MOUNT AIRY, N.C., October 18, 2007 Insteel Industries, Inc. (Nasdaq: IIIN) today announced financial results for the fourth quarter and fiscal year ended September 29, 2007. Earnings from continuing operations for the quarter were $5.1 million, or $0.28 per diluted share compared with $9.5 million, or $0.52 per diluted share for the same period last year. Including the results of discontinued operations, net earnings were $5.2 million, or $0.28 per diluted share compared with $10.1 million, or $0.55 per diluted share in the prior year. Net sales for the fourth quarter decreased 9.9% to $74.4 million from $82.5 million in the prior year quarter. Shipments decreased 9.4% while average selling prices decreased 0.4%.
For the year ended September 29, 2007, earnings from continuing operations were $24.3 million, or $1.33 per diluted share compared with $34.4 million, or $1.86 per diluted share in the prior year. Including the results of discontinued operations, net earnings were $24.2 million, or $1.32 per diluted share compared with $33.0 million, or $1.79 per diluted share in the prior year. Net sales for the year decreased 9.6% to $297.8 million from $329.5 million last year. Shipments decreased 11.4% while average selling prices increased 2.0%.
"Insteel's fourth-quarter earnings were negatively impacted by the continuation of soft demand in certain markets," said H.O. Woltz III, Insteel's president and chief executive officer. "As we had previously reported, the reduction in shipments for the quarter was driven by the continued weakness in housing-related demand, high levels of PC strand imports and unfavorable weather conditions in certain regions of the country that resulted in construction delays. Gross margins for the quarter narrowed to 17.1% from 22.0% in the third quarter and 22.2% a year ago due to the reduced shipments, lower spreads between average selling prices and raw material costs, and higher unit conversion costs. On a positive note, excluding the impact of our decision not to pursue certain PC strand business during the quarter due to low-priced import competition, shipments were up 2.1% from a year ago reflecting the continued strength of the nonresidential construction sector."
Operating activities of continuing operations provided $6.4 million of cash during the fourth quarter compared with $9.7 million in the year-ago period primarily due to the decrease in earnings. Net working capital used $25,000 of cash in the quarter while providing $1.2 million in the same prior year period. Inventories were reduced by $12.3 million during the quarter which was offset by a $13.0 million decrease in accounts payable and accrued expenses due to lower raw material purchases and changes in the mix of vendor payment terms. The strong operating cash flow for the quarter enabled the Company to fund $3.7 million of capital expenditures, pay $1.1 million of dividends and end the quarter debt-free with $8.7 million of cash, an increase of $2.4 million from the previous quarter-end.
Capital expenditures for 2008 are currently expected to total $10.0 million as the result of cost increases associated with the upgrading of the Company's Florida PC strand facility and additional projects that are likely to be undertaken. The actual timing of these expenditures as well as the amounts are subject to change based on adjustments in project timelines or scope, future market conditions, the Company's financial performance and additional growth opportunities that may arise.
The Company did not repurchase shares of its common stock during the fourth quarter under its stock repurchase program. As of September 29, 2007, the Company was authorized to buy back up to an additional $25.0 million of its shares over the remaining term of the program, which runs through January 5, 2008. Repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors.
Commenting on the outlook for fiscal 2008, Woltz said, "As we approach the seasonally slower months of the year, prices for hot-rolled steel wire rod, our primary raw material, are on the rise and reduced operating rates will have an unfavorable impact on unit conversion costs. Our ability to recover these additional costs will ultimately depend upon the strength of demand and competitive dynamics in our markets.
"At a macro level, the outlook for our primary demand driver, nonresidential construction, remains positive, although we expect some moderation in the growth rate from the elevated levels of recent years. In contrast, conditions in the housing market have continued to deteriorate, making the timing of a recovery uncertain at this point. Despite these near-term challenges, we expect increasing contributions from the substantial investments that have been made in our facilities over the past two years as we ramp up production volumes on the new equipment. With engineered structural mesh continuing to gain broader market acceptance as a replacement for rebar, we are well-positioned to capitalize on this growth opportunity through the new production lines at our North Carolina and Texas facilities and are evaluating further expansions."
Insteel will hold a conference call at 10:00 a.m. ET today to discuss the Company's fourth-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.
Insteel Industries is one of the nation's largest manufacturers of steel wire reinforcing products for concrete construction applications. The Company manufactures and markets 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 in Mount Airy, North Carolina, Insteel operates six 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 are discussed in detail in the Company's periodic reports, in particular in its report on Form 10-K for the year ended September 30, 2006, filed with the U.S. Securities and Exchange Commission. You should carefully read these risk factors.
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 continuation of favorable demand trends for the Company's concrete reinforcing products resulting from increases in spending for nonresidential construction; the severity and duration of the downturn in residential construction activity 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 Company's ability to further develop the market for ESM and expand its shipments of ESM; the timely and successful completion of the expansions of the Company's ESM and PC strand operations; the actual net proceeds realized and closure costs incurred in connection with the Company's exit from the industrial wire business; legal, environmental 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 Form 10-K for the year ended September 30, 2006.
Michael C. Gazmarian
Vice President, Chief Financial Officer and Treasurer
Insteel Industries, Inc.
336-786-2141, Ext. 3020
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