Published:
Insteel Industries Reports Third Quarter Financial Results
MOUNT AIRY, N.C., July 17 /PRNewswire-FirstCall/ -- Insteel Industries,
Inc. (Nasdaq: IIIN) today announced financial results for the third quarter
ended June 28, 2008. Earnings from continuing operations for the quarter were
$16.9 million, or $0.97 per diluted share compared with $8.3 million, or $0.46
per diluted share for the same period last year. Net sales for the quarter
increased 32.1% to $104.3 million from $79.0 million last year. Average
selling prices rose 37.6% while shipments decreased 4.0%.
For the nine-month period ended June 28, 2008, earnings from continuing
operations were $28.1 million, or $1.58 per diluted share compared with $19.2
million, or $1.05 per diluted share in the prior year. Net sales for the
nine-month period increased 10.8% to $247.6 million from $223.4 million last
year. Average selling prices rose 17.2% while shipments decreased 5.5%.
"We are pleased with Insteel's financial performance for the third
quarter, especially in light of the continued escalation in raw material costs
and difficult conditions that we experienced in certain of our markets," said
H.O. Woltz III, Insteel's president and chief executive officer. "Additional
price increases were implemented across all our product lines during the
quarter to recover these added costs and position the Company to achieve
satisfactory results when steel and other commodity prices eventually
stabilize. Shipments fluctuated within the quarter due to accelerated
purchases by customers driven by the unprecedented frequency and magnitude of
the price increases, making it difficult to determine the actual consumption
trends for our products."
Gross profit for the quarter increased to $30.9 million (29.6% of net
sales) from $17.4 million (22.0% of net sales) a year ago due to higher
spreads between average selling prices and raw material costs, which more than
offset the lower shipments and higher unit conversion costs. The widening in
spreads was driven by the price increases that were implemented during the
quarter together with the consumption of lower cost inventory under FIFO
accounting. Most of the Company's manufacturing facilities continued to
operate on reduced schedules in response to the soft demand.
Operating activities of continuing operations provided $2.6 million of
cash during the quarter compared with $16.4 million a year ago primarily due
to the year-over-year changes in net working capital which offset the increase
in earnings for the quarter. Net working capital used $17.3 million of cash
during the quarter while providing $5.0 million a year ago largely due to the
increases in inventories and accounts receivable in the current year quarter,
which were in turn driven by the sharp escalation in raw material costs and
selling prices. Operating cash flow for the quarter was primarily used to fund
$2.2 million of capital expenditures and pay $0.5 million of dividends,
leaving the Company debt-free at the end of the quarter with $17.5 million of
cash. Capital expenditures through the first nine months of fiscal 2008 were
$8.4 million and are expected to total $10.0 million for the fiscal year,
although the actual amount is subject to change based on adjustments in
project timelines or additional investment opportunities that may arise.
Commenting on the outlook for the remainder of fiscal 2008 and for fiscal
2009, Woltz said, "We expect business conditions to become increasingly
challenging in view of the anticipated softening in nonresidential
construction, particularly for commercial projects. In addition, we foresee
further increases in raw material costs in the coming months driven by tight
supply in the domestic market and limited availability of imports at
competitive prices. It may become more difficult for us to pass on these
additional costs depending upon the magnitude of the drop-off in demand and
competitive dynamics. We also expect spreads and margins to narrow to more
sustainable levels when the pricing for wire rod and our products levels out
and the higher cost material begins to be reflected in cost of sales.
"As we navigate our way through these immediate challenges, we are
confident that Insteel's competitive position has never been stronger based on
our operating costs, our manufacturing capabilities and our financial
position. We look forward to improved market conditions that will provide us
with an opportunity to more clearly demonstrate the improved earnings power of
the Company through the ramp-up of the significant investments we have made in
our facilities over the past few years."
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss the
Company's third quarter financial results. A live webcast of this call can be
accessed on the Company's website at http://investor.insteel.com/ and will be
archived for replay.
About Insteel
Insteel Industries is one of the nation's largest manufacturers of steel
wire reinforcing products for concrete construction applications. The Company
manufactures and markets prestressed concrete strand ("PC strand") and welded
wire reinforcement, including concrete pipe reinforcement, engineered
structural mesh ("ESM") and standard welded wire reinforcement. Insteel's
products are sold primarily to manufacturers of concrete products that are
used in nonresidential construction. Headquartered inMount Airy, North
Carolina, Insteel operates six manufacturing facilities located inthe 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, in particular in its Annual Report on Form 10-K for the year ended
September 29, 2007, filed with the U.S. Securities and Exchange Commission
(the "SEC"). You should carefully review these risks and uncertainties.
All forward-looking statements attributable to the Company 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 the Company 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.
It is not possible to anticipate and list all risks and uncertainties that
may affect the Company'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 the Company operates; the
expected softening in demand for the Company's concrete reinforcing products
resulting from the anticipated reduction in spending for nonresidential
construction, particularly commercial construction; the severity and duration
of the downturn in residential construction and the impact on those portions
of the Company'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 the Company's primary raw material, hot-rolled
steel wire rod from domestic and foreign suppliers; the Company's ability to
raise selling prices in order to recover increases in wire rod costs; changes
in U.S. or foreign trade policy affecting imports or exports of steel wire rod
or the Company's products; the impact of increased imports of PC strand;
unanticipated changes in customer demand, order patterns and inventory levels;
the impact of weak demand and reduced capacity utilization levels on the
Company's unit manufacturing costs; the Company's ability to further develop
the market for ESM and expand its shipments of ESM; the actual net proceeds
realized and closure costs incurred in connection with the Company's exit from
the industrial wire business; legal, environmental, economic or regulatory
developments that significantly impact the Company's operating costs;
unanticipated plant outages, equipment failures or labor difficulties;
continued escalation in certain of the Company's operating costs; and the
"Risk Factors" discussed in the Company's Annual Report on Form 10-K for the
year ended September 29, 2007 and in other filings made by the Company with
the SEC.
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share data)
(Unaudited)
Three Months Nine Months
Ended Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net sales $104,332 $78,966 $247,572 $223,448
Cost of sales 73,447 61,614 190,280 180,114
Gross profit 30,885 17,352 57,292 43,334
Selling, general and
administrative expense 4,496 4,202 13,748 13,038
Other income, net (12) (26) (88) (76)
Interest expense 150 155 460 451
Interest income (125) (39) (568) (299)
Earnings from continuing
operations before
income taxes 26,376 13,060 43,740 30,220
Income taxes 9,428 4,716 15,669 11,001
Earnings from
continuing operations 16,948 8,344 28,071 19,219
Loss from discontinued
operations net of income
taxes of ($12), ($23),
$- and ($139) (21) (37) (2) (220)
Net earnings $16,927 $8,307 $28,069 $18,999
Per share amounts:
Basic:
Earnings from
continuing
operations $0.98 $0.46 $1.59 $1.06
Loss from
discontinued
operations - - - (0.01)
Net earnings $0.98 $0.46 $1.59 $1.05
Diluted:
Earnings from
continuing
operations $0.97 $0.46 $1.58 $1.05
Loss from
discontinued
operations - (0.01) - (0.01)
Net earnings $0.97 $0.45 $1.58 $1.04
Cash dividends declared $0.03 $0.03 $0.09 $0.09
Weighted average shares
outstanding
Basic 17,330 18,158 17,618 18,136
Diluted 17,482 18,326 17,773 18,304
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 28, September 29,
2008 2007
Assets
Current assets:
Cash and cash equivalents $17,472 $8,703
Accounts receivable, net 45,657 34,518
Inventories 72,996 47,401
Prepaid expenses and other 2,019 4,640
Total current assets 138,144 95,262
Property, plant and equipment, net 70,331 67,147
Other assets 6,372 7,485
Non-current assets of discontinued
operations 3,635 3,635
Total assets $218,482 $173,529
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $34,961 $16,705
Accrued expenses 15,003 7,613
Current liabilities of discontinued
operations 181 247
Total current liabilities 50,145 24,565
Other liabilities 5,183 4,862
Long-term liabilities of discontinued
operations 227 252
Shareholders' equity:
Common stock 17,480 18,303
Additional paid-in capital 42,540 48,939
Deferred stock compensation (1,248) (1,132)
Retained earnings 106,076 79,859
Accumulated other comprehensive loss (1,921) (2,119)
Total shareholders' equity 162,927 143,850
Total liabilities and
shareholders' equity $218,482 $173,529
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
June 28, June 30,
2008 2007
Cash Flows From Operating Activities:
Net earnings $28,069 $18,999
Loss from discontinued operations 2 220
Earnings from continuing operations 28,071 19,219
Adjustments to reconcile earnings from continuing
operations to net cash provided
by operating activities of continuing operations:
Depreciation and amortization 5,337 4,082
Amortization of capitalized financing costs 374 374
Stock-based compensation expense 1,282 881
Excess tax benefits from
stock-based compensation (27) (67)
Loss on sale of property, plant and equipment 55 -
Deferred income taxes 702 470
Gain from life insurance proceeds (661) -
Increase in cash surrender value of life
insurance over premiums paid - (200)
Net changes in assets and liabilities:
Accounts receivable, net (11,139) 2,450
Inventories (25,595) (12,920)
Accounts payable and accrued expenses 25,208 (4,127)
Other changes 3,006 495
Total adjustments (1,458) (8,562)
Net cash provided by
operating activities -
continuing operations 26,613 10,657
Net cash used for operating
activities - discontinued
operations (93) (244)
Net cash provided by
operating activities 26,520 10,413
Cash Flows From Investing Activities:
Capital expenditures (8,397) (13,303)
Proceeds from sale of property, plant and
equipment 93 -
Increase in cash surrender value of life
insurance policies (365) (628)
Proceeds from life insurance claims 1,111 -
Net cash used for investing
activities - continuing
operations (7,558) (13,931)
Net cash used for
investing activities (7,558) (13,931)
Cash Flows From Financing Activities:
Proceeds from long-term debt 877 16,037
Principal payments on long-term debt (877) (16,037)
Cash received from exercise of stock options 120 162
Excess tax benefits from stock-based compensation 27 67
Repurchases of common stock (8,691) -
Cash dividends paid (1,616) (1,095)
Other (33) 46
Net cash used for financing
activities - continuing
operations (10,193) (820)
Net cash used for
financing activities (10,193) (820)
Net increase (decrease) in cash and cash equivalents 8,769 (4,338)
Cash and cash equivalents at beginning of period 8,703 10,689
Cash and cash equivalents at end of period $17,472 $6,351
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $86 $77
Income taxes 6,877 11,508
Non-cash investing and
financing activities:
Purchases of property, plant and equipment
in accounts payable 272 817
Issuance of restricted stock 733 763
Declaration of cash dividends to be paid 524 546
Restricted stock surrendered for withholding
taxes payable 76 -
SOURCE Insteel Industries, Inc.
Copyright © 2009, PRNewswire
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