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.
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
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SOURCE Insteel Industries, Inc.