November 10, 1997
Dear Stockholder:
It is our pleasure to invite you to the Annual Meeting of Stockholders of
Webco Industries, Inc. to be held on Thursday, December 2, 1997 at 3:00 p.m.
(Central Standard Time), at 9101 West 21st Street, Sand Springs, Oklahoma.
Whether or not you plan to attend, and regardless of the number of shares
you own, it is important that your shares be represented at the meeting. You
are accordingly urged to sign, date and return your proxy promptly in the
enclosed envelope, which requires no postage if mailed in the United States.
We sincerely hope you will be able to join us at the meeting. The officers
and directors of the Company look forward to seeing you at that time.
Sincerely,
F. William Weber
Chairman
<PAGE>
WEBCO INDUSTRIES, INC.
9101 West 21st Street
Sand Springs, Oklahoma 74063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held December 2, 1997
Notice is hereby given that the Annual Meeting of Stockholders of Webco
Industries, Inc. (the "Company") will be held at 9101 West 21st Street, Sand
Springs, Oklahoma on Thursday, December 2, 1997 at 3:00 p.m. (Central Standard
Time) for the following purposes:
1. to elect one director of the Company;
2. to consider and act upon a proposal to confirm the appointment of
Coopers & Lybrand LLP as the independent certified public accountants
of the Company; and
3. to transact any such other business as may properly come before the
meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 31, 1997
as the record date for determining stockholders entitled to notice of and to
vote at the meeting and any adjournments or postponements thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE ENCLOSED
PROXY WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors,
DAVD E. BOYER,
Secretary
November 10, 1997
<PAGE>
WEBCO INDUSTRIES, INC.
9101 West 21st Street
Sand Springs, Oklahoma 74063
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
December 2, 1997
This Proxy Statement is furnished to the stockholders of Webco
Industries, Inc. (the "Company"), in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of
Stockholders of the Company to be held on Tuesday, December 2, 1997 at the
offices of the Company at 9101 West 21st Street, Sand Springs, Oklahoma at 3:00
p.m. (central standard time), and any adjournments thereof. A copy of the
notice of meeting accompanies this Proxy Statement. It is anticipated that the
mailing of this Proxy Statement will commence on or about November 10, 1997.
Only stockholders of record at the close of business on October 31, 1997,
the record date for the meeting, will be entitled to notice of and to vote at
the meeting. On the record date the Company had outstanding 6,339,000 shares of
common stock, par value $.01 per share (the "Common Stock"), which are the only
securities of the Company entitled to vote at the stockholders meeting, each
share being entitled to one vote. Voting rights are non-cumulative. A majority
of the outstanding shares will constitute a quorum at the meeting, and
abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, they will be voted in accordance with such
specification. If no instructions are given, the persons named in the proxy
intend to vote FOR the election of the nominee for director listed herein and
FOR the ratification of the appointment of Coopers & Lybrand LLP as independent
certified public accountants of the Company for the current year. Directors are
elected by plurality vote (i.e., the nominee receiving the highest number of
affirmative votes of the shares voting will be elected). The ratification of
the re-appointment of Coopers & Lybrand LLP will require the affirmative vote
of a majority of the Common Stock voting on the proposal. Abstentions and
broker non-votes will not be counted as votes cast on any matter to which they
relate.
The Board of Directors does not know of any other matter that is expected
to be presented for consideration at the meeting. However, if other matters
properly come before the meeting, the persons named in the accompanying proxy
intend to vote thereon in accordance with their judgment.
Stockholders who execute proxies may revoke them by giving written notice
to the Secretary of the Company at any time before such proxies are voted.
Attendance at the meeting will not have the effect of revoking a proxy unless,
at any time prior to voting of the proxy, the stockholder so attending the
meeting notifies the Secretary of the Company, in writing, of his or her
withdrawal of the proxy.
The Company will bear the cost of the meeting and the cost of soliciting
proxies, including the cost of mailing the proxy material. In addition to
solicitation by mail, directors, officers, and regular employees of the Company
(who will not be specifically compensated for such services) may solicit
proxies by telephone or otherwise. Arrangements will be made with brokerage
houses and other custodians, nominees, and fiduciaries to forward proxies and
proxy material to their principals, and the Company will reimburse them for
their expenses.
<PAGE>
Security Holdings of Principal Stockholders, Directors and Executive Officers
The table below sets forth the beneficial ownership of the Common Stock as
of September 30, 1997 by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director, (iii) each of the executive officers of the Company, including the
executive officers named in the "Summary Compensation Table" below, and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent
Name Position Ownership of Class
<S> <C> <C> <C>
F. William Weber Chairman of the Board and Chief 2,054,801(1) 32.42%
Executive Officer
Dana S. Weber Vice Chairman of the Board, 782,266(1) 12.34
President, Chief Operating Officer
Kimberly A.W. Frank -- 390,870(1) 6.17
Wellington Management -- 359,700(4) 5.67
Company, LLP
Kenneth E. Case Director 6,000(2) *
Neven C. Hulsey Director 7,500(2) *
Frederick C. Ermel Director 14,500(2) *
H. Lee Beard Chief Information Officer, 63,228(2) 1.00
Vice President - Management
Systems
David E. Boyer Vice President - Sales & Marketing, 85,762(2) 1.35
and Secretary
Michael P. Howard Chief Financial Officer, Vice 2,847 *
President - Finance and Administration,
and Treasurer
Stuart D. Keeton Vice President and General Manager - 14,148(2) *
Stainless Products Division
Thomas M. Lewis Vice President and General Manager - 85,842(2) 1.35
Oil City Division
Mark A. Meek Vice President and General Manager- - -
QuikWater Division
William F. Obermark Vice President and General Manager - 89,979(2) 1.42
Southwest Tube Division
Thomas M. Willey Vice President - Materials Management 19,047(2) *
All directors and executive 3,616,789(3) 56.29
officers of the Company as a
group (thirteen persons)
<FN>
* Less than 1%
<PAGE>
(1) F. William Weber, Martha A. Weber, Dana S. Weber and Kimberly A.W.
Frank (the "Weber Family") each holds his or her shares in a revocable
living trust. F. William Weber and Martha A. Weber are co-trustees of
the trusts established by each other. Certain members of the Weber
Family (F. William Weber, Martha A. Weber, Dana S. Weber and Kimberly
A.W. Frank) may be deemed to be a "group,' as such term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
the rules promulgated thereunder, and to share beneficial ownership of
the shares owned by each other member of the Weber Family. Each member
of the Weber Family disclaims beneficial ownership of the shares owned
by each other member of the Weber Family, except Mr. and Mrs. F.
William Weber as to the shares owned by the other (shares shown in the
table for each member of the Weber Family do not include shares as to
which beneficial ownership is disclaimed as aforesaid). In addition,
members of the Weber Family disclaim beneficial ownership of certain
shares included in those shown for them in the table, as follows: Mr.
and Mrs. F. William Weber disclaim beneficial ownership of 262,648
shares held in an irrevocable trust, of which they are the trustees,
for the benefit of Ashley R. Weber; Dana S. Weber disclaims beneficial
ownership of 2,000 shares held in an irrevocable trust, of which she is
the trustee, for the benefit of the children of Kimberly A.W. Frank;
and Kimberly A.W. Frank disclaims beneficial ownership of 1,000 shares
held in an irrevocable trust, of which she is a co-trustee, for the
benefit of the child of Dana S. Weber. The address of each such
stockholder is c/o Webco Industries, Inc., 9101 West 21st Street, Sand
Springs, Oklahoma 74063.
(2) Includes shares of Common Stock that directors and executive officers
had the right to acquire on September 30, 1997 as follows: Kimberly
A. W. Frank, 800: Dr. Kenneth E. Case, 6,000; Neven C. Hulsey, 7,500;
Frederick C. Ermel, 7,500; H. Lee Beard, 10,800; David E. Boyer,
10,800, Thomas M. Lewis, 10,800, Stuart D. Keeton. 10,200, William F.
Obermark, 10,800, and Thomas M Willey, 10,800.
(3) See Footnotes (1) and (2) above.
(4) Wellington Management Company, LLP, ("WMC") is an investment adviser
registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940, as amended. As of June 30, 1997 WMC,
in its capacity as investment adviser, may be deemed to have beneficial
ownership of 359,700 shares of common stock of Webco Industries, Inc.
that are owned by numerous investment advisory clients, none of which
is known to have such interest with respect to more than five percent
of the class. As of June 30, 1997, WMC had voting power and dispositive
power as follows:
Sole Voting Power: 0 shares
Shared Voting Power: 99,700 shares
Sole Dispositive Power: 0 shares
Shared Dispositive Power: 359,700 shares
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors is presently composed of five members, four of
whose terms as directors continue past the date of the Annual Meeting. At the
Annual Meeting one director is to be elected, and he is to hold office for a
three-year term and until his successor has been elected and qualified. If the
nominee should become unavailable for any reason, which is not anticipated, the
proxy will be voted for any substitute nominee who may be selected by the Board
of Directors prior to or at the meeting, or, if no substitute is selected by
the Board of Directors prior to or at the meeting, for a motion to reduce the
membership of the Board of Directors to the number of remaining directors. The
nominee for director will be elected by a plurality of the votes cast (i.e. the
nominee receiving the highest number of affirmative votes of the shares voting
will be elected).
<TABLE>
Nominee for Election at the Annual Meeting
<CAPTION>
Name Age Positions with Company Director Since
<S> <C> <C> <C>
Neven C. Hulsey 63 Director 1993
</TABLE>
<TABLE>
Directors Whose Terms Continue
<CAPTION>
Name Age Positions with Company Director Since
<S> <C> <C> <C>
F. William Weber 71 Chairman of the Board and Chief 1969
Executive Officer
Dana S. Weber 39 Vice Chairman of the Board, 1990
President and Chief Operating
Officer
Frederick C .Ermel 55 Director 1993
Dr. Kenneth E. Case 53 Director 1995
</TABLE>
<TABLE>
Executive Officers who are not Directors
<CAPTION>
Name Age Positions with Company Officer Since
<S> <C> <C> <C>
H. Lee Beard 55 Chief Information Officer, 1987
Vice President of Management Systems
David E. Boyer 37 Vice President - Sales and Marketing, and 1992
Secretary
Michael P. Howard 34 Chief Financial Officer, Vice President - 1997
Finance and Administration, and Treasurer
Stuart D. Keeton 39 Vice President and General Manager - 1995
Stainless Products
Thomas M. Lewis 62 Vice President and General Manager 1984
Operations
Mark A. Meek 39 Vice President and General Manager- 1997
QuikWater Division
William F. Obermark 56 Vice President and General Manager - 1984
Southwest Tube
Thomas M. Willey 57 Vice President - Materials Management 1995
</TABLE>
F. William Weber is Chairman of the Board and Chief Executive Officer of
the Company, positions he has held with the Company or its predecessors since
1969. Mr. Weber's term as a director of the Company expires in December 1999.
Mr. Weber also serves on the Advisory Board of Selco Industries Corporation,
Inc., a privately-held manufacturer of promotional timepieces, and is Chairman
of the Board of Custom Containers International ("C-CAM"), a company owned by
the Weber Family which manufactures intermodal tank containers and Diversified
Plastics, Inc. ("Diversified"), a company owned by F. William Weber which
primarily manufactures plastic access panels and performs some packaging
services. Mr. Weber is not actively involved in the day-to-day operations of
C-CAM or Diversified.
Dana S. Weber became President of the Company in June 1995, and is also
Vice Chairman of the Board and Chief Operating Officer, positions she has held
since June 1990. Ms. Weber was the acting Chief Financial Officer of the
<PAGE>
Company from August 1994 to July 1995. Ms. Weber's term as a director of the
Company expires in December 1999. Ms. Weber served as Chief Financial Officer
and Treasurer of the Company from 1986 to June 1990. Ms. Weber has been with
the Company or its predecessors in various positions since 1977. Ms. Weber also
serves on the Board of C-CAM and has not been actively involved in the
day-to-day operations of C-CAM since March 1, 1994. Ms. Weber is the daughter
of F. William Weber.
Dr. Kenneth E. Case has been a director of the Company since July 1995,
when he was designated by the Board of Directors to fill a vacancy on the
Board. Dr. Case's term as a director of the Company expires in February 1999.
Dr. Case has been a Regents Professor of Industrial Engineering and Management
at Oklahoma State University since August 1975. He is a licensed professional
engineer and was named the Outstanding Engineer in Oklahoma in 1987. His
specialties include quality and reliability engineering, economic analysis and
production planning and control. Dr. Case was a Senior Examiner on the Malcolm
Baldrige National Quality Award from 1988 to 1990, and on the Panel of Judges
from 1991 to 1993. He is a member of the National Academy of Engineering,
considered among the highest professional distinctions accorded an engineer,
and a Fellow of the Institute of Industrial Engineers and the American Society
for Quality Control. Dr. Case has also been project director on over twenty
sponsored research projects and has published over 90 articles and co-authored
three books.
Frederick C. Ermel has been a director of the Company since November 1993.
Mr. Ermel's term as a director of the Company expires in February 1999. Mr.
Ermel has been a private investor and the founder, President, and sole
stockholder of Carreden Group, Inc., an investment banking firm and registered
broker-dealer, since September 1990. From March 1986 to September 1990, Mr.
Ermel was a Managing Director of Paine Weber, Inc., a brokerage and investment
banking firm. In connection with an investment made by Mr. Ermel, from
September 1990 to March 1993 he was a director and Vice Chairman of and a
consultant to Wiener Enterprises, Inc., which filed a petition under Chapter II
of the Federal Bankruptcy Code in December 1991.
Neven C. Hulsey has been a director of the Company since December 1993,
and his term will expire in 1998. In January 1997, Mr. Hulsey became an
Associate of Eaglestone Capital, a Director of Baron Industries, and a Director
and Chairman of the Board of the Earle M. Jorgensen Company "Jorgensen"), the
largest independent distributor of metal products in the United States. From
May 1990 until January 1997, Mr. Hulsey was a director and President and Chief
Executive Officer of "Jorgensen" as well as the Earle M. Jorgensen Holding
Company, Inc., the parent of "Jorgensen." From 1984 to May 1990, Mr. Hulsey
Chairman of the Board, President, and Chief Executive Officer, of Kilsby-
Roberts Holding Co., a predecessor of "Jorgensen". "Jorgensen" is one of the
largest customers of the Company. Mr. Hulsey is a director of International
House of Pancakes, Inc., and has been since August 1987. In September 1997,
he became an Advisor of the University of Pacific's Business Advisory Board.
As of November 1996, Mr. Hulsey completed a five-year term as a Regent of the
University of the Pacific, as well as a Director of the Steel & Aluminum
Industry and the National Association of Aluminum Distributors.
H. Lee Beard is Vice President of Management Systems and has been with the
Company since November 1987. Mr. Beard has been in the specialty tubing
industry since 1979. Mr. Beard was the Chief Executive Officer of C-CAM from
April 1989 to January 1990.
David E. Boyer is Vice President of Sales and Marketing and has held that
position since July 1992. Mr. Boyer became Secretary of the Company in November
1993. Mr. Boyer previously served as General Manager-Stainless Division from
June 1991 to July 1992; as Product Manager, Stainless Products, from February
1989 to June 1991; and in various other positions with the Company since 1984.
Michael P. Howard joined the Company as Chief Financial Officer and Vice
President of Finance and Administration in January, 1997. Prior to joining the
Company, Mr. Howard was Vice President of Finance and Administration and Chief
Financial Officer for Multimedia Games Inc. from January 1996 to January 1997.
From May 1985 to January 1996 Mr. Howard was with the international accounting
firm of Coopers & Lybrand LLP, where he worked in the Business Assurance Group
and served as the audit manager on the Company's audit during four years of
that period.
Stuart D. Keeton has been Vice President and General Manager of Stainless
Products since November 1995. Mr. Keeton had previously been General Manager
- -Stainless from July 1992 to November 1995, and has been with the Company in
various positions since December 1980.
<PAGE>
Thomas M. Lewis has been Vice President and General Manager of Oil City
Division since November 1995. Mr. Lewis was previously Vice President of
Operations and has held similar positions with the Company since 1982.
Mark A. Meek joined the Company in July 1997 as Vice President and General
Manager of the QuikWater Division. Mr. Meek had previously been with Hilti
Corporation from 1977 to 1997, most recently as Vice President of Sales:
Construction Strategic Business Unit. Other positions held while at Hilti
included Director of Purchasing and General manager of Near and Mid-East Sales
Operations.
William F. Obermark has been Vice President and General Manager of
Southwest Tube Division since November 1995. Mr. Obermark previously was
Vice President of Engineering, a position he had held with the Company since
June 1984. Mr. Obermark has been with the Company in various positions since
1980, and has been in the specialty tubing industry since 1969.
Thomas M. Willey has been Vice President of Materials Management since
March 1995. Mr. Willey has been with the Company in various purchasing and
materials acquisition and management positions since May 1980.
The Company's Amended and Restated Certificate of Incorporation provides
that the Board of Directors shall be divided into three classes as nearly equal
in number as possible and that one class shall be elected each year and serve
for a three-year term. Executive officers hold office until their successors
are chosen and qualified, subject to earlier removal by the Board of Directors.
Meetings of Board of Directors
During the fiscal year ended July 31, 1997, the Board of Directors held
four meetings. During that period no Director attended fewer than 100% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period for which he or she was a director, and (ii) the total number
of meetings held by all Committees of the Board of Directors on which he served
during the period that he served on such Committees.
Board Committees Meetings and Membership
The Company has an Audit Committee of the Board of Directors, whose
members are Dr. Kenneth E. Case, Frederick C. Ermel and Neven C. Hulsey, and a
Compensation Committee whose members are F. William Weber, Dr. Kenneth E. Case,
Frederick C. Ermel and Neven C. Hulsey.
The Audit Committee meets with management and the Company's independent
accountants to determine the adequacy of internal controls and other financial
matters. The Compensation Committee reviews general policy matters relating to
compensation and benefits of employees and officers of the Company and
administers the Company's 1994 Stock Incentive Plan. The Audit Committee held
two meetings in fiscal 1997, and the Compensation Committee held three meetings
in fiscal 1997.
Directors' Compensation
Pursuant to the Company's 1994 Stock Incentive Plan (the "Plan"), each
director who is not an employee of the Company receives an initial grant
(either on the date the Plan was adopted or on the date such person first
becomes a director) of options to purchase 3,000 shares of Common Stock.
Thereafter, each outside director, on January 1 of each year, will receive
options to purchase 1,500 shares of Common Stock. All such options will be
exercisable at the fair market value at date of grant, commencing six months
after the date of grant. In fiscal 1997, each of Messrs. Case, Ermel and
Hulsey received options to purchase 1,500 shares of Common Stock at a price of
$5.25 per share. Outside directors who are not members of the Compensation
Committee are also eligible for discretionary grants under the Plan. In
addition, directors of the Company who are not employees receive directors'
fees of $10,000 per year and $1,500 for each Board meeting or committee
meeting attended in person ($2,000 if such director is the Chairman of the
Board or the committee) and $500 (or $1,000, for the Chairman) for each
meeting attended by telephone. Outside directors also receive reimbursement
of all out-of-pocket expenses related to meetings attended. Officers of the
Company who serve as directors do not receive compensation for their services
as directors other than the compensation they receive as officers of the
Company.
<PAGE>
Compliance with Section l6(a) of the Securities Exchange Act of 1934
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than 10 percent of the Common
Stock are required to report their ownership of Common Stock and any changes in
that ownership, on a timely basis, to the Securities and Exchange Commission.
Based on material provided to the Company, all such required reports were filed
on a timely basis in fiscal 1997.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table sets forth the cash compensation paid or accrued by
the Company for services rendered during fiscal 1997 to the Company's Chief
Executive Officer and the only other executive officers of the Company whose
compensation exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation
All Other
Name and Principal Position Year Salary Bonus Compensation
F. William Weber 1995 $380,638 (1) $47,900(2)
Chairman of the Board and Chief 1996 377,722 (1) 48,440(2)
Executive Officer 1997 445,661 (1) -
Dana S. Weber 1995 $166,338 (1) $2,683(3)
Vice Chairman of the Board, 1996 205,784 (1) 947(3)
President and 1997 218,930 (1) 1,342(3)
Chief Operating Officer
(1) No bonuses were paid in fiscal years 1995, 1996 or 1997.
(2) In 1995 and 1996, the Company reimbursed Mr. Weber, on an after tax basis,
for the cost of certain life insurance policies. The policies are now owned
by Mr. Weber's children (or trusts established by them), who are also the
beneficiaries. In 1997, the policy cost was incorporated into Mr. Weber's
salary.
(3) Represents the aggregate amount paid by the Company for life insurance
policies.
Employment Agreements and Termination of Employment Arrangements
Each of F. William Weber and Dana S. Weber is employed pursuant to an
agreement which terminates December 31,1999. The agreements provide for a base
salary of $422,706 for Mr. Weber and $225,000 for Ms. Weber, subject to such
increases as may be approved by the Compensation Committee, and the use of an
automobile. Mr. Weber will also receive reimbursement annually for the cost of
certain life insurance policies, and the Company will pay the cost of life
insurance policies for Ms. Weber, as described in the footnotes to the Summary
Compensation Table above. Upon the occurrence of a "change in control," each
of Mr. Weber and Ms. Weber will be entitled to receive an amount equal to three
times the sum of his or her base salary plus the highest bonus paid to him or
her in the prior three years (plus such amount as is necessary so that such
payment is received net of any special or excise taxes), payable at such
person's option in either a lump-sum or over three years with interest. A
"change in control" is generally defined in the agreements to have occurred
if (i) the Company consummates a merger in which the Company is not the
surviving corporation or in which shares of Common Stock are converted into
other property, other than a merger in which the holders of the Common Stock
immediately prior to such merger have substantially the same proportionate
ownership of common stock of the corporation surviving such merger, (ii) the
Company sells, leases, exchanges, or transfers (in one or a series of related
transactions) all or substantially all of its assets, (iii) the Company's
stockholders approve a liquidation or dissolution of the Company, (iv) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), other than the Company or any employee
benefit plan sponsored by the Company, becomes the beneficial owner of either
(A) 51% of the Common Stock or (B) a greater percentage of the Common Stock
that is held by the Weber Family, or (v) at any time during two consecutive
years, individuals who, at the beginning of such period, constituted the Board
<PAGE>
of Directors cease to constitute at least a majority thereof, unless the
election or nomination of each new director during such two-year period was
approved by at least two-thirds of the directors then in office who were
directors at the beginning of such two-year period.
Stock Options
The following table summarizes individual grants of options made during
fiscal year 1997 to each of the Named Executive Officers:
Individual Option Grants in Last Fiscal Year
<TABLE>
Number of % of Total Potential Realized
Securities Options Value at Assumed
Underlying Granted to Annual Rate of Stock
Options Employees Exercise Vesting Expiration Price Appreciation
Name Granted in Fiscal Year Price Period Date for Option Term
5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
F. William Weber - - - - - - -
Dana S. Weber 32,000 16.4% $6.738(1) 5 years 2/27/06 103,662 292,773
<FN>
(1) Represents 10% over the market value of the stock as of the date of grant.
The following table shows the number of shares of Common Stock represented
by outstanding stock options held by the Named Executive Officers as of July
31, 1997. Also reported are the values for "in the money" options which
represent positive spread between the exercise price of any such existing stock
options and the fiscal year-end price of the Common Stock.
</TABLE>
<TABLE>
Aggregated Option Exercises in 1997
and Fiscal Year-End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Number of Securities Underlying Unexercised Options at In-the-Money
Underlying Options Options at Fiscal Year-End ( #) Options at Fiscal Year-End ($ )
Value
Name Exercised (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
F. William Weber -0- -0- -0- -0- $ -- $ --
Dana S. Weber -0- -0- -0- 32,000 -- 4,400
</TABLE>
Report of the Compensation Committee
The Compensation Committee (the "Committee") of the Board of Directors
is comprised of Directors who are not officers or employees of the Company,
and the Chief Executive Officer. The Committee is responsible for reviewing and
making recommendations to the Board of Directors regarding the compensation and
benefits of the Company's management personnel.
As discussed under "Employment Agreements and Termination of Employment
Arrangements," the Company entered into employment agreements with William F.
Weber, the Company's Chief Executive Officer, and Dana Weber, the Company's
Chief Operating Officer. Because compensation of Mr. Weber during fiscal 1997
has been solely pursuant to his employment agreement and the Committee
authorized no discretionary increase in salary, the Committee has not formulated
specific policies concerning compensation of the Chief Executive Officer. Based
upon its review of the relationship between the salaries of Chief Executive
Officers and Chief Operating Officers in comparable companies, the Compensation
Committee has established a salary policy for the Chief Operating Officer
whereby the base salary for that position is approximately 60% of the base
salary of the Chief Executive Officer.
While decisions regarding salary levels for management personnel, other
than the Chief Executive Officer and Chief Operating Officer, are determined
by the Chief Executive Officer and the Chief Operating Officer (subject to
review by the Committee), the Committee has established general policies
designed to enable the Company to reward qualified management personnel
and to provide longer term incentives. The Committee's philosophy is that
the Company's goals are more likely to be achieved if final compensation is
tied to the Company's performance during the year, and that long term stock
options are longer term incentives that are closely aligned with shareholder
return. In fiscal 1997 194,900 new options were granted to 82 employees and
management personnel, as authorized by the Compensation Committee. The specific
number of options granted was commensurate with the degree of responsibility of
the grantee's position and the length of the grantee's employment. No options
have been granted to the Chief Executive Officer.
<PAGE>
In fiscal 1997 no bonuses were paid to management personnel.
MEMBERS OF COMPENSATION COMMITTEE
F. William Weber
Dr. Kenneth E. Case
Frederick C. Ermel
Neven C. Hulsey
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee of the Company's Board of Directors is
comprised of Messrs. Weber, Ermel, Hulsey and Case. Mr. Weber is the Chairman
of the Board and Chief Executive Officer of the Company. There are no
compensation committee interlocks. See "Certain Relationships and Related
Transactions."
<PAGE>
Stock Price Performance Graph
The following table compares on a cumulative basis the percentage change,
since the Company's initial public offering in February 1994, in the total
shareholder return on the Company's Common Stock, with (a) the total return or
the AMEX Market Value Index, which is being used as the required broad entity
market index, and (b) the total return for a selected peer group index (the
"Peer Group"). The Peer Group consists of Huntco Inc., Maverick Tube
Corporation, Quanex Corporation, Steel Technologies, Inc. Lone Star
Technologies, Consolidated Stainless, Inc., and Synalloy Corporation. This
represents a change from the peer group identified in the prior year by the
addition of Lone Star Technologies, Consolidated Stainless, Inc., and Synalloy
Corporation and the deletion of Gibraltar Steel Corporation and Tubos De Accro
De Mexico S. A. ADR. The Company believes the amended peer group better
reflects companies related to the Company's industry. The table assumes (i)
investment of $l00 on February 8, 1994 in the Company's Common Stock, the
AMEX Market Value Index and the common stock of the Peer Group, and (ii) the
reinvestment of all dividends.
Webco Industries Inc. Peer Group American Stock Exchange
2/8/97 100.00 100.00 100.00
7/31/94 95.31 88.75 88.12
7/31/95 40.63 92.22 106.87
7/31/96 35.94 91.33 109.38
7/31/97 42.97 157.96 130.00
<PAGE>
Certain Transactions
C-CAM
The Company paid C-CAM $316,000 in fiscal 1997 pursuant to a contract with
C-CAM for certain fabrication activities at market rates and terms for such
activities. In addition, the Company had a receivable balance at July 31, 1997
of $367,000 for amounts paid on behalf of C-CAM.
Diversified Plastics. Inc.
The Company purchases certain specialty packaging and shipping material
from Diversified Plastics, Inc., an entity owned by F. William Weber. Payments
made by the Company totaled $200,000 in fiscal 1997 and the Company owed a
balance of $3,300 at July 31, 1997.
Advances to Affiliates
Temporary advances were made from time-to-time during fiscal 1997 to Mr.
F. William Weber, Chairman of the Board and Chief Executive Officer, with the
highest amount outstanding being $1,200,000. The balance outstanding at
July 31, 1997 was $1,162,000. The advances are subject to a three-year note
from Mr. Weber, collateralized by certain assets having a current market value
at least double the highest outstanding balance advanced pursuant to the note.
The note bears interest at the prevailing rate under the Company's Loan
Agreement which is payable at maturity of the note on August 15, 1999.
Earle M. Jorgensen Co.
Mr. Neven C. Hulsey, a director of the Company, is Chairman of the Board
of Earle M. Jorgensen Co., the largest independent distributor of metal
products in the United States and one of the larger customers of the Company.
Annual sales to this company and its subsidiaries were approximately $3,865,000
in fiscal 1997 with outstanding receivable balances of approximately $892,000
at July 31, 1997.
INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand LLP as the
Company's independent certified public accountants, to audit the books and
records of the Company for the current fiscal year, and the Board recommends
that the stockholders of the Company ratify such appointment.
Representatives of Coopers & Lybrand LLP are expected to be available at
the Annual Meeting to respond to appropriate questions and will be given the
opportunity to make a statement if they desire to do so.
STOCKHOLDER PROPOSALS
It is contemplated that the Company's 1998 Annual Meeting of Stockholders
will be held on or about December 15, 1998. Stockholders of the Company wishing
to include proposals in the proxy material in relation to the Annual Meeting of
Stockholders to be held in 1998 must submit the same in writing so as to be
received at the executive office of the Company on or before July 8, 1997.
Such proposals must also meet the other requirements of the rules of the
Securities and Exchange Commission relating to stockholders' proposals.
By Order of the Board of Directors,
DAVID E. BOYER
Secretary
November 10,1997
