Webco Reports Third-Quarter Loss

Webco Industries Inc. reports a third-quarter net loss of $2.99 million, or a $3.93 loss per share, compared to net income of $3.41 million, or $4.49 per share, for the same quarter in fiscal 2008.
Webco’s business has been negatively affected by precipitous declines in the cost of steel.
Net sales for the third quarter of fiscal 2009 were $72.1 million, a 20.5 percent decrease from the $90.6 million of sales in last year’s third quarter.
Current quarter results were negatively impacted as the continued to work through high cost inventories and as sales prices declined based on the lower cost of steel. In addition, the global economic crisis has affected business levels for most of our customers, resulting in reduced volumes.
“We have been suffering through a period of time during which we are selling high cost inventory off of our balance sheet,” said F. William Weber, Webco’s chairman and CEO. “We previously indicated such a process could take three to four quarters, and we are hopeful that such a process could be largely completed in the fall of calendar year 2009.”
Webco expects to generate losses as the company liquidates high cost inventories and adjust to lower demand, said Weber.
“We have reduced our inventories $40.8 million since Oct. 31, and will continue to reduce our inventories to create additional liquidity for our business,” he said. “We have also reduced our costs and capital spending wherever possible during this time of transition in the economy to ensure that our cost structure is appropriate for current business levels. From October 31, 2008 to April 30, 2009, as a result of our inventory reductions and reduced spending, our outstanding long-term debt has dropped $29.7 million, and we expect to continue this process. We do not know when the economic environment will improve, but are hopeful that industry-wide inventory reductions will be completed and demand will improve by the fall of 2009. Our focus remains on our long-term niche strategy, which we believe is appropriate even in this difficult economic environment.”
For the first nine months of fiscal year 2009, Webco generated a net loss of $2.9 million, or a loss of $3.81 per share, compared to net income of $11.58 million, or $15.26 per share, for the same period in fiscal 2008.
Net sales for the first nine months of the current year amounted to $267.6 million, a 4.9 percent decrease from the $281.4 million in sales for the same nine-month period of last year.”
The nine month results were impacted by a net $4.4 million of inventory reserve charges and $6.3 million of non-cash pre-tax charges related to interest rate swaps. Results for the nine-month period of the current fiscal year have been negatively impacted by the pricing and volume conditions that affected the current quarter.
These declines have placed tremendous pressure on sales prices, and therefore margins. Further, the global economic crisis and low consumer confidence have eroded short-term demand as companies reduce inventories and costs to compensate for the softness in demand that is affecting downstream customers.

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