PR Newswire | Apr 22, 2021 06:31AM EDT

04/22 05:30 CDT

Insteel Industries Reports Second Quarter 2021 Results MOUNT AIRY, N.C., April 22, 2021

MOUNT AIRY, N.C., April 22, 2021 /PRNewswire/ -- Insteel Industries Inc. (NYSE: IIIN) today announced financial results for its second quarter ended April 3, 2021.

Second Quarter 2021 Results

Insteel's second quarter results were favorably impacted by continued strong demand for its reinforcing products. Net earnings increased to $14.9 million, or $0.76 per diluted share, from $4.4 million, or $0.23 per share, in the same period a year ago.

Net sales increased 21.0% to $139.0 million from $114.9 million in the prior year quarter driven by a 15.0% increase in average selling prices and a 5.2% increase in shipments. On a sequential basis, average selling prices increased 12.7% while shipments increased 3.1%. The average selling price increase was largely the result of price increases implemented across all product lines during the quarter to recover rapidly escalating raw material costs.

Gross margin widened 840 basis points to 21.7% from 13.3% in the prior year quarter primarily due to higher spreads between selling prices and raw material costs. Insteel's net earnings for the current quarter reflect a $0.8 million increase in cash surrender value of life insurance policies, which reduced selling, general and administrative ("SG&A") expense, increasing net earnings per share by $0.03. Net earnings for the prior year quarter reflect a $1.2 million decrease in cash surrender value of life insurance policies, which reduced net earnings per share by $0.05.

Operating activities generated $15.3 million of cash compared with using $3.0 million in the prior year quarter primarily due to an increase in earnings. Working capital used $0.8 million of cash in the current year quarter as compared to using $13.8 million in the prior year quarter.

Six Month 2021 Results

Net earnings for the first six months of fiscal 2021 increased to $23.1 million, or $1.18 per diluted share, from $4.9 million, or $0.25 per diluted share, in the same period a year ago. Net sales increased 21.7% to $258.6 million from $212.4 million in the prior year period driven by a 12.7% increase in shipments and an 8.0% increase in average selling prices. Gross margin widened 930 basis points to 19.4% from 10.1% due to higher spreads and the increase in shipments. Insteel's net earnings for the current year period reflect a $1.2 million increase in the cash surrender value of life insurance policies, which reduced SG&A expense and $1.2 million of restructuring charges related to the Company's March 16, 2020 acquisition of substantially all the assets of Strand-Tech Manufacturing, Inc. ("STM"), which, in the aggregate, offset resulting in no impact on net earnings per share.

Net earnings for the prior year period reflect a $0.9 million decrease in the cash surrender value of life insurance policies and $0.3 million of restructuring charges and acquisition costs related to the STM acquisition, which, in the aggregate, reduced net earnings per share by $0.05.

Operating activities provided $29.2 million of cash compared with providing $26.6 million in the prior year period primarily due to an increase in earnings. Working capital used $1.3 million of cash in the current year period as compared to providing $10.8 million in the prior year period.

Capital Allocation and Liquidity

Capital expenditures for the first six months of fiscal 2021 increased to $8.8 million from $2.4 million in the prior year period and are expected to total up to $20.0 million in 2021 to complete the upgrade and redeployment of the STM assets, support the growth of our engineered structural mesh business, invest in our information systems, and fund recurring maintenance requirements.

Insteel ended the quarter debt-free with $58.9 million of cash and no borrowings outstanding on its $100.0 million revolving credit facility.

Outlook

"Looking ahead to the second half of our fiscal year, we expect solid performance given the favorable trends in non-residential construction markets along with the usual seasonal upturn in demand," commented H.O. Woltz III, Insteel's president and CEO. "Recent private non-residential construction leading indicators are signaling a rebound in activity close to pre-pandemic levels and public construction activity has remained resilient which causes us to be optimistic about the demand environment for the next couple of quarters."

Woltz continued, "Over the last year we have pursued anti-dumping and countervailing duty trade cases against sixteen countries we believe violated U.S. trade law with respect to their exports of PC strand and standard welded wire reinforcement to U.S. markets. We are pleased to report that we have received favorable determinations in the cases and expect to obtain margins against every country and every company we targeted. This lengthy process should wrap up by the end of our third quarter. Our success in addressing illegal trading practices should restore balance in our markets for years to come."

"During our third and fourth quarters, we expect to confront extremely tight supply conditions and escalating prices in both the domestic and international markets for steel wire rod, our primary raw material. Delivery performance by our suppliers may be unpredictable which could lead to scheduling and operational inefficiencies as we seek to fulfill commitments to our customers. While we expect a favorable impact on gross margin as we pass rising costs through the supply chain, it should normalize once raw material markets stabilize."

Conference Call

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its second quarter financial results. A live webcast of this call can be accessed on Insteel's website at https://insteelgcs.gcs-web.com/ 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 prestressed concrete 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 and concrete contractors for use, primarily, in nonresidential construction applications. 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 safe harbor provisions 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 3, 2020.

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: the impact of COVID-19 on the economy, demand for our products and our operations, including the measures taken by governmental authorities to address it, which may precipitate or exacerbate other risks and/or uncertainties; 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 Engineered Structural Mesh ("ESM") and expand our shipments of ESM; legal, environmental, economic or regulatory developments that significantly impact our business or 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 3, 2020 and in other filings made by us with the SEC.

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except for per share data)

(Unaudited)

Three Months Ended Six Months Ended

April 3, March 28, April 3, March 28,

2021 2020 2021 2020

Net sales $ 138,999 $ 114,859 $ 258,604 $ 212,428

Cost of sales 108,771 99,576 208,525 190,908

Gross profit 30,228 15,283 50,079 21,520

Selling, general and administrative expense 10,330 9,602 18,883 15,346

Restructuring charges, net 545 149 1,202 149

Acquisition costs - 187 - 187

Other expense (income), net 75 (18) 88 (43)

Interest expense 24 26 49 52

Interest income (5) (204) (10) (430)

Earnings before income taxes 19,259 5,541 29,867 6,259

Income taxes 4,339 1,177 6,804 1,340

Net earnings $ 14,920 $ 4,364 $ 23,063 $ 4,919

Net earnings per share:

Basic $ 0.77 $ 0.23 $ 1.19 $ 0.26

Diluted 0.76 0.23 1.18 0.25

Weighted average shares outstanding:

Basic 19,328 19,272 19,319 19,266

Diluted 19,517 19,386 19,476 19,378

Cash dividends declared per share $ 0.03 $ 0.03 $ 1.56 $ 0.06

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited) (Unaudited)

April 3, January 2, October 3, March 28,

2021 2021 2020 2020

Assets

Current assets:

Cash and cash equivalents $ 58,940 $ 50,182 $ 68,688 $ 40,363

Accounts receivable, net 58,123 49,224 53,817 54,912

Inventories 68,623 64,276 68,963 71,685

Other current assets 6,556 5,201 5,570 9,312

Total current assets 192,242 168,883 197,038 176,272

Property, plant and equipment, net 104,680 101,351 101,392 111,674

Intangibles, net 8,095 8,331 8,567 8,951

Goodwill 9,745 9,745 9,745 9,624

Other assets 22,099 21,641 21,160 12,514

Total assets $ 336,861 $ 309,951 $ 337,902 $ 319,035

Liabilities and shareholders' equity

Current liabilities:

Accounts payable $ 44,941 $ 31,761 $ 38,961 $ 38,438

Accrued expenses 14,252 15,012 14,717 9,687

Total current liabilities 59,193 46,773 53,678 48,125

Long-term debt - - -

Other liabilities 18,932 19,444 19,421 20,079

Commitments and contingencies

Shareholders' equity:

Common stock 19,341 19,314 19,304 19,283

Additional paid-in capital 77,351 76,716 76,387 75,661

Retained earnings 164,000 149,660 171,068 158,135

Accumulated other comprehensive loss (1,956) (1,956) (1,956) (2,248)

Total shareholders' equity 258,736 243,734 264,803 250,831

Total liabilities and shareholders' equity $ 336,861 $ 309,951 $ 337,902 $ 319,035

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended Six Months Ended

April 3, March 28, April 3, March 28,

2021 2020 2021 2020

Cash Flows From Operating Activities:

Net earnings $ 14,920 $ 4,364 $ 23,063 $ 4,919

Adjustments to reconcile net earnings to net cash provided by (used for)

operating activities:

Depreciation and amortization 3,590 3,513 7,200 6,991

Amortization of capitalized financing costs 16 16 32 32

Stock-based compensation expense 710 941 934 1,127

Deferred income taxes (402) 419 (466) 605

Loss on sale and disposition of property, plant and equipment 83 2 115 2

Increase in cash surrender value of life insurance policies over premiums (804) - (1,168) -paid

Net changes in assets and liabilities (net of assets and liabilitiesacquired):

Accounts receivable, net (8,899) (15,647) (4,306) (6,870)

Inventories (4,347) (3,261) 340 2,338

Accounts payable and accrued expenses 12,430 5,072 2,677 15,297

Other changes (2,008) 1,614 818 2,167

Total adjustments 369 (7,331) 6,176 21,689

Net cash provided by (used for) operating activities 15,289 (2,967) 29,239 26,608

Cash Flows From Investing Activities:

Acquisition of business - (21,500) - (21,500)

Capital expenditures (5,908) (1,768) (8,768) (2,368)

Decrease (increase) in cash surrender value of life insurance policies - 710 (197) 668

Proceeds from sale of assets held for sale - - 19 -

Proceeds from surrender of life insurance policies 5 6 23 6

Net cash used for investing activities (5,903) (22,552) (8,923) (23,194)

Cash Flows From Financing Activities:

Cash dividends paid (580) (1,156) (30,131) (1,156)

Proceeds from long-term debt 89 68 134 135

Principal payments on long-term debt (89) (68) (134) (135)

Payment of employee tax withholdings related to net share transactions (97) (76) (110) (76)

Cash received from exercise of stock options 49 - 177 -

Net cash used for financing activities (628) (1,232) (30,064) (1,232)

Net increase (decrease) in cash and cash equivalents 8,758 (26,751) (9,748) 2,182

Cash and cash equivalents at beginning of period 50,182 67,114 68,688 38,181

Cash and cash equivalents at end of period $ 58,940 $ 40,363 $ 58,940 $ 40,363

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:

Income taxes, net $ 5,717 $ 261 5,812 275

Non-cash investing and financing activities:

Receivable related to post-closing purchase price adjustment for business - 3,113 - 3,113acquired

Purchases of property, plant and equipment in accounts payable 1,357 274 1,357 274

Restricted stock units and stock options surrendered for withholding taxes 97 76 110 76payable

Accrued liability related to holdback for business acquired - 1,000 - 1,000

IIIN - E

View original content to download multimedia: http://www.prnewswire.com/news-releases/insteel-industries-reports-second-quarter-2021-results-301273858.html

SOURCE Insteel Industries, Inc.