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8-K - FORM 8-K - INSTEEL INDUSTRIES INC | g27713e8vk.htm |
Exhibit 99.1
Insteel Industries, Inc.
NEWS RELEASE
FOR IMMEDIATE RELEASE
|
Contact: | Michael C. Gazmarian | ||
Vice President, Chief Financial Officer and Treasurer | ||||
Insteel Industries, Inc. | ||||
336-786-2141, Ext. 3020 |
INSTEEL INDUSTRIES REPORTS THIRD QUARTER FINANCIAL RESULTS
MOUNT AIRY, N.C., July 21, 2011 Insteel Industries, Inc. (NasdaqGS: IIIN) today reported net
earnings of $3.7 million ($0.20 per diluted share) for the third quarter of fiscal 2011 compared
with $1.6 million ($0.09 per share) in the third quarter of fiscal 2010. Net earnings for the
current year quarter include restructuring charges of $2.0 million ($0.07 per share after-tax)
related to the November 2010 acquisition of certain of the assets of Ivy Steel & Wire, Inc.
(Ivy).
Insteels financial results for the third quarter of fiscal 2011 were favorably impacted by the
contribution from the Ivy facilities and widening spreads between selling prices and raw material
costs. Demand for the Companys products remained at depressed levels due to the ongoing weakness
in the construction sector. Insteels capacity utilization for the quarter was 48% compared with
46% in the second quarter of fiscal 2011 and 52% in the third quarter of fiscal 2010.
Net sales for the third quarter of fiscal 2011 increased 59.1% to $98.6 million from $62.0 million
in the third quarter of fiscal 2010 primarily due to the addition of Ivys facilities and higher
average selling prices. Shipments for the third quarter of fiscal 2011 increased 41.9% from the
prior year quarter and average selling prices increased 12.1%. On a sequential basis, shipments
increased 7.5% from the second quarter of fiscal 2011 and average selling prices increased 5.5%.
For the first nine months of fiscal 2011, Insteel incurred a net loss of $1.4 million ($0.08 per
share) compared with net earnings of $2.1 million ($0.12 per share) in the first nine months of
fiscal 2010. The nine-month results for the current year include restructuring charges,
acquisition-related costs and a bargain purchase gain related to the Ivy acquisition, which had the
net effect of reducing net earnings by $11.6 million ($0.41 per share after-tax). Net earnings for
the prior year period include $1.9 million ($0.07 per share after-tax) of inventory write-downs to
reduce the carrying value of inventory to the lower of cost or market.
Net sales for the first nine months of fiscal 2011 increased 53.0% to $237.8 million from $155.4
million in the first nine months of fiscal 2010. Shipments for the first nine months of fiscal 2011
increased 35.0% from the prior year period and average selling prices increased 13.4%.
Liquidity and Capital Resources
Operating activities used $0.1 million of cash for the third quarter of fiscal 2011 compared with
$6.8 million in the third quarter of fiscal 2010. Net working capital used $8.8 million of cash
during the current year quarter and $10.7 million in the prior year quarter primarily due to the
usual seasonal increase in sales volume together with sequential increases in selling prices and
raw material costs. Capital expenditures for the nine-month period were $6.3 million and are
expected to total less than $10.0 million for fiscal 2011. Insteel ended the quarter with $2.0
million of cash and cash equivalents,
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1373 BOGGS DRIVE / MOUNT AIRY, NORTH CAROLINA 27030 / 336-786-2141/ FAX 336-786-2144
Page 2 of 7
$13.5 million of total debt and no borrowings outstanding on its $75.0 million revolving credit
facility.
Ivy Acquisition and Restructuring Activities
The Company has completed the consolidation of its welded wire reinforcement operations in Texas
and the Northeast, which involved the closure of two facilities and absorption of the business by
other Insteel locations. These actions were taken due to the close proximity of the Ivy facilities
that were acquired in Hazleton, Pennsylvania and Houston, Texas to Insteels existing facilities in
Wilmington, Delaware and Dayton, Texas. The leased facility in Houston was closed in December 2010
and the Wilmington facility was closed in May 2011. The Company is also in the process of
reconfiguring certain of its operations and redeploying equipment across locations in order to
achieve further improvements in its operating costs and customer service capabilities. These
activities are currently expected to be completed by the end of the first quarter of fiscal 2012.
The $2.0 million of restructuring charges recorded during the quarter include asset impairment
charges to write down the carrying value of long-lived assets related to the facility closures and
decommissioning of equipment ($0.7 million); other facility closure-related costs ($0.6 million);
equipment relocation costs ($0.6 million); and employee separation costs ($0.1 million). The
Company currently expects to incur approximately $1.0 million of additional restructuring charges
in connection with the remaining anticipated equipment relocation and facility closure-related
costs.
With the facility consolidations, staffing reductions and systems conversions essentially behind
us, our integration efforts are now focused on the implementation of Insteel operating metrics and
procedures at the former Ivy locations and the execution of the remainder of our reconfiguration
plans, said H.O. Woltz III, Insteels president and CEO. We expect these initiatives will further
strengthen Insteels competitive position and improve our earnings potential, which should become
more apparent as market conditions improve.
Outlook
Commenting on the outlook for the remainder of 2011, Woltz said, As we head into the second half
of the calendar year, we expect demand in our construction end-markets to remain at depressed
levels pending a sustained recovery in the private sector and increased availability of credit for
project financing. The outlook for infrastructure construction is clouded by the uncertainty
regarding the duration and magnitude of a new federal transportation funding authorization and the
fiscal constraints at the state and local level. During the interim, we expect market conditions to
remain intensively competitive, although our financial results should be favorably impacted by
increasing contributions from the Ivy acquisition and our ongoing process improvement initiatives.
In addition, our strong balance sheet and financial flexibility position us to pursue additional
acquisition opportunities in our core businesses that further our market penetration or expand our
geographic footprint.
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss its third quarter 2011
financial results. A live webcast of this call can be accessed on Insteels website at
http://investor.insteel.com/ and will be archived for replay until the next quarterly conference
call.
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Insteel Industries, Inc.
Page 3 of 7
About Insteel
Insteel is the nations largest manufacturer of steel wire reinforcing products for concrete
construction applications. Insteel manufactures and markets PC strand and welded wire
reinforcement, including concrete pipe reinforcement, engineered structural mesh (ESM) and
standard welded wire reinforcement. Insteels products are sold primarily to manufacturers of
concrete products that are used in nonresidential construction. Headquartered in Mount Airy, North
Carolina, Insteel currently operates nine manufacturing facilities located in the United States.
All references to per share amounts in this release indicate that the amounts referenced were the
same on a basic and diluted basis.
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, plans, intends, may, should
and similar expressions are intended to identify forward-looking statements. Although the Company
believes that its plans, intentions and expectations reflected in or suggested by such
forward-looking statements are reasonable, such forward-looking statements are subject to a number
of risks and uncertainties, and the Company can provide no assurances that such plans, intentions
or expectations will be achieved. Many of these risks and uncertainties are discussed in detail in
the Companys periodic and other reports and statements that it files 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 2, 2010. You should carefully review these risks and uncertainties.
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 Insteels
future operations or financial performance; however, they include, but are not limited to, the
following: potential difficulties that may be encountered in integrating the acquisition of certain
assets of Ivy into Insteels existing business; potential difficulties in realizing synergies,
including reduced operating costs, with respect to Insteels acquisition of certain assets of Ivy;
competitive and customer responses to Insteels expanded business; general economic and competitive
conditions in the markets in which Insteel operates; credit market conditions and the relative
availability of financing to Insteel, its customers and the construction industry as a whole; the
continuation of reduced spending for nonresidential construction, particularly commercial
construction, and the impact on demand for Insteels products; the duration and magnitude of a new
federal transportation funding authorization and the amount of infrastructure-related funding
provided for that requires the use of Insteels products; the severity and duration of the downturn
in residential construction and the impact on those portions of Insteels business that are
correlated with the housing sector; the cyclical nature of the steel and building material
industries; fluctuations in the cost and availability of Insteels primary raw material, hot-rolled
steel wire rod, from domestic and foreign suppliers; competitive pricing pressures and Insteels
ability to raise
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Insteel Industries, Inc.
Page 4 of 7
selling prices in order to recover increases in wire rod costs; changes in U.S. or foreign trade
policy affecting imports or exports of steel wire rod or Insteels products; unanticipated changes
in customer demand, order patterns and inventory levels; the impact of weak demand and reduced
capacity utilization
levels on Insteels unit manufacturing costs; Insteels ability to further develop the market for
engineered structural mesh (ESM) and expand its shipments of ESM; legal, environmental, economic
or regulatory developments that significantly impact Insteels operating costs; unanticipated plant
outages, equipment failures or labor difficulties; continued escalation in certain of Insteels
operating costs; and the other risks and uncertainties discussed in Insteels Annual Report on Form
10-K for the year ended October 2, 2010 and in other filings made by Insteel with the SEC.
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Insteel Industries, Inc.
Page 5 of 7
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share data)
(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
July 2, | July 3, | July 2, | July 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 98,579 | $ | 61,956 | $ | 237,818 | $ | 155,425 | ||||||||
Cost of sales |
86,050 | 54,266 | 213,821 | 137,841 | ||||||||||||
Inventory write-downs |
| | | 1,933 | ||||||||||||
Gross profit |
12,529 | 7,690 | 23,997 | 15,651 | ||||||||||||
Selling, general and administrative expense |
4,947 | 4,317 | 13,638 | 12,241 | ||||||||||||
Restructuring charges |
1,970 | | 8,573 | | ||||||||||||
Acquisition costs |
| | 3,518 | | ||||||||||||
Bargain purchase gain |
| | (500 | ) | | |||||||||||
Other income, net |
(27 | ) | (2 | ) | (96 | ) | (252 | ) | ||||||||
Interest expense |
260 | 116 | 664 | 411 | ||||||||||||
Interest income |
(18 | ) | (45 | ) | (37 | ) | (71 | ) | ||||||||
Earnings (loss) from continuing operations before
income taxes |
5,397 | 3,304 | (1,763 | ) | 3,322 | |||||||||||
Income taxes |
1,747 | 1,680 | (404 | ) | 1,177 | |||||||||||
Earnings (loss) from continuing operations |
3,650 | 1,624 | (1,359 | ) | 2,145 | |||||||||||
Loss from
discontinued operations net of income taxes of $- , ($12), $- and ($26) |
| (19 | ) | | (42 | ) | ||||||||||
Net earnings (loss) |
$ | 3,650 | $ | 1,605 | $ | (1,359 | ) | $ | 2,103 | |||||||
Per share amounts: |
||||||||||||||||
Basic: |
||||||||||||||||
Earnings (loss) from continuing operations |
$ | 0.21 | $ | 0.09 | $ | (0.08 | ) | $ | 0.12 | |||||||
Loss from discontinued operations |
| | | | ||||||||||||
Net earnings (loss) |
$ | 0.21 | $ | 0.09 | $ | (0.08 | ) | $ | 0.12 | |||||||
Diluted: |
||||||||||||||||
Earnings (loss) from continuing operations |
$ | 0.20 | $ | 0.09 | $ | (0.08 | ) | $ | 0.12 | |||||||
Loss from discontinued operations |
| | | | ||||||||||||
Net earnings (loss) |
$ | 0.20 | $ | 0.09 | $ | (0.08 | ) | $ | 0.12 | |||||||
Cash dividends declared |
$ | 0.03 | $ | 0.03 | $ | 0.09 | $ | 0.09 | ||||||||
Weighted average shares outstanding |
||||||||||||||||
Basic |
17,587 | 17,492 | 17,550 | 17,454 | ||||||||||||
Diluted |
17,855 | 17,695 | 17,550 | 17,661 | ||||||||||||
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Insteel Industries, Inc.
Page 6 of 7
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) | ||||||||||||
July 2, | April 2, | October 2, | ||||||||||
2011 | 2011 | 2010 | ||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 2,009 | $ | 3,893 | $ | 45,935 | ||||||
Accounts receivable, net |
43,691 | 37,418 | 24,970 | |||||||||
Inventories |
70,454 | 61,717 | 43,919 | |||||||||
Other current assets |
5,699 | 4,930 | 3,931 | |||||||||
Total current assets |
121,853 | 107,958 | 118,755 | |||||||||
Property, plant and equipment, net |
90,018 | 93,169 | 58,653 | |||||||||
Other assets |
6,077 | 5,770 | 5,097 | |||||||||
Total assets |
$ | 217,948 | $ | 206,897 | $ | 182,505 | ||||||
Liabilities and shareholders equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 41,952 | $ | 35,870 | $ | 20,689 | ||||||
Accrued expenses |
8,267 | 8,555 | 5,929 | |||||||||
Current portion of long-term debt |
675 | 675 | | |||||||||
Current liabilities of discontinued operations |
| | 210 | |||||||||
Total current liabilities |
50,894 | 45,100 | 26,828 | |||||||||
Long-term debt |
12,825 | 12,825 | | |||||||||
Other liabilities |
7,381 | 5,970 | 7,521 | |||||||||
Long-term liabilities of discontinued operations |
| | 280 | |||||||||
Shareholders equity: |
||||||||||||
Common stock |
17,615 | 17,614 | 17,579 | |||||||||
Additional paid-in capital |
47,828 | 47,105 | 45,950 | |||||||||
Retained earnings |
83,714 | 80,592 | 86,656 | |||||||||
Accumulated other comprehensive loss |
(2,309 | ) | (2,309 | ) | (2,309 | ) | ||||||
Total shareholders equity |
146,848 | 143,002 | 147,876 | |||||||||
Total liabilities and shareholders equity |
$ | 217,948 | $ | 206,897 | $ | 182,505 | ||||||
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Insteel Industries, Inc.
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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
July 2, | July 3, | July 2, | July 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash Flows From Operating Activities: |
||||||||||||||||
Net earnings (loss) |
$ | 3,650 | $ | 1,605 | $ | (1,359 | ) | $ | 2,103 | |||||||
Loss from discontinued operations |
| 19 | | 42 | ||||||||||||
Earnings (loss) from continuing operations |
3,650 | 1,624 | (1,359 | ) | 2,145 | |||||||||||
Adjustments to reconcile earnings (loss) from continuing operations to net cash
provided by (used for) operating activities of continuing operations: |
||||||||||||||||
Depreciation and amortization |
2,509 | 1,772 | 7,062 | 5,230 | ||||||||||||
Amortization of capitalized financing costs |
21 | 93 | 61 | 342 | ||||||||||||
Stock-based compensation expense |
716 | 501 | 1,898 | 1,604 | ||||||||||||
Asset impairment charges |
683 | | 4,135 | | ||||||||||||
Inventory write-downs |
| | | 1,933 | ||||||||||||
Excess tax benefits from stock-based compensation |
| | (81 | ) | (3 | ) | ||||||||||
Loss (gain) on sale of property, plant and equipment |
(26 | ) | 2 | (10 | ) | 13 | ||||||||||
Deferred income taxes |
1,802 | (222 | ) | (474 | ) | (439 | ) | |||||||||
Gain from life insurance proceeds |
| | (357 | ) | | |||||||||||
Decrease
(increase) in cash surrender value of life insurance policies over premiums paid |
(59 | ) | 274 | (357 | ) | (10 | ) | |||||||||
Net changes in assets and liabilities (net of assets and liabilities acquired): |
||||||||||||||||
Accounts receivable, net |
(6,273 | ) | (5,245 | ) | (18,721 | ) | (7,167 | ) | ||||||||
Inventories |
(8,737 | ) | (9,655 | ) | (5,950 | ) | (5,206 | ) | ||||||||
Accounts payable and accrued expenses |
6,227 | 4,159 | 15,587 | 83 | ||||||||||||
Other changes |
(650 | ) | (91 | ) | (1,529 | ) | 14,167 | |||||||||
Total adjustments |
(3,787 | ) | (8,412 | ) | 1,264 | 10,547 | ||||||||||
Net cash provided by (used for) operating activities continuing
operations |
(137 | ) | (6,788 | ) | (95 | ) | 12,692 | |||||||||
Net cash used for operating activities discontinued operations |
| (33 | ) | | (73 | ) | ||||||||||
Net cash provided by (used for) operating activities |
(137 | ) | (6,821 | ) | (95 | ) | 12,619 | |||||||||
Cash Flows From Investing Activities: |
||||||||||||||||
Acquisition of business |
| | (37,308 | ) | | |||||||||||
Capital expenditures |
(1,390 | ) | (347 | ) | (6,292 | ) | (1,249 | ) | ||||||||
Proceeds from life insurance claims |
| | 1,063 | | ||||||||||||
Proceeds from sale of property, plant and equipment |
146 | | 164 | | ||||||||||||
Increase in cash surrender value of life insurance policies |
(35 | ) | (30 | ) | (460 | ) | (440 | ) | ||||||||
Proceeds from surrender of life insurance policies |
19 | | 19 | | ||||||||||||
Net cash used for investing activities continuing operations |
(1,260 | ) | (377 | ) | (42,814 | ) | (1,689 | ) | ||||||||
Net cash used for investing activities |
(1,260 | ) | (377 | ) | (42,814 | ) | (1,689 | ) | ||||||||
Cash Flows From Financing Activities: |
||||||||||||||||
Proceeds from long-term debt |
6,699 | 81 | 12,607 | 231 | ||||||||||||
Principal payments on long-term debt |
(6,699 | ) | (81 | ) | (12,607 | ) | (231 | ) | ||||||||
Financing costs |
| (395 | ) | | (395 | ) | ||||||||||
Cash received from exercise of stock options |
8 | 56 | 21 | 140 | ||||||||||||
Excess tax benefits from stock-based compensation |
| | 81 | 3 | ||||||||||||
Cash dividends paid |
(528 | ) | (527 | ) | (1,055 | ) | (1,580 | ) | ||||||||
Other |
33 | (29 | ) | (64 | ) | (30 | ) | |||||||||
Net cash used for financing activities continuing operations |
(487 | ) | (895 | ) | (1,017 | ) | (1,862 | ) | ||||||||
Net cash used for financing activities |
(487 | ) | (895 | ) | (1,017 | ) | (1,862 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents |
(1,884 | ) | (8,093 | ) | (43,926 | ) | 9,068 | |||||||||
Cash and cash equivalents at beginning of period |
3,893 | 52,263 | 45,935 | 35,102 | ||||||||||||
Cash and cash equivalents at end of period |
$ | 2,009 | $ | 44,170 | $ | 2,009 | $ | 44,170 | ||||||||
Supplemental Disclosures of Cash Flow Information: |
||||||||||||||||
Cash paid during the period for: |
||||||||||||||||
Interest |
$ | 373 | $ | 23 | $ | 439 | $ | 69 | ||||||||
Income taxes |
(106 | ) | 184 | 654 | 186 | |||||||||||
Non-cash investing and financing activities: |
||||||||||||||||
Purchases of property, plant and equipment in accounts payable |
(434 | ) | 99 | 7 | 197 | |||||||||||
Declaration of cash dividends to be paid |
528 | | 528 | | ||||||||||||
Restricted stock surrendered for withholding taxes payable |
| | 86 | 52 | ||||||||||||
Note payable issued as consideration for business acquired |
| | 13,500 | | ||||||||||||
Post-closing purchase price adjustment for business acquired |
| | 500 | |
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Insteel Industries, Inc.