iiin20191014_8k.htm

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

 

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 17, 2019

 

 

Commission File Number 1-9929

 

Insteel Industries, Inc.

(Exact name of registrant as specified in its charter)

 

 

North Carolina

(State or other jurisdiction of

incorporation or organization)

 

56-0674867

(I.R.S. Employer Identification No.)

     

1373 Boggs Drive, Mount Airy, North Carolina

(Address of principal executive offices)

 

27030

(Zip Code)

 

Registrant’s telephone number, including area code: (336) 786-2141

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

   

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

   

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

   

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

   

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered subject to Section 12(b) of the Exchange Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock (No Par Value)

IIIN

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 

 

Item 2.02. Results of Operations and Financial Condition

 

On October 17, 2019, Insteel Industries, Inc. (“Insteel” or the “Company”) issued a press release regarding its financial results for the fourth fiscal quarter and fiscal year ended September 28, 2019. A copy of this release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in Item 2.02 of this Current Report on Form 8-K, including the related information in Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits

 

(d)        Exhibits

 

Exhibit 99.1

Press release dated October 17, 2019 announcing fourth fiscal quarter and fiscal year 2019 financial results of Insteel Industries, Inc.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

INSTEEL INDUSTRIES, INC.

Registrant

 

 

 

Date: October 17, 2019

 

By:

 /s/ Michael C. Gazmarian

     

     Michael C. Gazmarian

     

     Vice President, Chief Financial Officer and Treasurer

       

 

ex_160132.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 FOURTH QUARTER AND FISCAL 2019 RESULTS

 

MOUNT AIRY, N.C., October 17, 2019 – Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its fourth quarter and fiscal year ended September 28, 2019.

 

Fourth Quarter 2019 Results

 

Despite ongoing growth in the Company’s construction end-markets, Insteel’s results for the fourth quarter of fiscal 2019 continued to be unfavorably impacted by increasing low-priced import competition. The Company incurred a net loss of $1.8 million, or $0.09 per share, compared with net earnings of $9.4 million, or $0.49 per share, in the same period a year ago.

 

Net sales decreased 6.6% to $113.4 million from $121.4 million in the prior year quarter driven by a 12.8% decrease in average selling prices that offset a 7.2% increase in shipments. On a sequential basis, shipments decreased 4.0% from the third quarter of fiscal 2019 while average selling prices decreased 6.5%.

 

Shipments for the current year quarter were adversely impacted by escalating volumes of low-priced imports, which have surged following the imposition of tariffs on imports of upstream steel products, including the Company’s raw materials, under Section 232 of the Trade Expansion Act of 1962. Foreign competitors have responded by shifting production to downstream products such as PC strand and standard welded wire reinforcement in order to circumvent the tariffs and further their penetration of the U.S. market. Gross margin narrowed to 3.4% from 16.1% in the prior year quarter due to lower spreads between selling prices and raw material costs largely driven by the increased import competition.

 

The income tax provision for the prior year quarter includes a $0.4 million, or $0.02 per share, adjustment to reduce the estimated deferred tax gain related to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act. Excluding the deferred tax adjustment in the prior year quarter, Insteel’s effective tax rate decreased to 13.1% from 19.3% a year ago.  

 

Cash flow from operations increased to $32.5 million from $4.1 million in the prior year quarter due to a $31.4 million decrease in working capital driven by reductions in inventories and receivables.

 

Fiscal 2019 Results

 

Net earnings for fiscal 2019 decreased to $5.6 million, or $0.29 per share, from $36.3 million, or $1.88 per diluted share, in the prior year. Net sales increased 0.6% to $455.7 million from $453.2 million in the prior year driven by an 8.2% increase in average selling prices that offset a 7.1% decrease in shipments. Gross margin narrowed to 6.6% from 15.6% due to the lower spreads and, to a lesser extent, higher manufacturing costs and the reduction in shipments.

 

Other income for fiscal 2019 includes a $1.1 million gain from insurance proceeds and a $0.5 million gain on the disposition of property, plant and equipment, which, in the aggregate, increased net earnings per share by $0.06. The income tax provision for fiscal 2018 reflects a $3.3 million, or $0.17 per share, deferred

 

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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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tax gain related to the impact of the new tax law. Excluding the deferred tax gain in the prior year, Insteel’s effective tax rate increased to 24.9% from 22.7% a year ago.  

 

Cash flow from operations in fiscal 2019 decreased to $6.6 million from $54.0 million in the prior year due to the lower earnings and a $12.0 million increase in working capital driven by a reduction in accounts payable and accrued expenses.

 

Capital Allocation and Liquidity

 

Capital expenditures for fiscal 2019 decreased to $10.5 million from $18.4 million in the prior year and are expected to total up to $17.0 million in 2020 primarily focused on cost and productivity improvement initiatives in addition to recurring maintenance requirements.

 

Insteel ended the year debt-free with $38.2 million of cash and no borrowings outstanding on its $100.0 million revolving credit facility.

 

Outlook

 

“As we move into fiscal 2020, we expect the continuation of favorable conditions in our construction end-markets,” commented H.O. Woltz III, Insteel’s president and CEO. “Public construction, particularly for roads and bridges, should remain strong driven by increased state and local spending together with FAST Act and supplementary funding. The latest third-party forecasts for our other primary demand driver, nonresidential construction, reflect continued growth supported by the ongoing economic expansion.

 

The import-related headwinds, however, are expected to persist in our PC strand and standard welded reinforcement markets as foreign competitors continue to gain market share by underpricing domestic producers. We believe the Administration is aware of the adverse impact of the surge in foreign finished products on our industry and are advocating for action that addresses these unfavorable trends.”

 

Mr. Woltz concluded, “We’re making additional investments in our sales and engineering infrastructure to accelerate the growth of our cast-in-place business and leverage our engineered structural mesh (“ESM”) manufacturing capabilities, which are unmatched in the industry. Our ESM product offering creates value for contractors by reducing the installation labor and material requirement for a project and compressing the construction timeline. We expect to make considerable progress in furthering our penetration of the rebar market during the coming year.”

 

Conference Call

 

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its fourth 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

 

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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.

 

 

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share amounts)

 

 

   

Three Months Ended

   

Year Ended

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

         
   

September 28,

   

September 29,

   

September 28,

   

September 29,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Net sales

  $ 113,403     $ 121,371     $ 455,713     $ 453,217  

Cost of sales

    109,575       101,827       425,652       382,410  

Gross profit

    3,828       19,544       30,061       70,807  

Selling, general and administrative expense

    5,898       7,525       24,504       28,304  

Other expense (income), net

    50       121       (1,773 )     274  

Interest expense

    31       40       168       114  

Interest income

    (117 )     (236 )     (293 )     (515 )

Earnings (loss) before income taxes

    (2,034 )     12,094       7,455       42,630  

Income taxes

    (267 )     2,686       1,857       6,364  

Net earnings (loss)

  $ (1,767 )   $ 9,408     $ 5,598     $ 36,266  
                                 
                                 

Net earnings (loss) per share:

                               

Basic

  $ (0.09 )   $ 0.49     $ 0.29     $ 1.90  

Diluted

    (0.09 )     0.49       0.29       1.88  
                                 

Weighted average shares outstanding:

                               

Basic

    19,256       19,154       19,243       19,079  

Diluted

    19,256       19,353       19,340       19,277  
                                 

Cash dividends declared per share

  $ 0.03     $ 0.03     $ 0.12     $ 1.12  

 

 

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

   

(Unaudited)

         
   

September 28,

   

June 29,

   

September 29,

 
   

2019

   

2019

   

2018

 

Assets

                       

Current assets:

                       

Cash and cash equivalents

  $ 38,181     $ 7,449     $ 43,941  

Accounts receivable, net

    44,182       50,743       51,484  

Inventories

    70,851       104,624       94,157  

Other current assets

    7,370       6,911       5,895  

Total current assets

    160,584       169,727       195,477  

Property, plant and equipment, net

    104,960       107,331       106,148  

Intangibles, net

    8,610       8,884       9,703  

Goodwill

    8,293       8,293       8,293  

Other assets

    10,562       10,560       9,913  

Total assets

  $ 293,009     $ 304,795     $ 329,534  
                         

Liabilities and shareholders' equity

                       

Current liabilities:

                       

Accounts payable

  $ 21,595     $ 31,311     $ 60,059  

Accrued expenses

    6,818       6,396       11,929  

Total current liabilities

    28,413       37,707       71,988  

Long-term debt

    -       -       -  

Other liabilities

    18,579       18,764       15,881  

Shareholders' equity:

                       

Common stock

    19,261       19,252       19,223  

Additional paid-in capital

    74,632       73,849       72,852  

Retained earnings

    154,372       156,717       151,084  

Accumulated other comprehensive loss

    (2,248 )     (1,494 )     (1,494 )

Total shareholders' equity

    246,017       248,324       241,665  

Total liabilities and shareholders' equity

  $ 293,009     $ 304,795     $ 329,534  

 

 

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Year Ended

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

         
   

September 28,

   

September 29,

   

September 28,

   

September 29,

 
   

2019

   

2018

   

2019

   

2018

 

Cash Flows From Operating Activities:

                               

Net earnings (loss)

  $ (1,767 )   $ 9,408     $ 5,598     $ 36,266  

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

                               

Depreciation and amortization

    3,469       3,240       13,553       12,818  

Amortization of capitalized financing costs

    17       17       65       65  

Stock-based compensation expense

    856       837       2,057       2,078  

Deferred income taxes

    (395 )     (486 )     1,798       (2,807 )

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

    72       111       (1,688 )     381  

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

    -       (125 )     (187 )     (553 )

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

                               

Accounts receivable, net

    6,561       4,348       7,302       (11,200 )

Inventories

    33,773       (39,406 )     23,306       (12,304 )

Accounts payable and accrued expenses

    (8,952 )     25,223       (42,592 )     28,234  

Other changes

    (1,104 )     967       (2,604 )     991  

Total adjustments

    34,297       (5,274 )     1,010       17,703  

Net cash provided by operating activities

    32,530       4,134       6,608       53,969  
                                 

Cash Flows From Investing Activities:

                               

Capital expenditures

    (1,132 )     (5,968 )     (10,512 )     (18,449 )

Increase in cash surrender value of life insurance policies

    -       (64 )     (322 )     (355 )

Proceeds from property insurance

    -       -       1,192       -  

Proceeds from surrender of life insurance policies

    -       13       67       165  

Proceeds from sale of property, plant and equipment

    2       -       19       -  

Acquisition of business

    -       -       -       (3,300 )

Net cash used for investing activities

    (1,130 )     (6,019 )     (9,556 )     (21,939 )
                                 

Cash Flows From Financing Activities:

                               

Proceeds from long-term debt

    94       82       44,333       372  

Principal payments on long-term debt

    (94 )     (82 )     (44,333 )     (372 )

Cash dividends paid

    (578 )     (577 )     (2,310 )     (21,333 )

Cash received from exercise of stock options

    -       1,839       -       2,081  

Payment of employee tax withholdings related to net share transactions

    (64 )     (668 )     (239 )     (942 )

Financing costs

    (26 )     -       (263 )     -  

Net cash provided by (used for) financing activities

    (668 )     594       (2,812 )     (20,194 )
                                 

Net increase (decrease) in cash and cash equivalents

    30,732       (1,291 )     (5,760 )     11,836  

Cash and cash equivalents at beginning of period

    7,449       45,232       43,941       32,105  

Cash and cash equivalents at end of period

  $ 38,181     $ 43,941     $ 38,181     $ 43,941  
                                 

Supplemental Disclosures of Cash Flow Information:

                               

Cash paid during the period for:

                               

Interest

  $ -     $ -     $ 49     $ -  

Income taxes, net

    (16 )     4,224       1,743       7,777  

Non-cash investing and financing activities:

                               

Purchases of property, plant and equipment in accounts payable

    377       967       377       967  

Restricted stock units and stock options surrendered for withholding taxes payable

    64       668       239       942  

 

 

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