Webco, a leading manufacturer of carbon steel, stainless steel, and other metal specialty tubing products, has released its financial report for fiscal year 2023. The report highlights a drop in income from operations, a decrease in gross profit, and an intensified focus on investment.
According to the report, Webco’s income from operations for fiscal year 2023 was $38.9 million, a notable decrease compared to the previous fiscal year’s income of $64.8 million. The decrease in income was attributed to depreciation expenses of $13.5 million in 2023, compared to $14.0 million in 2022. Furthermore, the gross profit for fiscal year 2023 was $89.4 million, which accounted for 13.0 percent of net sales. This represents a decrease from the previous year’s gross profit of $118.1 million, which was 16.8 percent of net sales.
Dana S. Weber, the Chief Executive Officer and Board Chair of Webco, expressed the company’s focus on positioning itself for different economic scenarios. Weber emphasized the importance of maintaining a strong balance sheet, good liquidity, and making compelling investments in the business. As of July 31, 2023, Webco had a total cash, short-term investments, and available credit of $89.4 million, which the company considers to be a competitive advantage.
The financial report also provided insights into selling, general, and administrative (SG&A) expenses. In the fourth quarter of fiscal year 2023, SG&A expenses amounted to $14.0 million, compared to $10.0 million in the same quarter of fiscal year 2022. For the entire fiscal year 2023, SG&A expenses were $50.5 million, reflecting a decrease from the $53.3 million incurred in fiscal year 2022. The decrease in SG&A expenses in 2023 was primarily driven by lower profitability and a reduction in costs associated with company-wide incentive compensation and variable pay programs. However, these savings were partially offset by inflationary pressures on wages and other expenses.
Another notable aspect of the financial report was the increase in interest expenses. In the fourth quarter of fiscal year 2023, interest expenses were $1.3 million, compared to $1.2 million in the same quarter of fiscal year 2022. For the entire fiscal year, interest expenses amounted to $6.1 million in 2023, up from $3.3 million in the previous year. This increase was primarily due to the Federal Reserve’s decision to raise the fed funds rate, which led to a higher variable rate component on Webco’s senior credit facility.
Capital expenditures also played a significant role in Webco’s financial performance. In the fourth quarter of fiscal year 2023, capital expenditures totaled $10.8 million, while the total for the entire fiscal year was $34.7 million. These capital expenditures included ongoing construction of the F. William Weber Leadership Campus, which will house Webco’s Tech Center, Webco University, and corporate headquarters. The Tech Center aims to strengthen Webco’s trusted and technical brand in the industry, while Webco University serves as a platform for educating and engaging the company’s employees.
Webco’s financial report highlighted the company’s borrowing capacity under its senior revolving credit facility. As of July 31, 2023, Webco had $72.0 million of available borrowing capacity under this facility. However, the actual amount available was subject to advance rates on eligible accounts receivable and inventories. The decrease in borrowing capacity was primarily due to reduced working capital levels. In September 2022, Webco refinanced its senior credit facility, increasing the revolving credit facility from $160 million to $220 million and the senior term loan from $12 million to $20 million. These changes were made to help Webco navigate volatility in raw material costs. Notably, the increased capacity of the senior credit facility will expire in September 2027.
Additionally, Webco’s stock repurchase program was addressed in the financial report. The company’s Board of Directors recently refreshed the repurchase program, allowing for the purchase of up to $40 million of Webco’s outstanding common stock through private or open market transactions. The repurchase program, which has been extended until July 31, 2026, did not result in any stock purchases during the fourth quarter of fiscal year 2023. However, Webco had previously repurchased over 140,000 shares in the three fiscal years preceding the report.
In conclusion, Webco’s financial report for fiscal year 2023 highlighted a decrease in income from operations and gross profit, as well as an intensified focus on investments. The company’s CEO emphasized the importance of positioning Webco for different economic environments and maintaining a strong balance sheet. Despite the challenges faced, Webco remains committed to leveraging its core values of trust and teamwork to provide high-quality tubing products to its customers worldwide.
