KeyBanc Capital Markets May 30, 2013 1 May 30, 2013 Jim Braun EVP & CFO MRC Global Inc. // KeyBanc Capital Markets’ Industrial Automotive and Transportation Conference Exhibit 99.1 |
KeyBanc Capital Markets May 30, 2013 2 2 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act, as amended, including, for example, statements about the Company’s business strategy, its industry, its future profitability, growth in the Company’s various markets, and the Company’s expectations, beliefs, plans, strategies, objectives, prospects and assumptions. These forward-looking statements are not guarantees of future performance. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s 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 annual report on Form 10-K for the year ended December 31, 2012 and the registration statement (including a prospectus and prospectus supplement) for the offering to which this communication relates, which are available on the SEC’s website at www.sec.gov and on the Company’s website, 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 our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements 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. Statement Regarding Use of Non-GAAP Measures: The Non-GAAP financial measures contained in this presentation (EBITDA, Adjusted EBITDA, Adjusted EPS and variations thereof) are not measures of financial performance calculated in accordance with GAAP and should not be considered as alternatives to net income (loss) or any other performance measure derived in accordance with GAAP or as alternatives to cash flows from operating activities as a measure of our liquidity. They should be viewed in addition to, and not as a substitute for, analysis of our results reported in accordance with GAAP, or as alternative measures of liquidity. Management believes that certain non-GAAP financial measures provide a view to measures similar to those used in evaluating our compliance with certain financial covenants under our credit facilities and provide financial statement users meaningful comparisons between current and prior year period results. They are also used as a metric to determine certain components of performance-based compensation. The adjustments and Adjusted EBITDA are based on currently available information and certain adjustments that we believe are reasonable and are presented as an aid in understanding our operating results. They are not necessarily indicative of future results of operations that may be obtained by the Company. Forward Looking Statements and Non-GAAP Disclaimer |
KeyBanc Capital Markets May 30, 2013 3 By the Numbers Industry Sectors Product Categories Business Model 2012 Sales $5.57 B Upstream Line Pipe / OCTG Locations 400+ Countries 44+ Midstream Valves Customers 18,000+ Suppliers 18,000+ Downstream/ Industrial Fittings / Flanges SKU’s 175,000+ Employees 4,750+ Company Snapshot Canada 14% Europe / Asia Pacific 10% MRC is the largest global distributor of pipe, valves and fittings (PVF) to the energy industry MRO 70% Projects 30% U.S. 76% |
KeyBanc Capital Markets May 30, 2013 4 Founded 1921 1989 Acquires Appalachian Pipe & Supply 2007 Goldman Sachs Capital Partners Strategic Investment 1977 Founded 2005 Acquires Midfield Supply 2007 Merger of McJunkin and Red Man to form MRC 2009 MRC opens Houston HQ 2011 MRC acquires SPF 2011 MRC acquires VSC 2012 MRC acquires OneSteel Piping Systems 2009 MRC acquires Transmark 2010 MRC acquires South Texas Supply 2010 MRC acquires Dresser Oil Tools MRC’s 92 Year History // The Road to the Fortune 500 2012 MRC Global IPO; begins trading on NYSE 2012 MRC listed on Fortune 500 2012 MRC signs the industry’s first global valve contract with Shell 2008 MRC acquires LaBarge 2012 MRC acquires Chaparral Supply 2012 MRC acquires Production Specialty Services (now #451, up from #493 after IPO and #10 on the Barron’s 500 of Top Companies) |
KeyBanc Capital Markets May 30, 2013 5 Clear Market Leader Globally and in the Shales • ~2/3 of sales are under contracts 1 with a 95% renewal rate since 2000 • Continue to grow “share” and “size of wallet” with major existing customers while adding new ones • North American Shales as much as 5x PVF intensive as conventional activity Leading industrial distributor of PVF globally to the energy and industrials sectors Note: As of 31-Dec-2012 1 Including contracts and pricing arrangements. 2 International locations include sales offices and pipe yards at MRC locations. Ecuador Equatorial Guinea Finland France Germany India Indonesia Iraq Italy Kazakhstan Kuwait Malaysia Mexico Netherlands New Zealand Nigeria Norway Pakistan Peru Poland Russia Saudi Arabia 44+ Countries & 400+ Locations Angola Aruba Australia Austria Belgium Brunei Cameroon Canada China Colombia Denmark Branch operations and significant direct export sales Singapore South Africa South Korea Spain Sweden Thailand Trinidad Turkey United Arab Emirates United Kingdom United States 2 North America International Branches 190+ 50+ Distribution Centers 8 = U.S. 1 = Canada 1 = U.K. 1 = Singapore 1 = Netherlands 1 = Australia Valve Automation Centers 12 12 Pipe Yards 120 10 |
KeyBanc Capital Markets May 30, 2013 6 By Geography Note: Business mix based on fiscal year 2012. By Product Line By Industry Sector MRC Diversification 1 - Approximately 17% (or $200 M) of total for valves is valve automation Industry leading product, end market and geographic diversification |
KeyBanc Capital Markets May 30, 2013 7 Core Distribution Processes • Cost Savings and Efficiencies • Order Management and Product Bundling • Quality Assurance • Supplier Registration • Logistics Management • Customer Reporting Integrated Services • Technical Assistance / Product Recommendation • Inventory Consignment / Just-in- Time Delivery • Customized IT Solutions • Warehouse Management Service Offerings Products Delivery of Mission Critical Products and Value Added Services Generating savings and efficiencies for our customers while enabling them to focus on their core competencies • 175,000+ unique, mission-critical products used in high pressure, high stress or abrasive operating environments • Low cost relative to overall cost of maintenance or project spend so service is paramount |
KeyBanc Capital Markets May 30, 2013 8 Supplier Benefits Customer Benefits MRC plays a critical role in the complex, technical, global energy supply chain Strong Long-Term Relationships with “Blue Chip” Customers and Suppliers Mutual Benefits • Access to over 18,000+ customers • Manufacturing and scale efficiencies • Leverage MRC’s technical sales force • Trusted long-term partnerships • Financial stability • MRC Approved Supplier List / Quality Program • Access to over 18,000+ suppliers worldwide • Efficiencies and inventory management • Access to a broad product offering (~$1B inventory) • Access to global sourcing from 35 countries |
KeyBanc Capital Markets May 30, 2013 9 Positive Energy and Industrial Spending Trends • Global: Energy demand continues to grow with sizable MRO/project opportunities given the age of global energy infrastructure and slowly improving global economy • Upstream: Shales extremely active, shift to Oil/NGL E&P, Natural Gas MRO production, Oil Sands activity seeing strong growth • Midstream: Shale activity in new unsupported areas; increased pipeline integrity regulation plus aging pipeline infrastructure accelerating MRO rates; gas utilities continue to outsource PVF procurement • Downstream: MRO and infrastructure projects accelerating; strong growth in chemical/industrial with low natural gas prices and steady PMI; rebound in refinery utilization / margins Multi-Year Exploration & Production Spending Forecast Source: Barclays Global 2013 E&P Spending Outlook Dec 2012 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 2009A 2010A 2011A 2012E 2013E 2014E 2015E US Canada Outside North America |
KeyBanc Capital Markets May 30, 2013 10 (US$ in millions) 1 Reflects reported revenues for the year of acquisition MRC has completed and successfully acquired $3 billion of revenues since 2007 M&A Driven Growth: Track Record of Success Date Acquisition Rationale Region Revenue 1 Apr-07 Midway Tristate Appalachian / Rockies PVF U.S. $150 Oct-07 Jul -08 Red Man Midfield (49%) Transformational Merger 100% Ownership of Canadian Subsidiary U.S. Canada 1,982 Oct-08 LaBarge Midstream U.S. 233 Oct-09 Transmark International MRO Platform Europe and Asia 346 May-10 South Texas Supply Eagle Ford South Texas 9 Aug -10 Dresser Oil Tools Supply Bakken North Dakota 13 Jun -11 SPF Australia / SE Asia Projects Australia 91 Jul -11 VSC Valve Automation U.S. 13 Mar-12 On eSteel Piping Systems Australia PVF MRO Australia 174 Jun -12 Chaparral Supply Mississippian Lime MRO Oklahoma / Kansas 71 Dec-12 Production Specialty Services Permian Basin / Eagle Ford U.S. 127 Total $3,209 |
KeyBanc Capital Markets May 30, 2013 11 Today 10 – 15 Years Ago Next 1 to 5 Years Changing PVF Energy Distribution Landscape Consolidating energy industry benefits global players Procurement • PVF purchasing handled locally • Facility-by-facility basis • Separate contracts by product class: • Pipe • Valves • Fittings • Flanges • Supplies Centralized Procurement • Purchasing more consolidated • Contracts by end segment: • Upstream • Midstream • Downstream • Contracts cover PVF • Customers align with suppliers with size/scale Global Procurement • Global upstream / midstream / downstream PVF contracts Decentralized |
KeyBanc Capital Markets May 30, 2013 12 MRC & Shell // Global Valve Contract for MRO and Projects Industry’s first valve and combined North American PFF contract Shell has one of the top 5 global CAPEX budgets Deepwater GOM NA Tight Gas & Liquids Brazil Offshore BC-10 West Africa Future Middle East RDC FLNG / LNG Oceania Sakhalin Shell Offshore Coal Bed Methane Cracker Unit Pittsburgh, PA Tar Sands Kashagan Ph1 Alaska Offshore LNG / GTL North America Includes PFF Salym Development LNG China Tight Gas |
KeyBanc Capital Markets May 30, 2013 13 • Global Energy Demand Favorable: Continued general economic recovery, commodity price environment, global supply constraints and increased energy consumption • Shale Activity Unprecedented: Shale gas, as a percentage of total natural gas production, has rapidly increased from less than 2% of total U.S. natural gas production in 2001 to 30% in 2011 and is projected to increase to 49% by 2035 • Accelerating MRO: Increased utilization of processing facilities and decreasing quality of energy feedstocks accelerating PVF replacement rates • Recovering Project Outlook: Infrastructure and E&P projects rebounding with economic growth and need for capacity expansions Large, Fragmented Market with Significant Growth Opportunities • One-Stop Solution: Leverage extensive product offering and be “one-stop” PVF solution • Cross-Selling: Introduce existing customers to complete PVF product portfolio • Projects: Further penetrate existing customer’s project activity • Investments: Add incremental branches, DCs and sales people • International: Expand further globally with existing customers • Adjacencies: Add new products to existing PVF “bundle” or target new complimentary end markets • Core Competency: Proven ability to identify, execute and integrate strategic and tuck-in acquisitions • Highly Fragmented: Opportunities to extend product offering, end markets and/or geographic coverage MRC is in an excellent position to continue to exceed industry growth Long-term Targets: Revenue Growth: 10-12% | Adjusted EBITDA Margin: 10+% | Leverage: 2.0 – 3.0x Note: All targets are long term. Global E&P Spending Growth – Positive Secular Trends (Target 6 – 7% Annually) Organic Growth – Leverage Scale (Target: 8 – 9% Annually) Acquisitions – Accretive Expansion (Target: 2 – 3% Annually) |
KeyBanc Capital Markets May 30, 2013 14 Financial Overview |
KeyBanc Capital Markets May 30, 2013 15 Strong Growth and Margin Drive Attractive Returns Sales Adjusted Gross Profit and % Margin Adjusted EBITDA and % Margin Adjusted EBITDA RONA Y-o-Y Growth 5% 26% 15% (US$ in millions) Y-o-Y Growth 34% 28% 24% Y-o-Y Growth 3% 61% 29% 6.0% 5.8% 7.5% 8.3% 13.5% 17.2% 17.6% 19.0% Strong growth and continued improving profitability 1 Source: Company management; Company Filings 1 Adjusted EBITDA RONA calculation = Adjusted EBITDA / (EOY Inventory + EOY LIFO reserve + EOY Receivables + EOY PP&E – Payables). |
KeyBanc Capital Markets May 30, 2013 16 Significant Cash Flow for Deleveraging and Growth Investments Capital Structure Cumulative FCF Net Leverage (US$ in millions) 1 Strong cash flows allow for continued deleveraging ($ in millions) March 31, 2013 Cash and Cash Equivalents $ 27 Total Debt (including current portion): Term Loan B due 2019, net of discount 641 Global ABL Facility due 2017 426 Other 6 Total Debt $ 1,073 Total Equity 1,231 Total Capitalization $ 2,304 $495 $597 $479 $695 2009 2010 2011 2012 1 6.4 x 5.8 x 4.1 x 2.6 x 2.3 x 2009 2010 2011 2012 Since 2008, Free Cash Flow defined as cash from operations, less fixed asset purchases (net of disposals). $202 $210 $342 $437 2009 2010 2011 2012 5.5% 5.5% 7.8% 7.1% Mar - 13 Adjusted EBITDA – Capex and % Margin |
KeyBanc Capital Markets May 30, 2013 17 Sales Margins Net Income Q1 2013 Financial Summary (In millions except per share data) Q1 2012 2013 OCTG $221 $126 All Other 1,162 1,179 2% Total $1,383 $1,305 Adjusted Gross Profit Adjusted EBITDA Net Income EPS $ 260 $ 262 Q1 2012 Q1 2013 18.8% 20.1% $ 115 $ 104 Q1 2012 Q1 2013 8.3 % 8.0% $ 38 $ 46 Q1 2012 Q1 2013 $ 0.44 $ 0.45 Q1 2012 Q1 2013 • Total revenue was impacted by strategic OCTG reduction • Acquisition related revenue offset slowdown in customer spending • Year-on-year adjusted gross profit margin expansion of ~130 bps due to emphasis on higher margin products • Adjusted EBITDA margins reflected lower sales • Net Income improvement driven by $18 million interest expense savings • EPS reflects additional shares outstanding in 2013 |
KeyBanc Capital Markets May 30, 2013 18 Appendix |
KeyBanc Capital Markets May 30, 2013 19 March 31 December 31 ($ in millions) 2013 2012 2012 2011 2010 2009 Net income (loss) $ 46.2 $ 37.5 $118.0 $ 29.0 $(51.8) $(339.8) Income taxes 25.0 21.1 63.7 26.8 (23.4) (15.0) Interest expense 15.3 33.7 112.5 136.8 139.6 116.5 Write off of debt issuance costs - 1.7 1.7 9.5 - - Depreciation and amortization 5.4 4.1 18.6 17.0 16.6 14.5 Amortization of intangibles 13.2 12.3 49.5 50.7 53.9 46.6 Amortization of purchase price accounting - - - - - 15.7 Change in fair value of derivative instruments (0.6) (2.1) (2.2) (7.0) 4.9 (8.9) Closed locations - - - - (0.7) 1.4 Share based compensation 1.9 1.8 8.5 8.4 3.7 7.8 Franchise taxes - - - 0.4 0.7 1.4 Loss (gain) on early extinguishment of debt - - 114.0 - - (1.3) Goodwill and intangibles impairment - - - - - 386.1 Inventory write-down - - - - 0.4 46.5 IT system conversion costs - - - - - 2.4 M&A transaction & integration expenses - - - 0.5 1.4 17.5 Pension settlement - - 4.4 - - - Legal and consulting expenses - - (1.2) 9.9 4.2 1.9 Joint venture termination - - - 1.7 - - Provision for uncollectible accounts - - - 0.4 (2.0) 1.0 Severance and related costs - - - 1.1 3.2 4.4 MRC Transmark pre-Acquisition contribution - - - - - 38.5 LIFO (3.1) 6.9 (24.1) 73.7 74.6 (115.6) Other expenses 0.6 (1.8) (0.2) 1.6 (1.1) (3.1) Adjusted EBITDA $ 103.9 $ 115.2 $ 463.2 $ 360.5 $ 224.2 $ 218.5 EBITDA Adjustments |
KeyBanc Capital Markets May 30, 2013 20 December 31 ($ in millions) EBITDA $ 463.2 $ 360.5 $ 224.2 $ 218.5 AR $ 823.2 $ 791.3 $ 596.4 $ 506.2 Inventory at AC 1,121.2 1,074.2 866.8 898.5 Fixed Assets 122.5 107.4 104.7 111.5 (-) AP (438.4) (479.6) (426.6) (338.5) PSS Adjustment (28.0) — — — Total Adjusted Net Assets $ 1,600.5 $ 1,493.3 $ 1,141.3 $ 1,177.7 Inventory at LIFO 970.2 899.1 765.4 871.6 (+) LIFO reserve 151.0 175.1 101.4 26.9 Total Inventory $ 1,121.2 $ 1,074.2 $ 866.8 $ 898.5 RONA 28.9 % 24.1 % 19.6 % 18.6 % 2011 2010 2009 2012 December 31 ($ in millions) Stockholders' Equity $ 1,185.9 $ 720.8 $ 689.8 $ 743.9 Long term debt 1,256.6 1,526.7 1,360.2 1,452.6 Deferred taxes 334.5 357.2 373.7 377.9 Other liabilities 147.7 143.3 140.8 170.2 Intangible assets (1,359.7) (1,333.1) (1,366.5) (1,425.7) LIFO reserve 151.0 175.1 101.4 26.9 Other assets (50.4) (50.6) (101.9) (111.9) Cash (37.1) (46.1) (56.2) (56.2) PSS Adjustment (28.0) — — — Total Adjusted Net Assets $ 1,600.5 $ 1,493.3 $ 1,141.3 $ 1,177.7 Net income (loss) $ 118.0 $ 29.0 $(51.8) $(339.8) Stockholders' equity 1,185.9 720.8 689.8 743.9 Net income / stockholders'equity 10.0 % 4.0 % (7.5)% (45.7)% 2012 2011 2010 2009 Adjusted EBITDA RONA Calculation Total Adjusted Net Assets GAAP Reconciliation |
KeyBanc Capital Markets May 30, 2013 21 March 31 December 31 ($ in millions) 2013 2012 2012 2011 2010 2009 Gross Profit $ 246.6 $ 236.6 $ 1,013.7 $ 708.2 $ 518.1 $ 548.0 Depreciation and amortization 5.4 4.1 18.6 17.0 16.6 14.5 Amortization of intangibles 13.2 12.3 49.5 50.7 53.9 46.6 (Decrease) increase in LIFO reserve (3.1) 6.9 (24.1) 73.7 74.6 (115.6) Adjusted Gross Profit $ 262.1 $ 259.9 $ 1,057.7 $ 849.6 $ 663.2 $ 493.5 December 31 ($ in millions) 2012 2011 2010 2009 Cash from operations $ 240.1 $(102.9) $ 112.7 $ 505.5 Fixed asset purchases (26.2) (18.1) (14.3) (16.7) Disposal of fixed assets 2.3 3.1 3.1 6.5 Free cash flow $216.2 $(117.9) $ 101.5 $ 495.3 Cummulative free cash flow $ 695.1 $ 478.9 $ 596.8 $ 495.3 Adjusted Gross Profit GAAP Reconciliation Free Cash Flow Calculation |