Houston, TX - MRC Global Inc. announced second quarter 2013 results.
MRC's sales of $1.268 billion in the second quarter of 2013 decreased 11% from the second quarter of 2012 due, in part, to a planned reduction in the company's lower margin oil country tubular goods (OCTG) business. OCTG represented 9% of total sales in the second quarter of 2013 compared to 14% of total sales in the second quarter of 2012. Continued weakness in the company's line pipe product group within the midstream and upstream sectors also impacted sales. Line pipe sales were $231.1 million for the second quarter of 2013 as compared to $294.4 million for the same period in 2012.
Net income for the second quarter of 2013 increased 13% to $43.9 million, or $0.43 per diluted share, compared to second quarter 2012 adjusted net income of $38.8 million, or $0.39 per diluted share, which excludes a $7.5 million after-tax ($0.07 per diluted share) charge related to the purchase and early retirement of a portion of MRC's previously outstanding senior secured notes in 2012. Net income for the second quarter of 2012 was $31.3 million, or $0.32 per diluted share. The refinancing of the company's senior secured notes in November 2012 contributed to lower interest expense in 2013. Other items impacting net income in the second quarter of 2013 included a $13.6 million pre-tax foreign currency exchange loss due to weaker Australian and Canadian dollars as well as a $2.6 million favorable adjustment to the company's deferred tax liabilities. Adjusted EBITDA was $98.9 million for the second quarter of 2013 compared to $123.6 million for the same period in 2012.
Andrew R. Lane, MRC's chairman, president and chief executive officer, stated, "While our revenues reflect reduced upstream and midstream customer spending, primarily in the U.S., our efforts to improve operating margins and our fourth quarter 2012 debt refinancing actions to lower our interest costs are resulting in net income and earnings per share improvements. In addition, we are executing on our growth strategy through the previously announced acquisition of Flow Control Products in the Permian Basin and the announcement and implementation of new contracts with NiSource and Celanese during the quarter."
MRC's second quarter 2013 gross profit of $243.9 million improved to 19.2% of sales from $241.7 million, or 16.9% of sales, in the second quarter of 2012. The increase in gross profit percentage reflected planned changes in product mix and other gross profit enhancement initiatives and included a $12.5 million pre-tax second quarter 2013 benefit resulting from the use of the last-in, first-out method of inventory cost accounting as compared to an $11.6 million pre-tax expense in the second quarter of 2012.
For the second quarter of 2013, selling, general and administrative expenses were $154.0 million compared to $151.2 million in the same period of 2012. This increase was primarily attributable to the inclusion of expenses from the acquisition of Production Specialty Services, Inc. (PSS) in December 2012.
Sales by Segment
U.S. sales in the second quarter of 2013 were $975.2 million and reflected an expected decrease in OCTG revenues of $83.0 million from the second quarter of 2012. Canadian sales in the second quarter of 2013 were $153.6 million, down 4% from the same quarter in 2012 due primarily to a longer spring break-up in 2013. International sales in the second quarter of 2013 were $139.0 million and decreased 8% over the same period in 2012 reflecting weaker demand, particularly in parts of Australia that have experienced reduced customer spending in the mining and oil and gas sectors.
Sales by Sector
Upstream sales in the second quarter of 2013 declined 17% from the second quarter of 2012 to $542.4 million, or 43% of sales, attributable to the planned reduction in OCTG revenue and reduced customer spending during the quarter, slightly offset by the acquisition of PSS and Chaparral Supply, LLC, which together contributed $41 million of revenue in the second quarter of 2013.
Midstream sales in the second quarter of 2013 decreased 5% from the second quarter of 2012 to $375.9 million, or 30% of sales. Spending from the company's transmission customers declined but was slightly offset by an increase in spending from the company's gas utility customers.
Downstream sales in the second quarter of 2013 decreased 7% from the second quarter of 2012 to $349.5 million, or 27% of sales. Lower sales in the downstream sector were primarily attributable to the company's Australian operations, driven by a reduction in mining and oil and gas activities as well as the company's European operations, which were impacted by weak economic conditions.
Updated Calendar Year 2013 Guidance
MRC's expected full year 2013 results, excluding the impact of any future acquisitions, are as follows:
Diluted Earnings Per Share