Webco Industries, Inc. (WEBC: OTC Pink Limited) | Webco Industries, Inc. Reports Fiscal 2017 First Quarter Results

OTC

Webco Industries, Inc. Reports Fiscal 2017 First Quarter Results

Dec 07, 2016

OTC Disclosure News Service

Webco Industries, Inc. (OTC: WEBC) today reported results for our first
quarter of fiscal year 2017, ended October 31, 2016.

For our first quarter of fiscal year 2017, we generated net income of
$0.7 million, or $0.86 per diluted share, compared to a net loss of $1.2
million, or a loss of $1.47 per diluted share, for the first quarter in
fiscal 2016. Net sales for the first quarter of fiscal 2017 were $88.3
million, a 4.3 percent decrease from the $92.3 million of sales in last
year’s first quarter. The current quarter includes a non-cash gain of
$0.5 million related to our interest swap contract, whereas the prior
year first quarter includes a $0.4 million non-cash loss related to the
interest swap contract.

In the first quarter of fiscal year 2017, we generated income from
operations of $1.5 million, after depreciation of $2.8 million. The
first fiscal quarter of the prior year generated a loss from operations
of $0.9 million, after depreciation amounting to $3.0 million. Gross
profit for the first quarter of fiscal 2017 was $7.9 million, or 9.0
percent of net sales, compared to $5.0 million, or 5.4 percent of net
sales, for the first quarter of fiscal 2016.

Dana S. Weber, Chief Executive Officer, commented, “We did better this
quarter, much as a result of not having to deal with high cost steel in
this lower demand environment. Volumes are still low and the industrial
and energy-related economies are sluggish at best. The steel industry,
for a number of micro and macro reasons, continues to have cost
volatility for both stainless and carbon steel. Most tubing
manufacturers continue to struggle in light of low oil prices, commodity
volatility, a strong U.S. dollar, foreign competition and general
lackluster demand. Expense and working capital management continue to be
priorities in this lower demand environment. We continue to invest in
our core strengths, including quality, efficiency, yield improvement and
capabilities.”

Selling, general and administrative expenses were $6.4 million in the
first quarter of fiscal 2017 and $5.8 million in the first quarter of
fiscal 2016. Interest expense was $0.7 million in each of the first
quarters of fiscal year 2017 and 2016.

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, 2016, we had $8.4 million in cash in addition to $26.4
million of available borrowing under our senior revolving credit
facility, which had $47.3 million drawn. The revolver has a $120 million
cap with availability subject to advance rates on eligible accounts
receivable and inventories.

Capital expenditures incurred amounted to $3.7 million in the first
fiscal quarter of fiscal 2017. Our fiscal 2017 capital investments are
focused on improving efficiencies, yields, quality and capabilities. The
first quarter fiscal 2017 adoption of a change in balance sheet
presentation of deferred taxes has resulted in current deferred tax
assets being netted against long-term deferred income tax liabilities,
and presented as a single element on our balance sheet; however, since
we changed for future presentation only, our July 31, 2016, balance
sheet was not changed.

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. Our tubing products consist
primarily of pressure tubing, including heat exchanger and boiler
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. 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
imports, including any impacts associated with 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,

2016

 

 

 

2015

 

 

Net sales

$ 88,341

$

92,281

Cost of sales

80,431

 

 

87,320

 

Gross profit

7,910

4,961

Selling, general administrative

6,406

 

 

5,821

 

Income (loss) from operations

1,504

(860

)

Interest expense

677

712

(Gain) loss on interest contracts

(458

)

 

374

 

Income (loss) before income taxes

1,284

(1,947

)

Income tax expense (benefit)

569

 

 

(755

)

 

Net income (loss)

$ 715

 

$

(1,191

)

 

 

Net income (loss) per common share:

Basic

$ 0.88

 

$

(1.47

)

Diluted

$ 0.86

 

$

(1.47

)

 

 

Weighted average common shares outstanding:

Basic

812,900

 

 

807,700

 

Diluted

827,700

 

 

807,700

 

 

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,
2016

 

July 31,
2016

 

Cash

$

8,354

$

6,261

Accounts receivable, net

39,701

39,871

Inventories, net

116,956

113,354

Other current assets

 

1,676

 

9,804

Total current assets

166,686

169,289

 

Property, plant and equipment, net

93,189

92,575

Other long-term assets

 

1,490

 

1,299

 

Total assets

$

261,365

$

263,164

 

Other current liabilities

$

29,157

$

30,166

Current portion of long-term debt

 

50,190

 

43,367

Total current liabilities

79,347

73,533

 

Long-term debt

12,000

12,000

Deferred income tax liability

8,310

17,009

 

Total equity (812,900 common shares, par value $0.01, outstanding at
October 31, 2016)

 

161,709

 

160,622

 

Total liabilities and equity

$

261,365

$

263,164

 

CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

 

Three Months Ended
October 31,

 

2016

 

 

 

2015

Net cash provided by (used in) operating activities

$

(1,559

)

$

10,269

 

Depreciation and amortization

$

2,932

 

$

2,994

 

Cash paid for capital expenditures

$

2,299

 

$

2,809

 

Note: Amounts may not sum due to rounding.

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