WEBC Webco Industrial Inc (PK)

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2014 second quarter ended January 31, 2014.

For its fiscal 2014 second quarter, the Company reported a net income of $0.1 million, or $0.15 per diluted share, compared to net income of $1.3 million, or $1.62 per diluted share, for the second quarter in fiscal 2013. Net sales for the second quarter of fiscal 2014 were $93.2 million, a 5.9 percent decrease from the $99.1 million of sales in last year’s second quarter. The current quarter includes a $1.3 million non-cash loss related to the impairment of manufacturing equipment. In addition, the current quarter results include a $0.3 million non-cash gain related to the Company’s interest swap contract, whereas the prior year second quarter includes a $0.5 million non-cash gain related to the interest swap contract.

For the first six months of fiscal year 2014, the Company generated a net loss of $0.7 million, or $0.86 per diluted share, compared to net income of $3.0 million, or $3.81 per diluted share, for the same period in fiscal 2013. Net sales for the first six months of the current year amounted to $195.6 million, a 9.2 percent reduction from the $215.5 million in sales for the same six-month period of last year. Results for the first six months of the current year include a $0.2 million non-cash loss related to the interest swap contract, whereas the prior year same six-month period contained a $0.3 million non-cash gain on the contract. There were impairment charges on manufacturing equipment of $1.3 million and $1.1 million included in the results for the first six months of fiscal years 2014 and 2013, respectively.

In the second quarter of fiscal year 2014, the Company generated income from operations of $0.8 million, including depreciation of $3.3 million and a $1.3 million non-cash impairment charge on manufacturing equipment. Income from operations in the second quarter of the prior year was $2.4 million, with depreciation amounting to $3.5 million. Gross profit for the second quarter of fiscal 2014 was $6.7 million, or 7.2 percent of net sales, compared to $8.1 million, or 8.1 percent of net sales, for the second quarter of fiscal 2013. Gross profit for the second quarter of fiscal 2014 includes the $1.3 million non-cash impairment charge.

Income from operations for the first six months of fiscal year 2014 was $1.1 million, after depreciation expense of $6.8 million, while income from operations for the same period in fiscal 2013 was $6.2 million, after depreciation expense of $6.7 million. Gross profit for the first six months of fiscal 2014 was $12.6 million, or 6.4 percent of net sales, compared to $18.0 million, or 8.3 percent of net sales for the same period in fiscal year 2013. The first six months of fiscal 2014 and fiscal 2013 include non-cash impairment charges on manufacturing equipment of $1.3 and $1.1 million, respectively.

Dana S. Weber, Chief Executive Officer, commented, “The current environment continues to be burdened with lower demand for our products, less favorable product mix and weak spot market pricing. We are having success adding incremental business, but the industrial economy in general is challenging, exacerbated by the accelerating cost and complexity of regulations and legislation. We hope for the return of more favorable business conditions into calendar year 2014. Because of the magnitude of our depreciation we are generating cash flow well in excess of debt service, enabling us to continue investing in efficiencies and long-term organic growth.”

Selling, general and administrative expenses in the second quarter of fiscal 2014 were $6.0 million, increasing from $5.7 million in the second quarter of fiscal 2013. Selling, general and administrative charges were $11.5 million in the first six months of the current fiscal year, a slight decrease from the $11.7 million in such expenses in the same period of fiscal 2013.

Interest expense was $1.0 million in each of fiscal 2014’s and fiscal 2013’s second quarter. Interest expense was also the same in each of fiscal 2014 and fiscal 2013 first six-month periods, amounting to $2.0 million each. 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 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 are included in interest expense.

Capital expenditures incurred amounted to $2.0 million in the second fiscal quarter ended January 31, 2014 and amounted to $4.1 million for the six months then ended. Capital spending for fiscal year 2014 is expected to be in the range of $8 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, the costs associated with providing healthcare benefits to employees, 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 Six Months Ended January 31, January 31, 2014   2013 2014   2013   Net sales $ 93,231 $ 99,125 $ 195,601 $ 215,519 Cost of sales   86,502     91,066     183,005     197,567     Gross profit 6,729 8,059 12,596 17,952 Selling, general & administrative   5,950     5,663     11,500     11,709     Income from operations 779 2,396 1,096 6,244 Interest expense 1,004 978 2,022 1,956 Unrealized (gain) loss on interest contracts   (329 )   (493 )   206     (339 )

Income (loss) before income taxes

104

1,911

(1,132

)

4,627

Income tax expense (benefit)   (18 )   633     (451 )   1,637     Net income (loss) $ 122   $ 1,278   $ (681 ) $ 2,990  

 

Net income (loss) per common share: Basic $ 0.15   $ 1.64   $ (0.86 ) $ 3.86   Diluted $ 0.15   $ 1.62   $ (0.86 ) $ 3.81     Weighted average common shares outstanding: Basic   789,200     778,400     789,400     774,300   Diluted   797,600     788,200     789,400     785,300    

Note: Amounts may not sum due to rounding.

    WEBCO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

      January 31, July 31, 2014 2013   Cash $ 4,770 $ 7,181 Accounts receivable, net 36,875 38,297 Inventories, net 156,310 153,675 Other current assets   8,253   9,843 Total current assets 206,206 208,995   Net property, plant and equipment 98,919 103,006 Other long-term assets   1,698   1,719   Total assets $ 306,823 $ 313,721   Other current liabilities $ 39,564 $ 45,227 Current portion of long-term debt   78,545   78,565 Total current liabilities 118,109 123,792   Long-term debt 12,000 12,000 Deferred income tax liability 18,995 20,142   Total equity   157,719   157,786   Total liabilities and equity $ 306,823 $ 313,721     CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

        Three Months Ended Six Months Ended January 31, January 31, 2014   2013 2014 2013

Net cash provided by (used in) operating activities

$

7,167

$

26,115

$

114

$

30,542

  Depreciation and amortization $ 3,425 $ 3,651 $ 7,055 $ 7,052   Cash paid for capital expenditures $ 2,219 $ 2,192 $ 3,919 $ 6,079  

Note: Amounts may not sum due to rounding.

Webco Industries, Inc.Mike Howard, 918-241-1094Chief Financial Officermhoward@webcoindustries.com