MRC Global recently announced its sales were $942 million for the third quarter of 2019, which was 4% lower than the second quarter of 2019 and 12% lower than the third quarter of 2018.

The sequential decline was driven by a decrease in the midstream sector, partially offset by a slight increase in the upstream and downstream sectors, MRC noted. As compared to the third quarter of 2018, sales decreased across all segments and end-markets.

Net income attributable to common stockholders for the third quarter of 2019 was $15 million, or $0.18 per diluted share, as compared to $18 million, or $0.20 per diluted share in the third quarter of 2018. The third quarter of 2019 included after-tax severance charges of $4 million, or $0.05 per diluted share.

"We are pleased to see progress from our strategy to increase margins, as we achieved 20% adjusted gross profit this quarter,” MRC Global President and CEO Andrew Lane said. “Revenue in the third quarter, however, was lower due to progressively weaker market conditions and unusually low customer spending patterns. We remain focused on maximizing shareholder returns throughout the cycle as we repurchased $13 million of our stock during the third quarter. So far in 2019, we have generated $134 million of cash from operations, reduced debt, improved working capital efficiency and executed cost reduction initiatives, including headcount reductions of 180 in the third quarter. This first phase of cost reductions is expected to yield annual savings of approximately $12 million, and we have more initiatives underway. In total, our headcount is down 230 since the end of 2018.  In periods of slower growth, our business continues to generate cash, and we expect to generate at least $200 million of cash from operations in 2019." 

MRC Global's third quarter 2019 gross profit was $174 million, or 18.5% of sales, as compared to gross profit of $172 million, or 16.1% of sales, in the third quarter of 2018. Gross profit for the third quarter of 2019 and 2018 reflects income of $2 million and expense of $26 million, respectively, in cost of sales relating to the use of the last-in, first out (LIFO) method of inventory cost accounting. The improvement in gross profit percent was attributable primarily to the lower LIFO expense.

Selling, general and administrative expenses were $137 million, or 14.5% of sales, for the third quarter of 2019 compared to $140 million, or 13.1% of sales, for the same period of 2018. SG&A expenses for the third quarter of 2019 included $5 million of pre-tax severance charges.

Adjusted EBITDA was $62 million in the third quarter of 2019 compared to $80 million for the same period in 2018. Please refer to the reconciliation of non-GAAP measures (adjusted gross profit and adjusted EBITDA) to GAAP measures (gross profit and net income) in this release.

Sales by segment

U.S. sales in the third quarter of 2019 were $763 million, down $96 million, or 11%, from the same quarter in 2018. Midstream declined $50 million, or 12%, due to lower transmission and gathering activity. Upstream declined $24 million, or 11%, as a result of increased capital discipline by our customers. Downstream declined by $22 million, or 9%, due to non-recurring project work that resulted in a $20 million decrease in sales.

Canadian sales in the third quarter of 2019 were $57 million, down $21 million, or 27%, from the same quarter in 2018 driven by the upstream sector, which continues to be negatively impacted by low Canadian oil prices and government-imposed production limits.

International sales in the third quarter of 2019 were $122 million, down $12 million, or 9%, from the same period in 2018 reflecting the conclusion of a major upstream project in Kazakhstan, as well as, the impact of weaker foreign currencies relative to the U.S. dollar, which unfavorably impacted sales by $6 million. Excluding the impact of the project and weaker foreign currencies, sales increased $23 million, or 23%, due to improving market conditions, particularly in Norway and the United Kingdom.

Sales by sector

Upstream sales in the third quarter of 2019 decreased 15% from the third quarter of 2018 to $287 million, or 31% of total sales. The decrease in upstream sales was across all geographic segments, as described above.

Midstream sales in the third quarter of 2019 were $370 million, or 39% of total sales, down $52 million, or 12%, from the third quarter of 2018. Sales to gas utility customers were flat for the quarter, while sales to transmission and gathering customers were down 26% over the same quarter in 2018. Gas utility sales are up 7% for the first nine months of 2019 compared to the same period last year as MRC Global continues to grow its share in this market, it explained.

Downstream sales in the third quarter of 2019 were $285 million, or 30% of total sales, down $26 million, or 8%, from the third quarter of 2018 due primarily to the U.S. segment as described above.

Balance sheet

Cash balances were $25 million at September 30, 2019. Debt, net of cash, was $602 million and excess availability under our asset-based lending facility was $477 million as of September 30, 2019. Cash provided by operations was $126 million in the third quarter of 2019 bringing cash provided by operations for the first nine months of 2019 to $134 million. MRC Global's liquidity position of $502 million is sufficient to support the business and capital needs of the company.

Share repurchase programs

In October 2018, the board of directors authorized a share repurchase program for common stock of up to $150 million. As previously reported, during the third quarter of 2019, the Company purchased $13 million of its common stock at an average price of $13.59 per share. There is $12 million remaining available under the current authorization. This program is scheduled to expire on December 31, 2019. 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.

Since 2015, the company has repurchased $363 million or 23.4 million shares at an average price of $15.49 per share. The outstanding share count as of September 30, 2019 was 82.2 million shares.