INSTEEL INDUSTRIES, INC. MOUNT AIRY, N.C., Jan. 19, 2017 /PRNewswire/ -- Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its first quarter ended December 31, 2016.
First Quarter 2017 Results
Net earnings for the first quarter of fiscal 2017 decreased to $4.5 million, or $0.23 per share, from $6.7 million, or $0.36 per share, in the same period a year ago. Net sales increased 1.6% to $93.9 million from $92.4 million in the prior year quarter, reflecting an 8.5% increase in shipments and a 6.4% decrease in average selling prices. Shipments decreased 4.7% sequentially from the fourth quarter of fiscal 2016 due to the usual seasonal slowdown in construction activity while average selling prices decreased 4.5%.
Insteel's first-quarter results were unfavorably impacted by narrower spreads between selling prices and raw material costs, which were partially offset by the increase in shipments relative to the prior year quarter. The spread compression was driven by competitive pricing pressures together with the consumption of higher cost inventory purchased in prior periods.
Cash flow from operations fell to $3.8 million from $12.4 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 $4.6 million of cash while providing $0.7 million in the same period a year ago. Capital expenditures increased to $5.4 million from $0.9 million in the prior year quarter. Total capital outlays for fiscal 2017 are expected to increase to up to $25.0 million largely related to the expansion of the Houston, Texas prestressed concrete strand ("PC strand") facility, additional investments in engineered structural mesh ("ESM") manufacturing capabilities and further upgrades of production technology and information systems. Following the end of the quarter, on January 6, 2017 Insteel paid a special cash dividend totaling $23.7 million, or $1.25 per share, to shareholders of record as of December 14, 2016.
Balance Sheet and Liquidity
Cash and cash equivalents decreased $1.9 million during the first quarter to $57.0 million. Insteel ended the quarter debt-free with no borrowings outstanding on its $100.0 million revolving credit facility.
Outlook
"We are encouraged by the stronger than anticipated order activity during the first quarter, which is typically our seasonally weakest period of the year," commented H.O. Woltz III, Insteel's president and CEO. "Looking ahead to the remainder of fiscal 2017, the most recent macro indicators for our construction end-markets point to continued growth in nonresidential construction and the federal funding provided for under the FAST Act should have a greater impact on the infrastructure-related portion of our business in the coming year. We also expect to benefit from lower manufacturing costs through our ongoing process improvement initiatives and the cost reductions associated with the expansion of our Houston PC strand facility."
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 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 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 October 1, 2016.
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 October 1, 2016 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 31, January 2,
2016 2016
---- ----
Net sales $93,888 $92,391
Cost of sales 80,878 75,968
------ ------
Gross profit 13,010 16,423
Selling, general
and
administrative
expense 6,264 6,335
Restructuring
charges
(recoveries),
net 48 (75)
Other income,
net (10) (114)
Interest expense 34 41
Interest income (52) (18)
--- ---
Earnings before
income taxes 6,726 10,254
Income taxes 2,266 3,546
----- -----
Net earnings $4,460 $6,708
====== ======
Net earnings per
share:
Basic $0.23 $0.36
Diluted 0.23 0.36
Weighted average
shares
outstanding:
Basic 18,980 18,525
Diluted 19,209 18,883
Cash dividends
declared per
share $1.28 $1.03
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) (Unaudited)
December 31, October 1, January 2,
2016 2016 2016
---- ---- ----
Assets
Current assets:
Cash and cash equivalents $57,020 $58,873 $45,619
Accounts receivable, net 44,155 47,389 40,368
Inventories 61,590 71,186 69,065
Other current assets 3,258 3,039 2,547
----- ----- -----
Total current assets 166,023 180,487 157,599
Property, plant and equipment,
net 92,332 88,193 83,144
Intangibles, net 8,774 9,063 9,931
Goodwill 6,965 6,965 6,965
Other assets 8,463 8,184 7,681
----- ----- -----
Total assets $282,557 $292,892 $265,320
======== ======== ========
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable $29,001 $42,759 $31,467
Accrued expenses 8,394 11,024 12,033
Dividends payable 24,298 - 18,600
------ --- ------
Total current liabilities 61,693 53,783 62,100
Other liabilities 15,888 14,543 13,814
Shareholders' equity:
Common stock 18,985 18,976 18,600
Additional paid-in capital 68,056 67,817 62,475
Retained earnings 119,476 139,314 110,477
Accumulated other comprehensive
loss (1,541) (1,541) (2,146)
------ ------ ------
Total shareholders' equity 204,976 224,566 189,406
------- ------- -------
Total liabilities and
shareholders' equity $282,557 $292,892 $265,320
======== ======== ========
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
------------------
December 31, January 2,
2016 2016
---- ----
Cash Flows From Operating Activities:
Net earnings $4,460 $6,708
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 3,018 2,742
Amortization of capitalized financing costs 16 16
Stock-based compensation expense 257 229
Deferred income taxes 1,187 1,215
Excess tax benefits from stock-based compensation (100) (253)
Loss (gain) on sale and disposition of property, plant and equipment 36 (239)
Increase in cash surrender value of life insurance policies over premiums paid (73) -
Net changes in assets and liabilities:
Accounts receivable, net 3,234 6,414
Inventories 9,596 (3,056)
Accounts payable and accrued expenses (17,412) (2,659)
Other changes (425) 1,274
---- -----
Total adjustments (666) 5,683
---- -----
Net cash provided by operating activities 3,794 12,391
----- ------
Cash Flows From Investing Activities:
Capital expenditures (5,417) (941)
Proceeds from sale of assets held for sale - 180
Proceeds from sale of property, plant and equipment - 60
Proceeds from surrender of life insurance policies - 40
Increase in cash surrender value of life insurance policies (221) (212)
Net cash used for investing activities (5,638) (873)
------ ----
Cash Flows From Financing Activities:
Proceeds from long-term debt 97 65
Principal payments on long-term debt (97) (65)
Cash dividends paid - (559)
Cash received from exercise of stock options 35 1,492
Excess tax benefits from stock-based compensation 100 253
Payment of employee tax withholdings related to net share transactions (144) (332)
Financing costs - (11)
--- ---
Net cash provided by (used for) financing activities (9) 843
--- ---
Net increase (decrease) in cash and cash equivalents (1,853) 12,361
Cash and cash equivalents at beginning of period 58,873 33,258
------ ------
Cash and cash equivalents at end of period $57,020 $45,619
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes, net $44 $2,194
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable 1,487 479
Declaration of cash dividends to be paid 24,298 18,600
Restricted stock units and stock options surrendered for withholding taxes payable 144 332
IIIN - E
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SOURCE Insteel Industries, Inc.
