Quantcast
Last updated on April 16, 2014 at 17:17 EDT

Insteel Industries Reports Second Quarter Financial Results

April 19, 2012

MOUNT AIRY, N.C., April 19, 2012 /PRNewswire/ — Insteel Industries, Inc. (NasdaqGS: IIIN) today reported net earnings of $0.3 million, or $0.01 per share, for the second quarter of fiscal 2012 compared with $2.6 million, or $0.15 per share, in the same period a year ago. The second quarter results for fiscal 2012 include restructuring charges related to the November 2010 acquisition of certain of the assets of Ivy Steel & Wire, Inc. (“Ivy”), which reduced pre-tax earnings by $0.2 million and net earnings per share by $0.01. The second quarter results for the prior year include restructuring charges, acquisition-related costs and a bargain purchase gain related to the Ivy acquisition, which, in the aggregate, reduced pre-tax earnings by $2.5 million and net earnings per share by $0.08.

Insteel’s financial results for the second quarter of fiscal 2012 were unfavorably impacted by narrower spreads between selling prices and raw material costs, lower shipments and higher unit conversion costs relative to the prior year quarter. Demand for the Company’s products was unfavorably impacted by the ongoing weakness in construction activity. Insteel’s capacity utilization for the quarter was 46% compared with 42% in the first quarter of fiscal 2012 and 46% in the prior year quarter.

Net sales for the second quarter of fiscal 2012 increased 0.1% to $87.0 million from $86.9 million in the same period a year ago due to higher average selling prices. Shipments decreased 6.4% from the prior year quarter while average selling prices increased 7.0%. On a sequential basis, shipments increased 3.0% from the first quarter of fiscal 2012 and average selling prices decreased 0.4%.

For the first six months of fiscal 2012, net earnings were essentially breakeven compared with a net loss of $5.0 million, or $0.29 per share, in the same period a year ago. The six-month results for fiscal 2012 include restructuring charges related to the Ivy acquisition and a gain on the early extinguishment of debt, which, in the aggregate, reduced pre-tax earnings by $0.4 million and net earnings per share by $0.02. The six-month results for the prior year include restructuring charges, acquisition-related costs and a bargain purchase gain related to the Ivy acquisition, which, in the aggregate, increased the pre-tax loss by $9.6 million and the net loss per share by $0.34.

Net sales for the first six months of fiscal 2012 increased 23.4% to $171.8 million from $139.2 million in the same period a year ago. Shipments increased 12.0% from the prior year period primarily due to the contribution of the Ivy facilities for the entire period this year and average selling prices increased 10.2%.

Operating activities provided $12.3 million of cash for the second quarter of fiscal 2012 compared with $5.1 million in the same period a year ago. Net working capital provided $8.6 million of cash while using $2.3 million in the prior year quarter. Capital expenditures for the first six months of fiscal 2012 were $4.0 million compared with $4.9 million in the prior year period, and are expected to total less than $10.0 million for fiscal 2012. Insteel ended the quarter with $0.2 million of cash and cash equivalents, and $8.0 million of borrowings outstanding on its $100.0 million revolving credit facility.

Outlook
Commenting on the outlook for the balance of fiscal 2012, Insteel’s president and CEO, H.O. Woltz III said, “Demand for our reinforcing products seems to have bottomed out with some signs of improvement beginning to appear in our construction end-markets. As we move into the second half of the year, we expect our financial results will be favorably impacted by the usual seasonal upturn in volume together with reduced operating costs as we ramp up the equipment that has been redeployed in connection with the Ivy acquisition and related reconfiguration of our welded wire reinforcement operations.

“We have recently entered into purchase commitments for equipment additions that will serve to broaden our product offering of engineered structural mesh and better position us to satisfy the expected growth in this market. The new production lines, which are expected to be commissioned during the second quarter of fiscal 2013, should facilitate further reductions in our manufacturing costs, improve our customer service capabilities and strengthen our market leadership position. At this time, we do not believe that our fiscal 2013 capital expenditures, including the outlays for these projects, will exceed $10.0 million.”

Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss its second quarter 2012 financial results. A live webcast of this call can be accessed on Insteel’s website at http://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 PC 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 that are used in nonresidential construction. Headquartered in Mount Airy, North Carolina, Insteel operates nine 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,” “plans,” “intends,” “may,” “should” and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, such forward-looking statements are subject to a number of risks and uncertainties, and the Company can provide no assurances that such plans, intentions or expectations will be achieved. Many of these risks and uncertainties are discussed in detail in the Company’s periodic and other reports and statements that it files with the U.S. Securities and Exchange Commission (the “SEC”), in particular in its Annual Report on Form 10-K for the year ended October 1, 2011. You should carefully review these risks and uncertainties.

All forward-looking statements attributable to Insteel or persons acting on its 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 Insteel does not undertake and specifically declines 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 Insteel’s future operations or financial performance; however, they include, but are not limited to, the following: potential difficulties in realizing the anticipated synergies, including reduced operating costs, associated with the acquisition of certain of the assets of Ivy and reconfiguration of Insteel’s welded wire reinforcement operations; general economic and competitive conditions in the markets in which Insteel operates; credit market conditions and the relative availability of financing for Insteel, its customers and the construction industry as a whole; the continuation of reduced spending for nonresidential construction and the impact on demand for Insteel’s products; the duration and magnitude of a new federal transportation funding authorization and the amount of the infrastructure-related funding provided for that requires the use of Insteel’s products; the severity and duration of the downturn in residential construction and the impact on those portions of Insteel’s business that are correlated with the housing sector; the cyclical nature of the steel and building material industries; fluctuations in the cost and availability of Insteel’s primary raw material, hot-rolled steel wire rod, from domestic and foreign suppliers; competitive pricing pressures and Insteel’s ability to raise selling prices in order to recover increases in wire rod costs; changes in United States (“U.S.”) or foreign trade policy affecting imports or exports of steel wire rod or Insteel’s products; unanticipated changes in customer demand, order patterns and inventory levels; the impact of weak demand and reduced capacity utilization levels on Insteel’s unit manufacturing costs; Insteel’s ability to further develop the market for engineered structural mesh and expand its shipments of engineered structural mesh; legal, environmental, economic or regulatory developments that significantly impact Insteel’s operating costs; unanticipated plant outages, equipment failures or labor difficulties; continued escalation in certain of Insteel’s operating costs; and the other risks and uncertainties discussed in Insteel’s Annual Report on Form 10-K for the year ended October 1, 2011 and in other filings made by Insteel with the SEC.

                                                          INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
                                                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                                           (In thousands except for per share data)
                                                                         (Unaudited)

                                      Three Months Ended                  Six Months Ended
                                      ------------------                  ----------------
                                           March 31,                          April 2,              March 31,          April 2,
                                                      2012                              2011                     2012              2011
                                                      ----                              ----                     ----              ----

    Net sales                                      $87,029                           $86,933                 $171,840          $139,239
    Cost of sales                                   81,535                            75,330                  161,687           127,771
                                                    ------                            ------                  -------           -------
        Gross profit                                 5,494                            11,603                   10,153            11,468
    Selling, general and
     administrative expense                          4,906                             4,523                    9,498             8,691
    Gain on early extinguishment
     of debt                                             -                                 -                     (425)                -
    Restructuring charges, net                         203                             2,213                      802             6,603
    Acquisition costs                                    -                               768                        -             3,518
    Bargain purchase gain                                -                              (500)                       -              (500)
    Other income, net                                 (144)                              (56)                    (214)              (69)
    Interest expense                                   119                               253                      372               404
    Interest income                                     (2)                               (6)                      (2)              (19)
                                                       ---                               ---                      ---               ---
        Earnings (loss) before income
         taxes                                         412                             4,408                      122            (7,160)
    Income taxes                                       150                             1,789                       40            (2,151)
                                                       ---                             -----                      ---            ------
        Net earnings (loss)                           $262                            $2,619                      $82           $(5,009)
                                                      ====                            ======                      ===           =======

    Net earnings (loss) per
     share:
        Basic                                        $0.01                             $0.15           $            -            $(0.29)
        Diluted                                       0.01                              0.15                        -             (0.29)

    Weighted average shares
     outstanding
        Basic                                       17,649                            17,551                   17,630            17,531
        Diluted                                     18,038                            17,802                   17,986            17,531

    Cash dividends declared per
     share                                           $0.03                             $0.03                    $0.06             $0.06

                                          INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED BALANCE SHEETS
                                                       (In thousands)

                                        (Unaudited)                             (Audited)
                                         ----------
                                         March 31,                            December 31,           October 1,
                                                      2012                                     2011                2011
                                                      ----                                     ----                ----
    Assets
    Current assets:
        Cash and cash equivalents                     $233                                      $10                 $10
        Accounts receivable, net                    36,524                                   36,129              41,971
        Inventories, net                            69,225                                   73,402              76,374
        Other current assets                         4,908                                    4,602               4,093
                                                     -----                                    -----               -----
            Total current assets                   110,890                                  114,143             122,448
    Property, plant and equipment,
     net                                            88,740                                   88,420              89,484
    Other assets                                     5,810                                    5,274               4,598
                                                     -----                                    -----               -----
            Total assets                          $205,440                                 $207,837            $216,530
                                                  ========                                 ========            ========

    Liabilities and shareholders'
     equity
    Current liabilities:
        Accounts payable                           $33,754                                  $27,874             $38,607
        Accrued expenses                             5,307                                    6,638               7,377
        Current portion of long-term
         debt                                            -                                        -                 675
                                                       ---                                      ---                 ---
            Total current liabilities               39,061                                   34,512              46,659
    Long-term debt                                   8,000                                   16,383              13,481
    Other liabilities                                9,886                                    8,802               7,916
    Shareholders' equity:
        Common stock                                17,677                                   17,613              17,609
        Additional paid-in capital                  49,651                                   49,094              48,723
        Retained earnings                           83,180                                   83,448              84,157
        Accumulated other comprehensive
         loss                                       (2,015)                                  (2,015)             (2,015)
                                                    ------                                   ------              ------
            Total shareholders' equity             148,493                                  148,140             148,474
                                                   -------                                  -------             -------
            Total liabilities and
             shareholders' equity                 $205,440                                 $207,837            $216,530
                                                  ========                                 ========            ========

                                                                 INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
                                                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                               (In thousands)
                                                                                (Unaudited)

                                               Three Months Ended                    Six Months Ended
                                               ------------------                    ----------------
                                                    March 31,                            April 2,          March 31,         April 2,
                                                                2012                                2011               2012             2011
                                                                ----                                ----               ----             ----
    Cash Flows From Operating
     Activities:
      Net earnings (loss)                                       $262                              $2,619                $82          $(5,009)
      Adjustments to reconcile net
       earnings (loss) to net cash
       provided by
        operating activities:
          Depreciation and amortization                        2,429                               2,499              4,835            4,553
          Amortization of capitalized
           financing costs                                        25                                  20                 45               40
          Stock-based compensation
           expense                                               757                                 643              1,126            1,182
          Gain on early extinguishment of
           debt                                                    -                                   -               (425)               -
          Asset impairment charges                                 -                                 583                (11)           3,451
          Deferred income taxes                                  155                               1,693                 39           (2,276)
          Excess tax benefits from stock-
           based compensation                                   (126)                                (81)              (131)             (81)
          Loss (gain) on sale of property,
           plant and equipment                                   (74)                                 16                (74)              16
          Gain from life insurance
           proceeds                                                -                                (357)                 -             (357)
          Increase in cash surrender value
           of life insurance policies over
           premiums paid                                        (447)                                (50)              (737)            (298)
          Net changes in assets and
           liabilities (net of assets and
           liabilities acquired):
            Accounts receivable, net                            (395)                            (15,062)             5,447          (12,448)
            Inventories                                        4,177                                (655)             7,149            2,787
            Accounts payable and accrued
             expenses                                          4,860                              13,398             (6,819)           9,360
            Other changes                                        690                                (133)             1,058             (878)
                                                                 ---                                ----              -----             ----
              Total adjustments                               12,051                               2,514             11,502            5,051
                                                              ------                               -----             ------            -----
                Net cash provided by operating
                 activities                                   12,313                               5,133             11,584               42
                                                              ------                               -----             ------              ---

    Cash Flows From Investing
     Activities:
      Capital expenditures                                    (2,997)                             (4,396)            (4,005)          (4,902)
      Increase in cash surrender value
       of life insurance policies                                  -                                (425)              (427)            (425)
      Proceeds from surrender of life
       insurance policies                                          -                                   -                 16                -
      Proceeds from sale of property,
       plant and equipment                                        81                                  18                 96               18
      Proceeds from life insurance
       claims                                                      -                               1,063                  -            1,063
      Acquisition of business                                      -                                 280                  -          (37,308)
                                                                 ---                                 ---                ---          -------
                Net cash used for investing
                 activities                                   (2,916)                             (3,460)            (4,320)         (41,554)
                                                              ------                              ------             ------          -------

    Cash Flows From Financing
     Activities:
      Proceeds from long-term debt                            10,374                               5,799             51,894            5,908
      Principal payments on long-term
       debt                                                  (18,757)                             (5,799)           (57,625)          (5,908)
      Financing costs                                           (161)                                  -               (161)               -
      Excess tax benefits from stock-
       based compensation                                        126                                  81                131               81
      Cash received from exercise of
       stock options                                               1                                  13                  2               13
      Cash dividends paid                                       (530)                               (527)            (1,059)            (527)
      Other                                                     (227)                               (134)              (223)             (97)
                                                                ----                                ----               ----              ---
                Net cash used for financing
                 activities                                   (9,174)                               (567)            (7,041)            (530)
                                                              ------                                ----             ------             ----

    Net increase (decrease) in cash
     and cash equivalents                                        223                               1,106                223          (42,042)
    Cash and cash equivalents at
     beginning of period                                          10                               2,787                 10           45,935
                                                                 ---                               -----                ---           ------
    Cash and cash equivalents at end
     of period                                                  $233                              $3,893               $233           $3,893
                                                                ====                              ======               ====           ======

    Supplemental Disclosures of Cash
     Flow Information:
      Cash paid during the period for:
        Interest                                                 $66                                 $30               $618              $66
        Income taxes, net                                         40                                  51                 73              760

      Non-cash investing and
       financing activities:
        Purchases of property, plant and
         equipment in accounts payable                            97                                 441                 97              441
        Declaration of cash dividends to
         be paid                                                   -                                 527                  -              527
        Restricted stock surrendered for
         withholding taxes payable                               263                                  86                263               86
        Note payable issued as
         consideration for business
         acquired                                                  -                                   -                  -           13,500
        Post-closing purchase price
         adjustment for business
         acquired                                                  -                                 500                  -              500

SOURCE Insteel Industries, Inc.


Source: PR Newswire