<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K/A
-------------------------
CURRENT REPORT
AMENDMENT NO. 2
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JANUARY 3, 2000
LONE STAR TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 1-12881 75-2085454
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
15660 NORTH DALLAS PARKWAY,
SUITE 500, DALLAS, TEXAS 75248
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (972) 770-6401
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
AMENDMENT NO. 2
Amend Item 7. FINANCIAL STATEMENTS AND EXHIBITS by deleting such item in its
entirety and substituting therefor the following which supplements the
previously filed financial statements by adding (i) financial information for
the acquired business for the year ended December 31, 1997 and the year ended
December 31, 1999 and (ii) pro forma financial information for the year ended
December 31, 1999:
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
- Report of Independent Public Accountants
- Consolidated Balance Sheets as of December 31, 1999 and
1998
- Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997
- Consolidated Statements of Partners' Capital for the Years
Ended December 31, 1999, 1998 and 1997
- Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997
- Notes to Consolidated Financial Statements, December 31,
1999, 1998 and 1997
(b) PRO FORMA FINANCIAL INFORMATION.
- Introduction to Pro Forma Financial Information
- Unaudited Pro Forma Balance Sheet at December 31, 1999
- Notes to Unaudited Pro Forma Balance Sheet
- Unaudited Pro Forma Income Statement for the Twelve Months
ended December 31, 1999
- Notes to Unaudited Pro Forma Income Statement
(c) EXHIBITS.
2.1* Asset Purchase Agreement dated as of November 16, 1999 by
and among Lone Star Technologies, Inc., Fintube
Technologies, Inc. and Fintube Limited Partnership.
2.2* First Amendment to Asset Purchase Agreement dated as of
January 1, 2000 by and among Lone Star Technologies, Inc.,
Fintube Technologies, Inc. and Fintube Limited Partnership.
99.1* Press release dated January 3, 1999.
- ---------------
*Previously filed as an exhibit to the Form 8-K on January 18, 2000.
2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Description Page
- ----------- ----
<S> <C>
Fintube Limited Partnership:
- ---------------------------
Report of Independent Public Accountants........................................................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998....................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1999, 1998 and 1997............................. F-4
Consolidated Statements of Partners' Capital for the Years Ended December 31, 1999, 1998 and
1997............................................................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997......................... F-6
Notes to Consolidated Financial Statements, December 31, 1999, 1998 and 1997....................................... F-7
INDEX TO PRO FORMA FINANCIAL INFORMATION
<CAPTION>
Page
----
Lone Star Technologies, Inc.:
- ----------------------------
Introduction to Pro Forma Financial Information.................................................................... F-12
Unaudited Pro Forma Balance Sheet at December 31, 1999............................................................. F-13
Notes to Unaudited Pro Forma Balance Sheet......................................................................... F-14
Unaudited Pro Forma Income Statement for the Twelve Months ended December 31, 1999................................. F-16
Notes to Unaudited Pro Forma Income Statement...................................................................... F-17
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Fintube Limited Partnership:
We have audited the accompanying consolidated balance sheets of Fintube Limited
Partnership (a Delaware Limited Partnership) and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income, partners'
capital and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fintube Limited Partnership and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
February 4, 2000
F-2
<PAGE>
FINTUBE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 256,600 $ 628,000
Accounts receivable, net allowance for doubtful accounts of
$196,177 in 1999 and $152,461 in 1998 15,485,510 10,903,157
Inventories 10,718,286 8,585,322
Prepaid expenses 112,822 74,986
----------- -----------
Total current assets 26,573,218 20,191,465
----------- -----------
PROPERTY, PLANT AND EQUIPMENT 38,530,540 36,959,749
Less - accumulated depreciation 17,126,282 15,615,646
----------- -----------
21,404,258 21,344,103
----------- -----------
OTHER ASSETS 1,382,721 281,054
----------- -----------
$49,360,197 $41,816,622
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current portion of long-term debt $17,871,191 $ -
Accounts payable 3,893,928 2,945,979
Accrued liabilities 5,905,367 2,120,887
----------- -----------
Total current liabilities 27,670,486 5,066,866
----------- -----------
LONG-TERM DEBT - 18,225,853
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 23,757,932 20,592,124
Less - notes receivable for purchase of Partnership interest (2,068,221) (2,068,221)
----------- -----------
NET PARTNERS' CAPITAL 21,689,711 18,523,903
----------- -----------
$49,360,197 $41,816,622
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
FINTUBE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $80,743,647 $61,215,649 $56,972,650
COST OF SALES 53,847,666 45,621,021 45,665,484
----------- ----------- -----------
Gross profit 26,895,981 15,594,628 11,307,166
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,165,431 9,800,521 10,453,351
MANAGEMENT EQUITY PLAN EXPENSE 1,655,000 - -
----------- ----------- -----------
Operating income 13,075,550 5,794,107 853,815
INTEREST EXPENSE 1,170,850 1,474,601 1,290,290
GAIN ON DISPOSAL OF FIRE DAMAGED
ASSETS - 1,743,270 -
OTHER INCOME 2,169,116 835,865 974,691
----------- ----------- -----------
INCOME BEFORE TAX PROVISION 14,073,816 6,898,641 538,216
TAX PROVISION 117,076 115,267 114,849
----------- ----------- -----------
NET INCOME $13,956,740 $ 6,783,374 $ 423,367
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
FINTUBE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<S> <C> <C>
PARTNERS' CAPITAL, December 31, 1996 $ 15,871,938
-------------
COMPREHENSIVE INCOME:
Net income for the year ended December 31, 1997 $ 423,367
Foreign translation adjustment (98,509)
-------------
TOTAL COMPREHENSIVE INCOME 324,858
SALE OF PARTNERSHIP INTEREST 350,000
DISTRIBUTIONS TO PARTNERS (1,259,114)
-------------
PARTNERS' CAPITAL, December 31, 1997 15,287,682
-------------
COMPREHENSIVE INCOME:
Net income for the year ended December 31, 1998 6,783,374
Foreign translation adjustment (83,715)
-------------
TOTAL COMPREHENSIVE INCOME 6,699,659
DISTRIBUTIONS TO PARTNERS (1,395,217)
-------------
PARTNERS' CAPITAL, December 31, 1998 20,592,124
-------------
COMPREHENSIVE INCOME:
Net income for year ended December 31, 1999 13,956,740
Foreign translation adjustment (6,946)
-------------
TOTAL COMPREHENSIVE INCOME 13,949,794
DISTRIBUTION TO PARTNERS (12,438,986)
MANAGEMENT EQUITY PLAN APPRECIATION 1,655,000
-------------
PARTNERS' CAPITAL, December 31, 1999 $ 23,757,932
=============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
F-5
<PAGE>
FINTUBE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,956,740 $ 6,783,374 $ 423,367
-------------- -------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation 2,901,948 2,492,897 2,079,268
Amortization 152,763 292,327 278,292
Gain on disposition of fire damaged assets - (1,743,270) -
Expenses reimbursed from fire - (397,759) -
(Gain) loss on disposal of assets 50,756 (5,154) 11,224
Foreign currency exchange gains (6,946) (83,715) (98,509)
Management equity plan appreciation 1,655,000 -
Change in assets and liabilities-
(Increase) decrease in accounts receivable (4,582,353) 1,215,983 1,214,880
(Increase) decrease in inventories (2,132,964) 474,420 (3,227,038)
(Increase) decrease in prepaid expenses (37,836) 617,019 (411,612)
Increase in other assets (1,254,430) (169,899) (82,344)
Increase in accounts payable 947,949 254,829 577,057
Increase (decrease) in accrued liabilities 3,784,480 (2,326,155) 846,274
-------------- -------------- --------------
Net cash provided by operating activities 15,435,107 7,404,897 1,610,859
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,178,762) (5,838,638) (6,238,309)
Proceeds from insurance company - 2,891,296 -
Proceeds from sales of property 165,903 - 171,038
Patent expenditure - - (43,622)
-------------- -------------- --------------
Net cash used in investing activities (3,012,859) (2,947,342) (6,110,893)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 40,136,901 26,862,985 53,257,361
Repayment of long-term debt (40,491,563) (29,913,000) (46,373,146)
Distributions to partners (12,438,986) (1,395,217) (2,159,114)
-------------- -------------- --------------
Net cash used in financing activities (12,793,648) (4,445,232) 4,725,101
--------------- -------------- --------------
NET (DECREASE) INCREASE IN CASH (371,400) 12,323 225,067
CASH AT BEGINNING OF YEAR 628,000 615,677 390,610
-------------- -------------- --------------
CASH AT END OF YEAR $ 256,600 $ 628,000 $ 615,677
============== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 1,090,003 $ 1,474,601 $ 1,290,290
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
FINTUBE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
1. OPERATIONS AND ORGANIZATION:
FORMATION
Fintube Limited Partnership (the Partnership) is a limited partnership
organized on July 19, 1991, under the Delaware Revised Uniform Limited
Partnership Act. The Partnership's wholly-owned subsidiaries include TEKtube,
Kentube Engineered Products and Aletas y Birlos, S.A. de C.V. (AYB), a
Mexican entity. The General Partner is Division Fintube Corporation (DFC), an
Oklahoma corporation. DFC is also the Class B Limited Partner. In addition,
the Partnership owns 99 percent of Fintube Properties, LLC.
The Partnership has operations in Oklahoma, Mexico and Canada. Primary
operations include the application of fins and studs to tubes and the
manufacturing of heat economizers and retromizers. The manufacturing
operations are internally supported by a steel coil slitting division and a
tube mill. Principal markets are throughout the U.S., Asia and South America.
In 1999, 1998 and 1997, significant sales of manufacturing equipment were
made and the Partnership expects to make similar sales in future years.
SHARING RATIOS
Under the Limited Partnership Agreement, net income and net loss are
allocated as follows:
1) For each fiscal year in which the Partnership has net income, a
preferred return will first be made to the Class B Limited Partner
in an amount equal to the interest rate applicable to the
revolving line of credit multiplied by the average daily Class B
Limited Partner capital account. The remaining net income will be
allocated to the General Partner and the Class A Limited Partners
on a pro-rata basis based on their respective capital accounts.
2) For each fiscal year in which the Partnership has a net loss, it
will be allocated to the General Partner and the Class A Limited
Partners on a pro-rata basis based on their respective capital
accounts. In no event shall the allocation of a net loss create or
increase a negative capital account for any Limited Partner.
DISTRIBUTION PREFERENCE
The Class B Limited Partner has a preferred distribution right of $0,
$1,800,000 and $2,800,000 at December 31, 1999, 1998 and 1997, respectively.
F-7
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
Raw materials $ 6,295,398 $ 5,853,752
Work in process 4,169,198 1,586,032
Finished goods 253,690 1,145,538
-------------- ------------
$ 10,718,286 $ 8,585,322
============== ============
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and are depreciated on either
a straight-line or accelerated basis over the estimated useful lives (5-20
years) of the assets. Maintenance, repairs and betterments, including
replacement of minor items of physical properties are charged to expense. Major
additions to physical properties are capitalized. The cost of the assets retired
or sold is credited to the asset accounts and the related accumulated
depreciation is charged to the accumulated depreciation accounts. The gain or
loss from sale or retirement of property, if any, is included in the
consolidated statement of income. Property, plant and equipment consisted of the
following at December 31:
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
Land and land improvements $ 1,222,274 $ 1,222,274
Buildings 7,630,398 7,944,286
Machinery and equipment 24,126,385 22,548,827
Furniture and fixtures 4,542,288 2,633,760
Construction in progress 1,009,195 2,610,602
-------------- -------------
$ 38,530,540 $ 36,959,749
============== =============
</TABLE>
ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
Unvouchered accounts payable $ 1,423,738 $ 255,082
Customer deposits 1,419,613 116,093
Accrued payroll and employee benefits 1,331,435 1,045,799
Accrued bonuses 940,000 216,750
Other accrued liabilities 790,581 487,163
------------ -------------
$ 5,905,367 $ 2,120,887
============ =============
</TABLE>
REVENUE RECOGNITION
The Partnership recognizes revenue upon shipment.
F-8
<PAGE>
WARRANTY
The Partnership maintains a reserve for potential warranty claims based on
known conditions. Generally, the warranty period on all products is one to
two years and is limited to the replacement cost of the product.
ROYALTIES
The Partnership has four royalty agreements under which income is received
based on a percentage of the net selling price, as defined in the agreements,
of products manufactured under the agreements.
INCOME TAXES
The Partnership is not a taxable entity for federal and state income tax
purposes. As a partnership, the taxable income of the Partnership is included
in the taxable income of its partners. During 1999, 1998 and 1997, taxes of
$117,076, $115,267 and $114,849, respectively, were paid by the Partnership
on behalf of its Mexican subsidiary, AYB.
CONSOLIDATION
All significant intercompany accounts and transactions between the
Partnership and its subsidiaries have been eliminated.
FOREIGN CURRENCY TRANSLATION
Foreign currency transactions and financial statements are translated in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation." Assets and liabilities are translated to U.S. dollars
at the current exchange rate. Income and expense accounts are translated
using the weighted average exchange rate for the period. Adjustments arising
from translation of foreign financial statements are reflected in a
cumulative translation adjustment account in the partners' capital section of
the consolidated balance sheets. Transaction gains and losses are included in
net income.
COMPREHENSIVE INCOME
The Partnership applies Statement of Financial Accounting Standards No. 130,
(SFAS 130), "Reporting Comprehensive Income." SFAS 130 requires reporting of
all nonowner changes in equity in a financial statement of the period for
which they are recognized. The Partnership discloses comprehensive income,
which consists of the foreign translation adjustment, in the consolidated
statements of partners' capital.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-9
<PAGE>
3. INVOLUNTARY CONVERSION OF NONMONETARY ASSETS:
On January 27, 1998, the Partnership suffered a structural fire at one of its
manufacturing facilities. The fire caused approximately $3.2 million in
damage to property, plant, equipment and inventory. Proceeds received from
the insurance carrier resulted in a gain of approximately $1.7 million. In
addition, the fire and subsequent building and equipment repairs affected
production capacity, resulting in an operating variance for 1998.
4. LONG-TERM DEBT:
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
Revolving line of credit, interest payable monthly at LIBOR plus
1.35% (6.69688% at December 31, 1999). $ 3,347,783 $ 7,099,383
Bank term loan, payable in varying annual amounts, interest at LIBOR plus
1.35% (6.69688% at December 31, 1999). 13,170,313 9,500,000
Industrial revenue bond, monthly payments of $22,500 plus interest at 82%
of Wall Street Journal prime (6.97% at
December 31, 1999), maturing in April 2006. 1,353,095 1,626,470
-------------- --------------
$ 17,871,191 $ 18,225,853
============== ==============
</TABLE>
All debt of the Partnership was repaid in conjunction with the purchase of
the Partnership's assets on January 1, 2000 (see Note 8).
5. COMMITMENTS AND CONTINGENCIES:
PARTNERS' INCOME TAX PAYMENTS
The Partnership Agreement provides for quarterly distributions on or before
January 10, April 10, June 10 and September 10 to all partners in an amount
sufficient to pay all federal, state and local income tax liabilities
resulting from allocation of income.
ROLLUP TRANSACTION
The Class A Limited Partners have the option to initiate a tax-free rollup
transaction in which all partners would exchange their partnership interest
for an equivalent equity interest in a new corporation.
CLAIMS AND LITIGATION
The Partnership is involved in certain claims and pending litigation arising
from the normal conduct of business. Based on the present knowledge of the
facts, management believes the resolution of claims and pending litigation
will not have a material adverse effect on the Partnership's consolidated
financial statements.
F-10
<PAGE>
6. MANAGEMENT INVESTMENT IN PARTNERSHIP:
Certain key management personnel have purchased interests in the Partnership
under the provisions of a Management Equity Participation Plan. Purchases
prior to 1997 were financed through notes payable to the Partnership due in
2000 with interest payable annually at the lesser of a bank's prime rate or
ten percent. Effective January 1, 1997, two notes totaling $350,000 were
issued for Partnership interests. The new notes payable to the Partnership
are due in 2006 with interest payable at the lesser of a bank's prime rate or
ten percent. The notes are deducted from the partnership capital in the
consolidated balance sheets. Notes payable to the Partnership at December 31,
1999 and 1998, totaled $2,068,221. The Partnership applies variable
accounting to the plan. Compensation expense of $1,841,000, $0 and $0 was
recorded for the years ended December 31, 1999, 1998 and 1997, respectively.
Throughout the term of the notes, the Partnership is obligated to repurchase
the interest of a participant in the event of death, termination or
withdrawal at a price based on the participant's purchase price or the
valuation formula provided in the agreement with the participant.
7. RETIREMENT SAVINGS PLAN:
The Partnership sponsors a defined contribution benefit plan. The Partnership
may, on a discretionary basis, make contributions to the plan. In 1999, 1998
and 1997, Partnership contributions to the plan were approximately $0,
$165,000 and $180,000, respectively.
8. SUBSEQUENT EVENT:
Effective January 1, 2000, a subsidiary of Lone Star Technologies, Inc.
purchased substantially all of the assets of the Partnership and its
subsidiaries for a base purchase price of $82 million plus a $2.5 million
adjustment for working capital. Of the purchase price, $20 million was paid
through the issuance of 760,237 shares of Lone Star common stock directly to
the selling partners. Promissory notes receivable from the Management Equity
Participation Plan of approximately $2 million were excluded from the
transaction. The Partnership's bank debt ($17 million as of January 3, 2000),
litigation and expenses incurred in conjunction with the sale of Fintube
Limited Partnership's assets to Lone Star, among other things, were excluded
from the transaction.
F-11
<PAGE>
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the Financial Statements of Lone Star
Technologies, Inc. ("Lone Star") and Fintube Limited Partnership ("Fintube")
for the year ended December 31, 1999, which are included elsewhere in this
Prospectus, and has been prepared to illustrate the effects of the
transactions described below.
The following unaudited pro forma statement of operations for the year ended
December 31, 1999 give effect to the acquisition by Lone Star and its
subsidiaries of the assets of Fintube and its subsidiaries (the
"Acquisition"), and the issuance of the Lone Star common stock, as if such
transactions had occurred on January 1, 1999. The pro forma unaudited balance
sheet as of December 31, 1999 has been prepared as if the Acquisition of
Fintube had occurred on that date.
The Acquisition of Fintube will be accounted for using the purchase method of
accounting. The total purchase costs of the Acquisition (approximately $85
million) have been allocated to the tangible and intangible assets and
liabilities acquired based upon their respective fair values. The allocation
of the aggregate purchase price reflected in the Pro Forma Financial
Information is preliminary. The final allocation of the purchase price is
contingent upon the review for other intangible assets and an assessment of
the acquired net assets; however, that allocation is not expected to differ
materially from the preliminary allocation.
The Pro Forma Financial Information is based on the historical financial
statements of Lone Star and Fintube and the assumptions and adjustments
described in the accompanying notes. The unaudited pro forma statements of
operations do not purport to represent what Lone Star's results of operations
actually would have been if the Acquisition had occurred as of the date
indicated or what results will be for any future periods. The Pro Forma
Financial Information is based upon assumptions that Lone Star believes are
reasonable and should be read in conjunction with the Financial Statements
and the related notes thereto included elsewhere in this Prospectus.
F-12
<PAGE>
LONE STAR TECHNOLOGIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Lone Star
Lone Star Pro Forma Technologies
Technologies Fintube Adjustments Pro Forma
------------ ----------- ------------ ------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,200,000 $ 257,000 $ - $ 22,457,000
Short-term investments 1,200,000 - - 1,200,000
Accounts receivable, net 56,100,000 15,485,000 - 71,585,000
Inventories 88,900,000 10,718,000 - 99,618,000
Prepaid expenses and other current assets 3,700,000 113,000 - 3,813,000
------------ ----------- ------------ ------------
Total current assets 172,100,000 26,573,000 - 198,673,000
MARKETABLE SECURITIES 15,400,000 - - 15,400,000
PROPERTY, PLANT, AND EQUIPMENT, net 149,500,000 21,404,000 (3,441,000)(a) 167,463,000
GOODWILL AND OTHER INTANGIBLES - - 50,113,000 (a) 50,113,000
OTHER ASSETS 14,100,000 1,383,000 (708,000)(a)(c) 14,775,000
------------ ----------- ------------ ------------
Total assets $351,100,000 $49,360,000 $ 45,964,000 $446,424,000
============ =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,000,000 $17,871,000 $(11,871,000)(d) $ 8,000,000
Accounts payable 57,000,000 3,894,000 - 60,894,000
Accrued liabilities 27,000,000 5,905,000 - 32,905,000
------------ ----------- ------------ ------------
Total current liabilities 86,000,000 27,670,000 (11,871,000) 101,799,000
LONG-TERM DEBT, net 7,000,000 - 33,000,000 (d) 40,000,000
REVOLVING CREDIT FACILITY 21,000,000 - 26,525,000 (d) 47,525,000
OTHER NONCURRENT LIABILITIES 42,000,000 - - 42,000,000
------------ ----------- ------------ ------------
Total liabilities 156,000,000 27,670,000 47,654,000 231,324,000
STOCKHOLDERS' EQUITY 195,100,000 21,690,000 (1,690,000)(b) 215,100,000
------------ ----------- ------------ ------------
Total liabilities and stockholders'
equity $351,100,000 $49,360,000 $ 45,964,000 $446,424,000
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma balance sheet.
F-13
<PAGE>
LONE STAR TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) Reflects the preliminary allocation of the purchase price for the
Acquisition. The Acquisition will be accounted for using the purchase
method of accounting. Lone Star has not yet determined the final allocation
of the purchase price and, accordingly, the amounts shown below may differ
from the amounts ultimately determined; however, that allocation is not
expected to differ materially from the preliminary allocation.
The preliminary pro forma allocation of the purchase price is as follows:
<TABLE>
<S> <C>
Purchase price for net assets of Fintube $84,850,000
Less - Net assets of Fintube acquired (Fintube
long-term debt and revolving credit facility
not acquired) 39,561,000
-----------
Excess of purchase price over historical
amounts to be allocated $45,289,000
===========
Allocation of excess of purchase price based on preliminary estimated
values:
Property, plant, and equipment $(3,441,000)
Goodwill and other intangibles 50,113,000
Other assets (1,383,000)
-----------
$45,289,000
===========
(b) The adjustment to stockholders equity consists of:
Issuance of Lone Star common stock $20,000,000
Less - Elimination of Fintube partners' equity
at December 31, 1999 (21,690,000)
-----------
$(1,690,000)
===========
(c) This adjustment reflects the elimination of historical Fintube other assets
which were determined to have no fair market value and recognition of the
deferred financing costs associated with the financing described in (d),
below.
Historical Fintube other assets $(1,383,000)
Deferred financing costs 675,000
-----------
Total adjustment $ (708,000)
===========
</TABLE>
F-14
<PAGE>
(d) Reflects bank financing of $39,000,000 under the terms of a six year term
loan agreement and $26,525,000 of proceeds from revolving credit facilities
used to finance the acquisition, less the Fintube long-term debt and
revolving credit facility not assumed.
<TABLE>
<CAPTION>
Current Noncurrent Revolving
Long-Term Long-Term Credit
Debt Debt Facilities
----------- ----------- ------------
<S> <C> <C> <C>
Transaction financing $6,000,000 $33,000,000 $26,525,000
Less- Fintube debt not assumed 17,871,000 - -
------------ ----------- -----------
$(11,871,000) $33,000,000 $26,525,000
============ =========== ===========
</TABLE>
F-15
<PAGE>
LONE STAR TECHNOLOGIES, INC.
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
(a) (b) Lone Star
Lone Star Pro Forma Technologies
Technologies Fintube Adjustments Pro Forma
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
NET SALES/REVENUES $353,400,000 $80,744,000 $ - $434,144,000
COST OF SALES (341,400,000) (53,848,000) 492,000 (c) (394,756,000)
------------ ----------- ------------- ------------
Gross profit 12,000,000 26,896,000 492,000 39,388,000
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (15,500,000) (13,820,000) (1,906,000)(d) (31,226,000)
------------ ----------- ------------- ------------
- - 1,655,000 (e) -
------------ ----------- ------------- ------------
Operating income (loss) (3,500,000) 13,076,000 (1,414,000) 8,162,000
INTEREST INCOME 1,800,000 - - 1,800,000
INTEREST EXPENSE (4,600,000) (1,171,000) (4,653,000)(f) (10,424,000)
OTHER INCOME (EXPENSE) - 2,169,000 - 2,169,000
------------ ----------- ------------- ------------
Income (loss) before income taxes (6,300,000) 14,074,000 (6,067,000) 1,707,000
INCOME TAX BENEFIT (EXPENSE) - (117,000) - (117,000)
------------ ----------- ------------- ------------
NET INCOME (LOSS) $ (6,300,000) $13,957,000 $(6,067,000) $ 1,590,000
============ =========== =========== ============
NET INCOME (LOSS) PER SHARE
Basic $(.28) - - $.14
Diluted $(.28) - - $.14
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 22,548,000 - 760,000 23,308,000
Diluted 22,548,000 - 1,076,000 23,624,000
The accompanying notes are an integral part of this unaudited pro forma financial statement.
</TABLE>
F-16
<PAGE>
LONE STAR TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
(a) The historical balances for Lone Star are derived from the audited
financial statements of Lone Star for the twelve months ended December 31,
1999.
(b) The historical balances for Fintube are derived from the audited financial
statements of Fintube for the twelve months ended December 31, 1999.
(c) Reflects the incremental change in depreciation expense due to purchase
accounting adjustments to the fair value of property, plant, and equipment
consistent with the depreciation policies utilized by Lone Star.
(d) Reflects the incremental change in amortization expense due to purchase
accounting and adjustments to intangible assets in connection with the
acquisition consistent with the amortization policies utilized by Lone
Star.
(e) Reflects the elimination of compensation expense from the Fintube
Management Equity Participation Plan, obligations of which Lone Star did
not acquire.
(f) Reflects interest expense (at an assumed rate of 8.64%) associated with the
borrowings under the revolving credit agreement and term loan, and
amortization of deferred financing cost in connection with the Acquisition.
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
-----------------
<S> <C>
Interest expense related to new borrowings $5,824,000
Less- Historical interest expense of Fintube (1,171,000)
(debt not assumed) ----------
$4,653,000
==========
</TABLE>
F-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 17, 2000 LONE STAR TECHNOLOGIES, INC.
By: /s/ Charles J. Keszler
---------------------------------------
Charles J. Keszler
Vice President-Finance and Treasurer
