HOUSTON, May 1, 2014 /PRNewswire/ -- MRC Global Inc.
(NYSE: MRC), the largest global distributor, based on sales, of
pipe, valves and fittings (PVF) and related products and services
to the energy industry, today announced first quarter 2014
results.
The company's sales were $1,306
million for the first quarter of 2014, which are unchanged
from the first quarter of 2013 and 3% lower than the fourth quarter
of 2013. Net income for the first quarter of 2014 was $23.5 million, or $0.23 per diluted share, compared to a first
quarter 2013 net income of $46.2
million, or $0.45 per diluted
share.
Adjusted diluted earnings per share (EPS) for the first quarter
of 2014 was $0.28 per diluted share
and excludes the impact of a $5.0
million after-tax charge ($0.05 per diluted share) related to the sale of
the company's progressive cavity pump (PCP) distribution and
servicing business in Canada.
There were no adjustments to the first quarter of 2013 diluted EPS
of $0.45 per diluted share. Please
refer to the reconciliation of adjusted net income (a non-GAAP
measure) to net income (a GAAP measure) included in this
release.
Andrew R. Lane, MRC Global's
chairman, president and chief executive officer, stated, "As we
previously discussed, inclement weather negatively impacted first
quarter 2014 sales in some regions of the U.S. in January and
February. However, we saw an increase in activity late in the
quarter, which contributed to organic growth in the upstream sector
across all segments. The outlook for the remainder of 2014 is
encouraging. Our backlog at the end of the first quarter was
$1.03 billion, an all-time record for
our company." Mr. Lane also commented, "We are pleased to have
completed the acquisition of Stream in the first quarter and are
looking forward to their contributions to MRC Global."
MRC Global's first quarter 2014 gross profit of $232.1 million declined to 17.8% of sales from
first quarter 2013 gross profit of $246.6 million, or 18.9% of sales. The 110
basis point decline reflected the impact of deflation in the
company's line pipe product group as well as the company's last-in,
first-out (LIFO) inventory costing methodology. First quarter 2014
gross profit reflected a charge of $1.3 million in cost of sales relating to
the use of the LIFO method of inventory cost accounting, while the
first quarter of 2013 reflected a benefit of $3.1 million.
Selling, general and administrative (SG&A) expenses were
$171.4 million for the first quarter
of 2014 compared to $160.8 million in
the same period of 2013. The increase included $18 million of incremental expense from the
acquisitions of Stream AS (Stream) in January 2014 as well as Flangefitt Stainless Ltd.
(Flangefitt) and Flow Control Products (Flow Control) in the second
half of 2013. Excluding these acquisitions, SG&A was down
$7.4 million in the first quarter of
2014 compared to the first quarter of 2013 primarily due to the
disposition of the PCP distribution and servicing business in
Canada.
Adjusted EBITDA was $84.0 million
for the first quarter of 2014 compared to $103.9 million for the same period in 2013.
Please refer to the reconciliation of adjusted EBITDA (a
non-GAAP measure) to net income (a GAAP measure) in this
release.
Interest expense for the first quarter of 2014 was $15.1 million as compared to $15.3 million in the first quarter of 2013. The
benefit of the repricing of the Senior Secured Term Loan B in
November 2013 was partially offset by
higher average debt balances in the first quarter of 2014 related
to the acquisition of Stream.
Sales by Segment
U.S. sales in the first quarter of 2014 were down 1.8% to
$948.0 million from the same quarter
in 2013. The decline was attributable to reduced line pipe sales as
a result of lower line pipe pricing and reduced customer capital
spending including the impact of inclement weather in the company's
Eastern region in the first quarter of 2014. This decline was
partially offset by an increase in the company's other product
lines as well as $5.6 million of
sales related to the company's July
2013 acquisition of Flow Control. From a sector perspective,
the U.S. experienced organic growth in the upstream and downstream
sectors of 2.8% and 1.0%, respectively.
Canadian sales in the first quarter of 2014 were $166.2 million, down 18.7% from the same quarter
in 2013. The decline was primarily attributable to the sale of the
PCP distribution and servicing business, which reduced sales by
$23 million. The remaining 7.4%
reduction in sales was due to a decline in the Canadian dollar
relative to the U.S. dollar.
International sales in the first quarter of 2014 were
$191.5 million, an increase of
41.9% from the same period in 2013. The increase was due primarily
to sales from Stream and Flangefitt of $64.3 million for the first quarter of 2014.
Organically, excluding the decline in the Australian dollar
compared to the U.S. dollar, International sales remained
relatively flat when comparing first quarter of 2014 to first
quarter of 2013.
Sales by Sector
Upstream sales in the first quarter of 2014 increased 9.7% from
the first quarter of 2013 to $634.8 million, or 49% of total sales. The
improvement in upstream sales was substantially attributable to the
acquisitions completed in 2013 and 2014, as well as organic growth
of 2.0%, partially offset by the sale of the PCP distribution and
servicing business in Canada.
Midstream sales in the first quarter of 2014 decreased 11.1%
from the first quarter of 2013 to $307.4 million, or 23% of total sales. Sales
to both transmission and gas utility customers were down by 16.9%
and 1.6%, respectively. Reduced midstream sales were influenced by
lower line pipe activity in the U.S.
Downstream sales in the first quarter of 2014 decreased 4.6%
from the first quarter of 2013 to $363.5
million, or 28% of total sales. The company experienced weak
market conditions in the Canadian and International segments,
partially offset by modest growth in the U.S.
Balance Sheet
Debt outstanding was $1,314
million at March 31, 2014, an
increase of $327.4 million during the
first quarter of 2014, primarily due to the acquisition of Stream.
Cash used in operations was $74.3
million during the first quarter of 2014 primarily due to
timing of receivables collections and an increase in inventory
purchases in anticipation of increased sales levels.
Calendar Year 2014 Guidance
MRC Global's expected full year 2014 results, excluding the
impact of any future acquisitions, is unchanged from last quarter,
as presented below.
|
Low
|
|
High
|
Sales
|
$5.5
billion
|
|
$5.8
billion
|
Adjusted
EBITDA
|
$ 400
million
|
|
$ 450
million
|
Tax rate
|
35%
|
|
36%
|
Capital
expenditures
|
$25
million
|
|
$30
million
|
Cash flow from
operations
|
$175
million
|
|
$ 200
million
|
Conference Call
The Company will hold a conference call to discuss its first
quarter 2014 results at 10:00 a.m. Eastern
Time (9:00 a.m. Central Time)
on May 2, 2014. To participate
in the call, please dial (480) 629-9692 and ask for the MRC
Global conference call at least 10 minutes prior to the start time.
To access the conference call live over the Internet, please log
onto the web at http://www.mrcglobal.com and go to the
"Investor Relations" page of the company's website at least fifteen
minutes early to register, download and install any necessary audio
software. For those who cannot listen to the live call, a replay
will be available through May 16,
2014 and may be accessed by dialing (303) 590-3030 and using
pass code 4673664#. Also, an archive of the webcast will be
available shortly after the call at
http://www.mrcglobal.com for 90 days.
About MRC Global Inc.
Headquartered in Houston,
Texas, MRC Global, a Fortune 500 company, is the largest
global distributor, based on sales, of pipe, valves and fittings
(PVF) and related products and services to the energy industry and
supplies these products and services across each of the upstream,
midstream and downstream sectors. More information about MRC Global
can be found on our website mrcglobal.com.
This news release contains forward-looking statements within
the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. Words such as "will,"
"expect," "expected", "looking forward", "guidance" and similar
expressions are intended to identify forward-looking
statements.
Statements about the company's business, including its
strategy, its industry, the company's future profitability, the
company's guidance on its sales, adjusted EBITDA, tax rate, capital
expenditures and cash flow, growth in the company's various markets
and the company's expectations, beliefs, plans, strategies,
objectives, prospects and assumptions are not guarantees of future
performance. These statements are based on management's
expectations that involve a number of business risks and
uncertainties, any of which could cause actual results to differ
materially from those expressed in or implied by the
forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors, most of which are
difficult to predict and many of which are beyond our control,
including the factors described in the company's SEC filings that
may cause our actual results and performance to be materially
different from any future results or performance expressed or
implied by these forward-looking statements.
These risks and uncertainties include (among others)
decreases in oil and natural gas industry expenditure levels, which
may result from decreased oil and natural gas prices or other
factors; increased usage of alternative fuels, which may negatively
affect oil and natural gas industry expenditure levels; U.S.
and international general economic conditions; the company's
ability to compete successfully with other companies in MRC
Global's industry; the risk that manufacturers of the
products the company distributes will sell a substantial amount of
goods directly to end users in the industry sectors the
company serves; unexpected supply
shortages; cost increases by the company's suppliers;
the company's lack of long-term contracts with most of its
suppliers; suppliers' price reductions of products that the company
sells, which could cause the value of the company's
inventory to decline; decreases in steel
prices, which could significantly lower MRC's
profit; increases in steel prices, which
the company may be unable to pass along to its customers
which could significantly lower its profit; the company's lack of
long-term contracts with many of its customers and the
company's lack of contracts with customers that require
minimum purchase volumes; changes in the
company's customer and product mix; risks
related to the company's customers' creditworthiness;
the potential adverse effects associated with integrating
acquisitions into the company's business and whether these
acquisitions will yield their intended benefits;
the success of the company's acquisition
strategies; the company's significant indebtedness;
the dependence on the company's subsidiaries for
cash to meet its debt obligations; changes in
the company's credit profile; a decline in
demand for certain of the products the company distributes if
import restrictions on these products are lifted; environmental,
health and safety laws and regulations and the
interpretation or implementation thereof; the sufficiency of
the company's insurance policies to cover losses, including
liabilities arising from litigation; product
liability claims against the company; pending
or future asbestos-related claims against the company;
the potential loss of key personnel;
interruption in the proper functioning of the
company's information systems; loss of
third-party transportation providers; potential
inability to obtain necessary capital; risks
related to adverse weather events or natural disasters; impairment
of our goodwill or other intangible assets;
changes in tax laws or adverse positions taken by taxing
authorities in the countries in which the company operates;
adverse changes in political or economic conditions in the
countries in which the company operates; exposure to U.S.
and international laws and regulations, including the Foreign
Corrupt Practices Act and the U.K. Bribery Act and other economic
sanction programs; risks relating to ongoing evaluations of
internal controls required by Section 404 of the Sarbanes-Oxley
Act; the impact on us of the SEC's move toward convergence
with IFRS; and the occurrence of cyber security
incidents.
For a discussion of key risk factors, please see the risk
factors disclosed in the company's SEC filings, which are available
on the SEC's website at www.sec.gov and on the company's
website, www.mrcglobal.com. Our filings and other important
information are also available on the Investor Relations page of
our website at www.mrcglobal.com.
Undue reliance should not be placed on the company's
forward-looking statements. Although forward-looking statements
reflect the company's good faith beliefs, reliance should not be
placed on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, which may cause the
company's actual results, performance or achievements or future
events to differ materially from anticipated future results,
performance or achievements or future events expressed or implied
by such forward-looking statements. The company undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events,
changed circumstances or otherwise, except to the extent required
by law.
Contact:
Monica
Schafer
Vice President Investor
Relations
MRC Global
Inc.
Monica.Schafer@mrcglobal.com
832-308-2847
MRC Global
Inc.
Condensed
Consolidated Balance Sheets (Unaudited)
(Dollars in
thousands, except per share amounts)
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
2014
|
|
2013
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
30,140
|
|
$
25,188
|
Accounts receivable,
net
|
904,838
|
|
812,147
|
Inventories,
net
|
1,053,594
|
|
971,567
|
Other current
assets
|
36,895
|
|
37,091
|
Total current
assets
|
2,025,467
|
|
1,845,993
|
|
|
|
|
Other
assets
|
27,568
|
|
30,473
|
|
|
|
|
Property, plant and
equipment, net
|
120,650
|
|
118,923
|
|
|
|
|
Intangible
assets:
|
|
|
|
Goodwill,
net
|
779,513
|
|
632,284
|
Other intangible
assets, net
|
767,122
|
|
708,009
|
|
|
|
|
|
$
3,720,320
|
|
$
3,335,682
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
535,842
|
|
$
550,393
|
Accrued expenses and
other current liabilities
|
150,118
|
|
124,925
|
Deferred income
taxes
|
77,686
|
|
78,844
|
Current portion of
long-term debt
|
7,935
|
|
7,935
|
Total current
liabilities
|
771,581
|
|
762,097
|
|
|
|
|
Long-term
obligations:
|
|
|
|
Long-term debt,
net
|
1,306,292
|
|
978,899
|
Deferred income
taxes
|
256,566
|
|
241,116
|
Other
liabilities
|
19,750
|
|
15,302
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.01
par value per share: 500,000 shares authorized, 101,944
and
|
|
|
|
101,913 issued and
outstanding, respectively
|
1,019
|
|
1,019
|
Preferred stock, $0.01
par value per share; 100,000 shares authorized,
|
|
|
|
no shares issued and
outstanding
|
-
|
|
-
|
Additional paid-in
capital
|
1,646,421
|
|
1,644,406
|
Retained
deficit
|
(243,215)
|
|
(266,735)
|
Accumulated other
comprehensive loss
|
(38,094)
|
|
(40,422)
|
|
1,366,131
|
|
1,338,268
|
|
$
3,720,320
|
|
$
3,335,682
|
|
|
|
|
MRC Global
Inc.
Condensed
Consolidated Statements of Income (Unaudited)
(Dollars in
thousands, except per share amounts)
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
March
31,
|
|
2014
|
|
2013
|
|
|
|
|
Sales
|
$
1,305,679
|
|
$
1,305,100
|
Cost of
sales
|
1,073,547
|
|
1,058,529
|
Gross
profit
|
232,132
|
|
246,571
|
|
|
|
|
Selling, general and
administrative expenses
|
171,389
|
|
160,757
|
Operating
income
|
60,743
|
|
85,814
|
|
|
|
|
Other income
(expense):
|
|
|
|
Interest
expense
|
(15,148)
|
|
(15,302)
|
Change in fair value
of derivative instruments
|
(3,563)
|
|
567
|
Other, net
|
(5,310)
|
|
116
|
|
|
|
|
Income before income
taxes
|
36,722
|
|
71,195
|
Income tax
expense
|
13,202
|
|
25,012
|
Net income
|
$
23,520
|
|
$
46,183
|
|
|
|
|
Basic earnings per
common share
|
$
0.23
|
|
$
0.45
|
Diluted earnings per
common share
|
$
0.23
|
|
$
0.45
|
Weighted-average
common shares, basic
|
101,924
|
|
101,609
|
Weighted-average
common shares, diluted
|
102,738
|
|
102,426
|
MRC Global
Inc.
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in
thousands)
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
March
31,
|
|
2014
|
|
2013
|
|
|
|
|
Operating
activities
|
|
|
|
Net income
|
$
23,520
|
|
$
46,183
|
|
|
|
|
Adjustments to
reconcile net income to net cash (used in) provided by
operations:
|
|
|
|
Depreciation and
amortization
|
5,177
|
|
5,392
|
Amortization of
intangibles
|
15,730
|
|
13,243
|
Equity-based
compensation expense
|
1,808
|
|
1,920
|
Deferred income tax
benefit
|
(6,809)
|
|
(4,017)
|
Amortization of debt
issuance costs
|
1,352
|
|
1,446
|
Increase (decrease)
in LIFO reserve
|
1,315
|
|
(3,072)
|
Change in fair value
of derivative instruments
|
3,563
|
|
(567)
|
Provision for
uncollectible accounts
|
244
|
|
(907)
|
Foreign currency
gains
|
(1,636)
|
|
(184)
|
Other non-cash
items
|
783
|
|
572
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(39,335)
|
|
11,937
|
Inventories
|
(46,141)
|
|
12,581
|
Income taxes
payable
|
22,013
|
|
25,198
|
Other current
assets
|
4,934
|
|
(6,987)
|
Accounts
payable
|
(45,696)
|
|
83,484
|
Accrued expenses and
other current liabilities
|
(15,140)
|
|
(11,815)
|
Net cash (used in)
provided by operations
|
(74,318)
|
|
174,407
|
|
|
|
|
Investing
activities
|
|
|
|
Purchases of
property, plant and equipment
|
(1,957)
|
|
(4,890)
|
Proceeds from the
disposition of property, plant and equipment
|
551
|
|
52
|
Acquisitions, net of
cash acquired
|
(247,201)
|
|
-
|
Other investment and
notes receivable transactions
|
(734)
|
|
295
|
Net cash used in
investing activities
|
(249,341)
|
|
(4,543)
|
|
|
|
|
Financing
activities
|
|
|
|
Payments on revolving
credit facilities
|
(451,808)
|
|
(544,460)
|
Proceeds from
revolving credit facilities
|
781,114
|
|
365,167
|
Payments on long-term
obligations
|
(1,984)
|
|
(1,625)
|
Debt issuance costs
paid
|
(90)
|
|
(173)
|
Proceeds from
exercise of stock options
|
329
|
|
1,459
|
Tax (expense) benefit
on stock options
|
(9)
|
|
451
|
Net cash provided by
(used in) financing activities
|
327,552
|
|
(179,181)
|
|
|
|
|
Increase (decrease)
in cash
|
3,893
|
|
(9,317)
|
Effect of foreign
exchange rate on cash
|
1,059
|
|
(352)
|
Cash -- beginning of
period
|
25,188
|
|
37,090
|
Cash -- end of
period
|
$
30,140
|
|
$
27,421
|
MRC Global
Inc.
Supplemental
Information (Unaudited)
Reconciliation of
Adjusted Net Income to Net Income
(Dollars in
thousands, except per share amounts)
|
|
|
|
|
|
Three Months
Ended
|
|
March 31,
2014
|
|
Net
Income
|
|
Per
Share
|
Net income
|
$
23,520
|
|
$
0.23
|
Loss on sale of
Canadian PCP business (1)
|
5,012
|
|
0.05
|
Adjusted Net
Income
|
$
28,532
|
|
$
0.28
|
|
|
|
|
Note to
above:
|
|
(1)
|
Charge related to the
sale of our progressive cavity pump distribution and servicing
business in Canada.
|
|
|
There were no
adjustments to net income for the three months ending March 31,
2013.
|
|
The company presents
adjusted net income and adjusted net income per share because the
company believes these measures are useful indicators of what the
company's net income and net income per share would have been
without the impact of these events being included and believes that
many analysts and investors will want to know this information when
comparing the company's results against the results of other
companies. Adjusted net income and adjusted net income per share,
however, do not represent and should not be considered as an
alternative to net income and net income per share calculated and
presented in accordance with U.S. generally accepted accounting
principles (GAAP). Because adjusted net income and
adjusted net income per share do not account for certain
expenses, its utility as a measure of our performance has material
limitations. Because of these limitations, management does not view
adjusted net income and net income per share in isolation or as a
primary performance measure and also uses other measures, such as
net income and net income per share, to measure
performance.
|
MRC Global
Inc.
Supplemental
Information (Unaudited)
Reconciliation of
Adjusted EBITDA to Net Income
(Dollars in
millions)
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
March
31,
|
|
2014
|
|
2013
|
Net income
|
$
23.5
|
|
$
46.2
|
Income tax
expense
|
13.2
|
|
25.0
|
Interest
expense
|
15.1
|
|
15.3
|
Depreciation and
amortization
|
5.2
|
|
5.4
|
Amortization of
intangibles
|
15.7
|
|
13.2
|
Increase (decrease)
in LIFO reserve
|
1.3
|
|
(3.1)
|
Change in fair value
of derivative instruments
|
3.6
|
|
(0.6)
|
Equity-based
compensation expense
|
1.8
|
|
1.9
|
Loss on sale of
Canadian PCP business
|
6.2
|
|
-
|
Foreign currency
gains
|
(1.6)
|
|
(0.2)
|
Other
expense
|
-
|
|
0.8
|
Adjusted
EBITDA
|
$
84.0
|
|
$
103.9
|
|
|
|
|
Note to
above:
|
|
The company defines
Adjusted EBITDA as net income plus interest, income taxes,
depreciation and amortization, amortization of intangibles, and
certain other expenses (such as gain/losses on the early
extinguishment of debt, changes in the fair value of derivative
instruments and goodwill impairment) and plus or minus the impact
of its LIFO inventory costing methodology. The company
presents Adjusted EBITDA because the company believes Adjusted
EBITDA is a useful indicator of the company's operating
performance. Among other things, Adjusted EBITDA measures the
company's operating performance without regard to certain
non-recurring, non-cash or transaction-related expenses.
Adjusted EBITDA, however, does not represent and should not be
considered as an alternative to net income, cash flow from
operations or any other measure of financial performance calculated
and presented in accordance with GAAP. Because Adjusted EBITDA does
not account for certain expenses, its utility as a measure of the
company's operating performance has material limitations. Because
of these limitations, the company does not view Adjusted EBITDA in
isolation or as a primary performance measure and also uses other
measures, such as net income and sales, to measure operating
performance. See the Company's Annual Report filed on Form
10-K for a more thorough discussion of the use of Adjusted
EBITDA.
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SOURCE MRC Global Inc.