Form 8-K INSTEEL INDUSTRIES INC For: Oct 20

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

 

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 20, 2016

 

 

Commission File Number 1-9929

 

 

 

Insteel Industries, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

North Carolina (State or other jurisdiction of incorporation or organization)	56-0674867 (I.R.S. Employer Identification No.)
1373 Boggs Drive, Mount Airy, North Carolina (Address of principal executive offices)	27030 (Zip Code)

 

Registrant’s telephone number, including area code: (336) 786-2141

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition

 

On October 20, 2016, Insteel Industries, Inc. issued a press release regarding its financial results for the fourth fiscal quarter and fiscal year ended October 1, 2016. A copy of this release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in Item 2.02 of this Current Report on Form 8-K, including the related information in Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

 

Item 9.01. Financial Statements and Exhibits

 

(d)         Exhibits

 

Exhibit 99.1

Press release dated October 20, 2016 announcing fourth fiscal quarter and fiscal year 2016 financial results of Insteel Industries, Inc.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

INSTEEL INDUSTRIES, INC.

Registrant

 

 

 

Date: October 20, 2016		By:	/s/ Michael C. Gazmarian
			Michael C. Gazmarian
			Vice President, Chief Financial Officer and Treasurer

 

 

EXHIBIT INDEX

 

Exhibit Number	Description
99.1	Press release October 20, 2016 announcing fourth fiscal quarter and fiscal year 2016 financial results of Insteel Industries, Inc.

 

Exhibit 99.1

 

 

NEWS RELEASE

 

FOR IMMEDIATE RELEASE

Contact:

Michael C. Gazmarian Vice President, CFO and Treasurer Insteel Industries, Inc. (336) 786-2141, Ext. 3020

 

INSTEEL INDUSTRIES REPORTS FOURTH QUARTER

AND FISCAL 2016 FINANCIAL RESULTS

 

MOUNT AIRY, N.C., October 20, 2016 – Insteel Industries, Inc. (NasdaqGS: IIIN) today announced financial results for its fourth quarter and fiscal year ended October 1, 2016.

 

Fourth Quarter 2016 Results

 

Net earnings for the fourth quarter of fiscal 2016 increased to $9.9 million from $9.6 million in the same period a year ago, while earnings per diluted share was unchanged at $0.51. The fourth-quarter results for the current year reflect a charge related to the settlement and termination of a pension plan, which reduced pre-tax earnings by $2.5 million and net earnings per share by $0.09. The fourth-quarter results for the prior year reflect $0.3 million of net restructuring recoveries, which increased net earnings per share by $0.01.

 

Insteel’s fourth-quarter results were favorably impacted by widening spreads between selling prices and raw material costs relative to the prior year quarter, which offset lower shipments and higher conversion costs. Net sales decreased 12.7% to $103.1 million from $118.1 million in the prior year quarter, reflecting an 8.8% decrease in shipments and a 4.3% decrease in average selling prices. Shipments for the prior year quarter benefited from an extra week based on Insteel’s fiscal calendar. On a pro forma basis adjusting both quarters to reflect the same 13-week period as the current year, the year-over-year shipment decrease was 2.9%. Shipments decreased 15.0% sequentially from the third quarter of fiscal 2016 while average selling prices increased 4.9%.

 

Cash flow from operations fell to $8.9 million from $19.3 million in the prior year quarter primarily due to the relative changes in net working capital, which used $4.2 million of cash while providing $7.8 million in the prior year quarter. Capital expenditures increased to $3.9 million from $0.4 million in the prior year quarter.

 

Fiscal 2016 Results

 

Net earnings for fiscal 2016 increased to $37.2 million, or $1.95 per diluted share from $21.7 million, or $1.15 per diluted share in the prior year. The current year results reflect a charge related to the pension plan settlement and termination, which reduced pre-tax earnings by $2.5 million and net earnings per share by $0.09. The prior year results reflect net restructuring charges, a charge related to a customer dispute and a net gain from insurance proceeds, which, in the aggregate, increased pre-tax earnings by $0.7 million and net earnings per share by $0.02.

 

Insteel’s fiscal 2016 results were favorably impacted by widening spreads between selling prices and raw material costs relative to the prior year and, to a lesser extent, higher shipments and lower conversion costs. Net sales decreased 6.5% to $418.5 million from $447.5 million in the prior year, reflecting a 2.6% increase in shipments offset by an 8.8% decrease in average selling prices. Shipments for the prior year benefited from an extra week based on Insteel’s fiscal calendar. On a pro forma basis adjusting both years to reflect the same 52-week period as the current year, the year-over-year shipment increase was 4.8%.

 

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1373 BOGGS DRIVE, MOUNT AIRY, NC 27030/PHONE: (336) 786-2141/FAX: (336) 786-2144

WWW.INSTEEL.COM

 

Page 2 of 6 

 

 

Cash flow generated from operations rose to $54.5 million from $35.8 million in the prior year primarily due to the increase in earnings. Net working capital provided $3.2 million of cash compared with $2.3 million in the prior year. Capital expenditures increased to $13.0 million from $7.2 million in the prior year largely due to outlays related to the expansion of the Houston prestressed concrete strand (“PC strand”) facility and are not expected to exceed $25 million for fiscal 2017.

 

Balance Sheet and Liquidity

 

Cash and cash equivalents increased $5.0 million during the fourth quarter to $58.9 million. Insteel ended the year debt-free with no borrowings outstanding on its $100.0 million revolving credit facility.

 

Outlook

 

“As we move into fiscal 2017, it is unclear whether the softening in shipments we experienced during the fourth fiscal quarter represents a temporary lull or will persist,” commented H.O. Woltz III, Insteel’s president and CEO. “Although recent macro indicators for our construction end-markets have been mixed, customer sentiment remains positive and we expect demand for our products will be favorably impacted by the FAST Act together with increased infrastructure spending at the state and local level.

 

“The expansion of our Houston PC strand facility remains on track to begin start-up activities before the end of the first quarter of fiscal 2017. The investments we are making realign the plant’s capacity with the requirements of the Texas market and should position it to achieve costs that are comparable to our other strand facilities.”

 

Conference Call

 

Insteel will hold a conference call at 10:00 a.m. ET today to discuss its fourth 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 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, 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 Insteel believes that its 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 Insteel 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 Insteel’s filings with the U.S. Securities and Exchange Commission (the “SEC”), in particular in its Annual Report on Form 10-K for the year ended October 3, 2015.

 

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All forward-looking statements attributable to Insteel or persons acting on its 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 Insteel does not undertake and specifically declines 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 Insteel’s 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 Insteel operates; changes in the spending levels for nonresidential and residential construction and the impact on demand for Insteel’s 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 Insteel’s products; the cyclical nature of the steel and building material industries; credit market conditions and the relative availability of financing for Insteel, its customers and the construction industry as a whole; fluctuations in the cost and availability of Insteel’s primary raw material, hot-rolled steel wire rod, from domestic and foreign suppliers; competitive pricing pressures and Insteel’s 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 Insteel’s products; unanticipated changes in customer demand, order patterns and inventory levels; the impact of fluctuations in demand and capacity utilization levels on Insteel’s unit manufacturing costs; Insteel’s ability to further develop the market for ESM and expand its shipments of ESM; legal, environmental, economic or regulatory developments that significantly impact Insteel’s operating costs; unanticipated plant outages, equipment failures or labor difficulties; and the “Risk Factors” discussed in Insteel’s Annual Report on Form 10-K for the year ended October 3, 2015 and in other filings made by Insteel with the SEC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share amounts)

 

 

		Three Months Ended								Year Ended
		(Unaudited)				(Unaudited)				(Unaudited)
		October 1,				October 3,				October 1,				October 3,
		2016				2015				2016				2015
Net sales		$	103,113			$	118,093			$	418,547			$	447,504
Cost of sales			80,510				96,199				333,359				389,171
Gross profit			22,603				21,894				85,188				58,333
Selling, general and administrative expense			5,249				7,770				26,069				25,824
Pension plan settlement loss			2,539				-				2,539				-
Restructuring charges (recoveries), net			32				(329	)			115				349
Other expense (income), net			45				(75	)			183				(1,113	)
Interest expense			37				47				158				320
Interest income			(63	)			(6	)			(166	)			(11	)
Earnings before income taxes			14,764				14,487				56,290				32,964
Income taxes			4,910				4,863				19,045				11,254
Net earnings		$	9,854			$	9,624			$	37,245			$	21,710
Net earnings per share:
Basic		$	0.52			$	0.52			$	1.99			$	1.18
Diluted			0.51				0.51				1.95				1.15
Weighted average shares outstanding:
Basic			18,945				18,451				18,754				18,418
Diluted			19,188				18,740				19,055				18,803
Cash dividends declared per share		$	0.03			$	0.03			$	1.12			$	0.12

 

 

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Page 5 of 6

  

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

		(Unaudited)
		October 1,				July 2,				October 3,
		2016				2016				2015
Assets
Current assets:
Cash and cash equivalents		$	58,873			$	53,838			$	33,258
Accounts receivable, net			47,389				49,426				46,782
Inventories			71,186				63,914				66,009
Other current assets			3,039				2,208				5,309
Total current assets			180,487				169,386				151,358
Property, plant and equipment, net			88,193				85,779				84,178
Intangibles, net			9,063				9,352				10,220
Goodwill			6,965				6,965				6,965
Other assets			8,184				7,935				7,518
Total assets		$	292,892			$	279,417			$	260,239
Liabilities and shareholders' equity
Current liabilities:
Accounts payable		$	42,759			$	39,738			$	32,182
Accrued expenses			11,024				13,376				13,644
Total current liabilities			53,783				53,114				45,826
Other liabilities			14,543				13,212				14,198
Shareholders' equity:
Common stock			18,976				18,904				18,466
Additional paid-in capital			67,817				66,303				60,967
Retained earnings			139,314				130,030				122,928
Accumulated other comprehensive loss			(1,541	)			(2,146	)			(2,146	)
Total shareholders' equity			224,566				213,091				200,215
Total liabilities and shareholders' equity		$	292,892			$	279,417			$	260,239

 

 

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Page 6 of 6

 

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

		Three Months Ended								Year Ended
		(Unaudited)				(Unaudited)				(Unaudited)
		October 1,				October 3,				October 1,				October 3,
		2016				2015				2016				2015
Cash Flows From Operating Activities:
Net earnings		$	9,854			$	9,624			$	37,245			$	21,710
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			3,015				3,230				11,544				11,934
Amortization of capitalized financing costs			17				17				65				89
Stock-based compensation expense			918				796				2,439				2,298
Deferred income taxes			(61	)			(213	)			536				333
Pension plan settlement, net of cash contribution			620				-				620				-
Asset impairment charges			-				306				20				543
Excess tax benefits from stock-based compensation			(473	)			(19	)			(1,717	)			(169	)
Loss (gain) on sale and disposition of property, plant and equipment			46				(897	)			61				(2,652	)
Increase in cash surrender value of life insurance policies over premiums paid			(212	)			-				(480	)			(39	)
Net changes in assets and liabilities (net of assets and liabilities acquired):
Accounts receivable, net			2,037				1,433				(607	)			4,266
Inventories			(7,272	)			4,784				(5,177	)			15,890
Accounts payable and accrued expenses			1,028				1,548				9,009				(17,861	)
Other changes			(635	)			(1,354	)			978				(568	)
Total adjustments			(972	)			9,631				17,291				14,064
Net cash provided by operating activities			8,882				19,255				54,536				35,774
Cash Flows From Investing Activities:
Capital expenditures			(3,900	)			(386	)			(12,977	)			(7,153	)
Acquisition of intangible asset			-				-				-				(1,460	)
Acquisition of business			-				-				-				480
Proceeds from fire loss insurance			-				-				-				1,713
Proceeds from sale of assets held for sale			-				3,537				180				3,537
Proceeds from sale of property, plant and equipment			-				28				60				132
Proceeds from surrender of life insurance policies			6				-				140				40
Decrease (increase) in cash surrender value of life insurance policies			(51	)			150				(375	)			(328	)
Net cash provided by (used for) investing activities			(3,945	)			3,329				(12,972	)			(3,039	)
Cash Flows From Financing Activities:
Proceeds from long-term debt			55				106				328				60,978
Principal payments on long-term debt			(55	)			(106	)			(328	)			(60,978	)
Cash dividends paid			(570	)			(554	)			(20,859	)			(2,211	)
Cash received from exercise of stock options			753				-				5,065				200
Excess tax benefits from stock-based compensation			473				19				1,717				169
Payment of employee tax withholdings related to net share transactions			(558	)			(224	)			(1,861	)			(478	)
Financing costs			-				-				(11	)			(207	)
Net cash provided by (used for) financing activities			98				(759	)			(15,949	)			(2,527	)
Net increase in cash and cash equivalents			5,035				21,825				25,615				30,208
Cash and cash equivalents at beginning of period			53,838				11,433				33,258				3,050
Cash and cash equivalents at end of period		$	58,873			$	33,258			$	58,873			$	33,258
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest		$	-			$	24			$	-			$	143
Income taxes, net			7,018				3,607				19,184				7,805
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable			1,746				570				1,746				570
Restricted stock units and stock options surrendered for withholding taxes payable			558				224				1,861				478

 

         IIIN – E

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