Webco Net Income Drops 90 Percent

Webco Industries Inc. said continued troubles in the steel industry, with costly inventories and lower sales hit net income as it dropped 90 percent from a year ago.
Webco reports net income of $502,000, or 66 cents per share, compared to net income of $5,083,000, or $6.65 per share, for the same quarter in fiscal 2009. Net sales for the first quarter of fiscal 2010 were $68 million, a 38.5 percent decrease from the $110.6 million of sales in last year’s first quarter.
Results included a $700,000 non-cash pre-tax loss in the value of interest rate swap contracts versus a non-cash pre-tax loss of $1.3 million in the same quarter in fiscal 2009. The prior year’s first fiscal quarter included a $2.8 million pre-tax charge for inventory reserves. Additionally, significant decline in current quarter to same prior year quarter sales reflects the global economic crisis that affected business levels for most of our customers, resulting in reduced volumes; although current first quarter sales are up 21.4 percent over the most recently completed fourth quarter.
“Webco addressed the challenges presented by the global economic crisis early and swiftly,” said F. William Weber, Webco’s chairman and CEO. “The dedication of our employees and plans implemented by management resulted in our being able to put the challenge of high priced material and lower volumes behind us as quickly as possible. Simultaneously, the company endeavored to substantially reduce debt and create the liquidity necessary for the current environment. At the end of the current quarter, Webco’s outstanding debt was $38.9 million. That is a reduction of $53.6 million from the $92.5 million of outstanding debt just one year ago.”
Gross profit for the first quarter of fiscal 2010 was $6.2 million, or 9.1 percent of net sales, compared to $16.5 million, or 14.9 percent of net sales, for the first quarter of fiscal 2009. The current quarter’s gross profit percentage is up from the 1.5 percent of sales realized in the immediately preceding fourth quarter. The current quarter gross profit was negatively impacted by selling high cost inventories, while the first quarter of fiscal year 2009 endured $2.8 million in charges for inventory reserves that resulted from the declines in steel costs and margins.
Selling, general and administrative expenses in the first quarter of fiscal 2010 were $3.8 million, compared to $6.5 million in the first quarter of the prior year. SG&A expenses remain at low levels due to cost reductions and lower employee profit sharing and bonuses related to current financial performance.

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