HOUSTON, Oct. 31, 2018 /PRNewswire/ -- MRC Global Inc. (NYSE: MRC), the largest global distributor, based on sales, of pipe, valves and fittings and related products and services to the energy industry, today announced third quarter 2018 results.

The company's sales were $1.07 billion for the third quarter of 2018, which were 12% higher than the third quarter of 2017. Net income attributable to common stockholders for the third quarter of 2018 was $18 million, or $0.20 per diluted share, compared to net loss attributable to common stockholders of $(3) million, or $(0.03) per diluted share for the third quarter of 2017.

Andrew R. Lane, MRC Global's president and chief executive officer stated, "I am very pleased with the quarterly results. This is the third quarter in a row where the Company delivered over $1 billion in sales and increasing amounts of adjusted EBITDA as increased customer base spending plays out as expected in the second year of the oil and gas recovery. While business remains strong, we expect a typical seasonal decline in the fourth quarter, partially offset by project deliveries that have been pushed to the fourth quarter from the third."

"The adjusted gross profit percentage in the third quarter in excess of 20% was the best quarterly percentage since the first quarter of 2013. Our gross margin and inventory management strategies have contributed to the improvement in our gross profit percentage. Our revenue growth and improved profitability were led by our United States segment with its third quarter adjusted EBITDA percentage of 8.5%, the highest since the third quarter of 2013. We also achieved total incremental adjusted EBITDA of 21% in the third quarter. Our business is performing very well as demand for our products increases and we are well positioned for future growth," Mr. Lane added.

MRC Global's third quarter 2018 gross profit was $172 million, or 16.1% of sales, an increase from third quarter 2017 gross profit of $152 million, or 15.8% of sales. Gross profit for the third quarter of 2018 and 2017 reflects an expense of $26 million and $13 million, respectively, in cost of sales relating to the use of the last-in, first out (LIFO) method of inventory cost accounting.

Selling, general and administrative (SG&A) expenses were 13.1% of sales, or $140 million, for the third quarter of 2018 compared to 13.6% of sales, or $130 million for the same period of 2017. SG&A as a percentage of sales declined due to continued growth in the business and disciplined cost control.

Adjusted EBITDA was $80 million in the third quarter of 2018 compared to $56 million for the same period in 2017. Please refer to the reconciliation of non-GAAP measures (adjusted gross profit, adjusted EBITDA) to GAAP measures (gross profit, net income) in this release.

The effective tax rate in the third quarter of 2018 and 2017 was 0% and 40%, respectively. The effective tax rate in the third quarter of 2018 differed from our forecasted rate of 28% primarily as a result of favorable one-time adjustments made during the current quarter to the provisional amounts originally recognized in the fourth quarter of 2017 upon the enactment of the Tax Cuts and Jobs Act of 2017. 

Sales by Segment

U.S. sales in the third quarter of 2018 were $859 million, up $100 million, or 13%, from the same quarter in 2017 as our customer base continues to grow. Downstream led the increase with growth of $54 million, or 29%, driven primarily by large petrochemical project deliveries, followed by upstream, which increased $49 million, or 30%, due to increased drilling and completion activity, particularly in the Permian Basin. Midstream declined by $3 million or less than 1% due to non-recurring project work.

Canadian sales in the third quarter of 2018 were $78 million, up $1 million, or 1%, from the same quarter in 2017 due to growth in our upstream and downstream businesses partially offset by lower midstream revenue. A weaker Canadian dollar relative to the U.S. dollar had an unfavorable impact of approximately $3 million.

International sales in the third quarter of 2018 were $134 million, up $11 million, or 9%, from the same period in 2017. Our global market reach continues to improve.  The increase was primarily due to upstream project activity in Kazakhstan partially offset by non-recurring midstream pipeline project sales in Australia in 2017. Weaker foreign currencies relative to the U.S. dollar had an unfavorable impact of approximately $3 million.

Sales by Sector

Upstream sales in the third quarter of 2018 increased 26% over the third quarter of 2017 to $338 million, or 32% of total sales. The increase in upstream sales was primarily in our U.S. and International segments.

Midstream sales in the third quarter of 2018 decreased 3% from the third quarter of 2017 to $422 million, or 39% of total sales. Sales to gas utility customers were lower by 3% while sales to transmission and gathering customers were down 4% over the same quarter in 2017.

Downstream sales in the third quarter of 2018 increased 23% from the third quarter of 2017 to $311 million, or 29% of total sales. The increase was across all segments but primarily in the U.S. segment.  

Balance Sheet

As of September 30, 2018, cash balances were $29 million. Debt, net of cash, was $690 million and excess availability under our asset-based lending facility was $418 million. Our liquidity of $447 million is adequate to support our current business and capital needs.

Share Repurchase Program

In October 2018, the board of directors authorized a share repurchase program for common stock of up to $150 million. The program is scheduled to expire on December 31, 2019. The shares may be repurchased at management's discretion in the open market. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice.

Mr. Lane commented, "With the recovery in the oil and gas markets continuing, our leading market position and the attractive stock price, the Board has authorized an opportunistic share repurchase program. This will be the third program the Board has authorized since 2015, having previously repurchased $225 million of shares. The latest $150 million authorization reflects the Board's confidence in MRC Global's ability to continue to grow as well as return cash to shareholders."

Conference Call

The Company will hold a conference call to discuss its third quarter 2018 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on November 1, 2018. 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 http://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 15, 2018 and can be accessed by dialing 201-612-7415 and using pass code 13683112#. 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, is the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy industry and supplies these products and services across each of the upstream, midstream and downstream sectors. More information about MRC Global can be found on our website 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", "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, 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.

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 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'sprofit;  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 debt obligations;  changes in the company's credit profile;  a decline in demand for or adverse change in the value of certain of the products the company distributes if tariffs and duties on these products are imposed or lifted; 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; 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 our 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 laws and regulations in the countries in which we operate, including (among others) changes in tax laws, tax rates, interpretation in tax laws and the recently implemented General Data Protection Regulation.

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.

Contact:

Monica Broughton
Investor Relations
MRC Global Inc.
Monica.Broughton@mrcglobal.com  
832-308-2847

 

 

 

 

 

 

 

 

 

 

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SOURCE MRC Global Inc.