Webco Industries, Inc. Reports Fiscal 2014 Fourth Quarter Results

Webco Industries, Inc. (OTC: WEBC) today reported results for its fiscal 2014 fourth quarter and fiscal year ended July 31, 2014.

For its fiscal 2014 fourth quarter, the Company reported net income of $0.8 million, or $0.99 per diluted share, compared to net income of $1.7 million, or $2.15 per diluted share, for the fourth quarter in fiscal 2013. Net sales for the fourth quarter of fiscal 2014 were $107.0 million, a 6.6 percent increase over the $100.4 million of sales in last year’s fourth quarter. The current quarter includes a $0.3 million non-cash gain related to the Company’s interest swap contract, whereas the prior year fourth quarter includes a $2.0 million non-cash gain related to the interest swap contract. In addition, other non-cash charges increased $0.3 million to $0.6 million from the fourth quarter of fiscal 2013 to the fourth quarter of fiscal 2014.

For fiscal year 2014, the Company generated a net income of $0.4 million, or $0.52 per diluted share, compared to net income of $5.8 million, or $7.28 per diluted share, for fiscal year 2013. Net sales for fiscal year 2014 amounted to $409.5 million, a 1.0 percent decrease from last fiscal year’s sales of $413.7 million. Results for fiscal year 2014 include a $0.3 million non-cash gain related to the interest swap contract, whereas the prior fiscal year contained a $1.6 million non-cash gain on the contract. There were impairment charges on manufacturing equipment of $2.0 million and $1.7 million included in the results for fiscal years 2014 and 2013, respectively. Other non-cash charges increased from $0.9 million in fiscal year 2013 to $1.7 million in fiscal year 2014.

In the fourth quarter of fiscal year 2014, the Company generated income from operations of $2.0 million, including depreciation of $3.1 million. Income from operations in the fourth fiscal quarter of the prior year was $1.7 million, with depreciation amounting to $3.5 million. Gross profit for the fourth quarter of fiscal 2014 was $8.2 million, or 7.7 percent of net sales, compared to $6.9 million, or 6.9 percent of net sales, for the fourth quarter of fiscal 2013.

Income from operations for fiscal year 2014 was $4.2 million, after depreciation expense of $12.8 million, while income from operations for fiscal year 2013 was $11.2 million, after depreciation expense of $13.6 million. Gross profit for fiscal year 2014 was $27.7 million, or 6.8 percent of net sales, compared to $33.3 million, or 8.1 percent of net sales in fiscal year 2013. The previously mentioned non-cash impairment charges of $2.0 million and $1.7 million, respectively, are reflected in gross profit for fiscal year 2014 and 2013, respectively, and all previously mentioned non-cash charges are reflected in the operating income of the respective fiscal years.

Dana S. Weber, Chief Executive Officer, commented, “We continue to make progress in an environment that is 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. 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 fourth quarter of fiscal 2014 were $6.2 million, increasing from $5.2 million in the fourth quarter of fiscal 2013. Selling, general and administrative charges were $23.5 million in fiscal year 2014, increasing from $22.1 million for fiscal year 2013.

Interest expense was $0.9 million and $1.0 million in the fiscal 2014 and fiscal 2013 fourth quarter, respectively. Interest expense amounted to $3.8 million for fiscal year 2014 and $3.9 million for fiscal year 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 $1.0 million in the fourth fiscal quarter ended July 31, 2014 and amounted to $7.3 million for fiscal year 2014.

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 EndedJuly 31,

Fiscal Year EndedJuly 31,

2014 2013 2014 2013 Net sales $ 107,036 $ 100,421 $ 409,484 $ 413,699 Cost of sales 98,831 93,478 381,787 380,380 Gross profit 8,205 6,944 27,696 33,319 Selling, general & administrative 6,235 5,234 23,518 22,138 Income from operations 1,969 1,710 4,178 11,182 Interest expense 914 1,010 3,826 3,892 Unrealized (gain) loss on interest contracts (255 ) (1,985 ) (328 ) (1,631 )

Income (loss) before income taxes

1,310

2,685

679

8,921

Income tax expense (benefit) 510 968 268 3,168 Net income (loss) $ 800 $ 1,717 $ 412 $ 5,753

Net income (loss) per common share: Basic $ 1.00 $ 2.17 $ 0.52 $ 7.38 Diluted $ 0.99 $ 2.15 $ 0.52 $ 7.28 Weighted average common shares outstanding: Basic 799,000 790,000 792,000 779,000 Diluted 805,000 800,000 799,000 790,000

Note: Amounts may not sum due to rounding.

WEBCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands)

(Unaudited)

July 31,2014

July 31,2013

Cash $ 4,793 $ 7,181 Accounts receivable, net 44,100 38,297 Inventories, net 153,071 153,675 Other current assets 8,131 9,843 Total current assets 210,095 208,995 Net property, plant and equipment 95,904 103,006 Other long-term assets 1,874 1,719 Total assets $ 307,873 $ 313,721 Other current liabilities $ 36,550 $ 45,227 Current portion of long-term debt 81,405 78,565 Total current liabilities 117,955 123,792 Long-term debt 12,000 12,000 Deferred income tax liability 18,363 20,142 Total equity 159,555 157,786 Total liabilities and equity $ 307,873 $ 313,721 CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

Three Months EndedJuly 31,

Fiscal Year EndedJuly 31,

2014 2013 2014 2013 Net cash provided by (used in)

operating activities

2,209

1,303

(642

)

30,533

Depreciation and amortization $ 3,092 $ 3,682 $ 13,229 $ 14,245 Cash paid for capital expenditures $ 1,174 $ 753 $ 7,188 $ 8,041