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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _______ TO _______

Commission file number: 001-35479

MRC GLOBAL INC.

(Exact name of registrant as specified in its charter)

Delaware

20-5956993

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer

Identification No.)

Fulbright Tower

1301 McKinney Street, Suite 2300

Houston, Texas

77010

(Address of Principal Executive Offices)

(Zip Code)

(877) 294-7574
(Registrant’s Telephone Number, including Area Code)

________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

MRC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [X] Accelerated Filer [ ] Non-Accelerated Filer [ ] Smaller Reporting Company [ ] Emerging Growth Company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [ ] No [X]

There were 82,187,833 shares of the registrant’s common stock (excluding 74,055 unvested restricted shares), par value $0.01 per share, issued and outstanding as of October 25, 2019.


INDEX TO QUARTERLY REPORT ON FORM 10-Q

 

Page

PART I – FINANCIAL INFORMATION

ITEM 1.

financial statements (UNAUDITED)

1

Condensed Consolidated Balance Sheets – SEPTEMBER 30, 2019AND DECEMBER 31, 2018

1

cONdENSED cONSOLIDATED STATEMENTS OF OPERATIONS – THREE AND NINE MONTHS ENDEDSEPTEMBER 30, 2019 AND SEPTEMBER 30, 2018

2

Condensed Consolidated Statements ofcOMPREHENSIVE INCOME – three and NINE months ended SEPTEMBER 30, 2019 and SEPTEMBER 30, 2018

3

Condensed CONSOLIDATED STATEMENTS OF STOCKHOLDERs’ EQUITY NINE MONTHS ENDEd SEPTEMBER 30, 2019 and SEPTEMBER 30, 2018

4

Condensed CONSOLIDATED STATEMENTS OF cash flows – NINE MONTHS ENDEd SEPTEMBER 30, 2019AND SEPTEMBER 30, 2018

6

Notes to the Condensed Consolidated Financial Statements – SEPTEMBER 30  2019

7

ITEM 2.

management’s discussion and analysis of financial condition and

results of operations

18

ITEM 3.

quantitative and qualitative disclosures about market risk

31

ITEM 4.

controls and procedures

31

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

32

ITEM 1a.

RISK FACTORS

32

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

32

ITEM 3.

Defaults Upon Senior Securities

32

ITEM 4.

MINING SAFETY DISCLOSURES

33

ITEM 5.

other information

33

ITEM 6.

Exhibits

34


Table Of Contents

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)

 

September 30,

December 31,

2019

2018

Assets

Current assets:

Cash

$

25

$

43

Accounts receivable, net

586

587

Inventories, net

742

797

Other current assets

37

38

Total current assets

1,390

1,465

Long-term assets:

Operating lease assets

186

-

Property, plant and equipment, net

140

140

Other assets

21

23

Intangible assets:

Goodwill, net

482

484

Other intangible assets, net

288

322

$

2,507

$

2,434

Liabilities and stockholders' equity

Current liabilities:

Trade accounts payable

$

431

$

435

Accrued expenses and other current liabilities

93

130

Operating lease liabilities

34

-

Current portion of long-term debt

4

4

Total current liabilities

562

569

Long-term liabilities:

Long-term debt, net

623

680

Operating lease liabilities

168

-

Deferred income taxes

91

98

Other liabilities

37

40

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,

105,623,390 and 104,953,693 issued, respectively

1

1

Additional paid-in capital

1,727

1,721

Retained deficit

(453)

(498)

Less: Treasury stock at cost: 23,436,329 and 19,347,839 shares, respectively

(363)

(300)

Accumulated other comprehensive loss

(241)

(232)

671

692

$

2,507

$

2,434

See notes to condensed consolidated financial statements.

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Table Of Contents

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)

 

Three Months Ended

Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2019

2018

2019

2018

Sales

$

942

$

1,071

$

2,896

$

3,163

Cost of sales

768

899

2,374

2,645

Gross profit

174

172

522

518

Selling, general and administrative expenses

137

140

409

414

Operating income

37

32

113

104

Other (expense) income:

Interest expense

(10)

(10)

(31)

(28)

Write off of debt issuance costs

-

-

-

(1)

Other, net

2

2

3

4

Income before income taxes

29

24

85

79

Income tax expense

8

-

22

15

Net income

21

24

63

64

Series A preferred stock dividends

6

6

18

18

Net income attributable to common stockholders

$

15

$

18

$

45

$

46

Basic income per common share

$

0.18

$

0.20

$

0.54

$

0.51

Diluted income per common share

$

0.18

$

0.20

$

0.53

$

0.50

Weighted-average common shares, basic

82.7

90.3

83.4

90.6

Weighted-average common shares, diluted

83.4

91.7

84.2

92.4

See notes to condensed consolidated financial statements.

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Table Of Contents

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

MRC GLOBAL INC.

(in millions)

 

Three Months Ended

Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2019

2018

2019

2018

Net income

$

21

$

24

$

63

$

64

Other comprehensive (loss) income

Foreign currency translation adjustments

(8)

-

(3)

(10)

Hedge accounting adjustments, net of tax

-

2

(6)

2

Total other comprehensive (loss) income, net of tax

(8)

2

(9)

(8)

Comprehensive income

$

13

$

26

$

54

$

56

See notes to condensed consolidated financial statements.

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Table Of Contents

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

MRC GLOBAL INC.

(in millions)

 

Nine Months Ended September 30, 2019

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Treasury Stock

Comprehensive

Stockholders'

Shares

Amount

Capital

(Deficit)

Shares

Amount

(Loss)

Equity

Balance at December 31, 2018

105 

$

1 

$

1,721 

$

(498)

(19)

$

(300)

$

(232)

$

692 

Net income

-

-

-

18 

-

-

-

18 

Foreign currency translation

-

-

-

-

-

-

3 

3 

Hedge accounting adjustments

-

-

-

-

-

-

(2)

(2)

Shares withheld for taxes

-

-

(6)

-

-

-

-

(6)

Equity-based compensation expense

-

-

4 

-

-

-

-

4 

Dividends declared on preferred stock

-

-

-

(6)

-

-

-

(6)

Purchase of common stock

-

-

-

-

(2)

(25)

-

(25)

Balance at March 31, 2019

105 

$

1 

$

1,719 

$

(486)

(21)

$

(325)

$

(231)

$

678 

Net income

-

-

-

24 

-

-

-

24 

Foreign currency translation

-

-

-

-

-

-

2 

2 

Hedge accounting adjustments

-

-

-

-

-

-

(4)

(4)

Equity-based compensation expense

1 

-

3 

-

-

-

-

3 

Dividends declared on preferred stock

-

-

-

(6)

-

-

-

(6)

Purchase of common stock

-

-

-

-

(1)

(25)

-

(25)

Balance at June 30, 2019

106 

$

1 

$

1,722 

$

(468)

(22)

$

(350)

$

(233)

$

672 

Net income