MRC Global Announces Third Quarter 2019 Results
The company's sales were
Net income attributable to common stockholders for the third quarter of 2019 was
Selling, general and administrative expenses were
Adjusted EBITDA was
Sales by Segment
U.S. sales in the third quarter of 2019 were
Canadian sales in the third quarter of 2019 were
International sales in the third quarter of 2019 were $122 million, down
Sales by Sector
Upstream sales in the third quarter of 2019 decreased 15% from the third quarter of 2018 to $287 million, or 31% of total sales. The decrease in upstream sales was across all geographic segments, as described above.
Midstream sales in the third quarter of 2019 were $370 million, or 39% of total sales, down
Downstream sales in the third quarter of 2019 were
Balance Sheet
Cash balances were
Share Repurchase Programs
In
Since 2015, the Company has repurchased
Conference Call
The Company will hold a conference call to discuss its third quarter 2019 results at
About
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 "expect," "expected," "intend," "believes," "looking forward," "guidance," "plans" 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 expectations regarding its sales, including (without limitation) sales to utility customers, sales through e-commerce, sales from services provided by the Company's Midstream Valve & Engineering Center and sales of valves, adjusted EBITDA, tax rate, achievement of working capital targets, capital expenditures, savings from cost reductions and cash from operations, 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. |
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Condensed Consolidated Balance Sheets (Unaudited) |
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(in millions, except shares) |
|||||
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 |
MRC Global Inc. |
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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, |
||||||||
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 |
MRC Global Inc. |
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Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||
(in millions) |
|||||
Nine Months Ended |
|||||
September 30, |
September 30, |
||||
2019 |
2018 |
||||
Operating activities |
|||||
Net income |
$ |
63 |
$ |
64 |
|
Adjustments to reconcile net income to net cash provided by (used in) operations: |
|||||
Depreciation and amortization |
16 |
17 |
|||
Amortization of intangibles |
33 |
34 |
|||
Equity-based compensation expense |
12 |
11 |
|||
Deferred income tax benefit |
(5) |
(7) |
|||
Amortization of debt issuance costs |
1 |
1 |
|||
Write off of debt issuance costs |
- |
1 |
|||
(Decrease) increase in LIFO reserve |
(3) |
48 |
|||
Other |
3 |
2 |
|||
Changes in operating assets and liabilities: |
|||||
Accounts receivable |
(4) |
(156) |
|||
Inventories |
56 |
(206) |
|||
Other current assets |
- |
3 |
|||
Accounts payable |
(3) |
58 |
|||
Accrued expenses and other current liabilities |
(35) |
(16) |
|||
Net cash provided by (used in) operations |
134 |
(146) |
|||
Investing activities |
|||||
Purchases of property, plant and equipment |
(12) |
(15) |
|||
Proceeds from the disposition of property, plant and equipment |
1 |
6 |
|||
Other investing activities |
1 |
- |
|||
Net cash used in investing activities |
(10) |
(9) |
|||
Financing activities |
|||||
Payments on revolving credit facilities |
(786) |
(808) |
|||
Proceeds from revolving credit facilities |
733 |
1,004 |
|||
Payments on long-term obligations |
(3) |
(3) |
|||
Debt issuance costs paid |
- |
(1) |
|||
Purchase of common stock |
(63) |
(50) |
|||
Dividends paid on preferred stock |
(18) |
(18) |
|||
Repurchases of shares to satisfy tax withholdings |
(6) |
(5) |
|||
Proceeds from exercise of stock options |
- |
21 |
|||
Other |
1 |
(1) |
|||
Net cash (used in) provided by financing activities |
(142) |
139 |
|||
Decrease in cash |
(18) |
(16) |
|||
Effect of foreign exchange rate on cash |
- |
(3) |
|||
Cash -- beginning of period |
43 |
48 |
|||
Cash -- end of period |
$ |
25 |
$ |
29 |
MRC Global Inc. |
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Supplemental Information (Unaudited) |
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Reconciliation of Net Income to Adjusted EBITDA (a non-GAAP measure) |
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(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 |
||||
Income tax expense |
8 |
- |
22 |
15 |
||||||||
Interest expense |
10 |
10 |
31 |
28 |
||||||||
Depreciation and amortization |
5 |
5 |
16 |
17 |
||||||||
Amortization of intangibles |
11 |
12 |
33 |
34 |
||||||||
(Decrease) increase in LIFO reserve |
(2) |
26 |
(3) |
48 |
||||||||
Equity-based compensation expense (1) |
5 |
4 |
12 |
11 |
||||||||
Severance charges (2) |
5 |
- |
5 |
- |
||||||||
Write off of debt issuance costs (3) |
- |
- |
- |
1 |
||||||||
Change in fair value of derivative instruments |
- |
- |
- |
(1) |
||||||||
Foreign currency gains |
(1) |
(1) |
(1) |
- |
||||||||
Adjusted EBITDA |
$ |
62 |
$ |
80 |
$ |
178 |
$ |
217 |
||||
Notes to above:
(1) Recorded in SG&A
(2) Charge (pre-tax) related to cost reduction initiatives in the third quarter of 2019 recorded in SG&A.
(3) Charge (pre-tax) to write off debt issuance costs related to refinancing the Term Loan agreement in the second quarter of 2018.
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. |
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Supplemental Information (Unaudited) |
|||||||||
Reconciliation of Gross Profit to Adjusted Gross Profit (a non-GAAP measure) |
|||||||||
(in millions) |
|||||||||
Three Months Ended |
|||||||||
September 30, |
Percentage |
September 30, |
Percentage |
||||||
2019 |
of Revenue |
2018 |
of Revenue |
||||||
Gross profit, as reported |
$ |
174 |
18.5% |
$ |
172 |
16.1% |
|||
Depreciation and amortization |
5 |
0.5% |
5 |
0.5% |
|||||
Amortization of intangibles |
11 |
1.2% |
12 |
1.1% |
|||||
(Decrease) increase in LIFO reserve |
(2) |
(0.2%) |
26 |
2.4% |
|||||
Adjusted Gross Profit |
$ |
188 |
20.0% |
$ |
215 |
20.1% |
|||
Nine Months Ended |
|||||||||
September 30, |
Percentage |
September 30, |
Percentage |
||||||
2019 |
of Revenue |
2018 |
of Revenue |
||||||
Gross profit, as reported |
$ |
522 |
18.0% |
$ |
518 |
16.4% |
|||
Depreciation and amortization |
16 |
0.6% |
17 |
0.5% |
|||||
Amortization of intangibles |
33 |
1.1% |
34 |
1.1% |
|||||
(Decrease) increase in LIFO reserve |
(3) |
(0.1%) |
48 |
1.5% |
|||||
Adjusted Gross Profit |
$ |
568 |
19.6% |
$ |
617 |
19.5% |
Notes to above:
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. |
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Supplemental Sales Information (Unaudited) |
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(in millions) |
|||||||||||
Disaggregated Sales by Segment |
|||||||||||
Three Months Ended |
|||||||||||
September 30, |
|||||||||||
U.S. |
Canada |
International |
Total |
||||||||
2019: |
|||||||||||
Upstream |
$ |
189 |
$ |
43 |
$ |
55 |
$ |
287 |
|||
Midstream |
356 |
7 |
7 |
370 |
|||||||
Downstream |
218 |
7 |
60 |
285 |
|||||||
$ |
763 |
$ |
57 |
$ |
122 |
$ |
942 |
||||
2018: |
|||||||||||
Upstream |
$ |
213 |
$ |
59 |
$ |
66 |
$ |
338 |
|||
Midstream |
406 |
11 |
5 |
422 |
|||||||
Downstream |
240 |
8 |
63 |
311 |
|||||||
$ |
859 |
$ |
78 |
$ |
134 |
$ |
1,071 |
||||
Nine Months Ended |
|||||||||||
September 30, |
|||||||||||
U.S. |
Canada |
International |
Total |
||||||||
2019: |
|||||||||||
Upstream |
$ |
583 |
$ |
130 |
$ |
170 |
$ |
883 |
|||
Midstream |
1,098 |
35 |
19 |
1,152 |
|||||||
Downstream |
667 |
18 |
176 |
861 |
|||||||
$ |
2,348 |
$ |
183 |
$ |
365 |
$ |
2,896 |
||||
2018: |
|||||||||||
Upstream |
$ |
580 |
$ |
180 |
$ |
187 |
$ |
947 |
|||
Midstream |
1,253 |
33 |
18 |
1,304 |
|||||||
Downstream |
710 |
23 |
179 |
912 |
|||||||
$ |
2,543 |
$ |
236 |
$ |
384 |
$ |
3,163 |
MRC Global Inc. |
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Supplemental Sales Information (Unaudited) |
||||||||||||
(in millions) |
||||||||||||
Sales by Product Line |
||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||
September 30, |
September 30, |
September 30, |
September 30, |
|||||||||
Type |
2019 |
2018 |
2019 |
2018 |
||||||||
Line pipe |
$ |
153 |
$ |
186 |
$ |
468 |
$ |
556 |
||||
Carbon steel fittings and flanges |
145 |
182 |
456 |
531 |
||||||||
Total carbon steel pipe, fittings and flanges |
298 |
368 |
924 |
1,087 |
||||||||
Valves, automation, measurement and instrumentation |
362 |
393 |
1,125 |
1,146 |
||||||||
Gas products |
147 |
154 |
425 |
425 |
||||||||
Stainless steel and alloy pipe and fittings |
43 |
48 |
135 |
150 |
||||||||
General oilfield products |
92 |
108 |
287 |
355 |
||||||||
$ |
942 |
$ |
1,071 |
$ |
2,896 |
$ |
3,163 |
|||||
MRC Global Inc. |
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Supplemental Information (Unaudited) |
|||||||||||
Reconciliation of Net Income Attributable to Common Stockholders to |
|||||||||||
Adjusted Net Income Attributable to Common Stockholders (a non-GAAP measure) |
|||||||||||
(in millions, except per share amounts) |
|||||||||||
September 30, 2019 |
|||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||
Amount |
Per Share |
Amount |
Per Share |
||||||||
Net income attributable to common stockholders |
$ |
15 |
$ |
0.18 |
$ |
45 |
$ |
0.53 |
|||
Decrease in LIFO reserve, net of tax |
(2) |
(0.02) |
(2) |
(0.02) |
|||||||
Adjusted net income attributable to common stockholders |
$ |
13 |
$ |
0.16 |
$ |
43 |
$ |
0.51 |
|||
September 30, 2018 |
|||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||
Amount |
Per Share* |
Amount |
Per Share |
||||||||
Net income attributable to common stockholders |
$ |
18 |
$ |
0.20 |
$ |
46 |
$ |
0.50 |
|||
Increase in LIFO reserve, net of tax |
20 |
0.22 |
37 |
0.40 |
|||||||
Adjusted net income attributable to common stockholders |
$ |
38 |
$ |
0.41 |
$ |
83 |
$ |
0.90 |
Notes to above:
*Does not foot due to rounding
The Company defines Adjusted Net Income Attributable to Common Stockholders (a non-GAAP measure) as Net Income Attributable to Common Stockholders plus or minus the after-tax impact of its LIFO inventory costing methodology. The Company presents Adjusted Net Income Attributable to Common Stockholders and related per share amounts because the Company believes it provides useful comparisons of the Company's operating results to other companies, including those companies with whom we compete in the distribution of pipe, valves and fittings to the energy industry, without regard to the LIFO inventory costing methodology. The impact of the LIFO inventory costing methodology 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 believes that Net Income Attributable to Common Stockholders is the financial measure calculated and presented in accordance with U.S. generally accepted accounting principles that is most directly compared to Adjusted Net Income Attributable to Common Stockholders.
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