Webco Industries, Inc. Reports Fiscal 2017 First Quarter Results

SAND SPRINGS, Okla.--(BUSINESS WIRE)--

Webco Industries, Inc. 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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