Insteel Encouraged by Improvement in Non-Res Construction Market
01/19/2015 - Insteel Industries Inc. announced financial results for its first quarter ended 27 December 2014.
First Quarter 2015 Results
Net earnings for the first quarter of fiscal 2015 increased to US$4.2 million, or US$0.22 per diluted share from US$2.7 million, or US$0.15 per share in the same period a year ago. Net sales increased 26.8% to US$110.6 million from US$87.2 million in the same period a year ago due to the August 2014 acquisition of the prestressed concrete strand (PC strand) business of American Spring Wire Corporation together with higher sales at Insteel's other facilities. Shipments increased 20.9% from the prior year quarter and average selling prices increased 4.9%. On a sequential basis, shipments decreased 6.7% from the fourth quarter of fiscal 2014 reflecting the usual seasonal slowdown in construction activity while average selling prices increased 1.3%.
Insteel's first-quarter results were favorably impacted by higher spreads between selling prices and raw material costs and the increase in shipments, partially offset by higher conversion costs relative to the prior year quarter. Capacity utilization for the quarter was 54% compared with 47% in the prior year quarter and 57% in the fourth quarter of fiscal 2014.
Balance Sheet and Liquidity
Operating activities used US$9.5 million of cash while providing US$6.3 million in the prior year period primarily due to the relative changes in net working capital. Net working capital usedUS$17.9 million of cash while providing US$0.5 million in the same period a year ago largely due to the current year reduction in accounts payable resulting from lower raw material purchases. Capital expenditures were US$3.5 million and are expected to range from US$11.0 to US$13.0 million for fiscal 2015. Insteel ended the quarter with US$10.0 million of borrowings outstanding on its US$100.0 million revolving credit facility.
Outlook
"We made substantial progress during the quarter in ramping up the operating levels of our Gallatin, Tenn., PC strand facility following the completion of the repair work related to the January 2014 fire," commented H.O. Woltz III, Insteel's president and CEO. "The completion of this project will enable us to consider alternative manufacturing configurations for our PC strand business that are more cost effective while continuing to satisfy the requirements of our customers.
"Looking ahead, we are encouraged by the continued improvement in the leading indicators for our nonresidential construction end-markets. Customer sentiment for 2015 remains positive and the recovery appears to be gaining momentum, which should favorably impact our shipment and production volumes. In addition, we have intensified our process improvement initiatives across all our operations and expect to realize significant improvements in our conversion costs over the remainder of the year."
Net earnings for the first quarter of fiscal 2015 increased to US$4.2 million, or US$0.22 per diluted share from US$2.7 million, or US$0.15 per share in the same period a year ago. Net sales increased 26.8% to US$110.6 million from US$87.2 million in the same period a year ago due to the August 2014 acquisition of the prestressed concrete strand (PC strand) business of American Spring Wire Corporation together with higher sales at Insteel's other facilities. Shipments increased 20.9% from the prior year quarter and average selling prices increased 4.9%. On a sequential basis, shipments decreased 6.7% from the fourth quarter of fiscal 2014 reflecting the usual seasonal slowdown in construction activity while average selling prices increased 1.3%.
Insteel's first-quarter results were favorably impacted by higher spreads between selling prices and raw material costs and the increase in shipments, partially offset by higher conversion costs relative to the prior year quarter. Capacity utilization for the quarter was 54% compared with 47% in the prior year quarter and 57% in the fourth quarter of fiscal 2014.
Balance Sheet and Liquidity
Operating activities used US$9.5 million of cash while providing US$6.3 million in the prior year period primarily due to the relative changes in net working capital. Net working capital usedUS$17.9 million of cash while providing US$0.5 million in the same period a year ago largely due to the current year reduction in accounts payable resulting from lower raw material purchases. Capital expenditures were US$3.5 million and are expected to range from US$11.0 to US$13.0 million for fiscal 2015. Insteel ended the quarter with US$10.0 million of borrowings outstanding on its US$100.0 million revolving credit facility.
Outlook
"We made substantial progress during the quarter in ramping up the operating levels of our Gallatin, Tenn., PC strand facility following the completion of the repair work related to the January 2014 fire," commented H.O. Woltz III, Insteel's president and CEO. "The completion of this project will enable us to consider alternative manufacturing configurations for our PC strand business that are more cost effective while continuing to satisfy the requirements of our customers.
"Looking ahead, we are encouraged by the continued improvement in the leading indicators for our nonresidential construction end-markets. Customer sentiment for 2015 remains positive and the recovery appears to be gaining momentum, which should favorably impact our shipment and production volumes. In addition, we have intensified our process improvement initiatives across all our operations and expect to realize significant improvements in our conversion costs over the remainder of the year."
