Mount Airy, North Carolina-based Insteel Industries, a manufacturer of steel wire reinforcing products for concrete construction applications, Thursday reported net earnings of $1.6 million ($0.09 per share) for the second quarter of fiscal 2010 compared with a net loss of $16.4 million ($0.94 per share) in the second quarter of fiscal 2009. The net loss for the prior year quarter includes a pre-tax charge of $16.1 million ($0.58 per share after-tax) for inventory write-downs to reduce the carrying value of inventory to the lower of cost or market.
Net sales for the second quarter of fiscal 2010 increased 3.7 percent to $52.3 million from $50.4 million in the second quarter of fiscal 2009. Shipments for the second quarter of fiscal 2010 increased 34.7 percent from the second quarter of fiscal 2009, while average selling prices decreased 23.0 percent. On a sequential basis, shipments increased 25.7 percent from the first quarter of fiscal 2010 and average selling prices increased 0.9 percent.
Insteel's financial results for the second quarter of fiscal 2010 were favorably impacted by the increase in shipments, widening spreads between selling prices and raw material costs, lower unit conversion costs and a lower effective income tax rate. The upturn in shipments during the quarter was primarily driven by customer inventory restocking and hedge buying in anticipation of future price increases together with the continued favorable effect of the PC strand trade cases against China, which more than offset the negative effect of adverse weather conditions and the reduced level of construction activity. Unit conversion costs benefited from increased operating schedules at Insteel's manufacturing facilities during the quarter as the company's overall capacity utilization rose to 49 percent from 33 percent in the first quarter of fiscal 2010.
Operating activities provided $29.2 million of cash for the second quarter of fiscal 2010 while using $0.7 million in the second quarter of fiscal 2009. Cash provided by operating activities in the current year quarter was primarily attributable to the receipt of a $13.3 million income tax refund relating to the prior year loss and an increase in accounts payable resulting from higher raw material purchases. Capital expenditures for the six-month period were $0.9 million compared with $1.4 million for the same period last year and are expected to total less than $5.0 million for fiscal 2010. Insteel ended the quarter debt-free with $52.3 million of cash and cash equivalents.
"Although our financial results for the second half of the fiscal year should benefit from the usual seasonal factors, we expect that end use consumption of our products will remain at depressed levels pending a sustained recovery in the construction sector," said H.O. Woltz III, Insteel's president and CEO. ‘Private nonresidential construction has yet to show any signs of improvement due to the ongoing weakness in the economy and limited availability of project financing in the credit markets. The near-term outlook for public construction remains mixed as any favorable impact from federal stimulus funding is likely to be offset by the deteriorating fiscal positions of state and local governments."
"Prices for hot-rolled steel wire rod, our primary raw material, have risen substantially since December 2009 and could continue to trend higher as there are further increases in the cost of scrap and other raw materials for wire rod producers," Woltz added. "The timing and magnitude of these increases and the impact on selling prices for our products is uncertain at this time. However, considering our highly competitive cost structure, strong balance sheet and financial flexibility, we continue to believe that Insteel is ideally positioned to weather the ongoing challenges in our markets and capitalize on any strategic acquisition opportunities that may arise."