HOUSTON, May 1, 2014 /PRNewswire/ -- MRC Global Inc. (NYSE: MRC), the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy industry, today announced first quarter 2014 results.

The company's sales were $1,306 million for the first quarter of 2014, which are unchanged from the first quarter of 2013 and 3% lower than the fourth quarter of 2013. Net income for the first quarter of 2014 was $23.5 million, or $0.23 per diluted share, compared to a first quarter 2013 net income of $46.2 million, or $0.45 per diluted share.

Adjusted diluted earnings per share (EPS) for the first quarter of 2014 was $0.28 per diluted share and excludes the impact of a $5.0 million after-tax charge ($0.05 per diluted share) related to the sale of the company's progressive cavity pump (PCP) distribution and servicing business in Canada. There were no adjustments to the first quarter of 2013 diluted EPS of $0.45 per diluted share. Please refer to the reconciliation of adjusted net income (a non-GAAP measure) to net income (a GAAP measure) included in this release.

Andrew R. Lane, MRC Global's chairman, president and chief executive officer, stated, "As we previously discussed, inclement weather negatively impacted first quarter 2014 sales in some regions of the U.S. in January and February. However, we saw an increase in activity late in the quarter, which contributed to organic growth in the upstream sector across all segments. The outlook for the remainder of 2014 is encouraging. Our backlog at the end of the first quarter was $1.03 billion, an all-time record for our company." Mr. Lane also commented, "We are pleased to have completed the acquisition of Stream in the first quarter and are looking forward to their contributions to MRC Global."

MRC Global's first quarter 2014 gross profit of $232.1 million declined to 17.8% of sales from first quarter 2013 gross profit of $246.6 million, or 18.9% of sales. The 110 basis point decline reflected the impact of deflation in the company's line pipe product group as well as the company's last-in, first-out (LIFO) inventory costing methodology. First quarter 2014 gross profit reflected a charge of $1.3 million in cost of sales relating to the use of the LIFO method of inventory cost accounting, while the first quarter of 2013 reflected a benefit of $3.1 million.

Selling, general and administrative (SG&A) expenses were $171.4 million for the first quarter of 2014 compared to $160.8 million in the same period of 2013.  The increase included $18 million of incremental expense from the acquisitions of Stream AS (Stream) in January 2014 as well as Flangefitt Stainless Ltd. (Flangefitt) and Flow Control Products (Flow Control) in the second half of 2013. Excluding these acquisitions, SG&A was down $7.4 million in the first quarter of 2014 compared to the first quarter of 2013 primarily due to the disposition of the PCP distribution and servicing business in Canada.

Adjusted EBITDA was $84.0 million for the first quarter of 2014 compared to $103.9 million for the same period in 2013.  Please refer to the reconciliation of adjusted EBITDA (a non-GAAP measure) to net income (a GAAP measure) in this release.

Interest expense for the first quarter of 2014 was $15.1 million as compared to $15.3 million in the first quarter of 2013. The benefit of the repricing of the Senior Secured Term Loan B in November 2013 was partially offset by higher average debt balances in the first quarter of 2014 related to the acquisition of Stream.

Sales by Segment

U.S. sales in the first quarter of 2014 were down 1.8% to $948.0 million from the same quarter in 2013. The decline was attributable to reduced line pipe sales as a result of lower line pipe pricing and reduced customer capital spending including the impact of inclement weather in the company's Eastern region in the first quarter of 2014. This decline was partially offset by an increase in the company's other product lines as well as $5.6 million of sales related to the company's July 2013 acquisition of Flow Control. From a sector perspective, the U.S. experienced organic growth in the upstream and downstream sectors of 2.8% and 1.0%, respectively.

Canadian sales in the first quarter of 2014 were $166.2 million, down 18.7% from the same quarter in 2013. The decline was primarily attributable to the sale of the PCP distribution and servicing business, which reduced sales by $23 million. The remaining 7.4% reduction in sales was due to a decline in the Canadian dollar relative to the U.S. dollar.

International sales in the first quarter of 2014 were $191.5 million, an increase of 41.9% from the same period in 2013. The increase was due primarily to sales from Stream and Flangefitt of $64.3 million for the first quarter of 2014. Organically, excluding the decline in the Australian dollar compared to the U.S. dollar, International sales remained relatively flat when comparing first quarter of 2014 to first quarter of 2013. 

Sales by Sector

Upstream sales in the first quarter of 2014 increased 9.7% from the first quarter of 2013 to $634.8 million, or 49% of total sales. The improvement in upstream sales was substantially attributable to the acquisitions completed in 2013 and 2014, as well as organic growth of 2.0%, partially offset by the sale of the PCP distribution and servicing business in Canada.

Midstream sales in the first quarter of 2014 decreased 11.1% from the first quarter of 2013 to $307.4 million, or 23% of total sales. Sales to both transmission and gas utility customers were down by 16.9% and 1.6%, respectively. Reduced midstream sales were influenced by lower line pipe activity in the U.S.

Downstream sales in the first quarter of 2014 decreased 4.6% from the first quarter of 2013 to $363.5 million, or 28% of total sales. The company experienced weak market conditions in the Canadian and International segments, partially offset by modest growth in the U.S.

Balance Sheet

Debt outstanding was $1,314 million at March 31, 2014, an increase of $327.4 million during the first quarter of 2014, primarily due to the acquisition of Stream. Cash used in operations was $74.3 million during the first quarter of 2014 primarily due to timing of receivables collections and an increase in inventory purchases in anticipation of increased sales levels.

Calendar Year 2014 Guidance

MRC Global's expected full year 2014 results, excluding the impact of any future acquisitions, is unchanged from last quarter, as presented below.

Conference Call

The Company will hold a conference call to discuss its first quarter 2014 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on May 2, 2014.  To participate in the call, please dial (480) 629-9692 and ask for the MRC Global conference call at least 10 minutes prior to the start time. To access the conference call live over the Internet, please log onto the web at http://www.mrcglobal.com and go to the "Investor Relations" page of the company's website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live call, a replay will be available through May 16, 2014 and may be accessed by dialing (303) 590-3030 and using pass code 4673664#.  Also, an archive of the webcast will be available shortly after the call at http://www.mrcglobal.com for 90 days.

About MRC Global Inc.

Headquartered in Houston, Texas, MRC Global, a Fortune 500 company, is the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy industry and supplies these products and services across each of the upstream, midstream and downstream sectors. More information about MRC Global can be found on our website mrcglobal.com.

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Words such as "will," "expect," "expected", "looking forward", "guidance" and similar expressions are intended to identify forward-looking statements.

Statements about the company's business, including its strategy, its industry, the company's future profitability, the company's guidance on its sales, adjusted EBITDA, tax rate, capital expenditures and cash flow, growth in the company's various markets and the company's expectations, beliefs, plans, strategies, objectives, prospects and assumptions are not guarantees of future performance. These statements are based on management's expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, most of which are difficult to predict and many of which are beyond our control, including the factors described in the company's SEC filings that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements.

These risks and uncertainties include (among others) decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors; increased usage of alternative fuels, which may negatively affect oil and natural gas industry expenditure levels; U.S. and international general economic conditions; the company's ability to compete successfully with other companies in MRC Global's industry; the risk that manufacturers of the products the company distributes will sell a substantial amount of goods directly to end users in the industry sectors the company serves;  unexpected supply shortages;  cost increases by the company's suppliers; the company's lack of long-term contracts with most of its suppliers; suppliers' price reductions of products that the company sells, which could cause the value of the company's inventory to decline;  decreases in steel prices, which could significantly lower MRC'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 potential adverse effects associated with integrating acquisitions into the company's business and whether these acquisitions will yield their intended benefits;  the success of the company's acquisition strategies; 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; environmental, health and safety laws and regulations and the interpretation or implementation thereof; the sufficiency of the company's insurance policies to cover losses, including liabilities arising from litigation;  product liability claims against the company;  pending or future asbestos-related claims against the company;  the potential loss of key personnel;  interruption in the proper functioning of the company's information systems;  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;  changes in tax laws or adverse positions taken by taxing authorities in the countries in which the company operates;  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 Foreign Corrupt Practices Act and the U.K. Bribery Act and other economic sanction programs;  risks relating to ongoing evaluations of internal controls required by Section 404 of the Sarbanes-Oxley Act;  the impact on us of the SEC's move toward convergence with IFRS; and the occurrence of cyber security incidents.

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 Schafer
Vice President Investor Relations
MRC Global Inc.
Monica.Schafer@mrcglobal.com
832-308-2847

SOURCE MRC Global Inc.