Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2011 second quarter, which ended January 31, 2011.
For its fiscal 2011 second quarter, the Company reported net income of $5,225,000, or $6.75 per diluted share, compared to net income of $124,000, or $0.16 per diluted share, for the same quarter in fiscal 2010. Net sales for the second quarter of fiscal 2011 were $111.9 million, a 73.6 percent increase from the $64.5 million of sales in last year's second quarter. The current quarter results reflect a $1.4 million non-cash pre-tax gain related to interest rate swap contracts, whereas the prior year same quarter included a $0.2 million pre-tax loss on the contracts. The improvement in current quarter results reflects an improved business environment, along with significant productivity gains. In addition to suffering through lower sales volumes, the prior year quarter was burdened by high cost inventories and sales prices which were based on lower replacement cost steel.
For the first six months of fiscal year 2011, the Company generated net income of $11,376,000, or $14.73 per diluted share, compared to net income of $626,000, or $0.82 per diluted share, for the same period in fiscal 2010. Net sales for the first six months of the current year amounted to $215.2 million, a 62.4 percent increase over the $132.5 million in sales for the same six-month period of last year. Results for the first six months of the current year reflect a $1.1 million non-cash pre-tax gain related to interest rate swap contracts, whereas the prior year's same period included a $0.9 million pre-tax loss on the contracts. The first six months of the prior year reflected the same low sales volume and pricing conditions as the prior year first quarter.
F. William Weber, Webco's Chairman, commented, "Our facilities are operating at a high level of productivity, thanks to the efforts of our management and employees. We continue to pursue organic growth through strategic investments in manufacturing and information technology. Our current investments support our long-term niche strategy."
Mr. Weber further commented, "I am pleased to announce that our Board of Directors has appointed our current President and Chief Operating Officer, Dana Weber, to be Chief Executive Officer and President. Additionally, we promoted David E. Boyer, to Chief Operating Officer. Both of these promotions reflect the tireless efforts and undying commitment of these individuals to Webco's success. While I have relinquished the role of CEO to Dana, I will continue to serve as the Chairman of the Board of Directors and be involved on a daily basis."
Gross profit for the second quarter of fiscal 2011 was $16.4 million, or 14.6 percent of net sales, compared to $5.6 million, or 8.8 percent of net sales, for the second quarter of fiscal 2010. Gross profit for the first six months of fiscal 2011 was $32.1 million, or 14.9 percent of net sales, compared to $11.8 million, or 8.9 percent of net sales, in the same six-month period in 2010. The current year quarter and first six-month gross profit percentages increased from the comparable prior year periods because of the impacts of selling high cost inventories on those prior year periods.
Selling, general and administrative expenses in the second quarter of fiscal 2011 were $8.0 million, compared to $4.3 million in the second quarter of the prior year. SG&A costs in the first six-months of fiscal 2011 increased to $13.7 million, from the $8.1 million reported for the same six-month period in 2010. SG&A expense in the current fiscal year periods are higher than the same periods in the prior year due to a $1.0 million bad debt charge during the current quarter and because improved results increased company-wide incentive compensation. In addition, prior period short-term cost reduction strategies have given way to longer term management objectives.
Interest expense was $1.0 million in the current year second quarter and $0.9 million in prior year second quarter. Interest expense totaled $2.0 million in the first six-month period in fiscal 2011 and $1.9 million in the comparable period in fiscal 2010. The Company is party to arrangements that swap the variable interest rate for $75 million of the Company's debt to a fixed rate through September 2013. Monthly swap settlements are included in interest expense. The Company records interest rate swap contracts at fair value and non-cash changes in value are reported as unrealized gains or losses on interest contracts.
Capital expenditures incurred amounted to $4.3 million for the second quarter and $7.6 million for the first six months of fiscal 2011. The Company is pursuing plans for expansion that would broaden its technical capabilities, enhance quality and increase capacity for carbon steel tubing. The Company is pursuing financing that would enable it to undertake such an expansion, as well as provide funds for additional working capital that would be required. Excluding spending related to possible expansion, capital spending in fiscal 2011 is expected to be between $11 million and $13 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 five 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 the continuing global recession and 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) | ||||||||||||||||||
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 | Three Months Ended January 31, |  |  |  | Six Months Ended January 31, | |||||||||||||
2011 | Â | Â | 2010 | 2011 | Â | Â | 2010 | |||||||||||
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Net sales | $ | 111,894 | $ | 64,455 | $ | 215,240 | $ | 132,486 | ||||||||||
Cost of sales | Â | 95,507 | Â | Â | 58,808 | Â | 183,111 | Â | Â | 120,653 | ||||||||
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Gross profit | 16,387 | 5,647 | 32,129 | 11,833 | ||||||||||||||
Selling, general & administrative | Â | 7,957 | Â | Â | 4,289 | Â | 13,724 | Â | Â | 8,094 | ||||||||
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Income from operations | 8,430 | 1,358 | 18,405 | 3,739 | ||||||||||||||
Interest expense | 1,032 | 938 | 2,024 | 1,898 | ||||||||||||||
Unrealized (gain) loss on interest contracts | Â | (1,437 | ) | Â | 157 | Â | (1,062 | ) | Â | 852 | ||||||||
Income before income taxes | 8,835 | 263 | 17,443 | 989 | ||||||||||||||
Income tax expense | Â | 3,610 | Â | Â | 139 | Â | 6,067 | Â | Â | 363 | ||||||||
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Net income | $ | 5,225 | Â | $ | 124 | $ | 11,376 | Â | $ | 626 | ||||||||
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Net income per common share: | ||||||||||||||||||
Basic | $ | 6.81 | Â | $ | 0.16 | $ | 14.82 | Â | $ | 0.82 | ||||||||
Diluted | $ | 6.75 | Â | $ | 0.16 | $ | 14.73 | Â | $ | 0.82 | ||||||||
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Weighted average common shares outstanding: | ||||||||||||||||||
Basic | Â | 767,000 | Â | Â | 765,000 | Â | 768,000 | Â | Â | 764,000 | ||||||||
Diluted | Â | 773,000 | Â | Â | 766,000 | Â | 772,000 | Â | Â | 765,000 | ||||||||
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WEBCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Dollars in thousands) (Unaudited) | |||||||
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January 31, 2011 | July 31, 2010 | ||||||
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Accounts receivable, net | $ | 54,922 | $ | 41,310 | |||
Inventories, net | 108,382 | 116,631 | |||||
Other current assets | Â | 17,591 | Â | 7,952 | |||
Total current assets | 180,895 | 165,893 | |||||
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Net property, plant and equipment | 68,785 | 65,594 | |||||
Other long-term assets | Â | 7,527 | Â | 7,301 | |||
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Total assets | $ | 257,207 | $ | 238,788 | |||
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Other current liabilities | $ | 44,982 | $ | 42,836 | |||
Current portion of long-term debt | Â | 68,221 | Â | 63,903 | |||
Total current liabilities | 113,203 | 106,739 | |||||
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Long-term debt | 8,750 | 8,750 | |||||
Deferred income tax liability | 11,618 | 11,117 | |||||
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Total equity | Â | 123,636 | Â | 112,182 | |||
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Total liabilities and equity | $ | 257,207 | $ | 238,788 | |||
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CASH FLOW DATA (Dollars in thousands) (Unaudited) | |||||||||||||||||
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Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||
2011 | Â | Â | 2010 | 2011 | 2010 | ||||||||||||
Net cash provided by (used in) operating activities | $ | 17,109 | $ | (4,144 | ) | $ | 16,359 | $ | 1,898 | ||||||||
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Depreciation and amortization | $ | 2,166 | $ | 1,972 | Â | $ | 4,217 | $ | 3,953 | ||||||||
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Cash paid for capital expenditures | $ | 4,711 | $ | 2,072 | Â | $ | 7,797 | $ | 2,406 |
Contacts:
Webco Industries, Inc.
Mike Howard, 918-241-1094
Chief
Financial Officer