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, 2001.
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
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of 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)
As of March 4, 2002, there were 32,812,036 shares of Registrant's common stock
(including 3,734,965 shares of exchangeable shares) were outstanding. The
approximate market value of voting stock held by non-affiliates of the
Registrant (including exchangeable shares) was $464,218,063 (based upon the
closing price for shares of the Registrant's common stock as reported on the New
York Stock Exchange on that date).
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for its calendar
year ended December 31, 2001 are incorporated by reference into Part I, Part II
and Part IV of this Annual Report on Form 10-K where indicated.
(2) Portions of the Registrant's Proxy Statement relating to the Registrant's
2002 Annual Meeting of Shareholders, to be held on May 2, 2002, are incorporated
by reference into Part III of this Form 10-K where indicated.
1
MAVERICK TUBE CORPORATION
INDEX
PART I.
Item 1. Business
General
Risk Factors
The Products We Produce
Our Business Strategy
The Energy Pipe Industry
Industrial Industry
Discontinued Operations
Raw Materials
Employees
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 Disclosure 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
2
PART I
ITEM 1 Business
GENERAL
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.
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 North American producer of tubular steel products used in
energy and industrial applications. Maverick is the largest producer of oil
country tubular goods (OCTG) and line pipe products for use in newly drilled oil
and gas wells and for transporting oil and natural gas. These products are
primarily sold to distributors in the United States and Canada. Maverick will be
expanding into coiled tubing products with its acquisition of Precision Tube
Technology, Inc. Coiled tubing products are primarily used in maintaining
existing wells but are also used in completing new wells. These products are
sold to service companies throughout North America and internationally. OCTG,
line pipe and coiled tubing will comprise our energy product line. We also
manufacture structural tubing (hollow structural sections, or HSS), standard
pipe and pipe piling. These products are sold to service centers, fabricators
and end-users and comprise our industrial product line. During calendar 2001,
energy products accounted for approximately 85% 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.
RISK FACTORS
You should carefully consider the following risk factors and other information
contained or incorporated by reference in this annual report before purchasing
shares of our common stock. Investing in our common stock involves risk. If any
of the events described in the following risk factors occur, our business and
financial condition could be seriously harmed. In addition, the trading price of
our common stock could decline due to the occurrence of any of such events, and
you may lose all or part of your investment.
Fluctuations in oil and natural gas prices could adversely affect us because we
sell a significant portion of our products to the energy industry.
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Our principal products consist of oil country tubular goods and line pipe. Sales
of these products to the energy industry constitute the most significant source
of our revenue. In fact, revenues from the sale of oil country tubular goods and
line pipe to the energy industry accounted for approximately 85% and 80% of our
revenues for the years ended December 31, 2001 and 2000, respectively. Demand
for these products depends primarily upon the number of oil and natural gas
wells being drilled, completed and worked over in the United States and Canada
and the depth and drilling conditions of these wells. The level of these
activities is primarily dependent on current and anticipated oil and natural gas
prices. Many factors, such as the supply and demand for oil and natural gas,
general economic conditions and global weather patterns affect these prices. As
a result, future levels and volatility of oil and natural gas prices are
uncertain.
3
The level of imports of oil country tubular goods into the United States and
Canadian markets, which has been reduced by trade relief now in place, will
impact demand and pricing for our products.
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The level of imports of oil country tubular goods, which has varied
significantly over time, affects the United States and Canadian oil country
tubular goods markets. High levels of imports reduce the volume sold by domestic
producers and tend to suppress selling prices, both of which would have an
adverse impact on our business. We believe that United States and Canadian
import levels are affected by, among other things:
o United States, Canadian and overall world demand for oil country tubular
goods;
o the trade practices of and government subsidies to foreign producers and
o the presence or absence of antidumping and countervailing duty orders.
Antidumping and countervailing duty orders require special duties to be imposed
in amounts designed to offset unfair pricing and government subsidization,
respectively. In the United States, once an order is in place, foreign
producers, importers, domestic producers and other parties may request an
"administrative review" on a yearly basis to determine the duty rates to be
applied to imports during subsequent years, as well as the duty deposit rates
for future imports from the companies covered by the review. In addition, a
company that did not ship to the United States during the original period
examined by the United States government may request a "new shipper review" to
obtain its own duty rate on an expedited basis.
United States antidumping and countervailing duty orders may be revoked as a
result of periodic "sunset reviews." An individual importer may also obtain
revocation application only to itself under certain circumstances. In June 2001,
the United States government completed sunset reviews of the orders covering
Argentina, Italy, Japan, Korea and Mexico and kept those orders in place.
However, those orders remain subject to future periodic sunset reviews. If the
orders covering imports from Argentina, Italy, Japan, Korea and Mexico are
revoked in full or in part or the duty rates lowered, we could be exposed to
increased competition from imports that could have a material adverse effect on
our United States business.
Since 1986, imports of certain oil country tubular goods into Canada from the
United States, Korea, Japan and Germany have been restricted by the existence of
antidumping and countervailing duty orders. Following a sunset review process,
the orders, to the extent applicable to imports of carbon grade casing from the
United States and Korea into Canada, expired in June 2001. As a result, the
requirement that an importer obtain "normal values" for these products was not
continued. The expiration of this ruling is expected to result in downward
pressure on the selling price of these products in Canada.
The volatility and cyclical nature of steel prices may adversely affect our
business.
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Purchased steel currently represents slightly more than two-thirds of our cost
of goods sold. As a result, the steel industry, which is highly volatile and
cyclical in nature, affects our business both positively and negatively.
Numerous factors, most of which are beyond our control, drive the cycles of the
steel industry and influence steel prices. Some of these factors are:
o general economic conditions; o industry capacity utilization;
o import duties and other trade restrictions and
o currency exchange rates.
Changes in steel prices can affect the pricing and gross margin levels of our
products. With respect to industrial products, we intend to seek to recover any
increase in steel costs by attempting to increase the price of our products.
However, increases in the prices of our products often do not fully compensate
for
4
steel price increases and generally lag several months behind increases in steel
prices. Prices of energy products move in conjunction with demand for those
products and are not necessarily related to changes in steel costs. This could
result in an inability to recover steel cost increases on those products during
poor energy market conditions. Consequently, we typically have a limited ability
to recover increases in steel costs.
In November 2001, the International Trade Commission (ITC) recommended to the
President of the United States that a Section 201 case for steel and all steel
products, with the exception of oil country tubular goods products, be supported
with a wide scale program of quotas and duties. The President's remedy plan
released on March 5, 2002, provides a three year program of quotas and tariffs
covering a wide range of imported steel products. Of specific interest to the
Company's business, imported flat rolled products including hot rolled steel
coils are subject to a 30% tariff in year one, a 24% tariff in year two and an
18% tariff in year three. This plan will likely result in an increase in the
cost of foreign imported hot rolled steel and steel products. This, in turn,
could significantly increase the cost of our purchased steel. We have already
experienced some steel price increases that we believe were caused by the ITC's
recommendation. For example, our major supplier of steel increased our steel
prices by $20 per ton in January 2002 and plans to implement another price
increase in April 2002. The plan would not affect imports of oil country tubular
goods. Accordingly, we would expect additional competition from foreign imports
of oil country tubular goods products in the United States. We, together with
other domestic oil country tubular goods providers, are presently considering
pursuing similar relief for oil country tubular goods. We cannot give any
assurance that we will be successful in obtaining such relief. Moreover, even if
we can obtain significant relief from foreign import competition, we would not
expect significant benefits from any relief for approximately nine months to one
year from the time we initially file a case with the ITC.
Industry inventory levels affect our sales and net income.
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Industry inventory levels of our products, particularly oil country tubular
goods, can change significantly from period to period. These changes can have a
direct adverse effect on the demand for new production of energy and industrial
products when customers draw from inventory rather than purchase new products.
We believe currently that industry-wide oil country tubular goods inventory is
moderately above normal levels in relation to current demand. Additionally,
months of supply of inventory, which defines the level of inventory in terms of
monthly consumption, also appears to be moderately above historical levels.
Material increases in months of supply of inventory can have an adverse impact
on us.
We may have difficulty integrating acquired businesses and may be exposed to
certain operational risks.
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We have agreed to purchase all of the capital stock of Precision Tube Holding
Corporation with the expectation that the stock purchase would result in certain
benefits, including entering into the coiled pipe market and increasing our
operational efficiencies. Achieving the benefits of this contemplated
acquisition and future acquisitions will depend upon the successful integration
of the acquired businesses into our existing operations. We cannot assure you
that we will be successful in integrating the businesses of Precision or of any
other business acquired by us in the future into our current businesses. The
integration risks associated with these acquisitions include, but are not
limited to:
o integrating the operations of newly acquired companies requires a
substantial amount of our management's attention;
o difficulties associated in assimilating the technology, including billing
and customer information systems and
o any significant loss of key personnel of Precision or of any future acquired
business could lead to disruption in the integration of the acquired
business.
5
We cannot assure you that we will be able to successfully overcome the risks
associated with our integration efforts with respect to Precision and future
acquisitions. There is a risk that the costs of integration could have a
material adverse effect on our operating results.
We regularly evaluate potential acquisition opportunities to support and
strengthen our business. We cannot be sure that we will be able to locate
suitable acquisition candidates, acquire candidates on acceptable terms or
integrate acquired businesses successfully. Future acquisitions may require us
to incur additional debt and contingent liabilities, which may materially and
adversely affect our business, operating results and financial condition.
We have limited information concerning Precision and it may have liabilities or
obligations that are not reflected in its historical financial statements.
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In connection with our proposed acquisition of Precision, we conducted a due
diligence review of information available to us regarding its business; however,
we have been unable to perform a complete review of the past activities and
financial performance of this company. Prior to our acquisition of the business,
Precision may have incurred contractual, financial or other obligations and
liabilities that may impact us in the future and that are not currently
reflected in its historical financial statements or otherwise known to us. While
we have received limited warranties with respect to these obligations and
liabilities from certain of Precision's selling stockholders, any such
obligation or liability could have a material adverse effect on our business,
financial condition and results of operations.
The operations of the end-users of our products expose us to potential product
liability claims.
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Drilling for, and the transmission of, oil and natural gas involve a variety of
risks, including risks relating to well failures, line pipe leaks and fires.
Actual or claimed defects in products, including our pipes and structural
tubing, could give rise to claims, liabilities, costs and expenses, relating to
loss of life, personal injury, property damage, damage to equipment and
facilities, pollution, inefficient heat recovery, loss of production or
suspension of operations. We maintain insurance coverage against potential
product liability claims in amounts that we believe to be adequate. However, in
the future we may incur product liability claims in excess of our insurance
coverage, or that is subject to substantial deductibles or incur uninsured
product liability costs. These liabilities and costs could have a material
adverse effect on our business, results of operations and financial condition.
Moreover, any claims made under our policies likely will cause our premiums to
increase, and we may not be able to maintain adequate insurance coverage levels
in the future.
Cold drawn tubular business discontinued operation.
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During the first quarter of 2001, we adopted a formal plan to sell the operating
assets of our cold drawn tubular, also known as DOM, business. The operating
results of this DOM business, including the provisions for loss on disposal and
operating losses, are estimated to be $11.2 million (after tax). The most
significant accounting estimate in this amount is the realizable value of the
machinery and equipment. We are proceeding with negotiations to sell the
facility, and we ultimately plan to sell or liquidate this business in the first
quarter of 2002. The final proceeds will be determined by either the sale or
liquidation.
The closure of our Longview facility may generate greater losses than
anticipated.
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As previously announced, we decided to close our Longview, Washington facility
and move most of that facility's production equipment to one of our existing
buildings in Hickman, Arkansas. We estimate a cost of approximately $8.1 million
in connection with this facility closure, which includes a provision to write
down certain property by $6.8 million based on an appraisal of its recovery
value of $6.0 million. We cannot give any assurance that we will find a buyer
for the property at the $6.0 million appraised value.
6
Our plan assumes that these proceeds, along with significant working capital
reductions, will fund additional capital expenditures and other cash costs
necessary to relocate the equipment to our existing facility in Hickman,
Arkansas. We also may face unanticipated expenditures that may reduce or
eliminate our projected annual savings of $3.0 million to $5.0 million.
Our plans for the new large diameter facility may not be successful.
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An important part of our growth strategy is and will continue to be our ability
to successfully expand our current product lines, offer new product lines and
enter new markets. We are devoting significant resources to this strategy. To
this end, we recently completed the construction of a new large diameter
facility to produce products with larger diameters than we manufactured in the
past. Operating the new facility may expose us to risks including:
o intense competition in the larger diameter product lines and
o potential unforeseen or higher than expected costs and operating
difficulties.
Any of these risks could adversely affect or prevent the success of the new
facility.
We depend on a few suppliers for a significant portion of our steel, and a loss
of one or more significant suppliers could affect our ability to produce our
products.
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In calendar year 2001, we purchased in excess of 93% of our steel for our United
States operations from four suppliers, and in excess of 94% of the steel for our
Canadian operations from two Canadian suppliers. The loss of any of these
suppliers or interruption of production at one or more of the suppliers could
have a material adverse effect on our business, financial condition and results
of operations.
We depend on a few distributors for a significant portion of our net sales of
oil country tubular goods, and a loss of one or more significant distributors
could affect our ability to sell our products.
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In 2001, our distributors, McJunkin Appalachian Oilfield Supply Company and
Sooner Pipe & Supply Corp. accounted for approximately 20% of our United States
net sales, and four other distributors accounted for approximately 53% of our
Canadian revenues. Many of these distributors are not bound to us by exclusive
distribution contracts and may offer products and services that compete with our
products and services. The loss of any of these distributors could have a
material adverse effect on our business, financial condition or results of
operations.
Covenant restrictions in our senior revolving credit facilities could limit our
ability to operate our business.
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We currently have two revolving credit facilities consisting of a short-term
facility with a Canadian financial institution and a long-term facility with a
group of United States financial institutions. The short-term facility, which is
subject to certain restrictions related to working capital, is unsecured, and
the long-term facility is secured by accounts receivable, inventories and
certain equipment. The long-term facility includes restrictive covenants
relating to levels of funded debt and other financial measurements.
In connection with our proposed acquisition of Precision, we have obtained a
commitment from a banking institution for a new senior credit facility that
would provide us with a $150.0 million revolving line of credit. This new
facility would replace the existing short-term and long-term facilities and
would expire in
7
March 2006. The new senior credit facility would be secured by all accounts
receivable, inventories, and equipment and real estate. Under the new senior
credit facility, we can borrow amounts based on a percentage of eligible
accounts receivable, eligible inventory and property, plant and equipment. The
new senior credit facility will include a fixed charge coverage ratio if
availability falls below $30.0 million, and a capital spending limit of $25.0
million annually. Similar to our current credit facilities, the new senior
credit facility would limit our ability to incur additional debt, pay dividends,
create liens, sell assets or enter into transactions with affiliates without the
consent of the lenders.
All of these covenants could affect our ability to operate our business and may
limit our ability to take advantage of potential business opportunities as they
arise. Moreover, our failure to comply with the financial and other covenants
could result in an event of default that, if not cured or waived, would prevent
us from borrowing under our senior revolving credit facility and could cause us
to be required to repay our borrowings before their due date. If we were unable
to make this repayment or otherwise refinance these borrowings, our lenders
could foreclose on our assets.
Our Canadian operations are subject to collective bargaining agreements.
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In January 2001, we renewed a collective bargaining agreement with the United
Steelworkers of America, Local Union 7226, covering approximately 450 employees
at our Calgary facilities. The new agreement, which expires on December 31,
2003, covers wages, healthcare benefits, retirement plans, seniority, job
classes and certain work rules. While we believe our present labor relations to
be good, we cannot assure you that the collective bargaining agreement will be
renewed upon expiration or that a new collective bargaining agreement on terms
acceptable to us will be established.
Because of the substantial amount of business we conduct in Canada, exchange
rate fluctuations have a direct impact on our results of operations.
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Although our financial results are reported in United States dollars, a
significant portion of our sales and operating costs are denominated in Canadian
dollars. Consequently, in consolidating the financial results of our Canadian
operations for reporting purposes, we are exposed to cash flow and earnings
volatility as a result of fluctuations in relative currency values. Significant
fluctuations may adversely affect our consolidated results of operations. In
particular, our results of operations may be adversely affected by a significant
strengthening of the United States dollar against the Canadian dollar.
Our industry is characterized by intense competition.
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Our businesses are very competitive and complete against a number of companies.
Some of our competitors are larger than us and have greater financial and
marketing resources and business diversification. These companies may be better
able than our company to successfully endure downturns in either the energy or
industrial sectors. The oil country tubular goods and structural product markets
are largely commodity-based in nature and as a result, price competition is of
particular importance.
Seasonal fluctuations that affect our customers may affect demand for our
products.
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Our company, as well as the oil country tubular goods industry in general, have
historically experienced seasonal fluctuations in demand for 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 more difficult in Western Canada. Consequently, drilling
activity and the corresponding demand for our oil country tubular goods
generally will be lower at these times in these respective regions. We also will
experience seasonal fluctuations in demand for our industrial products. However,
the timing of these fluctuations may differ from fluctuations experienced in the
oil country tubular goods market.
8
Compliance with and changes in environmental, health and safety laws regulating
the operation of our business could adversely affect our performance and expose
us to environmental claims.
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Our businesses are subject to numerous United States and Canadian local, state,
provincial and federal laws and regulations concerning environmental, health and
safety matters, including those relating to air emissions, wastewater discharges
and the generation, handling, storage, transportation, treatment and disposal of
hazardous wastes. Violations of such laws and regulations can lead to
substantial fines and penalties. Also, there are risks of substantial costs and
liabilities relating to the investigation and remediation of past or present
contamination, at current as well as former properties utilized by us and at
third-party disposal sites, regardless of fault or the legality of the original
activities that led to such contamination. Moreover, future developments, such
as changes in laws and regulations, more stringent enforcement or interpretation
thereof, and claims for property damage or personal injury could cause us to
incur substantial losses or expenditures. Although we believe we are in
substantial compliance with all applicable laws and regulations, there can be no
assurance that any such law, regulation, enforcement or private claim will not
have a material adverse effect on our business, results of operations and
financial condition.
We are subject to interest rate risk to the extent we borrow against our credit
facilities with variable interest rates.
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Interest on our current short-term and long-term credit facilities accrues at
fluctuating rates, and interest under our proposed new credit facility will
likewise accrue at a fluctuating rate. Rising interest rates could have a
substantial impact on our interest expense. For example, assuming the current
level of borrowings at variable rates and assuming a two percentage point change
in the average interest rates under these borrowings, we estimate that our
interest expense for the year ended December 31, 2001 would have increased by
approximately $1.3 million. Management may take actions that would mitigate our
exposure to interest rate risks; however, due to the uncertainty of the actions
that we might take and their possible effects, we cannot give any assurance that
these actions would effectively mitigate our exposure to interest rate risk to a
material extent.
We have defined benefit pensions plans, which could result in charges against
our earnings and claims against our assets.
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Our Prudential subsidiary sponsors two pension plans and a post-retirement
benefit plan for substantially all of its Canadian employees and a supplemental
executive retirement plan. At December 31, 2001, certain of these plans were
underfunded resulting in a combined underfunding of an aggregate of
approximately $2.4 million. Moreover, if these plans do not achieve an
investment return to the extent of the estimated rate for a particular fiscal
year, such deficiency could result in a charge against earnings for that and
subsequent years.
Provisions in our corporate documents and Delaware law could delay or prevent a
change of control.
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The existence of some provisions in our corporate documents and Delaware law
could delay or prevent a change in control of the Company, even if that change
might be beneficial to our stockholders. Our certificate of incorporation and
bylaws contain provisions that may make acquiring control of the Company
difficult, including:
o provisions limiting the rights to call special meetings of our stockholders;
o provisions regulating the ability of our stockholders to bring matters for
action at annual meetings of our stockholders;
o a provision prohibiting action by stockholders by written consent and
9
o the authorization to issue and set the terms of preferred stock by the
Company's board of directors.
In addition, we have adopted a stockholder rights plan that would cause extreme
dilution to any person or group who would attempt to acquire a significant
interest in the Company without advance approval of the Company's board of
directors. Moreover, Delaware law would impose restrictions on mergers and other
business combinations between us and any holder of 15% or more of our
outstanding common stock.
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, line 11/2" - 16"
pipe, standard pipe, structural
shapes and rounds and piling
Conroe, Texas Oil country tubular goods, line 41/2" - 9 5/8"
pipe, structural shapes and rounds
and piling
Calgary, Alberta Oil country tubular goods, line 2 3/8" - 123/4"
pipe and structural shapes and rounds
Longview, Washington (2) Oil country tubular goods, line 2 3/8" - 103/4"
pipe and structural shapes and rounds
(1) Represents outside diameter measurement. Structural tubing can have a
square, rectangular or round cross-section.
(2) Scheduled to be closed during the first quarter of 2002.
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 11 to the Consolidated Financial Statements on page 30 and 35 of our Annual
Report to Stockholders for the Year Ended December 31, 2001 ("2001 Annual
Report"), portions of which are filed as Exhibit 13, hereto.
OUR BUSINESS STRATEGY
Identify And Enter New Markets
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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, the
addition of large diameter pipe and tubing to our product lines, our recent
combination with Prudential and our expected purchase of Precision. 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
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We believe that the expansion of both our energy and industrial product lines
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 and the expected purchase of
Precision are examples of this strategy.
10
Continually Improve The Efficiency Of Our Manufacturing Process
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We intend to continue to pursue our objective of being a low-cost, high-volume
producer of quality steel tubular products by seeking to: maintain product
manufacturing cost controls; maximize production yields from raw materials; make
capital expenditures designed to lower costs and improve quality; minimize unit
production costs through effective utilization of plant capacity and minimize
freight costs.
Deliver Quality Products And Service To Our Customers
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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: offer broad-based product lines; focus
on product availability; deliver competitively priced quality products and
provide a high level of customer support before and after the sale.
THE ENERGY PIPE INDUSTRY
General
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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 it 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:
Alberta
U.S. Natural Spot Price
WTI Oil Price Gas Price Natural Gas
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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
1Q01.................................. $29.06 $6.65 $7.13
2Q01.................................. $27.99 $4.32 $4.58
3Q01.................................. $26.96 $2.65 $2.53
4Q01.................................. $20.45 $2.40 $2.09
11
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 July 2001 of 1,293 rigs and a low in April 1999 of 496 rigs. Since July
1987, the Baker Hughes Canadian rig count hit a high in February 2001 of 579
rigs and a low in April 1992 of 32 rigs. 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 Baker Hughes
Shipments Rig Count
- --------------------------------------------------------------------------------
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................................................ 75,784 770
2Q00................................................ 80,816 842
3Q00................................................ 88,411 981
4Q00................................................ 79,877 1,076
1Q01................................................ 91,289 1,139
2Q01................................................ 107,921 1,237
3Q01................................................ 99,931 1,241
4Q01................................................ 70,459 1,008
Quarterly
Prudential Baker Hughes
OCTG Shipments Rig Count
- --------------------------------------------------------------------------------
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................................................ 54,293 480
2Q00................................................ 39,737 212
3Q00................................................ 49,050 313
4Q00................................................ 53,926 380
1Q01................................................ 55,202 515
2Q01................................................ 36,766 252
3Q01................................................ 37,643 317
4Q01................................................ 27,663 276
12
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 years 2001 and 1999, declining industry inventory levels satisfied
0.5% and 13.6%, respectively of the U.S. oil country tubular goods consumption.
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.
Antidumping and countervailing duty orders require special duties to be imposed
in amounts designed to offset unfair pricing and government subsidization,
respectively. In November 2001, the International Trade Commission recommended
to the President that a Section 201 case for steel and all steel products, with
the exception of OCTG, be supported with a wide scale program of quotas and
duties. The President announced his remedy plan on March 5, 2002 which could
increase the cost of foreign imported hot rolled steel and steel products. This
measure could increase the cost of our purchased steel significantly. We have
already seen some increases which we feel are linked to the trade cases as our
major supplier of steel increased our steel prices by $20 in January 2002 and is
looking to implement another price increase in April 2002. This measure also
does not protect our OCTG pipe and could allow additional imports to come into
the U.S. market. The industry is considering filing a dumping case on OCTG
products in the first quarter of 2002.
Previously, there existed a Canada Customs and Revenue Agency ruling against
carbon grade casing from the U.S. and Korea into Canada which required an
interested importer to obtain "normal values" for these products. In June of
2001, the Canadian ruling was expired and U.S. and Korean carbon grade casing is
no longer subject to import restrictions. This expiration poses a threat to the
selling price in Canada and may force us to compete with more U.S. or
internationally priced products.
13
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,
2001 2000 1999
------------------------------------------
U.S. Market Activity:
- ---------------------
Average rig count..................... 1,157 918 624
U.S. oil country tubular goods
consumption (in thousands of tons):
U.S. producer shipments............... 1,962 1,853 901
Imports............................... 904 720 170
Inventory (increase)/decrease......... 15 (436) 202
Used pipe............................. 79 174 174
------------------------------------------
Total U.S. Consumption............ 2,960 2,311 1,447
==========================================
Year Ended December 31,
2001 2000 1999
------------------------------------------
Canadian Market Activity:
- -------------------------
Average rig count..................... 341 344 244
Canadian oil country tubular goods
consumption (in thousands of tons):
Canadian producer shipments........... 463 465 303
Imports............................... 222 273 160
Inventory (increase)/decrease......... 71 25 10
------------------------------------------
Total Canadian consumption........ 756 763 473
==========================================
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. consumption of OCTG is our
estimate based on estimated per rig consumption of OCTG multiplied by the Baker
Hughes rig count. 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 producer 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.
14
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, 2001.......... 415,741 $272,385 81.3%
Year ended December 31, 2000.......... 341,610 $222,487 75.7%
Three months ended December 31, 1999.. 89,450 $49,612 73.8%
Year ended September 30, 1999......... 184,958 $101,864 61.1%
PRUDENTIAL
Year ended December 31, 2001.......... 264,489 $175,497 90.6%
Year ended December 31, 2000.......... 325,092 $227,228 90.5%
Year ended December 31, 1999.......... 188,089 $123,285 86.7%
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 provides additional tons which optimizes mill operations and
improves fixed cost absorption. Prudential tolling tons for the years ended
December 31, 2001, 2000 and 1999 were 23,919, 26,444 and 9,626, respectively.
Net sales associated with tolling tons for the years ended December 31, 2001,
2000 and 1999 were $5,591,000, $4,433,000 and $1,403,000, 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
15
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. Three 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%, 16% and 14%
of the tons of energy products sold calendar 2001, 2000 and fiscal 1999,
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 2001 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 2001, 2000 and
fiscal 1999 were $16.5 million, $19.5 million and $11.3 million, respectively.
Maverick sales to other foreign customers in calendar 2001, 2000 and fiscal 1999
made up an additional $1.1 million, $77,000 and $200,000, respectively.
Prudential sales to U.S. customers in calendar 2001, 2000 and 1999 were $2.6
million, $8.4 million and $1.0 million, respectively. 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, 2001 and 2000, our backlog orders (including bill and hold
orders not yet shipped) for oil country tubular goods and line pipe products
were approximately $53.7 million and $128.2 million, respectively. All of the
backlog orders as of December 31, 2001 are expected to be filled by the end of
calendar 2002. We consider only $3.8 million and $9.0 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 (scheduled
to be closed during the first quarter of 2002) and Calgary, Alberta. We began
full production of all of our products at our new large diameter facility
adjacent to our Hickman, Arkansas facilities, during calendar year 2001. The
facilities are strategically located to serve the energy markets in the United
States and Canada. The new large diameter facility will
16
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 1,459,000 tons of finished products
per year with approximately 1,154,500 tons currently dedicated to energy related
products. We operated our energy facilities at a capacity utilization of
approximately 59% and 69% during calendar 2001 and 2000, 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 95% of
an employee's salary and wages.
During calendar 2001, 2000 and fiscal 1999, we spent $9.9 million, $10.9 million
and $6.4 million, respectively, on new capital equipment for our existing energy
facilities. Capital expenditures related to the new large diameter facility were
approximately $5.0 million and $48.6 million during calendar 2001 and 2000,
respectively. Our capital budget for calendar 2002 is $16.2 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, Newport Steel Company and IPSCO
Tubular, Inc., which produce electric resistance welded pipe, and United States
Steel Corporation and North Star Steel Company, which primarily produce 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
2001, 2000 and 1999, we estimate that domestic oil country tubular goods market
penetration of tons consumed by imports into the U.S. was 30.5%, 31.0% and
11.7%, respectively. During calendar years 2001, 2000 and 1999, we estimate that
domestic oil country tubular goods market penetration of tons consumed by
imports into Canada was 29.4%, 35.8% and 33.8%, respectively.
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.
17
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 and welded. 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 2001, 2000 and 1999 was
2.3 million, 2.2 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 2001, 2000 and 1999 was 2.8
million, 2.8 million and 2.4 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 304,500 tons.
During calendar 2001 and 2000, we were operating at approximately 60% and 78%,
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, 2001.......... 152,139 $62,507 18.7%
Year ended December 31, 2000.......... 157,080 $71,422 24.3%
Three months ended December 31, 1999.. 40,351 $17,620 26.2%
Year ended September 30, 1999......... 148,275 $64,822 38.9%
PRUDENTIAL
Year ended December 31, 2001.......... 30,704 $12,626 6.5%
Year ended December 31, 2000.......... 41,004 $19,337 7.7%
Year ended December 31, 1999.......... 38,133 $17,507 12.3%
The new large diameter facility in Hickman, Arkansas increases the size range of
our structural tube and standard pipe offerings, thus allowing us to market a
broader line of products for industrial applications. As a result of this new
facility, we expect to gain additional complementary sales by offering larger
sizes, while
18
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 now produce with the 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, 2001 and 2000, our backlog of orders for structural tubing
and standard pipe were $8.5 million and $9.0 million, respectively. All of the
backlog orders as of December 31, 2001 are expected to be filled by the end of
calendar 2002. 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 and large diameter facilities located in
Hickman, Arkansas and in Calgary, Alberta. We are also currently producing
structural round tubing products and standard pipe at our Hickman, Arkansas and
Conroe, Texas facilities.
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 97% of the domestic tonnage of all
sizes of domestic structural tubing products consumed.
We believe that the types of standard pipe products we are capable of
manufacturing account for approximately 41% of the domestic tonnage of all types
of the U.S. standard pipe 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 2001, 2000 and fiscal 1999, we spent $1,052,000, $1,384,000 and
$1,500,000, respectively, on additional equipment at our industrial facility in
Hickman, Arkansas. Our capital budget for our industrial facility in Hickman,
Arkansas for calendar 2002 is $1.3 million. We expect these capital expenditures
to result in manufacturing cost savings and quality improvements. Capital
expenditures related to our facility in Calgary, Alberta is included in the
energy pipe industry section. Although the Calgary, Alberta facility
manufactures industrial products, this facility is primarily energy product
focused and only produces industrial products to fill out mill capacity.
19
Competition
- -----------
Although a significant market for structural tubing is located within a 400-mile
radius of our Hickman, Arkansas structural facility, no other major structural
tubing facility is currently located within this area. Non-domestic competitors,
primarily from Canada, represented 20%, 24% and 32% of total domestic sales of
structural tubing in calendar years 2001, 2000 and 1999, respectively. We
compete primarily against several domestic and numerous foreign producers of
structural tubing. Our more significant structural tube competitors are IPSCO
Tubular, Inc., 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 37%, 40% and 30% of total domestic sales of standard pipe in
calendar years 2001, 2000 and 1999, respectively. Our more significant standard
pipe competitors are Wheatland Tube Company, Armco, Inc., Sawhill Tubular
Division and IPSCO Tubular, 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.
DISCONTINUED OPERATIONS
During the first quarter of 2001, the Company adopted a formal plan to sell the
operating assets of its Cold Drawn Tubular Business (DOM). Accordingly, the
operating results of the DOM facility, including the provision for the loss on
disposal and operating losses during the phase out period of $10,240,000 (net of
$5,760,000 tax benefit), have been segregated from continuing operations and
reported separately as discontinued operations in the statement of operations.
DOM revenues were $7,544,000, $15,278,000, $2,736,000 and $5,770,000 for the
years ended December 31, 2001 and 2000, the three months ended December 31,
1999, and the year ended September 30, 1999, respectively.
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 2001, 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 75% of
consolidated purchases made from Nucor Corporation, IPSCO Steel, Inc. and
Dofasco, Inc. Nucor's mill in Hickman, Arkansas is directly connected by rail to
our Hickman facilities, thus eliminating our freight costs for raw materials
purchased from Nucor. Unlike our Hickman facilities, our facilities in Conroe,
Texas 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, 2001, we employed 1,569 persons, of whom 521 were Prudential
employees and 1,048 were Maverick employees. A union represents approximately
68% of Prudential employees. We consider our employee relations to be excellent.
20
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, 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 adjacent to the large diameter
facility is utilized for the epoxy coating of 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. Each manufacturing facility operated by Maverick is served by truck,
has its own rail spur 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. The 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.
We also own approximately 35 acres in Longview, Washington. 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. The Company expects
to sell the Longview, Washington land and building during 2002 as part of our
planned exit from the Longview, Washington facility.
We lease on a month to month basis a 21-acre site and a 370,000 square foot
manufacturing facility in Beaver Falls, Pennsylvania which was used for the
production of cold drawn tubing. The land and building lease was terminated in
2001 as the Company had announced its plan to discontinue its cold drawn tubing
business during 2001. The facility ceased production in August 2001. However,
the option to purchase this facility has been continued through monthly lease
payments.
ITEM 3 Legal Proceedings
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.
Our businesses are subject to numerous U.S. and Canadian local, state,
provincial and federal laws and regulations concerning environmental, health and
safety matters, including those relating to air emissions, wastewater discharges
and the generation, handling, storage, transportation, treatment and disposal of
21
hazardous wastes. Violations of such laws and regulations can lead to
substantial fines and penalties. Also, there are risks of substantial costs and
liabilities relating to the investigation and remediation of past or present
contamination, at current as well as former properties utilized by us and at
third-party disposal sites, regardless of fault or the legality of the original
activities that led to such contamination. Moreover, future developments, such
as changes in laws and regulations, more stringent enforcement or interpretation
thereof, and claims for property damage or personal injury could cause us to
incur substantial losses or expenditures. Although we believe we are in
substantial compliance with all applicable laws and regulations, there can be no
assurance that any such law, regulation, enforcement or private claim will not
have a material adverse effect on our business, results of operations and
financial condition.
ITEM 4 Submission of Matters to a Vote of Security Holders
There were no matters submitted, during the quarter ended December 31, 2001
covered by this report, to a vote of our security holders through the
solicitation of proxies or otherwise.
ITEM 4A Executive Officers
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 (age 51) 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 the current president, a former
director and past chairman of the Committee on Pipe and Tube Imports.
Pamela G. Boone (age 38) has served as Vice President - Finance and
Administration, Treasurer, Secretary and Chief Financial Officer of the Company
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 (age 54) 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 (age 54) 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 (age 41) has served as Vice President - Canadian Operations of the
Company since November 2000. From 1994 to November 2000, 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.
22
PART II
ITEM 5 Market for Registrant's Common Equity and Related Stockholder Matters
The information required by Item 5 is set forth under the caption "Market For
Our Common Equity and Related Stockholder Matters" (page 41) of our 2001 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 2001 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 2001 Annual Report and incorporated herein by reference.
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A is set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (page
25) of our 2001 Annual Report and incorporated herein by reference.
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 26 through 38) of our 2001 Annual Report and incorporated herein by
reference.
ITEM 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
23
PART III
ITEM 10 Directors and Executive Officers of the Registrant
The information required by Item 10 is set forth under the caption "Item 1 -
Election of Directors" (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 "Executive
Compensation" (page 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 "Security
Ownership of Management" (page 3) 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 "Certain
Relationships and Related Transactions" (page 8) 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.
24
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 2001 Annual
Report and are filed herewith as Exhibit 13.
o Report of Independent Auditors (page 38).
o Consolidated Balance Sheets as of December 31, 2001 and 2000
(page 26).
o Consolidated Statements of Operations for the years ended
December 31, 2001 and 2000, the three months ended December
31, 1999 and the year ended September 30, 1999 (page 27).
o Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2001 and 2000, the three months ended
December 31, 1999 and the year ended September 30, 1999
(page 28).
o Consolidated Statements of Cash Flows for the years ended
December 31, 2001 and 2000, the three months ended December
31, 1999 and the year ended September 30, 1999 (page 29).
o Notes to Consolidated Financial Statements (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 years ended
December 31, 2001 and 2000, the three months ended December 31,
1999 and the year ended September 30, 1999.
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) Reports on Form 8-K:
The Company filed three reports on Form 8-K during the quarter ended December
31, 2001. Information regarding the items reported on is as follows:
Date Item Reported On
- ---- ----------------
December 17, 2001 The Company announced its earnings expectations for the
quarter ended December 31, 2001 and the closure of its
Longview, Washington plant during the first quarter of
2002.
25
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, 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
Year ended December
31, 2001:
Deducted from asset
account:
Accounts receivable
allowances $2,141 $327 $-- $56(1) $2,412
Valuation allowance
for deferred income
taxes $2,377 $-- $-- $(1,376)(3) $1,001
(1) Uncollectible accounts written off, net of recoveries.
(2) Resulted from an additional net operating loss carryforward generated at
our Longview, Washington facility, which was not valued for financial
statement purposes.
(3) Resulted from generating taxable income at our Longview, Washington
facility.
26
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 12, 2002 /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 12, 2002 /s/ Gregg M. Eisenberg
--------------------------------------------
Gregg M. Eisenberg, Chairman, President
and Chief Executive Officer and Director
(Principal Executive Officer)
March 12, 2002 /s/ Pamela G. Boone
--------------------------------------------
Pamela G. Boone, Vice President - Finance
and Administration
(Principal Financial and Accounting Officer)
March 12, 2002
--------------------------------------------
William E. Macaulay, Director
March 12, 2002 /s/ C. Robert Bunch
--------------------------------------------
C. Robert Bunch, Director
March 12, 2002 /s/ C. Adams Moore
--------------------------------------------
C. Adams Moore, Director
March 12, 2002 /s/ David H. Kennedy
--------------------------------------------
David H. Kennedy, Director
March 12, 2002 /s/ Wayne P. Mang
--------------------------------------------
Wayne P. Mang, Director
March 12, 2002 /s/ Donald Wilson
--------------------------------------------
J. Donald Wilson, Director
March 12, 2002 /s/ Norman W. Robertson
--------------------------------------------
Norman W. Robertson, Director
March 12, 2002 /s/ Rhys T. Eyton
--------------------------------------------
Rhys T. Eyton, Director
March 12, 2002
--------------------------------------------
Dennis G. Flanagan, Director
March 12, 2002 /s/ Donald A. Pether
--------------------------------------------
Donald A. Pether, Director
27
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
2.1 Combination Agreement by and between the Registrant and Prudential
Steel Ltd. dated 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).
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 definitive proxy statement
filed on August 11, 2000 (Filed No. 001-10651).
2.3 Stock Purchase Agreement dated as of February 12, 2002 by and among
Maverick Tube Corporation, Precision Tube Holding Corporation and the
shareholders of Precision Tube Holding Corporation, incorporated herein
by reference to Exhibit 2.1 to the Registrant's Form 8-K filed on
February 14, 2002.
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.
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, incorporated herein by reference to Exhibit 4.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.
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 definitive proxy statement filed
on August 11, 2000 (File No. 001-10651).
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
definitive proxy statement filed on August 11, 2000 (File No.001-10651).
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 definitive proxy
statement filed on August 11, 2000 (File No. 001-10651).
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.
28
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 Registrant's Annual Report
on Form 10-K for the fiscal year ended September 30, 1994.
10.7* The Maverick Tube Corporation Director Stock Option Plan, incorporated
herein by reference to Exhibit 10.18 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended September 30, 1994.
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.
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
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998.
10.10* Amendment #1 to the Maverick Tube Corporation Director Stock Option
Plan, incorporated herein by reference to Exhibit 10.24 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996.
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 Agreement of Limited Partnership between the Registrant, Maverick
Investment Corporation and Maverick Tube L.P., incorporated herein by
reference to Exhibit 10.13 of the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1998.
10.13* 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).
10.14* Amended and Restated Prudential Steel Ltd. Pension Plan for Salaried
Employees restated effective January 1, 1992 and including amendments to
January 1, 1998, incorporated herein by reference to Exhibit 10.15 of
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 (In Canadian Dollars).
29
10.15 Amended and Restated Secured Credit Agreement among the Registrant and
Harris Trust and Savings Bank as Agent dated as of December 28, 2000,
incorporated herein by reference to Exhibit 10.16 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
10.16 Credit Facility between Prudential Steel Ltd. and Royal Bank of Canada
dated as of December 27, 2000, incorporated herein by reference to
Exhibit 10.17 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 (In Canadian Dollars).
10.17 Lease and Agreement dated January 10, 2001, by and between the
Registrant and Commercial Resins Company, Inc., incorporated herein by
reference to Exhibit 10.18 of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 2000.
10.18* Prudential Steel Ltd. Supplemental Employees' Retirement Plan dated as
of January 1, 1994, incorporated herein by reference to Exhibit 10.19
of the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.
10.19* Change of Control Agreement dated April 28, 1998 by and between
Prudential Steel Ltd. and J. D. Wilson, incorporated herein by reference
to Exhibit 10.20 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
10.20 First Amendment to Amended and Restated Secured Credit Agreement,
incorporated herein by reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q for the period ended March 31, 2001.
10.21* Second Amendment to the 1994 Stock Option Plan, incorporated herein by
reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form
10-Q for the period ended March 31, 2001.
10.22* Collective Bargaining Agreement between Prudential Steel Ltd. and the
United Steelworkers of America, Local 7226, effective as of January 1,
2001 through December 31, 2003, incorporated herein by reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 2001 (In Canadian Dollars).
10.23 Amending Letter to the Letter Agreement dated December 27, 2000 between
Prudential Steel Ltd. and Royal Bank of Canada, incorporated herein by
reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form
10-Q for the period ended September 30, 2001.
10.24 Waiver Letter to the Amended and Restated Secured Credit Agreement among
the Registrant and Harris Trust and Savings Bank as Agent dated as of
December 28, 2000, incorporated herein by reference to Exhibit 10.2 of
the Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 2001.
10.25* Form of Secured Note Agreement among certain employees of Maverick Tube
Corporation and Maverick Tube Corporation, incorporated herein by
reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form
10-Q for the period ended September 30, 2001.
10.26 Second Amendment to Amended and Restated Secured Credit Agreement, filed
herewith.
13 Portions of Registrant's 2001 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.
* Management contract or compensatory plan or arrangement.
30