<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K/A
-------------------------
CURRENT REPORT
AMENDMENT NO. 1
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 31, 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. 1
Amend Item 7. FINANCIAL STATEMENTS AND EXHIBITS by deleting such item in its
entirety and substituting therefor the following:
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
- Independent Auditor's Report
- Balance Sheet at December 31, 1999
- Statement of Income for the Year Ended
December 31, 1999
- Statement of Changes in Stockholders'
Equity for the Year Ended December 31, 1999
- Statement of Cash Flows for the Year Ended
December 31, 1999
- Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
- Introduction to March 31, 2000 Unaudited
Pro Forma Financial Information
- Unaudited Pro Forma Balance Sheet as of
March 31, 2000
- Notes to Unaudited Pro Forma Balance Sheet
- Unaudited Pro Forma Income Statement for the
Three Months Ended March 31, 2000
- Notes to Unaudited Pro Forma Statements of
Operations
- Introduction to December 31, 1999 Pro
Forma Financial Information
- Unaudited Pro Forma Income Statement for
the Twelve Months Ended December 31, 1999
- Notes to Unaudited Statements of
Operations
(c) EXHIBITS.
2.1* Asset Purchase Agreement dated as of March
8, 2000 by and among Lone Star Technologies,
Inc., Bellville Acquisition, Inc. and
Bellville Tube Corporation.
2.2* First Amendment to Asset Purchase Agreement
dated as of March 31, 2000 by and among Lone
Star Technologies, Inc., Bellville
Acquisition, Inc. and Bellville Tube
Corporation.
2.3* Limited Guaranty dated as of March 31, 2000
by and between The CIT Group/Business
Credit, Inc., as agent, and Lone Star
Technologies, Inc.
2.4* Stock Pledge Agreement dated as of March 31,
2000 by and between The CIT Group/Business
Credit, Inc., as agent, and Lone Star
Technologies, Inc.
23.1 Consent of Harper & Pearson Company.
99.1* Press release dated March 31, 2000.
--------------------
*Previously filed as an exhibit to the Form 8-K on April 17, 2000.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
DESCRIPTION
BELLVILLE TUBE CORPORATION:
<TABLE>
<S> <C>
Independent Auditor's Report....................................................................................F-2
Balance Sheet at December 31, 1999 .............................................................................F-3
Statement of Income for the Year Ended December 31, 1999 .......................................................F-4
Statement of Changes in Stockholders' Equity for the Year Ended December 31, 1999 ..............................F-5
Statement of Cash Flows for the Year Ended December 31, 1999 ...................................................F-6
Notes to Financial Statements...................................................................................F-7
INDEX TO PRO FORMA FINANCIAL INFORMATION
LONE STAR TECHNOLOGIES, INC.:
Introduction to March 31, 2000 Unaudited Pro Forma Financial Information.......................................F-11
Unaudited Pro Forma Balance Sheet as of March 31, 2000.........................................................F-12
Notes to Unaudited Pro Forma Balance Sheet.....................................................................F-13
Unaudited Pro Forma Income Statement for the Three Months Ended March 31, 2000.................................F-14
Notes to Unaudited Pro Forma Statements of Operations..........................................................F-15
Introduction to December 31, 1999 Pro Forma Financial Information..............................................F-16
Unaudited Pro Forma Income Statement for the Twelve Months Ended December 31, 1999.............................F-17
Notes to Unaudited Statements of Operations....................................................................F-18
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Directors of
Bellville Tube Corporation
Bellville, Texas
We have audited the accompanying balance sheet of Bellville Tube Corporation
(the "Company") as of December 31, 1999, and the related statements of
income, changes in stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides 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 Bellville Tube Corporation at
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Harper & Pearson Company
Houston, Texas
January 26, 2000
F-2
<PAGE>
BELLVILLE TUBE CORPORATION
BALANCE SHEET
DECEMBER 31, 1999
--------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 2,253,724
Accounts receivable, trade 1,389,268
Accounts receivable, other 5,745
Inventory 139,052
Prepaid insurance 39,918
Other prepaid expenses 1,025
-----------
TOTAL CURRENT ASSETS 3,828,732
-----------
PROPERTY, PLANT AND EQUIPMENT
Land 200,794
Buildings 1,812,813
Furniture and fixtures 88,069
Machinery and equipment 7,094,791
Construction in progress 64,073
-----------
9,260,540
Less accumulated depreciation (6,234,960)
-----------
PROPERTY, PLANT AND EQUIPMENT, NET 3,025,580
-----------
TOTAL ASSETS $ 6,854,312
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 118,531
Accrued electrical costs 55,530
Accrued medical costs 89,005
Accrued payroll costs 99,283
Accrued franchise tax 59,701
Accrued property tax 99,164
Other accrued expenses 63,635
-----------
TOTAL CURRENT LIABILITIES 584,849
-----------
DEFERRED COMPENSATION 177,020
-----------
STOCKHOLDERS' EQUITY
Class A Voting Common stock, $.01 par value, 50,000 shares
authorized, 5,000 shares issued and outstanding 50
Class B NonVoting Common stock, $.01 par value, 50,000 shares
authorized, 4,798 shares issued and outstanding 48
Additional paid-in capital 97,882
Retained earnings 5,994,463
-----------
TOTAL STOCKHOLDERS' EQUITY 6,092,443
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,854,312
-----------
</TABLE>
See accompanying notes. F-3
<PAGE>
BELLVILLE TUBE CORPORATION
STATEMENT OF INCOME
FOR THE YEAR ENDED
DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999
-------------------------
AMOUNT PERCENT
----------- --------
<S> <C> <C>
NET SALES $9,235,017 100.00
COST OF GOODS SOLD 7,033,786 76.16
----------- --------
Gross Profit 2,201,231 23.84
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative 625,401 6.77
Management fees - related party 131,000 1.42
----------- --------
Operating Income 1,444,830 15.65
----------- --------
OTHER INCOME (EXPENSE)
Interest income 89,944 0.97
Other income (expense) (407) (0.00)
----------- --------
89,537 0.97
----------- --------
INCOME BEFORE STATE INCOME TAX EXPENSE 1,534,367 16.61
STATE INCOME TAX EXPENSE 57,700 0.62
----------- --------
NET INCOME $1,476,667 15.99
=========== ========
</TABLE>
See accompanying notes. F-4
<PAGE>
BELLVILLE TUBE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
COMMON COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
--------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ 50 $ 48 $ 97,882 $5,306,853 $5,404,833
DISTRIBUTIONS TO
STOCKHOLDERS - - - (789,057) (789,057)
NET INCOME - - - 1,476,667 1,476,667
---------- ---------- ---------- ---------- ----------
BALANCE, December 31, 1999 $ 50 $ 48 $ 97,882 $5,994,463 $6,092,443
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes. F-5
<PAGE>
BELLVILLE TUBE CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,476,667
-----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,053,527
Deferred compensation 23,205
Change in operating assets and liabilities:
Accounts receivable, trade (1,124,756)
Accounts receivable, other (3,300)
Inventory (139,052)
Prepaid insurance 11,682
Other prepaid expenses (654)
Accounts payable 75,403
Accrued electrical costs 29,252
Accrued medical costs 9,780
Accrued payroll costs (12,050)
Accrued franchise tax (55,299)
Accrued property tax (10,643)
Other accrued expenses 40,976
-----------
Total adjustments (101,929)
-----------
Net cash provided by operating activities 1,374,738
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (170,832)
-----------
Net cash used by investing activities (170,832)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (789,057)
-----------
Net cash used by financing activities (789,057)
-----------
NET INCREASE IN CASH 414,849
CASH AT BEGINNING OF YEAR 1,838,875
-----------
CASH AT END OF YEAR $ 2,253,724
-----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income Taxes $ 113,000
-----------
</TABLE>
See accompanying notes. F-6
<PAGE>
BELLVILLE TUBE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
OPERATIONS - Bellville Tube Corporation (the Company) is
engaged in the services of converting hot rolled steel coils
into electric resistance welded plain end pipe and raw tube
shells for processing into finished oil country tubular goods.
During 1999, substantially all of the Company's revenue was
generated from one customer located in Houston, Texas. This
customer has the exclusive right to purchase conversion
services from the Company.
This customer pays the Company a commitment fee of $330,000
per month plus a conversion fee of between $114 and $162 per
ton. The Company has an agreement with this customer to
perform a minimum of 4,000 tons and a maximum of 6,000 tons of
conversion work per month. This agreement runs through June
30, 2001. The customer may terminate the agreement by giving
170 days notice. If terminated, the Company will receive the
applicable termination fee, as follows:
April 1, 1999 to March 31, 2000 $300,000
April 1, 2000 to June 30, 2001 $250,000
During the term of the agreement, the customer will provide
all raw materials for the Company to process.
Due to market conditions during 1998, the Company chose to
amend this agreement as a courtesy to the customer. The
minimum tons of conversion work before a shortfall fee will be
incurred was reduced to 3,000 tons per month for the months of
August through December 1998 and the shortfall fee was waived
entirely for January through March 1999. In December 1999 the
Company signed a letter of intent to sell all of the assets of
the Company to the customer. See Note I for further
discussion.
REVENUE RECOGNITION - The Company recognizes revenues as
processing is completed.
ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles
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. Significant
estimates used in preparing these financial statements include
those utilized in recording a liability for the Company's
self-insured health care plan. Actual results could differ
from those estimates.
CONCENTRATIONS OF CREDIT RISK - Financial instruments which
potentially subject the Company to concentrations of credit
risk consist principally of trade receivables and cash. The
Company places its cash with high credit quality financial
institutions. Generally, no collateral or other security is
required to support customer receivables. At December 31,
1999, substantially all of the Company's accounts receivable
balance was due from the customer discussed above. During
January 2000, the majority of the accounts receivable balance
at December 31, 1999 was collected and management feels the
remaining balance is fully collectable, therefore no allowance
for doubtful accounts has been recorded.
F-7
<PAGE>
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
CASH - Cash consists of amounts included in demand accounts,
of which substantially all balances are invested in overnight
sweep accounts. At December 31, 1999 the Company had on
deposit with a financial institution, cash totaling
approximately $2,174,000 in excess of FDIC insurance limits.
INVENTORY - Inventory consists of raw materials and is valued
at the lower of cost or market on a first-in, first-out basis.
PROPERTY, PLANT, AND EQUIPMENT - Property, plant, and
equipment is stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the
respective assets using straight-line method.
Expenditures for additions, major renewals, and betterments
are capitalized and expenditures for maintenance and repairs
are charged to earnings as incurred.
When property and equipment are retired or otherwise disposed
of, the cost thereof and the applicable accumulated
depreciation is removed from the respective accounts and the
resulting gain or loss is reflected in earnings.
Construction in progress includes a waste treatment plant and
other manufacturing equipment. Remaining estimated costs to
complete amount to $16,700 as of December 31, 1999.
FEDERAL INCOME TAXES - The Company is an S Corporation for
federal income tax purposes. Accordingly, no liability for
federal income taxes has been recorded on the accompanying
balance sheet as the income and expenses are reflected on the
tax returns of the Company's stockholders.
NOTE B PROPERTY, PLANT AND EQUIPMENT
The major asset categories, together with the related
estimated useful lives and accumulated depreciation, are as
follows:
<TABLE>
<CAPTION>
Life 1999
---------------- ---------------
<S> <C> <C>
Buildings 31.5 - 40 yrs. $ 368,671
Furniture and fixtures 7 yrs. 63,189
Machinery and equipment 7 yrs. 5,803,100
----------
$6,234,960
==========
</TABLE>
F-8
<PAGE>
NOTE C LINE OF CREDIT
The Company has a line of credit which allowed borrowings up
to $1,500,000 through December 31, 1999, which was reduced to
allow borrowings of up to $500,000 from January, 2000 through
June, 2001. Interest is at the lower of prime or LIBOR rate.
At December 31, 1999, there were no borrowings on the line of
credit.
The line of credit is secured by substantially all assets of
the Company. Among other provisions, the line of credit
requires maintenance of certain financial ratios and levels of
tangible net worth and contains restrictions as to certain
operating activities of the Company. Management is not aware
of any violations of the covenants.
NOTE D RELATED PARTY TRANSACTIONS
During 1999, the Company paid management fees to an affiliated
company amounting to $131,000.
NOTE E EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Employee Savings Plan whereby all
qualified employees may defer up to 15% of their salary and
the Company will match 50% of the participant's eligible
contributions. Eligible contributions equal the amount of the
participant's elective deferrals for the year, limited to 5%
of annual compensation. The Company's retirement benefit cost
for 1999 amounted to $52,256.
In addition to the matching contribution, the Company may make
a discretionary contribution allocated to each eligible
participant based upon their ratio of compensation to all
eligible participants' compensation. There were no
discretionary contributions for 1999.
NOTE F COMMITMENTS
The Company leases certain automobiles, trucks and trailers
under operating lease agreements, which expire during 2000.
These agreements may be cancelled by either party within 30
days. In association with the truck and trailer leases, the
Company pays mileage costs amounting to six and a half cents
per mile for trucks and two cents per mile for trailers. The
Company also leases certain equipment on a month to month
basis. Rental expense was $168,663 for 1999. It is expected
that in the normal course of business, leases that expire will
be renewed or replaced.
NOTE G STOCKHOLDER AGREEMENT
The Company maintains a stockholder agreement whereby each
stockholder has a right of first refusal. Upon receipt of a
bona fide offer to purchase shares of common stock from a
third party, a selling stockholder, under the same terms as
with the third party, must first offer the shares to be sold
to the same group stockholders, as defined, and if refused,
then to the remaining stockholders, as defined.
F-9
<PAGE>
NOTE H NONQUALIFIED DEFERRED CASH COMPENSATION AGREEMENTS
Effective March 1, 1998, the Company entered into nonqualified
deferred cash compensation agreements with two employees.
Under the agreements the employees will receive at retirement
the cumulative total of the greater of 10% of annual base
earnings or 50% of supplementary income payments (based on a
percentage of profits) earned each year.
In the event the employees retire before age 65 without the
consent of the Bellville Tube Board, the employees will
forfeit any benefits. If the employees die while active
employees of the Company, their surviving spouses will receive
50% of the accrued deferred incentive compensation. These
agreements are purely discretionary and may be altered or
cancelled at any time by the Board. The deferred compensation
expense for 1999 amounted to $23,205. All amounts due under
the Plan are recorded during the period earned.
NOTE I LETTER OF INTENT
The Company signed a letter of intent dated December 3, 1999
to sell the net assets of the company to its largest customer
mentioned previously in Note A. Closing is set for March 31,
2000.
F-10
<PAGE>
LONE STAR TECHNOLOGIES, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
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 Bellville Tube Corporation ("Bellville")
for the period ended March 31, 2000, which are incorporated by reference, and
has been prepared to illustrate the effects of the transactions described
below.
The following unaudited pro forma income statement for the period ended
March 31, 2000 gives effect to the acquisition by Lone Star and its
subsidiaries of the assets of Bellville (the "Acquisition"), as if such
transaction had occurred on January 1, 1999. The unaudited pro forma balance
sheet as of March 31, 2000 has been prepared as if the Acquisition had
occurred on that date.
The Acquisition will be accounted for using the purchase method of
accounting. The total purchase costs of the Acquisition (approximately $15
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 Bellville and the assumptions and adjustments
described in the accompanying notes. Lone Star's historical March 31, 2000
financial statements were restated to reflect the utilization of a $0.8
million reserve previously set aside for an inventory purchase commitment.
The unaudited pro forma income statement does 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 the 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 filing.
F-11
<PAGE>
LONE STAR TECHNOLOGIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
(a) LONE STAR
LONE STAR (b) PRO FORMA TECHNOLOGIES
TECHNOLOGIES BELLVILLE ADJUSTMENTS PRO FORMA
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 7,100,000 $ 500,000 $ (500,000)(c) $ 7,100,000
Short-term investments................ 1,300,000 -- -- 1,300,000
Accounts receivable, net.............. 86,900,000 1,484,000 (1,484,000)(c) 86,900,000
Inventories........................... 122,500,000 410,000 -- 122,910,000
Prepaid expenses and other current
assets.............................. 2,500,000 23,000 -- 2,523,000
------------ ---------- ------------ ------------
Total current assets................ 220,300,000 2,417,000 (1,984,000) 220,733,000
MARKETABLE SECURITIES................... 20,400,000 -- -- 20,400,000
PROPERTY, PLANT, AND EQUIPMENT, net..... 168,000,000 2,800,000 4,507,000 (d) 175,307,000
GOODWILL AND OTHER INTANGIBLES.......... 48,500,000 -- 7,079,000 (d) 55,579,000
PREPAID DEPOSIT FOR ACQUISITION......... 14,586,000 -- (14,586,000)(d) --
OTHER ASSETS............................ 15,814,000 -- -- 15,814,000
------------ ---------- ------------ ------------
Total assets........................ $487,600,000 $5,217,000 $ (4,984,000) $487,833,000
============ ========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt..... $ 8,000,000 $ -- $ -- $ 8,000,000
Accounts payable...................... 74,700,000 233,000 -- 74,933,000
Accrued liabilities................... 31,700,000 505,000 (505,000)(c) 31,700,000
Due to partners....................... -- 500,000 (500,000)(c) --
------------ ---------- ------------ ------------
Total current liabilities........... 114,400,000 1,238,000 (1,005,000) 114,633,000
LONG-TERM DEBT, net..................... 38,000,000 -- -- 38,000,000
REVOLVING CREDIT FACILITY............... 69,300,000 -- 69,300,000
OTHER NONCURRENT LIABILITIES............ 41,800,000 -- -- 41,800,000
------------ ---------- ------------ ------------
Total liabilities................... 263,500,000 1,238,000 (1,005,000) 263,733,000
STOCKHOLDERS' EQUITY.................... 224,100,000 3,979,000 (3,979,000)(e) 224,100,000
------------ ---------- ------------ ------------
Total liabilities and stockholders'
equity............................ $487,600,000 $5,217,000 $ (4,984,000) $487,833,000
============ ========== ============ ============
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma balance
sheet.
F-12
<PAGE>
LONE STAR TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
a) The historical balances for Lone Star are derived from the unaudited
financial statements of Lone Star as of March 31, 2000.
b) The historical balances for Bellville are derived from the audited financial
statements of Bellville as of March 31, 2000.
c) Lone Star did not acquire the accounts receivable and did not assume certain
liabilities of Bellville Tube Corporation. These adjustments reflect the
elimination of such assets as follows:
<TABLE>
<CAPTION>
ACCOUNTS ACCRUED DUE TO
CASH RECEIVABLE LIABILITIES PARTNERS
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Elimination of assets not acquired................... (500,000) $(1,484,000) $ -- --
Elimination of liabilities not assumed............... -- -- (505,000) (500,000)
-------- ----------- --------- --------
Total............................................ (500,000) $(1,484,000) $(505,000) (500,000)
</TABLE>
d) Reflects the preliminary allocation of the purchase price for the
Acquisition, which was recorded by Lone Star as of March 31, 2000 as prepaid
deposit for acquisition. The Acquisition will be accounted for using the
purchase method of accounting. The Company 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 Bellville.................. $14,586,000
Less--Net assets of Bellville acquired (Bellville accounts
receivable not acquired)................................ 3,000,000
-----------
Excess of purchase price over historical amounts to
be allocated...................................... $11,586,000
===========
</TABLE>
Allocation of excess purchase price based on preliminary estimated values:
<TABLE>
<S> <C>
Property, plant, and equipment.............................. $ 4,507,000
Goodwill and other intangibles.............................. 7,079,000
-----------
Total excess purchase price............................... $11,586,000
===========
</TABLE>
e) Reflects the elimination of Bellville stockholders' equity at December 31,
1999.
F-13
<PAGE>
LONE STAR TECHNOLOGIES, INC.
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
(a) LONE STAR
LONE STAR (b) PRO FORMA TECHNOLOGIES
TECHNOLOGIES BELLVILLE ADJUSTMENTS PRO FORMA
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
NET SALES/REVENUES..................... $ 153,900,000 $ 3,548,000 $(3,344,000)(c) $ 154,104,000
COST OF SALES.......................... (135,900,000) (2,411,000) 3,430,000 (d) (134,881,000)
------------- ----------- ----------- -------------
Gross profit....................... 18,000,000 1,137,000 86,000 19,223,000
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES............................. (8,200,000) (541,000) (59,000)(e) (8,800,000)
------------- ----------- ----------- -------------
Operating income (loss)............ 9,800,000 596,000 27,000 10,423,000
INTEREST INCOME........................ 500,000 21,000 (147,000)(f) 374,000
INTEREST EXPENSE....................... (3,000,000) -- (108,000 (g) (3,108,000)
OTHER INCOME (EXPENSE)................. 200,000 35,000 -- 235,000
------------- ----------- ----------- -------------
Income (loss) before income
taxes............................ 7,500,000 652,000 (228,000) 7,924,000
INCOME TAX BENEFIT (EXPENSE)........... (400,000) (33,000) 33,000 (h) (400,000)
------------- ----------- ----------- -------------
NET INCOME (LOSS)...................... $ 7,100,000 $ 619,000 $ (195,000) $ 7,524,000
============= =========== =========== =============
NET LOSS PER SHARE
Basic................................ $ .30 -- -- $ .32
Diluted.............................. $ .29 -- -- $ .31
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic................................ 23,400,000 -- -- 23,400,000
Diluted.............................. 24,000,000 -- -- 24,000,000
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
financial statement.
F-14
<PAGE>
LONE STAR TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
a) The historical balances for Lone Star are derived from the unaudited
financial statements of Lone Star for the three months ended March 31, 2000.
b) The historical balances for Bellville are derived from the audited financial
statements of Bellville for the three months ended March 31, 2000.
c) Reflects the elimination of intercompany transactions between Lone Star and
Bellville.
d) 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, and the
elimination of the effects of sales between Lone Star and Bellville.
<TABLE>
<S> <C>
Reduction in Depreciation expense........................... $ 80,000
Elimination of Intercompany transactions.................... 3,344,000
----------
$3,430,000
==========
</TABLE>
e) 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.
f) Reflects a reduction in interest income on the invested cash used to acquire
Bellville at an assumed rate of 5.3%.
g) Reflects interest expense (at an assumed rate of 8.64%) associated with the
incremental borrowings under the revolving credit agreement, in connection
with the Acquisition financing.
h) Reflects the utilization of Lone Star's net operating loss carryforward to
eliminate the Bellville income tax expense.
F-15
<PAGE>
LONE STAR TECHNOLOGIES, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
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"), Fintube Limited Partnership ("Fintube") and
Bellville Tube Corporation ("Bellville") for the year ended December 31, 1999,
which are included elsewhere in this Prospectus or incorporated herein by
reference, and has been prepared to illustrate the effects of the transactions
described below.
The following unaudited pro forma income statement for the year ended
December 31, 1999 gives effect to the acquisition by Lone Star and its
subsidiaries of the assets of Fintube, the Fintube subsidiaries and Bellville
(the "Acquisition"), and the issuance of approximately 760,000 shares of Lone
Star common stock, as if such transactions had occurred on January 1, 1999. The
unaudited pro forma balance sheet as of December 31, 1999 has been prepared as
if the Acquisition and the issuance of such stock had occurred on that date.
The Acquisition will be accounted for using the purchase method of
accounting. The total purchase costs of the Acquisition (approximately
$85 million for Fintube and $15 million for Bellville) 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, Fintube and Bellville and the assumptions and
adjustments described in the accompanying notes. Lone Star's historical
December 31, 1999 financial statements were restated to reflect the
utilization of a $0.8 million reserve previously set aside for an inventory
purchase commitment. The unaudited pro forma income statement does not
purport to represent what Lone Star's results of operations actually would
have been if the Acquisition and the above-described stock issuance had
occurred as of the date indicated or what the 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 or incorporated herein by reference.
F-16
<PAGE>
<TABLE>
<CAPTION>
LONE STAR TECHNOLOGIES, INC.
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
Fintube Pro Forma
(a) (b) Pro Forma Lone Star & Fintube
Lone Star Fintube Adjustments SubTotal
---------------- --------------- --------------- -------------------
<S> <C> <C> <C> <C>
NET SALES/REVENUES $ 353,400,000 $ 80,744,000 $ - $ 434,144,000
COST OF SALES (340,600,000) (53,848,000) 492,000 (d) (393,956,000)
---------------- --------------- --------------- ----------------
Gross profit 12,800,000 26,896,000 492,000 40,188,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (15,500,000) (13,820,000) (251,000)(e) (29,571,000)
---------------- --------------- --------------- ----------------
Operating income (loss) (2,700,000) 13,076,000 241,000 10,617,000
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 (5,500,000) 14,074,000 (4,412,000) 4,162,000
INCOME TAX BENEFIT (EXPENSE) - (117,000) - (117,000)
---------------- --------------- --------------- ----------------
NET INCOME (LOSS) $ (5,500,000) $ 13,957,000 $ (4,412,000) $ 4,045,000
================ =============== =============== ================
NET LOSS PER SHARE
Basic $(.24) .18
Diluted $(.24) .18
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 22,548,000 760,000 (g) 23,308,000
Diluted 22,548,000 1,076,000 (g) 23,624,000
</TABLE>
<TABLE>
<CAPTION>
Bellville
(c) Pro Forma Lone Star
Bellville Adjustments Pro Forma
---------------- --------------- ----------------
<S> <C> <C> <C>
NET SALES/REVENUES $ 9,235,000 $ (7,600,000)(h) $ 435,779,000
COST OF SALES (7,034,000) 7,914,000 (i) (393,076,000)
---------------- --------------- ----------------
Gross profit 2,201,000 314,000 42,703,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (756,000) (248,000)(j) (30,575,000)
---------------- --------------- ----------------
Operating income (loss) 1,445,000 66,000 12,128,000
INTEREST INCOME 90,000 (596,000)(k) 1,294,000
INTEREST EXPENSE - (432,000)(l) (10,856,000)
OTHER INCOME (EXPENSE) - - 2,169,000
---------------- --------------- ----------------
Income (loss) before income taxes 1,535,000 (962,000) 4,735,000
-
INCOME TAX BENEFIT (EXPENSE) (58,000) 58,000 (m) (117,000)
---------------- --------------- ----------------
NET INCOME (LOSS) $ 1,477,000 $ (904,000) $ 4,618,000
================ =============== ================
NET LOSS PER SHARE
Basic 0.20
Diluted 0.20
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 23,308,000
Diluted 23,624,000
The accompanying notes are an integral part of this unaudited pro forma financial statement.
</TABLE>
F-17
<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) The historical balances for Bellville are derived from the audited financial
statements of Bellville for the twelve months ended December 31, 1999.
d) Reflects the reduction 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.
e) 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.
This adjustment also reflects the elimination of compensation expense from
the Fintube Management Equity Participation Plan, obligations of which Lone
Star did not assume.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Incremental change in amortization expense.................. $(1,906,000)
Less--Elimination of Compensation expense of Fintube........ 1,655,000
-----------
Net Selling, General and Administrative expenses.......... $ (251,000)
===========
</TABLE>
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 Fintube
Acquisitions.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Interest expense related to new borrowings - Fintube........ $ 5,824,000
Less--Historical interest expense of Fintube (debt not
assumed).................................................. (1,171,000)
-----------
$ 4,653,000
===========
</TABLE>
g) Reflects the issuance of approximately 760,000 shares to the limited
partners of Fintube. Diluted weighted average shares outstanding also
includes the Lone Star stock options which are dilutive.
h) Reflects the elimination of Sales between Lone Star and Bellville.
i) Reflects the reduction 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, and the elimination of
the effects of sales between Lone Star and Bellville.
<TABLE>
<S> <C>
Reduction in depreciation expense........................... 314,000
Elimination of intercompany transactions.................... 7,600,000
-----------------
7,914,000
=================
</TABLE>
j) 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.
k) Reflects a reduction in interest income on the invested cash used to acquire
Bellville at an assumed rate of 5.3%.
l) Reflects interest expense (at an assumed rate of 8.64%) associated with the
borrowings under the revolving credit agreement
m) Reflects the utilization of Lone Star's net operating loss carryforwards to
eliminate the Bellville income tax expense.
F-18
<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.
LONE STAR TECHNOLOGIES, INC.
By: /s/ Charles J. Keszler
------------------------------------
Charles J. Keszler
Vice President-Finance and Treasurer
Date: June 14, 2000
