MRC Global Reports Full Year and Fourth Quarter 2023 Results
- None.
- Sales decreased by 12% in Q4 2023 compared to the same period in 2022.
- Adjusted EBITDA decreased to $48 million in Q4 2023 from $66 million in Q4 2022.
- SG&A expenses increased to $125 million in Q4 2023 from $123 million in Q4 2022.
- Income tax expense decreased to $2 million in Q4 2023 with an effective rate of 9%.
- Net debt was $170 million as of December 31, 2023.
Insights
Analyzing MRC Global Inc.'s financial results indicates a mixed performance year-over-year, with a slight increase in annual sales but a decrease in quarterly sales. The company's ability to maintain adjusted EBITDA margins above 7% for two consecutive years is a noteworthy achievement, reflecting efficient operations and cost control. Additionally, achieving the lowest leverage ratio in the company's history at 0.7x demonstrates a strong balance sheet and reduced financial risk. However, the decline in adjusted net income year-over-year from $101 million to $97 million warrants attention as it may indicate pressures on profitability despite top-line growth.
From an operational cash flow perspective, the reported $181 million is a robust indicator of liquidity, potentially enhancing the company's ability to invest in growth or return capital to shareholders. The projected flat to modestly lower revenue for 2024, paired with the goal of reducing SG&A expenses, suggests a continued focus on margin preservation amidst a potentially challenging revenue environment. This conservative approach could be seen as a strategic move to ensure stability and continued profitability.
Investors should consider the implications of MRC Global's financial positioning and its impact on the stock's valuation. The company's gross profit margin improvement from 18.2% to 19.9% is positive, indicating better pricing or cost management. However, the reduced adjusted net income and the 12% decrease in Q4 sales year-over-year could be interpreted as signs of market challenges or operational headwinds, which may affect investor sentiment.
Furthermore, the management's anticipation of improved business activity in the second half of 2024 due to an improving economy and lower interest rates suggests a strategic outlook that is dependent on macroeconomic factors. The potential to be in a positive net cash position by 2025 could position MRC Global favorably for strategic initiatives or provide resilience against economic downturns. These factors combined with the lowest net debt level in the company's history as a public company are likely to be focal points for investor analysis and stock performance.
The company's performance and future projections must be contextualized within the broader economic environment. The mention of an improving economy and lower interest rates as catalysts for business activity in H2 2024 implies a macroeconomic dependency. This reliance on economic conditions suggests that MRC Global's business is sensitive to industrial demand cycles, which can be influenced by factors such as commodity prices, industrial production and infrastructure spending.
The strategic focus on working capital efficiency and SG&A expense reduction aligns with broader economic trends of cost optimization and productivity in the face of uncertain economic growth. This approach may insulate the company from potential downturns and enable it to capitalize on opportunities as they arise. The mention of energy transition activity as a growth driver also aligns with global shifts towards sustainable energy, indicating an adaptive business model that could benefit from long-term industry trends.
HOUSTON, Feb. 13, 2024 (GLOBE NEWSWIRE) -- MRC Global Inc. (NYSE: MRC), the leading global distributor of pipe, valves and fittings (PVF) and other infrastructure products and services to diversified gas utility, energy and industrial end-markets, today reported full year and fourth quarter 2023 results.
Net income attributable to common stockholders for the fourth quarter of 2023 was
MRC Global’s fourth quarter 2023 gross profit was
Highlights for the full year and fourth quarter 2023:
Full Year 2023 Financial Highlights:
● Cash flow provided by operations of
● Sales of
● Adjusted EBITDA of
● Two consecutive years of adjusted EBITDA percentages above
● Adjusted Gross Profit, as a percentage of sales, of
● Leverage ratio of 0.7x, the lowest in MRC Global history
Fourth Quarter 2023 Financial Highlights:
● Sales of
● Adjusted EBITDA of
● Adjusted Gross Profit, as a percentage of sales, of
Rob Saltiel, MRC Global’s President and Chief Executive Officer, commented, “Our revenue grew for a third straight year in 2023 to
“In 2024, we expect revenue to be flat to modestly lower than 2023 levels. We expect a pick-up in our business activity in the second half of the year as an improving economy and lower interest rates support projects and oil and gas investments. We are targeting to generate
"Longer term, we project that MRC Global may be in a positive net cash position in 2025. This will provide us with a lot of flexibility to pursue a capital allocation strategy that is focused on the highest return opportunities for our shareholders, including investing in our growth drivers and distributing capital to our shareholders,” Mr. Saltiel added.
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Gross Profit, Adjusted Net Income 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
For the three months ended December 31, 2023, income tax expense was
Adjusted EBITDA was
Sales
The company’s sales were
Sales by Segment
U.S. sales in the fourth quarter of 2023 were
Sequentially, as compared to the third quarter of 2023, U.S. sales decreased
Canada sales in the fourth quarter of 2023 were
Sequentially, as compared to the third quarter of 2023, Canada sales decreased
International sales in the fourth quarter of 2023 were
Sequentially, as compared to the third quarter of 2023, International sales increased
Sales by Sector
Gas Utilities sales in the fourth quarter of 2023 were
Sequentially, as compared to the third quarter of 2023, Gas Utilities sales declined
DIET sales in the fourth quarter of 2023 were
Sequentially, as compared to the third quarter of 2023, DIET sales decreased
PTI sales in the fourth quarter of 2023 were
Sequentially, as compared to the third quarter of 2023, PTI sales decreased
Balance Sheet and Cash Flow
As of December 31, 2023, the company's cash balance was
Conference Call
The company will hold a conference call to discuss its fourth quarter and full year 2023 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on February 14, 2024. 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 February 28, 2024, and can be accessed by dialing 201-612-7415 and using passcode 13743230#. 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 infrastructure 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 214 locations including valve and engineering centers. The company’s unmatched quality assurance program offers over 300,000 SKUs from over 8,500 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,” “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 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 potential share price volatility and costs incurred in response to any shareholder activism campaigns; 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; and risks related to changing laws and regulations including trade policies and tariffs.
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) | ||||||||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 131 | $ | 32 | ||||
| Accounts receivable, net | 430 | 501 | ||||||
| Inventories, net | 560 | 578 | ||||||
| Other current assets | 34 | 31 | ||||||
| Total current assets | 1,155 | 1,142 | ||||||
| Long-term assets: | ||||||||
| Operating lease assets | 205 | 202 | ||||||
| Property, plant and equipment, net | 78 | 82 | ||||||
| Other assets | 21 | 22 | ||||||
| Intangible assets: | ||||||||
| Goodwill, net | 264 | 264 | ||||||
| Other intangible assets, net | 163 | 183 | ||||||
| $ | 1,886 | $ | 1,895 | |||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 355 | $ | 410 | ||||
| Accrued expenses and other current liabilities | 102 | 115 | ||||||
| Operating lease liabilities | 34 | 36 | ||||||
| Current portion of debt obligations | 292 | 3 | ||||||
| Total current liabilities | 783 | 564 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt | 9 | 337 | ||||||
| Operating lease liabilities | 186 | 182 | ||||||
| Deferred income taxes | 45 | 49 | ||||||
| Other liabilities | 20 | 22 | ||||||
| Commitments and contingencies | ||||||||
and outstanding | 355 | 355 | ||||||
| Stockholders' equity: | ||||||||
| Common stock, | 1 | 1 | ||||||
| Additional paid-in capital | 1,768 | 1,758 | ||||||
| Retained deficit | (678 | ) | (768 | ) | ||||
| Treasury stock at cost: 24,216,330 shares | (375 | ) | (375 | ) | ||||
| Accumulated other comprehensive loss | (228 | ) | (230 | ) | ||||
| 488 | 386 | |||||||
| $ | 1,886 | $ | 1,895 | |||||
| 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, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Sales | $ | 768 | $ | 869 | $ | 3,412 | $ | 3,363 | ||||||||
| Cost of sales | 615 | 711 | 2,722 | 2,753 | ||||||||||||
| Gross profit | 153 | 158 | 690 | 610 | ||||||||||||
| Selling, general and administrative expenses | 125 | 123 | 503 | 470 | ||||||||||||
| Operating income | 28 | 35 | 187 | 140 | ||||||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | (6 | ) | (7 | ) | (32 | ) | (24 | ) | ||||||||
| Other, net | 1 | 5 | (2 | ) | (6 | ) | ||||||||||
| Income before income taxes | 23 | 33 | 153 | 110 | ||||||||||||
| Income tax expense | 2 | 12 | 39 | 35 | ||||||||||||
| Net income | 21 | 21 | 114 | 75 | ||||||||||||
| Series A preferred stock dividends | 6 | 6 | 24 | 24 | ||||||||||||
| Net income attributable to common stockholders | $ | 15 | $ | 15 | $ | 90 | $ | 51 | ||||||||
| Basic earnings per common share | $ | 0.18 | $ | 0.18 | $ | 1.07 | $ | 0.61 | ||||||||
| Diluted earnings per common share | $ | 0.17 | $ | 0.18 | $ | 1.05 | $ | 0.60 | ||||||||
| Weighted-average common shares, basic | 84.3 | 83.6 | 84.2 | 83.5 | ||||||||||||
| Weighted-average common shares, diluted | 85.9 | 85.3 | 85.5 | 84.9 | ||||||||||||
| MRC Global Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| (in millions) | ||||||||
| Year Ended | ||||||||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Operating activities | ||||||||
| Net income | $ | 114 | $ | 75 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operations: | ||||||||
| Depreciation and amortization | 19 | 18 | ||||||
| Amortization of intangibles | 21 | 21 | ||||||
| Equity-based compensation expense | 14 | 13 | ||||||
| Deferred income tax benefit | (7 | ) | (7 | ) | ||||
| Increase in LIFO reserve | 2 | 66 | ||||||
| Other non-cash items | 7 | 4 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 72 | (128 | ) | |||||
| Inventories | 16 | (196 | ) | |||||
| Other current assets | (3 | ) | (9 | ) | ||||
| Accounts payable | (58 | ) | 90 | |||||
| Accrued expenses and other current liabilities | (16 | ) | 33 | |||||
| Net cash provided by (used in) operations | 181 | (20 | ) | |||||
| Investing activities | ||||||||
| Purchases of property, plant and equipment | (15 | ) | (11 | ) | ||||
| Proceeds from the disposition of property, plant and equipment | 1 | - | ||||||
| Net cash used in investing activities | (14 | ) | (11 | ) | ||||
| Financing activities | ||||||||
| Payments on revolving credit facilities | (882 | ) | (779 | ) | ||||
| Proceeds from revolving credit facilities | 847 | 824 | ||||||
| Payments on debt obligations | (3 | ) | (2 | ) | ||||
| Debt issuance costs paid | (1 | ) | - | |||||
| Dividends paid on preferred stock | (24 | ) | (24 | ) | ||||
| Repurchases of shares to satisfy tax withholdings | (4 | ) | (2 | ) | ||||
| Net cash (used in) provided by financing activities | (67 | ) | 17 | |||||
| Increase (decrease) in cash | 100 | (14 | ) | |||||
| Effect of foreign exchange rate on cash | (1 | ) | (2 | ) | ||||
| Cash beginning of year | 32 | 48 | ||||||
| Cash end of year | $ | 131 | $ | 32 | ||||
| MRC Global Inc. | ||||||||||||||||
| Supplemental Sales Information (Unaudited) | ||||||||||||||||
| (in millions) | ||||||||||||||||
| Disaggregated Sales by Segment and Sector | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| U.S. | Canada | International | Total | |||||||||||||
| 2023 | ||||||||||||||||
| Gas Utilities | $ | 252 | $ | - | $ | 1 | $ | 253 | ||||||||
| DIET | 191 | 4 | 63 | 258 | ||||||||||||
| PTI | 190 | 24 | 43 | 257 | ||||||||||||
| $ | 633 | $ | 28 | $ | 107 | $ | 768 | |||||||||
| 2022 | ||||||||||||||||
| Gas Utilities | $ | 313 | $ | 6 | $ | - | $ | 319 | ||||||||
| DIET | 182 | 5 | 61 | 248 | ||||||||||||
| PTI | 225 | 35 | 42 | 302 | ||||||||||||
| $ | 720 | $ | 46 | $ | 103 | $ | 869 | |||||||||
| Year Ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| U.S. | Canada | International | Total | |||||||||||||
| 2023 | ||||||||||||||||
| Gas Utilities | $ | 1,190 | $ | 4 | $ | 3 | $ | 1,197 | ||||||||
| DIET | 790 | 20 | 250 | 1,060 | ||||||||||||
| PTI | 865 | 122 | 168 | 1,155 | ||||||||||||
| $ | 2,845 | $ | 146 | $ | 421 | $ | 3,412 | |||||||||
| 2022 | ||||||||||||||||
| Gas Utilities | $ | 1,247 | $ | 15 | $ | 1 | $ | 1,263 | ||||||||
| DIET | 758 | 25 | 226 | 1,009 | ||||||||||||
| PTI | 818 | 126 | 147 | 1,091 | ||||||||||||
| $ | 2,823 | $ | 166 | $ | 374 | $ | 3,363 | |||||||||
| 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 | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Line pipe | $ | 133 | $ | 172 | $ | 566 | $ | 589 | ||||||||
| Carbon fittings and flanges | 98 | 106 | 451 | 441 | ||||||||||||
| Total carbon pipe, fittings and flanges | 231 | 278 | 1,017 | 1,030 | ||||||||||||
| Valves, automation, measurement and instrumentation | 272 | 290 | 1,192 | 1,111 | ||||||||||||
| Gas products | 170 | 191 | 782 | 778 | ||||||||||||
| Stainless steel and alloy pipe and fittings | 29 | 33 | 137 | 180 | ||||||||||||
| General products | 66 | 77 | 284 | 264 | ||||||||||||
| $ | 768 | $ | 869 | $ | 3,412 | $ | 3,363 | |||||||||
| 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 | |||||||||||||
| 2023 | of Revenue* | 2022 | of Revenue* | |||||||||||||
| Gross profit, as reported | $ | 153 | 19.9 | % | $ | 158 | 18.2 | % | ||||||||
| Depreciation and amortization | 4 | 0.5 | % | 4 | 0.5 | % | ||||||||||
| Amortization of intangibles | 6 | 0.8 | % | 6 | 0.7 | % | ||||||||||
| Increase in LIFO reserve | 5 | 0.7 | % | 16 | 1.8 | % | ||||||||||
| Adjusted Gross Profit | $ | 168 | 21.9 | % | $ | 184 | 21.2 | % | ||||||||
| Year Ended | ||||||||||||||||
| December 31, | Percentage | December 31, | Percentage | |||||||||||||
| 2023 | of Revenue* | 2022 | of Revenue* | |||||||||||||
| Gross profit, as reported | $ | 690 | 20.2 | % | $ | 610 | 18.1 | % | ||||||||
| Depreciation and amortization | 19 | 0.6 | % | 18 | 0.5 | % | ||||||||||
| Amortization of intangibles | 21 | 0.6 | % | 21 | 0.6 | % | ||||||||||
| Increase in LIFO reserve | 2 | 0.1 | % | 66 | 2.0 | % | ||||||||||
| Adjusted Gross Profit | $ | 732 | 21.5 | % | $ | 715 | 21.3 | % | ||||||||
| Notes to above: | ||||||||||||||||
| * Does not foot due to rounding | ||||||||||||||||
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, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Selling, general and administrative expenses | $ | 125 | $ | 123 | $ | 503 | $ | 470 | ||||||||
| Severance and restructuring (1) | - | (1 | ) | - | (1 | ) | ||||||||||
| Customer settlement (2) | - | - | (3 | ) | - | |||||||||||
| Non-recurring IT related professional fees | - | - | (1 | ) | - | |||||||||||
| Activism response legal and consulting costs | (1 | ) | - | (1 | ) | - | ||||||||||
| Adjusted Selling, general and administrative expenses | $ | 124 | $ | 122 | $ | 498 | $ | 469 | ||||||||
Notes to above:
| (1) | Employee severance and restructuring charges (pre-tax), primarily in the U.S. | |
| (2) | Charge (pre-tax) for a customer settlement in our U.S. segment. |
The company defines adjusted selling, general and administrative (SG&A) expenses as SG&A, less severance and restructuring expenses and other unusual items. The company presents adjusted SG&A because the company believes it 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 (Loss) to Adjusted EBITDA (a non-GAAP measure) | ||||||||||||||||
| (in millions) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income | $ | 21 | $ | 21 | $ | 114 | $ | 75 | ||||||||
| Income tax expense | 2 | 12 | 39 | 35 | ||||||||||||
| Interest expense | 6 | 7 | 32 | 24 | ||||||||||||
| Depreciation and amortization | 4 | 4 | 19 | 18 | ||||||||||||
| Amortization of intangibles | 6 | 6 | 21 | 21 | ||||||||||||
| Severance and restructuring (1) | - | 1 | - | 1 | ||||||||||||
| Non-recurring IT related professional fees | - | - | 1 | - | ||||||||||||
| Increase in LIFO reserve | 5 | 16 | 2 | 66 | ||||||||||||
| Equity-based compensation expense (2) | 4 | 4 | 14 | 13 | ||||||||||||
| Activism response legal and consulting costs | 1 | - | 1 | - | ||||||||||||
| Customer settlement (3) | - | - | 3 | - | ||||||||||||
| Asset disposal (4) | - | - | 1 | - | ||||||||||||
| Foreign currency (gains) losses | (1 | ) | (5 | ) | 3 | 8 | ||||||||||
| Adjusted EBITDA | $ | 48 | $ | 66 | $ | 250 | $ | 261 | ||||||||
Notes to above:
| (1) | Employee severance and restructuring charges (pre-tax), primarily in the U.S. | |
| (2) | Charges (pre-tax) recorded in SG&A. | |
| (3) | Charge (pre-tax) for a customer settlement in our U.S. segment. | |
| (4) | Charge (pre-tax) for an asset disposal in our International segment. |
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 (Loss) Attributable to Common Stockholders to | ||||||||||||||||
| Adjusted Net Income Attributable to Common Stockholders (a non-GAAP measure) | ||||||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||
| December 31, 2023 | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| Amount | Per Share* | Amount | Per Share* | |||||||||||||
| Net income attributable to common stockholders | $ | 15 | $ | 0.17 | $ | 90 | $ | 1.05 | ||||||||
| Non-recurring IT related professional fees, net of tax | - | - | 1 | 0.01 | ||||||||||||
| Asset disposal, net of tax (1) | - | - | 1 | 0.01 | ||||||||||||
| Customer settlement, net of tax (2) | - | - | 2 | 0.02 | ||||||||||||
| Activism response legal and consulting costs, net of tax | 1 | 0.01 | 1 | 0.01 | ||||||||||||
| Increase in LIFO reserve, net of tax | 4 | 0.04 | 2 | 0.02 | ||||||||||||
| Adjusted net income attributable to common stockholders | $ | 20 | $ | 0.23 | $ | 97 | $ | 1.13 | ||||||||
| December 31, 2022 | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| Amount | Per Share | Amount | Per Share | |||||||||||||
| Net income attributable to common stockholders | $ | 15 | $ | 0.18 | $ | 51 | $ | 0.60 | ||||||||
| Increase in LIFO reserve, net of tax | 12 | 0.14 | 50 | 0.59 | ||||||||||||
| Adjusted net income attributable to common stockholders | $ | 27 | $ | 0.32 | $ | 101 | $ | 1.19 | ||||||||
Notes to above:
*Does not foot due to rounding
| (1) | An after-tax charge for an asset disposal in our International segment. | |
| (2) | An after-tax charge for a customer settlement in our U.S. segment. |
The company defines adjusted net income attributable to common stockholders (a non-GAAP measure) as net income attributable to common stockholders plus or minus the after-tax impact of items deemed non-standard and plus or minus the after-tax impact of its 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. After-tax impacts were determined using the company's U.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 events not indicative of the on-going business. 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.
| MRC Global Inc. | ||||
| Supplemental Information (Unaudited) | ||||
| Reconciliation of Long-term Debt to Net Debt (a non-GAAP measure) and the Leverage Ratio | ||||
| Calculation | ||||
| (in millions) | ||||
| | ||||
| December 31, | ||||
| 2023 | ||||
| Long-term debt | $ | 9 | ||
| Plus: current portion of debt obligations | 292 | |||
| Total debt | 301 | |||
| Less: cash | 131 | |||
| Net Debt | $ | 170 | ||
| Net Debt | $ | 170 | ||
| Trailing twelve months adjusted EBITDA | 250 | |||
| Leverage ratio (1) | 0.7 | |||
Notes to above:
| (1) | Under the Senior Secured Term Loan B, for purposes of calculating the leverage ratio, cash is limited to |
Net Debt and related leverage metrics may be considered non-GAAP measures. The company defines Net Debt as long-term debt, including current portion, minus cash. The company defines leverage ratio as Net Debt divided by trailing twelve months adjusted EBITDA. The company believes 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. The company believes the leverage ratio is a commonly used metric that management and investors use to assess the borrowing capacity of the company. The company believes total long-term debt (including the current portion) is the financial measure calculated and presented in accordance with U.S. Generally Accepted Accounting Principles that is most directly comparable to Net Debt.
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