Net income attributable to common stockholders for the first quarter of 2022 was $10 million, or
MRC Global’s first quarter of 2022 gross profit was $136 million, or 18.3% of sales, as compared to the first quarter 2021 gross profit of $103 million, or 16.9% of sales. Gross profit for the first quarter of 2022 and 2021 include $6 million and $4 million of expense in cost of sales relating to the use of the last-in, first-out (LIFO) method of inventory cost accounting, respectively. Adjusted gross profit, which excludes the impact of LIFO, was $152 million, or 20.5% of sales, for the first quarter of 2022 and was $118 million, or 19.4% of revenue, for the first quarter of 2021.
First Quarter 2022 Financial Highlights:
- Sales of $742 million, an 8% sequential increase and a 22% improvement over the same quarter a year ago
- Adjusted EBITDA of $48 million, 6.5% of sales, doubled compared to the first quarter of 2021
- Adjusted Gross Profit, as a percentage of sales, of 20.5%
- Leverage ratio of 1.6x
Adjusted net income attributable to common stockholders, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Gross Profit, 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.
"Our strong first quarter results, favorable business fundamentals and growing backlog are leading us to raise our 2022 outlook to
Selling, general and administrative (SG&A) expenses were $107 million, or 14.4% of sales, for the first quarter of 2022 compared to $100 million, or 16.4% of sales, for the same period in 2021. SG&A expense for 2022 includes a benefit of
An income tax expense of $7 million was generated in the first quarter of 2022, with an effective tax rate of 30%, as compared to income tax expense of $0 million for the first quarter of 2021. The effective tax rate for the three months ended
Adjusted EBITDA was $48 million in the first quarter of 2022 compared to $24 million for the same period in 2021. Please refer to the reconciliation of non-GAAP measures (adjusted EBITDA) to GAAP measures (net income) in this release.
Sales
The company’s sales were $742 million for the first quarter of 2022, which was 8% higher than the fourth quarter of 2021 and 22% higher than the first quarter of 2021. As compared to the first quarter of 2021, all sectors grew double-digit percentages, led by the gas utilities business followed by the upstream production sector. Sequentially, the
Sales by Segment
Sequentially, as compared to the fourth quarter, the
Canada sales in the first quarter of 2022 were $43 million, up $11 million, or 34%, from the same quarter in 2021, driven by the upstream production sector from increased customer capital budgets on improved commodity prices.
Sequentially, as compared to the prior quarter,
International sales in the first quarter of 2022 were $81 million, down $12 million, or 13%, from the same period in 2021 as a result of reduced project approvals in late 2021 due to the pandemic, primarily in the upstream sector as well as
Sequentially, as compared to the previous quarter, International sales increased 1% driven by the upstream production sector partially offset by the DIET sector. Upstream production increased as customer activity increased in
Sales by Sector
Gas utilities sector sales, primarily
Sequentially, as compared to the fourth quarter, the gas utilities sector grew $13 million, or 5%, primarily related to a general increase in activity to start the new year and market share gains in the
Downstream, industrial and energy transition sector sales in the first quarter of 2022 were $226 million, or 30% of total sales, an increase of $32 million, or 16%, from the first quarter of 2021. The increase in DIET sector sales was driven by the U.S. segment.
Sequentially, as compared to the previous quarter, sales in this sector were up $25 million, or 12%, driven by the U.S.
Upstream production sector sales in the first quarter of 2022 were $158 million, or 21% of total sales, an improvement of $31 million, or 24%, from the first quarter of 2021. The increase in upstream production sales was led by the U.S. segment followed by the
Sequentially, as compared to the prior quarter, upstream production sector sales increased $18 million, or 13%, with double-digit growth in all segments, driven by the U.S. segment as well completions and general activity levels have increased on new, higher customer budgets.
Midstream pipeline sector sales in the first quarter of 2022 were $87 million, or 12% of total sales, an increase of $9 million, or 12%, from the first quarter of 2021, driven by the
Sequentially, midstream pipeline sector sales were consistent with the fourth quarter sales due to an increase in the
Backlog
As of
Balance Sheet and Cash Flow
Cash used by operations was ($13) million in the first quarter of 2022. As of March 31, 2022, the cash balance was $31 million, long-term debt (including current portion) was $303 million, and net debt was $272 million. Availability under the company’s asset-based lending facility was $514 million and available liquidity was $545 million as of
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 first quarter 2022 results at
About
Headquartered in
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,” "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, 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
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;
For a discussion of key risk factors, please see the risk factors disclosed in the company’s
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:
Investor Relations |
Monica.Broughton@mrcglobal.com |
832-308-2847 |
Condensed Consolidated Balance Sheets (Unaudited)
(in millions, except shares)
2022 | 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 31 | $ | 48 | ||||
Accounts receivable, net | 453 | 379 | ||||||
Inventories, net | 500 | 453 | ||||||
Other current assets | 28 | 19 | ||||||
Total current assets | 1,012 | 899 | ||||||
Long-term assets: | ||||||||
Operating lease assets | 200 | 191 | ||||||
Property, plant and equipment, net | 88 | 91 | ||||||
Other assets | 23 | 22 | ||||||
Intangible assets: | ||||||||
264 | 264 | |||||||
Other intangible assets, net | 199 | 204 | ||||||
$ | 1,786 | $ | 1,671 | |||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 400 | $ | 321 | ||||
Accrued expenses and other current liabilities | 87 | 80 | ||||||
Operating lease liabilities | 35 | 33 | ||||||
Current portion of long-term debt | 3 | 2 | ||||||
Total current liabilities | 525 | 436 | ||||||
Long-term liabilities: | ||||||||
Long-term debt, net | 300 | 295 | ||||||
Operating lease liabilities | 184 | 177 | ||||||
Deferred income taxes | 57 | 53 | ||||||
Other liabilities | 26 | 32 | ||||||
Commitments and contingencies | ||||||||
6.5% Series A Convertible Perpetual Preferred Stock, | 355 | 355 | ||||||
Stockholders' equity: | ||||||||
Common stock, | 1 | 1 | ||||||
Additional paid-in capital | 1,748 | 1,747 | ||||||
Retained deficit | (809 | ) | (819 | ) | ||||
Less: | (375 | ) | (375 | ) | ||||
Accumulated other comprehensive loss | (226 | ) | (231 | ) | ||||
339 | 323 | |||||||
$ | 1,786 | $ | 1,671 |
Condensed Consolidated Statements of Operations (Unaudited)
(in millions, except per share amounts)
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Sales | $ | 742 | $ | 609 | ||||
Cost of sales | 606 | 506 | ||||||
Gross profit | 136 | 103 | ||||||
Selling, general and administrative expenses | 107 | 100 | ||||||
Operating income | 29 | 3 | ||||||
Other expense: | ||||||||
Interest expense | (6 | ) | (6 | ) | ||||
Income (loss) before income taxes | 23 | (3 | ) | |||||
Income tax expense | 7 | - | ||||||
Net income (loss) | 16 | (3 | ) | |||||
Series A preferred stock dividends | 6 | 6 | ||||||
Net income (loss) attributable to common stockholders | $ | 10 | $ | (9 | ) | |||
Basic earnings (loss) per common share | $ | 0.12 | $ | (0.11 | ) | |||
Diluted earnings (loss) per common share | $ | 0.12 | $ | (0.11 | ) | |||
Weighted-average common shares, basic | 83.3 | 82.3 | ||||||
Weighted-average common shares, diluted | 84.3 | 82.3 |
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in millions)
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Operating activities | ||||||||
Net income (loss) | $ | 16 | $ | (3 | ) | |||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operations: | ||||||||
Depreciation and amortization | 5 | 5 | ||||||
Amortization of intangibles | 5 | 6 | ||||||
Equity-based compensation expense | 3 | 5 | ||||||
Deferred income tax expense | 1 | - | ||||||
Increase in LIFO reserve | 6 | 4 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (74 | ) | (50 | ) | ||||
Inventories | (52 | ) | - | |||||
Other current assets | (9 | ) | (6 | ) | ||||
Accounts payable | 78 | 75 | ||||||
Accrued expenses and other current liabilities | 8 | (12 | ) | |||||
Net cash (used in) provided by operations | (13 | ) | 24 | |||||
Investing activities | ||||||||
Purchases of property, plant and equipment | (2 | ) | (2 | ) | ||||
Other investing activities | - | 1 | ||||||
Net cash used in investing activities | (2 | ) | (1 | ) | ||||
Financing activities | ||||||||
Payments on revolving credit facilities | (107 | ) | (2 | ) | ||||
Proceeds from revolving credit facilities | 113 | 2 | ||||||
Payments on long-term obligations | - | (1 | ) | |||||
Dividends paid on preferred stock | (6 | ) | (6 | ) | ||||
Repurchases of shares to satisfy tax withholdings | (2 | ) | (2 | ) | ||||
Net cash used in financing activities | (2 | ) | (9 | ) | ||||
(Decrease) increase in cash | (17 | ) | 14 | |||||
Effect of foreign exchange rate on cash | - | (1 | ) | |||||
Cash -- beginning of period | 48 | 119 | ||||||
Cash -- end of period | $ | 31 | $ | 132 |
Supplemental Sales Information (Unaudited)
(in millions)
Disaggregated Sales by Segment and Sector
Three Months Ended |
International | Total | |||||||||||||||
2022 | ||||||||||||||||
Gas utilities | $ | 268 | $ | 3 | $ | - | $ | 271 | ||||||||
Downstream, industrial & energy transition | 169 | 7 | 50 | 226 | ||||||||||||
Upstream production | 101 | 29 | 28 | 158 | ||||||||||||
Midstream pipeline | 80 | 4 | 3 | 87 | ||||||||||||
$ | 618 | $ | 43 | $ | 81 | $ | 742 | |||||||||
2021 | ||||||||||||||||
Gas utilities | $ | 209 | $ | 1 | $ | - | $ | 210 | ||||||||
Downstream, industrial & energy transition | 138 | 4 | 52 | 194 | ||||||||||||
Upstream production | 68 | 23 | 36 | 127 | ||||||||||||
Midstream pipeline | 69 | 4 | 5 | 78 | ||||||||||||
$ | 484 | $ | 32 | $ | 93 | $ | 609 |
Supplemental Sales Information (Unaudited)
(in millions)
Sales by Product Line
Three Months Ended | ||||||||
Type | 2022 | 2021 | ||||||
Line pipe | $ | 112 | $ | 65 | ||||
Carbon fittings and flanges | 100 | 85 | ||||||
Total carbon pipe, fittings and flanges | 212 | 150 | ||||||
Valves, automation, measurement and instrumentation | 251 | 241 | ||||||
Gas products | 184 | 134 | ||||||
Stainless steel and alloy pipe and fittings | 36 | 29 | ||||||
General products | 59 | 55 | ||||||
$ | 742 | $ | 609 |
Supplemental Information (Unaudited)
Reconciliation of Gross Profit to Adjusted Gross Profit (a non-GAAP measure)
(in millions)
Three Months Ended | ||||||||||||||||
Percentage | Percentage | |||||||||||||||
2022 | of Revenue | 2021 | of Revenue | |||||||||||||
Gross profit, as reported | $ | 136 | 18.3 | % | $ | 103 | 16.9 | % | ||||||||
Depreciation and amortization | 5 | 0.7 | % | 5 | 0.8 | % | ||||||||||
Amortization of intangibles | 5 | 0.7 | % | 6 | 1.0 | % | ||||||||||
Increase in LIFO reserve | 6 | 0.8 | % | 4 | 0.7 | % | ||||||||||
Adjusted Gross Profit | $ | 152 | 20.5 | % | $ | 118 | 19.4 | % |
Notes to above:
The company defines Adjusted Gross Profit as sales, less cost of sales, plus depreciation and amortization, plus amortization of intangibles, plus inventory-related charges incremental to normal operations 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
Supplemental Information (Unaudited)
Reconciliation of Selling, General and Administrative Expenses to
Adjusted Selling, General and Administrative Expenses (a non-GAAP measure)
(in millions)
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Selling, general and administrative expenses | $ | 107 | $ | 100 | ||||
Employee separation (1) | - | (2 | ) | |||||
Adjusted Selling, general and administrative expenses | $ | 107 | $ | 98 |
Notes to above:
(1 | ) | Charges (pre-tax) related to employee separation of which |
The company defines Adjusted Selling, general and administrative (SG&A) expenses as SG&A, less severance and restructuring expenses, employee separation costs, facility closures plus the recovery of supplier bad debt. The company presents Adjusted SG&A because the company believes it is a useful indicator of the company’s operating performance without regard to items that can vary substantially from company to company. Among other things, Adjusted SG&A measures the company’s operating performance without regard to certain non-recurring, non-cash or transaction-related expenses. The company uses Adjusted SG&A as a key performance indicator in managing its business. The company believes that SG&A is the financial measure calculated and presented in accordance with
Supplemental Information (Unaudited)
Reconciliation of Net (Loss) Income to Adjusted EBITDA (a non-GAAP measure)
(in millions)
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Net income (loss) | $ | 16 | $ | (3 | ) | |||
Income tax expense | 7 | - | ||||||
Interest expense | 6 | 6 | ||||||
Depreciation and amortization | 5 | 5 | ||||||
Amortization of intangibles | 5 | 6 | ||||||
Employee separation (1) | - | 1 | ||||||
Increase in LIFO reserve | 6 | 4 | ||||||
Equity-based compensation expense (2) | 3 | 5 | ||||||
Adjusted EBITDA | $ | 48 | $ | 24 |
Notes to above:
(1 | ) | Charges (pre-tax) recorded in SG&A. |
(2 | ) | Charges (pre-tax) recorded in SG&A. In 2021, |
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, long-lived asset impairments (including goodwill and intangible assets), inventory-related charges incremental to normal operations, 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.
Supplemental Information (Unaudited)
Reconciliation of Net Loss Attributable to Common Stockholders to
Adjusted Net Income (Loss) Attributable to Common Stockholders (a non-GAAP measure)
(in millions, except per share amounts)
Three Months Ended | ||||||||
Amount | Per Share | |||||||
Net income attributable to common stockholders | $ | 10 | $ | 0.12 | ||||
Increase in LIFO reserve, net of tax | 5 | 0.05 | ||||||
Adjusted net income attributable to common stockholders | $ | 15 | $ | 0.17 |
Three Months Ended | ||||||||
Amount | Per Share | |||||||
Net loss attributable to common stockholders | $ | (9 | ) | $ | (0.11 | ) | ||
Increase in LIFO reserve, net of tax | 3 | 0.04 | ||||||
Adjusted net loss attributable to common stockholders | $ | (6 | ) | $ | (0.07 | ) |
Notes to above:
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. After-tax impacts were determined using the Company's blended statutory rate. 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
Supplemental Information (Unaudited)
Reconciliation of Long-term Debt to Net Debt (a non-GAAP measure) and the Leverage Ratio Calculation
(in millions)
2022 | ||||
Long-term debt, net | $ | 300 | ||
Plus: current portion of long-term debt | 3 | |||
Long-term debt | 303 | |||
Less: cash | 31 | |||
Net Debt | $ | 272 | ||
Net Debt | $ | 272 | ||
Trailing twelve months adjusted EBITDA | 170 | |||
Leverage ratio | 1.6 |
Notes to above:
Net Debt and related leverage metrics may be considered non-GAAP measures. We define Net Debt as total long-term debt, including current portion, minus cash. We define our leverage ratio as Net Debt divided by trailing twelve months Adjusted EBITDA. We believe Net Debt is an indicator of the extent to which the company’s outstanding debt obligations could be satisfied by cash on hand and a useful metric for investors to evaluate the company’s leverage position. We believe the leverage ratio is a commonly used metric that management and investors use to assess the borrowing capacity of the company. We believe total long-term debt (including the current portion) is the financial measure calculated and presented in accordance with
Source:
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