Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 10, 2015

 

 

MRC GLOBAL INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-35479   20-5956993

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

2 Houston Center, 909 Fannin, Suite 3100,

Houston, TX 77010

(Address of principal executive offices,

including zip code)

Registrant’s telephone number, including area code: (877) 294-7574

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 7.01 Regulation FD Disclosure.

MRC Global Inc. (“MRC Global”) executive management will make presentations from time to time to current and potential investors, lenders, creditors, insurers, vendors, customers, employees and others with an interest in MRC Global and its business regarding, among other things, MRC Global’s operations and performance. A copy of the materials to be used at the presentations (the “Presentation Materials”) is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information contained in the Presentation Materials is summary information that should be considered in the context of MRC Global’s filings with the Securities and Exchange Commission and other public announcements that MRC Global may make by press release or otherwise from time to time. The Presentation Materials speak as of the date of this Current Report on Form 8-K. While MRC Global may elect to update the Presentation Materials in the future or reflect events and circumstances occurring or existing after the date of this Current Report on Form 8-K, MRC Global specifically disclaims any obligation to do so. The Presentation Materials will also be posted in the Investor Relations section of MRC Global’s website, http://www.mrcglobal.com, for 90 days.

The information referenced under Item 7.01 (including Exhibit 99.1 referenced under Item 9.01 below) of this Current Report on Form 8-K is being “furnished” under “Item 7.01. Regulation FD Disclosure” and, as such, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information set forth in this Current Report on Form 8-K (including Exhibit 99.1 referenced under Item 9.01 below) shall not be incorporated by reference into any registration statement, report or other document filed by MRC Global pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

99.1   Investor Presentation, dated August 10, 2015

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 10, 2015

 

MRC GLOBAL INC.
By:  

/s/ James E. Braun

  James E. Braun
  Executive Vice President and Chief Financial Officer

 

3


INDEX TO EXHIBITS

 

Exhibit

No.

  

Description

99.1    Investor Presentation, dated August 10, 2015

 

4

EX-99.1
August 2015
TM
Investor Presentation
Exhibit 99.1


2
2
Forward Looking Statements and Non-GAAP Disclaimer
This
presentation
contains
forward-looking
statements
within
the
meaning
of
Section
27A
of
the
Securities
Act
and
Section
21E
of
the
Exchange
Act.
Words
such as “will,” “expect,” “expected”, “looking forward”, “guidance” and similar expressions are intended to identify forward-looking statements. Statements
about the company’s business, including its strategy, the impact of changes in oil prices and customer spending, its industry, the company’s future
profitability, the company’s guidance on its sales, adjusted EBITDA, adjusted gross profit, tax rate, capital expenditures and cash flow, the company’s
expectations regarding the pay down of its debt, growth in the company’s various markets and the company’s expectations, beliefs, plans, strategies,
objectives, prospects and assumptions are not guarantees of future performance. These statements are based on management’s expectations that involve a
number
of
business
risks
and
uncertainties,
any
of
which
could
cause
actual
results
to
differ
materially
from
those
expressed
in
or
implied
by
the
forward-
looking
statements.
These
statements
involve
known
and
unknown
risks,
uncertainties
and
other
factors,
most
of
which
are
difficult
to
predict
and
many
of
which
are
beyond
our
control,
including
the
factors
described
in
the
company’s
SEC
filings
that
may
cause
our
actual
results
and
performance
to
be
materially different from any future results or performance expressed or implied by these forward-looking statements.
For
a
discussion
of
key
risk
factors,
please
see
the
risk
factors
disclosed
in
the
company’s
SEC
filings,
which
are
available
on
the
SEC’s
website
at
www.sec.gov
and on the company’s website, www.mrcglobal.com. Our filings and other important information are also available on the Investor Relations
page of our website at
www.mrcglobal.com.
Undue reliance should not be placed on the company’s forward-looking statements. Although forward-looking statements reflect the company’s good faith
beliefs,
reliance
should
not
be
placed
on
forward-looking
statements
because
they
involve
known
and
unknown
risks,
uncertainties
and
other
factors,
which
may cause the company’s actual results, performance or achievements or future events to differ materially from anticipated future results, performance or
achievements or future events expressed or implied by such forward-looking statements. The company undertakes no obligation to publicly update or revise
any
forward-looking
statement,
whether
as
a
result
of
new
information,
future
events,
changed
circumstances
or
otherwise,
except
to
the
extent
required
by
law.


3
Company Snapshot
MRC Global is the largest global distributor of pipe, valves and fittings (PVF)
to the energy industry, by sales
1.
As of June 30, 2015
By
the
Numbers
TTM Sales
TTM Adjusted EBITDA
$5.621B
$384M
Employees
~4,500
Locations
400+
Countries
Operations
Direct Sales (>$100,000)
All countries
22
45+
90+
Customers
21,000+
Suppliers
21,000+
SKU’s
230,000+
Industry Sectors
Product Categories
Upstream
Line Pipe & OCTG
Midstream
Valves
Downstream/ Industrial
Fittings & Flanges
1


4
Revenue by Industry Sector
Note: Percentage of sales for the twelve months ended June 30, 2015.
Upstream
Downstream
Midstream
Diversified Across All Three Major Energy Sectors
MRO, recurring, turnaround work
Large installed base of refineries &
petrochemical facilities
Weighted
to customer’s operating budgets v.
new construction capital projects
Primarily new construction
Growing pipeline integrity work in gas utilities
Weighted
to customer’s new construction
capital projects v. operating budgets
Includes approximately half of line pipe sales
Both MRO and new construction
Weighted slightly to customer’s operating
budgets v. new construction capital projects
Includes 100% of OCTG sales
Tracks customer CapEx, well completions and
well count
Primarily production equipment, above ground
Transmission
19%
Production
Infrastructure,
Materials &
Supplies
35%
Drilling &
Completion
Tubulars
(OCTG)
8%
Gas Utility
12%
Other/
Industrial
13%
Chemicals
& Refining
13%
26%
31%
43%


5
By Product Line
Revenue by Geography and Product Line
9%
14%
24%
25%
28%
Canada
Asia / Europe
Eastern
Western
Gulf Coast
32%
21%
20%
19%
8%
Valves
Fittings & Flanges
Line Pipe
General Oilfield
Products
OCTG
Note: Percentage of sales for the twelve months ended June 30, 2015
By Geography
8%
21%
19%
20%
32%
Houston, TX
Edmonton, AB
Bradford,
UK
Singapore
Perth, AU
Stavanger,
NO
Diversified Across Multiple Geographies -
Domestically (all shale plays) and Internationally


6
MRC Global plays a vital role in the complex, technical, global energy supply chain
Long-Term Supplier & Customer Relationships
CUSTOMERS
SUPPLIERS
IOCs
DOW
DuPont
Marathon
Petroleum
AGL
Resources
Atmos
NiSource
PG&E
MarkWest
DCP
Midstream
Chesapeake
Energy
CNRL
ConocoPhillips
Apache
Anadarko
California Resources
Corporation
Hess
Husky
Energy
Marathon
Oil
Statoil
Tenaris
TMK-
IPSCO
U.S.
Steel
CSI Tubular
JMC
Wheatland
Balon
Cameron
Flowserve
Kitz
Neway
Velan
Boltex
Bonney
Forge
Chevron
Phillips
Chemical
Tube
Forgings of
America
WL Plastics
Emerson
Williams
Phillips
66
Chevron Phillips
Chemical
Valero
Colombia Pipeline Group
Energy Carbon Steel
Tubular Products
Valves
Fittings, Flanges and General
Use Products
Downstream
Midstream
Upstream


7
Integrated Supply Statistics
Supplying Integrated Supply services
since 1988
Accounts for sales in excess of $830
million
and growing rapidly
Employ over 190 personnel
at customer sites
Providing Integration Services on over
100 customer sites
Managing
over 1.4 million customer
part numbers
Consignment inventories in excess of
$35 million at 700 locations
Manage customer-owned point of use
materials at
over 800 locations
MRC Global is a Leading Provider of Integrated Supply
Services to the Energy Industry


8
Long Term Growth Strategy –
Greater Scale for Better Returns
Rebalance Product Mix to
Higher Margin Items
Focus on valves and valve automation
Growth from Mergers & Acquisitions
Continue to identify geographic and
product line opportunities
1.
Percentage of sales for the twelve months ended June 30, 2015
Targeted Growth Account
Continue to grow share with the “next 75”
customers
29%
22%
49%
All Other -
21,000+ customers
Targeted Growth Accounts
Top 1 -
25
Focus on multi-year “Top 25” MRO agreements &
adding scope to current agreements
Execute Global Preferred Supplier Contracts
Recently added or renewed:
MarkWest
U.S. midstream MRO, 5 years
Statoil –
Norway, Johan Sverdrup project,
instrumentation
Marathon Oil –
U.S. MRO, 5 years
California
Resources
Corporation
U.S.
integrated supply, 3 years
TECO Energy’s People’s Gas & New Mexico Gas
U.S. integrated supply, 5 years
SABIC –
Saudi Arabia, downstream valve
framework agreement, 5 years
Strategic Objectives
Customer
Mix
1


Product Mix
Shift from 2008 to 2015
Stable, higher margin valves are a larger percentage of revenue.
More volatile carbon pipe is a smaller percentage of revenue.
The prices of higher margin products are more stable.
55%
Higher
Margin
Products
45%
Carbon
Pipe
2008
72%
Higher
Margin
Products
TTM 2015
Note: Percentage of sales for the year ended December 31, 2008 and the twelve months ended June 30, 2015.
OCTG
24%
Line Pipe
21%
Valves
15%
Fittings &
Flanges
18%
Oilfield
OCTG
8%
28%
Carbon
Pipe
Line Pipe
20%
Valves
32%
9
Fittings &
21%
Flanges
General
Oilfield
19%
Supplies
Products
22%
General


10
Inflation impacted both OCTG and LP in 2008…resulting in a significant
reduction in prices in 2009.
Today, prices are lower and have less to fall in a downturn.
Line Pipe
Prices
OCTG Prices
48%
47%
Carbon Steel Prices in 2008/2009 as Compared to Today
Note:
Prices
are
per
ton,
as
reported
in
published
market
data.
Amounts
reflect
peak
prices
in
September
2008
and
trough
prices
in
November
2009.
2014
peak
prices
for
OCTG
are
from
November
and
Line Pipe from August.
23%
$3,036
$1,614
$1,643
$1,404
Peak 2008
Trough 2009
Peak 2014
Jul-15
$3,242
$1,675
$1,786
$1,402
Peak 2008
Trough 2009
Peak 2014
Jul-15


11
Building an International Platform for Growth
North America
Estimated PVF Spend
~$25B
Estimated
Percentage
of
PVF
Spend
¹
International
Estimated PVF Spend
~$20B
1.  Estimated percentages are management estimates based on 2014 results.
$0
$52
$256
$330
$567
$554
$873
2008
2009
2010
2011
2012
2013
2014
International Segment Revenue
($ millions)
MRC
Global
20%
~$5.0 B
All
others
80%
MRC
Global
5%
~$900M
All
others
95%


12
Strategic Expansion into Offshore Production Platform MRO
Top 4
largest offshore markets ~$140 billion E&P spend
Norway is the largest –
we are positioned in 4 of the 5 largest offshore markets.
MRC Global revenue mix
Pre Stream
acquisition (2013) –
approx. 98% onshore, 2% offshore
Post Stream
acquisition (2014) –
approx. 93% onshore, 7% offshore
$38
$36
$35
$32
$24
$20
$17
$16
$16
$15
Norway
United Kingdom
USA
Brazil
Australia
Angola
Nigeria
Kingdom of Saudi Arabia
Malaysia
Mexico
Top 10 Global Offshore E&P Markets
¹
1.
Source:
Rystad
Energy,
September
2014
($ billions)
Stream 2014 Sales by Division
Valve
Management
37%
Instrumentation
38%
Pipe, Fittings
& Flanges
25%


13
Financial Overview


14
$663
$850
$1,058
$1,009
$1,120
$538
$452
2010
2011
2012
2013
2014
2014
2015
Financial Metrics
Sales
Adjusted Gross Profit and % Margin
Adjusted EBITDA and % Margin
7.0%
8.5%
($ millions, except per share data)
Y-o-Y
Growth
28%
24%
(5%)
11%
Y-o-Y
Growth
61%
29%
(17%)
10%
$3,846
$4,832
$5,571
$5,231
$5,933
$2,803
$2,490
2010
2011
2012
2013
2014
2014
2015
$224
$360
$463
$386
$424
$190
$150
2010
2011
2012
2013
2014
2014
2015
5.8%
7.5%
8.3%
7.4%
7.1%
6.8%
6.0%
Y-o-Y
Growth
26%
15%
(6%)
13%
Diluted EPS
$(0.61)
$0.34
$1.22
$1.48
$1.40
$0.61
$0.43
2010
2011
2012
2013
2014
2014
2015
Y-o-Y
Growth
156%
259%
21%
(5%)
17.2%
17.6%
19.0%
19.3%
18.9%
19.2%
18.1%
Six months ended
June 30
Six months ended
June 30
Six months ended
June 30
Six months ended
June 30


15
Balance Sheet Metrics
Total Debt
Capital Structure
Cash Flow from Operations
Net Leverage
($ millions)
June 30, 2015
Cash and Cash Equivalents
$ 33
Total Debt (including
current portion):
Term
Loan
B
due
2019,
net
of
discount
527
Global ABL Facility due 2019
321
Total Debt
$
848
Preferred
stock
355
Common stockholders’
equity
1,404
Total Capitalization
$ 2,607
Liquidity
$ 576
5.8x
4.1x
2.5x
2.6x
3.4x
2.6x –
2.9x
2.1x
2010
2011
2012
2013
2014
2015E
06/30/15
$113
$(103)
$240
$324
$(106)
$400  -
$475
$(52)
$277
2010
2011
2012
2013
2014
2015E
2014
2015
$1,360
$1,527
$1,257
$987
$1,454
$680 -
$750
$848
2010
2011
2012
2013
2014
2015E
06/30/15
Six months ended
June 30
NOTE:
The Net Leverage ratio is calculated assuming the expected year-end debt balance above, the 6/30/2015 cash balance and a denominator of $249 million, which is 2015 EBITDA consensus, as per
Bloomberg on August 6, 2015.


16
Current 2015 Guidance
Revenue
Quarter: Q3 sequentially lower by 7-12%
Annual:  2015 expected to be 20-25% lower than 2014
Upstream
upper
30%
decline
Midstream
high
single
digit
decline
Downstream
mid
single
digit
decline
Revenue headwinds in 2015 in excess of $120 million related to currency
Adjusted gross margin
Low to mid 17% range for the remainder of 2015
LIFO
$30 million benefit for 2015
SG&A
$149-$152 million per quarter for the remainder of 2015
Effective tax rate
36% for 2015
Balance sheet
Expect to generate $400-$475 million of cash from operations
Reduce debt by $700-$750 million in 2014
Reduce debt to $680-$750 million at year-end


17
Macro drivers
Growth in global energy consumption
driving investment
Increased global production
Need for additional energy infrastructure
Expansion of downstream energy
conversion businesses
Investment Thesis
Highlights
Leading global PVF distributor to the energy sector
MRC Global attributes
Market leader
Exposed to all sectors of global energy
Long term global customer & supplier
relationships
Generates strong cash flow from operations
over the cycle


18
Appendix


19
MRC Global // North America
Corporate Headquarters
Branch Locations
Regional Distribution Centers
Valve Automation Centers
Western
Gulf Coast
Canada
Eastern


20
Global
Footprint
to
Serve
Customers
-
North
America
Munster, IN
Nitro, WV
Tulsa, OK
Houston, TX
Nisku, AB
Cheyenne, WY
Odessa, TX
Bakersfield, CA
San Antonio, TX
Regional Distribution Centers
Corporate Headquarters
Valve Automation Centers
Branch Locations
By the Numbers
As of 6/30/2015
Branches
160+
RDCs
10
VACs
14
Employees
~3,200
Pittsburgh, PA


Global
Footprint
to
Serve
Customers
-
Europe
Regional Distribution Centers
Valve Automation Centers
Branch Locations
Stavanger, NO
By the Numbers
As of 6/30/2015
Branches
34
RDCs
3
VACs
13
Countries
9
Employees
~900
Rotterdam, NL
Bradford, UK
21


22
By the Numbers
As of 6/30/2015
Branches
28
RDCs
4
VACs
7
Countries
11
Employees
~400
Global Footprint to Serve Customers -
Asia Pacific & Middle East
Regional Distribution Centers
Valve Automation Centers
Branch Locations
Singapore
Perth, WA
Brisbane, QLD
Dubai, UAE


Date
Acquisition
Rationale
Region
Revenue
¹
($ millions)
Oct-08
LaBarge
Midstream
U.S.
$ 233
Oct-09
Transmark
International
valve platform
Europe and Asia
346
May-10
South Texas Supply
Domestic shale
Eagle Ford Shale
-
South Texas
9
Aug-10
Dresser
Oil Tools Supply
Domestic shale
Bakken
Shale
-
North Dakota
13
Jun-11
Stainless Pipe and Fittings
Projects
Australia / SE Asia
91
Jul-11
Valve Systems and Controls
Valve automation
U.S. Gulf of Mexico
13
Mar-12
OneSteel
Piping Systems
International
PVF expansion
Australia
174
Jun-12
Chaparral Supply
Domestic shale
Mississippian Lime -
Oklahoma /
Kansas
71
Dec-12
Production Specialty Services
Domestic shale
Permian Basin / Eagle Ford shale
127
Jul-13
Flow Control
Products
Valve automation
Permian Basin / Eagle Ford shale
28
Dec-13
Flangefitt
Stainless
Stainless/Alloys
United Kingdom
24
Jan-14
Stream
International Offshore PVF
Norway
271
May-14
MSD Engineering
Valve automation
Singapore & SE Asia
26
Jun-14
HypTeck
International Offshore
Norway
38
1.
Reflects reported revenues for the year of acquisition or 2013 for Stream, MSD and HypTeck.
M&A -
Track Record of Strategic Acquisitions
Acquisition Priorities
International branch platform for “super majors” E&P spend
Branch platforms/infrastructure for North American shale plays
Global valve and valve automation
Global stainless/alloys
23
$ 1.46 Billion +


24
Upstream


25
Midstream


26
Downstream


27
Performance Measures
$1,043
$1,234
$1,255
$1,054
$1,181
2010
2011
2012
2013
2014
$180
$217
$238
$203
$223
2010
2011
2012
2013
2014
Sales per Employee
($ thousands)
Adjusted Gross Profit per Employee
($ thousands)
23.0%
19.8%
20.4%
21.8%
21.3%
2010
2011
2012
2013
2014
11.7%
10.6%
10.9%
12.3%
12.1%
2010
2011
2012
2013
2014
SG&A / Sales
Average Working Capital / Sales
1.9%
6.1%
10.9%
8.4%
7.0%
2010
2011
2012
2013
2014
Return on Average Net Capital Employed (RANCE)
1.
Calculated based on average number of employees
2.
RANCE is defined as Pretax income for the year plus Interest expense and
related financing charges, multiplied by 1, minus our effective tax rate, and
the denominator is average net capital employed for the year. Net capital
employed is defined as Total assets minus Current liabilities plus Other long-
term liabilities.
1
1
2


28
Adjusted EBITDA Reconciliation
Six months ended
June 30
Year Ended December 31
($ millions)
2015
2014
2014
2013
2012
2011
2010
Net
income available to shareholders
$ 45.4
$ 62.8
$ 144.1
$ 152.1
$ 118.0
$ 29.0
$ (51.8)
Income tax
expense
26.2
34.0
81.8
84.8
63.7
26.8
(23.4)
Interest expense
28.3
30.5
61.8
60.7
112.5
136.8
139.6
Depreciation
and amortization
10.2
10.5
22.5
22.3
18.6
17.0
16.6
Amortization of
intangibles
30.9
33.9
67.8
52.1
49.5
50.7
53.9
Increase (decrease)
in LIFO reserve
(15.1)
2.1
11.9
(20.2)
(24.1)
73.7
74.6
Change in fair value of derivative instruments
1.1
4.3
1.1
(4.7)
(2.2)
(7.0)
4.9
Equity-based compensation expense
5.4
4.0
8.9
15.5
8.5
8.4
3.7
Severance & related costs
8.7
5.0
7.5
0.8
-
1.1
3.2
Write-off of debt
issuance costs
3.2
-
-
-
-
-
-
Foreign
currency losses (gains)
5.5
(3.1)
2.5
12.9
(0.8)
(0.6)
0.3
Loss on sale of Canadian progressive cavity pump business
-
6.2
6.2
-
-
-
-
Loss on disposition of rolled and welded business
-
-
4.1
-
-
-
-
Insurance charge
-
-
-
2.0
-
-
-
Cancellation of executive employment agreement (cash portion)
-
-
3.2
-
-
-
-
Inventory write-down
-
-
-
-
-
-
0.4
M&A transaction
& integration expenses
-
-
-
-
-
0.5
1.4
Expenses associated with refinancing
-
-
-
5.1
1.7
9.5
-
Loss on early extinguishment of debt
-
-
-
-
114.0
-
-
Pension settlement
-
-
-
-
4.4
-
-
Legal and consulting expenses
-
-
-
-
-
9.9
4.2
Provision for uncollectible accounts
-
-
-
-
-
0.4
(2.0)
Joint venture termination
-
-
-
-
-
1.7
-
Other expense
(income)
-
-
0.6
3.0
(0.6)
2.6
(1.4)
Adjusted EBITDA
$ 149.8
$ 190.2
$ 424.0
$ 386.4
$ 463.2
$ 360.5
$ 224.2


29
Adjusted Gross
Profit Reconciliation
Six months ended
June 30
Year ended
December 31
($ millions)
2015
2014
2014
2013
2012
2011
2010
Gross
profit
$ 425.9
$ 491.6
$ 1,018.1
$ 954.8
$ 1,013.7
$ 708.2
$ 518.1
Depreciation and amortization
10.2
10.5
22.5
22.3
18.6
17.0
16.6
Amortization of intangibles
30.9
33.9
67.8
52.1
49.5
50.7
53.9
Increase (decrease) in LIFO reserve
(15.1)
2.1
11.9
(20.2)
(24.1)
73.7
74.6
Adjusted Gross Profit
$ 451.9
$ 538.1
$ 1,120.3
$ 1,009.0
$ 1,057.7
$ 849.6
$ 663.2