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8-K - FORM 8-K - INSTEEL INDUSTRIES INCiiin20150713_8k.htm

Exhibit 99.1

 

NEWS RELEASE

 

FOR IMMEDIATE RELEASE

 

 

Contact:

 

Michael C. Gazmarian

          Vice President, CFO and Treasurer
          Insteel Industries, Inc.
         

(336) 786-2141, Ext. 3020

 

INSTEEL INDUSTRIES REPORTS THIRD QUARTER FINANCIAL RESULTS

 

MOUNT AIRY, N.C., July 16, 2015 – Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its third quarter ended June 27, 2015.

 

Third Quarter 2015 Results

 

Net earnings for the third quarter of fiscal 2015 were $5.4 million, or $0.29 per share compared with $5.8 million, or $0.31 per diluted share in the same period a year ago. Insteel’s earnings for the current year quarter include $0.3 million of restructuring charges associated with the March 2015 closure of the Newnan, Georgia prestressed concrete strand (“PC strand”) facility, a $0.7 million charge related to the settlement of a customer dispute and a $0.1 million net gain from insurance proceeds related to the January 2014 fire at the Gallatin, Tennessee facility. In the aggregate, these items reduced pre-tax earnings by $1.0 million and net earnings per share by $0.03. Insteel’s earnings for the prior year quarter include a $0.8 million net gain from insurance proceeds related to Gallatin fire, which increased net earnings per share by $0.03.

 

Net sales increased 3.3% to $117.0 million from $113.2 million in the prior year period due to the additional revenue provided by the August 2014 acquisition of the PC strand business of American Spring Wire Corporation (“ASW”), which offset the adverse impact of the record amounts of rainfall and flooding in the central region of the country. Shipments increased 5.1% from the prior year quarter while average selling prices decreased 1.7%. On a sequential basis, shipments increased 19.1% from the second quarter of fiscal 2015 while average selling prices decreased 3.4%.

 

Insteel’s third-quarter results were favorably impacted by higher spreads between selling prices and raw material costs and the increase in shipments, partially offset by higher conversion costs relative to the prior year quarter. Capacity utilization for the quarter was 54% compared with 58% in the prior year quarter and 52% in the second quarter of fiscal 2015.

 

Operating activities provided $18.1 million of cash compared with $14.2 million in the prior year period primarily due to the relative changes in net working capital, which provided $10.5 million of cash compared with $6.9 million in the same period a year ago. Capital expenditures were $2.2 million compared with $2.8 million in the prior year period.

 

Nine Month 2015 Results

 

Net earnings for the first nine months of fiscal 2015 were essentially unchanged from the prior year at $12.1 million, or $0.64 per diluted share compared with $0.65 per diluted share in the same period a year ago. Insteel’s earnings for the current year nine-month period include $0.7 million of restructuring charges associated with the closure of the Newnan facility, a $0.7 million charge related to the customer dispute and a $1.7 million net gain from insurance proceeds related to the Gallatin fire. In the aggregate, these items increased pre-tax earnings by $0.3 million and net earnings per share by $0.01. Insteel’s earnings for the prior year nine-month period include a $0.4 million net gain from insurance proceeds related to the Gallatin fire, which increased net earnings per share by $0.01.

 

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1373 Boggs Drive, Mount Airy, NC 27030/PHONE: (336) 786-2141/FAX: (336) 786-2144

WWW.INSTEEL.COM

 

 
 

 

 

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Net sales increased 12.9% to $329.4 million from $291.9 million in the prior year period due to the additional revenue provided by the ASW acquisition. Shipments increased 11.6% from the prior year period and average selling prices increased 1.1%.

 

Operating activities provided $16.3 million of cash compared with $22.1 million in the prior year period primarily due to the relative changes in net working capital, which used $5.5 million of cash while providing $2.2 million in the same period a year ago. Capital expenditures were $6.8 million compared with $5.8 million in the prior year period. Capital expenditures are not expected to exceed $11.0 million for fiscal 2015.

 

Balance Sheet

 

Insteel ended the quarter with $11.4 million of cash and cash equivalents, and no borrowings outstanding on its $100.0 million revolving credit facility.

 

Outlook

 

“Looking ahead to the remainder of our fiscal year, we expect the recovery in nonresidential construction will regain traction following the recent stretch of inclement weather that limited the operations of our customers for extended periods in the regions that were affected,” commented H.O. Woltz III, Insteel’s president and CEO. “Our financial results should also be favorably impacted by the consumption of lower-cost inventory and reduced conversion costs at our facilities. We remain focused on strengthening our market leadership positions across our product lines, achieving further improvements in our productivity and costs, and pursuing additional growth opportunities in our core businesses.”

 

Conference Call

 

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its third 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 (“ESM”), 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 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 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 U.S. Securities and Exchange Commission (the “SEC”), in particular in its Annual Report on Form 10-K for the year ended September 27, 2014. You should carefully review these risks and uncertainties.

 

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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; 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; credit market conditions and the relative availability of financing for Insteel, its customers and the construction industry as a whole; 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 ESM and expand its shipments of ESM; 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 27, 2014 and in other filings made by Insteel 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

   

Nine Months Ended

 
   

June 27,

   

June 28,

   

June 27,

   

June 28,

 
   

2015

   

2014

   

2015

   

2014

 
                                 

Net sales

  $ 117,016     $ 113,227     $ 329,411     $ 291,881  

Cost of sales

    101,322       98,964       292,972       256,957  

Gross profit

    15,694       14,263       36,439       34,924  

Selling, general and administrative expense

    6,427       6,219       18,054       16,908  

Restructuring charges, net

    345       -       678       -  

Other expense (income), net

    601       (849 )     (1,038 )     (653 )

Interest expense

    65       56       273       169  

Interest income

    (1 )     (4 )     (5 )     (10 )

Earnings before income taxes

    8,257       8,841       18,477       18,510  

Income taxes

    2,865       3,044       6,391       6,444  

Net earnings

  $ 5,392     $ 5,797     $ 12,086     $ 12,066  
                                 
                                 

Net earnings per share:

                               

Basic

  $ 0.29     $ 0.32     $ 0.66     $ 0.66  

Diluted

    0.29       0.31       0.64       0.65  
                                 

Weighted average shares outstanding

                               

Basic

    18,438       18,267       18,407       18,230  

Diluted

    18,828       18,683       18,823       18,636  
                                 

Cash dividends declared per share

  $ 0.03     $ 0.03     $ 0.09     $ 0.09  

 

 

 

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

 
 

 

   

(Unaudited)

           

(Unaudited)

 
   

June 27,

   

March 28,

   

September 27,

   

June 28,

 
   

2015

   

2015

   

2014

   

2014

 

Assets

                               

Current assets:

                               

Cash and cash equivalents

  $ 11,433     $ 6,172     $ 3,050     $ 31,449  

Accounts receivable, net

    48,215       44,025       51,211       46,645  

Inventories

    70,793       83,439       81,899       79,167  

Other current assets

    3,923       4,887       6,433       5,682  

Total current assets

    134,364       138,523       142,593       162,943  

Property, plant and equipment, net

    86,642       87,164       90,386       80,745  

Intangibles, net

    10,532       10,821       9,816       1,441  

Goodwill

    6,965       6,965       6,965       -  

Other assets

    10,338       10,076       7,035       6,910  

Total assets

  $ 248,841     $ 253,549     $ 256,795     $ 252,039  
                                 

Liabilities and shareholders' equity

                               

Current liabilities:

                               

Accounts payable

  $ 33,312     $ 36,076     $ 52,811     $ 55,276  

Accrued expenses

    9,775       6,727       10,375       9,046  

Total current liabilities

    43,087       42,803       63,186       64,322  

Long-term debt

    -       10,000       -       -  

Other liabilities

    14,844       14,925       14,726       14,378  

Commitments and contingencies

                               

Shareholders' equity:

                               

Common stock

    18,439       18,436       18,377       18,280  

Additional paid-in capital

    60,403       60,156       58,867       57,216  

Retained earnings

    113,858       109,019       103,429       99,405  

Accumulated other comprehensive loss

    (1,790 )     (1,790 )     (1,790 )     (1,562 )

Total shareholders' equity

    190,910       185,821       178,883       173,339  

Total liabilities and shareholders' equity

  $ 248,841     $ 253,549     $ 256,795     $ 252,039  

 

 

 

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

   

Three Months Ended

   

Nine Months Ended

 
   

June 27,

   

June 28,

   

June 27,

   

June 28,

 
   

2015

   

2014

   

2015

   

2014

 

Cash Flows From Operating Activities:

                               

Net earnings

  $ 5,392     $ 5,797     $ 12,086     $ 12,066  

Adjustments to reconcile net earnings to net cash provided by operating activities:

                               

Depreciation and amortization

    2,907       2,579       8,704       7,481  

Amortization of capitalized financing costs

    21       26       72       77  

Stock-based compensation expense

    229       549       1,502       1,777  

Deferred income taxes

    (282 )     (330 )     546       (113 )

Asset impairment charges

    -       -       237       -  

Excess tax benefits from stock-based compensation

    (3 )     (31 )     (150 )     (222 )

Gain on sale and disposition of property, plant and equipment

    (76 )     (800 )     (1,755 )     (425 )

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

    -       (110 )     (233 )     (468 )

Net changes in assets and liabilities (net of assets and liabilities acquired):

                               

Accounts receivable, net

    (4,190 )     (5,470 )     2,833       (5,535 )

Inventories

    12,646       (7,768 )     11,106       (20,374 )

Accounts payable and accrued expenses

    2,029       20,115       (19,409 )     28,122  

Other changes

    (570 )     (383 )     786       (253 )

Total adjustments

    12,711       8,377       4,239       10,067  

Net cash provided by operating activities

    18,103       14,174       16,325       22,133  
                                 

Cash Flows From Investing Activities:

                               

Capital expenditures

    (2,180 )     (2,837 )     (6,767 )     (5,801 )

Acquisition of intangible asset

    -       -       (1,460 )     -  

Acquisition of business

    -       -       480       -  

Proceeds from fire loss insurance

    100       1,245       1,713       1,380  

Proceeds from sale of property, plant and equipment

    15       1       104       1  

Proceeds from surrender of life insurance policies

    -       47       40       160  

Increase in cash surrender value of life insurance policies

    (38 )     (35 )     (284 )     (304 )

Net cash used for investing activities

    (2,103 )     (1,579 )     (6,174 )     (4,564 )
                                 

Cash Flows From Financing Activities:

                               

Proceeds from long-term debt

    397       114       60,871       331  

Principal payments on long-term debt

    (10,397 )     (114 )     (60,871 )     (331 )

Cash dividends paid

    (553 )     (548 )     (1,657 )     (1,642 )

Cash received from exercise of stock options

    24       190       200       365  

Excess tax benefits from stock-based compensation

    3       31       150       222  

Payment of employee tax withholdings related to net share transactions

    (6 )     -       (254 )     (505 )

Financing costs

    (207 )     -       (207 )     -  

Net cash used for financing activities

    (10,739 )     (327 )     (1,768 )     (1,560 )
                                 

Net increase in cash and cash equivalents

    5,261       12,268       8,383       16,009  

Cash and cash equivalents at beginning of period

    6,172       19,181       3,050       15,440  

Cash and cash equivalents at end of period

  $ 11,433     $ 31,449     $ 11,433     $ 31,449  
                                 

Supplemental Disclosures of Cash Flow Information:

                               

Cash paid during the period for:

                               

Interest

  $ 26     $ -     $ 119     $ 2  

Income taxes, net

    795       1,962       4,198       4,464  

Non-cash investing and financing activities:

                               

Purchases of property, plant and equipment in accounts payable

    182       45       182       45  

Restricted stock units and stock options surrendered for withholding taxes payable

    6       -       254       505  

 

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