FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Delaware 43-1455766
Maverick Tube Corporation
400 Chesterfield Center, 2nd Floor
Chesterfield, MO 63017
(314) 537-1314
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 X No ____
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No ____
<PAGE>
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Stock, $.01 Par Value 7,544,071
as of August 11, 1997
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<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
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Item 1. Financial statements (Unaudited)
Condensed Consolidated Balance Sheets -- June 30, 1997
and September 30, 1996 3
Condensed Consolidated Statements of Income -- Three and
nine month periods ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows -- Nine
months ended June 30, 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 2. Changes in the Rigths of the Company's Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE PAGE 14
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<PAGE>
Part I. Financial Information
Item 1. Financial statements (Unaudited)
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
JUNE 30, SEPTEMBER 30,
1997 1997
(Unaudited) (Note)
-------------------- --------------------
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ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................................$2,926...................$613
Accounts receivable, less allowances of $732 and
$629 on June 30, 1997 and September 30, 1996,
respectively...........................................................................29,641.................18,400
Inventories (See Notes 2 & 3)............................................................66,718.................50,624
Deferred income taxes.....................................................................2,359..................2,679
Prepaid expenses and other current assets.................................................1,186....................875
------------------- --------------------
Total current assets................................................................102,830.................73,191
PROPERTY, PLANT AND EQUIPMENT
Less accumulated depreciation (June 30, 1997 -
$25,704; September 30, 1996 - $21,776).................................................55,464.................51,695
OTHER ASSETS.....................................................................................769....................670
------------------- --------------------
TOTAL ASSETS................................................................................$159,063...............$125,556
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........................................................................$31,163................$23,042
Accrued expenses and other liabilities..................................................10,774..................7,478
Deferred revenue (See Note 2) ...........................................................15,511..................8,176
Current maturities of long-term debt......................................................1,968..................1,843
------------------- --------------------
Total current liabilities............................................................59,416.................40,539
LONG TERM DEBT, less current maturities.......................................................10,534.................11,901
REVOLVING CREDIT FACILITY ....................................................................18,750.................13,250
DEFERRED INCOME TAXES .........................................................................3,099..................2,619
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
20,000,000 authorized shares,
7,532,571 issued in 1997 and 7,472,071 shares
issued in 1996 ..........................................................................75.....................75
Additional paid-in capital...............................................................38,186.................37,674
Retained earnings........................................................................29,003.................19,498
------------------- --------------------
Total stockholders' equity...........................................................67,264.................57,247
------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................$159,063...............$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>
<PAGE>
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three months ended Nine months ended
June 30 June 30
1997 1996 1997 1996
-------------------------------------------------------------
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NET SALES (See Note 2) .......................................................$74,669........$56,333........$205,778.......$142,067
COSTS and EXPENSES
Cost of goods sold.........................................................64,875.........49,750.........181,629...... 126,886
Selling, general and administrative.........................................3,530..........2,823...........9,245 7,320
------------------------------ ------------------------------
Income from operations (See Note 2) ........................................6,264..........3,760..........14,904..........7,861
OTHER INCOME (EXPENSE)
Interest expense.............................................................(497)..........(602).........(1,491)....... (1,963)
Other expense..................................................................(5)............36.............(25)....... (18)
------------------------------ ------------------------------
Income before income taxes (See Note 2) ....................................5,762..........3,194..........13,388..........5,880
PROVISION FOR INCOME TAXES.................................................1,824............639........ 3,883 1,176
------------------------------ ------------------------------
NET INCOME (See Note 2)........................................................$3,938.........$2,555..........$9,505.........$4,704
============================== ==============================
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE (See Note 2)........................................$0.51..........$0.34...........$1.25...... $0.63
============================== ==============================
................................................................................................................................
Earnings per common and common equivalent share calculation:
Net income (See Note 2) .......................................................$3,938.........$2,555..........$9,505.........$4,704
Average shares outstanding..................................................7,511,390......7,472,071.......7,486,185......7,468,964
Net income /average
shares outstanding (See Note 2) ............................................$0.51..........$0.34...........$1.25..........$0.63
============================== ==============================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
June 30,
1997 1996
-------------------------
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OPERATING ACTIVITIES
Net income ............................................................................................$9,505..........$4,704
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.........................................................................3,983...........3,877
Provision for accounts receivable allowances............................................................103..............85
(Gain) on sale of equipment ............................................................................(51).............--
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable.......................................................(11,344)............922
(Increase) in inventories........................................................................(16,094)........(12,680)
(Increase) decrease in prepaid expenses and other assets............................................(263)............456
Increase in accounts payable.......................................................................8,121...........6,932
Increase in accrued liabilities and other expenses.................................................3,296...........1,675
Increase in deferred revenue (See Note 2) .........................................................7,335...........5,964
-------------- --------------
Cash provided by operating activities.......................................................5,391..........11,935
INVESTING ACTIVITIES
Purchases of property, plant and equipment.............................................................(7,698).........(3,334)
Other......................................................................................................--............(314)
-------------- --------------
Cash used by investing activities.................................................................(7,698).........(3,648)
FINANCING ACTIVITIES
Proceeds from borrowings...............................................................................64,050..........43,100
Principal payments on borrowings......................................................................(59,943)........(50,483)
-------------- --------------
4,107 (7,383)
Net proceeds from sale of common stock ...................................................................513.............206
-------------- --------------
Cash (used) provided by financing activities.......................................................4,620..........(7,177)
Increase in cash and cash equivalents...................................................................2,313...........1,110
Cash and cash equivalents at beginning of period............................................................613.............491
-------------- --------------
Cash and cash equivalents at end of period...............................................................$2,926..........$1,601
============== ==============
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest..........................................................................................$1,681..........$2,087
Income taxes......................................................................................$2,352............$785
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
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 nine month period ended June 30,
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 nine
months ended June 30, 1996 is 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.
<PAGE>
(3) INVENTORIES
<TABLE>
The components of inventories consisted of the following:
<CAPTION>
June 30, September 30,
1997 1996
(In thousands)
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Finished goods $38,682 $28,323
Work-in-process 2,998 2,671
Raw materials 11,702 10,081
In-transit materials 10,174 6,274
Storeroom parts 3,162 3,275
$66,718 $50,624
<FN>
Inventories are principally valued at the lower of average cost or
market.
</FN>
</TABLE>
(4) SUBSEQUENT EVENT
On August 1, 1997, the Company announced the declaration of a two-for-one
stock split in the form of a 100% stock dividend to all shareholders of
record as of the close of business on August 12, 1997 with the distribu-
tion to be made on August 21, 1997. The outstanding shares, average
shares outstanding and the per share data have not been adjusted to reflect
the payment of this dividend.
<PAGE>
Item 2. 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.
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 customer inventories.
According to published industry reports, domestic drilling activity
rose by 23% for the quarter ended June 30, 1997, as compared to the same
quarter of the previous year. The Company believes that the domestic
consumption of tubular goods per well drilled has increased
proportionately. Natural gas drilling in the United States increased by 19%
during the third quarter of fiscal 1997 as compared to the comparable
period of fiscal 1996, and oil related drilling increased by 32%. The
Company believes that gas and oil drilling increased in spite of cyclical
short-term price decreases of 7% and 8%, respectively, as compared to the
quarter ended June 30, 1996, due principally to lower finding and producing
costs by end users. The trend in overall drilling during the third quarter
of fiscal 1997 continued upward, as drilling at the end of the quarter was
26% higher than the comparable period of the prior year and 4% higher than
the quarter average.
Shipments of domestic OCTG increased by 58% during the third quarter
ended June 30, 1997 from the comparable period of the prior year. Import
penetration of the domestic OCTG market increased to an estimated 13.9%
during the quarter as compared to 12.2% during the same quarter last year.
Domestic consumption of OCTG increased 22% during the same period. The
domestic OCTG business was also impacted by an estimated 23% decrease in
exports during the quarter ended June 30, 1997, with exports accounting for
an estimated 10.5% of domestic production during the quarter. Maverick's
energy related shipments during the third quarter of fiscal 1997 increased
by 30.7% from the same quarter last year and it's exports increased 5.5%
from the same quarter of the previous year as the Company's shipments to
Canada grew. Industry inventory build created 29.4% of additional demand
for OCTG as compared to 3.8% during the same quarter last year with a
substantial portion of the inventory build in seamless products. Maverick
believes that the increased inventory levels of OCTG is attributed to
consumption levels which increased by approximately the same magnitude. The
increase in inventory is believed to be due to end users gearing up for
higher drilling activity in the second half of this calendar year. 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 14% in the third
quarter of fiscal 1997 compared to the comparable quarter of last year. In
addition, management estimates that imports of HSS product remained
relatively level and inventories of HSS held by distributors were stable
during the quarter, both as compared to the same quarter last year. As a
result of these market conditions, domestic shipments of HSS rose by an
estimated 19%. The Company's shipments of industrial products rose by
14.9%, due to a 38.4% increase in HSS shipments offset by a 39.2% decrease
in standard pipe shipments.
Pricing for both the Company's energy products and industrial products
was up by 5.9% and 1.0% for the third quarter of fiscal 1997, respectively,
as compared to the quarter ended June 30, 1996, due to improved prime
selling prices. The Company has announced pricing increases during the
current quarter on all of its products as have its principal competitors.
The Company's backlog of energy products is currently at higher average
selling prices than were realized during the quarter. While the Company is
receiving orders at these 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 third
quarter of fiscal 1997 by $17 per ton, or 5.1% as compared to the quarter
ended June 30, 1996 and 1.1% during the June 30, 1997 quarter as compared
to the quarter ended March 31, 1997. Steel costs during the quarter were
slightly below current replacement costs. The Company believes that the
reason for increasing steel costs is supply related rather than demand
related as a strike at one steel manufacturer, which occurred in October
1996, reduced the availability of hot rolled steel. On August 4, 1997, this
manufacturer reached an agreement with its union which should allow for
their re-entry into the marketplace. 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 third quarter of fiscal 1997 and in the first nine months of
fiscal 1997, total net sales increased $18.3 million, or 32.5% and $63.7
million, or 44.8%, respectively, over the comparable periods of the
preceding fiscal year. Energy products sales increased $15.9 million or
38.4% for the third quarter and increased $56.4 million or 56.1% for the
nine months ended June 30, 1997, while industrial products sales increased
$2.4 million or 16.1% for the third quarter and increased $7.3 million or
17.6% for the nine months ended June 30, 1997 as compared with the
comparable periods in the prior year. These results were attributable
primarily to an increase of 25.8% and 39.6% in the Company's total product
shipments, from 95,517 tons in the third fiscal quarter of 1996 to 120,130
tons in the third fiscal quarter of 1997 and from 240,911 tons in the first
nine months of fiscal 1996 to 336,226 tons in the first nine months of
fiscal 1997. Energy tons increased 20,119 tons, or 30.7%, in the third
quarter of 1997 as compared to the third quarter of 1996 and increased
81,398 tons or 52.0% in the first nine months of 1997 as compared to the
first nine months of 1996. Shipments of industrial products increased 4,494
tons, or 14.9% in the third quarter of 1997 as compared to the third
quarter of 1996 and 13,917 tons, or 16.5% in the first nine months of 1997
as compared to the first nine months of 1996. The sales and shipments of
energy products during the third fiscal quarter of 1997 increased
substantially due to: (i) increased activity in gas drilling by 19%, (ii)
increased activity in oil drilling by 32% and (iii) a 5.5% increase in
Maverick's export sales. The increase in sales and shipments of industrial
products was due to the Company's continued penetration into the HSS market
offset somewhat by reduced standard pipe shipments. Average net selling
prices for energy products during the third quarter of fiscal 1997 and the
nine months ended June 30, 1997 as compared to the comparable periods of
fiscal 1996 increased by 5.9% from an average of $633 per ton to $670 per
ton and increased by 2.7% from an average of $642 per ton to $659 per ton,
respectively. This improvement in selling prices is primarily due to a
substantial increase in demand for OCTG products. See "Overview." Average
net selling price for industrial products during the third quarter of
fiscal 1997 and the nine months ended June 30, 1997, as compared to the
periods of fiscal 1996 increased 1.0% from an average of $496 per ton to
$501 per ton and decreased 0.9% from an average of $493 per ton to $498 per
ton, respectively. This slight increase for the third quarter was due
primarily to an improved selling price driven by the increased steel prices
discussed below.
Cost of goods sold increased $15.1 million or 30.4% and $54.7 million
or 43.1% in the third quarter of fiscal 1997 and first nine months of 1997,
respectively, over the comparable periods of fiscal 1996. Energy products
cost of goods sold increased $13.2 million, or 36.4% and increased $49.2
million or 55.3% in the third quarter and the first nine months of fiscal
1997, respectively. Industrial products cost of goods sold increased $1.9
million or 14.1% and increased $5.5 million or 14.6% in the third quarter
and the first nine 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 3.7% (from an average
of $521 to $540) in the third quarter of fiscal 1997 and 2.6% (from an
average of $527 to $540 per ton) in the first nine months of fiscal 1997 as
compared to the comparable periods of fiscal 1996. This increase was
primarily due to an increase in delivered steel costs during the fourth
quarter of fiscal 1996 and the first and second quarters of fiscal 1997,
resulting in an increase of the average prime steel cost of goods sold by
$17 per ton over the third quarter of fiscal 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 $3.2 million or 48.8% and $9.0 million or 59.1%
for the third quarter and first nine months of fiscal 1997 over the
comparable periods of fiscal 1996. Gross profit for energy products
increased $2.7 million, or 53.2% and $7.2 million, or 62.2%, while
industrial products gross profit increased approximately $512,000 or 33.8%
and $1.7 million, or 48.8%, respectively. The consolidated gross profit as
a percentage of net sales ("gross profit percentage") was 13.12% and 11.74%
for the third quarter and first nine months of fiscal 1997 compared to
11.69% and 10.69% for the comparable periods of fiscal 1996. Energy gross
profit percentage increased from 12.23% to 13.54% for the third quarter of
fiscal 1997 and increased from 11.57% to 12.02% for the nine months ended
June 30, while industrial products remained relatively stable at 11.7% for
the third quarter of fiscal 1997 and increased to 10.83% from 8.55% for the
nine months ended June 30. Energy and industrial products gross profit
percentage in the third quarter of fiscal 1997 benefited from improved
selling prices, operating efficiencies, improved fixed costs absorption
offset by the impact of increased steel costs.
Selling, general and administrative expenses increased by $707,000, or
25.0% and $1.9 million, or 26.3% in the third quarter and first nine months
of fiscal 1997 over the comparable periods of fiscal 1996. Direct
structural selling costs increased $95,000 and $308,000 for the third
quarter and first nine months of fiscal 1997, respectively, 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 third quarter and first nine months of fiscal 1997 were 4.7% and
4.5%, respectively, as compared to 5.0% and 5.2%, respectively for the
comparable periods of fiscal 1996.
Interest expense decreased $105,000 or 17.4% and $472,000 or 24.0% in
the third quarter and first nine months of fiscal 1997 compared to the
comparable periods of fiscal 1996. The decreased interest expense is
primarily due to a lower average effective interest rat, as $4.3 million of
higher interest-bearing fixed rate debt was retired in the fourth quarter
of fiscal 1996.
The provision for income taxes increased $1.2 million or 185.4% and
$2.7 million or 230.2% in the third quarter and first nine months of fiscal
1997, respectively 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 third 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 its alternative
minimum tax credits during 1997.
As a result of the increased gross profit and the other factors
discussed above, net income increased $1.4 million in the third quarter of
fiscal 1997 and $4.8 million in the nine month period ended June 30, 1997,
from the comparable periods of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1997, was $43.4 million, and the ratio of
current assets to current liabilities was 1.7 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 $2.9 million increase in cash,
$11.3 million increase in accounts receivable and a $16.1 million increase
in inventory, partially offset by a $12.2 million increase in accounts
payable and accrued liabilities and a $7.3 million increase in deferred
revenue. The increase in cash and accounts receivable is due to the high
volume of energy-related business in June. 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 increased vendor payables supporting the
increased inventory position. The increase in deferred revenue is due to
the build-up in customer-obligated inventory prior to the announced July
price increase. Cash provided by operating activities was $6.2 million for
the nine months ended June 30, 1997. The primary source of cash was net
income, exclusive of the impact of non-cash items (primarily depreciation
and amortization) of $13.4 million. The primary use of cash was the build
in accounts receivable and inventory of $27.4 million.
During the nine months ended June 30, 1997, cash used in investing
activities was $7.7 million, all of which was attributable to purchases of
property, plant and equipment.
Cash provided by financing activities was $3.8 million. The Company's
Revolving Credit Facility increased $5.5 million primarily to partially
fund the increased levels of accounts receivable and inventories. The
Company's other long-term indebtedness was reduced by approximately $1.2
million.
The Company's capital budget for fiscal 1997 is approximately $9.3
million of which $7.7 million was expended during the nine months ended
June 30, 1997. The budgeted funds are being utilized principally to acquire
new equipment for existing manufacturing facilities. As of June 30, 1997,
the Company had an additional $1.4 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, 1999. As of June 30, 1997, the applicable
interest rate was 7.02 percent per annum and the Company had $8.4 million
in unused availability under the Revolving Credit Facility. As of June 30,
1997, the Company had $2.9 million in cash and cash equivalents.
<PAGE>
Part II. Other Information
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
On August 1, 1997, the Company announced the declaration of a two-for-one
stock split in the form of a 100% stock dividend to all shareholders of
record as of the close of business on August 12, 1997 with the distribution
to be made on August 21, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
10 Seventh Amendment to Secured Credit
Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K. In a report filed on Form 8-K dated
July 22, 1997, the Company reported a change in the
composition of the Board of Directors.
<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.
Maverick Tube Corporation
(Registrant)
Date: August 11, 1997 /s/ Gregg Eisenberg
Gregg Eisenberg
President and Chief Executive Officer
Date: August 11, 1997 /s/ Charles Struckhoff
Charles Struckhoff
Vice President -- Finance and Administration
(Chief Financial Officer)
SEVENTH AGREEMENT TO SECURED CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
Mercantile Bank of St. Louis
National Association
St. Louis, Missouri
Gentlemen:
The undersigned, Maverick Tube Corporation, a Delaware corporation (the
"Borrower") refers to the Secured Credit Agreement dated as of May 15, 1992, as
amended (the "Agreement") and currently in effect between the Company and you
(the "Banks") and Harris Trust and Savings Bank, as agent for the Banks (the
"Agent"). All capitalized terms used herein without definition shall have the
same meanings as they have in the Agreement.
The Borrower hereby applies to the Agent and the Banks for certain
modifications to the Agreement and the Borrower's borrowing arrangements with
the Agent and the Banks.
1. AMENDMENT.
Upon your acceptance hereof in the space provided for that purpose
below, the Agreement shall be and hereby is amended as follows:
(a) Section 7.12 of the Agreement shall be amended in its entirety and
as so amended shall read as follows:
"Section 7.12 Capitalized Expenditures. The Borrower will not, and will
not permit any Subsidiary to, expend or become obligated for capital
expenditures (as defined and classified in accordance with generally accepted
accounting principles consistently applied but in any event including the
liability of the Borrower and its Subsidiaries in respect of Capitalized Leases)
in excess of $9,500,000 during fiscal year 1997 and in excess of $4,250,000 in
each fiscal year thereafter."
2. CONDITIONS PRECEDENT.
The effectiveness of this Seventh Amendment is subject to the
satisfaction of all the following conditions precedent:
(a) The Borrower and the Banks shall have executed this Seventh
Amendment.
(b) The Banks shall have received copies executed or certified (as may
be appropriate) of all legal documents or proceedings taken in connection with
the execution and delivery hereof and the other instruments and documents
contemplated hereby.
(c) All legal matters incident to the execution and delivery hereof and
of the instruments and documents contemplated hereby shall be satisfactory to
the Banks and their counsel.
3. REPRESENTATIONS
In order to induce the Banks to execute and deliver this Seventh
Amendment, the Borrower hereby represents to the Banks that as of the date
hereof and as of the time that this Seventh Amendment become effective, each of
the representations and warranties set forth in Section 5 of the Agreement are
and shall be and remain true and correct (except that the representations
contained in Section 5 shall be deemed to refer to the most recent financial
statements of the Borrower delivered to the Banks) and the Borrower is in full
compliance with all of the terms and conditions of the Agreement and no Default
as defined in the Agreement as amended hereby nor any Event of Default as so
defined, shall have occurred and be continuing or shall arise after giving
effect to this Seventh Amendment.
4. MISCELLANEOUS
(a) Collateral Security Unimpaired. The Borrower hereby agrees that
notwithstanding the execution and delivery hereof, the Security Documents shall
be and remain in full force and effect and that any rights and remedies of the
Banks thereunder, obligations of the Borrower thereunder and any liens or
security interests created or provided for thereunder shall be and remain in
full force and effect and shall not be affected, impaired or discharged hereby.
Nothing herein contained shall in any manner affect or impair the priority of
the liens and security interest created and provided for by Security Documents
as to the indebtedness which would be secured thereby prior to giving effect
hereto.
(b) Effect of Amendment. Except as specifically amended and modified
hereby, the Agreement shall stand and remain unchanged and in full force and
effect in accordance with its original terms. Reference to this specific
Amendment need not be made in any note, instrument or other document making
reference to the Agreement, any reference to the Agreement in any of such to be
deemed to be a reference to the Agreement as amended hereby.
(c) Costs and Expenses. The Borrower agrees to pay on demand all
out-of-pocket costs and expenses incurred by the Banks in connection with the
negotiation, preparation, execution and delivery of this Seventh Amendment and
the documents and transactions contemplated hereby, including the fees and
expenses of counsel to the Banks with respect to the foregoing.
(d) Counterparts; Governing Law. This Seventh Amendment may be executed
in any number of counterparts and by different parties hereto on separate
counterparts, each of which when executed shall be an original but all of which
to constitute one and the same agreement. This Amendment shall be governed by
the internal laws of the State of Illinois.
Dated as of April 27, 1997
MAVERICK TUBE CORPORATION
By: /s/ Charles Struckhoff
Its: Chief Financial Officer
Accepted and agreed to at Chicago, Illinois as of the date and year
last above written.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Bonnie Ogden
Its Vice President
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By: /s/ David Higbee
Its Vice President
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<PERIOD-START> APR-01-1997
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0
0
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