MOUNT AIRY, N.C., Oct. 20, 2016 /PRNewswire/ -- Insteel
Industries, Inc. (NasdaqGS: IIIN) today announced financial results
for its fourth quarter and fiscal year ended October 1, 2016.
Fourth Quarter 2016 Results
Net earnings for the fourth quarter of fiscal 2016 increased to
$9.9 million from $9.6 million in the same period a year ago, while
earnings per diluted share was unchanged at $0.51. The fourth-quarter results for the current
year reflect a charge related to the settlement and termination of
a pension plan, which reduced pre-tax earnings by $2.5 million and net earnings per share by
$0.09. The fourth-quarter results for
the prior year reflect $0.3 million
of net restructuring recoveries, which increased net earnings per
share by $0.01.
Insteel's fourth-quarter results were favorably impacted by
widening spreads between selling prices and raw material costs
relative to the prior year quarter, which offset lower shipments
and higher conversion costs. Net sales decreased 12.7% to
$103.1 million from $118.1 million in the prior year quarter,
reflecting an 8.8% decrease in shipments and a 4.3% decrease in
average selling prices. Shipments for the prior year quarter
benefited from an extra week based on Insteel's fiscal calendar. On
a pro forma basis adjusting both quarters to reflect the same
13-week period as the current year, the year-over-year shipment
decrease was 2.9%. Shipments decreased 15.0% sequentially from the
third quarter of fiscal 2016 while average selling prices increased
4.9%.
Cash flow from operations fell to $8.9
million from $19.3 million in
the prior year quarter primarily due to the relative changes in net
working capital, which used $4.2
million of cash while providing $7.8
million in the prior year quarter. Capital expenditures
increased to $3.9 million from
$0.4 million in the prior year
quarter.
Fiscal 2016 Results
Net earnings for fiscal 2016 increased to $37.2 million, or $1.95 per diluted share from $21.7 million, or $1.15 per diluted share in the prior year. The
current year results reflect a charge related to the pension plan
settlement and termination, which reduced pre-tax earnings by
$2.5 million and net earnings per
share by $0.09. The prior year
results reflect net restructuring charges, a charge related to a
customer dispute and a net gain from insurance proceeds, which, in
the aggregate, increased pre-tax earnings by $0.7 million and net earnings per share by
$0.02.
Insteel's fiscal 2016 results were favorably impacted by
widening spreads between selling prices and raw material costs
relative to the prior year and, to a lesser extent, higher
shipments and lower conversion costs. Net sales decreased 6.5% to
$418.5 million from $447.5 million in the prior year, reflecting a
2.6% increase in shipments offset by an 8.8% decrease in average
selling prices. Shipments for the prior year benefited from an
extra week based on Insteel's fiscal calendar. On a pro forma basis
adjusting both years to reflect the same 52-week period as the
current year, the year-over-year shipment increase was 4.8%.
Cash flow generated from operations rose to $54.5 million from $35.8
million in the prior year primarily due to the increase in
earnings. Net working capital provided $3.2
million of cash compared with $2.3
million in the prior year. Capital expenditures increased to
$13.0 million from $7.2 million in the prior year largely due to
outlays related to the expansion of the Houston prestressed concrete strand ("PC
strand") facility and are not expected to exceed $25 million for fiscal 2017.
Balance Sheet and Liquidity
Cash and cash equivalents increased $5.0
million during the fourth quarter to $58.9 million. Insteel ended the year debt-free
with no borrowings outstanding on its $100.0
million revolving credit facility.
Outlook
"As we move into fiscal 2017, it is unclear whether the
softening in shipments we experienced during the fourth fiscal
quarter represents a temporary lull or will persist," commented
H.O. Woltz III, Insteel's president
and CEO. "Although recent macro indicators for our construction
end-markets have been mixed, customer sentiment remains positive
and we expect demand for our products will be favorably impacted by
the FAST Act together with increased infrastructure spending at the
state and local level.
"The expansion of our Houston PC strand facility remains on
track to begin start-up activities before the end of the first
quarter of fiscal 2017. The investments we are making realign the
plant's capacity with the requirements of the Texas market and should position it to achieve
costs that are comparable to our other strand facilities."
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss its fourth 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 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, they are subject to a number of risks
and uncertainties, and Insteel 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 Insteel's filings 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.
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; changes in the spending
levels 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 raw material
or operating 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
fluctuations in demand and 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; and the "Risk
Factors" 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
October
1,
|
|
October
3,
|
|
October
1,
|
|
October
3,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
103,113
|
|
$
118,093
|
|
$
418,547
|
|
$
447,504
|
Cost of
sales
|
|
80,510
|
|
96,199
|
|
333,359
|
|
389,171
|
Gross profit
|
|
22,603
|
|
21,894
|
|
85,188
|
|
58,333
|
Selling, general and
administrative expense
|
|
5,249
|
|
7,770
|
|
26,069
|
|
25,824
|
Pension plan
settlement loss
|
|
2,539
|
|
-
|
|
2,539
|
|
-
|
Restructuring charges
(recoveries), net
|
|
32
|
|
(329)
|
|
115
|
|
349
|
Other expense
(income), net
|
|
45
|
|
(75)
|
|
183
|
|
(1,113)
|
Interest
expense
|
|
37
|
|
47
|
|
158
|
|
320
|
Interest
income
|
|
(63)
|
|
(6)
|
|
(166)
|
|
(11)
|
Earnings before income taxes
|
|
14,764
|
|
14,487
|
|
56,290
|
|
32,964
|
Income
taxes
|
|
4,910
|
|
4,863
|
|
19,045
|
|
11,254
|
Net earnings
|
|
$
9,854
|
|
$
9,624
|
|
$
37,245
|
|
$
21,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.52
|
|
$
0.52
|
|
$
1.99
|
|
$
1.18
|
Diluted
|
|
0.51
|
|
0.51
|
|
1.95
|
|
1.15
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
18,945
|
|
18,451
|
|
18,754
|
|
18,418
|
Diluted
|
|
19,188
|
|
18,740
|
|
19,055
|
|
18,803
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
|
$
0.03
|
|
$
0.03
|
|
$
1.12
|
|
$
0.12
|
|
|
|
|
|
|
|
|
|
INSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
October
1,
|
|
July
2,
|
|
October
3,
|
|
|
2016
|
|
2016
|
|
2015
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
58,873
|
|
$
53,838
|
|
$
33,258
|
Accounts receivable, net
|
|
47,389
|
|
49,426
|
|
46,782
|
Inventories
|
|
71,186
|
|
63,914
|
|
66,009
|
Other current assets
|
|
3,039
|
|
2,208
|
|
5,309
|
Total
current assets
|
|
180,487
|
|
169,386
|
|
151,358
|
Property, plant and
equipment, net
|
|
88,193
|
|
85,779
|
|
84,178
|
Intangibles,
net
|
|
9,063
|
|
9,352
|
|
10,220
|
Goodwill
|
|
6,965
|
|
6,965
|
|
6,965
|
Other
assets
|
|
8,184
|
|
7,935
|
|
7,518
|
Total
assets
|
|
$
292,892
|
|
$
279,417
|
|
$
260,239
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
42,759
|
|
$
39,738
|
|
$
32,182
|
Accrued expenses
|
|
11,024
|
|
13,376
|
|
13,644
|
Total
current liabilities
|
|
53,783
|
|
53,114
|
|
45,826
|
Other
liabilities
|
|
14,543
|
|
13,212
|
|
14,198
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common stock
|
|
18,976
|
|
18,904
|
|
18,466
|
Additional paid-in capital
|
|
67,817
|
|
66,303
|
|
60,967
|
Retained earnings
|
|
139,314
|
|
130,030
|
|
122,928
|
Accumulated other comprehensive loss
|
|
(1,541)
|
|
(2,146)
|
|
(2,146)
|
Total
shareholders' equity
|
|
224,566
|
|
213,091
|
|
200,215
|
Total
liabilities and shareholders' equity
|
|
$
292,892
|
|
$
279,417
|
|
$
260,239
|
|
|
|
|
|
|
|
INSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
October
1,
|
|
October
3,
|
|
October
1,
|
|
October
3,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
9,854
|
|
$
9,624
|
|
$
37,245
|
|
$
21,710
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
|
|
|
|
|
|
|
|
|
|
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,015
|
|
3,230
|
|
11,544
|
|
11,934
|
|
Amortization of
capitalized financing costs
|
|
17
|
|
17
|
|
65
|
|
89
|
|
Stock-based
compensation expense
|
|
918
|
|
796
|
|
2,439
|
|
2,298
|
|
Deferred income
taxes
|
|
(61)
|
|
(213)
|
|
536
|
|
333
|
|
Pension plan
settlement, net of cash contribution
|
|
620
|
|
-
|
|
620
|
|
-
|
|
Asset impairment
charges
|
|
-
|
|
306
|
|
20
|
|
543
|
|
Excess tax benefits
from stock-based compensation
|
|
(473)
|
|
(19)
|
|
(1,717)
|
|
(169)
|
|
Loss (gain) on sale
and disposition of property, plant and equipment
|
|
46
|
|
(897)
|
|
61
|
|
(2,652)
|
|
Increase in cash
surrender value of life insurance policies over premiums
paid
|
|
(212)
|
|
-
|
|
(480)
|
|
(39)
|
|
Net changes in assets
and liabilities (net of assets and liabilities
acquired):
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
2,037
|
|
1,433
|
|
(607)
|
|
4,266
|
|
Inventories
|
|
(7,272)
|
|
4,784
|
|
(5,177)
|
|
15,890
|
|
Accounts
payable and accrued expenses
|
|
1,028
|
|
1,548
|
|
9,009
|
|
(17,861)
|
|
Other
changes
|
|
(635)
|
|
(1,354)
|
|
978
|
|
(568)
|
|
Total adjustments
|
|
(972)
|
|
9,631
|
|
17,291
|
|
14,064
|
|
Net cash provided by operating activities
|
|
8,882
|
|
19,255
|
|
54,536
|
|
35,774
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(3,900)
|
|
(386)
|
|
(12,977)
|
|
(7,153)
|
|
Acquisition of
intangible asset
|
|
-
|
|
-
|
|
-
|
|
(1,460)
|
|
Acquisition of
business
|
|
-
|
|
-
|
|
-
|
|
480
|
|
Proceeds from
fire loss insurance
|
|
-
|
|
-
|
|
-
|
|
1,713
|
|
Proceeds from
sale of assets held for sale
|
|
-
|
|
3,537
|
|
180
|
|
3,537
|
|
Proceeds from
sale of property, plant and equipment
|
|
-
|
|
28
|
|
60
|
|
132
|
|
Proceeds from
surrender of life insurance policies
|
|
6
|
|
-
|
|
140
|
|
40
|
|
Decrease
(increase) in cash surrender value of life insurance
policies
|
|
(51)
|
|
150
|
|
(375)
|
|
(328)
|
|
Net cash provided by (used for) investing activities
|
|
(3,945)
|
|
3,329
|
|
(12,972)
|
|
(3,039)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from
long-term debt
|
|
55
|
|
106
|
|
328
|
|
60,978
|
|
Principal
payments on long-term debt
|
|
(55)
|
|
(106)
|
|
(328)
|
|
(60,978)
|
|
Cash dividends
paid
|
|
(570)
|
|
(554)
|
|
(20,859)
|
|
(2,211)
|
|
Cash received
from exercise of stock options
|
|
753
|
|
-
|
|
5,065
|
|
200
|
|
Excess tax
benefits from stock-based compensation
|
|
473
|
|
19
|
|
1,717
|
|
169
|
|
Payment of
employee tax withholdings related to net share
transactions
|
|
(558)
|
|
(224)
|
|
(1,861)
|
|
(478)
|
|
Financing
costs
|
|
-
|
|
-
|
|
(11)
|
|
(207)
|
|
Net cash provided by (used for) financing activities
|
|
98
|
|
(759)
|
|
(15,949)
|
|
(2,527)
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
|
5,035
|
|
21,825
|
|
25,615
|
|
30,208
|
|
Cash and cash
equivalents at beginning of period
|
|
53,838
|
|
11,433
|
|
33,258
|
|
3,050
|
|
Cash and cash
equivalents at end of period
|
|
$
58,873
|
|
$
33,258
|
|
$
58,873
|
|
$
33,258
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Cash paid
during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
-
|
|
$
24
|
|
$
-
|
|
$
143
|
|
Income taxes, net
|
|
7,018
|
|
3,607
|
|
19,184
|
|
7,805
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment in accounts
payable
|
|
1,746
|
|
570
|
|
1,746
|
|
570
|
|
Restricted stock units and stock options surrendered for
withholding taxes payable
|
558
|
|
224
|
|
1,861
|
|
478
|
|
|
|
|
|
|
|
|
|
|
|
IIIN – E
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SOURCE Insteel Industries, Inc.