HOUSTON, July 28, 2020 /PRNewswire/ -- MRC Global Inc.
(NYSE: MRC), the largest global distributor, based on sales, of
pipe, valves and fittings and related infrastructure products and
services to the energy industry, today announced second quarter
2020 results.
The company's sales were $602
million for the second quarter of 2020, which was 24% lower
than the first quarter of 2020 and 39% lower than the second
quarter of 2019. The sequential decline was across all segments and
sectors except gas utilities, which was up $3 million. As compared to the second quarter of
2019, the decrease was across all sectors and segments as the
impact of the COVID-19 pandemic and lower commodity prices
significantly reduced customer spending.
Net loss attributable to common stockholders for the second
quarter of 2020 was $287 million, or
$(3.50) per diluted share, as
compared the second quarter of 2019 net income of $18 million,
or $0.21 per diluted share. The
second quarter of 2020 results include pre-tax charges for the
impairment of goodwill and intangible assets, severance and
restructuring and other items of $301
million and after-tax charges of $284
million or $3.46 per diluted
share. Adjusted net loss attributable to common stockholders for
the second quarter of 2020 was $(8) million, or $(0.10) per diluted share, compared to net income
of $17 million, or $0.20 per
diluted share for the second quarter of 2019. Please refer to the
reconciliation of adjusted net income (loss) (a non-GAAP measure)
to net income (loss) (a GAAP measure) included in this release.
Andrew R. Lane, MRC Global's
president and chief executive officer stated, "Due to the
incredible demand destruction brought on by the coronavirus
pandemic, the second quarter was our most challenging to date, but
I am very pleased with the rapid and proactive response of our
employees and management team, who remain fully committed to our
long-term strategy to enhance shareholder value. We are keenly
focused on the levers within our control. As a result, we have
reduced operating costs significantly in the second quarter,
exceeding our initial estimates and achieving a new quarterly
SG&A run rate of $104 million,
excluding severance and restructuring charges. Our cost savings
programs are expected to achieve over $100
million of adjusted cost savings in 2020 as compared to 2019
and we will continue to adjust the cost structure as conditions
dictate. We generated $84 million of
cash from operations in the first half of the year, and we continue
to target $200 million for the full
year. Debt reduction remains a top priority. We have reduced net
debt by $64 million in the first half
of the year and reduced our ABL balance to $89 million."
"We continue to invest in e-commerce opportunities and have
recently set a new milestone to transition thousands of smaller
transactional customers to our e-commerce platform, which can
reduce our cost to serve with targeted $5
million to $10 million in annual savings by 2022. We
are the global leader in supplying PVF to the energy industry. We
remain focused on delivering shareholder value by serving our
customers, generating cash, strengthening our balance sheet,
managing operating costs and optimizing our working capital." Mr.
Lane added.
MRC Global's second quarter 2020 gross profit was $79 million, or 13.1% of sales as compared to the
second quarter of 2019 gross profit of $174
million, or 17.7% of sales. Gross profit for the second
quarter of 2020 and 2019 reflects income of $6 million and $1
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 second quarter of 2020 also
includes $34 million of pre-tax
inventory-related charges. Adjusted gross profit, which excludes
both the impact of LIFO and inventory-related charges for the
second quarter of 2020 was $118
million or 19.6% of revenue, a 30-basis point improvement
over the second quarter of 2019.
Selling, general and administrative (SG&A) expenses were
$126 million, or 20.9% of sales, for
the second quarter of 2020 compared to $133
million, or 13.5% of sales, for the same period of 2019.
SG&A includes severance and restructuring charges and
facilities closure charges of $22
million in the second quarter of 2020.
Other, net includes $3 million of
non-cash charges for the write-down of assets related to facility
closures.
The income tax benefit was $17 million for the three
months ended June 30, 2020 as
compared to $8 million of expense for the three
months ended June 30, 2019. The
effective tax rates were 6% and 25% for the three months
ended June 30, 2020 and 2019,
respectively. The company's rates generally differ from the U.S.
federal statutory rate of 21% as a result of state income taxes and
differing foreign income tax rates. The effective tax rate for
three months ended June 30, 2020 was
lower primarily due to a non-tax-deductible goodwill impairment
charge during the quarter.
Please refer to the reconciliation of non-GAAP measures
(adjusted gross profit, adjusted EBITDA) to GAAP measures (gross
profit, net income) in this release.
Sales by Segment
U.S. sales in the second quarter of 2020 were $474 million, down $332
million, or 41%, from the same quarter in 2019. Upstream
production sales decreased by $122
million, or 65% primarily due to reduced spending from the
company's customers and a 62% reduction in well completions.
Downstream and industrial sales declined $87
million, or 41%, as many customers delayed maintenance
spending and idled facilities due to lower demand as well as
non-recurring projects. Midstream pipeline sales declined
$79 million, or 49% due to reduced
customer spending and the timing of customer projects. Gas
utilities' sales were down $44
million, or 18%, primarily due to the impact from the
pandemic restrictions as customers paused spending.
Canadian sales in the second quarter of 2020 were $28 million, down $30
million, or 52%, from the same quarter in 2019 driven
primarily by the upstream production sector, which was adversely
affected by the pandemic and associated reduced demand as well as
the midstream pipeline sector, which was lower due to non-recurring
projects.
International sales in the second quarter of 2020 were
$100 million, down $20 million,
or 17%, from the same period in 2019 driven primarily by reduced
spending in the downstream and industrials sector followed by the
upstream sector due to the completion of a multi-year project in
2019. Weaker foreign currencies relative to the U.S. dollar
unfavorably impacted sales by $6
million or 5%.
All sales were adversely impacted by the COVID-19 pandemic and
the related mitigation measures, which negatively affected demand
for energy products.
Sales by Sector
Upstream production sales in the second quarter of 2020 were
$134 million, or 22% of total sales, a decline of
$150 million or 53% from the second quarter of 2019. The
decrease in upstream production sales was across all segments led
by the U.S. segment.
Midstream pipeline sales in the second quarter of 2020 were
$87 million, or 15% of total sales, a reduction of
$87 million or 50% from the first quarter of 2019 driven by
the U.S. segment.
Gas utilities sales in the second quarter of 2020 were
$205 million, or 34% of total sales,
lower by 17% from the second quarter of 2019.
Downstream and industrial sales in the second quarter of 2020
were $176 million, or 29%, of total
sales, a decrease of $103 million, or 37%, from the second
quarter of 2019 driven by the U.S. segment.
Balance Sheet
Cash balances were $19 million and
debt, net of cash, was $455 million
at June 30, 2020. Cash provided by
operations was $47 million in the second quarter of 2020 and
$84 million for the six months ended
June 30, 2020. Excess availability
under the company's asset-based lending facility was $411 million and available liquidity was
$430 million.
COVID-19 Pandemic Impact
The COVID-19 pandemic and related mitigation measures have
created significant volatility and uncertainty in the oil and gas
industry. Oil demand has significantly deteriorated as a result.
The unparalleled demand destruction has resulted in lower spending
by customers and reduced demand for the company's products and
services. There is significant uncertainty as to the duration of
this disruption.
As a critical supplier to the global energy infrastructure and
an essential business, the company has remained operational with no
closures to any facilities. The company currently has 27 COVID-19
illnesses reported. MRC Global has implemented various safety
measures for employees working in the company's facilities and
implemented remote working for those whose jobs permit it. MRC
Global is committed to a safe working environment for all employees
and is constantly monitoring its response in the locations where
the company operates.
From a supply chain perspective, the effects have moved around
the globe as the virus has spread. Given the company's inventory
position and the reduced demand, the company has fulfilled orders
with little disruption. However, if shutdowns are re-established in
our suppliers' locations, order fulfillment risk could
increase.
Conference Call
The company will hold a conference call to discuss its second
quarter 2020 results at 10:00 a.m. Eastern
Time (9:00 a.m. Central Time)
on July 29, 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 August 12,
2020 and can be accessed by dialing 201-612-7415 and using
pass code 13704697#. 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 240
service locations worldwide, approximately 2,850 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 production, midstream pipeline, gas utility and downstream
and industrial. MRC Global manages a complex network of over
200,000 SKUs and 10,000 suppliers simplifying the supply chain for
its over 13,000 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 "will,"
"expect," "expected," "intend," "believes," "well positioned,"
"strong position," "looking forward," "guidance," "plans," "can,"
"target," "targeted," 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, achieving cost savings and cash flow, debt
reduction, liquidity, 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 MRC Global's control, including the factors described in
the company's SEC filings that may cause the company's 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 the company's 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. MRC Global's filings and other important
information are also available on the Investor Relations page of
the company's 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
MRC Global
Inc.
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
(in millions,
except shares)
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
19
|
|
|
$
|
32
|
Accounts receivable,
net
|
|
|
379
|
|
|
|
459
|
Inventories,
net
|
|
|
627
|
|
|
|
701
|
Other current
assets
|
|
|
36
|
|
|
|
26
|
Total current
assets
|
|
|
1,061
|
|
|
|
1,218
|
|
|
|
|
|
|
|
|
Long-term
assets:
|
|
|
|
|
|
|
|
Operating lease
assets
|
|
|
163
|
|
|
|
186
|
Property, plant and
equipment, net
|
|
|
131
|
|
|
|
138
|
Other
assets
|
|
|
17
|
|
|
|
19
|
|
|
|
|
|
|
|
|
Intangible
assets:
|
|
|
|
|
|
|
|
Goodwill,
net
|
|
|
264
|
|
|
|
483
|
Other intangible
assets, net
|
|
|
241
|
|
|
|
281
|
|
|
$
|
1,877
|
|
|
$
|
2,325
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Trade accounts
payable
|
|
$
|
301
|
|
|
$
|
357
|
Accrued expenses and
other current liabilities
|
|
|
89
|
|
|
|
91
|
Operating lease
liabilities
|
|
|
33
|
|
|
|
34
|
Current portion of
long-term debt
|
|
|
4
|
|
|
|
4
|
Total current
liabilities
|
|
|
427
|
|
|
|
486
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
|
470
|
|
|
|
547
|
Operating lease
liabilities
|
|
|
157
|
|
|
|
167
|
Deferred income
taxes
|
|
|
81
|
|
|
|
91
|
Other
liabilities
|
|
|
46
|
|
|
|
37
|
|
|
|
|
|
|
|
|
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, 106,283,903 and
105,624,750 issued, respectively
|
|
|
1
|
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,733
|
|
|
|
1,731
|
Retained
deficit
|
|
|
(767)
|
|
|
|
(483)
|
Less: Treasury stock
at cost: 24,216,330 shares
|
|
|
(375)
|
|
|
|
(375)
|
Accumulated other
comprehensive loss
|
|
|
(251)
|
|
|
|
(232)
|
|
|
|
341
|
|
|
|
642
|
|
|
$
|
1,877
|
|
|
$
|
2,325
|
MRC Global
Inc.
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
(in millions,
except per share amounts)
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
602
|
|
|
$
|
984
|
|
|
$
|
1,396
|
|
|
$
|
1,954
|
Cost of
sales
|
|
|
523
|
|
|
|
810
|
|
|
|
1,169
|
|
|
|
1,606
|
Gross
profit
|
|
|
79
|
|
|
|
174
|
|
|
|
227
|
|
|
|
348
|
Selling, general and
administrative expenses
|
|
|
126
|
|
|
|
133
|
|
|
|
252
|
|
|
|
272
|
Goodwill and
intangibles impairment
|
|
|
242
|
|
|
|
-
|
|
|
|
242
|
|
|
|
-
|
Operating (loss)
income
|
|
|
(289)
|
|
|
|
41
|
|
|
|
(267)
|
|
|
|
76
|
Other (expense)
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(7)
|
|
|
|
(10)
|
|
|
|
(15)
|
|
|
|
(21)
|
Other, net
|
|
|
(2)
|
|
|
|
1
|
|
|
|
(2)
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before
income taxes
|
|
|
(298)
|
|
|
|
32
|
|
|
|
(284)
|
|
|
|
56
|
Income tax (benefit)
expense
|
|
|
(17)
|
|
|
|
8
|
|
|
|
(12)
|
|
|
|
14
|
Net (loss)
income
|
|
|
(281)
|
|
|
|
24
|
|
|
|
(272)
|
|
|
|
42
|
Series A preferred
stock dividends
|
|
|
6
|
|
|
|
6
|
|
|
|
12
|
|
|
|
12
|
Net (loss) income
attributable to common stockholders
|
|
$
|
(287)
|
|
|
$
|
18
|
|
|
$
|
(284)
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income
per common share
|
|
$
|
(3.50)
|
|
|
$
|
0.22
|
|
|
$
|
(3.47)
|
|
|
$
|
0.36
|
Diluted (loss) income
per common share
|
|
$
|
(3.50)
|
|
|
$
|
0.21
|
|
|
$
|
(3.47)
|
|
|
$
|
0.35
|
Weighted-average
common shares, basic
|
|
|
82.0
|
|
|
|
83.2
|
|
|
|
81.9
|
|
|
|
83.8
|
Weighted-average
common shares, diluted
|
|
|
82.0
|
|
|
|
83.9
|
|
|
|
81.9
|
|
|
|
84.7
|
MRC Global
Inc.
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(in
millions)
|
|
|
|
Six Months
Ended
|
|
|
June
30,
|
|
|
June
30,
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(272)
|
|
|
$
|
42
|
Adjustments to
reconcile net (loss) income to net cash provided by
operations:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
10
|
|
|
|
11
|
Amortization of
intangibles
|
|
|
13
|
|
|
|
22
|
Equity-based
compensation expense
|
|
|
5
|
|
|
|
7
|
Deferred income tax
benefit
|
|
|
(8)
|
|
|
|
(2)
|
Decrease in LIFO
reserve
|
|
|
(9)
|
|
|
|
(1)
|
Goodwill and intangible
asset impairment
|
|
|
242
|
|
|
|
-
|
Lease impairment and
abandonment
|
|
|
15
|
|
|
|
-
|
Inventory-related
charges
|
|
|
34
|
|
|
|
-
|
Provision for
uncollectible accounts
|
|
|
5
|
|
|
|
2
|
Other
|
|
|
1
|
|
|
|
2
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
69
|
|
|
|
(47)
|
Inventories
|
|
|
41
|
|
|
|
-
|
Other current
assets
|
|
|
(10)
|
|
|
|
1
|
Accounts
payable
|
|
|
(51)
|
|
|
|
2
|
Accrued expenses and
other current liabilities
|
|
|
(1)
|
|
|
|
(31)
|
Net cash provided by
operations
|
|
|
84
|
|
|
|
8
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
|
|
(5)
|
|
|
|
(6)
|
Other investing
activities
|
|
|
-
|
|
|
|
2
|
Net cash used in
investing activities
|
|
|
(5)
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
Payments on revolving
credit facilities
|
|
|
(460)
|
|
|
|
(513)
|
Proceeds from
revolving credit facilities
|
|
|
389
|
|
|
|
569
|
Payments on long-term
obligations
|
|
|
(4)
|
|
|
|
(2)
|
Purchase of common
stock
|
|
|
-
|
|
|
|
(50)
|
Dividends paid on
preferred stock
|
|
|
(12)
|
|
|
|
(12)
|
Repurchases of shares
to satisfy tax withholdings
|
|
|
(3)
|
|
|
|
(6)
|
Other
|
|
|
-
|
|
|
|
1
|
Net cash used in
financing activities
|
|
|
(90)
|
|
|
|
(13)
|
|
|
|
|
|
|
|
|
Decrease in
cash
|
|
|
(11)
|
|
|
|
(9)
|
Effect of foreign
exchange rate on cash
|
|
|
(2)
|
|
|
|
1
|
Cash -- beginning of
period
|
|
|
32
|
|
|
|
43
|
Cash -- end of
period
|
|
$
|
19
|
|
|
$
|
35
|
MRC Global
Inc.
|
Supplemental
Information (Unaudited)
|
Reconciliation of
Net Income to Adjusted EBITDA (a non-GAAP measure)
|
(in
millions)
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(281)
|
|
|
$
|
24
|
|
|
$
|
(272)
|
|
|
$
|
42
|
Income tax (benefit)
expense
|
|
|
(17)
|
|
|
|
8
|
|
|
|
(12)
|
|
|
|
14
|
Interest
expense
|
|
|
7
|
|
|
|
10
|
|
|
|
15
|
|
|
|
21
|
Depreciation and
amortization
|
|
|
5
|
|
|
|
6
|
|
|
|
10
|
|
|
|
11
|
Amortization of
intangibles
|
|
|
6
|
|
|
|
11
|
|
|
|
13
|
|
|
|
22
|
Goodwill and
intangible asset impairment (1)
|
|
|
242
|
|
|
|
-
|
|
|
|
242
|
|
|
|
-
|
Inventory-related
charges (2)
|
|
|
34
|
|
|
|
-
|
|
|
|
34
|
|
|
|
-
|
Facility closures
(3)
|
|
|
18
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
Severance and
restructuring (4)
|
|
|
7
|
|
|
|
-
|
|
|
|
7
|
|
|
|
-
|
Decrease in LIFO
reserve
|
|
|
(6)
|
|
|
|
(1)
|
|
|
|
(9)
|
|
|
|
(1)
|
Equity-based
compensation expense (5)
|
|
|
3
|
|
|
|
3
|
|
|
|
5
|
|
|
|
7
|
Gain on early
extinguishment of debt (6)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1)
|
|
|
|
-
|
Foreign currency
(gains) losses
|
|
|
(1)
|
|
|
|
(1)
|
|
|
|
1
|
|
|
|
-
|
Adjusted
EBITDA
|
|
$
|
17
|
|
|
$
|
60
|
|
|
$
|
51
|
|
|
$
|
116
|
|
Notes to
above:
|
(1)
|
Non-cash charges
(pre-tax) for the impairment of $217 million for goodwill and $25
million for the U.S. intangible, indefinite-lived tradename asset.
The goodwill impairment consisted of $177 million for the U.S.
segment and $40 million for the International segment, resulting in
a $0 balance for the International segment.
|
(2)
|
Non-cash charges
(pre-tax) for inventory recorded in cost of goods sold. Charges of
$19 million in the U.S. and $1 million in Canada relate to excess
and obsolete inventory as a result of the current market outlook
for certain products. International segment charges of $14 million
relate to increased reserves for excess and obsolete inventory as
well as the exit of the Thailand business.
|
(3)
|
Charges (pre-tax) of
$15 million for lease impairments and abandonments related to
facility closures, substantially non-cash, recorded in SG&A.
$12 million is recorded in the International segment, $2 million in
the U.S. segment and $1 million in Canada segment. Also included
are $3 million of non-cash (pre-tax) charges for the write-down of
assets for facilities in Canada ($2 million) and
International, recorded in Other expense.
|
(4)
|
Charges (pre-tax)
related to employee severance and restructuring charges associated
with the company's cost reduction initiatives recorded in SG&A,
of which $6 million is in the U.S. segment and $1 million is in the
International segment.
|
(5)
|
Recorded in
SG&A.
|
(6)
|
Charges (pre-tax)
related the purchase of the Term Loan recorded in Other,
net.
|
|
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 intangible assets and inventory) and plus or minus the
impact of its LIFO inventory costing methodology. The company
presents Adjusted EBITDA because the company believes Adjusted
EBITDA is a useful indicator of the company's operating
performance. Among other things, Adjusted EBITDA measures the
company's operating performance without regard to certain
non-recurring, non-cash or transaction-related expenses. Adjusted
EBITDA, however, does not represent and should not be considered as
an alternative to net income, cash flow from operations or any
other measure of financial performance calculated and presented in
accordance with GAAP. Because Adjusted EBITDA does not account for
certain expenses, its utility as a measure of the company's
operating performance has material limitations. Because of these
limitations, the company does not view Adjusted EBITDA in isolation
or as a primary performance measure and also uses other measures,
such as net income and sales, to measure operating
performance. See the company's Annual Report filed on Form
10-K for a more thorough discussion of the use of Adjusted
EBITDA.
|
MRC Global
Inc.
|
Supplemental
Information (Unaudited)
|
Reconciliation of
Gross Profit to Adjusted Gross Profit (a non-GAAP
measure)
|
(in
millions)
|
|
|
|
Three Months
Ended
|
|
|
|
June
30,
|
|
|
Percentage
|
|
|
June
30,
|
|
|
Percentage
|
|
|
|
2020
|
|
|
of
Revenue*
|
|
|
2019
|
|
|
of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit, as
reported
|
|
$
|
79
|
|
|
|
13.1
|
%
|
|
$
|
174
|
|
|
|
17.7
|
%
|
Depreciation and
amortization
|
|
|
5
|
|
|
|
0.8
|
%
|
|
|
6
|
|
|
|
0.6
|
%
|
Amortization of
intangibles
|
|
|
6
|
|
|
|
1.0
|
%
|
|
|
11
|
|
|
|
1.1
|
%
|
Decrease in LIFO
reserve
|
|
|
(6)
|
|
|
|
(1.0)
|
%
|
|
|
(1)
|
|
|
|
(0.1)
|
%
|
Inventory-related
charges (1)
|
|
|
34
|
|
|
|
5.6
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
Adjusted Gross
Profit
|
|
$
|
118
|
|
|
|
19.6
|
%
|
|
$
|
190
|
|
|
|
19.3
|
%
|
|
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
|
Percentage
|
|
|
June
30,
|
|
|
Percentage
|
|
|
|
2020
|
|
|
of
Revenue
|
|
|
2019
|
|
|
of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit, as
reported
|
|
$
|
227
|
|
|
|
16.3
|
%
|
|
$
|
348
|
|
|
|
17.8
|
%
|
Depreciation and
amortization
|
|
|
10
|
|
|
|
0.7
|
%
|
|
|
11
|
|
|
|
0.6
|
%
|
Amortization of
intangibles
|
|
|
13
|
|
|
|
0.9
|
%
|
|
|
22
|
|
|
|
1.1
|
%
|
Decrease in LIFO
reserve
|
|
|
(9)
|
|
|
|
(0.6)
|
%
|
|
|
(1)
|
|
|
|
(0.1)
|
%
|
Inventory-related
charges (1)
|
|
|
34
|
|
|
|
2.4
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
Adjusted Gross
Profit
|
|
$
|
275
|
|
|
|
19.7
|
%
|
|
$
|
380
|
|
|
|
19.4
|
%
|
|
Notes to
above:
|
|
*
|
Does not foot due to
rounding
|
(1)
|
Non-cash charges
(pre-tax) for inventory recorded in cost of goods sold. Charges of
$19 million in the U.S. and $1 million in Canada relate to excess
and obsolete inventory as a result of the current market outlook
for certain products. International segment charges of $14 million
relate to increased reserves for excess and obsolete inventory as
well as the exit of the Thailand business.
|
|
|
The company defines
Adjusted Gross Profit as sales, less cost of sales, plus
depreciation and amortization, plus amortization of intangibles,
plus inventory-related charges, and plus or minus the impact of its
LIFO inventory costing methodology. The company presents Adjusted
Gross Profit because the company believes it is a useful indicator
of the company's operating performance without regard to items,
such as amortization of intangibles, that can vary substantially
from company to company depending upon the nature and extent of
acquisitions of which they have been involved. Similarly, the
impact of the LIFO inventory costing method can cause results to
vary substantially from company to company depending upon whether
they elect to utilize LIFO and depending upon which method they may
elect. The company uses Adjusted Gross Profit as a key performance
indicator in managing its business. The company believes that gross
profit is the financial measure calculated and presented in
accordance with U.S. generally accepted accounting principles that
is most directly comparable to Adjusted Gross Profit.
|
MRC Global
Inc.
|
Supplemental Sales
Information (Unaudited)
|
(in
millions)
|
|
Disaggregated
Sales by Segment
|
|
Three Months
Ended
|
June
30,
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
International
|
|
|
Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upstream
production
|
|
$
|
66
|
|
|
$
|
18
|
|
|
$
|
50
|
|
|
$
|
134
|
|
Midstream
pipeline
|
|
|
82
|
|
|
|
3
|
|
|
|
2
|
|
|
|
87
|
|
Gas
utilities
|
|
|
200
|
|
|
|
5
|
|
|
|
-
|
|
|
|
205
|
|
Downstream &
industrial
|
|
|
126
|
|
|
|
2
|
|
|
|
48
|
|
|
|
176
|
|
|
|
$
|
474
|
|
|
$
|
28
|
|
|
$
|
100
|
|
|
$
|
602
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upstream
production
|
|
$
|
188
|
|
|
$
|
41
|
|
|
$
|
55
|
|
|
$
|
284
|
|
Midstream
pipeline
|
|
|
161
|
|
|
|
9
|
|
|
|
4
|
|
|
|
174
|
|
Gas
utilities
|
|
|
244
|
|
|
|
3
|
|
|
|
-
|
|
|
|
247
|
|
Downstream &
industrial
|
|
|
213
|
|
|
|
5
|
|
|
|
61
|
|
|
|
279
|
|
|
|
$
|
806
|
|
|
$
|
58
|
|
|
$
|
120
|
|
|
$
|
984
|
|
|
Six Months
Ended
|
June
30,
|
|
|
|
U.S.
|
|
|
Canada
|
|
|
International
|
|
|
Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upstream
production
|
|
$
|
205
|
|
|
$
|
55
|
|
|
$
|
96
|
|
|
$
|
356
|
|
Midstream
pipeline
|
|
|
192
|
|
|
|
7
|
|
|
|
7
|
|
|
|
206
|
|
Gas
utilities
|
|
|
399
|
|
|
|
8
|
|
|
|
-
|
|
|
|
407
|
|
Downstream &
industrial
|
|
|
316
|
|
|
|
8
|
|
|
|
103
|
|
|
|
427
|
|
|
|
$
|
1,112
|
|
|
$
|
78
|
|
|
$
|
206
|
|
|
$
|
1,396
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upstream
production
|
|
$
|
394
|
|
|
$
|
87
|
|
|
$
|
115
|
|
|
$
|
596
|
|
Midstream
pipeline
|
|
|
294
|
|
|
|
15
|
|
|
|
12
|
|
|
|
321
|
|
Gas
utilities
|
|
|
448
|
|
|
|
13
|
|
|
|
-
|
|
|
|
461
|
|
Downstream &
industrial
|
|
|
449
|
|
|
|
11
|
|
|
|
116
|
|
|
|
576
|
|
|
|
$
|
1,585
|
|
|
$
|
126
|
|
|
$
|
243
|
|
|
$
|
1,954
|
|
MRC Global
Inc.
|
|
Supplemental Sales
Information (Unaudited)
|
|
(in
millions)
|
|
|
|
Sales by Product
Line
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
Type
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Line pipe
|
|
$
|
80
|
|
|
$
|
161
|
|
|
$
|
180
|
|
|
$
|
315
|
|
Carbon fittings and
flanges
|
|
|
73
|
|
|
|
158
|
|
|
|
188
|
|
|
|
311
|
|
Total carbon pipe,
fittings and flanges
|
|
|
153
|
|
|
|
319
|
|
|
|
368
|
|
|
|
626
|
|
Valves, automation,
measurement and instrumentation
|
|
|
249
|
|
|
|
380
|
|
|
|
572
|
|
|
|
763
|
|
Gas
products
|
|
|
114
|
|
|
|
145
|
|
|
|
248
|
|
|
|
278
|
|
Stainless steel and
alloy pipe and fittings
|
|
|
30
|
|
|
|
42
|
|
|
|
67
|
|
|
|
92
|
|
General
products
|
|
|
56
|
|
|
|
98
|
|
|
|
141
|
|
|
|
195
|
|
|
|
$
|
602
|
|
|
$
|
984
|
|
|
$
|
1,396
|
|
|
$
|
1,954
|
|
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)
|
|
|
|
June 30,
2020
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
Amount
|
|
|
Per
Share
|
|
|
Amount
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to common stockholders
|
|
$
|
(287)
|
|
|
$
|
(3.50)
|
|
|
$
|
(284)
|
|
|
$
|
(3.47)
|
|
Goodwill and
intangible asset impairment, net of tax (1)
|
|
|
234
|
|
|
|
2.85
|
|
|
|
234
|
|
|
|
2.86
|
|
Inventory-related
charges, net of tax (2)
|
|
|
29
|
|
|
|
0.35
|
|
|
|
29
|
|
|
|
0.35
|
|
Facility closures,
net of tax (3)
|
|
|
16
|
|
|
|
0.20
|
|
|
|
16
|
|
|
|
0.20
|
|
Severance and
restructuring, net of tax (4)
|
|
|
5
|
|
|
|
0.06
|
|
|
|
5
|
|
|
|
0.06
|
|
Decrease in LIFO
reserve, net of tax
|
|
|
(5)
|
|
|
|
(0.06)
|
|
|
|
(7)
|
|
|
|
(0.09)
|
|
Adjusted net loss
attributable to common stockholders
|
|
$
|
(8)
|
|
|
$
|
(0.10)
|
|
|
$
|
(7)
|
|
|
$
|
(0.09)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
Amount
|
|
|
Per
Share
|
|
|
Amount
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
|
$
|
18
|
|
|
$
|
0.21
|
|
|
$
|
30
|
|
|
$
|
0.35
|
|
Decrease in LIFO
reserve, net of tax
|
|
|
(1)
|
|
|
|
(0.01)
|
|
|
|
(1)
|
|
|
|
(0.01)
|
|
Adjusted net income
attributable to common stockholders
|
|
$
|
17
|
|
|
$
|
0.20
|
|
|
$
|
29
|
|
|
$
|
0.34
|
|
|
Notes to
above:
|
(1)
|
Non-cash charges
(after-tax) for the impairment of $215 million for goodwill and $19
million for the U.S. intangible, indefinite-lived tradename asset.
The after-tax goodwill impairment consisted of $175 million for the
U.S. segment and $40 million for the International segment,
resulting in a $0 balance for the International segment.
|
(2)
|
Charges (after-tax)
for inventory recorded in cost of goods sold. Charges (after-tax)
of $15 million in the U.S. relate to excess and obsolete inventory
as a result of the current market outlook for certain products.
International segment charges (after-tax) of $14 million
relate to increased reserves for excess and obsolete inventory as
well as the exit of the Thailand business.
|
(3)
|
Charges (after-tax)
of $14 million for lease impairments and abandonments related to
facility closures, substantially non-cash, recorded in SG&A.
$11 million is recorded in the International segment, $2 million in
the U.S. segment and $1 million in Canada segment, each after-tax.
Also includes $2 million of non-cash (after-tax) charges for the
write-down of assets for facilities in Canada ($2 million) and
International, recorded in Other expense.
|
(4)
|
Charges (after-tax)
related to employee severance and restructuring charges associated
with the company's cost reduction initiatives recorded in SG&A,
of which $4 million is in the U.S. segment and $1 million is in the
International segment.
|
|
|
The company defines
Adjusted Net Income Attributable to Common Stockholders (a non-GAAP
measure) as Net Income Attributable to Common Stockholders less
after-tax goodwill and intangible impairment, inventory-related
charges, facility closures, severance and restructuring, 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
irregular variations from certain restructuring events not
indicative of the on-going business. Those items include goodwill
and intangible asset impairments, inventory-related charges,
facility closures, severance and restructuring as well as 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.
|
View original
content:http://www.prnewswire.com/news-releases/mrc-global-announces-second-quarter-2020-results-301101538.html
SOURCE MRC Global Inc.