MRC Global Inc. (NYSE: MRC), the leading global distributor, based on sales, of pipe, valves and fittings and related products and services to the energy industry, recently stated 3rd-quarter 2k19 results.
The company’s sales were $942.00M for the 3rd-quarter of 2k19, which was 4.0 percent lower than the 2nd-quarter of 2k19 and 12.00 percent lower than the 3rd-quarter of 2k18. The sequential decline was driven by a decline in the midstream sector, partially offset by a slight incline in the upstream and downstream sectors. As a contrast to the 3rd-quarter of 2k18, sales reduced across all segments and end-markets.
Net income attributable to common stockholders for the 3rd-quarter of 2k19 was $15.00M, or $0.18 for each diluted share, as a contrast to $18.00M, or $0.200 for each diluted share in the 3rd-quarter of 2k18. The 3rd-quarter of 2k19 included after-tax severance charges of $4.00M, or $0.050 for each diluted share.
Andrew R. Lane, MRC Global’s president and chief executive officer stated, “We are happy to see progress from our strategy to incline margins, as we achieved 20.00 percent adjusted gross profit this quarter. Revenue in the 3rd-quarter, however, was lower because of progressively weaker market conditions and unusually low customer spending patterns. We remain focused on maximizing shareholder returns throughout the cycle as we repurchased $13.00M of our stock throughout the 3rd-quarter. So far in 2k19, we have generated $134.00M of cash from operations, reduced debt, improved working capital efficiency and executed cost reduction programs, counting headcount reductions of 180 in the 3rd-quarter. This 1st-phase of cost reductions is expected to yield annual savings of about $12.00M, and we have more programs underway. In total, our headcount is down 230 since the end of 2k18. In durations of slower growth, our business continues to generate cash, and we expect to generate at least $200.00M of cash from operations in 2k19.”
MRC Global’s 3rd-quarter 2k19 gross profit was $174M, or 18.50 percent of sales, in contrast to gross profit of $172.00M, or 16.10 percent of sales, in the 3rd-quarter of 2k18. Gross profit for the 3rd-quarter of 2k19 and 2k18 reflects income of $2.00M and cost of $26.00M, respectively, in cost of sales regarding the use of the last-in, 1st-out (LIFO) method of inventory cost accounting. The improvement in gross profit percent was attributable mainly to the lower LIFO cost.
Selling, general and administrative costs were $137.00M, or 14.50 percent of sales, for the 3rd-quarter of 2k19 contrast to $140.00M, or 13.10 percent of sales, for a similar duration of 2k18. SG&A costs for the 3rd-quarter of 2k19 included $5.00M of pre-tax severance charges.
Adjusted EBITDA was $62.00M in the 3rd-quarter of 2k19 contrast to $80.00M for a similar duration in 2k18. Please refer to the reconciliation of non-GAAP measures (adjusted gross profit and adjusted EBITDA) to GAAP measures (gross profit and net income) in this release.
Sales by Segment
U.S. sales in the 3rd-quarter of 2k19 were $763.00M, down $96.00M, or 11.00 percent, from the similar quarter in 2k18. Midstream declined $50.00M, or 12.00 percent, because of lower transmission and gathering activity. Upstream declined $24.00M, or 11.00 percent, as a result of raised capital discipline by our customers. Downstream declined by $22.00M, or 9.0 percent, because of non-recurring project work that resulted in a $20.00M decline in sales.
Canadian sales in the 3rd-quarter of 2k19 were $57.00M, down $21.00M, or 27.00 percent, from the similar quarter in 2k18 driven by the upstream sector, which continues to be negatively influenced by low Canadian oil prices and government-imposed production limits.
International sales in the 3rd-quarter of 2k19 were $122.00M, down $12.00M, or 9.0 percent, from the similar duration in 2k18 reflecting the conclusion of a major upstream project in Kazakhstan, in addition to, the impact of weaker foreign currencies relative to the U.S. dollar, which unfavorably influenced sales by $6.00M. Apart From the impact of the project and weaker foreign currencies, sales raised $23.00M, or 23.00 percent, because of improving market conditions, particularly in Norway and the United Kingdom.
Sales by Sector
Upstream sales in the 3rd-quarter of 2k19 reduced 15.00 percent from the 3rd-quarter of 2k18 to $287.00M, or 31.00 percent of total sales. The decline in upstream sales was across all geographic segments, as described above.
Midstream sales in the 3rd-quarter of 2k19 were $370.00M, or 39.00 percent of total sales, down $52.00M, or 12.00 percent, from the 3rd-quarter of 2k18. Sales to gas utility customers were flat for the quarter, while sales to transmission and gathering customers were down 26.00 percent over the similar quarter in 2k18. Gas utility sales are up 7.0 percent for the 1st-9.0-months of 2k19 contrast to a similar duration last year as we continue to grow our share in this market.
Downstream sales in the 3rd-quarter of 2k19 were $285.00M, or 30.00 percent of total sales, down $26.00M, or 8.0 percent, from the 3rd-quarter of 2k18 due mainly to the U.S. segment as described above.
Cash balances were $25.00M at September 30, 2k19. Debt, net of cash, was $602.00M and excess availability under our asset-based lending facility was $477.00M as of September 30, 2k19. Cash offered by operations was $126.00M in the 3rd-quarter of 2k19 bringing cash offered by operations for the 1st-9.0-months of 2k19 to $134.00M. MRC Global’s liquidity position of $502.00M is sufficient to support the business and capital needs of the Company.
Share Repurchase Programs
In October 2k18, the board of directors authorized a share repurchase program for common stock of up to $150.00M. As formerly stated, throughout the 3rd-quarter of 2k19, the Company purchased $13.00M of its common stock at an average price of $13.590 for each share. There is $12.00M remaining available under the current authorization. This program is planned to expire on December 31, 2k19. Shares may be repurchased at administration’s discretion in the open market. Depending on market conditions and other factors, these repurchases may be behind or suspended from time to time without previous notice.
Since 2015, the Company has repurchased $363.00M or 23.40M shares at an average price of $15.490 for each share. The outstanding share count as of September 30, 2k19 was 82.20M shares.