Insteel Industries Reports 1st Quarter Results
01/18/2008 - Insteel Industries announces net earnings of $4.2 million on net sales of $66.0 million for the first quarter ended December 29, 2007.
Insteel Industries, Inc. announced net earnings of $4.2 million on net sales of $66.0 million for the first quarter ended December 29, 2007.
The $4.2 million net earnings ($0.23 per diluted share) compare with net earnings of $5.8 million ($0.32 per diluted share) for the same period last year. Net sales $66.0 million reflect a 5.4% decline from net sales of $69.7 million last year. Shipments decreased 6.1% while average selling prices rose 0.7%.
“Considering the weak demand that we experienced in certain of our markets and rising raw material costs, Insteel posted solid results for the first quarter,” said H.O. Woltz III, Insteel's President and CEO. “Shipments for the quarter were unfavorably impacted by the continued downturn in housing-related demand and low-priced import competition in our PC strand business.
The quarter was not as bad for non-residential construction. “Demand for engineered structural mesh (ESM) and other products for markets related to nonresidential construction remained relatively strong.”
Escalation of raw material costs, lower shipments, and higher unit conversion costs suppressed gross profit to $10.6 million (16.1% of net sales) as compared to gross profit of $13.6 million (19.5% of net sales) in the year-ago quarter. During the quarter, most of the company's manufacturing facilities operated on reduced schedules in response to the soft market conditions and usual seasonal downturn during what is typically the weakest shipment period of the year.
Operating activities of continuing operations provided $17.3 million of cash during the quarter compared with $4.2 million a year ago. The increase, said the company was due primarily to year-over-year changes in net working capital, which offset the decrease in earnings. Net working capital provided $8.9 million of cash while using $3.8 million a year ago, largely due to the $9.9 million increase in inventory that occurred in the prior year.
The strong operating cash flow for the quarter enabled the company to fund $4.9 million of capital expenditures, repurchase 208,585 shares ($2.5 million) of common stock under its previous share repurchase authorization, pay $0.5 million of dividends, and end the quarter debt-free with $17.7 million of cash, an increase of $9.0 million from the previous quarter-end.
Outlook—Looking forward, the company expects capital expenditures for fiscal 2008 to total $10.0 million. The company said this projection is subject to change based on adjustments in project timelines or scope, future market conditions, the company's financial performance, and additional growth opportunities that may arise.
Commenting on the outlook for the remainder of fiscal 2008, Woltz said, “Although the favorable trends for most categories of nonresidential construction are expected to continue, we anticipate the weakness in residential construction will begin to impact commercial construction markets as the year progresses. In addition, prices for our primary raw material, hot-rolled steel wire rod, are rising to unprecedented levels in spite of weak demand across most markets as the drop-off in import availability has caused supply to fall faster than demand. Under these circumstances, it may be difficult for us to fully recover these costs in our markets depending upon competitive dynamics.
“While business conditions in 2008 are likely to be more challenging than in recent years, we believe that our aggressive investment program ideally positions the company to capitalize on future growth in demand and achieve significant cost reductions. As we move further into the year, we expect to benefit from the usual seasonal upturn in demand and gradually increasing contributions from our ESM product line as we continue to ramp up the expansions at our North Carolina and Texas facilities.”
Insteel Industries is one of the nation's largest manufacturers of steel wire reinforcing products for concrete construction applications. The company manufactures and markets PC strand and welded wire reinforcement, including concrete pipe reinforcement, ESM 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 six manufacturing facilities located in the United States.
