Webco Industries, Inc. Reports Fiscal 2014 Third Quarter Results

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2014 third quarter ended April 30, 2014.

For its fiscal 2014 third quarter, the Company reported a net income of $0.3 million, or $0.37 per diluted share, compared to net income of $1.0 million, or $1.33 per diluted share, for the third quarter in fiscal 2013. Net sales for the third quarter of fiscal 2014 were $106.8 million, a 9.3 percent increase over the $97.8 million of sales in last year’s third quarter. The current quarter includes a $0.3 million non-cash gain related to the Company’s interest swap contract, whereas the prior year third quarter includes a $0.7 million non-cash loss related to the interest swap contract.

For the first nine months of fiscal year 2014, the Company generated a net loss of $0.4 million, or a loss of $0.49 per diluted share, compared to net income of $4.0 million, or $5.13 per diluted share, for the same period in fiscal 2013. Net sales for the first nine months of the current year amounted to $302.4 million, a 3.5 percent decrease from the $313.3 million in sales for the same nine-month period of last year. Results for the first nine months of the current year include a $0.1 million non-cash gain related to the interest swap contract, whereas the prior year same nine-month period contained a $0.4 million non-cash loss on the contract. There were impairment charges on manufacturing equipment of $1.5 million and $1.1 million included in the results for the first nine months of fiscal years 2014 and 2013, respectively.

In the third quarter of fiscal year 2014, the Company generated income from operations of $1.1 million, including depreciation of $3.0 million. Income from operations in the third quarter of the prior year was $3.2 million, with depreciation amounting to $3.4 million. Gross profit for the third quarter of fiscal 2014 was $6.9 million, or 6.5 percent of net sales, compared to $8.4 million, or 8.6 percent of net sales, for the third quarter of fiscal 2013.

Income from operations for the first nine months of fiscal year 2014 was $2.2 million, after depreciation expense of $9.8 million, while income from operations for the same period in fiscal 2013 was $9.5 million, after depreciation expense of $10.1 million. Gross profit for the first nine months of fiscal 2014 was $19.5 million, or 6.4 percent of net sales, compared to $26.4 million, or 8.4 percent of net sales for the same period in fiscal year 2013. The first nine months of fiscal 2014 and fiscal 2013 include non-cash impairment charges on manufacturing equipment of $1.5 and $1.1 million, respectively.

Dana S. Weber, Chief Executive Officer, commented, “The increases in sales we have generally experienced since the first quarter of fiscal year 2013, have been accomplished through hard work and improved productivity in an environment that continues to be burdened with lower demand, less favorable product mix and weak spot market pricing. We are having success adding incremental business, but the industrial economy in general is challenging, exacerbated by the accelerating cost and complexity of regulations and legislation. We continue to anticipate the return of more favorable business conditions as we continue 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 third quarter of fiscal 2014 were $5.8 million, increasing from $5.2 million in the third quarter of fiscal 2013. Selling, general and administrative charges were $17.3 million in the first nine months of the current fiscal year, also increased from $16.9 million in the same period of fiscal 2013.

Interest expense was $0.9 million in each of fiscal 2014’s and fiscal 2013’s third quarter. Interest expense was $2.9 million in each of fiscal 2014 and fiscal 2013. 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 $2.2 million in the third fiscal quarter ended April 30, 2014 and amounted to $6.2 million for the nine months then ended. Capital spending for fiscal year 2014 is expected to be in the range of $8.5 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 Nine Months Ended April 30, April 30, 2014 2013 2014 2013 Net sales $ 106,846 $ 97,758 $ 302,448 $ 313,277 Cost of sales 99,951 89,335 282,956 286,902 Gross profit 6,896 8,423 19,492 26,376 Selling, general & administrative 5,783 5,195 17,283 16,904 Income from operations 1,113 3,228 2,209 9,472 Interest expense 891 926 2,912 2,882 Unrealized (gain) loss on interest contracts (279 ) 693 (73 ) 354

Income (loss) before income taxes

501

1,609

(630

)

6,236

Income tax expense (benefit) 208 563 (243 ) 2,200 Net income (loss) $ 293 $ 1,046 $ (388 ) $ 4,036

Net income (loss) per common share: Basic $ 0.37 $ 1.34 $ (0.49 ) $ 5.20 Diluted $ 0.37 $ 1.33 $ (0.49 ) $ 5.13 Weighted average common shares outstanding: Basic 790,100 778,200 789,700 775,600 Diluted 797,600 788,200 789,700 786,400

Note: Amounts may not sum due to rounding.

WEBCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

April 30, July 31, 2014 2013 Cash $ 5,860 $ 7,181 Accounts receivable, net 43,640 38,297 Inventories, net 161,422 153,675 Other current assets 10,223 9,843 Total current assets 221,145 208,995 Net property, plant and equipment 97,934 103,006 Other long-term assets 1,742 1,719 Total assets $ 320,820 $ 313,721 Other current liabilities $ 49,153 $ 45,227 Current portion of long-term debt 82,729 78,565 Total current liabilities 131,882 123,792 Long-term debt 12,000 12,000 Deferred income tax liability 18,639 20,142 Total equity 158,300 157,786 Total liabilities and equity $ 320,820 $ 313,721 CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

Three Months Ended Nine Months Ended April 30, April 30, 2014 2013 2014 2013 Net cash provided by (used in)

operating activities

(2,966

)

(1,312

)

(2,852

)

29,230

Depreciation and amortization $ 3,082 $ 3,512 $ 10,137 $ 10,563 Cash paid for capital expenditures $ 2,095 $ 1,209 $ 6,015 $ 7,288