MRO Magazine

Webco Industries, Inc. Reports Fiscal 2015 Fourth Quarter Results


September 24, 2015
By Business Wire News

SAND SPRINGS, Okla

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2015 fourth quarter ended July 31, 2015.

For its fiscal 2015 fourth quarter, the Company reported net income of $1.2 million, or $1.42 per diluted share, compared to net income of $0.8 million, or $0.99 per diluted share, for the fourth quarter in fiscal 2014. Net sales for the fourth quarter of fiscal 2015 were $99.0 million, a 7.5 percent decrease from the $107.0 million of sales in last year’s fourth quarter. The fourth quarter of fiscal year 2015 includes a pre-tax gain on the sale of an asset for $0.5 million. The current quarter includes a $0.2 million non-cash gain related to the Company’s interest swap contract, whereas the prior year fourth quarter includes a $0.3 million non-cash gain related to the interest swap contract. The effective tax rate for the fourth quarter of fiscal year 2015 is impacted by the receipt of $0.7 million in tax refunds associated with prior fiscal periods.

For fiscal year 2015, the Company generated net income of $0.9 million, or $1.15 per diluted share, compared to net income of $0.4 million, or $0.52 per diluted share, for the same period in fiscal 2014. Net sales for fiscal year 2015 amounted to $414.1 million, a 1.1 percent increase over the $409.5 million in sales for last fiscal year. Results for fiscal year 2015 include a $1.2 million non-cash loss related to the interest swap contract, as well as the $0.5 million gain on the sale of an asset. The prior fiscal year contains a $0.3 million gain on the interest swap contract and a $1.1 million impairment charge on manufacturing equipment. Fiscal year 2015 also includes the impact of downtime associated with the planned improvements on our largest weld mill, which consumed over two of the first six months of fiscal 2015. Fiscal 2015’s effective tax rate is affected by a $0.7 million tax refund related to a prior fiscal year.

In the fourth quarter of fiscal year 2015, the Company had income from operations of $1.4 million, including depreciation of $3.0 million. Income from operations in the fourth fiscal quarter of the prior year was $2.0 million, with depreciation amounting to $3.1 million. Gross profit for the fourth quarter of fiscal 2015 was $7.0 million, or 7.1 percent of net sales, compared to $8.2 million, or 7.7 percent of net sales, for the fourth quarter of fiscal 2014.

Income from operations for fiscal year 2015 was $4.9 million, after depreciation expense of $12.0 million, while income from operations for the same period in fiscal 2014 was $4.2 million, after depreciation expense of $12.8 million. Gross profit for fiscal 2015 was $29.0 million, or 7.0 percent of net sales, compared to $27.7 million, or 6.8 percent of net sales for the same period in fiscal year 2014. Income from operations and gross profit for the current and prior fiscal year were impacted by the gain on sale of asset, planned mill improvements and impairment charges, respectively.

Dana S. Weber, Chief Executive Officer, commented, “The low price of oil and strength of the dollar are all negative conditions for our industry and many of our customers. Further, the recent reductions in the cost of steel, which have not completely worked their way through our inventories, along with declines in demand, have negatively impacted short-term margins. We have reduced our expenses and working capital to an amount we believe is currently appropriate and are continuing to make investments that are intended to improve efficiencies, yields and quality.”

Selling, general and administrative expenses were $5.6 million in the fourth quarter of fiscal 2015 and $6.2 million in the fourth quarter of fiscal 2014. Selling, general and administrative charges were $24.1 million for the current fiscal year, an increase over the $23.5 million in such expenses in the same period of fiscal 2014.

Interest expense was $0.8 million in the fourth quarter of fiscal year 2015 and $0.9 million the fourth quarter of fiscal 2014. Interest expense decreased to $3.2 million in fiscal year 2015 from $3.8 million in fiscal year 2014. The Company is party to an arrangement that swaps the variable interest rate for $50 million of the Company’s debt to a fixed rate through December 2019. The Company records the interest swap contract at fair value and non-cash changes in value are reported as unrealized gains or losses on interest contracts. Monthly cash swap settlements are included in interest expense. Changes in market expectations for future interest rates, such as treasury yields, can cause significant fluctuations in the mark to market valuation of our interest rate swap and therefore volatility in the unrealized gain or loss on interest contracts.

Capital expenditures incurred amounted to $2.7 million in the fourth fiscal quarter ended July 31, 2015, and amounted to $8.7 million for the fiscal year then ended.

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 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 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,” “intended,” “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 or as a result of reduced oil prices, competition from imports, including any impacts associated with the strength of the U.S. dollar to a number of foreign currencies, changes in manufacturing technology, banking environment, including availability of adequate financing, monetary policy, changes in tax rates and regulation, raw material costs and availability, industry capacity, domestic competition, loss of or reductions in purchases by significant customers and customer work stoppages, the costs associated with providing healthcare benefits to employees, customer claims, technical and data processing capabilities, insurance costs and availability and geo-political events. 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,

    Fiscal Year Ended

July 31,

  2015         2014     2015         2014  
 
Net sales $ 99,004 $ 107,036 $ 414,067 $ 409,484
Cost of sales   91,992     98,831     385,095     381,787  
 
Gross profit 7,011 8,205 28,972 27,696
Selling, general & administrative   5,620     6,235     24,104     23,518  
 
Income from operations 1,392 1,969 4,868 4,178
Interest expense 798 914 3,244 3,826
Unrealized (gain) loss on interest contracts   (158 )   (255 )   1,232     (328 )

Income (loss) before income taxes

751

1,310

391

679

Income tax expense (benefit)   (400 )   510     (542 )   268  
 
Net income (loss) $ 1,151   $ 800   $ 933   $ 412  

 

Net income (loss) per common share:
Basic $ 1.42   $ 1.00   $ 1.16   $ 0.52  
Diluted $ 1.42   $ 0.99   $ 1.15   $ 0.52  
 
Weighted average common shares outstanding:
Basic   808,100     799,000     806,900     792,000  
Diluted   809,400     805,000     809,700     799,000  
 

Note: Amounts may not sum due to rounding.

 
 
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands, except par value)

(Unaudited)

       
July 31,

2015

July 31,

2014

 
Cash $ 6,900 $ 4,793
Accounts receivable, net 40,885 44,100
Inventories, net 139,191 153,071
Other current assets   8,466   8,131
Total current assets 195,443 210,095
 
Property, plant and equipment, net 91,226 95,904
Other long-term assets   2,505   1,874
 
Total assets $ 289,174 $ 307,873
 
Other current liabilities $ 27,443 $ 36,550
Current portion of long-term debt   69,959   81,405
Total current liabilities 97,402 117,955
 
Long-term debt 12,000 12,000
Deferred income tax liability 17,561 18,363
 
Total equity (807,800 common shares, par value $0.01, outstanding at July 31, 2015)  

162,211

 

159,555

 
Total liabilities and equity $ 289,174 $ 307,873
 
 
CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

           
Three Months Ended

July 31,

Fiscal Year Ended

July 31,

2015     2014 2015 2014
Net cash provided by (used in)

operating activities

$

14,670

$

2,209

$

23,911

$

(642

)

 
Depreciation and amortization $ 3,081 $ 3,092 $ 12,204 $ 13,229  
 
Cash paid for capital expenditures $ 2,702 $ 1,174 $ 8,723 $ 7,188  
 

Note: Amounts may not sum due to rounding.

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