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Jan 17, 2019
Insteel Industries Reports First Quarter 2019 Results

MOUNT AIRY, N.C., Jan. 17, 2019 /PRNewswire/ -- Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its first quarter ended December 29, 2018.

Corporate Logo - Insteel Industries

First Quarter 2019 Results

Net earnings for the first quarter of fiscal 2019 decreased to $4.1 million, or $0.21 per share, from $8.1 million, or $0.42 per diluted share, in the same period a year ago. Insteel's first-quarter results for fiscal 2019 were unfavorably impacted by lower shipments and higher unit manufacturing costs on lower production volume relative to the prior year quarter.

Net sales increased 6.5% to $104.1 million from $97.7 million in the prior year quarter driven by a 28.7% increase in average selling prices that offset a 17.2% decrease in shipments. Shipments for the current year quarter were adversely impacted by the unusually wet weather in many regions of the country and construction project delays together with an increase in low-priced import competition. On a sequential basis, shipments decreased 14.5% from the fourth quarter of fiscal 2018 while average selling prices increased 0.4%. Gross margin narrowed 140 basis points to 10.5% from 11.9% in the prior year quarter due to the reduction in shipments and higher manufacturing costs.

Other income for the current year quarter includes a $0.7 million gain on the disposition of property, plant and equipment, which increased net earnings per share by $0.02. The income tax provision for the prior year quarter includes a $3.7 million, or $0.19 per share, gain on the remeasurement of deferred tax assets and liabilities related to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act. Excluding the deferred tax gain in the prior year quarter, Insteel's effective tax rate decreased to 23.5% from 24.9% a year ago.  

Operating activities used $22.8 million of cash while providing $14.8 million in the prior year quarter primarily due to the relative changes in net working capital and the decrease in earnings. Net working capital used $31.3 million of cash in the current year quarter to fund an increase in inventories and a reduction in accounts payable and accrued expenses while providing $4.7 million in the prior year quarter.

Capital Allocation and Liquidity

Capital expenditures for the first quarter of fiscal 2019 increased to $6.2 million from $6.1 million in the prior year quarter. Capital outlays for fiscal 2019 are expected to total up to $22.0 million primarily focused on cost and productivity improvement initiatives in addition to recurring maintenance.

Insteel ended the quarter debt-free with $15.5 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 fiscal 2019, we expect improved market conditions driven by continued growth in the construction sector and the weather-related deferral of business from the first quarter. We should also benefit from lower manufacturing costs at our facilities through higher operating volumes and increasing contributions from our process improvement initiatives. Our second quarter results, however, will reflect the usual seasonal slowdown in construction activity.

"The growth outlook for our engineered structural mesh ("ESM") product line remains positive. We believe the continued tightness in the job market will spur increased interest in the use of ESM as a replacement for conventional rebar for many cast-in-place applications where it can allow contractors to realize a meaningful reduction in installation labor and compress project timelines.  

"We continue to be actively engaged with the Administration regarding the detrimental impact of the Section 232 tariff program on downstream consumers of steel. Domestic prices for hot-rolled steel wire rod, our primary raw material, remain substantially higher than global market levels, providing foreign producers of welded wire reinforcement and PC strand with a significant cost advantage as they aggressively seek to expand their presence in the U.S. market. The resulting pricing pressure has compressed margins in those portions of our business that are susceptible to import competition, particularly for our PC strand product line. We remain hopeful that the Administration will be amenable to a solution that places domestic producers on equal footing with foreign competitors."

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://insteelgcs.gcs-web.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 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 we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are subject to a number of 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, and are updated from time to time in our filings with the U.S. Securities and Exchange Commission (the "SEC"), in particular in our Annual Report on Form 10-K for the year ended September 29, 2018.

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; 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 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 29, 2018 and in other filings made by us with the SEC.

 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except for per share data)

(Unaudited)


















Three Months Ended



December 29,


December 30,



2018


2017

Net sales


$        104,110


$          97,741

Cost of sales


93,134


86,080

    Gross profit


10,976


11,661

Selling, general and administrative expense


6,534


5,763

Other expense (income), net


(829)


19

Interest expense


30


28

Interest income


(155)


(76)

    Earnings before income taxes


5,396


5,927

Income taxes


1,270


(2,184)

    Net earnings


$            4,126


$            8,111











Net earnings per share:





    Basic


$              0.21


$              0.43

    Diluted


0.21


0.42






Weighted average shares outstanding:





    Basic


19,223


19,041

    Diluted


19,336


19,224






Cash dividends declared per share


$              0.03


$              1.03






 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)


















(Unaudited)




(Unaudited)



December 29,


September 29,


December 30,



2018


2018


2017

Assets







Current assets:







    Cash and cash equivalents


$          15,503


$          43,941


$          37,336

    Accounts receivable, net


36,524


51,484


39,769

    Inventories


115,306


94,157


70,918

    Other current assets


5,841


5,895


5,101

        Total current assets


173,174


195,477


153,124

Property, plant and equipment, net


111,171


106,148


102,891

Intangibles, net


9,429


9,703


10,634

Goodwill


8,293


8,293


8,293

Other assets


9,367


9,913


9,698

        Total assets


$        311,434


$        329,534


$        284,640








Liabilities and shareholders' equity







Current liabilities:







    Accounts payable


$          40,456


$          60,059


$          30,992

    Accrued expenses


6,876


11,929


5,411

    Dividends payable


577


-


19,612

        Total current liabilities


47,909


71,988


56,015

Other liabilities


18,143


15,881


16,515

Shareholders' equity:







    Common stock


19,223


19,223


19,041

    Additional paid-in capital


73,019


72,852


70,052

    Retained earnings


154,634


151,084


124,350

    Accumulated other comprehensive loss


(1,494)


(1,494)


(1,333)

        Total shareholders' equity


245,382


241,665


212,110

        Total liabilities and shareholders' equity


$        311,434


$        329,534


$        284,640

 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


















Three Months Ended



December 29,


December 30,



2018


2017

Cash Flows From Operating Activities:





    Net earnings


$            4,126


$            8,111

    Adjustments to reconcile net earnings to net cash provided by (used for)





        operating activities:





            Depreciation and amortization


3,242


3,176

            Amortization of capitalized financing costs


16


16

            Stock-based compensation expense


174


235

            Deferred income taxes


2,131


(2,069)

            Loss (gain) on sale and disposition of property, plant and equipment


(709)


17

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


-


(256)

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





                Accounts receivable, net


14,960


515

                Inventories


(21,149)


10,935

                Accounts payable and accrued expenses


(25,145)


(6,793)

                Other changes


(414)


877

                    Total adjustments


(26,894)


6,653

                        Net cash provided by (used for) operating activities


(22,768)


14,764






Cash Flows From Investing Activities:





    Capital expenditures


(6,194)


(6,080)

    Acquisition of business


-


(3,300)

    Proceeds from surrender of life insurance policies


13


41

    Decrease (increase) in cash surrender value of life insurance policies 


518


(194)

                        Net cash used for investing activities


(5,663)


(9,533)






Cash Flows From Financing Activities:





    Proceeds from long-term debt


90


90

    Principal payments on long-term debt


(90)


(90)

    Payment of employee tax withholdings related to net share transactions


(7)


-

                        Net cash used for financing activities


(7)


-






Net increase (decrease) in cash and cash equivalents


(28,438)


5,231

Cash and cash equivalents at beginning of period


43,941


32,105

Cash and cash equivalents at end of period


$          15,503


$          37,336






Supplemental Disclosures of Cash Flow Information:





    Cash paid during the period for:





        Income taxes, net


$                 36


$                  (7)

    Non-cash investing and financing activities:





        Purchases of property, plant and equipment in accounts payable


1,090


1,005

        Declaration of cash dividends to be paid


576


19,612

        Restricted stock units and stock options surrendered for withholding taxes payable

7


-

 

IIIN – E

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/insteel-industries-reports-first-quarter-2019-results-300777582.html

SOURCE Insteel Industries, Inc.

Michael C. Gazmarian, Vice President, Chief Financial Officer and Treasurer, Insteel Industries, Inc., (336) 786-2141, Ext. 3020


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