EX-99.1 4 g18753exv99w1.htm EX-99.1 EX-99.1
Exhibit 99.1
(INSTEEL LOGO)
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 SECOND-QUARTER FINANCIAL RESULTS
MOUNT AIRY, N.C., April 16, 2009 — Insteel Industries, Inc. (NasdaqGS: IIIN) today reported a net loss of $16.4 million ($0.94 per share) for the second quarter ended March 28, 2009 compared with net earnings of $6.9 million ($0.39 per diluted share) for the same period last year. The net loss for the current year quarter includes a pre-tax charge of $16.1 million ($0.58 per share after-tax) for inventory write-downs to reduce the carrying value of inventory to the lower of cost or market. Net sales for the second quarter decreased 34.8% to $50.4 million from $77.3 million in the same year-ago period. Shipments decreased 45.5% while average selling prices increased 19.7% from the same period last year.
For the six-month period ended March 28, 2009, the net loss was $22.0 million ($1.27 per share) compared with net earnings of $11.1 million ($0.62 per diluted share) for the same period last year. The net loss for the current year includes a pre-tax charge of $23.0 million ($0.82 per share after-tax) for inventory write-downs. Net sales for the six-month period decreased 21.7% to $112.2 million from $143.2 million in the same year-ago period. Shipments decreased 41.9% while average selling prices increased 34.9% from the same period last year.
Insteel’s financial results for the second quarter were unfavorably impacted by the reduction in shipments, the consumption of higher cost inventory that was purchased prior to the recent collapse in steel prices and the escalation in unit conversion costs resulting from reduced operating schedules at its manufacturing facilities. The Company’s overall capacity utilization level for the quarter was 35%. Shipments continued to trend at reduced levels due to customer inventory destocking, the general economic downturn and the tightening in the credit markets. Although selling prices for Insteel’s products have fallen since the beginning of the fiscal year to a lesser extent than the prices for hot-rolled steel wire rod, its primary raw material, the favorable impact from the widening in spreads has not been reflected in the Company’s current year results due to the inventory write-downs and consumption of the previously purchased higher cost inventory.
Operating activities used $0.7 million of cash during the second quarter while providing $6.8 million during the same period last year primarily due to the current year loss, which was partially offset by the year-over-year changes in net working capital. Net working capital provided $6.8 million of cash during the quarter while using $3.1 million during the same year-ago period largely due to the reduced operating levels and declining prices during the current year. Capital expenditures for the six-month period were $1.4 million compared with $6.2 million for the same period last year and are expected to total less than $5.0 million for fiscal 2009. Insteel ended the quarter with $0.4 million of borrowings outstanding on its $100.0 million revolving credit facility.
Commenting on the outlook for the remainder of fiscal 2009, H.O. Woltz III, Insteel’s president and CEO said, “In the wake of the dramatic drop-off in demand that has occurred since September, our visibility is limited as we move into the second half of the year. We expect our order book to improve due to the
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1373 BOGGS DRIVE / MOUNT AIRY, NORTH CAROLINA 27030 / 336-786-2141/ FAX 336-786-2144

 

 

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usual seasonal factors together with the anticipated completion of the inventory rebalancing by our customers, although the timing and magnitude of any upturn remains uncertain. We also believe the mismatching of higher raw material costs with lower selling prices is largely behind us and expect significant improvement in our margins as the lower replacement costs for wire rod begin to be reflected in cost of sales.
“Despite the losses we have incurred resulting from the unprecedented decline in steel prices, we are pleased with the effectiveness of the measures that we have taken to preserve cash. Absent further deterioration in our markets, we expect to generate strong operating cash flow through the remainder of the fiscal year driven by the anticipated improvement in our financial results together with substantial reductions in our inventory levels. We will continue to focus on cash generation through our ongoing initiatives to minimize operating costs and closely manage working capital while continuing to meet the expectations of our customers.”
Conference Call
Insteel will hold a conference call at 10:00 a.m. ET today to discuss its second quarter 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 its 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 prestressed concrete strand (“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.
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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; the impact of increased imports of PC strand; 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.
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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share data)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    March 28,     March 29,     March 28,     March 29,  
    2009     2008     2009     2008  
 
                                
Net sales
   $ 50,404     $ 77,260     $ 112,203     $ 143,240  
Cost of sales
     55,323       61,473       114,564       116,833  
Inventory write-downs
     16,121       —       22,955       —  
 
                        
Gross profit (loss)
     (21,040 )     15,787       (25,316 )     26,407  
Selling, general and administrative expense
     4,368       5,165       9,101       9,252  
Other income, net
     (58 )     (57 )     (49 )     (76 )
Interest expense
     189       152       337       310  
Interest income
     (7 )     (236 )     (102 )     (443 )
 
                        
Earnings (loss) from continuing operations before income taxes
     (25,532 )     10,763       (34,603 )     17,364  
Income taxes
     (9,150 )     3,871       (12,622 )     6,241  
 
                        
Earnings (loss) from continuing operations
     (16,382 )     6,892       (21,981 )     11,123  
Earnings (loss) from discontinued operations net of income taxes of ($8), $16, ($31) and $12
     (13 )     26       (49 )     19  
 
                        
Net earnings (loss)
   $ (16,395 )   $ 6,918     $ (22,030 )   $ 11,142  
 
                        
 
                                
Per share amounts:
                                
Basic:
                                
Earnings (loss) from continuing operations
   $ (0.94 )   $ 0.40     $ (1.27 )   $ 0.63  
Earnings (loss) from discontinued operations
     —       —       —       —  
 
                        
Net earnings (loss)
   $ (0.94 )   $ 0.40     $ (1.27 )   $ 0.63  
 
                        
 
                                
Diluted:
                                
Earnings (loss) from continuing operations
   $ (0.94 )   $ 0.39     $ (1.27 )   $ 0.62  
Earnings (loss) from discontinued operations
     —       —       —       —  
 
                        
Net earnings (loss)
   $ (0.94 )   $ 0.39     $ (1.27 )   $ 0.62  
 
                        
 
                                
Cash dividends declared
   $ 0.03     $ 0.03     $ 0.06     $ 0.06  
 
                        
 
                                
Weighted average shares outstanding
                                
Basic
     17,365       17,503       17,350       17,762  
 
                        
Diluted
     17,365       17,647       17,350       17,918  
 
                        
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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    (Unaudited)        
    March 28,     September 27,  
    2009     2008  
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 8     $ 26,493  
Accounts receivable, net
     23,353       49,581  
Inventories
     55,073       71,220  
Prepaid expenses and other
     16,774       3,122  
 
            
Total current assets
     95,208       150,416  
Property, plant and equipment, net
     67,056       69,105  
Other assets
     4,046       5,064  
Non-current assets of discontinued operations
     3,635       3,635  
 
            
Total assets
   $ 169,945     $ 228,220  
 
            
 
                
Liabilities and shareholders’ equity
                
Current liabilities:
                
Accounts payable
   $ 11,094     $ 23,581  
Accrued expenses
     4,794       29,081  
Current liabilities of discontinued operations
     225       188  
 
            
Total current liabilities
     16,113       52,850  
Long-term debt
     400          
Other liabilities
     5,422       5,306  
Long-term liabilities of discontinued operations
     200       217  
Shareholders’ equity:
                
Common stock
     17,526       17,507  
Additional paid-in capital
     44,439       43,202  
Deferred stock compensation
     (1,668 )     (1,456 )
Retained earnings
     89,398       112,479  
Accumulated other comprehensive loss
     (1,885 )     (1,885 )
 
            
Total shareholders’ equity
     147,810       169,847  
 
            
Total liabilities and shareholders’ equity
   $ 169,945     $ 228,220  
 
            
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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    March 28,     March 29,     March 28,     March 29,  
    2009     2008     2009     2008  
 
                                
Cash Flows From Operating Activities:
                                
Net earnings (loss)
   $ (16,395 )   $ 6,918     $ (22,030 )   $ 11,142  
Loss (earnings) from discontinued operations
     13       (26 )     49       (19 )
 
                        
Earnings (loss) from continuing operations
     (16,382 )     6,892       (21,981 )     11,123  
Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by (used for) operating activities of continuing operations:
                                
Depreciation and amortization
     1,808       1,781       3,569       3,473  
Amortization of capitalized financing costs
     124       125       249       249  
Stock-based compensation expense
     551       582       985       910  
Excess tax deficiencies (benefits) from stock-based compensation
     43       (30 )     (2 )     (15 )
Inventory write-downs
     16,121       —       22,955       —  
Loss on sale of property, plant and equipment
     —       10       20       56  
Deferred income taxes
     (115 )     529       339       653  
Gain from life insurance proceeds
     —       (661 )     —       (661 )
Net changes in assets and liabilities:
                                
Accounts receivable, net
     2,206       (7,451 )     26,228       1,107  
Inventories
     10,971       (9,898 )     (6,808 )     (7,907 )
Accounts payable and accrued expenses
     (6,382 )     14,223       (28,162 )     12,554  
Other changes
     (9,622 )     695       (13,883 )     2,512  
 
                        
Total adjustments
     15,705       (95 )     5,490       12,931  
 
                        
Net cash provided by (used for) operating activities - continuing operations
     (677 )     6,797       (16,491 )     24,054  
Net cash used for operating activities — discontinued operations
     (11 )     (36 )     (28 )     (65 )
 
                        
Net cash provided by (used for) operating activities
     (688 )     6,761       (16,519 )     23,989  
 
                        
 
                                
Cash Flows From Investing Activities:
                                
Capital expenditures
     (483 )     (1,259 )     (1,382 )     (6,159 )
Proceeds from sale of property, plant and equipment
     —       83       13       83  
Decrease (increase) in cash surrender value of life insurance policies
     (364 )     (122 )     354       (382 )
Proceeds from surrender of life insurance policies
     413       —       413       —  
Proceeds from life insurance claims
     —       1,111       —       1,111  
 
                        
Net cash used for investing activities — continuing operations
     (434 )     (187 )     (602 )     (5,347 )
 
                        
Net cash used for investing activities
     (434 )     (187 )     (602 )     (5,347 )
 
                        
 
                                
Cash Flows From Financing Activities:
                                
Proceeds from long-term debt
     19,500       74       20,474       772  
Principal payments on long-term debt
     (19,100 )     (74 )     (20,074 )     (772 )
Cash received from exercise of stock options
     53       38       66       38  
Excess tax benefits (deficiencies) from stock-based compensation
     (43 )     30       2       15  
Repurchases of common stock
     —       (6,161 )     —       (8,691 )
Cash dividends paid
     (525 )     (544 )     (9,804 )     (1,092 )
Other
     1       (4 )     (28 )     37  
 
                        
Net cash used for financing activities — continuing operations
     (114 )     (6,641 )     (9,364 )     (9,693 )
 
                        
Net cash used for financing activities
     (114 )     (6,641 )     (9,364 )     (9,693 )
 
                        
Net increase (decrease) in cash and cash equivalents
     (1,236 )     (67 )     (26,485 )     8,949  
Cash and cash equivalents at beginning of period
     1,244       17,719       26,493       8,703  
 
                        
Cash and cash equivalents at end of period
   $ 8     $ 17,652     $ 8     $ 17,652  
 
                        
 
                                
Supplemental Disclosures of Cash Flow Information:
                                
Cash paid during the period for:
                                
Interest
   $ 64     $ 16     $ 88     $ 61  
Income taxes
     427       2,427       11,333       2,557  
Non-cash investing and financing activities:
                                
Purchases of property, plant and equipment in accounts payable
     (30 )     263       170       650  
Issuance of restricted stock
     —       733       —       733  
Declaration of cash dividends to be paid
     1       524       526       524  
Restricted stock surrendered for withholding taxes payable
     9       76       9       76  
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Insteel Industries, Inc.