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Insteel Gives Quarterly Update, Provides Outlook
10/16/2014 - Insteel Industries Inc. announced financial results for its fourth quarter and fiscal year ended 27 September 2014.
Fourth Quarter 2014 Results
Net earnings for the fourth quarter of fiscal 2014 increased to US$4.6 million from US$2.3 million in the same period a year ago. The fourth quarter results for fiscal 2014 include US$1.2 million of restructuring charges and US$600,000 of acquisition costs, both associated with the transaction that was completed during the quarter, and a US$1.4 million net gain from insurance proceeds related to the January 2014 fire at the Gallatin, Tenn., facility. In the aggregate, these items reduced pre-tax earnings by US$500,000.
Net sales increased 19.3% to a record high US$117.1 million from US$98.2 million in the same period a year ago. Shipments increased 15.0% from the prior year quarter, also to a new record high, and average selling prices increased 3.7%. On a sequential basis, shipments increased 1.4% from the third quarter of fiscal 2014 and average selling prices increased 2.0%.
Insteel's fourth-quarter results were favorably impacted by higher spreads between selling prices and raw material costs and the increase in shipments relative to the prior year quarter. Capacity utilization for the quarter was 57% compared with 50% in the prior year quarter and 58% in the third quarter of fiscal 2014.
Operating activities provided US$7.1 million of cash compared with US$4.3 million in the same period a year ago primarily due to the increase in earnings and the relative changes in net working capital. Net working capital provided US$200,000 of cash while using US$2.2 million in the prior year quarter. Capital expenditures were US$3.2 million, including US$3.0 million of outlays related to the replacement of property and equipment damaged in the Gallatin fire for which Insteel expects to be reimbursed under its insurance coverage.
Fiscal 2014 Results
Net earnings for fiscal 2014 increased to US$16.6 million from US$11.7 million in the prior year. The fiscal 2014 results include US$1.2 million of restructuring charges and US$0.6 million of acquisition costs, both associated with the transaction that was completed during the year, and a US$1.8 million net gain from insurance proceeds related to the Gallatin fire. In the aggregate, these items did not materially impact pre-tax earnings or net earnings per share for the year.
Net sales increased 12.4% to a record high US$409 million from US$363.9 million in the prior year. Shipments increased 12.8% from the prior year while average selling prices decreased 0.3%.
Operating activities provided US$29.2 million of cash compared with US$36.8 million in the prior year primarily due to the relative changes in net working capital partially offset by the increase in earnings. Net working capital provided US$2.4 million of cash compared with US$9.7 million in the prior year. Capital expenditures were US$9.0 million, including US$4.8 million of outlays related to the replacement of property and equipment damaged in the Gallatin fire for which Insteel expects to be reimbursed under its insurance coverage. Capital expenditures for fiscal 2015 are expected to range from US$11 to US$13 million, excluding the outlays related to the Gallatin fire.
Balance Sheet
Insteel ended the quarter and year debt-free with US$3.1 million of cash and cash equivalents, and no borrowings outstanding on its US$100.0 million revolving credit facility.
ASW Acquisition
As previously announced, on 15 August 2014, Insteel, through its wholly-owned subsidiary, Insteel Wire Products Company, acquired substantially all of the assets associated with the prestressed concrete strand (PC strand) business of American Spring Wire Corporation (ASW) for an adjusted purchase price of US$33.9 million, subject to certain additional post-closing adjustments. ASW was previously the second largest producer of PC strand in the U.S. behind Insteel. For the twelve months ended 30 June 2014, ASW's sales of PC strand were US$67.8 million.
Under the terms of the purchase agreement, Insteel acquired, among other assets, the accounts receivable and inventories related to ASW's PC strand business, production equipment at its facility in Houston, Texas and its production facility in Newnan, Georgia. Insteel will lease the Houston facility from ASW. The transaction was funded from cash on hand and borrowings on Insteel's US$100 million revolving credit facility, which were subsequently repaid.
During the quarter, Insteel recorded US$1.2 million of restructuring charges related to the ASW acquisition for employee separation costs associated with staffing reductions and US$0.6 million of acquisition costs for legal, accounting and other professional fees.
"We are pleased with the substantial progress that was made in executing our integration plan during the quarter," said H.O. Woltz III, Insteel's president and CEO. "Both ASW facilities have transitioned to Insteel's information systems and the same operating metrics and procedures as our existing PC strand plants. We are evaluating the optimal operating configuration for our newly combined facilities, which will be significantly influenced by the prospects for a continued recovery in our construction end markets."
Outlook
"As we move into fiscal 2015, the most recent macro indicators and forecasts for our primary demand driver, private nonresidential construction, point to continued improvement over the course of the year," commented Woltz. "We expect that our financial results will also be favorably impacted by the full-year contribution of the ASW acquisition and higher operating levels at our facilities driven by the strengthening market environment."
Insteel is the nation's largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel manufactures and markets PC strand and welded wire reinforcement, including engineered structural mesh (ESM), concrete pipe reinforcement 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, N.C., Insteel operates 11 manufacturing facilities located in the U.S.
Net earnings for the fourth quarter of fiscal 2014 increased to US$4.6 million from US$2.3 million in the same period a year ago. The fourth quarter results for fiscal 2014 include US$1.2 million of restructuring charges and US$600,000 of acquisition costs, both associated with the transaction that was completed during the quarter, and a US$1.4 million net gain from insurance proceeds related to the January 2014 fire at the Gallatin, Tenn., facility. In the aggregate, these items reduced pre-tax earnings by US$500,000.
Net sales increased 19.3% to a record high US$117.1 million from US$98.2 million in the same period a year ago. Shipments increased 15.0% from the prior year quarter, also to a new record high, and average selling prices increased 3.7%. On a sequential basis, shipments increased 1.4% from the third quarter of fiscal 2014 and average selling prices increased 2.0%.
Insteel's fourth-quarter results were favorably impacted by higher spreads between selling prices and raw material costs and the increase in shipments relative to the prior year quarter. Capacity utilization for the quarter was 57% compared with 50% in the prior year quarter and 58% in the third quarter of fiscal 2014.
Operating activities provided US$7.1 million of cash compared with US$4.3 million in the same period a year ago primarily due to the increase in earnings and the relative changes in net working capital. Net working capital provided US$200,000 of cash while using US$2.2 million in the prior year quarter. Capital expenditures were US$3.2 million, including US$3.0 million of outlays related to the replacement of property and equipment damaged in the Gallatin fire for which Insteel expects to be reimbursed under its insurance coverage.
Fiscal 2014 Results
Net earnings for fiscal 2014 increased to US$16.6 million from US$11.7 million in the prior year. The fiscal 2014 results include US$1.2 million of restructuring charges and US$0.6 million of acquisition costs, both associated with the transaction that was completed during the year, and a US$1.8 million net gain from insurance proceeds related to the Gallatin fire. In the aggregate, these items did not materially impact pre-tax earnings or net earnings per share for the year.
Net sales increased 12.4% to a record high US$409 million from US$363.9 million in the prior year. Shipments increased 12.8% from the prior year while average selling prices decreased 0.3%.
Operating activities provided US$29.2 million of cash compared with US$36.8 million in the prior year primarily due to the relative changes in net working capital partially offset by the increase in earnings. Net working capital provided US$2.4 million of cash compared with US$9.7 million in the prior year. Capital expenditures were US$9.0 million, including US$4.8 million of outlays related to the replacement of property and equipment damaged in the Gallatin fire for which Insteel expects to be reimbursed under its insurance coverage. Capital expenditures for fiscal 2015 are expected to range from US$11 to US$13 million, excluding the outlays related to the Gallatin fire.
Balance Sheet
Insteel ended the quarter and year debt-free with US$3.1 million of cash and cash equivalents, and no borrowings outstanding on its US$100.0 million revolving credit facility.
ASW Acquisition
As previously announced, on 15 August 2014, Insteel, through its wholly-owned subsidiary, Insteel Wire Products Company, acquired substantially all of the assets associated with the prestressed concrete strand (PC strand) business of American Spring Wire Corporation (ASW) for an adjusted purchase price of US$33.9 million, subject to certain additional post-closing adjustments. ASW was previously the second largest producer of PC strand in the U.S. behind Insteel. For the twelve months ended 30 June 2014, ASW's sales of PC strand were US$67.8 million.
Under the terms of the purchase agreement, Insteel acquired, among other assets, the accounts receivable and inventories related to ASW's PC strand business, production equipment at its facility in Houston, Texas and its production facility in Newnan, Georgia. Insteel will lease the Houston facility from ASW. The transaction was funded from cash on hand and borrowings on Insteel's US$100 million revolving credit facility, which were subsequently repaid.
During the quarter, Insteel recorded US$1.2 million of restructuring charges related to the ASW acquisition for employee separation costs associated with staffing reductions and US$0.6 million of acquisition costs for legal, accounting and other professional fees.
"We are pleased with the substantial progress that was made in executing our integration plan during the quarter," said H.O. Woltz III, Insteel's president and CEO. "Both ASW facilities have transitioned to Insteel's information systems and the same operating metrics and procedures as our existing PC strand plants. We are evaluating the optimal operating configuration for our newly combined facilities, which will be significantly influenced by the prospects for a continued recovery in our construction end markets."
Outlook
"As we move into fiscal 2015, the most recent macro indicators and forecasts for our primary demand driver, private nonresidential construction, point to continued improvement over the course of the year," commented Woltz. "We expect that our financial results will also be favorably impacted by the full-year contribution of the ASW acquisition and higher operating levels at our facilities driven by the strengthening market environment."
Insteel is the nation's largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel manufactures and markets PC strand and welded wire reinforcement, including engineered structural mesh (ESM), concrete pipe reinforcement 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, N.C., Insteel operates 11 manufacturing facilities located in the U.S.
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