MRC Global Announces Q4 and Full Year 2012 Results
02/25/2013 - MRC Global said 2012 was a landmark year for the company as it completed anIPO and a secondary offering, significantly reduced debt and interest expense, improved its product mix and grew its business both organically and through strategic acquisitions.
MRC Global Inc., the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy and industrial sectors, announced fourth quarter and full year 2012 results. MRC's sales of US$1.307 billion in the fourth quarter of 2012 were in line with the prior year's quarter, driven by 9.4% growth in sales of the company's core product offerings offset by the planned reduction in the OCTG business. Sales in 2012 were a record of $5.571 billion, compared to $4.832 billion in 2011, an increase of 15%.
MRC reported a net loss of $6.4 million for the fourth quarter of 2012 compared to net income of $3.6 million in the fourth quarter of 2011. Fourth quarter 2012 net loss included pre-tax charges totaling $96.6 million ($62.8 million after tax) related to the redemption of MRC's outstanding 9.50% senior secured notes and the termination of a pension plan in the Netherlands. Excluding these charges, adjusted net income for the fourth quarter of 2012 was $56.4 million. Fourth quarter 2012 results reflected a $27.2 million benefit relating to the use of the last-in, first-out (LIFO) method of inventory cost accounting. Adjusted EBITDA was $99.2 million for the fourth quarter of 2012 compared to $100.3 million for the same period in 2011. See the tables below for a reconciliation of both adjusted net income and adjusted EBITDA to net income.
For the full year, MRC's reported net income for 2012 was $118.0 million compared to net income of $29.0 million in 2011. Excluding the impact of special items, adjusted net income for 2012 was $196.0 million. Adjusted EBITDA for 2012 was $463.2 million compared to $360.5 million in 2011, a 29% increase.
Andrew R. Lane, MRC's chairman, president and chief executive officer, stated, "2012 was a landmark year for MRC. We completed our IPO and a secondary offering, significantly reduced debt and interest expense, improved our product mix and grew our business both organically and through strategic acquisitions. In spite of an industry-wide slowdown in the fourth quarter, we still produced solid top-line growth of 21% for the year in our core product offerings, which excludes the OCTG business which we strategically began deemphasizing in 2012. We exceeded our expectations in executing on our strategic rebalancing away from the OCTG business in the fourth quarter, reducing its contribution to below 9% of our total revenue."
The company's North American sales were $1.166 billion in the fourth quarter of 2012 and reflect a decrease in OCTG revenues of $102.0 million from the fourth quarter of 2011. Excluding the OCTG business, North American revenues were 5.3% higher than last year's fourth quarter. International sales of $140.6 million in the fourth quarter of 2012 increased 55% over the same period in 2011, primarily due to the acquisition of OneSteel Piping Systems (MRC PSA) in March 2012.
Fourth quarter 2012 sales to the upstream sector declined 10% from the fourth quarter of 2011 to $574.4 million, or 44% of sales, as a result of the planned reduction in OCTG revenues. Fourth quarter 2012 midstream sales increased 6% over the same period in 2011 to $365.9 million, or 28% of sales. Fourth quarter 2012 sales to the downstream sector grew 13% over the same period in 2011 to $366.4 million, or 28% of sales, driven by the company's Australian acquisition, which is more heavily weighted toward the downstream sector than the company as a whole.
MRC's gross profit of $258.3 million in the fourth quarter of 2012 improved by 550 basis points to 19.8% of sales compared to $187.4 million, or 14.3% of sales, in the fourth quarter of 2011. The increase in gross profit percentage reflected improved product sales mix, pricing and cost of product initiatives, including a $27.2 million fourth quarter 2012 benefit resulting from the use of LIFO. For 2012, gross profit was $1.014 billion, or 18.2% of sales, compared to $708.2 million, or 14.7% of sales, in 2011.
For the fourth quarter of 2012, selling, general and administrative expenses (SG&A) were $154.2 million compared to $137.5 million in the same period in 2011. This increase was primarily attributable to the inclusion of expenses from MRC PSA in Australia and an increase in personnel expenses.
Mr. Lane continued, "Strong cash flow performance in the fourth quarter contributed toward full year cash flow from operations of $240.1 million, resulting in year-end net debt of $1.219 billion, down $261 million from 2011. With the refinancing steps we took in the quarter to significantly lower the interest rate on our debt, we expect to see significant interest expense savings in 2013 as compared to 2012."
Headquartered in Houston, Texas, MRC, a Fortune 500 company, is the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy and industrial sectors and supplies these products and services across each of the upstream, midstream and downstream sectors.
