Net income attributable to common stockholders for the third quarter of 2023 was $29 million, or
MRC Global’s third quarter 2023 gross profit was $183 million, or 20.6% of sales, as compared to the third quarter 2022 gross profit of $165 million, or 18.3% of sales. Gross profit for the third quarter of 2023 and 2022 includes $4 million of income and $24 million of expense, respectively, in cost of sales relating to the use of the last-in, first-out (LIFO) method of inventory cost accounting. Adjusted Gross Profit, which excludes (among other items) the impact of LIFO, was $189 million, or 21.3% of sales, for the third quarter of 2023 and was $198 million, or 21.9% of sales, for the third quarter of 2022.
Third Quarter 2023 Financial Highlights:
- Sales of
$888 million , a 2% improvement compared to the second quarter of 2023 - Adjusted Gross Profit, as a percentage of sales, of 21.3%
- Adjusted EBITDA of
$70 million , or 7.9% of sales and the company's 6th consecutive quarter above 7% - Cash Flow from operations of
$102 million during the third quarter, allowing the company to achieve our full year target of$90 million a quarter early - Net Debt leverage ratio of 0.9 times, the lowest in the company's public company history
Adjusted EBITDA was $70 million in the third quarter of 2023 compared to $82 million for the same period in 2022.
Adjusted net income attributable to common stockholders, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Gross Profit, Adjusted SG&A, Net Debt and Leverage Ratio are all non-GAAP measures. Please refer to the reconciliation of each of these measures to the nearest GAAP measure in this release.
Selling, general and administrative (SG&A) expenses were $126 million, or 14.2% of sales, for the third quarter of 2023 compared to $120 million, or 13.3% of sales, for the same period in 2022. Adjusted SG&A for the third quarter of 2023 was $123 million, or 13.9% of sales, excluding a $3 million customer settlement expense.
An income tax expense of $14 million was incurred in the third quarter of 2023, with an effective tax rate of 29%, as compared to an income tax expense of $10 million for the third quarter of 2022. Our rates differ from the
Sales
The company’s sales were $888 million for the third quarter of 2023, which was 2% higher than the second quarter of 2023 and 2% lower than the third quarter of 2022. As compared to the third quarter of 2022, the Production and Transmission Infrastructure (PTI) sector led with 10% growth followed by the Downstream, Industrial and Energy Transition (DIET) sector at 1%, offset by the
Sales by Segment
Sequentially, as compared to the second quarter of 2023,
Canada sales in the third quarter of 2023 were $38 million, up $1 million, or 3%, from the same quarter in 2022, as increases in the DIET and PTI sectors offset a decrease in the Gas Utilities sector.
Sequentially,
International sales in the third quarter of 2023 were $105 million, up $6 million, or 6%, from the same period in 2022 including a $3 million favorable impact from stronger foreign currencies. The increase was driven by the PTI sector primarily in the
Sequentially, as compared to the previous quarter, International sales were down $1 million, or 1%, due to a decrease in sales in the PTI sector, where reduced activity in
Sales by Sector
Sequentially, as compared to the second quarter of 2023, the
DIET sector sales in the third quarter of 2023 were $279 million, or 32% of total sales, an increase of $3 million, or 1%, from the third quarter of 2022. The increase in DIET sector sales was spread relatively evenly across the segments.
Sequentially, as compared to the previous quarter, sales in the DIET sector were up $34 million, or 14%, primarily due to increased turnarounds and projects in the
PTI sector sales in the third quarter of 2023 were $295 million, or 33% of total sales, an improvement of $26 million, or 10%, from the third quarter of 2022. The increase in PTI sales was led by the U.S. segment, followed by the International and
Sequentially, as compared to the prior quarter, PTI sector sales decreased $8 million, or 3%, driven by the Canada segment followed by the
Backlog
As of
Balance Sheet and Cash Flow
Cash provided by operations was $102 million in the third quarter of 2023. As of September 30, 2023, the cash balance was $52 million, long-term debt (including current portion) was $303 million, and Net Debt was $251 million. Availability under the company’s asset-based lending facility was $696 million, and available liquidity was $748 million as of
Please refer to the reconciliation of non-GAAP measures (Net Debt) to GAAP measures (Long-term Debt) in this release.
Conference Call
The company will hold a conference call to discuss its third quarter 2023 results at
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,” “anticipating,” “intend,” “believes,” "on-track," “well positioned,” “strong position,” “looking forward,” “guidance,” “plans,” “can,” "target," "targeted" and similar expressions are intended to identify forward-looking statements.
Statements about the company’s business, including its strategy, its industry, the company’s future profitability, the company’s guidance on its sales, adjusted EBITDA, adjusted EBITDA margin, tax rate, capital expenditures, achieving cost savings and cash flow, debt reduction, liquidity, growth in the company’s various markets and the company’s expectations, beliefs, plans, strategies, objectives, prospects and assumptions are not guarantees of future performance. These statements are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, most of which are difficult to predict and many of which are beyond
These risks and uncertainties include (among others) decreases in capital and other expenditure levels in the industries that the company serves;
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:
VP, Investor Relations &
Monica.Broughton@mrcglobal.com
832-308-2847
Condensed Consolidated Balance Sheets (Unaudited)
(in millions, except shares)
2023 | 2022 | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 52 | $ | 32 | ||
Accounts receivable, net | 518 | 501 | ||||
Inventories, net | 620 | 578 | ||||
Other current assets | 35 | 31 | ||||
Total current assets | 1,225 | 1,142 | ||||
Long-term assets: | ||||||
Operating lease assets | 206 | 202 | ||||
Property, plant and equipment, net | 77 | 82 | ||||
Other assets | 18 | 22 | ||||
Intangible assets: | ||||||
264 | 264 | |||||
Other intangible assets, net | 168 | 183 | ||||
$ | 1,958 | $ | 1,895 | |||
Liabilities and stockholders' equity | ||||||
Current liabilities: | ||||||
Trade accounts payable | $ | 438 | $ | 410 | ||
Accrued expenses and other current liabilities | 111 | 115 | ||||
Operating lease liabilities | 38 | 36 | ||||
Current portion of long-term debt | 3 | 3 | ||||
Total current liabilities | 590 | 564 | ||||
Long-term liabilities: | ||||||
Long-term debt, net | 300 | 337 | ||||
Operating lease liabilities | 184 | 182 | ||||
Deferred income taxes | 46 | 49 | ||||
Other liabilities | 20 | 22 | ||||
Commitments and contingencies | ||||||
6.5% Series A Convertible Perpetual Preferred Stock, | 355 | 355 | ||||
Stockholders' equity: | ||||||
Common stock, | 1 | 1 | ||||
Additional paid-in capital | 1,764 | 1,758 | ||||
Retained deficit | (693 | ) | (768 | ) | ||
Less: | (375 | ) | (375 | ) | ||
Accumulated other comprehensive loss | (234 | ) | (230 | ) | ||
463 | 386 | |||||
$ | 1,958 | $ | 1,895 |
Condensed Consolidated Statements of Operations (Unaudited)
(in millions, except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
Sales | $ | 888 | $ | 904 | $ | 2,644 | $ | 2,494 | ||||
Cost of sales | 705 | 739 | 2,107 | 2,042 | ||||||||
Gross profit | 183 | 165 | 537 | 452 | ||||||||
Selling, general and administrative expenses | 126 | 120 | 378 | 347 | ||||||||
Operating income | 57 | 45 | 159 | 105 | ||||||||
Other (expense) income: | ||||||||||||
Interest expense | (9 | ) | (6 | ) | (26 | ) | (17 | ) | ||||
Other, net | 1 | (5 | ) | (3 | ) | (11 | ) | |||||
Income before income taxes | 49 | 34 | 130 | 77 | ||||||||
Income tax expense | 14 | 10 | 37 | 23 | ||||||||
Net income | 35 | 24 | 93 | 54 | ||||||||
Series A preferred stock dividends | 6 | 6 | 18 | 18 | ||||||||
Net income attributable to common stockholders | $ | 29 | $ | 18 | $ | 75 | $ | 36 | ||||
Basic earnings per common share | $ | 0.34 | $ | 0.22 | $ | 0.89 | $ | 0.43 | ||||
Diluted earnings per common share | $ | 0.33 | $ | 0.21 | $ | 0.88 | $ | 0.42 | ||||
Weighted-average common shares, basic | 84.3 | 83.6 | 84.2 | 83.5 | ||||||||
Weighted-average common shares, diluted | 105.9 | 85.0 | 105.8 | 84.8 |
Notes to above:
(1) The preferred stock shares (20.3 million shares) were dilutive for the three and nine months ended
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in millions)
Nine Months Ended | ||||||
2023 | 2022 | |||||
Operating activities | ||||||
Net income | $ | 93 | $ | 54 | ||
Adjustments to reconcile net income to net cash provided by (used in) operations: | ||||||
Depreciation and amortization | 15 | 14 | ||||
Amortization of intangibles | 15 | 15 | ||||
Equity-based compensation expense | 10 | 9 | ||||
Deferred income tax benefit | (3 | ) | (1 | ) | ||
(Decrease) increase in LIFO reserve | (3 | ) | 50 | |||
Other, net | 12 | 13 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (20 | ) | (159 | ) | ||
Inventories | (45 | ) | (197 | ) | ||
Other current assets | (4 | ) | (11 | ) | ||
Accounts payable | 27 | 165 | ||||
Accrued expenses and other current liabilities | (5 | ) | 18 | |||
Net cash provided by (used in) operations | 92 | (30 | ) | |||
Investing activities | ||||||
Purchases of property, plant and equipment | (10 | ) | (8 | ) | ||
Other investing activities | (2 | ) | (2 | ) | ||
Net cash used in investing activities | (12 | ) | (10 | ) | ||
Financing activities | ||||||
Payments on revolving credit facilities | (776 | ) | (523 | ) | ||
Proceeds from revolving credit facilities | 743 | 569 | ||||
Payments on long-term obligations | (2 | ) | (2 | ) | ||
Debt issuance costs paid | (1 | ) | - | |||
Dividends paid on preferred stock | (18 | ) | (18 | ) | ||
Repurchases of shares to satisfy tax withholdings | (4 | ) | (2 | ) | ||
Net cash (used in) provided by financing activities | (58 | ) | 24 | |||
Increase (decrease) in cash | 22 | (16 | ) | |||
Effect of foreign exchange rate on cash | (2 | ) | (3 | ) | ||
Cash -- beginning of period | 32 | 48 | ||||
Cash -- end of period | $ | 52 | $ | 29 |
Supplemental Sales Information (Unaudited)
(in millions)
Disaggregated Sales by Segment and Sector
Three Months Ended | ||||||||||||
International | Total | |||||||||||
2023 | ||||||||||||
$ | 311 | $ | 2 | $ | 1 | $ | 314 | |||||
Downstream, Industrial & Energy Transition | 210 | 7 | 62 | 279 | ||||||||
Production & Transmission Infrastructure | 224 | 29 | 42 | 295 | ||||||||
$ | 745 | $ | 38 | $ | 105 | $ | 888 | |||||
2022 | ||||||||||||
$ | 355 | $ | 3 | $ | 1 | $ | 359 | |||||
Downstream, Industrial & Energy Transition | 209 | 6 | 61 | 276 | ||||||||
Production & Transmission Infrastructure | 204 | 28 | 37 | 269 | ||||||||
$ | 768 | $ | 37 | $ | 99 | $ | 904 |
Nine Months Ended | ||||||||||||
International | Total | |||||||||||
2023 | ||||||||||||
$ | 938 | $ | 4 | $ | 2 | $ | 944 | |||||
Downstream, Industrial & Energy Transition | 599 | 16 | 187 | 802 | ||||||||
Production & Transmission Infrastructure | 675 | 98 | 125 | 898 | ||||||||
$ | 2,212 | $ | 118 | $ | 314 | $ | 2,644 | |||||
2022 | ||||||||||||
$ | 934 | $ | 9 | $ | 1 | $ | 944 | |||||
Downstream, Industrial & Energy Transition | 576 | 20 | 165 | 761 | ||||||||
Production & Transmission Infrastructure | 593 | 91 | 105 | 789 | ||||||||
$ | 2,103 | $ | 120 | $ | 271 | $ | 2,494 |
Supplemental Sales Information (Unaudited)
(in millions)
Sales by Product Line
Three Months Ended | Nine Months Ended | ||||||||||||
Type | 2023 | 2022 | 2023 | 2022 | |||||||||
$ | 164 | $ | 173 | $ | 433 | $ | 417 | ||||||
Carbon Fittings and Flanges | 117 | 119 | 353 | 335 | |||||||||
Total Carbon Pipe, Fittings and Flanges | 281 | 292 | 786 | 752 | |||||||||
Valves, Automation, Measurement and Instrumentation | 306 | 290 | 920 | 821 | |||||||||
Gas Products | 191 | 205 | 612 | 587 | |||||||||
Stainless Steel and Alloy Pipe and Fittings | 40 | 53 | 108 | 147 | |||||||||
General Products | 70 | 64 | 218 | 187 | |||||||||
$ | 888 | $ | 904 | $ | 2,644 | $ | 2,494 |
Supplemental Information (Unaudited)
Reconciliation of Gross Profit to Adjusted Gross Profit (a non-GAAP measure)
(in millions)
Three Months Ended | |||||||||||||
Percentage | Percentage | ||||||||||||
2023 | of Revenue | 2022 | of Revenue* | ||||||||||
Gross profit, as reported | $ | 183 | 20.6 | % | $ | 165 | 18.3 | % | |||||
Depreciation and amortization | 5 | 0.6 | % | 5 | 0.6 | % | |||||||
Amortization of intangibles | 5 | 0.6 | % | 4 | 0.4 | % | |||||||
(Decrease) increase in LIFO reserve | (4 | ) | (0.5 | )% | 24 | 2.7 | % | ||||||
Adjusted Gross Profit | $ | 189 | 21.3 | % | $ | 198 | 21.9 | % |
Nine Months Ended | |||||||||||||
Percentage | Percentage | ||||||||||||
2023 | of Revenue* | 2022 | of Revenue | ||||||||||
Gross profit, as reported | $ | 537 | 20.3 | % | $ | 452 | 18.1 | % | |||||
Depreciation and amortization | 15 | 0.6 | % | 14 | 0.6 | % | |||||||
Amortization of intangibles | 15 | 0.6 | % | 15 | 0.6 | % | |||||||
(Decrease) increase in LIFO reserve | (3 | ) | (0.1 | )% | 50 | 2.0 | % | ||||||
Adjusted Gross Profit | $ | 564 | 21.3 | % | $ | 531 | 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 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 (SG&A) to Adjusted SG&A (a non-GAAP measure)
(in millions)
Three Months Ended | Nine Months Ended | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
Selling, general and administrative expenses | $ | 126 | $ | 120 | $ | 378 | $ | 347 | ||||
Customer settlement (1) | (3 | ) | - | (3 | ) | - | ||||||
Non-recurring IT related professional fees | - | - | (1 | ) | - | |||||||
Adjusted Selling, general and administrative expenses | $ | 123 | $ | 120 | $ | 374 | $ | 347 |
Notes to above:
(1 | ) | Charge (pre-tax) for a customer settlement in our |
Supplemental Information (Unaudited)
Reconciliation of Net Income to Adjusted EBITDA (a non-GAAP measure)
(in millions)
Three Months Ended | Nine Months Ended | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
Net income | $ | 35 | $ | 24 | $ | 93 | $ | 54 | ||||
Income tax expense | 14 | 10 | 37 | 23 | ||||||||
Interest expense | 9 | 6 | 26 | 17 | ||||||||
Depreciation and amortization | 5 | 5 | 15 | 14 | ||||||||
Amortization of intangibles | 5 | 4 | 15 | 15 | ||||||||
Non-recurring IT related professional fees | - | - | 1 | - | ||||||||
(Decrease) increase in LIFO reserve | (4 | ) | 24 | (3 | ) | 50 | ||||||
Equity-based compensation expense (1) | 3 | 3 | 10 | 9 | ||||||||
Customer settlement (2) | 3 | - | 3 | - | ||||||||
Asset disposal (3) | - | - | 1 | - | ||||||||
Foreign currency losses | - | 6 | 4 | 13 | ||||||||
Adjusted EBITDA | $ | 70 | $ | 82 | $ | 202 | $ | 195 |
Notes to above:
(1 | ) | Charges (pre-tax) recorded in SG&A. |
(2 | ) | Charge (pre-tax) for a customer settlement in our |
(3 | ) | 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, 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 Income (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 | Nine Months Ended | |||||||||||
Amount | Per Share | Amount | Per Share | |||||||||
Net income attributable to common stockholders (3) | $ | 29 | $ | 0.33 | $ | 75 | $ | 0.88 | ||||
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 | 2 | 0.02 | ||||||||
Decrease in LIFO reserve, net of tax | (3 | ) | (0.03 | ) | (2 | ) | (0.02 | ) | ||||
Adjusted net income attributable to common stockholders (3) | $ | 28 | $ | 0.32 | $ | 77 | $ | 0.90 |
Notes to above:
(1 | ) | An after-tax charge for an asset disposal in our International segment. |
(2 | ) | An after-tax charge for a customer settlement in our |
(3 | ) | Earnings per share represents diluted earnings per share. For the three months ended September 30, 2023, the diluted earnings per common share calculation is calculated as net income of |
Three Months Ended | Nine Months Ended | |||||||||||
Amount | Per Share | Amount | Per Share | |||||||||
Net income attributable to common stockholders | $ | 18 | $ | 0.21 | $ | 36 | $ | 0.42 | ||||
Increase in LIFO reserve, net of tax | 18 | 0.21 | 38 | 0.45 | ||||||||
Adjusted net income attributable to common stockholders | $ | 36 | $ | 0.42 | $ | 74 | $ | 0.87 |
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
Supplemental Information (Unaudited)
Reconciliation of Long-term Debt to Net Debt (a non-GAAP measure) and the Leverage Ratio Calculation
(in millions)
2023 | |||
Long-term debt, net | $ | 300 | |
Plus: current portion of long-term debt | 3 | ||
Long-term debt | 303 | ||
Less: cash | 52 | ||
Net Debt | $ | 251 | |
Net Debt | $ | 251 | |
Trailing twelve months adjusted EBITDA | 268 | ||
Leverage ratio | 0.9 |
Notes to above:
Net Debt and related leverage metrics may be considered non-GAAP measures. The company defines Net Debt as total long-term debt, including current portion, minus cash. The company defines its 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
Source:
2023 GlobeNewswire, Inc., source