WEBC Webco Industrial Inc (PK)

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2012 third quarter ended April 30, 2012.

For its fiscal 2012 third quarter, the Company reported net income of $5.2 million, or $6.69 per diluted share, compared to net income of $7.8 million, or $10.02 per diluted share, for the same quarter in fiscal 2011. Net sales for the third quarter of fiscal 2012 were $134.8 million, an 11.9 percent increase over the $120.4 million of sales in last year’s third quarter.

For the first nine months of fiscal year 2012, the Company generated net income of $11.4 million, or $14.58 per diluted share, compared to net income of $19.1, or $24.75 per diluted share, for the same period in fiscal 2011. Net sales for the first nine months of the current year amounted to $391.2 million, a 16.6 percent increase over the $335.7 million in sales for the same nine-month period of last year. Results for the first nine months of the current year include a $3.8 million non-cash pre-tax loss related to the interest swap contract, whereas the prior year same nine-month period included a $1.4 million non-cash pre-tax gain on interest swap contracts.

Gross profit for the third quarter of fiscal 2012 was $14.6 million, or 10.8 percent of net sales, compared to $18.7 million, or 15.5 percent of net sales, for the third quarter of fiscal 2011. Gross profit for the first nine months of fiscal 2012 was $41.8 million, or 10.7 percent of net sales, compared to $50.8 million, or 15.1 percent of net sales, in the same nine-month period in 2011. The gross profit percentages decreased because of facility start-up and product development costs.

Dana S. Weber, Chief Executive Officer, commented, “Our new facility in Sand Springs, Oklahoma began production in May 2012. We want to thank our employees, shareholders and customers for their support while we worked to complete this project on schedule and within budget. Now that the plant is operational, the real work can begin. We plan to continue to deploy capital in pursuit of organic growth opportunities that are consistent with our long-term niche strategy.”

Selling, general and administrative expenses in the third quarter of fiscal 2012 were $5.5 million, compared to $7.3 million in the third quarter of the prior year. SG&A costs in the first nine-months of fiscal 2012 decreased to $17.1 million, from the $21.0 million reported for the same nine-month period in 2011. The decrease in SG&A costs resulted from a $1.0 million bad debt charge that affected the prior year periods and current period reductions in company-wide incentive compensation as a result of lower profitability.

Interest expense was $0.6 million in the current year third quarter and $1.2 million in the prior year third quarter. Interest expense totaled $2.9 million in the first nine-month period in fiscal 2012 and $3.2 million in the comparable period in fiscal 2011. The Company is party to an arrangement that swaps the variable interest rate for $75 million of the Company’s debt to a fixed rate from January 2013 through December 2017. Monthly swap settlements are included in interest expense. The Company records the interest swap contract at fair value and non-cash changes in value are reported in Gains or Losses on Interest Contracts. The reduction in interest expense in the current quarter is because the swap arrangement that existed in the comparable quarter in 2011 was modified in January 2012 to allow for a variable interest rate until January 2013.

Capital expenditures incurred amounted to $10.7 million for the third quarter of fiscal 2012 and $30.8 million for the first nine months of fiscal 2012. The Company’s new manufacturing facility in Oklahoma that will broaden technical capabilities, enhance quality and increase capacity for carbon steel tubing, is expected to commence production in the fourth quarter of fiscal 2012. Capital spending in fiscal 2012 is expected to be in the range of $40 to $45 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 seven 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 any global economic downturn or 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,

2012   2011 2012   2011   Net sales $ 134,775 $ 120,413 $ 391,218 $ 335,654 Cost of sales   120,192   101,737     349,427   284,848     Gross profit 14,583 18,676 41,791 50,806 Selling, general & administrative   5,522   7,253     17,095   20,978     Income from operations 9,061 11,422 24,696 29,828 Interest expense 625 1,160 2,876 3,185 (Gain) loss on interest contracts   88   (328 )   3,795   (1,390 )

Income before income taxes

8,349

10,589

18,026

28,033

Income tax expense   3,120   2,820     6,667   8,886     Net income $ 5,228 $ 7,770   $ 11,359 $ 19,148  

 

Net income per common share: Basic $ 6.80 $ 10.14   $ 14.81 $ 24.96   Diluted $ 6.69 $ 10.02   $ 14.58 $ 24.75     Weighted average common shares outstanding: Basic   768,900   766,000     765,800   767,000   Diluted   781,900   776,000     778,900   774,000    

Totals may not foot due to rounding.

  WEBCO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

    April 30,

2012

July 31,

2011

  Accounts receivable, net $ 65,915 $ 73,411 Inventories, net 147,211 147,925 Other current assets   13,942   15,484 Total current assets 227,069 236,820   Net property, plant and equipment 105,006 81,710 Other long-term assets   2,301   5,074   Total assets $ 334,376 $ 323,604   Other current liabilities $ 64,985 $ 57,020 Current portion of long-term debt   88,755   96,521 Total current liabilities 153,740 153,541   Long-term debt 16,000 18,643 Deferred income tax liability 15,894 14,593   Total equity   148,742   136,827   Total liabilities and equity $ 334,376 $ 323,604   CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

      Three Months Ended

April 30,

Nine Months Ended

April 30,

2012   2011 2012 2011 Net cash provided by (used in)

operating activities

$

7,971

$

(6,951

)

$

38,768

$

9,408

  Depreciation and amortization $ 2,742 $ 2,304   $ 7,865 $ 6,521   Cash paid for capital expenditures $ 9,905 $ 7,000   $ 30,328 $ 14,797  

Totals may not foot due to rounding.