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MRC Global Announces Third Quarter 2012 Financial Results

          MRC Global Announces Third Quarter 2012 Financial Results

Sales of $1.45 billion, up 6% from prior year's quarter

Net income of $55.5 million and diluted EPS of $0.54

Excluding a special charge, net income of $62.0 million and diluted EPS of
$0.61

Adjusted EBITDA of $125 million, up 14% from prior year's quarter

PR Newswire

HOUSTON, Oct. 26, 2012

HOUSTON, Oct. 26, 2012 /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 and industrial sectors, today
announced third quarter 2012 financial results. MRC's sales of $1.451billion
in the third quarter of 2012 were up 6% from $1.366 billion in the third
quarter of 2011. MRC's net income was $55.5 million, or $0.54 per diluted
share for the third quarter of 2012, as compared to $21.9 million, or $0.26
per diluted share, in the third quarter of 2011. Included in the third
quarter of 2012 net income was a $10.3million pre-tax charge ($6.5 million
after tax, or $0.06 per diluted share) related to the purchase and early
retirement of a portion of MRC's senior secured notes. Excluding the impact
of this charge, net income was $62.0 million, or $0.61 per diluted share, for
the third quarter of 2012. In addition, third quarter 2012 results benefited
from a $15.4 million reduction in cost of sales relating to the use of the
last-in, first-out (LIFO) method of inventory cost accounting. This reflects
a change in the Company's full year LIFO estimate because of deflation
recently experienced in certain of the indices used to determine our LIFO cost
of sales. Adjusted EBITDA rose 14% to $125.3 million for the third quarter of
2012, compared to $109.6 million for the same period in 2011. See the table
below for a reconciliation of Adjusted EBITDA to net income.

For the first nine months of 2012, MRC's sales were $4.264 billion compared to
$3.526 billion for the first nine months of 2011, an increase of 21%. MRC's
net income for the first nine months of 2012 was $124.4 million or $1.31 per
diluted share, compared to net income of $25.4 million or $0.30 per diluted
share in the first nine months of 2011. In a series of transactions from June
to September 2012, MRC purchased, in the open market, $189 million in face
value of the Company's 9.50%senior secured notes due 2016 for
$205million.We recorded a pre-tax charge of $21.7million in the nine months
ended September 30, 2012, or $13.8 million after-tax ($0.14 per diluted
share), related to these transactions. Excluding the impact of these charges,
net income for the first nine months of 2012 was $138.2 million or $1.45 per
diluted share.

Commenting on the company's results, Andrew R. Lane, MRC's chairman, president
and chief executive officer, stated, "Our third quarter results reflect strong
infrastructure spending in both the upstream and the midstream end sectors for
us. The 6% year-on-year top line growth was driven by strength in our North
American operations, and in August, we recorded the second highest monthly
revenue in the company's history. The 14% Adjusted EBITDA improvement
represents our improving volumes and continued emphasis on improved
profitability including our inventory rebalancing strategy."

MRC's sales of $1.451 billion set a record for the third quarter and increased
6% over the third quarter of 2011. Within the company's North American
segment, sales of $1.298 billion in the third quarter of 2012 increased 3%
over the third quarter of 2011. International segment sales of $154million in
the third quarter of 2012 increased 47% over the same period in 2011 due to
the acquisition of OneSteel Piping Systems (MRC PSA) in March 2012.

Third quarter 2012 sales to the upstream sector grew 7% from the third quarter
of 2011 to $654million, or 45% of sales. Third quarter 2012 midstream sales
increased 8% over the same period in 2011 to $404 million, or 28% of sales.
Third quarter 2012 sales to the downstream sector grew 4% over the same period
in 2011 to $394 million, driven by the company's Australian acquisition, which
is more heavily weighted toward the downstream sector than the company as a
whole.

MRC's gross profit of $277.2 million in the third quarter of 2012 improved by
440 basis points to 19.1% of sales, compared with $201.1 million, or 14.7% of
sales, in the third quarter of 2011. The increase in gross profit percentage
reflected a $15.4 million third quarter 2012 reduction in cost of sales
resulting from the use of LIFO. Excluding the impact of LIFO, gross profit
improved by 200basis points, driven primarily by improved product sales mix
and the leveraging of the fixed component of cost of sales. For the first nine
months of 2012, gross profit was $755.4 million, or 17.7% of sales compared
with $520.8 million, or 14.8% of sales in the first nine months of 2011.

For the third quarter of 2012, selling, general and administrative expenses
(SG&A) were $155.0million as compared to $134.7 million the same period in
2011. This increase was attributable primarily to an increase in variable
personnel expenses and the inclusion of expenses from the acquisition MRC PSA
in Australia. As a percent of sales, SG&A expense was 10.7% in the third
quarter of 2012, compared to 9.9% in the third quarter of 2011.

Mr. Lane continued, "On top of our strong growth and earnings improvement, we
continue to take steps to de-lever our balance sheet and to lower our overall
interest expense. In addition to the steps taken in the second and third
quarters, we've also announced that we are taking further measures in the
fourth quarter to lower our total interest expense by launching a transaction
to obtain a new term loan, which along with draws against our asset based
lending facility, is expected to replace our senior secured notes from 2009.
We expect the impact of all of the steps we've taken in 2012 to have a
significant improvement in lowering our total interest expense as compared to
2011."

Conference Call

The Company will hold a conference call to discuss its third quarter 2012
results at 4:45 p.m. Eastern (3:45 p.m. Central) on Friday, October 26, 2012.
To participate in the call, dial(480) 629-9835 and ask for the MRC Global
conference call at least 10 minutes prior to the start time. To access it 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 9, 2012 and may be accessed by dialing (303) 590-3030 and
using passcode 4566244#. 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, 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 and industrial sectors and
supplies these products and services across each of the upstream, midstream
and downstream sectors.

This news release contains forward-looking statements within the meaning of
Section27A of the Securities Act and Section21E of the Exchange Act. Words
such as "will," "expect," "expected" and similar expressions are intended to
identify forward-looking statements.

Despite the company's expectations of entering into a new term loan, the terms
and pricing of a term loan and the use of proceeds to refinance its existing
Senior Secured Notes are only the company's expectations regarding these
actions. Whether the company is actually successful in obtaining such a term
loan on expected terms and conditions with expected uses of proceeds is
dependent on a number of factors, including (among others) debt market
conditions, reaching final agreement with lenders, approval of the company's
board of directors and the company's financial condition, results and future
prospects, which, in turn are dependent on factors, including (among others)
those that impact our business.

Statements about the company's business, including its strategy, its industry,
the company's future profitability, 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 involve known and unknown risks, uncertainties and other factors
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 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 the company'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 industries it serves; unexpected supply
shortages; cost increases by the company's suppliers; the company's 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
company's profit; increases in steel prices, which it 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 its 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' credit; 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 that
the company distributes if import restrictions on these products are lifted;
environmental, health and safety laws and regulations; 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 the company's 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
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.

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.

Contacts:
James E. Braun, Executive Vice President
and Chief Financial Officer
MRC Global Inc.
Jim.Braun@mrcpvf.com
832-308-2845

Ken Dennard, Managing Partner
DRG&L
ksdennard@drg-l.com
713-529-6600

MRC Global Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
                                  September 30,          December 31,
                                  2012                   2011
Assets
Current assets:
 Cash                           $       36,839  $       46,127
 Accounts receivable, net       929,740                791,280
 Inventories, net               1,035,861              899,064
 Other current assets           17,563                 11,437
Total current assets              2,020,003              1,747,908
Other assets                      38,569                 39,212
Property, plant and equipment,    120,885                107,430
net
Intangible assets:
 Goodwill, net                  580,367                561,270
 Other intangible assets, net   743,418                771,867
                                  1,323,785              1,333,137
                                  $     3,503,242    $     3,227,687
Liabilities and stockholders'
equity
Current liabilities:
 Trade accounts payable         $      521,818   $      479,584
 Accrued expenses and other     134,550                108,973
current liabilities
 Income taxes payable           17,936                 11,950
 Deferred revenue               2,536                  4,450
 Deferred income taxes          65,699                 68,210
Total current liabilities         742,539                673,167
Long-term obligations:
 Long-term debt, net            1,267,971              1,526,740
 Deferred income taxes          288,234                288,985
 Other liabilities              16,693                 17,933
                                  1,572,898              1,833,658
Stockholders' equity              1,187,805              720,862
                                  $     3,503,242    $     3,227,687



MRC Global Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
                          Three Months Ended           Nine Months Ended
                          September 30,   September    September    September
                                          30,          30,          30,
                          2012            2011         2012         2011
Sales                     $ 1,451,114     $1,366,202   $ 4,264,125  $ 
                                                                    3,526,054
Cost of sales             1,173,916       1,165,076    3,508,686    3,005,264
Gross profit             277,198         201,126      755,439      520,790
Selling, general and      154,955         134,685      452,528      376,094
administrative expenses
Operating income          122,243         66,441       302,911      144,696
Other income (expense):
 Interest expense       (28,177)        (34,348)     (92,621)     (102,372)
 Loss on early          (10,322)        -            (21,746)     -
extinguishment of debt
 Write off of debt      -               -            (1,685)      (9,450)
issuance costs
 Change in fair value
of derivative             845             1,768        1,770        5,260
instruments
 Other, net           1,232           (821)        3,554        241
                          (36,422)        (33,401)     (110,728)    (106,321)
Income before income      85,821          33,040       192,183      38,375
taxes
Income tax expense        30,280          11,167       67,783       12,952
Net income                $            $       $           $    
                          55,541          21,873       124,400     25,423
Effective tax rate        35.3%           33.8%        35.3%        33.8%
Basic earnings per        $         $        $       $    
common share              0.55            0.26         1.31       0.30
Diluted earnings per      $          $        $       $    
common share              0.54           0.26         1.31       0.30
Weighted-average common   101,490         84,418       94,768       84,417
shares, basic
Weighted-average common   102,029         84,657       95,185       84,619
shares, diluted



MRC Global Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
                                            Nine Months Ended
                                            September 30,        September 30,
                                            2012                 2011
Operating activities
Net income                                  $      124,400  $      
                                                                 25,423
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization               13,180               12,819
Amortization of intangibles                 37,184               37,799
Equity-based compensation expense           5,859                6,264
Deferred income tax benefit                 (3,463)              (14,099)
Amortization of debt issuance costs         7,088                8,057
Write off of debt issuance costs            1,685                9,450
Loss on early extinguishment of debt        21,746               -
Increase in LIFO reserve                    3,080                46,000
Change in fair value of derivative          (1,770)              (5,260)
instruments
Provision for uncollectible accounts        3,936                733
Other non-cash items                        5,218                3,663
Changes in operating assets and
liabilities:
Accounts receivable                         (105,234)            (223,475)
Inventories                                 (78,889)             (112,100)
Income taxes payable                        5,867                16,911
Other current assets                        (5,836)              83
Accounts payable                            9,562                78,624
Deferred revenue                            (1,976)              (13,975)
Accrued expenses and other current          24,130               28,135
liabilities
Net cash provided by (used in) operations   65,767               (94,948)
Investing activities
Purchases of property, plant and equipment  (21,002)             (10,068)
Proceeds from the disposition of property,  2,451                1,511
plant and equipment
Acquisitions, net of cash acquired $0 and   (89,893)             (39,865)
$1,900 for 2012 and 2011, respectively
Proceeds from the sale of assets held for   -                    10,594
sale
Other investment and notes receivable       (3,979)              (246)
transactions
Net cash used in investing activities       (112,423)            (38,074)
Financing activities
Proceeds from the sale of common stock      333,342              -
Net proceeds (payments) from/on revolving   (46,219)             125,708
credit facilities
Purchase of senior secured notes            (205,003)            -
Payments on long term obligations           (31,456)             -
Debt issuance costs paid                    (7,930)              (9,690)
Proceeds from exercise of stock options     51                   3
Tax benefit on stock options                422                  -
Net cash provided by financing activities   43,207               116,021
Decrease in cash                            (3,449)              (17,001)
Effect of foreign exchange rate on cash     (5,839)              2,246
Cash - beginning of period                  46,127               56,202
Cash - end of period                        $              $      
                                            36,839              41,447



MRC Global Inc.
Supplemental Information (Unaudited)
Calculation of Adjusted EBITDA
(Dollars in millions)
                              Three Months Ended        Nine Months Ended
                              September      September  September  September
                              30,            30,        30,        30,
                              2012           2011       2012       2011
Net income                    $        $      $      $     
                               55.5        21.9      124.4        25.4
Income tax expense            30.3           11.1       67.8       12.9
Interest expense              28.2           34.3       92.6       102.4
Loss on early extinguishment  10.3           -          21.7       -
of debt
Write off of debt issuance    -              -          1.7        9.5
costs
Depreciation and              4.6            4.7        13.2       12.8
amortization
Amortization of intangibles   12.4           12.7       37.2       37.8
Increase (decrease) in LIFO   (15.4)         18.3       3.1        46.0
reserve
Change in fair value of       (0.8)          (1.8)      (1.8)      (5.3)
derivative instruments
Equity-based compensation     2.2            3.8        5.9        6.3
expense
Legal and consulting          -              1.5        (1.2)      6.1
expenses
Foreign currency (gains)     (2.0)          0.8        (0.5)      0.3
losses
Other non-cash expenses       -              2.3        -          5.9
Adjusted EBITDA               $        $       $      $     
                               125.3       109.6     364.1       260.1



Note to above:
MRC Global defines Adjusted EBITDA as net income plus interest, income taxes,
depreciation and amortization, amortization of intangibles, and other
non-recurring and non-cash charges (such as gain/losses on the early
extinguishment of debt, changes in the fair value of derivative instruments
and goodwill impairment) and plus or minus the impact of its LIFO inventory
costing methodology. The company presents Adjusted EBITDA because it is an
important measure used to determine the interest rate and commitment fee paid
under its Global ABL Facility. In addition, management believes it is a
useful indicator of the company's operating performance. See the company's
Annual Report filed on Form 10-K and the quarterly report filed on Form 10-Q
for a more thorough discussion of the use of Adjusted EBITDA.

SOURCE MRC Global Inc.

Website: http://www.mrcglobal.com
 
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