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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 2000. 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 001-10651
MAVERICK TUBE CORPORATION
16401 Swingley Ridge Road
Seventh Floor
Chesterfield, Missouri 63017
(636) 733-1600
DELAWARE 43-1455766
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par
Value $.01 Per Share Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
The aggregate market value of the 33,486,744 voting shares of Common Stock
(including 6,717,836 shares of Exchangeable Shares) held by non-affiliates of
the Registrant as of March 12, 2001 was $703,221,624 based upon the closing
price as reported on the New York Stock Exchange on that date. As of March 12,
2001, the Registrant had 33,732,118 outstanding shares of Common Stock and
Exchangeable Shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
specified parts of this Annual Report on Form 10-K:
Maverick Tube Corporation 2000 Annual Report into Part I, II and IV
Maverick Tube Corporation definitive proxy statement for the 2001 Annual Meeting
of Stockholders into Part III
MAVERICK TUBE CORPORATION AND SUBSIDIARIES
INDEX
PART I.
Item 1. BUSINESS
Item 2. PROPERTIES
Item 3. LEGAL PROCEEDINGS
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
PART II.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Item 6. SELECTED FINANCIAL DATA
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
PART III.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
SIGNATURES
EXHIBIT INDEX
We make forward-looking statements in this Form 10-K and in our public documents
that are incorporated by reference, which represent our expectations or beliefs
about future events and financial performance. You can identify these statements
by forward-looking words such as "expect," "believe," "anticipate," "goal,"
"plan," "intend," "estimate," "may," "will" or similar words. Forward-looking
statements are subject to known and unknown risks, uncertainties and
assumptions, including:
* oil and gas price volatility;
* steel price volatility;
* domestic and foreign competitive pressures;
* fluctuations in industry-wide inventory levels;
* the presence or absence of governmentally imposed trade restrictions;
* plans for our new large diameter facility;
* plans for our cold drawn tubing business;
* plans for our Longview, Washington facility;
* seasonal fluctuations;
* steel supply;
* asserted and unasserted claims;
* compliance with laws and regulations;
* presence of a collective bargaining agreement;
* those other risks and uncertainties discussed in Exhibit 99.1 of this
Form 10-K and elsewhere in this and our other filings with the
Securities and Exchange Commission.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed may not occur. In addition, actual results could differ
materially from those suggested by the forward-looking statements. Accordingly,
you should not place undue reliance on the forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
PART I
ITEM 1
BUSINESS
General
As used herein, Maverick Tube Corporation and its direct and indirect
wholly-owned subsidiaries are collectively referred to as the "Company," whereas
"Maverick" is the Company exclusive of its subsidiary Prudential Steel Ltd.
("Prudential") and its direct and indirect subsidiaries. Also, unless the
context otherwise requires, the terms "we," "us" and "our" refers to the
Company.
We are a leading domestic producer of tubular steel products used in energy and
industrial applications. We manufacture "oil country tubular goods," which are
steel tubular products used in the completion and production of oil and natural
gas wells. We also serve the energy industry by manufacturing line pipe, which
is used primarily in the transportation of oil and natural gas. For industrial
applications, we manufacture structural tubing and standard pipe. We also
recently began producing "cold drawn tubing" in our industrial products segment,
which is used as a component of high quality products that require close
tolerances. During calendar 2000, energy products accounted for approximately
80% of our total revenues.
We were incorporated in Missouri in 1977 and reincorporated in Delaware in 1987.
Our principal executive offices are located at 16401 Swingley Ridge Road,
Seventh Floor, Chesterfield, Missouri 63017 and our phone number is (636)
733-1600.
Recent Developments
On September 22, 2000, Maverick completed a business combination with
Prudential, a corporation existing under the laws of the Province of Alberta,
Canada. Pursuant to the terms of the combination, Prudential stockholders
received 0.52 of an exchangeable share, issued by Maverick Tube (Canada) Inc., a
wholly-owned Canadian subsidiary of Maverick, for each Prudential common share.
Consequently, Prudential stockholders received a total of 15,813,088
exchangeable shares. The exchangeable shares are Canadian securities that began
trading on The Toronto Stock Exchange on September 27, 2000 under the symbol
MAV. These shares have the same voting rights, dividend entitlements and other
attributes as shares of the Company's common stock and are exchangeable, at each
exchangeable stockholder's option, for the Company's common stock on a
one-for-one basis. The transaction was accounted for as a pooling of interests
and thus the financial statements and management's discussion and analysis for
the fiscal years ended September 30, 1999 and 1998 have been restated to include
the operations and activities of Prudential.
As a result of the combination with Prudential, the Company has two principal
operating subsidiaries, Maverick Tube, L.P., a Delaware limited partnership, and
Prudential. Maverick Tube, L.P. conducts substantially all of our U.S.
operations while Prudential conducts substantially all of our Canadian
operations.
In conjunction with the completion of the Prudential transaction, the Maverick
Board of Directors approved a change in the fiscal year end of Maverick from
September 30 to December 31, effective with the calendar year beginning January
1, 2000. Accordingly, our fiscal year is now on a calendar year basis.
As a result of the differing year-ends of Maverick and Prudential, prior to the
combination and Maverick's change in year-end, the financial statements for
dissimilar year-ends have been combined. Maverick's financial statement for its
fiscal year ended September 30, 1999 and 1998 have been combined with
Prudential's financial statements for the years ended December 31, 1999 and
1998. Thus, Prudential's results of operations for the three months ended
December 31, 1999 are included in both the year ended September 30, 1999 and a
three-month transition period ended December 31, 1999.
To further our growth and enhance our ability to compete in our energy and
industrial businesses, we recently completed the construction of and equipped a
new large diameter facility immediately adjacent to our current facilities in
Hickman, Arkansas, at a cost of $51.0 million. This facility allows us to
include larger diameter pipe and tubing products in our product line offerings.
Based principally on historical product relationships and our assumptions about
markets, we estimate that our product size range prior to the new large diameter
facility allowed us to compete for approximately 49% of the total tons consumed
in all of the markets we serve. Similarly, we estimate that our expansion into
the production of larger diameter pipe and tubing products should allow us to
compete for approximately 67% of the total tons consumed in these markets. This
represents an estimated increase of approximately 37% of the total tons consumed
for which we can compete in the markets we serve. We began limited production of
select industrial products at the new facility during December 2000. Recently,
we have demonstrated the ability to produce and ship our full product line.
The Products We Produce
The following table summarizes our current manufacturing facilities and the
products they produce:
Facility Products Sizes (1)
Hickman, Arkansas Oil country tubular goods, 1 1/2" - 16"
line pipe, standard pipe,
structural shapes and rounds,
and piling
Conroe, Texas Oil country tubular goods 4 1/2"- 9 5/8"
and line pipe
Calgary, Alberta Oil country tubular goods, 2 3/8" - 12 3/4"
line pipe and structural shapes
and rounds
Longview, Washington Oil country tubular goods, 2 3/8" - 10 3/4"
structural shapes and rounds
and line pipe
Beaver Falls, Pennsylvania Cold drawn mechanical tubular 1 3/4" - 12"
(1) Represents outside diameter measurement. Structural tubing can have a
square, rectangular or round cross-section.
For information with regard to total revenue, operating profit or loss and
identifiable assets attributable to each of the business segments, see Note 1
and 12 to the Consolidated Financial Statements on page 30 and 35 of our Annual
Report to Stockholders for the Year Ended December 31, 2000 ("2000 Annual
Report"), portions of which are filed as Exhibit 13, hereto.
Our Business Strategy
Identify And Enter New Markets
We continually seek and make acquisitions and capital expenditures to enter new
markets as evidenced by our entry into the structural tube market in 1994, our
entry into the cold drawn tubular market in 1998, the addition of large diameter
pipe and tubing to our product lines and our recent combination with Prudential.
We intend to seek additional opportunities to expand our business to new markets
where we believe we can compete effectively and profitably.
Increase Market Share By Expanding Our Existing Product Lines
We believe that the expansion of our product lines in both the energy and
industrial segments of our business will allow us to increase our market share
by capitalizing on our existing customer relationships to market additional
products. The construction and equipping of the new large diameter facility is
an example of this strategy.
Continually Improve The Efficiency Of Our Manufacturing Process
We intend to continue to pursue our objective of being a low-cost, high-volume
producer of quality steel tubular products by seeking to:
o maintain product manufacturing cost controls;
o maximize production yields from raw materials;
o make capital expenditures designed to lower costs and improve quality;
o minimize unit production costs through effective utilization of plant
capacity; and
o minimize freight costs.
Deliver Quality Products And Service To Our Customers
We believe that we have achieved an excellent reputation with our existing
customers. We intend to continue to build long-term customer relationships with
new and existing customers by seeking to:
o offer broad-based product lines;
o focus on product availability;
o deliver competitively priced quality products; and
o provide a high level of customer support before and after the sale.
The Energy Pipe Industry
General
Oil country tubular goods consist of drill pipe, production casing, surface
casing and production tubing. Drill pipe is used and may be reused to drill
wells. Production casing forms the structural wall in oil and gas wells to
provide support and prevent caving during drilling operations and is generally
not removed after its has been installed in a well. Surface casing is used to
protect water-bearing formations during the drilling of a well. Production
tubing is placed within the casing and is used to convey oil and natural gas to
the surface and may be replaced during the life of a producing well.
The oil country tubular goods market is affected by several factors, the most
significant being the number of oil and natural gas wells being drilled. The
level of drilling activity is largely a function of current prices for oil and
natural gas and the industry's future price expectations. The prices are
determined by various supply and demand factors, such as consumption levels,
current inventory levels, weather, import levels, production economics and
future expectations. The following chart shows the price of oil and natural gas
since the fourth quarter of 1996:
U.S. Natural Alberta Spot Price
WTI Oil Price Gas Price Natural Gas
- -------------------------------------------------------------------------------
4Q96 $24.65 $2.88 $1.39
1Q97 $23.46 $2.59 $1.69
2Q97 $19.92 $2.04 $1.23
3Q97 $19.73 $2.37 $1.14
4Q97 $20.22 $2.80 $1.92
1Q98 $16.08 $2.11 $1.13
2Q98 $14.77 $2.18 $1.34
3Q98 $14.13 $1.96 $1.29
4Q98 $13.09 $1.87 $1.53
1Q99 $13.09 $1.73 $1.50
2Q99 $17.68 $2.14 $1.76
3Q99 $21.59 $2.49 $2.02
4Q99 $24.30 $2.45 $2.03
1Q00 $28.88 $2.53 $2.13
2Q00 $29.04 $3.53 $2.93
3Q00 $30.62 $4.44 $4.24
4Q00 $32.10 $6.21 $4.87
The most commonly cited indicator of the level of drilling activity is the Baker
Hughes rig count which represents the number of active oil and natural gas rigs
currently being operated. Since July 1987, the Baker Hughes U.S. rig count hit a
high in December 1987 of 1,162 rigs and a low in April 1999 of 496. Since July
1987, the Baker Hughes Canadian rig count hit a high in February 2000 of 544
rigs and a low in April 1992 of 32. The following charts show the U.S. and
Canadian rig count since the fourth quarter 1996 and our shipments of oil
country tubular goods for the same period:
Quarterly Maverick OCTG Shipments Baker Hughes Rig Count
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4Q96 72,186 846
1Q97 68,248 856
2Q97 76,231 936
3Q97 90,766 992
4Q97 87,312 997
1Q98 63,290 965
2Q98 47,420 862
3Q98 44,124 794
4Q98 36,971 688
1Q99 25,970 550
2Q99 41,947 524
3Q99 60,346 649
4Q99 84,978 775
1Q00 75,784 771
2Q00 80,816 845
3Q00 88,411 981
4Q00 79,877 1,076
Quarterly Prudential OCTG Shipments Canadian Rig Count
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4Q96 45,706 320
1Q97 44,781 395
2Q97 37,929 258
3Q97 48,812 400
4Q97 52,207 443
1Q98 38,947 469
2Q98 13,982 177
3Q98 19,957 205
4Q98 21,562 202
1Q99 23,372 283
2Q99 17,786 102
3Q99 35,072 257
4Q99 41,923 336
1Q00 54,293 469
2Q00 39,737 216
3Q00 49,050 313
4Q00 53,926 380
The level of industry inventories maintained by manufacturers, distributors and
end users also affects the U.S. oil country tubular goods market. When customers
draw-down on inventory rather than purchase new products, this has an adverse
effect on the demand for new production. Conversely, when distributors and end
users increase inventory levels, this has a positive effect on the demand for
new production. Inventory levels do not materially affect the production of oil
country tubular goods in Canada as distributors do not generally hold
significant amounts of inventory.
For calendar year 1999 and 1998, declining industry inventory levels satisfied
14.0% and 8.5% of the U.S. oil country tubular goods consumption, respectively.
For calendar year 2000, increasing industry inventory levels added an estimated
18.9% to the U.S. oil country tubular goods demand for production.
Import levels of foreign oil country tubular goods into North America also
significantly affect the North American oil country tubular goods market. High
levels of imports reduce the volume sold by North American producers and tend to
suppress selling prices. We believe that North American import levels are
affected by, among other things, overall world demand for oil country tubular
goods, the trade practices of and government subsidies to foreign producers and
the presence or absence of governmentally imposed trade restrictions in the U.S.
and Canada. Since 1986, the level of imports of oil country tubular goods from
Canada and Taiwan has been reduced by the existence of duties imposed by the
United States government (rescinded in June 2000). In addition, since 1995, the
level of imports of oil country tubular goods from Argentina, Italy, Japan,
Korea and Mexico has also been reduced by the existence of anti-dumping duties.
The U.S. International Trade Commission is scheduled to review these duties in
2001. If these duties expire or are renewed on a less stringent basis, we could
be exposed to increased competition from imports.
The following table illustrates certain factors related to industry-wide U.S.
and Canadian drilling activity, oil country tubular goods consumption,
shipments, imports and inventories during the periods presented:
Year Ended December 31,
2000 1999 1998
---------------------------------------
U.S. Market Activity:
Average rig count 918 624 827
U.S. oil country tubular goods
consumption (in thousands of tons):
U.S. producer shipments 1,856 901 1,217
Imports 717 170 343
Inventory (increase)/decrease (436) 202 156
Used pipe 174 174 111
---------------------------------------
Total U.S. Consumption 2,311 1,447 1,827
=======================================
Year Ended December 31,
2000 1999 1998
---------------------------------------
Canadian Market Activity:
Average rig count 344 244 263
Canadian oil country tubular goods
consumption (in thousands of tons):
Canadian producer shipments 465 303 350
Imports 273 160 157
Inventory (increase)/decrease 25 10 (15)
---------------------------------------
Total Canadian consumption 763 473 492
=======================================
The U.S. rig count in the table is based on weekly rig count reporting from
Baker Hughes, Inc. Imports are as reported by Duane Murphy and Associates in
"The OCTG Situation Report." Inventory (increase)/decrease are our estimates
based upon independent research by Duane Murphy and Associates. Used pipe
quantities are calculated by multiplying 8.3 recoverable tubing and casing tons
by the number of abandoned oil and gas wells. U.S. producer shipments are our
estimates calculated based on the components listed above.
The Canadian rig count in the table is based on weekly rig count reporting from
Baker Hughes, Inc. Imports are as reported by Statistics Canada. Inventory
(increase)/decrease are our estimates based upon data reported by Statistics
Canada. Canadian shipments are reported by Statistics Canada Steel Pipe and Tube
Report.
Manufacturers produce oil country tubular goods in numerous sizes, weights,
grades and end finishes. We believe that most oil country tubular goods are
produced to American Petroleum Institute and Canadian Standard Association
specifications. The grade of pipe used in a particular application depends on
technical requirements for strength, corrosion resistance and other performance
qualities. Oil country tubular goods are generally classified into groupings of
"carbon" and "alloy" grades. Carbon grades of oil country tubular goods have
yield strength levels of 75,000 pounds per square inch or less and are generally
used in oil and natural gas wells drilled to depths less than 8,000 feet. Alloy
grades of oil country tubular goods have yield strength levels of 75,000 pounds
per square inch or more and are generally used in oil and natural gas wells
drilled to depths in excess of 8,000 feet, or for high temperature wells, highly
corrosive wells or critical applications.
Carbon and alloy grades of oil country tubular goods are available from both
electric resistance welded and seamless pipe producers. Electric resistance
welded pipe is produced by processing flat rolled steel into strips which are
cold-formed, welded, heat-treated or seam-annealed and end-finished with threads
and couplings. Seamless products are produced by individually heating and
piercing solid steel billets into pipe and then end finishing such pipe into oil
country tubular goods in a manner similar to electric resistance welded pipe. We
believe that the seamless manufacturing process involves higher costs than the
welded process and that, as a result, seamless products are generally priced
higher than comparable welded products.
Based on published industry statistics, electric resistance welded products,
which did not have significant market penetration prior to the mid-1970's, now
account for approximately half of the tonnage of domestic oil country tubular
goods consumed annually. We believe electric resistance welded products have
captured a significant majority of the carbon grade oil country tubular goods
market, while seamless products retain a significant majority of the alloy grade
oil country tubular goods market. We also believe that further significant
market penetration of welded products will depend upon increased market
acceptance of welded products and technological advances in the types of raw
materials and equipment utilized in the electric resistance welding process.
Line pipe products are used for surface production flow lines, gathering systems
and pipeline transportation and distribution systems for oil, natural gas and
other fluids. Line pipe is produced in both welded and seamless form. Line pipe
markets are dependent not only on the factors which influence the oil country
tubular goods market, but also on the level of pipe line construction activity,
line pipe replacement requirements, new residential construction and utility
purchasing programs.
Our Energy Products
We manufacture oil country tubular goods used for production tubing, production
casing and surface casing, and we also manufacture line pipe. We do not make
drill pipe. We produce all of our oil country tubular goods and line pipe using
only the electric resistance welding process.
The following table shows our energy product shipments in tons, net sales and as
a percentage of overall net sales measured in dollars:
Energy Products
Net Sales % of
Tons (000's) Net Sales
------------------------------------
MAVERICK
Year ended December 31, 2000 341,610 222,487 72.0%
Three months ended December 31, 1999 89,450 49,612 70.9%
Year ended September 30, 1999 184,958 101,864 61.1%
Year ended September 30, 1998 263,248 184,825 69.6%
PRUDENTIAL
Year ended December 31, 2000 325,092 227,228 90.5%
Year ended December 31, 1999 188,089 123,285 86.7%
Year ended December 31, 1998 142,278 104,989 88.2%
Prudential provides tolling services which is the conversion of steel to tubular
products owned by our competitors. While tolling only comprised a small portion
of our business, it provided additional tons which optimizes mill operations and
improves fixed cost absorption. Prudential tolling tons for the years ended
December 31, 2000, 1999 and 1998 were 26,444, 9,626 and 17,551, respectively.
Net sales associated with tolling tons for the years ended December 31, 2000,
1999 and 1998 were $4,433,000, $1,403,000 and $2,648,000, respectively.
Our energy products meet or exceed the applicable standards as required by the
American Petroleum Institute and Canadian Standards Association. In addition,
similar to other producers, we manufacture oil country tubular goods in custom
or proprietary grades. We design and engineer our custom and proprietary oil
country tubular goods to be used in similar applications as products meeting or
exceeding American Petroleum Institute and Canadian Standards Association
standards and to provide performance features comparable to products meeting
those standards. We warrant our American Petroleum Institute and Canadian
Standards Association casing and tubing to be free of defects in material or
workmanship in accordance with the applicable specifications. In addition, we
warrant our proprietary grade products to be free of defects in accordance with
our published standards. We have not incurred significant costs in connection
with these warranties.
We manufacture finished goods in both carbon and alloy steel grades. Virtually
all of our products are fully completed or "end-finished" at our facilities. In
contrast, some of our competitors outsource the end-finishing of their products
thus adding to their freight and handling costs or do not end-finish their
products at all. The end-finish process includes, as appropriate, upsetting,
beveling, threading, pressure testing and the application of couplings. Our
fully finished oil country tubular goods are ready to be installed in oil or
natural gas wells. By end-finishing our products, we are better able to control
quality, cost and service to customers. Two of our U.S. energy facilities
provide heat-treatment capabilities necessary for the production of alloy grade
pipe. Our alloy grade tubing and casing products accounted for 16%, 14% and 14%
of the tons of energy products sold calendar year 2000, fiscal 1999 and fiscal
1998, respectively. Carbon grade tubing and casing accounted for the balance of
these tons.
We manufacture oil country tubular goods and line pipe ranging in size from 1
1/2" to 16" in outside diameter. Excluding drill pipe, which we do not
manufacture, approximately 80% of the total oil country tubular goods and line
pipe tonnage produced in the western hemisphere in calendar 2000 fell into this
size range.
Marketing
We sell oil country tubular goods and line pipe primarily throughout the United
States and Canada to numerous distributors, which then resell the pipe to major
and independent oil and natural gas production, gathering and pipeline
companies. Maverick sales to Canadian customers in calendar 2000, fiscal 1999
and fiscal 1998 were $19.5 million, $11.3 million and $17.9 million,
respectively. Maverick sales to other foreign customers in calendar 2000, fiscal
1999 and fiscal 1998 made up an additional $77,000, $200,000 and $900,000,
respectively. Prudential sales to U.S. customers in calendar 2000 and 1999 were
$8.4 million and $1.0 million, respectively. Prudential did not have any sales
to U.S. customers in fiscal 1998. Our marketing philosophy emphasizes delivering
competitively priced quality products and providing a high level of service to
our customers. With the completion of our new large diameter facility, we are
marketing ourselves as a broad line supplier of oil country tubular goods and
line pipe products. We maintain inventories of finished goods that are housed at
our production facilities and at field locations close to the areas of drilling
activity, which allows us to provide timely delivery of our products.
As of December 31, 2000 and September 30, 1999, our backlog orders (including
bill and hold orders not yet shipped) for oil country tubular goods and line
pipe products were approximately $128.2 million and $82.8 million, respectively.
All of the backlog orders as of December 31, 2000 are expected to be filled by
the end of calendar 2001. We consider only $9.0 million and $3.7 million of our
backlog orders, respectively, to be firm as remaining orders may generally be
cancelled without penalty. Our backlog orders, as of any particular date, may
not be indicative of our actual operating results for any period. We cannot give
any assurance that the amount of backlog at any particular date will ultimately
be realized.
Manufacturing
We manufacture oil country tubular goods and line pipe products at our
facilities in Hickman, Arkansas, Conroe, Texas, Longview, Washington and
Calgary, Alberta. We began limited production of select industrial products at
our new large diameter facility adjacent to our Hickman, Arkansas facilities,
during December 2000. The facilities are strategically located to serve the
energy markets in the United States and Canada. The new large diameter facility
that will produce approximately 75% energy related products and 25% industrial
related products in larger sizes than we currently produce. We can currently
produce at a consolidated maximum rate of approximately 1,209,000 tons of
finished products per year with approximately 967,000 tons currently dedicated
to energy related products. After the completion of our new large diameter
facility, we expect these amounts to increase to 1,459,000 total tons of
capacity and 1,154,500 tons of energy capacity per year. We operated our energy
facilities at a capacity utilization of approximately 69% and 44% during
calendar 2000 and fiscal 1999, respectively.
In order to control our manufacturing costs, we attempt to maximize production
yields from purchased steel and reduce unit labor costs. We control labor costs
by automating some of our activities and by seeking to optimize product
throughput and scheduling. Generally, we maintain an innovative compensation
plan, whereby the employees of our facilities that achieve certain performance
based criteria receive quarterly bonuses. In addition, some employees are
eligible to receive annual profitability bonuses based on our consolidated
earnings. The maximum achievable incentives and bonuses range from 15% to 75% of
an employee's salary and wages.
During calendar 2000, fiscal 1999 and fiscal 1998, we spent $10.9 million, $6.4
million and $26.4 million, respectively, on new capital equipment for our
existing energy facilities. Capital expenditures for fiscal 1998 include the
construction costs of the Longview, Washington facility. Capital expenditures
related to the new large diameter facility were approximately $48.6 million
during calendar 2000. Our capital budget for calendar 2001 is $12.0 million. We
expect these capital expenditures to result in manufacturing cost savings,
quality improvements and/or expanding or maintaining production capabilities and
product lines.
Competition
The suppliers of oil country tubular goods and line pipe products face a highly
competitive market. We believe that the principal competitive factors affecting
our business are price, quality, delivery, availability and service. We believe
we enjoy an excellent reputation for quality products and outstanding customer
service. We compete with several North American and numerous foreign producers
of oil country tubular goods, some of which have greater financial resources
than we do. In the oil country tubular goods market, our more significant U.S.
competitors are Lone Star Steel Company and Newport Steel Company, which produce
electric resistance welded pipe, and United States Steel Corporation and North
Star Steel Company, which primarily produces seamless pipe. Our most significant
Canadian competitor is IPSCO Tubular, Inc., which produces electric resistance
welded pipe. We also compete in the line pipe market with these same
competitors, and with foreign producers of line pipe, most of which are units of
large foreign steel makers. During calendar years 2000, 1999 and 1998, we
estimate that domestic oil country tubular goods market penetration of tons
consumed by imports into the U.S. was 31.0%, 11.7% and 18.8%, respectively.
During calendar years 2000, 1999 and 1998, we estimate that domestic oil country
tubular goods market penetration of tons consumed by imports into Canada was
35.8%, 33.8% and 31.9%, respectively.
We, as well as the oil country tubular goods industry in general, experience
seasonal fluctuations in demand for our products. For instance, weather
conditions during the first half of the calendar year normally make drilling
operations more difficult in the United States while the second and third
quarters are difficult drilling conditions in western Canada. For this reason,
drilling activity and the corresponding demand for our oil country tubular goods
within the United States generally will be lower during our first and second
quarters, as compared with the third and fourth quarters. Drilling activity and
corresponding demand for our oil country tubular goods within Canada generally
will be lower during the second and third quarters, as compared with the first
and fourth quarters.
Industrial Industry
General
We manufacture structural tubing products, standard pipe and piling products.
Our structural tubing products are used in the following applications:
o construction, including handrails, building columns and bridge frames;
o transportation, including boat trailers;
o agricultural, including farm implement components and tillage equipment;
o material handling, including storage rack systems and conveying systems
support; and
o recreational, including exercise equipment.
In addition, structural tubing is an attractive alternative to other structural
steel forms, such as I-beams and H-beams. Structural tubing products offer
strength and other product characteristics similar to beams, but with less steel
content, resulting in lower costs to the end user in many applications.
Structural tubing is produced by processing flat rolled steel into strips, which
are cold-formed, welded and heat-treated or seam-annealed. The machinery and
equipment used for the manufacture of structural tubing products are similar to
that used for the manufacture of oil country tubular goods. Structural tubing
and standard pipe are not, however, subject to the same degree of tolerances as
are oil country tubular goods, which results in lower production costs related
to testing and inspection than for oil country tubular goods. Moreover,
structural tubing does not require end finishing, flash elimination for the
welding process or seam-annealing. Because less finishing is required of
structural tubing products as compared to oil country tubular goods, the average
cost per ton to convert steel into structural tubing is slightly less than oil
country tubular goods.
We believe that demand for structural tubing is influenced primarily by the
level of general economic activity in North America. We estimate that domestic
consumption of structural tubing during calendar years 2000, 1999 and 1998 was
2.2 million, 2.0 million and 2.0 million tons, respectively.
Standard pipe products are used in industrial applications such as steam, water,
air and gas lines, and plumbing and heating. We manufacture standard pipe in the
same manner as we manufacture structural tubing. As with structural tubing, we
believe that demand for standard pipe is influenced primarily by the level of
general economic activity in North America. We estimate that domestic
consumption of standard pipe during calendar years 2000, 1999 and 1998 was 2.8
million, 2.4 million and 2.6 million tons, respectively. In recent years,
standard pipe has faced limited new competition from plastic pipe in certain
applications.
Our Products
With the completion of our new large diameter facility, we can produce square,
rectangular and round structural tubing and standard pipe at our facilities in
sizes ranging from 1 1/2" to 16" square and the equivalent sizes in rectangular
and round tubing. Our products range from .120 to .500 inches in thickness.
Because of the large number of applications for structural tubing and standard
pipe, the number of different products produced for the industrial market is
considerably larger than that produced for the oil country tubular goods market.
The annual capacity at our structural facilities is approximately 242,000 tons.
After the completion of our new large diameter facility, we expect this amount
to increase to 304,500 tons. During calendar 2000 and fiscal 1999, we were
operating at approximately 78% and 77%, respectively, of our structural
capacity.
The following table shows our industrial product shipments in tons, net sales
and as a percentage of overall net sales measured in dollars:
Industrial Products
Net Sales % of
Tons (000's) Net Sales
---------------------------------------
MAVERICK
Year ended December 31, 2000 157,080 71,422 23.1%
Three months ended December 31, 1999 40,351 17,620 25.2%
Year ended September 30, 1999 148,275 64,822 38.9%
Year ended September 30, 1998 164,973 80,565 30.4%
PRUDENTIAL
Year ended December 31, 2000 41,004 19,337 7.7%
Year ended December 31, 1999 38,133 17,507 12.3%
Year ended December 31, 1998 21,291 11,425 9.6%
The new large diameter facility in Hickman, Arkansas will increase the size
range of our structural tube and standard pipe offerings, thus allowing us to
market a broader line of products for industrial applications. We expect that
the new large diameter facility will add an additional 100,000 tons in
structural and standard pipe capacity. As a result of this new facility, we
expect to gain additional complementary sales by offering larger sizes, while
limiting the amount of additional expenses. This new facility allows us to
market ourselves as a broad line producer of structural tubing and standard
pipe.
Marketing
The structural tubing and standard pipe markets are somewhat regional in nature,
primarily because order sizes are smaller and lead-time requirements are shorter
than for oil country tubular goods. We currently sell principally to
distributors, but since 1997, we significantly increased our sales to large
end-user customers. As in the case of oil country tubular goods, our marketing
strategy emphasizes delivering competitively priced, quality products and
providing a high level of service to our customers. In addition, we expect our
marketing ability will be enhanced by the addition of larger diameter pipe and
tubing that we will produce upon completion of our large diameter facility.
Because the application of structural tubing and standard pipe products is
diverse, and a short lead-time is required for customer satisfaction, we
maintain inventory levels, in terms of months of supply, comparable to those for
oil country tubular goods. This finished goods inventory will consist of a
larger number of items than in the case of oil country tubular goods. We use
experienced manufacturing representatives in our sales efforts.
As of December 31, 2000 and September 30, 1999, our backlog of orders for
structural tubing and standard pipe were $9.0 million and $8.5 million,
respectively. All of the backlog orders as of December 31, 2000 are expected to
be filled by the end of calendar 2001. We do not consider any of our backlog
orders to be firm as they may generally be cancelled without penalty. Our
backlog orders as of any particular date may not be indicative of our actual
operating results for any fiscal period. We cannot give any assurance that the
amount of backlog at any given time ultimately will be realized.
Manufacturing
We are currently producing structural square and rectangular shaped tubing
products in our structural tube facilities located in Hickman, Arkansas,
Longview, Washington and in Calgary, Alberta. We are also currently producing
structural round tubing products and standard pipe at our Hickman, Arkansas and
Conroe, Texas facilities. We began production of larger sized structural tubing
and standard pipe at our large diameter facility in March 2001.
Based upon historical product relationships and our assumptions about the U.S.
market, we estimate that the sizes of structural tubing products we currently
are capable of manufacturing account for 85% of the domestic tonnage of all
sizes of domestic structural tubing products consumed. Similarly, after
completing the new large diameter facility, we estimate that we should be
capable of manufacturing sizes that account for more than 97% of domestic
tonnage consumed.
We believe that the types of standard pipe products we are capable of
manufacturing account for approximately 25% of the domestic tonnage of all types
of the U.S. standard pipe products consumed. After completing the new large
diameter facility, we expect to be capable of manufacturing more than 41% of the
domestic tonnage of all sizes of U.S. products consumed.
Consistent with our manufacturing strategy for oil country tubular goods
production, we believe we are a low-cost, high-volume producer of quality
structural tubing and standard pipe products. We believe that the application of
our efficient manufacturing process originally developed for the production of
oil country tubular goods, the labor costs and the strategic location of our
facilities provide a conversion cost advantage relative to the majority of
existing domestic structural tubing and standard pipe manufacturers.
During calendar 2000, fiscal 1999 and fiscal 1998, we spent $1,384,000,
$1,500,000 and $722,000, respectively, on additional equipment at our industrial
facility in Hickman, Arkansas. Our capital budget for our industrial facility in
Hickman, Arkansas for calendar 2001 is $1.3 million. We expect these capital
expenditures to result in manufacturing cost savings and quality improvements.
Capital expenditures related to our facilities in Longview, Washington and
Calgary, Alberta are included in the energy pipe industry section. Although the
Longview, Washington and Calgary, Alberta facilities manufacture industrial
products, these facilities are primarily energy product focused and only produce
industrial products to fill out mill capacity.
Competition
Although a significant market for structural tubing is located within a 400-mile
radius of our Hickman structural facility, no other major structural tubing
facility is currently located within this area. Non-domestic competitors,
primarily from Canada, represented 31%, 32% and 23% of total domestic sales of
structural tubing in calendar years 2000, 1999 and 1998, respectively. We
compete primarily against several domestic and numerous foreign producers of
structural tubing. Our more significant structural tube competitors are Pinkert
Industrial Group LLC., LTV Copperweld, Bull Moose Tube Corporation, Hanna Steel
Corporation, Atlas Tube Inc., Independence Tube Corporation and Ex-L-Tube, Inc.
A significant market for standard pipe also exists. Foreign competition has had
a large presence in the standard pipe market. Foreign competition represented
approximately 39%, 30% and 31% of total domestic sales of standard pipe in
calendar years 2000, 1999 and 1998, respectively. Our more significant standard
pipe competitors are Wheatland Tube Company, Armco, Inc., Sawhill Tubular
Division, Laclede Steel Company and IPSCO Tubulars, Inc.
We believe that the principal competitive factors affecting our structural
tubing and standard pipe businesses are price, product availability, delivery
and service.
We believe we experience seasonal fluctuations in demand for our industrial
products. However, the timing of such fluctuations may differ from fluctuations
experienced in the oil country tubular goods market.
The Cold Drawn Tubing Market
General
The cold drawn tubing market is made up of mechanical or pressure tubing used
for applications that require closer tolerances and/or a better surface finish
than ordinary electrical resistance welded or seamless tubing. The following
table describes some of these applications:
Industrial Uses Oilfield Uses Consumer Uses
- --------------------------------------------------------------------------------
Hydraulic, pneumatic Mud pumps Motorcycle forks
and gas cylinder stock
Precision pumps Exercise equipment
Power takeoff and auger
shafts Perforating tubes Office furniture
Electric motor housings Subsurface pump shells Playground equipment
Conveyor rollers Coupling stock Bicycles
Axles Boat trailers
Cold drawn tubing starts with either a plain-end electric resistance welded or
seamless tube. The source tube is then pulled through a die and over a mandrel
to create precise outside and inside diameters or wall tolerances and to create
a smoother finish.
The cold drawn tubing market is driven primarily by the general economy. Other
factors include agricultural prices and infrastructure construction due to the
large quantity of cold drawn tubing consumed in cylinder manufacturing for
agriculture and construction machinery. We believe the market size is currently
about 516,000 tons per year. Imports have typically satisfied about 5% of total
consumption.
The market is made up of three segments based upon outside diameter and wall
thickness of the tube, as follows:
Outside Diameter Wall Thickness
- --------------------------------------------------------------------------------
Group 1 through 4" through .134"
Group 2 4" through 7 1/2" through .320"
Group 3 above 7 1/2" all
Our Products
Maverick primarily manufacture and sell cold drawn tubing products in the Group
2 and Group 3 market segments as shown above.
The following table shows our drawn mechanical tubing (DOM) shipments in tons,
net sales and as a percentage of overall sales measured in dollars:
DOM
Net Sales % of
Tons (000's) Net Sales
-------------------------------------
MAVERICK
Year ended December 31, 2000 14,341 15,278 4.9%
Three months ended December 31, 1999 2,365 2,736 3.9%
Marketing
Our current customer base for cold drawn tubing is primarily made up of service
centers. Generally, because cold drawn tubing products are components of larger
products, order sizes range from 5,000 to 10,000 pounds, which is smaller than
our typical order sizes for structural tubing or oil country tubular goods. We
almost always manufacture cold drawn tubing products to order resulting in a
finished goods inventory that is smaller than our finished goods inventory of
structural or energy products. Currently, the industry lead-time for cold drawn
tubing is approximately six to seven weeks.
As of December 31, 2000 and September 30, 1999, our backlog of cold drawn tubing
orders were approximately $1,163,000 and $900,000, respectively. We do not
consider any of our backlog firm. Our backlog orders as of any particular date
may not be indicative of our actual operating results for any period. We cannot
give any assurance that the amount of backlog at any given time ultimately will
be realized.
Manufacturing
In fiscal 1998, we acquired the assets used in the production of cold drawn
tubular products at our production facility in Beaver Falls, Pennsylvania. This
facility began production during the first quarter of fiscal 1999. We expect to
supply approximately 75% of this facility's raw material requirements from our
other production facilities. We purchase the remainder from outside sources,
which include both smaller diameter pipe with heavier walls and seamless pipe.
During calendar 2000 and fiscal 1999, we spent approximately $2.7 million each
year on additional equipment for the Beaver Falls facility. Our capital budget
for calendar 2001 is $800,000. We expect these capital expenditures to result in
manufacturing cost savings and quality improvements. We currently have
approximately 75,000 tons of drawing capacity annually.
Competition
A significant market for drawn tubing is located within a 500-mile radius of the
Pennsylvania facility. Our primary competitors in this market are Alliance
Midwest, Copperweld, Lone Star Steel, LTV, Metal Matic, Pacific Tube, Plymouth
Tube, Pittsburgh Tube, Vision Metals and Webco. We believe that the principal
competitive factors affecting our drawn tubular products are price, quality,
product availability, delivery and service.
Raw Materials
We make all steel purchases at either our headquarters in Chesterfield, Missouri
or our Canadian headquarters in Calgary, Alberta in order to optimize pricing,
quality, availability and delivery of our raw materials. During 2000, we
consumed approximately 2.0% of the total amount of hot rolled steel produced in
North America. Accordingly, we believe that we are generally considered to be a
significant purchaser by our steel suppliers. We maintain favorable working
relationships with our steel suppliers and believe that we are treated favorably
with respect to volume allocations and deliveries. We presently purchase the
majority of our steel from several suppliers, with approximately 72% of
consolidated purchases made from Nucor Corporation, IPSCO Steel, Inc., Dofasco,
Inc. and Salzgitter Trade, Inc. Nucor's mill in Hickman, Arkansas is directly
connected by rail to our Hickman facilities, thus eliminating our raw material
freight costs for raw materials purchased from Nucor. Unlike our Hickman
facilities our facilities in Conroe, Texas, Longview, Washington and Calgary,
Alberta are not directly connected by rail to our primary steel suppliers. To
date, we have not experienced any significant disruption in our supply of raw
materials.
Employees
As of December 31, 2000, we employed 2,079 persons, of whom 697 were Prudential
employees and 1,382 were Maverick employees. A union represents approximately
68% of Prudential employees. We consider our employee relations to be excellent.
ITEM 2
PROPERTIES
We lease approximately 40,000 square feet of office space in Chesterfield,
Missouri for our executive offices under a lease, which expires in 2008. We use
180 acres of our 200-acre site in Hickman, Arkansas for three facilities. A
315,000 square foot oil country tubular goods manufacturing plant and storage
space utilizes 55 acres. A 275,000 square foot structural tube manufacturing
plant is located adjacent to the existing oil country tubular goods facility.
Approximately 120,000 square feet of this facility is utilized for manufacturing
with the remainder used for inventory and material storage and shipping. We
occupy both facilities under separate leases, each providing us an option to
purchase, which is exercisable on the expiration dates of the leases. The
expiration dates are August 1, 2007 for the oil country tubular goods facility
and February 1, 2004 for the structural tube facility. A 300,000 square foot
large diameter manufacturing plant and storage space utilizes 50 acres. This new
large diameter facility is owned by the Company and will produce both oil
country tubular goods and structural tubing. Approximately 20 acres remain in
Hickman, Arkansas for future expansion. A 30,000 square foot facility is in the
process of being constructed adjacent to the large diameter facility, which will
house the epoxy coating equipment for Maverick's line pipe products. This
facility is under lease to an independent third party who will coat the line
pipe. We also own 117 acres and a 244,000 square foot manufacturing facility
located in Conroe, Texas. Of the 117 acres, approximately 30 acres is used for
manufacturing and storage and 60 acres is available for future expansion. We
lease a 21-acre site and a 370,000 square foot manufacturing facility in Beaver
Falls, Pennsylvania for the production of cold drawn tubing, with an option to
purchase, which is exercisable on September 17, 2001, which is the expiration
date of the lease. Each manufacturing facility operated by Maverick is served by
truck, has its own rail spur, other than the Beaver Falls facility, and is
within close proximity of barge facilities.
We lease approximately 16,800 square feet of office space in Calgary, Alberta
under a lease, which expires in 2003. We use 82 acres of our 90-acre site in
Calgary, Alberta for three energy/industrial production facilities and three oil
country tubular goods finishing facilities. The energy/industrial production
facilities are located in approximately 210,000 square feet in two separate
buildings. The oil country tubular finishing facilities are located in three
separate buildings, which utilize approximately 81,000 square feet of space.
Adjacent to these buildings is a 94,500 square foot industrial storage facility.
Prudential owns these facilities and has approximately 8 acres available for
future expansion. We also own approximately 35 acres in Longview, Washington
with 8 acres available for future expansion. This site has a 51,000 square feet
manufacturing facility for energy and industrial products. Adjacent to this
building is a 100,000 square foot industrial products storage facility and a
12,000 square foot steel slitting facility. Prudential also owns these
facilities. Each manufacturing facility operated by Prudential is served by
truck and has its own rail spur.
We believe each of our facilities is in good condition, is adequately insured
and is suitable for our planned level of operations.
ITEM 3
LEGAL PROCEEDINGS
General. From time to time, we are involved in litigation relating to claims
arising out of our operations in the normal course of our business. We maintain
insurance coverage against potential claims in an amount, which we believe to be
adequate. We believe that we are not presently a party to any litigation in
which the outcome would have a material adverse effect on our business or
operations.
Environmental Matters. We are subject to federal, state, provincial and local
environmental laws and regulations concerning, among other things, waste water
disposal and air emissions. We believe we are currently in compliance with all
applicable environmental regulations.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted, during the fourth quarter of calendar 2000
covered by this report, to a vote of our security holders through the
solicitation of proxies or otherwise.
ITEM 4A
EXECUTIVE OFFICERS
Name Age Title
- --------------------------------------------------------------------------------
Gregg M. Eisenberg 50 Chairman of the Board, President and
Chief Executive Officer
Pamela G. Boone 37 Vice President - Finance and
Administration, Treasurer, Secretary
and Chief Financial Officer
T. Scott Evans 53 Vice President - Commercial Operations
Sudhakar Kanthamneni 53 Vice President - Manufacturing and Technology
Rick W. Preckel 40 Vice President - Canadian Operations
Set forth below are descriptions of the backgrounds of our executive officers
and their principal occupations for at least the last five years:
Gregg M. Eisenberg has served as Chairman of the Board since February 1996. He
has served as President, Chief Executive Officer and a director of the Company
since 1988. Prior to joining the Company in 1983, he was employed with Central
Steel Tube Company for six years. He is a former director and past chairman of
the Committee on Pipe and Tube Imports.
Pamela G. Boone has served as Vice President - Finance and Administration,
Treasurer, Secretary and Chief Financial Officer since March 2001. From January
1997 to March 2001, Ms. Boone served as Corporate Controller. From 1994 until
she became Corporate Controller, she served as the Company's budget and tax
accounting manager. Before joining the Company in 1994, she was employed by
Ernst & Young, LLP, where she was a Senior Manager.
T. Scott Evans has served as Vice President - Commercial Operations of the
Company since September 1992. Prior to joining the Company in 1988 as General
Sales Manager, he was employed with Wolverine Tube Corporation. From January
1981 to June 1986, Mr. Evans was employed with Republic Steel Corporation.
Sudhakar Kanthamneni has served as Vice President - Manufacturing and Technology
of the Company since August 1992. From May 1991 to August 1992, Mr. Kanthamneni
served as the Company's Vice President - Manufacturing. Prior to joining the
Company in 1987, he was employed with Central Steel Tube Company for ten years.
Rick Preckel has served as Vice President - Canadian Operations since March
2001. From 1994 to March 2001, Mr. Preckel was the Company's General Manager of
Marketing Services. Mr. Preckel joined the Company in 1987 and served as the
Company's Manager of Planning and Budgets, Controller of the Texas facility and
Accounting Manager.
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In connection with our acquisition of Prudential, Maverick, directly or
indirectly, issued the following securities on September 22, 2000:
o Maverick issued 15,813,088 shares of exchangeable shares to all of the
Prudential shareholders in exchange for all of the issued and
outstanding common shares of Prudential. No other proceeds were
derived from the issuance of the exchangeable shares. The exchangeable
shares were issued by Maverick Tube (Canada) Inc., a wholly-owned
Canadian subsidiary of Maverick, pursuant to the exemptive provisions
of Section 3(a)(10) of the Securities Act of 1933, as amended.
o Maverick issued one share of our Series II - Special Voting Stock, a
class of preferred stock, to CIBC Mellon Trust Company as trustee
pursuant to the Voting and Exchange Trust Agreement. The one share of
Special Voting Stock permits the exchangeable shareholders to vote,
through the trustee, at meetings of our common stockholders. No
proceeds were derived from the issuance of the one share of Special
Voting Stock. Maverick issued the one share of Special Voting Stock
pursuant to the exemptive provisions of Section 4(2) of the Securities
Act of 1933, as amended.
o The other information required by Item 5 is set forth under the
caption "Market For Our Common Equity and Related Stockholder Matters"
(page 41) of our 2000 Annual Report and incorporated herein by
reference.
ITEM 6
SELECTED FINANCIAL DATA
The information required by Item 6 is set forth under the caption "Historical
Financial Information" (page 40) of our 2000 Annual Report and incorporated
herein by reference.
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required by Item 7 is set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (pages
18 through 25) of our 2000 Annual Report and incorporated herein by reference.
ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's reported cash flows related to its Canadian operations is based on
cash flows measured in Canadian dollars converted to the U.S. dollar equivalent
based on published exchange rates for the period reported. The Company believes
its current risk exposure to the exchange rate movements, based on net cash
flows, to be immaterial.
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is set forth under the caption "Consolidated
Financial Statements", the notes thereto and the Report of Ernst & Young, LLP
(pages 25 through 37) of our 2000 Annual Report and incorporated herein by
reference.
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
PART III
ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is set forth under the caption "Notice of
Annual Meeting of Stockholders " (pages 3-4) of our definitive proxy statement
and incorporated herein by reference. Our definitive proxy statement is being
filed with the Securities and Exchange Commission within 120 days of the end of
our most recent fiscal year.
ITEM 11
EXECUTIVE COMPENSATION
The information required by Item 11 is set forth under the caption "Notice of
Annual Meeting of Stockholders " (pages 5-6) of our definitive proxy statement
and incorporated herein by reference. Our definitive proxy statement is being
filed with the Securities and Exchange Commission within 120 days of the end of
our most recent fiscal year.
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is set forth under the caption "Notice of
Annual Meeting of Stockholders " (page 2) of our definitive proxy statement and
incorporated herein by reference. Our definitive proxy statement is being filed
with the Securities and Exchange Commission within 120 days of the end of our
most recent fiscal year.
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is set forth under the caption "Notice of
Annual Meeting of Stockholders " (pages 8-9) of our definitive proxy statement
and incorporated herein by reference. Our definitive proxy statement is being
filed with the Securities and Exchange Commission within 120 days of the end of
our most recent fiscal year.
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. 1. Financial Statements
The consolidated financial statements of the Company, including the notes
thereto, required in response to this item as set forth in response to Part
II, Item 8 of this Annual Report are incorporated herein by reference to
the Company's 2000 Annual Report and are filed herewith as Exhibit 13.
Report of Independent Auditors (page 25).
Consolidated Balance Sheets as of December 31, 2000 and September 30, 1999
(page 26).
Consolidated Statements of Operations for the year ended December 31, 2000,
the three months ended December 31, 1999 and the years ended September 30,
1999 and 1998 (page 27).
Consolidated Statements of Stockholders' Equity for the year ended December
31, 2000, the three months ended December 31, 1999 and the years ended
September 30, 1999 and 1998 (page 28).
Consolidated Statements of Cash Flows for the year ended December 31, 2000,
the three months ended December 31, 1999 and the years ended September 30,
1999 and 1998 (page 29).
Notes to Consolidated Financial Statements as of December 31, 2000 (pages
30-37).
2. Financial Statement Schedule
The following consolidated financial statement schedule of the Company is
included with this Annual Report on Form 10-K:
Schedule II Valuation and Qualifying Accounts for the year ended December
31, 2000, the three months ended December 31, 1999 and the years ended
September 30, 1999 and 1998.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
3. Exhibits:
The exhibits listed on the Exhibit Index of this Annual Report are
incorporated herein by reference or filed herewith as required by item 601
of Regulation S-K (each management contract or compensatory plan or
arrangement listed therein is identified).
b. 1. Reports on Form 8-K:
The following items were filed during the fourth quarter of the
Registrant's calendar year ended December 31, 2000:
o The Company filed a Form 8-K dated October 25, 2000 which includes an
Analyst Model.
o The Company filed a Form 8-K/A dated October 25, 2000, which includes
an Analyst Model (including information for the year ended 1997).
o The Company filed a Form 8-K dated November 8, 2000 which includes an
Investor Slide Presentation.
o The Company filed a Form 8-K dated December 5, 2000 which includes the
restated financial statements after the combination of Maverick Tube
Corporation and Prudential Steel Ltd. The Form 8-K also disclosed the
resignation of Barry Pearl and the consolidated net sales and net
income of the combined company for the period October 1, 2000 through
October 31, 2000.
Maverick Tube Corporation
and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
(In thousands)
Additions
-----------------------------
Balance at Charged to Charged
beginning cost and to other Deductions Balance at
Classification of year expenses accounts describe end of year
- -----------------------------------------------------------------------------------------------------------------
Year ended September 30, 1998:
Deducted from asset accounts:
Accounts receivable allowances $ 2,137 $ 3 $ -- $ 116 (1) $ 2,024
Valuation allowance for deferred
income taxes $ -- $ -- $ -- $ -- $ --
Year ended September 30, 1999:
Deducted from asset account:
Accounts receivable allowances $ 2,024 $ 1,047 $ -- $ 1,490 (1) $ 1,581
Valuation allowance for deferred
income taxes $ -- $ -- $ -- $ 1,717 (2) $ 1,717
Three months ended December 31, 1999:
Deducted from asset account:
Accounts receivable allowances $ 1,581 $ 68 $ -- $ 129 (1) $ 1,520
Valuation allowance for deferred
income taxes $ 1,717 $ -- $ -- $ -- $ 1,717
Year ended December 31, 2000:
Deducted from asset account:
Accounts receivable allowances $ 1,520 $ 979 $ -- $ 358 (1) $ 2,141
Valuation allowance for deferred
income taxes $ 1,717 $ -- $ -- $ 660 (2) $ 2,377
(1) Uncollectible accounts written off, net of recoveries.
(2) Resulted from an additional net operating loss carryforward generated,
which was not valued for financial statement purposes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
March 23, 2001 /s/ Gregg M. Eisenberg
------------------------------------------
Gregg M. Eisenberg, Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 23, 2001 /s/ Gregg M. Eisenberg
------------------------------------------
Gregg M. Eisenberg, Chairman, President
and Chief Executive Officer and Director
(Principal Executive Officer)
March 23, 2001 /s/ Pamela G. Boone
------------------------------------------
Pamela G. Boone, Vice President - Finance
and Administration
(Principal Financial and Accounting
Officer)
March 23, 2001 /s/ William E. Macaulay
------------------------------------------
William E. Macaulay, Director
March 23, 2001 /s/ C. Robert Bunch
------------------------------------------
C. Robert Bunch, Director
March 23, 2001 /s/ C. Adams Moore
------------------------------------------
C. Adams Moore, Director
March 23, 2001
------------------------------------------
David H. Kennedy, Director
March 23, 2001 /s/ Wayne P. Mang
------------------------------------------
Wayne P. Mang, Director
March 23, 2001 /s/ J. Donald Wilson
------------------------------------------
J. Donald Wilson, Director
March 23, 2001 /s/ Norman W. Robertson
------------------------------------------
Norman W. Robertson, Director
March 23, 2001 /s/ Rhys T. Eyton
------------------------------------------
Rhys T. Eyton, Director
March 23, 2001
------------------------------------------
Dennis G. Flanagan, Director
March 23, 2001 /s/ Donald A. Pether
------------------------------------------
Donald A. Pether, Director
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.1 Combination Agreement by and between the Registrant and Prudential Steel
Ltd. dated effective as of June 11, 2000, incorporated herein by reference
to Annex B to our definitive proxy statement filed on August 11, 2000,
(File No. 001-10651) ("2000 Proxy Statement").
2.2 Form of Plan of Arrangement involving and affecting Prudential Steel Ltd.
and the holders of its common shares and options, incorporated herein by
reference to Annex D to our 2000 Proxy Statement.
3.1 Amended and Restated Certificate of Incorporation of the registrant, as
amended, incorporated herein by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 2000.
3.2 Amended and Restated Bylaws of the Registrant, as amended, incorporated
herein by reference to Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 30, 1998 ( the "1998 Form
10-K").
4.1 Form of Amended and Restated Shareholder Rights Agreement, dated as of
September 22, 2000 between the Registrant and Harris Trust and Savings Bank
(which includes as Exhibit A thereto the Form of Preferred Stock Rights
Certificate) incorporated herein by reference to Exhibit (5) of the
Registrant's Form 8-A/A filed on September 26, 2000.
4.2 Form of Stock Certificate for Common Stock, incorporated herein by
reference to Exhibit 4.1 to the Registrant's Registration Statement on Form
S-1,( File No. 33-37363).
4.3 Form of Stock Certificate for Series II or Special Voting Preferred Stock,
filed herewith.
4.4 Form of Share Capital and other Provisions to be Included in the Articles
of Incorporation of Maverick Tube (Canada) Inc., incorporated herein by
reference to Annex E to our 2000 Proxy Statement.
4.5 Form of Support Agreement by and between the Registrant and Maverick Tube
(Canada), Inc., incorporated herein by reference to Annex F to our 2000
Proxy Statement.
4.6 Form of Voting and Exchange Trust Agreement by and between the Registrant,
Maverick Tube (Canada), Inc. and CIBC Mellon Trust Company, incorporated
herein by reference to Annex G to our 2000 Proxy Statement.
10.1 Lease and Agreement dated July 24, 1992, by and between the Registrant and
the Arkansas Development Finance Authority (the "Authority"), incorporated
herein by reference to Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 30, 1992.
10.2*Maverick Tube Corporation Amended and Restated 1990 Stock Option Plan,
incorporated herein by reference to Exhibit 10.21 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 30, 1991.
10.3*Maverick Tube Corporation Savings for Retirement Plan effective on
February 15, 1988, as amended, incorporated herein by reference to Exhibit
10.11 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993.
10.4 Lease Agreement dated as of March 1, 1994, between the Authority, as
lessor, and the Registrant as lessee, related to the Registrant's Arkansas
Structural Facility, incorporated herein by reference to Exhibit 10.14 to
the Registrant's Registration Statement on Form S-2,(File number 33-80096.)
10.5 First Supplemental Trust Indenture to Lease Agreement between the
Authority, as lessor and the Registrant, as lessee relating to the
Registrant's Arkansas Structural Facility, dated July 1, 1994, incorporated
herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1994.
10.6*The Maverick Tube Corporation 1994 Stock Option Plan, incorporated herein
by reference to Exhibit 10.17 of the Registrants Annual Report on Form 10-K
for the fiscal year ended September 30. 1994 (the "1994 Form 10-K").
10.7*The Maverick Tube Corporation Director Stock Option Plan, incorporated
herein by reference to Exhibit 10.18 of the 1994 Form 10-K.
10.8*Form of Deferred Compensation Agreement between the Registrant and Messrs.
Gregg M. Eisenberg, T. Scott Evans and Sudhakar Kanthamneni dated October
1, 1995, incorporated herein by reference to Exhibit 10.22 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended September
30, 1996 (the "1996 Form 10-K").
10.9*Form of Severance Agreement dated December 10, 1998, by and among the
Registrant and Gregg M. Eisenberg, Sudhakar Kanthamneni and T. Scott Evans,
incorporated herein by reference to Exhibit 10.16 of the 1998 Form 10-K.
10.10Amendment #1 to the Maverick Tube Corporation Director Stock Option Plan,
incorporated herein by reference to Exhibit 10.24 of the 1996 Form 10-K.
10.11*Amendment #1 to the Maverick Tube Corporation 1994 Stock Option Plan,
incorporated herein by reference to Exhibit 10.21 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 30, 1997.
10.12* Employment Agreement of Barry R. Pearl, incorporated herein by reference
to Exhibit 10 of the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1998.
10.13Agreement of Limited Partnership between the Registrant, Maverick
Investment Corporation and Maverick Tube L.P., incorporated herein by
reference to Exhibit 10.13 of the 1998 Form 10-K.
10.14* The Registrant's Amended and Restated Prudential Steel Ltd. Stock Option
Plan incorporated herein by reference to Exhibit 99.1 of the Registrant's
Form S-8 filed on September 27, 2000 (File No. 335-46740).
10.15* Amended and Restated Prudential Steel Ltd. Pension Plan for Salaried
Employees restated effective January 1, 1992 and including amendments to
January 1, 1998, filed herewith (in Canadian Dollars).
10.16Amended and Restated Secured Credit Agreement among the Registrant and
Harris Trust and Savings Bank as Agent dated as of December 28, 2000, filed
herewith.
10.17Credit Facility between Prudential Steel Ltd. and Royal Bank of Canada
dated as of December 27, 2000, filed herewith (in Canadian Dollars).
10.18Lease and Agreement dated January 10, 2001, by and between the Registrant
and Commercial Resins Company, Inc., filed herewith.
10.19* Prudential Steel Ltd. Supplemental Employees' Retirement Plan dated as of
January 1, 1994, filed herewith.
10.20* Change of Control Agreement dated April 28, 1998 by and between
Prudential Steel Ltd. and J. D. Wilson, filed herewith (in Canadian
Dollars).
10.21Collective Bargaining Agreement between Prudential Steel Ltd. and the
United Steelworkers of America, Local 7226, effective as of January 1, 1998
through December 31, 2000, filed herewith (in Canadian Dollars).
13 Portions of Registrant's 2000 Annual Report to Stockholders which are
incorporated by reference herein, filed herewith.
21 Subsidiaries of the Registrant, filed herewith.
23.1 Consent of Ernst & Young LLP, independent auditors, filed herewith.
99.1 Risk Factors, filed herewith.
* Management contract or compensatory plan or arrangement.