Webco Industries, Inc. Reports Fiscal 2008 Fourth Quarter and Year-End Results

  
    
  
  
    
      Webco Industries, Inc. (OTC: WEBC) today reported results for its fourth 
      quarter and fiscal year ended July 31, 2008.
    
    
      For its fiscal 2008 fourth quarter, the Company reported net income of 
      $5,345,000, or $7.02 per diluted share, compared to $2,887,000, or $3.81 
      per diluted share, for the same quarter in fiscal 2007. Net sales for 
      the fourth quarter of fiscal 2008 were $94.2 million, a 9.2 percent 
      increase over the $86.3 million of sales in last year’s 
      fourth quarter.
    
    
      Net income for the year ended July 31, 2008 was $16,933,000, or $22.28 
      per diluted share, compared to $8,565,000, or $11.31 per diluted share, 
      for the same period in fiscal 2007. Net sales for the current year 
      amounted to $375.7 million, an 11.4 percent increase over the $337.3 
      million of sales last year. Fiscal 2008 sales and earnings reflect the 
      benefit of higher sales prices related to the increased steel costs 
      during the year. Fiscal year 2007 earnings were negatively impacted by 
      $2,038,000 in pre-tax inventory, bad debt and equipment impairment 
      charges.
    
    
      F. William Weber, Webco’s Chairman and Chief 
      Executive Officer, commented, “The Company 
      continues to perform very well. However, the current turbulence in the 
      economy does represent a risk to the quality of the industrial economy 
      and the amount of capital available to businesses. Our current focus is 
      on the volatility and substantial upward movement of carbon steel costs. 
      Our success in passing such cost increases to our customers could impact 
      our earnings in the future. We are focusing our capital spending on new 
      customer opportunities and more efficient production methods as we 
      aggressively pursue our long-term strategy of making investments in 
      manufacturing and information technology within niche markets.”
    
    
      Gross profit for the fourth quarter of fiscal 2008 was $14.8 million, or 
      15.7 percent of net sales, compared to $9.9 million, or 11.5 percent of 
      net sales, for the fourth quarter of fiscal 2007. Gross profit for the 
      fiscal year 2008 was $50.5 million, or 13.4 percent of net sales, 
      compared to $35.5 million, or 10.5 percent of net sales, in 2007. The 
      current year gross profit reflects higher prices to counter increased 
      steel costs and steady market conditions. Fiscal 2007 gross profit was 
      reduced by a one-time pre-tax inventory charge of $840,000 in the second 
      quarter related to a change in the method of estimating standard costs 
      at the Company’s distribution facilities.
    
    
      Selling, general and administrative expenses in the fourth quarter of 
      fiscal 2008 were $6.0 million, compared to $4.9 million in the fourth 
      quarter of fiscal 2007. SG&A costs in fiscal 2008 increased to $21.6 
      million, from the $18.1 million reported for the same period in 2007. 
      SG&A costs before the effects of impairment charges were higher for the 
      current quarter and fiscal year by $1.2 million and $3.5 million, 
      respectively, primarily due to increased sales and marketing and higher 
      employee profit sharing and bonuses related to improved profitability.
    
    
      Interest expense for the fourth quarter of fiscal 2008 decreased to $0.7 
      million from approximately $1.1 million in the prior year quarter. 
      Interest expense was $3.6 million and $4.5 million in fiscal year 2008 
      and 2007, respectively. Although the Company’s 
      debt has expanded to facilitate higher working capital required to 
      support current sales levels, interest expense declined for the quarter 
      and fiscal year due to lower borrowing rates. The Company has fixed the 
      interest rate for $75 million of its debt for five years, concluding 
      that the current long-term rates available are preferred to the exposure 
      to significant interest rate increases in the future. Since the Company 
      marks such interest rate swap contracts to market, there will be future 
      earnings impacts from the changes in the valuation of the contracts from 
      quarter to quarter.
    
    
      Capital spending amounted to $4.1 million for the fourth quarter of 
      fiscal 2008, bringing the total to $12.4 million for the full year. The 
      Company is considering various plans for expansion of its Sand Springs 
      manufacturing facilities that would broaden its technical capabilities, 
      enhance quality and increase capacity. The Company is pursuing financing 
      that would enable it to undertake such an expansion, as well as provide 
      additional funds for working capital. Without considering any possible 
      expansion, capital spending in 2009 is expected to be between $10 
      million and $12 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 four 
      production facilities in Oklahoma and Pennsylvania and five value-added 
      distribution facilities in Oklahoma, Texas, Illinois and Michigan, 
      serving more than 1,000 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," “pursuing,” 
      "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, among others: general economic and business conditions, 
      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

          
            July 31,
          
        
        
        
        
          Year Ended

          
            July 31,
          
        
      
      
        
        
        
        
        
          
            2008
          
        
        
           
        
        
          
            2007
          
        
        
        
        
          
            2008
          
        
        
           
        
        
          
            2007
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net sales
        
        
        
        
          $
        
        
          94,217
        
        
        
        
        
        
          $
        
        
          86,330
        
        
        
        
          $
        
        
          375,657
        
        
        
        
        
        
          $
        
        
          337,263
        
      
      
        
          Cost of sales
        
        
        
        
           
        
        
          79,434
        
        
           
        
        
        
        
           
        
        
          76,380
        
        
        
        
           
        
        
          325,169
        
        
           
        
        
        
        
           
        
        
          301,809
        
      
      
        
          Gross profit
        
        
        
        
        
        
          14,783
        
        
        
        
        
        
        
        
          9,950
        
        
        
        
        
        
          50,488
        
        
        
        
        
        
        
        
          35,454
        
      
      
        
          Selling, general & administrative
        
        
        
        
           
        
        
          6,038
        
        
           
        
        
        
        
           
        
        
          4,891
        
        
        
        
           
        
        
          21,641
        
        
           
        
        
        
        
           
        
        
          18,123
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from operations
        
        
        
        
        
        
          8,745
        
        
        
        
        
        
        
        
          5,059
        
        
        
        
        
        
          28,847
        
        
        
        
        
        
        
        
          17,331
        
      
      
        
          Interest expense
        
        
        
        
        
        
          711
        
        
        
        
        
        
        
        
          1,104
        
        
        
        
        
        
          3,615
        
        
        
        
        
        
        
        
          4,491
        
      
      
        
          Unrealized gain on interest contract
        
        
        
        
           
        
        
          (330
        
        
          )
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          (596
        
        
          )
        
        
        
        
           
        
        
          -
        
      
      
        
          
            Income before income taxes
          
        
        
        
        
        
        
          
            8,364
          
        
        
        
        
        
        
        
        
          
            3,955
          
        
        
        
        
        
        
          
            25,828
          
        
        
        
        
        
        
        
        
          
            12,840
          
        
      
      
        
          Provision for income taxes
        
        
        
        
           
        
        
          3,019
        
        
           
        
        
        
        
           
        
        
          1,068
        
        
        
        
           
        
        
          8,895
        
        
           
        
        
        
        
           
        
        
          4,275
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
        
        
          $
        
        
          5,345
        
        
           
        
        
        
        
          $
        
        
          2,887
        
        
        
        
          $
        
        
          16,933
        
        
           
        
        
        
        
          $
        
        
          8,565
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income per common share:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          $
        
        
          7.05
        
        
           
        
        
        
        
          $
        
        
          3.82
        
        
        
        
          $
        
        
          22.37
        
        
           
        
        
        
        
          $
        
        
          11.35
        
      
      
        
          Diluted
        
        
        
        
          $
        
        
          7.02
        
        
           
        
        
        
        
          $
        
        
          3.81
        
        
        
        
          $
        
        
          22.28
        
        
           
        
        
        
        
          $
        
        
          11.31
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average common shares outstanding:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
           
        
        
          758,000
        
        
           
        
        
        
        
           
        
        
          755,000
        
        
        
        
           
        
        
          757,000
        
        
           
        
        
        
        
           
        
        
          755,000
        
      
      
        
          Diluted
        
        
        
        
           
        
        
          761,000
        
        
           
        
        
        
        
           
        
        
          758,000
        
        
        
        
           
        
        
          760,000
        
        
           
        
        
        
        
           
        
        
          758,000
        
      
    
    
      
        
          WEBCO INDUSTRIES, INC. AND SUBSIDIARIES

          
            CONSOLIDATED BALANCE SHEET HIGHLIGHTS
          
          
            (Dollars in thousands)
          
          
            (Unaudited)
          
        
      
      
        
        
        
           
        
        
        
      
      
        
        
        
        
        
          
            July 31,
          
          
            2008
          
        
        
           
        
        
          
            July 31,
          
          
            2007
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Accounts receivable, net
        
        
        
        
          $
        
        
          38,964
        
        
        
        
          $
        
        
          33,654
        
      
      
        
          Inventories, net
        
        
        
        
        
        
          145,632
        
        
        
        
        
        
          103,971
        
      
      
        
          Other current assets
        
        
        
        
           
        
        
          8,613
        
        
        
        
           
        
        
          6,080
        
      
      
        
          Total current assets
        
        
        
        
        
        
          193,209
        
        
        
        
        
        
          143,705
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net property, plant and equipment
        
        
        
        
        
        
          62,628
        
        
        
        
        
        
          56,874
        
      
      
        
          Other long-term assets
        
        
        
        
           
        
        
          5,760
        
        
        
        
           
        
        
          7,719
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          261,597
        
        
        
        
          $
        
        
          208,298
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Other current liabilities
        
        
        
        
          $
        
        
          65,802
        
        
        
        
          $
        
        
          40,614
        
      
      
        
          Current portion of long-term debt
        
        
        
        
           
        
        
          61,261
        
        
        
        
           
        
        
          48,345
        
      
      
        
          Total current liabilities
        
        
        
        
        
        
          127,063
        
        
        
        
        
        
          88,959
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Long-term debt
        
        
        
        
        
        
          11,458
        
        
        
        
        
        
          14,005
        
      
      
        
          Deferred income tax liability
        
        
        
        
        
        
          12,001
        
        
        
        
        
        
          11,606
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total equity
        
        
        
        
           
        
        
          111,075
        
        
        
        
           
        
        
          93,728
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total liabilities and equity
        
        
        
        
          $
        
        
          261,597
        
        
        
        
          $
        
        
          208,298
        
      
    
    
      
        
          CASH FLOW DATA

          
            (Dollars in thousands)
          
          
            (Unaudited)
          
        
      
      
        
        
        
           
        
        
        
        
           
        
        
        
        
           
        
        
        
      
      
        
        
        
        
        
          Three Months Ended

          
            July 31,
          
        
        
        
        
          Year Ended

          
            July 31,
          
        
      
      
        
        
        
        
        
          
            2008
          
        
        
           
        
        
          
            2007
          
        
        
        
        
          
            2008
          
        
        
        
        
          
            2007
          
        
      
      
        
          Net cash provided by (used in)

          
            operating activities
          
        
        
        
        
          
            $
          
        
        
          
            (10,101
          
        
        
          
            )
          
        
        
        
        
          
            $
          
        
        
          
            5,737
          
        
        
        
        
          
            $
          
        
        
          
            (9,862
          
        
        
          
            )
          
        
        
        
        
          
            $
          
        
        
          
            (228
          
        
        
          
            )
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Depreciation and amortization
        
        
        
        
          $
        
        
          1,933
        
        
           
        
        
        
        
          $
        
        
          1,901
        
        
        
        
          $
        
        
          7,787
        
        
           
        
        
        
        
          $
        
        
          7,282
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Capital expenditures
        
        
        
        
          $
        
        
          4,149
        
        
           
        
        
        
        
          $
        
        
          1,544
        
        
        
        
          $
        
        
          12,350
        
        
           
        
        
        
        
          $
        
        
          5,309