MOUNT AIRY, N.C., July 16, 2020 /PRNewswire/ -- Insteel
Industries, Inc. (NasdaqGS: IIIN) today announced financial results
for its third quarter ended June 27,
2020.
Third Quarter 2020 Results
Net earnings for the third quarter of fiscal 2020 increased to
$6.7 million, or $0.34 per diluted share, from $2.2 million, or $0.11 per share, in the same period a year ago.
Insteel's results benefited from higher spreads between selling
prices and raw material costs relative to the depressed level of
the prior year, although prices, particularly in our markets
subject to import competition, remained under pressure.
Net sales decreased 3.4% to $122.0
million from $126.3 million in
the prior year quarter driven by an 11.7% decrease in average
selling prices that was partially offset by a 9.5% increase in
shipments. On a sequential basis, shipments increased 7.4% from the
second quarter of fiscal 2020 while average selling prices
decreased 1.2%. The strong shipping performance for the quarter was
supported by continued robust construction activity in most
markets, while selling prices remained under pressure due to the
impact of low-priced import competition in certain markets.
Gross margin widened 560 basis points to 12.1% from 6.5% in the
prior year quarter primarily due to the increase in spreads and
higher shipments. Insteel's earnings for the current year quarter
reflect a $0.7 million gain in the
cash surrender value of life insurance policies in selling, general
and administrative expense, $0.8
million of restructuring charges related to the Company's
March 16, 2020 acquisition of
substantially all of the assets of Strand-Tech Manufacturing, Inc.
("STM") and a $1.1 million gain on
the disposition of assets held for sale, which, in the aggregate,
increased net earnings per diluted share by $0.04.
Operating activities generated $17.3
million of cash compared with $14.3
million in the prior year quarter primarily due to the
relative changes in working capital and increase in earnings.
Working capital generated $8.4
million of cash in the current year quarter primarily from
an increase in accounts payable and accrued expenses compared to
$9.2 million in the prior year
quarter.
Nine Month 2020 Results
Net earnings for the first nine months of fiscal 2020 increased
to $11.6 million, or $0.60 per share, from $7.4
million, or $0.38 per share,
in the same period a year ago. Net sales decreased 2.3% to
$334.4 million from $342.3 million in the prior year period driven by
a 13.9% decrease in average selling prices that was largely offset
by a 13.5% increase in shipments. Gross margin widened 320 basis
points to 10.9% from 7.7% due to the increase in shipments and
higher spreads. Insteel's earnings for the current year period
reflect $1.2 million of restructuring
charges and acquisition costs related to the STM acquisition and a
$1.1 million gain on the disposition
of assets held for sale, which in the aggregate, had no impact on
net earnings per share. Insteel's earnings for the prior year
period reflect a $1.2 million gain
from insurance proceeds and a $0.6
million gain on the disposition of property, plant and
equipment in other income, which, in the aggregate, increased
fiscal 2019 net earnings per share by $0.07.
Operating activities provided $44.6
million of cash while using $25.9
million in the prior year period primarily due to the
relative changes in working capital. Working capital provided
$19.1 million of cash in the current
year period largely from an increase in accounts payable and
accrued expenses while using $43.4
million in the prior year period.
Capital Allocation and Liquidity
Capital expenditures for the first nine months of fiscal 2020
decreased to $3.4 million from
$9.4 million in the prior year period
and are now expected to total up to $12.0
million in 2020 due to changes in the timelines for certain
projects. Capital outlays for the year are focused primarily on
cost reduction initiatives, the continued growth of our engineered
structural mesh product line and recurring maintenance
requirements.
Insteel ended the quarter with $61.4
million of cash and no borrowings outstanding on its
$100.0 million revolving credit
facility, providing the Company with substantial liquidity and
financial flexibility.
Outlook
"While we are pleased with the robust market conditions through
our third quarter and expect the fourth quarter to remain strong,
our visibility into fiscal 2021 is clouded by the uncertainty
surrounding the impact of COVID-19 on our markets," commented H.O.
Woltz III, Insteel's President and CEO. "We are particularly
concerned about the potential impact of future funding constraints
on infrastructure projects and the uncertain economic environment
on activity in the private non-residential construction market.
Despite these factors, we believe we are favorably positioned to
confront any market challenges and capitalize on strategic growth
opportunities that may arise.
We are pleased with the execution of our plant closure and
integration plans associated with the STM acquisition, which remain
on schedule. We are currently proceeding with the initial
relocation and upgrading of equipment that will be redeployed to
other facilities, which is expected to be completed by the end of
the second fiscal quarter of 2021. We remain confident that the
integration of the STM assets with our PC strand plants will
provide meaningful operating leverage for the company.
We expect that our markets susceptible to import competition
will continue to be unfavorably impacted by pricing pressure. On
April 16, 2020 a group of domestic
producers filed trade cases against 15 countries exporting PC
strand to U.S. markets, and on June 30,
2020 a separate group of domestic producers of standard
welded wire reinforcing products filed a trade case against
Mexico. We believe the facts
supporting these cases are strong and that we will be successful in
addressing violations of U.S. trade law by these
countries."
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 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," "continue," "outlook," "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 28, 2019.
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: the impact of COVID-19 on the economy, demand for our
products and our operations, including the measures taken by
governmental authorities to address it, which may precipitate or
exacerbate other risks and/or uncertainties; 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
28, 2019 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
|
|
Nine Months
Ended
|
|
|
June
27,
|
|
June
29,
|
|
June
27,
|
|
June
29,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
121,959
|
|
$
126,252
|
|
$
334,387
|
|
$
342,310
|
Cost of
sales
|
|
107,154
|
|
118,016
|
|
298,062
|
|
316,077
|
Gross profit
|
|
14,805
|
|
8,236
|
|
36,325
|
|
26,233
|
Selling, general and
administrative expense
|
|
6,694
|
|
5,516
|
|
22,040
|
|
18,606
|
Restructuring
charges
|
|
808
|
|
-
|
|
957
|
|
-
|
Acquisition
costs
|
|
8
|
|
-
|
|
195
|
|
-
|
Other income,
net
|
|
(1,240)
|
|
(23)
|
|
(1,283)
|
|
(1,823)
|
Interest
expense
|
|
26
|
|
62
|
|
78
|
|
137
|
Interest
income
|
|
(22)
|
|
(9)
|
|
(452)
|
|
(176)
|
Earnings before income taxes
|
|
8,531
|
|
2,690
|
|
14,790
|
|
9,489
|
Income
taxes
|
|
1,867
|
|
500
|
|
3,207
|
|
2,124
|
Net earnings
|
|
$
6,664
|
|
$
2,190
|
|
$
11,583
|
|
$
7,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.35
|
|
$
0.11
|
|
$
0.60
|
|
$
0.38
|
Diluted
|
|
0.34
|
|
0.11
|
|
0.60
|
|
0.38
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
19,283
|
|
19,252
|
|
19,272
|
|
19,239
|
Diluted
|
|
19,377
|
|
19,334
|
|
19,378
|
|
19,336
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
|
$
0.03
|
|
$
0.03
|
|
$
0.09
|
|
$
0.09
|
INSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
June
27,
|
|
March
28,
|
|
December
28,
|
|
September
28,
|
|
June
29,
|
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
61,371
|
|
$
40,363
|
|
$
67,114
|
|
$
38,181
|
|
$
7,449
|
Accounts receivable, net
|
|
54,901
|
|
54,912
|
|
35,405
|
|
44,182
|
|
50,743
|
Inventories
|
|
74,269
|
|
71,685
|
|
65,252
|
|
70,851
|
|
104,624
|
Other current assets
|
|
6,245
|
|
9,312
|
|
6,470
|
|
7,370
|
|
6,911
|
Total
current assets
|
|
196,786
|
|
176,272
|
|
174,241
|
|
160,584
|
|
169,727
|
Property, plant and
equipment, net
|
|
101,089
|
|
111,674
|
|
102,665
|
|
104,960
|
|
107,331
|
Intangibles,
net
|
|
8,810
|
|
8,951
|
|
8,337
|
|
8,610
|
|
8,884
|
Goodwill
|
|
9,745
|
|
9,624
|
|
8,293
|
|
8,293
|
|
8,293
|
Other
assets
|
|
20,260
|
|
12,514
|
|
12,915
|
|
10,562
|
|
10,560
|
Total
assets
|
|
$
336,690
|
|
$
319,035
|
|
$
306,451
|
|
$
293,009
|
|
$
304,795
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
47,891
|
|
$
38,438
|
|
$
31,919
|
|
$
21,595
|
|
$
31,311
|
Accrued expenses
|
|
11,839
|
|
9,687
|
|
8,363
|
|
6,818
|
|
6,396
|
Total
current liabilities
|
|
59,730
|
|
48,125
|
|
40,282
|
|
28,413
|
|
37,707
|
Long-term
debt
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other
liabilities
|
|
19,894
|
|
20,079
|
|
19,989
|
|
18,579
|
|
18,764
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
19,283
|
|
19,283
|
|
19,261
|
|
19,261
|
|
19,252
|
Additional paid-in capital
|
|
75,811
|
|
75,661
|
|
74,818
|
|
74,632
|
|
73,849
|
Retained earnings
|
|
164,220
|
|
158,135
|
|
154,349
|
|
154,372
|
|
156,717
|
Accumulated other comprehensive loss
|
|
(2,248)
|
|
(2,248)
|
|
(2,248)
|
|
(2,248)
|
|
(1,494)
|
Total
shareholders' equity
|
|
257,066
|
|
250,831
|
|
246,180
|
|
246,017
|
|
248,324
|
Total
liabilities and shareholders' equity
|
|
$
336,690
|
|
$
319,035
|
|
$
306,451
|
|
$
293,009
|
|
$
304,795
|
|
|
|
|
|
|
|
|
|
|
|
INSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
June
27,
|
|
June
29,
|
|
June
27,
|
|
June
29,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
6,664
|
|
$
2,190
|
|
$
11,583
|
|
$
7,365
|
Adjustments to
reconcile net earnings to net cash provided by (used
for)
|
|
|
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,635
|
|
3,462
|
|
10,626
|
|
10,084
|
Amortization of
capitalized financing costs
|
|
17
|
|
16
|
|
49
|
|
48
|
Stock-based
compensation expense
|
|
150
|
|
182
|
|
1,277
|
|
1,201
|
Deferred income
taxes
|
|
(213)
|
|
57
|
|
392
|
|
2,193
|
Asset impairment
charges
|
|
343
|
|
-
|
|
343
|
|
-
|
Gain on sale and
disposition of property, plant and equipment
|
|
(1,033)
|
|
(2)
|
|
(1,031)
|
|
(1,760)
|
Increase in cash
surrender value of life insurance policies over premiums
paid
|
|
(731)
|
|
(142)
|
|
-
|
|
(204)
|
Gain from life
insurance claims
|
|
(200)
|
|
-
|
|
(200)
|
|
-
|
Net changes in assets
and liabilities (net of assets and liabilities
acquired):
|
|
-
|
|
|
|
-
|
|
|
Accounts
receivable, net
|
|
(20)
|
|
(169)
|
|
(6,890)
|
|
741
|
Inventories
|
|
(2,584)
|
|
12,603
|
|
(246)
|
|
(10,467)
|
Accounts
payable and accrued expenses
|
|
10,969
|
|
(3,283)
|
|
26,281
|
|
(33,640)
|
Other
changes
|
|
292
|
|
(662)
|
|
2,444
|
|
(1,500)
|
Total adjustments
|
|
10,625
|
|
12,062
|
|
33,045
|
|
(33,304)
|
Net cash provided by (used for) operating activities
|
|
17,289
|
|
14,252
|
|
44,628
|
|
(25,939)
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
|
|
|
|
|
Acquisition of
business
|
|
3,144
|
|
-
|
|
(18,356)
|
|
-
|
Capital
expenditures
|
|
(1,080)
|
|
(1,273)
|
|
(3,448)
|
|
(9,380)
|
Increase in
cash surrender value of life insurance policies
|
|
(70)
|
|
(42)
|
|
(133)
|
|
(305)
|
Proceeds from
sale of assets held for sale
|
|
1,875
|
|
-
|
|
1,875
|
|
-
|
Proceeds from
property insurance
|
|
-
|
|
144
|
|
-
|
|
1,192
|
Proceeds from
sale of property, plant and equipment
|
|
40
|
|
9
|
|
40
|
|
17
|
Proceeds from
surrender of life insurance policies
|
|
189
|
|
49
|
|
195
|
|
67
|
Proceeds from
life insurance claims
|
|
200
|
|
-
|
|
200
|
|
-
|
Net cash provided by (used for) investing activities
|
|
4,298
|
|
(1,113)
|
|
(19,627)
|
|
(8,409)
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
long-term debt
|
|
88
|
|
26,613
|
|
223
|
|
44,239
|
Principal
payments on long-term debt
|
|
(88)
|
|
(31,978)
|
|
(223)
|
|
(44,239)
|
Cash dividends
paid
|
|
(579)
|
|
(578)
|
|
(1,735)
|
|
(1,732)
|
Financing
costs
|
|
-
|
|
(237)
|
|
-
|
|
(237)
|
Payment of
employee tax withholdings related to net share
transactions
|
|
-
|
|
-
|
|
(76)
|
|
(175)
|
Net cash used for financing activities
|
|
(579)
|
|
(6,180)
|
|
(1,811)
|
|
(2,144)
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
21,008
|
|
6,959
|
|
23,190
|
|
(36,492)
|
Cash and cash
equivalents at beginning of period
|
|
40,363
|
|
490
|
|
38,181
|
|
43,941
|
Cash and cash
equivalents at end of period
|
|
$
61,371
|
|
$
7,449
|
|
$
61,371
|
|
$
7,449
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid
during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
-
|
|
$
49
|
|
$
-
|
|
$
49
|
Income taxes, net
|
|
67
|
|
372
|
|
342
|
|
1,759
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment in accounts
payable
|
|
712
|
|
518
|
|
712
|
|
518
|
Restricted stock units and stock options surrendered for
withholding taxes payable
|
|
-
|
|
-
|
|
76
|
|
175
|
Payable related to holdback for business acquired
|
|
-
|
|
-
|
|
1,000
|
|
-
|
IIIN – E
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SOURCE Insteel Industries, Inc.