MRC Global Announces Third Quarter 2017 Results and $100 Million Share Repurchase Program
The company's sales were
Net loss attributable to common stockholders for the third quarter of 2017 and 2016 was
"Third quarter results were strong, delivering adjusted gross margin of 19% and adjusted EBITDA of
"I am pleased with 18% revenue growth for the first nine months of 2017 over the prior year as well as the continued execution of several multi-year framework agreements this year. In 2012, we executed the first global valve agreement in the industry with Shell and we have continued to build on that success, as this quarter we extended that agreement for an additional five years. Also, capitalizing on favorable market conditions, we refinanced our senior secured term loan and asset based lending facility this quarter, extending our maturities to 2024 and 2022, respectively. We are well-positioned for continued growth as the energy markets continue to improve," Mr. Lane added.
Selling, general and administrative (SG&A) expenses were
Adjusted EBITDA was
Sales by Segment
U.S. sales in the third quarter of 2017 were
Canadian sales in the third quarter of 2017 were
International sales in the third quarter of 2017 were $123 million, down
Sales by Sector
Upstream sales in the third quarter of 2017 increased 20% over the third quarter of 2016 to $269 million, or 28% of total sales. The increase in upstream sales was in our U.S. segment, which was up 42% and our Canadian segment, which was up 55% as a result of increased customer activity.
Midstream sales in the third quarter of 2017 increased 34% from the third quarter of 2016 to $437 million, or 46% of total sales. Sales to transmission and gathering customers were up 41% while sales to gas utility customers were up by 27% over the same quarter in 2016.
Downstream sales in the third quarter of 2017 increased 5% from the third quarter of 2016 to $253 million, or 26% of total sales. The U.S. downstream sector was the primary driver of the increase growing 6% over the third quarter of last year.
Balance Sheet
During the third quarter, we refinanced our senior secured term loan and our asset based lending facility at lower interest rates and extended the maturities to 2024 and 2022, respectively. The outstanding balances on the senior secured term loan and the asset based lending facility (ABL) at
Share Repurchase Program
In
"This authorization demonstrates the confidence the Board has in our strategy, our ability to deliver long-term shareholder value and the overall intrinsic value of the company. Our strong balance sheet position provides sufficient capital for growth and opportunistic share repurchases." Mr. Lane commented.
Conference Call
The Company will hold a conference call to discuss its third quarter 2017 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, 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, except shares) |
|||
September 30, |
December 31, |
||
2017 |
2016 |
||
Assets |
|||
Current assets: |
|||
Cash |
$ 40 |
$ 109 |
|
Accounts receivable, net |
578 |
399 |
|
Inventories, net |
649 |
561 |
|
Other current assets |
40 |
48 |
|
Total current assets |
1,307 |
1,117 |
|
Other assets |
20 |
19 |
|
Property, plant and equipment, net |
144 |
135 |
|
Intangible assets: |
|||
Goodwill, net |
486 |
482 |
|
Other intangible assets, net |
379 |
411 |
|
$ 2,336 |
$ 2,164 |
||
Liabilities and stockholders' equity |
|||
Current liabilities: |
|||
Trade accounts payable |
$ 449 |
$ 314 |
|
Accrued expenses and other current liabilities |
115 |
111 |
|
Current portion of long-term debt |
3 |
8 |
|
Total current liabilities |
567 |
433 |
|
Long-term obligations: |
|||
Long-term debt, net |
444 |
406 |
|
Deferred income taxes |
172 |
184 |
|
Other liabilities |
22 |
23 |
|
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, 103,051,858 and 102,529,637 issued, respectively |
1 |
1 |
|
Additional paid-in capital |
1,686 |
1,677 |
|
Retained deficit |
(577) |
(574) |
|
Less: Treasury stock at cost: 8,537,410 and 7,677,580 shares, respectively |
(125) |
(107) |
|
Accumulated other comprehensive loss |
(209) |
(234) |
|
776 |
763 |
||
$ 2,336 |
$ 2,164 |
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, |
||||
2017 |
2016 |
2017 |
2016 |
||||
Sales |
$ 959 |
$ 793 |
$ 2,743 |
$ 2,322 |
|||
Cost of sales |
807 |
705 |
2,302 |
1,976 |
|||
Gross profit |
152 |
88 |
441 |
346 |
|||
Selling, general and administrative expenses |
130 |
124 |
388 |
396 |
|||
Operating income (loss) |
22 |
(36) |
53 |
(50) |
|||
Other expense: |
|||||||
Interest expense |
(9) |
(9) |
(24) |
(26) |
|||
Write off of debt issuance costs |
(8) |
- |
(8) |
- |
|||
Other, net |
- |
3 |
- |
2 |
|||
Income (loss) before income taxes |
5 |
(42) |
21 |
(74) |
|||
Income tax expense (benefit) |
2 |
(2) |
6 |
(9) |
|||
Net income (loss) |
3 |
(40) |
15 |
(65) |
|||
Series A preferred stock dividends |
6 |
6 |
18 |
18 |
|||
Net loss attributable to common stockholders |
$ (3) |
$ (46) |
$ (3) |
$ (83) |
|||
Basic loss per common share |
$ (0.03) |
$ (0.48) |
$ (0.03) |
$ (0.85) |
|||
Diluted loss per common share |
$ (0.03) |
$ (0.48) |
$ (0.03) |
$ (0.85) |
|||
Weighted-average common shares, basic |
94.5 |
95.9 |
94.6 |
98.1 |
|||
Weighted-average common shares, diluted |
94.5 |
95.9 |
94.6 |
98.1 |
MRC Global Inc. |
|||
Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||
(in millions) |
|||
Nine Months Ended |
|||
September 30, |
September 30, |
||
2017 |
2016 |
||
Operating activities |
|||
Net income (loss) |
$ 15 |
$ (65) |
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operations: |
|||
Depreciation and amortization |
16 |
16 |
|
Amortization of intangibles |
34 |
35 |
|
Equity-based compensation expense |
12 |
9 |
|
Deferred income tax benefit |
(13) |
(12) |
|
Amortization of debt issuance costs |
3 |
3 |
|
Write off of debt issuance costs |
8 |
- |
|
Increase (decrease) in LIFO reserve |
19 |
(7) |
|
Inventory-related charges |
- |
45 |
|
Foreign currency (gains) losses |
(2) |
1 |
|
Other |
3 |
4 |
|
Changes in operating assets and liabilities: |
|||
Accounts receivable |
(165) |
88 |
|
Inventories |
(100) |
119 |
|
Other current assets |
15 |
1 |
|
Accounts payable |
127 |
11 |
|
Accrued expenses and other current liabilities |
(9) |
(18) |
|
Net cash (used in) provided by operations |
(37) |
230 |
|
Investing activities |
|||
Purchases of property, plant and equipment |
(23) |
(24) |
|
Proceeds from the disposition of property, plant and equipment |
- |
1 |
|
Proceeds from the disposition of non-core product line |
- |
48 |
|
Net cash (used in) provided by investing activities |
(23) |
25 |
|
Financing activities |
|||
Payments on revolving credit facilities |
(468) |
(32) |
|
Proceeds from revolving credit facilities |
518 |
32 |
|
Payments on long-term obligations |
(18) |
(6) |
|
Debt issuance costs paid |
(7) |
- |
|
Purchase of common stock |
(18) |
(88) |
|
Dividends paid on preferred stock |
(18) |
(18) |
|
Repurchases of shares to satisfy tax withholdings |
(3) |
- |
|
Net cash used in financing activities |
(14) |
(112) |
|
(Decrease) increase in cash |
(74) |
143 |
|
Effect of foreign exchange rate on cash |
5 |
1 |
|
Cash -- beginning of period |
109 |
69 |
|
Cash -- end of period |
$ 40 |
$ 213 |
MRC Global Inc. |
|||||||
Supplemental Information (Unaudited) |
|||||||
Reconciliation of Adjusted EBITDA (a non-GAAP measure) to Net Income (Loss) |
|||||||
(in millions) |
|||||||
Three Months Ended |
Nine Months Ended |
||||||
September 30, |
September 30, |
September 30, |
September 30, |
||||
2017 |
2016 |
2017 |
2016 |
||||
Net income (loss) |
$ 3 |
$ (40) |
$ 15 |
$ (65) |
|||
Income tax expense (benefit) |
2 |
(2) |
6 |
(9) |
|||
Interest expense |
9 |
9 |
24 |
26 |
|||
Depreciation and amortization |
5 |
6 |
16 |
16 |
|||
Amortization of intangibles |
12 |
12 |
34 |
35 |
|||
Increase (decrease) in LIFO reserve |
13 |
(3) |
19 |
(7) |
|||
Change in fair value of derivative instruments |
1 |
(2) |
1 |
- |
|||
Equity-based compensation expense (1) |
3 |
2 |
12 |
9 |
|||
Inventory-related charges (2) |
- |
40 |
- |
40 |
|||
Write off of debt issuance costs (3) |
8 |
- |
8 |
- |
|||
Severance and restructuring charges (4) |
- |
3 |
- |
12 |
|||
Litigation settlement (5) |
- |
- |
3 |
- |
|||
Foreign currency (gains) losses |
- |
(1) |
(2) |
1 |
|||
Adjusted EBITDA |
$ 56 |
$ 24 |
$ 136 |
$ 58 |
|||
Notes to above: |
|
(1) |
Recorded in SG&A |
(2) |
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. |
(3) |
Charge (pre-tax) related to refinancing of our senior secured term loan and our asset based lending facility. |
(4) |
Charge (pre-tax) related to employee severance and restructuring charges associated with the company's cost reduction initiatives recorded in SG&A. |
(5) |
Charge (pre-tax) related to the settlement of litigation with Weatherford Canada Partnership in the second quarter 2017 recorded in Other, net. The company previously recognized a charge of $3 million associated with this matter in the fourth quarter of 2015. |
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 |
|||||||
September 30, |
Percentage |
September 30, |
Percentage |
||||
2017 |
of Revenue |
2016 |
of Revenue |
||||
Gross profit, as reported |
$ 152 |
15.8% |
$ 88 |
(1) |
11.1% |
||
Depreciation and amortization |
5 |
0.5% |
6 |
0.8% |
|||
Amortization of intangibles |
12 |
1.3% |
12 |
1.5% |
|||
Increase (decrease) in LIFO reserve |
13 |
1.4% |
(3) |
(0.4%) |
|||
Adjusted Gross Profit |
$ 182 |
19.0% |
$ 103 |
(1) |
13.0% |
||
Nine Months Ended |
|||||||
September 30, |
Percentage |
September 30, |
Percentage |
||||
2017 |
of Revenue |
2016 |
of Revenue |
||||
Gross profit, as reported |
$ 441 |
16.1% |
$ 346 |
(1) |
14.9% |
||
Depreciation and amortization |
16 |
0.6% |
16 |
0.7% |
|||
Amortization of intangibles |
34 |
1.2% |
35 |
1.5% |
|||
Increase (decrease) in LIFO reserve |
19 |
0.7% |
(7) |
(0.3%) |
|||
Adjusted Gross Profit |
$ 510 |
18.6% |
$ 390 |
(1) |
16.8% |
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. Gross profit, as reported, excluding these charges, would be $133 million (16.8%) and $391 million (16.8%) for the three and the nine months ended September 30, 2016, respectively. Adjusted Gross Profit, excluding these charges, would be $148 million (18.7%) and $435 million (18.7%) for the three and the nine months ended September 30, 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. |
|||||||
Supplemental Sales Information (Unaudited) |
|||||||
(in millions) |
|||||||
Sales by Segment |
|||||||
Three Months Ended |
Nine Months Ended |
||||||
September 30, |
September 30, |
September 30, |
September 30, |
||||
2017 |
2016 |
2017 |
2016 |
||||
U.S. |
$ 759 |
$ 590 |
$ 2,145 |
$ 1,747 |
|||
Canada |
77 |
70 |
223 |
188 |
|||
International |
123 |
133 |
375 |
387 |
|||
$ 959 |
$ 793 |
$ 2,743 |
$ 2,322 |
Sales by Product Line |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
September 30, |
September 30, |
September 30, |
September 30, |
|||||
Type |
2017 |
2016 |
2017 |
2016 |
||||
Valves, automation, measurement and instrumentation |
$ 338 |
$ 296 |
$ 987 |
$ 894 |
||||
Line pipe |
201 |
117 |
517 |
345 |
||||
Gas products |
150 |
124 |
427 |
332 |
||||
Carbon steel fittings and flanges |
143 |
117 |
405 |
353 |
||||
Stainless steel and alloy pipe and fittings |
45 |
60 |
136 |
155 |
||||
Other |
82 |
79 |
271 |
243 |
||||
$ 959 |
$ 793 |
$ 2,743 |
$ 2,322 |
View original content:http://www.prnewswire.com/news-releases/mrc-global-announces-third-quarter-2017-results-and-100-million-share-repurchase-program-300548769.html
SOURCE