INSTEEL INDUSTRIES, INC. MOUNT AIRY, N.C., April 20, 2017 /PRNewswire/ -- Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its second quarter ended April 1, 2017.
Second Quarter 2017 Results
Net earnings for the second quarter of fiscal 2017 increased to $7.4 million, or $0.39 per share, from $7.2 million, or $0.38 per share, in the same period a year ago. Insteel's results were favorably impacted by widening spreads between selling prices and raw material costs and lower operating expenses relative to the prior year quarter.
Net sales decreased 5.8% to $101.2 million from $107.4 million in the prior year quarter, reflecting a 6.9% decrease in shipments and a 1.1% increase in average selling prices. Shipments increased 5.6% sequentially from the first quarter of fiscal 2017 while average selling prices increased 2.0%. Gross margin widened 80 basis points to 18.1% from 17.3% due to higher spreads, which were offset by the decrease in shipments and higher unit conversion costs on lower production volumes.
Cash flow from operations increased to $13.3 million from $11.4 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 $3.2 million of cash compared with $0.4 million in the prior year quarter.
Six Month 2017 Results
Net earnings for the first six months of fiscal 2017 decreased to $11.9 million, or $0.62 per diluted share, from $13.9 million, or $0.73 per diluted share in the same period a year ago. Net sales decreased 2.4% to $195.0 million from $199.8 million in the prior year period, reflecting lower average selling prices and flat shipments. Gross margin narrowed 150 basis points to 16.0% from 17.5% due to lower spreads and higher unit conversion costs on lower production volumes.
Cash flow from operations decreased to $17.1 million from $23.7 million in the prior year period primarily due to the relative changes in net working capital and the decrease in earnings. Net working capital used $1.4 million of cash while providing $1.1 million in the prior year period.
Capital Allocation and Liquidity
Capital expenditures for the first six months of fiscal 2017 increased to $10.7 million from $4.3 million in the prior year period. Capital outlays for fiscal 2017 are expected to total 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.
During the second quarter of fiscal 2017, Insteel returned $24.9 million of capital to shareholders through the payment of a special cash dividend of $1.25 per share and two regular quarterly cash dividends of $0.03 per share. Insteel ended the quarter debt-free with $40.2 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 fiscal 2017, we expect increasing shipments driven by continued growth in the construction sector together with the usual seasonal upturn in demand," commented H.O. Woltz III, Insteel's president and CEO. "Recent leading indicators for private construction are signaling further expansion, which should be supported by rising public construction activity later in the year. We expect the higher operating volumes coupled with targeted process improvements will translate into lower manufacturing costs at our facilities. We should also benefit from the cost reductions anticipated at our Houston PC strand facility as we begin to ramp up the new raw material cleaning and production lines."
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 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 amounts)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
April 1, April 2, April 1, April 2,
2017 2016 2017 2016
---- ---- ---- ----
Net sales $101,159 $107,414 $195,047 $199,805
Cost of sales 82,865 88,799 163,743 164,767
------ ------ ------- -------
Gross profit 18,294 18,615 31,304 35,038
Selling, general and administrative expense 7,055 7,636 13,319 13,971
Restructuring charges, net 25 100 73 25
Other expense (income), net 10 29 - (85)
Interest expense 35 40 69 81
Interest income (48) (32) (100) (50)
--- --- ---- ---
Earnings before income taxes 11,217 10,842 17,943 21,096
Income taxes 3,797 3,690 6,063 7,236
----- ----- ----- -----
Net earnings $7,420 $7,152 $11,880 $13,860
====== ====== ======= =======
Net earnings per share:
Basic $0.39 $0.38 $0.63 $0.75
Diluted 0.39 0.38 0.62 0.73
Weighted average shares outstanding:
Basic 19,004 18,678 18,992 18,601
Diluted 19,224 19,015 19,217 18,949
Cash dividends declared per share $0.03 $0.03 $1.31 $1.06
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) (Unaudited)
----------
April 1, December 31, October 1, April 2,
2017 2016 2016 2016
---- ---- ---- ----
Assets
Current assets:
Cash and cash equivalents $40,185 $57,020 $58,873 $36,402
Accounts receivable, net 49,577 44,155 47,389 48,578
Inventories 59,230 61,590 71,186 56,574
Other current assets 3,264 3,258 3,039 2,563
----- ----- ----- -----
Total current assets 152,256 166,023 180,487 144,117
Property, plant and equipment, net 94,805 92,332 88,193 83,788
Intangibles, net 8,484 8,774 9,063 9,641
Goodwill 6,965 6,965 6,965 6,965
Other assets 8,712 8,463 8,184 7,813
----- ----- ----- -----
Total assets $271,222 $282,557 $292,892 $252,324
======== ======== ======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $35,605 $29,001 $42,759 $30,654
Accrued expenses 7,222 8,394 11,024 9,096
Dividends payable - 24,298 - -
--- ------ --- ---
Total current liabilities 42,827 61,693 53,783 39,750
Other liabilities 15,736 15,888 14,543 13,498
Shareholders' equity:
Common stock 19,025 18,985 18,976 18,786
Additional paid-in capital 68,850 68,056 67,817 65,370
Retained earnings 126,325 119,476 139,314 117,066
Accumulated other comprehensive loss (1,541) (1,541) (1,541) (2,146)
------ ------ ------ ------
Total shareholders' equity 212,659 204,976 224,566 199,076
------- ------- ------- -------
Total liabilities and shareholders' equity $271,222 $282,557 $292,892 $252,324
======== ======== ======== ========
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
April 1, April 2, April 1, April 2,
2017 2016 2017 2016
---- ---- ---- ----
Cash Flows From Operating Activities:
Net earnings $7,420 $7,152 $11,880 $13,860
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 2,711 2,878 5,729 5,620
Amortization of capitalized financing costs 16 16 32 32
Stock-based compensation expense 876 1,047 1,133 1,276
Deferred income taxes (277) (344) 910 871
Asset impairment charges - 20 - 20
Excess tax benefits from stock-based compensation (388) (571) (488) (824)
Loss (gain) on sale and disposition of property, plant and equipment 10 31 46 (208)
Increase in cash surrender value of life insurance policies over premiums paid (287) (103) (360) (96)
Net changes in assets and liabilities:
Accounts receivable, net (5,422) (8,210) (2,188) (1,796)
Inventories 2,360 12,491 11,956 9,435
Accounts payable and accrued expenses 6,280 (3,844) (11,132) (6,503)
Other changes (5) 787 (430) 2,061
--- --- ---- -----
Total adjustments 5,874 4,198 5,208 9,888
----- ----- ----- -----
Net cash provided by operating activities 13,294 11,350 17,088 23,748
------ ------ ------ ------
Cash Flows From Investing Activities:
Capital expenditures (5,239) (3,393) (10,656) (4,334)
Proceeds from surrender of life insurance policies 77 - 77 40
Increase in cash surrender value of life insurance policies (56) (45) (277) (264)
Proceeds from sale of assets held for sale - - - 180
Proceeds from sale of property, plant and equipment - - - 60
--- --- --- ---
Net cash used for investing activities (5,218) (3,438) (10,856) (4,318)
------ ------ ------- ------
Cash Flows From Financing Activities:
Proceeds from long-term debt 79 107 176 172
Principal payments on long-term debt (79) (107) (176) (172)
Cash dividends paid (24,869) (19,163) (24,869) (19,722)
Cash received from exercise of stock options 72 1,760 107 3,252
Excess tax benefits from stock-based compensation 388 571 488 824
Payment of employee tax withholdings related to net share transactions (502) (297) (646) (629)
Financing costs - - - (11)
--- --- --- ---
Net cash used for financing activities (24,911) (17,129) (24,920) (16,286)
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents (16,835) (9,217) (18,688) 3,144
Cash and cash equivalents at beginning of period 57,020 45,619 58,873 33,258
------ ------ ------ ------
Cash and cash equivalents at end of period $40,185 $36,402 $40,185 $36,402
======= ======= ======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes, net $4,116 $6,339 $4,160 $8,533
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable 1,152 369 1,152 369
Restricted stock units and stock options surrendered for withholding taxes payable 502 297 646 629
IIIN - E
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/insteel-industries-reports-second-quarter-2017-financial-results-300440304.html
SOURCE Insteel Industries, Inc.
