-----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, Mwadmqr0EHc+oo0YBkOrdsuOh/8HPXKvZUt35C2X29pLiEDR8w4NvO1CvfSUWcVf jHynG1vtF48XJGl9C8vvow== 0000950144-99-010104.txt : 19990816 0000950144-99-010104.hdr.sgml : 19990816 ACCESSION NUMBER: 0000950144-99-010104 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19990813 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: SEC FILE NUMBER: 001-09929 FILM NUMBER: 99687940 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. 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 JULY 3, 1999 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: 336-786-2141 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 August 11, 1999 was 8,457,226. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INSTEEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
July 3, October 3, 1999 1998 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 517 $ 422 Accounts receivable, net 28,940 28,687 Inventories 31,929 30,566 Prepaid expenses and other 1,686 2,023 -------- -------- Total current assets 63,072 61,698 Property, plant and equipment, net 85,504 80,350 Other assets 11,126 5,083 -------- -------- Total assets $159,702 $147,131 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 27,452 $ 28,758 Accrued expenses 8,386 6,013 Current portion of long-term debt 620 620 -------- -------- Total current liabilities 36,458 35,391 Long-term debt 39,639 35,743 Deferred income taxes 7,311 5,726 Other liabilities 1,014 1,011 Shareholders' equity: Common stock 16,914 16,885 Additional paid-in capital 38,314 38,232 Retained earnings 20,052 14,143 -------- -------- Total shareholders' equity 75,280 69,260 -------- -------- Total liabilities and shareholders' equity $159,702 $147,131 ======== ========
3 INSTEEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands except for per share data) (Unaudited)
Three Months Ended Nine Months Ended --------------------- ---------------------- July 3, June 27, July 3, June 27, 1999 1998 1999 1998 ------- ------- -------- -------- Net sales $72,676 $69,275 $201,105 $192,190 Cost of sales 61,947 65,258 174,606 185,371 ------- ------- -------- -------- Gross profit 10,729 4,017 26,499 6,819 Selling, general and administrative expense 4,764 3,070 12,883 9,488 ------- ------- -------- -------- Operating income (loss) 5,965 947 13,616 (2,669) Interest expense 602 911 1,850 2,928 Other expense (income) (35) 28 103 (2,402) ------- ------- -------- -------- Earnings (loss) before income taxes and extraordinary item 5,398 8 11,663 (3,195) Provision (benefit) for income taxes 2,010 3 4,234 (1,134) ------- ------- -------- -------- Earnings (loss) before extraordinary item 3,388 5 7,429 (2,061) Extraordinary item - loss on early extinguishment of debt -- -- -- (408) ------- ------- -------- -------- Net earnings (loss) $ 3,388 $ 5 $ 7,429 $ (2,469) ======= ======= ======== ======== Weighted average shares outstanding (basic) 8,453 8,443 8,446 8,442 ======= ======= ======== ======== Per share (basic and diluted): Earnings (loss) before extraordinary item $ 0.40 $ -- $ 0.88 $ (0.24) Extraordinary item - loss on early extinguishment of debt -- -- -- (0.05) ------- ------- -------- -------- Net earnings (loss) $ 0.40 $ -- $ 0.88 $ (0.29) ======= ======= ======== ======== Dividends paid per share $ 0.06 $ 0.06 $ 0.18 $ 0.18 ======= ======= ======== ========
4 INSTEEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended ----------------------- July 3, June 27, 1999 1998 -------- -------- Cash Flows From Continuing Operating Activities: Net earnings (loss) $ 7,429 $ (2,469) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 6,766 6,767 Gain on sale of assets (113) (4,704) Extraordinary loss -- 408 Net changes in assets and liabilities: Accounts receivable, net (224) (1,091) Inventories 263 7,082 Accounts payable and accrued expenses 1,055 (4,639) Other changes 2,196 (2,688) -------- -------- Total adjustments 9,943 1,135 -------- -------- Net cash provided by (used for) continuing operating activities 17,372 (1,334) -------- -------- Cash Flows From Discontinued Operating Activities: Net cash provided by discontinued operating activities -- 1,869 Cash Flows From Investing Activities: Capital expenditures (5,126) (5,261) Acquisition of business (8,397) -- Equity investments (3,250) -- Purchases of short-term investments (1,875) -- Proceeds from (issuance of) notes receivable (1,355) 134 Proceeds from sale of property, plant and equipment 239 8,864 -------- -------- Net cash provided by (used for) investing activities (19,764) 3,737 -------- -------- Cash Flows From Financing Activities: Proceeds from long-term debt 81,142 86,118 Principal payments on long-term debt (77,246) (89,275) Proceeds from exercise of stock options 111 44 Cash dividends paid (1,520) (1,519) -------- -------- Net cash provided by (used for) financing activities 2,487 (4,632) -------- -------- Net increase (decrease) in cash 95 (360) Cash and cash equivalents at beginning of period 422 1,079 -------- -------- Cash and cash equivalents at end of period $ 517 $ 719 ======== ======== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 1,898 $ 3,177 Income taxes 2,355 596
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 October 3, 1998. 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
July 3, October 3, (Amounts in thousands) 1999 1998 ------- ------- Raw materials $13,355 $15,514 Supplies 2,671 2,242 Work in process 1,473 1,525 Finished goods 14,430 11,285 ------- ------- Total inventories $31,929 $30,566 ======= =======
(3) EARNINGS PER SHARE The reconciliation of basic and diluted earnings per share ("EPS") is as follows:
Three Months Ended Nine Months Ended -------------------- -------------------- July 3, June 27, July 3, June 27, (Amounts in thousands, except per share data) 1999 1998 1999 1998 ------- ------- ------- ------- Earnings (loss) before extraordinary item $ 3,388 $ 5 $ 7,429 $(2,061) Extraordinary loss -- -- -- (408) ------- ------- ------- ------- Net earnings (loss) $ 3,388 $ 5 $ 7,429 $(2,469) ======= ======= ======= ======= Weighted average shares outstanding: Weighted average shares outstanding (basic) 8,453 8,443 8,446 8,442 Dilutive effect of stock options 99 12 24 -- ------- ------- ------- ------- Weighted average shares outstanding (diluted) 8,552 8,455 8,470 8,442 ======= ======= ======= ======= Earnings (loss) per share (basic and diluted): Earnings (loss) before extraordinary item $ 0.40 $ -- $ 0.88 $ (0.24) Extraordinary loss -- -- -- (0.05) ------- ------- ------- ------- Net earnings (loss) $ 0.40 $ -- $ 0.88 $ (0.29) ======= ======= ======= =======
Options to purchase 58,000 shares and 354,000 shares for the three months ended July 3, 1999 and June 27, 1998, respectively, were antidilutive and were not included in the diluted EPS computation. 6 (4) NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131, which is based on the management approach to segment reporting, establishes requirements to report selected information about operating segments and related disclosures about products and services, major customers and geographic areas. As the statement only impacts financial statement disclosures, it will not effect the Company's financial position or results of operations. Management is in the process of evaluating the effects of this change on its reporting. The Company will adopt SFAS No. 131 as required in its annual report for 1999. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Management has not yet evaluated the effects of this change on its financial position or results of operations. The Company will adopt SFAS No. 133 as required in its interim financial statements for the first quarter of 2001. (5) INVESTMENT IN STRUCTURAL REINFORCEMENT PRODUCTS In January 1999, the Company acquired a 25% interest in Structural Reinforcement Products, Inc. ("SRP"), a manufacturer of welded wire fabric products for the construction industry. Under the terms of the purchase agreement, the Company acquired 25% of the common stock in SRP for $3.3 million. In addition, the Company provided SRP with $1.5 million of debt financing and $1.9 million of collateral to support its existing credit facility in order to assume a proportionate share of SRP's debt-related obligations. The Company may be obligated to increase its investment for its equity position by up to $1.0 million depending upon SRP's future financial performance. The Company is accounting for its investment in SRP on an equity basis and, accordingly, is including its share of SRP's earnings in its consolidated earnings. For the second quarter, the Company recorded an equity loss of $125,000 in other expense on its consolidated statement of earnings. (6) ACQUISITION OF CONCRETE REINFORCING BUSINESS In April 1999, the Company acquired the assets of the concrete reinforcing business of Northwestern Steel and Wire Company ("Northwestern"). Under the terms of the purchase agreement, the Company acquired the inventory, property, plant and equipment of Northwestern's Hickman, Kentucky facility for approximately $8.4 million. In addition, the companies entered into a three-year agreement under which Northwestern will supply Insteel with a portion of its raw material requirements. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS STATEMENTS OF EARNINGS - SELECTED DATA ($ in thousands)
Three Months Ended Nine Months Ended ----------------------------------- ------------------------------------ July 3, June 27, July 3, June 27, 1999 Change 1998 1999 Change 1998 ---- ------ ---- ---- ------ ---- Net sales $72,676 5% $69,275 $201,105 5% $192,190 Gross profit 10,729 167% 4,017 26,499 289% 6,819 Percentage of net sales 14.8% 5.8% 13.2% 3.5% Selling, general and administrative expense $ 4,764 55% $ 3,070 $ 12,883 36% $ 9,488 Percentage of net sales 6.6% 4.4% 6.4% 4.9% Operating income (loss) $ 5,965 N/M $ 947 $ 13,616 N/M $ (2,669) Percentage of net sales 8.2% 1.4% 6.8% (1.4%) Interest expense $ 602 (34%) $ 911 $ 1,850 (37%) $ 2,928 Percentage of net sales 0.8% 1.3% 0.9% 1.5% Effective income tax rate 37.2% 37.5% 36.3% 35.5% Earnings (loss) before extraordinary item $ 3,388 N/M $ 5 $ 7,429 N/M $ (2,061) Percentage of net sales 4.7% .0% 3.7% (1.1%)
Net sales for the third quarter increased 5% to $72.7 million from $69.3 million in the year-ago period. For the nine-month period, sales increased 5% from the prior year. The sales increase for the nine-month period was in spite of the sale of the assets related to the Company's agricultural fencing product line in February 1998 which reduced current year sales relative to the prior year. On a comparable basis, sales rose 10% for the nine-month period. Sales of concrete reinforcing products increased significantly for the three-month and nine-month periods as a result of strong construction markets, additional volume generated by the building mesh supply agreement with SRP, and the Company's recent acquisition of the assets of Northwestern's concrete reinforcing business. Sales of tire bead wire rose to a new high during the quarter as the Company continued to gain customer acceptance and further its market penetration. Industrial wire sales declined for the three-month and nine-month periods compared to the same periods in fiscal 1998, primarily due to a significant increase in the proportion of wire consumed internally to manufacture higher value products. Gross margins for the third quarter increased to 14.8% of sales compared with 5.8% in the prior year. For the nine-month period, gross margins rose to 13.2% of sales from 3.5% a year ago. The margin improvement was primarily caused by strong market conditions and widening spreads between selling values and raw material costs for most products together with lower per-unit manufacturing costs and additional building mesh sales provided by SRP. Gross margins were also favorably impacted by the higher sales of tire bead wire as the Company increased the capacity utilization of the Virginia manufacturing facility. Selling, general and administrative expense ("SG&A expense") rose 55% for the third quarter, increasing to 6.6% of sales from 4.4% in the prior year. For the nine-month period, SG&A expense increased 36%, rising to 6.4% of sales from 4.9% a year ago. The increase in SG&A expense was primarily caused by higher incentive plan and profit-sharing plan expenses resulting from the significant improvement in the Company's financial results together with legal fees related to acquisition activities and employment-related issues. Interest expense fell sharply for the third quarter and nine-month periods compared with a year ago due to lower borrowing levels and rates on the Company's revolving credit facility. The reduction in debt was primarily due to the significant improvement in the Company's earnings relative to the year-ago loss. The nine-month results for the prior year reflect a pre-tax gain of $2.5 million in other income related to the February 1998 sale of the assets associated with the Company's agricultural fencing product line. The nine-month results for the prior year reflect an extraordinary loss of $408,000 after income taxes, or approximately five cents per share, related to the early extinguishment of debt. In March 1998, the Company retired its $10.0 million 8.25% senior secured notes due 2002, funding the prepayment under its unsecured revolving credit facility. 8 FINANCIAL CONDITION SELECTED FINANCIAL DATA ($ in thousands)
Nine Months Ended ------------------------ July 3, June 27, 1999 1998 -------- -------- Net cash provided by (used for) continuing operating activities $ 17,372 $ (1,334) Net cash provided by (used for) investing activities (19,764) 3,737 Net cash provided by (used for) financing activities 2,487 (4,632) Total long-term debt 40,259 49,118 Percentage of total capital 35% 42% Shareholders' equity $ 75,280 $ 67,378 Percentage of total capital 65% 58% Total capital (total long-term debt + shareholders' equity) $115,539 $116,496
Operating activities generated $17.4 million of cash for nine-month period while using $1.3 million a year ago. The year-to-year change was primarily related to the significant improvement in the Company's financial results and increases in accrued expenses and deferred taxes. Investing activities used $19.8 million of cash for the nine-month period while providing $3.7 million a year ago. The year-to-year change was principally due to the current year investments related to SRP and the acquisition of the assets of Northwestern's concrete reinforcing business compared with the prior year proceeds from the sale of agricultural fencing equipment. Capital expenditures were primarily for equipment replacements and upgrades together with the tire bead wire expansion. Financing activities provided $2.5 million of cash for the nine-month period while using $4.6 million a year ago. The increase in financing requirements primarily resulted from the investments related to SRP and the acquisition of the assets of Northwestern's concrete reinforcing business. The Company's debt to capital ratio decreased to 35% at July 3, 1999 compared with 42% at June 27, 1998. At July 3, 1999, approximately $23.7 million was available under the Company's revolving credit facility which provided for maximum availability of $60.0 million. 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. YEAR 2000 The "Year 2000" issue refers to older computer systems and other equipment operating on software that uses only two digits to represent the year, rather than four digits. As a result, these older systems and equipment may not process information or otherwise function properly when using the year "2000", since that year will be indistinguishable from the year "1900". The Company has initiated a Year 2000 program to assess and develop plans to resolve the issue both internally and externally. During 1996, the Company began developing a plan to upgrade its business and operating systems to Year 2000 compliant software. In addition to addressing the Year 2000 issue, the systems upgrade is expected to enhance the performance of the Company's customer service, manufacturing and administrative processes. Implementation of the upgrade began in 1997 with the initial testing of the system on a limited basis prior to converting all of the Company's locations. As of July 3, 1999, the implementation had been completed at all but one of the Company's facilities. The remaining location is expected to complete the implementation in September 1999. In order to identify potential Year 2000 problems at key suppliers and customers, the Company initiated external surveys to assess their level of compliance. As of July 3, 1999, the Company had received responses back from approximately 80% of its critical suppliers indicating that they were either already in compliance or planned on being in compliance by December 31, 1999. The Company is in the process of following up with those suppliers who have not responded that are considered to be critical to the Company's operations. Alternative suppliers will be identified and 9 evaluated by October 31, 1999 for those vendors who have not indicated that they will be Year 2000 compliant by December 31, 1999. The Company also is in the process of reviewing embedded software in its equipment and facilities to identify potential Year 2000 issues. Equipment manufacturers are being requested to certify their compliance and assist the Company in developing solutions where they are currently non-compliant. As of July 3, 1999, approximately 90% of the Company's critical manufacturing equipment had been certified by vendors as being Year 2000 compliant. The Company expects to complete the assessment and testing process by September 1999. Any critical equipment that is non-compliant will be upgraded or replaced as necessary. The Company's efforts to date have been concentrated on mitigating Year 2000 disturbances. As the Company proceeds forward with its assessment, remediation and testing programs and evaluates the reasonable potential risks, it will determine the appropriate contingency plans and resources. Any such contingency actions and resources would be planned to be in place in sufficient time for the Year 2000. While reasonable actions have been taken to address the Year 2000 problem and will continue to be taken in the future to mitigate such disruption, the magnitude of all Year 2000 disturbances cannot be predicted. Failure to complete these programs as planned could result in the corruption of data, hardware or equipment failures or the inability to manufacture products or conduct other business activities, all of which could have a material impact on the Company's business, consolidated financial position or results of operations. Management believes that past or expected future capital requirements related to Year 2000 compliance issues will not have a material impact on its consolidated financial position or results of operations. OUTLOOK The Company's operating results are impacted by seasonal factors, 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. Market conditions for hot-rolled wire rod, the Company's primary raw material, continued to be favorable through the third quarter. Recent expansions in domestic production capacity together with changes in the global market environment significantly increased supplier competition. In January 1999, domestic wire rod producers initiated a Section 201 filing with the U.S. International Trade Commission ("ITC") alleging that rising import levels had resulted in serious injury. The domestic producers are pursuing trade relief on a worldwide basis against all countries other than NAFTA nations through duties, quotas or other measures intended to reduce import competition. In May 1999, three ITC commissioners found that the domestic wire rod industry had not been injured by imports. Two commissioners found that the industry had been injured by imports, and the sixth commissioner found that the industry had not been injured, but that a threat of injury existed. The investigation is now in the remedy phase. President Clinton is scheduled to make a determination on relief for the industry by September 27, 1999. Domestic rod producers have recently implemented price increases in response to strong market conditions. The future impact of these actions on the Company's financial results is difficult to predict, depending upon the resolution of the trade filings together with the Company's ability to recover any raw material price increases in its markets. The Company's business strategy continues to be focused on (1) further expansion into higher value products that offer the potential to generate returns that exceed the Company's cost of capital and (2) improving the financial performance of the Company's traditional businesses to acceptable levels. During 1994 - 1997, the Company built two new production facilities and reconfigured an existing operation in order to develop the manufacturing capabilities required to enter the markets for PC strand, collated fasteners and tire bead wire. Sales of these new products are expected to increase from $39.6 million in 1998 to $100.0 million when fully operational. The Company expects that the recently enacted federal highway spending legislation ("TEA-21") will have a favorable impact on the demand for its concrete reinforcing products. As customer requirements rise, the Company expects to gradually increase the operating volumes of its recently expanded PC strand manufacturing facility to its full design capacity. During the third quarter, sales of the Company's most recent product addition, tire bead wire, rose to a new high as the Company continued to make progress towards completing the qualification process and establishing itself as a credible supplier. As the Company is currently incurring substantially all of the anticipated operating costs required to support its new business, the incremental impact of projected increases in sales is expected to have a significant favorable impact on its financial performance. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that reflect management's current assumptions and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of the 10 Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those projected, stated or implied by the statements. Such risks and uncertainties include, but are not limited to, general economic conditions in the markets in which the Company operates; unanticipated changes in customer demand, order patterns and inventory levels; fluctuations in the cost and availability of the Company's primary raw material, hot rolled steel wire rod; the Company's ability to raise selling prices in order to recover increases in wire rod prices; the impact of the resolution of the Section 201 filing with the U.S International Trade Commission on the cost and availability of wire rod; legal, environmental or regulatory developments that significantly impact the Company's operating costs; increased demand for the Company's concrete reinforcing products resulting from increased federal funding levels provided for in the TEA-21 highway spending legislation; the financial impact of the acquisition of the 25% interest in SRP and the Hickman, KY manufacturing facility; the success of the Company's new product initiatives, including the PC strand, collated fastener and tire bead wire expansions; the inability of the Company to expedite the qualification process with prospective customers for tire bead wire; and the failure of the Company to receive regular and substantial orders for its new products. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On April 26, 1999, the Board of Directors of the Company declared a dividend distribution of one Preferred Stock Purchase Right on each share of the Company's Common Stock to shareholders of record on May 17, 1999. One right will also be issued for each share of Common Stock issued after May 17, 1999. The Company issued the rights pursuant to a Rights Agreement dated as of April 27, 1999 between the Company and First Union National Bank, as Rights Agent. The issuance of the rights did not constitute a sale of securities for the purpose of Section 5 of the Securities Act of 1933. The rights and the Rights Agreement are described in the Company's Current Report on Form 8-K dated April 26, 1999, which is incorporated herein by reference. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 27 - Financial Data Schedule b. Reports on Form 8-K The Company filed a report on Form 8-K, dated May 7, 1999. The Item reported was "Item 5. Other Events". 11 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: August 11, 1999 By /s/ H.O. WOLTZ III - ------------------------------ -------------------------------- H.O. Woltz III President and Chief Executive Officer Date: August 11, 1999 By /s/ MICHAEL C. GAZMARIAN - ------------------------------ -------------------------------- Michael C. Gazmarian Chief Financial Officer and Treasurer EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF INSTEEL INDUSTRIES, INC. FOR THE NINE MONTHS ENDED JULY 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS OCT-02-1999 JUL-03-1999 517 0 28,940 0 31,929 63,072 85,504 0 159,702 36,458 0 16,914 0 0 58,366 159,702 201,105 201,105 174,606 174,606 0 0 1,850 11,663 4,234 7,429 0 0 0 7,429 0.88 0.88
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