Insteel Industries Reports Fourth Quarter and Fiscal Year 2009 Financial Results
- Press Release
- Source: Insteel Industries, Inc.
- On 8:30 am EDT, Thursday October 22, 2009
MOUNT AIRY, N.C., Oct. 22 /PRNewswire-FirstCall/ -- Insteel Industries, Inc. (Nasdaq: IIIN - News) today reported earnings from continuing operations of $2.8 million ($0.16 per share) for the fourth quarter of fiscal 2009 compared with a loss from continuing operations of $1.7 million ($0.10 per share) in the third quarter of fiscal 2009. Earnings from continuing operations in the fourth quarter of fiscal 2008 were $15.6 million ($0.89 per diluted share).
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| IIIN | 11.75 | -0.40 |
Including the results of discontinued operations, net earnings for the fourth quarter of fiscal 2009 were $1.7 million ($0.10 per share) compared with a net loss of $1.7 million ($0.10 per share) in the third quarter of fiscal 2009. The loss from discontinued operations for the fourth quarter of fiscal 2009 reflects a $1.8 million impairment charge ($1.1 million or $0.06 per share after-tax) to write down the carrying value of the real estate held for sale associated with the industrial wire business, which the Company exited in 2006. Net earnings in the fourth quarter of fiscal 2008 were $15.7 million ($0.89 per diluted share).
Net sales for the fourth quarter of fiscal 2009 ($61.1 million) increased 7.2% compared with the third quarter of fiscal 2009 ($57.0 million) and decreased 42.5% from the fourth quarter of fiscal 2008 ($106.3 million). Shipments increased 16.4% from the third quarter of fiscal 2009 and decreased 4.4% from the fourth quarter of fiscal 2008. Average selling prices decreased 7.9% from the third quarter of fiscal 2009 and 39.9% from the fourth quarter of fiscal 2008. Based on the Company's fiscal calendar, the fourth quarter of fiscal 2009 benefited from having one additional week than the third quarter of fiscal 2009 and the fourth quarter of fiscal 2008.
For fiscal 2009, the Company incurred a loss from continuing operations of $20.9 million ($1.20 per diluted share) compared with earnings from continuing operations of $43.7 million ($2.47 per diluted share) in fiscal 2008. The fiscal 2009 loss includes a pre-tax charge of $25.9 million ($0.96 per share after-tax) for inventory write-downs to reduce the carrying value of inventory to the lower of cost or market. Including the results of discontinued operations, the net loss for fiscal 2009 was $22.1 million ($1.27 per share) compared with net earnings of $43.8 million ($2.47 per diluted share) in fiscal 2008. Net sales for fiscal 2009 decreased 34.9% to $230.2 million from $353.9 million in fiscal 2008. Shipments for fiscal 2009 decreased 29.7% while average selling prices decreased 7.5% from fiscal 2008. Based on the Company's fiscal calendar, fiscal 2009 benefited from having one additional week than fiscal 2008.
Insteel's financial results for the fourth quarter were favorably impacted by higher shipments compared with the previous quarter reflecting reduced imports of PC strand and the completion of customer inventory destocking following the surge of low priced PC strand imports that occurred in 2008. Additionally, spreads between average selling prices and raw material costs widened from the third quarter of fiscal 2009 and unit conversion costs declined on higher operating volumes. Insteel's overall capacity utilization for the quarter was 56% compared with 42% in the third quarter of fiscal 2009 and 63% in the fourth quarter of fiscal 2008.
Continuing operating activities provided $14.9 million of cash for the fourth quarter compared with $23.1 million in the third quarter of fiscal 2009 primarily due to the larger reductions in working capital in the previous quarter. Cash provided by continuing operating activities was $10.2 million in the fourth quarter of fiscal 2008. Capital expenditures for the year were $2.4 million compared with $9.5 million for fiscal 2008 and are expected to total less than $5.0 million for fiscal 2010. In connection with the current year loss, the Company has an estimated income tax refund of $13.0 million that it expects to receive during fiscal 2010. Insteel ended the year debt-free with $35.1 million of cash and cash equivalents.
"We are pleased with Insteel's financial performance for the fourth quarter, particularly in view of the continued weakness in our markets and low operating rates at our facilities," commented H.O. Woltz III, Insteel's president and CEO. "Our results for the quarter benefited from the sequential increase in shipments as PC strand customers worked through the substantial inventories that had accumulated earlier in the fiscal year consisting largely of low priced imports from China. Welded wire reinforcing customers also ramped up purchases in response to the closer alignment between inventories and sales."
PC Strand Trade Actions
In May 2009, a coalition of U.S. PC strand producers, including Insteel, filed antidumping and countervailing duty petitions alleging that imports of PC strand from China were injuring the domestic PC strand industry. The petitions allege that imports of PC strand from China were being "dumped" or sold in the U.S. at a price that was lower than its fair value and that subsidies were being provided to Chinese PC strand producers by the Chinese government. The petitioners are alleging dumping margins ranging from 140% to 315%, with an average margin of 223%.
The next step in the investigative process will be the issuance of preliminary determinations by the U.S. Department of Commerce ("DOC") regarding the alleged dumping and subsidies. The current deadline for these preliminary decisions is October 26, 2009 for the countervailing duty case and December 3, 2009 for the antidumping case. If the DOC rules in the affirmative, importers would be required to begin posting cash deposits or bonds on all future imports of Chinese PC strand in the amount of the preliminary margins calculated by the DOC. The entire investigative process is anticipated to take approximately one year, with the final determinations of injury, dumping and subsidies expected to occur in mid-2010.
Concerning the trade cases, Woltz commented, "Despite the lengthy timeline inherent to pursuing relief from illegal trading practices, we believe that the trade cases we filed in May 2009 had a positive impact on our business during the fourth quarter. Insteel's shipments of PC strand rose 18.7% sequentially due largely to reduced import competition and we were able to implement price increases during August to recover rising raw material costs. Absent the impact of the pending cases, it is unlikely that we would have been able to report positive news on either of these fronts."
Outlook
Commenting on the outlook for fiscal 2010, Woltz said, "In certain of our welded wire reinforcing markets, there are recent indications that we have gained share by outservicing our competitors, which should translate into increased volume in the coming year. At the same time, while the upturn in business we have experienced during the third and fourth quarters is encouraging, we do not believe that it constitutes a rebound in actual end use demand for our products. In fact, we expect that market conditions will remain difficult for the near-term as customers work down backlogs and new project activity stays at depressed levels amid the ongoing uncertainty regarding the timing and magnitude of a sustained economic recovery. We are also moving into what has historically been our seasonally weakest period of the year when construction activity and demand for our products are significantly impacted by weather conditions. The next two quarters could be particularly challenging given that demand is also being adversely affected by cyclical forces.
As we enter a new year, we will continue to focus on delivering value in each of our markets, striving to be the supplier of choice and building upon our leadership positions. We will also focus on maintaining our financial strength and flexibility so that we are well-positioned to capitalize on any growth opportunities that may arise."
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss its fourth quarter and fiscal 2009 financial results. A live webcast of this call can be accessed on Insteel's website at http://investor.insteel.com/ and will be archived for replay until the next quarterly conference call.
About Insteel
Insteel is one of the nation's largest manufacturers 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. 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 six 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," "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 Company's 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 September 27, 2008. You should carefully review these risks and uncertainties.
All forward-looking statements attributable to the Company 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 the Company 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.
It is not possible to anticipate and list all risks and uncertainties that may affect the Company'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 the Company operates; credit market conditions and the impact of the measures that have been taken by the federal government on the relative availability of financing for the Company, its customers and the construction industry as a whole; the timing and magnitude of the impact of the additional federal infrastructure-related funding provided for under the American Recovery and Reinvestment Act; the anticipated reduction in spending for nonresidential construction, particularly commercial construction, and the impact on demand for the Company's concrete reinforcing products; the severity and duration of the downturn in residential construction and the impact on those portions of the Company's 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 the Company's primary raw material, hot-rolled steel wire rod from domestic and foreign suppliers; the Company's ability to raise 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 the Company's products, including the outcome of the trade cases that have been filed by domestic producers of PC strand regarding imports of PC strand from China; unanticipated changes in customer demand, order patterns and inventory levels; the impact of weak demand and reduced capacity utilization levels on the Company's unit manufacturing costs; the Company's ability to further develop the market for ESM and expand its shipments of ESM; the actual net proceeds realized and closure costs incurred in connection with the Company's exit from the industrial wire business; legal, environmental, economic or regulatory developments that significantly impact the Company's operating costs; unanticipated plant outages, equipment failures or labor difficulties; continued escalation in certain of the Company's operating costs; and the other risks and uncertainties discussed in the Company's Annual Report on Form 10-K for the year ended September 27, 2008 and in other filings made by the Company with the SEC.
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share data)
Three Months Ended Year Ended
----------------------------------- ----------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Oct. 3, June 27, Sept. 27, Oct. 3, Sept. 27,
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
Net sales $61,070 $56,963 $106,290 $230,236 $353,862
Cost of sales 51,935 52,889 76,827 219,388 267,107
Inventory
write-downs 88 2,898 - 25,941 -
-- ----- --- ------ ---
Gross profit
(loss) 9,047 1,176 29,463 (15,093) 86,755
Selling, general
and administrative
expense 4,126 4,016 4,875 17,243 18,623
Other expense
(income), net (85) (1) 173 (135) 85
Interest expense 157 147 134 641 594
Interest income (26) (16) (153) (144) (721)
--- --- ---- ---- ----
Earnings (loss)
from continuing
operations
before income
taxes 4,875 (2,970) 24,434 (32,698) 68,174
Income taxes 2,097 (1,233) 8,788 (11,758) 24,457
----- ------ ----- ------- ------
Earnings (loss)
from continuing
operations 2,778 (1,737) 15,646 (20,940) 43,717
Earnings (loss)
from discontinued
operations net of
income taxes of
($692), ($6),
$23, ($729)
and $23 (1,085) (12) 37 (1,146) 35
------ --- -- ------ --
Net earnings
(loss) $1,693 $(1,749) $15,683 $(22,086) $43,752
====== ======= ======= ======== =======
Per share amounts:
Basic:
Earnings (loss)
from
continuing
operations $0.16 $(0.10) $0.90 $(1.20) $2.49
Earnings
(loss)
from
discontinued
operations (0.06) - - (0.07) -
----- --- --- ----- ---
Net
earnings
(loss) $0.10 $(0.10) $0.90 $(1.27) $2.49
===== ====== ===== ====== =====
Diluted:
Earnings
(loss) from
continuing
operations $0.16 $(0.10) $0.89 $(1.20) $2.47
Earnings
(loss) from
discontinued
operations (0.06) - - (0.07) -
----- --- --- ----- ---
Net earnings
(loss) $0.10 $(0.10) $0.89 $(1.27) $2.47
===== ====== ===== ====== =====
Cash dividends
declared $0.03 $0.03 $0.53 $0.12 $0.62
===== ===== ===== ===== =====
Weighted average
shares
outstanding
Basic 17,405 17,392 17,335 17,380 17,547
====== ====== ====== ====== ======
Diluted 17,595 17,392 17,529 17,380 17,712
====== ====== ====== ====== ======
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
-------------------
October 3, June 27, September 27,
2009 2009 2008
---- ---- ----
Assets
Current assets:
Cash and cash equivalents $35,102 $21,569 $26,493
Accounts receivable, net 21,283 24,635 49,581
Inventories 38,542 35,169 71,220
Prepaid expenses and other 16,724 18,284 3,122
------ ------ -----
Total current assets 111,651 99,657 150,416
Property, plant and
equipment, net 64,204 65,396 69,105
Other assets 4,382 3,722 5,064
Non-current assets of
discontinued operations 1,880 3,635 3,635
----- ----- -----
Total assets $182,117 $172,410 $228,220
======== ======== ========
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable $23,965 $16,346 $23,581
Accrued expenses 5,215 4,434 29,081
Current liabilities of
discontinued operations 219 217 188
--- --- ---
Total current liabilities 29,399 20,997 52,850
Other liabilities 5,465 5,245 5,306
Long-term liabilities of
discontinued operations 183 191 217
Shareholders' equity:
Common stock 17,525 17,526 17,507
Additional paid-in capital 43,774 43,213 41,746
Retained earnings 88,291 87,123 112,479
Accumulated other
comprehensive loss (2,520) (1,885) (1,885)
------ ------ ------
Total shareholders' equity 147,070 145,977 169,847
------- ------- -------
Total liabilities and
shareholders' equity $182,117 $172,410 $228,220
======== ======== ========
INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
October 3, June 27, September 27,
2009 2009 2008
---- ---- ----
Cash Flows From Operating
Activities:
Net earnings (loss) $1,693 $(1,749) $15,683
Loss (earnings) from
discontinued operations 1,085 12 (37)
----- -- ---
Earnings (loss) from
continuing operations 2,778 (1,737) 15,646
Adjustments to reconcile
earnings (loss) from continuing
operations to net cash provided
by operating activities of
continuing operations:
Depreciation and amortization 1,982 1,826 1,934
Amortization of capitalized
financing costs 134 125 124
Stock-based compensation
expense 610 441 477
Excess tax deficiencies
(benefits) from stock-based
compensation 35 (1) (4)
Inventory write-downs 88 2,898 -
Loss on sale of property,
plant and equipment - 4 234
Deferred income taxes 341 (258) (218)
Gain from life insurance
proceeds - - -
Net changes in assets and
liabilities:
Accounts receivable, net 3,352 (1,282) (3,924)
Inventories (3,461) 17,006 1,776
Accounts payable and
accrued expenses 8,377 5,024 (6,509)
Other changes 685 (959) 659
--- ---- ---
Total adjustments 12,143 24,824 (5,451)
------ ------ ------
Net cash provided by
operating activities -
continuing operations 14,921 23,087 10,195
Net cash provided by
(used for) operating
activities -
discontinued operations 663 (30) 34
--- --- --
Net cash provided
by operating
activities 15,584 23,057 10,229
------ ------ ------
Cash Flows From Investing
Activities:
Capital expenditures (693) (302) (1,059)
Proceeds from sale of property,
plant and equipment - - 23
Decrease (increase) in cash
surrender value of life
insurance policies (300) (269) 175
Proceeds from surrender of
life insurance policies - - 170
Proceeds from life insurance
claims - - -
--- --- ---
Net cash used for
investing activities
- continuing operations (993) (571) (691)
---- ---- ----
Net cash used for
investing activities (993) (571) (691)
---- ---- ----
Cash Flows From Financing
Activities:
Proceeds from long-term debt 124 2,322 74
Principal payments on
long-term debt (124) (2,722) (74)
Cash received from exercise of
stock options - - -
Excess tax benefits
(deficiencies) from stock-based
compensation (35) 1 4
Repurchases of common stock - - -
Cash dividends paid (1,051) (526) (525)
Other 28 - 4
-- --- ---
Net cash used for
financing activities -
continuing operations (1,058) (925) (517)
------ ---- ----
Net cash used for
financing activities (1,058) (925) (517)
------ ---- ----
Net increase in cash and cash
equivalents 13,533 21,561 9,021
Cash and cash equivalents at
beginning of period 21,569 8 17,472
------ --- ------
Cash and cash equivalents at
end of period $35,102 $21,569 $26,493
======= ======= =======
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the period
for:
Interest $23 $22 $9
Income taxes 12 109 4,686
Non-cash investing and financing
activities:
Purchases of property, plant
and equipment in accounts
payable 97 (131) (94)
Issuance of restricted stock - - 452
Declaration of cash dividends
to be paid - 526 9,279
Restricted stock surrendered
for withholding taxes payable 15 - -
Year Ended
--------------------------
(Unaudited)
October 3, September 27,
2009 2008
---- ----
Cash Flows From Operating Activities:
Net earnings (loss) $(22,086) $43,752
Loss (earnings) from discontinued
operations 1,146 (35)
----- ---
Earnings (loss) from continuing
operations (20,940) 43,717
Adjustments to reconcile earnings
(loss) from continuing operations to
net cash provided by operating
activities of continuing operations:
Depreciation and amortization 7,377 7,271
Amortization of capitalized financing
costs 508 498
Stock-based compensation expense 2,036 1,759
Excess tax deficiencies (benefits)
from stock-based compensation 32 (31)
Inventory write-downs 25,941 -
Loss on sale of property, plant and
equipment 24 289
Deferred income taxes 422 484
Gain from life insurance proceeds - (661)
Net changes in assets and liabilities:
Accounts receivable, net 28,298 (15,063)
Inventories 6,737 (23,819)
Accounts payable and accrued expenses (14,761) 18,699
Other changes (14,157) 3,665
------- -----
Total adjustments 42,457 (6,909)
------ ------
Net cash provided by operating
activities - continuing operations 21,517 36,808
Net cash provided by (used for)
operating activities -
discontinued operations 605 (59)
--- ---
Net cash provided by operating
activities 22,122 36,749
------ ------
Cash Flows From Investing Activities:
Capital expenditures (2,377) (9,456)
Proceeds from sale of property, plant and
equipment 13 116
Decrease (increase) in cash surrender value
of life insurance policies (215) (190)
Proceeds from surrender of life insurance
policies 413 170
Proceeds from life insurance claims - 1,111
--- -----
Net cash used for investing
activities - continuing operations (2,166) (8,249)
------ ------
Net cash used for investing
activities (2,166) (8,249)
------ ------
Cash Flows From Financing Activities:
Proceeds from long-term debt 22,920 951
Principal payments on long-term debt (22,920) (951)
Cash received from exercise of stock options 66 120
Excess tax benefits (deficiencies) from
stock-based compensation (32) 31
Repurchases of common stock - (8,691)
Cash dividends paid (11,381) (2,141)
Other - (29)
--- ---
Net cash used for financing
activities - continuing operations (11,347) (10,710)
------- -------
Net cash used for financing
activities (11,347) (10,710)
------- -------
Net increase in cash and cash equivalents 8,609 17,790
Cash and cash equivalents at beginning of
period 26,493 8,703
------ -----
Cash and cash equivalents at end of period $35,102 $26,493
======= =======
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $133 $95
Income taxes 11,454 11,563
Non-cash investing and financing activities:
Purchases of property, plant and equipment
in accounts payable 136 178
Issuance of restricted stock - 1,185
Declaration of cash dividends to be paid - 9,279
Restricted stock surrendered for withholding
taxes payable 24 76
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