Webco Industries, Inc. reported net income of $2,106,000 on net sales of $82.4 million for its fiscal 2007 third quarter, and net income of $5,678,000 on net sales of $250.9 million for the nine months ended April 30, 2007.
Third Quarter Results—The $2,106,000 net income ($2.78 per diluted share) compares to net income of $1,298,000 ($1.72 per diluted share) for the same quarter in fiscal 2006. Net sales of $82.4 million, a 12.0% increase over the $73.5 million in last year’s third quarter. Current earnings reflect the benefit of higher sales volumes compared to the prior year’s third quarter. Earnings were reduced by a fixed-asset impairment charge of $244,000, before taxes, related to machinery and a bad debt charge of $308,000.
Gross profit was $8.8 million (10.6% of net sales) compared to gross profit of $6.7 million (9.1% of net sales) for the third quarter of fiscal 2006. Selling, general and administrative expenses were $4.4 million, compared to $3.5 million in the third quarter of fiscal 2006. SG&A costs were higher due to equipment impairment, bad debt charges, and higher employee profit sharing and bonuses related to higher profitability.
Interest expense grew to $1.2 million from $1.1 million in the prior year’s third quarter.
Nine-Month Results—Net income was $5,678,000 ($7.49 per diluted share), which compares to net income of $3,633,000 ($4.80 per diluted share) for the same period in fiscal 2006. Net sales were $250.9 million, a 12.9% increase over the $222.3 million in sales for the same nine-month period of last year. Current earnings were impacted by $1,958,000 in pretax inventory, bad debt and equipment impairment charges.
Gross profit was $25.5 million (10.2% of net sales) compared to $19.6 million (8.8% of net sales) in the same nine-month period in 2006. Gross profit for the current year reflects higher volumes and slightly improved market conditions over the compared prior fiscal periods.
Selling, general and administrative costs increased to $13.2 million, from the $11.0 million reported for the same nine-month period in 2006. SG&A costs were higher due to equipment impairment, bad debt charges, and higher employee profit sharing and bonuses related to higher profitability.
Interest expense was $3.4 million, which compares to interest expense of $3.0 million for the first nine months of fiscal 2006. The company’s debt has expanded to facilitate higher working capital required to support current sales levels.
Management Comments—“Our biggest concern going forward is the health of the industrial economy,” said F. William Weber, Webco’s Chairman and CEO. “Steel and other metal prices have continued to be volatile. While our business can certainly be impacted by rapid changes in the cost of steel, we believe we can perform well as long as the industrial economy remains strong. We are focusing on more efficient production methods and achieving higher sales volumes. We continue to aggressively pursue our long-term strategy of utilizing our investments in manufacturing and information technology within niche markets to obtain the best margins possible.”
Capital spending amounted to $2.0 million for the third quarter of fiscal 2007, bringing the total to $3.8 for the first nine months. Capital spending for fiscal year 2007 is expected to be in the range of $6.0 million to $7.0 million.
Webco is a processor 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 three production facilities in Oklahoma and Pennsylvania and five value-added distribution facilities in Oklahoma, Texas, Illinois, and Michigan, serving more than 1000 customers throughout North America.