Webco Industries, Inc. Reports Fiscal 2012 Third Quarter Results

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.