8K Cover (Earnings Release) 1231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

___________________________________



FORM 8-K



___________________________________



CURRENT REPORT



Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



date of Report (Date of earliest event reported): February 15, 2018



___________________________________





MRC Global inc.

(Exact name of registrant as specified in its charter)



___________________________________





 

 

 


Identification Number)

Delaware

(State or other jurisdiction of incorporation)

001-35479

(Commission

File Number)

20-5956993 

(I.R.S. Employer
Identification Number)



 

Fulbright Tower, 1301 McKinney Street,  Suite 2300 

Houston, Texas 77010
(Address of Principal Executive Offices)

 

 

Registrant’s telephone number, including area code:  (877) 294-7574





Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):



[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





 


 

Item 2.02Results of Operations and Financial Condition

On February 15, 2018, MRC Global Inc. (“MRC Global” or the “Company”) issued a press release announcing its financial results for the year ended December  31, 2017. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 5.02Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers



In February 2018, we granted the following named executive officers named in the table below performance stock units pursuant to the MRC Global Inc. 2011 Omnibus Incentive Plan in addition to certain time-vested restricted stock units reported on Forms 4.  Each recipient of performance stock units can earn shares of Company common stock between 0% and 175% of the target number of units based:



·

50% on a three-year total shareholder return relative to the companies in the Philadelphia OSX Index (the “OSX Index”) at the end of the three-year period ending December 31, 2020 (the “Performance Period”) and

·

50% on a three-year return on average net capital employed objective for the Performance Period. 



The performance stock units vest at the end of the Performance Period so long as the recipient remains employed with the Company when the performance against the two criteria is measured.



Below is the number of target performance stock units that the Company granted to each named executive officer:





 

 

Name

Job Title

# of Performance Stock Units

Lane, Andrew R.

President & Chief Executive Officer

114,471

Braun, James E.

Executive Vice President & Chief Financial Officer

28,265

Churay, Daniel J.

Executive Vice President – Corporate Affairs, General Counsel, Corporate Secretary

21,022

Bates, Grant R.

Senior Vice President & Chief Information Officer

9,186

Bowhay, John L.

Senior Vice President, Supply Chain Management, Valve & Technical Product Sales

10,415




 

Item 7.01Regulation FD Disclosure.



MRC Global expects the following results with respect to the operations and performance of the Company for the 2018 fiscal year:



·

The Company expects 2018 revenue to be between $3,850 million and $4,250 million.



·

The Company expects revenue in the upstream sector to be up 10-20%, revenue in the midstream sector to be up 5-15% and revenue in the downstream sector to be up 5-15%, in each case, for the full year 2018 as compared to 2017



·

The Company expects double digit percentage revenue growth in both the U.S. and Canada segments.  The Company expects International revenue to experience a mid-single digit percentage increase.



·

Sequentially, the Company expects first quarter 2018 revenue to be up low to mid-single digit percentage from the fourth quarter of 2017.



·

Given MRC Global’s current mix of products and projects, the Company expects a gross profit percentage of 16.7% and an Adjusted Gross Profit percentage of 19% for 2018.  Adjusted Gross Profit percentage is a non-GAAP measure that is not necessarily better than gross profit percentage.  The Company defines Adjusted Gross Profit as sales, less cost of sales, plus depreciation and amortization, plus amortization of intangibles, and plus or minus the impact of its last-in, first-out (“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.



The following table reconciles Adjusted Gross Profit and Adjusted Gross Profit percentage (non-GAAP measures) to gross profit and gross profit percentage (GAAP measures):



 

 



Expected for the Year Ended 2018

Percentage of Expected Revenue*

Gross profit

$                  678 

16.7% 

Depreciation and amortization

                      23 

0.6% 

Amortization of intangibles

                      44 

1.1% 

LIFO expense 

                      25

                       0.6%

Adjusted Gross Profit

$                  770 

19.0% 



* Percentages are based on the midpoint of revenue guidance provided above.


 



·

The Company expects selling, general and administrative expense to be between $525 million and $535 million in 2018.



·

The Company expects to generate approximately $50 million of cash from operations in 2018.



·

The Company expects to have an effective tax rate of 27% for the full year of 2018.



·

The Company expects its total capital expenditures for 2018 to be approximately $25 million.



·

Assuming no acquisitions, the Company expects net leverage to decrease in 2018.





The above information, as well as information contained in Exhibit 99.1 referenced under Item 9.01 below, contain 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,” “expects,” “expected,” “believes,” “looking forward,” “guidance” 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, gross profit, gross profit percentage, Adjusted Gross Profit and Adjusted Gross Profit percentage, tax rate, capital expenditures and cash from operations, 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 our control, including the factors described in the company’s SEC filings that may cause our 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; increased usage of alternative fuels, which may negatively affect oil and natural gas industry expenditure levels; 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 debt 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; 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; 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 our 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 laws and regulations in the countries in which we operate, including (among others) changes in tax law, tax rates and interpretation in tax laws.  In addition, the Company’s intention to continue to repurchase shares of the Company’s common stock is also subject to the trading price of the stock being at prices that the Company believes are favorable to stockholders and to the Company’s debt and liquidity levels being at levels the Company deems sufficient to repurchase shares. 



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.  Our filings and other important information are also available on the Investor Relations page of our 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.



The information referenced under Item 7.01 (including Exhibit 99.1 referenced under Item 9.01 below) of this Current Report on Form 8-K is being “furnished” under “Item 7.01.  Regulation FD Disclosure” and, as such, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.  The information set forth in this Current Report on Form 8-K (including Exhibit 99.1 referenced under Item 9.01 below) shall not be incorporated by reference into any registration statement, report or other document filed by MRC Global pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.



Item 9.01 Financial Statements and Exhibits.





 

(d)

Exhibits.

99.1 Press release of MRC Global Inc. dated February 15, 2018

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:    February 15, 2018

MRC GLOBAL INC.

By: /s/ James E. Braun                                                    

James E. Braun

Executive Vice President and Chief Financial Officer





 


 

INDEX TO EXHIBITS

 

re

 

 



 

 

Exhibit No.

  

Description



 

99.1

  

Press release dated February 15, 2018