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United States
Securities And Exchange Commission
Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934

For the quarterly period ended March 31, 2003

COMMISSION FILE NUMBER: 1-12881

Lone Star Technologies, Inc.
(A Delaware Corporation)
I.R.S. Employer Identification Number: 75-2085454

15660 N. Dallas Parkway, Suite 500
Dallas, Texas 75248
(972) 770-6401

Indicate by a 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 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 ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        As of April 28, 2003, the number of shares of Common Stock outstanding at $1.00 par value per share was 28,426,628.

Lone Star Technologies, Inc.


Index


Part I—Financial Information

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LONE STAR TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited; $ and shares in millions, except per share data)

See Notes to Consolidated Financial Statements.

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LONE STAR TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; $ in millions, except share data)

See Notes to Consolidated Financial Statements.

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LONE STAR TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; $ in millions)

See Notes to Consolidated Financial Statements.

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LONE STAR TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1—Basis of Presentation

        In the opinion of management, the unaudited consolidated financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to present fairly the financial position as of March 31, 2003 and the cash flows and the results of operations for the three months ended March 31, 2003 and 2002. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended December 31, 2002. The principal operating companies of Lone Star Technologies, Inc. ("Lone Star", or the "Company") are Lone Star Steel Company ("Steel"), Fintube Technologies, Inc. ("Fintube"), Bellville Tube Company ("Bellville") and Wheeling Machine Products, Inc. ("Wheeling"). The results of operations for the interim periods presented may not be indicative of total results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations promulgated by the United States Securities and Exchange Commission. However, management believes that the disclosures contained herein are adequate to make the information presented not misleading. Certain reclassifications of prior period amounts have been made to conform with the current period presentation. The unaudited financial statements should be read in conjunction with the audited financial statements and accompanying notes in Lone Star's Annual Report on Form 10-K for the year ended December 31, 2002. In these Notes to Consolidated Financial Statements, all dollar and share amounts in tabulation are in millions of dollars and shares, respectively, except per share amounts and unless otherwise noted.

        Lone Star uses estimates and assumptions required for preparation of the financial statements. The estimates are primarily based on historical experience and business knowledge and are revised as circumstances change. However, actual results could differ from the estimates.

Note 2—Goodwill and Other Intangible Assets

        Goodwill identified with Lone Star's oilfield segment resulted from the acquisitions of Steel and Bellville. Goodwill identified with Lone Star's specialty tubing segment resulted from the acquisition of Fintube. Goodwill is tested for impairment annually by each reporting unit. Other intangible assets that

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are subject to amortization are amortized on a straight-line basis over their respective estimated useful lives of four to six years. The components of goodwill and intangible assets were as follows:

Note 3—Stock-Based Compensation Plans

        The Company applies the intrinsic value method provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for grants of options to Company directors, officers and employees under the Company's various stock-based compensation plans. No stock-based employee compensation cost was reflected in net earnings related to incentive and nonqualified stock options, as all option grants under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. In addition, no compensation expense was recognized related to restricted stock grants for the quarters ended March 31, 2003 and 2002, respectively. The following table illustrates the effect on net loss and loss per

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share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" in accounting for the plan.

Note 4—Inventories

        At March 31, 2003, inventories totaled $175.8 million before LIFO reserves and were composed of: finished goods, $55.0 million; work in process, $55.4 million; and raw materials and supplies, $65.4 million. Net of LIFO reserves of $34.5 million, inventories were $141.3 million, of which $3.7 million (consisting of supplies and spare parts) were classified as noncurrent assets.

Note 5—Earnings Per Share

        Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock. The numbers of shares used to compute basic earnings per share for the three months ended March 31, 2003 and 2002, respectively, were 28.4 million and 25.3 million. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and other dilutive securities. Lone Star had a net loss for the three months ended March 31, 2003 and 2002 and the effect of including dilutive securities in earnings per share would have been anti-dilutive. At March 31, 2003 and 2002, options to purchase 0.2 million common shares were excluded from the calculation of diluted earnings per share.

Note 6—Product Warranties

        Lone Star's products are used in applications which are subject to inherent risks including well failures, performance deficiencies, line pipe leaks, personal injury, property damage, environmental contamination or loss of production. The Company warrants its products to meet certain specifications. Actual or claimed deficiencies from these specifications may give rise to claims and the Company maintains a reserve for asserted and unasserted warranty claims. The warranty claim exposure is evaluated using historical claim trends and information available on specifically known claims. The Company also maintains product and excess liability insurance subject to certain deductibles that limit

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the exposure to these claims. The Company considers the extent of insurance coverage in its estimate of the reserve. Typically, this reserve is not subject to significant fluctuations from period-to-period. However, the incurrence of an unusual amount of claims could alter the Company's exposure and the related reserve. The following table identifies changes in warranty reserves from December 31, 2002 to March 31, 2003:

Note 7—Treasury Shares

        Beginning in October 2002, the Company's Board of Directors authorized the open-market purchase of Lone Star's common stock from time to time for a total investment not to exceed $10.0 million. Since the inception of the stock buy-back program, a total of 160,600 shares have been repurchased as treasury shares. The 165,844 treasury shares held as of March 31, 2003 and 105,844 shares held as of December 31, 2002 are reported at their acquired cost.

Note 8—Business Segments Data

        The following table presents segment information. The "Corporate/Other" column includes corporate related items and other insignificant nonsegments:

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Note 9—Contingencies

        On August 16, 2001, Lone Star entered into an agreement to purchase the assets of North Star Steel Company's Tubular Steel Division. Consummation of the acquisition was subject to completion of financing arrangements. Due to lack of common stock financing which, along with certain debt financing, was required by the acquisition agreement to close the acquisition, Lone Star notified Cargill, Incorporated, the parent company of North Star Steel Company, on December 14, 2001, that it was not able to complete the acquisition. Later that day, Cargill, Incorporated notified Lone Star that it was filing a lawsuit against Lone Star seeking unspecified damages and alleging that Lone Star had breached the agreement. On March 13, 2003, the jury in Minnesota returned a verdict of $32 million in damages against Lone Star. The Company believes it has fully performed all of its obligations under the acquisition agreement and will vigorously contest the verdict. Lone Star has set up a reserve of $32 million which is included in non-current liabilities at December 31, 2002 and March 31, 2003 with a corresponding charge to selling, general and administrative expenses for the year ended December 31, 2002.

        During the last four years, Steel has been named as one of a number of defendants in 30 lawsuits alleging that certain individuals were exposed to asbestos on the defendants' premises. The plaintiffs are seeking unspecified damages. To date several of these lawsuits have been settled for approximately $30,000 in the aggregate. Of the 30 lawsuits, eight have been settled or are pending settlement and eight have been dismissed or are pending dismissal. Steel did not manufacture or distribute any products containing asbestos. Some or all of these claims may not be covered by insurance. The Company has accrued for its estimated exposure to known claims, but does not know the extent to which future claims may be filed. Therefore, the Company cannot estimate its exposure, if any, to unasserted claims.

        Lone Star's operations are subject to foreign, federal, state, provincial and local environmental laws and regulations concerning, among other things, waste materials, wastewater disposal and air emissions. The Company believes that its subsidiaries are currently in material compliance with all applicable environmental laws and regulations.

        Lone Star and its subsidiaries are parties to a number of other lawsuits and controversies that are not discussed herein. Management of Lone Star and its operating companies, based upon their analysis of known facts and circumstances and reports from legal counsel, does not believe that any such matter will have a material adverse effect on the results of operations, financial condition or cash flows of Lone Star and its subsidiaries, taken as a whole.

Note 10—Guarantor Subsidiaries

        In 2001, the Company issued $150.0 million 9% senior subordinated notes due June 1, 2011 (the "Senior Notes"). The Senior Notes are fully and unconditionally (as well as jointly and severally) guaranteed on an unsecured, senior subordinated basis by each subsidiary of the Company (the "Guarantor Subsidiaries") other than Aletas y Birlos S.A., de C.V. (the "Non-Guarantor Subsidiary"). Each of the Guarantor Subsidiaries and Non-Guarantor Subsidiary is wholly-owned by the Company.

        The following condensed, consolidating financial statements of the Company include the accounts of the Company, the combined accounts of the Guarantor Subsidiaries and the accounts of the Non-Guarantor Subsidiary.    Given the size of the Non-Guarantor Subsidiary relative to the Company on a consolidated basis, separate financial statements of the respective Guarantor Subsidiaries are not

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presented because management has determined that such information is not material in assessing the Guarantor Subsidiaries.

CONDENSED CONSOLIDATING BALANCE SHEET
AT MARCH 31, 2003

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CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE QUARTER ENDED MARCH 31, 2003