HOUSTON, Nov. 6, 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 third quarter 2014 results.

The company's sales were $1.618 billion for the third quarter of 2014, which were 23% higher than the third quarter of 2013 and 8% higher than the second quarter of 2014. Net income for the third quarter of 2014 was $50 million, or $0.49 per diluted share, compared to third quarter 2013 net income of $39 million, or $0.38 per diluted share.

Adjusted diluted earnings per share (EPS) were $0.54 per diluted share for the third quarter of 2014 as compared to adjusted diluted EPS for the third quarter of 2013 of $0.40 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, "Our multi-year strategy to expand internationally, re-balance our product lines, focus on global industrial valve sales and streamline our SG&A is evidenced in our strong third quarter results. We are very pleased with year to date revenue growth of 14%."

Mr. Lane continued, "The third quarter sales of $1.618 billion set a new all-time record for our company in its 93 year history, surpassing a previous peak set in the fourth quarter of 2008. We also set an all-time record for quarterly valve sales of $531 million, reflecting the results from our valve product line growth strategy. We continued our operating expense reduction efforts, which we now expect to generate more than $17 million in annual savings. Also notable, we ended the quarter with backlog of $1.254 billion, the highest in company history."

Mr. Lane concluded, "I am proud to report that the results of our cost savings initiatives and leveraging of our cost structure are evidenced in our improved 8.2% adjusted EBITDA margin this quarter."

MRC Global's third quarter 2014 gross profit was $278.0 million, or 17.2% of sales as compared to gross profit of $238.3 million, or 18.1% of sales for the third quarter of 2013. The decline in gross profit percentage reflects the impact of the company's last-in, first-out (LIFO) inventory costing methodology. Third quarter 2014 gross profit reflected a charge of $3.9 million to cost of sales relating to the use of the LIFO method of inventory cost accounting, while the third quarter of 2013 reflected a benefit of $5.7 million.

Selling, general and administrative (SG&A) expenses were $184.8 million for the third quarter of 2014, or 11.4% of sales, compared to $160.9 million, or 12.2% of sales, in the same period of 2013. The 80 basis point improvement was due to the previously announced cost reduction initiatives taken through the third quarter of 2014 and the higher revenue levels. The increase of $23.9 million included $20.8 million of incremental expense from the acquired businesses. The remainder of the increase was driven by $2.6 million of severance and related charges associated with our cost reduction initiatives and $5.7 million of pre-tax costs associated with the cancellation of executive employment contracts.

Adjusted EBITDA was $132.3 million for the third quarter of 2014 compared to $96.4 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.

Sales by Segment

U.S. sales in the third quarter of 2014 were up 18.7% to $1.205 billion from the same quarter in 2013 due to organic growth. The increase was across each product line as well as each sector due to growth in customer capital spending, an increase in rig and well count as well as market share gains. 

Canadian sales in the third quarter of 2014 were $161.2 million, down 0.6% from the same quarter in 2013. The decline was primarily attributable to the sale of the progressive cavity pump (PCP) distribution and servicing business, which reduced sales by $20.4 million and the impact of the decline of the Canadian dollar relative to the U.S. dollar which amounted to $7.6 million.  After adjusting for these items, the Canadian business was up 20.2%, which was due to growth in customer spending in the upstream and midstream sectors.

International sales in the third quarter of 2014 were $251.7 million, an increase of 84.3% from the same period in 2013. The increase was due primarily to sales from acquired businesses of $92.3 million for the third quarter of 2014. Organically, international sales increased $22.8 million over the same quarter a year ago due to growth in the European business.

Sales by Sector

Upstream sales in the third quarter of 2014 increased 28.1% from the third quarter of 2013 to $753.1 million, or 47% of total sales. The improvement in upstream sales was attributable to organic growth of 16.2%, as well as the acquisitions completed in 2013 and 2014, partially offset by the sale of the PCP distribution and servicing business in Canada.

Midstream sales in the third quarter of 2014 increased organically by 25.7% from the third quarter of 2013 to $474.3 million, or 29% of total sales. Higher midstream sales were influenced by increased project activity and an increase in market share among our targeted growth accounts all within our transmission subsector.

Downstream sales in the third quarter of 2014 increased 12.2% from the third quarter of 2013 to $390.7 million, or 24% of total sales. Substantially all of the increase was organic growth.  Sales to downstream customers increased in both the International and U.S. segments.

Balance Sheet

Debt outstanding was $1.417 billion at September 30, 2014, an increase of $19.1 million during the third quarter of 2014. Net cash used in operations was $68.6 million during the nine months ended September 30, 2014 compared to net cash provided by operations of $241.4 million during the same period a year ago. Excluding the impact of acquisitions, working capital increased $227.7 million in the first nine months of 2014 as compared to a decrease of $76.9 million in the first nine months of 2013. These movements reflect increases in business activity leading to higher revenue which resulted in growth in working capital, and due also to the timing of payments from various large customers.

Updated Calendar Year 2014 Guidance

Given the strong third quarter results above expectations and the outlook for the fourth quarter, MRC Global's expected full year 2014 results are updated from last quarter, as presented below.

Conference Call

The Company will hold a conference call to discuss its third quarter 2014 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on November 7, 2014.  To participate in the call, please dial (719) 325-2484 and ask for the MRC Global conference call at least 10 minutes prior to the start time. To access the conference call live over the Internet, please log onto the web at http://www.mrcglobal.com and go to the "Investor Relations" page of the company's website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live call, a replay will be available through November 21, 2014 and may be accessed by dialing 719-457-0820 and using pass code 5872996#.  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 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 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE MRC Global Inc.