Press release

MRC Global Announces Third Quarter 2023 Results

HOUSTON, Nov. 07, 2023 (GLOBE NEWSWIRE) -- MRC Global Inc. (NYSE:MRC), the leading global distributor of pipe, valves, fittings and infrastructure products and services to diversified energy, industrial and gas utilities end-markets, today announced third quarter 2023 results.

Net income attributable to common stockholders for the third quarter of 2023 was $29 million, or $0.33 per diluted share, as compared to the third quarter of 2022 net income attributable to common stockholders of $18 million, or $0.21 per diluted share. Adjusted net income attributable to common stockholders for the third quarter of 2023 was $28 million, or $0.32 per diluted share, as compared to the third quarter of 2022 adjusted net income attributable to common stockholders of $36 million, or $0.42 per diluted share.

MRC Global's third quarter 2023 gross profit was $183 million, or 20.6% of sales, as compared to the third quarter 2022 gross profit of $165 million, or 18.3% of sales. Gross profit for the third quarter of 2023 and 2022 includes $4 million of income and $24 million of expense, respectively, in cost of sales relating to the use of the last-in, first-out (LIFO) method of inventory cost accounting. Adjusted Gross Profit, which excludes (among other items) the impact of LIFO, was $189 million, or 21.3% of sales, for the third quarter of 2023 and was $198 million, or 21.9% of sales, for the third quarter of 2022. 

Third Quarter 2023 Financial Highlights:

  • Sales of $888 million, a 2% improvement compared to the second quarter of 2023
  • Adjusted Gross Profit, as a percentage of sales, of 21.3%
  • Adjusted EBITDA of $70 million, or 7.9% of sales and the company's 6th consecutive quarter above 7%
  • Cash Flow from operations of $102 million during the third quarter, allowing the company to achieve our full year target of $90 million a quarter early
  • Net Debt leverage ratio of 0.9 times, the lowest in the company's public company history

Rob Saltiel, MRC Global's President and CEO stated, "Revenue in the third quarter increased moderately compared to the second quarter, as rising DIET sector revenue offset declines in our Gas Utilities and PTI sectors. We are pleased to have achieved adjusted gross profit margins in excess of 21%, operating cash flow of over $100 million and adjusted EBITDA margins of 7.9%. The value of our end-market diversification is evident as year-to-date revenue gains in the PTI and DIET sectors have countered the temporary weakness we are experiencing in Gas Utilities."

Adjusted EBITDA was $70 million in the third quarter of 2023 compared to $82 million for the same period in 2022.

Adjusted net income attributable to common stockholders, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Gross Profit, Adjusted SG&A, Net Debt and Leverage Ratio are all non-GAAP measures. Please refer to the reconciliation of each of these measures to the nearest GAAP measure in this release. 

Selling, general and administrative (SG&A) expenses were $126 million, or 14.2% of sales, for the third quarter of 2023 compared to $120 million, or 13.3% of sales, for the same period in 2022. Adjusted SG&A for the third quarter of 2023 was $123 million, or 13.9% of sales, excluding a $3 million customer settlement expense. 

An income tax expense of $14 million was incurred in the third quarter of 2023, with an effective tax rate of 29%, as compared to an income tax expense of $10 million for the third quarter of 2022. Our rates differ from the U.S. federal statutory rate of 21% as a result of state income taxes, non-deductible expenses, and differing foreign income tax rates. In addition, the effective tax rate for the three months ended September 30, 2023, was higher than the U.S. federal statutory rate due to foreign losses with no tax benefit.

Sales

The company's sales were $888 million for the third quarter of 2023, which was 2% higher than the second quarter of 2023 and 2% lower than the third quarter of 2022. As compared to the third quarter of 2022, the Production and Transmission Infrastructure (PTI) sector led with 10% growth followed by the Downstream, Industrial and Energy Transition (DIET) sector at 1%, offset by the Gas Utilities sector, which declined 13%. Sequentially, the DIET sector increased offsetting decreases in the Gas Utilities and PTI sectors.

Sales by Segment

U.S. sales in the third quarter of 2023 were $745 million, down $23 million, or 3%, from the same quarter in 2022. PTI sector sales increased by $20 million, or 10%, resulting from increased customer infrastructure activity in the Permian and Rockies. DIET sector sales increased $1 million. The Gas Utilities sector revenue decreased $44 million, or 12%, driven by decreased capex spending for modernization and replacement activity as customers focus on reducing their own product inventory levels as well as delayed customer projects due to higher interest rates and inflation in construction costs.

Sequentially, as compared to the second quarter of 2023, U.S. sales increased $18 million, or 2%, driven by the DIET sector, which increased $31 million, or 17%, due to increased turnarounds and project activity. The U.S. Gas Utilities sector decreased $10 million, or 3%, primarily due to decreases in capex spending for modernization and replacement activity as customers focus on reducing their own product inventory levels as well as the timing of projects. PTI decreased $3 million, or 1%, primarily due to seasonal decrease and the timing of customer projects.

Canada sales in the third quarter of 2023 were $38 million, up $1 million, or 3%, from the same quarter in 2022, as increases in the DIET and PTI sectors offset a decrease in the Gas Utilities sector. Canada sales also include a $1 million unfavorable impact from weaker foreign currencies.

Sequentially, Canada sales were flat with no change from the prior quarter.

International sales in the third quarter of 2023 were $105 million, up $6 million, or 6%, from the same period in 2022 including a $3 million favorable impact from stronger foreign currencies. The increase was driven by the PTI sector primarily in the Middle East and the U.K., followed by the DIET sector in the Netherlands. 

Sequentially, as compared to the previous quarter, International sales were down $1 million, or 1%, due to a decrease in sales in the PTI sector, where reduced activity in Australia was partially offset by increased activity in the U.K. and the Middle East.

Sales by Sector

Gas Utilities sector sales, which are primarily U.S. based, were $314 million in the third quarter of 2023, or 35% of total sales, a decrease of $45 million, or 13%, from the third quarter of 2022.

Sequentially, as compared to the second quarter of 2023, the Gas Utilities sector decreased $9 million, or 3%, driven by the U.S. segment.

DIET sector sales in the third quarter of 2023 were $279 million, or 32% of total sales, an increase of $3 million, or 1%, from the third quarter of 2022. The increase in DIET sector sales was spread relatively evenly across the segments.

Sequentially, as compared to the previous quarter, sales in the DIET sector were up $34 million, or 14%, primarily due to increased turnarounds and projects in the U.S. segment.

PTI sector sales in the third quarter of 2023 were $295 million, or 33% of total sales, an improvement of $26 million, or 10%, from the third quarter of 2022. The increase in PTI sales was led by the U.S. segment, followed by the International and Canada segments.

Sequentially, as compared to the prior quarter, PTI sector sales decreased $8 million, or 3%, driven by the Canada segment followed by the U.S. and International segments.

Backlog

As of September 30, 2023, the company's backlog was $718 million, a 6% decline compared to the previous quarter.

Balance Sheet and Cash Flow

Cash provided by operations was $102 million in the third quarter of 2023. As of September 30, 2023, the cash balance was $52 million, long-term debt (including current portion) was $303 million, and Net Debt was $251 million. Availability under the company's asset-based lending facility was $696 million, and available liquidity was $748 million as of September 30, 2023. 

Please refer to the reconciliation of non-GAAP measures (Net Debt) to GAAP measures (Long-term Debt) in this release.

Conference Call

The company will hold a conference call to discuss its third quarter 2023 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on November 8, 2023. To participate in the call, please dial 201-689-8261 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 "Investors" 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 22, 2023, and can be accessed by dialing 201-612-7415 and using pass code 13739473#. Also, an archive of the webcast will be available shortly after the call at www.mrcglobal.com for 90 days.

About MRC Global Inc.

Headquartered in Houston, Texas, MRC Global (NYSE:MRC) is the leading global distributor of pipe, valves, fittings (PVF) and other infrastructure products and services to diversified end-markets including the gas utilities, downstream, industrial and energy transition, and production and transmission sectors. With over 100 years of experience, MRC Global has provided customers with innovative supply chain solutions, technical product expertise and a robust digital platform from a worldwide network of 218 locations including valve and engineering centers. The company's unmatched quality assurance program offers over 250,000 SKUs from over 9,000 suppliers, simplifying the supply chain for approximately 10,000 customers. 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," "anticipating," "intend," "believes," "on-track," "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, adjusted EBITDA margin, 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 capital and other expenditure levels in the industries that the company serves; U.S. and international general economic conditions; geopolitical events; decreases in oil and natural gas prices; unexpected supply shortages; loss of third-party transportation providers; cost increases by the company's suppliers and transportation providers; increases in steel prices, which the company may be unable to pass along to its customers which could significantly lower the company's profit; 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 its inventory to decline; decreases in steel prices, which could significantly lower the company's profit; a decline in demand for certain of the products the company distributes if tariffs and duties on these products are imposed or lifted; holding more inventory than can be sold in a commercial time frame; significant substitution of renewables and low-carbon fuels for oil and gas, impacting demand for the company's products; risks related to adverse weather events or natural disasters; environmental, health and safety laws and regulations and the interpretation or implementation thereof; changes in the company's customer and product mix; the risk that manufacturers of the products that the company distributes will sell a substantial amount of goods directly to end users in the industry sectors that the company serves; failure to operate the company's business in an efficient or optimized manner; the company's ability to compete successfully with other companies; 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; inability to attract and retain employees or the potential loss of key personnel; adverse health events, such as a pandemic; interruption in the proper functioning of the company's information systems; the occurrence of cybersecurity incidents; risks related to the company's customers' creditworthiness; the success of acquisition strategies; the potential adverse effects associated with integrating acquisitions and whether these acquisitions will yield their intended benefits; 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; the company's significant indebtedness; the dependence on the company's subsidiaries for cash to meet parent company obligations; changes in the company's credit profile; potential inability to obtain necessary capital; 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; exposure to U.S. and international laws and regulations, regulating corruption, limiting imports or exports or imposing economic sanctions; risks relating to ongoing evaluations of internal controls required by Section 404 of the Sarbanes-Oxley Act; risks related to changing laws and regulations including trade policies and tariffs; and the potential share price volatility and costs incurred in response to any shareholder activism campaigns.

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 Investors 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
VP, Investor Relations & Treasury
MRC Global Inc.
Monica.Broughton@mrcglobal.com
832-308-2847


MRC Global Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in millions, except shares)

  September 30,   December 31,  
  2023   2022  
             
Assets            
Current assets:            
Cash $ 52   $ 32  
Accounts receivable, net   518     501  
Inventories, net   620     578  
Other current assets   35     31  
Total current assets   1,225     1,142  
             
Long-term assets:            
Operating lease assets   206     202  
Property, plant and equipment, net   77     82  
Other assets   18     22  
             
Intangible assets:            
Goodwill, net   264     264  
Other intangible assets, net   168     183  
  $ 1,958   $ 1,895  
             
Liabilities and stockholders' equity            
Current liabilities:            
Trade accounts payable $ 438   $ 410  
Accrued expenses and other current liabilities   111     115  
Operating lease liabilities   38     36  
Current portion of long-term debt   3     3  
Total current liabilities   590     564  
             
Long-term liabilities:            
Long-term debt, net   300     337  
Operating lease liabilities   184     182  
Deferred income taxes   46     49  
Other liabilities   20     22  
             
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, 108,512,938 and 107,864,421 issued, respectively   1     1  
Additional paid-in capital   1,764     1,758  
Retained deficit   (693 )   (768 )
Less: Treasury stock at cost: 24,216,330 shares   (375 )   (375 )
Accumulated other comprehensive loss   (234 )   (230 )
    463     386  
  $ 1,958   $ 1,895  


MRC Global Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in millions, except per share amounts)

  Three Months Ended   Nine Months Ended  
  September 30,   September 30,   September 30,   September 30,  
  2023   2022   2023   2022  
                         
Sales $ 888   $ 904   $ 2,644   $ 2,494  
Cost of sales   705     739     2,107     2,042  
Gross profit   183     165     537     452  
Selling, general and administrative expenses   126     120     378     347  
Operating income   57     45     159     105  
Other (expense) income:                        
Interest expense   (9 )   (6 )   (26 )   (17 )
Other, net   1     (5 )   (3 )   (11 )
Income before income taxes   49     34     130     77  
Income tax expense   14     10     37     23  
Net income   35     24     93     54  
Series A preferred stock dividends   6  

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