Insteel Industries Reports Third Quarter 2017 Financial Results

MOUNT AIRY, N.C., July 20, 2017 /PRNewswire/ -- Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its third quarter ended July 1, 2017.

Third Quarter 2017 Results

Net earnings for the third quarter of fiscal 2017 decreased to $6.9 million, or $0.36 per share, from $13.5 million, or $0.71 per diluted share, in the same period a year ago. Insteel's results were unfavorably impacted by lower shipment and production volumes together with narrower spreads between selling prices and raw material costs relative to the prior year quarter.

Net sales decreased 16.2% to $96.9 million from $115.6 million in the prior year quarter, reflecting a 20.8% decrease in shipments and a 5.9% increase in average selling prices. Shipments decreased 7.5% sequentially from the second quarter of fiscal 2017 while average selling prices increased 3.5%. Shipments for the quarter were adversely affected by the excessive rainfall in many regions of the country, a reduction in new project activity and competitive pricing pressures. Gross margin narrowed 660 basis points to 17.2% from 23.8% due to the reductions in shipments and spreads, and higher manufacturing costs on the lower production volume.

Cash flow from operations decreased to $4.5 million from $21.9 million in the prior year quarter primarily due to the relative changes in net working capital and the decrease in earnings. Net working capital used $5.8 million of cash while providing $6.3 million in the prior year quarter.

Nine Month 2017 Results

Net earnings for the first nine months of fiscal 2017 decreased to $18.7 million, or $0.98 per diluted share, from $27.4 million, or $1.44 per diluted share in the same period a year ago. Net sales decreased 7.4% to $292.0 million from $315.4 million in the prior year period, reflecting a 7.8% decrease in shipments and a 0.4% increase in average selling prices. Gross margin narrowed 340 basis points to 16.4% from 19.8% due to lower spreads and shipments, and higher manufacturing costs on lower production volume.

Cash flow from operations decreased to $21.6 million from $45.7 million in the prior year period primarily due to the relative changes in net working capital and the decrease in earnings. Net working capital used $7.1 million of cash while providing $7.4 million in the prior year period.

Capital Allocation and Liquidity

Capital expenditures for the first nine months of fiscal 2017 increased to $16.9 million from $9.1 million in the prior year period. Capital outlays for fiscal 2017 are expected to total up to $25.0 million largely related to the expansion of the Houston, Texas prestressed concrete strand ("PC strand") facility, additional investments in engineered structural mesh ("ESM") manufacturing capabilities and further upgrades of production technology and information systems. 

During the first nine months of fiscal 2017, Insteel returned $25.4 million of capital to shareholders through the payment of a special cash dividend of $1.25 per share and three regular quarterly cash dividends of $0.03 per share. Insteel ended the quarter debt-free with $37.8 million of cash and cash equivalents, and no borrowings outstanding on its $100.0 million revolving credit facility.

Outlook

"As we move into the fourth fiscal quarter, the leading indicators for nonresidential construction remain positive and our customers are optimistic that business conditions will improve over the remainder of the year," commented H.O. Woltz III, Insteel's president and CEO. "We believe the recent increases in infrastructure funding that have been authorized at the state and local level will begin to favorably impact demand for our products later in the year. We also expect improved manufacturing costs driven by higher operating volumes together with our process improvement initiatives and the recent upgrading and expansion of our Houston PC strand facility."

Conference Call

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its third quarter financial results. A live webcast of this call can be accessed on Insteel's website at http://investor.insteel.com/events.cfm and will be archived for replay until the next quarterly conference call.

About Insteel

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 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, North Carolina, Insteel operates ten manufacturing facilities located in the United States.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release, the words  "believes," "anticipates," "expects," "estimates," "appears," "plans," "intends," "may," "should," "could" and similar expressions are intended to identify forward-looking statements.  Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are subject to a number of risks and uncertainties, and we can provide no assurances that such plans, intentions or expectations will be implemented or achieved. Many of these risks and uncertainties are discussed in detail, and are updated from time to time in our filings with the U.S. Securities and Exchange Commission (the "SEC"), in particular in our Annual Report on Form 10-K for the year ended October 1, 2016.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only to the respective dates on which such statements are made and we do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as may be required by law.

It is not possible to anticipate and list all risks and uncertainties that may affect our future operations or financial performance; however, they include, but are not limited to, the following: general economic and competitive conditions in the markets in which we operate; changes in the spending levels for nonresidential and residential construction and the impact on demand for our products; changes in the amount and duration of transportation funding provided by federal, state and local governments and the impact on spending for infrastructure construction and demand for our products; the cyclical nature of the steel and building material industries; credit market conditions and the relative availability of financing for us, our customers and the construction industry as a whole; fluctuations in the cost and availability of our primary raw material, hot-rolled steel wire rod, from domestic and foreign suppliers; competitive pricing pressures and our ability to raise selling prices in order to recover increases in raw material or operating costs; changes in United States or foreign trade policy affecting imports or exports of steel wire rod or our products; unanticipated changes in customer demand, order patterns and inventory levels; the impact of fluctuations in demand and capacity utilization levels on our unit manufacturing costs; our ability to further develop the market for ESM and expand our shipments of ESM; legal, environmental, economic or regulatory developments that significantly impact our operating costs; unanticipated plant outages, equipment failures or labor difficulties; and the "Risk Factors" discussed in our Annual Report on Form 10-K for the year ended October 1, 2016 and in other filings made by us with the SEC.

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SOURCE Insteel Industries, Inc.