WEBC Webco Industrial Inc (PK)

Webco Industries, Inc. (OTC: WEBC) today reported results for its fourth quarter and fiscal year ended July 31, 2008. For its fiscal 2008 fourth quarter, the Company reported net income of $5,345,000, or $7.02 per diluted share, compared to $2,887,000, or $3.81 per diluted share, for the same quarter in fiscal 2007. Net sales for the fourth quarter of fiscal 2008 were $94.2 million, a 9.2 percent increase over the $86.3 million of sales in last year�s fourth quarter. Net income for the year ended July 31, 2008 was $16,933,000, or $22.28 per diluted share, compared to $8,565,000, or $11.31 per diluted share, for the same period in fiscal 2007. Net sales for the current year amounted to $375.7 million, an 11.4 percent increase over the $337.3 million of sales last year. Fiscal 2008 sales and earnings reflect the benefit of higher sales prices related to the increased steel costs during the year. Fiscal year 2007 earnings were negatively impacted by $2,038,000 in pre-tax inventory, bad debt and equipment impairment charges. F. William Weber, Webco�s Chairman and Chief Executive Officer, commented, �The Company continues to perform very well. However, the current turbulence in the economy does represent a risk to the quality of the industrial economy and the amount of capital available to businesses. Our current focus is on the volatility and substantial upward movement of carbon steel costs. Our success in passing such cost increases to our customers could impact our earnings in the future. We are focusing our capital spending on new customer opportunities and more efficient production methods as we aggressively pursue our long-term strategy of making investments in manufacturing and information technology within niche markets.� Gross profit for the fourth quarter of fiscal 2008 was $14.8 million, or 15.7 percent of net sales, compared to $9.9 million, or 11.5 percent of net sales, for the fourth quarter of fiscal 2007. Gross profit for the fiscal year 2008 was $50.5 million, or 13.4 percent of net sales, compared to $35.5 million, or 10.5 percent of net sales, in 2007. The current year gross profit reflects higher prices to counter increased steel costs and steady market conditions. Fiscal 2007 gross profit was reduced by a one-time pre-tax inventory charge of $840,000 in the second quarter related to a change in the method of estimating standard costs at the Company�s distribution facilities. Selling, general and administrative expenses in the fourth quarter of fiscal 2008 were $6.0 million, compared to $4.9 million in the fourth quarter of fiscal 2007. SG&A costs in fiscal 2008 increased to $21.6 million, from the $18.1 million reported for the same period in 2007. SG&A costs before the effects of impairment charges were higher for the current quarter and fiscal year by $1.2 million and $3.5 million, respectively, primarily due to increased sales and marketing and higher employee profit sharing and bonuses related to improved profitability. Interest expense for the fourth quarter of fiscal 2008 decreased to $0.7 million from approximately $1.1 million in the prior year quarter. Interest expense was $3.6 million and $4.5 million in fiscal year 2008 and 2007, respectively. Although the Company�s debt has expanded to facilitate higher working capital required to support current sales levels, interest expense declined for the quarter and fiscal year due to lower borrowing rates. The Company has fixed the interest rate for $75 million of its debt for five years, concluding that the current long-term rates available are preferred to the exposure to significant interest rate increases in the future. Since the Company marks such interest rate swap contracts to market, there will be future earnings impacts from the changes in the valuation of the contracts from quarter to quarter. Capital spending amounted to $4.1 million for the fourth quarter of fiscal 2008, bringing the total to $12.4 million for the full year. The Company is considering various plans for expansion of its Sand Springs manufacturing facilities that would broaden its technical capabilities, enhance quality and increase capacity. The Company is pursuing financing that would enable it to undertake such an expansion, as well as provide additional funds for working capital. Without considering any possible expansion, capital spending in 2009 is expected to be between $10 million and $12 million. 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 four production facilities in Oklahoma and Pennsylvania and five value-added distribution facilities in Oklahoma, Texas, Illinois and Michigan, serving more than 1,000 customers throughout North America. 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," "plans," �pursuing,� "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, among others: general economic and business conditions, competition from imports, changes in manufacturing technology, banking environment, including availability of adequate financing, monetary policy, raw material costs and availability, industry capacity, domestic competition, loss of significant customers and customer work stoppages, customer claims, technical and data processing capabilities, and insurance costs and availability. 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 July 31, Year Ended July 31, 2008 � 2007 2008 � 2007 � Net sales $ 94,217 $ 86,330 $ 375,657 $ 337,263 Cost of sales � 79,434 � � 76,380 � 325,169 � � 301,809 Gross profit 14,783 9,950 50,488 35,454 Selling, general & administrative � 6,038 � � 4,891 � 21,641 � � 18,123 � Income from operations 8,745 5,059 28,847 17,331 Interest expense 711 1,104 3,615 4,491 Unrealized gain on interest contract � (330 ) � - � (596 ) � - Income before income taxes 8,364 3,955 25,828 12,840 Provision for income taxes � 3,019 � � 1,068 � 8,895 � � 4,275 � Net income $ 5,345 � $ 2,887 $ 16,933 � $ 8,565 � Net income per common share: Basic $ 7.05 � $ 3.82 $ 22.37 � $ 11.35 Diluted $ 7.02 � $ 3.81 $ 22.28 � $ 11.31 � Weighted average common shares outstanding: Basic � 758,000 � � 755,000 � 757,000 � � 755,000 Diluted � 761,000 � � 758,000 � 760,000 � � 758,000 WEBCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Dollars in thousands) (Unaudited) � July 31, 2008 � July 31, 2007 � Accounts receivable, net $ 38,964 $ 33,654 Inventories, net 145,632 103,971 Other current assets � 8,613 � 6,080 Total current assets 193,209 143,705 � Net property, plant and equipment 62,628 56,874 Other long-term assets � 5,760 � 7,719 � Total assets $ 261,597 $ 208,298 � Other current liabilities $ 65,802 $ 40,614 Current portion of long-term debt � 61,261 � 48,345 Total current liabilities 127,063 88,959 � Long-term debt 11,458 14,005 Deferred income tax liability 12,001 11,606 � Total equity � 111,075 � 93,728 � Total liabilities and equity $ 261,597 $ 208,298 CASH FLOW DATA (Dollars in thousands) (Unaudited) � � � Three Months Ended July 31, Year Ended July 31, 2008 � 2007 2008 2007 Net cash provided by (used in) operating activities $ (10,101 ) $ 5,737 $ (9,862 ) $ (228 ) � Depreciation and amortization $ 1,933 � $ 1,901 $ 7,787 � $ 7,282 � � Capital expenditures $ 4,149 � $ 1,544 $ 12,350 � $ 5,309 �