WEBC Webco Industrial Inc (PK)

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2011 third quarter, which ended April 30, 2011.

For its fiscal 2011 third quarter, the Company reported net income of $7.7 million, or $10.02 per diluted share, compared to net income of $1.0 million, or $1.30 per diluted share, for the same quarter in fiscal 2010. Net sales for the third quarter of fiscal 2011 were $120.4 million, a 45.2 percent increase from the $82.9 million of sales in last year’s third quarter. The current quarter results reflect a $0.3 million non-cash pre-tax gain related to interest rate swap contracts, whereas the prior year same quarter included a $0.1 million pre-tax loss on the contracts. The improvement in current quarter results reflects an improved business environment, along with continued productivity gains. In addition to suffering through lower sales volumes, the prior year quarter was burdened by high cost inventories and sales prices which were based on lower replacement cost steel.

For the first nine months of fiscal year 2011, the Company generated net income of $19.1 million, or $24.75 per diluted share, compared to net income of $1.6 million, or $2.12 per diluted share, for the same period in fiscal 2010. Net sales for the first nine months of the current year amounted to $335.7 million, a 55.8 percent increase over the $215.4 million in sales for the same nine-month period of last year. Results for the first nine months of the current year reflect a $1.4 million non-cash pre-tax gain related to interest rate swap contracts, whereas the prior year’s same period included a $1.0 million pre-tax loss on the contracts. The first nine months of the prior year reflected the low sales volume and pricing conditions discussed previously.

Dana S. Weber, Chief Executive Officer, commented, “Our facilities are operating at a high level of productivity, thanks to the efforts of our employees. We continue to deploy capital in pursuit of organic growth opportunities that are consistent with our long-term niche strategy.”

Gross profit for the third quarter of fiscal 2011 was $18.7 million, or 15.5 percent of net sales, compared to $7.8 million, or 9.4 percent of net sales, for the third quarter of fiscal 2010. Gross profit for the first nine months of fiscal 2011 was $50.8 million, or 15.1 percent of net sales, compared to $19.6 million, or 9.1 percent of net sales, in the same nine-month period in 2010. The current year quarter and first nine-month gross profit percentages increased from the comparable prior year periods because of high productivity in the current periods, as well as the impact of selling high cost inventories on the prior year periods.

Selling, general and administrative expenses in the third quarter of fiscal 2011 were $7.3 million, compared to $5.2 million in the third quarter of the prior year. SG&A costs in the first nine-months of fiscal 2011 increased to $21.0 million, from the $13.3 million reported for the same nine-month period in 2010. SG&A expense in the current fiscal year first nine month period is higher than the same period in the prior year in part due to a $1.0 million bad debt charge during the second quarter of fiscal 2011. SG&A for all current year periods are higher than the prior year periods because improved results have increased company-wide incentive compensation and cost reduction strategies that were necessary in the prior year have given way to longer term management objectives.

Interest expense was $1.2 million in the current year third quarter and $1.0 million in prior year third quarter. Interest expense totaled $3.2 million in the first nine-month period in fiscal 2011 and $2.9 million in the comparable period in fiscal 2010. The Company is party to arrangements that swap the variable interest rate for $75 million of the Company’s debt to a fixed rate through September 2013. Monthly swap settlements are included in interest expense. The Company records interest rate swap contracts at fair value and non-cash changes in value are reported as unrealized gains or losses on interest contracts.

Capital expenditures incurred amounted to $7.1 million for the third quarter and $14.5 million for the first nine months of fiscal 2011. The Company has commenced construction of a new manufacturing facility in Oklahoma that will broaden its technical capabilities, enhance quality and increase capacity for carbon steel tubing. During the current year third quarter, the Company consummated financing necessary to undertake the expansion, including additional working capital that will be required. Capital spending in fiscal 2011 is expected to be in the range of $33 to $35 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 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," "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 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

April 30,

Nine Months Ended

April 30,

  2011       2010   2011       2010   Net sales $ 120,413 $ 82,918 $ 335,654 $ 215,404 Cost of sales   101,737     75,111   284,848     195,764   Gross profit 18,676 7,807 50,806 19,640 Selling, general & administrative   7,253     5,182   20,978     13,276   Income from operations 11,422 2,625 29,828 6,364 Interest expense 1,160 957 3,185 2,855 Unrealized (gain) loss on interest contracts   (328 )   113   (1,390 )   965  

Income before income taxes

10,589

1,555

28,033

2,544

Income tax expense   2,820     555   8,886     918   Net income $ 7,770   $ 1,000 $ 19,148   $ 1,626

 

Net income per common share: Basic $ 10.14   $ 1.31 $ 24.96   $ 2.13 Diluted $ 10.02   $ 1.30 $ 24.75   $ 2.12   Weighted average common shares outstanding: Basic   766,000     765,000   767,000     764,000 Diluted   776,000     767,000   774,000     766,000  

Totals may not foot due to rounding.

  WEBCO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

    April 30,

2011

July 31,

2010

  Accounts receivable, net $ 66,877 $ 41,310 Inventories, net 120,581 116,631 Other current assets   10,779   7,952 Total current assets 198,237 165,893   Net property, plant and equipment 73,742 65,594 Other long-term assets   4,765   7,301   Total assets $ 276,744 $ 238,788   Other current liabilities $ 62,176 $ 42,836 Current portion of long-term debt   51,079   63,903 Total current liabilities 113,255 106,739   Long-term debt 19,500 8,750 Deferred income tax liability 12,662 11,117   Total equity   131,327   112,182   Total liabilities and equity $ 276,744 $ 238,788  

Totals may not foot due to rounding.

 

CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

      Three Months Ended

April 30,

Nine Months Ended

April 30,

  2011       2010     2011   2010   Net cash provided by (used in)

operating activities

$

(6,951

)

$

(11,830

)

$

9,408

$

(9,932

)

  Depreciation and amortization $ 2,304   $ 1,988   $ 6,521 $ 5,941     Cash paid for capital expenditures $ 7,000   $ 3,336   $ 14,797 $ 5,742    

Totals may not foot due to rounding.