MRC Global Announces Full Year and Fourth Quarter 2020 Results
MRC Global Inc. reported its full year and fourth quarter 2020 results, with sales of $2,560 million for the year and $579 million for the fourth quarter, marking a 24% decrease from Q4 2019. The net loss for Q4 was $11 million, an improvement from a $30 million loss a year prior. Adjusted gross profit remained steady at 19.7%. The company achieved $261 million in cash from operations and reduced net debt by 49% to $264 million. Liquidity stands at $551 million. MRC Global also highlighted growth in gas utilities, despite overall sector declines due to the pandemic.
- Achieved a significant reduction in net debt by 49% to $264 million.
- Generated $261 million in cash from operations for 2020.
- Maintained an adjusted gross profit margin of 19.7% throughout 2020.
- Liquity increased to $551 million, supporting business operations.
- Q4 sales declined 1% sequentially and 24% year-over-year.
- Net loss for Q4 2020 of $11 million compared to $30 million in Q4 2019.
- Significant decreases in U.S. sector sales, particularly in upstream production (down 55%) and midstream pipeline (down 51%).
- Overall sales across most sectors declined due to pandemic impacts.
HOUSTON, Feb. 11, 2021 /PRNewswire/ --
Full Year 2020: | Fourth Quarter 2020: |
Sales of | Sales of |
Net loss attributable to common stockholders of ( | Net loss attributable to common stockholders of ( |
Adjusted Gross Profit of | Adjusted Gross Profit of |
Adjusted EBITDA of | Adjusted EBITDA of |
Cash Flow from Operations | Cash Flow from Operations of |
Net debt of | |
Total available liquidity of |
MRC Global Inc. (NYSE: MRC), the largest global distributor, based on sales, of pipe, valves and fittings and other infrastructure products and services to the energy industry, today announced full year and fourth quarter 2020 results.
The company's sales were
Net loss attributable to common stockholders for the fourth quarter of 2020 was (
Andrew R. Lane, MRC Global's president and chief executive officer stated, "Overcoming enormous challenges in 2020, I am proud of our MRC Global team for staying focused and executing our strategy for long-term shareholder value. We exceeded all the targets we set for 2020 including generating
"Next week, MRC Global celebrates a significant milestone, our 100-year anniversary, an achievement few can claim. It is just the beginning however, and we look forward to remaining the leading global PVF distributor to the oil and gas industry providing world-class supply chain solutions for our customers, creating new opportunities for our employees and generating superior returns for our shareholders." Mr. Lane added.
MRC Global's fourth quarter 2020 gross profit was
Selling, general and administrative (SG&A) expenses were
For the three months ended December 31, 2020, the income tax benefit was (
Adjusted EBITDA was
Sales by Segment
U.S. sales in the fourth quarter of 2020 were
Canadian sales in the fourth quarter of 2020 were
International sales in the fourth quarter of 2020 were
Sales by Sector
Gas utilities sales in the fourth quarter of 2020 were
Downstream and industrial sales in the fourth quarter of 2020 were
Upstream production sales in the fourth quarter of 2020 were
Midstream pipeline sales in the fourth quarter of 2020 were
Balance Sheet and Cash Flow
Cash balances were
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 our customers and reduced demand for the company's products and services. Although we have seen a modest improvement in oil demand, uncertainty exists as to when a more significant recovery will occur.
As a critical supplier to the global energy infrastructure and an essential business, the company has remained operational with no closures to any facilities. Our office staff initially worked from home as the pandemic began but has returned to the office in varying degrees depending on the stage of the pandemic at each locality. As of February 2, 2021, the company had 10 active COVID-19 illnesses reported, which is
From a supply chain perspective, given the company's inventory position and the reduced demand, the company has fulfilled orders with little disruption.
Conference Call
The company will hold a conference call to discuss its fourth quarter and full year 2020 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on February 12, 2021. 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 February 26, 2021 and can be accessed by dialing 201-612-7415 and using pass code 13714607#. 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 230 service locations worldwide, approximately 2,600 employees and with 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 over 10,000 suppliers simplifying the supply chain for approximately 12,000 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," "on-track," "well positioned," "look 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) | |||||||
December 31, | December 31, | ||||||
2020 | 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 119 | $ | 32 | |||
Accounts receivable, net | 319 | 459 | |||||
Inventories, net | 509 | 701 | |||||
Other current assets | 19 | 26 | |||||
Total current assets | 966 | 1,218 | |||||
Long-term assets: | |||||||
Operating lease assets | 200 | 186 | |||||
Property, plant and equipment, net | 103 | 138 | |||||
Other assets | 19 | 19 | |||||
Intangible assets: | |||||||
Goodwill, net | 264 | 483 | |||||
Other intangible assets, net | 229 | 281 | |||||
$ | 1,781 | $ | 2,325 | ||||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Trade accounts payable | $ | 264 | $ | 357 | |||
Accrued expenses and other current liabilities | 94 | 91 | |||||
Operating lease liabilities | 37 | 34 | |||||
Current portion of long-term debt | 4 | 4 | |||||
Total current liabilities | 399 | 486 | |||||
Long-term liabilities: | |||||||
Long-term debt, net | 379 | 547 | |||||
Operating lease liabilities | 187 | 167 | |||||
Deferred income taxes | 70 | 91 | |||||
Other liabilities | 41 | 37 | |||||
Commitments and contingencies | |||||||
355 | 355 | ||||||
Stockholders' equity: | |||||||
Common stock, | 1 | 1 | |||||
Additional paid-in capital | 1,739 | 1,731 | |||||
Retained deficit | (781) | (483) | |||||
Treasury stock at cost: 24,216,330 shares | (375) | (375) | |||||
Accumulated other comprehensive loss | (234) | (232) | |||||
350 | 642 | ||||||
$ | 1,781 | $ | 2,325 |
MRC Global Inc. | |||||||||||||||
Condensed Consolidated Statements of Operations (Unaudited) | |||||||||||||||
(in millions, except per share amounts) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Sales | $ | 579 | $ | 766 | $ | 2,560 | $ | 3,662 | |||||||
Cost of sales | 489 | 635 | 2,129 | 3,009 | |||||||||||
Gross profit | 90 | 131 | 431 | 653 | |||||||||||
Selling, general and administrative expenses | 97 | 141 | 449 | 550 | |||||||||||
Goodwill and intangible asset impairment | - | - | 242 | - | |||||||||||
Operating (loss) income | (7) | (10) | (260) | 103 | |||||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (6) | (9) | (28) | (40) | |||||||||||
Other, net | 6 | - | 5 | 3 | |||||||||||
(Loss) income before income taxes | (7) | (19) | (283) | 66 | |||||||||||
Income tax (benefit) expense | (2) | 5 | (9) | 27 | |||||||||||
Net (loss) income | (5) | (24) | (274) | 39 | |||||||||||
Series A preferred stock dividends | 6 | 6 | 24 | 24 | |||||||||||
Net (loss) income attributable to common stockholders | $ | (11) | $ | (30) | $ | (298) | $ | 15 | |||||||
Basic (loss) earnings per common share | $ | (0.13) | $ | (0.37) | $ | (3.63) | $ | 0.18 | |||||||
Diluted (loss) earnings per common share | $ | (0.13) | $ | (0.37) | $ | (3.63) | $ | 0.18 | |||||||
Weighted-average common shares, basic | 82.1 | 81.8 | 82.0 | 83.0 | |||||||||||
Weighted-average common shares, diluted | 82.1 | 81.8 | 82.0 | 83.9 |
MRC Global Inc. | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
(in millions) | |||||||
Year Ended | |||||||
December 31, | December 31, | ||||||
2020 | 2019 | ||||||
Operating activities | |||||||
Net (loss) income | $ | (274) | $ | 39 | |||
Adjustments to reconcile net income to net cash provided by (used in) operations: | |||||||
Depreciation and amortization | 20 | 21 | |||||
Amortization of intangibles | 26 | 42 | |||||
Equity-based compensation expense | 12 | 16 | |||||
Deferred income tax benefit | (21) | (5) | |||||
Amortization of debt issuance costs | 1 | 1 | |||||
Decrease in LIFO reserve | (19) | (2) | |||||
Goodwill and intangible asset impairment | 242 | - | |||||
Lease impairment and abandonment | 14 | - | |||||
Inventory-related charges | 46 | 5 | |||||
Provision for credit losses | 2 | 2 | |||||
Gain on sale leaseback | (5) | - | |||||
Other non-cash items | (3) | 5 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 141 | 127 | |||||
Inventories | 173 | 95 | |||||
Other current assets | 7 | 10 | |||||
Accounts payable | (98) | (79) | |||||
Accrued expenses and other current liabilities | (3) | (35) | |||||
Net cash provided by operations | 261 | 242 | |||||
Investing activities | |||||||
Purchases of property, plant and equipment | (11) | (18) | |||||
Proceeds from the disposition of property, plant and equipment | 30 | 1 | |||||
Other investing activities | - | 1 | |||||
Net cash provided by (used in) investing activities | 19 | (16) | |||||
Financing activities | |||||||
Payments on revolving credit facilities | (819) | (1,145) | |||||
Proceeds from revolving credit facilities | 658 | 1,016 | |||||
Payments on long-term obligations | (6) | (4) | |||||
Purchases of common stock | - | (75) | |||||
Dividends paid on preferred stock | (24) | (24) | |||||
Repurchases of shares to satisfy tax withholdings | (4) | (6) | |||||
Net cash used in financing activities | (195) | (238) | |||||
Increase (decrease) in cash | 85 | (12) | |||||
Effect of foreign exchange rate on cash | 2 | 1 | |||||
Cash beginning of year | 32 | 43 | |||||
Cash end of year | $ | 119 | $ | 32 |
MRC Global Inc. | ||||||||||||||||
Supplemental Sales Information (Unaudited) | ||||||||||||||||
(in millions) | ||||||||||||||||
Disaggregated Sales by Segment | ||||||||||||||||
Three Months Ended | ||||||||||||||||
December 31, | ||||||||||||||||
U.S. | Canada | International | Total | |||||||||||||
2020 | ||||||||||||||||
Gas utilities | $ | 216 | $ | 1 | $ | - | $ | 217 | ||||||||
Downstream & industrial | 119 | 3 | 52 | 174 | ||||||||||||
Upstream production | 63 | 17 | 46 | 126 | ||||||||||||
Midstream pipeline | 50 | 2 | 10 | 62 | ||||||||||||
$ | 448 | $ | 23 | $ | 108 | $ | 579 | |||||||||
2019 | ||||||||||||||||
Gas utilities | $ | 178 | $ | 2 | $ | - | $ | 180 | ||||||||
Downstream & industrial | 187 | 4 | 53 | 244 | ||||||||||||
Upstream production | 140 | 32 | 52 | 224 | ||||||||||||
Midstream pipeline | 103 | 5 | 10 | 118 | ||||||||||||
$ | 608 | $ | 43 | $ | 115 | $ | 766 | |||||||||
Year Ended | ||||||||||||||||
December 31, | ||||||||||||||||
U.S. | Canada | International | Total | |||||||||||||
2020 | ||||||||||||||||
Gas utilities | $ | 821 | $ | 11 | $ | - | $ | 832 | ||||||||
Downstream & industrial | 566 | 15 | 205 | 786 | ||||||||||||
Upstream production | 329 | 89 | 182 | 600 | ||||||||||||
Midstream pipeline | 307 | 13 | 22 | 342 | ||||||||||||
$ | 2,023 | $ | 128 | $ | 409 | $ | 2,560 | |||||||||
2019 | ||||||||||||||||
Gas utilities | $ | 841 | $ | 16 | $ | - | $ | 857 | ||||||||
Downstream & industrial | 854 | 22 | 229 | 1,105 | ||||||||||||
Upstream production | 723 | 162 | 222 | 1,107 | ||||||||||||
Midstream pipeline | 538 | 26 | 29 | 593 | ||||||||||||
$ | 2,956 | $ | 226 | $ | 480 | $ | 3,662 |
MRC Global Inc. | ||||||||||||||||
Supplemental Sales Information (Unaudited) | ||||||||||||||||
(in millions) | ||||||||||||||||
Sales by Product Line | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
Type | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Line pipe | $ | 65 | $ | 92 | $ | 308 | $ | 560 | ||||||||
Carbon fittings and flanges | 76 | 109 | 340 | 565 | ||||||||||||
Total carbon pipe, fittings and flanges | 141 | 201 | 648 | 1,125 | ||||||||||||
Valves, automation, measurement and instrumentation | 216 | 309 | 1,018 | 1,434 | ||||||||||||
Gas products | 138 | 126 | 517 | 551 | ||||||||||||
Stainless steel and alloy pipe and fittings | 32 | 42 | 128 | 177 | ||||||||||||
General products | 52 | 88 | 249 | 375 | ||||||||||||
$ | 579 | $ | 766 | $ | 2,560 | $ | 3,662 |
MRC Global Inc. | |||||||||||||||
Supplemental Information (Unaudited) | |||||||||||||||
Reconciliation of Gross Profit to Adjusted Gross Profit (a non-GAAP measure) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended | |||||||||||||||
December 31, | Percentage | December 31, | Percentage | ||||||||||||
2020 | of Revenue | 2019 | of Revenue* | ||||||||||||
Gross profit, as reported | $ | 90 | 15.5 | % | $ | 131 | 17.1 | % | |||||||
Depreciation and amortization | 5 | 0.9 | % | 5 | 0.7 | % | |||||||||
Amortization of intangibles | 6 | 1.0 | % | 9 | 1.2 | % | |||||||||
Increase in LIFO reserve | 1 | 0.2 | % | 1 | 0.1 | % | |||||||||
Inventory-related charges (1) | 12 | 2.1 | % | 5 | 0.7 | % | |||||||||
Adjusted Gross Profit | $ | 114 | 19.7 | % | $ | 151 | 19.7 | % | |||||||
Year Ended | |||||||||||||||
December 31, | Percentage | December 31, | Percentage | ||||||||||||
2020 | of Revenue | 2019 | of Revenue* | ||||||||||||
Gross profit, as reported | $ | 431 | 16.8 | % | $ | 653 | 17.8 | % | |||||||
Depreciation and amortization | 20 | 0.8 | % | 21 | 0.6 | % | |||||||||
Amortization of intangibles | 26 | 1.0 | % | 42 | 1.1 | % | |||||||||
Decrease in LIFO reserve | (19) | (0.7) | % | (2) | (0.1) | % | |||||||||
Inventory-related charges (1) | 46 | 1.8 | % | 5 | 0.1 | % | |||||||||
Adjusted Gross Profit | $ | 504 | 19.7 | % | $ | 719 | 19.6 | % |
Notes to above: | |
* | Does not foot due to rounding |
(1) | In the fourth quarter of 2020, |
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 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 | Year Ended | ||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Selling, general and administrative expenses | $ | 97 | $ | 141 | $ | 449 | $ | 550 | |||||||
Severance and restructuring (1) | (2) | (4) | (14) | (9) | |||||||||||
Facility closures (2) | 1 | - | (14) | - | |||||||||||
Supplier bad debt and recovery of supplier bad debt (3) | - | (5) | 2 | (5) | |||||||||||
Adjusted Selling, general and administrative expenses | $ | 96 | $ | 132 | $ | 423 | $ | 536 |
Notes to above: | |
(1) | Employee severance and restructuring charges (pre-tax) associated with the company's cost reduction initiatives were recorded in 2020 and 2019. Charges of |
(2) | Sub-lease income and charges (pre-tax) for lease impairments and abandonments related to facility closures, substantially non-cash, were recorded in 2020. In the fourth quarter, |
(3) | Charges (pre-tax) in 2019 related to a product claim from a foreign supplier and income (pre-tax) related to the collection of the same product claim in 2020. |
The company defines adjusted selling, general and administrative (SG&A) expenses as SG&A, less severance and restructuring expenses, 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. The company presents adjusted SG&A because the company believes Adjusted SG&A is a useful indicator of the company's operating performance. 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 U.S. generally accepted accounting principles that is most directly comparable to adjusted SG&A.
MRC Global Inc. | |||||||||||||||
Supplemental Information (Unaudited) | |||||||||||||||
Reconciliation of Net Income to Adjusted EBITDA (a non-GAAP measure) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net (loss) income | $ | (5) | $ | (24) | $ | (274) | $ | 39 | |||||||
Income tax (benefit) expense | (2) | 5 | (9) | 27 | |||||||||||
Interest expense | 6 | 9 | 28 | 40 | |||||||||||
Depreciation and amortization | 5 | 5 | 20 | 21 | |||||||||||
Amortization of intangibles | 6 | 9 | 26 | 42 | |||||||||||
Goodwill and intangible asset impairment (1) | - | - | 242 | - | |||||||||||
Inventory-related charges (2) | 12 | 5 | 46 | 5 | |||||||||||
Facility closures (3) | (1) | - | 17 | - | |||||||||||
Severance and restructuring (4) | 2 | 4 | 14 | 9 | |||||||||||
Increase (decrease) in LIFO reserve | 1 | 1 | (19) | (2) | |||||||||||
Equity-based compensation expense (5) | 4 | 4 | 12 | 16 | |||||||||||
Gain on early extinguishment of debt (6) | - | - | (1) | - | |||||||||||
Supplier bad debt and recovery of supplier bad debt (7) | - | 5 | (2) | 5 | |||||||||||
Gain on sale leaseback (8) | (5) | - | (5) | - | |||||||||||
Foreign currency (gains) losses | (1) | - | 2 | (1) | |||||||||||
Adjusted EBITDA | $ | 22 | $ | 23 | $ | 97 | $ | 201 |
Notes to above: | |
(1) | Non-cash charges (pre-tax) recorded in the second quarter of 2020 for the impairment of |
(2) | In the fourth quarter of 2020, |
(3) | Sub-lease income and charges (pre-tax) for lease impairments and abandonments related to facility closures, substantially non-cash, were recorded in 2020. In the fourth quarter, |
(4) | Employee severance and restructuring charges (pre-tax) associated with the company's cost reduction initiatives were recorded in 2020 and 2019. Charges of |
(5) | Recorded in SG&A |
(6) | Charge (pre-tax) related to the purchase of the senior secured Term Loan recorded in Other, net. |
(7) | Charges (pre-tax) in 2019 related to a product claim from a foreign supplier and income (pre-tax) related to the collection of the same product claim in 2020. |
(8) | Income (pre-tax) recorded in Other, net with |
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 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 Net Income Attributable to Common Stockholders to | |||||||||||||||
Adjusted Net Income Attributable to Common Stockholders (a non-GAAP measure) | |||||||||||||||
(in millions, except per share amounts) | |||||||||||||||
December 31, 2020 | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
Amount | Per Share | Amount | Per Share | ||||||||||||
Net loss attributable to common stockholders | $ | (11) | $ | (0.13) | $ | (298) | $ | (3.63) | |||||||
Goodwill and intangible asset impairment, net of tax (1) | - | - | 234 | 2.85 | |||||||||||
Inventory-related charges, net of tax (2) | 9 | 0.11 | 38 | 0.46 | |||||||||||
Facility closures, net of tax (3) | (1) | (0.01) | 15 | 0.18 | |||||||||||
Severance and restructuring, net of tax (4) | 2 | 0.02 | 12 | 0.15 | |||||||||||
Recovery of supplier bad debt, net of tax (5) | - | - | (2) | (0.02) | |||||||||||
Gain on sale leaseback (6) | (4) | (0.05) | (4) | (0.05) | |||||||||||
Increase (decrease) in LIFO reserve, net of tax | 1 | 0.01 | (15) | (0.18) | |||||||||||
Adjusted net loss attributable to common stockholders | $ | (4) | $ | (0.05) | $ | (20) | $ | (0.24) | |||||||
December 31, 2019 | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
Amount | Per Share | Amount | Per Share | ||||||||||||
Net (loss) income attributable to common stockholders | $ | (30) | $ | (0.37) | $ | 15 | $ | 0.18 | |||||||
Inventory-related charges, net of tax (2) | 5 | 0.06 | 5 | 0.06 | |||||||||||
Severance and restructuring, net of tax (4) | 3 | 0.04 | 7 | 0.08 | |||||||||||
Supplier bad debt, net of tax (5) | 5 | 0.06 | 5 | 0.06 | |||||||||||
Decrease in LIFO reserve, net of tax | - | - | (2) | (0.02) | |||||||||||
Adjusted net (loss) income attributable to common stockholders | $ | (17) | $ | (0.21) | $ | 30 | $ | 0.36 |
Notes to above: | ||||||||||||||||
(1) | Non-cash charges (after-tax) recorded in the second quarter of 2020 for the impairment of | |||||||||||||||
(2) | In the fourth quarter of 2020, | |||||||||||||||
(3) | Sub-lease income and charges (after-tax) for lease impairments and abandonments related to facility closures, substantially non-cash, were recorded in 2020. In the fourth quarter, | |||||||||||||||
(4) | Employee severance and restructuring charges (after-tax) associated with the company's cost reduction initiatives were recorded in 2020 and 2019. Charges of | |||||||||||||||
(5) | Charges (after-tax) in 2019 related to a product claim from a foreign supplier and income (pre-tax) related to the collection of the same product claim from a foreign supplier in 2020. | |||||||||||||||
(6) | Income (after-tax) recorded in Other, net with |
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.
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SOURCE MRC Global Inc.
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