Monika Broughton - IR Andrew Lane - Chairman, President and CEO Jim Braun - EVP and CFO.

Sean Meakim - JPMorgan Matt Duncan - Stephens David Manthey - Robert W Baird Ryan Merkel - William Blair Douglas Becker - Bank of America William Bremer - Maxim Group.

Greeting, and welcome to MRC Global’s Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Monika Broughton, Investor Relations. Thank you, Ms. Broughton, you may begin..

Thank you, Rob and good morning, everyone. Welcome to the MRC Global second quarter 2015 earnings conference call webcast. We appreciate you joining us. On the call today we have Andrew Lane, Chairman, President, and CEO; and Jim Braun, Executive Vice President and CFO.

There will be a replay of today’s call available by webcast on our website mrcglobal.com, as well as by phone until August 16, 2015. The dial-in information is in yesterday’s release. Later today, we expect to file second quarter 2015 Form 10-Q which will be available on our website.

Please note that the information reported on this call speaks as of only today, august 4, 2015, and therefore you’re advised that this information may no longer be accurate as of the time of replay. In addition, the comments made by the management of MRC Global during this call may contain forward-looking statements within the meaning of the U.S.

federal securities laws. These forward-looking statements reflect the current views of the management of MRC Global. However, MRC Global’s actual results could differ materially from those expressed today. You are encouraged to read the Company’s SEC Filings. And now, I would like to turn the call over to our CEO, Mr. Andrew Lane..

Thank you, Monika. Good morning and thank you for joining us today and for your interest in MRC Global. I’ll begin with a discussion of the quarter’s highlights before turning it over to Jim for a detailed financial discussion, and I’ll close with our current outlook.

Last quarter we said that we expected our second quarter revenues to be down between 5% and 10% from the first quarter. We came in at $1.2 billion, down 7% sequentially at the midpoint of where we thought.

As compared to the same quarter a year ago revenue was down 20%, driven primarily by weakness in our upstream sector due to the much publicized lower activity levels. However our U.S. upstream business performed better than the rig count. We attribute this impart to market share gains.

In addition, our midstream and downstream businesses continue to perform very well during the quarter. Demonstrating the benefit of our balance and sector exposure. Adjusted net income available to common stockholders for the quarter was $23 million, or $0.22 per diluted share, compared to $0.42 per diluted share a year ago.

Adjusted gross margin declined by 100 basis points sequentially and 140 basis points quarter-over-quarter. There are combination of factors that contributed to the decline, including the higher mix of direct sales attributable to lower margin project sales and also pricing pressure as a result of the industry slowdown.

We expect that project sales will remain a larger part of our sales mix, as midstream and downstream projects continue. The business generated $161 million of cash from operations this quarter and $277 million so far this year. With that, we are raising our expected range of cash flow from operations.

We now expect to generate $400 million to $475 million of cash from operations this year. Our priority remains to pay down debt, with free cash flow and we would expect our debt balance to be in the $680 million to $750 million range by the end of the year. This quarter we also reduced debt with the proceeds from our preferred stock offering.

One of the benefits of the preferred stock offering was the ability to better position the company to take advantage of any potential opportunities that might arise, both organic and potential acquisitions.

The strength of the US dollar is still a headwind to revenue as we experience an impact of $41 million in the second quarter and $88 million for the first half of the year. We expect the annual impact to be in excess of $120 million. In this challenging environment we continue to focus on what we can control.

From a cost management perspective we took additional cost saving measures in the second quarter, by reducing head count by approximately 180. This is higher than the estimate of 100 that we discussed on our last call. Since our peak employment in 2014, we have reduced our head count by approximately 680.

We expect our new SG&A run rate to be about $149 million to $152 million per quarter for the remainder of 2015, which includes the benefit from the most recent cost saving measures. The most important thing was in our control is our focus on serving our customers.

We continue to develop our customer relationships and demonstrate value by providing excellent service, which intern leads to market share gain. This will position us to be a stronger when the market recovers.

Most recently we announced some extension of our United States and European MRO Valve contract with SABIC to include all 22 of their petrochemical facilities in Saudi Arabia. We estimate this could yield $5 million to $10 million in revenue annually in the first couple of years, with the potential increase over the time to $20 million per year.

This is another example of leveraging relationships with customers from one geography into another, as well as the benefits of our international expansion. We have also had success in the gas utility space, which is reported in our midstream sector.

We talked about several new wins last quarter and this quarter yielded the highest revenue for that sub sector in the company’s history. Another recent market share gain includes an agreement to set a line pipe to one of our largest customers in the Gulf of Mexico.

While we currently provide them with PVF onshore, adding to Gulf of Mexico is a new geography for us. We also recently agreed to renew our contract with one of our largest downstream and midstream customers for an additional five years. This contract renew includes both projects and MRO activity.

We hope to make a formal announcement and provide more specifics on both of these in the near future, as well as a new international win. Finally, we continue to evaluate our footprint and make adjustments as necessary. Last quarter we consolidated or closed six branches in Canada and the United States.

This quarter we’ve closed an additional eight branches. Six in the United States and two in Australia. We continually review our infrastructure to determine where it make sense to open, close, expand or consolidate our branches. Our hub and spoke replenishment model was designed to respond to changing market conditions.

So with that let me turn the call over to Jim to review our financial results..

Thanks, Andrew and good morning, everyone. Total revenues for the second quarter of 2015 were $1.198 billion, which were down 20% from the second quarter of last year, and 7% lower sequentially. Starting with revenues by segment, U.S. revenues were $956 million in the second quarter, down $159 million or 14% from the second quarter of last year.

The decline was driven by weak upstream sector as the midstream and the downstream sectors were up slightly. The U.S. upstream business was down 36%, due to lower oil and gas activity. However this was favorable relative to the market as the average U.S. rig count was down 51% over the same period.

We believe some of this outperformance is due to market share gains. Sequentially, the U.S. segment sales were down from the first quarter by $60 million or 2%, strong sales in midstream partially offset a 17% decline in the U.S. upstream business, which was half of the 35% sequential reduction in the U.S. rig count.

Canadian revenues were $78 million in the second quarter, down $72 million or 48% from the second quarter of last year. Due primarily to reduced customer spending in the upstream sector, as activity has declined year-over-year. $10 million of the decline was the impact from a weaker Canadian dollar.

Sequentially the Canadian segment sales were down 42 million or 35% from the first quarter of 2015. The Canadian upstream sales were down 42%, an improvement over the Canadian rig count, which was down 68% over the prior quarter due to the seasonal break up period.

Internationally, second quarter sales were $164 million down $67 million or 29% from a year ago. The decline resulted from weaker foreign currencies of $31 million and lower customer spending in the UK, Norway and Australia partially offset by the acquisitions of MSD and Hypteck, which added $10 million in incremental revenue.

Sequentially, the international segment was down $37 million or 18% from the first quarter, primarily due to lower activity in Norway, Australia and the UK. And turning to our results based on end-market sector. Second quarter sales in the upstream sector decreased $265 million or 38% from the same quarter last year to $435 million.

This decrease was driven by lower oil and gas activity across all our segments. The biggest impact was in the U.S. where our upstream business declined to $163 million or 36% as discussed earlier. Canada declined $65 million or 55%, including the impact of foreign currency which was $9 million.

International declined $37 million or 30%, including the impact of foreign currency which was $15 million. Midstream sector sales were $419 million in second quarter of 2015, nearly flat with the same quarter in 2014. The gas utility sector was a bright spot and was higher by $43 million or 30% from the same quarter last year.

The increase in gas utilities is due to our strong market position with these customers, as they continue to execute their pipeline integrity projects. This was offset by the transmissions sub sector, which was down $45 million or 17%, due the impact on gathering systems from lower upstream activity.

In the downstream sector, second quarter 2015 revenues decreased by $33 million or 9% to $345 million as compared to the second quarter 2014. International downstream was off $35 million or 29% of which $16 million or just over half was the result of weaker foreign currencies.

The remaining decline was due to continued weakness in the Australian economy and Europe. The U.S. downstream was up slightly despite the negative impact of less spring turnarounds as a result of the strikes at 13 U.S. refineries in the front part of the year.

Now turning to revenue by product class, sales from our energy carbon steel tubular products were $321 million during the second quarter of 2015, with line pipe sales of $242 million and OCTG sales of $79 million.

Overall sales from this product class decreased 24% in the second quarter from the same quarter year ago, including a $55 million or 41% decrease in OCTG and the $46 million or 16% decrease in line pipe sales. We had experienced some deflation in this product group however, not as much as reflected in the public indices.

For the second quarter of 2015, 58% of our line pipe sales were within our midstream sector, with the reminder about equally weighted between upstream and downstream. Sales of valves, fittings and flanges and other products were $877 million in the second quarter, an 18% decrease from the second quarter of 2014.

Sales of valves were down 19% during the quarter. For the second quarter of 2015, 38% of our valve sales were within our upstream sector and 41% in the downstream, with the remainder in the midstream. Sales from fittings and flanges were down 19% and other products were down 16% also from the second quarter of last year.

Now turning to margins, the gross profit percentage declined 10 basis points to 17.2% in the second quarter of 2015 from 17.3$ in the second quarter of last year. A LIFO benefit of $15 million was recorded in the second quarter of 2015, as compared to an expense of $800,000 in the second quarter 2014.

Sequentially, gross profit improved 20 basis points from the first quarter of 2015, which included a LIFO benefit of $200,000.

Our adjusted gross profit percentage, which is gross profit plus depreciation and amortization, the amortization of intangible and then plus or minus the impact of LIFO inventory costing decreased to 17.6% in the second quarter of 2015 from 19% in the second quarter of 2014.

This decline was a result of higher relative direct sales, related to additional lower margin project work and pricing pressure from customers. On a sequential basis, the second quarter of 2015 adjusted gross profit margin percentage is 100 basis points lower than the first quarter of 2015. The decrease was due to the same factors described above.

SG&A cost for the second quarter of 2015 were $159 million or 13.3% of sales a decrease of $26 million or 14% from $185 million of second quarter of 2014. We incurred pre-tax severance and restructuring charges of $6.9 million in the second quarter related to cost savings initiatives compared to $5 million in the same quarter of last year.

SG&A in the second quarter of 2015 also includes $2.6 million of incremental SG&A related to our MSD and Hypteck acquisitions.

Taking both the severance charge and acquisitions into account, SG&A decreased approximately $31 million the majority of which was a result of cost reduction initiatives $10 million of the decrease was due to the weakening for foreign currencies.

Operating income for the second quarter of 2015 was $47 million, which was $27 million lower than the same quarter a year ago. The operating margin was 3.9% for the second quarter of 2015, which was 100 basis points lower than the last year.

Our interest expense totaled $13.7 million the second quarter of 2015, which was lower than the $15.4 million in the second quarter of 2014, due to the lower average debt balances. Adjusted EBITDA was down 41% to $63 million in the second quarter of 2015 versus $106 million a year ago. Adjusted EBITDA margins decreased to 5.3% from 7.1% a year ago.

Year-to-date, adjusted EBITDA margin was 6%, reflecting segment adjusted EBITDA margin of 6.4% for the U.S., 5.2% for Canada and 4.4% for international. Our effective tax rate was 44.6% in the second quarter of 2015 versus 34.6% in the same quarter of last year.

During the quarter, we've raised the expected tax rate for the full year of 2015 to 36% from the 31% we estimated in the first quarter of this year. The higher expected tax rate is due to lower forecasted international profits, which are generally taxed at rates lower than the U.S.

tax rate as well as larger than expected losses in jurisdiction where no tax benefit is recognized. Our operations generated cash of $161 million in the second quarter of 2015 and our working capital at June 30, 2015 was $1.237 billion, $201 million less than it was at December 31, 2014 reflecting of lower activity levels.

Our total debt outstanding at June 30, 2015 was $848 million, compared to $1.373 billion at March 2015 for a decrease of 38%. The proceeds from our previously mentioned preferred stock offering, combined with cash generated during the quarter allowed us to reduce debt by $525 million during the quarter.

Our leverage ratio at June 2015 was 2.1 times and our excess availability as defined in our global ABL agreement was $544 million, indicating we are well positioned we believe to weather the current down term and position us for eventual recovery.

Cash used in investing activities totaled $8 million in the second quarter primarily from capital expenditures. There has been no change to our expectations around capital expenditure since last quarter. We expect to spend $43 million this year.

The increase over historical levels relates to the implementation of a new ERP system in some of our regions in the international segment. And now I’ll turn it back to Andrew for his closing comments..

Thanks, Jim. Some are calling the bottom of the cycle now based on the apparent stabilization of U.S. rig activity. However, in our view we haven’t seen U.S. oil production come off meaningfully or demand growing up to have much impact on oil prices for the foreseeable future.

As a result of recent fall in West Texas and immediate to below $50, we are of the view that the oil and gas market bounces along the bottom here through the end 2015. Given the current conditions we expect the third quarter sales to be down 7% to 12% from the second quarter.

We expect the year-over-year changes in the upstream to be a high 30% decline. The midstream to be a high single-digit decline and the down string to be a mid-single digit decline. When taking together we expect full year 2015 sales to be down 20% to 25% from 2014.

While we expect our gas utility business will continue to grow and transmission projects will continue to progress. We think the midstream’s best quarter was the second quarter.

Downstream has been affected somewhat more than we had anticipated as many of the refineries are just now recertifying their crews and may delay some fall turnaround into next string as well as continued weakness in Australia and Europe.

Our backlog was $768 million at the end of the second quarter this year, which is 32% less than it was same time last year and 16% less than the first quarter. From an adjusted gross margin perspective, we expect the things we saw on the second quarter to continue into the third quarter.

Namely more direct project work as a percentage of total revenues, which will put some downward pressure on margins the rest of the year. Pricing pressure across all product groups are expected to remain as evidenced by recent customer announcements on further cost cutting measures.

All in, we expect adjusted gross profit margins to be at the low to mid 17% level for the remainder of the year. So far this year has played as we expected. We delivered a solid first half result given all the volatility in our customer spending and the significant reduction in the U.S. rig count.

I am proud of our management and employees for what they’ve accomplished so far this year. I’d also like to thank our customers for the continued trust in MRC global. In a challenging market we will continue to stay focused on what we control depending and taking market shares by taking care of our customers.

Generating cash from operations, deleveraging the balance sheet and appropriately managing our cost structure. So with that we’ll now take your questions.

Operator?.

Thank you. [Operator Instructions] Our first question is from the line of Sean Meakim with JP Morgan. Please proceed with your question..

Good morning, guys..

Good morning, Sean..

So Andy if upstream activities flat lines from here for say a couple of more quarters into 2016, do you think your working capital would start to stabilized at that point or do you think there is more burn through your inventory and generated more cash in ‘16?.

Yeah. Sean we’re still in the middle of reducing our working capital to adjust our lower rig count. So will still see lowering of inventory in the back half and also some additional collection on the receivable side.

So the additional cash flow from ops that we’re forecasting in the second half will come, majority from inventory reductions and some from receivables..

Okay, fair enough.

And then I was hoping if you could give us a little more color on the weakness we’re seeing in the international on the downstream side, particularly you mentioned Europe and Australia and how that could look going forward end of this year and into next?.

Yeah, Sean well the biggest impact is what Jim went through with the FX is impacting us a lot internationally. There is some softness in Europe refining that’s impacting our downstream; the big impact in Australia is mining, mining remains very slow with the slowdown in China.

And so those are the two things, two headwinds we’re still going to face in the back half of the year..

But you characterize this to be more FX driven than fundamentals on the demand side?.

Yeah, I mean the mining slowdown is real fundamentals, but the bigger impact is FX..

Okay, fair enough thank you..

Our next question is coming from Matt Duncan from Stephens. Please go ahead with your question..

Good morning, guys..

Good morning, Matt..

Andy can you give us some idea of what the month-to-month sales trends have looked like this year sort of all the way through July are we still seeing sequential downticks and how much of that is just sort of rolling through some of the project activity versus some of the other factors maybe a lag in your business first rig count things like that?.

Yeah Matt, it’s been pretty steady and as we’ve said second quarter came in right where we thought at the midpoint.

MRO spending in general has been down with our customer pulling back on their spending and then we’ve been working through a nice backlog of midstream and downstream projects and that’s why projects are a little bigger percentage of our revenue mix than MRO historically. So you’re seeing some impact from that.

But the second quarter, I mean June was a very good strong finish for the quarter. We had a good second quarter and then July results are right on target with what we’re guiding here for the third quarter. You know very well normally our third quarter is our best quarter of the year during a normal year. This of course is not a normal year.

So while we do see some construction projects continuing not like last year where we ramped up to $1.6 billion of course it’s not going to be that kind of year this year. And we do think we are at the bottom on rig count. So we just really it’s I think third quarter is playing out like we expect..

Okay.

And then my second question is just on M&A, in the wake of the preferred offering you’ve obviously paid debt down a good bit, it looks like you’re going to be in a position to consider acquisitions here as the market that was bottoming and hopefully targets are a little more willing to start being realistic on what they may be worth, what are you thinking you guys are going to do on the M&A front, do you want to look at anything larger is it really more small bolt-on type deal just talk to us about how you plan to use the balance sheet here?.

Yeah Matt, we’re very pleased with the steps we’ve taken, the working capital reductions come with the slowdown in business, we’ve developed a strong management team to manage through those situations. The preferred stock offering was a step change in deleveraging. We like the position we’re at $815 million of debt is our lowest level since 2007.

So we’re in a really strong position given the end markets are weak right now. To invest organically we’re doing some additional investments in facilities to position us for when things turnaround that’s the highest priority for us. I wouldn’t expect any acquisitions on the M&A front in the third quarter or early fourth quarter.

I think the emphasis will be on a couple of small bolt-on primarily expanding our capabilities with a valve focus and in international.

But I wouldn’t expect any major acquisitions in short-term we’re going to continue to work to pay down debt and we’re going to be in a great position at the end of 2015 going into ‘16 to be more aggressive if we see the market turning back on acquisitions in the first half of ‘16..

Okay, thanks Andy..

Our next question is from the line of David Manthey with Robert W Baird. Please go ahead with your questions..

Hi good morning, guys..

Good morning, Dave..

First question is on your outlook as it relates to the end of this year and then into 2016 I think your original budgeting for 2015 was based on $50 or $60 plus oil at 1,000 rigs and you also had mentioned that you thought that 2016 might be a mirror image of 2015 that is weak at the beginning and then accelerating in the back-end.

And Andy you mentioned bouncing along the bottom, are you thinking sort of a lower for longer scenario or does that mirror image scenario still on the table?.

Well Dave, the volatility in our end market is difficult, as you know to predict right now. That certainly was our view in the first half of the year that we’d see a pickup in the back half of ‘16 and it would mirror ‘15’s results.

But right now I think there is some more uncertainty; I mean we didn’t think we’d be down here to $45 to $46 oil in August. And so with our sequential guidance we see the third quarter being around $1.050 billion to 1.1 billion in revenue then the fourth quarter on that similar run rate.

So it’s really too early to predict much on the second half of ‘16..

Okay, that make sense. And then second in terms of the drilled but uncompleted wells out there.

Is it possible that you could see better upstream trends even before the rig count loss up materially as those wells are completed maybe not this year, but into 2016?.

Yeah, Dave. A big part of our upstream business is the well hookup and we do very well in that environment. So in the short-term would be an impact of course by the lower rig count. Our well hookups usually lag drops in the rig count by a quarter.

So there is a timing issue there and then we are seeing a lot of wells be added to the drilled uncompleted category and certainly as things turned back around when we see some improvement in pricing, those would be the first to be brought on production which will give us a nice pick up in well hookups.

So yes, I think we will see an upstream pick there with maybe a marginal increase in rig count just as our customers bring those wells back on production quicker..

Got it, alright. Thanks a lot, Andy..

Thanks, Dave..

Our next question is from the line of Ryan Merkel of William Blair. Please go ahead with your question..

Thanks, good morning everyone..

Ryan, good morning..

So can you talk a little bit more about line pipe pricing? I think you mentioned that your deflation is a little bit less than public indices, so maybe just talk about that a bit. And then how do you think line pipe prices will be down this year? I think last quarter the estimate was maybe 10%..

Yeah, Ryan. There has been some more deflation given the slowdown in our end markets. We started out the year thinking the OCTG would be down around 20% and line pipe around 10% in the spot market, which we don’t play a lot in OCTG spot market we have the programs and we buy into stock and serve those programs with our core customers.

So we don’t see as much impact as the spot pricing decline where it’s just a bid and buy on the daily basis. But we have seen the spot prices on OCTG come down roughly 23% from the peak and we’ve seeing line pipe prices now come down 15%. So they are both around $1,400 a ton, which is a little bit more than we thought.

So certainly part of our guidance down on the second half of the year is the impact of some more pricing pressure and more deflationary impact on line pipe in back half. We have a good backlog of the larger diameter midstream projects.

We are seeing the most pressure on the small diameter flow line type application especially in upstream where you see the most pricing pressure..

Okay, that’s helpful.

And then pretty good results I think overall in midstream and downstream, have you seen project delays in those two markets?.

In the U.S. most of our midstream large diameter work of gas or NGL related so we haven’t seen that, that’s been good for us, the real positive along with our gas utility business. The chemical projects we’ve had going and we’ve talked about a couple quarters, they are doing really well.

So I think the midstream infrastructure spend you are seeing despite the upstream slowdown of activity you’ve seen the investment being taken place on the infrastructure where we had seen projects delay is in the international and we’ve seen, definitely seen projects delay in the heavy oil, oil sands in region of Canada, which we I think previously said that we thought was going to be the highest impact on us..

Right. Okay, thanks a lot. I’ll get back in line..

Thank you..

Our next question coming from the line of Jeff Hammond with KeyBanc. Please go ahead with your question..

Hi guys this is James filling in for Jeff.

So could we just talk about the LIFO benefit and how we should be thinking about that for the remainder of the year, just based on what we saw this past quarter?.

Sure James as you know we had $15 million both in the quarter and year-to-date benefit and we would expect based on our methodology that we’d see another $15 million of benefit at the back half of the year. So total benefit of about $30 million for the entire year..

Got it.

And then just you guys obviously pointed out that you hit a record level in terms of utility volume that you’ve seen in midstream, could you just talk about what the function is driving your market share gains and the visibility that you have there in terms of maybe looking into early 2016, how strong is that visibility just any color there would be helpful?.

Yeah James that’s been a focus of our business development efforts for a number of years, we have very strong position in gas utilities. So that’s nice source atmos, Atlantic Gas, Pacific Gas and Electric. So a lot more gas products, its gas infrastructure, its gas replacement lines gas meters both residential and commercial.

So not directly tied to the impact we are seeing in oil and the end market there. So we like that balance that along with chemicals is really driven by gas pricing and demand and we have a very good backlog and very good insight to that and as we said the second quarter was a record for the company in the gas utility sector.

So it still should be a very bright spot even at $280 gas some improvement in that as we go into the fall pricing we should be in good shape in gas utilities going into next year..

Got it, thanks.

And just one thing that I think I missed at the end, you talked about adjusted gross margin how they should trend the remainder of the year what was that comment?.

Yeah, it was low to mid-17% for the balance of the year..

Got it, thank you very much. I will get back in queue..

Thank you.

Our next question is from the line of [indiscernible] with Raymond James. Please go ahead with your question..

Good morning, thanks for taking my questions..

Good morning, Josh..

What sort of color or commentary are you hearing from your customers on their spending plans for 2016?.

Yeah, Josh it’s usually - it’s little early for that. I mean, of course everyone is aware that Chevron, Shell and ConocoPhillips, Exxon Mobile are making some midyear adjustments to this year’s CapEx budgets due to the commodity pricing environment.

But I am seeing a lot of color on ‘16 and normally comes in November-December time frame and that of course a big driver for our outlook on the business when they publish their CapEx plans..

And could you spell up specifically where you expect to have inventories by the end of this year?.

I would in general terms expect to be down $115 million by the end of the year from the end of the second quarter..

And to clarify your guidance for the second half are you assuming further pricing pressure in the pipe products or are you assuming that’s flat from here?.

Well I think we are near at the bottom end and deflation on pricing, but we haven’t seen in the previous quarters you will get the full impact in the third and Fourth quarter from this new lower deflationary pricing on carbon pipe.

So it’s pretty much we know where the price is, our volume have been still strong in some sizes, but we see the deflationary pricing pressure in the back half and that’s included in our guidance..

Thanks good luck with third quarter..

Thank you..

[Operator Instructions]. Our next question is from the line of Doug Becker with Bank of America. Please go ahead with your questions..

Thanks.

Andy, how much visibility do you have to the downstream segment into the third quarter just it seems like very volatile area right now margins are high right now some are expecting a pullback which creates questions into turnaround season, so just want a little more color on what type of visibility that you have there and how that might being different if margin moves?.

Yeah Doug, that’s probably one of the bigger variables we have. Essentially the large majority of the spring turnarounds because of the strike environment got pushed into the fall. So we know some work, we should have a good turnaround season in the fall.

We don’t know if it’s going to be the spring on top of the fall or some of the normal fall turnaround get pushed into 2016. So we have some good visibility from a couple of our major customers on the [indiscernible] and there are some large turnarounds going to happen in the third quarter and into the beginning of the fourth quarter.

So that’s a positive that has if you look at the last two quarters of refining utilization it’s been a couple of percent higher than normal as they basically ran the plants and refineries at peak capacity without the turnaround activity.

So I would think that that’s going to have some slowing down in the third and fourth quarter especially as the turnaround activity gets done. So we have good visibility on big orders on some of the turnaround. So it’s hard to predict whether it’s going to be very strong, but we have a good inside of that, chemical plants is mostly projects for us.

And of course we have a visibility of those projects through the third and fourth quarter..

That’s definitely encouraging. Switching gears the ERP implementation that always scars me but you lowering our SG&A guidance. So it sounds like that’s going well just maybe an update on how that’s progressing how much longer there might be a drag on cost in the short-term and the benefits longer term..

Yeah, Jim?.

Yeah I was going to say Doug; I mean we’ve just gotten started with that we’re about 8 to 10 weeks into it. As you know we’re going to do the implementation and then carry over in the Asia Pacific region next in 2016 and most likely in May on the schedule. So it’s going well now.

We’ve started to capitalize some cost in the second quarter and we’ll capitalize more of those costs in the third and fourth quarter..

And Doug I just add to Jim’s comments, we see tremendous advantage being on one platform in the North American markets, with all the acquisitions we’ve done internationally the goal was to get our international business on a single platform and also to take what we believe is some of the best functionality that we utilize in North America and then put it into play in international to improve margins there.

And so 80%, so roughly 80% of our revenues in Asia and Middle East region was already on SAP. So it’s a conversion that is ongoing as Jim said. And we expect to see good results from that.

And then, we expect to see that as part of our improved along with a lower cost structure part of our improvement in margins in international over the next couple of years..

Thank you..

Thank you. Our next question is from the line of William Bremer with Maxim. Please go ahead with your question..

Good morning, Andy good morning, Jim..

Good morning, Bill..

Just want to get a sense from your suppliers.

Have they asked you to potentially take more on during this time not more on in terms of inventory, but to perform more on their behalf?.

No Bill, I would say it’s been pretty normal interaction with the suppliers. I mean one on the positive side one of the big changes we’ve seen this cycle is the actions by the steel mills and a very large percentage of steel mill capacity especially in the U.S.

is ideal at this point, which as we think about ‘16 is a real positive because as we work through inventory reductions and distribution in the United States especially you don’t have a lot of additional capacity coming out on spec. So we will be in a position with our inventory reductions to be placing orders towards the end of this year.

And with today’s environment at a good cost level. So we see part of our deleveraging and part of our destocking has positioned us to buy as we see going into ‘16. And so that’s the steel mill I think it shows a lot of discipline on their part to not over supply the market. And then downstream plants stainless has been just normal operations..

Okay, good to hear.

And then possibly can you give us a little bit more granularity on the international markets, maybe the stream acquisition and how you’re coping with all that there and just some of the maybe the leverage you’re able to pull in this environment?.

Yeah I mean two areas where we have streamline our cost and you’ll see more streamline in international as we work following the acquisitions free we were onto work to get more operating leverage. So we’re reducing in Australia, we’ve reduced headcount in Western Europe and Norway. So that’s working as per our plan.

In Norway, they were still very keen on the stream acquisition even the Gulf for Mexico win that we talked about earlier in our prepared remarks is the part of our strategy to focus on offshore platforms and the PVS.

So we’re seeing a much bigger presence in that market that we haven’t participated in, in the Gulf most recently and also in the UK and Norway. So we announced already one nice win on Yule Hans Fair Drip [ph] project and we expect in the third quarter to have another major international win.

So we’re very keen on our position, we built our platform, we’re finished the consolidation in Singapore with our latest acquisition there MSD engineering and we’ve opened up our South Korea warehouse operation. So the few critical delivery points that we want to have in place we now have in place.

So you will see us focused a lot on streamlining operating cost and Jim mentioned the EBITDA were at year-to-date a 4.4% international EBITDA and we see that improving as we continue to optimize the operating cost..

Excellent, thank you. I look forward to reading about the win..

Thank you. At this time I will turn the floor back to Monika Broughton for concluding comments..

All thank you for your interest in MRC Global. This concludes our call. Have a great day..

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