UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to ____________________.
Commission File Number: 0-23242
WEBCO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1097133
(State or other jurisdiction of (I.R.S. Employer Identification No)
incorporation or organization)
9101 West 21st Street, SAND SPRINGS, OKLAHOMA 74063
(Address of principal executive offices) (Zip Code)
(918) 241-1000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months ( or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to distribution of securities under a plan
confirmed by a court.
NOT APPLICABLE [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date: 7,169,000 shares of Common
Stock, $0.01 par value, as of December 1, 1998.
<PAGE>
WEBCO INDUSTRIES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Page
Number
________
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Balance Sheets 3
Statements of Income 4
Statements of Cash Flows 5
Notes to Unaudited Financial Statements 6-8
Report of Review by Independent
Accountants 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10-14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<PAGE>
<TABLE>
WEBCO INDUSTRIES, INC. AND SUBSIDIARY
BALANCE SHEETS
(Dollars in thousands, except par value)
(Unaudited)
<CAPTION>
October 31, July 31,
ASSETS 1998 1998
<S> <C> <C>
Current assets:
Cash $ 264 $ 266
Accounts receivable, net 19,794 19,874
Inventories 28,843 27,775
Prepaid expenses 256 205
Deferred income tax asset 2,019 2,740
Total current assets 51,176 50,860
Property, plant and equipment:
Land 1,436 1,436
Buildings and 14,571 14,571
Machinery and equipment 60,396 60,138
Furniture and fixtures 5,007 4,975
Construction in progress 8,092 5,261
Less accumulated depreciation and amortization (30,865) (29,751)
Net property, plant and equipment 58,637 56,630
Notes receivable from related parties 1,774 1,774
Other assets, net 2,586 2,494
Total assets $ 114,173 $ 111,758
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,397 $ 11,760
Accrued liabilities 7,066 6,957
Current portion of long-term debt 444 1,282
Total current liabilities 20,907 19,999
Long-term debt 33,384 32,894
Deferred income tax liability 10,425 10,620
Contingencies (Note 3)
Stockholders' equity:
Common stock, $.01 par value, 12,000,000 shares
authorized, 7,169,000 shares
issued and outstanding 72 72
Additional paid-in capital 36,179 36,179
Retained earnings 13,206 11,994
49,457 48,245
Total liabilities and stockholders' equity $ 114,173 $ 111,758
<FN>
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
<TABLE>
WEBCO INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF INCOME
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended
October 31,
1998 1997
<S> <C> <C>
Net sales $ 36,583 $ 34,538
Cost of sales 29,616 29,248
Gross profit 6,967 5,290
Commission income 194 228
Selling, general and administrative expenses 4,606 3,508
Income from operations 2,555 2,010
Interest expense 599 633
Income before income taxes 1,956 1,377
Provision for income taxes 744 338
Net income $ 1,212 $ 1,039
Pro forma net income (1) $ 845
Net income per common share:
Basic $ .17 $ .14
Diluted $ .17 $ .14
Pro forma net income per common share: (1)
Basic $ .12
Diluted $ .12
Weighted average common shares outstanding:
Basic 7,169 7,169
Diluted 7,193 7,231
<FN>
(1) Pro forma net income for the three months ended October 31, 1997 includes
a provision for income taxes on the earnings of Phillips & Johnston,
Inc., which prior to its merger with Webco in June 1998, was taxed as an
S-Corporation. Pro forma income taxes have been calculated using an
effective tax rate of 38% (34% Federal and 4% state).
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
<TABLE>
WEBCO INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
October 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,212 $ 1,039
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,207 929
Loss (gain) on write-off and disposition
of property, plant and equipment (7) 10
Deferred tax expense 526 324
(Increase) decrease in:
Accounts receivable 80 (921)
Inventories (1,068) (1,007)
Prepaid expenses (51) 106
Increase (decrease) in:
Accounts payable 1,236 (531)
Accrued liabilities 109 451
Net cash provided by operating activities 3,244 400
Cash flows from investing activities:
Capital expenditures (3,057) (2,430)
Proceeds from sale of property, plant and equipment 7 -
Advances to stockholder - (38)
Other (177) (102)
Net cash used in investing activities (3,227) (2,570)
Cash flows from financing activities:
Proceeds from long-term debt 34,735 34,675
Principal payments on long-term debt (35,083) (31,128)
Dividends paid - (256)
Increase (decrease) in book overdrafts 329 (584)
Net cash provided by (used in) financing activities (19) 2,707
Net change in cash (2) 537
Cash, beginning of period 266 202
Cash, end of period $ 264 $ 739
<FN>
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
WEBCO INDUSTRIES, INC. AND SUBSIDIARY
Notes to Unaudited Financial Statements
Note 1 - General
The accompanying unaudited condensed consolidated financial statements of
Webco Industries, Inc. and Subsidiary ("Webco" or the "Company") include, in
the opinion of management, all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of financial position at October 31,
1998 and results of operations for the three months ended October 31, 1998 and
October 31, 1997, and cash flows for the three months ended October 31, 1998
and October 31, 1997. Results for the three months ended October 31, 1998 are
not necessarily indicative of results which will be realized for the full
fiscal year. Results for the three months-ended October 31, 1997 have been
restated to reflect the June 1998 merger with Phillips & Johnston, Inc. The
year-end balance sheet was derived from the audited consolidated financial
statements but does not include all disclosures required by generally accepted
accounting principles. The unaudited condensed consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and related notes thereto for the year ended July 31,
1998, included in the Company's Form 10-K for the year ended July 31, 1998.
Note 2 - Inventory
At October 31, 1998 and July 31, 1998, the components of inventory were
as follows:
October 31, 1998 July 31, 1998
Raw materials $14,281,000 $13,614,000
Work-in-process 1,703,000 1,860,000
Finished goods 11,194,000 10,664,000
Maintenance parts
and supplies 1,665,000 1,637,000
Total inventories $28,843,000 $27,775,000
Note 3 - Contingencies
The Company is a party to various lawsuits and claims arising in the ordinary
course of business. Management, after review and consultation with legal
counsel, considers that any liability resulting from these matters would not
materially affect the results of operations or the financial position of the
Company.
The reader should refer to the Company's 1998 Form 10-K: Part I, Item 3 "Legal
Proceedings" for additional information regarding these matters.
<PAGE>
WEBCO INDUSTRIES, INC. AND SUBSIDIARY
Notes to Unaudited Financial Statements
Note 4 - Common Stock and Common Stock Equivalents
Presented below is a reconciliation of the differences between actual weighted
average shares outstanding, which are used in computing basic earnings per
share and diluted weighted average shares, which are used in computing diluted
earnings per share.
Three Months Ended
October 31,
1998 1997
Basic EPS:
Weighted average shares outstanding 7,169,000 7,169,000
Effect of dilutive securities: Options 24,000 62,000
Diluted EPS:
Diluted weighted average shares outstanding 7,193,000 7,231,000
Anti-dilutive options outstanding:
Number of options 227,300 215,500
Weighted average exercise price $ 7.30 $ 7.26
Note 5 - Segment Information
In 1998 Webco Industries, Inc. adopted FAS 131 "Disclosures about Segments of
an Enterprise and Related Information". The Company has two reportable
segments: tubing products and QuikWater, representing the Company's two
strategic business units offering different products. The Company internally
evaluates its business by facility, however, because of the similar economic
characteristics of the tubing operations, including the nature of products,
production processes and customers, those operations have been aggregated for
segment reporting purposes. The tubing products segment manufactures as well
as distributes tubular products principally made of carbon and stainless
steel. QuikWater manufactures a patented direct contact, high efficiency water
heater.
The Company measures segment profit or loss as segment income before income
taxes. Information on the Company's segments is as follows:
<PAGE>
Note 5 - Segment Information, Continued
Tubing
Products QuikWater Total
(Dollars in Thousands)
Quarter-ended October 31, 1998:
Revenues $ 35,846 $ 737 $ 36,583
Segment profit or (loss) 2,358 (402) 1,956
Quarter-ended October 31, 1997:
Revenues 34,184 354 34,538
Segment profit or (loss) 1,829 (452) 1,377
<PAGE>
<AUDIT-REPORT>
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Stockholders
Webco Industries, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Webco Industries, Inc. and subsidiary as of October 31, 1998, and the related
condensed consolidated statements of income for the three month periods ended
October 31, 1998 and 1997 and cash flows for the three-month periods ended
October 31, 1998 and 1997. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Webco Industries, Inc.
and subsidiary as of July 31, 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated September 9, 1998, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of July 31, 1998 is fairly stated in all material respects in relation to
the balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
November 23, 1998
</AUDIT-REPORT>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Webco Industries, Inc., an Oklahoma corporation founded in 1969 by F. William
Weber, chairman of the board and chief executive officer, is a specialty
manufacturer of high-quality carbon steel tubing and stainless steel tubing
products designed to industry and customer specifications. Webco's tubing
products consist primarily of: welded carbon heat exchanger tubing, welded
boiler tubing, stainless tube and pipe, and advanced carbon mechanical tubing
for use in consumer durable and capital goods. Management believes that Webco
is the domestic market leader in the manufacture of welded carbon heat
exchanger tubing and welded carbon boiler tubing, and the leading supplier of
stainless tubing for certain niche applications. The Company's subsidiary,
Phillips & Johnston, Inc. ("P&J"), represents several manufacturers in the
sale of various non-competing mechanical and specialty tubular products made
from copper, brass, aluminum, stainless steel and carbon steel, among others.
This representation allows the Company to better serve its customers by
offering a full range of tubing products. The Company's QuikWater division
manufactures and markets a patented direct contact water heater for commercial
and industrial applications. The Company has three production facilities in
Oklahoma and Pennsylvania and five distribution facilities in Oklahoma, Texas,
Illinois and Michigan, serving more than 1,300 customers throughout North
America.
Unless the context otherwise requires, the information contained in this
report, and the terms "Webco" and the "Company" when used in this report,
include Webco Industries, Inc. and its subsidiary, P&J, on a combined basis.
Results of Operations for the Three Months Ended October 31, 1998 Compared to
the Three Months Ended October 31, 1997
Manufactured Tubing Product sales for the quarter ended October 31, 1998
were $32,332,000, an increase of 3.2% over the $31,341,000 for the same
quarter last year. The $991,000 increase in net sales is primarily the result
of a 10.3% increase in the average net sales price per ton, which was
partially offset by a 6.4% decrease in the tonnage of tubing sold. The
increase in the average net selling price is a reflection of improved pricing
structures in stainless products combined with a sales mix emphasizing higher
priced products. A decrease in sales of mechanical tubing was primarily
responsible for the overall decrease in the tonnage of tubing sold.
Gross profit for Manufactured Tubing Products increased to $6,079,000 or 18.8%
of net sales for the first quarter of fiscal 1999 from $4,660,000 or 14.9% of
net sales for the same period in fiscal 1998. This is a function of a 10.3%
increase in the average net sales price per ton, noted above, which was
partially offset by a 7.5% increase in the average manufactured cost per ton
of tubing sold.
Other Tubing Products sales are made primarily by Webco's subsidiary, P&J.
Sales of these products increased 23.6% to $3,514,000 for the period ended
October 31, 1998 from $2,843,000 for the period ended October 31, 1997. While
there were some increases in sales prices, the increase in sales is primarily
the result of volume increases.
Gross profit from Other Tubing Products increased to $806,000 or 22.9% of net
sales for the first quarter of fiscal 1999 from $662,000 or 23.3% of net sales
for the same period in fiscal 1998.
<PAGE>
Sales for Quikwater were $737,000 for the first quarter of fiscal 1999, which
is double the $354,000 in sales for the same period in fiscal 1998. The
increase is the result of an expanded sales force and a continued increase of
recognition in the market place.
Gross profit for QuikWater was $82,000 for the first period of fiscal 1999 as
compared to ($32,000) for the same period of fiscal 1998. This increase is a
reflection of lower manufacturing fixed costs and to semi-fixed costs being
spread over higher volumes.
Commission income, which is generated by P&J's non-Webco sales representative
business, decreased slightly to $194,000 in the first fiscal quarter of 1999
from $228,000 in the same period of fiscal 1998. The decrease relates to the
loss of or resignation from customer accounts.
Selling, general and administrative expenses were $4,606,000 for the
first quarter of fiscal 1999 compared to $3,508,000 for the same quarter of
fiscal 1998. The increase in the current quarter is primarily the result of a
$290,000 increase in profit sharing and bonuses to employees, $306,000 in
legal fees related to the Thermatool litigation, and $160,000 of expense
related to the installation of an enterprise software system.
Income from operations for the current quarter increased to $2,555,000
(7.0% of net sales) as compared to $2,010,000 (5.8% of net sales) for the same
quarter last year. The increase is primarily attributable to the increase in
the average net selling price per ton which was partially offset by the
increase in the average manufactured cost per ton.
Interest expense for the current period was $599,000 ($692,000 prior to
interest capitalization) as compared to interest expense of $633,000 ($705,000
prior to interest capitalization) for the same quarter last year. The slight
decrease in interest prior to interest capitalization is the result of the
average level of debt under the bank Loan and Security Agreement for the three
months ended October 31, 1998 being $32.4 million as compared to $33.9 million
for the same period last year. In addition, the related average interest rate
decreased slightly to 7.43% in the first quarter of fiscal 1999 from 7.67% in
the first quarter of fiscal 1998.
The recorded income tax expense for the quarter ended October 31, 1998 is
based upon the estimated annual effective federal and state income tax rates.
Liquidity and Capital Resources
Net cash provided by operations was $3,244,000 for the three months ended
October 31, 1998 versus $400,000 for the three-month period ended October 31,
1997. While receivables decreased by $80,000 during the current period and
increased by $921,000 for the same period last year, inventories increased
$1,068,000 and $1,007,000 during the first quarter of fiscal 1999 and 1998,
respectively. Accounts payable increased by $1,236,000 in the current quarter
and decreased by $531,000 in the comparable quarter of fiscal 1998. In
<PAGE>
addition, accrued liabilities increased by $109,000 for the period ended
October 31, 1998 as compared to an increase of $451,000 during the same period
last year.
Net cash used in investing activities for the three months ended October
31, 1998 was $3,227,000, which was $657,000 greater than the $2,570,000 used
in investing activities during the same period in fiscal 1998. Capital
expenditures made during the quarter related to the initial expenditures for
the expansion of the Oil City facility, installation of new computer software
and continued progress with the expansion of the stainless facility, as well
as other projects which are expected to increase capacity and improve
productivity.
The Company's capital needs have historically been to fund equipment
purchases and for general working capital needs resulting from the growth that
the Company experienced. The Company has followed an aggressive capital
expenditure plan as part of its growth strategy and to enable it to continue
to be a leader in tubular manufacturing technologies. The Company foresees a
continuance of this strategy in the future. The Company is currently
evaluating expanding its carbon tubing manufacturing capacity.
The Company's financing arrangements provide for a term loan of $25 million
and a line of credit of $20 million. As of October 31, 1998, the Company had
$25 million outstanding on the term loan, and $7.2 million under the revolving
line of credit. These loans mature on August 31, 2002 and are collateralized
by substantially all of the Company's assets other than the Sand Springs and
Oil City real estate. The Company may have borrowings and outstanding letters
of credit ($550,000 at October 31, 1998) under the revolving credit facility
up to the lesser of $20.0 million or an amount determined by a formula based
on the amount of eligible inventories and accounts receivable. At October 31,
1998, $12.3 million was available for borrowing under this line of credit.
P&J has a line of credit agreement for $2,000,000 and a term note of $250,000
with its primary lender. As of October 31, 1998 the Company had $105,000
outstanding on the term loan, and no amounts outstanding under the line of
credit. The line of credit matures on April 30, 1999 and the term loan
matures in January 2000 and is collateralized by P&J's assets. At October 31,
1998, $2.0 million was available for borrowing under this line of credit.
In the past, the Company has funded its capital growth expenditures with a
combination of cash flow from operations and debt. With the possible
exception of the expansion of its carbon facilities, the Company currently
believes that working capital will fund capital spending in 1999. Any
significant carbon tubing capacity expansion may require an increase in
available debt facilities, or the possible issuance of common stock or other
securities.
Information Technology and the Year 2000
Over two years ago, the Company began an evaluation of its information systems
to determine the potential impact of advanced technology on the Company's
operations and profitability. During the course of this evaluation, issues
surrounding the effect of the year 2000 on date sensitive applications became
more widely publicized and understood. The Company, recognizing an
opportunity to both update its technology and to address year 2000 concerns,
<PAGE>
decided to replace its current information systems with an Enterprise Resource
Planning ("ERP") system.
In the second quarter of fiscal 1998, the Company purchased, and began
installation of, an ERP system. The installation process, which includes the
testing of date functions, consists of four phases. The first phase of
installation, addressing the financial, purchasing and plant maintenance
functions, was successfully completed before the end of fiscal 1998. The
remaining three phases, including materials management, shop floor control,
and production planning for each of the Company's three manufacturing
locations and related facilities, are scheduled for completion late in fiscal
1999.
The Company has also been evaluating non-information technology systems such
as phone systems, e-mail and personal computers. These systems are either
currently year 2000 compliant or will have been replaced with year 2000
compliant equipment before July 31, 1999. Other important systems, including
equipment used in manufacturing and processing, are basically signal driven
systems where dates play no role in the operating logic.
The Company is currently trying to determine the impact of year 2000 non-
compliance by third parties, including vendors and customers. The impact of
such non-compliance could effect timely delivery of raw materials and cause
reductions in orders by customers who are unable to control their own
production and sales process.
The Company presently believes that with the implementation of the ERP system
and the replacement of other non-compliant systems, the year 2000 issue will
not pose significant operational problems for its computer systems. However,
if installation of the ERP is not completed in a timely manner and non-
compliant systems replaced, the year 2000 issue could have a material impact
on the operations of the Company. Ramifications could include mismatched
material purchase orders and customer sales orders and a need to manually
operate materials planning, purchasing, order backlog and capacity planning
functions. A transition to manual operations could result in, among other
things, damage to customer relationships, lost sales, and significant customer
claims.
As of October 31, 1998, the Company had spent $2.9 million on the ERP system
and the Company currently estimates another $3.1 will be expended to complete
the project. Of the $6 million total expenditure, over 25% is hardware
related, including upgrading the Company's mid-range computers and the
placement of personal computers on the shop floor. Due to the necessity of
technology upgrades generally, it would be arbitrary to allocate any portion
of this project exclusively to the correction of year 2000 issues and
therefore no such allocation has been attempted.
The foregoing forward-looking statements, including the costs of addressing
the year 2000 issue and the dates upon which compliance will be attained,
reflect management's current assessment and estimates with respect to the
Company's year 2000 compliance effort. Various factors could cause actual
plans and results to differ materially from those contemplated by such
assessments, estimates and forward-looking statements, many of which are
beyond the control of the Company. Some of these factors include, but are not
<PAGE>
limited to, third party modification and installation plans, representations
by vendors and customers, technological advances, economic considerations and
customer perceptions.
Forward Looking Statements
Certain statements in this Form 10-Q, including statements preceded by,
or predicated upon the words "expects" and "believes", constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. 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,
among others: general economic and business conditions, competition from
imports, changes in manufacturing technology, industry capacity, domestic
competition, raw material costs and availability, loss of significant
customers and customer and vendor work stoppages, successful implementation of
enterprise software and Year 2000 compliance by customers and vendors. The
reader should refer to Part I, Item 1: "Forward Looking Statements" of the
Company's Form 10-K for the year ended July 31, 1998 for additional
information regarding this matter.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In August 1997, the Company filed an action, Webco Industries, Inc. vs.
Thermatool Corporation and Alpha Industries, Inc., relating to certain cut-off
equipment sold to the Company and installed on Mill 3, which did not perform
to specifications. The case, filed in the United States District Court for
the Northern District of Oklahoma (Case No. 97-CV-708H (W)), seeks recoveries
including, but not limited to, the cost of the equipment and other incidental
and consequential damages, including lost profits, suffered by the Company.
The trial is currently set for January 19, 1999. On December 1, 1998, the
court ruled that the Company could not collect incidental and consequential
damages including lost profits and limited the Company's possible recovery to
the purchase price of the equipment plus the cost of certain improvements.
The Company intends to appeal this ruling. There can be no assurance that the
Company will prevail in all or in part of its action, or that if successful,
any recoveries will be commensurate with the damages suffered by the Company.
In addition, the Company is a party to various other lawsuits and claims
arising in the ordinary course of business. Management, after review and
consultation with legal counsel, considers that any liability resulting from
these matters would not materially affect the results of operations or the
financial position of the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 15.1: Letter Regarding Unaudited Interim Financial
Information
B. Reports on Form 8-K
On September 11, 1998, the Company filed a report on
Form 8-K/A for the purpose of filing historical audited and
pro forma financial information relating to its merger with
Phillips & Johnston, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEBCO INDUSTRIES, INC. AND SUBSIDIARY
December 14, 1998 /s/F. William Weber
F. William Weber
Chairman
Chief Executive Officer
Director
December 14, 1998 /s/Dana S Weber
Dana S. Weber
President
Chief Operating Officer
Director
December 14, 1998 /s/Michael P. Howard
Michael P. Howard
Treasurer
Chief Financial Officer
Vice President of Finance and Administration
<PAGE>
EXHIBIT 15.1
WEBCO INDUSTRIES, INC.
LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D.C. 20549
Re: Webco Industries, Inc.
Registration on Form S-3 and S-8
We are aware that our report dated November 23, 1998, on our review of the
interim financial information of Webco Industries, Inc. for the periods ended
October 31, 1998 and 1997, and included in this Form 10-Q is incorporated by
reference in the Company's registration statements on Form S-3 (File nos. 333-
22779 and 333-67923) and S-8 (File no. 333-49219). Pursuant to Rule 436(c)
under the Securities Act of 1933, these reports should not be considered a
part of the registration statement prepared or certified by us within the
meaning of Sections 7 and 11 of the Act.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
December 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 264
<SECURITIES> 0
<RECEIVABLES> 19794
<ALLOWANCES> 0
<INVENTORY> 28843
<CURRENT-ASSETS> 51176
<PP&E> 89502
<DEPRECIATION> 30865
<TOTAL-ASSETS> 114173
<CURRENT-LIABILITIES> 20907
<BONDS> 33384
0
0
<COMMON> 72
<OTHER-SE> 49457
<TOTAL-LIABILITY-AND-EQUITY> 114173
<SALES> 36583
<TOTAL-REVENUES> 36583
<CGS> 29616
<TOTAL-COSTS> 29616
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 599
<INCOME-PRETAX> 1956
<INCOME-TAX> 744
<INCOME-CONTINUING> 1212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1212
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
