MOUNT AIRY, N.C., Oct. 22, 2020 /PRNewswire/ -- Insteel Industries,
Inc. (NasdaqGS: IIIN) today announced financial results for its
fourth quarter and fiscal year ended October
3, 2020.
Fourth Quarter 2020 Results
Insteel's results for the fourth quarter of fiscal 2020
benefitted from robust demand in the Company's construction markets
and a rebound in spreads between selling prices and raw material
costs from depressed levels of a year ago. Shipments in the
fourth quarter of fiscal 2020 were at the highest quarterly level
on record for the Company. Net earnings for the fourth quarter of
fiscal 2020 were $7.4 million, or
$0.38 per share, compared to a net
loss of $1.8 million, or $0.09 per share, in the same period a year ago.
Net sales increased 21.9% to $138.2
million from $113.4 million in
the prior year quarter driven by a 27.7% increase in shipments that
offset a 4.6% decrease in average selling prices. On a sequential
basis, shipments increased 12.0% from the third quarter of fiscal
2020 and average selling prices increased 1.1%. The Company
benefitted from an extra week in the current year and quarter based
on its fiscal calendar.
Gross margin widened 1,070 basis points to 14.1% from 3.4% in
the prior year quarter primarily due to wider spreads between
selling prices and raw material costs and leverage from higher
shipment levels. Earnings for the current year quarter reflect a
$0.4 million gain in cash surrender
value of life insurance policies in selling, general and
administrative expense and $0.7
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"), which in the aggregate decreased net earnings per share by
$0.01.
Operating activities provided $11.4
million of cash during the fourth quarter compared to
$32.5 million in the prior year
quarter due largely to the relative changes in working capital.
Working capital generated $0.3
million of cash in the current year compared to $31.4 million the prior year driven by reductions
in inventories and receivables in the prior year
quarter.
Fiscal 2020 Results
Net earnings for fiscal 2020 increased to $19.0 million, or $0.98 per diluted share, from $5.6 million, or $0.29 per share, in the prior year. Net sales
increased 3.7% to $472.6 million from
$455.7 million in the prior year
driven by a 17.3% increase in shipments that offset an 11.5%
decrease in average selling prices, as well as the extra week in
the current year based on the Company's fiscal calendar.
Gross margin expanded to 11.8% from 6.6% due to the wider spreads
and, to a lesser extent, increased shipment
volumes.
Insteel's earnings for fiscal 2020 reflect $1.9 million of restructuring charges and
acquisition costs related to the STM transaction and a $1.0 million gain on the disposition of assets
held for sale, which in the aggregate, decreased fiscal 2020 net
earnings per diluted share by $0.04. Insteel's earnings for the prior
year period reflect a $1.1 million
gain from insurance and $0.5 million
gain on the disposition of property, plant and equipment in other
income, which increased fiscal 2019 net earnings per diluted share
by $0.06.
Operating activities provided $56.2
million of cash compared to $6.6
million in the prior year due to both higher earnings and
the relative changes in working capital. Working capital provided
$19.4 million in the current year
compared to a $12.0 million use of
cash in the prior year.
Capital Allocation and Liquidity
Capital expenditures for fiscal 2020 decreased to $7.1 million from $10.5
million in the prior year and are expected to total up to
$20 million in 2021 including
expenditures to relocate and upgrade the STM assets, to advance the
growth of our engineered structural mesh business and to support
cost and productivity improvement initiatives and recurring
maintenance requirements. The shortfall in 2020 investing activity
relative to prior estimates is related solely to timing
considerations.
Insteel ended the year debt-free with $68.7 million of cash and no borrowings
outstanding on its $100.0 million
revolving credit facility.
Outlook
"Looking ahead to fiscal 2021, we expect our financial results
will remain vulnerable to uncertain market conditions depending on
the strength and direction of the U.S. economic recovery,"
commented H.O. Woltz III, Insteel's president and CEO. "The latest
forecasts for non-residential construction indicate a bottoming or
modest improvement, but the sustainability of those trends is not
yet clear. Public construction has not experienced the level
of weakness forecast at the onset of the pandemic, although the
impact varies widely from state to state. Federal action on
new transportation spending or proposed state budget relief has the
potential to be a positive catalyst if implemented by the U.S.
Congress."
Mr. Woltz added, "Despite the economic uncertainties, we remain
optimistic about our key initiatives, which should benefit our
fiscal 2021 performance. We are pleased with our performance
in the engineered structural mesh market during 2020 and expect
further growth in 2021. Additionally, the trade cases filed
in April and June 2020 alleging
illegal activity by importers in the U.S. PC strand and standard
welded wire reinforcement markets have progressed favorably. The PC
strand cases are now scheduled to conclude during our third fiscal
quarter and the standard welded wire reinforcing case is expected
to conclude during the fourth fiscal quarter of 2021. As with any
litigation, we cannot predict the outcome, but we believe the facts
supporting the cases are strong."
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss its fourth quarter
and 2020 fiscal year end 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 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 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 business
or 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
|
|
Year
Ended
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
October
3,
|
|
September
28,
|
|
October
3,
|
|
September
28,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
138,231
|
|
$
113,403
|
|
$
472,618
|
|
$
455,713
|
Cost of
sales
|
|
118,769
|
|
109,575
|
|
416,831
|
|
425,652
|
Gross profit
|
|
19,462
|
|
3,828
|
|
55,787
|
|
30,061
|
Selling, general and
administrative expense
|
|
9,308
|
|
5,898
|
|
31,348
|
|
24,504
|
Restructuring
charges
|
|
738
|
|
-
|
|
1,695
|
|
-
|
Acquisition
costs
|
|
-
|
|
-
|
|
195
|
|
-
|
Other expense
(income), net
|
|
29
|
|
50
|
|
(1,254)
|
|
(1,773)
|
Interest
expense
|
|
28
|
|
31
|
|
106
|
|
168
|
Interest
income
|
|
(21)
|
|
(117)
|
|
(473)
|
|
(293)
|
Earnings (loss) before income taxes
|
|
9,380
|
|
(2,034)
|
|
24,170
|
|
7,455
|
Income
taxes
|
|
1,954
|
|
(267)
|
|
5,161
|
|
1,857
|
Net earnings (loss)
|
|
$
7,426
|
|
$
(1,767)
|
|
$
19,009
|
|
$
5,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.38
|
|
$
(0.09)
|
|
$
0.99
|
|
$
0.29
|
Diluted
|
|
0.38
|
|
(0.09)
|
|
0.98
|
|
0.29
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
19,296
|
|
19,256
|
|
19,278
|
|
19,243
|
Diluted
|
|
19,396
|
|
19,256
|
|
19,383
|
|
19,340
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
|
$
0.03
|
|
$
0.03
|
|
$
0.12
|
|
$
0.12
|
INSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
October
3,
|
|
June
27,
|
|
September
28,
|
|
|
2020
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
68,688
|
|
$
61,371
|
|
$
38,181
|
Accounts receivable, net
|
|
53,817
|
|
54,901
|
|
44,182
|
Inventories
|
|
68,963
|
|
74,269
|
|
70,851
|
Other current assets
|
|
5,570
|
|
6,245
|
|
7,370
|
Total
current assets
|
|
197,038
|
|
196,786
|
|
160,584
|
Property, plant and
equipment, net
|
|
101,392
|
|
101,089
|
|
104,960
|
Intangibles,
net
|
|
8,567
|
|
8,810
|
|
8,610
|
Goodwill
|
|
9,745
|
|
9,745
|
|
8,293
|
Other
assets
|
|
21,160
|
|
20,260
|
|
10,562
|
Total
assets
|
|
$
337,902
|
|
$
336,690
|
|
$
293,009
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
38,961
|
|
$
47,891
|
|
$
21,595
|
Accrued expenses
|
|
14,717
|
|
11,839
|
|
6,818
|
Total
current liabilities
|
|
53,678
|
|
59,730
|
|
28,413
|
Long-term
debt
|
|
-
|
|
-
|
|
-
|
Other
liabilities
|
|
19,421
|
|
19,894
|
|
18,579
|
Commitments and
contingencies
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common stock
|
|
19,304
|
|
19,283
|
|
19,261
|
Additional paid-in capital
|
|
76,387
|
|
75,811
|
|
74,632
|
Retained earnings
|
|
171,068
|
|
164,220
|
|
154,372
|
Accumulated other comprehensive loss
|
|
(1,956)
|
|
(2,248)
|
|
(2,248)
|
Total
shareholders' equity
|
|
264,803
|
|
257,066
|
|
246,017
|
Total
liabilities and shareholders' equity
|
|
$
337,902
|
|
$
336,690
|
|
$
293,009
|
INSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
October
3,
|
|
September
28,
|
|
October
3,
|
|
September
28,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
7,426
|
|
$
(1,767)
|
|
$
19,009
|
|
$
5,598
|
Adjustments to
reconcile net earnings to net cash provided by
|
|
|
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,629
|
|
3,469
|
|
14,255
|
|
13,553
|
Amortization of
capitalized financing costs
|
|
17
|
|
17
|
|
66
|
|
65
|
Stock-based
compensation expense
|
|
751
|
|
856
|
|
2,028
|
|
2,057
|
Deferred income
taxes
|
|
(816)
|
|
(395)
|
|
(424)
|
|
1,798
|
Asset impairment
charges
|
|
-
|
|
-
|
|
343
|
|
-
|
Loss (gain) on sale
and disposition of property, plant and equipment
|
|
(83)
|
|
72
|
|
(1,114)
|
|
(1,688)
|
Increase in cash
surrender value of life insurance policies over premiums
paid
|
|
(419)
|
|
-
|
|
(243)
|
|
(187)
|
Gain from life
insurance claims
|
|
-
|
|
-
|
|
(200)
|
|
-
|
Net changes in assets
and liabilities (net of assets and liabilities
acquired):
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
1,084
|
|
6,561
|
|
(5,806)
|
|
7,302
|
Inventories
|
|
5,306
|
|
33,773
|
|
5,060
|
|
23,306
|
Accounts
payable and accrued expenses
|
|
(6,122)
|
|
(8,952)
|
|
20,159
|
|
(42,592)
|
Other
changes
|
|
647
|
|
(1,104)
|
|
3,091
|
|
(2,604)
|
Total adjustments
|
|
3,994
|
|
34,297
|
|
37,215
|
|
1,010
|
Net cash provided by operating activities
|
|
11,420
|
|
32,530
|
|
56,224
|
|
6,608
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
|
|
|
|
|
Acquisition of
business
|
|
-
|
|
-
|
|
(18,356)
|
|
-
|
Capital
expenditures
|
|
(3,666)
|
|
(1,132)
|
|
(7,114)
|
|
(10,512)
|
Increase in
cash surrender value of life insurance policies
|
|
(81)
|
|
-
|
|
(390)
|
|
(322)
|
Proceeds from
sale of assets held for sale
|
|
311
|
|
-
|
|
2,186
|
|
-
|
Proceeds from
property insurance
|
|
-
|
|
-
|
|
-
|
|
1,192
|
Proceeds from
sale of property, plant and equipment
|
|
-
|
|
2
|
|
40
|
|
19
|
Proceeds from
surrender of life insurance policies
|
|
65
|
|
-
|
|
260
|
|
67
|
Proceeds from
life insurance claims
|
|
-
|
|
-
|
|
200
|
|
-
|
Net cash used for investing activities
|
|
(3,371)
|
|
(1,130)
|
|
(23,174)
|
|
(9,556)
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
long-term debt
|
|
99
|
|
94
|
|
322
|
|
44,333
|
Principal
payments on long-term debt
|
|
(99)
|
|
(94)
|
|
(322)
|
|
(44,333)
|
Cash dividends
paid
|
|
(578)
|
|
(578)
|
|
(2,313)
|
|
(2,310)
|
Financing
costs
|
|
-
|
|
(26)
|
|
-
|
|
(263)
|
Payment of
employee tax withholdings related to net share
transactions
|
|
(154)
|
|
(64)
|
|
(230)
|
|
(239)
|
Net cash used for financing activities
|
|
(732)
|
|
(668)
|
|
(2,543)
|
|
(2,812)
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
7,317
|
|
30,732
|
|
30,507
|
|
(5,760)
|
Cash and cash
equivalents at beginning of period
|
|
61,371
|
|
7,449
|
|
38,181
|
|
43,941
|
Cash and cash
equivalents at end of period
|
|
$
68,688
|
|
$
38,181
|
|
$
68,688
|
|
$
38,181
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid
during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
49
|
Income taxes, net
|
|
1,577
|
|
(16)
|
|
1,919
|
|
1,743
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment in accounts
payable
|
|
769
|
|
377
|
|
769
|
|
377
|
Restricted stock units and stock options surrendered for
withholding taxes payable
|
154
|
|
64
|
|
230
|
|
239
|
Payable related to holdback for business acquired
|
|
-
|
|
-
|
|
1,000
|
|
-
|
IIIN – E
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multimedia:http://www.prnewswire.com/news-releases/insteel-industries-reports-fourth-quarter-and-fiscal-2020-results-301156142.html
SOURCE Insteel Industries, Inc.