WEBC

Webco Industries, Inc.

 
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OTC Disclosure & News Service

 

Webco Industries, Inc. Reports Fiscal 2015 Third Quarter Results

May 27, 2015

OTC Disclosure & News Service

-

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2015 third quarter ended April 30, 2015.

For its fiscal 2015 third quarter, the Company reported net income of $0.5 million, or $0.64 per diluted share, compared to net income of $0.3 million, or $0.37 per diluted share, for the third quarter in fiscal 2014. Net sales for the third quarter of fiscal 2015 were $103.0 million, a 3.6 percent decrease from the $106.8 million of sales in last year’s third quarter. The current quarter includes a $0.5 million non-cash gain related to the Company’s interest swap contract, whereas the prior year third quarter includes a $0.3 million non-cash gain related to the interest swap contract.

For the first nine months of fiscal year 2015, the Company generated a net loss of $0.2 million, or $0.27 per diluted share, compared to a net loss of $0.4 million, or $0.49 per diluted share, for the same period in fiscal 2014. Net sales for the first nine months of the current year amounted to $315.1 million, a 4.2 percent increase over the $302.4 million in sales for the same nine-month period of last year. Results for the first nine months of the current year include a $1.4 million non-cash loss related to the interest swap contract, whereas the prior year same nine-month period contained a $0.1 million non-cash gain on the contract. The current fiscal year period includes the impact of downtime associated with the planned improvements on our largest weld mill, which consumed over two of the first six months of fiscal 2015. The prior fiscal year’s first nine-month period included $1.1 million in impairment charges on manufacturing equipment.

In the third quarter of fiscal year 2015, the Company had income from operations of $1.3 million, including depreciation of $3.1 million. Income from operations in the third fiscal quarter of the prior year was $1.1 million, with depreciation amounting to $3.1 million. Gross profit for the third quarter of fiscal 2015 was $7.4 million, or 7.2 percent of net sales, compared to $6.9 million, or 6.5 percent of net sales, for the third quarter of fiscal 2014.

Income from operations for the first nine months of fiscal year 2015 was $3.5 million, after depreciation expense of $9.0 million, while income from operations for the same period in fiscal 2014 was $2.2 million, after depreciation expense of $9.8 million. Gross profit for the first nine months of fiscal 2015 was $22.0 million, or 7.0 percent of net sales, compared to $19.5 million, or 6.4 percent of net sales for the same period in fiscal year 2014. Income from operations and gross profit for the current and prior year nine month periods are impacted by the planned mill improvements and impairment charges, respectively.

Dana S. Weber, Chief Executive Officer, commented, “The low price of oil and recent volatility in the cost of steel has impacted demand and pressured margins in several of our product groups. Sustained strength in the U.S. dollar presents a longer term risk to foreign competition for domestic manufacturers. We have reduced our expenses to an amount we believe is currently appropriate and are continuing to make investments that are intended to improve efficiencies, yields and quality.”

Selling, general and administrative expenses were $6.1 million in the third quarter of fiscal 2015 and $5.8 million in the third quarter of fiscal 2014. Selling, general and administrative charges were $18.5 million in the first nine months of the current fiscal year, an increase over the $17.3 million in such expenses in the same period of fiscal 2014.

Interest expense was $0.9 million in the third quarter of both fiscal 2015 and fiscal 2014, respectively. Interest expense decreased to $2.4 million in the first nine months of fiscal year 2015 from $2.9 million in the same period in fiscal year 2014. The Company is party to an arrangement that swaps the variable interest rate for $50 million of the Company’s debt to a fixed rate through December 2019. The Company records the interest swap contract at fair value and non-cash changes in value are reported as an unrealized gains or losses on interest contracts. Monthly cash swap settlements are included in interest expense. Changes in market expectations for future interest rates, such as treasury yields, can cause significant fluctuations in the mark to market valuation of our interest rate swap and therefore volatility in the unrealized gain or loss on interest contracts.

Capital expenditures incurred amounted to $2.8 million in the third fiscal quarter ended April 30, 2015, and amounted to $6.0 million for the nine month period then ended.

Webco is a manufacturer and value-added distributor of high-quality carbon steel, stainless steel and other metal tubular products designed to industry and customer specifications. Webco's tubing products consist primarily of pressure tubing and specialty tubing for use in durable and capital goods. Webco's long-term strategy involves the pursuit of niche markets within the metal tubing industry through the deployment of leading-edge manufacturing and information technology. Webco has seven production facilities in Oklahoma and Pennsylvania and five value-added distribution facilities in Oklahoma, Texas, Illinois and Michigan, serving customers globally.

Forward-looking statements: Certain statements in this release, including, but not limited to, those preceded by or predicated upon the words "anticipates," "appears," "believes," “can,” “considering,” "expects," "hopes,", “intended”, "plans," “projects,” “pursue,” "should," "would," or similar words constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied herein. Such risks, uncertainties and factors include the factors discussed above and, among others: general economic and business conditions, including any global economic downturn or disruptions in the global credit markets or as a result of reduced oil prices, competition from imports, including any impacts associated with the strength of the U.S. dollar to a number of foreign currencies, changes in manufacturing technology, banking environment, including availability of adequate financing, monetary policy, changes in tax rates and regulation, raw material costs and availability, industry capacity, domestic competition, loss of or reductions in purchases by significant customers and customer work stoppages, the costs associated with providing healthcare benefits to employees, customer claims, technical and data processing capabilities, insurance costs and availability and geo-political events. The Company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise.

 
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

 
    Three Months Ended

April 30,

      Nine Months Ended

April 30,

2015     2014 2015     2014
 
Net sales $ 102,953 $ 106,846 $ 315,063 $ 302,448
Cost of sales   95,555     99,951     293,103     282,956  
 
Gross profit 7,398 6,896 21,960 19,492
Selling, general & administrative   6,131     5,783     18,484     17,283  
 
Income from operations 1,267 1,113 3,476 2,209
Interest expense 865 891 2,446 2,912
Unrealized (gain) loss on interest contracts   (463 )   (279 )   1,390     (73 )
 

Income (loss) before income taxes

865

501

(360

)

(630

)

Income tax expense (benefit)   345     208     (143 )   (243 )
 
Net income (loss) $ 520   $ 293   $ (217 ) $ (388 )

 

Net income (loss) per common share:
Basic $ 0.64   $ 0.37   $ (0.27 ) $ (0.49 )
Diluted $ 0.64   $ 0.37   $ (0.27 ) $ (0.49 )
 
Weighted average common shares outstanding:
Basic   808,300     790,100     806,600     789,700  
Diluted   810,300     797,600     806,600     789,700  
 

Note: Amounts may not sum due to rounding.

 
 
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands, except par value)

(Unaudited)

       

April 30,
2015

July 31,
2014

 
Cash $ 6,919 $ 4,793
Accounts receivable, net 40,935 44,100
Inventories, net 156,833 153,071
Other current assets   8,426   8,131
Total current assets 213,113 210,095
 
Property, plant and equipment, net 92,480 95,904
Other long-term assets   1,661   1,874
 
Total assets $ 307,254 $ 307,873
 
Other current liabilities $ 36,844 $ 36,550
Current portion of long-term debt   80,060   81,405
Total current liabilities 116,904 117,955
 
Long-term debt 12,000 12,000
Deferred income tax liability 17,620 18,363
 
Total equity (808,330 common shares, par value $0.01, outstanding at April 30, 2015)  

160,730

 

159,555

 
Total liabilities and equity $ 307,254 $ 307,873
 
 
CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

             

Three Months Ended
April 30,

Nine Months Ended
April 30,

2015     2014 2015 2014
 

Net cash provided by (used in) operating activities

$

15,812

$

(2,966

)

$

9,241

$

(2,852

)

 
Depreciation and amortization $ 3,155 $ 3,082   $ 9,122 $ 10,137  
 
Cash paid for capital expenditures $ 2,904 $ 2,095   $ 6,021 $ 6,015  
 

Note: Amounts may not sum due to rounding.

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