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8-K - FORM 8-K - MRC GLOBAL INC.d447001d8k.htm
James E. Braun
EVP & CFO
MRC Global Inc.  // Barclays Select Series 2012 Industrial Distribution Forum
December 6, 2012
Exhibit 99.1
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December 6, 2012
2
Forward Looking Statements and GAAP Disclaimer
This
presentation
contains
forward-looking
statements,
including,
for
example,
statements
about
the
Company’s
business
strategy,
its
industry,
its
future
profitability,
growth
in
the
Company’s
various
markets,
the
strength
of
future
activity
levels,
and
the
Company’s
expectations,
beliefs,
plans,
strategies,
objectives,
prospects
and
assumptions.
These
forward-looking
statements
are
not
guarantees
of
future
performance.
These
statements
involve
known
and
unknown
risks,
uncertainties
and
other
factors
that
may
cause
the
Company’s
actual
results
and
performance
to
be
materially
different
from
any
future
results
or
performance
expressed
or
implied
by
these
forward-looking
statements.
For
a
discussion
of
key
risk
factors,
please
see
the
risk
factors
disclosed
in
the
Company’s
registration
statement
on
Form
S-1
effective
April
11,
2012,
related
to
our
common
stock,
and
our
Quarterly
Statement
on
Form
10-Q
for
the
quarter
ended
September
30,
2012,
both
of
which
are
available
on
the
SEC’s
website
at
www.sec.gov.
Undue
reliance
should
not
be
placed
on
the
Company’s
forward-looking
statements.
Although
forward-looking
statements
reflect
the
Company’s
good
faith
beliefs,
reliance
should
not
be
placed
on
forward-looking
statements
because
they
involve
known
and
unknown
risks,
uncertainties
and
other
factors,
which
may
cause
our
actual
results,
performance
or
achievements
to
differ
materially
from
anticipated
future
results,
performance
or
achievements
expressed
or
implied
by
such
forward-looking
statements.
The
Company
undertakes
no
obligation
to
publicly
update
or
revise
any
forward-looking
statement,
whether
as
a
result
of
new
information,
future
events,
changed
circumstances
or
otherwise,
except
to
the
extent
required
by
law.
Statement Regarding use of Non-GAAP Measures:
The
Non-GAAP
financial
measures
contained
in
this
presentation
(including,
without
limitation,
EBITDA,
Adjusted
EBITDA,
Adjusted
EBITDA
Margin,
Adjusted
Gross
Profit,
Return
on
Net
Assets
(RONA)
and
variations
thereof)
are
not
measures
of
financial
performance
calculated
in
accordance
with
GAAP
and
should
not
be
considered
as
alternatives
to
net
income
(loss)
or
any
other
performance
measure
derived
in
accordance
with
GAAP
or
as
alternatives
to
cash
flows
from
operating
activities
as
a
measure
of
our
liquidity.
They
should
be
viewed
in
addition
to,
and
not
as
a
substitute
for,
analysis
of
our
results
reported
in
accordance
with
GAAP,
or
as
alternative
measures
of
liquidity.
Management
believes
that
certain
non-GAAP
financial
measures
provide
a
view
to
measures
similar
to
those
used
in
evaluating
our
compliance
with
certain
financial
covenants
under
our
credit
facilities
and
provide
financial
statement
users
meaningful
comparisons
between
current
and
prior
year
period
results.
They
are
also
used
as
a
metric
to
determine
certain
components
of
performance-based
compensation.
The
adjustments
and
Adjusted
EBITDA
are
based
on
currently
available
information
and
certain
adjustments
that
we
believe
are
reasonable
and
are
presented
as
an
aid
in
understanding
our
operating
results.
They
are
not
necessarily
indicative
of
future
results
of
operations
that
may
be
obtained
by
the
Company.


December 6, 2012
3
By the Numbers
Industry Sectors
Product Categories
Business Model
*
9/30/12
LTM Sales
$5.6 B
Upstream
Line Pipe / OCTG
Locations
410
Countries
44+
Midstream
Valves
Customers
12,000+
Suppliers
12,000+
Downstream/
Industrial
Fittings / Flanges
SKU’s
150,000+
Employees
4,500+
MRC is the largest global distributor of pipe, valves and fittings (PVF) to the energy industry.
MRC is the largest global distributor of pipe, valves and fittings (PVF) to the energy industry.
Company Snapshot
Note: Charts based on 9/30/2012 LTM revenue


December 6, 2012
4
MRC’s 91 Year History  //  The Road to the Fortune 500


December 6, 2012
5
By Geography
Note: Business mix based on YTD 09/30/2012
By Product Line
MRC is diversified by geography, industry sector, and product line.
By Industry Sector
MRC Diversification


December 6, 2012
6
Access to over 12,000+
customers
Manufacturing and scale
efficiencies
Leverage MRC’s technical
sales force
Access to over 12,000+ suppliers
worldwide
Efficiencies and inventory
management
Access to a broad product offering
($1B+ inventory)
Access to global sourcing from 35
countries
MRC plays a critical role in the complex, technical, global energy supply chain.
Business Model
Trusted long-term partnerships
Financial stability
MRC Approved Supplier List /
Quality Program
Supplier Benefits
Mutual Benefits
Customer Benefits


December 6, 2012
7
Horn River
Montney
Duvernay
Bakken
Niobrara
Monterey
Mississippian
Lime
Granite Washington
Woodford
Fayetteville
Barnett
Haynesville
Permian
Basin
Eagle Ford
Utica
Marcellus
175+ Branches
140+ Pipe Yards
8 Regional Distribution Centers
12 Valve Automation Centers
North America Core Business Model
Well positioned to capitalize on shale, heavy oil and oil sands activity.
North America E&P spending to grow 6% in 2012*.
*  Barclays Equity Research
North American Infrastructure


December 6, 2012
8
International E&P spending forecast to grow 12% in 2012*.
50+ Branches
10 Pipe Yards
5 Regional Distribution Centers: UK, France,
New Zealand, Singapore and Australia
12 Valve Automation Centers
International Growth Model
*  Barclays Equity Research
Expanding International Presence


December 6, 2012
9
Strong Growth in Global E&P Spending
Positive E&P Capital Spending trends through 2015
E&P spending to exceed
$600 billion
26% of E&P spend is in
North America
47% of E&P spend is with
core MRC customers
Of the E&P spend outside of North America,
$123 billion is attributable to MRC’s core customer base.
2012 Statistics
Source: Barclays 2012 E&P Spending Outlook Mid Year Update.


December 6, 2012
10
Robust North America pipeline infrastructure spending
forecast for 2013
Low natural gas and NGL prices are not dampening pipeline infrastructure
spending in the North American market.
NA Pipeline Infrastructure Spending Forecast
Drivers:
30% increase in oil production
(2010-2016)
55% increase in NGL production
by 2017
Coal to gas power generation
switching
LNG terminal development
Aging US infrastructure and
legislated replacement program
Source: Stifel Nicolaus Diversified industrial Infrastructure Report August 28, 2012


December 6, 2012
11
Chemical industry capital spending expected to grow 107%
year over year
Chemical Industry Capital Spending
Planned unit additions in East/Gulf Coast =
$14 billion
Companies include Bayer, Shell,
ExxonMobil, Sasol, Chevron Phillips, Dow,
Occidental
20 –
21 billion lbs/yr of new capacity
$3 billion in retrofits / debottlenecking
adding another 2 –
3 billion lbs/yr capacity
Source: Industrial Information Resources, Inc. North American Industrial Outlook, September 2012
Major driver -
The race to cheap
Ethane:
Source: Industrial Information Resources, Inc. North American Industrial Outlook, September 2012


December 6, 2012
12
Positive downstream project and maintenance trend going
into 2013
Value for scheduled Project Starts
Value for scheduled Maintenance & Turn Arounds
MRC uniquely positioned to capitalize on downstream increase in spend on maintenance and projects.
Source:  Industrial Information Resources.
Source:  Industrial Information Resources.


December 6, 2012
13
Multi-Year Strategy to Shift Away from OCTG Towards
Higher Margin, More MRO Focused, Less Volatile Products 
Key Components to Strategy
Remain committed to one-stop PVF focused customers
Focus on energy infrastructure E&P spend
Increase earnings stability
Improve overall margins
Reduce volatility and exposure to North America rig count
Shift to Higher Margin Products
Short term loss of revenue offset by long term benefits of earnings stability
Historic Margins
OCTG
6-10%
All Other
18-22%


December 6, 2012
14
1
Reflects reported revenues for the year of acquisition
2
Estimate based on supply agreement with SandRidge Energy
3
Subject to closing; Asset purchase agreement signed Nov 2012
(US$ in millions)
Track Record of Successful M&A
MRC has completed and successfully acquired over $1 billion of revenues since mid 2008.


December 6, 2012
15
PVF purchasing
handled locally
Facility-by-facility
basis
Separate contracts
by product class:
Pipe
Valves
Fittings
Flanges
Supplies
Contracts cover PVF
Customers align with
suppliers with size/scale
Global upstream /
midstream /
downstream PVF
contracts
Today
10 –
15 Years Ago
Next 1 to 5 Years
Consolidating energy industry benefits global players.
Changing PVF Energy Distribution Landscape
Decentralized
Procurement
Centralized
Procurement
Global
Procurement
Purchasing more
consolidated
Contracts by end
segment:
Upstream
Midstream
Downstream


December 6, 2012
16
MRC & Shell  //  Global Valve Contract for MRO & Projects
Industry’s first global valve and combined North American PFF contract.
Shell has one of the top 5 global CAPEX budgets


December 6, 2012
17
Financial Highlights
Strong end market demand drives continued revenue growth.
Continued
stable
MRO
spending
broadly,
coupled
with
accelerating
midstream
MRO
expenditures
Shale activity unprecedented
Robust new infrastructure spending across the upstream, midstream and downstream sectors
Strong momentum in margin improvement
Continued inventory rebalancing away from OCTG towards more MRO focused products aimed at
driving higher profitability and earnings stability
Largely variable cost structure can lead to highly stable margins
Recent gross margin and SG&A cost initiatives beginning to be realized
Significant cash flow and deleveraging
Industry leading Adjusted EBITDA margins and improving Adjusted EBITDA RONA metrics
Very low capex requirements can lead to strong free cash flow conversion
Low cost debt structure for next several years
Industry leading financial performance within industrial distribution sector


December 6, 2012
18
Strong Growth and Margin Drive Attractive Returns
Sales
Adjusted Gross Profit and % Margin
Source:  Company management; Company Filings
Note:  YTD as of September 30, 2012.
1
Adjusted
EBITDA
RONA
calculation
=
Adjusted
EBITDA
/
(EOY
Inventory
+
EOY
LIFO
reserve
+
EOY
Receivables
+
EOY
PP&E
Payables).
Adjusted EBITDA and % Margin
Adjusted EBITDA RONA
1
Strong growth and continued improving profitability
(US$ in millions)


December 6, 2012
19
Significant Cash Flow for Deleveraging and Growth Investments
Capital Structure
(US$ in millions)
Strong cash flows allow for continued deleveraging
Net Leverage
6.4 x
5.8 x
4.1 x
2.7 x
2009
2010
2011
LTM 9/30
7.8%
1
Completion of anticipated debt refinancing will increase leverage to 2.9x.
As of September 30, 2012
($ in millions)
Current
Pro Forma
Cash and Cash Equivalents
$ 36.8
$ 36.8
Total Debt (including current portion):
9.5% senior Secured Notes, net of discount
$ 848.5
-
Term Loan B due 2019, net of discount
-
643.5
Global ABL Facility due 2017
409.6
706.9
Other
9.9
9.9
Total Debt
$ 1,268.0
$ 1,360.3
Total Equity
$ 1,187.8
1,127.7
Total Capitalization
$ 2,455.8
$ 2,488.0
1
Pro
forma
for
refinancing
of
senior
secured
notes
with
new
term
loan.
330bps
Interest Cost Savings Since IPO
31-Dec-2011
30-Sep-2012
Balance
Coupon
Balance
Coupon
9.5% Notes
$
1,050
9.50%
Term Loan B
$
650
6.25%
North American ABL
456
2.00%
Global ABL
708
1.75%
International Debt
39
6.09%
Total Funded Debt
$
1,545
Total Funded Debt
$
1,358
WACD
7.20%
WACD
3.90%
Implied Cash Interest Cost
1
$
111
Implied Cash Interest Cost
1
$
53
1
1
Implied cash interest reflects annualized interest based on the year-end and current debt balances of $1,545 and
$1,358 and weighted average cost-of-debt of 7.20% and 3.9%, respectively.
1


December 6, 2012
20
Commentary -
MRC hitting on
nearly “all cylinders”
Midstream is strongest and fastest growing
end market
Oil/NGL activity more than compensating for
more challenging upstream natural gas
trends
Chemical / industrial strong with refinery
outlook improving for 2013
Europe softer but strong Southeast Asia
activity
Global Shell contract is industry first and
reaffirmation of investment thesis
MRC believes it will continue to experience
above market growth
2011
2012
Sales
$ 3,526
$ 4,264
21%
Adjusted gross profit
617
809
% Margin
17.5%
19.0%
Diluted EPS
$   0.30
$   1.31
Adjusted EBITDA
$    260
$    364
40%
% Margin
7.4%
8.5%
Full Year 2012 Outlook
Sales
$5.55 to $5.68 billion
Adjusted Gross Profit
18.6% to 19.2% of sales
Adjusted EBITDA
8.4% to 8.7% of sales
Effective Tax Rate
35.5% to 36.5%
Capital Expenditures
$26 to $27 million
Cash from Operations
$125 -
$150 million
YTD 9/30
Year Over Year Results
In millions, except per share data or where otherwise noted
Financial
Update


December 6, 2012
21
Increasing MRC Shareholder Value
Growth
Efficiency / Profitability
Organic Growth
Increase Returns on
Working Capital Investment
Optimize Cost of Capital
North American shale activity
Midstream infrastructure
Downstream –
refining turnaround
activity and resurgence in
petrochemical activity
Australia –
new PVF leadership
position
Optimize inventory mix
Global sourcing
Focus on higher margin
products
Target leverage at
2.0x –
3.0x
Reduce overall cost
of debt
International geographic extensions
Valve & actuation
North American region / shale bolt-ons
Revenue Growth:
Target 10% to 12% per year
Organic:
8% to 9%
Acquisitions:
2% to 3%
Adjusted EBITDA Margin Improvement
8.5 to 9.0%      in near term
9.0 to 9.5%      in mid term
10+%           in 5 years
Acquisitions