Nov 17, 2017   SOURCE: BusinessWire

Webco Industries, Inc. Reports Fiscal 2018 First Quarter Results

Webco Industries, Inc. (OTC: WEBC) today reported results for our first quarter of fiscal year 2018, ended October 31, 2017.

For our first quarter of fiscal year 2018, we generated net income of $3.0 million, or $3.31 per diluted share, compared to a net income of $0.7 million, or $0.86 per diluted share, for the first quarter in fiscal 2017. Net sales for the first quarter of fiscal 2018 were $114.3 million, a 29.4 percent increase from the $88.3 million of sales in last year’s first quarter. The current quarter includes a $0.2 million non-cash gain related to our interest swap contract, whereas the prior year first quarter includes a $0.5 million non-cash gain related to the interest swap contract.

In the first quarter of fiscal year 2018, we generated income from operations of $5.7 million, after depreciation of $3.0 million. The first fiscal quarter of the prior year generated income from operations of $1.5 million, after depreciation amounting to $2.8 million. Gross profit for the first quarter of fiscal 2018 was $13.9 million, or 12.2 percent of net sales, compared to $7.9 million, or 9.0 percent of net sales, for the first quarter of fiscal 2017.

Dana S. Weber, Chief Executive Officer, commented, “Results have improved over the prior year’s quarter, in large part, due to the hard work and dedication of our engaged workforce. We have experienced pricing and volume improvement resulting from the trade case filed in April 2017 against certain steel tubular products being imported from six named countries. We have been investing in our core strengths, including quality, efficiency, yield improvement and capabilities.”

Selling, general and administrative expenses were $8.1 million in the first quarter of fiscal 2018 and $6.4 million in the first quarter of fiscal 2017. The increase in SG&A reflects increased costs associated with increased business levels, such as company-wide incentive compensation and variable pay programs.

Interest expense was $0.8 million and $0.7 million, respectively, in each of the first quarters of fiscal years 2018 and 2017.

We are party to an arrangement that swaps the variable interest rate for $50 million of our debt to a fixed rate through December 2019. We record the interest swap contract at fair value on our balance sheet and non-cash changes in value are reported as unrealized gains or losses on interest contracts. The non-cash income and charges from adjusting the interest swap contract value to market value create volatility in our income statement; however, they have no bearing on cash flow for the quarter because the actual monthly cash swap payments are reflected in interest expense, and therefore earnings.

At October 31, 2017, we had $6.3 million in cash, in addition to $29.1 million of available borrowing under our senior revolving credit facility, which had $67.5 million drawn. The amended revolver continues to have a $120 million cap with availability primarily subject to advance rates on eligible accounts receivable and inventories.

Capital expenditures incurred amounted to $1.9 million in the first fiscal quarter. Our first quarter fiscal 2018 capital investments were largely focused on improving our efficiencies, yields, quality and capabilities.

Webco’s mission is to create a vibrant company for the ages. We leverage on core values of trust and teamwork, continuously building strength, agility and innovation. We focus on practices that are in support of our brand, such that we are 100% engaged every day to build a forever kind of company for our teammates, customers, business partners and community. We manufacture and distribute high-quality carbon steel, stainless steel and other metal tubular products designed to industry and customer specifications. We have five tube production facilities in Oklahoma and Pennsylvania and six value-added 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," “available,” "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, reduced oil prices, competition from foreign imports, including any impacts associated with dumping or the strength of the U.S. dollar, changes in manufacturing technology, banking environment, including availability of adequate financing, monetary policy, changes in tax rates and regulation, raw material costs and availability, appraised values of inventories which can impact available borrowing under the Company’s credit facility, 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, and insurance costs and availability. The Company assumes no obligation to update publicly such forward-looking statements.

 
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

  Three Months Ended

October 31,

2017       2016  
 
Net sales $ 114,270 $ 88,341
Cost of sales 100,380     80,431  

Gross profit

13,889

7,910

Selling, general & administrative 8,149     6,406  

Income (loss) from operations

5,740

1,504

Interest expense 782 677
(Gain) loss on interest contracts (243 )   (458 )

Income (loss) before income taxes

5,201

1,284

Income tax expense (benefit) 2,158     569  
 
Net income (loss) $ 3,044   $ 715  
 
 
Net income (loss) per common share:
Basic $ 3.74   $ 0.88  
Diluted $ 3.31   $ 0.86  
 
 
Weighted average common shares outstanding:
Basic 815,000     812,900  
Diluted 919,100     827,700  
 

Note: Amounts may not sum due to rounding.

 
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands, except par value)

(Unaudited)

 

October 31,
2017

 

July 31,
2017

 
Cash $ 6,323 $ 7,189
Accounts receivable, net 54,662 52,988
Inventories, net 130,685 124,533
Other current assets   5,880   5,491
Total current assets 197,550 190,202
 
Property, plant and equipment, net 96,058 97,208
Other long-term assets   4,586   4,750
 
Total assets $ 298,194 $ 292,159
 
Other current liabilities $ 35,386 $ 31,355
Current portion of long-term debt   67,027   67,876
Total current liabilities 102,412 99,232
 
Long-term debt 12,000 12,000
Deferred income tax liability 12,293 12,772
 
Total equity (889,600 common shares, par value $0.01, outstanding at October 31, 2017)  

171,489

 

168,156

 
Total liabilities and equity $ 298,194 $ 292,159
 
CASH FLOW DATA
(Dollars in thousands)
(Unaudited)
 

Three Months Ended
October 31,

  2017     2016  
Net cash provided by

(used in) operating activities

$

2,466

$

(1,559

)

 
Depreciation and amortization $ 3,085 $ 2,932  
 
Cash paid for capital expenditures $ 2,494 $ 2,299  
 

Note: Amounts may not sum due to rounding.