HOUSTON, Nov. 6, 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 third quarter 2014
results.
The company's sales were $1.618
billion for the third quarter of 2014, which were 23% higher
than the third quarter of 2013 and 8% higher than the second
quarter of 2014. Net income for the third quarter of 2014 was
$50 million, or $0.49 per diluted share, compared to third
quarter 2013 net income of $39
million, or $0.38 per diluted
share.
Adjusted diluted earnings per share (EPS) were $0.54 per diluted share for the third quarter of
2014 as compared to adjusted diluted EPS for the third quarter of
2013 of $0.40 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, "Our
multi-year strategy to expand internationally, re-balance our
product lines, focus on global industrial valve sales and
streamline our SG&A is evidenced in our strong third quarter
results. We are very pleased with year to date revenue growth of
14%."
Mr. Lane continued, "The third quarter sales of $1.618 billion set a new all-time record for our
company in its 93 year history, surpassing a previous peak set in
the fourth quarter of 2008. We also set an all-time record for
quarterly valve sales of $531
million, reflecting the results from our valve product line
growth strategy. We continued our operating expense reduction
efforts, which we now expect to generate more than $17 million in annual savings. Also notable, we
ended the quarter with backlog of $1.254
billion, the highest in company history."
Mr. Lane concluded, "I am proud to report that the results of
our cost savings initiatives and leveraging of our cost structure
are evidenced in our improved 8.2% adjusted EBITDA margin this
quarter."
MRC Global's third quarter 2014 gross profit was $278.0 million, or 17.2% of sales as compared to
gross profit of $238.3 million,
or 18.1% of sales for the third quarter of 2013. The decline in
gross profit percentage reflects the impact of the company's
last-in, first-out (LIFO) inventory costing methodology. Third
quarter 2014 gross profit reflected a charge of $3.9 million to cost of sales relating to
the use of the LIFO method of inventory cost accounting, while the
third quarter of 2013 reflected a benefit of $5.7 million.
Selling, general and administrative (SG&A) expenses were
$184.8 million for the third quarter
of 2014, or 11.4% of sales, compared to $160.9 million, or 12.2% of sales, in the same
period of 2013. The 80 basis point improvement was due to the
previously announced cost reduction initiatives taken through the
third quarter of 2014 and the higher revenue levels. The
increase of $23.9 million included
$20.8 million of incremental expense
from the acquired businesses. The remainder of the increase was
driven by $2.6 million of severance
and related charges associated with our cost reduction initiatives
and $5.7 million of pre-tax
costs associated with the cancellation of executive employment
contracts.
Adjusted EBITDA was $132.3 million
for the third quarter of 2014 compared to $96.4 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.
Sales by Segment
U.S. sales in the third quarter of 2014 were up 18.7% to
$1.205 billion from the same quarter
in 2013 due to organic growth. The increase was across each product
line as well as each sector due to growth in customer capital
spending, an increase in rig and well count as well as market share
gains.
Canadian sales in the third quarter of 2014 were $161.2 million, down 0.6% 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 $20.4 million
and the impact of the decline of the Canadian dollar relative to
the U.S. dollar which amounted to $7.6
million. After adjusting for these items, the Canadian
business was up 20.2%, which was due to growth in customer spending
in the upstream and midstream sectors.
International sales in the third quarter of 2014 were
$251.7 million, an increase of
84.3% from the same period in 2013. The increase was due primarily
to sales from acquired businesses of $92.3 million for the third quarter of 2014.
Organically, international sales increased $22.8 million over the same quarter a year ago
due to growth in the European business.
Sales by Sector
Upstream sales in the third quarter of 2014 increased 28.1% from
the third quarter of 2013 to $753.1 million, or 47% of total sales. The
improvement in upstream sales was attributable to organic growth of
16.2%, 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 third quarter of 2014 increased
organically by 25.7% from the third quarter of 2013 to $474.3 million, or 29% of total sales.
Higher midstream sales were influenced by increased project
activity and an increase in market share among our targeted growth
accounts all within our transmission subsector.
Downstream sales in the third quarter of 2014 increased 12.2%
from the third quarter of 2013 to $390.7
million, or 24% of total sales. Substantially all of the
increase was organic growth. Sales to downstream customers
increased in both the International and U.S. segments.
Balance Sheet
Debt outstanding was $1.417
billion at September 30, 2014,
an increase of $19.1 million during
the third quarter of 2014. Net cash used in operations was
$68.6 million during the nine months
ended September 30, 2014 compared to
net cash provided by operations of $241.4
million during the same period a year ago. Excluding the
impact of acquisitions, working capital increased $227.7 million in the first nine months of
2014 as compared to a decrease of $76.9
million in the first nine months of 2013. These movements
reflect increases in business activity leading to higher revenue
which resulted in growth in working capital, and due also to the
timing of payments from various large customers.
Updated Calendar Year 2014 Guidance
Given the strong third quarter results above expectations and
the outlook for the fourth quarter, MRC Global's expected full year
2014 results are updated from last quarter, as presented below.
|
|
|
|
|
Low
|
|
High
|
Sales
|
$5.90
billion
|
|
$5.97
billion
|
Adjusted
EBITDA
|
$430
million
|
|
$450
million
|
Tax rate
|
34%
|
|
35%
|
Capital
expenditures
|
$15
million
|
|
$20
million
|
Cash flow (used in)
provided by operations
|
$(25)
million
|
|
$25
million
|
Conference Call
The Company will hold a conference call to discuss its third
quarter 2014 results at 10:00 a.m. Eastern
Time (9:00 a.m. Central Time)
on November 7, 2014. To
participate in the call, please dial (719) 325-2484 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 November 21,
2014 and may be accessed by dialing 719-457-0820 and using
pass code 5872996#. 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
Investor
Relations
|
MRC Global
Inc.
|
Monica.Schafer@mrcglobal.com
|
832-308-2847
|
MRC Global
Inc.
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
2014
|
|
2013
|
|
|
|
|
|
(In thousands,
except per share amounts)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
31,130
|
|
$
25,188
|
Accounts receivable,
net
|
1,089,507
|
|
812,147
|
Inventories,
net
|
1,080,857
|
|
971,567
|
Other current
assets
|
48,553
|
|
37,091
|
Total current
assets
|
2,250,047
|
|
1,845,993
|
|
|
|
|
Other
assets
|
29,037
|
|
30,473
|
|
|
|
|
Property, plant and
equipment, net
|
116,421
|
|
118,923
|
|
|
|
|
Intangible
assets:
|
|
|
|
Goodwill,
net
|
834,336
|
|
632,284
|
Other intangible
assets, net
|
739,338
|
|
708,009
|
|
|
|
|
|
$
3,969,179
|
|
$
3,335,682
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
617,369
|
|
$
550,393
|
Accrued expenses and
other current liabilities
|
173,030
|
|
124,925
|
Deferred income
taxes
|
77,812
|
|
78,844
|
Current portion of
long-term debt
|
7,935
|
|
7,935
|
Total current
liabilities
|
876,146
|
|
762,097
|
|
|
|
|
Long-term
obligations:
|
|
|
|
Long-term debt,
net
|
1,408,998
|
|
978,899
|
Deferred income
taxes
|
234,388
|
|
241,116
|
Other
liabilities
|
24,413
|
|
15,302
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock,
$0.01 par value per share: 500,000 shares
|
|
|
|
authorized,
102,064 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
|
1,653,702
|
|
1,644,406
|
Retained
deficit
|
(153,781)
|
|
(266,735)
|
Accumulated other
comprehensive loss
|
(75,707)
|
|
(40,422)
|
|
1,425,234
|
|
1,338,268
|
|
$
3,969,179
|
|
$
3,335,682
|
MRC Global
Inc.
Condensed
Consolidated Statements of Income (Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
(In thousands,
except per share amounts)
|
Sales
|
$
1,618,146
|
|
$
1,313,711
|
|
$
4,421,120
|
|
$
3,886,589
|
Cost of
sales
|
1,340,103
|
|
1,075,418
|
|
3,651,523
|
|
3,157,792
|
Gross
profit
|
278,043
|
|
238,293
|
|
769,597
|
|
728,797
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
184,842
|
|
160,910
|
|
541,518
|
|
475,642
|
Operating
income
|
93,201
|
|
77,383
|
|
228,079
|
|
253,155
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest
expense
|
(14,925)
|
|
(15,463)
|
|
(45,436)
|
|
(45,988)
|
Change in fair value of
derivative instruments
|
2,593
|
|
(1,828)
|
|
(1,667)
|
|
589
|
Other, net
|
(4,677)
|
|
(87)
|
|
(7,961)
|
|
(13,471)
|
Income before income
taxes
|
76,192
|
|
60,005
|
|
173,015
|
|
194,285
|
Income tax
expense
|
26,058
|
|
21,248
|
|
60,061
|
|
65,493
|
Net income
|
$
50,134
|
|
$
38,757
|
|
$
112,954
|
|
$
128,792
|
|
|
|
|
|
|
|
|
Basic earnings per
common share
|
$
0.49
|
|
$
0.38
|
|
$
1.11
|
|
$
1.27
|
Diluted earnings per
common share
|
$
0.49
|
|
$
0.38
|
|
$
1.10
|
|
$
1.26
|
Weighted-average
common shares, basic
|
102,035
|
|
101,715
|
|
101,982
|
|
101,673
|
Weighted-average
common shares, diluted
|
102,860
|
|
102,393
|
|
102,875
|
|
102,455
|
MRC Global
Inc.
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
|
|
|
Operating
activities
|
(In
thousands)
|
Net income
|
$
112,954
|
|
$
128,792
|
Adjustments to
reconcile net income to net cash (used in) provided by
operations:
|
|
|
|
Depreciation and
amortization
|
17,075
|
|
16,782
|
Amortization of
intangibles
|
53,209
|
|
39,128
|
Equity-based
compensation expense
|
7,468
|
|
8,602
|
Deferred income tax
benefit
|
(25,178)
|
|
(16,747)
|
Amortization of debt
issuance costs
|
3,822
|
|
4,376
|
Increase (decrease) in
LIFO reserve
|
5,907
|
|
(21,247)
|
Change in fair value
of derivative instruments
|
1,667
|
|
(589)
|
Provision for
uncollectible accounts
|
941
|
|
(355)
|
Foreign currency
losses
|
1,798
|
|
11,993
|
Other non-cash
items
|
1,318
|
|
(133)
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(226,789)
|
|
(25,448)
|
Inventories
|
(83,186)
|
|
48,026
|
Income taxes
payable
|
17,179
|
|
(815)
|
Other current
assets
|
(6,632)
|
|
(11,961)
|
Accounts
payable
|
38,397
|
|
64,849
|
Accrued expenses and
other current liabilities
|
11,414
|
|
(3,878)
|
Net cash (used in)
provided by operations
|
(68,636)
|
|
241,375
|
|
|
|
|
Investing
activities
|
|
|
|
Purchases of
property, plant and equipment
|
(10,051)
|
|
(14,902)
|
Proceeds from the
disposition of property, plant and equipment
|
1,231
|
|
4,025
|
Acquisitions, net of
cash acquired
|
(346,992)
|
|
(21,909)
|
Other investment and
notes receivable transactions
|
1,342
|
|
(2,116)
|
Net cash used in
investing activities
|
(354,470)
|
|
(34,902)
|
|
|
|
|
Financing
activities
|
|
|
|
Payments on revolving
credit facilities
|
(1,148,750)
|
|
(1,534,095)
|
Proceeds from
revolving credit facilities
|
1,585,509
|
|
1,328,296
|
Payments on long-term
obligations
|
(5,951)
|
|
(4,875)
|
Debt issuance costs
paid
|
(3,606)
|
|
(189)
|
Proceeds from
exercise of stock options
|
2,145
|
|
2,230
|
Tax benefit on stock
options
|
186
|
|
302
|
Other financing
activities
|
-
|
|
(6)
|
Net cash provided by
(used in) financing activities
|
429,533
|
|
(208,337)
|
|
|
|
|
Increase (decrease)
in cash
|
6,427
|
|
(1,864)
|
Effect of foreign
exchange rate on cash
|
(485)
|
|
(1,787)
|
Cash -- beginning of
period
|
25,188
|
|
37,090
|
Cash -- end of
period
|
$
31,130
|
|
$
33,439
|
MRC Global
Inc.
Supplemental
Information (Unaudited)
Reconciliation of
Adjusted Net Income to Net Income
|
|
|
|
|
|
|
|
|
|
September
30, 2014
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Net
Income
|
|
Per
Share
|
|
Net
Income
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
(In thousands,
except per share amounts)
|
Net income
|
$ 50,134
|
|
$
0.49
|
|
$ 112,954
|
|
$
1.10
|
Loss on sale of
Canadian PCP business (1)
|
-
|
|
-
|
|
5,012
|
|
0.05
|
Severance and related
charges (2)
|
2,058
|
|
0.02
|
|
5,676
|
|
0.06
|
Cancellation of
executive employment agreements (3)
|
3,614
|
|
0.03
|
|
3,614
|
|
0.03
|
Adjusted Net
Income
|
$ 55,806
|
|
$
0.54
|
|
$ 127,256
|
|
$
1.24
|
|
|
|
|
|
|
|
|
|
September 30,
2013
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Net
Income
|
|
Per
Share
|
|
Net
Income
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
(In thousands,
except per share amounts)
|
Net income
|
$ 38,757
|
|
$
0.38
|
|
$ 128,792
|
|
$
1.26
|
Executive separation
expense (4)
|
1,295
|
|
0.01
|
|
1,295
|
|
0.01
|
Insurance charge
(5)
|
1,291
|
|
0.01
|
|
1,291
|
|
0.01
|
Adjusted Net
Income
|
$ 41,343
|
|
$
0.40
|
|
$ 131,378
|
|
$
1.28
|
Notes 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.
|
(3)
|
Charge (after-tax)
related to the cancellation of executive employment agreements
recorded in SG&A, including both equity-based compensation and
cash components.
|
(4)
|
Charges
(after-tax) associated with the separation of an executive
officer for both cash and equity-based compensation recorded in
SG&A.
|
(5)
|
Charge (after-tax)
resulting from the bankruptcy of a workers' compensation insurance
carrier, which required the company to assume the obligation for
existing workers' compensation claims, recorded in Other,
net.
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
Net income
|
$
50.1
|
|
$
38.8
|
|
$
113.0
|
|
$
128.8
|
Income tax
expense
|
26.1
|
|
21.2
|
|
60.1
|
|
65.5
|
Interest
expense
|
14.9
|
|
15.5
|
|
45.4
|
|
46.0
|
Depreciation and
amortization
|
6.5
|
|
5.6
|
|
17.1
|
|
16.8
|
Amortization of
intangibles
|
19.3
|
|
13.1
|
|
53.2
|
|
39.1
|
Increase (decrease)
in LIFO reserve
|
3.9
|
|
(5.7)
|
|
5.9
|
|
(21.2)
|
Change in fair value
of derivative instruments
|
(2.6)
|
|
1.8
|
|
1.7
|
|
(0.6)
|
Equity-based
compensation expense (1)
|
3.4
|
|
4.0
|
|
7.4
|
|
8.6
|
Loss on sale of
Canadian PCP business (2)
|
-
|
|
-
|
|
6.2
|
|
-
|
Severance and related
charges (3)
|
2.6
|
|
0.8
|
|
7.5
|
|
0.8
|
Cancellation of
executive employment agreements
|
|
|
|
|
|
|
|
(cash portion)
(4)
|
3.2
|
|
-
|
|
3.2
|
|
-
|
Insurance charge
(5)
|
-
|
|
2.0
|
|
-
|
|
2.0
|
Foreign currency
(gains) losses
|
4.9
|
|
(1.4)
|
|
1.8
|
|
12.0
|
Other
expense
|
-
|
|
0.7
|
|
-
|
|
1.4
|
Adjusted
EBITDA
|
$
132.3
|
|
$
96.4
|
|
$
322.5
|
|
$
299.2
|
Notes to
above:
|
|
|
(1)
|
Includes $2.5 million
(pre-tax) charge for the non-cash portion or equity-based
compensation associated with the cancellation of executive
employment agreements recorded in SG&A.
|
(2)
|
Charge (pre-tax)
related to the sale of our progressive cavity pump distribution and
servicing business in Canada recorded in Other, net.
|
(3)
|
Charge (pre-tax) for
employee severance and related charges associated with our cost
reduction initiatives recorded in SG&A.
|
(4)
|
Cash compensation
charges (pre-tax) associated with the cancellation of executive
employment agreements recorded in SG&A.
|
(5)
|
Insurance charge
(pre-tax) resulting from the bankruptcy of a workers' compensation
insurance carrier, which required the company to assume the
obligation for existing workers' compensation claims, recorded in
Other, net.
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
Percentage
|
|
September
30,
|
|
Percentage
|
|
2014
|
|
of
Revenue
|
|
2013
|
|
of
Revenue
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Gross profit, as
reported
|
$
278.0
|
|
17.2%
|
|
$
238.3
|
|
18.1%
|
Depreciation and
amortization
|
6.5
|
|
0.4%
|
|
5.6
|
|
0.4%
|
Amortization of
intangibles
|
19.3
|
|
1.2%
|
|
13.1
|
|
1.0%
|
Increase (decrease)
in LIFO reserve
|
3.9
|
|
0.2%
|
|
(5.7)
|
|
(0.4%)
|
Adjusted Gross
Profit
|
$
307.7
|
|
19.0%
|
|
$
251.3
|
|
19.1%
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
September
30,
|
|
Percentage
|
|
September
30,
|
|
Percentage
|
|
2014
|
|
of
Revenue
|
|
2013
|
|
of
Revenue
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Gross profit, as
reported
|
$
769.6
|
|
17.4%
|
|
$
728.8
|
|
18.8%
|
Depreciation and
amortization
|
17.1
|
|
0.4%
|
|
16.8
|
|
0.4%
|
Amortization of
intangibles
|
53.2
|
|
1.2%
|
|
39.1
|
|
1.0%
|
Increase (decrease)
in LIFO reserve
|
5.9
|
|
0.1%
|
|
(21.2)
|
|
(0.5%)
|
Adjusted Gross
Profit
|
$
845.8
|
|
19.1%
|
|
$
763.5
|
|
19.6%
|
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 LIFO 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.