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As Of Filer Filing For·On·As Docs:Size Issuer Agent 9/07/06 Lone Star Technologies Inc 8-K:7 9/07/06 1:197K Merrill Corp-MD/FA |
Document/Exhibit Description Pages Size 1: 8-K Current Report of Material Events or Corporate HTML 112K Changes
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 7, 2006
Lone Star Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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75-2085454 |
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(State or other jurisdiction |
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(Commission |
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(IRS Employer |
of incorporation) |
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File Number) |
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Identification No.) |
15660 North Dallas Parkway
Suite 500
(Address, including zip code, of principal executive offices)
Registrant’s telephone number, including area code: (972) 770-6401
Not applicable
(Former name or former address, if changed since last report)
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 7.01. REGULATION FD DISCLOSURE.
Certain officers of Lone Star Technologies, Inc. plan to present the following materials, in the form of a slide show presentation, printed brochure and/or Internet webcast to investors in various presentations commencing September 7, 2006.
Lone Star Technologies, Inc. Investor Presentation 2006
Graphic representations of casing and other various tubular products situated behind Lone Star Technologies, Inc. star logo.
Forward – Looking Statements
This presentation contains statements regarding our expectations and future performance based on assumptions that are subject to a wide range of business risks. Such statements are “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements are based on our analysis of currently inherently uncertain, and events and actual results could turn out to be significantly different from our expectations. The following are some of the factors that should be considered when evaluating these forward looking statements:
Fluctuations in domestic and worldwide prices and demand for natural gas and oil; fluctuations in levels of natural gas and crude oil exploration and development activities; fluctuations in the demand for our products and services; the competition for raw materials used in our business and the volatility of our raw material costs; the effect of foreign competition on our industry, particularly oilfield products, which could be increased by an easing of U.S. government import trade restrictions; fluctuations in inventory levels of oilfield products; the existence of inherent risks in oil and gas drilling transmission activities; fluctuations in levels of manufacturing and other general economic activity, particularly in the automotive and other industries that purchase our specialty tubulars and general economic conditions.
A sustained increase or decrease in the price of natural gas or oil, which could have a material impact on exploration and production activities, could also materially affect our financial position, results of operations and cash flows. These and other important factors that could cause actual results to differ materially from the forward-looking statements are described in the periodic filings of Lone Star Technologies, Inc. with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Lone Star Technologies, Inc., does not undertake any obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.
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Graphic representation of Lone Star Technologies, Inc. star logo.
Company Representatives
Rhys J. Best, Chairman of the Board and Chief Executive Officer
Charles J. Keszler, Vice President and Chief Financial Officer
Graphic representation of Lone Star Technologies, Inc. star logo.
Investment Considerations
Graphic representation of Lone Star Technologies, Inc. star logo.
Lone Star Revenues by Segment
Graphic of a pie chart depicting the following amounts for the following segments: (1) 80% Oilfield Products, (2) 13% Specialty Tubing Products and (3) 7% Flat Rolled/Other.
Graphic representation of Lone Star Technologies, Inc. star logo.
Oilfield Products – 80% of Revenues
OCTG (85 - 90% of Oilfield Products)
Casing – used as a retainer wall for oil and gas wells
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Production Tubing – transports oil and gas from wells to the surface
Coupling – connections used to join individual sections of casing and tubing together
Custom Finishing –premium threading, heat treating, upsetting, storage & inspection
LINE PIPE (10 - 15% of Oilfield Products)
Used in the gathering and transmission of oil and natural gas from wellhead to larger transmission lines and refineries.
Graphic of a pie chart depicting the following amounts for the following segments: (1) 85-90% OCTG and (2) 10-15% Line Pipe.
Graphic representation of Lone Star Technologies, Inc. star logo.
Oilfield Products – 60% Premium OCTG Revenues
Graphic of a pie chart depicting the following amounts for the following segments: (1) 60% Premium and (2) 30% Other.
Graphic representation of Lone Star Technologies, Inc. star logo.
Specialty Tubing – 10-15% of Total Revenues
Precision Mechanical Tubing – 70% of Specialty Tubing
Heat Recovery Tubular Products
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Graphic representation of products in which precision mechanical tubulars are used as component parts.
Graphic representation of Lone Star Technologies, Inc. star logo.
Flat Rolled/Other – 5-10% Revenues
Graphic representation of flat rolled steel.
Graphic representation of Lone Star Technologies, Inc. star logo.
Steadfast on Strategy
Graphic representation of stretch reduction.
Graphic representation of Lone Star Technologies, Inc. star logo.
Oilfield Products – Customer Based Solutions
Lone Star provides one of the broadest offerings of casing, tubing, couplings, line pipe and OCTG finishing in the world. Significant users include: Anadarko, Devon, XTO, BP, Burlington Resources, and Exxon Mobil.
Graphic representation of onshore drilling rig and offshore shallow water and deep water drilling platforms.
Graphic representation of couplings situated below Lone Star Technologies, Inc. star logo.
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Slide 12
Unconventional Gas Hot Spots
Lone Star is geographically advantaged to the market
Multiple high volume fracs require more heat treat casing
Horizontal and bi-lateral completions consume more casing
Graphic representation of a map of the United States indicating hot spots in the following general locations on the map:
Slide 12 attributes the source of certain information contained therein to Cambridge Energy Research Associates (updated May 2005).
Graphic representation of Lone Star Technologies, Inc. star logo.
Broad Oilfield Tubular Size
Our mills and our alliance mills produce OCTG and Line Pipe in size range 60” to 1” OD. Star Energy Group provides the broadest range (1” to 20” OD) of OCTG finishing, production tubing and couplings, inspection and storage services in the marketplace today.
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Graphic representation of a three-level cylinder. The bottom level is labeled “Lone Star Mills,” the middle level is labeled “Alliance Mills” and the top level is labeled “Star Energy Group.”
Graphic representation of various tubular products situated below Lone Star Technologies, Inc. star logo.
Broadest Product Size Range
Through our 2 wholly-owned oilfield tubular manufacturers and 7 alliance mills, we have one of the broadest OCTG and line pipe product ranges in the world.
Graphic representation of Lone Star Product Offering. This illustration depicts a tubular product divided into five segments: (1) 1”, (2) 2-3/8” – 8-5/8”, (3) 8-5/8” – 13-3/8”, (4) 13-3/8” – 16” and (5) 16” – 60”. The segments are further identified as follows: ERW Seam Annealed – 2-3/8” – 8-5/8”; Seamless – 2-3/8” – 8-5/8” and 8-5/8” – 13-3/8”; ERW Full-Body Normalized – 1”, 2-3/8” – 8-5/8”, 8-5/8” – 13-3/8” and 13-3/8” –16”; DSAW – 16” – 60”; and the Lone Star Product Offering, which is identified with all five segments.
Graphic representation of Lone Star Technologies, Inc. star logo.
LONE STAR TECHNOLOGIES, INC./HUNAN VALIN STEEL TUBE AND WIRE CO., LTD. JOINT VENTURE IN CHINA
Graphic representation of various tubular products.
Graphic representation of Lone Star Technologies, Inc. star logo.
Transaction Overview
Transaction |
· Lone Star will acquire 40% stake in MPM for consideration of $132MM |
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· Upon injection of $132MM, Lone Star and Valin Tube and Wire to establish Sales Company to manage North American sales and marketing of OCTG produced by Joint Venture |
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Potential investment |
· Lone Star contemplates a series of future investments up to an aggregate of $238MM in the Joint Venture for 47% ownership stake in MPM and steel tube and related assets of Valin Tube and Wire |
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· $15MM initial equity investment in Sales Company |
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Funding |
· General corporate resources, which includes cash, available credit lines |
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Approvals |
· Customary conditions |
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· Relevant regulatory authorities in Peoples Republic of China |
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Expected Close |
· By early 2007 |
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Anticipated financial impact |
· Accretive to EPS in 2007 |
Graphic representation of Lone Star Technologies, Inc. star logo.
Key Operational and Strategic Benefits
· Output from mills (melt shops through product finishing) of approx 1MM seamless pipe tons annually
· Additional capabilities include small- and large-diameter billet casting, heat treating and OCTG finishing
· Exclusive marketing and sales rights in North America to annual minimum of 200,000 tons of OCTG product manufactured by Joint Venture
· Addition of high-quality seamless tubular products and oilfield services complements Lone Star’s existing line of premium welded OCTG offerings
· Offers customers fuller array of competitively-priced products and services from a single source, when and where they need them
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· Participation in Chinese oilfield tubular markets
· Proximity to other high-growth markets
Graphic representation of Lone Star Technologies, Inc. star logo.
Expanded Sourcing and Global Reach
Graphic representation of a world map showing the following entities at the following locations:
Bellville Tube, Bellville, TX – ERW-FBN OCTG, LP
Citra Tubindo, Batam, Indonesia – Seamless OCTG
Lone Star Steel, Lone Star, TX – ERW-FBN OCTG, LP, ST
Tex-Tube, Houston, TX – ERW-SA LP & OCTG
Northwest Pipe, Atchison, KS – ERW-SA LP
Texas Tubular Prod., Lone Star, TX – ERW-SA OCTG & LP
Tubos Apolo, Sao Paulo, Brazil – ERW-SA OCTG & LP
TMK, Volgograd & Others, Russia – Seamless OCTG
Valin Tube & Wire, Hengyang China – Seamless OCTG
Welspun, Vettadora, India – SAW & ERW LP
ERW = |
Electric Resistance Welded |
FBN = |
Full-Body Normalized |
LP = |
Line Pipe |
OCTG = |
Oil Country Tubular Goods |
SA = |
Seam Annealed |
SAW = |
Submerged Arc Welded |
ST = |
Specialty Tubing |
Graphic representation of map of China showing the location of the Joint Venture Facilities, Hengyang, Hunan Province, China.
Graphic representation of Lone Star Technologies, Inc. star logo.
Key Financial Benefits
· Preferential return for Lone Star until earlier date of:
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· Profits shared equally thereafter
· Joint Venture profits shared based upon partners’ ownership stakes
· Expected to be accretive to EPS in 2007
Graphic representation of Lone Star Technologies, Inc. star logo.
Oilfield Tubular Products Demand
Factors that influence demand:
· Currencies relationships
· Freight costs
· Home market demand
Graphic representation of Lone Star Technologies, Inc. star logo.
Deeper Wells Increase Demand
Well depth increases OCTG use and premium product requirements
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Graphic illustrating the amount of tubular consumption as a function of well depth. The graph shows the following three wells:
Graphic representation of an offshore drilling platform situated below Lone Star Technologies, Inc. star logo.
Historical Rig Count
Line graph labeled “2001 – June 2006” depicting the historical rig count with respect to the following categories: Gulf of Mexico, U.S. Land, Canada and International. The graph illustrates the following historical numbers of rigs for each of the following years:
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Gulf of Mexico |
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U.S. Land |
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Canada |
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International |
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2001 |
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119 |
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768 |
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264 |
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752 |
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2002 |
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108 |
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721 |
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348 |
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753 |
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2003 |
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101 |
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931 |
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417 |
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803 |
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2004 |
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100 |
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1,092 |
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440 |
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869 |
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2005 |
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75 |
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1,308 |
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575 |
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948 |
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2006 |
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93 |
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1,590 |
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533 |
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906 |
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Slide 22 attributes the source of certain information contained in such slide to Baker Hughes.
Graphic representation of Lone Star Technologies, Inc. star logo.
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Slide 23
Rigs Drilling Deeper than 8,000 Feet
Pie chart depicting the following amounts: 1) 75% — 8,000 feet and deeper and 2) 25% — Less than 8,000 feet.
Graphic representation of line pipe situated below Lone Star Technologies, Inc. star logo.
Financial Overview
Graphic representation of various tubular products labeled with the Star Energy Group, Lone Star Steel, Fintube, Wheeling, Bellville Tube and Delta logos. A large star graphic is centered in front of the tubular products.
Historical Revenues Demand Drivers
Oilfield Products
Specialty Tubing Products
Flat Rolled Steel
Line graph reflecting the following revenues for the following years:
1999 |
$362 million |
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2000 |
$645 million |
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2001 |
$650 million |
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2002 |
$524 million |
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2003 |
$534 million |
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2004 |
$967 million |
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2005 |
$1,285 million |
Graphic representation of Lone Star Technologies, Inc. star logo.
Cost of Goods Sold
Pie chart reflecting the following percentages for the following items:
(1) Raw Materials – 65%;
(2) Labor – 10%;
(3) Energy – 5%; and
(4) Other – 20%.
Graphic representation of Lone Star Technologies, Inc. star logo.
Raw Materials Strategy
Graphic representation of steel slabs, flat rolled steel, pipe and molten steel.
Graphic representation of Lone Star Technologies, Inc. star logo.
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Slide 28
Financial Performance ($ in millions, except share data)
A table containing the following information:
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2004 |
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2005 |
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1st Half 2006 |
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Operating Data: |
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Revenues |
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$ |
966.8 |
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$ |
1,285.1 |
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$ |
706.7 |
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Gross Profit |
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162.0 |
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272.3 |
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152.6 |
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Net Income |
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101.0 |
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223.6 |
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73.5 |
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Diluted EPS |
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3.46 |
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7.34 |
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2.41 |
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Operating Cash Flow |
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29.5 |
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148.2 |
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153.3 |
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EBITDA |
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147.2 |
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258.4 |
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136.2 |
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Margins: |
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Gross Profit |
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16.8 |
% |
21.2 |
% |
21.6 |
% |
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EBITDA |
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15.2 |
% |
20.1 |
% |
19.3 |
% |
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Graphic representation of Lone Star Technologies, Inc. star logo.
Reconciliation of EBITDA to operating cash flows on Page 25 of this presentation.
A table containing the following information:
Strong Balance Sheet
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6/30/06 |
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Cash and Investments in Debt Securities |
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$ |
236.8 |
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Total Assets |
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932.5 |
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Equity |
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722.5 |
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Graphic representation of casing situated below Lone Star Technologies, Inc. star logo.
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Slide 30
EBITDA to Operating Cash Flow Reconciliation
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2005 |
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1Q ‘06 |
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2Q ‘06 |
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Operating cash flows |
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$ |
148.2 |
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$ |
105.7 |
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$ |
153.3 |
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Add (deduct): |
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Non-cash charges for stock compensation |
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(3.5 |
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(1.9 |
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(4.2 |
) |
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Gain (loss) on sale of property |
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0.1 |
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— |
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(0.1 |
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Balance sheet changes |
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106.7 |
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(55.5 |
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(52.1 |
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Interest expense, net |
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10.3 |
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0.7 |
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— |
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Income tax expense (benefit) |
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(3.4 |
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23.8 |
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39.3 |
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EBITDA(1) |
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$ |
258.4 |
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$ |
72.8 |
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$ |
136.2 |
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(1) See page 31 regarding our use of EBITDA as a Non-GAAP liquidity measure.
Graphic representation of casing situated below Lone Star Technologies, Inc. star logo.
Use of Non-GAAP Financial Measures
With respect to the inclusion of EBITDA in this investor presentation, EBITDA is a measure of Lone Star’s liquidity that is not required by, or presented in accordance with, GAAP. EBITDA should not be considered as an alternative to cash flow from operating activities as a measure of Lone Star’s liquidity or as an alternative to net income, operating income, or any other performance measures derived in accordance with GAAP.
EBITDA represents net income before interest, taxes, depreciation, and amortization. Lone Star uses EBITDA:
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However, EBITDA has limitations as an analytical tool, and you should not consider EBITDA in isolation or as a substitute for analysis of Lone Star’s results as reported under GAAP. For example, EBITDA does not reflect:
Because of these limitations, you should not consider EBITDA as a measure of discretionary cash available to Lone Star to invest in the growth of its business. Lone Star compensates for these limitations by relying primarily on Lone Star’s GAAP results and by using EBITDA only supplementally.
Graphic representation of casing situated below Lone Star Technologies, Inc. star logo.
Investment Considerations
Graphic representation of Lone Star Technologies, Inc. star logo.
Slide 33
Graphic representation of various tubular products. A large star graphic is centered in front of the tubular products.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LONE STAR TECHNOLOGIES, INC. |
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By: |
/s/ Robert F. Spears |
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Robert F. Spears, |
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Vice President, General Counsel |
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and Secretary |
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This ‘8-K’ Filing | Date | Other Filings | ||
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Filed on / For Period End: | 9/7/06 | |||
8/15/06 | 8-K | |||
List all Filings |