WEBC Webco Industrial Inc (PK)

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2011 first quarter, which ended October 31, 2010.

For its fiscal 2011 first quarter, the Company reported net income of $6,151,000, or $7.98 per diluted share, compared to net income of $502,000, or $0.66 per diluted share, for the same quarter in fiscal 2010. Net sales for the first quarter of fiscal 2011 were $103.3 million, a 51.9 percent increase from the $68.0 million of sales in last year’s first quarter. The improvement in current quarter results reflects an improved business environment, along with significant productivity gains.

F. William Weber, Webco’s Chairman and Chief Executive Officer, commented, “The initiatives on which we focused over the last year and a half are allowing us to operate at a high level of productivity. We continue to pursue organic growth through strategic investments in manufacturing and information technology. Our current investments support our long-term niche strategy.”

Gross profit for the first quarter of fiscal 2011 was $15.7 million, or 15.2 percent of net sales, compared to $6.2 million, or 9.1 percent of net sales, for the first quarter of fiscal 2010. The current quarter gross profit percentage increased from the comparable prior year period because of the impacts of high priced inventories on that prior year period.

Selling, general and administrative expenses in the first quarter of fiscal 2011 were $5.8 million, compared to $3.8 million in the first quarter of the prior year. SG&A expense in the current fiscal year period is higher than the prior year same period as short-term cost reduction strategies employed have given way to longer term management objectives.

Interest expense was $1.0 million in each of the current and prior year quarters. In the spring of 2008, the Company entered into arrangements that swapped the variable interest rate for $75 million of the Company’s debt to a fixed rate for five years, concluding that fixed rates available for that period were preferred to the exposure to significant interest rate increases in the future. The global economic crisis that began in October 2008 resulted in significant decreases in interest rates and, therefore, current rates are less than the swapped rates. Monthly swap settlements are included in interest expense and amounted to $0.7 million in each of the current and prior year quarters. The Company records interest rate swap contracts at fair value, and the non-cash changes in value from period to period are reported as unrealized gains or losses on interest contracts. During the first quarter of fiscal year 2011, fair value adjustments on the interest contracts resulted in a non-cash charge of $0.4 million versus a non-cash charge of $0.7 million in the prior year’s first quarter. At October 31, 2010, the Company had a liability of $7.3 million related to the negative fair value of the interest rate swap contracts.

Capital expenditures incurred amounted to $3.3 million for the first quarter of fiscal 2011. Capital spending for fiscal year 2011 is currently projected to be in the range of $12 million to $14 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 five production facilities in Oklahoma and Pennsylvania and five value-added distribution facilities in Oklahoma, Texas, Illinois and Michigan, serving more than 1,500 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," “projects,” "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 the continuing global recession and disruptions in the global credit markets, 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

October 31,

2010     2009   Net sales $ 103,346 $ 68,031 Cost of sales   87,604   61,845  

Gross profit

15,742

6,186

Selling, general & administrative   5,767   3,805  

Income from operations

9,975

2,381

Interest expense 992 960 Unrealized loss on interest contract   375   695  

Income before income taxes

8,608

726

Income tax expense   2,457   224   Net income $ 6,151 $ 502     Net income per common share: Basic $ 8.01 $ 0.66 Diluted $ 7.98 $ 0.66     Weighted average common shares outstanding: Basic   768,000   763,000 Diluted   771,000   765,000   WEBCO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

      October 31,

2010

July 31,

2010

  Accounts receivable, net $ 49,181 $ 41,310 Inventories, net 119,059 116,631 Other current assets   9,446   7,952 Total current assets 177,686 165,893   Net property, plant and equipment 66,501 65,594 Other long-term assets   7,302   7,301   Total assets $ 251,489 $ 238,788   Other current liabilities $ 44,383 $ 42,836 Current portion of long-term debt   69,003   63,903 Total current liabilities 113,386 106,739   Long-term debt 8,750 8,750 Deferred income tax liability 10,805 11,117   Total equity   118,548   112,182   Total liabilities and equity $ 251,489 $ 238,788   CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

  Three Months Ended

October 31,

2010     2009

Net cash provided by

  (used in) operating activities

$

(750

)

$

6,042

  Depreciation and amortization $ 2,051   $ 1,981   Cash paid for capital expenditures $ 3,086   $ 334