UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
COMMISSION FILE NUMBER 1-10651
MAVERICK TUBE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 43-1455766
(State or other jurisdiction of (I.RS. Employer
incorporation or organization) Identification No.)
400 Chesterfield Center
Second Floor
Chesterfield, Missouri 63017
(Address of principal executive offices) (Zip Code)
(314) 537-1314
(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. Yes XX No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value -- 7,496,571 shares as of May 6, 1997
MAVERICK TUBE CORPORATION AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial statements (Unaudited)
Condensed Consolidated Balance Sheets -- March 31, 1997
and September 30, 1996 3
Condensed Consolidated Statements of Operations -- Three and
six month periods ended March 31, 1997 and 1996 4
Condensed Consolidated Statement of Cash Flows -- Six
months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of the Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE PAGE 15
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
MARCH 31, SEPTEMBER 30,
1997 1996
(Unaudited) (Note)
------------------- --------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................................$2,656...................$613
Accounts receivable, less allowances of $570 and
$629 on March 31, 1997 and September 30, 1996,
respectively...........................................................................20,306.................18,400
Inventories (See Notes 2 & 3)............................................................56,296.................50,624
Deferred income taxes.....................................................................2,359..................2,679
Prepaid expenses and other current assets...................................................850....................875
------------------- --------------------
Total current assets.................................................................82,467.................73,191
PROPERTY, PLANT AND EQUIPMENT
Less accumulated depreciation (March 31, 1997 -
$24,308; September 30, 1996 - $21,776).................................................55,105.................51,695
OTHER ASSETS.....................................................................................798....................670
------------------- --------------------
TOTAL ASSETS................................................................................$138,370...............$125,556
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........................................................................$23,563................$23,042
Accrued expenses and other liabilities...................................................8,605..................7,478
Deferred revenue (See Note 2) ...........................................................10,419..................8,176
Current maturities of long-term debt......................................................1,926..................1,843
------------------- --------------------
Total current liabilities............................................................44,513.................40,539
LONG TERM DEBT, less current maturities.......................................................10,893.................11,901
REVOLVING CREDIT FACILITY ....................................................................17,000.................13,250
DEFERRED INCOME TAXES .........................................................................3,099..................2,619
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
20,000,000 authorized shares,
7,477,071 issued in 1997 and 7,472,071
issued in 1996 ..........................................................................75.....................75
Additional paid-in capital...............................................................37,706.................37,674
Retained earnings........................................................................25,084.................19,498
------------------- --------------------
Total stockholders' equity...........................................................62,865.................57,247
------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................$138,370...............$125,556
=================== ====================
<FN>
............................................................................................................................
Note: The condensed consolidated balance sheet at September 30, 1996, has been
derived from the audited consolidated financial statements at that date.
............................................................................................................................
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
Three months ended Six months ended
March 31 March 31
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES (See Note 2) .......................................................$66,920........$40,856........$131,110........$85,734
COSTS and EXPENSES
Cost of goods sold.........................................................59,228.........36,483.........116,754...... 77,136
Selling, general and administrative.........................................3,017..........2,406...........5,716 4,497
------------------------------ ------------------------------
Income from operations (See Note 2) .......................................4,675..........1,967...........8,640..........4,101
OTHER INCOME (EXPENSE)
Interest expense.............................................................(476)..........(628)...........(994)....... (1,361)
Other expense.................................................................(50)...........(28)............(20)....... (54)
------------------------------ ------------------------------
Income before income taxes (See Note 2) ....................................4,149..........1,311...........7,626..........2,686
PROVISION FOR INCOME TAXES.....................................................1,171............262.... 2,040 537
------------------------------ ------------------------------
NET INCOME (See Note 2)........................................................$2,978.........$1,049..........$5,586.........$2,149
============================== ==============================
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE (See Note 2)........................................$0.39..........$0.14...........$0.74...... $0.29
============================== ==============================
...................................................................... .............................. ..............................
Earnings per common and common equivalent share calculation:
Net income (See Note 2) .......................................................$2,978.........$1,049..........$5,586.........$2,149
Average shares outstanding..................................................7,475,127......7,472,071.......7,473,582......7,467,419
Common stock equivalents .....................................................145,259.........23,653........ 126,292 11,106
------------------------------ ------------------------------
Total common and common equivalent shares 7,620,386 7,495,724 7,599,874 7,478,525
Net income /average
shares outstanding (See Note 2) ............................................$0.39..........$0.14...........$0.74..........$0.29
============================== ==============================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
March 31,
1997 1996
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ...............................................................................$5,586..........$2,149
Adjustments to reconcile net income loss to net cash provided
(used) by operating activities:
Depreciation and amortization............................................................2,569...........2,566
Deferred income taxes......................................................................800..............--
Provision for accounts receivable allowances...............................................(59)............(29)
(Increase) decrease in accounts receivable...........................................(2,132)..........1,768
(Increase) in inventories............................................................(5,671).........(8,146)
Decrease in prepaid expenses and other assets...........................................145.............196
Increase in accounts payable..........................................................1,182...........1,517
Increase in accrued liabilities and other expenses....................................2,116...........1,011
Increase in deferred revenue (See Note 2) ............................................1,254...........8,757
-------------- --------------
Cash provided by operating activities.................................................5,790...........9,789
INVESTING ACTIVITIES
Purchases of property, plant and equipment................................................(5,941).........(1,683)
Other.........................................................................................--..............17
-------------- --------------
Cash (used) by investing activities..................................................(5,941).........(1,666)
FINANCING ACTIVITIES
Proceeds from borrowings..................................................................48,950..........27,250
Principal payments on borrowings.........................................................(46,788)........(35,905)
-------------- --------------
2,162 (8,655)
Net proceeds from sale of common stock .......................................................32.............206
-------------- --------------
Cash provided (used) by financing activities..........................................2,194..........(8,449)
Increase(decrease) in cash and cash equivalents............................................2,043............(326)
Cash and cash equivalents at beginning of period...............................................613.............491
-------------- --------------
Cash and cash equivalents at end of period..................................................$2,656............$165
============== ==============
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest.............................................................................$1,162..........$1,460
Income taxes.........................................................................$1,424............$375
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Maverick Tube Corporation (the "Company") and its wholly-owned
subsidiary, Maverick Tube International, Inc. All significant
intercompany balances and transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring items) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended
March 31, 1997, are not necessarily indicative of the results that may
be expected for the year ended September 30, 1997. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended September 30, 1996.
(2) REVENUE RECOGNITION
The Company, effective January 1, 1996, records revenue on energy
products at the date of shipment pursuant to customer instructions,
rather than its previous practice of recording revenue at the time
goods were set aside for customers at the customer's request. The
previous practice was not material to prior periods, nor is the new
practice expected to have any material effect on future periods.
However, included in the results of the quarter and six months ended
March 31, 1996 was a one-time effect of this change in practice which
resulted in a reduction in net sales, gross margin, earnings and
earnings per share of $8.7 million, $1.0 million, $839,000 and $0.11,
respectively. Accordingly, the March 31, 1996 balance sheet is impacted
by an increase in current assets of $7.7 million in customer obligated
inventory and by an increase in current liabilities of $8.7 million in
deferred revenue.
(3) INVENTORIES
The components of inventories consisted of the following:
March 31, September 30,
1997 1996
(In thousands)
Finished goods $34,494 $28,323
Work-in-process 3,931 2,671
Raw materials 9,851 10,081
In-transit materials 4,591 6,274
Storeroom parts 3,429 3,275
--------------------------
$56,296 $50,624
==========================
Inventories are principally valued at the lower of average cost or
market.
MAVERICK TUBE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Certain statements contained in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding matters that are not
historical facts (including statements as to the beliefs or expectations of the
Company) are forward-looking statements. Because such forward-looking statements
include risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. For example,
uncertainty continues to exist as to future levels and volatility of oil and gas
price expectations and their effect on drilling levels and demand for the
Company's energy-related products, the future impact of industry-wide draw-downs
of inventories and future import levels. Uncertainty also exists as to the trend
and direction of both product pricing and purchased steel costs. Reference is
made to the "Risk Factors" discussed in Exhibit 99.1 of Maverick's Form 10-K for
its fiscal year ended September 30, 1996.
OVERVIEW
The Company's products consist of electrical resistance welded ("ERW") tubular
products sold primarily into energy and industrial applications in North
America. The Company's energy segment includes Oil Country Tubular Goods (OCTG)
and line pipe which are sold primarily to distributors who supply end users in
the energy industry. The Company's industrial products segment consists of
structural tubing and standard pipe which are sold primarily to distributors who
supply end users in construction, transportation, agriculture and other
industries. Demand for the Company's energy related products depends primarily
upon the number of oil and natural gas wells being drilled in the United States
and Canada, the depth and drilling conditions of these wells and the number of
well completions, which are in turn primarily dependent on oil and natural gas
prices. Domestic consumption of OCTG is supplied by domestic and foreign pipe
products. Given the numerous applications for the Company's industrial products,
sources of demand for such products are diversified. Such demand generally
depends on the general level of economic activity in the construction,
transportation, agricultural, material handling and recreational segments, the
use of structural tubing as a substitute for other structural steel forms, such
as I-beams and H-beams, and draw downs of existing inventories.
According to published industry reports, domestic drilling activity rose by 21%
for the quarter ended March 31, 1997, as compared to the same quarter of the
previous year. The Company also believes that the domestic consumption of
tubular goods per well drilled has increased. This increase in consumption per
rig was due to a higher portion of gas wells being drilled and increased rig
efficiencies. Overall natural gas drilling in the United States increased by 20%
during the quarter as compared to a year earlier, and oil related drilling
increased by 25%. The Company believes that gas drilling increased in spite of
cyclical short-term price of natural gas decreases of 7% as compared to the
quarter ended March 31, 1996. The increase in gas drilling appears to be due to
expected tightness in the gas supply and general optimistic outlook for natural
gas markets while oil drilling responded to higher oil prices which had
increased by approximately 20% from the quarter ended March 31,1996. The trend
in overall drilling during the quarter continued upward, as drilling at the end
of the quarter was 26% higher than the comparable period of the prior year.
Consumption of domestic OCTG had increased by 29% during the quarter from the
comparable period of the prior year in spite of import penetration of an
estimated 19.2% during the second quarter of fiscal 1997 as compared to 10.3%
during the same quarter last year. The domestic OCTG business was also impacted
by an estimated 32% decrease in exports during the quarter, with exports
accounting for an estimated 13.4% of domestic production during the quarter.
Maverick's exports increased 127.2% from the same quarter of the previous year
as the Company's shipments to Canada grew significantly, reflecting the Canadian
rig count increase of approximately 17%. Industry inventory build created a
14.4% additional demand as compared to 6.9% during the same quarter last year.
According to published reports, total domestic production of OCTG increased by
15% during the quarter. Domestic consumption of OCTG increased 29% during the
same period. Maverick's energy related shipments during the quarter increased by
85.5% from the same quarter last year which was negatively impacted by a change
in the Company's practice of revenue recognition. The Company believes that the
strengthened demand for its OCTG was the result of increased drilling activity
in the Company's traditional markets, principally on shore in the continental
United States and western Canada.
Management estimates the demand for the Company's structural tube (hollow
structural sections or HSS) products increased by 6% in the quarter compared to
the comparable quarter of last year. In addition, management estimates that
imports of HSS product fell by approximately 5% as compared to the same quarter
of last year. Further, inventories of HSS held by distributors were stable
during the quarter, as compared to the same quarter last year when inventories
were being reduced. As a result of these market conditions, domestic shipments
of HSS rose by 9%. The Company's shipments of industrial products rose by 21.1%,
due to a 42.3% increase in HSS shipments offset by a 28.2% decrease in standard
pipe shipments.
Pricing for both the Company's energy products and industrial products was up by
2.8% and 0.5%, respectively, as compared to the quarter ended March 31, 1996 due
to improved prime selling prices. The Company has announced pricing increases
during the current quarter on all of its products as has its principal
competitors. In the Company's energy business, substantial backlogs of price
protected products exist, which may delay the impact of these price increase
efforts. While the Company is receiving orders at higher prices, there is no
assurance as to how much and when the overall pricing of the Company's products
will increase.
Steel costs included in cost of goods sold increased during the quarter by $37
per ton, or 12.4% as compared to the quarter ended March 31, 1996. However,
steel costs included in cost of goods sold remained relatively stable during the
quarter as compared to the quarter ended December 31, 1996. Steel costs during
the quarter were generally below current replacement costs. Based on March 31,
1997 inventory values and previously announced price increases for steel, the
Company estimates steel costs will rise within the range of 1.1 to 1.7% during
the third and fourth quarters of fiscal 1997. The Company believes that the
reason for increasing steel costs is supply related rather than demand related
as substantial production interruptions at one steel manufacturer has occurred
during the last several months, significantly reducing the availability of hot
rolled steel. The supply of steel is continuing to increase significantly as
four new steel mills are scheduled to begin or have begun the production and
sale of 6.5 million tons of additional hot rolled steel annually.
RESULTS OF OPERATIONS
In the second quarter of fiscal 1997 and first six months of fiscal 1997, total
net sales increased $26.1 million, or 63.8% and $45.4 million, or 52.9%,
respectively, over the comparable periods of the preceding fiscal year. Energy
products sales increased $22.9 million or 85.9% for the second quarter and
increased $40.5 million or 68.6% for the six months ended March 31, 1997, while
industrial products sales increased $3.2 million or 22.3% for the second quarter
and increased $4.9 million or 18.4% for the six months ended March 31, 1997.
These results were attributable primarily to an increase of 58.8% and 48.6% in
total product shipments, from 69,455 tons in the second fiscal quarter of 1996
to 110,261 tons in the second fiscal quarter of 1997 and from 145,394 tons in
the first six months of fiscal 1996 to 216,096 tons in the first nine months of
fiscal 1997. Energy tons increased 34,707 tons, or 85.5%, in the second quarter
of 1997 as compared to the second quarter of 1996 and increased 61,279 tons or
67.2% in the first six months of 1997 as compared to the first nine months of
1996. The tons sold in the second quarter of 1996 were negatively impacted by a
change in the Company's practice of revenue recognition (see note 2 to the
financial statements). Shipments of industrial products increased 6,099 tons, or
21.1% in the second quarter of 1997 as compared to the second quarter of 1996
and 9,423 tons, or 17.4% in the first six months of 1997 as compared to the
first six months of 1996. The sales and shipments of energy products during the
second fiscal quarter of 1997 increased substantially due to: (i) increased
activity in gas drilling by 20%, (ii) increased activity in oil drilling by 25%,
(iii) a 127.2% increase in Maverick's sales of product exported to Canada and
other countries, and (iv) the change in the Company's revenue recognition
practice. The increase in sales and shipments of industrial products was due to
Company's continued penetration into the HSS market offset somewhat by reduced
standard pipe shipments. Average net selling prices for energy products during
the second quarter of fiscal 1997 and the six months ended March 31, 1997 as
compared to the comparable periods of fiscal 1996 remained relatively stable
(increasing by 0.2%) from an average of $657 per ton to $658 per ton and
(increasing by 0.8%) from an average of $648 per ton to $653 per ton. This
selling price stability is primarily due to product mix, as the Company was
experiencing capacity constraints on its higher value alloy grade tubing and
casing. Average net selling price for industrial products during the second
quarter of fiscal 1997 and the six months ended March 31, 1997 as compared to
the periods of fiscal 1996 remained relatively stable (increasing 1.0%) from an
average of $492 per ton to $497 per ton and (increasing 0.9%) from an average of
$492 per ton to $496 per ton. This slight increase was due primarily to an
improved selling price driven by the increased steel prices discussed below.
Cost of goods sold increased $22.8 million or 62.3% and $39.6 million or 51.4%
in the second quarter of fiscal 1997 and first six months of 1997, respectively,
over the comparable periods of fiscal 1996. Energy products cost of goods sold
increased $20.5 million, or 87.8% and increased $35.9 million or 68.5% in the
second quarter and the first six months of fiscal 1997, respectively. Industrial
products cost of goods sold increased $2.3 million or 17.0% and increased $3.7
million or 14.9% in the second quarter and the first six months of fiscal 1997,
respectively. The overall increase was due primarily to increased product
shipments. However, the overall unit cost per ton of products sold increased
2.2% (from an average of $525 to $537) in the second quarter of fiscal 1997 and
1.8% (from an average of $531 to $540) in the first six months of fiscal 1997 as
compared to the comparable periods of fiscal 1996. This increase was due to an
increase in delivered steel costs during the fourth quarter of 1996 and the
first and second fiscal quarters of 1997. Steel purchases during the fourth
fiscal quarter of 1996, and the first and second quarters of 1997 at these
increased purchase prices resulted in an increase of the average prime steel
cost of goods sold by $37 per ton over the second fiscal quarter of 1996. See
"Overview." The impact of such increase in steel costs was offset somewhat by
the operating efficiencies achieved by Maverick and improved fixed costs
absorption.
Gross profit increased $3.3 million or 75.9% and $5.8 million or 67.0% for the
second quarter and first six months of fiscal 1997 over the comparable periods
of fiscal 1996. Gross profit for energy products increased $2.4 million, or
72.3% and $4.5 million, or 69.1%, while industrial products gross profit
increased approximately $938,000 or 87.0% and $1.2 million, or 60.0%. The
consolidated gross profit as a percentage of net sales ("gross profit
percentage") was 11.6% and 10.95% for the second quarter and first six months of
fiscal 1997 compared to 10.7% and 10.0% for the comparable periods of fiscal
1996. Energy gross profit percentage decreased to 11.5% from 12.4% for the
second quarter of fiscal 1997 and remained stable at 11.1% for the six months
ended March 31, while industrial products improved to 11.6% from 7.6% for the
second quarter of fiscal 1997 and increased to 10.4% from 7.7% for the six
months ended March 31. Energy and industrial products gross profit percentage in
the second quarter of fiscal 1997 was impacted by improved selling prices,
operating efficiencies, improved fixed costs absorption and increasing steel
costs. The energy segment was impacted more dramatically by the rising steel
costs, thus causing its gross profit percentage to fall. The industrial products
segment was impacted more dramatically by improved operating efficiencies and
fixed cost absorption and less by rising steel costs, thus, causing its gross
profit percentage to rise. During the third quarter of 1997, the replacement
costs of steel is expected to rise on average approximately $2 per ton due to
previously announced steel price increases from steel sources other than the
Company's principal supplier. It is expected that if successfully implemented,
the impact of these higher replacement costs on costs of goods sold will
partially affect the remainder of fiscal 1997.
Selling, general and administrative expenses increased by $611,000, or 25.4% and
$1.2 million, or 27.1% in the second quarter and first six months of fiscal 1997
over the comparable periods of fiscal 1996. Direct structural selling costs
increased $122,000 and $213,000 for the quarter and first six months of fiscal
1997 from the comparable periods of fiscal 1996 due principally to the increase
in sales and shipments of industrial products. Selling, general and
administrative expenses were also impacted by general wage increases granted as
of the beginning of the fiscal year, small increases in staffing, and incentive
compensation accrued for sales and administrative employees. However, selling,
general and administrative expenses as a percentage of net sales in the second
quarter and first six months of fiscal 1997 was 4.5% and 4.4% as compared to the
comparable periods of fiscal 1996 of 5.9% and 5.2%.
Interest expense decreased $152,000 or 24.2% and $376, 000 or 27.0% in the
second quarter and first six months of fiscal 1997 compared to the comparable
periods of fiscal 1996. The decreased interest expense is primarily due to a
lower effective interest rate as fixed rate debt was paid off in the fourth
quarter of fiscal 1996 and replaced with the lower interest-bearing revolving
credit facility, as well as lower overall average borrowings.
The provision for income taxes increased $928,000 or 354.2% and $1.5 million or
279.9% in the second quarter and first six months of fiscal 1997 as compared to
the comparable periods of fiscal 1996. This increase is attributable to the
higher level of pretax earnings generated by the Company in the second quarter
of 1997 and also a higher effective tax rate as the Company expects to fully
utilize existing net operating loss carryforwards and utilize a portion of the
alternative minimum tax credits during 1997.
As a result of the increased gross profit and the other factors discussed above,
net income increased $1.9 million in the second quarter of fiscal 1997 and $3.4
million in the six month period ended March 31, 1997 from the comparable periods
of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1997 was $37.5 million, and the ratio of current
assets to current liabilities was 1.8 to 1.0, as compared to September 30, 1996
when working capital was $32.7 million and the ratio of current assets to
current liabilities was 1.8 to 1.0. The increase in working capital was
principally due to a $2.0 million increase in cash, $2.1 million increase in
accounts receivable and a $5.7 million increase in inventory (which includes
approximately $9.2 million in customer-obligated inventory), partially offset by
a $4.1 million increase in accounts payable and accrued liabilities and a $1.3
million increase in deferred revenue. The increase in cash and accounts
receivable is due to the high volume of energy-related business in February and
March. The increase in inventories is due to increased requirements to support
the Company's substantially increased level of shipments. The increase in
accounts payable and accrued liabilities resulted from the increased inventory
position. The increase in deferred revenue is due to the build-up in
customer-obligated inventory prior to the end of the quarter. Cash provided by
operating activities was $5.8 million for the six months ended March 31, 1997.
The primary source of cash was net income, exclusive of the impact of non-cash
items (primarily depreciation and amortization) of $8.1 million. The primary use
of cash was the build in inventory of $5.7 million.
During the six months ended March 31 1997, cash used in investing activities was
$5.9 million, all of which was attributable to purchases of property, plant and
equipment.
Cash provided by financing activities was $2.2 million. The Company's Revolving
Credit Facility increased $3.8 million primarily to partially fund the increased
levels of accounts receivable and inventories. The Company's other long-term
indebtedness was reduced by approximately $1.0 million.
The Company's capital budget for fiscal 1997 is approximately $7.3 million of
which $5.9 million was expended during the six months ended March 31, 1997. The
budgeted funds are being utilized principally to acquire new equipment for
existing manufacturing facilities. As of March 31, 1997, the Company had an
additional $1.8 million committed for the purchase of equipment.
The Company expects that it will meet its ongoing working capital and capital
expenditure requirements from a combination of cash flow from operations, which
constitutes its primary source of liquidity, and available borrowings under its
Revolving Credit Facility. The Revolving Credit Facility provides for maximum
borrowings up to the lesser of the eligible borrowing base or $27.5 million, and
bears interest at either the prevailing prime rate or an adjusted Eurodollar
rate, plus an interest margin, depending upon certain financial measurements.
The Revolving Credit Facility is secured by the Company's accounts receivable
and inventories and will expire on May 31, 1998. As of March 31, 1997, the
applicable interest rate was 6.57 percent per annum and the Company had $10.1
million in unused availability under the Revolving Credit Facility. As of March
31, 1997, the Company had $2.7 million in cash and cash equivalents.
MAVERICK TUBE CORPORATION AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of the Stockholders of the Company was held
on February 10, 1997. Of the 7,472,071 shares entitled to vote
at such meeting, 6,528,273 shares were present at the meeting
in person or by proxy.
(b) The individuals listed below were elected as Directors of the
Company, and, with respect to each Director, the number of
shares voted for and withheld were as follows:
No. of Shares Voted
Name of Nominee For Withheld
Gregg M. Eisenberg 6,245,443 282,830
William E. Macaulay 6,245,443 282,830
John A. Hill 6,245,443 282,830
David H. Kennedy 6,245,443 282,830
C. Robert Bunch 6,245,443 282,830
C. Adams Moore 6,245,443 282,830
(c) 2,802,289 shares voted in favor of the approval of the
amendment to the Maverick Tube Corporation 1994 Stock Option
Plan. This was less than the requisite number of shares
required for approval.
(d) There were no brokers' non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K. In a report filed on Form 8-K
dated March 31, 1997, the Company reported a change
in the composition of the Board of Directors.
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.
Maverick Tube Corporation
(Registrant)
Date: May 6, 1997 /s/ Gregg Eisenberg
-------------------
Gregg Eisenberg
President and Chief Executive Officer
Date: May 6, 1997 /s/ Charles Struckhoff
----------------------
Charles Struckhoff
Vice President -- Finance
and Administration
(Chief Financial Officer)
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