Insteel Reports Increasing Capacity Utilization in Quarterly Earnings Report
07/21/2014 - Insteel Industries Inc. announced financial results for its third quarter ended 28 June 2014.
Third Quarter 2014 Results
Net earnings for the third quarter of fiscal 2014 were US$5.8 million compared with US$3.3 million in the same period a year ago. Insteel's earnings for the current year quarter include a net gain of US$0.8 million in other income for insurance recoveries in excess of the carrying value of property and equipment destroyed in the January 2014 fire at the Gallatin, Tenn., prestressed concrete strand (PC strand) manufacturing facility.
Net sales increased 16.8% to a record high US$113.2 million from US$96.9 million in the prior year period. Shipments increased 16.0% year-over-year, also to a new record high, and average selling prices increased 0.7%. On a sequential basis, shipments increased 25.2% from the second quarter of fiscal 2014 while average selling prices decreased 1.1%.
Insteel's third-quarter results were favorably impacted by the increase in shipments, higher spreads between selling prices and raw material costs, and lower unit conversion costs relative to the same period a year ago. Capacity utilization for the quarter was 58% compared with 48% in the prior year quarter and 51% in the second quarter of fiscal 2014.
Operating activities provided US$14.2 million of cash compared with US$5.7 million in the prior year period primarily due to the relative changes in net working capital and the increase in earnings. Net working capital provided US$6.9 million of cash while using US$0.9 million in the same period a year ago. Capital expenditures were US$2.8 million, including US$1.7 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.
Nine Month 2014 Results
Net earnings for the first nine months of fiscal 2014 were US$12.1 million compared with US$9.4 million in the same period a year ago. Insteel's earnings for the current year nine-month period include a net gain of US$0.4 million in other income for insurance recoveries in excess of the carrying value of property and equipment destroyed in the Gallatin fire.
Net sales increased 9.9% to US$291.9 million from US$265.7 million in the prior year period. Shipments increased 11.9% year-over-year while average selling prices decreased 1.9%.
Operating activities provided US$22.1 million of cash compared with US$32.1 million in the prior year period primarily due to the relative changes in net working capital, which was partially offset by the increase in earnings. Net working capital provided US$2.2 million of cash compared with US$11.3 million in the same period a year ago. Capital expenditures were US$5.8 million, including US$1.9 million of outlays related to the replacement of property and equipment damaged in the Gallatin fire for which the Company expects to be reimbursed under its insurance coverage. Capital expenditures for fiscal 2014 are not expected to exceed US$5.0 million, excluding the outlays related to the Gallatin fire.
Balance Sheet
Insteel ended the quarter debt-free with US$31.4 million of cash and cash equivalents, and no borrowings outstanding on its US$100.0 million revolving credit facility.
Outlook
"We are encouraged by the continued improvement in private nonresidential construction across most of our markets, which has become more pronounced over the past few months and is expected to continue through the remainder of our fiscal year," commented H.O. Woltz III, Insteel's president and CEO. "The outlook for infrastructure construction, however, is uncertain at this time in view of the projected shortfall in the highway trust fund and upcoming expiration of the current MAP-21 federal transportation funding authorization in September. It now appears likely that a short-term stop-gap funding measure will be enacted, which could have an unfavorable effect on state and local spending levels. Nevertheless, there appears to be a heightened degree of focus on developing a longer-term funding solution to address the critical needs that exist, and we expect this issue will ultimately be resolved."
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 nine manufacturing facilities located in the United States.
Net earnings for the third quarter of fiscal 2014 were US$5.8 million compared with US$3.3 million in the same period a year ago. Insteel's earnings for the current year quarter include a net gain of US$0.8 million in other income for insurance recoveries in excess of the carrying value of property and equipment destroyed in the January 2014 fire at the Gallatin, Tenn., prestressed concrete strand (PC strand) manufacturing facility.
Net sales increased 16.8% to a record high US$113.2 million from US$96.9 million in the prior year period. Shipments increased 16.0% year-over-year, also to a new record high, and average selling prices increased 0.7%. On a sequential basis, shipments increased 25.2% from the second quarter of fiscal 2014 while average selling prices decreased 1.1%.
Insteel's third-quarter results were favorably impacted by the increase in shipments, higher spreads between selling prices and raw material costs, and lower unit conversion costs relative to the same period a year ago. Capacity utilization for the quarter was 58% compared with 48% in the prior year quarter and 51% in the second quarter of fiscal 2014.
Operating activities provided US$14.2 million of cash compared with US$5.7 million in the prior year period primarily due to the relative changes in net working capital and the increase in earnings. Net working capital provided US$6.9 million of cash while using US$0.9 million in the same period a year ago. Capital expenditures were US$2.8 million, including US$1.7 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.
Nine Month 2014 Results
Net earnings for the first nine months of fiscal 2014 were US$12.1 million compared with US$9.4 million in the same period a year ago. Insteel's earnings for the current year nine-month period include a net gain of US$0.4 million in other income for insurance recoveries in excess of the carrying value of property and equipment destroyed in the Gallatin fire.
Net sales increased 9.9% to US$291.9 million from US$265.7 million in the prior year period. Shipments increased 11.9% year-over-year while average selling prices decreased 1.9%.
Operating activities provided US$22.1 million of cash compared with US$32.1 million in the prior year period primarily due to the relative changes in net working capital, which was partially offset by the increase in earnings. Net working capital provided US$2.2 million of cash compared with US$11.3 million in the same period a year ago. Capital expenditures were US$5.8 million, including US$1.9 million of outlays related to the replacement of property and equipment damaged in the Gallatin fire for which the Company expects to be reimbursed under its insurance coverage. Capital expenditures for fiscal 2014 are not expected to exceed US$5.0 million, excluding the outlays related to the Gallatin fire.
Balance Sheet
Insteel ended the quarter debt-free with US$31.4 million of cash and cash equivalents, and no borrowings outstanding on its US$100.0 million revolving credit facility.
Outlook
"We are encouraged by the continued improvement in private nonresidential construction across most of our markets, which has become more pronounced over the past few months and is expected to continue through the remainder of our fiscal year," commented H.O. Woltz III, Insteel's president and CEO. "The outlook for infrastructure construction, however, is uncertain at this time in view of the projected shortfall in the highway trust fund and upcoming expiration of the current MAP-21 federal transportation funding authorization in September. It now appears likely that a short-term stop-gap funding measure will be enacted, which could have an unfavorable effect on state and local spending levels. Nevertheless, there appears to be a heightened degree of focus on developing a longer-term funding solution to address the critical needs that exist, and we expect this issue will ultimately be resolved."
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 nine manufacturing facilities located in the United States.
