MVK Maverick Tube

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. -0- *T 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