MRC Global Announces Fourth Quarter 2016 Results
The company's sales were
Net loss attributable to common stockholders for the fourth quarter of 2016 was
"While the last two years have been challenging in the oil and gas markets, we are in a strong position to capitalize on the improving market conditions. Over the past two years, since the downturn began, we executed our strategic objectives. We have gained valuable market share, generated
"Looking ahead, we expect 2017 results to be improved over 2016 and we are looking forward to returning to sales and earnings growth across each of our segments and sectors."
Selling, general and administrative ("SG&A") expenses were
Adjusted EBITDA was
The effective tax rate in the fourth quarter 2016 was negative 6% as a result of a lower effective tax rate (benefit) for the full year of 9%, reflecting increased unbenefited pre-tax losses in the International segment.
Sales by Segment
U.S. sales in the fourth quarter of 2016 were
Canadian sales in the fourth quarter of 2016 were
International sales in the fourth quarter of 2016 were
Sales by Sector
Upstream sales in the fourth quarter of 2016 decreased 41% from the fourth quarter of 2015 to $218 million, or 30% of total sales. The decline in upstream sales was across all segments and was a result of reduced customer activity. Excluding OCTG revenue from the fourth quarter 2015, U.S. upstream sales declined 36% in the fourth quarter of 2016. Canadian and International upstream sales declined 17% and 19% in the fourth quarter 2016 from the fourth quarter 2015, respectively.
Midstream sales in the fourth quarter of 2016 decreased 15% from the fourth quarter of 2015 to $268 million, or 37% of total sales. Sales to transmission and gas utility customers were down 7% and 22% over the same quarter in 2015, respectively.
Downstream sales in the fourth quarter of 2016 decreased 17% from the fourth quarter of 2015 to $233 million, or 33% of total sales. The decrease was due to a 24% decline in U.S. downstream sales primarily related to lower project activity.
Balance Sheet
Cash balances were
Share Repurchase Program Update
In
Conference Call
The Company will hold a conference call to discuss its fourth quarter and annual 2016 results at
About
Headquartered in
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Words such as "will," "expect," "expected", "looking forward", "guidance" and similar expressions are intended to identify forward-looking statements.
Statements about the company's business, including its strategy, its industry, the company's future profitability, the company's guidance on its sales, adjusted EBITDA, tax rate, capital expenditures and cash flow, the company's expectations regarding the pay down of its debt, growth in the company's various markets and the company's expectations, beliefs, plans, strategies, objectives, prospects and assumptions are not guarantees of future performance. These statements are based on management's expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, most of which are difficult to predict and many of which are beyond our control, including the factors described in the company's
These risks and uncertainties include (among others) decreases in oil and natural gas prices; decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors; increased usage of alternative fuels, which may negatively affect oil and natural gas industry expenditure levels; U.S. and international general economic conditions; the company's ability to compete successfully with other companies in
For a discussion of key risk factors, please see the risk factors disclosed in the company's
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:
Investor Relations
Monica.Broughton@mrcglobal.com
832-308-2847
MRC Global Inc. Condensed Consolidated Balance Sheets (Unaudited) (in millions) |
|||
December 31, |
|||
2016 |
2015 |
||
Assets |
|||
Current assets: |
|||
Cash |
$ 109 |
$ 69 |
|
Accounts receivable, net |
399 |
533 |
|
Inventories, net |
561 |
781 |
|
Other current assets |
48 |
22 |
|
Total current assets |
1,117 |
1,405 |
|
Other assets |
19 |
22 |
|
Property, plant and equipment, net |
135 |
127 |
|
Intangible assets: |
|||
Goodwill, net |
482 |
484 |
|
Other intangible assets, net |
411 |
459 |
|
$ 2,164 |
$ 2,497 |
||
Liabilities and stockholders' equity |
|||
Current liabilities: |
|||
Trade accounts payable |
$ 314 |
$ 327 |
|
Accrued expenses and other current liabilities |
111 |
110 |
|
Current portion of long-term debt |
8 |
8 |
|
Total current liabilities |
433 |
445 |
|
Long-term obligations: |
|||
Long-term debt, net |
406 |
511 |
|
Deferred income taxes |
184 |
208 |
|
Other liabilities |
23 |
22 |
|
Commitments and contingencies |
|||
6.5% Series A Convertible Perpetual Preferred Stock, $0.01 par value; authorized 363,000 shares; 363,000 shares issued and outstanding |
|||
355 |
355 |
||
Stockholders' equity: |
|||
Common stock, $0.01 par value per share: 500 million shares authorized, 102,529,637 and 102,203,074 issued, respectively |
|||
1 |
1 |
||
Additional paid-in capital |
1,677 |
1,666 |
|
Retained deficit |
(574) |
(467) |
|
Treasury stock at cost: 7,677,580 and 816,389 shares, respectively |
(107) |
(12) |
|
Accumulated other comprehensive loss |
(234) |
(232) |
|
763 |
956 |
||
$ 2,164 |
$ 2,497 |
MRC Global Inc. Condensed Consolidated Statements of Operations (Unaudited) (in millions, except per share amounts) |
|||||||
Three Months Ended |
Year Ended |
||||||
December 31, |
December 31, |
December 31, |
December 31, |
||||
2016 |
2015 |
2016 |
2015 |
||||
Sales |
$ 719 |
$ 967 |
$ 3,041 |
$ 4,529 |
|||
Cost of sales |
597 |
792 |
2,573 |
3,743 |
|||
Gross profit |
122 |
175 |
468 |
786 |
|||
Selling, general and administrative expenses |
128 |
146 |
524 |
606 |
|||
Goodwill and intangible asset impairment |
- |
462 |
- |
462 |
|||
Operating loss |
(6) |
(433) |
(56) |
(282) |
|||
Other expense: |
|||||||
Interest expense |
(9) |
(9) |
(35) |
(48) |
|||
Write off of debt issuance costs |
(1) |
- |
(1) |
(3) |
|||
Other, net |
(1) |
(7) |
1 |
(9) |
|||
Loss before income taxes |
(17) |
(449) |
(91) |
(342) |
|||
Income tax expense (benefit) |
1 |
(56) |
(8) |
(11) |
|||
Net loss |
(18) |
(393) |
(83) |
(331) |
|||
Series A preferred stock dividends |
6 |
6 |
24 |
13 |
|||
Net loss attributable to common stockholders |
$ (24) |
$ (399) |
$ (107) |
$ (344) |
|||
Basic loss per common share |
$ (0.25) |
$ (3.92) |
$ (1.10) |
$ (3.38) |
|||
Diluted loss per common share |
$ (0.25) |
$ (3.92) |
$ (1.10) |
$ (3.38) |
|||
Weighted-average common shares, basic |
95.1 |
101.8 |
97.3 |
102.1 |
|||
Weighted-average common shares, diluted |
95.1 |
101.8 |
97.3 |
102.1 |
MRC Global Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in millions) |
|||
Year Ended December 31, |
|||
2016 |
2015 |
||
Operating activities |
|||
Net loss |
$ (83) |
$ (331) |
|
Adjustments to reconcile net loss to net cash provided by operations: |
|||
Depreciation and amortization |
22 |
21 |
|
Amortization of intangibles |
47 |
60 |
|
Equity-based compensation expense |
12 |
10 |
|
Deferred income tax benefit |
(23) |
(87) |
|
Amortization of debt issuance costs |
4 |
4 |
|
Inventory-related charges |
45 |
- |
|
Write off of debt issuance costs |
1 |
3 |
|
Goodwill and intangible asset impairment |
- |
462 |
|
Decrease in LIFO reserve |
(14) |
(53) |
|
Change in fair value of derivative instruments |
(1) |
1 |
|
Provision for uncollectible accounts |
4 |
2 |
|
Foreign currency losses |
4 |
3 |
|
Other non-cash items |
4 |
9 |
|
Changes in operating assets and liabilities: |
|||
Accounts receivable |
128 |
412 |
|
Inventories |
141 |
419 |
|
Other current assets |
(23) |
6 |
|
Income taxes payable |
6 |
(13) |
|
Accounts payable |
(13) |
(198) |
|
Accrued expenses and other current liabilities |
(8) |
(40) |
|
Net cash provided by operations |
253 |
690 |
|
Investing activities |
|||
Purchases of property, plant and equipment |
(33) |
(39) |
|
Proceeds from the disposition of property, plant and equipment |
1 |
1 |
|
Proceeds from the disposition of non-core product lines |
48 |
- |
|
Other investing activities |
- |
(3) |
|
Net cash provided by (used in) investing activities |
16 |
(41) |
|
Financing activities |
|||
Payments on revolving credit facilities |
(41) |
(1,343) |
|
Proceeds from revolving credit facilities |
41 |
670 |
|
Payments on long-term obligations |
(108) |
(258) |
|
Debt issuance costs paid |
- |
(1) |
|
Purchases of common stock |
(95) |
(12) |
|
Proceeds from issuance of preferred stock, net of issuance costs |
- |
355 |
|
Dividends paid on preferred stock |
(24) |
(10) |
|
Proceeds from exercise of stock options |
1 |
- |
|
Net cash used in financing activities |
(226) |
(599) |
|
Increase in cash |
43 |
50 |
|
Effect of foreign exchange rate on cash |
(3) |
(6) |
|
Cash beginning of year |
69 |
25 |
|
Cash end of year |
$ 109 |
$ 69 |
|
MRC Global Inc. Supplemental Information (Unaudited) Reconciliation of Adjusted EBITDA (a non-GAAP measure) to Net Loss (in millions) |
|||||||
Three Months Ended |
Year Ended |
||||||
December 31, |
December 31, |
December 31, |
December 31, |
||||
2016 |
2015 |
2016 |
2015 |
||||
Net loss |
$ (18) |
$ (393) |
$ (83) |
$ (331) |
|||
Income tax expense (benefit) |
1 |
(56) |
(8) |
(11) |
|||
Interest expense |
9 |
9 |
35 |
48 |
|||
Depreciation and amortization |
6 |
6 |
22 |
21 |
|||
Amortization of intangibles |
12 |
14 |
47 |
60 |
|||
Decrease in LIFO reserve |
(7) |
(23) |
(14) |
(53) |
|||
Inventory-related charges (1) |
- |
- |
40 |
- |
|||
Goodwill and intangible asset impairment |
- |
462 |
- |
462 |
|||
Equity-based compensation expense (2) |
3 |
2 |
12 |
10 |
|||
Severance and restructuring charges (3) |
8 |
5 |
20 |
14 |
|||
Loss on disposition of non-core product lines (4) |
- |
5 |
- |
5 |
|||
Foreign currency losses (gains) |
3 |
(1) |
4 |
3 |
|||
Write off of debt issuance costs (5) |
1 |
- |
1 |
3 |
|||
Litigation matter (6) |
- |
3 |
- |
3 |
|||
Change in fair value of derivative instruments |
(1) |
1 |
(1) |
1 |
|||
Adjusted EBITDA |
$ 17 |
$ 34 |
$ 75 |
$ 235 |
Notes to above: |
|
(1) |
Non-cash charges (pre-tax) recorded in cost of goods sold. Charges in the international segment are related to a restructuring of our Australian business and market conditions in Iraq as well as an increase in reserves for excess and obsolete inventory in the U.S. and Canada as a result of the current market outlook for certain products. |
(2) |
Recorded in SG&A |
(3) |
Charge (pre-tax) related to employee severance and restructuring charges associated with the company's cost reduction initiatives recorded in SG&A |
(4) |
Charge (pre-tax) related to the sale of the company's OCTG business in 2015 recorded in Other, net. |
(5) |
Charge (pre-tax) related to the early repayment of debt. |
(6) |
Charge (pre-tax) related to the Weatherford claim as described in the company's SEC filings recorded in Other, net. |
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 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 Adjusted Gross Profit (a non-GAAP measure) to Gross Profit (in millions) |
|||||||
Three Months Ended |
|||||||
December 31, |
Percentage |
December 31, |
Percentage |
||||
2016 |
of Revenue |
2015 |
of Revenue |
||||
Gross profit, as reported |
$ 122 |
17.0% |
$ 175 |
18.1% |
|||
Depreciation and amortization |
6 |
0.8% |
6 |
0.6% |
|||
Amortization of intangibles |
12 |
1.7% |
14 |
1.5% |
|||
Decrease in LIFO reserve |
(7) |
(1.0%) |
(23) |
(2.4%) |
|||
Adjusted Gross Profit |
$ 133 |
18.5% |
$ 172 |
17.7% |
|||
Year Ended |
|||||||
December 31, |
Percentage |
December 31, |
Percentage |
||||
2016 |
of Revenue |
2015 |
of Revenue |
||||
Gross profit, as reported |
$ 468 |
(1) |
15.4% |
$ 786 |
17.4% |
||
Depreciation and amortization |
22 |
0.7% |
21 |
0.5% |
|||
Amortization of intangibles |
47 |
1.6% |
60 |
1.3% |
|||
Decrease in LIFO reserve |
(14) |
(0.5%) |
(53) |
(1.2%) |
|||
Adjusted Gross Profit |
$ 523 |
(1) |
17.2% |
$ 814 |
18.0% |
Notes to above: |
|
(1) |
Includes $45 million of non-cash charges (pre-tax) recorded in cost of goods sold. Charges in the international segment are related to a restructuring of our Australian business and market conditions in Iraq as well as an increase in reserves for excess and obsolete inventory in the U.S. and Canada as a result of the current market outlook for certain products. Excluding these charges, gross profit, as reported would be $513 million (16.9%) and adjusted gross profit would be $568 million (18.7%) for the year ended December 31, 2016, respectively. |
The company defines Adjusted Gross Profit as sales, less cost of sales, plus depreciation and amortization, plus amortization of intangibles, and plus or minus the impact of its LIFO inventory costing methodology. The company presents Adjusted Gross Profit because the company believes it is a useful indicator of the company's operating performance without regard to items, such as amortization of intangibles, that can vary substantially from company to company depending upon the nature and extent of acquisitions 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. Sales by Product Line (Unaudited) (in millions) |
||||||||
Three Months Ended |
Year Ended |
|||||||
December 31, |
December 31, |
December 31, |
December 31, |
|||||
Type |
2016 |
2015 |
2016 |
2015 |
||||
Valves, automation, measurement and instrumentation |
$ 267 |
$ 340 |
$ 1,161 |
$ 1,507 |
||||
Carbon steel fittings and flanges |
107 |
139 |
460 |
665 |
||||
Line pipe (1) |
99 |
162 |
444 |
864 |
||||
Gas products |
111 |
112 |
443 |
475 |
||||
Stainless steel alloy pipe and fittings |
51 |
52 |
206 |
267 |
||||
Oil country tubular goods ("OCTG") |
- |
62 |
- |
311 |
||||
Other |
84 |
100 |
327 |
440 |
||||
$ 719 |
$ 967 |
$ 3,041 |
$ 4,529 |
Notes to above: |
|
(1) |
As a result of the disposition of our U.S. OCTG product line, pre-disposition OCTG sales of $18 million have been included within line pipe sales for the year ended December 31, 2016. |
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SOURCE