WEBC Webco Industrial Inc (PK)

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2013 first quarter ended October 31, 2012.

For its fiscal 2013 first quarter, the Company reported net income of $1.7 million, or $2.19 per diluted share, compared to net income of $2.8 million, or $3.63 per diluted share, for the same quarter in fiscal 2012. Net sales for the first quarter of fiscal 2013 were $116.4 million, a 10.2 percent decrease from the $129.6 million of sales in last year’s first quarter. Results for the first quarter of fiscal year 2013 include a $1.1 million impairment charge to cost of sales on manufacturing equipment and $0.2 million in non-cash pre-tax losses related to the interest swap contract, whereas the first quarter of the prior year included a $1.9 million non-cash pre-tax loss on the interest swap contract.

Gross profit for the first quarter of fiscal 2013 was $9.9 million, or 8.5 percent of net sales, compared to $13.0 million, or 10.0 percent of net sales, for the first quarter of fiscal 2012. Gross profit for the first quarter of fiscal 2013 was negatively impacted by the $1.1 million impairment charge and a weaker spot pricing market and less favorable product mix than in the same quarter of fiscal 2012.

Dana S. Weber, Chief Executive Officer, commented, “Fiscal 2013 has started with lower volume, a weaker spot pricing market and suboptimal product mix than in fiscal year 2012. We hope for the return of more favorable conditions as fiscal year 2013 progresses, but continue to monitor domestic and international economic and political uncertainty. We have deployed significant capital over the last 18 months, and plan to continue to invest strategically in our industry. We are constructing a platform for long-term organic growth opportunities that are consistent with our niche strategy.”

Selling, general and administrative expenses in the first quarter of fiscal 2013 were $6.0 million, compared to $5.4 million in the first quarter of the prior year. The increase in SG&A costs relates to a $0.4 million reversal of bad debt expense that occurred in the first quarter of fiscal 2012.

Interest expense was $1.0 million in the current year first quarter and $1.3 million in the prior year first quarter. 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. 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. Monthly swap settlements, if any, are included in interest expense. The reduction in interest expense in the current quarter is because the swap arrangement that existed in the comparable quarter in 2012 was modified to allow for a variable interest rate until January 2013.

Capital expenditures incurred amounted to $3.9 million for the first quarter of fiscal 2013. Capital spending for the full fiscal year 2013 is expected to be in the range of $10 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 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, tax rates and regulation, 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, 2012   2011   Net sales $ 116,394 $ 129,609 Cost of sales   106,500   116,611  

Gross profit

9,894

12,998

Selling, general & administrative   6,045   5,419  

Income from operations

3,848

7,579

Interest expense 978 1,252 (Gain) loss on interest contracts   154   1,905  

Income before income taxes

2,716

4,422

Income tax expense   1,004   1,603   Net income $ 1,712 $ 2,819     Net income per common share: Basic $ 2.22 $ 3.69 Diluted $ 2.19 $ 3.63     Weighted average common shares outstanding: Basic   770,000   765,000 Diluted   782,000   776,000  

Note: Amounts may not sum due to rounding.

  WEBCO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

    October 31, July 31, 2012 2012   Accounts receivable, net $ 46,345 $ 61,916 Inventories, net 149,716 157,601 Other current assets   19,103   17,887 Total current assets 215,163 237,404   Net property, plant and equipment 109,553 109,109 Other long-term assets   1,979   2,128   Total assets $ 326,696 $ 348,642   Other current liabilities $ 40,110 $ 72,870 Current portion of long-term debt   98,575   87,538 Total current liabilities 138,685 160,408   Long-term debt 14,250 15,125 Deferred income tax liability 20,452 21,288   Total equity   153,309   151,821   Total liabilities and equity $ 326,696 $ 348,642   CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

  Three Months Ended October 31, 2012   2011

Net cash provided by

(used in) operating activities

$

4,427

$

20,195

  Depreciation and amortization $ 3,401 $ 2,449   Cash paid for capital expenditures $ 3,886 $ 6,376  

Note: Amounts may not sum due to rounding.