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 DECEMBER 31, 1998
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.)
16401 Swingly Ridge Road
Seventh Floor
Chesterfield, Missouri 63017
(Address of principal executive offices) (Zip Code)
(314) 733-1600
(Registrant's telephone number, including area code)
(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 -- 15,437,474 shares as of February 12, 1999
MAVERICK TUBE CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial statements (Unaudited)
Condensed Consolidated Balance Sheets -- December 31, 1998
and September 30, 1998 3
Condensed Consolidated Statements of Operations -- Three
month periods ended December 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -- Three
month periods ended December 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market
Risk -- Not Applicable
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, September 30,
1998 1998
(Unaudited) (Note)
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................................$873................$748
Accounts receivable, less allowances of $636 and
$391 on December 31 and September 30, 1998,
respectively............................................................................12,655..............15,515
Inventories (see Note 2)..................................................................50,431..............61,685
Deferred income taxes......................................................................1,827...............1,827
Income taxes refundable....................................................................1,790...............5,078
Prepaid expenses and other current assets..................................................1,366...............1,200
----------------- -----------------
Total current assets..................................................................68,942..............86,053
PROPERTY, PLANT, AND EQUIPMENT
Less accumulated depreciation (December 31, 1998 -
$33,536; September 30, 1998 - $31,893)..................................................71,154..............69,879
OTHER ASSETS...................................................................................1,238.................953
----------------- -----------------
TOTAL ASSETS................................................................................$141,334............$156,885
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.........................................................................$11,260.............$12,301
Accrued expenses and other liabilities.....................................................5,814...............9,153
Deferred revenue ..........................................................................2,363...............3,584
Current maturities of long-term debt.........................................................667.................653
----------------- -----------------
Total current liabilities.............................................................20,104..............25,691
LONG-TERM DEBT, less current maturities........................................................8,026...............8,226
REVOLVING CREDIT FACILITY ....................................................................20,000..............27,400
DEFERRED INCOME TAXES .........................................................................5,505...............5,505
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
5,000,000 shares authorized..............................................................--..................--
Common stock, $.01 par value;
20,000,000 authorized shares,
15,437,474 shares issued and outstanding.................................................154.................154
Additional paid-in capital................................................................44,216..............44,216
Retained earnings.........................................................................43,329..............45,693
----------------- -----------------
Total stockholders' equity............................................................87,699..............90,063
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................$141,334............$156,885
================= =================
<FN>
..........................................................................................................................
Note: The condensed consolidated balance sheet at September 30, 1998, 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 SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three months ended
December 31
-------------------------------------
1998 1997
<S> <C> <C>
NET SALES....................................................................$41,388............$86,479
COSTS and EXPENSES
Cost of goods sold.......................................................40,643.............72,705
Selling, general and administrative.......................................3,420..............3,196
Start-up costs..............................................................719.................--
-------------------------------------
Income (loss) from operations ...........................................(3,394)............10,578.
OTHER INCOME (EXPENSE)
Interest expense...........................................................(335)..............(442)
Other income ................................................................36.................50
-------------------------------------
Income (loss) before income taxes........................................(3,693)............10,186
(BENEFIT FROM) PROVISION FOR INCOME TAXES.....................................(1,329).............3,616
-------------------------------------
NET INCOME (LOSS)............................................................($2,364)............$6,570
=====================================
AVERAGE SHARES 15,437,474 15,435,302
BASIC EARNINGS (LOSS) PER SHARE ($0.15) $0.43
=====================================
DILUTED EARNINGS (LOSS) PER SHARE ($0.15) $0.42
=====================================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MAVERICK TUBE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended
December 31,
1998 1997
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).....................................................................................($2,364).........$6,570
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization.........................................................................1,659...........1,408
Provision for accounts receivable allowances............................................................245.............(33)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable...........................................................2,615...........3,036
(Increase) decrease in inventories..................................................................11,254.............926
(Increase) decrease in prepaid expenses and other assets..............................................(466)...........(220)
(Decrease) increase in accounts payable............................................................(1,041).........(3,278)
(Decrease) increase in deferred revenue ............................................................(1,221).........(6,771)
(Decrease) increase in accrued expenses and other liabilities..........................................(51).........(3,235)
-------------- --------------
Cash provided (used) by operating activities......................................................10,630..........(1,597)
INVESTING ACTIVITIES
Purchases of property, plant and equipment.............................................................(2,919).........(2,893)
FINANCING ACTIVITIES
Proceeds from borrowings...............................................................................12,050..........34,000
Principal payments on borrowings......................................................................(19,636)........(32,123)
-------------- --------------
(7,586) 1,877
Net proceeds from sale of common stock ....................................................................--.............161
-------------- --------------
Cash provided (used) by financing activities......................................................(7,586)..........2,038
Increase (decrease) in cash and cash equivalents..........................................................125..........(2,452)
Cash and cash equivalents at beginning of period............................................................748...........2,886
-------------- --------------
Cash and cash equivalents at end of period.................................................................$873............$434
============== ==============
<FN>
Supplemental disclosures of cash flow information: Cash paid (received) during
the period for:
Interest............................................................................................$304............$471
Income taxes.....................................................................................($4,847)...........$465
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
MAVERICK TUBE CORPORATION AND SUBSIDIARIES
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 subsidiaries.
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
month period ended December 31, 1998, are not necessarily indicative of the
results that may be expected for the year ended September 30, 1999. 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, 1998.
(2) INVENTORIES
The components of inventories consisted of the following:
December 31, September 30,
1998 1998
(In thousands)
Finished goods $28,049 $34,674
Work-in-process 1,927 2,868
Raw materials 10,979 12,042
In-transit materials 4,400 7,003
Storeroom parts 5,076 5,098
$50,431 $61,685
Inventories are principally valued at the lower of average cost or
market.
Gross profit for the quarter ended December 31, 1998 includes a
$707,000 charge to earnings for the reduction in carrying value of
finished goods inventory, primarily related to a decline in the selling
prices of the Company's energy products.
(3) START-UP COSTS
During September 1998, the Company acquired assets to be used in the
production of cold drawn-tubular products at a production facility in
Beaver Falls, Pennsylvania. The Company incurred costs of $719,000 in
the first quarter of fiscal 1999 related to the commencement of
operations at this facility. These costs are comprised primarily of
salary and related costs for the production, sales and administrative
personnel prior to the fully integrated peration of the facility.
(4) EARNINGS (LOSS) PER SHARE
Dilutive earnings per share was computed in accordance with SFAS No.
128, "Earnings per Share" based upon net income or loss and the
weighted average number of shares of common stock including the net
effect of stock options. The reconciliation for diluted earnings per
share for the quarter ended December 31, 1998 and 1997 is as follows:
December 31,
1998 1997
Average shares outstanding
utilized in the computation of
basic earnings per share 15,437,474 15,435,302
Dilutive effect of outstanding
stock options 0 190,804
Average share utilized in
the computation of diluted
earnings per share 15,437,474 15,626,106
MAVERICK TUBE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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, 1998.
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 that 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 service centers
that supply end users in construction, transportation, agriculture and other
industries. Also, during the second quarter of fiscal 1999, the Company expects
to begin the production of cold drawn mechanical tubing, which will be included
in the industrial products segment.
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 fell by 31%
for the quarter ended December 31, 1998, as compared to the same quarter of the
previous year. Natural gas drilling in the United States decreased by 19% during
the first quarter of fiscal 1999 as compared to the comparable period of fiscal
1998, and oil related drilling decreased by 49%. The Company believes that gas
and oil drilling decreased due to gas and oil price decreases of 33% and 36%,
respectively, as compared to the quarter ended December 31, 1997. The trend in
overall drilling continued downward, as drilling at the end of the first quarter
of fiscal 1998 was 35% lower than the comparable period of the prior year and 6%
lower than the average drilling level for the quarter.
Shipments of domestic OCTG decreased by 70% during the first quarter ended
December 31, 1998 from the comparable period of the prior year. Import pene-
tration of the domestic OCTG market increased to an estimated 21% during the
quarter as compared to 19% during the same quarter last year. Domestic consump-
tion of OCTG decreased 25% during the same period. The domestic OCTG business
was also impacted by an estimated 50% decrease in exports during the quarter,
with exports accounting for an estimated 23% of domestic production during
the quarter. Maverick's energy related shipments during the first quarter
decreased by 58% from the same quarter last year and its exports to Canada
decreased 88%. The Canadian rig count decreased 54% during this time frame.
Industry inventory draw-down accounted for 34% of demand for OCTG as compared
to an industry inventory build-up which created 12% additional demand during
the same quarter last year. At December 31, 1998, the ratio of OCTG inventories
to current consumption rates remained out of balance, as months of supply of
inventory has only decreased by 5% from 7.3 months to 6.9 months.
According to published industry reports, total structural tube shipments fell by
approximately 2% in the quarter ended December 31, 1998 as compared to the
comparable prior year quarter reflecting weakening demand in the agricultural
equipment sector. In addition, imports increased 16%, increasing their market
penetration from 21% during the quarter ended December 31, 1997 to 25% during
the quarter ended December 31, 1998. Domestic producers' shipments fell by
approximately 6% as total shipments fell and imports increased. Management
estimates that inventories of HSS held by steel service centers also declined
during the quarter primarily due to concerns over falling steel prices. As a
result of these market conditions, the Company's shipments of industrial
products fell by 10%, due to a 12% decrease in HSS shipments offset by an 8%
increase in standard pipe shipments.
Pricing of the Company's products declined in all product lines during the first
quarter of fiscal 1999, primarily due to unfavorable market conditions and
declining steel prices. Pricing of OCTG, line, structural and standard pipe was
down 10.9%, 18.0%, 6.2% and 11.4%, respectively, as compared to the prior year
quarter.
Steel costs included in cost of goods sold decreased during the first quarter of
fiscal 1999 by $38 per ton, or 11.5% as compared to the quarter ended December
31, 1997 and by $17 per ton, or 5.5% as compared to the quarter ended September
30, 1998. These steel costs were above current replacement costs. The Company's
major supplier of steel has announced three price decreases since September 1998
which have reduced the Company's current replacement cost by $50 per ton. The
Company estimates that a substantial portion of these cost reductions will be
reflected in cost of goods sold in the second quarter of fiscal 1999. The supply
of steel in the United States has increased significantly during calendar 1998,
primarily due to previous capacity additions and increased import levels. The
Company anticipates that these market conditions should help keep steel costs
relatively low during fiscal 1999. However, steel trade cases filed with the
International Trade Commission in September, 1998 could negatively impact the
Company's future replacement cost of steel.
RESULTS OF OPERATIONS
OVERALL COMPANY
Net sales of $41.4 million decreased $45.1 million, or 52.1% during the first
quarter of fiscal 1999 as compared to the first quarter of fiscal 1998. These
results were attributable primarily to a decrease of 43.2% in total product
shipments, from 134,104 tons in first quarter of fiscal 1998 to 76,158 tons in
the current year quarter and an overall decrease of 15.7% in the average selling
prices of the Company's products.
Cost of goods sold of $40.6 million decreased $32.1 million, or 44.1% over the
comparable prior year period. The overall decrease was due primarily to
decreased product shipments. However, the overall unit cost per ton of products
sold decreased 1.6% (from an average of $542 to $533 per ton) in the first
quarter of fiscal 1999 as compared with the same period in fiscal 1998. This
decrease was due to a decrease in steel costs of $38 per ton, or 11.5%, offset
by an increase in conversion costs from less favorable fixed cost absorption due
to lower production. See "Overview."
Gross profit of $745,000 decreased $13.0 million, or 94.6% over the prior year
period. Gross profit as a percentage of net sales was 1.8% for the three month
period ended December 31, 1998 as compared to 15.9% for the three month period
ended December 31, 1997.
During September 1998, the Company acquired assets that will be used in the
production of cold drawn tubular products at a production facility in Beaver
Falls, Pennsylvania. The Company incurred costs of $719,0000 during the quarter
related to the commencement of operations at this facility. These costs are
comprised primarily of salary and related costs for the production, sales and
administrative personnel prior to the fully integrated operation of the
facility. As the Company commences operations of the facility, it may generate
some additional start-up costs during fiscal 1999.
Selling, general and administrative expenses increased by $224,000, or 7.0% in
the first quarter of fiscal 1999 over the prior year period. Selling, general
and administrative expenses were impacted by an increase in the allowance for
doubtful accounts (which reflects the deterioration of a specific accounts
receivable balance) and general wage increases granted as of the beginning of
the 1999 fiscal year. The increases were partially offset by decreased selling
commissions on sales of industrial products. However, due to the significant
decline in net sales revenue caused by the market conditions discussed above,
selling, general and administrative expenses as a percentage of net sales in the
first quarter of fiscal 1999 was 8.3% as compared to 3.7% for the prior year
period.
Interest expense decreased $107,000 or 24.2% in the first quarter of fiscal 1999
compared to the prior year period. The decreased interest expense is primarily
due to additional amounts of interest expense capitalized on additions to
property, plant and equipment.
The benefit from income taxes was $1.3 million for the quarter ended December
31, 1998 as compared to the prior year period when the Company recorded a
provision of $3.6 million. This change is attributable to the generation of a
pre-tax loss by the Company of $3.7 million in the first quarter of fiscal 1999
as compared to pre-tax income of $10.2 million in the first quarter of fiscal
1998.
As a result of the decreased gross profit and the other factors discussed above,
the Company generated a net loss of $2.4 million, a decrease of $8.9 million
from the prior year period.
ENERGY PRODUCTS SEGMENT
Energy product sales of $25.0 million decreased $41.9 million, or 62.6% for the
first quarter of fiscal 1999 as compared with the prior year period. OCTG
product shipments decreased 50,341 tons, or 57.7% from 87,312 to 36,971. The
Company's domestic shipments of OCTG fell 49.0% from the quarter ended December
31, 1997 due to excessive levels of industry inventory and a declining rig count
(from 997 active rigs to 697 active rigs). The Company's export shipments,
primarily to Canada, decreased 87.6%, from 19,567 tons in the quarter ended
December 31, 1997 to 2,436 tons in the quarter ended December 31, 1998, as
average Canadian drilling fell 54.4% from 443 active rigs to 202 active rigs.
Line pipe shipments decreased by 50.8% principally due to increased import
penetration. The average selling price for energy products was $615 per ton, a
decrease of $90 per ton. The decrease was due primarily to the market conditions
discussed above and a change in mix to lower value products. See "Overview."
Energy products cost of goods sold of $25.9 million decreased $30.1 million, or
53.7% for the first quarter of fiscal 1999 as compared with the prior year
period. Gross profit for energy products of ($906,000) decreased $11.8 million.
Gross profit for the quarter ended December 31, 1998 includes a charge to
earnings for the reduction in carrying value of finished goods inventory,
primarily related to a decline in the selling prices of the Company's energy
products. Energy products gross profit percentage was (3.6)% for the quarter
ended December 31, 1998 as compared to 16.3% for the quarter ended December 31,
1997.
Continued downward pressure on energy selling prices would not only impact total
sales but could require the Company to further reduce the carrying value of its
inventory. While the Company believes that its inventory is now in line with its
anticipated future sales levels, any significant decrease in prices would have a
negative impact on conversion costs recorded in cost of goods sold.
INDUSTRIAL PRODUCTS SEGMENT
Industrial products sales of $16.4 million decreased $3.2 million or 16.3% for
the first quarter as compared with the prior year period. Industrial products
shipments decreased 3,824 tons, or 9.7% in the first quarter of 1999 as compared
to the first quarter of 1998. The decrease in sales and shipments of industrial
products was negatively impacted by declines in inventories held by HSS
distributors primarily related to concern over falling steel and tube prices and
a slowing in agricultural demand. The average net selling prices for industrial
products during the first quarter of fiscal 1999 was $462, down $37 per ton as
compared to the same period of the prior year. This decrease for the first
quarter was due primarily to declining steel prices.
Cost of goods sold of $14.7 million decreased $2.0 million or 12.0% in the first
quarter of fiscal 1999 over the prior year period of fiscal 1998. Industrial
products gross profit decreased $1.2 million or 41.9%. The decreased gross
profit margin was due to lower selling prices and reduced operating
efficiencies, partially offset by lower steel costs. Industrial gross profit
margin percentage declined from 14.5% during the quarter ended December 31, 1997
to 10.1% during the quarter ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 31, 1998 was $48.8 million, and the ratio of current
assets to current liabilities was 3.4 to 1.0, as compared to September 30, 1998
when working capital was $60.3 million and the ratio of current assets to
current liabilities was 3.3 to 1.0. The decrease in working capital was due
principally to an $11.3 million decrease in inventory, a $2.6 million decrease
in accounts receivable, partially offset by a $1.0 million decrease in accounts
payable and a $1.2 million decrease in deferred revenue. The above changes in
inventory, accounts receivable, accounts payable and deferred revenue are due to
the decreased volume of energy business. The change in prepaids and other assets
includes a $5.0 million income tax refund received during the first fiscal
quarter of 1999. Cash provided by operating activities was $10.6 million for the
three months ended December 31, 1998.
Cash used by financing activities was $7.6 million. Outstanding borrowings on
the Company's Revolving Credit Facility decreased $7.4 million primarily due to
the reduction in accounts receivable and inventory. The Company's other
long-term indebtedness including current maturities was reduced by approximately
$186,000.
The Company's capital budget for fiscal 1999 is approximately $16.5 million of
which $2.9 million was expended during the three months ended December 31, 1998.
The budgeted funds are being utilized principally to complete the newly
purchased cold drawn mechanical tube facility, acquire equipment for its
existing manufacturing facilities, and to purchase and install a new enterprise
resource planning system. As of December 31, 1998, the Company had an additional
$5.2 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 flows 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 $50.0 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 September 30, 2003. As of December 31, 1998,
the applicable interest rate was 6.41 percent per annum and the Company had $5.3
million in unused availability under the Revolving Credit Facility. As of
December 31, 1998, the Company had $873,000 in cash and cash equivalents.
YEAR 2000 READINESS DISCLOSURE
The Company is in the implementation phase of its conversion to a new Year 2000
compliant enterprise resource planning system which will replace and upgrade
many of the Company's older information systems, some of which are not year 2000
compliant. The integrated information provided by this new system will enhance
the Company's ability to make more informed decisions regarding sales and
inventory, optimize inventory levels and minimize costs. Implementation is
expected to be completed by the fourth fiscal quarter of 1999. The total cost of
the system implementation, including the cost of software and related internal
cost, is expected to be $4.7 million, of which approximately $1.7 million has
been expended through December 31, 1998. In addition, the Company is performing
a separate evaluation of its other systems for Year 2000 compliance and is
contacting its significant customers, suppliers and vendors to determine their
Year 2000 compliance. Business interruption caused by these suppliers could
negatively impact the Company's operations. These evaluations and the conversion
of these systems (if necessary) are also expected to be completed in the same
time frame as the implementation of the Company's new enterprise resource
planning system and the cost of these activities is not expected to be material.
Although the Company believes that the plans described above will address its
Year 2000 issues and as a result, the Company will not be significantly impacted
by it, the Company has established a contingency plan to address non-compliance
issues. This plan involves the utilization of various manual procedures that
bypass computer applications and may be utilized in the event of a significant
system shutdown or if the Company faces problems with its customers, suppliers
or vendors. If the Company is required to implement its contingency plan, such
action could have an adverse effect on the operations, liquidity and financial
condition of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No.
Description
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the three
month period ended December 31, 1998.
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: February 5, 1999 /s/ Gregg Eisenberg
Gregg Eisenberg
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 5, 1999 /s/ Barry Pearl
Barry Pearl
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 873
<SECURITIES> 0
<RECEIVABLES> 13,291
<ALLOWANCES> 636
<INVENTORY> 50,431
<CURRENT-ASSETS> 68,942
<PP&E> 104,690
<DEPRECIATION> 33,536
<TOTAL-ASSETS> 141,334
<CURRENT-LIABILITIES> 20,104
<BONDS> 0
0
0
<COMMON> 154
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 141,334
<SALES> 42,103
<TOTAL-REVENUES> 41,388
<CGS> 40,643
<TOTAL-COSTS> 44,782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 335
<INCOME-PRETAX> (3,693)
<INCOME-TAX> (1,329)
<INCOME-CONTINUING> (2,364)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (2,364)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
