<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 1-9929
INSTEEL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0674867
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1373 BOGGS DRIVE, MOUNT AIRY, NORTH CAROLINA 27030
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 910-786-2141
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock as of
August 11, 1997 was 8,436,597.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSTEEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 63 $ 1,423
Accounts receivable, net 30,827 32,981
Inventories 44,460 31,705
Prepaid expenses and other 1,151 1,653
Net assets of discontinued operations 0 5,846
-------- --------
Total current assets 76,501 73,608
Property, plant and equipment, net 83,872 67,558
Other assets 6,642 4,956
-------- --------
Total assets $167,015 $146,122
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 31,277 $ 23,770
Accrued expenses 6,364 9,161
Current portion of long-term debt 2,620 3,188
-------- --------
Total current liabilities 40,261 36,119
Long-term debt 48,262 29,655
Deferred income taxes 6,403 5,935
Other liabilities 949 736
Shareholders' equity:
Common stock 16,871 16,871
Additional paid-in capital 38,192 38,192
Retained earnings 16,077 18,614
-------- --------
Total shareholders' equity 71,140 73,677
-------- --------
Total liabilities and shareholders' equity $167,015 $146,122
======== ========
</TABLE>
<PAGE> 3
INSTEEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------- --------------------------
1997 1996 1997 1996
------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $68,127 $ 72,619 $ 191,803 $ 192,665
Cost of sales 62,265 64,977 177,888 177,303
------- -------- --------- ---------
Gross profit 5,862 7,642 13,915 15,362
Selling, general and administrative expense 3,223 3,434 9,346 9,138
------- -------- --------- ---------
Operating income 2,639 4,208 4,569 6,224
Interest expense 636 413 1,472 1,467
Other expense 158 7 166 191
------- -------- --------- ---------
Earnings from continuing operations
before income taxes 1,845 3,788 2,931 4,566
Provision for income taxes 669 1,341 1,063 1,616
------- -------- --------- ---------
Earnings from continuing operations 1,176 2,447 1,868 2,950
Discontinued operations:
Loss from operations of Insteel Construction
Systems net of income tax benefits of $ - ,
$170, $395 and $388 0 (309) (693) (707)
Loss on disposal of Insteel Construction
Systems, including provision of $400 for
operating losses during phase-out period
(net of income tax benefit of $1,245) 0 0 (2,184) 0
------- -------- --------- ---------
Loss from discontinued operations 0 (309) (2,877) (707)
------- -------- --------- ---------
Net earnings (loss) $ 1,176 $ 2,138 ($ 1,009) $ 2,243
======= ======== ========= =========
Weighted average shares outstanding 8,437 8,422 8,436 8,410
======= ======== ========= =========
Per share:
Earnings from continuing operations $ 0.14 $ 0.29 $ 0.22 $ 0.35
Loss from discontinued operations 0.00 (0.04) (0.34) (0.08)
------- -------- --------- ---------
Net earnings (loss) $ 0.14 $ 0.25 ($ 0.12) $ 0.27
======= ======== ========= =========
Dividends paid $ 0.06 $ 0.06 $ 0.18 $ 0.18
======= ======== ========= =========
</TABLE>
<PAGE> 4
INSTEEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------
1997 1996
-------- --------
<S> <C> <C>
Operating Activities:
Net earnings from continuing operations $ 1,868 $ 2,950
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 6,253 5,927
Accounts receivable, net 1,408 (3,420)
Inventories (12,880) 4,252
Accounts payable and accrued expenses 5,521 4,442
Other changes 617 804
-------- --------
Total adjustments 919 12,005
-------- --------
Net cash provided by operating activities 2,787 14,955
-------- --------
Discontinued Operating Activities:
Net cash provided by discontinued operating activities 847 475
Investing Activities:
Capital expenditures (22,354) (8,543)
Proceeds (payments) on notes receivable 636 (191)
-------- --------
Net cash used for investing activities (21,718) (8,734)
-------- --------
Financing Activities:
Net decrease in short-term debt 0 (8,260)
Proceeds from long-term debt 89,676 50,847
Principal payments on long-term debt (71,425) (47,835)
Proceeds from stock options 0 195
Dividends paid (1,527) (1,514)
-------- --------
Net cash provided by (used for) financing activities 16,724 (6,567)
-------- --------
Net increase (decrease) in cash (1,360) 129
Cash and cash equivalents at beginning of period 1,423 263
-------- --------
Cash and cash equivalents at end of period $ 63 $ 392
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,609 $ 2,201
Income taxes 613 146
</TABLE>
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data)
(1) BASIS OF PRESENTATION
The consolidated unaudited financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These unaudited consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1996.
The unaudited consolidated financial statements included herein reflect all
adjustments (consisting only of normal recurring accruals) that the Company
considers necessary for a fair presentation of the financial position, results
of operations and cash flows for all periods presented. The results for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
(2) INVENTORIES
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
------- -------
<S> <C> <C>
Raw materials $23,549 $15,797
Supplies 2,105 2,099
Work in process 1,539 1,426
Finished goods 17,267 12,383
------- -------
Total inventories $44,460 $31,705
======= =======
</TABLE>
(3) DISCONTINUED OPERATIONS
On May 30, 1997, the Company sold its Insteel Construction Systems
division (ICS), which manufactured and marketed the Insteel 3-D(R) building
panel. ICS has been classified as a discontinued operation in the accompanying
financial statements in accordance with Accounting Principles Board Opinion
No. 30.
During the quarter ended March 31, 1997, the Company recorded a provision
of $2,184 for the estimated loss on disposal of ICS (net of a $1,245 tax
benefit) which included a $400 provision for anticipated operating losses prior
to disposal. Although the Company believes that the provision is sufficient, it
will defer making a final adjustment pending realization of the expected
proceeds from the sale.
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
STATEMENTS OF EARNINGS - SELECTED DATA
($ in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
1997 Change 1996 1997 Change 1996
---- ------ ---- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Net sales $68,127 -6% $72,619 $191,803 0 $192,665
Gross profit 5,862 -23% 7,642 13,915 -9% 15,362
Percentage of net sales 8.6% 10.5% 7.3% 8.0%
Selling, general and administrative expense $3,223 -6% $3,434 $9,346 2% $9,138
Percentage of net sales 4.7% 4.7% 4.9% 4.7%
Operating income $2,639 -37% $4,208 $4,569 -27% $6,224
Percentage of net sales 3.9% 5.8% 2.4% 3.2%
Interest expense $636 54% $413 $1,472 0 $1,467
Percentage of net sales 0.9% 0.6% 0.7% 0.9%
Effective income tax rate 36.3% 35.4% 36.3% 35.4%
Earnings from continuing operations $1,176 -52% $2,447 $1,868 -37% $2,950
Percentage of net sales 1.7% 3.4% 1.0% 1.5%
</TABLE>
Insteel's net sales for the third quarter declined to $68.1 million, a
6% decrease from the year-ago period. For the nine months, net sales were flat,
decreasing less than 1% to $191.8 million. Total wire product shipments declined
8% for the third quarter and 1% for the nine months compared with the year-ago
periods. Average selling prices increased 2% for the third quarter and 1% for
the nine months relative to the prior year. The sales decreases for the third
quarter and nine months were primarily due to weak market conditions in certain
segments of the wire products business unit. Sales of bulk nails, industrial
wire and agricultural fencing declined compared with the year-ago periods. Sales
of the concrete reinforcing products business unit rose from prior year levels
primarily due to continued increases in the operating levels of the PC strand
facility.
Gross profit for the third quarter decreased 23% from the prior year,
declining as a percentage of sales to 8.6% from 10.5%. For the nine months,
gross profit declined 9% from the year-ago period, decreasing as a percentage of
sales to 7.3% from 8.0%. Expenses were negatively impacted by pre-operating
costs related to the tire bead wire expansion together with start-up
inefficiencies associated with the transfer of equipment and industrial wire
capacity from the Virginia facility to other Insteel locations. Gross margins
benefited from a widening in the spread between selling values and raw material
costs relative to prior year levels.
Selling, general and administrative expense (SG&A expense) decreased 6%
for the third quarter, remaining at 4.7% of sales for the current and prior year
periods. For the nine months, SG&A expense rose 2%, increasing to 4.9% of sales
from 4.7% a year ago. The increase in SG&A expense was driven by expenditures
related to the upgrade of the Company's management information systems.
Interest expense increased 54% for the third quarter from the year-ago
period due to increased borrowings on the Company's revolving credit facility to
finance capital expenditures for the tire bead expansion together with higher
inventory levels. For the nine months, interest expense was flat relative to the
prior year as the impact of higher debt levels was offset by capitalized
interest related to the tire bead wire expansion and a decrease in the Company's
average borrowing rates.
The Company's effective income tax rate for the third quarter and nine
months increased to 36.3% compared with 35.4% in the prior year periods as a
result of a higher estimated state income tax rate.
Earnings from continuing operations decreased 52% in the third quarter
from the prior year, declining as a percentage of sales to 1.7% from 3.4%. For
the nine months, earnings from continuing operations fell 37% to 1.0% of sales
compared with 1.5% a year ago.
<PAGE> 7
Nine-month results reflect a loss of $2.9 million on the disposal of
the Company's Insteel Construction Systems division (ICS) and the
reclassification of the segment as discontinued operations. ICS manufactured and
marketed the Insteel 3-D(R) building panel.
FINANCIAL CONDITION
SELECTED FINANCIAL DATA
($ in thousands)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------
1997 1996
--------- --------
<S> <C> <C>
Net cash provided by operating activities $ 2,787 $ 14,955
Net cash used for investing activities (21,718) (8,734)
Net cash provided by (used for) financing activities 16,724 (6,567)
Long-term debt 48,262 26,318
Percentage of total capital 40% 27%
Shareholders' equity $ 71,140 $ 72,135
Percentage of total capital 60% 73%
Total capital (long-term debt + shareholders' equity) $ 119,402 $ 98,453
</TABLE>
Operating activities generated $2.8 million of cash during the nine
months compared with $15.0 million in the same period last year. The primary
factor driving the decline was a planned increase in raw material inventories in
the current year in anticipation of further escalation in wire rod prices during
the fourth quarter. In the prior year period, inventories had fallen from the
excess levels that had accumulated at the beginning of the year due to weak
market conditions and depressed shipment volumes. Cash generated by accounts
receivable increased during the current year as a result of a reduction in the
average days sales outstanding.
Investing activities consumed $21.7 million during the nine months
compared with $8.7 million in the same period last year as a result of higher
capital expenditures related to the tire bead wire expansion. The Company
expects that its capital expenditures will decrease significantly in fiscal 1998
as a result of the completion of the tire bead wire expansion.
Financing activities provided $16.7 million during the nine months
primarily to fund the outlays for the tire bead wire expansion and higher
inventory levels. In the prior year period, financing activities used $6.6
million of cash.
Insteel's financial position remains strong. The Company's long-term
debt to capital ratio increased to 40% at June 30, 1997 compared with 27% a year
ago primarily as a result of the capital expenditures related to the tire bead
wire expansion together with higher inventory levels. In January 1996, the
Company entered into a $35.0 million unsecured revolving credit facility that
will expire in November 2000, replacing the annual lines of credit that provided
total availability of $20.0 million. In April 1997, the revolving credit
facility was amended, increasing the Company's availability from $35.0 million
to $50.0 million. At June 30, 1997, approximately $15.4 million was available
under the facility. The Company currently expects to fund its capital
expenditure requirements and liquidity needs from a combination of internally
generated funds, the revolving credit facility and additional long-term sources
of financing.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Insteel operates in a rapidly changing environment that involves a
number of risks and uncertainties, some of which are beyond the Company's
control. The Company has short delivery cycles and as a result does not have a
large order backlog, which makes the forecasting of revenue inherently
uncertain. As delivery lead times have decreased, the Company has generated a
higher percentage of sales from new order bookings in the same fiscal period.
Business conditions and growth in the general economy have an impact on
the Company's operating results. Seasonality also affects the Company's
operating results, particularly in the first quarter of the fiscal year, which
has historically represented the lowest quarterly sales volume. Shipments
typically increase in the second quarter and reach a high point in the third or
fourth quarter, reflecting the buying patterns of the Company's customers.
<PAGE> 8
Wire rod market conditions also have a significant impact on the
Company's operating results. Hot rolled steel rod is the Company's primary raw
material and constitutes the largest component of manufacturing costs. Realized
selling values for the Company's products cannot always be adjusted in the
short-term to recover cost increases in steel rod, but generally tend to reflect
changes in these prices over the long-run. During the current year, domestic
wire rod market conditions have tightened and prices have escalated due to
production outages at some of the major manufacturers together with the filing
of anti-dumping charges against certain countries exporting into the U.S..
Recently announced expansions in domestic wire rod capacity should increase
supplier competition and favorably impact quality and availability once the
additional capacity becomes fully operational.
Insteel's business strategy continues to be focused on further
expansion into higher value products that offer the potential for superior
returns relative to the Company's traditional businesses. In January 1994, the
Company entered the PC strand business with the start-up of a new manufacturing
facility. The operation was expanded in October 1996 with the addition of a
second production line. In March 1996, the Company entered the collated fastener
business with the start-up of a new manufacturing facility. In April 1997, the
Company entered the tire reinforcement business with the start-up of a
reconfigured and expanded facility to manufacture and market tire bead wire.
Start-up costs related to the tire bead wire project have reduced current year
earnings by an estimated $1.3 million, or $0.16 a share, and will continue to
negatively impact earnings until sales begin to ramp up to significant levels in
the first quarter of fiscal 1998.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
4 - INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
4.42 First Amendment dated April 11, 1997 to
Amended and Restated Credit Agreement
between First Union National Bank of North
Carolina and Insteel Industries, Inc. dated
January 26, 1996.
4.43 Second Amendment dated April 30, 1997 to
Amended and Restated Credit Agreement
between First Union National Bank of North
Carolina and Insteel Industries, Inc. dated
January 26, 1996.
27 - Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended June 30, 1997.
<PAGE> 9
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: August 12, 1997 By /s/ H.O. Woltz III
----------------------------
H.O. Woltz III
President and Chief Executive Officer
Date: August 12, 1997 By /s/ Michael C. Gazmarian
----------------------------
Michael C. Gazmarian
Chief Financial Officer and Treasurer
<PAGE> 1
EXHIBIT 4.42
FIRST AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated this 11th day of April, 1997, is made by and between
INSTEEL INDUSTRIES, INC., a North Carolina corporation (the "Borrower"); and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association
(the "Bank"), to the Amended and Restated Credit Agreement, dated January 26,
1996 (as amended, modified, restated or supplemented from time to time, the
"Credit Agreement"). All capitalized terms used herein without definition shall
have the meanings ascribed to such terms in the Credit Agreement.
RECITALS
A. Pursuant to the Credit Agreement, the Bank has made available to the
Borrower a Revolving Line of Credit in the amount of $35,000,000 and a Letter
of Credit Facility in the amount of $17,500,000.
B. The Borrower has requested that the Bank (i) increase the amount of
the Revolving Line of Credit Commitment from the sum of $35,000,000 to the sum
of $50,000,000, and (ii) decrease the amount of the Letter of Credit Facility
from the sum of $17,500,000 to the sum of $10,000,000.
C. The Bank has agreed to such requests and the Borrower and the Bank
have therefore agreed to amend the Credit Agreement as set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the Borrower and the Bank hereby agree as follows:
ARTICLE I
AMENDMENTS TO CREDIT AGREEMENT
The Credit Agreement is hereby amended as follows:
1.1 Recitals. The third recital of the Credit Agreement is amended by (a)
deleting in the second line thereof the figure "$35,000,000" and by
substituting in lieu thereof the figure "$50,000,000", and (b) deleting in the
third line thereof the figure "$17,500,000" and by substituting in lieu thereof
the figure "$10,000,000".
<PAGE> 2
1.2 Defined Terms. Section 1.1 of the Credit Agreement is amended by
deleting the definitions of "Letter of Credit Facility Commitment" and
"Revolving Line of Credit Commitment" in their entirety and by substituting in
lieu thereof the following:
"Letter of Credit Facility Commitment" shall mean $10,000,000.
"Revolving Line of Credit Commitment" shall mean $50,000,000.
1.3 Exhibits. Exhibit A to the Credit Agreement is hereby amended by
deleting such exhibit in its entirety and by replacing it with a new Exhibit A
attached hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Bank that:
2.1 Acknowledgement of Obligations. As of the close of business on
April 8, 1997, the aggregate principal amount of Revolving Loans owing by the
Borrower was in the sum of $27,815,204.99, the aggregate amount of Letter of
Credit Obligations owing by the Borrower was in the sum of $4,952,467.01, and
the aggregate amount of Bankers' Acceptance Obligations owing by the Borrower
was in the sum of $-0-, and that all such Obligations are due and owing by the
Borrower to the Bank without any defense, deduction, offset or counterclaim of
any nature.
2.2 Compliance With the Credit Agreement. As of the execution of this
Amendment, the Borrower is in compliance with all of the terms and provisions
set forth in the Loan Documents to be observed or performed by the Borrower,
except where the failure of the Borrower to comply has been waived in writing
by the Bank.
2.3 Representations in Credit Agreement. The representations and
warranties of the Borrower set forth in the Credit Agreement are true and
correct in all material respects.
2.4 No Event of Default. No Default or Event of Default exists.
ARTICLE III
MODIFICATION OF LOAN DOCUMENTS
3.1 Loan Documents. Any individual or collective reference to any of the
Loan Documents shall hereafter mean such Loan Document as amended by this
Amendment, and as further amended, restated, supplemented or modified from time
to time, including, without limitation, all references to the Credit Agreement,
which shall mean the Credit Agreement as amended hereby and as further amended
from time to time.
2
<PAGE> 3
3.2 Note. The Revolving Credit Note evidencing the unpaid Revolving Loans
made by the Bank under the Revolving Line of Credit is amended and restated in
its entirety pursuant to the $50,000,000 Second Amended and Restated Revolving
Credit Note, dated of even date herewith, executed by the Borrower to the order
of the Bank.
ARTICLE IV
GENERAL
4.1 Full Force and Effect. Except as expressly amended hereby, the Credit
Agreement and the other Loan Documents shall continue in full force and effect
in accordance with the provisions thereof. As used in the Credit Agreement and
the other Loan Documents, "hereinafter", "hereto", "hereof", or words of
similar import, shall mean the Credit Agreement or the other Loan Documents, as
the case may be, as amended by this Amendment.
4.2 Applicable Law. This Amendment shall be governed by and construed in
accordance with the internal laws and judicial decisions of the State of North
Carolina.
4.3 Headings. The headings of this Amendment are for the purpose of
reference only and shall not effect the construction of this Amendment.
4.4 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER AND THE BANK EACH WAIVE THE RIGHT TO A JURY TRIAL IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE CREDIT
AGREEMENT OR THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered under seal by their duly authorized officers to be
effective as of the date first above written.
ATTEST: INSTEEL INDUSTRIES, INC.
/s/ Sandra S. White By: /s/ Michael C. Gazmarian
- ---------------------------- --------------------------------------------
Assistant Secretary Title: Chief Financial Officer and Treasurer
[CORPORATE SEAL]
[signatures continued on next page]
3
<PAGE> 4
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Richard J. Rizzo, Jr.
---------------------------------------
Title: Vice President
4
<PAGE> 5
EXHIBIT A TO AMENDED AND
RESTATED CREDIT AGREEMENT
SECOND AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$50,000,000 Greensboro, North Carolina
April 11, 1997
FOR VALUE RECEIVED, the undersigned INSTEEL INDUSTRIES, INC., a North
Carolina corporation ("Borrower"), promises to pay to FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, a national banking association ("Bank"), or order, at the
principal office of the Bank in Greensboro, North Carolina, or at such other
place as the Bank may from time to time designate in writing, the principal sum
of Fifty Million Dollars ($50,000,000), or, if less, the unpaid balance of all
Revolving Loans made by the Bank to the Borrower pursuant to the Credit
Agreement, together with interest on the unpaid principal amount of this Note
at the rates provided in the Credit Agreement.
This note amends and restates in its entirety that certain $35,000,000
Amended and Restated Revolving Credit Note, dated January 26, 1996, executed by
Borrower to the order of Bank and is the Revolving Credit Note issued to
evidence Revolving Loans made by the Bank to the Borrower under the Revolving
Line of Credit pursuant to Section 2.1 of the Amended and Restated Credit
Agreement, dated January 26, 1996, between the Borrower and the Bank, as the
same may from time to time be amended, modified, restated or supplemented
("Credit Agreement"), and is entitled to the benefits of, and the remedies
provided in, the Credit Agreement. All of the terms, conditions and covenants
of the Credit Agreement are expressly made a part of this Note, by reference in
the same manner and with the same effect as if set forth herein. Reference is
made to the Credit Agreement for provisions for the maturity, payment,
prepayment and acceleration of this Note. All capitalized terms used in this
Note without definition shall have the meanings ascribed to such terms in the
Credit Agreement.
The Borrower, for itself and its successors and assigns, expressly waives
presentment for payment, demand, protest and notice of demand, notice of
dishonor and notice of nonpayment and all other notices.
This Note shall be governed by, construed and enforced in accordance with
the internal laws, and not the laws of conflicts, of the State of North
Carolina.
<PAGE> 6
In the event that this Note shall at any time after maturity be collected
by or through an attorney-at-law, the Borrower agrees to pay, in addition to
the entire unpaid principal balance and interest due hereunder, all collection
costs, including reasonable attorneys' fees, incurred by the Bank in collecting
the indebtedness due hereunder, computed on the basis of usual and customary
rates and not on the basis of a fixed percentage of the indebtedness due
hereunder.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under
seal by its duly authorized corporate officers and its corporate seal to be
hereunto affixed on the day and year first above written.
ATTEST: INSTEEL INDUSTRIES, INC.
By:
- ---------------------- ------------------------------------
Secretary Title:
- ---------- ------------------------------
[CORPORATE SEAL]
2
<PAGE> 7
SECOND AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$50,000,000 Greensboro, North Carolina
April 11, 1997
FOR VALUE RECEIVED, the undersigned INSTEEL INDUSTRIES, INC., a North
Carolina corporation ("Borrower"), promises to pay to FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, a national banking association ("Bank"), or order, at the
principal office of the Bank in Greensboro, North Carolina, or at such other
place as the Bank may from time to time designate in writing, the principal sum
of Fifty Million Dollars ($50,000,000), or, if less, the unpaid balance of all
Revolving Loans made by the Bank to the Borrower under the Revolving Line of
Credit extended by the Bank to the Borrower pursuant to the Credit Agreement,
together with interest on the unpaid principal amount of this Note at the rates
provided in the Credit Agreement.
This Note amends and restates in its entirety that certain $35,000,000
Amended and Restated Revolving Credit Note, dated January 26, 1996, executed by
Borrower to the order of Bank and is the Revolving Credit Note issued to
evidence Revolving Loans made by the Bank to the Borrower under the Revolving
Line of Credit pursuant to Section 2.1 of the Amended and Restated Credit
Agreement, dated January 26, 1996, between the Borrower and the Bank, as the
same may from time to time be amended, modified, restated or supplemented
("Credit Agreement"), and is entitled to the benefits of, and the remedies
provided in, the Credit Agreement. All of the terms, conditions and covenants
of the Credit Agreement are expressly made a part of this Note, by reference in
the same manner and with the same effect as if set forth herein. Reference is
made to the Credit Agreement for provisions for the maturity, payment,
prepayment and acceleration of this Note. All capitalized terms used in this
Note without definition shall have the meanings ascribed to such terms in the
Credit Agreement.
The Borrower, for itself and its successors and assigns, expressly waives
presentment for payment, demand, protest and notice of demand, notice of
dishonor and notice of nonpayment and all other notices.
This Note shall be governed by, construed and enforced in accordance with
the internal laws, and not the laws of conflicts, of the State of North
Carolina.
In the event that this Note shall at any time after maturity be collected
by or through an attorney-at-law, the Borrower agrees to pay, in addition to
the entire unpaid principal balance and interest due hereunder, all collection
costs, including reasonable attorneys' fees, incurred by the Bank in collecting
the indebtedness due hereunder, computed on the basis of usual and customary
rates and not on the basis of a fixed percentage of the indebtedness due
hereunder.
<PAGE> 8
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under
seal by its duly authorized corporate officers and its corporate seal to be
hereunto affixed on the day and year first above written.
ATTEST: INSTEEL INDUSTRIES, INC.
/s/ Sandra S. White By: /s/ Michael C. Gazmarian
- -------------------------- ---------------------------------------------
Assistant Secretary Title: Chief Financial Officer and Treasurer
[CORPORATE SEAL]
2
<PAGE> 1
EXHIBIT 4.43
[First Union Letterhead]
As of April 30, 1997
SECOND AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT ("AMENDMENT")
---------------------------------------
Insteel Industries, Inc.
1373 Boggs Drive
Mount Airy, North Carolina 27030
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement, dated January 26, 1996, as amended by First Amendment thereto, dated
April 11, 1997 (the Amended and Restated Credit Agreement, as modified,
amended, supplemented or restated from time to time, being hereinafter called
the "Credit Agreement"), between Insteel Industries, Inc., a North Carolina
corporation ("Borrower"), and First Union National Bank of North Carolina
("Bank"), pursuant to which Bank has agreed to extend to Borrower, upon the
terms and subject to the conditions contained therein, a credit facility of up
to the sum of $60,000,000, as more particularly set forth therein. All
capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Loan Agreement.
Borrower has requested that Bank amend subsection (a) of Section 7.3,
Financial and Business Information as to Borrower, to provide that Borrower may
deliver the financial statements described therein no later than 45 days after
the close of each Fiscal Quarter. Bank has agreed to such request, and to
accomplish the foregoing purpose, Borrower and Bank agree to amend subsection
(a) of Section 7.3 of the Credit Agreement by deleting from lines 1 and 2
thereof the word and figure "thirty (30)" and by substituting in lieu thereof
the word and figure "forty-five (45)".
Except as expressly amended herein, the Credit Agreement and each of
the other Loan Documents and each and every term and provision thereof shall
remain in full force and effect in accordance with the provisions thereof.
This Amendment shall be governed by and construed in accordance with
the internal laws and judicial decisions of the State of North Carolina.
<PAGE> 2
Insteel Industries, Inc.
As of April 30, 1997
Page 2
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK
EACH WAIVE THE RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AMENDMENT, THE CREDIT AGREEMENT OR THE OTHER LOAN DOCUMENTS.
If this letter correctly states our agreement as to the matters set
forth herein, please so indicate in the space provided below for your signature
and return an executed copy of this Amendment to us.
Yours very truly,
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Richard J. Rizzo, Jr.
--------------------------
Title: Vice President
------------------------
Agreed to and accepted this
30th day of April, 1997.
INSTEEL INDUSTRIES, INC.
By: /s/ Michael C. Gazmarian
---------------------------
Title: Chief Financial Officer and Treasurer
---------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INSTEEL INDUSTRIES, INC. FOR THE NINE MONTH PERIOD ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 63
<SECURITIES> 0
<RECEIVABLES> 30,827
<ALLOWANCES> 0
<INVENTORY> 44,460
<CURRENT-ASSETS> 76,501
<PP&E> 83,872
<DEPRECIATION> 0
<TOTAL-ASSETS> 167,015
<CURRENT-LIABILITIES> 40,261
<BONDS> 0
0
0
<COMMON> 16,871
<OTHER-SE> 54,269
<TOTAL-LIABILITY-AND-EQUITY> 167,015
<SALES> 191,803
<TOTAL-REVENUES> 191,803
<CGS> 177,888
<TOTAL-COSTS> 177,888
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,472
<INCOME-PRETAX> 2,931
<INCOME-TAX> 1,063
<INCOME-CONTINUING> 1,868
<DISCONTINUED> (2,877)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,009)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
