8-K
INSTEEL INDUSTRIES INC (IIIN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 18, 2024
Insteel Industries Inc.
(Exact Name of Registrant as Specified in Charter)
| North Carolina | 1-9929 | 56-0674867 |
|---|---|---|
| (State or Other Jurisdiction<br><br> <br>of Incorporation) | (Commission<br><br> <br>File Number) | (I.R.S. Employer<br><br> <br>Identification No.) |
1373 Boggs Drive
Mount Airy, North Carolina ### 27030
(Address of Principal Executive Offices, and Zip Code)
(336) 786-2141
Registrant’s Telephone Number, Including Area Code
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock (No Par Value) | IIIN | The New York Stock Exchange |
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2 of this chapter).<br><br> <br>Emerging growth company ☐<br><br> <br><br><br> <br>If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | ||
| --- |
Item 2.02. Results of Operations and Financial Condition
On January 18, 2024, Insteel Industries Inc. issued a news release regarding its financial results for its first quarter ended December 30, 2023. A copy of this release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in Item 2.02 of this Current Report on Form 8-K, including the related information in Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits
| Exhibit 99.1 | News Release dated January 18, 2024 announcing financial results for the first quarter ended December 30, 2023. |
|---|---|
| Exhibit 104 | Cover Page Interactive Data File (embedded within Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
INSTEEL INDUSTRIES INC.
| By: | /s/ Elizabeth C. Southern |
|---|---|
| Name: | Elizabeth C. Southern |
| Title: | Vice President Administration, Secretary and Chief Legal Officer |
| Date: | January 18, 2024 |
ex_615185.htm
Exhibit 99.1
NEWS RELEASE
| FOR IMMEDIATE RELEASE | Contact: | Scot Jafroodi |
|---|---|---|
| Vice President, | ||
| Chief Financial Officer and Treasurer | ||
| Insteel Industries Inc. | ||
| (336) 786-2141 |
INSTEEL INDUSTRIES REPORTS FIRST QUARTER 2024 RESULTS
MOUNT AIRY, N.C., January 18, 2024 – 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.
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1373 BOGGS DRIVE, MOUNT AIRY, NC 27030/PHONE: (336) 786-2141/FAX: (336) 786-2144
WWW.INSTEEL.COM
Page 2 of 6
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.
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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.
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| 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 |
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| 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 |
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| 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