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 ~~April~~October 3031, ~~2003~~2004 _____________________________________________________________________________

[ ] 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 incorporation or organization) (I.R.S. Employer Identification No)

9101 West 21^st 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~~

[ X ] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [ X ] No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: 7,~~081~~109,~~723~~061 shares of Common Stock, $0.01 par value, as of ~~May~~November 3130, ~~2003~~2004.

WEBCO INDUSTRIES, INC. AND SUBSIDIARY
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
	Page
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited):
Balance Sheets	3
Statements of Operations	4
Statements of Cash Flows	5
Notes to Unaudited Financial Statements	6-9
Report of Independent Accountants	10
Report of Independent Registered Public Accounting Firm	10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations	11-1918
Item 3. Quantitative and Qualitative Disclosures about Market Risk	2019
Item 4. Controls and Procedures	2120
PART II OTHER INFORMATION
Item 1. Legal Proceedings	2221
Item 2. Changes in Securities and Use of Proceeds	22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3. Defaults Upon Senior Securities	2221
Item 4. Submission of Matters to a Vote of
Security Holders	2221
Item 5. Other Information	2221
Item 6. Exhibits and Reports on Form 8-K	22
Item 6. Exhibits	21
SIGNATURES	2322

WEBCO INDUSTRIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(Unaudited)
	April 30,	July 31,
	2003 -	2002 -
ASSETS
Current assets:
Cash	$ 164	$ 212
Accounts receivable, net	22,499	18,564
Inventories	38,621	34,307
Prepaid expenses	994	281
Deferred income tax asset	3,373	2,553
Total current assets	65,651	55,917
Property, plant and equipment, net	60,453	62,974
Notes receivable from related parties	2,547	2,508
Other assets, net	1,519	2,529
Total assets	$ 130,170 ======	$ 123,928 ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 17,048	$ 17,673
Accrued liabilities	5,872	5,788
Current portion of long-term debt	3,061	3,135
Total current liabilities	25,981	26,596
Long-term debt	40,374	37,325
Deferred income tax liability	12,768	10,861
Commitments and contingencies - Note 3
Stockholders' equity:
Common stock, $.01 par value, 12,000,000 shares
authorized, 7,081,723 shares issued and outstanding	71	71
Additional paid-in capital	35,744	35,744
Retained earnings	15,232	13,331
Total stockholders' equity	51,047	49,146
Total liabilities and stockholders' equity	$ 130,170 ======	$ 123,928 ======

WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(Unaudited)

	October 31,	July 31,
	2004 -	2004 -
ASSETS

Current assets:
Cash	$ 846	$ 1,203
Accounts receivable, net	36,638	27,911
Inventories	64,099	49,639
Prepaid expenses	836	358
Deferred income tax asset	2,697	2,664

Total current assets	105,116	81,775

Property, plant and equipment, net	59,715	59,621

Notes receivable from related parties	2,626	2,613
Other assets, net	2,093	1,422

Total assets	$ 169,550 ======	$ 145,431 ======


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$ 18,677	$ 14,666
Accrued liabilities	12,735	9,586
Current portion of long-term debt	42,262	40,688

Total current liabilities	73,674	64,940

Long-term debt	16,999	8,310

Deferred income tax liability	13,614	13,725

Commitments and contingencies - Note 4

Stockholders' equity:
Common stock, $.01 par-value, 12,000,000 shares authorized, 7,082,623 and 7,081,723 shares issued and outstanding at October 31, 2004 and July 31, 2004, respectively	71	71
Additional paid-in capital	35,748	35,744
Accumulated other comprehensive income, net of tax	363	174
Retained earnings	29,081	22,467

Total stockholders' equity	65,263	58,456

Total liabilities and stockholders' equity	$ 169,550 ======	$ 145,431 ======

See accompanying notes to unaudited consolidated financial statements.

WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)

	Three months ended October 31,
	2004 -	2003 -

Net Sales	$ 71,727	$ 49,090
Cost of Sales	54,885	44,496
Gross Profit	16,842	4,594

Selling, general and administrative expenses	5,732	3,334
Income from operations	11,110	1,260

Interest expense	533	555
Income before income taxes	10,577	705

Provision for income taxes	3,963	291
Net income	$ 6,614 ======	$ 414 ======

Net income per share:
Basic	$ .93 ======	$ .06 ======
Diluted	$ .92 ======	$ .06 ======
Weighted average common shares outstanding:
Basic	7,083 ======	7,082 ======
Diluted	7,192 ======	7,147 ======

See accompanying notes to unaudited consolidated financial statements.

WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

	Three Months Ended October 31,
	Three Months Ended October 31,
	2004 -	2003 -

Cash flows from operating activities:
Net income	$ 6,614	$ 414
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization	1,768	1,789
(Gain) loss on disposition of property, plant and equipment	-	7
Deferred tax expense	(248)	257
(Increase) decrease in:
Accounts receivable	(8,300)	(4,742)
Inventories	(14,460)	(774)
Prepaid and Other	(491)	(5)
Increase (decrease) in:
Accounts payable	3,692	(2,657)
Accrued liabilities	3,106	312
Net change from discontinued operation	(4)	(2)

Net cash used in operating activities	(8,323)	(5,401)

Cash flows from investing activities:
Capital expenditures	(1,918)	(2,339)
Proceeds from sale of property, plant and equipment	-	2
Other	-	63

Net cash used in investing activities	(1,918)	(2,274)

Cash flows from financing activities:
Proceeds from long-term debt	87,736	47,322
Principal payments on long-term debt	(77,473)	(42,111)
Debt issue costs	(383)	(50)
Proceeds from stock issuance	4	-
Increase in book overdrafts	-	2,487

Net cash provided by financing activities	9,884	7,648

Net decrease in cash	(357)	(27)

Cash, beginning of period	1,203	189

Cash, end of period	$ 846 ======	$ 162 ======

See accompanying notes to unaudited consolidated financial statements.

~~See~~Note ~~accompanying~~1 ~~notes~~– toBasis ~~unaudited consolidated~~of ~~financial~~Presentation ~~statements.~~and Selected Significant Accounting Policies

3The accompanying unaudited consolidated financial statements include the accounts of Webco Industries, Inc. and its wholly owned subsidiaries, Phillips & Johnston, Inc. (“P&J”) and Webco Tube, Inc. 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 wholly-owned subsidiaries on a consolidated basis. Webco is a manufacturer and value-added distributor of high-quality carbon steel, stainless steel and other metal tubular products designed to industry and customer specifications. All significant inter-company accounts and transactions have been eliminated in the accompanying financial statements.

WEBCO INDUSTRIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
	Three Months Ended April 30, 2003		Nine Months Ended April 30, 2003
	2003 -	2002 -	2003 -	2002 -
Net Sales	$ 44,704	$ 40,151	$ 132,155	$ 118,189
Cost of Sales	41,380	34,917	117,822	103,847
Gross Profit	3,324	5,234	14,333	14,342
Selling, general and administrative expenses	2,676	3,633	9,393	9,730
Litigation award - Note 3	-	-	-	1,580
Income from operations	648	1,601	4,940	6,192
Interest expense	535	694	1,718	2,391
Income before income taxes	113	907	3,222	3,801
Provision for income taxes	46	348	1,321	1,458
Income from continuing operations	67	559	1,901	2,343
Loss on discontinued operation, net of tax - Note 4	-	(773)	-	(815)
Net income	$ 67 ======	$ (214) ======	$ 1,901 ======	$ 1,528 ======
Net income (loss) per common share - basic:
Continuing operations	$ .01	$ .08	$ .27	$ .33
Discontinued operation	-	(.11)	-	(.12)
Net income (loss)	$ .01 ======	$ (.03) ======	$ .27 ======	$ .22 ======
Net income (loss) per common share - diluted:
Continuing operations	$ .01	$ .08	$ .27	$ .33
Discontinued operation	-	(.11)	-	(.12)
Net income (loss)	$ .01 ======	$ (.03) ======	$ .27 ======	$ .21 ======
Weighted average common shares outstanding:
Basic	7,082 ======	7,079 ======	7,082 ======	7,076 ======
Diluted	7,146 ======	7,185 ======	7,149 ======	7,144 ======

The unaudited consolidated financial statements include, in the opinion of management, all adjustments, which are of a normal recurring nature, necessary for the fair presentation of the Company’s financial position at October 31, 2004, and results of operations and cash flows for the three-month periods ended October 31, 2004 and 2003. Results for the three-month period ended October 31, 2004 are not necessarily indicative of results that will be realized for the full 2005 fiscal year. The July 31, 2004, year-end balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes which can be found in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2004.

~~See~~The ~~accompanying~~Company’s ~~notes~~independent toregistered ~~unaudited~~public accounting firm has ~~consolidated~~performed a review of these interim financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Pursuant to Rule 436(c) under the Securities Act of 1933, their report of that review should not be considered as part of any registration statements prepared or certified by them within the meaning of Sections 7 and 11 of that Act.

4Derivative Financial Instruments - The Company accounts for its natural gas hedge instruments according to FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS Nos. 137, 138 and 149. These statements require that every derivative or hedge instrument be recorded on the balance sheet as either an asset or a liability measured at fair value. The Company formally documents its hedge instruments as hedges of a specific underlying exposure (natural gas prices), as well as the risk management objective and strategy for entering into each hedge transaction. At October 31, 2004, the Company’s natural gas hedges had a positive net fair value of $588,000. This amount is included in other assets on the Company’s balance sheet with a corresponding credit balance of $363,000, net of a deferred tax liability of $225,000, reported in stockholders’ equity as accumulated other comprehensive income, net of tax. See Note 2.

WEBCO INDUSTRIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
	Nine Months Ended April 30,
	2003	2002
Cash flows from operating activities:
Net income	$ 1,901	$ 1,528
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Loss on disposal of discontinued operation	-	914
Depreciation and amortization	5,184	5,350
(Gain) Loss on disposition of property, plant and equipment	(2)	9
Deferred tax expense	1,024	895
(Increase) decrease in:
Accounts receivable	(3,942)	190
Inventories	(4,314)	3,249
Prepaid and Other	(689)	(182)
Increase (decrease) in:
Accounts payable	(3,227)	(5,177)
Accrued liabilities	142	965
Net change from discontinued operation	(93)	(8)
Net cash provided by (used in) operating activities	(4,016)	7,733
Cash flows from investing activities:
Capital expenditures	(2,352)	(2,419)
Proceeds from sale of property, plant and equipment	2	7
Repayment of stockholder advances	-	50
Other	844	131
Net change from discontinued operation	-	(11)
Net cash used in investing activities	(1,506)	(2,242)
Cash flows from financing activities:
Proceeds from long-term debt	125,020	107,536
Principal payments on long-term debt	(122,045)	(117,056)
Proceeds from stock options exercised	-	12
Debt issue costs	(32)	(121)
Increase in book overdrafts	2,531	3,338
Net cash provided by (used in) financing activities	5,474	(6,291)
Net increase (decrease) in cash	(48)	(800)
Cash, beginning of period	212	989
Cash, end of period	$ 164 ======	$ 189 ======

Note 1 – General, continued

~~See~~Stock ~~accompanying~~Options ~~notes~~- The Company accounts for stock options granted under its 1994 Stock Incentive Plan (the “Plan”) using the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” ~~unaudited~~and related interpretations. No stock-based compensation cost is ~~consolidated~~reflected ~~financial~~in ~~statements~~net income, as all options granted under the Plan were to employees and directors at an exercise price at least equal to the market value of the underlying common stock on the date of grant. FASB Statement No. 123, “Accounting for Stock-Based Compensation” and FASB Statement No. 148, "Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123," (together “FASB 123”) provides an alternative “fair value” method of accounting for stock option grants. Under FASB 123, the fair value of stock options on the date of grant is recorded as compensation expense. The fair value of options reported below has been estimated at the date of grant using the Black-Scholes option pricing model. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB 123 to stock-based employee compensation (in thousands, except per share amounts):

	Three Months Ended
	October 31,
	2004 .	2003 .
Net income, as reported	$ 6,614	$ 414
Less: Total stock-based employee compensation expense determined under fair value based method for all awards	(6)	(17)
Pro forma net income	$ 6,608 ======	$ 397 ======

Earnings per share:
Basic-as reported	$ .93 ======	$ .06 ======
Basic-pro forma	$ .93 ======	$ .06 ======

Diluted-as reported	$ .92 ======	$ .06 ======
Diluted-pro forma	$ .92 ======	$ .06 ======

~~WEBCO~~Note ~~INDUSTRIES,~~2 ~~INC.~~– ~~AND~~Comprehensive ~~SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Income

~~Note~~The 1Company -follows ~~General~~FASB Statement No. 130, “Reporting Comprehensive Income.” This statement requires the reporting of comprehensive income and its components which includes the changes in fair market value of the Company’s natural gas hedge contracts. The Company’s comprehensive income for the three months ended October 31, 2004 and 2003 was as follows (in thousands):

The accompanying unaudited consolidated financial statements include the accounts of Webco Industries, Inc. (together with its subsidiary, "Webco" or the "Company") and its wholly owned subsidiary Phillips & Johnston, Inc. All significant inter-company accounts and transactions have been eliminated in the accompanying financial statements. In May, 2002, the Company sold substantially all of the assets of its QuikWater Division. As a result, the fiscal 2002 consolidated financial statements and related footnotes have been adjusted to treat the sale as a discontinued operation. The reader should refer to Note 4 - Discontinued Operation for additional information regarding this matter.

		Three Months Ended October 31,
	2004		2003
Net Income	$ 6,614		$ 414
Changes in value of derivative hedging instrument, net of taxes of $120 and ($52), respectively	213		(74)
Reclassification of derivative hedging settlements to income, net of taxes of ($16) and $6, respectively	(24)		9
	189		(65)
Comprehensive Income	$ 6,803 =====		$ 349 =====

~~The unaudited~~As ~~consolidated~~of ~~financial~~October ~~statements include~~31, ~~in the opinion of management~~2004, ~~all adjustments~~accumulated ~~(which~~other ~~are~~comprehensive ~~of a normal recurring nature) necessary for the fair presentation of financial position at April 30~~income, ~~2003,~~net ~~and results~~ of ~~operations for the three-month and~~ ~~nine-month periods ended April 30~~tax, ~~2003~~reported ~~and~~in ~~2002 and cash flows for~~ the ~~nine-month~~equity ~~periods ended~~section ~~April 30, 2003 and 2002. Results for the three-month and nine-month periods ended April 30, 2003 are not necessarily indicative~~ of ~~results that will be realized for~~ the ~~full~~consolidated ~~2003 fiscal year. The year-end~~ balance sheet ~~was~~represents ~~derived from the audited~~a ~~consolidated financial statements~~$363,000 ~~but~~increase ~~does~~in ~~not~~the ~~include~~fair ~~all~~market ~~disclosures~~value ~~required~~on ~~by generally~~natural ~~accepted~~gas ~~accounting~~hedging ~~principles. These~~instruments, ~~unaudited~~net ~~consolidated financial~~of ~~statements~~$225,000 ~~should~~tax beexpense ~~read~~included in ~~conjunction~~deferred ~~with~~income ~~the~~tax ~~audited consolidated financial statements and related notes which can be found in the Company's Form 10-K for the year ended July 31, 2002~~liability.

~~The Company's~~Note ~~independent~~3 ~~accountants~~- have performed a review of these interim financial statements in accordance with standards established by the American Institute of Certified Public Accountants. Pursuant to Rule 436 (c) under the Securities Act of 1933, their report of that review should not be considered as part of any registration statements prepared or certified by them within the meaning of Sections 7 and 11 of that Act.Inventories

6At October 31, 2004 and July 31, 2004, inventories were as follows (in thousands):

WEBCO INDUSTRIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	October 31, 2004	July 31, 2004

Raw materials	$ 34,118	$ 22,131
Work-in-process	4,267	3,972
Finished goods	22,173	20,044
Maintenance parts and supplies	3,541	3,492

Total inventories	$ 64,099 ======	$ 49,639 ======

Note 14 -– ~~General,~~Commitments ~~continued~~and Contingencies

The Company ~~accounts~~is ~~for~~party ~~its~~to ~~1994~~various ~~Stock~~lawsuits ~~Incentive~~and ~~Plan~~claims ~~(the~~arising ~~"Plan")~~in ~~under~~ the ~~recognition~~ordinary ~~and~~course ~~measurement principles~~ of ~~APB~~business ~~Opinion~~and ~~No.~~accrues ~~25, "Accounting~~ for ~~Stock Issued~~such toclaims ~~Employees",~~when ~~and~~the ~~related~~liability ~~interpretations. No stock-based compensation cost~~ is ~~reflected in net income, as all options granted under the Plan had an exercise~~both ~~price~~probable ~~equal~~and to the ~~market~~amount ~~value~~can ofbe ~~the~~reasonably ~~underlying common stock on the date of grant~~estimated. ~~The~~ Management, ~~following~~after ~~table~~review ~~illustrates the effect on net income~~ and ~~earnings per share if the~~ ~~Company~~consultation ~~had~~with ~~applied~~legal ~~the~~counsel, ~~fair~~believes ~~value~~that ~~recognition~~any ~~provisions~~results of ~~FASB~~such ~~Statement~~litigation ~~No. 123, "Accounting for Stock-Based Compensation"~~ and ~~FASB Statement No. 148,~~claims ~~"Accounting~~would ~~for~~not ~~Stock-Based~~materially ~~Compensation~~affect -the ~~Transition~~results ~~and Disclosure, an amendment~~ of ~~FASB~~ ~~Statement~~operations ~~No.~~or ~~123",~~the tofinancial ~~stock-based~~position ~~employee~~of ~~compensation (in thousands):~~the Company.

	Three Months Ended		Nine Months Ended
	April 30,		April 30,
	2003 .	2002 .	2003 .	2002 .
Net income (loss), as reported	$ 67	$ (214)	$ 1,901	$ 1,528
Less: Total stock-based employee compensation expense determined under fair value based method for all awards	(44)	(46)	(101)	(114)
Pro forma net income (loss)	$ 23 =====	$ (260) =====	$ 1,800 =====	$ 1,414 =====
Earnings (loss) per share:
Basic-as reported	$ .01 =====	$ (.03) =====	$ .27 =====	$ .22 =====
Basic-pro forma	$ .00 =====	$ (.04) =====	$ .25 =====	$ .20 =====
Diluted-as reported	$ .01 =====	$ (.03) =====	$ .27 =====	$ .21 =====
Diluted-pro forma	$ .00 =====	$ (.04) =====	$ .25 =====	$ .20 =====

Note 2 - Inventories

At April 30, 2003 and July 31, 2002, inventories were as follows (in thousands):

	April 30, 2003	July 31, 2002
Raw materials	$ 13,881	$ 13,341
Work-in-process	2,558	1,538
Finished goods	19,196	16,637
Maintenance parts and supplies	2,986	2,791
Total inventories	$ 38,621 =====	$ 34,307 =====

WEBCO INDUSTRIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Commitments and Contingencies

The Company is 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.

In January 2002, the Company settled litigation with a vendor relating to equipment sold to the Company which did not perform to specifications. The total judgment of $1.58 million was collected and no further action by either party is expected. The reader should refer to Part II, Item 8: Note 8 - Commitments and Contingencies, in the footnotes to the consolidated financial statements included in the Company's Form 10-K for the year ended July 31, 2002 for additional information regarding this matter.

Note 4 - Discontinued Operation

On March 31, 2002, the Board of Directors approved a plan of divestiture for the Company's QuikWater Division and on May 10, 2002, the Company sold substantially all of the assets of this segment to a group of independent investors and members of management of QuikWater, which included Ashley Weber, daughter of F. William Weber, Chairman and Chief Executive Officer of the Company. The sale of the QuikWater Division represents a disposal of a business segment under Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144). Accordingly, prior year results of the QuikWater segment have been classified as discontinued, and prior periods have been restated. The reader should refer to Part II, Item 8: Note 5 - Discontinued Operation, in the footnotes to the consolidated financial statements included in the Company's Form 10-K for the year ended July 31, 2002 for additional information regarding this matter.

Net sales from the discontinued operation for the three-month and nine-month periods ended April 30, 2002 were $343,000 and $1,912,000. For the same periods, the discontinued segment incurred pre-tax losses from operations and disposal of $1,246,000 and $1,314,000, or after-tax losses of $773,000 and $815,000, respectively.

WEBCO INDUSTRIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Common Stock and Common Stock Equivalents

Presented below is a reconciliation of the differences between actual weighted average shares outstanding and diluted weighted average shares (in thousands, except per share amounts).

	~~Three Months Ended~~	Three Months Ended	~~Nine Months Ended~~
	April 30,		April 30,
		October 31,
	2003 .	2002 .	2003 .	2002 .
		2004 .	2003 .
Basic EPS:
Basic:
Weighted average shares outstanding	~~7,082~~	7,~~079~~083	7,082	~~7,076~~
Effect of dilutive securities: Options	64	106	67	68
Effect of dilutive securities: options		109	65
Diluted EPS:
Diluted:
Diluted weighted average shares outstanding	~~7,146 =====~~	7,~~185~~192 =====	7,~~149~~147 =====	~~7,144 =====~~
Anti-dilutive options outstanding:
Anti-dilutive options outstanding (1):
Number of options	~~680 =====~~	~~438 =====~~370	~~680 =====~~675	~~606 =====~~
Weighted average exercise price per share	~~$ 5.56 =====~~	$ 6.5556 =====	$ 5.56 =====	~~$ 5.87 =====~~

(1) – Anti-dilutive options and their average exercise prices were not included in the computation of diluted earnings per share due to the option exercise prices being greater than the average market price of the common stock during the periods reported.

Note 6 - Segment Information

The Company applies the provisions of Statement ~~FAS~~of Financial Accounting Standards No. 131, "“Disclosures about Segments of an an Enterprise and Related Information"~~. Prior~~(FAS ~~to the quarter ended April 30, 2002, the Company had two reportable segments: Tubing Products and QuikWater, representing the Company's two strategic business units offering different products~~131). ~~However, the QuikWater segment was disposed of on May 10, 2002 leaving one remaining segment.~~ The Company internally evaluates its business by facility, however, because of the similar ~~economic~~ economic characteristics of the tubing operations conducted at these facilities, including the nature of products, processes and customers, those operations are aggregated for segment ~~determination~~ determination purposes. As a result, the Company's ~~continuing~~ operations only include ~~activities~~one reportable segment related to the manufacturing and distribution of tubular products, primarily ~~principally~~ made of carbon and stainless steel.

9 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of

Webco Industries, Inc.

We have reviewed the accompanying consolidated balance sheet of Webco Industries, Inc. and ~~subsidiary~~ subsidiaries as of ~~April~~October 3031, ~~2003~~2004, and the related consolidated statements of operations ~~for the three-month~~ and ~~nine-month periods ended April 30, 2003 and 2002 and~~ cash flows for the ~~nine~~three-month periods ended ~~April~~October 3031, ~~2003~~ 2004 and ~~2002~~2003. These interim financial statements are the responsibility of the Company'’s management.

We conducted our review in accordance with the standards ~~established~~of by the ~~American~~Public Company ~~Institute~~Accounting ~~of Certified~~Oversight ~~Public~~Board ~~Accountants~~(United States). 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~~the ~~accepted~~standards ~~auditing~~of ~~standards,~~the Public Company Accounting Oversight Board, 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 interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We ~~have~~ previously audited in accordance with ~~auditing~~the standards ~~generally~~of ~~accepted in~~ the Public ~~United~~Company ~~States~~Accounting ofOversight ~~America~~Board (United States), the consolidated balance sheet as of July 31, ~~2002~~2004, 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~~October 2528, ~~2002~~2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of ~~July~~October 31, ~~2002~~2004 is fairly stated in all material respects in relation to the balance sheet from which it has been derived.

PricewaterhouseCoopers LLP Tulsa, Oklahoma

~~Tulsa,~~December ~~Oklahoma May 30~~9, ~~2003~~2004

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~General~~Executive Overview

Webco Industries, Inc., an Oklahoma corporation, was founded in 1969 by F. William Weber, Chairman of the Board and Chief Executive Officer. Webco is a manufacturer and value-added distributor of high-quality carbon steel, ~~and~~ stainless steel ~~tubing~~and other metal tubular products designed to industry and customer specifications. ~~Webco is also a value-added distributor of these and other~~ ~~metal tubular products.~~ Webco's tubing products consist primarily of pressure tubing and specialty tubing for use in durable and capital goods ~~markets~~including heat exchangers, boilers, autos and trucks, and home appliances. The Company's long-term strategy ~~involves~~is to pursue growth and profitability through the ~~pursuit~~development of niche markets within the ~~pressure~~tubular products industry where the Company can provide a high level of customer service and ~~specialty~~value-added ~~tubing~~engineering ~~markets~~ through the deployment of leading-edge manufacturing and information technology. The Company has three production facilities in Oklahoma and Pennsylvania and five value-added distribution facilities in Oklahoma, Texas, Illinois and Michigan, serving more than ~~950~~1,000 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 wholly-owned ~~subsidiary,~~subsidiaries ~~Phillips & Johnston, Inc.,~~ on a consolidated basis.

~~In May,~~Recent 2002, the Company sold substantially all of the assets of its QuikWater Division and the disposal was treated as a discontinued operation. The reader should refer to Part II, Item 8: Note 5 - Discontinued Operation, in the footnotes to the consolidated financial statements included in the Company's Form 10-K for the year ended July 31, 2002 for additional information regarding this matter.Events

~~Results~~On November 4, 2004, the Company announced that the Special Committee of ~~Operations~~its Board of Directors, and its full Board of Directors, had unanimously approved an increase in the price proposed to be paid for fractional shares acquired as a result of the ~~Three~~proposed ~~Months~~reverse ~~Ended~~split ~~April~~and 30subsequent forward split of Webco’s common stock. The new price proposed to be paid for fractional shares will be $6.50 per pre-split share, ~~2003~~increased from the previously ~~Compared~~determined price of $4.75 per pre-split share. The Board also determined that the proposed reverse/forward stock split would involve, at the discretion of the Board, one of four, instead of the previously announced five, alternative reverse/forward stock splits (each with a net effect of a one-for-ten reverse stock split) as follows: a reverse one-for-200 stock split followed immediately by a forward 20-for-one stock split of the common ~~Three~~stock; ~~Months~~a ~~Ended~~reverse ~~April~~one-for-500 30stock split followed immediately by a forward 50-for-one stock split of the common stock; a reverse one-for-800 stock split followed immediately by a forward 80-for-one stock split of the common stock; and a reverse one-for-1,000 ~~2002~~stock split followed immediately by a forward 100-for-one stock split of the common stock. Stockholders whose shares are converted into less than one share in the reverse split because they have fewer than the reverse split ratio at the effective time of the reverse split will receive a cash payment from Webco of $6.50 for each share of common stock that they held immediately prior to the reverse stock split. Stockholders who own more than one share after the reverse stock split will receive one share for every 10 shares that they owned immediately prior to the reverse stock split and, for each fractional share that they would hold as a result of the forward stock split, they will receive a cash payment of $6.50 per pre-reverse split share in lieu of the fractional share. The reverse/forward stock split is subject to the approval of Webco’s stockholders. The Board will also have the discretion if and when to effect the transaction and reserves the right to abandon the transaction even if it is approved by Webco’s stockholders.

~~Pressure~~If ~~and~~the ~~Specialty~~reverse/forward ~~Tubing~~split ~~Product~~is ~~sales~~effected, ~~for~~Webco ~~the~~would ~~quarter~~likely ~~ended~~have ~~April 30, 2003 were~~fewer ~~$44,704,000,~~than an300 ~~increase~~stockholders of 11record.3 If ~~percent~~that ~~from~~is the ~~$40~~case,~~151,000~~ ~~for~~Webco ~~the~~would ~~same~~deregister ~~quarter last~~its ~~year. The~~common ~~$4,553,000~~stock ~~increase~~under inthe ~~net~~Securities ~~sales~~Exchange isAct ~~due to higher sales volumes~~ of ~~specialty tubing products~~1934, ~~which~~Webco’s ~~has~~common ~~been~~stock ~~enabled~~would ~~by the additional~~no ~~production~~longer ~~gained~~be ~~from~~traded on the ~~Oil~~American ~~City~~Stock Exchange, ~~Pennsylvania~~Webco ~~expansion~~would ~~supplying~~cease ~~carbon~~filing ~~steel~~periodic ~~tubing~~reports ~~products~~with the Securities and ~~the~~Exchange ~~additional~~Commission ~~production~~and ~~gained~~Webco ~~from~~would ~~investments~~no atlonger ~~the~~be ~~stainless~~required ~~tube~~to ~~production~~comply ~~facility~~with inthe ~~Mannford,~~regulatory ~~Oklahoma. Competitive~~and ~~pricing~~reporting ~~continues~~requirements ~~along~~of ~~most~~Sarbanes-Oxley. ofWebco’s ~~the~~future ~~Company's~~operating ~~specialty~~results and ~~pressure~~financial ~~tubing~~condition ~~product~~could ~~lines. The~~be ~~Company~~adversely affected ~~continues~~in tothe ~~pursue~~event ~~niche~~Webco ~~opportunities~~remains ~~within~~subject to the ~~metal~~requirements ~~tubing~~of ~~markets despite the~~Sarbanes-Oxley. See ~~softness~~discussion inunder ~~the~~“Government ~~economy~~Regulation” above.

~~Gross~~Management ~~profit~~believes ~~for~~its ~~Pressure~~current ~~and~~capital ~~Specialty~~structure ~~Tubing~~and ~~Products~~resources ~~decreased to $3,324,000, or 7.4~~are ~~percent~~adequate ~~of net sales,~~ for ~~the~~current ~~third~~operations ~~quarter~~and ofto ~~fiscal~~allow ~~2003 from $5,234,000, or 13.0 percent of net sales,~~ for ~~the~~planned ~~same~~capital ~~period~~additions ~~in fiscal 2002. Gross~~and ~~profit~~improvements ~~margins~~and, insubject ~~fiscal~~to ~~2003 were negatively impacted by a two week mill outage at~~ the ~~Company's~~ ~~Sand~~approvals ~~Springs, Oklahoma, facility in February~~ and ~~softness~~the inoccurrence ~~demand~~of ~~that coincided with~~ the ~~war~~other inconditions referred ~~Iraq. The~~to ~~reduction~~ in ~~shipped tonnage at~~ the ~~Sand~~preceding ~~Springs facility lowered gross profit by approximately $875~~paragraph,~~000~~ ~~compared~~ to permit the ~~prior year quarter. The~~ Company ~~partially~~to ~~mitigated~~effect ~~slowing demand by pursuing new sales opportunities and increasing production late in~~ the ~~quarter, although the incremental~~contemplated ~~margin~~reverse ~~was~~stock ~~lower~~split. InInterest ~~addition,~~rate ~~along~~increases ~~with~~or ~~increased~~limited ~~carbon~~capital ~~steel~~availability ~~raw~~due ~~material prices~~to ~~and~~ higher ~~natural~~working ~~gas~~capital ~~prices,~~requirements ~~the~~could ~~Company's~~limit ~~Oil~~capital ~~City~~spending ~~facility~~or ~~did not perform as efficiently as expected during~~ the ~~fiscal~~working ~~2003 third quarter resulting in a further~~capital ~~decline~~necessary ~~in gross profit of approximately $835,000. The higher margins in Fiscal 2002 reflect the lower raw material costs prior~~ to ~~the~~take ~~enactment~~advantage of ~~trade~~other ~~tariffs in the spring of 2002~~opportunities.

11Government Regulation

The Company is subject to the regulatory and reporting requirements of ~~Selling~~the Sarbanes-Oxley Act of 2002. Management believes it is in material compliance with the provisions of this Act at this time. Management does anticipate, ~~general~~however, that current and ~~administrative~~future ~~expenses~~compliance ~~were~~with $2such provisions,~~676,000~~ ~~for~~including the ~~third~~Section ~~quarter~~404 certification of internal controls by management and attestation by the Company’s ~~fiscal~~independent ~~2003~~auditors, ~~compared~~will result in significant increases in consulting, audit and legal fees and overhead expenses related to $3software,~~633,000~~ ~~for~~hiring new personnel and administrative time. The total cost of the ~~same~~Company’s ~~quarter~~compliance with the requirements of ~~fiscal~~the Sarbanes-Oxley ~~2002. S~~Act is uncertain,~~G&A costs~~ inalthough the ~~current~~most ~~quarter~~costly ~~decreased~~provisions ~~primarily~~will ~~due~~be related to the aCompany’s first Section 404 compliance year ending July 31, 2005. However, management estimates such compliance costs could exceed $~~604~~735,000 ~~reduction~~during inthe ~~employee~~twelve months ~~incentive~~leading ~~payments~~up to July 31, 2005 and ~~executive~~could ~~bonus~~exceed ~~accruals~~$570,000 ~~due~~for each succeeding year thereafter. These costs are in addition to the ~~decline~~approximately $330,000 in ~~financial~~costs ~~performance~~historically ~~and~~incurred being a ~~$331,000~~public ~~decrease~~company. Such incompliance cost estimates are incremental to current general and administrative expenses ~~primarily~~and do not include the ~~caused~~opportunity costs associated with the time and effort of current employees and management, which is expected to be significant. These estimates are consistent with a survey conducted by ~~lower~~Financial ~~legal~~Executives International (“FEI”) in January 2004. A recent update to that survey, ~~sales~~by FEI, found that actual costs are running 40% above the amounts estimated in January by surveyed companies. In the event the Company’s proposed reverse/forward stock split transaction is completed, the above costs would not be incurred as the Company would no longer be subject to the regulatory reporting requirements under the Securities Exchange Act of 1934 and ~~bad~~Sarbanes-Oxley. See ~~debt~~“Recent ~~expenses~~Events” discussion above.

~~Interest~~Current ~~expense~~Industry for the current period was $535,000 compared to $694,000 for the same quarter last year. The decrease in interest is the result of the average interest rate under the Company's senior debt facility for the three months ended April 30, 2003 being 4.25 percent as compared to 5.53 percent during the third quarter of fiscal 2002. The average level of debt increased to $42.7 million from $39.5 million for the same period last year. The Company has historically elected for its term debt and a significant portion of its outstanding revolver to bear interest at a floating rate based on LIBOR. Slightly higher borrowing levels have resulted from the Company's higher inventory levels. LIBOR, much like the prime rate, has experienced significant decreases since September 2001, which primarily led to the reduction in the average interest rate. A further 1/2 percent reduction in the interest rates on the senior debt facility occurred in October 2003 as a result of the Company's improved operating performance in fiscal 2002. Conditions

~~The recorded~~Over ~~income~~the ~~tax~~past ~~provision~~several ~~for~~years, the ~~quarter~~steel ~~ended~~industry ~~April~~in 30the U.S. has been characterized by changing customer demand, ~~2003~~foreign iscompetition, ~~based~~volatility ~~upon~~in the cost of ~~estimated~~steel ~~annual~~making ~~combined~~inputs, ~~effective~~uncertain ~~federal~~financial ~~and~~stability ~~state~~of ~~income~~domestic ~~tax~~steel ~~rates~~producers and industry consolidation.. ~~The effective~~During ~~income~~the ~~tax~~last ~~rate~~twelve months, a significant demand for steel in China, as well as disruptions in the ~~current~~domestic ~~quarter~~supply of ~~fiscal~~steel-making ~~2003~~inputs, ~~was~~has caused ~~41.0~~a ~~percent~~lack ~~compared to~~of ~~38.4~~domestic ~~percent~~availability infor ~~the~~certain ~~prior~~types ~~year~~of ~~period~~steel, primarily carbon steel. The ~~higher~~declining ~~effective~~value ~~tax~~of ~~rate~~the ~~resulted from~~U.S. ~~the~~dollar ~~Company~~to ~~cashing~~foreign incurrencies ~~two~~has ~~key-man,~~contributed to ~~whole-life~~this ~~insurance~~market ~~policies~~condition ~~during~~as ~~the~~it ~~second quarter~~has caused foreign importing of ~~fiscal~~steel ~~2003~~to ~~and~~be ~~realizing~~less economical. A alack ~~taxable~~of ~~gain~~availability onand ~~the~~high-cost ~~transaction. While~~of ~~the effective~~steel-making ~~income~~inputs ~~tax~~such ~~rate~~as coke, ~~for~~scrap ~~the~~metal ~~full~~and ~~2003~~energy ~~fiscal~~has ~~year~~created isan ~~expected~~environment towhere becarbon ~~approximately~~steel coil producers ~~41.0~~have ~~percent,~~raised ~~the~~their ~~effective~~prices ~~tax~~and ~~rate~~placed surcharges on ~~future~~their ~~years'~~products ~~income~~that ~~should~~have ~~return~~greatly increased to the ~~historical~~ ~~average~~replacement cost of ~~approximately~~carbon 38steel.~~0 percent.~~

The lack of availability of steel and the related mitigation of the excess capacity in the tubing industry ishas ~~characterized~~created byan ~~changing~~enhanced ~~customer~~pricing ~~demands,~~environment ~~government~~for steel ~~influence~~tubular onproducts. Management has passed along to customers as many raw material ~~and~~price ~~finished~~increases ~~good~~as ~~import prices~~possible, including surcharges. The Company has agreed-upon pricing with some customers on certain products and as ~~evidenced~~the byCompany’s supplier ~~government~~arrangements ~~initiatives~~for ~~regarding~~these products are modified for surcharges or base price ~~tariffs~~increases, ~~and~~management ~~financial~~attempts ~~instability~~to ~~among~~pass ~~domestic~~on ~~steel~~raw ~~producers. Due~~material price increases to the extent ~~tariffs~~possible. The ~~enacted~~increased ~~over~~sales prices for the ~~steel~~Company’s ~~trade~~products, ~~cases~~which are reflected in the ~~spring~~Company’s offinancial ~~2002,~~statements asin ~~well~~the aslast ~~the~~nine ~~resulting~~months, were matched ~~supply~~against ~~and~~lower ~~demand~~average-cost ~~imbalances~~steel coil inventories, resulting in significant gross profit increases in the ~~Company's~~third ~~cost~~and fourth quarters of ~~carbon~~fiscal ~~steel~~2004 ~~coils~~and ~~has~~into ~~increased~~the first quarter of ~~significantly~~2005. The Company's ~~ability~~does tonot ~~raise~~believe ~~prices~~that tothe ~~offset~~earnings ~~increasing~~attributable ~~steel~~to selling from ~~costs~~lower ~~may~~average ~~prove~~cost toinventories beis ~~difficult,~~sustainable ~~which~~since ~~could~~the ~~result~~average incost ~~unsustainable~~of ~~profit~~inventories ~~margins.~~ is Anincreasing ~~increase~~as ininventory ~~demand~~is ~~for~~replenished with steel ~~tubing~~purchased ~~products,~~at ~~when~~the itcurrent ~~occurs,~~higher cost. It ~~should~~appears ~~improve~~that most of the benefits of selling from lower average-cost ~~pricing~~inventories ~~environment~~will ~~for~~have been realized by the ~~Company's~~end ~~products. Although~~of ~~every~~the ~~effort~~second isquarter ~~made~~of tofiscal 2005. ~~ensure~~Over the ~~accuracy~~course of ~~internal~~the ~~forecasting~~first quarter, ~~any~~the ~~significant~~availability ~~changes~~of insteel ~~demand~~improved ~~or finished good~~ and ~~raw~~the ~~material~~cost ~~prices~~of steel ~~could~~appears to have astabilized. Further ~~significant~~increases ~~impact~~in on the ~~value~~availability of ~~the~~steel ~~Company's~~and ~~inventory~~steel making inputs could act to decrease selling prices and ~~reported~~depress ~~operating~~margins ~~results~~since the Company would have higher average-cost inventory.

~~On March~~Part ~~31, 2002, the Board~~ of ~~Directors approved a plan of divestiture for~~ the ~~Company's QuikWater~~recent ~~Division~~earnings ~~and~~improvement onis ~~May~~attributable ~~10, 2002, the Company sold substantially all of the assets of this segment~~ to ~~a group of independent investors and members of management of~~improved ~~QuikWater,~~demand ~~which included Ashley Weber, daughter of F. William Weber, Chairman~~ and ~~Chief Executive Officer of the Company. The sale of the QuikWater Division represents~~ a ~~disposal~~ ofstronger aindustrial ~~business segment under Statement of Financial Accounting Standards No~~economy. ~~144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144).~~ ~~Accordingly, prior year results of the QuikWater segment have been classified as discontinued, and prior periods have been restated.~~ The ~~reader~~Company ~~should~~hopes ~~refer~~ to ~~Part~~ I,continue ~~Item 1: Note 4 - Discontinued Operation, in the footnotes~~ to ~~the unaudited~~benefit ~~consolidated~~from ~~financial~~these ~~statements~~factors ~~included~~into inthe ~~this Form 10-Q for additional information regarding this matter~~future.

12Over the years, Webco has forged solid and loyal relationships with its steel suppliers. These relationships have, in most circumstances, secured the availability of carbon and stainless steel in sufficient quantities to satisfy customer requirements during this recent period of reduced supply. There can be no assurances, however, that the Company’s carbon and stainless steel requirements will continue to be met, which, if not met, would negatively impact sales and income from operations and cash flows.

~~Results~~Overview of ~~Operations~~Financial ~~for the Nine Months Ended April 30, 2003 Compared with the Nine Months Ended April 30, 2002~~Results

~~Pressure~~For ~~and~~the ~~Specialty~~fiscal ~~Tubing~~2005 ~~Product~~first ~~sales~~quarter ~~for the nine months~~ ended ~~April~~October 3031, ~~2003~~2004, ~~were~~the Company ~~$132,155,000,~~reported annet ~~increase~~income of ~~11.8 percent from the~~ $~~118~~6,~~189~~614,000, ~~for~~or ~~the~~$0.92 ~~same~~per ~~period~~diluted ~~last year~~share. ~~The~~For ~~$13,966,000~~the ~~increase~~same quarter in ~~net~~fiscal ~~sales~~2004, isearnings ~~due~~were to$414,000, ~~higher sales~~or ~~volumes~~$0.06 ofper ~~specialty~~diluted ~~tubing products~~share. ~~The~~Net ~~additional~~sales ~~production gained from the Oil City, Pennsylvania expansion supplying carbon steel tubing products accounted~~ for ~~more than half of~~ the ~~revenue~~first ~~increase. Competitive~~quarter ~~pricing continues along most~~ of ~~the~~fiscal ~~Company's~~2005 ~~specialty~~were ~~and pressure tubing product lines~~$71. ~~Sluggish~~7 ~~demand~~million, ~~for~~ a ~~number~~46 ofpercent ~~products~~increase ~~coincided~~over ~~with~~ the ~~war in Iraq, which was~~$49.1 ~~partially~~million ~~mitigated~~for ~~by pursuing new sales opportunities and improved production late in~~ the ~~third~~same quarter~~. The~~ ~~Company~~last ~~continues to pursue niche opportunities within the metal tubing markets despite the softness in the economy~~year.

~~Gross~~The ~~profit~~Company’s ~~for~~business ~~Pressure~~during ~~and Specialty Tubing Products remained essentially unchanged at $14,333,000, or 10.8 percent of net sales, for~~ the ~~first~~last nine months ofhas ~~fiscal 2003~~been ~~from~~largely ~~$14,342,000,~~impacted orby ~~12.1~~two ~~percent~~separate ofbusiness ~~net sales~~conditions. First, ~~for~~selling ~~the~~prices ~~same period~~for infinished ~~fiscal~~product ~~2002. Margins in fiscal 2003~~ were ~~negatively~~based ~~impacted~~on by the ~~increase~~higher ~~in raw~~replacement ~~material~~costs ~~prices~~of ~~and~~coiled ~~the~~steel ~~two~~and ~~week~~were matched ~~mill~~against ~~outage at~~ the Company'’s ~~Sand~~lower ~~Springs,~~average-cost ~~Oklahoma, facility in February~~inventories. ~~The~~Second, ~~Company's~~the ~~Oil~~lack of ~~City~~availability ~~facility~~of ~~also~~carbon ~~did~~steel ~~not~~coils ~~perform~~in ~~as expected during~~ the ~~fiscal~~domestic ~~2003~~marketplace ~~third~~limited ~~quarter. Gross~~the ~~profit~~ability ~~margins~~of customers ~~continue~~ to ~~be pressured~~purchase byproducts ~~excess~~from ~~industry supply throughout~~ the ~~specialty and pressure tubing markets. Gross profit margins at the~~ Company'’s ~~Oil~~competitors ~~City~~resulting ~~and~~in ~~Sand Springs facilities~~tubing ~~were~~industry ~~further~~excess ~~depressed~~capacity bybeing ~~higher~~largely ~~natural gas prices during the third quarter of fiscal 2003~~mitigated.

~~Selling,~~Results ~~general and administrative expenses were $9,393,000 for the first nine months~~ of ~~fiscal~~ ~~2003~~Operations ~~compared to $9,730,000~~ for the ~~same~~Three ~~period~~Months inEnded ~~fiscal~~October ~~2002. The current nine-month period includes a pre-tax insurance recovery to the Company of $299~~31,~~000~~ ~~from~~2004 ~~the~~Compared ~~2001~~with ~~Oil City fire. Without~~ the ~~insurance~~Three ~~recovery~~Months inEnded ~~the~~October ~~current quarter~~31, ~~S,G&A~~ ~~costs decreased only $38,000. During fiscal~~ 2003 the Company had a $231,000 increase in information technology expenses related to a system hardware migration and a $98,000 increase in sales expenses principally offset by a $396,000 decrease in employee incentive payments and executive bonus accruals due to the Company not meeting certain financial performance expectations.

~~In January~~Tubing ~~2002,~~product ~~the~~sales ~~Company~~for ~~settled~~the ~~litigation~~current ~~with~~quarter awere ~~vendor~~$71,727,000, ~~relating~~an increase toof ~~equipment~~46 ~~sold~~percent to from the ~~Company~~$49,090,000 ~~which~~for ~~did~~the ~~not~~same ~~perform~~quarter tolast ~~specifications~~year. The $22,637,000 ~~total~~increase ~~judgment~~in ofnet ~~$1.58 million~~sales was ~~collected~~primarily ~~and~~due noto ~~further~~higher ~~action~~overall byprices ~~either~~per ~~party~~ton isfor the ~~expected~~Company’s products. ~~The~~Sales ~~reader should~~prices ~~refer~~increased toas ~~Part~~carbon IIraw material price increases, ~~Item~~surcharges 8:and ~~Note~~a 8limited -supply ~~Commitments~~of ~~and~~carbon ~~Contingencies,~~steel coils continued to drive selling prices in the ~~footnotes~~ tubing industry. Although the tubing industry continues to deal with excess capacity, the ~~consolidated~~limited ~~financial~~availability ~~statements~~of ~~included~~carbon steel coils has largely mitigated this condition. Shipped tonnages improved 12 percent over the same quarter in fiscal 2003 primarily due to improved volumes in OEM and pressure tubing. The overall price per ton for the Company'’s ~~Form~~products ~~10-K~~improved ~~for~~during the ~~year~~quarter, which ~~ended~~is ~~July~~reflected ~~31,~~in ~~2002~~the ~~for~~Company’s ~~additional~~gross ~~information~~profit ~~regarding~~margin ~~this~~percentages ~~matter~~in the first quarter of fiscal 2005.

13Gross profit for tubing products increased to $16,842,000, or 23.5 percent of net sales, for the first quarter of fiscal 2005 from $4,594,000, or 9.4 percent of net sales, for the same period in fiscal 2004. Gross profit margins in the first quarter of fiscal 2005 were positively impacted by increased sales prices, which have followed higher raw material pricing, which are being matched against lower average-cost raw materials. As the Company’s average-cost of raw materials increases towards current replacement cost, gross profit margins are expected to decrease, assuming selling prices do not increase proportionately. Excess tubing industry capacity, which still exists, is currently being mitigated by the limited availability of carbon steel coils.

~~Interest~~Selling, ~~expense~~general ~~for~~and ~~the~~administrative ~~current~~expenses ~~nine-month~~were ~~period was~~ $15,~~718~~732,000 ~~compared to $2,391,000~~ for the first ~~same~~quarter ~~period last year. The decrease in interest is the result~~ of ~~the~~fiscal ~~average interest~~2005 ~~rate under the Company's senior debt facility for the nine months ended April 30, 2003 being 4.7 percent as~~ compared to ~~6.1 percent in the same period last year. In addition~~$3, ~~the average level of debt for the nine months ended April 30~~334,000 ~~2003 was $42.0 million as compared to $43.1 million~~ for the same ~~period~~quarter ~~last year. Despite higher sales and inventory levels during the first nine months~~ of fiscal ~~2003, average borrowings~~ ~~remain lower than the comparable prior year period~~2004. The ~~Company~~current ~~has~~quarter ~~historically elected~~increase ~~for~~was ~~its~~primarily ~~term~~due ~~debt and a significant portion of its outstanding revolver~~ to ~~bear interest at~~ a ~~floating rate based on LIBOR. LIBOR~~$2, ~~much like the prime rate~~100,000 ~~has~~increase in ~~experienced~~employee ~~significant~~and ~~decreases~~executive ~~since~~bonus ~~September~~accruals ~~2001,~~due ~~which primarily led~~ to ~~the reduction~~improved inoperating ~~the average interest rate~~performance. ALegal expenses ~~further~~and ~~1/2~~certain ~~percent~~financial ~~reduction~~advisory incosts ~~the interest~~related ~~rates~~to on the ~~senior~~proposed ~~debt facility occurred in October 2003 as a result of the~~reverse/forward ~~Company's~~stock ~~improved~~split ~~operating~~increased ~~performance~~expenses inby ~~fiscal~~approximately ~~2002~~$266,000.

~~The recorded~~Interest ~~income~~expense ~~tax~~decreased ~~provision~~slightly ~~for~~to ~~the~~$533,000 ~~nine~~from ~~months ended April 30~~$555,000 ~~2003~~for ~~is based upon~~ the ~~estimated~~same ~~annual~~quarter ~~combined~~last ~~effective~~year, ~~federal~~primarily ~~and~~due ~~state~~to ~~income~~lower ~~tax~~amortization ~~rates~~of financing costs. ~~The~~Due ~~effective~~to ~~income tax rate for~~ the ~~first~~Company’s ~~nine~~recent ~~months~~refinancing, amortization of ~~fiscal~~deferred ~~2003~~financing ~~was~~costs ~~41.0 percent~~will ~~compared~~increase ~~to 38.4 percent~~ in the ~~prior~~second ~~year~~quarter ~~period. The~~of ~~higher~~fiscal ~~effective~~2005. A ~~tax~~significant ~~rate resulted~~increase ~~from the Company cashing~~ in ~~two key-man, whole-life insurance policies during the~~interest ~~second~~rates ~~quarter~~could ofhave ~~fiscal 2003 and realizing~~ a ~~taxable~~material ~~gain~~impact on the ~~transaction. While the~~Company’s ~~effective~~results ~~income~~of ~~tax~~operations ~~rate~~and ~~for~~cash flows. See ~~the~~Part ~~full~~I, ~~2003~~Item ~~fiscal~~3: ~~year~~“Quantitative isand ~~expected~~Qualitative toDisclosures beabout ~~approximately~~Market ~~41.0~~Risk” ~~percent,~~of ~~the~~this ~~effective~~Form ~~tax~~10-Q ~~rate~~for onadditional ~~future~~information ~~years'~~concerning ~~income~~interest ~~should return~~rate ~~to the historical average of approximately 38~~risk.~~0 percent.~~

~~The reader~~Income ~~should~~tax ~~refer~~expense toincreased ~~Part~~due I,to ~~Item~~increased 1:earnings ~~Note~~while 4he effective -income ~~Discontinued~~tax ~~Operation,~~rate infor the ~~footnotes~~first three months of fiscal 2005 was 37.5 percent compared to 41.3 percent in the ~~unaudited~~same ~~consolidated~~period ~~financial~~last ~~statements~~year. The ~~included~~drop in ~~this~~the ~~Form~~effective rate ~~10-Q~~has ~~for additional~~been ~~information~~primarily ~~regarding~~due to the ~~divestiture~~Company’s increased use of ~~the~~certain ~~QuikWater~~tax ~~segment~~credits ~~during~~as a ~~2002~~result of improved profitability.

Liquidity and Capital Resources

Net cash used in operations was $48,~~016~~323,000 for the ~~nine~~three months ended October ~~April 30~~31, ~~2003~~2004 versus ~~net cash provided by operations of~~ $75,~~733~~401,000 ~~for~~used ~~the~~in ~~nine~~operations ~~month~~in ~~period~~the ~~ended~~prior ~~April~~year ~~30, 2002~~period. Accounts receivable increased $38,~~942~~300,000 during the current period ~~and decreased $190,000 for the same period last year~~. The current year ~~period~~ period experienced stronger sales compared to the prior year ~~accounting~~period ~~for~~driving ~~most of~~ the increase in accounts receivable. Inventories also increased $414,~~314~~460,000 ~~for~~during the three-month period ended ~~April~~ ~~30,~~October ~~2003~~31, ~~due~~2004 compared to ~~higher priced raw materials~~$774,000 ~~strategic~~for ~~purchases~~the ~~made~~prior inyear ~~anticipation~~period. Rising ofcarbon ~~rising~~steel raw material prices and higher ~~purchased~~ finished goods ~~inventories.~~ ~~Management~~inventories ~~currently~~caused ~~believes~~ the ~~risk~~dramatic ~~of further significant carbon steel price increases has diminished and is proceeding with strategies to reduce current inventory levels~~increase. Despite the ~~increases~~large increase in inventory ~~levels~~, average inventory turned ~~four~~approximately 4.1 times on an annualized basis during the first three ~~nine~~ months of fiscal ~~2003. This~~2005 isdue ~~consistent with~~to continued strong sales during the period. The average inventory turn rate ~~over~~for ~~the~~fiscal ~~past~~year ~~three~~2004 ~~fiscal~~was ~~years~~approximately 4.6. ~~Accounts payable~~Accrued ~~decreased~~liabilities increased $3,~~227~~106,000 ~~during~~in the current period, asprimarily adue ~~result~~to ofincreases ~~slowing~~in current ~~inventory~~taxes ~~purchases~~payable and accrued profit sharing and bonuses. Due to improved ~~towards~~profitability, the ~~end~~Company ofanticipates ~~the~~making ~~period,~~estimated ~~which~~tax ~~are~~payments ~~aimed~~in atthe ~~reducing~~range ~~inventories~~of $3.5 to $4.5 million dollars during the second quarter.

Net cash used in investing activities for the ~~nine~~three months ended October ~~April 30~~31, ~~2003~~2004 ~~was~~decreased to $1,~~506~~918,000~~, which~~ ~~was~~from ~~slightly less than the~~ $2,~~242~~274,000 ~~used~~ in ~~investing activities during~~ the same period ~~in fiscal 2002. The decrease was primarily caused by receiving $822,000 of~~last ~~proceeds from cashing in two key-man, whole life insurance policies during the second quarter of fiscal 2003, which offset capital expenditures for the nine-month period~~year. Capital expenditures made during the current period primarily related to ~~technology~~ technology investments ~~for~~at ~~stainless~~the ~~tube-making~~manufacturing facilities and aERP ~~hardware~~software ~~migration for the Company's primary~~licensing ~~computer systems~~costs. Prior period expenditures were primarily ~~limited~~related to ~~minor~~the ~~projects~~expansion of the stainless tube welding facility in Mannford, Oklahoma, and ~~normal~~related ~~maintenance~~technology ~~spending~~investments.

14Net cash provided by or used in financing activities has historically been primarily related to borrowings and repayments under the Company’s senior credit facility. As a result of the increase in the Company’s stock price over the past several months, management anticipates additional proceeds will be received from stock issuances during the second quarter of fiscal 2005 as employees exercise in-the-money stock options. Although the exact dollars to be received is contingent on the market price of the Company’s stock, management expects proceeds to be in the range of $1,000,000 to $1,500,000.

The Company'’s capital requirements have historically been to fund equipment purchases and for general working capital needs resulting from the growth that the Company has experienced. The Company has ~~made,~~followed ~~and~~an ~~will~~aggressive ~~continue to make,~~ capital ~~expenditures~~ expenditure plan as part of its growth strategy and to enable it to continue to be a leader in tubular manufacturing technologies. ~~The~~In ~~Company~~the ispast, ~~currently~~the ~~focused~~Company onhas ~~inventory reduction~~funded ~~and~~its ~~other~~capital ~~working~~growth ~~capital~~expenditures ~~management~~with ~~strategies~~a incombination anof ~~effort~~cash toflow ~~reduce~~from ~~outstanding~~operations and debt. Capital spending ~~plans~~in ~~for~~2005 ~~2003~~will ~~primarily~~focus ~~consist~~on ofthe continued ~~deployment~~expansion ofand deployment of technology investments for stainless tube- making, and the development of value-added ~~capabilities~~ capabilities for ~~the~~our ~~Company's~~ increased carbon capacity, and normal facility ~~maintenance~~ spending,. ~~which~~Capital spending for 2005 is expected to be in the range of $35.0 to $46.0 million for the year. The Company currently intends to retain earnings to support this strategy and does not anticipate paying dividends in the foreseeable future.

The Company's senior ~~debt~~credit ~~facilities~~facility (the “Credit Facility”) with its primary lender ~~provide~~provides for a term loan of $~~15.5~~18 million, and a revolving line of credit of $3250 million. ~~As of April 30, 2003, the Company had $13.2 million outstanding on the senior debt facility term loan and $27.6 million on the related revolving line of credit.~~ The maturity date of the ~~debt~~Credit ~~facilities~~Facility is ~~May~~October 115, ~~2005~~ 2009 and ~~the~~it ~~loans~~is ~~are~~ collateralized by substantially all of the Company's assets. The Company may ~~is permitted to~~ have borrowings and outstanding letters of credit ($1,025,000 of letters of credit were outstanding at ~~April~~October 3031, ~~2003~~2004) under the revolving credit facility of up to the lesser of $3250 million or an amount determined by a formula based on the amount of eligible inventories and accounts receivable. At April 30, 2003, $3.4 million ($2.6 million at May 31, 2003) was available for borrowing on the line of credit. Notwithstanding the $32 million revolving loan cap, the Company had borrowing base in excess of the revolver loan balance of approximately $8.4 million at April 30, 2003 ($5.8 million at May 31, 2003). This excess collateral can not be accessed for current borrowing unless the Company modifies the terms of the revolving line of credit. Principal payments on the term loan of $~~184~~214,~~500~~300, plus interest, are due each month until maturity. ~~Along~~In ~~with~~addition ~~the~~to the scheduled principal payments, the Company is required to make additional principal payments on the term loan based on 50 percent of the Company’s excess cash flow per quarter not to exceed $~~221~~257,~~500~~150 per quarter, or $21,~~658~~800,000 on a cumulative basis over the term of the debt facility, beginning with the quarter ending October 31, 2004. AnThe Credit ~~additional~~Facility ~~payment~~contains ofcovenants ~~$221~~regarding debt coverage,~~500~~ ~~will~~capital beexpenditures ~~made~~and dividends ~~during~~and requires the ~~fourth~~Company to maintain a minimum excess borrowing base ~~quarter~~availability. As of ~~2003~~October ~~based~~31, on2004, the ~~excess~~Company ~~cash~~was ~~flow~~in ~~calculation~~compliance ~~for~~with all such covenants under the ~~third~~facility. Webco ~~quarter~~anticipates using a portion of ~~2003~~the term loan to fund the Company’s proposed reverse/forward stock split transaction and related matters.

Accounting principles require current classification of revolving lines ~~The~~of ~~Company's~~credit ~~debt~~that ~~facility~~permit ~~contains~~borrowings ~~covenants~~on ~~regarding~~a ~~debt~~long-term ~~coverage~~basis ~~and~~when the ~~ratio~~line of credit contains ~~liabilities~~both toa ~~equity. The~~lock-box ~~covenants~~arrangement, ~~also~~whereby ~~limit~~remittances ~~capital~~to ~~expenditures~~the ~~and~~lockbox ~~dividends~~automatically pay down the outstanding line of credit, and ~~require~~loan terms that allow the ~~Company~~lender to ~~maintain~~declare the loan in default on a ~~minimum~~subjective ~~average~~basis. This ~~borrowing~~accounting ~~base~~treatment ~~availability~~is ~~without considering~~required regardless of the ~~$32~~legal ~~million~~maturity date of the revolving ~~loan~~credit ~~cap~~arrangement. AsThe Company's line of credit, ~~April~~which 30matures October 15, ~~2003~~2009, ~~the~~contains ~~Company was~~such infeatures ~~compliance~~and ~~with~~accordingly, the accompanying ~~all~~financial ~~such~~statements ~~covenants~~classify outstanding borrowings under the line ~~existing~~of credit ~~facility~~as "Current portion of long-term debt".

The ~~Company~~facility ~~has~~also ~~arranged~~contains ~~financing~~restrictions ~~with~~related ~~various~~to ~~public~~the ~~agencies~~Company’s proposed ~~related~~reverse stock-split transaction. In order to ~~the~~proceed ~~Oil~~with ~~City~~the reverse ~~facility~~stock-split, ofthe ~~which,~~Company must have a minimum excess availability of $27.290 million ison ~~outstanding~~its revolving loan after giving effect to the transaction and nois ~~additional~~limited ~~amounts~~to ~~remain~~$2.0 million of ~~available~~new ~~for~~advances ~~borrowing~~to asmanagement shareholders for purposes of ~~April~~settling ~~30,~~loans ~~2003~~with third parties secured by Company stock. ~~The~~Total ~~agency~~remaining ~~loans~~cash ~~are~~required ~~collateralized~~to bycomplete the transaction is estimated to be in the ~~underlying~~range ~~real~~of ~~estate~~$3.0 ~~and/or~~to ~~equipment~~$4.0 million. ~~The~~At ~~notes~~October ~~mature~~31, ~~over~~2004, a$8.0 million 3was toavailable 9for ~~year period~~borrowing ~~and~~on ~~bear~~the ~~interest~~revolving atline ~~rates~~of ~~ranging~~credit ~~from~~under 3the toterms 5of ~~percent~~the credit facility.

P&J also has a ~~line~~separate line of credit agreement offor $12,~~500~~000,000, awhich ~~capital~~matures ~~expenditure ("CAPEX")~~on ~~facility~~November ~~of $500~~30,~~000~~ ~~and a term loan of $500,000 with its primary lender~~2005. As of October ~~April 30~~31, ~~2003~~2004, there was $~~116~~915,000 ~~was~~ outstanding on the ~~term loan and $150,000 on the~~ line of credit~~. The~~ ~~line of credit matures on November 30, 2003, the CAPEX facility matures on November 30, 2007,~~ and ~~the term loan matures in April 2004. The loans are collateralized by P&J's assets. At April 30, 2003,~~ $1,~~350~~085,000 was available for borrowing ~~under the revolving line of credit and $500,000 was available on the CAPEX facility~~.

15The Company has arranged financing with various public agencies related to the Oil City facility, of which $1.8 million was outstanding at October 31, 2004. The agency loans are collateralized by the underlying real estate and certain equipment. The notes mature over a 1 to 7 year period and bear interest at rates ranging from 3 to 5 percent.

InThe ~~addition~~Company tohas ~~the~~various ~~above~~equipment ~~debt~~loans ~~arrangements,~~with ~~the~~its ~~Company~~primary ~~leases~~lender ~~certain buildings~~ and ~~machinery~~other ~~and~~financing ~~equipment~~companies ~~under~~of ~~non-cancelable~~which ~~operating~~$549,000 ~~leases~~was outstanding at October 31, 2004. ~~Under~~The loans ~~certain~~are ~~of these~~collateralized ~~leases~~by the ~~Company~~underlying isequipment, ~~obligated~~mature toover ~~pay~~a ~~property~~1 ~~taxes,~~to ~~insurance,~~5 ~~repairs~~year ~~and~~period ~~other~~and ~~costs~~bear ~~related~~interest toat ~~the~~rates ~~leased~~ranging ~~property~~up to 6 percent.

~~The~~In ~~Company~~addition ~~enters~~to ~~into~~the ~~purchase~~above ~~commitments~~debt ~~with~~arrangements, ~~steel~~the ~~vendors~~Company asleases ~~part~~certain buildings, ofmachinery ~~the~~and ~~ordinary course~~equipment ofunder ~~business~~non-cancelable operating leases. ~~The~~Under certain of these leases the Company is ~~currently~~obligated ~~committed~~to onpay ~~outstanding~~property ~~purchase~~taxes, insurance, repairs ~~orders~~and ~~for~~other ~~inventory~~costs ~~approximating~~related ~~$22.0~~to ~~million~~the leased property.

The following table sets forth the future ~~minimum~~ minimum payments required under the above debt and lease agreements at ~~April~~October 3031, ~~2003~~2004:

	Payments Due by Fiscal Year
Contractual Obligations	~~2003~~2005 (1)	~~2004~~2006	~~2005~~2007	~~2006~~2008	~~2007~~2009	Thereafter	Total
Senior Long-Term Debt	$ ~~997~~2,186	$ 2,~~214~~572	$ 102,~~001~~572	$ -2,572	$ -2,572	$ -5,526	$ 1318,~~212~~000
Senior Line of Credit	-	-	27,620	-	-	-	27,620
Senior Line of Credit(2)	37,995	-	-	-	-	-	37,995
Public Agency Long-Term Debt	77220	~~341~~299	~~297~~307	~~299~~308	~~307~~240	~~971~~428	21,~~292~~802
P&J Long-Term Debt	28	88	-	-	-	-	116
P&J Line of Credit	915	-	-	-	-	-	915
P&J Line of Credit	-	150	-	-	-	-	150
Purchase Commitments (3)	45,421	-	-	-	-	-	45,421
Operating Leases	~~612~~1,869	12,~~626~~394	12,~~429~~144	1,~~165~~885	~~979~~1,528	24,~~023~~916	714,~~834~~736
Other	6191	26162	13103	-87	-6	-	45549
Total Cash Obligations	$ 188,~~720~~797 =====	$ 45,~~445~~427 =====	$ 395,~~360~~126 =====	$ 14,~~464~~852 =====	$ 14,~~286~~346 =====	$ 210,~~994~~870 =====	$ 51119,~~269~~418 ======

(1) - Amounts for ~~2003~~2005 reflect the future minimum payments for the remaining ~~three~~nine months of the fiscal year.

(2) - Accounting ~~Management~~principles ~~believes~~require ~~its~~ current ~~capital~~classification ~~structure~~of isrevolving ~~adequate~~lines ~~for~~of ~~current~~credit ~~operations~~that ~~and~~permit toborrowings ~~allow~~on ~~for~~a ~~planned~~long-term ~~capital~~basis ~~additions~~when ~~and~~the ~~improvements. Interest~~line ~~rate~~of ~~increases~~credit orcontains both a lock-box ~~lack~~arrangement, ofwhereby ~~capital~~remittances ~~availability~~to ~~could~~the ~~limit~~lockbox ~~capital~~automatically ~~spending~~pay ordown the ~~working~~outstanding line ~~capital~~of ~~necessary~~ credit, and loan terms that allow the lender to ~~take~~declare ~~advantage~~the ofloan ~~growth~~in ~~opportunities~~default on a subjective basis. ~~Management~~This accounting treatment is ~~currently~~required ~~negotiating~~regardless anof the legal ~~increase~~maturity date of ~~its~~the revolving credit arrangement. The Company's line of credit, which inmatures ~~order~~October to15, ~~fully~~2009, ~~access~~contains ~~the~~such ~~excess~~features ~~borrowing~~and accordingly, the accompanying ~~base~~financial ~~created~~statements byhave ~~increased~~presented ~~inventories~~the ~~and~~outstanding ~~accounts~~borrowings ~~receivable.~~under the line of credit to "Current portion of long-term debt".

16(3) - The Company enters into purchase commitments with steel vendors as part of the ordinary course of business and is currently committed on outstanding purchase orders for inventory.

~~Significant~~Critical Accounting Policies

The Company's ~~significant~~consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions used for calculating ~~financial~~ financial estimates that have a direct effect on the reported amounts of assets, liabilities, revenues and expenses for the period presented. By Management believes that the judgments it makes and the assumptions it uses are reasonable based on the information available; however by their nature, these judgments are subject to an inherent degree of uncertainty and in some instances may prove to be inaccurate. There can be no assurances that actual results will not differ from those estimates. These judgments are based on historical experience, terms of existing purchase arrangements, observance of trends in the industry, information provided by customers and information provided from outside sources, as appropriate. ~~Significant accounting~~The Company believes its most critical accounting policies ~~include~~are: Revenue Recognition, Inventories, Self-Insurance Reserves, Accounting for Certain Long-Lived Assets and Deferred Taxes. The reader should refer to Part II, Item 7: “Managements Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended July 31, 2004 for information on the Company’s most critical accounting policies.

Revenue Recognition - The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Company product is made to customer or industry specifications at an agreed upon price as typically specified in the customer purchase order. Title passes to the customer at the point of shipment along with all the risks and rewards of ownership. Customer orders are not released for shipment unless the customer is in good credit standing with the Company, which is internally evaluated by the Company's credit manager on an on-going basis. Should changes in conditions cause management to determine these criteria are not met for certain future transactions, revenue recognition would be delayed until such time as the transactions become realizable and fully earned.

Inventories - The Company values inventory at the lower of the actual cost to purchase and/or manufacture or the current estimated market value of the inventory. Cost for raw materials, work-in-process, finished goods and maintenance parts and supplies are determined on the weighted average cost method. The Company regularly reviews inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on inventory aging and internally generated forecasts based upon management's judgments and assumptions about future product demand and pricing. The steel industry is characterized by changing customer demands, government influence on raw material and finished good import prices, as evidenced by current trade tariffs, and financial instability among domestic steel producers that could result in significant increases or decreases in inventory pricing or increases in excess or obsolete inventory quantities on hand. The Company's estimates of future product demand may prove to be inaccurate, in which case the provision required for excess and obsolete inventory may have been understated or overstated. Although every effort is made to ensure the accuracy of internal forecasting, any significant changes in demand or finished good and raw material prices could have a significant impact on the value of the Company's inventory and reported operating results.

Self-Insurance Reserves - The Company self-insures both a medical coverage program and an Oklahoma workers' compensation program for its employees. The determination of reserves and expenses for these benefits is dependent on claims experience and the selection of certain assumptions used by actuaries in evaluating claims incurred, but not yet reported. Reserves for claims under both programs are accrued based upon the Company's estimate of the aggregate liability for claims (including claims incurred, but not yet reported). Significant changes in actual experience under either program or significant changes in assumptions may materially affect self-insured medical or workers' compensation reserves and future expense.

Accounting for Certain Long-Lived Assets - The Company evaluates its assets for impairment in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144). The Company reviews its long-lived assets for impairment based on estimated future non-discounted cash flows attributable to the assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values. While the Company believes its estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect the evaluations and result in a reduction of the carrying value of such assets.

Deferred Taxes - The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets are regularly reviewed for recoverability and, if deemed necessary, an appropriate valuation allowance is established based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. If the Company were unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, the Company could be required to establish a valuation allowance against all or a significant portion of the deferred tax assets, thus resulting in a substantial increase in the effective tax rate and a material adverse impact on net income.

New Accounting Pronouncements

In ~~April~~ ~~2003~~November 2004, the FASB issued Statement of Financial Accounting Standards No. ~~149~~151, "~~Amendment~~Inventory ofCosts ~~Statement~~– ~~133~~an onamendment ~~Derivative~~of ~~Instruments~~ARB ~~and~~No. ~~Hedging~~43, ~~Activities"~~chapter 4" (FAS ~~149~~151). FAS ~~149~~151 ~~amends~~seeks ~~and~~to ~~clarifies~~clarify ~~financial~~the accounting ~~and~~for ~~reporting~~abnormal ~~for~~amounts of ~~derivative~~idle ~~instruments~~facility expense, ~~including~~freight, ~~certain~~handling ~~derivative~~costs, ~~instruments~~and ~~embedded~~wasted material (spoilage) in ~~other~~the ~~contracts~~determination ~~(collectively~~of ~~referred~~inventory tocarrying ascosts. The ~~derivatives)~~statement ~~and~~requires ~~for~~such ~~hedging~~costs ~~activities~~to ~~under FAS~~be ~~No.~~treated ~~133,~~as ~~"Accounting~~a ~~for~~current ~~Derivative~~period ~~Instruments and Hedging Activities"~~expense. This statement is effective for ~~the~~ fiscal ~~year~~years beginning ~~ending~~after July 3115, ~~2003~~2005. The Company does not ~~expect~~believe ~~FAS~~the ~~149~~adoption toof FAS 151 will have a significant impact on ~~its~~the Company’s consolidated financial statements.

InSafe Harbor for Forward Looking Statements: Certain ~~May~~statements ~~2003~~in this Form 10-Q, ~~the~~including ~~FASB~~statements ~~issued~~preceded ~~Statement~~by, ofor ~~Financial~~predicated ~~Accounting~~upon ~~Standards~~the words ~~No.~~"anticipates", ~~150~~"appears", "believes", "~~Accounting~~estimates", ~~For~~"expects", ~~Certain~~"hopeful", ~~Financial~~"plans", “should”, ~~Instruments~~“would” ~~with~~or ~~Characteristics~~similar ofwords ~~both~~constitute “forward-looking ~~Liabilities~~statements” ~~and~~within ~~Equity"~~the ~~(FAS~~meaning ~~150). FAS~~of ~~150~~the ~~requires~~Private ~~financial~~Securities ~~statement issuers'~~Litigation toReform ~~classify~~Act ~~financial~~of 1995. Such ~~instruments~~forward-looking ~~that~~statements ~~require~~involve aknown ~~transfer~~and ofunknown ~~assets~~risks, uncertainties and other important factors that ~~meet~~ ~~the~~could ~~definition~~cause ofthe ~~liabilities~~actual inresults, ~~FASB~~performance ~~Concepts~~or achievements ~~Statement~~of ~~No.~~the 6Company, ~~(CON~~or 6)industry ~~and~~results, ~~other recognition~~to ~~criteria~~differ inmaterially ~~FASB~~from ~~Concepts~~any ~~Statement~~future results, ~~No.~~performance 5or ~~(CON~~achievements ~~5),~~expressed asor ~~liabilities~~implied herein. ~~The~~Such risks, ~~Statement~~uncertainties ~~also~~and ~~requires~~factors ~~that~~include, ~~certain~~among ~~obligations~~others: ~~that~~general ~~could~~economic beand ~~settled~~business byconditions, competition ~~issuance~~from ofimports, ~~an entity's~~changes ~~equity~~in ~~but~~manufacturing ~~lack~~technology, ~~other~~banking ~~characteristics~~environment, relocation of ~~equity~~domestic bedemand ~~reported~~and ascapacity, ~~liabilities~~raw ~~even though~~material ~~the~~costs ~~obligation~~and ~~does~~availability, ~~not~~industry capacity, ~~meet~~domestic ~~the~~competition, ~~definition~~loss of ~~liabilities~~significant incustomers ~~CON~~and ~~6. This Statement~~customer iswork ~~effective~~stoppages, customer ~~for~~claims, ~~financial~~technical ~~instruments~~and ~~entered~~data ~~into~~processing orcapabilities, ~~modified~~and ~~after~~insurance ~~May~~costs ~~31,~~and ~~2003,~~availability. The ~~and~~reader ~~otherwise~~should isrefer ~~effective~~to ~~for~~Part ~~interim~~I, ~~periods~~Item ~~beginning~~1: ~~after~~"Forward ~~June~~Looking Statements" ~~15,~~of ~~2003. The~~the Company's ~~does~~Annual ~~not~~Report ~~expect~~on ~~FAS~~Form ~~150~~10-K tofor ~~have~~the ayear ~~significant~~ended ~~impact~~July on31, 2004 ~~its~~for ~~consolidated financial~~additional ~~statements~~information regarding these and other matters.

Safe Harbor for Forward Looking Statements: Certain statements in this Form 10-Q, including statements preceded by, or predicated upon the words "anticipates", "appears", "believes", "expects", "hopeful", "plans" or "should", 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, banking environment, monetary policy, raw material costs and availability, industry capacity, domestic competition, loss of significant customers and customer work stoppages, customer claims, technical and data processing capabilities, and insurance costs and availability. 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, 2002 for additional information regarding this matter.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk -— The Company's primary risk ~~relates~~ relates to changes in interest rates on its long-term debt under its senior debt facility. At ~~April~~October 3031, ~~2003~~2004, the senior debt facility represented $4056.80 million of the total debt outstanding of $4359.43 million. A significant amount of the remaining debt of $23.6 3 million bears interest at fixed rates ~~between~~ranging from 3 ~~and~~to 56 percent. The Company's senior term loan and revolving ~~debt~~line of credit bear interest at a floating rate based on the London Interbank Offered Rate ("LIBOR") or the Prime Rate. Accordingly, the Company believes the carrying value of its variable rate, long-term debt approximates fair value. The Company has not entered into derivative contracts or other financial instruments for speculative or trading purposes. Furthermore, the Company ~~has~~is not ~~used~~ ~~financial~~currently ~~instruments~~using infinancial ~~the past~~instruments, such as interest rate swaps or hedges, to minimize the impact of interest rate fluctuations on earnings and cash flow, however, management could use such instruments if warranted based on estimates of future interest rates. Using the average outstanding long-term debt under the senior debt facility for the first ~~nine~~ three months of fiscal ~~2003~~2005 of $4243.0 million, a one percent change in the floating rates would change ~~annual~~ cash flow and earnings before income taxes by approximately $~~420~~430,000 on an annualized basis.

Inventory Risk -— The steel industry is characterized by ~~changing~~ changing customer demands, foreign competition, government influence on raw material and ~~finished~~ finished good import prices, asmanufacturing ~~evidenced~~capacity ~~by current trade tariffs,~~ and the financial instability ~~among~~of a number of domestic steel producers. Due to ~~the~~foreign ~~tariffs~~demand ~~enacted~~for ~~over~~domestic steel and scrap, the lack of availability and high-cost of steel-making ~~trade~~inputs ~~cases~~such as coke, scrap ~~well~~metal asand energy, and the ~~resulting~~weakening ~~supply~~value ~~and~~of ~~demand~~the ~~imbalances~~U.S. dollar, the ~~Company's~~ cost of carbon steel ~~coils~~coil ~~has~~is ~~increased~~dramatically ~~significantly~~increasing and in some cases steel is unavailable. AtThe Company’s ~~this~~short-term ~~time,~~ability ~~management~~to ~~believes~~raise prices ~~have peaked~~to ~~and~~its customers is ~~undertaking~~often ~~strategies,~~not ~~such~~as related to the change in the cost of its steel coil raw materials as ~~reducing~~it ~~inventory~~is ~~order~~to ~~quantities~~the ~~and~~competition that ~~maintaining~~exists ~~competitive~~in ~~sales~~the ~~prices,~~markets tointo ~~try~~which ~~and~~the ~~lower~~tubing ~~higher~~is ~~cost~~being ~~steel inventories~~sold. The Company's ~~ability~~ inability to raise prices to offset ~~increasing~~increases in steel costs ~~may~~ ~~prove~~or tofuture bedeclines ~~difficult,~~in ~~which~~sales ~~could~~prices may result in unrealizable inventory values and a decline in profit margins. Although every effort is made to ensure the accuracy of internal forecasting, any significant changes in demand or finished good and raw material prices could have a significant impact on the value of the Company's inventory and reported operating results.

Natural Gas Risk -— The Company uses natural gas in ~~significant~~ significant quantities as part of its manufacturing processes. From time to time, the Company experiences significant increases and decreases in the price of natural gas. The Company's ability to raise prices to offset increasing gas costs may prove to be difficult, which could result in declines in profit margins. The Company ~~is not~~ currently ahas ~~party~~various tofixed ~~any~~price ~~derivative~~and NYMEX swap contracts orin ~~other~~order ~~financial~~to ~~instruments~~manage ~~involving~~ natural gas risk. ~~Management~~Contract ~~could~~terms ~~use~~range ~~such~~from ~~instruments~~6 ifmonths ~~warranted~~to ~~based~~3 onyears ~~estimates of~~at ~~future~~ prices~~. The~~ ~~average~~ranging ~~amount~~from of$5.03 ~~natural~~per mcf ~~gas~~to ~~used~~$6.20 inper ~~the~~mcf. Contracts ~~first~~will ~~nine~~essentially ~~months~~lock ~~of fiscal~~in ~~2003~~prices ~~was~~for ~~approximately 35~~5,000 mcf per month~~. Based~~ onfrom ~~expected~~October ~~usage,~~2004 athrough ~~one dollar~~April ~~per~~2005 ~~mcf~~and ~~change~~10,000 inmcf ~~the~~per ~~price~~month offrom ~~natural~~November ~~gas~~2004 through ~~could~~September ~~change~~2006. Management ~~quarterly~~believes ~~cash~~such ~~flow~~contracts ~~and earnings~~are ~~before~~warranted ~~income~~based ~~taxes~~on estimates byof ~~approximately~~future ~~$105,000. The~~prices ~~Company's~~and ~~average~~the ~~price~~ amount of natural gas ~~was~~used ~~approximately~~by ~~$6.63~~the ~~and $4~~Company.91 The average ~~per~~amount ~~mcf~~of ~~for~~natural ~~the~~gas ~~three~~used ~~months~~per ~~and~~month ~~nine months~~in ~~ended~~fiscal ~~April~~2004 ~~30,~~was ~~2003~~34,000 ~~respectively. Due~~mcf toat ~~current~~an ~~economic~~average price ~~conditions~~of ~~and the~~$5.35 ~~uncertainty~~per ~~surrounding~~mcf. At ~~the~~October ~~Middle~~31, ~~East~~2004, the Company’s ~~experienced~~natural ~~increases~~gas ~~in natural~~hedges ~~gas~~had ~~prices~~a positive net fair value of $3588,000. This toamount $4is ~~per~~included ~~mcf~~in ~~during~~other assets on the ~~third~~Company’s ~~quarter~~balance ofsheet ~~2003~~with ~~from~~a ~~the~~corresponding ~~second~~credit ~~quarter~~balance of ~~2003. The~~ ~~Company~~$363,000, ~~anticipates~~net of ~~natural~~a ~~gas~~deferred ~~prices~~tax toliability ~~average~~of ~~back~~$225,000, ~~into~~reported ~~the~~in $4stockholders’ toequity $5as ~~per~~accumulated ~~mcf~~other ~~range~~comprehensive ~~for~~income, ~~the~~net ~~fourth quarter~~ of ~~fiscal 2003~~taxes.

Item 4. Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be ~~disclosed~~ disclosed in Company reports filed or submitted under the Securities Exchange Act isof 1934 is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission'’s rules and forms. WeThe doCompany ~~not~~does not expect that ~~our~~its disclosure controls and procedures or ~~our~~ other internal controls can prevent all error and all fraud or that ~~our~~ its evaluation of these controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The benefits of controls and procedures must be considered relative to their costs, and the design of any system of controls is based in part upon assumptions about the likelihood of future events. The Company'’s disclosure controls and procedures and other internal controls can only provide reasonable assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these and other inherent limitations in controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.

~~Within~~ As of the 90end ~~days~~of the ~~prior~~period tocovered by the ~~filing~~ date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company'’s management, including the Company'’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company'’s Chief Executive Officer and Chief Financial Officer concluded that the Company'’s disclosure controls and procedures are effective.

There have been no significant changes in the Company'’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of evaluation.

21PART II. OTHER INFORMATION

PART II OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to various lawsuits and claims arising in the ordinary course of business and accrues for such items when the liability is both probable and the amount can be reasonably estimated. Management, after review and consultation with legal counsel, believes that any ~~liability~~results ~~resulting~~of ~~from~~such ~~these~~litigation ~~matters~~and claims would not materially affect the results of operations or the financial position of the Company. ~~The Company maintains liability insurance against risks arising out of the normal course of business.~~

Item 2. ~~Changes~~Unregistered inSales of Equity Securities and Use of Proceeds ~~None~~

~~Item 3. Defaults Upon Senior Securities~~ None

Item 43. ~~Submission~~Defaults ofUpon ~~Matters~~Senior ~~to a Vote of Security Holders None~~Securities

~~Item 5. Other Information~~ None

Item 64. ~~Exhibits~~Submission ~~and~~of ~~Reports~~Matters onto ~~Form~~a ~~8-K~~Vote of Security Holders

~~A. Exhibits~~ None

~~Exhibit~~Item 155.~~1: Letter~~ ~~Regarding Unaudited~~Other ~~Interim Financial~~ Information.

On November 4, 2004, the ~~Exhibit~~Company ~~99.1:~~announced ~~Certificate~~that ~~pursuant~~its tospecial 18committee, comprised of three independent directors, Uand its full Board of Directors had unanimously approved a revised fractional share price of $6.S50 under the proposed reverse stock split.C. The ~~Section~~reader ~~1350~~should ofrefer ~~Chief~~to ~~Executive~~Part ~~Officer~~I, Item 2: "Management's Discussion and ~~Chief~~Analysis of Financial ~~Officer~~Condition and Results of Operations - Recent Events" of this Form 10-Q and to the Company's Current Report on Form 8-K, dated November 4, 2004.

BItem 6. ~~Reports on Form 8-K~~Exhibits

A. Exhibits ~~Form~~ 15.1 8Letter Regarding Unaudited Interim Financial Information. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-K,Oxley ~~Item~~Act 9of ~~disclosure,~~2002. 31.2 ~~dated~~Certification ~~March~~of Chief Financial Officer pursuant to Section 302 5,of ~~2003~~the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

22SIGNATURES

~~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.

~~Pursuant to the~~ ~~requirements~~WEBCO ~~of the Securities Exchange Act of 1934~~INDUSTRIES, ~~the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized~~INC.

~~WEBCO~~ December ~~INDUSTRIES~~14, 2004 /s/Michael ~~INC~~P. Howard Michael P. Howard Treasurer Chief Financial Officer Vice President of Finance and Administration (Principal Financial and Accounting Officer)

June 11, 2003 /s/Michael P. Howard Michael P. Howard Treasurer Chief Accounting Officer Vice President of Finance and Administration

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, F. William Weber, Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Webco Industries, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 11, 2003

/s/ F. William Weber F. William Weber Chief Executive Officer

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael P. Howard, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Webco Industries, Inc.;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date: June 11, 2003

/s/ Michael P. Howard Michael P. Howard Chief Financial Officer

Exhibit Index

Exhibit 15.1: Letter Regarding Unaudited Interim Financial Information.

Exhibit 99.1: Certificate pursuant to 18 U.S.C. Section 1350 of Chief Executive Officer and Chief Financial Officer.

Filing Compare · WEBCO INDUSTRIES INC