HOUSTON, Oct. 28, 2020 /PRNewswire/ -- MRC Global
Inc. (NYSE: MRC), the largest global distributor, based on sales,
of pipe, valves and fittings and related infrastructure products
and services to the energy industry, today announced
third quarter 2020 results.
The company's sales were $585 million for the
third quarter of 2020, which was 3% lower than the
second quarter of 2020 and 38% lower than the
third quarter of 2019. Sequentially, the downstream and
industrial and the gas utilities sectors each experienced an
increase in sales while the upstream production and the midstream
pipeline sectors each experienced a decline. As compared to the
third quarter of 2019, the decrease was across all sectors and
segments as the impact of the COVID-19 pandemic and lower commodity
prices significantly reduced customer spending.
Net loss attributable to common stockholders for the
third quarter of 2020 was $(3) million, or
$(0.04) per diluted share, as compared to the
third quarter of 2019 net income of $15 million, or
$0.18 per diluted share.
Adjusted net loss attributable to common stockholders for the
third quarter of 2020 was $(8) million, or
$(0.10) per diluted share, compared to adjusted net income of
$17 million, or $0.21 per
diluted share for the third quarter of 2019. Please refer to
the reconciliation of adjusted net income (loss) (a non-GAAP
measure) to net income (loss) (a GAAP measure) included in this
release.
Andrew R. Lane, MRC Global's
president and chief executive officer stated, "The resiliency of
our business model, which focuses on diversified sectors, was
evident this quarter. Two of our sectors, gas utilities and
downstream and industrial, which make-up 68% of our third quarter
revenue, were both up sequentially. As a result, total revenue
was down only 3% sequentially this quarter, better than
expectations. In September, e-commerce revenue as a percentage
of North America revenue reached 48%, an all-time high for our
company as we continue to invest in this technology
platform. We continue to focus on managing the business
through these difficult market conditions by aggressively reducing
costs, generating cash and reducing debt.
"We are on-track to exceed all the goals we initially laid
out earlier in the year. In the first nine months, we generated
$178 million of cash from operations and reduced net debt by
$150 million to a current balance of
$369 million. For the full year, we expect to generate
cash flow from operations greater than $220 million and
end the year with a net debt balance less than $300 million, as a result of the additional cash
generated in the fourth quarter and sales proceeds related to
recent real estate transactions. This quarter we closed or
consolidated 9 more facilities for a total of 22 this
year with plans to close 6 more in the fourth quarter for a
total of 28 in 2020. We also expect to achieve over
$110 million
of normalized cost savings in 2020 as compared to 2019,
with approximately two-thirds of these cost savings
being structural in nature, positioning the company to take
advantage of the eventual market recovery," Mr. Lane
added.
MRC Global's third quarter 2020 gross profit was
$114 million, or 19.5% of sales as compared to the
third quarter of 2019 gross profit of $174 million, or
18.5% of sales. Gross profit for the third quarter of
2020 and 2019 reflects income of $11 million and
$2 million, respectively, in cost of sales relating to the use
of the last-in, first out (LIFO) method of inventory cost
accounting. Adjusted gross profit, which excludes the impact of
LIFO, for the third quarter of 2020 was $115 million or
19.7% of revenue.
Selling, general and administrative (SG&A) expenses were
$100 million, or 17.1% of sales, for the
third quarter of 2020 compared to $137 million,
or 14.5% of sales, for the same period of 2019. Adjusted
SG&A of $97 million for the third
quarter of 2020 excludes the net impact of severance and
restructuring charges of $5 million and the recovery
of a $2 million supplier bad debt previously written
off.
Income tax expense was $5 million for the three months
ended September 30, 2020 as
compared to $8 million for the three months ended
September 30, 2019. The effective tax
rates were 63% and 28% for the three months ended
September 30, 2020 and 2019,
respectively. The company's rates generally differ from the U.S.
federal statutory rate of 21% as a result of state income taxes and
differing foreign income tax rates. The effective tax rate for
three months ended September 30,
2020 was higher primarily due to losses in foreign
jurisdictions with no corresponding tax benefit and the
reversal of a current year net operating loss benefit
recognized in a prior quarter but no longer expected to be
realized.
Please refer to the reconciliation of non-GAAP measures
(adjusted gross profit, adjusted SGA, adjusted EBITDA) to GAAP
measures (gross profit, SG&A, net income) in this release.
Sales by Segment
U.S. sales in the third quarter of 2020 were
$463 million, down $300 million, or 39%, from the same
quarter in 2019. Gas utilities' sector sales were down
$9 million, or 4%, primarily due to non-recurring work,
partially offset by recent market share gains and certain
customers increasing activity levels as they recover
from pandemic restrictions. Downstream and industrial sector
sales declined $87 million, or 40%, due to delayed
or reduced maintenance spending from lower demand as well as
non-recurring turnarounds. Upstream production sector sales
decreased by $128 million, or 68% primarily due to
reduced spending by customers and a 74% reduction in well
completions. Midstream pipeline sector sales declined
$76 million, or 54% due to lower production levels and
reduced demand for infrastructure.
Canadian sales in the third quarter of 2020 were
$27 million, down $30 million, or 53%, from the same
quarter in 2019 driven primarily by the upstream production sector,
which was adversely affected by the pandemic and associated reduced
demand.
International sales in the third quarter of 2020 were
$95 million, down $27 million, or 22%, from the same
period in 2019 driven primarily by reduced spending in the upstream
sector followed by the downstream and industrials sector due to the
lower activity levels associated with reduced demand. Stronger
foreign currencies relative to the U.S. dollar favorably impacted
sales by $2 million or 2%.
All sales were adversely impacted by the COVID-19 pandemic and
the related mitigation measures, which negatively affected demand
for energy products.
Sales by Sector
Gas utilities sector sales in the third quarter of 2020
were $208 million, or 36% of total sales, a
decline of $8 million, or 4%, from the
third quarter of 2019. Sequentially, the gas utilities sector
sales were 1% higher due to market share gains and some
customers increasing spending post pandemic restrictions.
Downstream and industrial sector sales in the third quarter
of 2020 were $185 million, or 32% of total sales, a
decrease of $100 million, or 35%, from the third quarter
of 2019. Sequentially, downstream sector sales were up 5% as
customers completed repair, maintenance and turnaround work post
pandemic restrictions.
Upstream production sector sales in the third quarter of
2020 were $118 million, or 20% of total sales, a decline
of $169 million, or 59%, from the third quarter of
2019. The decrease in upstream production sales was across all
segments led by the U.S. segment.
Midstream pipeline sector sales in the third quarter of
2020 were $74 million, or 12% of total sales, a reduction
of $80 million, or 52%, from the third quarter of 2019
driven by the U.S. segment.
Balance Sheet
The cash balance was $40 million and debt, net of
cash, was $369 million at September 30,
2020. Cash provided by operations was $94 million in
the third quarter of 2020 and $178 million for the nine
months ended September 30, 2020.
Excess availability under the company's asset-based lending
facility was $437 million and available liquidity was
$477 million.
COVID-19 Pandemic Impact
The COVID-19 pandemic and related mitigation measures have
created significant volatility and uncertainty in the oil and gas
industry. Oil demand has significantly deteriorated as a
result. The unparalleled demand destruction has resulted in
lower spending by customers and reduced demand for the company's
products and services. Although we have seen a modest improvement
in oil demand, uncertainty exists as to when a more
significant recovery will occur.
As a critical supplier to the global energy infrastructure and
an essential business, the company has remained operational with no
closures to any facilities. The company currently has
11 COVID-19 illnesses reported, down from 27 in the second
quarter of 2020 and only 0.4% of our global workforce. MRC Global
has implemented various safety measures for employees working in
the company's facilities and implemented remote working for those
whose jobs permit it. MRC Global is committed to a safe working
environment for all employees and is constantly monitoring its
response in the locations where the company operates.
From a supply chain perspective, the effects have moved around
the globe as the virus has spread. Given the company's inventory
position and the reduced demand, the company has fulfilled orders
with little disruption. However, if shutdowns are re-established,
order fulfillment risk could increase.
Conference Call
The company will hold a conference call to discuss its
third quarter 2020 results at 10:00
a.m. Eastern Time (9:00 a.m. Central
Time) on October 29, 2020. 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 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 12, 2020 and can be accessed by
dialing 201-612-7415 and using pass code 13709094#. Also, an
archive of the webcast will be available shortly after the call at
www.mrcglobal.com for 90 days.
About MRC Global Inc.
MRC Global is the largest distributor of pipe, valves and
fittings (PVF) and other infrastructure products and services to
the energy industry, based on sales. Through approximately
230 service locations worldwide, approximately 2,700 employees
and with nearly 100 years of history, MRC Global provides
innovative supply chain solutions and technical product expertise
to customers globally across diversified end-markets including the
upstream production, midstream pipeline, gas utility and downstream
and industrial. MRC Global manages a complex network of over
200,000 SKUs and 10,000 suppliers simplifying the supply chain for
its over 12,000 customers. With a focus on technical products,
value-added services, a global network of valve and engineering
centers and an unmatched quality assurance program, MRC
Global is the trusted PVF expert. Find out more
at www.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," "intend," "believes," "on-track," "well
positioned," "strong position," "looking forward," "guidance,"
"plans," "can," "target," "targeted" 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, achieving cost savings and cash flow,
debt reduction, liquidity, 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 MRC Global's
control, including the factors described in the company's SEC
filings that may cause the company's 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; 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 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 or imposed; significant
substitution of alternative fuels for oil and gas; 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; adverse health
events such as a pandemic; 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 the company's 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; risks related to the company's intention not to
pay dividends; and risks arising from compliance with and changes
in law in the countries in which we operate, including (among
others) changes in tax law, tax rates and interpretation in tax
laws.
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. MRC Global's filings and other important
information are also available on the Investor Relations page of
the company's 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,
except shares)
|
|
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
40
|
|
|
$
|
32
|
|
Accounts receivable,
net
|
|
|
343
|
|
|
|
459
|
|
Inventories,
net
|
|
|
582
|
|
|
|
701
|
|
Other current
assets
|
|
|
29
|
|
|
|
26
|
|
Total current
assets
|
|
|
994
|
|
|
|
1,218
|
|
|
|
|
|
|
|
|
|
|
Long-term
assets:
|
|
|
|
|
|
|
|
|
Operating lease
assets
|
|
|
168
|
|
|
|
186
|
|
Property, plant and
equipment, net
|
|
|
128
|
|
|
|
138
|
|
Other
assets
|
|
|
16
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets:
|
|
|
|
|
|
|
|
|
Goodwill,
net
|
|
|
264
|
|
|
|
483
|
|
Other intangible
assets, net
|
|
|
235
|
|
|
|
281
|
|
|
|
$
|
1,805
|
|
|
$
|
2,325
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts
payable
|
|
$
|
293
|
|
|
$
|
357
|
|
Accrued expenses and
other current liabilities
|
|
|
86
|
|
|
|
91
|
|
Operating lease
liabilities
|
|
|
34
|
|
|
|
34
|
|
Current portion of
long-term debt
|
|
|
4
|
|
|
|
4
|
|
Total current
liabilities
|
|
|
417
|
|
|
|
486
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
|
405
|
|
|
|
547
|
|
Operating lease
liabilities
|
|
|
160
|
|
|
|
167
|
|
Deferred income
taxes
|
|
|
80
|
|
|
|
91
|
|
Other
liabilities
|
|
|
41
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
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, 106,284,968 and
105,624,750 issued, respectively
|
|
|
1
|
|
|
|
1
|
|
Additional paid-in
capital
|
|
|
1,736
|
|
|
|
1,731
|
|
Retained
deficit
|
|
|
(770)
|
|
|
|
(483)
|
|
Less: Treasury stock
at cost: 24,216,330 shares
|
|
|
(375)
|
|
|
|
(375)
|
|
Accumulated other
comprehensive loss
|
|
|
(245)
|
|
|
|
(232)
|
|
|
|
|
347
|
|
|
|
642
|
|
|
|
$
|
1,805
|
|
|
$
|
2,325
|
|
MRC Global
Inc.
Condensed
Consolidated Statements of Operations (Unaudited)
(in millions,
except per share amounts)
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
585
|
|
|
$
|
942
|
|
|
$
|
1,981
|
|
|
$
|
2,896
|
|
Cost of
sales
|
|
|
471
|
|
|
|
768
|
|
|
|
1,640
|
|
|
|
2,374
|
|
Gross
profit
|
|
|
114
|
|
|
|
174
|
|
|
|
341
|
|
|
|
522
|
|
Selling, general and
administrative expenses
|
|
|
100
|
|
|
|
137
|
|
|
|
352
|
|
|
|
409
|
|
Goodwill and
intangibles impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
242
|
|
|
|
-
|
|
Operating income
(loss)
|
|
|
14
|
|
|
|
37
|
|
|
|
(253)
|
|
|
|
113
|
|
Other (expense)
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(7)
|
|
|
|
(10)
|
|
|
|
(22)
|
|
|
|
(31)
|
|
Other, net
|
|
|
1
|
|
|
|
2
|
|
|
|
(1)
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
|
8
|
|
|
|
29
|
|
|
|
(276)
|
|
|
|
85
|
|
Income tax expense
(benefit)
|
|
|
5
|
|
|
|
8
|
|
|
|
(7)
|
|
|
|
22
|
|
Net income
(loss)
|
|
|
3
|
|
|
|
21
|
|
|
|
(269)
|
|
|
|
63
|
|
Series A preferred
stock dividends
|
|
|
6
|
|
|
|
6
|
|
|
|
18
|
|
|
|
18
|
|
Net (loss) income
attributable to common stockholders
|
|
$
|
(3)
|
|
|
$
|
15
|
|
|
$
|
(287)
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income
per common share
|
|
$
|
(0.04)
|
|
|
$
|
0.18
|
|
|
$
|
(3.50)
|
|
|
$
|
0.54
|
|
Diluted (loss) income
per common share
|
|
$
|
(0.04)
|
|
|
$
|
0.18
|
|
|
$
|
(3.50)
|
|
|
$
|
0.53
|
|
Weighted-average
common shares, basic
|
|
|
82.1
|
|
|
|
82.7
|
|
|
|
81.9
|
|
|
|
83.4
|
|
Weighted-average
common shares, diluted
|
|
|
82.1
|
|
|
|
83.4
|
|
|
|
81.9
|
|
|
|
84.2
|
|
MRC Global
Inc.
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(in
millions)
|
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(269)
|
|
|
$
|
63
|
|
Adjustments to
reconcile net (loss) income to net cash provided by
operations:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
15
|
|
|
|
16
|
|
Amortization of
intangibles
|
|
|
20
|
|
|
|
33
|
|
Equity-based
compensation expense
|
|
|
8
|
|
|
|
12
|
|
Deferred income tax
benefit
|
|
|
(10)
|
|
|
|
(5)
|
|
Decrease in LIFO
reserve
|
|
|
(20)
|
|
|
|
(3)
|
|
Goodwill and intangible
asset impairment
|
|
|
242
|
|
|
|
-
|
|
Lease impairment and
abandonment
|
|
|
15
|
|
|
|
-
|
|
Inventory-related
charges
|
|
|
34
|
|
|
|
-
|
|
Provision for
uncollectible accounts
|
|
|
3
|
|
|
|
2
|
|
Other
|
|
|
3
|
|
|
|
2
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
110
|
|
|
|
(4)
|
|
Inventories
|
|
|
102
|
|
|
|
56
|
|
Other current
assets
|
|
|
(3)
|
|
|
|
-
|
|
Accounts
payable
|
|
|
(63)
|
|
|
|
(3)
|
|
Accrued expenses and
other current liabilities
|
|
|
(9)
|
|
|
|
(35)
|
|
Net cash provided by
operations
|
|
|
178
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
|
|
(8)
|
|
|
|
(12)
|
|
Other investing
activities
|
|
|
1
|
|
|
|
2
|
|
Net cash used in
investing activities
|
|
|
(7)
|
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Payments on revolving
credit facilities
|
|
|
(655)
|
|
|
|
(786)
|
|
Proceeds from
revolving credit facilities
|
|
|
519
|
|
|
|
733
|
|
Payments on long-term
obligations
|
|
|
(5)
|
|
|
|
(3)
|
|
Purchase of common
stock
|
|
|
-
|
|
|
|
(63)
|
|
Dividends paid on
preferred stock
|
|
|
(18)
|
|
|
|
(18)
|
|
Repurchases of shares
to satisfy tax withholdings
|
|
|
(3)
|
|
|
|
(6)
|
|
Other
|
|
|
-
|
|
|
|
1
|
|
Net cash used in
financing activities
|
|
|
(162)
|
|
|
|
(142)
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in cash
|
|
|
9
|
|
|
|
(18)
|
|
Effect of foreign
exchange rate on cash
|
|
|
(1)
|
|
|
|
-
|
|
Cash -- beginning of
period
|
|
|
32
|
|
|
|
43
|
|
Cash -- end of
period
|
|
$
|
40
|
|
|
$
|
25
|
|
MRC Global
Inc.
Supplemental Sales
Information (Unaudited)
(in
millions)
|
|
Disaggregated
Sales by Segment and Sector
|
|
Three Months
Ended
|
September
30,
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
International
|
|
|
Total
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
utilities
|
|
$
|
206
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
208
|
Downstream &
industrial
|
|
|
131
|
|
|
|
4
|
|
|
|
50
|
|
|
|
185
|
Upstream
production
|
|
|
61
|
|
|
|
17
|
|
|
|
40
|
|
|
|
118
|
Midstream
pipeline
|
|
|
65
|
|
|
|
4
|
|
|
|
5
|
|
|
|
74
|
|
|
$
|
463
|
|
|
$
|
27
|
|
|
$
|
95
|
|
|
$
|
585
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
utilities
|
|
$
|
215
|
|
|
$
|
1
|
|
|
$
|
-
|
|
|
$
|
216
|
Downstream &
industrial
|
|
|
218
|
|
|
|
7
|
|
|
|
60
|
|
|
|
285
|
Upstream
production
|
|
|
189
|
|
|
|
43
|
|
|
|
55
|
|
|
|
287
|
Midstream
pipeline
|
|
|
141
|
|
|
|
6
|
|
|
|
7
|
|
|
|
154
|
|
|
$
|
763
|
|
|
$
|
57
|
|
|
$
|
122
|
|
|
$
|
942
|
|
|
Nine Months
Ended
|
September
30,
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
International
|
|
|
Total
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
utilities
|
|
$
|
605
|
|
|
$
|
10
|
|
|
$
|
-
|
|
|
$
|
615
|
Downstream &
industrial
|
|
|
447
|
|
|
|
12
|
|
|
|
153
|
|
|
|
612
|
Upstream
production
|
|
|
266
|
|
|
|
72
|
|
|
|
136
|
|
|
|
474
|
Midstream
pipeline
|
|
|
257
|
|
|
|
11
|
|
|
|
12
|
|
|
|
280
|
|
|
$
|
1,575
|
|
|
$
|
105
|
|
|
$
|
301
|
|
|
$
|
1,981
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
utilities
|
|
$
|
663
|
|
|
$
|
14
|
|
|
$
|
-
|
|
|
$
|
677
|
Downstream &
industrial
|
|
|
667
|
|
|
|
18
|
|
|
|
176
|
|
|
|
861
|
Upstream
production
|
|
|
583
|
|
|
|
130
|
|
|
|
170
|
|
|
|
883
|
Midstream
pipeline
|
|
|
435
|
|
|
|
21
|
|
|
|
19
|
|
|
|
475
|
|
|
$
|
2,348
|
|
|
$
|
183
|
|
|
$
|
365
|
|
|
$
|
2,896
|
MRC Global
Inc.
Supplemental Sales
Information (Unaudited)
(in
millions)
|
|
Sales by Product
Line
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
Type
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
Line pipe
|
|
$
|
63
|
|
|
$
|
153
|
|
|
$
|
243
|
|
|
$
|
468
|
Carbon fittings and
flanges
|
|
|
76
|
|
|
|
145
|
|
|
|
264
|
|
|
|
456
|
Total carbon pipe,
fittings and flanges
|
|
|
139
|
|
|
|
298
|
|
|
|
507
|
|
|
|
924
|
Valves, automation,
measurement and instrumentation
|
|
|
230
|
|
|
|
362
|
|
|
|
802
|
|
|
|
1,125
|
Gas
products
|
|
|
131
|
|
|
|
147
|
|
|
|
379
|
|
|
|
425
|
Stainless steel and
alloy pipe and fittings
|
|
|
29
|
|
|
|
43
|
|
|
|
96
|
|
|
|
135
|
General
products
|
|
|
56
|
|
|
|
92
|
|
|
|
197
|
|
|
|
287
|
|
|
$
|
585
|
|
|
$
|
942
|
|
|
$
|
1,981
|
|
|
$
|
2,896
|
MRC Global
Inc.
Supplemental
Information (Unaudited)
Reconciliation of
Gross Profit to Adjusted Gross Profit (a non-GAAP
measure)
(in
millions)
|
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
Percentage
|
|
|
September
30,
|
|
|
Percentage
|
|
|
|
2020
|
|
|
of
Revenue
|
|
|
2019
|
|
|
of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit, as
reported
|
|
$
|
114
|
|
|
|
19.5
|
%
|
|
$
|
174
|
|
|
|
18.5
|
%
|
Depreciation and
amortization
|
|
|
5
|
|
|
|
0.9
|
%
|
|
|
5
|
|
|
|
0.5
|
%
|
Amortization of
intangibles
|
|
|
7
|
|
|
|
1.2
|
%
|
|
|
11
|
|
|
|
1.2
|
%
|
Decrease in LIFO
reserve
|
|
|
(11)
|
|
|
|
(1.9)
|
%
|
|
|
(2)
|
|
|
|
(0.2)
|
%
|
Adjusted Gross
Profit
|
|
$
|
115
|
|
|
|
19.7
|
%
|
|
$
|
188
|
|
|
|
20.0
|
%
|
|
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
Percentage
|
|
|
September
30,
|
|
|
Percentage
|
|
|
|
2020
|
|
|
of
Revenue
|
|
|
2019
|
|
|
of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit, as
reported
|
|
$
|
341
|
|
|
|
17.2
|
%
|
|
$
|
522
|
|
|
|
18.0
|
%
|
Depreciation and
amortization
|
|
|
15
|
|
|
|
0.8
|
%
|
|
|
16
|
|
|
|
0.6
|
%
|
Amortization of
intangibles
|
|
|
20
|
|
|
|
1.0
|
%
|
|
|
33
|
|
|
|
1.1
|
%
|
Decrease in LIFO
reserve
|
|
|
(20)
|
|
|
|
(1.0)
|
%
|
|
|
(3)
|
|
|
|
(0.1)
|
%
|
Inventory-related
charges (1)
|
|
|
34
|
|
|
|
1.7
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
Adjusted Gross
Profit
|
|
$
|
390
|
|
|
|
19.7
|
%
|
|
$
|
568
|
|
|
|
19.6
|
%
|
|
Notes to
above:
|
|
|
(1)
|
Non-cash charges
(pre-tax) recorded in the second quarter of 2020 for inventory
recorded in cost of goods sold. Charges of $19 million in the U.S.
and $1 million in Canada relate to excess and obsolete inventory as
a result of the current market outlook for certain products.
International segment charges of $14 million relate to increased
reserves for excess and obsolete inventory as well as the exit of
the Thailand business.
|
The company defines Adjusted Gross Profit as sales, less cost of
sales, plus depreciation and amortization, plus amortization of
intangibles, plus inventory-related charges 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 of which they have been involved. 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.
MRC Global
Inc.
Supplemental
Information (Unaudited)
Reconciliation of
Selling, General and Administrative Expenses to
Adjusted Selling,
General and Administrative Expenses (a non-GAAP
measure)
(in
millions)
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
$
|
100
|
|
|
$
|
137
|
|
|
$
|
352
|
|
|
$
|
409
|
|
Severance and
restructuring (1)
|
|
|
(5)
|
|
|
|
(5)
|
|
|
|
(12)
|
|
|
|
(5)
|
|
Facility closures
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
(15)
|
|
|
|
-
|
|
Recovery of supplier
bad debt (3)
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
Adjusted selling,
general and administrative expenses
|
|
$
|
97
|
|
|
$
|
132
|
|
|
$
|
327
|
|
|
$
|
404
|
|
|
|
(1)
|
Charges (pre-tax)
related to employee severance and restructuring charges associated
with the company's cost reduction initiatives in the second and
third quarters of 2020 as well as the third quarter of 2019.
Charges of $5 million were recorded in the third quarter of 2020
with $3 million in the International segment, $1 million in the
U.S. segment and $1 million in the Canada segment. Charges of $7
million were recorded in the second quarter 2020 with $6 million in
the U.S. segment and $1 million in the International segment.
Charges of $5 million were recorded in the third quarter of 2019 in
the U.S. segment.
|
(2)
|
Charges (pre-tax) of
$15 million for lease impairments and abandonments related to
facility closures, substantially non-cash, recorded in the second
quarter of 2020. $12 million is recorded in the International
segment, $2 million in the U.S. segment and $1 million in Canada
segment.
|
(3)
|
Income (pre-tax)
related to the collection of a product claim from a foreign
supplier.
|
The company defines Adjusted Selling, general and administrative
(SG&A) expenses as SG&A, less severance and
restructuring expenses, facility closures plus the recovery of
supplier bad debt. The company presents Adjusted SG&A because
the company believes it is a useful indicator of the company's
operating performance without regard to items that can vary
substantially from company to company. The company presents
Adjusted SG&A because the company believes Adjusted
SG&A is a useful indicator of the company's operating
performance. Among other things, Adjusted SG&A measures
the company's operating performance without regard to certain
non-recurring, non-cash or transaction-related expenses. The
company uses Adjusted SG&A as a key performance indicator
in managing its business. The company believes that SG&A is the
financial measure calculated and presented in accordance with U.S.
generally accepted accounting principles that is most directly
comparable to Adjusted SG&A.
MRC Global
Inc.
Supplemental
Information (Unaudited)
Reconciliation of
Net Income to Adjusted EBITDA (a non-GAAP measure)
(in
millions)
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
3
|
|
|
$
|
21
|
|
|
$
|
(269)
|
|
|
$
|
63
|
|
Income tax expense
(benefit)
|
|
|
5
|
|
|
|
8
|
|
|
|
(7)
|
|
|
|
22
|
|
Interest
expense
|
|
|
7
|
|
|
|
10
|
|
|
|
22
|
|
|
|
31
|
|
Depreciation and
amortization
|
|
|
5
|
|
|
|
5
|
|
|
|
15
|
|
|
|
16
|
|
Amortization of
intangibles
|
|
|
7
|
|
|
|
11
|
|
|
|
20
|
|
|
|
33
|
|
Goodwill and
intangible asset impairment (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
242
|
|
|
|
-
|
|
Inventory-related
charges (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
34
|
|
|
|
-
|
|
Facility closures
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
Severance and
restructuring (4)
|
|
|
5
|
|
|
|
5
|
|
|
|
12
|
|
|
|
5
|
|
Decrease in LIFO
reserve
|
|
|
(11)
|
|
|
|
(2)
|
|
|
|
(20)
|
|
|
|
(3)
|
|
Equity-based
compensation expense (5)
|
|
|
3
|
|
|
|
5
|
|
|
|
8
|
|
|
|
12
|
|
Gain on early
extinguishment of debt (6)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1)
|
|
|
|
-
|
|
Recovery of supplier
bad debt (7)
|
|
|
(2)
|
|
|
|
-
|
|
|
|
(2)
|
|
|
|
-
|
|
Foreign currency
losses (gains)
|
|
|
2
|
|
|
|
(1)
|
|
|
|
3
|
|
|
|
(1)
|
|
Adjusted
EBITDA
|
|
$
|
24
|
|
|
$
|
62
|
|
|
$
|
75
|
|
|
$
|
178
|
|
|
Notes to
above:
|
(1)
|
Non-cash charges
(pre-tax) recorded in the second quarter of 2020 for the impairment
of $217 million for goodwill and $25 million for the U.S.
indefinite-lived tradename asset. The goodwill impairment consisted
of $177 million for the U.S. segment and $40 million for the
International segment, resulting in a $0 balance for the
International segment.
|
(2)
|
Non-cash charges
(pre-tax) recorded in the second quarter of 2020 for inventory
recorded in cost of goods sold. Charges of $19 million in the U.S.
and $1 million in Canada relate to excess and obsolete inventory as
a result of the current market outlook for certain products.
International segment charges of $14 million relate to increased
reserves for excess and obsolete inventory as well as the exit of
the Thailand business.
|
(3)
|
Charges (pre-tax) of
$15 million for lease impairments and abandonments related to
facility closures, substantially non-cash, recorded in SG&A.
$12 million is recorded in the International segment, $2 million in
the U.S. segment and $1 million in Canada segment. Also included
are $3 million of non-cash (pre-tax) charges for the write-down of
assets for facilities in Canada ($2 million) and
International, recorded in Other expense. All charges were recorded
in the second quarter of 2020.
|
(4)
|
Charges (pre-tax)
related to employee severance and restructuring charges associated
with the company's cost reduction initiatives recorded in SG&A
in the second and third quarters of 2020 as well as the third
quarter of 2019. Charges of $5 million were recorded in the third
quarter of 2020 with $3 million in the International segment, $1
million in the U.S. segment and $1 million in the Canada
segment. Charges of $7 million were recorded in the second
quarter 2020 with $6 million in the U.S. segment and $1 million in
the International segment. Charges of $5 million were recorded in
the third quarter of 2019 in the U.S. segment.
|
(5)
|
Recorded in
SG&A.
|
(6)
|
Charges (pre-tax)
related to the purchase of the Term Loan recorded in Other,
net.
|
(7)
|
Income (pre-tax)
recorded in SG&A related to the collection of a product claim
from a foreign supplier.
|
The company defines Adjusted EBITDA as net income plus interest,
income taxes, depreciation and amortization, amortization of
intangibles, and certain other expenses, including non-cash
expenses, (such as equity-based compensation, severance and
restructuring, changes in the fair value of derivative instruments
and asset impairments, including intangible assets
and inventory) 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
Net Income Attributable to Common Stockholders to
Adjusted Net
Income Attributable to Common Stockholders (a non-GAAP
measure)
(in millions,
except per share amounts)
|
|
|
|
September 30,
2020
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
Amount
|
|
|
Per
Share
|
|
|
Amount
|
|
|
Per
Share*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to common stockholders
|
|
$
|
(3)
|
|
|
$
|
(0.04)
|
|
|
$
|
(287)
|
|
|
$
|
(3.50)
|
|
Goodwill and
intangible asset impairment, net of tax (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
234
|
|
|
|
2.86
|
|
Inventory-related
charges, net of tax (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
29
|
|
|
|
0.35
|
|
Facility closures,
net of tax (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
16
|
|
|
|
0.20
|
|
Severance and
restructuring, net of tax (4)
|
|
|
5
|
|
|
|
0.06
|
|
|
|
10
|
|
|
|
0.12
|
|
Recovery of supplier
bad debt, net of tax (5)
|
|
|
(2)
|
|
|
|
(0.02)
|
|
|
|
(2)
|
|
|
|
(0.02)
|
|
Decrease in LIFO
reserve, net of tax
|
|
|
(8)
|
|
|
|
(0.10)
|
|
|
|
(15)
|
|
|
|
(0.18)
|
|
Adjusted net loss
attributable to common stockholders
|
|
$
|
(8)
|
|
|
$
|
(0.10)
|
|
|
$
|
(15)
|
|
|
$
|
(0.18)
|
|
|
|
|
September 30,
2019
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
Amount
|
|
|
Per
Share
|
|
|
Amount
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
|
$
|
15
|
|
|
$
|
0.18
|
|
|
$
|
45
|
|
|
$
|
0.53
|
|
Severance and
restructuring, net of tax (4)
|
|
|
4
|
|
|
|
0.05
|
|
|
|
4
|
|
|
|
0.05
|
|
Decrease in LIFO
reserve, net of tax
|
|
|
(2)
|
|
|
|
(0.02)
|
|
|
|
(2)
|
|
|
|
(0.02)
|
|
Adjusted net income
attributable to common stockholders
|
|
$
|
17
|
|
|
$
|
0.21
|
|
|
$
|
47
|
|
|
$
|
0.56
|
|
|
Notes to
above:
|
* does not foot due
to rounding
|
(1)
|
Non-cash charges
(after-tax) recorded in the second quarter of 2020 for the
impairment of $215 million for goodwill and $19 million for the
U.S. indefinite-lived tradename asset. The after-tax goodwill
impairment consisted of $175 million for the U.S. segment and $40
million for the International segment, resulting in a $0 balance
for the International segment.
|
(2)
|
Charges (after-tax)
recorded in the second quarter of 2020 for inventory recorded in
cost of goods sold. Charges (after-tax) of $15 million in the U.S.
relate to excess and obsolete inventory as a result of the current
market outlook for certain products. International segment charges
(after-tax) of $14 million relate to increased reserves for
excess and obsolete inventory as well as the exit of the Thailand
business.
|
(3)
|
Charges (after-tax)
of $14 million for lease impairments and abandonments related to
facility closures, substantially non-cash, recorded in SG&A.
$11 million is recorded in the International segment, $2 million in
the U.S. segment and $1 million in Canada segment, each after-tax.
Also includes $2 million of non-cash (after-tax) charges for the
write-down of assets for facilities in Canada ($2 million) and
International, recorded in Other expense. All charges were
recorded in the second quarter of 2020.
|
(4)
|
Charges (after-tax)
related to employee severance and restructuring charges associated
with the company's cost reduction initiatives recorded in SG&A
in the second and third quarters of 2020. Charges of $5 million
were recorded in the third quarter 2020 with $3 million in the
International segment, $1 million in the U.S. segment and $1
million in the Canada segment. Charges of $5 million were recorded
in the second quarter 2020 with $4 million in the U.S. segment and
$1 million in the International segment. Charges of $5 million
were recorded in the third quarter of 2019 in the U.S.
segment.
|
(5)
|
Income (after-tax)
recorded in SG&A related to the collection of a product claim
from a foreign supplier.
|
The company defines Adjusted Net Income Attributable to Common
Stockholders (a non-GAAP measure) as Net Income Attributable to
Common Stockholders less after-tax goodwill and intangible
impairment, inventory-related charges, facility closures, severance
and restructuring, plus or minus the after-tax impact of its LIFO
inventory costing methodology. The company presents Adjusted Net
Income Attributable to Common Stockholders and related per share
amounts because the company believes it provides useful
comparisons of the company's operating results to other companies,
including those companies with whom we compete in the distribution
of pipe, valves and fittings to the energy industry, without regard
to the irregular variations from certain restructuring events not
indicative of the on-going business. Those items include goodwill
and intangible asset impairments, inventory-related charges,
facility closures, severance and restructuring as well as the LIFO
inventory costing methodology. The impact of the LIFO inventory
costing methodology 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 believes that Net Income Attributable to Common
Stockholders is the financial measure calculated and presented in
accordance with U.S. generally accepted accounting principles that
is most directly compared to Adjusted Net Income Attributable to
Common Stockholders.
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SOURCE MRC Global Inc.