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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _______ TO _______

Commission file number: 001-35479

MRC GLOBAL INC.

(Exact name of registrant as specified in its charter)

Delaware

20-5956993

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer

Identification No.)

Fulbright Tower

1301 McKinney Street, Suite 2300

Houston, Texas

77010

(Address of Principal Executive Offices)

(Zip Code)

(877) 294-7574
(Registrant’s Telephone Number, including Area Code)

________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

MRC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [X] Accelerated Filer [ ] Non-Accelerated Filer [ ] Smaller Reporting Company [ ] Emerging Growth Company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [ ] No [X]

There were 81,995,189 shares of the registrant’s common stock (excluding 74,055 unvested restricted shares), par value $0.01 per share, issued and outstanding as of April 22, 2020.


INDEX TO QUARTERLY REPORT ON FORM 10-Q

 

Page

PART I – FINANCIAL INFORMATION

ITEM 1.

financial statements (UNAUDITED)

1

Condensed Consolidated Balance Sheets – MARCH 31, 2020AND DECEMBER 31, 2019

1

cONdENSED cONSOLIDATED STATEMENTS OF OPERATIONS – THREE MONTHS ENDEDMARCH 31, 2020 AND MARCH 31, 2019

2

Condensed Consolidated Statements ofcOMPREHENSIVE INCOME – three months ended MARCH 31, 2020 and MARCH 31, 2019

3

Condensed CONSOLIDATED STATEMENTS OF STOCKHOLDERs’ EQUITY THREE MONTHS ENDEd MARCH 31, 2020 and MARCH 31, 2019

4

Condensed CONSOLIDATED STATEMENTS OF cash flows – THREE MONTHS ENDEd MARCH 31, 2020AND MARCH 31, 2019

5

Notes to the Condensed Consolidated Financial Statements – MARCH 31, 2020

6

ITEM 2.

management’s discussion and analysis of financial condition and

results of operations

16

ITEM 3.

quantitative and qualitative disclosures about market risk

25

ITEM 4.

controls and procedures

26

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

27

ITEM 1a.

RISK FACTORS

27

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

27

ITEM 3.

Defaults Upon Senior Securities

27

ITEM 4.

MINING SAFETY DISCLOSURES

28

ITEM 5.

other information

28

ITEM 6.

Exhibits

29


Table of Contents

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)

 

March 31,

December 31,

2020

2019

Assets

Current assets:

Cash

$

28

$

32

Accounts receivable, net

476

459

Inventories, net

691

701

Other current assets

24

26

Total current assets

1,219

1,218

Long-term assets:

Operating lease assets

179

186

Property, plant and equipment, net

131

138

Other assets

19

19

Intangible assets:

Goodwill, net

480

483

Other intangible assets, net

273

281

$

2,301

$

2,325

Liabilities and stockholders' equity

Current liabilities:

Trade accounts payable

$

399

$

357

Accrued expenses and other current liabilities

82

91

Operating lease liabilities

33

34

Current portion of long-term debt

4

4

Total current liabilities

518

486

Long-term liabilities:

Long-term debt, net

517

547

Operating lease liabilities

161

167

Deferred income taxes

90

91

Other liabilities

43

37

Commitments and contingencies

 

 

6.5% Series A Convertible Perpetual Preferred Stock, $0.01 par value; authorized

363,000 shares; 363,000 shares issued and outstanding

355

355

Stockholders' equity:

Common stock, $0.01 par value per share: 500 million shares authorized,

106,209,943 and 105,624,750 issued, respectively

1

1

Additional paid-in capital

1,730

1,731

Retained deficit

(480)

(483)

Less: Treasury stock at cost: 24,216,330 shares

(375)

(375)

Accumulated other comprehensive loss

(259)

(232)

617

642

$

2,301

$

2,325

See notes to condensed consolidated financial statements.

1


Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)

 

Three Months Ended

March 31,

March 31,

2020

2019

Sales

$

794

$

970

Cost of sales

646

796

Gross profit

148

174

Selling, general and administrative expenses

126

139

Operating income

22

35

Other (expense) income:

Interest expense

(8)

(11)

Other, net

-

-

Income before income taxes

14

24

Income tax expense

5

6

Net income

9

18

Series A preferred stock dividends

6

6

Net income attributable to common stockholders

$

3

$

12

Basic income per common share

$

0.04

$

0.14

Diluted income per common share

$

0.04

$

0.14

Weighted-average common shares, basic

81.7

84.3

Weighted-average common shares, diluted

82.4

85.3

See notes to condensed consolidated financial statements.

2


Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

MRC GLOBAL INC.

(in millions)

 

Three Months Ended

March 31,

March 31,

2020

2019

Net income

$

9

$

18

Other comprehensive (loss) income

Foreign currency translation adjustments

(21)

3

Hedge accounting adjustments, net of tax

(6)

(2)

Total other comprehensive (loss) income, net of tax

(27)

1

Comprehensive (loss) income

$

(18)

$

19

See notes to condensed consolidated financial statements.

3


Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

MRC GLOBAL INC.

(in millions)

 

Three Months Ended March 31, 2020

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Treasury Stock

Comprehensive

Stockholders'

Shares

Amount

Capital

(Deficit)

Shares

Amount

(Loss)

Equity

Balance at December 31, 2019

106 

$

1 

$

1,731 

$

(483)

(24)

$

(375)

$

(232)

$

642 

Net income

-

-

-

9 

-

-

-

9 

Foreign currency translation

-

-

-

-

-

-

(21)

(21)

Hedge accounting adjustments

-

-

-

-

-

-

(6)

(6)

Shares withheld for taxes

-

-

(3)

-

-

-

-

(3)

Equity-based compensation expense

-

-

2 

-

-

-

-

2 

Dividends declared on preferred stock

-

-

-

(6)

-

-

-

(6)

Balance at March 31, 2020

106 

$

1 

$

1,730 

$

(480)

(24)

$

(375)

$

(259)

$

617 

Three Months Ended March 31, 2019

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Treasury Stock

Comprehensive

Stockholders'

Shares

Amount

Capital

(Deficit)

Shares

Amount

(Loss)

Equity

Balance at December 31, 2018

105 

$

1 

$

1,721 

$

(498)

(19)

$

(300)

$

(232)

$

692 

Net income

-

-

-

18 

-

-

-

18 

Foreign currency translation

-

-

-

-

-

-

3 

3 

Hedge accounting adjustments

-

-

-

-

-

-

(2)

(2)

Shares withheld for taxes

-

-

(6)

-

-

-

-

(6)

Equity-based compensation expense

-

-

4 

-

-

-

-

4 

Dividends declared on preferred stock

-

-

-

(6)

-

-

-

(6)

Purchase of common stock

-

-

-

-

(2)

(25)

-

(25)

Balance at March 31, 2019

105 

$

1 

$

1,719 

$

(486)

(21)

$

(325)

$

(231)

$

678 

See notes to condensed consolidated financial statements.

4


Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

MRC GLOBAL INC.

(in millions)

 

Three Months Ended

March 31,

March 31,

2020

2019

Operating activities

Net income

$

9

$

18

Adjustments to reconcile net income to net cash provided by (used in) operations:

Depreciation and amortization

5

5

Amortization of intangibles

7

11

Equity-based compensation expense

2

4

Deferred income tax benefit

1

1

(Decrease) increase in LIFO reserve

(3)

-

Provision for uncollectible accounts

6

2

Other

1

2

Changes in operating assets and liabilities:

Accounts receivable

(33)

(47)

Inventories

(4)

(42)

Other current assets

2

8

Accounts payable

49

27

Accrued expenses and other current liabilities

(5)

(29)

Net cash provided by (used in) operations

37

(40)