MRC Global Inc. (NYSE: MRC), the leading global distributor of
pipe, valves and fittings and infrastructure products and
services to diversified end-markets, today announced
third quarter 2021 results.
The company’s sales were $685 million for
the third quarter of 2021, which was
consistent with the second quarter of
2021 but 17% higher than the third quarter of
2020. Sequentially, the U.S. segment experienced modest growth
led by the downstream, industrial and energy transition (DIET)
sector offset by the International segment,
which declined due to delayed maintenance, repairs
and operations (MRO) and project activity. As compared to the
third quarter of 2020, broad economic
recovery drove improvement in sales across all
sectors.
Net loss attributable to common stockholders for
the third quarter of 2021 was ($17) million, or
($0.21) per diluted share, as compared to the
third quarter of 2020 net loss of ($3) million,
or ($0.04) per diluted share.
Rob Saltiel, MRC Global’s president and chief
executive officer stated, “Our third quarter results reflect
solid execution and good cost control as we achieved adjusted
EBITDA margins of 5.7%, the highest for our company in two years.
Our U.S. business grew 2% sequentially while our International
segment experienced revenue declines due to delayed MRO and project
activity. We expect double-digit revenue growth next year based on
our growing backlog and increased customer activity.”
MRC Global’s third quarter
of 2021 gross profit was $95 million, or
13.9% of sales, as compared to the third quarter of
2020 gross profit of $114 million, or 19.5% of
sales. Gross profit for the third quarter of
2021 includes $32 million of expense in cost of
sales relating to the use of the last-in, first-out (LIFO) method
of inventory cost accounting as compared to the
third quarter of 2020, which reduced cost of sales
by $11 million. Adjusted gross profit, which excludes the
impact of LIFO was $137 million, or 20.0% of revenue, for
the third quarter of 2021 and was $115 million,
or 19.7% of revenue, for the third quarter
of 2020.
Please refer to the reconciliation of non-GAAP
measures (adjusted gross profit, adjusted SG&A, adjusted
EBITDA) to GAAP measures (gross profit, SG&A, net income) in
this release.
Selling, general and administrative (SG&A)
expenses were $102 million, or 14.9% of sales, for the
third quarter of 2021 compared to $100 million,
or 17.1% of sales, for the same period in 2020. Adjusted
SG&A of $97 million for the third quarter of 2020 excludes
$3 million of severance costs and the recovery of supplier bad
debt.
An income tax benefit of $2 million
was generated in the third quarter of 2021, with
an effective tax rate of 15%, as compared to income
tax expense of $5 million for the
third quarter of 2020. 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.
Sales by Geographic Segment
U.S. sales in the third quarter of
2021 were $570 million, up $107 million, or
23%, from the same quarter in 2020. The gas utilities sector led
the U.S. increase followed by the upstream production sector. The
gas utilities sector revenue increased $63 million, or
31%, driven by the implementation of a new customer contract,
increased activity levels as pandemic restrictions eased,
and continued execution of our customers' integrity upgrade
programs. Upstream production sector sales increased by
$21 million, or 34%, primarily due to increased customer
spending, recovery from the pandemic and an increase in well
completions. DIET sector sales
increased $12 million, or 9%, from additional
turnaround project spending and increased activity associated
with recovery from the pandemic. Midstream pipeline
sector sales improved $11 million, or 17%, driven by
smaller pipeline projects as well as gathering and processing
projects from increased completion activity.
Canada sales in the third quarter of
2021 were $30 million, up $3 million, or 11%,
from the same quarter in 2020, driven by a stronger Canadian
dollar and an improvement in the DIET sector
as scheduled maintenance activity increased.
International sales in the third quarter of
2021 were $85 million, down $10 million, or 11%,
from the same period in 2020 driven by the net effect of
non-recurring projects primarily in the upstream sector, partially
offset by stronger foreign currencies.
Sales by End-Market Sector
Gas utilities sector sales in the
third quarter of 2021 were $271 million, or
40% of total sales, an increase of $63 million,
or 30%, from the third quarter of 2020, driven by the
U.S. segment. Sequentially, the gas utilities sector grew $2
million, or 1%, primarily related to a general increase in
activity, integrity and modernization projects and continued growth
with a new customer.
Downstream, industrial and energy transition
sector sales in the third quarter of 2021 were
$197 million, or 29% of total sales, an increase of
$12 million, or 6%, from the third quarter of 2020. The
increase in DIET sector sales was driven by the
U.S. segment. Sequentially, sales in this sector were up
$6 million, or 3% on increased refinery turnarounds and
biodiesel projects in the U.S.
Upstream production sector sales in the
third quarter of 2021 were $132 million, or
19% of total sales, an
improvement of $14 million, or 12%, from the
third quarter of 2020. The increase in upstream production
sales was led by the U.S. segment, partially offset by the
International segment. Sequentially, upstream production
sector sales decreased $11 million, or 8%, driven by
the International segment.
Midstream pipeline sector sales in the
third quarter of 2021 were $85 million, or
12% of total sales, an increase of $11 million, or
15%, from the third quarter of 2020, driven by the U.S.
segment. Sequentially, midstream pipeline sector sales increased
$2 million, or 2%, due to maintenance and small projects.
Balance Sheet
Cash used by operations was
$31 million in the third quarter of 2021. As
of September 30, 2021, the cash balance was
$47 million, long-term debt (including current portion)
was $325 million, and net debt was $278 million.
Availability under the company’s asset-based lending facility
was $445 million and available liquidity
was $492 million as of September 30, 2021. In
September, the company refinanced the asset-based lending
facility with similar interest rates and terms
to the previous credit agreement and extended the
maturity date to 2026.
Please refer to the reconciliation of non-GAAP
measures (Net Debt) to GAAP measures (Long-term Debt) in this
release.
End-Market Sector Change
Beginning in the third quarter, the Downstream and Industrial
end-market sector will be known as the Downstream, Industrial
and Energy Transition, or DIET, end-market sector and the company
will classify all energy transition MRO and project sales in
this sector. This change reflects the growing importance
of energy transition and MRC Global's commitment to serve customers
in their transition efforts. Currently, this represents a
relatively small portion of the company's total revenue, but
it is expected to grow with our customer's increasing
commitments.
Conference Call
The company will hold a conference call to
discuss its third quarter 2021 results at 10:00 a.m.
Eastern Time (9:00 a.m. Central Time) on November 9, 2021. To
participate in the call, please dial 201-689-8261 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 23, 2021 and
can be accessed by dialing 201-612-7415 and using pass code
13722130#. 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
(NYSE: MRC) is the leading global distributor of pipe,
valves, fittings (PVF) and infrastructure products and
services to diversified end-markets including the gas utilities,
downstream, industrial and energy transition, upstream production
and midstream pipeline sectors. With over 100 years of
experience, MRC Global has provided customers with innovative
supply chain solutions, technical product expertise and a robust
digital platform from a worldwide network of 220 locations
including valve and engineering centers. The company’s unmatched
quality assurance program offers 200,000 SKUs from 10,000
suppliers, simplifying the supply chain for over 12,000 customers.
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 BroughtonInvestor 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, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
47 |
|
|
$ |
119 |
|
Accounts receivable, net |
|
|
399 |
|
|
|
319 |
|
Inventories, net |
|
|
471 |
|
|
|
509 |
|
Other current assets |
|
|
28 |
|
|
|
19 |
|
Total current assets |
|
|
945 |
|
|
|
966 |
|
|
|
|
|
|
|
|
|
|
Long-term assets: |
|
|
|
|
|
|
|
|
Operating lease assets |
|
|
186 |
|
|
|
200 |
|
Property, plant and equipment, net |
|
|
92 |
|
|
|
103 |
|
Other assets |
|
|
22 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
Intangible assets: |
|
|
|
|
|
|
|
|
Goodwill, net |
|
|
264 |
|
|
|
264 |
|
Other intangible assets, net |
|
|
210 |
|
|
|
229 |
|
|
|
$ |
1,719 |
|
|
$ |
1,781 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
329 |
|
|
$ |
264 |
|
Accrued expenses and other current liabilities |
|
|
76 |
|
|
|
94 |
|
Operating lease liabilities |
|
|
33 |
|
|
|
37 |
|
Current portion of long-term debt |
|
|
2 |
|
|
|
4 |
|
Total current liabilities |
|
|
440 |
|
|
|
399 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Long-term debt, net |
|
|
323 |
|
|
|
379 |
|
Operating lease liabilities |
|
|
173 |
|
|
|
187 |
|
Deferred income taxes |
|
|
65 |
|
|
|
70 |
|
Other liabilities |
|
|
32 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
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, 106,882,401 and 106,315,296 issued, respectively |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
1,747 |
|
|
|
1,739 |
|
Retained deficit |
|
|
(809 |
) |
|
|
(781 |
) |
Less: Treasury stock at cost: 24,216,330 shares |
|
|
(375 |
) |
|
|
(375 |
) |
Accumulated other comprehensive loss |
|
|
(233 |
) |
|
|
(234 |
) |
|
|
|
331 |
|
|
|
350 |
|
|
|
$ |
1,719 |
|
|
$ |
1,781 |
|
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, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
685 |
|
|
$ |
585 |
|
|
$ |
1,980 |
|
|
$ |
1,981 |
|
Cost of sales |
|
|
590 |
|
|
|
471 |
|
|
|
1,670 |
|
|
|
1,640 |
|
Gross profit |
|
|
95 |
|
|
|
114 |
|
|
|
310 |
|
|
|
341 |
|
Selling, general and
administrative expenses |
|
|
102 |
|
|
|
100 |
|
|
|
304 |
|
|
|
352 |
|
Goodwill and intangibles
impairment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
242 |
|
Operating (loss) income |
|
|
(7 |
) |
|
|
14 |
|
|
|
6 |
|
|
|
(253 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(6 |
) |
|
|
(7 |
) |
|
|
(18 |
) |
|
|
(22 |
) |
Other, net |
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
|
|
(1 |
) |
(Loss) income before income
taxes |
|
|
(13 |
) |
|
|
8 |
|
|
|
(11 |
) |
|
|
(276 |
) |
Income tax (benefit)
expense |
|
|
(2 |
) |
|
|
5 |
|
|
|
(1 |
) |
|
|
(7 |
) |
Net (loss) income |
|
|
(11 |
) |
|
|
3 |
|
|
|
(10 |
) |
|
|
(269 |
) |
Series A preferred stock
dividends |
|
|
6 |
|
|
|
6 |
|
|
|
18 |
|
|
|
18 |
|
Net loss attributable to
common stockholders |
|
$ |
(17 |
) |
|
$ |
(3 |
) |
|
$ |
(28 |
) |
|
$ |
(287 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common
share |
|
$ |
(0.21 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.34 |
) |
|
$ |
(3.50 |
) |
Diluted loss per common
share |
|
$ |
(0.21 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.34 |
) |
|
$ |
(3.50 |
) |
Weighted-average common
shares, basic |
|
|
82.7 |
|
|
|
82.1 |
|
|
|
82.5 |
|
|
|
81.9 |
|
Weighted-average common
shares, diluted |
|
|
82.7 |
|
|
|
82.1 |
|
|
|
82.5 |
|
|
|
81.9 |
|
MRC Global Inc.Condensed
Consolidated Statements of Cash Flows (Unaudited)(in
millions)
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Operating
activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(10 |
) |
|
$ |
(269 |
) |
Adjustments to reconcile net
loss to net cash provided by operations: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
14 |
|
|
|
15 |
|
Amortization of intangibles |
|
|
18 |
|
|
|
20 |
|
Equity-based compensation expense |
|
|
10 |
|
|
|
8 |
|
Deferred income tax benefit |
|
|
(7 |
) |
|
|
(10 |
) |
Amortization of debt issuance costs |
|
|
1 |
|
|
|
- |
|
Increase (decrease) in LIFO reserve |
|
|
47 |
|
|
|
(20 |
) |
Goodwill and intangible asset impairment |
|
|
- |
|
|
|
242 |
|
Lease impairment and abandonment |
|
|
- |
|
|
|
15 |
|
Inventory-related charges |
|
|
- |
|
|
|
34 |
|
Provision for credit losses |
|
|
- |
|
|
|
3 |
|
Other |
|
|
3 |
|
|
|
3 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(81 |
) |
|
|
110 |
|
Inventories |
|
|
(15 |
) |
|
|
102 |
|
Other current assets |
|
|
(11 |
) |
|
|
(3 |
) |
Accounts payable |
|
|
68 |
|
|
|
(63 |
) |
Accrued expenses and other current liabilities |
|
|
(21 |
) |
|
|
(9 |
) |
Net cash provided by
operations |
|
|
16 |
|
|
|
178 |
|
|
|
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
|
|
|
Purchases of property, plant
and equipment |
|
|
(6 |
) |
|
|
(8 |
) |
Other investing
activities |
|
|
2 |
|
|
|
1 |
|
Net cash used in investing
activities |
|
|
(4 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
|
|
Payments on revolving credit
facilities |
|
|
(262 |
) |
|
|
(655 |
) |
Proceeds from revolving credit
facilities |
|
|
290 |
|
|
|
519 |
|
Payments on long-term
obligations |
|
|
(87 |
) |
|
|
(5 |
) |
Debt issuance costs paid |
|
|
(3 |
) |
|
|
- |
|
Dividends paid on preferred
stock |
|
|
(18 |
) |
|
|
(18 |
) |
Repurchases of shares to
satisfy tax withholdings |
|
|
(2 |
) |
|
|
(3 |
) |
Net cash used in financing
activities |
|
|
(82 |
) |
|
|
(162 |
) |
|
|
|
|
|
|
|
|
|
(Decrease) increase in
cash |
|
|
(70 |
) |
|
|
9 |
|
Effect of foreign exchange
rate on cash |
|
|
(2 |
) |
|
|
(1 |
) |
Cash -- beginning of
period |
|
|
119 |
|
|
|
32 |
|
Cash -- end of period |
|
$ |
47 |
|
|
$ |
40 |
|
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 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas utilities |
|
$ |
269 |
|
|
$ |
2 |
|
|
$ |
- |
|
|
$ |
271 |
|
Downstream, industrial &
energy transition |
|
|
143 |
|
|
|
6 |
|
|
|
48 |
|
|
|
197 |
|
Upstream production |
|
|
82 |
|
|
|
18 |
|
|
|
32 |
|
|
|
132 |
|
Midstream pipeline |
|
|
76 |
|
|
|
4 |
|
|
|
5 |
|
|
|
85 |
|
|
|
$ |
570 |
|
|
$ |
30 |
|
|
$ |
85 |
|
|
$ |
685 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas utilities |
|
$ |
206 |
|
|
$ |
2 |
|
|
$ |
- |
|
|
$ |
208 |
|
Downstream, industrial &
energy transition |
|
|
131 |
|
|
|
4 |
|
|
|
50 |
|
|
|
185 |
|
Upstream production |
|
|
61 |
|
|
|
17 |
|
|
|
40 |
|
|
|
118 |
|
Midstream pipeline |
|
|
65 |
|
|
|
4 |
|
|
|
5 |
|
|
|
74 |
|
|
|
$ |
463 |
|
|
$ |
27 |
|
|
$ |
95 |
|
|
$ |
585 |
|
Nine Months Ended |
September 30, |
|
|
U.S. |
|
|
Canada |
|
|
International |
|
|
Total |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas utilities |
|
$ |
745 |
|
|
$ |
5 |
|
|
$ |
- |
|
|
$ |
750 |
|
Downstream, industrial &
energy transition |
|
|
417 |
|
|
|
15 |
|
|
|
150 |
|
|
|
582 |
|
Upstream production |
|
|
231 |
|
|
|
62 |
|
|
|
109 |
|
|
|
402 |
|
Midstream pipeline |
|
|
219 |
|
|
|
10 |
|
|
|
17 |
|
|
|
246 |
|
|
|
$ |
1,612 |
|
|
$ |
92 |
|
|
$ |
276 |
|
|
$ |
1,980 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas utilities |
|
$ |
605 |
|
|
$ |
10 |
|
|
$ |
- |
|
|
$ |
615 |
|
Downstream, industrial &
energy transition |
|
|
447 |
|
|
|
12 |
|
|
|
153 |
|
|
|
612 |
|
Upstream production |
|
|
266 |
|
|
|
72 |
|
|
|
136 |
|
|
|
474 |
|
Midstream pipeline |
|
|
257 |
|
|
|
11 |
|
|
|
12 |
|
|
|
280 |
|
|
|
$ |
1,575 |
|
|
$ |
105 |
|
|
$ |
301 |
|
|
$ |
1,981 |
|
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 |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Line pipe |
|
$ |
103 |
|
|
$ |
63 |
|
|
$ |
268 |
|
|
$ |
243 |
|
Carbon fittings and
flanges |
|
|
96 |
|
|
|
76 |
|
|
|
269 |
|
|
|
264 |
|
Total carbon pipe, fittings
and flanges |
|
|
199 |
|
|
|
139 |
|
|
|
537 |
|
|
|
507 |
|
Valves, automation,
measurement and instrumentation |
|
|
230 |
|
|
|
230 |
|
|
|
714 |
|
|
|
802 |
|
Gas products |
|
|
169 |
|
|
|
131 |
|
|
|
465 |
|
|
|
379 |
|
Stainless steel and alloy pipe
and fittings |
|
|
35 |
|
|
|
29 |
|
|
|
100 |
|
|
|
96 |
|
General products |
|
|
52 |
|
|
|
56 |
|
|
|
164 |
|
|
|
197 |
|
|
|
$ |
685 |
|
|
$ |
585 |
|
|
$ |
1,980 |
|
|
$ |
1,981 |
|
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 |
|
|
|
2021 |
|
|
of Revenue* |
|
|
2020 |
|
|
of Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit, as reported |
|
$ |
95 |
|
|
|
13.9 |
% |
|
$ |
114 |
|
|
|
19.5 |
% |
Depreciation and
amortization |
|
|
4 |
|
|
|
0.6 |
% |
|
|
5 |
|
|
|
0.9 |
% |
Amortization of
intangibles |
|
|
6 |
|
|
|
0.9 |
% |
|
|
7 |
|
|
|
1.2 |
% |
Increase (decrease) in LIFO
reserve |
|
|
32 |
|
|
|
4.7 |
% |
|
|
(11 |
) |
|
|
(1.9 |
)% |
Adjusted Gross Profit |
|
$ |
137 |
|
|
|
20.0 |
% |
|
$ |
115 |
|
|
|
19.7 |
% |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
Percentage |
|
|
September 30, |
|
|
Percentage |
|
|
|
2021 |
|
|
of Revenue* |
|
|
2020 |
|
|
of Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit, as reported |
|
$ |
310 |
|
|
|
15.7 |
% |
|
$ |
341 |
|
|
|
17.2 |
% |
Depreciation and
amortization |
|
|
14 |
|
|
|
0.7 |
% |
|
|
15 |
|
|
|
0.8 |
% |
Amortization of
intangibles |
|
|
18 |
|
|
|
0.9 |
% |
|
|
20 |
|
|
|
1.0 |
% |
Increase (decrease) in LIFO
reserve |
|
|
47 |
|
|
|
2.4 |
% |
|
|
(20 |
) |
|
|
(1.0 |
)% |
Inventory-related charges
(1) |
|
|
- |
|
|
|
0.0 |
% |
|
|
34 |
|
|
|
1.7 |
% |
Adjusted Gross Profit |
|
$ |
389 |
|
|
|
19.6 |
% |
|
$ |
390 |
|
|
|
19.7 |
% |
Notes to above:
* Does not foot due to rounding
(1 |
) |
Non-cash charges (pre-tax) 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 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, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
$ |
102 |
|
|
$ |
100 |
|
|
$ |
304 |
|
|
$ |
352 |
|
Severance and restructuring
(1) |
|
|
- |
|
|
|
(5 |
) |
|
|
- |
|
|
|
(12 |
) |
Facility closures (2) |
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
(15 |
) |
Recovery of supplier bad debt
(3) |
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
Employee separation (4) |
|
|
- |
|
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
Adjusted Selling, general and
administrative expenses |
|
$ |
102 |
|
|
$ |
97 |
|
|
$ |
301 |
|
|
$ |
327 |
|
Notes to above:
(1 |
) |
Charges (pre-tax) related to
employee severance and restructuring charges associated with the
company’s cost reduction initiatives in 2020 recorded in
SG&A. 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. |
(2 |
) |
2021: Charges (pre-tax) $1
million associated with the exit of the Korea business recorded in
the International segment. 2020: 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 the Canada segment. |
(3 |
) |
Income (pre-tax) related to the
collection of a product claim from a foreign supplier. |
(4 |
) |
Charges (pre-tax) related to
employee separation of which $1 million is non-cash share-based
compensation. |
The company defines Adjusted Selling, general
and administrative (SG&A) expenses as SG&A, less
severance and restructuring expenses, employee separation
costs, 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. 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 (Loss) Income to
Adjusted EBITDA (a non-GAAP measure)(in millions)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(11 |
) |
|
$ |
3 |
|
|
$ |
(10 |
) |
|
$ |
(269 |
) |
Income tax (benefit)
expense |
|
|
(2 |
) |
|
|
5 |
|
|
|
(1 |
) |
|
|
(7 |
) |
Interest expense |
|
|
6 |
|
|
|
7 |
|
|
|
18 |
|
|
|
22 |
|
Depreciation and
amortization |
|
|
4 |
|
|
|
5 |
|
|
|
14 |
|
|
|
15 |
|
Amortization of
intangibles |
|
|
6 |
|
|
|
7 |
|
|
|
18 |
|
|
|
20 |
|
Goodwill and intangible asset
impairment (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
242 |
|
Inventory-related charges
(2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
34 |
|
Facility closures (3) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18 |
|
Severance and restructuring
(4) |
|
|
- |
|
|
|
5 |
|
|
|
- |
|
|
|
12 |
|
Employee separation (5) |
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
Increase (decrease) in LIFO
reserve |
|
|
32 |
|
|
|
(11 |
) |
|
|
47 |
|
|
|
(20 |
) |
Equity-based compensation
expense (6) |
|
|
3 |
|
|
|
3 |
|
|
|
10 |
|
|
|
8 |
|
Gain on early extinguishment
of debt (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
Recovery of supplier bad debt
(8) |
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
|
|
(2 |
) |
Foreign currency losses |
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
3 |
|
Adjusted EBITDA |
|
$ |
39 |
|
|
$ |
24 |
|
|
$ |
99 |
|
|
$ |
75 |
|
Notes to above:
(1 |
) |
Non-cash charges (pre-tax) for
the impairment of $217 million for goodwill and $25 million for the
U.S. intangible, 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) 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 |
) |
2021: Charges (pre-tax) $1
million associated with the exit of the Korea business recorded in
the International segment. 2020: 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 the 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. |
(4 |
) |
Charges (pre-tax) related to
employee severance and restructuring charges associated with the
company’s cost reduction initiatives recorded in
SG&A. 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. |
(5 |
) |
Charges (pre-tax) recorded in
SG&A. $2 million relates to employee separation, of which, $1
million is recorded in equity-based compensation expense, in the
first quarter of 2021. |
(6 |
) |
Recorded in
SG&A |
(7 |
) |
Gain (pre-tax) related to the
purchase of the Term Loan recorded in Other, net. |
(8 |
) |
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
Loss Attributable to Common Stockholders to
Adjusted Net Income (Loss) Attributable to Common
Stockholders (a non-GAAP measure)(in millions, except per
share amounts)
|
|
September 30, 2021 |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Amount |
|
|
Per Share |
|
|
Amount |
|
|
Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to
common stockholders |
|
$ |
(17 |
) |
|
$ |
(0.21 |
) |
|
$ |
(28 |
) |
|
$ |
(0.34 |
) |
Increase in LIFO reserve, net
of tax |
|
|
25 |
|
|
|
0.30 |
|
|
|
36 |
|
|
|
0.43 |
|
Adjusted net income
attributable to common stockholders |
|
$ |
8 |
|
|
$ |
0.09 |
|
|
$ |
8 |
|
|
$ |
0.09 |
|
|
|
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 |
) |
Notes to above:* Does not foot due to
rounding
(1 |
) |
Non-cash charges (after-tax)
for the impairment of $215 million for goodwill and $19 million for
the U.S. intangible, 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) 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. |
(4 |
) |
Charges (after-tax) related to
employee severance and restructuring charges associated with the
company’s cost reduction initiatives recorded in
SG&A. 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. |
(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.
MRC Global
Inc.Supplemental Information
(Unaudited)Reconciliation of Long-term Debt to Net
Debt (a non-GAAP measure) and the Leverage Ratio
Calculation(in millions)
|
|
September 30, |
|
|
|
2021 |
|
|
|
|
|
|
Long-term debt, net |
|
$ |
323 |
|
Plus: current portion of
long-term debt |
|
|
2 |
|
Long-term debt |
|
|
325 |
|
Less: cash |
|
|
47 |
|
Net Debt |
|
$ |
278 |
|
|
|
|
|
|
Net Debt |
|
$ |
278 |
|
Trailing twelve months
adjusted EBITDA |
|
|
121 |
|
Leverage ratio |
|
|
2.3 |
|
Notes to above:Net Debt and related leverage
metrics may be considered non-GAAP measures. We define Net Debt as
total long-term debt, including current portion, minus cash. We
define our leverage ratio as Net Debt divided by trailing twelve
months Adjusted EBITDA. We believe Net Debt is an indicator of the
extent to which the company’s outstanding debt obligations could be
satisfied by cash on hand and a useful metric for investors to
evaluate the company’s leverage position. We believe the leverage
ratio is a commonly used metric that management and investors use
to assess the borrowing capacity of the company. We believe total
long-term debt (including the current portion) is the financial
measure calculated and presented in accordance with U.S. generally
accepted accounting principles that is most directly comparable to
Net Debt.
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