Insteel Industries Reports Second Quarter Financial Results

MOUNT AIRY, N.C., April 18, 2013 /PRNewswire/ -- Insteel Industries, Inc. (NasdaqGS: IIIN) today reported net earnings of $3.7 million, or $0.20 per diluted share for the second quarter of fiscal 2013 compared with $0.3 million, or $0.01 per share in the same period a year ago. The prior year results include net restructuring charges related to the November 2010 acquisition of certain of the assets of Ivy Steel & Wire, Inc., which reduced pre-tax earnings by $0.2 million and net earnings by $0.01 per share.

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Insteel's financial results for the second quarter of fiscal 2013 were favorably impacted by widening spreads between selling prices and raw material costs relative to the prior year quarter. Capacity utilization for the quarter was 46%, which was unchanged from the first quarter of fiscal 2013 and the prior year quarter.

Net sales for the second quarter of fiscal 2013 decreased 4.8% to $82.9 million from $87.0 million in the same period a year ago. Shipments decreased 1.5% from the prior year quarter while average selling prices decreased 3.4%. On a sequential basis, shipments decreased 3.7% from the first quarter of fiscal 2013 while average selling prices increased 0.2%. The reduction in shipments for the quarter was largely driven by adverse weather conditions in most of Insteel's markets.

For the first six months of fiscal 2013, net earnings were $6.1 million, or $0.34 per share compared with essentially breakeven 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.

Net sales for the first six months of fiscal 2013 decreased 1.8% to $168.8 million from $171.8 million in the same period a year ago. Shipments increased 2.0% from the prior year period and average selling prices decreased 3.7%.

Operating activities provided $2.4 million of cash for the second quarter of fiscal 2013 compared with $12.3 million in the same period a year ago primarily due to the year-over-year changes in net working capital. Net working capital used $5.2 million of cash in the current year quarter while providing $8.6 million in the prior year quarter. Capital expenditures for the first six months of fiscal 2013 were $3.7 million compared with $4.0 million in the prior year period, and are not expected to exceed $12.0 million for fiscal 2013. Insteel ended the quarter with $7.9 million of cash and cash equivalents, and no borrowings outstanding on its $100.0 million revolving credit facility.

"As we move into the second half of the year, the most recent macro data implies that conditions in our construction end-markets are gradually improving and customer sentiment appears to be on the rise," commented H.O. Woltz III, Insteel's president and CEO. "We expect that our financial results will be favorably impacted by the usual seasonal upturn in demand together with our ongoing performance improvement initiatives and the increasing contributions from the Ivy acquisition.

"We are pleased with the progress of our engineered structural mesh expansion projects, which are on schedule and on budget. The new production line at our Texas facility and the production line that was relocated to our Missouri facility were started up during the quarter. We expect the second new production line that is going into our North Carolina facility will be commissioned late in the current quarter and ramp up during the fourth quarter. We believe these investments will serve to strengthen our market leadership position and further our penetration of the rebar market by reducing lead times and expanding the range of concrete reinforcing solutions that we can offer."  

Conference Call

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its second quarter financial results. A live webcast of this call can be accessed on Insteel's website at http://investor.insteel.com/events.cfm 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 Insteel 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 Insteel can provide no assurances that such plans, intentions or expectations will be achieved. Many of these risks and uncertainties are discussed in detail in Insteel's periodic and other reports and statements that it files with the United States Securities and Exchange Commission (the "SEC"), in particular in its Annual Report on Form 10-K for the year ended September 29, 2012. 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: 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 and residential construction and the impact on demand for Insteel's 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 Insteel's products; 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 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 September 29, 2012 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 30,


March 31,


March 30,


March 31,



2013


2012


2013


2012










Net sales


$       82,873


$       87,029


$     168,760


$     171,840

Cost of sales


71,822


81,535


149,116


161,687

    Gross profit


11,051


5,494


19,644


10,153

Selling, general and administrative expense


5,245


4,906


10,087


9,498

Gain on early extinguishment of debt


-


-


-


(425)

Restructuring charges, net


-


203


-


802

Other income, net


(85)


(144)


(85)


(214)

Interest expense


53


119


125


372

Interest income


(2)


(2)


(2)


(2)

    Earnings before income taxes


5,840


412


9,519


122

Income taxes


2,126


150


3,403


40

    Net earnings


$         3,714


$            262


$         6,116


$              82



















Net earnings per share:









    Basic


$           0.21


$           0.01


$           0.34


$              -

    Diluted


0.20


0.01


0.34


-










Weighted average shares outstanding









    Basic


17,846


17,649


17,785


17,630

    Diluted


18,286


18,038


18,187


17,986










Cash dividends declared per share


$           0.03


$           0.03


$           0.31


$           0.06

 

 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)


















(Unaudited)


(Audited)



March 30,


December 29,


September 29,



2013


2012


2012

Assets







Current assets:







    Cash and cash equivalents


$            7,903


$            4,815


$                 10

    Accounts receivable, net


33,586


35,247


42,138

    Inventories, net


66,215


56,239


65,774

    Other current assets


4,906


5,343


7,146

        Total current assets


112,610


101,644


115,068

Property, plant and equipment, net


86,944


88,068


87,716

Other assets


6,385


6,009


5,768

        Total assets


$        205,939


$        195,721


$        208,552








Liabilities and shareholders' equity







Current liabilities:







    Accounts payable


$          33,728


$          30,124


$          30,126

    Accrued expenses


5,709


6,371


5,877

        Total current liabilities


39,437


36,495


36,003

Long-term debt


-


-


11,475

Other liabilities


12,982


11,881


11,574

Shareholders' equity:







    Common stock


18,021


17,745


17,717

    Additional paid-in capital


53,489


50,763


50,379

    Retained earnings


84,451


81,278


83,845

    Accumulated other comprehensive loss


(2,441)


(2,441)


(2,441)

        Total shareholders' equity


153,520


147,345


149,500

        Total liabilities and shareholders' equity


$        205,939


$        195,721


$        208,552








 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)












Three Months Ended


Six Months Ended



March 30,


March 31,


March 30,


March 31,



2013


2012


2013


2012

Cash Flows From Operating Activities:









  Net earnings


$        3,714


$           262


$        6,116


$             82

  Adjustments to reconcile net earnings to net cash provided by









    operating activities:









      Depreciation and amortization


2,407


2,429


4,739


4,835

      Amortization of capitalized financing costs


25


25


51


45

      Stock-based compensation expense


780


757


1,093


1,126

      Gain on early extinguishment of debt


-


-


-


(425)

      Asset impairment charges


-


-


-


(11)

      Deferred income taxes


1,676


155


2,913


39

      Excess tax benefits from stock-based compensation


(295)


(126)


(331)


(131)

      Gain on sale of property, plant and equipment


(79)


(74)


(67)


(74)

      Gain from life insurance proceeds


(45)


-


(45)


-

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


(321)


(447)


(291)


(737)

      Net changes in assets and liabilities:









        Accounts receivable, net


1,661


(395)


8,552


5,447

        Inventories


(9,976)


4,177


(441)


7,149

        Accounts payable and accrued expenses


3,112


4,860


3,803


(6,819)

        Other changes


(218)


690


(13)


1,058

          Total adjustments


(1,273)


12,051


19,963


11,502

            Net cash provided by operating activities


2,441


12,313


26,079


11,584










Cash Flows From Investing Activities:









  Capital expenditures


(1,028)


(2,997)


(3,724)


(4,005)

  Proceeds from life insurance claims


-


-


505


-

  Increase in cash surrender value of life insurance policies


(28)


-


(26)


(427)

  Proceeds from surrender of life insurance policies


3


-


3


16

  Proceeds from sale of property, plant and equipment


100


81


100


96

            Net cash used for investing activities


(953)


(2,916)


(3,142)


(4,320)










Cash Flows From Financing Activities:









  Proceeds from long-term debt


891


10,374


4,385


51,894

  Principal payments on long-term debt


(891)


(18,757)


(15,860)


(57,625)

  Cash dividends paid


(541)


(530)


(5,510)


(1,059)

  Cash received from exercise of stock options


2,194


1


2,257


2

  Excess tax benefits from stock-based compensation


295


126


331


131

  Financing costs


-


(161)


-


(161)

  Other


(348)


(227)


(647)


(223)

            Net cash provided by (used for) financing activities


1,600


(9,174)


(15,044)


(7,041)










Net increase in cash and cash equivalents


3,088


223


7,893


223

Cash and cash equivalents at beginning of period


4,815


10


10


10

Cash and cash equivalents at end of period


$        7,903


$           233


$        7,903


$           233










Supplemental Disclosures of Cash Flow Information:









  Cash paid during the period for:









    Interest


$               2


$             66


$             20


$           618

    Income taxes, net


708


40


721


73

  Non-cash investing and financing activities:









    Purchases of property, plant and equipment in accounts payable


276


97


276


97

    Restricted stock surrendered for withholding taxes payable


267


263


267


263

 

 

SOURCE Insteel Industries, Inc.



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