By a News Reporter-Staff News Editor at Journal of Engineering -- MRC Global Inc. (NYSE: MRC), the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy industry, announced second quarter 2014 results.
The company's sales were $1,497 million for the second quarter of 2014, which were 18% higher than the second quarter of 2013 and 15% higher than the first quarter of 2014. Net income for the second quarter of 2014 was $39.3 million, or $0.38 per diluted share, compared to second quarter 2013 net income of $43.9 million, or $0.43 per diluted share.
Adjusted diluted earnings per share (EPS) for the second quarter of 2014 were $0.42 per diluted share and exclude the impact of a $3.6 million after-tax charge ($0.04 per diluted share) related to employee severance costs. There were no adjustments to the second quarter 2013 diluted EPS of $0.43 per diluted share. Please refer to the reconciliation of adjusted net income (a non-GAAP measure) to net income (a GAAP measure) included in this release.
Andrew R. Lane, MRC Global's chairman, president and chief executive officer stated, "I'm pleased with our 18% quarter over quarter revenue growth. The second quarter revenue of $1,497 million was the second highest quarterly revenue in the company's history, surpassed only by the fourth quarter of 2008."
Mr. Lane continued, "We are also pleased to have completed two international acquisitions during the quarter: Hypteck in Norway, which expands our offshore capabilities, and MSD Engineering in Singapore, which broadens our valve and valve automation capability and technical support for our customers in Southeast Asia. We also began a cost reduction initiative in the second quarter of 2014, resulting in a $5 million pre-tax employee severance charge. We expect to realize savings of approximately $12 to $14 million a year from the headcount reductions as a result of this initiative."
In conclusion, Mr. Lane commented, "We ended the second quarter with a backlog of $1,125 million, a new company record. This record backlog along with our acquisitions in the first half of the year, increases in North American upstream activity and increases in E&P capital spending budgets by many of our major customers has positioned the second half of 2014 to be strong for us."
MRC Global's second quarter 2014 gross profit was $259.4 million or 17.3% of sales as compared to gross profit of $243.9 million, or 19.2% of sales for the second quarter of 2013. While gross profit dollars were higher by $15.5 million, the percentage of sales declined by 190 basis points. This decline reflected the impact of the company's last-in, first-out (LIFO) inventory costing methodology as well as deflation in the company's line pipe product group. Second quarter 2014 gross profit reflected a charge of $0.8 million to cost of sales relating to the use of the LIFO method of inventory cost accounting, while the second quarter of 2013 reflected a benefit of $12.5 million.
Selling, general and administrative (SG&A) expenses were $185.3 million for the second quarter of 2014 or 12.4% of sales compared to $154.0 million or 12.1% of sales in the same period of 2013. The increase included $18.3 million of incremental expense from the acquisitions of Stream AS (Stream), MSD Engineering Pte Ltd. (MSD) and Hypteck AS (Hypteck) in 2014 as well as Flangefitt Stainless Ltd. (Flangefitt) and Flow Control Products (Flow Control) in the second half of 2013. The remainder of the increase was driven by higher personnel costs resulting from increased business activity levels and $5 million of pre-tax employee severance costs associated with our cost reduction initiatives.
Adjusted EBITDA was $106.2 million for the second quarter of 2014 compared to $98.9 million for the same period in 2013. Please refer to the reconciliation of adjusted EBITDA (a non-GAAP measure) to net income (a GAAP measure) in this release.
Interest expense for the second quarter of 2014 was $15.3 million as compared to $15.2 million in the second quarter of 2013.
Keywords for this news article include: Engineering, MRC Global Inc.
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