Insteel Industries Encouraged by Ongoing Recovery in U.S. Housing Market
01/17/2013 - As it reported its earnings for its fiscal first quarted ended 31 December 2012, Insteel Industries said market conditions were stronger than anticipated during what is typically its weakest period of the year due to the seasonal downturn in construction activity, but its outlook for the remainder of the year remains cautious.
Insteel Industries, Inc. reported net earnings of US$2.4 million, or $0.13 per diluted share, for the first quarter of fiscal 2013 compared with a net loss of $0.2 million, or $0.01 per share in the same period a year ago. The prior year results include a gain on the early extinguishment of debt and restructuring charges related to the November 2010 acquisition of certain of the assets of Ivy Steel & Wire, Inc., which, in the aggregate, reduced pre-tax earnings by $0.2 million and net earnings by $0.01 per share.
Insteel's financial results for the first quarter of fiscal 2013 were favorably impacted by widening spreads between selling prices and raw material costs relative to the prior year quarter together with higher shipments and lower unit conversion costs. Capacity utilization for the quarter was 46% compared with 48% in the fourth quarter of fiscal 2012 and 42% in the prior year quarter reflecting continued weakness in Insteel's construction end-markets.
Net sales for the first quarter of fiscal 2013 increased 1.3% to $85.9 million from $84.8 million in the same period a year ago. Shipments increased 5.5% from the prior year quarter while average selling prices decreased 4.0%. On a sequential basis, shipments decreased 12.6% from the fourth quarter of fiscal 2012 while average selling prices increased 0.5%.
Operating activities provided $23.5 million of cash for the first quarter of fiscal 2013 while using $0.7 million in the same period a year ago primarily due to the year-over-year changes in net working capital. Net working capital provided $17.0 million of cash in the current year while using $2.9 million in the prior year. Operating cash flow for the quarter was primarily used to repay $11.5 million of borrowings outstanding on Insteel's $100.0 million revolving credit facility, return $5.0 million to shareholders through the payment of a $4.5 million special cash dividend and a $0.5 million regular cash dividend, and fund $2.6 million of capital expenditures. Capital expenditures for fiscal 2013 are not expected to exceed $12.0 million. Insteel ended the quarter debt-free with $4.8 million of cash and cash equivalents.
"Market conditions for the first quarter were stronger than anticipated during what is typically our weakest period of the year due to the seasonal downturn in construction activity," commented H.O. Woltz III, Insteel's president and CEO. "We are encouraged by the ongoing recovery in the housing market, which may improve the prospects for a broader upturn in nonresidential construction activity and demand for our products. Our outlook for the remainder of the year, however, remains cautious in view of the high degree of economic uncertainty. Nevertheless, we expect that our results will be favorably impacted by the recently completed reconfiguration of our welded wire reinforcement operations and the ramp up of our engineered structural mesh expansion.
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, 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 nine manufacturing facilities located in the United States.
