WEBCO INDUSTRIES, INC. REPORTS FISCAL 2024 SECOND QUARTER RESULTS

Rhea-AI Summary

Webco Industries, Inc. reported a decrease in net income and net sales for the second quarter of fiscal year 2024 compared to the same period in 2023. The company highlighted challenges such as inventory destocking, economic slowdown, and competition from foreign imports. Despite maintaining a strong balance sheet and liquidity, Webco's financial performance has been impacted by lower profitability, increased expenses, and reduced gross profit margins. The company's stock repurchase program and ongoing investments aim to enhance long-term growth.

Positive

• Webco Industries reported a net income of $0.3 million in the second quarter of fiscal year 2024, a significant decrease from $3.5 million in the same period of 2023.
• Net sales for the second quarter of fiscal year 2024 were $146.0 million, down by 15.8% from $173.4 million in the second quarter of fiscal year 2023.
• The company's income from operations and gross profit margins also declined in the second quarter of fiscal year 2024 compared to the prior year.
• Webco highlighted challenges such as inventory destocking, economic slowdown, and competition from foreign imports affecting its financial performance.
• Despite facing these challenges, Webco maintains a strong balance sheet with $78.3 million in total cash, short-term investments, and available credit.
• The company's stock repurchase program allows for the purchase of outstanding common stock, with a new limit of up to $40 million extended until July 31, 2026.
• Webco's ongoing investments include the construction of the F. William Weber Leadership Campus to enhance the company's brand and technical capabilities.
• Webco's mission focuses on building a vibrant company with core values of trust, teamwork, and innovation to support its employees, customers, partners, investors, and community.
• The company provides high-quality metal tubing products to global customers from its production and value-added facilities in multiple states.

Negative

• Decreased net income and net sales for the second quarter of fiscal year 2024 compared to the same period in 2023.
• Lower profitability and reduced gross profit margins in the second quarter of fiscal year 2024.
• Challenges such as inventory destocking, economic slowdown, and competition from foreign imports impacting financial performance.
• Increased selling, general, and administrative expenses due to inflation in wages and other costs.
• Reduction in interest expense primarily due to lower average debt balances.
• Asset-based debt agreements like the revolver classified as a current liability despite maturity in fiscal year 2028.

SAND SPRINGS, Okla., March 5, 2024 /PRNewswire/ -- Webco Industries, Inc. (OTC: WEBC) today reported results for our second quarter of fiscal year 2024, which ended January 31, 2024.

For our second quarter of fiscal year 2024, we had a net income of $0.3 million, or $0.42 per diluted share, while in our second quarter of fiscal year 2023, we had net income of $3.5 million, or $4.43 per diluted share.  Net sales for the second quarter of fiscal 2024 were $146.0 million, a 15.8 percent decrease from the $173.4 million of sales in the second quarter of fiscal year 2023. 

For the first six months of fiscal year 2024, we generated a net income of $5.4 million, or $6.69 per diluted share, compared to a net income of $11.9 million, or $14.97 per diluted share, for the same period in fiscal year 2023.  Net sales for the first six months of the current year amounted to $303.8 million, a 16.0 percent decrease from the $361.9 million in sales for the same six-month period of last year.

Dana S. Weber, Chief Executive Officer and Board Chair, stated, "The current quarter was impacted by inventory destocking and economic slowdown in various markets we serve, as well as seasonality.  Further, we have certain markets that are being adversely impacted by foreign imports. We continue to focus on positioning Webco for various economic environments and opportunities by maintaining a strong balance sheet and good liquidity and making compelling investments in our business.  Our total cash, short-term investments and available credit on our revolver were $78.3 million at January 31, 2024, which we believe to be a competitive advantage."

In the second quarter of fiscal year 2024, we had income from operations of $1.5 million after depreciation of $3.7 million.  The second fiscal quarter of the prior year generated income from operations of $4.6 million after depreciation of $3.3 million.  Gross profit for the second quarter of fiscal 2024 was $13.0 million, or 8.9 percent of net sales, compared to $15.3 million, or 8.8 percent of net sales, for the second quarter of fiscal year 2023.   

Our income from operations for the first six months of fiscal year 2024 was $9.5 million, after depreciation expense of $7.3 million.  Income from operations in the first six-month period of fiscal year 2023 was $17.0 million, after depreciation expense of $6.5 million.   Gross profit for the first half of fiscal 2024 was $34.6 million, or 11.4 percent of net sales, compared to $41.3 million, or 11.4 percent of net sales for the same period in fiscal year 2023.

Selling, general and administrative expenses were $11.5 million in the second quarter of fiscal 2024 and $10.7 million in the second quarter of fiscal 2023. SG&A expenses were $25.1 million in the first half of fiscal year 2024 and $24.3 million for the first six-month period of fiscal year 2023. Decreases in costs associated with lower profitability, such as company-wide incentive compensation and variable pay programs, have been more than offset by inflation we have experienced in wages and other expenses. 

Interest expense was $1.1 million in the second quarter of fiscal year 2024 and $1.7 million in the same quarter of fiscal year 2023.  Interest expense was $2.3 million and $3.2 million in the first six-month periods of the current and prior fiscal years, respectively.  The reduction in interest expense is primarily a result of lower average debt balances.    

Capital expenditures incurred amounted to $11.3 million in the second quarter of fiscal year 2024 and $21.4 million for the first six months of fiscal year 2024.  Included in our capital spending is ongoing construction of our F. William Weber Leadership Campus, which will house our Tech Center and corporate headquarters.  The Tech Center will be the tip of the spear leading Webco's trusted and technical brand throughout our industry.

As of January 31, 2024, we had $17.8 million in cash and short-term investments, in addition to $60.5 million of available borrowing under our $220 million senior revolving credit facility.  Availability on the revolver, which had $62.7 million drawn at January 31, 2024, was subject to advance rates on eligible accounts receivable and inventories.  Our term loan and revolver mature in September 2027.  Accounting rules require asset-based debt agreements like our revolver to be classified as a current liability, despite its fiscal year 2028 maturity.

Webco's stock repurchase program authorizes the purchase of our outstanding common stock in private or open market transactions.  In September 2023, the Company's Board of Directors refreshed the repurchase program with a new limit of up to $40 million and extended the program's expiration until July 31, 2026.  We purchased less than one thousand shares of our stock during the second quarter of fiscal year 2024.  The number of shares repurchased in the prior fiscal year totaled approximately 4,000 shares.  Webco purchased over 144,000 shares over the course of the four prior fiscal years.   The repurchase plan may be extended, suspended or discontinued at any time, without notice, at the Board's discretion. 

Webco's mission is to continuously build on our strengths as we create a vibrant company for the ages.  We leverage our core values of trust and teamwork, continuously building strength, agility and innovation.  We focus on practices that support our brand such that we are 100% engaged every day to build a forever kind of company for our Trusted Teammates, customers, business partners, investors and community.  We provide high-quality carbon steel, stainless steel and other metal specialty tubing products designed to industry and customer specifications.  We have five tube production facilities in Oklahoma and Pennsylvania and eight value-added facilities in Oklahoma, Illinois, Michigan, Pennsylvania and Texas, serving customers globally.

Risk Factors and Forward-looking statements: Certain statements in this release, including, but not limited to, those preceded by or predicated upon the words "anticipates," "appears," "believes," "estimates," "expects," "forever," "hopes," "intends," "plans," "projects," "pursue," "should," "will," "wishes," or similar words may 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; government policy or low hydrocarbon prices that stifle domestic investment in energy; competition from foreign imports, including any impacts associated with dumping or the strength of the U.S. dollar; political or social environments that are unfriendly to industrial or energy-related businesses; changes in manufacturing technology; banking environment, including availability of adequate financing; worldwide and domestic monetary policy; changes in tax rates and regulation; regulatory and permitting requirements, including, but not limited to, environmental, workforce, healthcare, safety and national security; availability and cost of adequate qualified and competent personnel; changes in import / export tariff or restrictions; volatility in raw material cost and availability for the Company, its customers and vendors; the cost and availability, including time for delivery, of parts and services necessary to maintain equipment essential to the Company's manufacturing activities; the cost and availability of manufacturing supplies, including process gases; volatility in oil, natural gas and power cost and availability;  world-wide or national transition from hydrocarbon sources of energy that adversely impact demand for our products; problems associated with product development efforts; appraised values of inventories that can impact available borrowing under the Company's credit facility; declaration of material adverse change by a lender; industry capacity; domestic competition; loss of, or reductions in, purchases by significant customers and customer work stoppages; work stoppages by critical suppliers; labor unrest; conditions, including acts of God, that require more costly transportation of raw materials; accidents, equipment failures and insured or uninsured casualties; third-party product liability claims; flood, tornado, winter storms and other natural disasters;  customer or supplier bankruptcy; customer or supplier declarations of force majeure; customer or supplier breach of contract; insurance cost and availability; lack of insurance coverage for floods; the cost associated with providing healthcare benefits to employees; customer claims; supplier quality or delivery problems; technical and data processing capabilities; cyberattack on our information technology infrastructure; world, domestic or regional health crises; vaccine mandates or related governmental policy that would cause significant portions of our workforce, or that of our customers or vendors, to leave their current employment; global or regional wars and conflicts; our inability or unwillingness to comply with rules required to maintain the quotation of our shares on any market place; and our ability to repurchase the Company's stock. The Company assumes no obligation to publicly update any such forward-looking statements.  No assurance is provided that current results are indicative of those that will be realized in the future.

-          TABLES FOLLOW -

 

WEBCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in thousands, except per share data – Unaudited)
	Three Months Ended January 31,				Six Months Ended January 31,
	2024		2023		2024		2023
Net sales	$   145,984		$   173,377		$   303,822		$   361,901
Cost of sales	133,008		158,076		269,240		320,608
Gross profit	12,976		15,301		34,582		41,292
Selling, general & administrative expenses	11,454		10,664		25,083		24,262
Income (loss) from operations	1,522		4,637		9,499		17,031
Interest expense	1,054		1,740		2,347		3,223
Pretax income (loss)	468		2,897		7,152		13,807
Provision for (benefit from) income taxes	128		(639)		1,727		1,865
Net income (loss)	$         341		$      3,535		$      5,425		$    11,943
Net income (loss) per share:
Basic	$        0.43		$        4.64		$        6.86		$      15.68
Diluted	$        0.42		$        4.43		$        6.69		$      14.97
Weighted average common shares outstanding:
Basic	791,000		762,000		790,000		762,000
Diluted	811,000		798,000		811,000		798,000

 

CONSOLIDATED CASH FLOW DATA (Dollars in thousands – Unaudited)
	Three Months Ended January 31,				Six Months Ended January 31,
	2024		2023		2024		2023
Net cash provided by (used in)      operating activities	$      9,673		$     19,988		$     27,724		$     19,889
Depreciation and amortization	$       3,736		$       3,315		$       7,432		$       6,622
Cash paid for capital expenditures	$     11,795		$       9,628		$     24,382		$     17,526
Notes: Amounts may not sum due to rounding.

 

	WEBCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands - Unaudited)
		January 31,		July 31,
		2024		2023
Current assets:
	Cash	$      3,044		$      6,208
	Certificates of deposit	-		1,000
	U.S. Treasury Bonds	14,801		14,858
	Accounts receivable	73,397		68,478
	Inventories, net	181,250		207,976
	Prepaid expenses	4,765		2,628
	Total current assets	277,258		301,148
Property, plant and equipment, net		158,925		144,717
Right of use, finance leases, net		1,188		1,196
Right of use, operating leases, net		21,837		23,210
Other long-term assets		15,593		13,405
Total assets		$   474,800		$   483,676
Current liabilities:
	Accounts payable	$     26,347		$     33,463
	Accrued liabilities	35,696		34,846
	Current portion of long-term debt	61,849		68,554
	Current portion of finance lease liabilities	428		407
	Current portion of operating lease liabilities	4,836		4,785
	Total current liabilities	129,156		142,055
Long-term debt, net of current portion		20,000		20,000
Finance lease liabilities, net of current portion		794		814
Operating lease liabilities, net of current portion		16,880		18,330
Stockholders' equity:
	Common stock	8		8
	Additional paid-in capital	52,711		52,559
	Retained earnings	255,251		249,910
	Total stockholders' equity	307,970		302,478
Total liabilities and stockholders' equity		$   474,800		$   483,676
Notes: Amounts may not sum due to rounding.

 

CONTACT:	Mike Howard
	Chief Financial Officer
	(918) 241-1094
	mhoward@webcotube.com

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SOURCE Webco Industries, Inc.

FAQ

What was Webco Industries' net income for the second quarter of fiscal year 2024?

Webco Industries reported a net income of $0.3 million for the second quarter of fiscal year 2024.

How did net sales for the second quarter of fiscal year 2024 compare to the same period in 2023?

Net sales for the second quarter of fiscal year 2024 were $146.0 million, a 15.8% decrease from the $173.4 million in the second quarter of fiscal year 2023.

What challenges did Webco Industries face in the second quarter of fiscal year 2024?

Webco Industries highlighted challenges such as inventory destocking, economic slowdown, and competition from foreign imports impacting its financial performance.

How much cash and short-term investments did Webco Industries have as of January 31, 2024?

As of January 31, 2024, Webco Industries had $17.8 million in cash and short-term investments.

What is the purpose of Webco Industries' stock repurchase program?

Webco Industries' stock repurchase program authorizes the purchase of outstanding common stock in private or open market transactions to enhance long-term growth.