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| 8-K - FORM 8-K - MRC GLOBAL INC. | d884042d8k.htm |
 1
March 4, 2015
Investor Presentation
Andrew Lane
Chairman, President & CEO
Jim Braun
Executive Vice President & CFO
Exhibit 99.1
TM |
 2
2
This
presentation
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”,
“looking
forward”,
“guidance”
and
similar
expressions
are
intended
to
identify
forward-looking
statements.
Statements
about
the
company’s
business,
including
its
strategy,
the
impact
of
changes
in
oil
prices
and
customer
spending,
its
industry,
the
company’s
future
profitability,
the
company’s
guidance
on
its
sales,
adjusted
EBITDA,
adjusted
gross
profit,
tax
rate,
capital
expenditures
and
cash
flow,
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.
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,
Our
filings
and
other
important
information
are
also
available
on
the
Investor
Relations
page
of
our
website
at
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.
www.mrcglobal.com.
Forward Looking Statements and Non-GAAP Disclaimer
www.mrcglobal.com. |
 3
By the Numbers
1
Industry Sectors
Product Categories
2014 Sales
Adjusted EBITDA
$5.933B
$424M
Upstream
Line Pipe & OCTG
Employees
~4,900
2
Locations
400+
Midstream
Valves
Countries
•
Operations
•
Direct Sales
(>$100,000)
•
All countries
20
45+
90+
Customers
21,000+
Downstream/
Industrial
Fittings & Flanges
Suppliers
21,000+
SKU’s
230,000+
Company Snapshot
MRC
Global
is
the
largest
global
distributor
of
pipe,
valves
and
fittings
(PVF)
to the energy industry, by sales
1.
As of December 31, 2014.
2.
With cost savings actions taken in the first quarter, this figure is expected to be
about 4,700. |
 4
Revenue by Industry Sector
Note: Percentage of sales for the year ended December 31, 2014.
Upstream
47%
Downstream 25%
28% Midstream
Diversified Across All Three Major Energy Sectors
Transmission
18%
Drilling & Completion
Tubulars
(OCTG)
10%
Production
Infrastructure,
Materials &
Supplies
37% |
 5
By Product Line
Revenue by Geography and Product Line
Note: Percentage of sales for the year ended December 31, 2014.
By Geography
Houston, TX
Edmonton, AB
Bradford, UK
Singapore
Perth, AU
Stavanger, NO
Diversified Across Multiple Geographies -
Domestically (all shale plays) and Internationally
32%
18%
21%
19%
10% |
 6
Downstream
Midstream
Upstream
MRC Global plays a vital role in the complex, technical, global energy supply
chain Long-Term Supplier & Customer Relationships
CUSTOMERS
SUPPLIERS
IOCs
Phillips 66
Valero
DOW
DuPont
Marathon
Petroleum
Access
Midstream
AGL
Resources
Atmos
NiSource
PG&E
Williams
DCP
Midstream
Chesapeake
Energy
ConocoPhillips
Devon
Apache
Anadarko
CNRL
Hess
Husky
Energy
Marathon
Oil
Statoil
Energy Carbon Steel
Tubular Products
Valves
Fittings, Flanges and General
Use Products
Tenaris
TMK-
IPSCO
U.S.
Steel
CSI Tubular
JMC
Wheatland
Balon
Cameron
Flowserve
Kitz
Neway
Velan
Boltex
Bonney
Forge
Chevron
Phillips
Chemical
Tube
Forgings of
America
WL Plastics
Emerson |
 7
Benefits of MRC Global
Generating savings and efficiencies for our customers
enabling them to focus on their core competencies
MRC Global is #7 on Industrial
Distribution magazine’s annual list of
the
50
largest
industrial
distributors
1
,
“The Big 50”
1. September/October 2014 edition, based on 2013 revenue.
1.
Wolseley
2.
Wurth Group
3.
W.W. Grainger
4.
HD Supply
5.
Wesco
6.
Anixter
7.
MRC Global
•
Supplier Registration / Preferred Supplier List
•
Global delivery footprint with 1.5 million + sq. ft. of
regional distribution centers
•
Approximately $1.2B in global inventory, net
•
Global sourcing from 45+ countries
Why
Customers
Choose
MRC
Global
–
Well
Positioned |
 8
Integrated Supply Statistics
•
Supplying Integrated Supply services since
1988 •
Accounts
for
sales
in
excess
of
$825
million
and
growing
rapidly
•
Employ over 190 personnel at customer
sites •
Providing Integration Services on over 100 customer
sites •
Managing
over 1.4 million customer part numbers
•
Consignment inventories in excess of $35 million at 700
locations
•
Manage
customer-owned
point
of
use
materials
at
over
800 locations
MRC Global is a leading provider of Integrated Supply
Services to the Energy Industry |
 9
Strategic Objectives
Rebalance Product Mix to
Higher Margin Items
•
Focus on valve and valve automation
•
Strengthen offerings in stainless & alloy PFF
Growth from Mergers & Acquisitions
1.
Percentage of sales for the year ended December 30, 2014.
All
Other
-
21,000+
customers
Targeted Growth Accounts
Top 1 -
25
Customer
Mix
-
Sales
1
Execute Global Preferred Supplier Contracts
•
Targeted Growth Accounts:
Organic Growth
develop the “next 75”
customers
•
Marathon Oil –
US MRO, 5 years
•
Statoil –
Johan Sverdrup project, instrumentation
•
Mark West –
midstream MRO, 5 years
•
Recently added or renewed:
•
Focus
on
multi-year
“Top
25”
MRO
agreements
and
adding scope to current agreements
•
Current expectation is to use free cash flow to
repay debt $200-$300 million in 2015
•
Continue to identify geographic and product line
opportunities, no acquisitions expected in 2015 |
 10
Strategic Shift in Product Mix to Higher Margin Products
($ millions)
Total Revenue less Carbon Energy Tubulars (OCTG & Line Pipe)
15%
CAGR
for
Higher
Margin
Products
2010
-
2014
$2,384
$2,989
$3,697
$3,705
$4,238
2010
2011
2012
2013
2014 |
 11
Product Mix Shift from 2008 to 2014
•
Stable, higher margin valves are a larger percentage of revenue
•
More volatile carbon pipe is a smaller percentage of revenue
•
The prices of higher margin products are more stable
55%
Higher
Margin
Products
45%
Carbon
Pipe
2008
71%
Higher
Margin
Products
29%
Carbon
Pipe
2014
Note: Percentage of sales for the year ended December 31, 2008 and December 31, 2014.
|
 12
•
Inflation impacted both OCTG and LP in 2008…resulting in a significant
reduction in prices in 2009
•
Today, prices are lower and have less to fall in a downturn
Line Pipe Prices
OCTG Prices
48%
47%
Carbon Steel Prices in 2008/2009 as Compared to Today
Note:
Prices
are
per
ton
as
reported
in
published
market
data.
Amounts
reflect
peak
prices
in
September
2008,
trough
prices
in
November
2009.
2014
peak
prices
for
OCTG
are
from
November
and
Line
Pipe from August. 2015 prices are the most recently available.
9%
1% |
 13
Strategic Expansion into Offshore Production Platform MRO
1. Source: Rystad Energy, September 2014
($ billions)
•
MRC Global revenue mix
•
Top 4 largest offshore markets ~$140 billion E&P spend
•
Norway
is
the
largest
–
we
are
now
positioned
in
4
of
the
5
largest
offshore
markets
•
Pro-forma
post
Stream
acquisition
–
approx.
92%
onshore,
8%
offshore
•
Pre
Stream
acquisition
–
approx.
98%
onshore,
2%
offshore |
 14
Building an International Platform
$0
$52
$256
$330
$567
$554
$873
2008
2009
2010
2011
2012
2013
2014
International Segment Revenue
($ millions) |
 15
Financial Overview |
 16
Financial Metrics
Sales
Adjusted Gross Profit and % Margin
Adjusted EBITDA and % Margin
8.5%
($ millions, except per share data)
Y-o-Y Growth
28%
24%
(5%)
11%
Y-o-Y Growth
61%
29%
(17%)
10%
5.8%
7.5%
8.3%
7.4%
7.1%
Y-o-Y Growth
26%
15%
(6%)
13%
Diluted EPS
Y-o-Y Growth
156%
259%
21%
(5%)
17.2%
17.6%
19.0%
19.3%
18.9%
2010 |
 17
Balance Sheet Metrics
Total Debt
Capital Structure
Cash Flow from Operations
Net Leverage
($ millions)
2014
Cash and Cash Equivalents
$ 25
Total Debt
(including
current portion):
Term Loan
B due 2019, net of discount
780
Global ABL Facility due 2019
674
Total Debt
$
1,454
Total Equity
$ 1,397
Total Capitalization
$ 2,851
Liquidity
$ 302
2010
2011
2012
2013
2014 |
 18
Summary of Certain Debt Terms
•
Repayment
•
No
near-term
maturities
-
Global
ABL
and
Term
Loan
B
mature
in
2019
•
Term Loan B has 1% per year amortization, paid quarterly
•
Term Loan B requires repayment in form of annual excess cash flow sweep
•
maximum of 50% of annual “Excess Cash Flow”
•
Financial Maintenance Covenants
•
No financial maintenance covenants currently in effect
•
Under
the
Global
ABL,
if
“Excess
Availability”
is
less
than
the
greater of :
•
10%
of
the
“ABL
Commitment”
-
The
threshold
is
approximately
$105
million
(10%
of
the
$1.050
billion
commitment)
or
$79.8
million,
•
then
a
“Fixed
Charge
Coverage
Ratio”
of
1.0
:
1.0
is
required
•
As of December 30, 2014:
•
“Excess
Availability”
is
approximately
$302
million
•
“Fixed
Charge
Coverage
Ratio”
is
2.29 |
 19
2015 Outlook
•
Market indicators
–
North American E&P capital expenditure budgets down 35% or more
–
US rig count down 800-900 from peak in 2014
•
Commodities
–
WTI Oil price $45-$55/bbl (Brent $50-$60)
–
US Natural Gas prices $2.50-$3.50/mcf
•
Expect to generate $200-$300 million of free cash flow
•
Cash flow to be used to reduce debt
•
Cost savings measure undertaken
–
Headcount reduction
–
Lower incentive compensation
–
Salary and hiring freezes
•
Revenue headwinds $100 million or more related to currency
•
Potential deflation in tubular products 5%-15% |
 20
Macro drivers
•
Growth in global energy consumption
driving investment
•
Increased global production
•
Need for additional energy infrastructure
•
Expansion of downstream energy
conversion businesses
Investment Thesis Highlights
Leading global PVF distributor to the energy sector
MRC Global attributes
•
Market leader
•
Exposed to all sectors of global energy
•
Long term global customer & supplier
relationships
•
Generates strong cash flow from operations
over the cycle |
 21
Appendix |
 22
Global
Footprint
to
Serve
Customers
-
North
America
Munster, IN
Nitro, WV
Tulsa, OK
Houston, TX
Nisku, AB
Cheyenne, WY
Odessa, TX
Bakersfield, CA
San Antonio, TX
By the Numbers
As of 12/31/2014
Branches
RDCs
VACs
Employees
170+
10
14
~3,400
Regional Distribution Centers
Corporate Headquarters
Valve Automation Centers
Branch Locations |
 23
Global
Footprint
to
Serve
Customers
-
Europe
Regional Distribution Centers
Valve Automation Centers
Branch Locations
Stavanger, NO
By the Numbers
As of 12/31/2014
Branches
37
RDCs
3
VACs
14
Countries
8
Employees
~900
Rotterdam, NL
Bradford, UK |
 24
Global Footprint to Serve Customers -
Asia Pacific & Middle East
Regional Distribution Centers
Valve Automation Centers
Branch Locations
Singapore
Perth, WA
Brisbane, QLD
Dubai, UAE
By the Numbers
As of 12/31/2014
Branches
24
RDCs
4
VACs
6
Countries
10
Employees
~400 |
 25
1.
Reflects reported revenues for the year of acquisition or 2013 for Stream, MSD and
HypTeck. M&A -
Track Record of Strategic Acquisitions
Acquisition Priorities
•
International
branch
platform
for
“super
majors”
E&P
spend
•
Branch platforms/infrastructure for North American shale plays
•
Global valve and valve automation
•
Global stainless/alloys
$ 1.46 Billion +
Date
Acquisition
Rationale
Region
Revenue
1
($ millions)
Oct-08
LaBarge
Midstream
U.S.
$ 233
Oct-09
Transmark
International valve platform
Europe and Asia
346
May-10
South Texas Supply
Domestic shale
Eagle
Ford
Shale
-
South
Texas
9
Aug-10
Dresser Oil Tools Supply
Domestic shale
Bakken
Shale
-
North
Dakota
13
Jun-11
Stainless Pipe and Fittings
Projects
Australia / SE Asia
91
Jul-11
Valve Systems and Controls
Valve automation
U.S. Gulf of Mexico
13
Mar-12
OneSteel
Piping Systems
International PVF expansion
Australia
174
Jun-12
Chaparral Supply
Domestic shale
Mississippian Lime -
Oklahoma / Kansas
71
Dec-12
Production Specialty Services
Domestic shale
Permian Basin / Eagle Ford shale
127
Jul-13
Flow Control
Products
Valve automation
Permian Basin / Eagle Ford shale
28
Dec-13
Flangefitt
Stainless
Stainless/Alloys
United Kingdom
24
Jan-14
Stream
International Offshore PVF
Norway
271
May-14
MSD Engineering
Valve automation
Singapore & SE Asia
26
Jun-14
HypTeck
International Offshore
Norway
38 |
 26
Year Ended December 31
($ millions)
2014
2013
2012
2011
2010
Net income
$ 144.1
$ 152.1
$ 118.0
$ 29.0
$ (51.8)
Income tax expense
81.8
84.8
63.7
26.8
(23.4)
Interest expense
61.8
60.7
112.5
136.8
139.6
Depreciation and amortization
22.5
22.3
18.6
17.0
16.6
Amortization of intangibles
67.8
52.1
49.5
50.7
53.9
Increase (decrease) in LIFO reserve
11.9
(20.2)
(24.1)
73.7
74.6
Expenses associated with refinancing
-
5.1
1.7
9.5
-
Loss on early extinguishment of debt
-
-
114.0
-
-
Change in fair value of derivative instruments
1.1
(4.7)
(2.2)
(7.0)
4.9
Equity-based compensation expense
8.9
15.5
8.5
8.4
3.7
Inventory write-down
-
-
-
-
0.4
M&A transaction & integration expenses
-
-
-
0.5
1.4
Severance & related costs
7.5
0.8
-
1.1
3.2
Loss on sale of Canadian progressive cavity pump business
6.2
-
-
-
-
Loss on disposition of rolled and welded business
4.1
-
-
-
-
Cancellation of executive employment agreement (cash portion)
3.2
-
-
-
-
Insurance charge
-
2.0
-
-
-
Foreign currency losses (gains)
2.5
12.9
(0.8)
(0.6)
0.3
Pension settlement
-
-
4.4
-
-
Legal and consulting expenses
-
-
-
9.9
4.2
Provision for uncollectible accounts
-
-
-
0.4
(2.0)
Joint venture termination
-
-
-
1.7
-
Other expense (income)
0.6
3.0
(0.6)
2.6
(1.4)
Adjusted EBITDA
$ 424.0
$ 386.4
$ 463.2
$ 360.5
$ 224.2
Adjusted EBITDA Reconciliation |
 27
Year Ended December 31
($ millions)
2014
2013
2012
2011
2010
Gross profit
$ 1,018.1
$ 954.8
$ 1,013.7
$ 708.2
$ 518.1
Depreciation and amortization
22.5
22.3
18.6
17.0
16.6
Amortization of intangibles
67.8
52.1
49.5
50.7
53.9
Increase (decrease) in LIFO reserve
11.9
(20.2)
(24.1)
73.7
74.6
Adjusted Gross Profit
$ 1,120.3
$ 1,009.0
$ 1,057.7
$ 849.6
$ 663.2
Adjusted Gross Profit Reconciliation |