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 infrastructure products and services across each of the following sectors:

We have service centers in industrial, chemical, gas distribution and hydrocarbon producing and refining areas throughout the United States, Europe, Asia, Australasia and the Middle East. We obtain products from a broad range of suppliers.

Planned Merger with DNOW Inc.

On June 26, 2025, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with DNOW Inc., a Delaware Corporation ("DNOW"), Buck Merger Sub, Inc., a Delaware corporation and a wholly owned, direct subsidiary of DNOW ("Merger Sub") and Stag Merger Sub, LLC, a Delaware limited liability company and a wholly owned, direct subsidiary of DNOW ("LLC Sub"). The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement:

At the Effective Time, each share of common stock of MRC Global issued and outstanding (other than certain excluded shares) immediately prior to the Effective Time will be converted into the right to receive 0.9489 shares of common stock, $0.01 par value, of DNOW, subject to certain adjustments, with cash paid in lieu of the issuance of fractional shares, if any (collectively, the "Merger Consideration"). The Merger Agreement also specifies the treatment of outstanding MRC Global equity awards in connection with the Mergers. The completion of the Mergers is subject to shareholder and regulatory approvals and other customary mutual closing conditions.

The Merger Agreement contains termination rights for each of MRC Global and DNOW, including, among others, if the consummation of the First Merger does not occur on or before June 26, 2026 (subject to two potential extensions to September 26, 2026 and December 26, 2026 if the required regulatory approvals have not been received but all other conditions to closing have been satisfied or waived (except for those conditions that by their nature are to be satisfied at closing)). Additionally, the Merger Agreement permits either party, subject to compliance with certain requirements and payment of a termination fee (described below), to terminate the Merger Agreement to enter into a definitive agreement for a superior alternative acquisition proposal. 

Upon termination of the Merger Agreement under specified circumstances, including, among others, either party's termination under the following circumstances:

the applicable party would be required to pay a termination fee to the other party of $45.5 million. In addition, under certain circumstances, if the Merger Agreement is terminated because of a failure of one party’s stockholders to approve the proposals necessary to consummate the Mergers, that party will be required to pay the other party up to $8.5 million for reimbursement of transaction expenses incurred. In no event will either party be entitled to receive more than one termination fee, net of any expense reimbursement.

During the three and six months ended June 30, 2025, we recorded third party legal and consulting costs of $6 million and $7 million, respectively, in connection with the Merger Agreement with DNOW. These costs are reflected in selling, general and administrative expenses within our condensed consolidated statement of operations. 

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 ("GAAP") require for complete annual financial statements. However, the information in these statements reflects all normal recurring adjustments that are, in our opinion, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and six months ended June 30, 2025, are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2025. We have derived our condensed consolidated balance sheet as of  June 30, 2025, from the audited consolidated financial statements for the year ended December 31, 2024. 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, 2024.

The condensed 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 terms such as "we", "our" or "us"). The Company is a primary beneficiary of a variable interest entity, and the assets, liabilities and results of operations of the variable interest entity are included in the Company's condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.

On December 13, 2024, we entered into a definitive agreement to sell assets associated with our Canada operations to EMCO Corporation, and on March 14, 2025, we completed the sale. The historical results of the assets to be sold and the liabilities to be assumed (the "Disposal Group") have been reflected as discontinued operations in our condensed consolidated financial statements for all periods prior to the definitive agreement. Assets and liabilities associated with the Disposal Group are classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024. Additional disclosures regarding the sale of assets and assumption of liabilities associated with our Canada operations are provided in Note 2.

Recently Issued Accounting Standards: In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-03, Income Statement - Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), which requires public entities to include more detailed disclosures about specific categories of expenses such as inventory purchases, employee compensation, depreciation, amortization and selling costs within the notes to the financial statements. This update will be effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. We are currently evaluating the impact of the provisions of ASU 2024-03 on our consolidated financial statements.

Adoption of New Accounting Standards: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) ("ASU 2023-09"), which aims to enhance the transparency and decision usefulness of income tax disclosures through requiring improvements in those disclosures primarily related to the rate reconciliation and income taxes paid information. This update will be effective for annual periods beginning after December 15, 2024. We adopted ASU 2023-09 on January 1, 2025. We do not expect ASU 2023-09 to impact our consolidated financial statements, and we are currently evaluating the impact of new disclosure requirements beginning with the Form 10-K for the year ended December 31, 2025.