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): May 29, 2013
MRC GLOBAL INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-35479 | 20-5956993 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
2 Houston Center, 909 Fannin, Suite 3100,
Houston, TX 77010
(Address of principal executive offices, including zip code)
Registrants 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)) |
Item 7.01 | Regulation FD Disclosure. |
The executive management of MRC Global Inc. (the Company) is scheduled to make a presentation on May 30, 2013 (the Presentation) to attendees of the KeyBanc Capital Markets Industrial, Automotive and Transportation Conference regarding, among other things, the Companys operations and performance. A copy of the materials to be used at the presentation (the Presentation Materials) is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Presentation Materials, possibly with modifications, may also be used from time to time after May 30, 2013 in presentations about the Companys operations and performance to current and potential investors, lenders, creditors, insurers, vendors, customers, employees and others with an interest in the Company and its business.
The information contained in the Presentation Materials is summary information that should be considered in the context of the Companys filings with the Securities and Exchange Commission (SEC) and other public announcements that the Company may make by press release or otherwise from time to time. The Presentation Materials speak as of the date of this Current Report on Form 8-K. While the Company may elect to update the Presentation Materials in the future or reflect events and circumstances occurring or existing after the date of this Current Report on Form 8-K, the Company specifically disclaims any obligation to do so. The Presentation Materials will also be posted in the Investor Relations section of the Companys website, http://www.mrcglobal.com for 90 days.
In connection with the Presentation, the Company is providing the following information regarding its projected quarter to date sales for April and May of 2013 (April/May 2013), based upon actual sales for April 2013 and projected sales for May 2013. April/May 2013 sales are expected to be approximately 10% below the same period in 2012. In particular, based on sales to date of line pipe in the United States for April/May 2013 and the Companys revised outlook for the remainder of May and June 2013, line pipe sales are expected to be approximately $100 million below the Companys expectations for the second quarter 2013. Capital expenditure spending of the Companys major customers in the United States on line pipe in the first quarter of 2013 as well as April/May 2013 has not occurred to the extent that the Company expected. Some of the Companys largest midstream customers have been impacted by lower upstream drilling activity and lower natural gas liquid (NGL) prices, which have resulted in lower spending in both natural gas and NGL pipelines. In addition, the permitting environment for new crude oil pipelines has slowed, resulting in the continued use by many customers of rail and trucks to transport oil. For the full year 2013, the Company now expects line pipe sales will be down approximately $300 million when compared to 2012.
Sales of valves, valve automation, carbon fittings and general MRO oilfield supplies continue to grow. In line with the Companys planned reduction of its oil country tubular goods (OCTG) product line and the re-balancing of the Companys business to other product lines, the Companys OCTG sales are expected to be down approximately $70 million in the second quarter 2013 from the same period in 2012, and approximately $200 million for the full year 2013 as compared to 2012. On a seasonal basis, the months of May through October have historically been the best sales months for the Company. The Company continues to believe that the second half of 2013 should be stronger than the first half. Even so, given the softness in midstream spending to date, second quarter 2013 revenue is now expected to be in the range of $1.25-1.35 billion, and full-year 2013 revenue is now expected to be in the range of $5.4-5.8 billion. The Company has recently experienced some margin pressure with respect to its line pipe products. Accordingly, the companys second quarter adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) are expected to between $87 - $97 million. The Company will update its expectations for full year 2013 revenue, Adjusted EBITDA and diluted earnings per share (EPS) in connection with the reporting of results for the second quarter 2013 in August. Accordingly, the Companys prior expectations (other than those provided in this Form 8-K) should no longer be relied upon. The Company is actively pursuing potential acquisitions to add to its business. The Companys revenue and Adjusted EBITDA expectations do not include any such acquisitions.
2
This Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Words such as projected, expects, expected, believe, should and similar expressions are intended to identify forward-looking statements. Statements about the Companys business, including its strategy, its industry, the Companys future profitability, the Companys expectations for revenue for 2013 and for the second quarter of 2013, the Companys expectations for line pipe sales, and OCTG sales, the Companys expectations for Adjusted EBITDA in the second quarter of 2013, the possibility of growth in the Companys various markets and product lines and the Companys expectations, beliefs, plans, strategies, objectives, prospects and assumptions are not guarantees of future performance. These statements involve known and unknown risks, uncertainties and other factors that may cause the Companys 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 Companys ability to compete successfully with other companies in the Companys industry; the risk that manufacturers of the products the Company distributes will sell a substantial amount of goods directly to end users in the industries it serves; unexpected supply shortages; cost increases by the Companys suppliers; the Companys lack of long-term contracts with most of its suppliers; increases in customer, manufacturer and distributor inventory levels; suppliers price reductions of products that the Company sells, which could cause the value of its inventory to decline; decreases in steel prices, which could significantly lower the Companys profit; increases in steel prices, which it may be unable to pass along to its customers, which could significantly lower its profit; the Companys lack of long-term contracts with many of its customers and its lack of contracts with customers that require minimum purchase volumes; changes in the Companys customer and product mix; risks related to the Companys customers credit; the potential adverse effects associated with integrating acquisitions into the Companys business and whether these acquisitions will yield their intended benefits; the success of the Companys acquisition strategies; the Companys significant indebtedness; the dependence on the Companys subsidiaries for cash to meet its debt obligations; changes in the Companys credit profile; a decline in demand for certain of the products that the Company distributes if import restrictions on these products are lifted; environmental, health and safety laws and regulations; the sufficiency of the Companys 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 Companys 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 the Companys goodwill or other intangible assets; changes in tax laws or adverse positions taken by taxing authorities in the countries in which the Company operates; and adverse changes in political or economic conditions in the countries in which the Company operates. For a discussion of key risk factors, please see the risk factors disclosed in the Companys SEC filings, which are available on the SECs website at www.sec.gov and on the Companys website, www.mrcglobal.com.
Undue reliance should not be placed on the Companys forward-looking statements. Although forward-looking statements reflect the Companys 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 Companys 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 in the 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
3
Exchange Act, 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 in Item 9.01 below) shall not be incorporated by reference into any registration statement, report or other document filed by the Company pursuant to the Securities Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01 | Other Events. |
Capital expenditure spending of the Companys major customers in the United States on line pipe in the first quarter of 2013 as well as during April and May of 2013 has not occurred to the extent that the Company expected. Some of the Companys largest midstream customers have been impacted by lower upstream drilling activity and lower natural gas liquid (NGL) prices, which have resulted in lower spending in both natural gas and NGL pipelines. In addition, the permitting environment for new crude oil pipelines has slowed, resulting in the continued use by many customers of rail and trucks to transport oil rather than pipelines. Accordingly, the Company has seen slower line pipe sales during April and May of 2013 compared to the same period in 2012 and expects that line pipe sales during the second quarter and full year of 2013 will be lower than during the second quarter and full year of 2012. The Company has also recently experienced some margin pressure with respect to its line pipe products.
Sales of valves, valve automation, carbon fittings and general MRO oilfield supplies continue to grow. However, in line with the Companys planned reduction of its oil country tubular goods (OCTG) product line and the re-balancing of the Companys business to other product lines, the Company expects that OCTG sales will decrease significantly during the second quarter 2013 compared to the same period in 2012 and during the full year 2013 compared to the full year 2012.
This Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The fifth and sixth paragraphs of Item 7.01 of this 8-K are incorporated herein by reference.
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits. |
99.1 | Presentation Materials, dated May 30, 2013 |
4
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: May 29, 2013
MRC GLOBAL INC. | ||
By: |
/s/ James E. Braun | |
James E. Braun | ||
Executive Vice President and Chief Financial Officer |
5
INDEX TO EXHIBITS
Exhibit |
Description | |
99.1 | Presentation Materials, dated May 30, 2013 |
6
KeyBanc
Capital Markets May 30, 2013
1
May 30, 2013
Jim Braun
EVP & CFO
MRC Global Inc. //
KeyBanc Capital Markets
Industrial
Automotive and Transportation Conference
Exhibit 99.1 |
KeyBanc Capital Markets
May 30, 2013
2
2
This presentation contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act, as amended, including, for example, statements about the Companys business strategy, its industry, its future
profitability, growth in the Companys various markets, and the Companys
expectations, beliefs, plans, strategies, objectives, prospects and
assumptions. These forward-looking statements are not guarantees of
future performance. These statements involve known and unknown risks,
uncertainties
and
other
factors
that
may
cause
the
Companys
actual
results
and
performance
to
be
materially
different
from
any
future
results
or
performance
expressed
or
implied
by
these
forward-looking
statements.
For
a
discussion
of
key
risk
factors,
please
see
the
risk
factors
disclosed
in
the
Companys annual report on Form 10-K for the year ended December 31, 2012
and the registration statement (including a prospectus and prospectus
supplement)
for
the
offering
to
which
this
communication
relates,
which
are
available
on
the
SECs
website
at
www.sec.gov
and
on
the
Companys
website, www.mrcglobal.com.
Undue reliance should not be placed on the Companys forward-looking
statements. Although forward-looking statements reflect the Companys 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 our actual results, performance or achievements to differ
materially from anticipated future results, performance or achievements
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. Statement Regarding Use of
Non-GAAP Measures: The Non-GAAP financial measures contained in this
presentation (EBITDA, Adjusted EBITDA, Adjusted EPS and variations thereof) are not measures of
financial performance calculated in accordance with GAAP and should not be
considered as alternatives to net income (loss) or any other performance
measure derived in accordance with GAAP or as alternatives to cash flows from
operating activities as a measure of our liquidity. They should be viewed
in addition to, and not as a substitute for, analysis of our results reported in
accordance with GAAP, or as alternative measures of liquidity. Management
believes that certain non-GAAP financial measures provide a view to measures
similar to those used in evaluating our compliance with certain financial
covenants under our credit facilities and provide financial statement users
meaningful comparisons between current and prior year period results. They
are also used as a metric to determine certain components of performance-based
compensation. The adjustments and Adjusted EBITDA are based on
currently available information and certain adjustments that we believe are
reasonable and are presented as an aid in understanding our operating
results. They are not necessarily indicative of future results of operations that
may be obtained by the Company. Forward Looking Statements and Non-GAAP
Disclaimer |
KeyBanc Capital Markets
May 30, 2013
3
By the Numbers
Industry Sectors
Product Categories
Business Model
2012 Sales
$5.57 B
Upstream
Line Pipe / OCTG
Locations
400+
Countries
44+
Midstream
Valves
Customers
18,000+
Suppliers
18,000+
Downstream/
Industrial
Fittings / Flanges
SKUs
175,000+
Employees
4,750+
Company Snapshot
Canada
14%
Europe / Asia Pacific
10%
MRC is the largest global distributor of pipe, valves and fittings (PVF) to the
energy industry MRO
70%
Projects
30%
U.S.
76% |
KeyBanc Capital Markets
May 30, 2013
4
Founded
1921
1989
Acquires
Appalachian
Pipe & Supply
2007
Goldman Sachs
Capital Partners
Strategic
Investment
1977
Founded
2005
Acquires
Midfield
Supply
2007
Merger of
McJunkin
and Red Man
to form
MRC
2009
MRC opens
Houston HQ
2011
MRC
acquires
SPF
2011
MRC
acquires
VSC
2012
MRC
acquires
OneSteel
Piping
Systems
2009
MRC
acquires
Transmark
2010
MRC
acquires
South
Texas
Supply
2010
MRC
acquires
Dresser
Oil Tools
MRCs 92 Year History // The Road to the Fortune 500
2012
MRC
Global
IPO;
begins
trading
on NYSE
2012
MRC
listed on
Fortune 500
2012
MRC
signs the
industrys
first global
valve
contract with
Shell
2008
MRC
acquires
LaBarge
2012
MRC
acquires
Chaparral
Supply
2012
MRC
acquires
Production
Specialty
Services
(now #451, up from #493 after IPO
and #10
on the Barrons 500 of Top Companies) |
KeyBanc Capital Markets
May 30, 2013
5
Clear Market Leader Globally and in the Shales
~2/3 of sales are under contracts
1
with a 95%
renewal rate since 2000
Continue to grow share
and size of wallet
with
major existing customers while adding new ones
North American Shales as much as 5x PVF
intensive as conventional activity
Leading
industrial
distributor
of
PVF
globally
to
the
energy
and
industrials
sectors
Note: As of 31-Dec-2012
1
Including contracts and pricing arrangements.
2
International locations include sales offices and pipe yards at MRC locations.
Ecuador
Equatorial Guinea
Finland
France
Germany
India
Indonesia
Iraq
Italy
Kazakhstan
Kuwait
Malaysia
Mexico
Netherlands
New Zealand
Nigeria
Norway
Pakistan
Peru
Poland
Russia
Saudi Arabia
44+ Countries & 400+ Locations
Angola
Aruba
Australia
Austria
Belgium
Brunei
Cameroon
Canada
China
Colombia
Denmark
Branch operations and significant direct export sales
Singapore
South Africa
South Korea
Spain
Sweden
Thailand
Trinidad
Turkey
United Arab Emirates
United Kingdom
United States
2
North America
International
Branches
190+
50+
Distribution Centers
8 = U.S.
1 = Canada
1 = U.K.
1 = Singapore
1 = Netherlands
1 = Australia
Valve Automation Centers
12
12
Pipe Yards
120
10 |
KeyBanc Capital Markets
May 30, 2013
6
By Geography
Note: Business mix based on fiscal year 2012.
By Product Line
By Industry Sector
MRC Diversification
1 -
Approximately 17% (or $200 M) of total
for valves is valve automation
Industry leading product, end market and geographic diversification
|
KeyBanc Capital Markets
May 30, 2013
7
Core Distribution Processes
Cost Savings and Efficiencies
Order Management and Product
Bundling
Quality Assurance
Supplier Registration
Logistics Management
Customer Reporting
Integrated Services
Technical Assistance / Product
Recommendation
Inventory Consignment / Just-in-
Time Delivery
Customized IT Solutions
Warehouse Management
Service Offerings
Products
Delivery of Mission Critical Products and Value Added Services
Generating savings and efficiencies for our customers
while enabling them to focus on their core competencies
175,000+ unique, mission-critical products
used in high pressure, high stress or
abrasive operating environments
Low cost relative to overall cost of
maintenance or project spend so service is
paramount |
KeyBanc Capital Markets
May 30, 2013
8
Supplier Benefits
Customer Benefits
MRC plays a critical role in the complex, technical, global energy supply chain
Strong
Long-Term
Relationships
with
Blue
Chip
Customers
and
Suppliers
Mutual Benefits
Access to over 18,000+
customers
Manufacturing and scale
efficiencies
Leverage MRCs technical
sales force
Trusted long-term partnerships
Financial stability
MRC Approved Supplier List /
Quality Program
Access to over 18,000+ suppliers
worldwide
Efficiencies and inventory
management
Access to a broad product offering
(~$1B inventory)
Access to global sourcing from 35
countries |
KeyBanc Capital Markets
May 30, 2013
9
Positive Energy and Industrial Spending Trends
Global:
Energy demand continues to grow with sizable MRO/project opportunities given the
age of global energy infrastructure and slowly improving global
economy
Upstream:
Shales
extremely
active,
shift
to
Oil/NGL
E&P,
Natural
Gas
MRO
production,
Oil
Sands
activity seeing strong growth
Midstream:
Shale activity in new unsupported areas; increased pipeline integrity regulation
plus aging pipeline infrastructure accelerating MRO rates; gas utilities
continue to outsource PVF procurement
Downstream:
MRO and infrastructure projects accelerating; strong growth in chemical/industrial
with low natural gas prices and steady PMI; rebound in refinery utilization
/ margins Multi-Year Exploration & Production Spending Forecast
Source: Barclays Global 2013 E&P Spending Outlook Dec 2012
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2009A
2010A
2011A
2012E
2013E
2014E
2015E
US
Canada
Outside North America |
KeyBanc Capital Markets
May 30, 2013
10
(US$ in millions)
1
Reflects reported revenues for the year of acquisition
MRC has completed and successfully acquired $3 billion of revenues since 2007
M&A Driven Growth: Track Record of Success
Date
Acquisition
Rationale
Region
Revenue
1
Apr-07
Midway Tristate
Appalachian
/ Rockies PVF
U.S.
$150
Oct-07
Jul
-08
Red Man
Midfield
(49%)
Transformational
Merger
100% Ownership
of Canadian
Subsidiary
U.S.
Canada
1,982
Oct-08
LaBarge
Midstream
U.S.
233
Oct-09
Transmark
International
MRO Platform
Europe and Asia
346
May-10
South Texas Supply
Eagle Ford
South Texas
9
Aug
-10
Dresser
Oil Tools Supply
Bakken
North Dakota
13
Jun
-11
SPF
Australia / SE Asia Projects
Australia
91
Jul
-11
VSC
Valve Automation
U.S.
13
Mar-12
On
eSteel
Piping Systems
Australia PVF MRO
Australia
174
Jun
-12
Chaparral Supply
Mississippian Lime MRO
Oklahoma / Kansas
71
Dec-12
Production Specialty Services
Permian Basin / Eagle Ford
U.S.
127
Total
$3,209 |
KeyBanc Capital Markets
May 30, 2013
11
Today
10
15 Years Ago
Next 1 to 5 Years
Changing PVF Energy Distribution Landscape
Consolidating energy industry benefits global players
Procurement
PVF purchasing handled
locally
Facility-by-facility basis
Separate contracts
by product class:
Pipe
Valves
Fittings
Flanges
Supplies
Centralized
Procurement
Purchasing more
consolidated
Contracts by end
segment:
Upstream
Midstream
Downstream
Contracts cover PVF
Customers align with
suppliers with size/scale
Global
Procurement
Global upstream /
midstream /
downstream PVF
contracts
Decentralized |
KeyBanc Capital Markets
May 30, 2013
12
MRC & Shell // Global Valve Contract for MRO and Projects
Industrys first valve and combined North American PFF contract
Shell has one of the top 5 global CAPEX budgets
Deepwater
GOM
NA Tight Gas
& Liquids
Brazil
Offshore
BC-10
West
Africa
Future
Middle
East
RDC
FLNG
/ LNG
Oceania
Sakhalin
Shell
Offshore
Coal Bed
Methane
Cracker Unit
Pittsburgh, PA
Tar Sands
Kashagan
Ph1
Alaska
Offshore
LNG /
GTL
North America
Includes PFF
Salym
Development
LNG
China
Tight Gas |
KeyBanc Capital Markets
May 30, 2013
13
Global
Energy Demand Favorable:
Continued
general economic recovery, commodity price
environment, global supply constraints and
increased energy consumption
Shale
Activity
Unprecedented:
Shale
gas,
as
a
percentage
of
total
natural
gas
production,
has
rapidly
increased
from
less
than
2%
of
total
U.S.
natural
gas
production
in
2001
to
30%
in
2011
and
is
projected
to
increase
to
49%
by
2035
Accelerating
MRO:
Increased
utilization
of
processing
facilities
and
decreasing
quality
of
energy
feedstocks
accelerating
PVF
replacement
rates
Recovering
Project
Outlook:
Infrastructure
and
E&P
projects
rebounding
with
economic
growth
and
need
for
capacity
expansions
Large,
Fragmented
Market
with
Significant
Growth
Opportunities
One-Stop
Solution:
Leverage
extensive
product
offering
and
be
one-stop
PVF
solution
Cross-Selling:
Introduce
existing
customers
to
complete
PVF
product
portfolio
Projects:
Further
penetrate
existing
customers
project
activity
Investments:
Add
incremental
branches,
DCs
and
sales
people
International:
Expand
further
globally with existing customers
Adjacencies:
Add
new
products
to
existing
PVF
bundle
or
target
new
complimentary
end
markets
Core
Competency:
Proven
ability
to
identify,
execute
and
integrate
strategic
and
tuck-in
acquisitions
Highly
Fragmented:
Opportunities
to
extend
product
offering,
end
markets
and/or
geographic
coverage
MRC is in an excellent position to continue to exceed industry growth
Long-term
Targets:
Revenue
Growth:
10-12%
|
Adjusted
EBITDA
Margin:
10+%
|
Leverage:
2.0
3.0x
Note: All targets are long term.
Global E&P Spending Growth
Positive Secular Trends
(Target 6
7% Annually)
Organic Growth
Leverage Scale
(Target: 8
9% Annually)
Acquisitions
Accretive Expansion
(Target: 2
3% Annually) |
KeyBanc Capital
Markets May 30, 2013
14
Financial Overview |
KeyBanc Capital Markets
May 30, 2013
15
Strong Growth and Margin Drive Attractive Returns
Sales
Adjusted Gross Profit and % Margin
Adjusted EBITDA and % Margin
Adjusted EBITDA RONA
Y-o-Y Growth
5%
26%
15%
(US$ in millions)
Y-o-Y Growth
34%
28%
24%
Y-o-Y Growth
3%
61%
29%
6.0%
5.8%
7.5%
8.3%
13.5%
17.2%
17.6%
19.0%
Strong growth and continued improving profitability
1
Source: Company management; Company Filings
1
Adjusted
EBITDA
RONA
calculation
=
Adjusted
EBITDA
/
(EOY
Inventory
+
EOY
LIFO
reserve
+
EOY
Receivables
+
EOY
PP&E
Payables). |
KeyBanc Capital Markets
May 30, 2013
16
Significant Cash Flow for Deleveraging and Growth Investments
Capital Structure
Cumulative FCF
Net Leverage
(US$ in millions)
1
Strong cash flows allow for continued deleveraging
($ in millions)
March 31, 2013
Cash and Cash Equivalents
$ 27
Total Debt (including current portion):
Term Loan B due 2019, net of discount
641
Global ABL Facility due 2017
426
Other
6
Total Debt
$ 1,073
Total Equity
1,231
Total Capitalization
$ 2,304
$495
$597
$479
$695
2009
2010
2011
2012
1
6.4 x
5.8 x
4.1 x
2.6 x
2.3 x
2009
2010
2011
2012
Since 2008, Free Cash Flow defined as cash from operations, less fixed asset purchases (net of
disposals). $202
$210
$342
$437
2009
2010
2011
2012
5.5%
5.5%
7.8%
7.1%
Mar
-
13
Adjusted
EBITDA
Capex
and
%
Margin |
KeyBanc Capital Markets
May 30, 2013
17
Sales
Margins
Net Income
Q1 2013 Financial Summary
(In millions except per share data)
Q1
2012
2013
OCTG
$221
$126
All Other
1,162
1,179
2%
Total
$1,383
$1,305
Adjusted Gross Profit
Adjusted EBITDA
Net Income
EPS
$ 260
$ 262
Q1 2012
Q1 2013
18.8%
20.1%
$ 115
$ 104
Q1 2012
Q1 2013
8.3 %
8.0%
$ 38
$ 46
Q1 2012
Q1 2013
$ 0.44
$ 0.45
Q1 2012
Q1 2013
Total revenue was impacted by strategic OCTG
reduction
Acquisition related revenue offset slowdown in
customer spending
Year-on-year adjusted gross profit margin expansion of
~130 bps due to emphasis on higher margin products
Adjusted EBITDA margins reflected lower sales
Net Income improvement driven by $18 million interest
expense savings
EPS reflects additional shares outstanding in 2013 |
KeyBanc Capital Markets
May 30, 2013
18
Appendix |
KeyBanc Capital Markets
May 30, 2013
19
March 31
December 31
($ in millions)
2013
2012
2012
2011
2010
2009
Net income (loss)
$ 46.2
$ 37.5
$118.0
$ 29.0
$(51.8)
$(339.8)
Income taxes
25.0
21.1
63.7
26.8
(23.4)
(15.0)
Interest expense
15.3
33.7
112.5
136.8
139.6
116.5
Write off of debt issuance costs
-
1.7
1.7
9.5
-
-
Depreciation and amortization
5.4
4.1
18.6
17.0
16.6
14.5
Amortization of intangibles
13.2
12.3
49.5
50.7
53.9
46.6
Amortization of purchase price
accounting
-
-
-
-
-
15.7
Change in fair value of derivative
instruments
(0.6)
(2.1)
(2.2)
(7.0)
4.9
(8.9)
Closed locations
-
-
-
-
(0.7)
1.4
Share based compensation
1.9
1.8
8.5
8.4
3.7
7.8
Franchise taxes
-
-
-
0.4
0.7
1.4
Loss (gain) on early extinguishment of
debt
-
-
114.0
-
-
(1.3)
Goodwill and intangibles impairment
-
-
-
-
-
386.1
Inventory write-down
-
-
-
-
0.4
46.5
IT system conversion costs
-
-
-
-
-
2.4
M&A transaction & integration expenses
-
-
-
0.5
1.4
17.5
Pension settlement
-
-
4.4
-
-
-
Legal and consulting expenses
-
-
(1.2)
9.9
4.2
1.9
Joint venture termination
-
-
-
1.7
-
-
Provision for uncollectible accounts
-
-
-
0.4
(2.0)
1.0
Severance and related costs
-
-
-
1.1
3.2
4.4
MRC Transmark pre-Acquisition
contribution
-
-
-
-
-
38.5
LIFO
(3.1)
6.9
(24.1)
73.7
74.6
(115.6)
Other expenses
0.6
(1.8)
(0.2)
1.6
(1.1)
(3.1)
Adjusted EBITDA
$ 103.9
$ 115.2
$ 463.2
$ 360.5
$ 224.2
$ 218.5
EBITDA Adjustments |
KeyBanc Capital Markets
May 30, 2013
20
December 31
($ in millions)
EBITDA
$
463.2
$
360.5
$
224.2
$
218.5
AR
$
823.2
$
791.3
$
596.4
$
506.2
Inventory at AC
1,121.2
1,074.2
866.8
898.5
Fixed Assets
122.5
107.4
104.7
111.5
(-) AP
(438.4)
(479.6)
(426.6)
(338.5)
PSS Adjustment
(28.0)
Total Adjusted Net Assets
$
1,600.5
$
1,493.3
$
1,141.3
$
1,177.7
Inventory at LIFO
970.2
899.1
765.4
871.6
(+) LIFO reserve
151.0
175.1
101.4
26.9
Total Inventory
$
1,121.2
$
1,074.2
$
866.8
$
898.5
RONA
28.9
%
24.1
%
19.6
%
18.6
%
2011
2010
2009
2012
December 31
($ in millions)
Stockholders' Equity
$
1,185.9
$
720.8
$
689.8
$
743.9
Long term debt
1,256.6
1,526.7
1,360.2
1,452.6
Deferred taxes
334.5
357.2
373.7
377.9
Other liabilities
147.7
143.3
140.8
170.2
Intangible assets
(1,359.7)
(1,333.1)
(1,366.5)
(1,425.7)
LIFO reserve
151.0
175.1
101.4
26.9
Other assets
(50.4)
(50.6)
(101.9)
(111.9)
Cash
(37.1)
(46.1)
(56.2)
(56.2)
PSS Adjustment
(28.0)
Total Adjusted Net Assets
$
1,600.5
$
1,493.3
$
1,141.3
$
1,177.7
Net income (loss)
$
118.0
$
29.0
$(51.8)
$(339.8)
Stockholders' equity
1,185.9
720.8
689.8
743.9
Net income / stockholders'equity
10.0
%
4.0
%
(7.5)%
(45.7)%
2012
2011
2010
2009
Adjusted EBITDA RONA
Calculation
Total Adjusted Net Assets
GAAP Reconciliation |
KeyBanc Capital Markets
May 30, 2013
21
March 31
December 31
($ in millions)
2013
2012
2012
2011
2010
2009
Gross Profit
$ 246.6
$ 236.6
$ 1,013.7
$ 708.2
$ 518.1
$ 548.0
Depreciation and amortization
5.4
4.1
18.6
17.0
16.6
14.5
Amortization of intangibles
13.2
12.3
49.5
50.7
53.9
46.6
(Decrease) increase in LIFO reserve
(3.1)
6.9
(24.1)
73.7
74.6
(115.6)
Adjusted Gross Profit
$ 262.1
$ 259.9
$ 1,057.7
$ 849.6
$ 663.2
$ 493.5
December 31
($ in millions)
2012
2011
2010
2009
Cash from operations
$ 240.1
$(102.9)
$ 112.7
$ 505.5
Fixed asset purchases
(26.2)
(18.1)
(14.3)
(16.7)
Disposal of fixed assets
2.3
3.1
3.1
6.5
Free cash flow
$216.2
$(117.9)
$ 101.5
$ 495.3
Cummulative free cash flow
$ 695.1
$ 478.9
$ 596.8
$ 495.3
Adjusted Gross Profit GAAP Reconciliation
Free Cash Flow Calculation |