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Insteel Industries Reports Gradual Improvement in Construction Markets

07/18/2013 - As it reported its third quarter of fiscal 2013 earnings results, Insteel Industries said it expects the rate of recovery will remain modest until there is more meaningful and sustained growth in the overall economy and in the employment market.

 Insteel Industries, Inc. reported net earnings of US$3.3 million, or US$0.18 per share for the third quarter of fiscal 2013 compared with US$0.9 million in the same period a year ago. Net earnings for the current year quarter include a US$0.4 million charge for the net loss on the disposal of equipment.
Insteel's financial results for the third quarter of fiscal 2013 were favorably impacted by widening spreads between selling prices and raw material costs, higher shipments and lower unit conversion costs relative to the prior year quarter. Capacity utilization for the quarter was 48% compared with 46% in the second quarter of fiscal 2013 and 44% in the prior year quarter.
Net sales for the third quarter of fiscal 2013 increased 3.6% to US$96.9 million from US$93.6 million in the same period a year ago. Shipments increased 9.3% from the prior year quarter while average selling prices decreased 5.3%. On a sequential basis, shipments increased 21.7% from the second quarter of fiscal 2013 while average selling prices decreased 3.9%.
For the first nine months of fiscal 2013, net earnings were US$9.4 million compared with US$1.0 million a year ago. The nine-month results for the current year include a US$0.3 million charge for the net loss on the disposal of equipment. The nine-month results for the prior year include restructuring charges related to the November 2010 acquisition of certain assets of Ivy Steel & Wire, Inc. and a gain on the early extinguishment of debt, which, in the aggregate, reduced pre-tax earnings by US$0.4 million.
Net sales for the first nine months of fiscal 2013 rose slightly to US$265.7 million from US$265.4 million in the same period a year ago. Shipments increased 4.6% from the prior year period while average selling prices decreased 4.3%.
Operating activities provided US$5.7 million of cash for the third quarter of fiscal 2013 while using US$10.1 million in the same period a year ago primarily due to the year-over-year changes in net working capital and the increase in earnings. Net working capital used US$0.9 million of cash in the current year quarter compared with US$13.8 million in the prior year quarter. Capital expenditures for the first nine months of fiscal 2013 were US$4.4 million, essentially unchanged from the prior year period, and are not expected to exceed US$7.0 million for fiscal 2013. Insteel ended the quarter with US$12.1 million of cash and cash equivalents, and no borrowings outstanding on itsUS$100.0 million revolving credit facility.
"Conditions in our construction end-markets have continued to gradually improve from historically depressed levels, although we have yet to see a significant pick up in momentum," commented H.O. Woltz III, Insteel's president and CEO. "We believe the rate of recovery will remain modest until there is more meaningful and sustained growth in the overall economy and in the employment market.
"We expect to commission and ramp up the new engineered structural mesh (ESM) production line at our North Carolina facility during the current quarter. The new line employs advanced technology that will enable us to broaden our offering of concrete reinforcing solutions and further our penetration of the rebar market in addition to significantly reducing the manufacturing costs for certain products currently produced on other equipment. We are confident the strategic investments we have made in our ESM business will serve to strengthen our market leadership position and financial performance in the coming quarters."
Insteel is the nation's largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel manufactures and markets prestressed concrete strand and welded wire reinforcement, including 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 nine manufacturing facilities located in the United States.