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Insteel earnings down 28 percent, but company now is debt-free

January 17th, 2008 · No Comments

Insteel Industries Inc. (Nasdaq: IIIN) of Mount Airy today said net earnings fell 28 percent in the first fiscal quarter that ended Dec. 29, 2007, when net sales decreased 5.4 percent compared to the same quarter in 2006.

However, operating activities in continuing operations provided $17.3 million of cash during the quarter compared with $4.2 million a year ago. The strong operating cash flow for the quarter enabled Insteel to spend $4.9 million on capital expenditures, repurchase 208,585 shares or $2.5 million of common stock, pay $500,000 in dividends and end the quarter debt-free with $17.7 million of cash, an increase of $9 million from the previous quarter’s end.

Net earnings for the first quarter were $4.2 million, or $0.23 per diluted share, compared with $5.8 million, or $0.32 per diluted share, for the same period last year. Net sales for the quarter decreased from $69.7 million in the 2006 quarter to $66 million. Shipments were down 6.1 percent. Average selling prices rose 0.7 percent.

“Considering the weak demand that we experienced in certain of our markets and rising raw material costs, Insteel posted solid results for the first quarter,” said H.O. Woltz III, Insteel’s president and chief executive officer in a press release. “Shipments for the quarter were unfavorably impacted by the continued downturn in housing-related demand and low-priced import competition in our PC strand business. Demand for engineered structural mesh (ESM) and other products for markets related to nonresidential construction remained relatively strong.”

Gross profit for the quarter decreased to $10.6 million (16.1 percent of net sales) from $13.6 million (19.5 percent of net sales) a year ago due to the escalation in raw material costs, lower shipments and higher unit-conversion costs. Most of the company’s manufacturing facilities operated on reduced schedules during the quarter in response to the soft market conditions and usual seasonal downturn during what is typically the weakest shipment period of the year.

Sharing his outlook for the remainder of 2008, Woltz said, “Although the favorable trends for most categories of nonresidential construction are expected to continue, we anticipate the weakness in residential construction will begin to impact commercial construction markets as the year progresses,” he said. “In addition, prices for our primary raw material, hot-rolled steel wire rod, are rising to unprecedented levels in spite of weak demand across most markets as the drop-off in import availability has caused supply to fall faster than demand. Under these circumstances, it may be difficult for us to fully recover these costs in our markets depending upon competitive dynamics.

“While business conditions in 2008 are likely to be more challenging than in recent years, we believe that our aggressive investment program ideally positions the company to capitalize on future growth in demand and achieve significant cost reductions. As we move further into the year, we expect to benefit from the usual seasonal upturn in demand and gradually increasing contributions from our ESM product line as we continue to ramp up the expansions at our North Carolina and Texas facilities.”

On Jan. 2, Insteel’s shares began trading on the NASDAQ Global Select Market under the symbol IIIN. The NASDAQ Global Select Market, one of the three market tiers at NASDAQ, recognizes NASDAQ’s world-class listed companies and their commitment to high standards and good governance. It is reserved for companies that meet the highest initial listing standards in the world based on financial and liquidity requirements. Prior to the upgrade, Insteel’s shares were traded on the NASDAQ Global Market under the same symbol.

Insteel held a conference call today to discuss the first-quarter financial results. A live webcast of this call can be accessed on the company’s website at

Insteel Industries is one of the nation’s largest manufacturers of steel wire reinforcing products for concrete construction applications. The company manufactures and markets PC strand and welded wire reinforcement, including concrete pipe reinforcement, ESM and standard welded wire reinforcement. Insteel’s products are sold primarily to manufacturers of concrete products used in nonresidential construction.

Headquartered in Surry County, North Carolina, Insteel operates six manufacturing facilities in the United States.

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