News Details

MOUNT AIRY, N.C., July 19, 2018 /PRNewswire/ -- Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its third quarter ended June 30, 2018.

Third Quarter 2018 Results

Net earnings for the third quarter of fiscal 2018 increased to $12.9 million, or $0.67 per share, from $6.9 million, or $0.36 per share, in the same period a year ago. Insteel's third-quarter results were favorably impacted by higher shipments and spreads between selling prices and raw material costs and a lower effective tax rate relative to the prior year quarter.

Net sales increased 30.7% to $126.7 million from $96.9 million in the prior year quarter driven by a 16.5% increase in shipments and a 12.2% increase in average selling prices. On a sequential basis, shipments increased 5.3% from the second quarter of fiscal 2018 while average selling prices increased 12.0%. Gross margin increased 190 basis points to 19.1% from 17.2% in the prior year quarter due to the higher shipments and spreads together with lower unit manufacturing costs on higher production volume. Insteel's effective tax rate decreased to 23.4% from 33.9% in the prior year quarter reflecting the reduction in the corporate tax rate under the Tax Cuts and Jobs Act.  

Cash flow from operations increased to $25.3 million from $4.5 million in the prior year quarter primarily due to the relative changes in net working capital and the increase in earnings. Net working capital provided $10.3 million of cash while using $5.8 million in the prior year quarter.

Nine Month 2018 Results

Net earnings for the first nine months of fiscal 2018 increased to $26.9 million, or $1.40 per diluted share, from $18.7 million, or $0.98 per diluted share, in the same period a year ago. Insteel's earnings for the current year period benefited from a $3.7 million, or $0.19 per share gain on the remeasurement of deferred tax liabilities related to the impact of the new tax law.

Net sales increased 13.7% to $331.8 million from $292.0 million in the prior year period driven by a 6.6% increase in shipments and a 6.7% increase in average selling prices. Gross margin narrowed 100 basis points to 15.4% from 16.4% due to lower spreads. Excluding the deferred tax gain, Insteel's effective tax rate decreased to 24.0% from 33.8% in the prior year period.

Cash flow from operations increased to $49.8 million from $22.0 million in the prior year period primarily due to the relative changes in net working capital and the increase in earnings. Net working capital provided $14.6 million of cash while using $7.1 million in the prior year period.

Capital Allocation and Liquidity

Capital expenditures for the first nine months of fiscal 2018 decreased to $12.5 million from $16.9 million in the prior year period. Capital outlays for fiscal 2018 are expected to total up to $21.0 million largely related to additional investments in engineered structural mesh ("ESM") manufacturing capabilities, the purchase of the leased Houston facility and further upgrades of production technology and information systems.

During the first nine months of fiscal 2018, Insteel returned $20.8 million of capital to shareholders through the payment of a special cash dividend of $1.00 per share and three regular quarterly cash dividends of $0.03 per share, marking the third consecutive year in which a special dividend of at least $1.00 per share has been paid. Insteel ended the quarter debt-free with $45.2 million of cash and cash equivalents, and no borrowings outstanding on its $100.0 million revolving credit facility.

Outlook

"Looking ahead, we are encouraged by the recent favorable demand trends in our markets and strengthening in construction activity, which is expected to continue," commented H.O. Woltz III, Insteel's president and CEO. "Business conditions will remain challenging, however, as we contend with rising cost pressures and supply constraints resulting from the imposition of the Section 232 tariffs on imported steel and the impact of recent trade cases initiated by domestic wire rod producers. We will continue to maintain commercial discipline in recovering these additional costs in our markets and intensify our ongoing process improvement initiatives across our operations."    

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 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 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 30, 2017.

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 30, 2017 and in other filings made by us with the SEC.

IIIN – E

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SOURCE Insteel Industries, Inc.

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