MOUNT AIRY, N.C., April 21, 2016 /PRNewswire/ -- Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its second quarter ended April 2, 2016.
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Second Quarter 2016 Results
Net earnings for the second quarter of fiscal 2016 increased to $7.2 million, or $0.38 per share from $2.5 million, or $0.14 per share in the same period a year ago. The second quarter results for the prior year include a net gain from insurance proceeds and restructuring charges, which, in the aggregate, increased pre-tax earnings by $1.3 million and net earnings per share by $0.04.
Insteel's second-quarter results were favorably impacted by widening spreads between selling prices and raw material costs together with higher shipments and lower conversion costs relative to the prior year quarter.
Net sales increased 5.5% to $107.4 million from $101.8 million in the prior year quarter benefiting from the milder winter weather in many regions of the country. Shipments increased 20.1% from the prior year quarter while average selling prices decreased 12.1%. On a sequential basis, shipments increased 23.1% from the first quarter of fiscal 2016 while average selling prices decreased 5.6%.
Operating activities provided $11.4 million of cash compared with $7.7 million in the prior year quarter primarily due to the increase in earnings. Net working capital provided $0.4 million of cash compared with $2.7 million in the prior year quarter. Capital expenditures increased to $3.4 million from $1.1 million in the prior year quarter.
Six Month 2016 Results
Net earnings for the first six months of fiscal 2016 increased to $13.9 million, or $0.73 per diluted share from $6.7 million, or $0.36 per share in the same period a year ago. The six-month results for the prior year include a net gain from insurance proceeds and restructuring charges, which, in the aggregate, increased pre-tax earnings by $1.3 million and net earnings per share by $0.04.
Net sales decreased 5.9% to $199.8 million from $212.4 million in the prior year period, reflecting a 5.1% increase in shipments offset by a 10.5% decrease in average selling prices.
Operating activities provided $23.7 million of cash while using $1.8 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 $1.1 million of cash while using $15.3 million in the prior year period. Capital expenditures were $4.3 million compared with $4.6 million in the prior year period and are expected to increase to approximately $20.0 million for fiscal 2016 largely due to outlays related to the expansion of the Houston prestressed concrete strand ("PC strand") facility. Insteel paid a special cash dividend during the quarter totaling $18.6 million, or $1.00 per share.
Balance Sheet and Liquidity
Insteel ended the quarter debt-free with $36.4 million of cash and cash equivalents, and no borrowings outstanding on its $100.0 million revolving credit facility.
Outlook
"Looking ahead to the second half of the fiscal year, we should benefit from the continuation of the favorable trends in our nonresidential construction end-markets together with the usual seasonal upturn in demand," commented H.O. Woltz III, Insteel's president and CEO. "As we move further into the year, we also expect the federal funding provided for under the recently passed FAST Act will begin to have a more pronounced impact on the infrastructure-related portion of our business.
"We are pleased with the considerable progress that was made during the quarter on the upgrading and expansion of our Houston PC strand facility. The first phase of the project remains on track to be completed by the end of the first fiscal quarter of 2017 and is expected to reduce our annual operating costs by approximately $5 million. We are also moving forward on the addition of a third production line at the facility that is anticipated to start up during fiscal 2017 following the successful completion of the first phase of the project."
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss its second quarter financial results. A live webcast of this call can be accessed on Insteel's website at http://investor.insteel.com/events.cfm 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 engineered structural mesh ("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 Insteel 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 Insteel can provide no assurances that such plans, intentions or expectations will be achieved. Many of these risks and uncertainties are discussed in detail in Insteel's periodic and other reports and statements that it files with the U.S. Securities and Exchange Commission (the "SEC"), in particular in its Annual Report on Form 10-K for the year ended October 3, 2015. You should carefully review these risks and uncertainties.
All forward-looking statements attributable to Insteel 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 Insteel 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, except as may be required by law. It is not possible to anticipate and list all risks and uncertainties that may affect Insteel'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 Insteel operates; reduced spending for nonresidential and residential construction and the impact on demand for Insteel's 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 Insteel's products; the cyclical nature of the steel and building material industries; credit market conditions and the relative availability of financing for Insteel, its customers and the construction industry as a whole; fluctuations in the cost and availability of Insteel's primary raw material, hot-rolled steel wire rod, from domestic and foreign suppliers; competitive pricing pressures and Insteel's ability to raise selling prices in order to recover increases in wire rod costs; changes in United States or foreign trade policy affecting imports or exports of steel wire rod or Insteel's products; unanticipated changes in customer demand, order patterns and inventory levels; the impact of weak demand and reduced capacity utilization levels on Insteel's unit manufacturing costs; Insteel's ability to further develop the market for ESM and expand its shipments of ESM; legal, environmental, economic or regulatory developments that significantly impact Insteel's operating costs; unanticipated plant outages, equipment failures or labor difficulties; continued escalation in certain of Insteel's operating costs; and the other risks and uncertainties discussed in Insteel's Annual Report on Form 10-K for the year ended October 3, 2015 and in other filings made by Insteel with the SEC.
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for per share amounts) (Unaudited) Three Months Ended Six Months Ended ------------------ ---------------- April 2, March 28, April 2, March 28, 2016 2015 2016 2015 ---- ---- ---- ---- Net sales $107,414 $101,767 $199,805 $212,395 Cost of sales 88,799 93,065 164,767 191,650 ------ ------ ------- ------- Gross profit 18,615 8,702 35,038 20,745 Selling, general and administrative expense 7,636 5,975 13,971 11,627 Restructuring charges, net 100 333 25 333 Other expense (income), net 29 (1,599) (85) (1,639) Interest expense 40 114 81 208 Interest income (32) (4) (50) (4) --- --- --- --- Earnings before income taxes 10,842 3,883 21,096 10,220 Income taxes 3,690 1,339 7,236 3,526 ----- ----- ----- ----- Net earnings $7,152 $2,544 $13,860 $6,694 ====== ====== ======= ====== Net earnings per share: Basic $0.38 $0.14 $0.75 $0.36 Diluted 0.38 0.14 0.73 0.36 Weighted average shares outstanding: Basic 18,678 18,404 18,601 18,391 Diluted 19,015 18,822 18,949 18,821 Cash dividends declared per share $0.03 $0.03 $1.06 $0.06
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) (Unaudited) ---------- April 2, January 2, October 3, March 28, 2016 2016 2015 2015 ---- ---- ---- ---- Assets Current assets: Cash and cash equivalents $36,402 $45,619 $33,258 $6,172 Accounts receivable, net 48,578 40,368 46,782 44,025 Inventories 56,574 69,065 66,009 83,439 Other current assets 2,563 2,547 5,309 4,887 ----- ----- ----- ----- Total current assets 144,117 157,599 151,358 138,523 Property, plant and equipment, net 83,788 83,144 84,178 87,164 Intangibles, net 9,641 9,931 10,220 10,821 Goodwill 6,965 6,965 6,965 6,965 Other assets 7,813 7,681 7,518 10,076 ----- ----- ----- ------ Total assets $252,324 $265,320 $260,239 $253,549 ======== ======== ======== ======== Liabilities and shareholders' equity Current liabilities: Accounts payable $30,654 $31,467 $32,182 $36,076 Accrued expenses 9,096 12,033 13,644 6,727 Dividends payable - 18,600 - - --- ------ --- --- Total current liabilities 39,750 62,100 45,826 42,803 Long-term debt - - - 10,000 Other liabilities 13,498 13,814 14,198 14,925 Shareholders' equity: Common stock 18,786 18,600 18,466 18,436 Additional paid-in capital 65,370 62,475 60,967 60,156 Retained earnings 117,066 110,477 122,928 109,019 Accumulated other comprehensive loss (2,146) (2,146) (2,146) (1,790) ------ ------ ------ ------ Total shareholders' equity 199,076 189,406 200,215 185,821 ------- ------- ------- ------- Total liabilities and shareholders' equity $252,324 $265,320 $260,239 $253,549 ======== ======== ======== ========
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended Six Months Ended ------------------ ---------------- April 2, March 28, April 2, March 28, 2016 2015 2016 2015 ---- ---- ---- ---- Cash Flows From Operating Activities: Net earnings $7,152 $2,544 $13,860 $6,694 Adjustments to reconcile net earnings to net cash provided by (used for) operating activities: Depreciation and amortization 2,878 2,928 5,620 5,797 Amortization of capitalized financing costs 16 25 32 51 Stock-based compensation expense 1,047 831 1,276 1,273 Deferred income taxes (344) (107) 871 828 Asset impairment charges 20 237 20 237 Excess tax benefits from stock-based compensation (571) (147) (824) (147) Loss (gain) on sale and disposition of property, plant and equipment 31 (1,602) (208) (1,679) Increase in cash surrender value of life insurance policies over premiums paid (103) (147) (96) (283) Net changes in assets and liabilities (net of assets and liabilities acquired): Accounts receivable, net (8,210) (3,337) (1,796) 7,023 Inventories 12,491 4,025 9,435 (1,540) Accounts payable and accrued expenses (3,844) 1,983 (6,503) (20,733) Other changes 787 452 2,061 651 --- --- ----- --- Total adjustments 4,198 5,141 9,888 (8,522) ----- ----- ----- ------ Net cash provided by (used for) operating activities 11,350 7,685 23,748 (1,828) ------ ----- ------ ------ Cash Flows From Investing Activities: Capital expenditures (3,393) (1,072) (4,334) (4,587) Acquisition of intangible asset - (1,460) - (1,460) Acquisition of business - 69 - 480 Proceeds from fire loss insurance - 1,613 - 1,613 Proceeds from sale of assets held for sale - - 180 - Proceeds from sale of property, plant and equipment - - 60 89 Proceeds from surrender of life insurance policies - - 40 40 Increase in cash surrender value of life insurance policies (45) (196) (264) (196) --- ---- ---- ---- Net cash used for investing activities (3,438) (1,046) (4,318) (4,021) ------ ------ ------ ------ Cash Flows From Financing Activities: Proceeds from long-term debt 107 12,717 172 60,474 Principal payments on long-term debt (107) (12,717) (172) (50,474) Cash dividends paid (19,163) (553) (19,722) (1,104) Cash received from exercise of stock options 1,760 176 3,252 176 Excess tax benefits from stock-based compensation 571 147 824 147 Payment of employee tax withholdings related to net share transactions (297) (248) (629) (248) Financing costs - - (11) - --- --- --- --- Net cash provided by (used for) financing activities (17,129) (478) (16,286) 8,971 ------- ---- ------- ----- Net increase (decrease) in cash and cash equivalents (9,217) 6,161 3,144 3,122 Cash and cash equivalents at beginning of period 45,619 11 33,258 3,050 ------ --- ------ ----- Cash and cash equivalents at end of period $36,402 $6,172 $36,402 $6,172 ======= ====== ======= ====== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ - $77 $ - $93 Income taxes, net 6,339 3,358 8,533 3,403 Non-cash investing and financing activities: Purchases of property, plant and equipment in accounts payable 369 227 369 227 Restricted stock units and stock options surrendered for withholding taxes payable 297 248 629 248
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SOURCE Insteel Industries, Inc.