-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A6N04anYlm4hmWbxrsxjj7bOAoVmGG+yCCirw67LE7ERW5z+W/8FsAkUMnAI20lC yIaCXHSnw6ZhnLHDczwVVw== 0000950144-96-000347.txt : 19960410 0000950144-96-000347.hdr.sgml : 19960410 ACCESSION NUMBER: 0000950144-96-000347 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960209 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTEEL INDUSTRIES INC CENTRAL INDEX KEY: 0000764401 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 560674867 STATE OF INCORPORATION: NC FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09929 FILM NUMBER: 96513965 BUSINESS ADDRESS: STREET 1: 1373 BOGGS DR CITY: MOUNT AIRY STATE: NC ZIP: 27030 BUSINESS PHONE: 9107862141 MAIL ADDRESS: STREET 1: 1373 BOGGS DRIVE CITY: MOUNT AIRY STATE: NC ZIP: 27030 FORMER COMPANY: FORMER CONFORMED NAME: EXPOSAIC INDUSTRIES INC DATE OF NAME CHANGE: 19880511 10-Q 1 INSTEEL INDUSTRIES,INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ----------- ----------- COMMISSION FILE NUMBER 1-9929 INSTEEL INDUSTRIES, INC. ------------------------ (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-0674867 -------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1373 BOGGS DRIVE, MOUNT AIRY, NORTH CAROLINA 27030 -------------------------------------------- ----- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 786-2141 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of the registrant's common stock as of February 2, 1996 was 8,406,446. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INSTEEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
(UNAUDITED) DECEMBER 31, SEPTEMBER 30, 1995 1995 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 435 $ 263 Accounts receivable, net 25,166 31,516 Inventories 35,586 40,566 Prepaid expenses and other 1,035 1,509 ------------- ------------- Total current assets 62,222 73,854 Property, plant and equipment, net 65,788 65,100 Other assets 6,950 7,181 ------------- ------------- Total assets $ 134,960 $ 146,135 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,550 $ 27,471 Accrued expenses 4,725 6,897 Short-term debt 7,201 8,260 Current portion of long-term debt 5,071 5,196 ------------- ------------ Total current liabilities 39,547 47,824 Deferred income taxes 4,852 5,010 Long-term debt 20,404 22,089 Stockholders' equity: Common stock 16,787 16,787 Additional paid-in capital 38,033 38,033 Retained earnings 15,337 16,392 ------------- ------------ Total stockholders' equity 70,157 71,212 ------------- ------------ Total liabilities and stockholders' equity $ 134,960 $ 146,135 ============= ============
3 INSTEEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands except for per share data) (Unaudited)
THREE MONTHS ENDED DECEMBER 31, ---------------------------------- 1995 1994 ------------ ----------- Net sales $ 57,505 $ 58,619 Cost of sales 54,719 53,945 ------------ ----------- Gross profit 2,786 4,674 Selling, general and administrative expense 3,039 3,187 ------------ ----------- Operating income (loss) (253) 1,487 Interest expense 608 546 Minority interest in loss of subsidiary - (164) Equity in loss (income) of affiliate (2) 5 Other expense (income) (6) 18 ------------ ----------- Earnings (loss) before income taxes (853) 1,082 Provision (benefit) for income taxes (302) 398 ------------ ----------- Net earnings (loss) $ (551) $ 684 ============ =========== Weighted average shares outstanding 8,393 8,333 ============ =========== Net earnings (loss) per share $ (.07) $ .08 ============ =========== Dividends paid per share $ .06 $ .06 ============ ===========
4 INSTEEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
THREE MONTHS ENDED DECEMBER 31, ----------------------------------- 1995 1994 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ (551) $ 684 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 2,066 2,035 Minority interest in loss of subsidiary - (164) Equity in loss (income) of affiliate (2) 5 Accounts receivable, net 6,350 7,692 Inventories 4,981 (9,080) Accounts payable and accrued expenses (7,092) 3,356 Other changes 339 356 ------------- ------------- Total adjustments 6,642 4,200 ------------- ------------- Net cash provided by operating activities 6,091 4,884 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,568) (1,053) Proceeds on notes receivable 21 83 ------------- ------------- Net cash used in investing activities (2,547) (970) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net decrease in short-term debt (1,059) (3,015) Proceeds from long-term debt 20 - Principal payments on long-term debt (1,830) (706) Dividends paid (503) (500) Capital contribution to subsidiary by minority interest - 164 ------------- ------------- Net cash used in financing activities (3,372) (4,057) ------------- ------------- Net decrease (increase) in cash 172 (143) Cash and cash equivalents at beginning of period 263 1,234 ------------- ------------- Cash and cash equivalents at end of period $ 435 $ 1,091 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the quarter for: Interest $ 1,026 $ 911 Income taxes $ 88 $ 287
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In thousands, except as noted) (1) BASIS OF PRESENTATION The consolidated unaudited financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995. The unaudited consolidated financial statements included herein reflect all adjustments (consisting only of normal recurring accruals) that the Company considers necessary for a fair presentation of the financial position, results of operations and cash flows for all periods presented. The results for the interim periods are not necessarily indicative of the results for the entire fiscal year. (2) INVENTORIES
DECEMBER 31, SEPTEMBER 30, 1995 1995 -------------- ------------- Raw materials $ 15,661 $ 24,025 Work in process 1,698 1,372 Finished goods 16,193 13,042 Supplies 2,034 2,127 -------------- ------------- Total inventories $ 35,586 $ 40,566 ============== =============
6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table presents selected financial data from the Consolidated Statements of Earnings as a percentage of net sales for the quarters ended December 31, 1995 and 1994:
THREE MONTHS ENDED DECEMBER 31, -------------------------------- 1995 1994 ------ ------ Net sales 100.0% 100.0% Cost of sales 95.2 92.0 ----- ----- Gross profit 4.8 8.0 Selling, general and administrative expense 5.2 5.5 ----- ----- Operating income (loss) (0.4) 2.5 Interest expense 1.1 0.9 Minority interest in loss of subsidiary 0.0 (0.2) ----- ----- Earnings (loss) before income taxes (1.5%) 1.8% ===== =====
Sales for the first quarter of fiscal 1996 were $57.5 million, a decrease of 2% from the prior year period. The sales decline was primarily attributable to weak demand for industrial wire products. Sales of concrete reinforcing products were up as a result of a record sales quarter for PC strand. Total wire products shipments decreased 2%, while average selling prices per ton were flat relative to the year-ago period. Sales for Insteel Construction Systems (ICS), which produces the Insteel 3-D(R) building panel, increased 32% over the prior year period, but remained substantially below breakeven levels. Gross profit as a percentage of sales fell to 4.8% in the first quarter of fiscal 1996 compared with 8.0% in the prior year period. The erosion in margins was primarily caused by narrowing spreads between selling prices and raw material costs. During the second half of fiscal 1995, weak market conditions and depressed shipment levels resulted in excess wire rod inventories. As these inventories were sharply reduced during the first quarter of fiscal 1996, the consumption of higher cost wire rod together with flat selling prices compressed margins relative to prior year levels. The decrease in gross profit also reflected the combination of higher manufacturing costs and lower production levels compared to the year-ago period. Selling, general and administrative expense (SG & A expense) decreased 5% for the first quarter of fiscal 1996, declining as a percentage of sales to 5.2% compared with 5.5% in the prior year period. The decline in SG & A expense was primarily due to a reduction in profit-sharing expense caused by weaker operating performance. Interest expense increased 11% in the first quarter of fiscal 1996 over the year-ago period as a result of higher average outstanding balances on the Company's lines of credit. The statement of earnings for fiscal 1995 reflected the funding of 30% of ICS' losses by Insteel's former joint venture partner. As a result of the purchase of the remaining interest in ICS in the second quarter of fiscal 1995, minority interest was not applicable to fiscal 1996 results. The Company's effective income tax rate for the first quarter of fiscal 1996 was 35.4% compared to 36.8% in the prior year period. The decrease in the fiscal 1995 rate is primarily due to a reduction in the estimated state income tax rate. 7 FINANCIAL CONDITION The following table presents selected financial data from the consolidated financial statements for the quarters ended December 31, 1995 and 1994:
THREE MONTHS ENDED DECEMBER 31, ----------------------------------------------- 1995 % Change 1994 ----------- ---------- ------------ Net sales $ 57,505 (2%) $ 58,619 Accounts receivable, net 25,166 (2) 25,723 Inventories 35,586 (6) 37,830 Working capital 22,675 (11) 25,621 Earnings before interest, taxes and depreciation 1,821 (50) 3,663 Capital expenditures 2,568 244 1,053 Long-term debt 20,404 (22) 26,083 Total debt 32,676 7 30,424 Stockholders' equity 70,157 5 66,645
Operating activities generated $6.1 million of cash during the first quarter of fiscal 1996 compared to $4.9 million in the year-earlier period. Cash provided by the reduction in raw material inventories was partially offset by decreases in accounts payable and accrued expenses. The downturn in operating performance resulted in a decrease in earnings before interest, taxes and depreciation to $1.8 million during the first quarter of fiscal 1996 compared with $3.7 million in the year-ago period. Investing activities consumed $2.6 million during the first quarter of fiscal 1996 compared to $1.0 million during the year-ago period as a result of higher capital expenditures. Total expenditures for the collated nail and PC strand projects will approximate $9.0 million. Financing activities used $3.4 million during the first quarter of fiscal 1996 compared to $4.1 million in the prior year period. Short-term debt levels remained higher than a year ago as a result of the decline in operating results. At December 31, 1995, the Company had lines of credit totalling $20.0 million, of which approximately $12.8 million was available. In January 1996, these lines of credit were replaced by a $35.0 million unsecured revolving credit facility that will expire in November 2000. The Company currently expects to fund its capital expenditure requirements and liquidity needs from a combination of internally generated funds, the revolving credit facility and additional long-term sources of financing. FACTORS THAT MAY AFFECT FUTURE RESULTS Insteel operates in a rapidly changing environment that involves a number of risks and uncertainties, some of which are beyond the Company's control. The Company has short delivery cycles and as a result does not have a large order backlog, which makes the forecasting of revenue inherently uncertain. As delivery lead times have decreased, the Company has generated a higher percentage of sales from new order bookings in the same fiscal period. Business conditions and growth in the general economy have an impact on the Company's operating results. Seasonality also affects the Company's operating results, particularly in the first quarter of the fiscal year, which has historically represented the lowest quarterly sales volume. Shipments typically increase in the second quarter and reach a high point in the third or fourth quarter, reflecting the buying patterns of the Company's customers. 8 Wire rod market conditions also have a significant impact on the Company's operating results. Hot rolled steel rod is the Company's primary raw material and constitutes the largest component of manufacturing costs. Recently announced increases in domestic wire rod capacity should increase supplier competition and favorably impact quality and availability. As order lead times begin to decrease, the Company should be able to significantly reduce raw material inventory levels in comparison to recent years when maintaining adequate supply was a primary concern. Insteel's business strategy continues to be focused on further expansion into higher value-added products that offer superior returns relative to the Company's traditional businesses. In late February 1996, the Company will enter the collated nail business with the start-up of a new manufacturing facility in Andrews, South Carolina. The plant will produce nails that are pneumatically driven by nail guns, a market that is related to the Company's existing bulk nail business. The Company has also extended purchase commitments to expand the capacity of its PC strand operation in Gallatin, Tennessee, with start-up anticipated in June 1996. Neither of these projects are expected to have a material impact on the Company's fiscal 1996 operating results. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 27.1 Financial Data Schedule (for SEC purposes only) b. Reports on Form 8-K: No reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1995. 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INSTEEL INDUSTRIES, INC. ------------------------ Registrant Date: February 8, 1996 By /s/ H. O. Woltz III ------------------------------------- H. O. Woltz III President and Chief Executive Officer Date: February 8, 1996 By /s/ Michael C. Gazmarian ------------------------------------- Michael C. Gazmarian Chief Financial Officer and Treasurer EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF INSTEEL INDUSTRIES, INC. FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-30-1996 DEC-31-1995 435 0 25,166 0 35,586 62,222 65,788 0 134,960 39,547 0 0 0 16,787 53,370 134,960 57,505 57,505 54,719 54,719 0 0 608 (853) (302) (551) 0 0 0 (551) (.07) (.07)
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