Webco Industries, Inc. Reports Fiscal 2014 First Quarter Results

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2014 first quarter ended October 31, 2013.

For its fiscal 2014 first quarter, the Company reported a net loss of $0.8 million, or $1.02 per diluted share, compared to net income of $1.7 million, or $2.19 per diluted share, for the first quarter in fiscal 2013. Net sales for the first quarter of fiscal 2014 were $102.4 million, a 12.0 percent decrease from the $116.4 million of sales in last year’s first quarter. The current quarter results include a $0.5 million non-cash loss related to the Company’s interest swap contract, whereas the prior year first quarter includes a $0.2 million non-cash loss related to the interest swap contract.

In the first quarter of fiscal year 2014, the Company generated income from operations of $0.3 million, including depreciation of $3.6 million. Income from operations in the first quarter of the prior year was $3.8 million, while depreciation amounted to $3.4 million. Gross profit for the first quarter of fiscal 2014 was $5.9 million, or 5.7 percent of net sales, compared to $9.9 million, or 8.5 percent of net sales, for the first quarter of fiscal 2013.

Dana S. Weber, Chief Executive Officer, commented, “The greatest factors affecting the quarterly comparisons continue to be lower volume, less favorable product mix and weak spot market pricing. We are having success adding incremental business, but the industrial economy in general is challenging and competitive. We hope for the return of more favorable business conditions into calendar year 2014. Because of the magnitude of our depreciation we are generating cash flow well in excess of debt service, enabling us to continue investing in efficiencies and long-term organic growth.”

Selling, general and administrative expenses in the first quarter of fiscal 2014 decreased to $5.6 million from $6.0 million in the first quarter of the prior year.

Interest expense was $1.0 million in each of fiscal 2014’s and fiscal 2013’s first quarter. The Company is party to an arrangement that swaps the variable interest rate for $75 million of the Company’s debt to a fixed rate through December 2017. The Company records the interest swap contract at fair value and non-cash changes in value are reported in Gains or Losses on Interest Contracts. Monthly swap settlements are included in interest expense.

Capital expenditures incurred amounted to $2.1 million in the first fiscal quarter ended October 31, 2013. Capital spending for fiscal year 2014 is expected to be in the range of $8 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 seven 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 any global economic downturn or disruptions in the global credit markets, competition from imports, changes in manufacturing technology, banking environment, including availability of adequate financing, monetary policy, tax rates and regulation, raw material costs and availability, industry capacity, domestic competition, loss of 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, 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

October 31,

2013 2012 Net sales $ 102,371 $ 116,394 Cost of sales 96,503 106,500

Gross profit

5,868

9,894

Selling, general & administrative 5,550 6,045

Income from operations

318

3,848

Interest expense 1,018 978 (Gain) loss on interest contracts 535 154

Income (loss) before income taxes

(1,236

)

2,716

Income tax expense (benefit) (433 ) 1,004 Net income (loss) $ (803 ) $ 1,712 Net income (loss) per common share: Basic

$

(1.02

)

$ 2.22 Diluted

$

(1.02

)

$ 2.19 Weighted average common shares outstanding: Basic 790,000 770,000 Diluted 790,000 782,000

Note: Amounts may not sum due to rounding.

WEBCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

October 31,

2013

July 31,

2013

Cash $ 6,377 $ 7,181 Accounts receivable, net 39,357 38,297 Inventories, net 153,593 153,675 Other current assets 10,249 9,843 Total current assets 209,576 208,995 Net property, plant and equipment 101,591 103,006 Other long-term assets 1,832 1,719 Total assets $ 312,998 $ 313,721 Other current liabilities $ 38,700 $ 45,227 Current portion of long-term debt 85,770 78,565 Total current liabilities 124,470 123,792 Long-term debt 12,000 12,000 Deferred income tax liability 19,362 20,142 Total equity 157,167 157,786 Total liabilities and equity $ 312,998 $ 313,721 CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

Three Months Ended

October 31,

2013 2012 Net cash provided by

(used in) operating activities

$

(7,053

)

$

4,427

Depreciation and amortization $ 3,630 $ 3,401 Cash paid for capital expenditures $ 1,701 $ 3,886