Insteel Industries Inc has reported net earnings of USD 2.6 million for the second quarter of fiscal 2011 as compared with USD 1.6 million in the second quarter of fiscal 2010. Net earnings for the current year quarter include restructuring charges, acquisition related costs and a bargain purchase gain related to the acquisition of certain of the assets of Ivy Steel & Wire Inc, which had the net effect of reducing net earnings by USD 1.5 million.
Net sales for the second quarter of fiscal 2011 increased 66.3% to USD 86.9 million from USD 52.3 million in the second quarter of fiscal 2010 primarily due to the addition of Ivy's facilities and higher average selling prices. Shipments for the second quarter of fiscal 2011 increased 42.6% from the prior year quarter and average selling prices increased 16.6%. On a sequential basis, shipments increased 54.7% from the first quarter of fiscal 2011 and average selling prices increased 7.5%.
For the first six months of fiscal 2011, the company incurred a net loss of USD 5 million as compared with net earnings of USD 0.5 million in the first six months of fiscal 2010. The six month results for the current year include restructuring charges, acquisition related costs and a bargain purchase gain related to the Ivy acquisition, which had the net effect of reducing net earnings by USD 6 million. The six month results for the prior year include inventory write downs to reduce the carrying value of inventory to the lower of cost or market, which reduced net earnings by USD 1.2 million.
Net sales for the first six months of fiscal 2011 increased by 49% to USD 139.2 million from USD 93.5 million in the first six months of fiscal 2010. Shipments for the first six months of fiscal 2011 increased 30.8% from the first six months of fiscal 2010 and average selling prices increased 13.9%.
Insteel's financial results for the second quarter of fiscal 2011 were favorably impacted by widening spreads between selling prices and raw material costs and the contribution from the Ivy facilities. Demand for the company's products remained at depressed levels due to the ongoing weakness in the construction sector. Insteel's overall capacity utilization for the quarter was 46% compared with 35% in the first quarter of fiscal 2011 and 49% in the second quarter of fiscal 2010.
Operating activities provided USD 5.1 million of cash for the second quarter of fiscal 2011 compared with USD 29.2 million in the second quarter of fiscal 2010. Net working capital used USD 2.3 million of cash during the current year quarter while providing USD 11.3 million in the prior year quarter. Cash provided by operating activities in the prior year quarter benefited from the receipt of a USD 13.3 million income tax refund. Capital expenditures for the six month period were USD 4.9 million and are expected to total less than USD 10 million for fiscal 2011. Insteel ended the quarter with USD 3.9 million of cash and cash equivalents, USD 13.5 million of total debt and no borrowings outstanding on its USD 75 million revolving credit facility.
Ivy Acquisition and Restructuring Activities
Following the completion of the Ivy acquisition in November 2010, the Company has proceeded with its plans to consolidate its Texas and Northeast operations. The leased facility in Houston, Texas was closed in December 2010 and the Wilmington, Delaware facility is now expected to be closed by the end of April 2011. The company has also implemented staffing reductions across its sales, administration and manufacturing support functions to address the redundancies resulting from the acquisition.
The USD 2.2 million of restructuring charges recorded during the quarter include employee separation costs associated with the plant closures and other staffing reductions (USD 1.2 million); asset impairment charges to write down the carrying value of long lived assets related to the plant closures and decommissioning of equipment (USD 0.6 million); other facility closure costs (USD 0.2 million) and equipment relocation costs (USD 0.2 million). The company currently expects to incur approximately USD 1 million of additional restructuring charges for equipment relocation and employee separation costs.
Mr HO Woltz III president & CEO of Insteel said that "We are pleased with the substantial progress that was made with our Ivy integration efforts during the quarter. The actions that we have taken to consolidate plants and realign staffing have yielded significant reductions in operating costs. All of the Ivy facilities have been transitioned over to Insteel's information systems and we are currently in the process of implementing Insteel's operating metrics and procedures. We are also proceeding with the rebalancing and reconfiguration of our manufacturing capabilities across locations, which should provide for additional synergies in the form of lower costs and enhanced customer service."
