HOUSTON, May 2, 2016 /PRNewswire/ -- MRC Global Inc.
(NYSE: MRC), the largest global distributor, based on sales, of
pipe, valves and fittings and related products and services to the
energy industry, today announced first quarter 2016 results.
The company's sales were $783
million for the first quarter of 2016, which were 39% lower
than the first quarter of 2015 and 19% lower than the fourth
quarter of 2015. As compared to last year, reduced customer
activity across all segments and sectors drove the decline as a
result of lower oil and natural gas prices.
Net loss attributable to common stockholders for the first
quarter of 2016 was $(14) million, or
$(0.14) per diluted share, compared
to net income attributable to common stockholders of
$29 million, or $0.28 per
diluted share for the first quarter of 2015. The first quarter 2016
and 2015 results include severance and restructuring pre-tax
charges of $5 million and
$2 million, respectively. Adjusted
net loss attributable to common stockholders for the first quarter
of 2016 was $(10) million, or
$(0.10) per diluted share. Please
refer to the reconciliation of adjusted net loss (a non-GAAP
measure) to net loss (a GAAP measure) included in this release.
Andrew R. Lane, MRC Global's
president and chief executive officer stated, "Despite a
challenging first quarter, we remain focused on executing our
strategy. We continue to retain and win customers, strengthen the
balance sheet, manage operating costs and optimize working capital
to align with current energy market conditions. The business
continues to generate cash, having generated $58 million in cash from operations in the first
quarter and in February, we closed the sale of our U.S. oil country
tubular goods product line for $48 million. We also made
additional progress under our stock repurchase program buying
$38 million in stock during the first
quarter. Combined with the share repurchases in the fourth quarter,
we are halfway through our share buy-back authorization."
MRC Global's first quarter 2016 gross profit was $133 million, or 17.0% of sales, a decrease from
first quarter 2015 gross profit of $220
million, or 17.0% of sales. Gross profit for the first
quarter 2016 and 2015 reflects a benefit of $3 million and $0
million, respectively, in cost of sales relating to the use
of the last-in, first out ("LIFO") method of inventory cost
accounting.
Selling, general and administrative ("SG&A") expenses were
$137 million, or 17.5% of sales, for
the first quarter of 2016 compared to $159
million, or 12.3% of sales, for the same period of 2015.
SG&A expenses were reduced by 14% versus the first quarter
2015, primarily due to cost reduction measures. SG&A expenses
for the first quarter of 2016 and 2015 include $5 million and $2
million of severance and restructuring charges,
respectively.
Adjusted EBITDA was $19 million in
the first quarter of 2016 compared to $87
million for the same period in 2015. Please refer to the
reconciliation of adjusted EBITDA (a non-GAAP measure) to net
(loss) income (a GAAP measure) in this release.
Sales by Segment
U.S. sales in the first quarter of 2016 were $606 million, down $366
million or 38% from the same quarter in 2015. The decrease
reflects a $226 million, or 63% decrease in the upstream
sector including an $85 million
impact from the sale of our U.S. oil country tubular goods (OCTG)
product line, a $94 million, or 26% decrease in the midstream
sector and $46 million, or 18%
decrease in the downstream sector.
Canadian sales in the first quarter of 2016 were $64 million, down $55
million or 46% from the same quarter in 2015. The decrease
in Canadian sales reflects a $44
million decrease in the upstream business. Approximately
$7 million of the total decline was a result of the weaker
Canadian dollar relative to the U.S. dollar.
International sales in the first quarter of 2016 were
$113 million, down $88 million
or 44% from the same period in 2015. The decrease was due to the
combined impact of lower project activity and deferral of
maintenance, repairs and operations expenditures particularly in
Norway, the U.K., Australia and Singapore. The impact of the decline in the
foreign currencies in areas where we operate account for
$8 million of the total decline.
Sales by Sector
Upstream sales in the first quarter of 2016 decreased 58% from
the first quarter of 2015 to $231 million, or 29% of total
sales. The decline in upstream sales was across all segments and
was a result of reduced customer activity. U.S. upstream sales
declined 39% in the first quarter of 2016, excluding the sale of
our U.S. OCTG product line, from the first quarter 2015 as compared
to a 61% decline in the average U.S. rig count over the same
period. International upstream sales declined 47% in the first
quarter of 2016 from the first quarter of 2015.
Midstream sales in the first quarter of 2016 decreased 27% from
the first quarter of 2015 to $278 million, or 36% of total
sales. Sales to transmission customers were down 44% while sales to
gas utility customers were up by 4% over the same quarter in
2015.
Downstream sales in the first quarter of 2016 decreased 25% from
the first quarter of 2015 to $274 million, or 35% of total
sales. The downstream sector declined by $46
million in the U.S. and $29
million in International due primarily to lower project
activity.
Balance Sheet
During the first quarter of 2016, the company generated
$58 million of cash from operations and grew cash to
$121 million at March 31, 2016
from $69 million at the end of 2015.
Debt, net of cash, was $397 million
at March 31, 2016.
Share Repurchase Program Update
In November 2015, the board of
directors authorized a share repurchase program for common stock of
up to $100 million. During the first
quarter of 2016, the company repurchased $38
million of its common stock at an average price of
$13.39 per share. In total, the
company has repurchased $50 million
of its common stock.
The program is scheduled to expire on December 31, 2017. The shares may be repurchased
at management's discretion in the open market. Depending on market
conditions and other factors, these repurchases may be commenced or
suspended from time to time without prior notice.
Conference Call
The Company will hold a conference call to discuss its first
quarter 2016 results at 10:00 a.m. Eastern
Time (9:00 a.m. Central Time)
on May 3, 2016. To participate in the
call, please dial 412‑902-0003 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 17,
2016 and can be accessed by dialing 201-612-7415 and using
pass code 13631856#. Also, an archive of the webcast will be
available shortly after the call at 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, the company's expectations regarding
the pay down of its debt, 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 prices; 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 success of the company's acquisition strategies; the
potential adverse effects associated with integrating acquisitions
into the company's business and whether these acquisitions will
yield their intended benefits; 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
and the occurrence of cyber security incidents; 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; 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 U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act and
other economic sanction programs; risks associated with
international stability and geopolitical developments; risks
relating to ongoing evaluations of internal controls required by
Section 404 of the Sarbanes-Oxley Act; the impact on us of
changes in generally accepted accounting principles or tax laws or
adverse positions taken by taxing authorities in the countries in
which the company operates; and compliance with and changes
in laws and regulations in the countries in which we
operate.
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 Broughton
Investor Relations
MRC Global Inc.
Monica.Broughton@mrcglobal.com
832-308-2847
MRC Global
Inc.
Condensed
Consolidated Balance Sheets (Unaudited)
(in
millions)
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
2016
|
|
2015
|
|
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
121
|
|
$
69
|
Accounts receivable,
net
|
470
|
|
533
|
Inventories,
net
|
720
|
|
781
|
Other current
assets
|
35
|
|
22
|
Total current
assets
|
1,346
|
|
1,405
|
|
|
|
|
Other
assets
|
22
|
|
22
|
|
|
|
|
Property, plant and
equipment, net
|
134
|
|
127
|
|
|
|
|
Intangible
assets:
|
|
|
|
Goodwill,
net
|
484
|
|
484
|
Other intangible
assets, net
|
448
|
|
459
|
|
$
2,434
|
|
$
2,497
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
309
|
|
$
327
|
Accrued expenses and
other current liabilities
|
100
|
|
110
|
Current portion of
long-term debt
|
8
|
|
8
|
Total current
liabilities
|
417
|
|
445
|
|
|
|
|
Long-term
obligations:
|
|
|
|
Long-term debt,
net
|
510
|
|
511
|
Deferred income
taxes
|
208
|
|
208
|
Other
liabilities
|
22
|
|
22
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
6.5% Series A Convertible Perpetual Preferred Stock,
$0.01 par value; authorized 363,000 shares; 363,000 shares
issued and outstanding
|
355
|
|
355
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.01 par value per share: 500 million
shares authorized, 102,345,890 and 102,202,599 issued,
respectively
|
1
|
|
1
|
Additional paid-in
capital
|
1,668
|
|
1,666
|
Retained
deficit
|
(481)
|
|
(467)
|
Less: Treasury stock at
cost: 3,695,263 and 816,389 shares, respectively
|
(50)
|
|
(12)
|
Accumulated other
comprehensive loss
|
(216)
|
|
(232)
|
|
922
|
|
956
|
|
$
2,434
|
|
$
2,497
|
MRC Global
Inc.
Condensed
Consolidated Statements of Operations (Unaudited)
(in millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
March
31,
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Sales
|
$
783
|
|
$ 1,292
|
Cost of
sales
|
650
|
|
1,072
|
Gross
profit
|
133
|
|
220
|
Selling, general and
administrative expenses
|
137
|
|
159
|
Operating (loss)
income
|
(4)
|
|
61
|
Other
expense:
|
|
|
|
Interest
expense
|
(8)
|
|
(15)
|
Other, net
|
(1)
|
|
(4)
|
(Loss) income before
income taxes
|
(13)
|
|
42
|
Income tax (benefit)
expense
|
(5)
|
|
13
|
Net (loss)
income
|
(8)
|
|
29
|
Series A preferred
stock dividends
|
6
|
|
-
|
Net (loss) income
attributable to common stockholders
|
$
(14)
|
|
$
29
|
|
|
|
|
Basic (loss) earnings
per common share
|
$
(0.14)
|
|
$
0.28
|
Diluted (loss)
earnings per common share
|
$
(0.14)
|
|
$
0.28
|
Weighted-average
common shares, basic
|
100.7
|
|
102.1
|
Weighted-average
common shares, diluted
|
100.7
|
|
102.2
|
MRC Global
Inc.
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
March
31,
|
|
2016
|
|
2015
|
|
|
|
|
Operating
activities
|
|
Net (loss)
income
|
$
(8)
|
|
$
29
|
Adjustments to
reconcile net (loss) income to net cash provided by
operations:
|
|
|
|
Depreciation and
amortization
|
5
|
|
5
|
Amortization of
intangibles
|
12
|
|
16
|
Equity-based
compensation expense
|
3
|
|
2
|
Deferred income tax
benefit
|
-
|
|
(8)
|
Decrease in LIFO
reserve
|
(3)
|
|
-
|
Provision for
uncollectible accounts
|
1
|
|
1
|
Foreign currency
losses
|
1
|
|
4
|
Other non-cash
items
|
2
|
|
3
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
67
|
|
103
|
Inventories
|
24
|
|
(9)
|
Other current
assets
|
(6)
|
|
(4)
|
Income taxes
payable
|
(5)
|
|
11
|
Accounts
payable
|
(22)
|
|
(6)
|
Accrued expenses and
other current liabilities
|
(13)
|
|
(32)
|
Net cash provided by
operations
|
58
|
|
115
|
|
|
|
|
Investing
activities
|
|
|
|
Purchases of
property, plant and equipment
|
(10)
|
|
(4)
|
Proceeds from the
disposition of non-core product line
|
48
|
|
-
|
Other investing
activities
|
-
|
|
(3)
|
Net cash provided by
(used in) investing activities
|
38
|
|
(7)
|
|
|
|
|
Financing
activities
|
|
|
|
Payments on revolving
credit facilities
|
(23)
|
|
(321)
|
Proceeds from
revolving credit facilities
|
23
|
|
243
|
Payments on long-term
obligations
|
(2)
|
|
(2)
|
Purchase of common
stock
|
(38)
|
|
-
|
Dividends paid on
preferred stock
|
(6)
|
|
-
|
Net cash used in
financing activities
|
(46)
|
|
(80)
|
|
|
|
|
Increase in
cash
|
50
|
|
28
|
Effect of foreign
exchange rate on cash
|
2
|
|
(4)
|
Cash -- beginning of
period
|
69
|
|
25
|
Cash -- end of
period
|
$
121
|
|
$
49
|
MRC Global
Inc.
Supplemental
Information (Unaudited)
Reconciliation of
Adjusted Net Loss to Net Loss
(in millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
March 31,
2016
|
|
Three Months
Ended
|
|
Net
Loss
|
|
Per
Share
|
|
|
|
|
Net loss attributable
to common stockholders
|
$
(14)
|
|
$
(0.14)
|
Severance and
restructuring charges (1)
|
4
|
|
0.04
|
Adjusted net loss
attributable to common stockholders
|
$
(10)
|
|
$
(0.10)
|
|
|
|
|
|
Notes to
above:
|
(1)
|
Charge (after-tax)
related to employee severance and restructuring charges associated
with the company's cost reduction initiatives recorded in
SG&A.
|
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 (Loss) Income
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
March
31,
|
|
2016
|
|
2015
|
|
|
|
|
Net (loss)
income
|
$
(8)
|
|
$
29
|
Income tax (benefit)
expense
|
(5)
|
|
13
|
Interest
expense
|
8
|
|
15
|
Depreciation and
amortization
|
5
|
|
5
|
Amortization of
intangibles
|
12
|
|
16
|
Decrease in LIFO
reserve
|
(3)
|
|
-
|
Change in fair value
of derivative instruments
|
1
|
|
1
|
Equity-based
compensation expense (1)
|
3
|
|
2
|
Severance and
restructuring charges (2)
|
5
|
|
2
|
Foreign currency
losses
|
1
|
|
4
|
Adjusted
EBITDA
|
$
19
|
|
$
87
|
|
|
|
|
|
|
Notes to
above:
|
(1)
|
Recorded in
SG&A.
|
(2)
|
Charge (pre-tax)
related to employee severance and restructuring charges associated
with the company's 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
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
Percentage
|
|
March
31,
|
|
Percentage
|
|
2016
|
|
of
Revenue
|
|
2015
|
|
of
Revenue
|
|
|
|
|
|
|
|
|
Gross profit, as
reported
|
$
133
|
|
17.0%
|
|
$
220
|
|
17.0%
|
Depreciation and
amortization
|
5
|
|
0.6%
|
|
5
|
|
0.4%
|
Amortization of
intangibles
|
12
|
|
1.5%
|
|
16
|
|
1.2%
|
Decrease in LIFO
reserve
|
(3)
|
|
(0.4%)
|
|
-
|
|
0.0%
|
Adjusted Gross
Profit
|
$
147
|
|
18.7%
|
|
$
241
|
|
18.6%
|
|
|
|
|
|
|
|
|
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.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/mrc-global-announces-first-quarter-2016-results-300261123.html
SOURCE MRC Global Inc.