mrc-20200213x8k
false000143909500014390952020-02-132020-02-13

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): February 13, 2020

___________________________________

MRC Global inc.

(Exact name of registrant as specified in its charter)

___________________________________


Identification Number)

Delaware

(State or other jurisdiction of incorporation)

001-35479

(Commission

File Number)

20-5956993

(I.R.S. Employer
Identification Number)

Fulbright Tower, 1301 McKinney Street, Suite 2300

Houston, Texas 77010
(Address of Principal Executive Offices)

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

MRC

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


Item 2.02Results of Operations and Financial Condition

On February 13, 2020, MRC Global Inc. (“MRC Global” or the “Company”) issued a press release announcing its financial results for the year ended December 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 5.02Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

In February 2020, we granted the following named executive officers set forth in the table below performance stock units pursuant to the MRC Global Inc. 2011 Omnibus Incentive Plan, as amended, in addition to certain time-vested restricted stock units reported on Forms 4. Each recipient of performance stock units can earn shares of Company common stock between 0% and 200% of the target number of units based:

50% on a three-year total shareholder return relative to the companies in the Philadelphia OSX Index (the “OSX Index”) plus NOW Inc. at the end of the three-year period ending December 31, 2022 (the “Performance Period”) and

50% on a three-year return on average net capital employed objective for the Performance Period.

The performance stock units vest at the end of the Performance Period, subject to continued employment and certain other provisions of the award agreement.

Below is the number of target performance stock units that the Company granted to each named executive officer:

Name

Job Title

# of Performance Stock Units

Lane, Andrew R.

President & Chief Executive Officer

150,125

Youngblood, Kelly

Executive Vice President

41,701

Churay, Daniel J.

Executive Vice President – Corporate Affairs, General Counsel, Corporate Secretary

26,585

Bates, Grant R.

Senior Vice President – Canada, International & Operational Excellence

13,553

Item 7.01Regulation FD Disclosure.

MRC Global expects the following results with respect to the operations and performance of the Company for the 2020 fiscal year:

The Company expects 2020 revenue to be between $3,200 million and $3,700 million.

The Company expects the upstream sector to be down high-single digit percentages and the midstream and downstream sectors to be down mid-single digit percentages in 2020 as compared to 2019.

The Company expects the U.S. and Canada segments to be down mid-single digit percentages and the International segment to be down low-single digit percentages in 2020 as compared to 2019.

Sequentially, the Company expects first quarter 2020 revenue to be flat as compared to the fourth quarter of 2019.

Given MRC Global’s current mix of products, the Company expects a gross profit percentage between 18.0% and 18.2% and an Adjusted Gross Profit percentage between 19.6% and 19.8% for 2019. Adjusted Gross Profit percentage is a non-GAAP measure that is not necessarily better than gross profit percentage. 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 last-in, first-out (“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.

The following table reconciles gross profit and gross profit percentage, GAAP measures, to Adjusted Gross Profit and Adjusted Gross Profit percentage, non-GAAP measures (in millions):

Expected for the Year Ended 2020

Percentage of Expected Revenue*

Gross profit

$

625

18.1%

Depreciation and amortization

22

0.6%

Amortization of intangibles

28

0.8%

Increase in LIFO reserve

5

0.1%

Adjusted Gross Profit

$

680

19.7%

* Percentages are based on the midpoint of revenue guidance provided above. Column does not foot due to rounding.

The Company expects LIFO expense to be between $0 million and $10 million in 2020.

The Company expects selling, general and administrative expense to be between $510 million and $530 million in 2020.

The Company expects equity-based compensation expense to be $17 million in 2020.

The Company expects to generate between $110 million and $160 million of cash from operations in 2020.

The Company expects to have an effective tax rate of 26% to 28% for the full year of 2020.

The Company expects its total capital expenditures for 2020 to be between $15 million and $20 million.

The Company expects diluted earnings per share to be between $0.19 and $0.56.

The Company expects to have net income (before preferred stock dividend) between $40 million and $70 million and Adjusted EBITDA between $160 million and $200 million in 2020. Adjusted EBITDA is a non-GAAP measure that is not necessarily better than net income. 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 our LIFO inventory costing methodology. The Company presents Adjusted EBITDA because the Company believes it provides investors a helpful measure for comparing our operating performance with the performance of other companies that have different financing and capital structures or tax rates. We believe that net income is the financial measure calculated and presented in accordance with U.S. generally accepted accounting principles that is most directly comparable to Adjusted EBITDA.

The following table reconciles net income, a GAAP measure, with Adjusted EBITDA, a non-GAAP measure, based on the mid-point of the guidance (in millions):

Expected for the Year Ended 2020

Net income

$

55

Income tax expense

20

Interest expense

33

Depreciation and amortization

22

Amortization of intangibles

28

Increase in LIFO reserve

5

Equity-based compensation expense

17

Adjusted EBITDA

$

180


The above information, as well as information contained in Exhibit 99.1 referenced under Item 9.01 below, contain 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,” “expects,” “expected,” “believes,” “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, gross profit, gross profit percentage, Adjusted Gross Profit and Adjusted Gross Profit percentage, tax rate, capital expenditures 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 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.

With respect to net income (before preferred stock dividend) and diluted earnings per share, these risks include actual share count, LIFO expense and the other component expectations listed above meeting the Company’s expectations for each component. These risks and uncertainties also 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; 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’s profit; 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 certain of the products the company distributes if import restrictions on these products are lifted or imposed; significant substitution of alternative fuels for oil and gas; 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; adverse health events, such as a pandemic; 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 law, tax rates and interpretation in tax laws, changes in trade and other treaties that lead to differing tariffs and trade rules, the expansion of currency exchange controls, export controls or additional restrictions on doing business in countries subject to sanctions in which we operate or intend to operate.

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.

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.

Earnings Presentation

On February 13, 2020, MRC Global Inc. announced its financial results for the three and twelve months ended December 31, 2019. In conjunction with this release, the Company issued a presentation summarizing the highlights of the financial results (the “Earnings Presentation”).  A copy of the Earnings Presentation is furnished as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference.

The information contained in the Earnings Presentation 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 Earnings Presentation speaks as of the date of this Current Report on Form 8-K. While MRC Global may elect to update the Earnings Presentation 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 Earnings Presentation will also be posted in the Investor Relations section of MRC Global’s website,  http://www.mrcglobal.com.

The information referenced under Item 7.01 (including Exhibit 99.2 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 99.2 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

Press release of MRC Global Inc. dated February 13, 2020

99.2

Earnings Presentation of MRC Global Inc. dated February 13, 2020

104

Cover Page Interactive Data File – The cover page XBRL tags from this Current Report on Form 8-K are imbedded within the Inline XBRL document


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: February 13, 2020

MRC GLOBAL INC.

By:

/s/ James E. Braun

James E. Braun

Executive Vice President and Chief Financial Officer


INDEX TO EXHIBITS

 

Exhibit No.

  

Description

99.1

  

Press release dated February 13, 2020

99.2

Earnings Presentation of MRC Global Inc. dated February 13, 2020

104

Cover Page Interactive Data File – The cover page XBRL tags from this Current Report on Form 8-K are imbedded within the Inline XBRL document

 

Earnings Release Exhibit 991

Exhibit 99.1

Exhibit 99.1

 



E

Picture 1

MRC Global Announces Fourth Quarter and Full Year 2019 Results

Full Year Cash Flow from Operations of $242 Million, Including $108 Million Generated in the Fourth Quarter

Repurchased $75 Million of Common Stock in 2019, Including $12 Million in the Fourth Quarter





 

Fourth Quarter 2019:

Full Year 2019:

Sales of $766 million

Sales of $3.662 billion

Net loss attributable to common

stockholders of $(30) million

Net income attributable to common stockholders of $15 million

Adjusted EBITDA of $23 million

Adjusted EBITDA of $201 million



Houston, TX – February 13, 2020 – MRC Global Inc. (NYSE: MRC), the largest global distributor, based on sales, of pipe, valves and fittings and other infrastructure products and services to the energy industry, today announced fourth quarter and full year 2019 results.



The company’s sales were $766 million for the fourth quarter of 2019, which was 19% lower than the third quarter of 2019 and 24% lower than the fourth quarter of 2018. Sales declined both sequentially and as compared to the fourth quarter of 2018 across all segments and end-markets.



Net loss attributable to common stockholders for the fourth quarter of 2019 was $(30) million, or $(0.37) per diluted share, as compared to income of $4 million, or $0.04 per diluted share in the fourth quarter of 2018. The fourth quarter results include after-tax charges related to severance and restructuring and asset write offs of $19 million, or $0.23 per diluted share and $3 million related to severance and restructuring charges, or $0.03 per diluted share in 2019 and 2018, respectively.



Andrew R. Lane, MRC Global’s president and chief executive officer stated, “Customer spending levels in the fourth quarter were significantly lower than expected as budget exhaustion and capital discipline drove customer behavior. Despite sales being down this quarter, we generated $108 million in cash from operations and $242 million for the year, above our stated goal. Our free cash flow for 2019 was $200 million, resulting in a free cash flow yield of approximately 20%, based on today’s stock price. We also completed our most recent share buyback program in the fourth quarter. Since we began repurchasing shares in 2015, we have returned $375 million to shareholders and repurchased 24.2 million shares. Our cost and debt reduction efforts have also been successful. Excluding certain items, we reduced our SG&A in 2019 by $25 million and our outstanding debt by $133 million, as compared to last year. SG&A reductions in 2019 were taken by streamlining operations in alignment with lower activity levels, which included closing locations and other cost reduction efforts, all resulting in a reduction in headcount of 360 or 10%, including 130 in the fourth quarter.”



“Due to continued weakness in market conditions, we expect 2020 activity levels to be lower than 2019. However, we remain committed to delivering the highest returns for shareholders through cost and debt reduction, operational and working capital efficiencies and a strategy of pursuing higher margin opportunities. Our business model is resilient, and we expect to continue generating strong operating cash flow with a minimum target of $110 million in 2020.” Mr. Lane added.



MRC Global’s fourth quarter 2019 gross profit was $131 million, or 17.1% of sales, as compared to gross profit of $171 million, or 16.9% of sales, in the fourth quarter of 2018. Gross profit for the fourth quarter of 2019 and 2018 reflects expense of $1 million and $14 million, respectively, in cost of sales relating to the use of the last-in, first out (LIFO) method of inventory cost accounting. Gross profit for the fourth quarter of 2019 was also negatively impacted by $8 million of pre-tax charges related to the final settlement of a multi-year customer project and the non-cash write-off of excess and obsolete inventory in our international segment. Excluding the


 

impact of these charges, gross profit and adjusted gross profit would have been 18.1% and 20.0% in the fourth quarter of 2019, respectively.



Selling, general and administrative expenses were $141 million, or 18.4% of sales, for the fourth quarter of 2019 compared to $148 million, or 14.7% of sales, for the same period of 2018. SG&A expenses for the fourth quarter of 2019 and 2018 each include $4 million of pre-tax severance and restructuring charges. SG&A expenses for the fourth quarter of 2019 also include $5 million of pre-tax charges related to the doubtful collection of a product claim against a foreign supplier and $3 million for an end of year adjustment for insurance receivables.



The effective tax rate for the fourth quarter of 2019 reflects tax expense of $5 million on a $19 million pre-tax loss. This is due primarily to losses incurred in foreign jurisdictions with no corresponding tax benefit and additional taxes related to recent changes in tax regulations.



Adjusted EBITDA was $23 million in the fourth quarter of 2019 compared to $63 million for the same period in 2018. Please refer to the reconciliation of non-GAAP measures (adjusted gross profit and adjusted EBITDA) to GAAP measures (gross profit and net income) in this release.



Sales by Segment



U.S. sales in the fourth quarter of 2019 were $608 million, down $170 million, or 22%, from the same quarter in 2018. Midstream declined $74 million, or 21%, primarily due to lower sales in the transmission and gathering sub-sector. Upstream declined $57 million, or 29%, as a result of end of year budget exhaustion and increased capital discipline by our customers. Downstream declined by $39 million, or 17%, due primarily to non-recurring project work that resulted in a $20 million decrease in sales.



Canadian sales in the fourth quarter of 2019 were $43 million, down $36 million, or 46%, from the same quarter in 2018 driven by the upstream sector, which continues to be negatively impacted by low Canadian oil prices and government-imposed production limits.



International sales in the fourth quarter of 2019 were $115 million, down $37 million, or 24%, from the same period in 2018 reflecting the conclusion of a major upstream project in Kazakhstan, as well as, the impact of weaker foreign currencies relative to the U.S. dollar, which unfavorably impacted sales by $4 million. Excluding the impact of the project and weaker foreign currencies, sales increased $5 million, or 5%, due to improved market conditions, particularly in Norway and the United Kingdom.



Sales by Sector



Upstream sales in the fourth quarter of 2019 were $224 million, or 29% of total sales, down $115 million, or 34%, from the fourth quarter of 2018. The decrease in upstream sales was across all geographic segments, as described above.

 

Midstream sales in the fourth quarter of 2019 were $298 million, or 39% of total sales, down $75 million, or 20%, from the fourth quarter of 2018. Sales to transmission and gathering customers were down 34% over the same quarter in 2018 due to customer capital discipline while sales to gas utility customers were down 9% for the quarter primarily due to the timing of deliveries and lower activity levels for a couple of customers. Gas utility sales were up 3% in 2019 over 2018, as the company continues to grow its share in this end market.



Downstream sales in the fourth quarter of 2019 were $244 million, or 32% of total sales, down $53 million, or 18%, from the fourth quarter of 2018 due primarily to the U.S. segment as described above.



Balance Sheet and Cash Flow



Cash balances were $32 million at December 31, 2019. Debt, net of cash, was $519 million and excess availability under the company’s asset-based lending facility was $451 million as of December 31, 2019. Cash provided by operations was $108 million in the fourth quarter of 2019 resulting in $242 million of cash provided by operations in 2019. Free cash flow (cash provided by operations less capital expenditures less preferred stock dividends) was $200 million in 2019. The company believes MRC Global’s liquidity position of $483 million is sufficient to support the business and capital needs of the company.

2

 


 







Share Repurchase Programs



In October 2018, the board of directors authorized a share repurchase program for common stock of up to $150 million, which was completed in the fourth quarter of 2019. During the fourth quarter of 2019, the company purchased the remaining $12 million of its common stock at an average price of $15.15 per share. In 2019, the company purchased $75 million of its common stock at an average price of $15.38 per share.



Since 2015, the company has purchased $375 million or 24.2 million shares at an average price of $15.48 per share. The outstanding share count as of December 31, 2019 was 81.4 million shares.



2020 Annual Guidance



The company has the following expectations regarding its results in 2020:





Low

 

High

Revenue

$3,200 million

 

$3,700 million

Net income (before preferred stock dividends)

$40 million

 

$70 million

Diluted income per common share

$0.19

 

$0.56

Adjusted EBITDA

$160 million

 

$200 million

Cash flow from operations

$110 million

 

$160 million



Please refer to the reconciliation of Net income to Adjusted EBITDA in this release.



Conference Call



The company will hold a conference call to discuss its fourth quarter 2019 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on February 14, 2020. 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 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 February 28, 2020 and can be accessed by dialing 201-612-7415 and using pass code 13697753#. Also, an archive of the webcast will be available shortly after the call at www.mrcglobal.com for 90 days.





About MRC Global Inc.



MRC Global is the largest distributor of pipe, valves and fittings (PVF) and other infrastructure products and services to the energy industry, based on sales. Through approximately 260 service locations worldwide, approximately 3,200 employees and with nearly 100 years of history, MRC Global provides innovative supply chain solutions and technical product expertise to customers globally across diversified end-markets including the upstream, midstream (including gas utilities) and downstream (including industrials). MRC Global manages a complex network of over 200,000 SKUs and 10,000 suppliers simplifying the supply chain for its over 14,000 customers. With a focus on technical products, value-added services, a global network of valve and engineering centers and an unmatched quality assurance program, MRC Global is the trusted PVF expert. Find out more at

www.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 “expect,” “expectations,” “believes,” “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, revenue, net income and adjusted EBITDA, 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 Valve Engineering & Modification Center and sales of valves,

3

 


 

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 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; 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’s profit;  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 obligations;  changes in the company’s credit profile;  a decline in demand for certain of the products the company distributes if import restrictions on these products are lifted or imposed; significant substitution of alternative fuels for oil and gas; 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; adverse health events such as a pandemic; 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 law in the countries in which we operate, including (among others) changes in tax law, tax rates and interpretation in tax laws.

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

4

 


 

MRC Global Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in millions)



0



 

 

 

 

 



December 31,



2019

 

2018

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

$

32 

 

$

43 

Accounts receivable, net

 

459 

 

 

587 

Inventories, net

 

701 

 

 

797 

Other current assets

 

26 

 

 

38 

Total current assets

 

1,218 

 

 

1,465 



 

 

 

 

 

Long-term assets:

 

 

 

 

 

Operating lease assets

 

186 

 

 

 -

Property, plant and equipment, net

 

138 

 

 

140 

Other assets

 

19 

 

 

23 



 

 

 

 

 

Intangible assets:

 

 

 

 

 

Goodwill, net

 

483 

 

 

484 

Other intangible assets, net

 

281 

 

 

322 



$

2,325 

 

$

2,434 



 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Trade accounts payable

$

357 

 

$

435 

Accrued expenses and other current liabilities

 

91 

 

 

130 

Operating lease liabilities

 

34 

 

 

 -

Current portion of long-term debt

 

 

 

Total current liabilities

 

486 

 

 

569 



 

 

 

 

 

Long-term obligations:

 

 

 

 

 

Long-term debt, net

 

547 

 

 

680 

Operating lease liabilities

 

167 

 

 

 -

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,

 

 

 

 

 

105,624,750 and 104,953,693 issued, respectively

 

 

 

Additional paid-in capital

 

1,731 

 

 

1,721 

Retained deficit

 

(483)

 

 

(498)

Treasury stock at cost: 24,216,330 and 19,347,839 shares, respectively

 

(375)

 

 

(300)

Accumulated other comprehensive loss

 

(232)

 

 

(232)



 

642 

 

 

692 



$

2,325 

 

$

2,434 











MRC Global Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in millions, except per share amounts)





5

 


 



0



 

 

 

 

 

 

 

 

 

 

 



Three Months Ended

 

Year Ended



December 31,

 

December 31,

 

December 31,

 

December 31,



2019

 

2018

 

2019

 

2018



 

 

 

 

 

 

 

 

 

 

 

Sales

$

766 

 

$

1,009 

 

$

3,662 

 

$

4,172 

Cost of sales

 

635 

 

 

838 

 

 

3,009 

 

 

3,483 

Gross profit

 

131 

 

 

171 

 

 

653 

 

 

689 



 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

141 

 

 

148 

 

 

550 

 

 

562 

Operating (loss) income

 

(10)

 

 

23 

 

 

103 

 

 

127 



 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

  Interest expense

 

(9)

 

 

(10)

 

 

(40)

 

 

(38)

  Write off of debt issuance costs

 

 -

 

 

 -

 

 

 -

 

 

(1)

  Other, net

 

 -

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(19)

 

 

16 

 

 

66 

 

 

95 

Income tax expense

 

 

 

 

 

27 

 

 

21 

Net income

 

(24)

 

 

10 

 

 

39 

 

 

74 

Series A preferred stock dividends

 

 

 

 

 

24 

 

 

24 

Net (loss) income attributable to common stockholders

$

(30)

 

$

 

$

15 

 

$

50 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per common share

$

(0.37)

 

$

0.05 

 

$

0.18 

 

$

0.55 

Diluted (loss) earnings per common share

$

(0.37)

 

$

0.04 

 

$

0.18 

 

$

0.54 

Weighted-average common shares, basic

 

81.8 

 

 

88.6 

 

 

83.0 

 

 

90.1 

Weighted-average common shares, diluted

 

81.8 

 

 

89.9 

 

 

83.9 

 

 

91.8 















6

 


 

MRC Global Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in millions)









 

 

 

 

 



Year Ended December 31,



2019

 

2018

Operating activities

 

 

 

 

 

Net income

$

39 

 

$

74 

Adjustments to reconcile net income to net cash provided by (used in) operations:

 

 

 

 

 

Depreciation and amortization

 

21 

 

 

23 

Amortization of intangibles

 

42 

 

 

45 

Equity-based compensation expense

 

16 

 

 

14 

Deferred income tax benefit

 

(5)

 

 

(9)

Amortization of debt issuance costs

 

 

 

Inventory-related charges

 

 

 

 -

Write off of debt issuance costs

 

 -

 

 

(Decrease) increase in LIFO reserve

 

(2)

 

 

62 

Change in fair value of derivative instruments

 

 -

 

 

(1)

Provision for uncollectible accounts

 

 

 

Other non-cash items

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

127 

 

 

(74)

Inventories

 

95 

 

 

(175)

Other current assets

 

10 

 

 

Accounts payable

 

(79)

 

 

27 

Accrued expenses and other current liabilities

 

(35)

 

 

(17)

Net cash provided by (used in) operations

 

242 

 

 

(11)



 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property, plant and equipment

 

(18)

 

 

(20)

Proceeds from the disposition of property, plant and equipment

 

 

 

Other investing activities

 

 

 

 -

Net cash used in investing activities

 

(16)

 

 

(14)



 

 

 

 

 

Financing activities

 

 

 

 

 

Payments on revolving credit facilities

 

(1,145)

 

 

(1,118)

Proceeds from revolving credit facilities

 

1,016 

 

 

1,280 

Payments on long-term obligations

 

(4)

 

 

(4)

Debt issuance costs paid

 

 -

 

 

(1)

Purchases of common stock

 

(75)

 

 

(125)

Dividends paid on preferred stock

 

(24)

 

 

(24)

Proceeds from exercise of stock options

 

 -

 

 

21 

Repurchase of shares to satisfy tax withholdings

 

(6)

 

 

(5)

Net cash (used in) provided by financing activities

 

(238)

 

 

24 



 

 

 

 

 

Decrease in cash

 

(12)

 

 

(1)

Effect of foreign exchange rate on cash

 

 

 

(4)

Cash beginning of year

 

43 

 

 

48 

Cash end of year

$

32 

 

$

43 

 

 

 

 

 

 





7

 


 

MRC Global Inc.

Supplemental Information (Unaudited)

Reconciliation of Net Income to Adjusted EBITDA (a non-GAAP measure)

 (in millions)







 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Expected for the



Three Months Ended

 

Year Ended

 

Year Ending



December 31,

 

December 31,

 

December 31,

 

December 31,

 

December 31, 2020



2019

 

2018

 

2019

 

2018

 

(mid-point)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

$

(24)

 

$

10 

 

$

39 

 

$

74 

 

$

55 

Income tax expense

 

 

 

 

 

27 

 

 

21 

 

 

20 

Interest expense

 

 

 

10 

 

 

40 

 

 

38 

 

 

33 

Depreciation and amortization

 

 

 

 

 

21 

 

 

23 

 

 

22 

Amortization of intangibles

 

 

 

11 

 

 

42 

 

 

45 

 

 

28 

Increase (decrease) in LIFO reserve

 

 

 

14 

 

 

(2)

 

 

62 

 

 

Inventory-related charges (1)

 

 

 

 -

 

 

 

 

 -

 

 

 -

Equity-based compensation expense (2)

 

 

 

 

 

16 

 

 

14 

 

 

17 

Severance and restructuring charges (3)

 

 

 

 

 

 

 

 

 

 -

Foreign currency gains

 

 -

 

 

(1)

 

 

(1)

 

 

(1)

 

 

 -

Write off of debt issuance costs (4)

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

Supplier bad debt (5)

 

 

 

 -

 

 

 

 

 -

 

 

 -

Change in fair value of derivative instruments

 

 -

 

 

 -

 

 

 -

 

 

(1)

 

 

 -

Adjusted EBITDA

$

23 

 

$

63 

 

$

201 

 

$

280 

 

$

180 



Notes to above:

(1)

Non-cash charges (pre-tax) for excess and obsolete inventory in the international segment.

(2)

Recorded in SG&A

(3)

Charges (pre-tax) related to employee severance and restructuring charges recorded in SG&A.

(4)

Charge (pre-tax) related to the write off of debt issuance costs related to the refinancing of our senior secured Term Loan in 2018.

(5)

Non-cash charges (pre-tax) recorded in SG&A related to the doubtful collection of a product claim against a foreign supplier.



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.

8

 


 

MRC Global Inc.

Supplemental Information (Unaudited)

Reconciliation of Gross Profit to Adjusted Gross Profit (a non-GAAP measure)

(in millions)







 

 

 

 

 

 

 

 

 



Three Months Ended



December 31,

 

Percentage

 

December 31,

 

Percentage



2019

 

of Revenue

 

2018

 

of Revenue



 

 

 

 

 

 

 

 

 

Gross profit, as reported

$

131 

(1)

17.1% 

 

$

171 

 

16.9% 

Depreciation and amortization

 

 

0.7% 

 

 

 

0.6% 

Amortization of intangibles

 

 

1.2% 

 

 

11 

 

1.1% 

Increase in LIFO reserve

 

 

0.1% 

 

 

14 

 

1.4% 

Adjusted Gross Profit

$

146 

(1)

19.1% 

 

$

202 

 

20.0% 



 

 

 

 

 

 

 

 

 



Year Ended



December 31,

 

Percentage

 

December 31,

 

Percentage



2019

 

of Revenue*

 

2018

 

of Revenue*



 

 

 

 

 

 

 

 

 

Gross profit, as reported

$

653 

(1)

17.8% 

 

$

689 

 

16.5% 

Depreciation and amortization

 

21 

 

0.6% 

 

 

23 

 

0.6% 

Amortization of intangibles

 

42 

 

1.1% 

 

 

45 

 

1.1% 

(Decrease) increase in LIFO reserve

 

(2)

 

(0.1%)

 

 

62 

 

1.5% 

Adjusted Gross Profit

$

714 

(1)

19.5% 

 

$

819 

 

19.6% 





Notes to above:

*

Column does not foot due to rounding.

(1)

Includes $5 million of non-cash charges (pre-tax) recorded in cost of goods sold in our international segment for excess and obsolete inventory, and $3 million of charges (pre-tax) recorded in sales for the final settlement of a multi-year customer project, for each of the three months and year ended December 31, 2019. Excluding these charges for the three months ended December 31, 2019 gross profit, as reported would be $139 million (18.1%) and adjusted gross profit would be $154 million (20.0%). Excluding these charges for the year ended December 31, 2019 gross profit, as reported would be $661 million (18.0%) and adjusted gross profit would be $722 million (19.7%).



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.























9

 


 

MRC Global Inc.

Supplemental Sales Information (Unaudited)

(in millions)



Disaggregated Sales by Segment





 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

December 31,



 

 

 

 

 

 

 

 

 

 

 



U.S.

 

Canada

 

International

 

Total

2019:

 

 

 

 

 

 

 

 

 

 

 

Upstream

$

140 

 

$

32 

 

$

52 

 

$

224 

Midstream

 

281 

 

 

 

 

10 

 

 

298 

Downstream

 

187 

 

 

 

 

53 

 

 

244 



$

608 

 

$

43 

 

$

115 

 

$

766 

2018:

 

 

 

 

 

 

 

 

 

 

 

Upstream

$

197 

 

$

59 

 

$

83 

 

$

339 

Midstream

 

355 

 

 

15 

 

 

 

 

373 

Downstream

 

226 

 

 

 

 

66 

 

 

297 



$

778 

 

$

79 

 

$

152 

 

$

1,009 







 

 

 

 

 

 

 

 

 

 

 

Year Ended

December 31,



 

 

 

 

 

 

 

 

 

 

 



U.S.

 

Canada

 

International

 

Total

2019:

 

 

 

 

 

 

 

 

 

 

 

Upstream

$

723 

 

$

162 

 

$

222 

 

$

1,107 

Midstream

 

1,379 

 

 

42 

 

 

29 

 

 

1,450 

Downstream

 

854 

 

 

22 

 

 

229 

 

 

1,105 



$

2,956 

 

$

226 

 

$

480 

 

$

3,662 

2018:

 

 

 

 

 

 

 

 

 

 

 

Upstream

$

777 

 

$

239 

 

$

270 

 

$

1,286 

Midstream

 

1,608 

 

 

48 

 

 

21 

 

 

1,677 

Downstream

 

936 

 

 

28 

 

 

245 

 

 

1,209 



$

3,321 

 

$

315 

 

$

536 

 

$

4,172 





Sales by Product Line

0



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Year Ended



 

December 31,

 

December 31,

 

December 31,

 

December 31,

Type

 

2019

 

2018

 

2019

 

2018

Line pipe

 

$

92 

 

$

172 

 

$

560 

 

$

728 

Carbon steel fittings and flanges

 

 

109 

 

 

152 

 

 

565 

 

 

683 

    Total carbon steel pipe, fittings and flanges

 

 

201 

 

 

324 

 

 

1,125 

 

 

1,411 



 

 

 

 

 

 

 

 

 

 

 

 

Valves, automation, measurement and instrumentation

 

 

309 

 

 

407 

 

 

1,434 

 

 

1,553 

Gas products

 

 

126 

 

 

136 

 

 

551 

 

 

561 

Stainless steel alloy pipe and fittings

 

 

42 

 

 

46 

 

 

177 

 

 

196 

General oilfield products

 

 

88 

 

 

96 

 

 

375 

 

 

451 



 

$

766 

 

$

1,009 

 

$

3,662 

 

$

4,172 





10

 


 

MRC Global Inc.

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)



















 

 

 

 

 

 

 

 

 

 

 



December 31, 2019



Three Months Ended

 

Year Ended



Net Income

 

Per Share*

 

Net Income

 

Per Share*



 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

(30)

 

$

(0.37)

 

$

15 

 

$

0.18 

Increase (decrease) in LIFO reserve, net of tax

 

 

 

0.01 

 

 

(2)

 

 

(0.02)

Adjusted net income attributable to common stockholders

$

(29)

 

$

(0.35)

 

$

13 

 

$

0.15 



 

 

 

 

 

 

 

 

 

 

 



December 31, 2018



Three Months Ended

 

Year Ended



Net Income

 

Per Share*

 

Net Income

 

Per Share*



 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

 

$

0.04 

 

$

50 

 

$

0.54 

Increase in LIFO reserve, net of tax

 

11 

 

 

0.12 

 

 

48 

 

 

0.52 

Adjusted net income attributable to common stockholders

$

15 

 

$

0.17 

 

$

98 

 

$

1.07 







Notes to above:

* Column 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.   











# # #

11

 


Earnings Presentation Exhibit 992

Exhibit 99.2

 

Picture 1



MRC Global 4Q 2019 Earnings Presentation February 13, 2020 Andrew Lane President & CEO Jim Braun Executive Vice President & CFO Kelly Youngblood Executive Vice President & CFO Kelly Youngblood Executive Vice President We Make Energy Flow


 

Picture 2



4Q 2019 Earnings Presentation MRC Global 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,” “looking forward,” “guidance,” “targeting”, 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, gross profit, gross profit percentage, Adjusted Gross Profit, Adjusted Gross Profit percentage, tax rate, capital expenditures 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 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, including the company’s Current Report on Form 8-K dated February 13, 2020. 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. Statement Regarding Use of Non-GAAP Measures: The Non-GAAP financial measures contained in this presentation (Adjusted EBITDA and Adjusted Gross Profit) are not measures of financial performance calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and should not be considered as alternatives to net income or gross profit. They should be viewed in addition to, and not as a substitute for, analysis of our results reported in accordance with GAAP. Management believes that these non-GAAP financial measures provide investors a view to measures similar to those used in evaluating our compliance with certain financial covenants under our credit facilities and provide meaningful comparisons between current and prior year period results. They are also used as a metric to determine certain components of performance-based compensation. They are not necessarily indicative of future results of operations that may be obtained by the company.


 

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4Q 2019 Earnings Presentation MRC Global 3 Key Points – Fourth Quarter 2019 Results Returned $75 million of cash to shareholders in 2019 and $12 million in 4Q, completing latest share repurchase authorization Purchased $375 million of shares since 2015 Generated $108 million of cash from operations in 4Q19 and $242 million in 2019 Lowered operating costs Excluding adjustments, 4Q19 lower than 4Q18 by $15 million and 2019 lower than 2018 by $25 million Adjusted gross profit of 19.1% in 4Q19 or 20.0%, excluding non-recurring items, flat with 3Q19 Adjusted gross profit of 19.5% in 2019 or 19.7%, excluding non-recurring items, up 10bps from 2018 Net debt of $519 million down $83 million from 3Q 2019 4Q19 revenue decline of 19% from 3Q19 on due to end of year budget exhaustion 4Q19 Adjusted EBITDA of $23 million or 3.0% of revenue Note: Adjusted Gross Profit and Adjusted EBITDA are non-GAAP measures. For a reconciliation to their closest GAAP measures, see our Current Report on Form 8-K dated February 13, 2020.


 

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4Q 2019 Earnings Presentation MRC Global 4 Summary Highlights from Fourth Quarter 2019 Results $766M in revenue – 19% sequential decrease SG&A $141M – down $7M from 4Q18 or down $15M excluding adjustments Segment revenue highlights 4Q19 v 4Q18 Market sector revenue highlights 4Q19 v 4Q18 U.S. – declined 22% on midstream (primarily T&G) and upstream weakness and less downstream project revenue Canada – declined 46% due to poor market conditions International – declined 24% on the conclusion of a project and weak foreign currency. Underlying business grew 5% excluding project & currency impact. Upstream – decreased 34% driven by all segments. Midstream – declined 20% primarily on transmission and gathering revenue decline Downstream – decreased 18% on non-recurring project revenue