Financial Performance - MRC Global Inc. reported consolidated revenue of $2.1 billion for the year ended December 31, 2022, representing a 10% increase compared to $1.9 billion in 2021[6]. - The company achieved a net income of $120 million for 2022, up from $100 million in 2021, reflecting a 20% year-over-year growth[6]. - Gross profit margin improved to 25% in 2022, compared to 23% in 2021, indicating enhanced operational efficiency[6]. - MRC Global's cash flow from operations for 2022 was $150 million, a 15% increase from $130 million in 2021[6]. - The company plans to expand its market presence in the Asia-Pacific region, targeting a 15% growth in that segment by 2024[6]. - New product lines are expected to contribute an additional $50 million in revenue in 2023, driven by increased demand in the energy sector[6]. - MRC Global is investing $30 million in technology development to enhance supply chain efficiency over the next two years[6]. - The company has set a performance guidance of $2.3 billion in revenue for 2023, reflecting a 10% growth target[6]. - MRC Global has no disagreements with accountants on financial disclosures, ensuring transparency in reporting[274]. Operational Highlights - The company operates a global distribution network across major oil and natural gas regions, segmented into U.S. ($539 million), Canada ($45 million), and International ($158 million) markets, with a total backlog of $742 million as of December 31, 2022[50]. - The company sources products from over 9,000 suppliers in more than 50 countries, with purchases from the 25 largest suppliers accounting for approximately 43% of total purchases in 2022[37]. - The company has a large customer base of approximately 10,000 customers, with no single customer representing more than 10% of revenue, indicating a diversified revenue stream[49]. - The company continues to invest in IT systems, including an enterprise resource planning (ERP) system, to enhance digital transaction exchanges and improve customer service[33]. - The company provides integrated supply services, allowing customers to outsource procurement and inventory management, which strengthens customer relationships[34]. - The company has designed and constructed valve assemblies in its engineering centers, enhancing its service offerings to midstream pipeline customers[35]. - The company’s sales model includes regional and national teams, with over 190 account managers and 700 customer service representatives to address customer needs effectively[44][46]. - The company’s product offerings include a complete line of PVF products, essential for gas utilities and industrial infrastructure applications, ensuring rapid delivery to meet customer demands[30]. Safety and Compliance - The total recordable incident rate (TRIR) was 0.78 in 2022, significantly lower than the 2021 U.S. Bureau of Labor Statistics average of 3.4 for wholesalers of metal products[29]. - The company’s operations are subject to safety regulatory standards, with a focus on maintaining high safety standards to prevent liabilities and ensure employee safety[28]. - The company is committed to maintaining a harassment and discrimination-free workplace, actively monitoring hiring and promotion processes for diversity[57]. - The company is subject to various environmental laws, and while compliance costs have not been material, future regulations could impact operations[66]. - Environmental regulations are evolving, and stricter laws could increase operational costs, affecting financial performance[95]. - Compliance with U.S. and foreign laws, including anti-corruption regulations, is critical, as violations could result in significant penalties and harm to reputation[133]. Workforce and Diversity - As of December 31, 2022, MRC Global had 2,800 employees, with approximately 68% located in the U.S., 25% in the International segment, and 7% in Canada[52]. - In the U.S., hourly employees are paid at least $15 per hour, and the company offers a defined contribution retirement plan in the U.S., Canada, and Australia[53]. - In 2022, 29% of the global workforce were female, with 24% of directors and above being female[59]. - The company has implemented a new human capital management system to enhance employee initiatives and development since 2020[60]. - The company's employee development process includes twice yearly check-ins and a tuition reimbursement plan for employees with over six months of service[55]. Market Risks - A significant portion of the company's revenue is dependent on capital expenditures in the industries served, particularly in gas utilities and oil and gas sectors[76]. - General economic conditions, including interest rates and inflation, can adversely affect customer demand and capital expenditures, impacting overall revenue[77]. - Geopolitical events and instability may disrupt operations and affect demand for products, leading to potential revenue declines[78]. - Volatile oil and gas prices directly impact capital spending by customers, which could materially affect the company's financial performance[79]. - Supply chain shortages and unexpected demand fluctuations may hinder the ability to meet customer needs, adversely affecting service offerings[80]. - The company does not have contracts with most suppliers, making it vulnerable to the loss of significant suppliers, which could impact product availability[85]. - Price reductions by suppliers could lead to inventory value declines and pressure on margins, negatively affecting profitability[86]. - A transition to alternative energy sources could reduce demand for oil and gas, adversely impacting sales and financial results[91]. - Changes in customer and product mix may lead to fluctuations in gross profit margins, impacting overall profitability[96]. - The company's 25 largest customers accounted for approximately 54% of sales for the year ended December 31, 2022[100]. Financial Position and Debt - As of December 31, 2022, the company had $447 million of goodwill and other intangible assets recorded on its consolidated balance sheet[111]. - The company had total debt outstanding of $340 million and excess availability of $606 million under its credit facilities as of December 31, 2022[116]. - The company may incur significant additional indebtedness in the future, which could increase operational risks[116]. - The company is highly leveraged, which limits its ability to obtain additional financing for working capital, acquisitions, and other corporate purposes[120]. - As of December 31, 2022, all outstanding debt was at floating rates, with a $250 million interest rate swap in place to manage variable rate exposure[267]. - A 1% increase in the LIBOR or Term SOFR rate would result in an increase in interest expense of less than $1 million per year if outstanding amounts remain unchanged[268]. - The company is exposed to foreign currency exchange rate risk, managed primarily through forward foreign exchange contracts, which are not used for trading or speculative purposes[269]. - Steel prices significantly impact product pricing, with carbon steel line pipe prices being the most sensitive; the company manages this risk by maintaining appropriate inventory levels[270]. - The ability of subsidiaries to make payments to the parent company is dependent on their earnings and existing debt terms, which may limit dividend payments[123]. - Changes in the credit profile may affect supplier relationships, potentially leading to shortened payment terms and adversely impacting liquidity[125]. - The company may require additional capital in the future, which may not be available on favorable terms, potentially forcing a reduction in operations or expansion opportunities[126]. Legal and Competitive Risks - The company faces competition from both large companies with substantial resources and smaller regional players, which could adversely affect revenue and earnings[99]. - The company does not have long-term contracts with many customers, leading to potential revenue volatility if significant customers reduce their purchasing volume[100]. - The company relies on its sales and marketing teams to generate demand, and losing key personnel could adversely affect operations[102]. - The company is subject to customer audit clauses in many contracts, which could lead to negotiated settlements if proper documentation is not provided[100]. - The company faces risks associated with conducting business in international markets, including geopolitical events and regulatory changes[114]. - The company faces potential legal liabilities from asbestos-related lawsuits, with approximately 1,112 claims currently pending[132].

MRC Global Inc. (NYSE:MRC) Q4 2022 Earnings Conference Call February 14, 2023 10:00 AM ET Company Participants Monica Broughton - IR Rob Saltiel - President and CEO Kelly Youngblood - EVP and CFO Conference Call Participants Nathan Jones - Stifel Cole Couzens - Stephens Inc. Katie Fleischer - KeyBanc Capital Markets Operator Greetings, welcome to the MRC Global's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will f ...

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |----------------------------------------------------------|----------------------------|-------------|-----------------------------|-------------|----------------------------|--------------|---------------|-------------|---------------|-----------| | ($ millions) | December 31, 2022 \nAmount | \nPer Share | September 30, 2022 \nAmount | \nPer Share | December 31, 2021 \nAmount | \nPer Share* | 2022 \nAmount | \nPer Share | 2021 \nAmount | ...

Revenue Growth - Revenue increased by 7% sequentially from Q2 2022, with a 49% growth in backlog from December 31, 2021, to September 30, 2022[71] - Company expects revenue growth in 2022 to exceed 25% compared to 2021, despite a projected seasonal decline of approximately 5% in Q4 2022[71] - Sales for the three months ended September 30, 2022, were $904 million, an increase of $219 million, or 32%, compared to $685 million for the same period in 2021[94] - Sales for the nine months ended September 30, 2022, were $2,494 million, an increase of $514 million, or 26%, compared to $1,980 million for the same period in 2021[113] Sector Performance - Gas utility sector accounted for 38% of total revenue, with a 26% increase in sales compared to the first nine months of 2021[72] - Downstream, Industrial and Energy Transition (DIET) sector generated 30% of total revenue, growing 31% from the first nine months of 2021[75] - Upstream production revenue increased by 27% and midstream pipeline revenue increased by 13% from the first nine months of 2021[77] Profitability - Gross profit for the three months ended September 30, 2022, was $165 million (18.3% of sales), compared to $95 million (13.9% of sales) for the same period in 2021, an increase of $70 million[98] - Adjusted Gross Profit increased to $198 million (21.9% of sales) for the three months ended September 30, 2022, from $137 million (20.0% of sales) for the same period in 2021, an increase of $61 million[99] - Operating income was $45 million for the three months ended September 30, 2022, compared to an operating loss of $7 million for the same period in 2021, an increase of $52 million[101] - Net income for the three months ended September 30, 2022, was $24 million, compared to a net loss of $11 million for the same period in 2021[106] Cash Flow and Liquidity - Total liquidity as of September 30, 2022, was $641 million, consisting of $29 million in cash and $612 million in excess availability under the Global ABL Facility[131] - Net cash used in operating activities was $30 million for the nine months ended September 30, 2022, compared to $16 million provided in the same period of 2021, primarily due to increased working capital[136] - Net cash provided by financing activities was $24 million for the nine months ended September 30, 2022, a significant improvement from $82 million used in financing activities in the same period of 2021[138] Capital Expenditures and Debt - Capital expenditures for the nine months ended September 30, 2022, totaled $8 million, compared to $6 million in the same period of 2021[137] - The outstanding balance on the Term Loan as of September 30, 2022, was $296 million, with no excess cash flow payment required for 2021[129] - The Global ABL Facility was amended to mature in September 2026, providing $705 million in revolver commitments in the U.S.[130] Market Conditions - Brent crude oil prices averaged over $100 per barrel and WTI prices averaged approximately $93 per barrel during Q3 2022[77] - Significant increases in transportation costs have been observed, although sequentially, these costs have begun to decline[82] - The company is well-positioned to benefit from new LNG infrastructure projects as Europe seeks alternatives to Russian gas supplies[81] - The energy transition business is growing rapidly, particularly for biofuels refinery projects, supported by government incentives[76] Tax and Compliance - Income tax expense for the nine months ended September 30, 2022, was $23 million, compared to a $1 million benefit in 2021, with effective tax rates of 30% and 9%, respectively[124] - The company expects to remain in compliance with covenants contained in its various credit facilities based on current forecasts[132]

MRC Global Inc. (NYSE:MRC) Q3 2022 Earnings Conference Call November 9, 2022 10:00 AM ET Company Participants Monica Broughton - Investor Relations Rob Saltiel - President and Chief Executive Officer Kelly Youngblood - Executive Vice President and Chief Financial Officer Conference Call Participants Tommy Moll - Stephens Ken Newman - KeyBanc Capital Markets Adam Farley - Stifel Operator Greetings, welcome to the MRC Global's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in ...

MRC Global 3Q 2022 Earnings Presentation November 8, 2022 Rob Saltiel President & CEO Kelly Youngblood Executive Vice President & CFO 1 2 Forward Looking Statements Non-GAAP Disclaimer • long-term debt, net (net debt) In this presentation, the company is providing certain non-GAAP financial measures. These are not measures of financial performance calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and should not be considered as alternatives. The following GAAP measures have ...

MRC Global Inc. (NYSE:MRC) Q2 2022 Earnings Conference Call August 9, 2022 10:00 AM ET Company Participants Monica Broughton - IR Robert Saltiel - President & CEO Kelly Youngblood - EVP & CFO Conference Call Participants Tommy Moll - Stephens Doug Becker - Benchmark Research Nathan Jones - Stifel Kenneth Newman - KeyBanc Capital Markets Operator Greetings, and welcome to the MRC Global's Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-an ...

MRC Global 2Q 2022 Earnings Presentation August 8, 2022 Rob Saltiel President & CEO Kelly Youngblood Executive Vice President & CFO 1 2 Forward Looking Statements Non-GAAP Disclaimer • long-term debt, net (net debt) In this presentation, the company is providing certain non-GAAP financial measures. These are not measures of financial performance calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and should not be considered as alternatives. The following GAAP measures have th ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section provides an overview of the company's financial performance and position, including unaudited statements and management's analysis [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents MRC Global Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes [CONDENSED CONSOLIDATED BALANCE SHEETS](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20%E2%80%93%20JUNE%2030%2C%202022%20AND%20DECEMBER%2031%2C%202021) Total assets and liabilities increased from December 31, 2021, to June 30, 2022, primarily due to higher accounts receivable and inventories | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Total Assets | $1,864 | $1,671 | | Current Assets | $1,101 | $899 | | Accounts receivable, net | $489 | $379 | | Inventories, net | $555 | $453 | | Total Current Liabilities | $549 | $436 | | Long-term debt, net | $353 | $295 | | Total Stockholders' Equity | $347 | $323 | [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20%E2%80%93%20THREE%20AND%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202022%20AND%20JUNE%2030%2C%202021) Sales and net income grew substantially for the three and six months ended June 30, 2022, reflecting improved operational performance and profitability | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :--------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Sales | $848 | $686 | $1,590 | $1,295 | | Gross profit | $151 | $112 | $287 | $215 | | Operating income | $31 | $10 | $60 | $13 | | Net income | $14 | $4 | $30 | $1 | | Basic earnings (loss) per common share | $0.10 | $(0.02) | $0.22 | $(0.13) | | Diluted earnings (loss) per common share | $0.09 | $(0.02) | $0.21 | $(0.13) | [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)%20%E2%80%93%20THREE%20AND%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202022%20AND%20JUNE%2030%2C%202021) Comprehensive income increased for the three and six months ended June 30, 2022, driven by higher net income, despite negative foreign currency translation adjustments | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net income | $14 | $4 | $30 | $1 | | Foreign currency translation adjustments | $(6) | $1 | $(4) | $0 | | Comprehensive income | $11 | $7 | $32 | $4 | [CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20%E2%80%93%20THREE%20AND%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202022%20AND%20JUNE%2030%2C%202021) Stockholders' equity increased to $347 million at June 30, 2022, from $323 million at December 31, 2021, primarily due to net income and equity-based compensation | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------- | :-------------------------- | :---------------------------- | | Total Stockholders' Equity | $347 | $323 | | Retained (Deficit) | $(801) | $(819) | | Additional Paid-in Capital | $1,751 | $1,747 |\ | Accumulated Other Comprehensive Loss | $(229) | $(231) | [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20%E2%80%93%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202022%20AND%20JUNE%2030%2C%202021) Net cash used in operating activities was $63 million for the six months ended June 30, 2022, primarily due to increased working capital for inventory, a shift from $47 million provided in the prior year | Metric | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash (used in) provided by operating activities | $(63) | $47 | | Net cash used in investing activities | $(7) | $(2) | | Net cash provided by (used in) financing activities | $45 | $(101) | | Net decrease in cash and cash equivalents | $(25) | $(56) | | Cash -- end of period | $21 | $63 | [NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=10&type=section&id=NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20%E2%80%93%20JUNE%2030%2C%202022) These notes provide detailed information on the company's business operations, accounting policies, and specific financial statement line items, including revenue, inventory, debt, and segment performance [NOTE 1 – BACKGROUND AND BASIS OF PRESENTATION](index=10&type=section&id=NOTE%201%20%E2%80%93%20BACKGROUND%20AND%20BASIS%20OF%20PRESENTATION) MRC Global Inc. is a global distributor of pipe, valves, fittings (PVF), and infrastructure products and services to energy and industrial sectors, with interim financial statements prepared under Rule 10-01 of Regulation S-X - **MRC Global Inc.** is a holding company and global distributor of pipe, valves, fittings (PVF) and infrastructure products and services[16](index=16&type=chunk) - The company serves **gas utilities, downstream, industrial and energy transition, upstream production, and midstream pipeline sectors**[21](index=21&type=chunk) - The adoption of ASU 2020-06 on January 1, 2022, **did not have a material impact** on the consolidated financial statements[20](index=20&type=chunk) [NOTE 2 – REVENUE RECOGNITION](index=11&type=section&id=NOTE%202%20%E2%80%93%20REVENUE%20RECOGNITION) Revenue is primarily recognized upon shipment or delivery, with contract assets of $13 million and deferred revenue of $5 million at June 30, 2022, showing strong growth in U.S. and Canada segments | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------- | :-------------------------- | :---------------------------- | | Contract asset balance | $13 | $12 | | Deferred revenue balance | $5 | $4 | | Segment | 3 Months Ended June 30, 2022 (in millions) | 3 Months Ended June 30, 2021 (in millions) | % Change | | :------------ | :--------------------------------------- | :--------------------------------------- | :------- | | U.S. | $717 | $558 | **28%** | | Canada | $40 | $30 | **33%** | | International | $91 | $98 | **(7)%** | | Segment | 6 Months Ended June 30, 2022 (in millions) | 6 Months Ended June 30, 2021 (in millions) | % Change | | :------------ | :--------------------------------------- | :--------------------------------------- | :------- | | U.S. | $1,335 | $1,042 | **28%** | | Canada | $83 | $62 | **34%** | | International | $172 | $191 | **(10)%** | [NOTE 3 – INVENTORIES](index=13&type=section&id=NOTE%203%20%E2%80%93%20INVENTORIES) Total inventories, net, increased to $555 million at June 30, 2022, from $453 million at December 31, 2021, with the LIFO method reducing net income during rising inventory costs | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :------------------------------------ | :-------------------------- | :---------------------------- | | Inventories, net | **$555** | **$453** | | Less: Excess of average cost over LIFO cost (LIFO reserve) | **$(239)** | **$(213)** | - The LIFO method **reduces net income** during periods of rising inventory costs (inflationary periods)[32](index=32&type=chunk) [NOTE 4 – LEASES](index=13&type=section&id=NOTE%204%20%E2%80%93%20LEASES) The company primarily uses operating leases for facilities, with lease expense of $20 million and cash paid for leases of $21 million for the six months ended June 30, 2022 | Metric | 6 Months Ended June 30, 2022 (in millions) | 6 Months Ended June 30, 2021 (in millions) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Operating lease expense | **$20** | **$19** | | Cash paid for leases | **$21** | **$19** | | Metric | June 30, 2022 | | :-------------------------------- | :------------ | | Weighted-average remaining lease term (years) | **13** | | Weighted-average discount rate | **6.7%** | [NOTE 5 – LONG-TERM DEBT](index=15&type=section&id=NOTE%205%20%E2%80%93%20LONG-TERM%20DEBT) Long-term debt, net, increased to $353 million at June 30, 2022, from $295 million at December 31, 2021, primarily due to increased Global ABL Facility borrowings, with $529 million in excess availability | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------- | :-------------------------- | :---------------------------- | | Long-term debt, net | **$353** | **$295** | | Senior Secured Term Loan B | **$297** | **$297** | | Global ABL Facility | **$59** | **$0** | - Excess Availability under the Global ABL Facility was **$529 million** as of June 30, 2022[40](index=40&type=chunk) | Metric | June 30, 2022 | December 31, 2021 | | :------------------------ | :------------ | :---------------- | | Weighted average interest rate | **5.32%** | **5.41%** | [NOTE 6 – REDEEMABLE PREFERRED STOCK](index=16&type=section&id=NOTE%206%20%E2%80%93%20REDEEMABLE%20PREFERRED%20STOCK) The company has 363,000 shares of Series A Convertible Perpetual Preferred Stock outstanding, paying 6.50% cumulative dividends, classified as temporary equity due to a potential repurchase obligation - **363,000 shares** of Series A Convertible Perpetual Preferred Stock are issued and outstanding, with a stated value of **$1,000 per share**[42](index=42&type=chunk) - Holders are entitled to cumulative dividends payable quarterly in cash at a rate of **6.50%** per annum[42](index=42&type=chunk) - The Preferred Stock is classified as **temporary equity** because a fundamental change could require redemption, an event not solely within the company's control[44](index=44&type=chunk) [NOTE 7 – STOCKHOLDERS' EQUITY](index=16&type=section&id=NOTE%207%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) Stockholders' equity increased to $347 million at June 30, 2022, with over 1.5 million equity awards granted, and accumulated other comprehensive loss at $(229) million, primarily from currency translation adjustments | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :------------------------------------ | :-------------------------- | :---------------------------- | | Total Stockholders' Equity | **$347** | **$323** | | Accumulated other comprehensive loss | **$(229)** | **$(231)** | - In 2022, **90,015 shares** of restricted stock, **423,896 performance share unit awards**, and **1,006,519 shares** of restricted stock units were granted[45](index=45&type=chunk) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic earnings (loss) per common share | **$0.10** | **$(0.02)** | **$0.22** | **$(0.13)** | | Diluted earnings (loss) per common share | **$0.09** | **$(0.02)** | **$0.21** | **$(0.13)** | [NOTE 8 – SEGMENT INFORMATION](index=17&type=section&id=NOTE%208%20%E2%80%93%20SEGMENT%20INFORMATION) The company operates in three reportable segments: U.S., Canada, and International, with the U.S. segment showing significant growth, while International sales decreased due to foreign currency weakening - The company's business is comprised of **three operating and reportable segments: U.S., Canada, and International**[48](index=48&type=chunk) | Segment | 3 Months Ended June 30, 2022 (in millions) | 3 Months Ended June 30, 2021 (in millions) | % Change | | :------------ | :--------------------------------------- | :--------------------------------------- | :------- | | U.S. Sales | **$717** | **$558** | **28%** | | Canada Sales | **$40** | **$30** | **33%** | | International Sales | **$91** | **$98** | **(7)%** | | U.S. Operating Income | **$30** | **$7** | **N/M** | | Canada Operating Income | **$(1)** | **$0** | **N/M** | | International Operating Income | **$2** | **$3** | **(33)%** | | Product Line | 3 Months Ended June 30, 2022 (in millions) | 3 Months Ended June 30, 2021 (in millions) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Total carbon pipe, fittings and flanges | **$248** | **$188** | | Valves, automation, measurement and instrumentation | **$280** | **$243** | | Gas products | **$198** | **$162** | [NOTE 9 – FAIR VALUE MEASUREMENTS](index=20&type=section&id=NOTE%209%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) The company uses derivative financial instruments, including an interest rate swap with a notional amount of $250 million, and foreign exchange forward contracts, to manage market risks - The company uses **derivative financial instruments** to manage exposure to interest rate risk and foreign currency fluctuations[52](index=52&type=chunk) - An interest rate swap with a notional amount of **$250 million** is designated as an **effective cash flow hedge**[53](index=53&type=chunk)[54](index=54&type=chunk) | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------- | :-------------------------- | :---------------------------- | | Fair value of interest rate swap | **$0** | **$(7)** (liability) | | Fair value of debt | **$348** | **$296** | [NOTE 10 – COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=NOTE%2010%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company is a defendant in approximately 552 asbestos lawsuits, substantially covered by third-party insurance, and other legal claims are not expected to materially affect financial statements - As of June 30, 2022, the company is named a defendant in approximately **552 lawsuits** involving **1,117 asbestos claims**[57](index=57&type=chunk) - Applicable third-party insurance **substantially covers** these asbestos claims[57](index=57&type=chunk) - The likelihood that the ultimate disposition of any legal proceedings or product claims will have a material adverse effect on consolidated financial statements is **remote**[57](index=57&type=chunk)[58](index=58&type=chunk)[60](index=60&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and operational results, highlighting revenue growth, improved profitability, key business drivers, market trends, supply chain challenges, and liquidity [Cautionary Note Regarding Forward-Looking Statements](index=22&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises against undue reliance on forward-looking statements, as they involve known and unknown risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to business risks and uncertainties that could cause actual results to **differ materially**[64](index=64&type=chunk) - Key risks include decreases in capital and other expenditure levels, U.S. and international economic conditions, decreases in oil and natural gas prices, and unexpected supply shortages[65](index=65&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by law[67](index=67&type=chunk) [Overview](index=23&type=section&id=Overview) MRC Global is a leading global distributor of pipe, valves, fittings (PVF) and infrastructure products, offering over 250,000 SKUs to approximately 10,000 customers across diversified energy, industrial, and gas utility end-markets - **MRC Global** is the **leading global distributor** of pipe, valves, fittings (PVF) and other infrastructure products and services[68](index=68&type=chunk) - The company offers **over 250,000 SKUs** from **more than 10,000 suppliers** and serves **approximately 10,000 customers** through **205 service locations** globally[68](index=68&type=chunk) - Key end-markets include **gas utilities, downstream, industrial and energy transition, upstream production, and midstream pipeline sectors**[70](index=70&type=chunk) [Key Drivers of Our Business](index=24&type=section&id=Key%20Drivers%20of%20Our%20Business) Revenue is primarily driven by PVF sales to energy, industrial, and gas utility customers, dependent on their maintenance and capital expenditures, influenced by energy infrastructure, commodity prices, and economic conditions - Revenue is **predominantly derived from the sale of PVF and other supplies** to energy, industrial and gas utility customers globally[71](index=71&type=chunk) - Business performance is **dependent on customer maintenance and expansionary operating and capital expenditures**[71](index=71&type=chunk) - Key influencing factors include energy infrastructure integrity, oil and natural gas demand and prices, economic conditions, inventory levels, and steel prices, availability, supply and demand[74](index=74&type=chunk) [Recent Trends and Outlook](index=24&type=section&id=Recent%20Trends%20and%20Outlook) The company experienced a 14% sequential revenue increase in Q2 2022, leading to an improved double-digit percentage revenue growth outlook for 2022, with strong growth across all key sectors - Revenue increased **14% sequentially** from Q1 2022 to Q2 2022, outperforming initial expectations[72](index=72&type=chunk) - The company expects **double-digit percentage revenue improvement** in 2022 compared to 2021[72](index=72&type=chunk) | Sector | H1 2022 Sales Growth (YoY) | % of Total Revenue (H1 2022) | | :------------------------------------ | :------------------------- | :--------------------------- | | Gas utilities | **22%** | **37%** | | Downstream, industrial & energy transition | **26%** | **31%** | | Upstream production | **24%** | **~21%** (from 336M/1590M) | | Midstream pipeline | **14%** | **~11%** (from 184M/1590M) | [Russia-Ukraine War](index=26&type=section&id=Russia-Ukraine%20War) The Russia-Ukraine war has led to commodity price spikes and supply constraints, and while MRC Global has no direct operations in the conflict regions, it anticipates benefiting from new LNG infrastructure projects in the U.S. and Europe - The Russia-Ukraine war has spurred a **commodity price spike, supply constraints, and policy changes for energy security**[81](index=81&type=chunk) - The company has **no operations or sales** in Ukraine, Belarus, or Russia[81](index=81&type=chunk) - **New LNG infrastructure projects** in the U.S. and Europe could benefit the midstream pipeline and DIET sectors[82](index=82&type=chunk) [Supply Chain and Labor](index=26&type=section&id=Supply%20Chain%20and%20Labor) The company faces extended lead-times and logistics disruptions, exacerbated by COVID-19 lockdowns, experiencing inflation in transportation and product costs, and labor constraints increasing SG&A expenses - **Extended lead-times and logistics disruptions** are expected to continue for the foreseeable future[83](index=83&type=chunk) - The company is experiencing **significant increases in transportation costs and inflation** for certain product categories[83](index=83&type=chunk)[84](index=84&type=chunk) - **Labor constraints** are impacting the company globally, leading to **increased selling, general and administrative expenses**[86](index=86&type=chunk) [COVID-19 Pandemic](index=27&type=section&id=COVID-19%20Pandemic) The company monitors the COVID-19 pandemic and has operational plans, including isolation protocols and alternative staffing, to manage potential outbreaks and ensure business continuity and employee safety - The company **continues to monitor** the COVID-19 pandemic as cases and hospitalizations have recently increased[87](index=87&type=chunk) - Plans are in place to isolate potentially infected employees and staff facilities with employees from other locations or supply product from other facilities in case of an outbreak[87](index=87&type=chunk) [Backlog](index=28&type=section&id=Backlog) Total backlog significantly increased to $746 million at June 30, 2022, from $394 million at June 30, 2021, reflecting strong growth across all segments, with most expected to be realized as revenue within twelve months | Segment | June 30, 2022 (in millions) | December 31, 2021 (in millions) | June 30, 2021 (in millions) | | :------------ | :-------------------------- | :------------------------------ | :-------------------------- | | U.S. | **$526** | **$350** | **$257** | | Canada | **$54** | **$35** | **$13** | | International | **$166** | **$135** | **$124** | | Total | **$746** | **$520** | **$394** | - **Substantially all** of the sales in the backlog are expected to be realized as revenue **within twelve months**[88](index=88&type=chunk) [Key Industry Indicators](index=28&type=section&id=Key%20Industry%20Indicators) Key industry indicators for the three and six months ended June 30, 2022, showed significant improvements, with average rig counts, crude oil and natural gas prices, and U.S. well permits and completions all substantially higher | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | % Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------- | | Average Rig Count (Total) | **1,642** | **1,256** | **30.7%** | | WTI crude oil (per barrel) | **$108.83** | **$66.19** | **64.4%** | | Brent crude oil (per barrel) | **$113.84** | **$68.98** | **65.0%** | | Natural gas ($/MMBtu) | **$7.50** | **$2.95** | **154.2%** | | Average Monthly U.S. Well Permits | **3,499** | **1,885** | **85.6%** | | U.S. Wells Completed | **2,862** | **2,328** | **22.9%** | [Results of Operations](index=29&type=section&id=Results%20of%20Operations) The company's results of operations for the three and six months ended June 30, 2022, demonstrate strong financial performance, characterized by significant sales growth, improved gross profit margins, and increased operating and net income [Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021](index=29&type=section&id=Three%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202021) Consolidated sales increased 24% to $848 million, driven by strong U.S. growth, with Canada sales up 33%, International sales down 7%, gross profit margin at 17.8%, operating income at $31 million, and net income at $14 million | Metric | June 30, 2022 (in millions) | June 30, 2021 (in millions) | $ Change | % Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Consolidated Sales | **$848** | **$686** | **$162** | **24%** | | U.S. Sales | **$717** | **$558** | **$159** | **28%** | | Canada Sales | **$40** | **$30** | **$10** | **33%** | | International Sales | **$91** | **$98** | **$(7)** | **(7)%** | | Gross profit | **$151** (**17.8%** of sales) | **$112** (**16.3%** of sales) | **$39** | **35%** | | Operating income | **$31** | **$10** | **$21** | **N/M** | | Net income | **$14** | **$4** | **$10** | **N/M** | | Adjusted EBITDA | **$65** (**7.7%** of sales) | **$36** (**5.2%** of sales) | **$29** | **81%** | - U.S. sales increase was driven by **renewable biofuel projects, turnaround project and maintenance spending, integrity upgrade programs, smart meter programs, and increased well completions**[93](index=93&type=chunk) - International sales decrease was primarily due to the **weakening of foreign currencies relative to the U.S. dollar**, unfavorably impacting sales by **$10 million**[95](index=95&type=chunk) [Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021](index=32&type=section&id=Six%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202021) Consolidated sales increased 23% to $1,590 million, with U.S. sales up 28%, Canada sales up 34%, International sales down 10%, gross profit margin at 18.1%, operating income at $60 million, and net income at $30 million | Metric | June 30, 2022 (in millions) | June 30, 2021 (in millions) | $ Change | % Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Consolidated Sales | **$1,590** | **$1,295** | **$295** | **23%** | | U.S. Sales | **$1,335** | **$1,042** | **$293** | **28%** | | Canada Sales | **$83** | **$62** | **$21** | **34%** | | International Sales | **$172** | **$191** | **$(19)** | **(10)%** | | Gross profit | **$287** (**18.1%** of sales) | **$215** (**16.6%** of sales) | **$72** | **33%** | | Operating income | **$60** | **$13** | **$47** | **N/M** | | Net income | **$30** | **$1** | **$29** | **N/M** | | Adjusted EBITDA | **$113** (**7.1%** of sales) | **$60** (**4.6%** of sales) | **$53** | **88%** | - U.S. sales increase was driven by the **full implementation of a new customer contract in gas utilities, increased renewable biofuels projects, and higher customer spending for well completions**[111](index=111&type=chunk) - International sales decrease was primarily due to the **weakening of foreign currencies relative to the U.S. dollar**, unfavorably impacting sales by **$15 million**[113](index=113&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity was $550 million at June 30, 2022, including cash and $529 million in excess availability under the $750 million Global ABL Facility, with sufficient liquidity expected for the foreseeable future - Total liquidity, consisting of cash on hand and amounts available under the Global ABL Facility, was **$550 million** as of June 30, 2022[128](index=128&type=chunk) - The outstanding balance on the Senior Secured Term Loan B was **$297 million** as of June 30, 2022[126](index=126&type=chunk) - The Global ABL Facility has **$750 million** in commitments, with **$59 million** borrowings outstanding and **$529 million** of Excess Availability as of June 30, 2022[127](index=127&type=chunk) - The company was **in compliance** with the covenants contained in its various credit facilities as of and during the six months ended June 30, 2022[129](index=129&type=chunk) [Cash Flows](index=36&type=section&id=Cash%20Flows) Net cash used in operating activities was $63 million for the six months ended June 30, 2022, primarily due to increased working capital for inventory, a shift from $47 million provided in the prior year | Metric | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash (used in) provided by operating activities | **$(63)** | **$47** | | Net cash provided by (used in) financing activities | **$45** | **$(101)** | - The change in operating cash flows was primarily the result of an **increase in working capital** due to inventory purchases and other expenses to support growing market activity[133](index=133&type=chunk) - Net cash provided by financing activities in H1 2022 was primarily due to net proceeds from revolving credit facilities of **$60 million**[135](index=135&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) Financial statement preparation requires management judgments, estimates, and assumptions for uncertain matters, with critical accounting policies detailed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - Financial statements require **management judgments, estimates, and assumptions** about highly uncertain matters[136](index=136&type=chunk) - Critical accounting policies are described in the **Annual Report on Form 10-K** for the fiscal year ended December 31, 2021[137](index=137&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=36&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is primarily exposed to market risks from interest rates, foreign currencies, and steel price volatility, with no material changes to its market risk policies or instruments since December 31, 2021 - The company is primarily exposed to market risk associated with unfavorable movements in **interest rates, foreign currencies, and steel price volatility**[138](index=138&type=chunk) - There have been **no material changes** to market risk policies or market risk sensitive instruments and positions since December 31, 2021[138](index=138&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=37&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting during Q2 2022 - The company's disclosure controls and procedures were **effective** as of June 30, 2022[139](index=139&type=chunk) - **No material changes** in internal control over financial reporting occurred during the second quarter of 2022[140](index=140&type=chunk) [PART II – OTHER INFORMATION](index=38&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=38&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, including asbestos and product claims, with management believing their ultimate disposition will not materially affect financial condition, results of operations, or cash flows, and asbestos claims substantially covered by insurance - The company is subject to various claims and legal proceedings incidental to its businesses, including **asbestos and product liability claims**[143](index=143&type=chunk)[144](index=144&type=chunk) - Management believes the ultimate disposition of these claims is **not expected to have a material adverse effect** on financial condition, results of operations, or cash flows[143](index=143&type=chunk)[144](index=144&type=chunk) - Information regarding asbestos cases and other claims is detailed in **Note 10 – Commitments and Contingencies**[145](index=145&type=chunk) [ITEM 1A. RISK FACTORS](index=38&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to significant factors that could materially adversely affect the company's business, financial condition, or operating results, as described in this Form 10-Q and the Annual Report on Form 10-K - Significant risk factors are described in **Part I, Item 2 of this Form 10-Q** and in **Part I, Item 1A of the Annual Report on Form 10-K** for the year ended December 31, 2021[146](index=146&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=38&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities or use of proceeds to report for the period [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=38&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities to report for the period [ITEM 4. MINING SAFETY DISCLOSURES](index=39&type=section&id=ITEM%204.%20MINING%20SAFETY%20DISCLOSURES) There were no mining safety disclosures to report for the period [ITEM 5. OTHER INFORMATION](index=39&type=section&id=ITEM%205.%20OTHER%20INFORMATION) There is no other information to report for the period [ITEM 6. EXHIBITS](index=40&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and financial information in iXBRL format - Exhibits include **corporate governance documents, certifications of the CEO and CFO, and financial information in iXBRL format**[152](index=152&type=chunk)

Revenue Performance - Revenue for the three months ended March 31, 2022, increased by 8% sequentially from the previous quarter, outperforming initial expectations[67]. - The gas utility sector accounted for 37% of total company revenue, with a 29% increase in sales compared to the same period in 2021[68]. - The downstream, industrial, and energy transition (DIET) sector generated 30% of total revenue, growing 16% from the first quarter of 2021[71]. - Upstream production revenue increased by 24% year-over-year, while midstream pipeline revenue rose by 12% in the same period[73]. - The company expects double-digit revenue improvement for 2022, driven by increased customer spending levels[67]. Sales and Profitability - Sales for the three months ended March 31, 2022, were $742 million, an increase of $133 million, or 22%, compared to $609 million for the same period in 2021[87]. - U.S. sales increased to $618 million for the three months ended March 31, 2022, from $484 million for the same period in 2021, reflecting a $134 million, or 28%, increase[88]. - Gross profit was $136 million (18.3% of sales) for the three months ended March 31, 2022, compared to $103 million (16.9% of sales) for the same period in 2021[91]. - Adjusted Gross Profit increased to $152 million (20.5% of sales) for the three months ended March 31, 2022, from $118 million (19.4% of sales) for the same period in 2021[92]. - Operating income was $29 million for the three months ended March 31, 2022, compared to operating income of $3 million for the same period in 2021, an increase of $26 million[94]. - Net income was $16 million for the three months ended March 31, 2022, compared to a net loss of $3 million for the same period in 2021[99]. - Adjusted EBITDA was $48 million (6.5% of sales) for the three months ended March 31, 2022, compared to $24 million (3.9% of sales) for the same period in 2021[100]. Market Conditions - Inflation and supply chain disruptions have led to significant increases in transportation costs, impacting overall profitability[78]. - The average Brent crude oil price during the first quarter of 2022 was over $100 per barrel, while West Texas Intermediate averaged approximately $95 per barrel[76]. - Average Commodity Prices for WTI crude oil rose to $95.18 per barrel for the three months ended March 31, 2022, compared to $58.09 for the same period in 2021[85]. Growth Potential - The compound annual growth rate for the gas utility sector since 2010 is 11%, indicating steady growth potential[70]. - The company is well-positioned to benefit from the growth of liquefied natural gas (LNG) infrastructure as Europe seeks alternatives to Russian gas supplies[77]. - The energy transition segment is expected to grow as pressure to decarbonize the economy increases, with low-emission valves representing 94% of valve revenue[72]. Financial Position - The backlog as of March 31, 2022, was $667 million, up from $520 million as of December 31, 2021[84]. - As of March 31, 2022, total liquidity was $545 million, consisting of $31 million in cash and $514 million of excess availability under the Global ABL Facility[106]. - Net cash used in operating activities was $13 million for the three months ended March 31, 2022, a decrease from $24 million provided in the same period of 2021, primarily due to increased working capital[111]. - The company had capital expenditures of $2 million for the three months ended March 31, 2022, compared to $1 million in the same period of 2021[112]. - The outstanding balance on the Term Loan as of March 31, 2022, was $297 million, with no excess cash flow payment required for 2021[104]. - The Global ABL Facility was amended to provide $705 million in revolver commitments, maturing in September 2026, with an accordion feature allowing an increase of up to $250 million[105]. - The company used $6 million to pay dividends on preferred stock for the three months ended March 31, 2022, consistent with the prior year[113]. - The company is not required to make an excess cash flow payment if the senior secured leverage ratio is less than or equal to 2.50 to 1.00[104]. - The company’s credit ratings are below investment grade, which may impact future borrowing costs and ability to raise funds[107]. Operational Metrics - Average Rig Count in the U.S. increased to 633 for the three months ended March 31, 2022, from 393 for the same period in 2021[85].