Sand Springs, OK - Webco Industries, Inc. 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.