MRC Global Inc. (NYSE: MRC), the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy industry, announced its first quarter 2015 results.

The company's sales were $1.292 billion for the first quarter of 2015, which were 1% lower than the first quarter of 2014 and 14.5% lower than the fourth quarter of 2014. As compared to the first quarter of 2014, sales were negatively impacted by $46.1 million in the first quarter of 2015 due to weaker foreign currencies relative to the U.S. dollar.  Net income for the first quarter of 2015 was $29.1 million, or $0.28 per diluted share, compared to a first quarter 2014 net income of $23.5 million, or $0.23 per diluted share.

Andrew R. Lane, MRC Global's chairman, president and chief executive officer, stated, "The first quarter results were in line with our expectations and our plan remains unchanged. We will continue to focus on generating cash, reducing debt and driving gains in market share. We generated $116 million cash flow from operations during the first quarter and reduced net debt by $105 million. We expect to generate $350-$450 million in cash from operations this year. While upstream activity has declined, the actions we took to reduce costs have positioned us well and our Adjusted EBITDA margins improved to 6.7% in the first quarter of 2015."

MRC Global's first quarter 2015 gross profit of $219.9 million, or 17.0% of sales, declined from first quarter 2014 gross profit of $232.1 million, or 17.8% of sales. The 80 basis point decline was a result of the impact of product mix changes and margin pressure in certain product categories related to the decline in oil prices. Gross profit for the first quarter 2015 and 2014 reflected a benefit of $0.2 million and a charge of $1.3 million, respectively, in cost of sales relating to the use of the LIFO method of inventory cost accounting.

Selling, general and administrative ("SG&A") expenses were $159.4 million, or 12.3% of sales, for the first quarter of 2015 compared to $171.4 million, or 13.1% of sales, for the same period of 2014.  SG&A for the first quarter of 2015 included $1.8 million of severance and related charges resulting from cost reduction efforts as well as $2.9 million of incremental expenses related to our MSD Engineering Pte. Limited ("MSD") and Hypteck AS ("Hypteck") acquisitions. No such severance charges occurred during the first quarter of 2014.

Adjusted EBITDA was $86.7 million for the first quarter of 2015 compared to $84.0 million for the same period in 2014.  Please refer to the reconciliation of adjusted EBITDA (a non-GAAP measure) to net income (a GAAP measure) in this release.

Sales by Segment

U.S. sales in the first quarter of 2015 were $971.8 million, an increase of 2.5% from the same quarter in 2014. The increase was attributable to increased midstream sales, including organic growth of 21.3%. Growth in the midstream sector was offset by reduced customer spending in the upstream sector. 

Canadian sales in the first quarter of 2015 were $119.4 million, down 28.2% from the same quarter in 2014. The decrease in Canadian sales reflected a $53 million decrease in the upstream business primarily due to a decline in customer spending. Approximately $14.7 million, or 31% of the total decline, was a result of the weaker Canadian dollar relative to the U.S. dollar.  

International sales in the first quarter of 2015 were $201.1 million, an increase of 5.0% from the same period in 2014. The increase was due primarily to the acquisitions of MSD and Hypteck, which added $15.6 million of revenue in the first quarter of 2015. Excluding the $31.4 million impact from weaker foreign currencies, international sales experienced organic growth of approximately 13% in the first quarter of 2015 compared to first quarter of 2014. 

Sales by Sector

Upstream sales in the first quarter of 2015 decreased 13.9% from the first quarter of 2014 to $546.7 million, or 42% of total sales. Excluding acquisitions, the decline in upstream sales was across all segments, and the result of reduced customer spending.

Midstream sales in the first quarter of 2015 increased 23.5% from the first quarter of 2014 to $379.6 million, or 30% of total sales. Sales to both transmission and gas utility customers were up by 35.5% and 7.0%, respectively, over a weak first quarter of 2014. Higher midstream sales were driven by an increase in line pipe sales.

Downstream sales in the first quarter of 2015 increased 0.7% from the first quarter of 2014 to $366.0 million, or 28% of total sales. The downstream sector experienced modest growth in the U.S. and benefitted from the recent acquisitions.

Balance Sheet

Debt outstanding was $1.373 billion at March 31, 2015, a decrease of $80.4 million during the first quarter of 2015. Cash provided by operations was $115.6 million during the first quarter of 2015 primarily due to a reduction in accounts receivable. In addition, cash balances grew to $49.3 million at March 31, 2015 from $25.1 million at the end of 2014.
 

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Headquartered in Houston, Texas, MRC Global, a Fortune 500 company, is the largest global distributor, based on sales, of pipe, valves and fittings (PVF) and related products and services to the energy industry and supplies these products and services across each of the upstream, midstream and downstream sectors. More information about MRC Global can be found on www.mrcglobal.com.