Webco Industries, Inc. Completes Acquisition of Phillips & Johnston, Inc

Business Wire, July 7, 1998

TULSA, Okla.--(BUSINESS WIRE)--July 7, 1998--Webco Industries, Inc. (AMEX: WEB) announced today that it has completed its previously announced acquisition of Phillips & Johnston, Inc. ("P&J"), for 830,000 shares of Webco common stock effected through a merger transaction. P&J, is a Chicago based sales representation organization and value-added tubing processor and had 1997 revenues of approximately $18,300,000. The Company is accounting for this business combination under the pooling of interests method.

F. William Weber, Webco's Chairman and Chief Executive Officer, commented: "P&J has been our business partner for more than 22 years and last year participated in over half of our sales. The merging of our organizations confirms our strong relationship and fosters an environment in which we can both grow more rapidly and efficiently. The addition of P&J will improve Webco's service capabilities, while at the same time broadening the range of products that Webco can market. In addition to the operational and marketing positives, the merger is accretive to diluted earnings per share."

The Company noted that prior year earnings will be restated as a result of the pooling transaction. Webco's reported earnings for the fiscal year ended July 31, 1997 will be $0.44 per diluted share, after making certain pro forma tax adjustments because of P&J's previous Subchapter S tax status, compared to the $0.31 per diluted share as previously reported. Similarly, earnings per diluted share for the nine months ended April 30, 1998 will be $0.59 as a result of the merger compared to $0.51 as previously reported. Estimated one-time merger related expenses of $450,000 or $0.04 per share will be charged to earnings in the fourth quarter.

Dana Weber, President and Chief Operating Officer, said: "While we celebrate the closing of this transaction, we closely watch the progress of the General Motors strike as to its impact on our fourth quarter. Approximately 10% of Webco's sales are to companies who are direct suppliers of GM. Most of these suppliers have curtailed or delayed orders pending the resolution of the strike. At this time, it is not possible to determine the magnitude of the effect of the GM shutdown on Webco. However, we are continuing our aggressive sales efforts to non-GM customers while minimizing operating costs wherever it is feasible. Most importantly, we are focused on strengthening our position as a supplier to GM and its direct suppliers by being fully prepared for the resumption of production after the strike is settled."

Webco 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 mechanical tubing for use in consumer durable and capital goods. The Company's subsidiary Phillips & Johnston, represents several manufacturers who produce various mechanical and specialty tubular products made from copper, brass, aluminum and surgical steel, among others. Through its QuikWater division, the Company manufactures and markets a patented direct contact water heater for commercial and industrial applications. The Company, including Phillips & Johnston, 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.

Safe harbor for forward-looking statements: Certain statements in this release, including those predicated or preceded by the words "believes", "expects" or "plans", should be considered forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to industry demand, competition, changes in the availability and pricing of carbon and stainless steel, labor supply near the Company's manufacturing facilities, interest rate fluctuations, foreign influences on domestic markets and other capital market conditions. -0-

                        WEBCO INDUSTRIES, INC.
                   RESTATED STATEMENTS OF INCOME (1)
           (Dollars in thousands, except per share amounts)
                              (Unaudited)

                                 Nine Months Ended    Year Ended
                                     April 30,          July 31,
                                 1998        1997         1997
Net sales                      $113,648     $94,480     $128,593
Cost of sales                    92,842      80,042      108,347
Gross profit                     20,806      14,438       20,246
Commission income                   551         442          842
Selling, general &
 administrative                  12,687       8,912       12,952
Special item:
  Write-off of Mill no.3
   cut-off equipment                - -        884           884
Income from operations            8,670       5,084        7,252
Interest expense                  1,811       1,474        2,046
   Income before income taxes     6,859       3,610        5,206
Provision for income taxes        2,035         789        1,257
Net income                       $4,824      $2,821       $3,949

Pro forma net income (2)         $4,230      $2,206       $3,190

Net income per diluted
  common share                  $  0.67     $  0.39      $  0.55

Pro forma net income per
 diluted common share (2)       $  0.59     $  0.31      $  0.44

Weighted average common
 shares outstanding
   Basic                      7,169,000   7,169,000    7,169,000
   Diluted                    7,227,000   7,169,000    7,169,000


                        WEBCO INDUSTRIES, INC.
                 RESTATED BALANCE SHEET HIGHLIGHTS (3)
                        (Dollars in thousands)
                              (Unaudited)

                                           As of
                                          April 30,
                                            1998
Working capital                          $  29,414
Net property, plant and equipment        $  54,360
Total assets                             $  08,450
Long-term debt                           $  30,442
Equity                                   $  47,432