UNITED STATES
‎SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR THE QUARTERLY PERIOD ENDED MARCH 31, ~~2019~~2020

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______

Commission file number: 001-35479

MRC GLOBAL INC.

~~MRC Global Inc.~~
(Exact name of registrant as specified in its charter)

Delaware	20-5956993
(State or Other Jurisdiction of ‎Incorporation or Organization)	(I.R.S. Employer Identification No.)

Fulbright Tower 1301 McKinney Street, Suite 2300 Houston, Texas	77010
(Address of Principal Executive Offices)	(Zip Code)

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

________________

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	MRC	New York Stock Exchange

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

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

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

Large ~~accelerated filer [ X ]~~ Accelerated ~~filer~~Filer [X] Accelerated Filer [ ] ~~Non-accelerated filer~~ Non-Accelerated Filer [ ] Smaller ~~reporting company~~Reporting Company [ ] Emerging ~~growth company~~Growth Company [ ]

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

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

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


~~Title of each class~~	~~Trading symbol(s)~~	~~Name of each exchange on which registered~~
~~Common Stock, par value $0.01~~	~~MRC~~	~~New York Stock Exchange~~

There were ~~83,066,661~~81,995,189 shares of the registrant’s common stock (excluding ~~74,508~~74,055 unvested restricted shares), par value $0.01 per share, issued and outstanding as of April ~~26, 2019.~~22, 2020.

Table Ofof Contents

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)


	March 31,		December 31,
	2020		2019

Assets
Current assets:
Cash	$	28	$	32
Accounts receivable, net		476		459
Inventories, net		691		701
Other current assets		24		26
Total current assets		1,219		1,218

Long-term assets:
Operating lease assets		179		186
Property, plant and equipment, net		131		138
Other assets		19		19

Intangible assets:
Goodwill, net		480		483
Other intangible assets, net		273		281
	$	2,301	$	2,325

Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable	$	399	$	357
Accrued expenses and other current liabilities		82		91
Operating lease liabilities		33		34
Current portion of long-term debt		4		4
Total current liabilities		518		486

Long-term liabilities:
Long-term debt, net		517		547
Operating lease liabilities		161		167
Deferred income taxes		90		91
Other liabilities		43		37

Commitments and contingencies

6.5% Series A Convertible Perpetual Preferred Stock, $0.01 par value; authorized
363,000 shares; 363,000 shares issued and outstanding		355		355

Stockholders' equity:
Common stock, $0.01 par value per share: 500 million shares authorized,
106,209,943 and 105,624,750 issued, respectively		1		1
Additional paid-in capital		1,730		1,731
Retained deficit		(480)		(483)
Less: Treasury stock at cost: 24,216,330 shares		(375)		(375)
Accumulated other comprehensive loss		(259)		(232)
		617		642
	$	2,301	$	2,325
See notes to condensed consolidated financial statements.

Table of Contents

March 31,

December 31,

2019

2018

Assets

Current assets:

Cash
$
27

$
43
Accounts receivable, net

626

587
Inventories, net

839

797
Other current assets

29

38
Total current assets

1,521

1,465

Long-term assets:

Operating lease assets

190

-
Property, plant and equipment, net

137

140
Other assets

30

23

Intangible assets:

Goodwill, net

484

484
Other intangible assets, net

311

322

$
2,673

$
2,434

Liabilities and stockholders' equity

Current liabilities:

Trade accounts payable
$
462

$
435
Accrued expenses and other current liabilities

97

130
Operating lease liabilities

35

-
Current portion of long-term debt

4

4
Total current liabilities

598

569

Long-term liabilities:

Long-term debt, net

742

680
Operating lease liabilities

170

-
Deferred income taxes

98

98
Other liabilities

32

40

Commitments and contingencies

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

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

355

355

Stockholders' equity:

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

105,545,121 and 104,953,693 issued, respectively

1

1
Additional paid-in capital

1,719

1,721
Retained deficit

(486)

(498)
Less: Treasury stock at cost: 21,106,376 and 19,347,839 shares, respectively

(325)

(300)
Accumulated other comprehensive loss

(231)

(232)

678

692

$
2,673

$
2,434
See notes to condensed consolidated financial statements.

~~Table Of Contents~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)


	Three Months Ended
	March 31,		March 31,
	2020		2019

Sales	$	794	$	970
Cost of sales		646		796
Gross profit		148		174
Selling, general and administrative expenses		126		139
Operating income		22		35
Other (expense) income:
Interest expense		(8)		(11)
Other, net		-		-

Income before income taxes		14		24
Income tax expense		5		6
Net income		9		18
Series A preferred stock dividends		6		6
Net income attributable to common stockholders	$	3	$	12


Basic income per common share	$	0.04	$	0.14
Diluted income per common share	$	0.04	$	0.14
Weighted-average common shares, basic		81.7		84.3
Weighted-average common shares, diluted		82.4		85.3

Three Months Ended

March 31,

March 31,

2019

2018

Sales
$
970

$
1,010
Cost of sales

796

841
Gross profit

174

169
Selling, general and administrative expenses

139

138
Operating income

35

31
Other expense:

Interest expense

(11)

(8)
Other, net

-

2

Income before income taxes

24

25
Income tax expense

6

7
Net income

18

18
Series A preferred stock dividends

6

6
Net income attributable to common stockholders
$
12

$
12

Basic income per common share
$
0.14

$
0.13
Diluted income per common share
$
0.14

$
0.13
Weighted-average common shares, basic

84.3

91.4
Weighted-average common shares, diluted

85.3

92.5

See notes to condensed consolidated financial statements.

Table Ofof Contents

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

MRC GLOBAL INC.

(in millions)


	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
	2019		2018		2020		2019

Net income	$	18	$	18	$	9	$	18

Other comprehensive income (loss)
Other comprehensive (loss) income
Foreign currency translation adjustments		3		(1)		(21)		3
Hedge accounting adjustments, net of tax		(2)		(1)		(6)		(2)
Total other comprehensive income (loss), net of tax		1		(2)
Comprehensive income	$	19	$	16
Total other comprehensive (loss) income, net of tax						(27)		1
Comprehensive (loss) income					$	(18)	$	19

See notes to condensed consolidated financial statements.

Table Ofof Contents

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

MRC GLOBAL INC.

(in millions)


	Three Months Ended March 31, 2020
											Accumulated
				Additional							Other		Total
	Common Stock			Paid-in		Retained		Treasury Stock			Comprehensive		Stockholders'
	Shares	Amount		Capital		(Deficit)		Shares	Amount		(Loss)		Equity
Balance at December 31, 2019	106	$	1	$	1,731	$	(483)	(24)	$	(375)	$	(232)	$	642
Net income	-		-		-		9	-		-		-		9
Foreign currency translation	-		-		-		-	-		-		(21)		(21)
Hedge accounting adjustments	-		-		-		-	-		-		(6)		(6)
Shares withheld for taxes	-		-		(3)		-	-		-		-		(3)
Equity-based compensation expense	-		-		2		-	-		-		-		2
Dividends declared on preferred stock	-		-		-		(6)	-		-		-		(6)
Balance at March 31, 2020	106	$	1	$	1,730	$	(480)	(24)	$	(375)	$	(259)	$	617


	Three Months Ended March 31, 2019
											Accumulated
				Additional							Other		Total
	Common Stock			Paid-in		Retained		Treasury Stock			Comprehensive		Stockholders'
	Shares	Amount		Capital		(Deficit)		Shares	Amount		(Loss)		Equity
Balance at December 31, 2018	105	$	1	$	1,721	$	(498)	(19)	$	(300)	$	(232)	$	692
Net income	-		-		-		18	-		-		-		18
Foreign currency translation	-		-		-		-	-		-		3		3
Hedge accounting adjustments	-		-		-		-	-		-		(2)		(2)
Shares withheld for taxes	-		-		(6)		-	-		-		-		(6)
Equity-based compensation expense	-		-		4		-	-		-		-		4
Dividends declared on preferred stock	-		-		-		(6)	-		-		-		(6)
Purchase of common stock	-		-		-		-	(2)		(25)		-		(25)
Balance at March 31, 2019	105	$	1	$	1,719	$	(486)	(21)	$	(325)	$	(231)	$	678

See notes to condensed consolidated financial statements.

Three Months Ended March 31, 2018

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Treasury Stock

Comprehensive

Stockholders'

Shares

Amount

Capital

(Deficit)

Shares

Amount

(Loss)

Equity

Balance at December 31, 2017
103

$
1

$
1,691

$
(548)

(12)

$
(175)

$
(210)

$
759
Net income
-

-

-

18

-

-

-

18
Foreign currency translation
-

-

-

-

-

-

(1)

(1)
Hedge accounting adjustments
-

-

-

-

-

-

(1)

(1)
Shares withheld for taxes
-

-

(5)

-

-

-

-

(5)
Equity-based compensation expense
-

-

4

-

-

-

-

4
Exercise and vesting of stock awards
1

-

5

-

-

-

-

5
Dividends declared on preferred stock
-

-

-

(6)

-

-

-

(6)
Purchase of common stock
-

-

-

-

(1)

(30)

-

(30)

Balance at March 31, 2018
104

$
1

$
1,695

$
(536)

(13)

$
(205)

$
(212)

$
743

Table Ofof Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

MRC GLOBAL INC.

(in millions)


	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
	2019		2018		2020		2019

Operating activities
Net income	$	18	$	18	$	9	$	18
Adjustments to reconcile net income to net cash used in operations:
Adjustments to reconcile net income to net cash provided by (used in) operations:
Depreciation and amortization		5		6		5		5
Amortization of intangibles		11		11		7		11
Equity-based compensation expense		4		4		2		4
Deferred income tax benefit		1		-		1		1
Increase in LIFO reserve		-		7
(Decrease) increase in LIFO reserve						(3)		-
Provision for uncollectible accounts						6		2
Other		4		2		1		2
Changes in operating assets and liabilities:
Accounts receivable		(47)		(98)		(33)		(47)
Inventories		(42)		(117)		(4)		(42)
Other current assets		8		-		2		8
Accounts payable		27		106		49		27
Accrued expenses and other current liabilities		(29)		(13)		(5)		(29)
Net cash used in operations		(40)		(74)
Net cash provided by (used in) operations						37		(40)

Investing activities
Purchases of property, plant and equipment		(2)		(5)		(2)		(2)
Net cash used in investing activities		(2)		(5)		(2)		(2)

Financing activities
Payments on revolving credit facilities		(256)		(194)		(228)		(256)
Proceeds from revolving credit facilities		319		307		205		319
Payments on long-term obligations		(1)		(1)		(4)		(1)
Purchase of common stock		(25)		(30)		-		(25)
Dividends paid on preferred stock		(6)		(6)		(6)		(6)
Repurchases of shares to satisfy tax withholdings		(6)		(5)		(3)		(6)
Proceeds from exercise of stock options		-		5
Other		1		-		-		1
Net cash provided by financing activities		26		76
Net cash (used in) provided by financing activities						(36)		26

Decrease in cash		(16)		(3)		(1)		(16)
Effect of foreign exchange rate on cash		-		-		(3)		-
Cash -- beginning of period		43		48		32		43
Cash -- end of period	$	27	$	45	$	28	$	27

Supplemental disclosures of cash flow information:
Cash paid for interest	$	10	$	8	$	8	$	10
Cash paid for income taxes	$	5	$	1	$	1	$	5
See notes to condensed consolidated financial statements.

Table Ofof Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MRC GLOBAL ~~INC~~INC.

NOTE 1 – BACKGROUND AND BASIS OF PRESENTATION

Business Operations: MRC Global Inc. is a holding company headquartered in Houston, Texas. Our wholly owned subsidiaries are global distributors of pipe, valves, fittings (“PVF”) and ~~other~~related infrastructure products and services across each of the upstream production (exploration, production and extraction of underground oil and gas), midstream pipeline (gathering and transmission of oil and gas), gas ~~gas~~utilities (gas utilities and the storage and distribution of oil and gas) and downstream and industrial (crude oil refining and petrochemical and chemical processing and general industrials) sectors. We have branches in principal industrial, hydrocarbon producing and refining areas throughout the United States, Canada, Europe, Asia, Australasia, the Middle East and Caspian. We obtain products from a broad range of suppliers.

Basis of Presentation: We have prepared our unaudited condensed consolidated financial statements in accordance with Rule 10-01 of Regulation S-X for interim financial statements. These statements do not include all information and footnotes that generally accepted accounting principles require for complete annual financial statements. However, the information in these statements reflects all normal recurring adjustments which are, in our opinion, necessary for a fair presentation of the results for the interim periods. The results of operations for the three months ended March 31, ~~2019~~2020 are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, ~~2019.~~2020. We have derived our condensed consolidated balance sheet as of December 31, ~~2018~~2019 from the audited consolidated financial statements for the year ended December 31, ~~2018.~~2019. You should read these condensed consolidated financial statements in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, ~~2018.~~2019.

The consolidated financial statements include the accounts of MRC Global Inc. and its wholly owned and majority owned subsidiaries (collectively referred to as the “Company” or by such terms as “we,” “our” or “us”). All material intercompany balances and transactions have been eliminated in consolidation.

Recent Issued Accounting Pronouncements: In ~~June 2016,~~March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards ~~Updated~~Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) ("ASU 2020-04"), which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate ("LIBOR") or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impacts of the the provisions of ASU 2020-04 on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an update intended to simplify various aspects related to accounting for income taxes. This guidance removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This accounting standards update will be effective for annual and interim financial statement periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this accounting standards update, but do not expect the adoption to materially impact our consolidated financial statements.

Adoption of New Accounting Standards: In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which requires that an entity measure impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses. This update is effective for annual and interim financial statement periods beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. In November 2018, the FASB issuedWe adopted ASU ~~2018-19 which clarifies guidance in ASU 2016-13. We do not expect the~~2016-13 on January 1, 2020. The adoption of this new standard ~~to materially impact our consolidated financial statements.~~

~~Adoption of New Accounting Standards~~: ~~On January 1, 2019, we adopted ASU 2016-02,~~ ~~Leases,~~ ~~which requires~~resulted in the recognition of ~~lease~~$1 million of incremental bad debt expense in the three months ended March 31, 2020.

Valuation of Goodwill and Indefinite-Lived Intangibles: We apply a fair value-based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis (as of October 1) and, ~~lease liabilities~~if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. Our October 2019 quantitative impairment tests for those leases classified as operating leases under previous guidance in Accounting Standards Codification 840. We adopted ASU 2016-02 using the modified retrospective approach. The guidance for this approach included an option to not restate comparative periods in transitiongoodwill and ~~elect to use the effective date~~indefinite-lived intangible assets indicated there was no impairment as the ~~initial application~~fair value of ~~transition,~~each of our reporting units and indefinite-lived intangible assets exceeded carrying value by a significant margin, with the exception of our International reporting unit for which ~~we elected. In addition, we elected~~ the ~~package~~excess was approximately 20%.

As a result of ~~practical expedients permitted under~~our reduced forecasts and the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classifications. On January 1, 2019, we recorded an operating lease asset of $192 million and an operating lease liability of $208 million. The standard did not impactsignificant decline in our ~~consolidated net earnings or cash flows.Adoption~~market capitalization as a result of the ~~new standard~~coronavirus disease 2019 (“COVID-19”) pandemic, we qualitatively assessed whether it was more likely than not our goodwill or indefinite-lived intangible assets were impaired as of March 31, 2020. We reviewed our previous forecasts and assumptions based on our current projections that are subject to various risks and uncertainties, including: (1) forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business from the COVID-19 pandemic, (2) current discount rates, (3) the reduction in ourmarket capitalization, and (4) control premiums on observable market conditions.

Table of Contents

Based on our qualitative assessment, we concluded that our goodwill and indefinite-lived intangible assets were not impaired as of March 31, 2020. However, we are unable to predict how long current market conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on our business. To the extent we are unable to conclude in a future period that it is more ~~fully described~~likely than not our goodwill and indefinite-lived intangible assets are not impaired, we would be required to perform a full quantitative impairment test, the results of which could require recognition of an impairment charge in ~~Note 4.~~future periods.

NOTE 2 – REVENUE RECOGNITION

Revenue is recognized when control of promised goods or services is transferred to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Substantially all of our revenue is recognized when products are shipped or delivered to our customers, and payment is due from our customers at the time of billing with a majority of our customers having 30-day terms. Returns are estimated and recorded as a reduction of revenue. Amounts received in advance of shipment are deferred and recognized when the performance obligations are satisfied. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from sales in the accompanying consolidated statements of operations. Cost of sales includes the cost of inventory sold and related items, such as vendor rebates, inventory allowances and reserves and shipping and handling costs associated with inbound and outbound freight, as well as depreciation and amortization and amortization of intangible assets. In some cases, particularly with third-party pipe shipments, shipping and handling costs are considered separate performance obligations, and as such, the revenue and cost of sales are recorded when the performance obligation is fulfilled.

~~Table Of Contents~~

Our contracts with customers ordinarily involve performance obligations that are one year or less. Therefore, we have applied the optional exemption that permits the omission of information about our unfulfilled performance obligations as of the balance sheet dates.

Contract Balances: Variations in the timing of revenue recognition, invoicing and receipt of payment result in categories of assets and liabilities that include invoiced accounts receivable, uninvoiced accounts receivable, contract assets and deferred revenue (contract liabilities) on the consolidated balance sheets.

Generally, revenue recognition and invoicing occur simultaneously as we transfer control of promised goods or services to our customers. We consider contract assets to be accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain cases, particularly those involving customer-specific documentation requirements, invoicing is delayed until we are able to meet the documentation requirements. In these cases, we recognize a contract asset separate from accounts receivable until those requirements are met, and we are able to invoice the customer. Our contract asset balance associated with these requirements, as of March 31, ~~2019~~2020 and December 31,~~2018,~~ 2019, was ~~$41~~$21 million and ~~$38~~$26 million, respectively. These contract asset balances are included within accounts receivable in the accompanying consolidated balance sheets.

We record contract liabilities, or deferred revenue, when cash payments are received from customers in advance of our performance, including amounts which are refundable. The deferred revenue balance at March 31, ~~2019~~2020 and December 31,~~2018~~ 2019 was $9$5 million and $6$4 million, respectively. During the three months ended March 31, 2020 and 2019, we recognized $2 million and $5 million of revenue that was deferred as of December31,~~2018.~~ 2019 and 2018, respectively. Deferred revenue balances are included within accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

~~On January 29, 2019, PG&E Corporation, a large public utility company in California, filed voluntary petitions under Chapter~~11

Table of ~~the U.S. Bankruptcy Code. At the time of the filing, our accounts receivable for PG&E totaled $16 million. As of March31, 2019, pre-petition accounts receivable for PG&E totaled $11 million. During the three months ended March31,2019, we recognized a charge of $2 million to write-off accounts receivable we do not expect to collect.~~ Contents

Disaggregated Revenue: Our disaggregated revenue represents our business of selling PVF to the energy sector across each of the upstream production (exploration, production and extraction of underground oil and gas), midstream pipeline (gathering and transmission of oil and ~~gas,~~gas), gas utilities and ~~the storage~~downstream and ~~distribution of oil and gas) and downstream~~industrial (crude oil refining and petrochemical and chemical processing and general industrials) sectors in each of our reportable segments. Each of our end markets and geographical reportable segments are impacted and influenced by varying factors, including macroeconomic environment, commodity prices, maintenance and capital spending, and exploration and production activity. As such, we believe that this information is important in depicting the nature, amount, timing and uncertainty of our contracts with customers.

The following table presents our revenue disaggregated by revenue source (in millions):


Three Months Ended
March 31,

	U.S.		Canada		International		Total
2020:
Upstream production	$	139	$	37	$	46	$	222
Midstream pipeline		110		4		5		119
Gas utilities		199		3		-		202
Downstream & industrial		190		6		55		251
	$	638	$	50	$	106	$	794
2019:
Upstream production	$	206	$	46	$	60	$	312
Midstream pipeline		133		6		8		147
Gas utilities		204		10		-		214
Downstream & industrial		236		6		55		297
	$	779	$	68	$	123	$	970

Three Months Ended
March 31,

U.S.

Canada

International

Total
2019:

Upstream
$
206

$
46

$
60

$
312
Midstream

337

16

8

361
Downstream

236

6

55

297

$
779

$
68

$
123

$
970
2018:

Upstream
$
178

$
57

$
67

$
302
Midstream

393

14

3

410
Downstream

235

7

56

298

$
806

$
78

$
126

$
1,010

~~Table Of Contents~~

NOTE 3 – INVENTORIES

The composition of our inventory is as follows (in millions):


	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Finished goods inventory at average cost:
Valves, automation, measurement and instrumentation	$	401	$	366	$	355	$	355
Carbon steel pipe, fittings and flanges		355		346		246		268
All other products		281		282		277		268
		1,037		994		878		891
Less: Excess of average cost over LIFO cost (LIFO reserve)		(157)		(157)		(152)		(155)
Less: Other inventory reserves		(41)		(40)		(35)		(35)
	$	839	$	797	$	691	$	701

The Company uses the last-in, first-out (“LIFO”) method of valuing U.S. inventories. The use of the LIFO method has the effect of reducing net income during periods of rising inventory costs (inflationary periods) and increasing net income during periods of falling inventory costs (deflationary periods). Valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination. Our inventory quantities are expected to be reduced for the current year, resulting in a liquidation of a LIFO inventory layer that was carried at a lower cost prevailing from a prior year, as compared with current costs in the current year (a “LIFO decrement”). A LIFO decrement results in the erosion of layers created in earlier years, and, therefore, a LIFO layer is not created for years that have decrements. For the three months ended March 31, 2020, the effect of this LIFO decrement decreased cost of sales by approximately $3 million.

NOTE 4 – LEASES

We lease certain distribution centers, warehouses, office space, land and equipment. Substantially all of these leases are classified as operating leases. We recognize lease expense ~~for these leases~~ on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Table of Contents

Many of our facility leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 15 years with a maximum lease term of 30 years, including renewals. The exercise of lease renewal options is at our sole discretion; therefore, renewals to extend the terms of most leases are not included in our right of use (“ROU”) assets and lease liabilities as they are not reasonably certain of exercise. In the case of our regional distribution centers and certain corporate offices, where the renewal is reasonably certain of exercise, we include the renewal period in our lease term. Leases with escalation adjustments based on an index, such as the consumer price index, are expensed based on current rates. Leases with specified escalation steps are expensed ~~and projected~~ based on the total lease obligation ratably over the life of the lease. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Non-lease components, such as payment of real estate taxes, maintenance, insurance and other operating expenses, have been excluded from the determination of our lease liability.

As most of our leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments using a portfolio approach. ~~For leases that commenced prior to the transition date, we used the incremental borrowing rates as of the beginning of the period of adoption, or January 1, 2019.~~

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Expense associated with our operating leases was $10 million for the three months ended March 31, 2020 and 2019, which is classified in selling, general and administrative expenses. Cash paid for ~~amounts included in the measurement of operating lease~~leases recognized as liabilities was $11 million for the three months ended March 31, 2020 and 2019.

~~Table Of Contents~~

The maturity of lease liabilities is as follows (in millions):



Maturity of Operating Lease Liabilities
2019	$	33
2020		37
Remainder of 2020			$	30
2021		31		35
2022		23		27
2023		19		21
After 2023		192
2024				17
After 2024				192
Total lease payments		335		322
Less: Interest		(130)		(128)
Present value of lease liabilities	$	205	$	194

Amounts maturing after ~~2023~~2024 include expected renewals for leases of regional distribution centers and certain corporate offices through dates up to 2049.

The term and discount rate associated with leases are as follows:


	March 31,
Operating Lease Term and Discount Rate	~~2019~~2020
Weighted-average remaining lease term (years)		14
Weighted-average discount rate		7.0%

Table of Contents

NOTE 5 – LONG-TERM DEBT

The components of our long-term debt are as follows (in millions):

March 31,

December 31,

2019

2018
Senior Secured Term Loan B, net of discount and issuance costs of $2 and $3, respectively
$
392

$
393
Global ABL Facility

354

291

746

684
Less: current portion

4

4

$
742

$
680


	March 31,		December 31,
	2020		2019
Senior Secured Term Loan B, net of discount and issuance costs of $2	$	386	$	390
Global ABL Facility		135		161
		521		551
Less: Current portion		(4)		(4)
	$	517	$	547

Senior Secured Term Loan B: We have a Senior Secured Term Loan B (the “Term Loan”) with an original principal amount of $400 million, which amortizes in equal quarterly installments of 1% per year with the balance payable in September 2024, when the facility matures. The Term Loan has an applicable interest rate margin of 300 basis points in the case of loans incurring interest based on LIBOR, and 200 basis points in the case of loans incurring interest based on the base rate.The Term Loan allows for incremental increases in facility size by up to an aggregate of $200million, plus an additional amount such that the Company’s first lien leverage ratio (as defined under the Term Loan) would not exceed 4.00 to 1.00. MRC Global (US) Inc. is the borrower under this facility, which is guaranteed by MRC Global Inc. as well as all of its wholly owned U.S. subsidiaries. In addition, it is secured by a second lien on the assets securing our Global ABL Facility, defined below, (which includes accounts receivable ~~inventory~~ and ~~related assets)~~inventory) and a first lien on substantially all of the other assets of MRC Global Inc. and those of its U.S. subsidiaries, as well as a pledge of all of the capital stock of our domestic subsidiaries and 65% of the capital stock of first tier, non-U.S. subsidiaries. We are required to repay the Term Loan with certain asset sales and insurance ~~proceeds, certain debt proceeds and~~proceeds. In addition, on an annual basis, we are required to repay an amount equal to 50% of excess cash flow, as defined in the Term Loan, ~~(reducing~~reducing to 25% if our first lien leverage ratio is no more than 2.75 to ~~1.00 and 0%~~1.00. No payment of excess cash flow is required if ~~our~~the first lien leverage ratio is ~~no more~~less than or equal 2.50 to ~~1.00).~~1.00. In addition, the Term Loan contains a number of customary restrictive covenants.

In ~~May 2018, the Company entered into Refinancing Amendment No. 2 relating to the Term Loan. Pursuant to this amendment, the Company~~March 2019, we purchased and the other parties thereto agreed to reduce the interest rate margin applicable to term loans, in the case of loans incurring interest based on the base rate, from 250 basis points to 200 basis points, and in the case of loans incurring interest based on LIBOR, from 350 basis points to 300 basis points. The parties to the amendment also agreed to reduce the base rate ‘floor’ from 2.00% to 1.00% and to reduce the LIBOR ‘floor’ from 1.00% to 0.00%. The parties also reset

~~Table Of Contents~~

~~the prepayment premium applicable to voluntary prepayments~~retired $3 million of the ~~term loans such that repayments made~~outstanding interests in ~~connection with certain re-pricing transactions will be subject to a 1% premium if made during the first six-months following the date of the amendment. Except as described above, the terms of~~ the Term Loan ~~Agreement generally were not modified as~~at a ~~result~~cost of $2 million. We recognized a gain of $1 million on the extinguishment of the ~~amendment.~~debt in the three months ended March 31, 2020.

Global ABL Facility: We have an $800 million multi-currency asset-based revolving credit (the “Global ABL Facility”) that matures in September 2022. This facility is comprised of revolver commitments of $675 million in the United States, $65million in Canada, $18 million in Norway, $15 million in Australia, $13million in the Netherlands, $7 million in the United Kingdom and $7 million in Belgium. It contains an accordion feature that allows us to increase the principal amount of the facility by up to $200 million, subject to securing additional lender commitments. MRC Global Inc. and each of its current and future wholly owned material U.S. subsidiaries guarantee the obligations of our borrower subsidiaries under the Global ABL Facility. Additionally, each of our non-U.S. borrower subsidiaries guarantees the obligations of our other non-U.S. borrower subsidiaries under the Global ABL Facility. Outstanding obligations are generally secured by a first priority security interest in accounts receivable and inventory. Availability is dependent on a borrowing base comprised of a percentage of eligible accounts receivable and inventory ~~and related assets.~~which is subject to redetermination from time to time. Excess Availability, as defined under our Global ABL Facility and adjusted for the pro forma effect of an inventory appraisal completed in April 2020, was ~~$382~~$437 million as of March 31, ~~2019.~~2020.

Interest on Borrowings: The interest rates on our borrowings outstanding at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, including a floating to fixed interest rate swap and amortization of debt issuance costs, are as set forth below:


	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Senior Secured Term Loan B		5.75%		5.76%		5.22%		5.50%
Global ABL Facility		3.70%		3.95%		2.55%		3.47%
Weighted average interest rate		4.78%		4.99%		4.52%		4.91%

Table of Contents

NOTE 6 – REDEEMABLE PREFERRED STOCK

Preferred Stock Issuance

In June 2015, we issued 363,000 shares of Series A Convertible Perpetual Preferred Stock (the “Preferred Stock”) and received gross proceeds of $363 million. The Preferred Stock ranks senior to our common stock with respect to dividend rights and rights on liquidation, winding-up and dissolution. The Preferred Stock has a stated value of $1,000 per share, and holders of Preferred Stock are entitled to cumulative dividends payable quarterly in cash at a rate of 6.50% per annum. In June 2018, the holders of Preferred Stock designated one member to our Board of Directors. If we fail to declare and pay the quarterly dividend for an amount equal to six or more dividend periods, the holders of the Preferred Stock would be entitled to designate an additional member to our Board of Directors. Holders of Preferred Stock are entitled to vote together with the holders of the common stock as a single class, in each case, on an as-converted basis, except where a separate class vote of the common stockholders is required by law. Holders of Preferred Stock have certain limited special approval rights, including with respect to the issuance of pari passu or senior equity securities of the Company.

The Preferred Stock is convertible at the option of the holders into shares of common stock at an initial conversion rate of 55.9284 shares of common stock for each share of Preferred Stock, which represents an initial conversion price of $17.88 per share of common stock, subject to adjustment. On or after June 10, 2020, the Company will have the option to redeem, in whole but not in part, all the outstanding shares of Preferred Stock at 105% of par value, subject to certain redemption price adjustments. After the seventh anniversary of the initial issuance of Preferred Stock, the Company will have the option to redeem, in whole but not in part, all of the outstanding shares of Preferred Stock at par value. We may elect to convert the Preferred Stock, in whole but not in part, into the relevant number of shares of common stock ~~on or after the 54th month after the initial issuance of the Preferred Stock~~ if the last reported sale price of the common stock has been at least 150% of the conversion price then in effect for a specified period. The conversion rate is subject to customary anti-dilution and other adjustments.

Holders of the Preferred Stock may, at their option, require the Company to repurchase their shares in the event of a fundamental change, as defined in the agreement. The repurchase price is based on the original $1,000 per share purchase price except in the case of a liquidation in which case they would receive the greater of $1,000 per share and the amount that would be received if they held common stock converted at the conversion rate in effect at the time of the fundamental change. Because this feature could require redemption as a result of the occurrence of an event not solely within the control of the Company, the Preferred Stock is classified as temporary equity on our balance sheet.

~~Table Of Contents~~

NOTE 7 – STOCKHOLDERS’ EQUITY

Share Repurchase Program

~~In October 2017,~~From time to time, the Company’s board of directors has authorized ~~a share~~ repurchase ~~program~~programs for ~~common stock~~shares of ~~up to $100 million. In the second quarter of 2018, the Company completed the repurchases of all shares authorized under this program.~~

~~In October 2018,~~ the Company’s ~~board~~common stock. As of ~~directors authorized another share repurchase program for common stock of up to $150~~million. The program is scheduled to expire December 31, 2019. The shares may be repurchased at management’s discretion in the open market. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice.

Summary of share repurchase activity under the repurchase program:

Three Months Ended

March 31,

March 31,

2019

2018
Number of shares acquired on the open market

1,758,537

1,726,825
Average price per share
$
14.24

$
17.39
Total cost of acquired shares (in millions)
$
25

$
30

~~Subsequent to~~ March 31, ~~2019, we repurchased an additional 1,372,084 shares for $25 million~~2020, there were 0 remaining authorizations outstanding under ~~the October 2018 program. In total, under all programs, we have acquired 22,478,460 shares at an average price per share of $15.58 for a total cost of $350million. As of April 26, 2019, we had 83,066,661~~these programs. There were 81,993,613 shares of common stock ~~outstanding.~~outstanding as of March 31, 2020.


The following table summarizes the share repurchase activity:

	Three Months Ended
	March 31,		March 31,
	2020		2019
Number of shares acquired on the open market		-		1,758,537
Average price per share	$	-	$	14.24
Total cost of acquired shares (in millions)	$	-	$	25

Equity Compensation Plans

Our 2011 Omnibus Incentive Plan originally had 3,250,000 shares reserved for issuance under the plan. In both April 2015 and 2019, our shareholders approved an additional 4,250,000 and 2,500,000 shares, respectively, for reservation for issuance under the plan. The plan permits the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other stock-based and cash-based awards. Since the adoption of the 2011 Omnibus Incentive Plan, the Company’s Board of Directors has periodically granted stock options, restricted stock awards, restricted stock units and performance share units to directors and ~~employees.~~employees, but no other types of awards have been granted under the plan. Options and stock appreciation rights may not be granted at prices less than the fair market value of our common stock on the date of the grant, nor for a term exceeding ten years. For employees, vesting generally occurs over a three year to five year period on the anniversaries of the date specified in the employees’ respective ~~stock option, restricted stock award, restricted stock unit and performance share unit award~~ agreements, subject to accelerated vesting under certain circumstances set forth in the agreements. Vesting for directors generally occurs on the ~~one-year~~one year anniversary of the grant date. In ~~2019, 242,290~~2020, 336,325 performance share unit awards and ~~581,343~~696,777 shares of restricted stock units have been granted to

Table of Contents

employees. To date, ~~since the plan’s inception in 2011, before consideration of forfeitures, 7,506,047~~8,744,461 shares have been granted ~~to management, members of our board of directors and key employees~~ under this plan. A Black-Scholes option-pricing model is used to estimate the fair value of the stock options. A Monte Carlo simulation is completed to estimate the fair value of performance share unit awards with a stock price performance component. We expense the fair value of all equity grants, including performance share unit awards, on a straight-line basis over the vesting period.

~~Table Of Contents~~

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss in the accompanying consolidated balance sheets consists of the following (in millions):



	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Currency translation adjustments	$	(226)	$	(229)
Foreign currency translation adjustments					$	(245)	$	(224)
Hedge accounting adjustments		(4)		(2)		(13)		(7)
Pension related adjustments		(1)		(1)		(1)		(1)
Accumulated other comprehensive loss	$	(231)	$	(232)	$	(259)	$	(232)

Earnings per Share

Earnings per share are calculated in the table below (in millions, except per share amounts). :



	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
	2019		2018		2020		2019
Net income	$	18	$	18	$	9	$	18
Less: Dividends on Series A Preferred Stock		6		6		6		6
Net income attributable to common stockholders	$	12	$	12	$	3	$	12

Weighted average basic shares outstanding		84.3		91.4		81.7		84.3
Effect of dilutive securities		1.0		1.1		0.7		1.0
Weighted average diluted shares outstanding		85.3		92.5		82.4		85.3

Net income per share:
Basic	$	0.14	$	0.13	$	0.04	$	0.14
Diluted	$	0.14	$	0.13	$	0.04	$	0.14

Table Ofof Contents

The following table presents financial information for each reportable segment (in millions):


	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
	2019		2018		2020		2019
Sales
U.S.	$	779	$	806	$	638	$	779
Canada		68		78		50		68
International		123		126		106		123
Consolidated sales	$	970	$	1,010	$	794	$	970

Operating income
U.S.	$	32	$	28	$	18	$	32
Canada		-		2		-		-
International		3		1		4		3
Total operating income		35		31		22		35

Interest expense		(11)		(8)		(8)		(11)
Other, net		-		2		-		-
Income before income taxes	$	24	$	25	$	14	$	24


	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Total assets
U.S.	$	2,285	$	2,088	$	1,913	$	1,915
Canada		120		124		95		91
International		268		222		293		319
Total assets	$	2,673	$	2,434	$	2,301	$	2,325

Our sales by product line are as follows (in millions):


	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
Type	2019		2018		2020		2019
Line pipe	$	154	$	158	$	100	$	154
Carbon steel fittings and flanges		153		171
Total carbon steel pipe, fittings and flanges		307		329
Carbon fittings and flanges						115		153
Total carbon pipe, fittings and flanges						215		307
Valves, automation, measurement and instrumentation		383		378		323		383
Gas products		133		124		134		133
Stainless steel and alloy pipe and fittings		50		53		37		50
General oilfield products		97		126
General products						85		97
	$	970	$	1,010	$	794	$	970

Table Ofof Contents

NOTE 9 – FAIR VALUE MEASUREMENTS

From time to time, we use derivative financial instruments to help manage our exposure to interest rate risk and fluctuations in foreign currencies.

Interest Rate Swap: In March 2018, we entered into a ~~five-year~~five year interest rate swap that became effective on March 31, 2018, with a notional amount of $250 million from which the Company will receive payments at 1-month LIBOR and make monthly payments at a fixed rate of 2.7145% with settlement and reset dates on or near the last business day of each month until maturity. The fair value of the swap at inception was ~~zero.~~ 0.

We have designated the interest rate swap as an effective cash flow hedge utilizing the guidance under ASU 2017-12. As such, the valuation of the interest rate swap is recorded as an asset or liability, and the gain or loss on the derivative is recorded as a component of other comprehensive income. Interest rate swap agreements are reported on the accompanying balance sheets at fair value utilizing observable Level 2 inputs such as yield curves and other market-based factors. We obtain dealer quotations to value our interest rate swap agreements. The fair value of our interest rate swap is estimated based on the present value of the difference between expected cash flows calculated at the contracted interest rates and the expected cash flows at current market interest rates. The fair value of the interest rate swap was a liability of $5$17 million and $3$9 million as of March31,~~2019~~ 2020 and December 31, ~~2018,~~2019, respectively.

Foreign Exchange Forward ~~and Option~~ Contracts: Foreign exchange forward contracts are reported at fair value utilizing Level 2 inputs, as the fair value is based on broker quotes for the same or similar derivative instruments. Our foreign exchange derivative instruments are freestanding, have not been designated as hedges and, accordingly, changes in their fair market value are recorded in earnings. The total notional amount of our forward foreign exchange contracts and options was approximately ~~$18~~$19 million and ~~$22~~$21 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The fair value of our foreign exchange contracts was ~~immaterial~~not material as of March 31, ~~2019~~2020 and December 31, ~~2018.~~ 2019.

With the exception of long-term debt, the fair values of our financial instruments, including cash and cash equivalents, accounts receivable, trade accounts payable and accrued liabilities approximate carrying value. The carrying value of our debt was ~~$746~~$521 million and ~~$684~~$551 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. We estimate the fair value of the Term Loan using Level 2 inputs, or quoted market prices. The fair value of our debt was ~~$746~~$447 million and ~~$675~~$554 million at March 31, ~~2019~~2020 and December 31, ~~2018~~2019 respectively.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Litigation

Asbestos Claims. We are one of many defendants in lawsuits that plaintiffs have brought seeking damages for personal injuries that exposure to asbestos allegedly caused. Plaintiffs and their family members have brought these lawsuits against a large volume of defendant entities as a result of the defendants’ manufacture, distribution, supply or other involvement with asbestos, asbestos containing-products or equipment or activities that allegedly caused plaintiffs to be exposed to asbestos. These plaintiffs typically assert exposure to asbestos as a consequence of third-party manufactured products that our MRC Global (US) Inc. subsidiary purportedly distributed. As of March 31, ~~2019,~~2020, we are named a defendant in approximately ~~571~~591 lawsuits involving approximately ~~1,151~~1,167 claims. No asbestos lawsuit has resulted in a judgment against us to date, with a majority being settled, dismissed or otherwise resolved. Applicable third-party insurance has substantially covered these claims, and insurance should continue to cover a substantial majority of existing and anticipated future claims. Accordingly, we have recorded a liability for our estimate of the most likely settlement of asserted claims and a related receivable from insurers for our estimated recovery, to the extent we believe that the amounts of recovery are probable. It is not possible to predict the outcome of these claims and proceedings. However, in our opinion, the likelihood that the ultimate disposition of any of these claims and legal proceedings will have a material adverse effect on our consolidated financial statements is remote.

Other Legal Claims and Proceedings. From time to time, we have been subject to various claims and involved in legal proceedings incidental to the nature of our businesses. We maintain insurance coverage to reduce financial risk associated with certain of these claims and proceedings. It is not possible to predict the outcome of these claims and proceedings. However, in our opinion, the likelihood that the ultimate disposition of any of these claims and legal proceedings will have a material adverse effect on our consolidated financial statements is remote.

Product Claims. From time to time, in the ordinary course of our business, our customers may claim that the products that we distribute are either defective or require repair or replacement under warranties that either we or the manufacturer may provide to the customer. These proceedings are, in the opinion of management, ordinary and routine matters incidental to our normal business. Our purchase orders with our suppliers generally require the manufacturer to indemnify us against any product liability claims, leaving the manufacturer ultimately responsible for these claims. In many cases, state, provincial or foreign law provides protection to distributors for these sorts of claims, shifting the responsibility to the manufacturer. In some cases, we could be required to repair or replace the products for the benefit of our customer and seek our recovery from the

Table Ofof Contents

manufacturer for our expense. In our opinion, the likelihood that the ultimate disposition of any of these claims and legal proceedings will have a material adverse effect on our consolidated financial statements is remote.

Customer Contracts

We have contracts and agreements with many of our customers that dictate certain terms of our sales arrangements (pricing, deliverables, etc.). While we make every effort to abide by the terms of these contracts, certain provisions are complex and often subject to varying interpretations. Under the terms of these contracts, our customers have the right to audit our adherence to the contract terms. Historically, any settlements that have resulted from these customer audits have not been material to our consolidated financial statements.

Purchase Commitments

We have purchase obligations consisting primarily of inventory purchases made in the normal course of business to meet operating needs. While our vendors often allow us to cancel these purchase orders without penalty, in certain cases, cancellations may subject us to cancellation fees or penalties depending on the terms of the contract.

‎

Table Ofof Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and related notes included elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. As used in this Form 10-Q, unless otherwise indicated or the context otherwise requires, all references to the “Company,” “MRC Global,” “we,” “our” or “us” refer to MRCGlobalInc. and its consolidated subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

Management’s Discussion and Analysis of Financial Condition and Results of Operations (as well as other sections of this Quarterly Report on Form 10-Q) contain forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include those preceded by, followed by or including the words “will,” “expect,” “intended,” “anticipated,” “believe,” “project,” “forecast,” “propose,” “plan,” “estimate,” ~~“enable,”~~“enable” and similar expressions, including, for example, statements about our business strategy, our industry, our future profitability, growth in the industry sectors we serve, our expectations, beliefs, plans, strategies, objectives, prospects and assumptions, and estimates and projections of future activity and trends in the oil and natural gas industry. These forward-looking statements 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 under “Risk Factors,” 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. Such risks and uncertainties include, among other things:

•decreases in oil and natural gas prices;

•decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors;

•U.S. and international general economic conditions;

•our ability to compete successfully with other companies in our industry;

•the risk that manufacturers of the products we distribute will sell a substantial amount of goods directly to end users in the industry sectors we serve;

•unexpected supply shortages;

•cost increases by our suppliers;

•our lack of long-term contracts with most of our suppliers;

•suppliers’ price reductions of products that we sell, which could cause the value of our inventory to decline;

•decreases in steel prices, which could significantly lower our profit;

•increases in steel prices, which we may be unable to pass along to our customers which could significantly lower our profit;

•our lack of long-term contracts with many of our customers and our lack of contracts with customers that require minimum purchase volumes;

•changes in our customer and product mix;

•risks related to our customers’ creditworthiness;

•the success of our acquisition strategies;

•the potential adverse effects associated with integrating acquisitions into our business and whether these acquisitions will yield their intended benefits;

•our significant indebtedness;

•the dependence on our subsidiaries for cash to meet our obligations;

•changes in our credit profile;

•a decline in demand for or adverse change in the value of certain of the products we distribute if tariffs and duties on these products are imposed or lifted;

•significant substitution of alternative fuels for oil and gas;

Table of Contents

•environmental, health and safety laws and regulations and the interpretation or implementation thereof;

•the sufficiency of our insurance policies to cover losses, including liabilities arising from litigation;

~~Table Of Contents~~

•product liability claims against us;

•pending or future asbestos-related claims against us;

•the potential loss of key personnel;

•adverse health events, such as a pandemic;

•interruption in the proper functioning of our information systems;

•the occurrence of cybersecurity incidents;

•loss of third-party transportation providers;

•potential inability to obtain necessary capital;

•risks related to adverse weather events or natural disasters;

•impairment of our goodwill or other intangible assets;

•adverse changes in political or economic conditions in the countries in which we operate;

•exposure to U.S. and international laws and regulations, including the Foreign Corrupt Practices Act and the U.K. Bribery Act and other economic sanctions programs;

•risks associated with international instability and geopolitical ~~developments;~~developments, including armed conflicts and terrorism;

•risks relating to ongoing evaluations of internal controls required by Section 404 of the Sarbanes-Oxley Act;

•our intention not to pay dividends; and

•risks related to changing laws and ~~regulations.~~regulations, including trade policies and tariffs.

Undue reliance should not be placed on our forward-looking statements. Although forward-looking statements reflect our 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. We undertake 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 law requires.

Overview

We are the largest ~~global industrial~~ distributor ~~based on sales,~~ of pipe, valves and fittings (“PVF”) and other infrastructure products and services to the energy industry, based on sales. We provide innovative supply chain solutions and ~~hold a~~technical product expertise to customers globally through our leading position ~~in our industry~~ across each of our diversified end-markets including the upstream production (exploration, production and extraction of underground oil and ~~natural~~ gas), midstream pipeline (gathering and transmission of oil and ~~natural gas, natural~~gas), gas utilities and ~~the storage~~downstream and ~~distribution of oil and natural gas) and downstream~~industrial (crude oil refining and petrochemical and chemical processing and general industrials) sectors. ~~Our business is segregated into three geographic reportable segments, consisting of our U.S., Canada and International operations. We serve our customers from approximately 300 service locations.~~ We offer ~~a wide~~over 200,000 SKUs, including an extensive array of PVF, oilfield supply, valve automation and ~~oilfield supplies encompassing a complete line of~~modification, measurement, instrumentation and other general and specialty products from our global network of over 10,000 suppliers. With nearly 100 years of history, our approximate 3,150 employees serve over 13,000 customers through approximately ~~11,000 suppliers to our approximately 15,000 customers. We are diversified by geography, the industry sectors~~250 service locations including regional distribution centers, branches, corporate offices and third party pipe yards, where we ~~serve and the products we sell.~~often deploy pipe near customer locations. We seek to provide best-in-class service to our customers by satisfying the most complex, multi-site needs of many of the largest companies in the energy sector as their primary PVF supplier. We believe the critical role we play in our customers’ supply chain, together with our extensive product and service offerings, broad global presence, customer-linked scalable information systems and efficient distribution capabilities, serve to solidify our long-standing customer relationships and drive our growth. As a result, we have an average relationship of over 25 years with our 25 largest customers.

Key Drivers of Our Business

Our revenue is predominantly derived from the sale of PVF and other oilfield and industrial supplies to the energy sector globally. Our business is, therefore, dependent upon both the current conditions and future prospects in the energy industry and, in particular, maintenance and expansionary operating and capital expenditures by our customers in the upstream production, midstream pipeline, gas utilities and downstream and industrial sectors of the industry. Long-term growth in spending has been driven by several factors, including demand growth for petroleum and petroleum derived products, underinvestment in global energy infrastructure, growth in shale and unconventional exploration and production (“E&P”)

Table of Contents

activity, and anticipated strength in the oil, natural gas, refined products and petrochemical sectors. The outlook for future oil, natural gas, refined products and petrochemical PVF spending is influenced by numerous factors, including the following:

•Oil and Natural Gas ~~Prices.~~Prices. Sales of PVF and related infrastructure products to the oil and natural gas industry constitute over 90% of our sales. As a result, we depend upon the oil and natural gas industry and its ability and willingness to make maintenance and capital expenditures to explore for, produce and process oil, natural gas and refined products. Oil and natural gas prices, both current and projected, along with the costs necessary to produce oil and gas, impact other drivers of our business, including capital spending by customers, additions to and maintenance of pipelines, refinery utilization and petrochemical processing activity.

~~Table Of Contents~~

•Economic ~~Conditions.~~Conditions. The demand for the products we distribute is dependent on the general economy, the energy sector and other factors. Changes in the general economy or in the energy sector (domestically or internationally) can cause demand for the products we distribute to materially change.

•Manufacturer and Distributor Inventory Levels of PVF and Related ~~Products.~~Products. Manufacturer and distributor inventory levels of PVF and related products can change significantly from period to period. Increased inventory levels by manufacturers or other distributors can cause an oversupply of PVF and related products in the industry sectors we serve and reduce the prices that we are able to charge for the products we distribute. Reduced prices, in turn, would likely reduce our profitability. Conversely, decreased manufacturer inventory levels may ultimately lead to increased demand for our products and would likely result in increased sales volumes and overall profitability.

• Steel Prices, Availability and Supply and ~~Demand.~~Demand. Fluctuations in steel prices can lead to volatility in the pricing of the products we distribute, especially carbon steel line pipe products, which can influence the buying patterns of our customers. A majority of the products we distribute contain various types of steel. The worldwide supply and demand for these products, or other steel products that we do not supply, impacts the pricing and availability of our products and, ultimately, our sales and operating profitability.

Recent Trends and Outlook

During the first three months of ~~2019,~~2020, the average oil price of West Texas Intermediate (“WTI”) decreased to ~~$54.82~~$45.34 per barrel from ~~$62.91~~$54.82 per barrel in the first three months of ~~2018.~~ 2019. However, in March of 2020 oil prices declined significantly to historically low levels and are currently below $20 per barrel.Natural gas prices decreased ~~slightly~~ to an average price of $1.91/MMBtu (Henry Hub) for the first three months of 2020 compared to $2.92/MMBtu (Henry Hub) for the first three months of ~~2019 compared to $3.08/MMBtu (Henry Hub) for the first three months of 2018.~~2019.North American drilling rig activity ~~was flat~~decreased 20% in the first three months of ~~2019~~2020 as compared to the first three months of ~~2018.~~2019. U.S. well completions were ~~up 17%~~down 9% in the first three months of ~~2019~~2020 compared to the same period in ~~2018. More recently, WTI oil prices rebounded~~2019.

The energy industry, and our business in turn, is cyclical in nature. In 2019, our customers demonstrated an increased focus on returns on invested capital, which drove a more disciplined approach to ~~above $60 per barrel, however, natural gas prices have continued~~spending that continues to ~~decline and are expected to remain below $3.00/MMBtu (Henry Hub).~~

In the past two years, we saw customer spending increase globally, including consecutive years of double-digit growth in North America combined with more modest growth internationally. A number of favorable influences have directly impactedimpact each of our business sectors. ~~Healthy commodity prices~~In the first quarter of 2020, demand for oil declined sharply as a result of the coronavirus disease 2019 (“COVID-19”) pandemic. As various governments implemented COVID-19 isolation orders, transportation use declined, energy use declined and ~~increased well completion activity benefited our upstream business.~~manufacturing declined. As a result, the need for oil consumption dropped dramatically. Major oil-producing nations have recently agreed to reduce oil production in the coming months by 9.7 million barrels per day, but this amount falls significantly short of offsetting the current reduction in oil demand. The combined impact of these events, limitations on the capacity for oil storage during this period of reduced demand and uncertainty regarding the timing and extent of a recovery has led to a collapse in the price of oil to historically low levels. In addition, storage constraints could result in a ~~more favorable regulatory environment in the United States has benefited our business, particularly in the midstream sector where we continue~~further curtailment of drilling activity and a failure to ~~see modernization and integrity projects in the gas utility space, as well as increased demand for take away capacity~~complete existing drilled but uncompleted wells. As a result, recent spending plan estimates by sell-side research analysts indicate a decrease in oil and gas producing basins. Our domestic downstream sector has benefited from the improved access to and stability in pricing of the necessary feedstocks available from increased, and in some cases, new upstream production. Many downstream companies are adding investments to expand capacity, especially along the U.S. Gulf Coast. These factors, combined with the completion of some major upstream, midstream and downstream projects, drove revenue growth of 37% over that two year timeframe.

~~Early global spending surveys for 2019 indicated an expectation of additional mid to high single digit growth in~~industry spending in ~~2019~~2020 of as ~~compared~~much as 30% globally, including up to 2018. However, at the time of our customers’ 2019 budget approvals, WTI oil prices had fallen to the low $50 per barrel range and many 2019 budgets were cut from the initial forecasted spending levels. Announced spending plans from our major customers indicate a 5%-10% decrease in spending50% in the U.S. ~~instead of a 10% increase~~These reductions in spending ~~as originally forecasted. During~~directly impact both the upstream production and midstream pipeline components of our business. In addition, we have seen our customers in the downstream sector seek to defer turnarounds and routine maintenance in order to preserve liquidity and comply with COVID-19 related limitations on employee activities. Given these recent developments and the continuing focus on capital discipline by oil and gas exploration and production operators, we expect revenue in 2020 to sharply decline from first quarter 2020 levels.

Because of the decline in the outlook for the remainder of 2020, we have taken in the first quarter of ~~2019, oil prices~~2020 and are taking additional steps in the second quarter to further reduce our operating costs. These steps have ~~rebounded~~and will include the following:

A voluntary early retirement program and an involuntary reduction in force to ~~above~~reduce headcount

Ongoing freezes on hiring and compensation increases

An indefinite suspension of the ~~$60~~Company’s 401(k) matching contributions to its U.S. employees

Reductions in annual bonus incentive targets and resulting payouts for both executive management and eligible employees

Table of Contents

For eligible executives and employees, a reduction in the long-term incentive awards that the Company grants to them pursuant to the Company’s 2011 Omnibus Incentive Plan

Furloughs in certain international and Canadian operations

Closure of certain branches and distribution centers where customer spending demand does not warrant continuation of those operations as we continue to adjust our distribution network as needed. For instance, in the first quarter of 2020, we closed two regional distribution centers and intend to close additional branch locations in the second quarter.

Continued cost reductions and efficiency efforts throughout the Company

In addition to these efforts, we are actively managing our investment in working capital to an appropriate level, ~~but~~which will allow us to generate cash and reduce our indebtedness. As a result of these actions, we will likely incur severance and restructuring charges in future periods. In such a situation, we may also incur charges to impair the ~~majority~~carrying value of ~~U.S.~~certain assets, including goodwill and other intangible assets.

During the COVID-19 pandemic crisis, we have continued to operate our business. Our video and audio conferencing and enterprise resource planning and other operational systems have enabled our office employees to work from home, performing their job functions. We required our employees to work from home as a result of governmental isolation orders and, in many cases, in advance of those orders for the health and safety of our employees. We have limited employee travel to only local deliveries of our products. Our warehouses and regional distribution centers have remained open. Under various isolation orders by national, state, provincial and local governments, we have been exempted as an “essential” business as the products we sell are necessary for the maintenance and functioning of the energy infrastructure. We have taken measures to safeguard the health and welfare of our employees, including (among other things) social distancing measures while at work, certain screening, providing personal protection equipment such as face masks and hand sanitizer and providing “deep” cleaning services at Company facilities. As of April 27, 2020, of our approximate 3,150 employees, four have been diagnosed with COVID-19, and all have recovered. If we were to develop a COVID-19 hotspot at one of our facilities, we have plans to isolate those in contact with the impacted employees and to either staff the facility with employees from other facilities or supply product to customers from other facilities. As various governmental isolation orders are lifted or phased out, we are reviewing our operational plans to continue operating our business while addressing the health and safety of our employees and those with whom our business comes into contact.

As a distribution business, we have also closely monitored the ability of our suppliers and transportation providers to continue the functioning of our supply chain. While there have been some temporary interruptions of manufacturing for some of our products, especially those who manufacture product or components in China, South Korea and Italy, many of these manufacturers have now resumed production. We have not ~~announced increased 2019 E&P capex spending increases due~~experienced significant delays by transportation providers. Our inventory position for most products has allowed us to ~~the higher commodity prices. Historically,~~continue supply to most customers with little interruption. In those instances where there is interruption, we are working with our customers ~~re-visit their spending plans at mid-year. Given~~to discuss the ~~uncertainty around oil prices~~impact of the COVID-19 delay. We continue to monitor the situation and have ongoing dialogue with our customers regarding the ~~fact that our level~~status of ~~major project activity is expected to be down significantly compared to 2018, any growth in 2019 will be more muted than the previous two years.~~impacted orders.

In ~~March 2018, the President of~~recent years, the United States ~~signed a proclamation (“Section 232”) imposing a 25% tariff~~imposed tariffs on ~~all steel~~ imports ~~and 10% on all aluminum imports into the U.S. Section 232 impacts all carbon steel~~of some products including pipe, fittings and flanges. Certain countries were initially exempted from the provisions of Section 232, and in certain cases, a quota system rather than tariffs was implemented. In July 2018, pursuant to Section 301 of the Trade Act of 1974 (“Section 301”), additional tariffs of 25% went into effect on certain Chinese goods, including valves, valve parts and gaskets that we distribute. ~~Subsequent to July, Section 301 tariffs ranging from 10% to 25% were applied to additional tranches of products.~~ Although these actions generally cause the price we pay for products to increase, we are generally able to leverage long-standing relationships with our suppliers and the volume of our purchases to receive market competitive pricing. In addition, our contracts with customers generally allow us to react quickly to price increases through mechanisms that enable us to pass those increases along to customers as they occur. Of course, the price increases that tariffs and quotas engender may be offset by the pricing impacts of lower demand that the COVID-19 pandemic has caused. These issues are dynamic and continue to evolve. ~~In 2018, we saw higher revenue due to these customer contract provisions and higher cost of sales for the products that we sold.~~ To the extent our products are further impacted by higher prices caused by tariffs and quotas, the ultimate impact on our revenue and cost of sales, which is determined using the last-in, first-out (“LIFO”) inventory costing methodology, remains subject to uncertainty and volatility.

Table Ofof Contents

~~The~~

Effective January 31, 2020, the United ~~Kingdom’s exit from~~Kingdom formally exited the European Union (“EU”) ~~continues to be uncertain. Most recently, an EU deadline of March 29, 2019 was extended to October~~. Following the exit, there is a transition period until December 31, ~~2019. Without an agreement reached~~2020. During the transition period, the U.K.'s trading relationship with the EU ~~to set forth~~will remain the ~~terms and impacts of an exit that is approved by~~same while the ~~U.K. parliament, uncertainty~~two sides negotiate a free trade deal. At the same time, many other aspects of the ~~impacts of~~U.K.'s future relationship with the ~~departure exists. In~~EU - including law enforcement, data sharing and security - will also be negotiated. If a ~~scenario where an~~trade agreement is ~~not reached,~~timely completed, the U.K. ~~could become a third country in~~'s new trading relationship with the EU ~~law,~~can begin immediately after the transition. If not, there would be no trade agreement, which could ~~create disruptions for businesses in the EU member states as well as the U.K. It is unknown at this time how a deal, or no-deal, would~~negatively impact our business, including any commodity pricing, transfer pricing and other cross border issues. However, we have a physical presence in both the U.K. and EU member states that would allow us to continue to operate and to serve our customers as needed. In ~~2018, 3.5%~~2019, 2.4% of our revenue was derived from our U.K. business.

We determine backlog by the amount of unshipped customer orders, either specific or general in nature, which the customer may revise or cancel in certain instances. The table below details our backlog by segment (in millions):


	March 31,		December 31,		March 31,		March 31,		December 31,		March 31,
	2019		2018		2018		2020		2019		2019
U.S.	$	421	$	426	$	589	$	280	$	301	$	421
Canada		41		35		45		32		34		41
International		174		177		254		167		174		174
	$	636	$	638	$	888	$	479	$	509	$	636

Approximately 4%~~, 7%, and 18%~~ of our March 31, 2019 ~~December 31, 2018 and March 31, 2018~~ ending backlog ~~respectively,~~ was associated with two customers in our U.S. segment. In addition, approximately 3%~~, 5%, and 14%~~ of our ending backlog for March 31, 2019 ~~December 31, 2018 and March 31, 2018, respectively,~~ was associated with one customer in our International segment. In each case, these ~~are~~were related to significant ~~ongoing~~ customer projects that ~~have been occurring over~~were substantially completed before the ~~last two years.~~end of 2019. Excluding these projects, our backlog as of March 31, 2020 had decreased 6% and 19% from December 31, 2019 and March 31, 2019, respectively. There can be no assurance that the backlog amounts will ultimately be realized as revenue or that we will earn a profit on the backlog of orders, but we expect that substantially all of the sales in our backlog will be realized in the next twelve months.

The following table shows key industry indicators for the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
	2019		2018		2020		2019
Average Rig Count (1):
United States		1,043		966		785		1,043
Canada		183		269		196		183
Total North America		1,226		1,235		981		1,226
International		1,030		970		1,074		1,030
Total		2,256		2,205		2,055		2,256

Average Commodity Prices (2):
WTI crude oil (per barrel)	$	54.82	$	62.91	$	45.34	$	54.82
Brent crude oil (per barrel)	$	63.10	$	66.86	$	50.27	$	63.10
Natural gas ($/MMBtu)	$	2.92	$	3.08	$	1.91	$	2.92

Average Monthly U.S. Well Permits (3)		5,838		4,543		2,246		5,838
U.S. Wells Completed (2)		3,931		3,364		3,231		3,565
3:2:1 Crack Spread (4)	$	16.96	$	17.63	$	9.85	$	16.96
_______________________
(1) Source-Baker Hughes (www.bhge.com) (Total rig count includes oil, natural gas and other rigs.)	(1) Source-Baker Hughes (www.bhge.com) (Total rig count includes oil, natural gas and other rigs.)				(1) Source-Baker Hughes (www.bhge.com) (Total rig count includes oil, natural gas and other rigs.)
(2) Source-Department of Energy, EIA (www.eia.gov) (As revised)	(2) Source-Department of Energy, EIA (www.eia.gov) (As revised)				(2) Source-Department of Energy, EIA (www.eia.gov) (As revised)
(3) Source-Evercore ISI Research	(3) Source-Evercore ISI Research				(3) Source-Evercore ISI Research
(4) Source-Bloomberg	(4) Source-Bloomberg				(4) Source-Bloomberg

Table Ofof Contents

Results of Operations

Three Months Ended March 31, ~~2019~~2020 Compared to the Three Months Ended March 31, ~~2018~~2019

The breakdown of our sales by sector for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 was as follows (in millions):

Three Months Ended

March 31, 2019

March 31, 2018
Upstream
$
312

32%

$
302

30%
Midstream

361

37%

410

41%
Downstream

297

31%

298

29%

$
970

100%

$
1,010

100%


	Three Months Ended
	March 31, 2020			March 31, 2019
Upstream production	$	222	28%	$	312	32%
Midstream pipeline		119	15%		147	15%
Gas utilities		202	25%		214	22%
Downstream & industrial		251	32%		297	31%
	$	794	100%	$	970	100%

For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the following table summarizes our results of operations (in millions):


	Three Months Ended							Three Months Ended
	March 31,		March 31,					March 31,		March 31,
	2019		2018		$ Change		% Change	2020		2019		$ Change		% Change
Sales:
U.S.	$	779	$	806	$	(27)	(3%)	$	638	$	779	$	(141)	(18%)
Canada		68		78		(10)	(13%)		50		68		(18)	(26%)
International		123		126		(3)	(2%)		106		123		(17)	(14%)
Consolidated	$	970	$	1,010	$	(40)	(4%)	$	794	$	970	$	(176)	(18%)

Operating income:
U.S.	$	32	$	28	$	4	14%	$	18	$	32	$	(14)	(44%)
Canada		-		2		(2)	N/M		-		-		-	N/M
International		3		1		2	N/M		4		3		1	33%
Consolidated		35		31		4	13%		22		35		(13)	(37%)

Interest expense		(11)		(8)		(3)	38%		(8)		(11)		3	(27%)
Other income		-		2		(2)	N/M
Other, net									-		-		-	N/M
Income tax expense		(6)		(7)		1	(14%)		(5)		(6)		1	(17%)
Net income		18		18		-	N/M		9		18		(9)	(50%)
Series A preferred stock dividends		6		6		-	0%		6		6		-	0%
Net income attributable to common stockholders	$	12	$	12	$	-	N/M	$	3	$	12	$	(9)	(75%)

Gross profit	$	174	$	169	$	5	3%	$	148	$	174	$	(26)	(15%)
Adjusted Gross Profit (1)	$	190	$	193	$	(3)	(2%)	$	157	$	190	$	(33)	(17%)
Adjusted EBITDA (1)	$	56	$	59	$	(3)	(5%)	$	34	$	56	$	(22)	(39%)

(1)Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial measures. For a reconciliation of these measures to an equivalent GAAP measure, see pages 22-24 herein.

~~(1)~~

~~Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial measures. For a reconciliation of these measures to an equivalent GAAP measure, see pages 21-23 herein.~~

Table of Contents

Sales. Our sales were $794 million for the three months ended March 31, 2020 as compared to $970 million for the three months ended March 31, 2019, ~~as compared to $1,010million for the three months ended March 31, 2018,~~ a decrease of ~~$40~~$176 million, or 4%18%. The weakening of foreign currencies in areas where we operate relative to the U.S. dollar unfavorably impacted sales by ~~$13~~$6 million, or 1%.

U.S. Segment—Our U.S. sales decreased to $638 million for the three months ended March 31, 2020 from $779 million for the three months ended March 31, 2019. This $141 million, or 18% decrease reflected a $67 million decrease in the upstream production sector, a $23 million decrease in the midstream pipeline sector, a $5 million decrease in the gas utilities sector and a $46 million decrease in the downstream and industrial sector. The decline in the upstream production sector is a result of reduced customer spending and resulting lower activity levels, including a 25% corresponding reduction in rig count. The decline in the midstream pipeline sector is attributable to increased capital discipline by our customers, which has had an ongoing impact since mid 2019, as well as the timing of project activity. All sectors were negatively impacted by the economic slowdown resulting from ~~$806~~the COVID-19 pandemic in March 2020.

Canada Segment—Our Canada sales decreased to $50 million for the three months ended March 31, ~~2018. This $27 million, or 3%,decrease~~reflected a $28 million increase in the upstream sector, a $56 million decrease in the midstream sector and a $1 million increase in the downstream sector. The 16% increase in the upstream sector is related to the 17% increase in well completions, particularly in the Permian region. The decrease in the midstream sector is related to the 2018 completion of a project with one of our transmission and gathering customers resulting in a $60 million decline in sales, partially offset by an increase in the gas utilities business.

~~Table Of Contents~~

~~Canada Segment—Our Canada sales decreased to~~2020 from $68 million for the three months ended March 31, 2019, ~~from $78~~a decrease of $18 million, or 26%. The decline reflected a $9 million decrease in the upstream production sector as a result of low Canadian oil prices and production limitations imposed by the government of Alberta. In addition, the gas utilities sector declined $7 million as a result of non-recurring project work.

International Segment—Our International sales decreased to $106 million for the three months ended March 31, 2018, a decrease of $10 million, or 13%. The decline is primarily in the upstream sector where the rig count has declined as a result of production limitations imposed by the government of Alberta, beginning in January 2019, in an effort to narrow the differential between Western Canadian Select Crude and WTI. In addition, Canadian sales were unfavorably impacted by $4 million, or 5%, as a result of the weaker Canadian dollar relative to the U.S. dollar.

~~International Segment—Our International sales decreased to~~2020 from $123 ~~million for the three months ended March 31, 2019 from $126~~ million for the same period in ~~2018.~~2019. The $3$17 million, or 2%14%, decrease is primarily attributable to the ~~concluding~~first quarter 2019 completion of a ~~long-running~~multi-year project in ~~Kazakhstan, as well as~~Kazakhstan. In addition, the weakening of foreign currencies in areas where we operate relative to the U.S. dollar which unfavorably impacted sales by $9$6 million, or 7%5%. ~~Excluding the impact of foreign currencies and the Kazakhstan project, sales increased $18 million, or 17% due to improving conditions in international markets.~~

Gross Profit. Our gross profit was $148 million (18.6% of sales) for the three months ended March 31, 2020 as compared to $174 million (17.9% of sales) for the three months ended March 31, ~~2019 as~~2019. As compared to ~~$169~~average cost, our LIFO inventory costing methodology reduced cost of sales by $3 million ~~(16.7%~~for the first three months of 2020 compared to no impact to cost of sales in the first three months of 2019. Excluding the impact of LIFO, gross profit improved 40 basis points.

Adjusted Gross Profit. Adjusted Gross Profit decreased to $157 million (19.8% of sales) for the three months ended March 31, 2018. Our LIFO inventory costing methodology had no impact for the first three months of 2019 while increasing cost of sales, as compared to average cost, by $7 million in the first three months of 2018. Excluding the impact of LIFO, gross profit percentage improved by 50 basis points. The improvement in gross profit percentage was attributable to a lower level of low margin major project sales in the first three months of 2019 as compared to the first three months of 2018.

~~Adjusted Gross Profit~~. ~~Adjusted Gross Profit decreased to~~2020 from $190 million (19.6% of sales) for the three months ended March 31, 2019, ~~from $193 million (19.1% of sales) for the three months ended March 31, 2018,~~ a decrease of $3$33 million. Adjusted Gross Profit is a non-GAAP financial measure. We define Adjusted Gross Profit as sales, less cost of sales, plus depreciation and amortization, plus amortization of intangibles and plus or minus the impact of our LIFO inventory costing methodology. We present Adjusted Gross Profit because we believe it is a useful indicator of our operating performance without regard to items, such as amortization of intangibles, that can vary substantially from company to company depending upon the nature and extent of acquisitions. Similarly, the impact of the LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO and depending upon which method they may elect. We use Adjusted Gross Profit as a key performance indicator in managing our business. We believe that gross profit is the financial measure calculated and presented in accordance with U.S. generally accepted accounting principles that is most directly comparable to Adjusted Gross Profit.

The following table reconciles Adjusted Gross Profit, a non-GAAP financial measure, with gross profit, as derived from our financial statements (in millions):


	Three Months Ended						Three Months Ended
	March 31,		Percentage	March 31,		Percentage	March 31,		Percentage	March 31,		Percentage
	2019		of Revenue*	2018		of Revenue	2020		of Revenue*	2019		of Revenue*
Gross profit, as reported	$	174	17.9%	$	169	16.7%	$	148	18.6%	$	174	17.9%
Depreciation and amortization		5	0.5%		6	0.6%		5	0.6%		5	0.5%
Amortization of intangibles		11	1.1%		11	1.1%		7	0.9%		11	1.1%
Increase in LIFO reserve		-	-		7	0.7%
(Decrease) increase in LIFO reserve								(3)	(0.4%)		-	0.0%
Adjusted Gross Profit	$	190	19.6%	$	193	19.1%	$	157	19.8%	$	190	19.6%

*Does not foot due to rounding

Operating Income. Operating income was $22 million for the three months ended March 31, 2020 as compared to $35 million for the three months ended March 31, 2019, ~~as compared to $31~~a decline of $13 million.

U.S. Segment—Operating income for our U.S. segment was $18 million for the three months ended March 31, ~~2018, an improvement of $4 million.~~

~~U.S. Segment~~—~~Operating income for our U.S. segment was~~2020 compared to $32 million for the three months ended March 31, ~~2019 compared~~2019. The $14 million decline was attributable to ~~$28 million for the three months ended March 31, 2018. The $4 million increase in operating income was driven~~lower revenues offset by ~~higher~~improved gross profit ~~offset by an increase in~~percentage and lower SG&A ~~expenses.~~ expense.

Canada Segment—Operating income for our Canada segment was $0 million for the three months ended March 31, 2020 and $22019.

International Segment—Operating income for our international segment was $4 million for the three months ended March 31, ~~2019 and 2018, respectively. The $2 million decrease is primarily attributable~~2020 as compared to ~~the decrease in sales.~~

~~Table Of Contents~~

~~International Segment~~—~~Operating income for our international segment was~~ $3 million for the three months ended March~~31,2019 as compared to $1 million for the three months ended March~~ 31, ~~2018.~~2019. The $2$1 million improvement in operating income was primarily attributable to ~~a combination of stronger gross profit and~~ cost reductions that occurred in the fourth quarter of ~~2018.~~2019.

Interest Expense. Our interest expense was ~~$11~~$8 million and $8$11 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~increase~~decrease in interest expense was ~~primarily~~ attributable to ~~higher~~lower average debt levels and interest rates during the first three months of ~~2019~~2020 as compared to the first three months of 2018. In addition, an 85 basis point increase in LIBOR rates for the first three months of 2019, as compared to the first three months of 2018, contributed $1 million to the increase in interest expense.2019.

Other, ~~Income~~net. Our other income was $0 million for the three months ended March 31, ~~2019 as compared to $2million for the three months ending~~2020 and March 31, ~~2018. Other~~2019.

Income Tax Expense. Our income tax expense was $5 million for the three months ended March 31, ~~2018 included $2million of income related~~2020 as compared to ~~the change in fair value of derivatives.~~

~~Income Tax Expense.~~ ~~Our income tax expense was~~ $6 million for the three months ended March 31, ~~2019 as compared~~2019. We typically record income tax expense for interim periods based on estimated annual effective tax rates. However, due to ~~$7 million~~the uncertainty in our industry and the effects of COVID-19, the income tax expense for the three months ended March 31, ~~2018. For interim periods, our income tax expense is~~2020 was computed based ~~upon our~~on a year-to-date effective tax rate. We will return to utilizing an estimated annual effective tax rate ~~and any discrete items that impact the interim periods.~~when appropriate. Our effective tax rates were ~~25%~~36% and ~~28%~~25% for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. Our rates generally differ from the U.S. federal statutory rate of 21% as a result of state income taxes and differing foreign income tax rates. The effective tax rate for the three months ended March 31, 2020 was higher due to a $1 million discrete tax charge related to share-based compensation plans. Excluding this impact, the effective tax rate would have been 29%.

In response to COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures that do not materially impact the Company’s deferred tax liability and its year-to-date effective tax rate. Given the uncertain outlook, we will continue to evaluate any future tax impacts resulting from the CARES Act.

Net Income. Our net income was $9 million and $18 million for the three months ended March 31, 2020 and 2019, ~~and 2018.~~ respectively.

Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure, was $34 million (4.3% of sales) for the three months ended March 31, 2020 as compared to $56 million (5.8% of sales) for the three months ended March 31, ~~2019 as compared to $59 million (5.8% of sales) for the three months ended March 31, 2018.~~ 2019.

We define Adjusted EBITDA as net income plus interest, income taxes, depreciation and amortization, amortization of intangibles and certain other expenses, including non-cash expenses (such as equity-based compensation, severance and restructuring, changes in the fair value of derivative instruments and asset impairments, including inventory) and plus or minus the impact of our LIFO inventory costing methodology.

We believe Adjusted EBITDA provides investors a helpful measure for comparing our operating performance with the performance of other companies that may have different financing and capital structures or tax rates. We believe it is a useful indicator of our operating performance without regard to items, such as amortization of intangibles, which can vary substantially from company to company depending upon the nature and extent of acquisitions. Similarly, the impact of the LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO and depending upon which method they may elect. We use Adjusted EBITDA as a key performance indicator in managing our business. We believe that net income is the financial measure calculated and presented in accordance with U.S. generally accepted accounting principles that is most directly comparable to Adjusted EBITDA.

Table Ofof Contents

The following table reconciles Adjusted EBITDA, a non-GAAP financial measure, with net income, as derived from our financial statements (in millions):


	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
	2019		2018		2020		2019
Net income	$	18	$	18	$	9	$	18
Income tax expense		6		7		5		6
Interest expense		11		8		8		11
Depreciation and amortization		5		6		5		5
Amortization of intangibles		11		11		7		11
Increase in LIFO reserve		-		7
Change in fair value of derivative instruments		-		(2)
(Decrease) increase in LIFO reserve						(3)		-
Equity-based compensation expense		4		4		2		4
Gain on early exthinguishment of debt						(1)		-
Foreign currency losses		1		-		2		1
Adjusted EBITDA	$	56	$	59	$	34	$	56

Liquidity and Capital Resources

Our primary credit facilities consist of a Term Loan maturing in September 2024 with an original principal amount of $400 million and an $800 million Global ABL Facility that provides $675 million in revolver commitments in the United States, $65 million in Canada, $18 million in Norway, $15 million in Australia, $13 million in the Netherlands, $7 million in the United Kingdom and $7 million in Belgium. As of March 31, 2020, the outstanding balance on our Term Loan, net of original issue discount and issuance costs, was $386 million. The Global ABL Facility matures in September 2022. The Global ABL Facility contains an accordion feature that allows us to increase the principal amount of the facility by up to $200 million, subject to securing additional lender commitments. Availability is dependent on a borrowing base comprised of a percentage of eligible accounts receivable and inventory which is subject to redetermination from time to time. As of March 31, 2020, we had $135 million of borrowings outstanding and $437 million of Excess Availability, as defined under our Global ABL Facility and adjusted for the pro forma effect of an inventory appraisal completed in April 2020. Including cash on hand of $28 million, total liquidity equaled $465 million.

Our primary sources of liquidity consist of cash generated from our operating activities, existing cash balances and borrowings under our Global ABL Facility. ~~At March 31, 2019, our total liquidity, including cash on hand, was $409 million.~~ Our ability to generate sufficient cash flows from our operating activities will continue to be primarily dependent on our sales of products and services to our customers at margins sufficient to cover our fixed and variable expenses. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we had cash of ~~$27~~$28 million and ~~$43~~$32 million, respectively, substantially all of which was maintained in the accounts of our various foreign subsidiaries and, if transferred among countries or repatriated to the U.S., may be subject to additional tax liabilities, which would be recognized in our financial statements in the period during which the transfer decision was made. ~~During the first three months of 2019, we repatriated $8 million of cash from our Canadian subsidiaries.~~

~~Our primary credit facilities consist of a Term Loan maturing in September 2024 with an original principal amount of $400million and an $800 million Global ABL Facility that provides $675 million in revolver commitments in the United States, $65million in Canada, $18 million in Norway, $15 million in Australia, $13 million in the Netherlands, $7~~million in the United Kingdom and $7 million in Belgium. As of March 31, 2019, the outstanding balance on our Term Loan, net of original issue discount and issuance costs, was $392 million. The Global ABL Facility matures in September 2022. The Global ABL Facility contains an accordion feature that allows us to increase the principal amount of the facility by up to $200 million, subject to securing additional lender commitments. As of March 31, 2019, we had $354 million of borrowings outstanding and $382million of Excess Availability, as defined under our Global ABL Facility. Availability is dependent on a borrowing base comprised of a percentage of eligible accounts receivable and inventory which is subject to redetermination from time to time.

Our credit ratings are below “investment grade” and, as such, could impact both our ability to raise new funds as well as the interest rates on our future borrowings. In April 2020, Moody’s Investor Services downgraded our credit rating from B1 to B2 largely due to softening demand for our products the COVID-19 pandemic and the reduction in our customer’s spending outlook from unusually low oil and gas prices. Our existing obligations restrict our ability to incur additional debt. We were in compliance with the covenants contained in our various credit facilities as of and during the three months ended March31,~~2019. The 2019 implementation of the new lease accounting standard did not impact our compliance with debt covenants, as our~~ 2020. Our credit facilities contain provisions that ~~grandfather our previous method of accounting for leases for debt compliance purposes.~~address the potential need to transition away from LIBOR if LIBOR is discontinued or replaced.

We believe our sources of liquidity will be sufficient to satisfy the anticipated cash requirements associated with our existing operations for ~~at least~~ the ~~next twelve months.~~foreseeable future. However, our future cash requirements could be higher than we currently expect as a result of various factors. Additionally, our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to general economic, political, financial, competitive and other factors beyond our control. We may, from time to time, seek to raise additional debt or equity financing or re-price or refinance existing debt in the public or private markets, based on market conditions. Any such capital markets activities would be subject to market conditions, reaching final agreement with lenders or investors, and other factors, and there can be no assurance that we would successfully consummate any such transactions.

~~In October 2018, our board of directors authorized a share repurchase program for our common stock up to $150 million. The~~

Table Ofof Contents

program is scheduled to expire December 31, 2019. The shares may be repurchased at management’s discretion in the open market. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the first quarter of 2019, we purchased 1,758,537 shares at a total cost of $25 million. Subsequent to the first quarter, in April 2019, we purchased an additional 1,372,084 at a total cost of $25~~million. As of April26, 2019, we had $25 million remaining under the October 2018 authorization.~~

Cash Flows

The following table sets forth our cash flows for the periods indicated below (in millions):


	Three Months Ended				Three Months Ended
	March 31,		March 31,		March 31,		March 31,
	2019		2018		2020		2019
Net cash (used in) provided by:
Net cash provided by (used in) :
Operating activities	$	(40)	$	(74)	$	37	$	(40)
Investing activities		(2)		(5)		(2)		(2)
Financing activities		26		76		(36)		26
Net decrease in cash and cash equivalents	$	(16)	$	(3)	$	(1)	$	(16)

Operating Activities

Net cash ~~used in~~provided by operating activities was ~~$40~~$37 million during the three months ended March 31, ~~2019~~2020 compared to ~~$74~~$40 million used in operating activities during the three months ended March 31, ~~2018.~~2019. The ~~decrease~~change in operating cash ~~used in operations~~flows was primarily the result of lower working capital requirements due to ~~lower~~declining sales in the first ~~quarter~~three months of ~~2019~~2020 as compared to the first ~~quarter~~three months of ~~2018. The growth~~2019. A reduction in working capital ~~due to increased activity levels used~~provided cash of ~~$83~~$9 million in the first three months of ~~2019~~2020 compared to ~~$122~~$83 million used to grow working capital in the first three months of ~~2018.~~2019. In particular, growth in accounts receivable utilized ~~$47~~only $33 million of cash in the first three months of ~~2019~~2020 compared to $47 million in the first three months ~~2018 when accounts receivable utilized cash~~ of ~~$98 million. Similarly, growth in~~2019. In addition, inventory utilized ~~$42~~only $4 million of cash in the first three months of ~~2019~~2020 as compared to ~~$117~~$42 million in the same period of ~~2018. These reductions in the~~2019. The accounts receivable and inventory use of cash were offset by ~~$27~~$49 million ~~generated~~of cash provided from ~~an increase~~a reduction in accounts payable in ~~2019~~the first three months of 2020 as compared to ~~$106~~$27 million in ~~2018, which was attributable to a more significant increase in accounts payable when purchasing levels were higher.~~the first three months of 2019.

Investing Activities

Net cash used in investing activities was comprised of capital expenditures totaling $2 million for the three months ended March 31, ~~2019, compared to $5~~2020 and 2019.

Financing Activities

Net cash used in financing activities was $36 million for the three months ended March 31, ~~2018.~~

~~Financing Activities~~

~~Net cash~~2020 compared to $26 million provided by financing activities ~~was $26 million~~ for the three months ended March 31, ~~2019 compared to $76 million for the three months ended March 31, 2018.~~2019. In the first three months of ~~2019 and 2018,~~2020, we had net ~~borrowings~~payments under revolving credit facilities of $23 million as compared to net borrowing of $63 million ~~and $113 million, respectively, and~~in the first three months of 2019. We used $25 million ~~and $30million, respectively,~~in the first three months of 2019 to fund purchases of our common stock. We used $6 million to pay dividends on preferred stock for the three months ended March31,~~2019~~ 2020 and ~~2018.~~ 2019. In addition, we repurchased and retired $3 million of our outstanding Term Loan in March 2020.

Critical Accounting Policies

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expense in the financial statements. Management bases its estimates on historical experience and other assumptions, which it believes are reasonable. If actual amounts are ultimately different from these estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.

Accounting policies are considered critical when they require management to make assumptions about matters that are highly uncertain at the time the estimates are made and when there are different estimates that management reasonably could have made, which would have a material impact on the presentation of our financial condition, changes in our financial condition or results of operations. For a description of our critical accounting policies, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~ 2019.

~~Table Of Contents~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign currencies and steel price volatility. There have been no material changes to our market risk policies or our market risk sensitive instruments and positions as described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

As of March 31, ~~2019,~~2020, we have reviewed, under the direction of our Chief Executive Officer and Chief Financial Officer, the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). Based upon and as of the date of that review, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the first quarter of ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

‎

Table Ofof Contents

Part II—other information

ITEM 1. LEGAL PROCEEDINGS

From time to time, we have been subject to various claims and involved in legal proceedings incidental to the nature of our businesses. We maintain insurance coverage to reduce financial risk associated with certain of these claims and proceedings. It is not possible to predict the outcome of these claims and proceedings. However, in our opinion, there are no pending legal proceedings that are likely to have a material effect on our business, financial condition, results of operations or cash flows, although it is possible that the resolution of certain actual, threatened or anticipated claims or proceedings could have a material adverse effect on our results of operations in the period of resolution.

Also, from time to time, in the ordinary course of our business, our customers may claim that the products that we distribute are either defective or require repair or replacement under warranties that either we or the manufacturer may provide to the customer. These proceedings are, in the opinion of management, ordinary and routine matters incidental to our normal business. Our purchase orders with our suppliers generally require the manufacturer to indemnify us against any product liability claims, leaving the manufacturer ultimately responsible for these claims. In many cases, state, provincial or foreign law provides protection to distributors for these sorts of claims, shifting the responsibility to the manufacturer. In some cases, we could be required to repair or replace the products for the benefit of our customer and seek recovery from the manufacturer for our expense. In the opinion of management, the ultimate disposition of these claims and proceedings is not expected to have a material adverse effect on our financial condition, results of operations or cash flows.

For information regarding asbestos cases in which we are a defendant and other claims and proceedings, see ~~Note 10 - Commitments~~“Note 10-Commitments and ~~Contingencies~~Contingencies” to our unaudited condensed consolidated financial statements.

Item 1A. Risk Factors

We are affected by risks specific to us as well as factors that affect all businesses operating in a global market. The significant factors known to us that could materially adversely affect our business, financial condition or operating results are described in Part I, Item 2 of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 under “Risk Factors”.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

A summary of our purchases of MRC Global Inc. common stock during the first quarter of fiscal year 2019 is as follows:

Total Number of Shares Purchased (1)

Average Price Paid per Share

Total number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Jan 1 - Jan 31
1,758,537

$
14.24

1,758,537

$
49,872,673
Feb 1- Feb 28
1,689

$
16.36

-

$
49,872,673
Mar 1- Mar 31
-

$
-

-

$
49,872,673

1,760,226

(1) We purchased 1,689 shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted shares.

None.

Item 3. Defaults Upon Senior Securities

None.

‎

2627

Table Ofof Contents

Item 4. MINING SAFETY DISCLOSURES

None.

Item 5. Other Information

~~None.~~An annual appraisal of the Company’s inventory value was completed in April 2020 by the administrative agent for the banks pursuant to the Third Amended and Restated, Loan, Security and Guarantee Agreement dated as of September 22, 2017 (as amended, the “Global ABL Facility”) among MRC Global (US) Inc. and certain other subsidiaries of the Company, Bank of America, N.A., as administrative agent, and the banks that are a party thereto (the “Lenders”). In the appraisal, the Net Orderly Liquidation Value (as defined in the Global ABL Facility) percentages decreased from those in the 2019 appraisal. Notwithstanding this decrease, the Lenders have agreed that, for purposes of determining Net Orderly Liquidation Value in the inventory component of each of the Borrowing Bases (as defined in the Global ABL Facility), one-half of the relevant percentage decrease in the calculation of each Borrowing Base will be used instead of the full percentage decrease. This would have the impact of reducing the Company’s liquidity under the Global ABL Facility by $58 million if applied at March 31, 2020 rather than the larger amount indicated by the appraisal. The applicable subsidiary of the Company has agreed to pay each consenting Lender a fee equal to 10 basis points on the Lender’s Commitment (as defined in the Global ABL Facility,) and, if Excess Availability (as defined in the Global ABL Facility) falls below $200 million at any time prior to the next annual appraisal, the applicable subsidiary of the Company will pay for an additional inventory appraisal and refrain from borrowing or requesting additional letters of credit if Excess Availability is or would be less than $200 million after giving effect to the transaction until after the completion and implementation of the new inventory appraisal. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.

‎

Table Ofof Contents

Item 6. Exhibits



Number		Description

~~Number~~3.1	~~Description~~Amended and Restated Certificate of Incorporation of MRC Global Inc. dated April 11, 2012. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of MRC Global Inc. filed with the SEC on April 17, 2012, File No. 001-35479).

31.1*3.2	Amended and Restated Bylaws of MRC Global Inc. dated November 7, 2013. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of MRC Global Inc. filed with the SEC on November 13, 2013, File No. 001-35479).

3.3	Certificate of Designations, Preferences, Rights and Limitations of Series A Convertible Perpetual Preferred Stock of MRC Global Inc. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of MRC Global Inc. filed with the SEC on June 11, 2015, File No. 001-35479).

10.1*	Consent Fee Letter dated April 26, 2020 between MRC Global (US) Inc. and Bank of America, N.A.

10.2*	Consent memorandum dated April 27, 2020 among MRC Global (US) Inc., and certain other subsidiaries of the Company, Bank of America, N.A., as administrative agent, and the banks that are a party thereto.

31.1*	Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32**	Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

100101	The following financial information from MRC Global Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2019,~~2020, formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(iXBRL): (i) the Condensed Consolidated Balance Sheets at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, (ii) the Condensed Consolidated Statements of Operations for the three month periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three month periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iv) the Condensed Statements of Stockholders’ Equity for the three month periods ended March 31, ~~2019~~2020 and ~~2018~~2019, (v) the Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, ~~2019~~2020 and ~~2018~~2019 and (vi) Notes to Condensed Consolidated Financial Statements.

101*104	~~Interactive data file.~~The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 formatted in Inline XBRL.

* Filed herewith.

** Furnished herewith.

Table Ofof Contents

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~May 3, 2019~~April 29, 2020

MRC GLOBAL INC.

By: ~~/s/ James E. Braun~~/s/ Kelly Youngblood

~~James E. Braun~~Kelly Youngblood
‎Executive Vice President and Chief Financial Officer


Page
PART I – FINANCIAL INFORMATION

ITEM 1.	financial statements (UNAUDITED)	1


	Condensed Consolidated Balance Sheets – MARCH 31, ~~2019~~ 2020AND DECEMBER 31, ~~2018~~201	1
9		1

	cONdENSED cONSOLIDATED STATEMENTS OF OPERATIONS – THREE MONTHS ENDED ~~March~~MARCH 31, ~~2019~~2020 AND ~~mARCH~~MARCH 31, ~~2018~~201	2
9		2

	Condensed Consolidated Statements ofcOMPREHENSIVE INCOME – three months ended ~~March~~MARCH 31, ~~2019~~2020 and MARCH 31, ~~2018~~201	3
9		3

	Condensed CONSOLIDATED STATEMENTS OF ~~STOCKHOLDER’S~~STOCKHOLDERs’ EQUITY – THREE MONTHS ENDEd ~~March~~MARCH 31, ~~2019~~2020 and MARCH 31, ~~2018~~201	4
9		4

	Condensed CONSOLIDATED STATEMENTS OF cash flows – THREE MONTHS ENDEd ~~March 31, 2019 AND~~ MARCH 31, ~~2018~~2020AND MARCH	5
31, 2019		5

	Notes to the Condensed Consolidated Financial Statements – ~~mARCH~~MARCH 31, ~~2019~~	6
2020		6

ITEM 2.	management’s discussion and analysis of financial condition and
	results of operations	16


ITEM 3.	quantitative and qualitative disclosures about market risk	25

~~ITEM 4.~~	~~controls and procedures~~	25

ITEM 4.	controls and procedures	26

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	26
		27
~~ITEM 1a.~~	~~RISK FACTORS~~	26

ITEM 2.1a.	RISK FACTORS	27

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26
		27

ITEM 3.	Defaults Upon Senior Securities	26
		27
~~ITEM 4.~~	~~MINING SAFETY DISCLOSURES~~	27

ITEM 5.4.	~~other information~~MINING SAFETY DISCLOSURES	27
		28

ITEM 6.5.	~~Exhibits~~other information	28

ITEM 6.	Exhibits	29


	Three Months Ended March 31, 2018
											Accumulated
				Additional							Other		Total
	Common Stock			Paid-in		Retained		Treasury Stock			Comprehensive		Stockholders'
	Shares	Amount		Capital		(Deficit)		Shares	Amount		(Loss)		Equity


Balance at December 31, 2017	103	$	1	$	1,691	$	(548)	(12)	$	(175)	$	(210)	$	759
Net income	-		-		-		18	-		-		-		18
Foreign currency translation	-		-		-		-	-		-		(1)		(1)
Hedge accounting adjustments	-		-		-		-	-		-		(1)		(1)
Shares withheld for taxes	-		-		(5)		-	-		-		-		(5)
Equity-based compensation expense	-		-		4		-	-		-		-		4
Exercise and vesting of stock awards	1		-		5		-	-		-		-		5
Dividends declared on preferred stock	-		-		-		(6)	-		-		-		(6)
Purchase of common stock	-		-		-		-	(1)		(30)		-		(30)

Balance at March 31, 2018	104	$	1	$	1,695	$	(536)	(13)	$	(205)	$	(212)	$	743


	Three Months Ended
	March 31, 2019			March 31, 2018
Upstream	$	312	32%	$	302	30%
Midstream		361	37%		410	41%
Downstream		297	31%		298	29%
	$	970	100%	$	1,010	100%


A summary of our purchases of MRC Global Inc. common stock during the first quarter of fiscal year 2019 is as follows:

	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Jan 1 - Jan 31	1,758,537	$	14.24	1,758,537	$	49,872,673
Feb 1- Feb 28	1,689	$	16.36	-	$	49,872,673
Mar 1- Mar 31	-	$	-	-	$	49,872,673
	1,760,226

(1) We purchased 1,689 shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted shares.