HOUSTON, July 31, 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 second quarter
2014 results.
The company's sales were $1,497
million for the second quarter of 2014, which were 18%
higher than the second quarter of 2013 and 15% higher than the
first quarter of 2014. Net income for the second quarter of 2014
was $39.3 million, or $0.38 per diluted share, compared to second
quarter 2013 net income of $43.9
million, or $0.43 per diluted
share.
Adjusted diluted earnings per share (EPS) for the second quarter
of 2014 were $0.42 per diluted share
and exclude the impact of a $3.6
million after-tax charge ($0.04 per diluted share) related to employee
severance costs. There were no adjustments to the second quarter
2013 diluted EPS of $0.43 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, "I'm
pleased with our 18% quarter over quarter revenue growth. The
second quarter revenue of $1,497
million was the second highest quarterly revenue in the
company's history, surpassed only by the fourth quarter of
2008."
Mr. Lane continued, "We are also pleased to have completed two
international acquisitions during the quarter: Hypteck in
Norway, which expands our offshore
capabilities, and MSD Engineering in Singapore, which broadens our valve and valve
automation capability and technical support for our customers in
Southeast Asia. We also began a
cost reduction initiative in the second quarter of 2014, resulting
in a $5 million pre-tax employee
severance charge. We expect to realize savings of approximately
$12 to $14 million a year from the
headcount reductions as a result of this initiative."
In conclusion, Mr. Lane commented, "We ended the second quarter
with a backlog of $1,125 million, a
new company record. This record backlog along with our acquisitions
in the first half of the year, increases in North American upstream
activity and increases in E&P capital spending budgets by many
of our major customers has positioned the second half of 2014 to be
strong for us."
MRC Global's second quarter 2014 gross profit was $259.4 million or 17.3% of sales as compared to
gross profit of $243.9 million,
or 19.2% of sales for the second quarter of 2013. While gross
profit dollars were higher by $15.5
million, the percentage of sales declined by 190 basis
points. This decline reflected the impact of the company's last-in,
first-out (LIFO) inventory costing methodology as well as deflation
in the company's line pipe product group. Second quarter 2014 gross
profit reflected a charge of $0.8 million to cost of sales relating to
the use of the LIFO method of inventory cost accounting, while the
second quarter of 2013 reflected a benefit of $12.5 million.
Selling, general and administrative (SG&A) expenses were
$185.3 million for the second quarter
of 2014 or 12.4% of sales compared to $154.0
million or 12.1% of sales in the same period of 2013.
The increase included $18.3 million
of incremental expense from the acquisitions of Stream AS (Stream),
MSD Engineering Pte Ltd. (MSD) and Hypteck AS (Hypteck) in 2014 as
well as Flangefitt Stainless Ltd. (Flangefitt) and Flow Control
Products (Flow Control) in the second half of 2013. The remainder
of the increase was driven by higher personnel costs resulting from
increased business activity levels and $5
million of pre-tax employee severance costs associated with
our cost reduction initiatives.
Adjusted EBITDA was $106.2 million
for the second quarter of 2014 compared to $98.9 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 second quarter of 2014 was $15.3 million as compared to $15.2 million in the second quarter of 2013.
Sales by Segment
U.S. sales in the second quarter of 2014 were up 14.4% to
$1,116 million from the same quarter
in 2013, primarily due to organic growth of 13.9%. The increase was
across each product line as well as each sector. Despite lower
average sales prices in 2014, the line pipe product line saw the
largest gains with sales increasing 29.7% over the second quarter
of 2013. From a sector perspective, the U.S. experienced growth in
the upstream, midstream and downstream sectors of 18.6%, 12.6% and
10.0%, respectively.
Canadian sales in the second quarter of 2014 were $150.0 million, down 2.3% from the same quarter
in 2013. The decline was primarily attributable to the sale of the
progressive cavity pump (PCP) distribution and servicing business,
which reduced sales by $14.5 million
and the impact of the decline of the Canadian dollar relative to
the U.S. dollar which equated to $9.9
million. After adjusting for these items, the Canadian
business was up 16.1%, which was due to growth in customer spending
in the upstream and midstream sectors.
International sales in the second quarter of 2014 were
$231.7 million, an increase of
66.7% from the same period in 2013. The increase was due primarily
to sales from Stream, Flangefitt, Hypteck and MSD of $78.8 million for the second quarter of
2014. Organically, international sales increased 10% over the last
quarter due to growth in the European business.
Sales by Sector
Upstream sales in the second quarter of 2014 increased 29.1%
from the second quarter of 2013 to $700.1 million, or 47% of total sales. The
improvement in upstream sales was attributable to organic growth of
16.8%, as well as the acquisitions completed in 2013 and 2014,
partially offset by the sale of the PCP distribution and servicing
business in Canada.
Midstream sales in the second quarter of 2014 increased 11.7%
from the second quarter of 2013 to $420.0 million, or 28% of total sales.
Substantially all of the increase or 11.4% was organic growth.
Sales to transmission customers were up 24.3%, and sales to gas
utility customers were down 5.8%. Higher midstream sales were
influenced by increased project activity and an increase in market
share among our targeted growth accounts.
Downstream sales in the second quarter of 2014 increased 7.9%
from the second quarter of 2013 to $377.2
million, or 25% of total sales. Substantially all of the
increase or 7.5% was organic growth. Sales to downstream
customers increased in both the U.S. and International segments
partially offset by lower sales in the Canadian segment.
Balance Sheet
Debt outstanding was $1,398
million at June 30, 2014, an
increase of $83.6 million during the
second quarter of 2014, primarily due to the acquisitions of
Hypteck and MSD and working capital growth related to increases in
revenue. Cash provided by operations was $22.4 million during the second quarter of
2014.
Updated Calendar Year 2014 Guidance
MRC Global's expected full year 2014 results, excluding the
impact of any future acquisitions, is updated from last quarter, as
presented below.
|
|
|
|
|
Low
|
|
High
|
Sales
|
$5.7
billion
|
|
$5.9
billion
|
Adjusted
EBITDA
|
$400
million
|
|
$430
million
|
Tax rate
|
35%
|
|
36%
|
Capital
expenditures
|
$20
million
|
|
$25
million
|
Cash flow from
operations
|
$75
million
|
|
$100
million
|
Conference Call
The Company will hold a conference call to discuss its second
quarter 2014 results at 10:00 a.m. Eastern
Time (9:00 a.m. Central Time)
on August 1, 2014. To
participate in the call, please dial (719) 325-2495 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 August 15,
2014 and may be accessed by dialing (719) 457-0820 and using
pass code 1808539#. 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 Global'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)
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
2014
|
|
2013
|
|
(In thousands,
except per share amounts)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
36,491
|
|
$
25,188
|
Accounts receivable,
net
|
1,008,369
|
|
812,147
|
Inventories,
net
|
1,110,618
|
|
971,567
|
Other current
assets
|
43,411
|
|
37,091
|
Total current
assets
|
2,198,889
|
|
1,845,993
|
|
|
|
|
Other
assets
|
26,738
|
|
30,473
|
|
|
|
|
Property, plant and
equipment, net
|
120,980
|
|
118,923
|
|
|
|
|
Intangible
assets:
|
|
|
|
Goodwill,
net
|
865,512
|
|
632,284
|
Other intangible
assets, net
|
756,372
|
|
708,009
|
|
|
|
|
|
$
3,968,491
|
|
$
3,335,682
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
652,912
|
|
$
550,393
|
Accrued expenses and
other current liabilities
|
149,989
|
|
124,925
|
Deferred income
taxes
|
77,824
|
|
78,844
|
Current portion of
long-term debt
|
7,935
|
|
7,935
|
Total current
liabilities
|
888,660
|
|
762,097
|
|
|
|
|
Long-term
obligations:
|
|
|
|
Long-term debt,
net
|
1,389,908
|
|
978,899
|
Deferred income
taxes
|
245,974
|
|
241,116
|
Other
liabilities
|
28,256
|
|
15,302
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.01 par
value per share: 500,000 shares authorized, 102,020
|
|
|
|
and 101,913 issued and
outstanding, respectively
|
1,020
|
|
1,019
|
Preferred stock, $0.01
par value per share; 100,000 shares authorized,
|
|
|
|
no shares issued and
outstanding
|
-
|
|
-
|
Additional paid-in
capital
|
1,649,880
|
|
1,644,406
|
Retained
deficit
|
(203,915)
|
|
(266,735)
|
Accumulated other
comprehensive loss
|
(31,292)
|
|
(40,422)
|
|
1,415,693
|
|
1,338,268
|
|
$
3,968,491
|
|
$
3,335,682
|
MRC Global
Inc.
|
Condensed
Consolidated Statements of Income (Unaudited)
|
(Dollars in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
June
30,
|
|
June
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
(In thousands,
except per share amounts)
|
Sales
|
$
1,497,295
|
|
$
1,267,778
|
|
$
2,802,974
|
|
$
2,572,878
|
Cost of
sales
|
1,237,873
|
|
1,023,845
|
|
2,311,420
|
|
2,082,374
|
Gross
profit
|
259,422
|
|
243,933
|
|
491,554
|
|
490,504
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
185,287
|
|
153,975
|
|
356,676
|
|
314,732
|
Operating
income
|
74,135
|
|
89,958
|
|
134,878
|
|
175,772
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest
expense
|
(15,363)
|
|
(15,223)
|
|
(30,511)
|
|
(30,525)
|
Change in fair value of
derivative instruments
|
(697)
|
|
1,850
|
|
(4,260)
|
|
2,417
|
Other, net
|
2,026
|
|
(13,500)
|
|
(3,284)
|
|
(13,384)
|
Income before income
taxes
|
60,101
|
|
63,085
|
|
96,823
|
|
134,280
|
Income tax
expense
|
20,801
|
|
19,233
|
|
34,003
|
|
44,245
|
Net income
|
$
39,300
|
|
$
43,852
|
|
$
62,820
|
|
$
90,035
|
|
|
|
|
|
|
|
|
Basic earnings per
common share
|
$
0.39
|
|
$
0.43
|
|
$
0.62
|
|
$
0.89
|
Diluted earnings per
common share
|
$
0.38
|
|
$
0.43
|
|
$
0.61
|
|
$
0.88
|
Weighted-average
common shares, basic
|
101,986
|
|
101,693
|
|
101,955
|
|
101,651
|
Weighted-average
common shares, diluted
|
102,978
|
|
102,519
|
|
102,893
|
|
102,472
|
MRC Global
Inc.
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(Dollars in
thousands)
|
|
|
|
|
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2014
|
|
2013
|
Operating
activities
|
(In
thousands)
|
Net income
|
$
62,820
|
|
$
90,035
|
Adjustments to
reconcile net income to net cash (used in) provided by
operations:
|
|
|
|
Depreciation and
amortization
|
10,574
|
|
11,162
|
Amortization of
intangibles
|
33,880
|
|
26,028
|
Equity-based
compensation expense
|
4,066
|
|
4,639
|
Deferred income tax
benefit
|
(15,338)
|
|
(11,004)
|
Amortization of debt
issuance costs
|
2,704
|
|
2,909
|
Increase (decrease) in
LIFO reserve
|
2,067
|
|
(15,566)
|
Change in fair value
of derivative instruments
|
4,260
|
|
(2,417)
|
Provision for
uncollectible accounts
|
561
|
|
(864)
|
Foreign currency
(gains) losses
|
(3,117)
|
|
13,441
|
Other non-cash
items
|
1,232
|
|
247
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(128,760)
|
|
6,785
|
Inventories
|
(90,702)
|
|
27,024
|
Income taxes
payable
|
8,245
|
|
(4,681)
|
Other current
assets
|
(2,463)
|
|
(8,952)
|
Accounts
payable
|
64,222
|
|
58,485
|
Accrued expenses and
other current liabilities
|
(6,105)
|
|
(15,371)
|
Net cash (used in)
provided by operations
|
(51,854)
|
|
181,900
|
|
|
|
|
Investing
activities
|
|
|
|
Purchases of
property, plant and equipment
|
(4,586)
|
|
(10,642)
|
Proceeds from the
disposition of property, plant and equipment
|
836
|
|
227
|
Acquisitions, net of
cash acquired
|
(346,672)
|
|
-
|
Other investment and
notes receivable transactions
|
(774)
|
|
(374)
|
Net cash used in
investing activities
|
(351,196)
|
|
(10,789)
|
|
|
|
|
Financing
activities
|
|
|
|
Payments on revolving
credit facilities
|
(806,768)
|
|
(994,207)
|
Proceeds from
revolving credit facilities
|
1,221,386
|
|
827,548
|
Payments on long-term
obligations
|
(3,968)
|
|
(3,250)
|
Debt issuance costs
paid
|
(349)
|
|
(181)
|
Proceeds from
exercise of stock options
|
1,498
|
|
1,634
|
Tax benefit on stock
options
|
141
|
|
226
|
Other financing
activities
|
-
|
|
(6)
|
Net cash provided by
(used in) financing activities
|
411,940
|
|
(168,236)
|
|
|
|
|
Increase in
cash
|
8,890
|
|
2,875
|
Effect of foreign
exchange rate on cash
|
2,413
|
|
(2,153)
|
Cash -- beginning of
period
|
25,188
|
|
37,090
|
Cash -- end of
period
|
$
36,491
|
|
$
37,812
|
MRC Global
Inc.
|
Supplemental
Information (Unaudited)
|
Reconciliation of
Adjusted Net Income to Net Income
|
(Dollars in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
Net
Income
|
|
Per
Share
|
|
Net
Income
|
|
Per
Share
|
Net income
|
$ 39,300
|
|
$
0.38
|
|
$ 62,820
|
|
$
0.61
|
Loss on sale of
Canadian PCP business (1)
|
-
|
|
-
|
|
5,012
|
|
0.05
|
Employee severance
(2)
|
3,618
|
|
0.04
|
|
3,618
|
|
0.04
|
Adjusted Net
Income
|
$ 42,918
|
|
$
0.42
|
|
$ 71,450
|
|
$
0.70
|
|
Note to
above:
|
|
(1)
|
Charge (after-tax) related to the sale of our
progressive cavity pump distribution and servicing business in
Canada recorded in Other, net.
|
(2)
|
Charge (after-tax) related to employee severance and
related charges associated with our cost reduction initiatives
recorded in SG&A.
|
|
|
|
There were no adjustments to net income for the three
and six months ending June 30, 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
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
June
30,
|
|
June
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net income
|
$
39.3
|
|
$
43.9
|
|
$
62.8
|
|
$
90.0
|
Income tax
expense
|
20.8
|
|
19.2
|
|
34.0
|
|
44.2
|
Interest
expense
|
15.3
|
|
15.2
|
|
30.5
|
|
30.5
|
Depreciation and
amortization
|
5.4
|
|
5.8
|
|
10.5
|
|
11.2
|
Amortization of
intangibles
|
18.1
|
|
12.8
|
|
33.9
|
|
26.0
|
Increase (decrease)
in LIFO reserve
|
0.8
|
|
(12.5)
|
|
2.1
|
|
(15.6)
|
Change in fair value
of derivative instruments
|
0.7
|
|
(1.9)
|
|
4.3
|
|
(2.4)
|
Equity-based
compensation expense
|
2.3
|
|
2.7
|
|
4.0
|
|
4.6
|
Loss on sale of
Canadian PCP business (1)
|
-
|
|
-
|
|
6.2
|
|
-
|
Employee severance
(2)
|
5.0
|
|
-
|
|
5.0
|
|
-
|
Foreign currency
(gains) losses
|
(1.5)
|
|
13.6
|
|
(3.1)
|
|
13.4
|
Other
expense
|
-
|
|
0.1
|
|
-
|
|
0.8
|
Adjusted
EBITDA
|
$
106.2
|
|
$
98.9
|
|
$
190.2
|
|
$
202.7
|
|
|
Note to
above:
|
|
|
(1)
|
Charge (pre-tax)
related to the sale of our progressive cavity pump distribution and
servicing business in Canada recorded in Other, net.
|
(2)
|
Charge (pre-tax)
related to employee severance and related charges associated with
our cost reduction initiatives recorded in SG&A.
|
|
|
|
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.
|
MRC Global
Inc.
|
Supplemental
Information (Unaudited)
|
Reconciliation of
Adjusted Gross Profit to Gross Profit
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
Percentage
|
|
June
30,
|
|
Percentage
|
|
2014
|
|
of
Revenue
|
|
2013
|
|
of
Revenue
|
Gross profit, as
reported
|
$
259.4
|
|
17.3%
|
|
$
243.9
|
|
19.2%
|
Depreciation and
amortization
|
5.4
|
|
0.4%
|
|
5.8
|
|
0.5%
|
Amortization of
intangibles
|
18.1
|
|
1.2%
|
|
12.8
|
|
1.0%
|
Increase (decrease)
in LIFO reserve
|
0.8
|
|
0.1%
|
|
(12.5)
|
|
(1.0%)
|
Adjusted Gross
Profit
|
$
283.7
|
|
19.0%
|
|
$
250.0
|
|
19.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
June
30,
|
|
Percentage
|
|
June
30,
|
|
Percentage
|
|
2014
|
|
of
Revenue
|
|
2013
|
|
of
Revenue
|
Gross profit, as
reported
|
$
491.6
|
|
17.5%
|
|
$
490.5
|
|
19.1%
|
Depreciation and
amortization
|
10.5
|
|
0.4%
|
|
11.2
|
|
0.4%
|
Amortization of
intangibles
|
33.9
|
|
1.2%
|
|
26.0
|
|
1.0%
|
Increase (decrease)
in LIFO reserve
|
2.1
|
|
0.1%
|
|
(15.6)
|
|
(0.6%)
|
Adjusted Gross
Profit
|
$
538.1
|
|
19.2%
|
|
$
512.1
|
|
19.9%
|
|
|
|
|
|
|
|
|
|
Notes to
above:
|
|
The company defines
Adjusted Gross Profit as sales, less cost of sales, plus
depreciation and amortization, plus amortization of intangibles,
and plus or minus the impact of its LIFO inventory costing
methodology. The company presents Adjusted Gross Profit because the
company believes it is a useful indicator of the company's
operating performance without regard to items, such as amortization
of intangibles, that can vary substantially from company to company
depending upon the nature and extent of acquisitions they have been
involved in. Similarly, the impact of the LIFO inventory costing
method can cause results to vary substantially from company to
company depending upon whether they elect to utilize the LIFO
method and depending upon which method they may elect. The company
uses Adjusted Gross Profit as a key performance indicator in
managing its business. The company believes that gross profit is
the financial measure calculated and presented in accordance with
U.S. generally accepted accounting principles that is most directly
comparable to Adjusted Gross Profit.
|
SOURCE MRC Global Inc.