 1
May 2015
TM
Investor Presentation
Exhibit 99.1 |
 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,
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.
Forward Looking Statements and Non-GAAP Disclaimer |
 3
By the Numbers
1
Industry Sectors
Product Categories
TTM Sales
TTM Adjusted EBITDA
$5.920B
$427M
Upstream
Line Pipe & OCTG
Employees
~4,700
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 March 31, 2015. |
 Revenue by
Industry Sector Note: Percentage of sales for the twelve months ended March
31, 2015. Upstream
46%
Downstream
25%
Midstream
29%
Diversified Across All Three Major Energy Sectors
Other/
Industrial
12%
Chemicals &
Refining
13%
Gas Utility
10%
Transmission
19%
Drilling &
Completion Tubulars
(OCTG)
9%
Production
Infrastructure,
Materials &
Supplies
37%
4 |
 By
Product Line Revenue by Geography and Product Line
Note: Percentage of sales for the twelve ended March 31, 2015.
By Geography
Houston, TX
Edmonton, AB
Bradford, UK
Singapore
Perth, AU
Stavanger, NO
Diversified Across Multiple Geographies -
Domestically (all shale plays) and Internationally
10%
15%
23%
25%
27%
Canada
Asia / Europe
Eastern
Western
Gulf Coast
32%
21%
20%
18%
9%
Valves
Fittings & Flanges
Line Pipe
General Oilfield
Products
OCTG
5
21%
20%
18%
9%
32% |
 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
AGL
Resources
Atmos
NiSource
PG&E
MarkWest
DCP
Midstream
Chesapeake
Energy
CNRL
ConocoPhillips
Apache
Anadarko
California Resources
Corporation
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
Williams |
 Integrated Supply Statistics
•
Supplying Integrated Supply services since
1988 •
Accounts
for
sales
in
excess
of
$830
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
7 |
 8
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 twelve months ended March 31, 2015.
•
All Other -
21,000+ customers
Customer
Mix
-
Sales
1
•
Focus
on
multi-year
“Top
25”
MRO
agreements
and
adding scope to current agreements
•
Recently added or renewed:
•
Mark West –
midstream MRO, 5 years
•
Statoil
–
Johan
Sverdrup
project,
instrumentation
•
Marathon
Oil
–
U.S.
MRO,
5
years
•
California
Resources
Corporation
–
U.S.
Integrated
Supply
-
3
years
•
TECO Energy’s People’s Gas & New Mexico
Gas
–
U.S.
Integrated
Supply
-
5
years
Execute Global Preferred Supplier Contracts
30%
22%
48%
Continue to identify geographic and product line
opportunities, no acquisitions expected in 2015
Current expectation is to use free cash flow to
repay debt $300-$400 million in 2015
Organic Growth
Targeted Growth Accounts:
develop
the
“next
75”
customers
Targeted Growth Accounts
Top 1 -
25 |
 9
Strategic Shift in Product Mix to Higher Margin Products
($ 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 |
 10
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
2008
2014
Note: Percentage of sales for the year ended December 31, 2008 and December 31,
2014. 55%
Higher
Margin
Products
OCTG
24%
Line Pipe
21%
Valves
15%
18%
General
Products
22%
45%
Carbon
Pipe
71%
Higher
Margin
Products
OCTG
10%
Line Pipe
19%
Valves
32%
Fittings &
Flanges
General
Oilfield
Products
18%
29%
Carbon
Pipe
Flanges
Fittings &
Oilfield
21% |
 11
•
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.
15%
8%
$3,242
$1,675
$1,786
$1,517
Peak 2008
Trough 2009
Peak 2014
Mar-15
$3,036
$1,614
$1,643
$1,511
Peak 2008
Trough 2009
Peak 2014
Mar-15 |
 12
Strategic Expansion into Offshore Production Platform MRO
•
Top 4 largest offshore markets ~$140 billion E&P spend
•
Norway
is
the
largest
–
we
are
positioned
in
4
of
the
5
largest
offshore
markets
•
MRC Global revenue mix
•
Pre Stream
acquisition (2013) –
approx. 98% onshore, 2% offshore
•
Post Stream
acquisition (2014) –
approx. 93% onshore, 7% offshore
1. Source: Rystad Energy, September 2014
($ billions)
$38
$36
$35
$32
$24
$20
$17
$16
$16
$15
Norway
United Kingdom
USA
Brazil
Australia
Angola
Nigeria
Kingdom of Saudi Arabia
Malaysia
Mexico
Top 10 Global Offshore E&P Markets
1
Pipe, Fittings
& Flanges
25%
Valve
Management
37%
Instrumentation
38%
Stream 2014 Sales by Division |
 13
Building an International Platform for Growth
North America
Estimated PVF Spend
~$25B
Estimated
Share
of
PVF
Spend
1
International
Estimated PVF Spend
~$20B
1. Market sizes are management estimates based on 2014 results.
$0
$52
$256
$330
$567
$554
$873
2008
2009
2010
2011
2012
2013
2014
International Segment Revenue
($ millions)
All
others
80%
MRC
Global
20%
~$5.0 B
MRC
%
~$900M
All
others
95%
Global
5 |
 14
Financial Overview |
 Financial
Metrics Sales
Adjusted Gross Profit and % Margin
Adjusted EBITDA and % Margin
7.0%
8.5%
($ 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%
6.4%
6.7%
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%
19.5%
18.6%
Three months ended
March 31
Three months ended
March 31
Three months ended
March 31
Three months ended
March 31
$663
$850
$1,058
$1,009
$1,120
$254
$241
2010
2011
2012
2013
2014
2014
2015
$3,846
$4,832
$5,571
$5,231
$5,933
$1,306
$1,292
2010
2011
2012
2013
2014
2014
2015
$224
$360
$463
$386
$424
$84
$87
2010
2011
2012
2013
2014
2014
2015
$(0.61)
$0.34
$1.22
$1.48
$1.40
$0.23
$0.28
2010
2011
2012
2013
2014
2014
2015
15 |
 16
Balance Sheet Metrics
Total Debt
Capital Structure
Cash Flow from Operations
Net Leverage
($ millions)
March 31, 2015
Cash and Cash Equivalents
$ 49
Total
Debt
(including
current
portion):
$ 1,373
Term Loan B due 2019, net of discount
$ 778
Global ABL Facility due 2019
$ 595
Total Debt
$ 1,373
Total Equity
$ 1,375
Total Capitalization
$ 2,748
Liquidity
$ 436
Three months ended
March 31
5.8x
4.1x
2.5x
2.6x
3.4x
3.1x
2010
2011
2012
2013
2014
31-Mar-15
$113
$(103)
$240
$ 324
$(106)
$(74)
$116
2010
2011
2012
2013
2014
2014
2015
$1,360
$1,527
$1,257
$987
$1,454
$1,373
2010
2011
2012
2013
2014
31-Mar-15 |
 17
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 March 31, 2015:
•
“Excess Availability”
is approximately $386 million
•
“Fixed
Charge
Coverage
Ratio”
is
2.12 |
 18
Current
2015
Outlook
–
Updated
May
2015
•
Market indicators
–
North American E&P capital expenditure budgets down 35%, with Canada impacted
the most –
International spending is expected to be 10-20% lower
–
US rig count down approximately 1,000 from peak in 2014
•
Commodities
–
WTI Oil price $50-$60/bbl (Brent $55-$65)
–
US Natural Gas prices $2.25-$3.25/mcf
•
Expect to generate $350-$450 million of cash from operations
•
Free 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 10%-15% |
 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
19 |
 20
Appendix |
 21
MRC Global // North America
Corporate Headquarters
Branch Locations
Regional Distribution Centers
Valve Automation Centers
Western
Gulf Coast
Canada
Eastern |
 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
Regional Distribution Centers
Corporate Headquarters
Valve Automation Centers
Branch Locations
By the Numbers
As of 3/31/2015
Branches
160+
RDCs
10
VACs
14
Employees
~3,300
Pittsburg, PA |
 23
Global
Footprint
to
Serve
Customers
-
Europe
Regional Distribution Centers
Valve Automation Centers
Branch Locations
Stavanger, NO
By the Numbers
As of 3/31/2015
Branches
35
RDCs
3
VACs
14
Countries
12
Employees
~900
Rotterdam, NL
Bradford, UK |
 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 3/31/2015
Branches
28
RDCs
4
VACs
7
Countries
8
Employees
~500
24 |
 25
1.
Reflects reported revenues for the year of acquisition or 2013 for Stream, MSD and
HypTeck. M&A -
Track Record of Strategic Acquisitions
•
•
•
•
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
Acquisition Priorities |
 Upstream
26 |
 Midstream
27 |
 Downstream
28 |
 Performance Measures
Sales per Employee
1
($ thousands)
Adjusted Gross Profit per Employee
1
($ thousands)
SG&A / Sales
Average Working Capital / Sales
Return on Average Net Capital Employed (RANCE)
2
1.
Calculated based on average number of employees
2.
RANCE is defined as Pretax income for the year plus interest expense and
related financing charges, multiplied by 1, minus our effective tax rate, and
the denominator is average net capital employed for the year. Net capital
employed is defined as Total assets minus Current liabilities plus Other
long- term liabilities.
$1,043
$1,234
$1,255
$1,054
$1,181
2010
2011
2012
2013
2014
$180
$217
$238
$203
$223
2010
2011
2012
2013
2014
23.0%
19.8%
20.4%
21.8%
21.3%
2010
2011
2012
2013
2014
11.7%
10.6%
10.9%
12.3%
12.1%
2010
2011
2012
2013
2014
1.9%
6.1%
10.9%
8.4%
7.0%
2010
2011
2012
2013
2014
29 |
 30
Three months
ended March
Year Ended December 31
($ millions)
2015
2014
2014
2013
2012
2011
2010
Net income
$29.1
$ 23.5
$ 144.1
$ 152.1
$ 118.0
$ 29.0
$ (51.8)
Income tax expense
13.1
13.2
81.8
84.8
63.7
26.8
(23.4)
Interest expense
14.6
15.1
61.8
60.7
112.5
136.8
139.6
Depreciation and amortization
5.1
5.2
22.5
22.3
18.6
17.0
16.6
Amortization of intangibles
15.9
15.7
67.8
52.1
49.5
50.7
53.9
Increase (decrease) in LIFO reserve
(0.2)
1.3
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
0.7
3.6
1.1
(4.7)
(2.2)
(7.0)
4.9
Equity-based compensation expense
2.5
1.8
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
1.8
-
7.5
0.8
-
1.1
3.2
Loss
on
sale
of
Canadian
progressive
cavity
pump business
-
6.2
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)
4.1
(1.6)
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
86.7
$ 84.0
$ 424.0
$ 386.4
$ 463.2
$ 360.5
$ 224.2
Adjusted EBITDA Reconciliation |
 31
Three months
ended March 31
Year ended December 31
($ millions)
2015
2014
2014
2013
2012
2011
2010
Gross profit
$219.9
$ 232.1
$ 1,018.1
$ 954.8
$ 1,013.7
$ 708.2
$ 518.1
Depreciation and amortization
5.1
5.2
22.5
22.3
18.6
17.0
16.6
Amortization of intangibles
15.9
15.7
67.8
52.1
49.5
50.7
53.9
Increase (decrease) in LIFO reserve
(0.2)
1.3
11.9
(20.2)
(24.1)
73.7
74.6
Adjusted Gross Profit
$240.7
$254.3
$ 1,120.3
$ 1,009.0
$ 1,057.7
$ 849.6
$ 663.2
Adjusted
Gross
Profit
Reconciliation |