PVF: MRC Global announces first quarter results
MRC Global recently announced its first quarter 2017 results. The company's sales were $862 million for the first quarter of 2017, which were 10% higher than the first quarter of 2016 and 20% higher than the fourth quarter of 2016. As compared to last year, increased customer activity primarily in the midstream sector drove the improvement.
Net income (loss) attributable to common stockholders for the first quarter of 2017 was $0 million, or $0.00 per diluted share, compared to net loss attributable to common stockholders of $(14) million, or $(0.14) per diluted share for the first quarter of 2016. The first quarter 2016 results include after-tax severance and restructuring charges of $4 million. There were no such charges in the first quarter of 2017.
"We are confident the recovery in the oil and gas market is underway with first quarter 2017 revenue higher than any quarter in 2016,” MRC Global President and CEO Andrew Lane said. “This quarter, we saw a 20% sequential increase in sales. This performance was driven by growth across all sectors with very strong performance in our midstream transmission and gathering sector as well as each of our Canadian and U.S. upstream businesses. Also, this quarter we completed the additional authorization of our stock repurchase program buying $18 million in stock for a total of $125 million since the program was implemented."
MRC Global's first quarter 2017 gross profit was $140 million or 16.2% of sales, an increase from first quarter 2016 gross profit of $133 million, or 17.0% of sales. Gross profit for the first quarter of 2017 and 2016 reflects an expense of $1 million and a benefit of $3 million, respectively, in cost of sales relating to the use of the last-in, first out (LIFO) method of inventory cost accounting.
Selling, general and administrative (SG&A) expenses were $126 million or 14.6% of sales for the first quarter of 2017 compared to $137 million, or 17.5% of sales, for the same period of 2016. SG&A expenses were 8% lower than the first quarter of 2016, primarily due to cost reduction measures taken in 2016. SG&A expenses for the first quarter of 2016 include $5 million of pre-tax severance and restructuring charges. There were no such charges in the first quarter of 2017.
Adjusted EBITDA was $36 million in the first quarter of 2017 compared to $19 million for the same period in 2016. Please refer to the reconciliation of adjusted EBITDA (a non-GAAP measure) to net income (loss) (a GAAP measure) in this release.
The effective tax rate in the first quarter of 2017 was 14% as a result of the impact of a discrete tax benefit related to a new accounting standard adopted in the quarter.
Sales by segment
U.S. sales in the first quarter of 2017 were $666 million, up $60 million, or 10%, from the same quarter in 2016. Excluding $18 million of revenue earned in the first quarter of 2016 related to the U.S. oil country tubular goods (OCTG) product line, which was sold in February 2016, U.S. sales increased 13%. The increase is due to higher rig counts and a large ongoing project with one of our transmission customers, partially offset by the conclusion of a large petrochemical project.
Canadian sales in the first quarter of 2017 were $77 million, up $13 million, or 20%, from the same quarter in 2016 primarily due to the upstream business. About $3 million of the total increase was a result of a stronger Canadian dollar relative to the U.S. dollar.
International sales in the first quarter of 2017 were $119 million, up $6 million, or 5%, from the same period in 2016. The increase was primarily due to a $12 million Australian line pipe contract in the midstream sector partially offset by a decline in upstream activity.
Sales by sector
Upstream sales in the first quarter of 2017 increased 6% over the first quarter of 2016 to $245 million, or 28% of total sales. The increase in upstream sales was primarily in our Canadian segment followed by the U.S. as a result of increased customer activity. Excluding OCTG revenue from the first quarter of 2016, U.S. upstream sales increased $27 million or 24% in the first quarter of 2017. International upstream sales decreased 17% in the first quarter of 2017 from the first quarter of 2016.
Midstream sales in the first quarter of 2017 increased 33% from the first quarter of 2016 to $371 million or 43% of total sales. Sales to transmission and gathering customers were up 48% while sales to gas utility customers were up by 20% over the same quarter in 2016.
Downstream sales in the first quarter of 2017 decreased 10% from the first quarter of 2016 to $246 million, or 29% of total sales. The U.S. downstream sector decreased by $32 million, or 15%, primarily due to the conclusion of a large petrochemical project. Sequentially, the U.S. downstream sector increased $13 million or 8% primarily related to an increase in refining turnaround activity.
Cash balances were $93 million at March 31, 2017. Debt, net of cash, was $319 million at March 31, 2017. During the first quarter of 2017, the company generated $22 million of cash from operations.
Share repurchase program update
In November 2015, the board of directors authorized a share repurchase program for common stock of up to $100 million, which was increased in November 2016 to $125 million. During the first quarter of 2017, the company repurchased $18 million of its common stock at an average price of $20.54 per share completing the current authorization under the share repurchase program. In total, the company has repurchased 8.5 million shares at an average price of $14.64. The outstanding share count as of March 31, 2017 is 94.4 million shares.