretary, Chief Legal Officer & VP-Administration
Walter Allen Rogers Lead Independent Director
Sector and Competitors