Maverick Tube (NYSE:MVK)
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Maverick Tube Corporation (NYSE:MVK) announced today its
results for the quarter ended March 31, 2006. The Company reported
record net income for the first quarter of $70.9 million, or $1.80 per
diluted share, compared to net income for the same quarter last year
of $31.2 million, or $0.72 per diluted share, and net income of $63.2
million, or $1.54 per diluted share, for the fourth quarter 2005. Net
revenues were a record $543.1 million for the quarter ended March 31,
2006, up from net revenues of $410.8 million for the first quarter
2005, and $484.7 million for the fourth quarter 2005.
First quarter 2006 energy products net revenues increased 39.6% to
$465.6 million from $333.6 million in the first quarter 2005, and
13.6% from $409.7 million in the fourth quarter 2005. Drilling
activity, measured by the average Baker Hughes Incorporated active rig
count, increased in the first quarter 2006 compared to the fourth
quarter 2005 by 2.8% in the United States and 16.3% in Canada, while
drilling activity declined 3.5% in the rest of the world. The 13.6%
increase in net revenues of energy products over last quarter is
attributable to a 13.6% increase in tons shipped. Average selling
prices remained constant during both periods.
First quarter 2006 electrical products net revenues were $77.4
million compared to $77.2 million in the first quarter 2005 and $75.0
million in the fourth quarter of 2005. The 3.2% increase in net
revenues over the fourth quarter 2005 is attributable to an 11.8%
increase in volume, to about 62,800 tons, partially offset by lower
selling prices.
Maverick's operating margin improved to 20.6% in the first quarter
2006 compared to 12.1% in the first quarter 2005 and 20.3% in the
fourth quarter 2005. This improvement over fourth quarter 2005 is
attributable to a $4.5 million reduction in selling, general and
administrative ("S,G&A") expenses and a $2.1 million nonrecurring
charge in the fourth quarter 2005 related to the impairment of
intangible assets partially offset by a lower gross profit margin. The
lower gross profit margin is principally attributable to lower gross
margins on sales of electrical products.
Maverick's net debt to total capitalization improved to 39.0% at
March 31, 2006 compared to 43.8% at December 31, 2005. Earnings before
interest, taxes, depreciation and amortization ("EBITDA") were $121.2
million in the first quarter 2006 compared to $56.4 million in the
first quarter 2005 and $107.1 million in the fourth quarter 2005.
C. Robert Bunch, the Company's Chairman, President and Chief
Executive Officer, said, "We are very pleased with the contributions
of all of our business units to this quarter's record results. In
particular, we had especially strong performances by Maverick Tubular
Products, our U.S. OCTG and line pipe business, as well as TuboCaribe,
our Latin American OCTG business, and Precision Tube, our coiled
tubing business. In addition, Prudential, our Canadian OCTG and line
pipe business, had another outstanding quarter. Canadian energy
activity was the driver for about 37% of our consolidated net revenues
this quarter. Our electrical products segment performed in line with
expectations. And, our efforts over the past several quarters to
reduce S,G&A expenses and create a more nimble, responsive and focused
organization are beginning to bear fruit."
Mr. Bunch continued, "While we expect our second quarter to be
impacted by the typical seasonal decline in Canadian drilling
activity, we remain very optimistic about the balance of 2006. We
believe global drilling activity will remain robust and that Maverick
will continue to benefit from the growth and other initiatives we've
completed over the last few years."
Maverick Tube Corporation is a St. Louis, Missouri based
manufacturer of tubular products in the energy industry for
exploration, production, and transmission, as well as industrial
tubing products (steel electrical conduit, standard pipe, pipe piling,
and mechanical tubing) used in various applications.
This news release may contain forward-looking information that is
based on assumptions that are subject to numerous business risks, many
of which are beyond the control of the Company. There is no assurance
that such assumptions will prove to be accurate. Actual results may
differ from these forward-looking statements due to numerous factors,
including those described under "Risk Factors" and elsewhere in
Maverick's Form 10-K for its year ended December 31, 2005.
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Maverick Tube Corporation
Selected Consolidated Financial Data
For the Quarter Ended March 31, 2006
(In thousands, except rig count, per share data and sales volumes)
(Unaudited)
Quarter Ended
March 31,
2006 2005
----------- -----------
Net revenues $543,060 $410,803
Cost of goods sold 407,169 341,620
----------- -----------
Gross profit 135,891 69,183
Selling, general and administrative 21,282 16,925
Sales commissions 2,508 2,578
----------- -----------
Income from operations 112,101 49,680
Interest expense 4,669 2,226
----------- -----------
Income from continuing operations before
income taxes 107,432 47,454
Provision for income taxes 36,478 15,658
----------- -----------
Income from continuing operations 70,954 31,796
Income (loss) from discontinued operations (net
of tax) 53 (581)
Loss on sale of PCD business (net of tax) (109) -
----------- -----------
Net income $70,898 $31,215
=========== ===========
Diluted earnings (loss) per share:
Income from continuing operations $1.81 $0.73
Income (loss) from discontinued operations (0.00) (0.01)
----------- -----------
Net income $1.80 $0.72
=========== ===========
Average shares deemed outstanding 39,320,476 43,481,348
Other Data:
Depreciation and amortization $9,104 $6,744
Capital expenditures 19,658 12,922
Quarter Ended
-----------------------------
March 31, March 31, Dec. 31,
2006 2005 2005
--------- --------- ---------
Reconciliation of Net Income to EBITDA
Net income $70,898 $31,215 $63,231
Discontinued operations 56 581 154
Provision for income taxes 36,478 15,658 31,113
Interest expense 4,669 2,226 3,744
Depreciation and amortization 9,104 6,744 8,813
--------- --------- ---------
EBITDA $121,205 $56,424 $107,055
========= ========= =========
Note: EBITDA is considered a non-GAAP financial measurement.
Management uses EBITDA because it believes it is a widely accepted
financial indicator used by investors and analysts to analyze and
compare companies on the basis of operating performance and that this
measurement may be used by investors to make informed investment
decisions.
March 31,
2006 2005
---------- ----------
Balance Sheet Data:
Working capital $404,479 $528,974
Cash and cash equivalents 80,709 6,636
Property, plant and equipment, net of accumulated
depreciation 305,184 215,885
Goodwill and intangibles 218,254 116,875
Total assets 1,376,527 1,017,355
Current maturities of long-term debt(1) 186,028 831
Long-term revolving credit facility 52,000 81,593
Convertible debt, at 4.0%, due June 2033(1) - 120,000
Convertible debt, at 1.875%, due November 2025 250,000 -
Other long-term debt (less current maturities) 302 2,637
Stockholders' equity 638,047 630,692
(1) In the fourth quarter of 2005, the $120 million, 4.0%,
convertible debt was classified to current debt due to the ability of
the holders to exercise their conversion rights.
Quarter Ended
March 31,
2006 2005
---------- ----------
Average U.S. rig count (2) 1,519 1,279
Average Canadian rig count (2) 665 521
Average U.S. & Canadian workover rigs (2) 2,234 2,031
Average Latin America rig count (2) 313 313
Average International rig count (2) 896 876
(2) Source: Baker Hughes Incorporated
Sales Volume by Product Line
(Short Tons)
2006
---------------------------------------------------
March 31 June 30 September 30
---------------- ---------------- ---------------
%of %of %of
Tons Total Tons Total Tons Total
-------- ------- ---------------- ---------------
OCTG 231,534 59.7% - -
Line Pipe 87,392 22.5% - -
Coiled 5,989 1.5% - -
-------- -------- --------
Total - Energy
Products 324,915 83.8% - -
Total -
Electrical
Products 62,796 16.2% - -
-------- -------- --------
Total Company 387,711 100.0% - -
======== ======== ========
2006
------------------------------------
December 31 Year-to-Date
---------------- ----------------
%of %of
Tons Total Tons Total
------------------------------------
OCTG - 231,534 59.7%
Line Pipe - 87,392 22.5%
Coiled - 5,989 1.5%
-------- ----------
Total - Energy
Products - 324,915 83.8%
Total -
Electrical
Products - 62,796 16.2%
-------- ----------
Total Company - 387,711 100.0%
======== ==========
2005
----------------------------------------------------
March 31 June 30 September 30
---------------- -------------- -------------
%of %of %of
Tons Total Tons Total Tons Total
----------------------------------------------------
OCTG 172,702 59.6% 174,248 61.2% 215,901 59.2%
Line Pipe 61,027 21.0% 46,798 16.4% 79,167 21.7%
Coiled 7,867 2.7% 7,850 2.8% 5,332 1.5%
-------- --------- --------
Total - Energy
Products 241,596 83.3% 228,896 80.4% 300,400 82.3%
Total -
Electrical
Products 48,330 16.7% 55,708 19.6% 64,601 17.7%
-------- --------- --------
Total Company 289,926 100.0% 284,604 100.0% 365,001 100.0%
======== ========= ========
2005
----------------------------------------
December 31 Year-to-Date
----------------- ----------------
%of %of
Tons Total Tons Total
----------------------------------------
OCTG 215,364 63.0% 778,215 60.7%
Line Pipe 65,464 19.1% 252,456 19.7%
Coiled 5,132 1.5% 26,181 2.0%
-------- ----------
Total - Energy
Products 285,960 83.6% 1,056,852 82.5%
Total -
Electrical
Products 56,150 16.4% 224,789 17.5%
-------- ----------
Total Company 342,110 100.0% 1,281,641 100.0%
======== ==========
Net Revenues and Gross Profit by Product Segment
2006
---------------------------------------------------
March 31 June 30 September 30
----------------- -------------- --------------
%of %of %of
$ Total $ Total $ Total
---------------------------------------------------
Energy Products
Net Revenues 465,638 85.7% - -
Gross Profit 124,027 91.3% - -
Electrical
Products
Net Revenues 77,422 14.3% - -
Gross Profit 11,864 8.7% - -
-------- ------ ------
Total Company
Net Revenues 543,060 100.0% - -
Gross Profit 135,891 100.0% - -
2006
-------------------------------------
December 31 Year-to-Date
-------------- ----------------
%of %of
$ Total $ Total
-------------------------------------
Energy Products
Net Revenues - 465,638 85.7%
Gross Profit - 124,027 91.3%
Electrical
Products
Net Revenues - 77,422 14.3%
Gross Profit - 11,864 8.7%
-------- ----------
Total Company
Net Revenues - 543,060 100.0%
Gross Profit - 135,891 100.0%
2005
-----------------------------------------------------
March 31 June 30 September 30
---------------- -------------- ---------------
%of %of %of
$ Total $ Total $ Total
-----------------------------------------------------
Energy Products
Net Revenues 333,588 81.2% 319,581 79.8% 399,516 81.7%
Gross Profit 49,108 71.0% 50,444 75.9% 69,275 80.1%
Electrical
Products
Net Revenues 77,215 18.8% 81,062 20.2% 89,621 18.3%
Gross Profit 20,075 29.0% 16,039 24.1% 17,247 19.9%
-------- --------- ---------
Total Company
Net Revenues 410,803 100.0% 400,643 100.0% 489,137 100.0%
Gross Profit 69,183 100.0% 66,483 100.0% 86,522 100.0%
2005
--------------------------------------
December 31 Year-to-Date
----------------- -----------------
%of %of
$ Total $ Total
--------------------------------------
Energy Products
Net Revenues 409,687 84.5% 1,462,372 81.9%
Gross Profit 112,256 87.2% 281,083 80.1%
Electrical
Products
Net Revenues 74,963 15.5% 322,861 18.1%
Gross Profit 16,539 12.8% 69,900 19.9%
--------- -----------
Total Company
Net Revenues 484,650 100.0% 1,785,233 100.0%
Gross Profit 128,795 100.0% 350,983 100.0%
Net Revenues by Geographic Area
2006
--------------------------------------------------
March 31 June 30 September 30
---------------- ---------------- -------------
%of %of %of
$ Total $ Total $ Total
--------------------------------------------------
United States 293,843 54.1% - -
Canada 201,019 37.0% - -
Latin America
and Other 48,198 8.9% - -
-------- -------- --------
Total Company 543,060 100.0% - -
======== ======== ========
2006
-------------------------------------
December 31 Year-to-Date
----------------- -----------------
%of %of
$ Total $ Total
-------------------------------------
United States - 293,843 54.1%
Canada - 201,019 37.0%
Latin America
and Other - 48,198 8.9%
-------- ----------
Total Company - 543,060 100.0%
======== ==========
2005
-----------------------------------------------------
March 31 June 30 September 30
---------------- --------------- -----------------
%of %of %of
$ Total $ Total $ Total
-----------------------------------------------------
United States 258,954 63.0% 286,708 71.6% 291,711 59.6%
Canada 137,964 33.6% 90,605 22.6% 131,505 26.9%
Latin America
and Other 13,885 3.4% 23,330 5.8% 65,921 13.5%
-------- -------- --------
Total Company 410,803 100.0% 400,643 100.0% 489,137 100.0%
======== ======== ========
2005
---------------------------------------
December 31 Year-to-Date
----------------- ------------------
%of %of
$ Total $ Total
---------------------------------------
United States 278,745 57.5% 1,116,118 62.5%
Canada 168,851 34.8% 528,925 29.6%
Latin America
and Other 37,054 7.6% 140,190 7.9%
-------- ----------
Total Company 484,650 100.0% 1,785,233 100.0%
======== ==========
Note: Net revenue is attributable to the destination to which the
product is shipped by Maverick. This attribution method differs from
the Geographic Information disclosure in the Segment Information
footnote of the Company's December 31, 2005 Form 10-K.
*T