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Amerino will begin by providing an update on our business. Susan will then detail our results. And before we take your questions, Amerino will highlight our OneTEAM progress and market outlook. Now I'd like to turn the call over to Amerino.

Amerino?

Amerino Gatti -- Chief Executive Officer

Thank you, Don, and good morning, everyone. We appreciate you joining us today. Consolidated first-quarter revenues were lower than expected at $270 million, a decrease of approximately 11% from $302 million in the prior-year period. We experienced market softness in both inspection and heat treating, and the mechanical services segments while quest integrity continued to strong growth.

Revenue decreased 16% and 9%, respectively, in IHT and MS segment. These declines were partially offset by higher activity levels in quest integrity that generated a 16% year-over-year improvement in revenue. In 2019, volumes were negatively imp -- in Q1 of 2019, volumes were negatively impacted by weather disruptions across Canada and parts of the U.S., project delays resulting from the U.S. government shutdown, certain large non-recurrent projects, and discontinued businesses in our IHT and MS segments.

The impact was deepened further due to a depressed Canadian market. Q1 2018 sets a tough revenue comparison due to pent-up demand from hurricane Harvey deferrals, which resulted in our strongest Q1 since our acquisitions. Despite these lower year-over-year revenues gross margins remained virtually flat driven by strong execution in our businesses. First-quarter total SG&A decreased $7.4 million or 8.2% from the prior-year period.

It also decreased by $7.8 million or 8.7% from the fourth quarter of 2018. The sequential and year-over-year reduction in SGA further reflects a key component of our OneTEAM program, showing the successful and ongoing implementation of our cost reduction initiatives. We remain focused on actively managing costs, and investing in projects with the greatest returns. During the quarter, we expect it to be a net borrower on our credit facility.

However, through disciplined working capital management, we reduced our debt for the third consecutive quarter. We generated positive free cash flow, which represents an improvement of $4.4 million from the prior-year period. We also repaid approximately $4 million in outstanding debt. Looking ahead, we expect to generate more than $30 million of free cash flow in 2019, doubling the $15 million generated last year.

Now, I will review our quarterly performance by segment. The inspection and heat treating segment reported first-quarter 2019 revenues of $127 million, a 16% decrease from $151 million in the prior-year period. First-quarter adjusted EBITDA was $6.3 million, down from $11.6 million in the first quarter of 2018. IHT's year-over-year revenue decline was primarily driven by one of the largest inspection refinery projects in the company's history, which did not repeat this quarter, as well as sustained softness in the Canadian market, and the discontinuation of certain underperforming businesses in the second half of 2018.

As part of our transformation program, we continue to proactively evaluate operations that do not meet our internal hurdle rates, and take appropriate actions. The mechanical services segment delivered first-quarter 2019 revenues of $122 million, 9% lower than the $133 million in the first quarter of 2018. Adjusted EBITDA was $11 million, a decrease of 10% when compared to $12 million in Q1 of 2018. Similar to IHT, the decline in revenue for MF is primarily due to the discontinuation of underperforming international businesses, and as previously as previously mentioned, the ongoing softness in the Canadian market.

As discussed during our last call, we expected MF to have a slow start to the year, and perform similar to the second half of 2018. For comparison purposes, Q1 2019 MS revenues were two-percent higher than Q3 of 2018. The quest integrity segment achieved first-quarter 2019 revenues of $20 million, a 16% increase when compared to $18 million last year. Adjusted EBITDA in the first quarter of 2019 was $2.6 million or 23% higher than the $2.1 million in the prior-year period.

Quest integrity continues to benefit from international and offshore expansion, as well as domestic onshore demand for our proprietary tools and advanced engineering services. Growth investments which include recruiting and training, expanding our manufacturing capabilities, and ongoing innovation investments into both new tool development and technology applications, will deliver increased revenues as the resources and tools are fully deployed throughout the balance of the year. Quest integrity's 2019 production schedule is nearing capacity, and on track to achieve its third straight year of record revenues. I will now provide highlights on our safety performance and the technology update.

Safety continues to be our number one priority. Our companywide focus on safety generated zero lost time cases in the first quarter. We were awarded the voluntary protection program star of excellence at one of the largest refineries in the U.S., as well as the 2018 contractor safety Excellence Award in the Texas Gulf region. In addition we were recognized by major Midwest refinery with the Gold Award for safety.

We are committed to achieving world class safety performance across all of our operations. I could not be more proud of our employees, and their focus and commitment to safety and quality. Now moving to technology. I have shared in the past about Team digital.

Our proprietary platform that maximizes quality and efficiency through digitally enabled workflows. Today I will highlight some of our other technology initiatives. First, quest integrity's integrated heater performance optimization solution. Our advanced decocking and cleanliness verification, which drives effective and efficient decocking and inspection of process fire heaters.

Processed fire heater decocking and maintenance, represents one of the largest contributors to refining and petrochemical plant downtime. Our smart clean solutions reduces cleaning time by 20% to 30%, and enhances our ability to inspect and assess the condition of our clients' heater assets, maximizing their production utilization. Second, our tank inspection services. At a recent project for one of our Midwest clients, major repairs were required on an 11 million gallon water tank during freezing temperatures.

The tank required hydro testing and asset integrity testing method, which is virtually impossible at these temperatures. Utilizing our innovative inspection and engineering techniques, coupled with superior service quality, the tank was operational in one week rather than being offline for months, saving the client time and money. As a result, all hydro test exemption tank projects for this client have been awarded to Team. Third, I will provide an update on our engineering and manufacturing capabilities.

Through innovation and automated processes, we reduced our manufacturing time on certain flanders by approximately seven percent, and have entered new markets for mechanical fittings. In addition, compared to the prior year, we have successfully reduced the engineering time to complete jobs by 42%. These are a few examples of production efficiency initiatives that continue to improve both cost and on time delivery results. As the market trends shifts toward more on stream maintenance and remedial repairs, our focus on safety and quality in our investments in technology and training differentiate Team.

I will now turn it over to Susan for a detailed financial review, and then I will share more of what our OneTEAM progress on outlook. Susan?

Susan Ball -- Chief Financial Officer

Thank you, Amerino and good morning, everyone. As Amerino mentioned, first-quarter consolidated revenues were lower than expected at $270 million, which was down 11% from the first-quarter 2018 due to a delayed project and turnaround work, as reflective with higher refinery utilization in the beginning of the quarter. Certain large non-repeat projects from the prior year, as well as continued softness in the Canadian market, and the disposition of underperforming businesses in 2018. Foreign currency exchange negatively impacted revenues by $3.4 million.

Overall, international revenue excluding Canada, was up by more than six percent over the prior year, as we continue to expand our superior services building on Team's unparalleled footprint. On lower revenues, we manage pricing, labor utilization, and associated costs to maintain a gross margin similar to the prior-year quarter. Despite a top-line decrease, consolidated gross margins remained relatively flat at 24.5% percent, as a testament to the ongoing success of our OneTEAM program initiatives. We generate a favorable follow through on revenue shortfall as evidenced by the gross margin variance of only 50 basis points.

Quest integrity segment gross margin dollars, increased 12% on a 16% revenue increase. IHT segment gross margin dollars, decreased 21% on a 16% revenue decrease, and MS segment gross margin dollars, decreased 12% on a nine-percent revenue decrease. The bulk of our segment margin changes were the result of volume impacts, and the associated fall through. Consolidated adjusted EBITDA of 3.8 million in the first quarter, decreased by 190 basis points to 1.4% from 3.3% in the first quarter of 2018.

As previously stated, both the IHT and MS segments reported lower-adjusted EBITDA, while class delivered positive-adjusted EBITDA gains over the first quarter of 2018. The IHT segment first-quarter 2019 adjusted EBITDA percentage, decreased to 5% from 7.7% in the first-quarter 2018. The MS segment first-quarter 2019 adjusted EBITDA percentage, decreased 20 basis points to 9.1%, from the first-quarter 2018. However, still representing an improvement over the 8.8% adjusted EBITDA percentage achieved for the full-year 2018.

The quest integrity segment first-quarter 2019 adjusted EBITDA percentage rose by 60 basis points to 12.2%. Now, moving to SG&A. In a continued focus on managing costs coupled with the benefits from our OneTEAM program, resulted in significant SG&A reductions both year over year, and sequentially. Total estimate for the first-quarter 2019 was $82.3 million, compared to $89.7 million in the first quarter of 2018, a decrease of $7.4 million or 8.2%, however, a sequential comparison gives even a more meaningful context.

Sequentially the $82.3 million was down from $90.1 million incurred in the fourth quarter of 2018, a decrease of $7.8 million or 8.7%. Our effective income tax rate approximate at 1.4% as a result of the correlation of our projected tax impacts on our projected full-year foreign and domestic pre-tax income and losses on the current quarter pre-tax loss. The company has domestic federal tax net operating loss carry forwards of approximately $126 million as of December 31st, 2018, which are available to offset future taxable US income. First-quarter 2019 operating cash flow of $7.6 million was significantly higher than the prior-year figure of $2.2 million, and represents the highest first-quarter operating cash flow since 2016.

Capital expenditures were $6.6 million in the first quarter of 2019, slightly higher than the first-quarter 2018. We estimate our full-year capital spend to be in the range of $30 million to $33 million. We ended the first quarter of 2019 with $15.1 million of cash, and had available borrowing capacity under the credit facility of approximately $58 million. We had positive free cash flow for the quarter and we paid down nearly $4 million of outstanding debt during the quarter.

Our senior secured leverage ratio was was at two-point-six times. Cash interest expense for the first-quarter 2019 was approximately $5.7 million, exiting the quarter with positive cash flow. Both capital discipline and cash flow management continued to remain a top priority moving forward. We are committed to paying down debt with any free cash flow generation.

That completes the financial review, I will now turn the call back over Dan Amerino.

Amerino Gatti -- Chief Executive Officer

Thank you Susan. Before we take your questions, I want to review the progress of our OneTEAM program, and provide a market outlook. We remain on track to achieve annual run rate cost efficiencies of $35 million to $45 million in 2020, from the two cost improvement pillars of the OneTEAM program. On the last call, we reported a savings of $10.1 million in the second half of 2018.

As we continue implementing the cost initiatives, we are now confident that we will achieve an additional $10 million to $12 million of savings this year, reaching a total of $20 million to $22 million. In Q1 2019, we realize the savings of $5.5 million. As previously discussed, we have expanded our focus from the cost reduction pillars to the revenue enhancement pillar, which includes contract management gross margin improvement, and both value and cross-selling initiatives. We are now using contract management pricing discipline and operational improvements to offset costs to serve headwinds with the goal of improving gross margins.

Our Q1 2019 gross margin was in line with Q1 2018, despite $33 million less revenue, which demonstrates enhanced pricing discipline and more selective project execution. We have implemented escalations and hurdle rates for new projects, and are continuously monitoring active contracts. Our focus on profitability may require us to pass on certain non-accretive projects. We are excited and remain committed to executing on our value and cross-selling strategy.

Due to increases in natural gas liquids and crude exports, we are experiencing an increase in midstream activity. These projects often expand in scope to include additional services through discovery and cross-sell opportunities. Our quest integrity segment was recently awarded a multi-year risk assessment and pipeline integrity management contract for a major pipeline network. Now shifting to the market outlook.

The global economic growth projection remains around 3% for the year. According to EIA data, U.S. refinery utilization rates remained high in the first two months of the year. January was the highest utilization at 95.1%, February was similar to 2018 at 89.4%, and March at 87.3% began to decline back to 2017 levels.

April utilization levels were at 87.7% marking a significant decrease from April 2018 rates of 92.4%. As a result of the delayed utilization drop in the first quarter, we are experiencing an activity demand spike primarily driven by projects and turnarounds. Such deferrals typically lead to additional work as discoveries occur during the restart phase of these projects. In addition, the upcoming summer driving season is causing a very compressed timeline, that we are mitigating through our workforce manager management group to meet client demands.

The Canadian market experienced a slower than expected start to the year because of abnormal weather conditions that caused certain project cancellations and deferrals. In addition, regulatory hurdles and delays are prompting market uncertainty across Canada for the foreseeable future. The macro economic factors driving our end markets coupled with deferred maintenance projects, should lead to higher spending in the second half of the year. Although we experienced a slow a slower start to the year, we anticipate 2019 to deliver increased revenues, expanded gross margins, and higher levels of free cash flow when compared to 2018.

As mentioned during our last call, we expect 2019 to be an inverse of 2018 with the first half of 2019 to be comparable with the second half of 2018, and a stronger second half of 2019. We remain on track to achieve our 2020 goals of 10% to 12% adjusted EBITDA, as we enter the second year of our OneTEAM integration and transformation program. Our new structure allows us to be more agile, responsive, and scalable based on demand fluctuations in the market. In closing, I would like to thank our employees for their hard work and ongoing dedication as we continue to partner with our clients, and execute on our strategy to deliver growth and margin expansion.

At this point we'll be happy to take your questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Tahira Afzal of KeyBanc. Your line is now open.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Hi, folks. How are you doing?

Amerino Gatti -- Chief Executive Officer

Good. Thank you, Tahira. Good morning.

Susan Ball -- Chief Financial Officer

Good morning.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Good morning. So Amerino and Susan, first question is you know, I'm glad to see that the free cash flow guidance for this year is intact and your 2020 goals. Do you know you have talked previously around 4% to 5% revenue growth being achievable in '19, and you know 200-basis-point improvement from an adjusted EBITDA margins into '19. Are those sort of medium term goal posts also still valid.

Amerino Gatti -- Chief Executive Officer

So Tahira, in terms of the overall market and our revenue, with that we do expect to outpace the market. The 200-basis-point adjusted EBITDA is still intact for the full year versus 2018. And right now, based on our outlook in terms of top-line growth, with the exception of Canada, we're still in -- we're still in line with previous numbers.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Got it. OK. And Amerino, you talked in your prepared commentary and even right now, about a bit of a spike and trying to, you know, that if refiners are trying to scramble ahead of the summer season. Can you talk a bit about what the activity levels have looked like in April.

Just to give us a sense of how a second quarter is shaping up so far.

Amerino Gatti -- Chief Executive Officer

Sure. So we've been monitoring obviously, very closely activity level changes, and we started our workforce management forecasting. It's announced about a year in maturity. We're seeing -- the delay was about two weeks coming out of Q1, which pushed our activity spike into the third and fourth week of March, and we've had a strong start to the quarter of April.

We're seeing a two-week delay on the back end because of the two-week starting point. So you know, that'll take us through most of May. The the main difference though that we're seeing this year versus last year, is we're seeing a lot more smaller projects post-turnaround season on our calendar. And those are more in the form of small pit-stop turnarounds which didn't happen last year.

So the turnaround season has spiked and compressed. Good start to the quarter, but we are seeing some other projects now landing on our schedule that we're starting to staff in what would normally have been a lower cyclical period like July and August.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

All right. Thank you and I'll hop back in the queue with some more follow up.

Amerino Gatti -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Adam Thalhimer with Thompson Davis. Your line is now open.

Adam Thalhimer -- Thompson Davis -- Analyst

Hey good morning guys.

Amerino Gatti -- Chief Executive Officer

Good morning, Adam.

Susan Ball -- Chief Financial Officer

Good morning, Adam.

Adam Thalhimer -- Thompson Davis -- Analyst

So I'm just to understand. So just to the adjusted EBITDA you're saying Q1 of '19 is roughly flat with Q2 of '18. And then are we thinking that the H2 of '19 is better than H1 of '18?

Amerino Gatti -- Chief Executive Officer

So what we're saying right now. I'll let Susan answer the first part. Let me talk about the full year. So are our H1 of '19 in line with H2 of '18.

And then, stronger H2 of '19 overall. So we're seeing a stronger second half compared to both halves of '18. You had one quote specifically?

Adam Thalhimer -- Thompson Davis -- Analyst

No. Let me -- So for -- Do you see EBITDA, up in Q2, year over year, Amerino?

Amerino Gatti -- Chief Executive Officer

Year over year in line with Q2 of last year.

Adam Thalhimer -- Thompson Davis -- Analyst

OK. Got it. And then can you give us some additional color on, you know what -- what's going on in Canada, and what the outlook is up there.

Amerino Gatti -- Chief Executive Officer

So yes. Canada a couple of things are happening. One is we did have, you know some very, very abnormally high free or low freezing temperatures, which ad -- adversely affected Western Canada primarily not so much Eastern Canada but on the west side. And that was an impact negatively for us quarter on quarter, year over year.

But, however, having said that, longer term a lot of the takeaway capacity mostly on the pipeline side. Regulatory approvals are being delayed which is impacting takeaway capacity project work. So we're seeing our mechanical business recover, but we expect to see lumpiness on the inspection side as a result of those regulatory approvals being delayed. There is some -- some review right now of having other ways of removing -- or moving hydrocarbons like rail for example.

But obviously, that's not as efficient as as pipeline. So it's a combination of weather, combination of takeaway capacity which is putting delays on our projects. And we expect that, Adam, through most of 2019.

Adam Thalhimer -- Thompson Davis -- Analyst

OK. Perfect. Thanks a lot.

Operator

Thank you. [Operator instructions] Our next question comes from Craig Bibb with CJS Securities. Your line is now open.

Craig Bibb -- CJS Securities -- Analyst

All right. Just kind of a quick housekeeping question first. All of -- assuming all the underperforming locations were closed part of your end is that correct?

Susan Ball -- Chief Financial Officer

That's correct. In prior to year end of 2018.

Craig Bibb -- CJS Securities -- Analyst

OK. And then, you know quest continues to grow when the rest of the business is a -- I'm assuming they have a smaller position in Canada. Well, it looks like they continue to move into adjacent markets. What else is key and are you adding additional resources to help them expand their --

Adam Thalhimer -- Thompson Davis -- Analyst

So for Quest specifically, Craig, that's your question right, on the resources?

Craig Bibb -- CJS Securities -- Analyst

Yeah, for quest.

Adam Thalhimer -- Thompson Davis -- Analyst

So you're right. In terms of growth of adjacent markets where we continue to see, as I've said, the last few quarters expansion and offshore. That that continues to be a good new market for us not only the U.S. Gulf of Mexico, but other offshore markets.

We also are seeing expansion international where our integrated offerings are being a lot more we're able to sell value and integrated offerings a lot more for example than we can domestically. It's a bit more piecemeal domestically, and Canada, you know relatively is a good market on the pipeline side for quest. But -- but yeah, most of the growth will come from the adjacent markets. In the U.S., however, with the midstream growth and the pipeline expansion, which is one of the largest fast -- fastest growing markets right now or sectors.

Quest plays very well in that space also. So it's really a combination of adjacent and domestic. In terms of investments, we've got recruiting, training, and manufacturing expansion to help help their growth. So it is, as I said, an area that we're investing significantly to make sure that they can continue to expand, you know their overall revenue and profitability into new markets.

Craig Bibb -- CJS Securities -- Analyst

OK. Well, it's going well. Susan you talked last quarter about having a debt reduction plan ready in Q2. Is that something you're going to reveal with second quarter results or before that?

Susan Ball -- Chief Financial Officer

Yes, you're correct. As I mentioned on the last call, we are working through plans on our capital structure and would anticipate, and still anticipate that we will speak to that with Q2 results, during the Q2 results.

Craig Bibb -- CJS Securities -- Analyst

Great. All right. Thanks a lot guys.

Amerino Gatti -- Chief Executive Officer

Thank you, Craig.

Susan Ball -- Chief Financial Officer

Thank you.

Operator

Thank you and I'm showing no further questions in the queue at this time. I'd like to turn the call back to Amerino Gatti for any closing remarks.

Amerino Gatti -- Chief Executive Officer

Thank you Jimmy. Well, I think we have one more call or one more question that just come in. We'll take it.

Operator

All right. We have a follow up to from Tahira of KeyBanc. Your line is now open.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Sorry, Amerino. I thought I'd press the bleepy button, but I hadn't. So I guess the question is if you look and pass through the gap you saw in the first quarter. How much that's driven by the shutdown staff.

I assume it was the smaller piece, you know you don't have much exposure there I assume.

Amerino Gatti -- Chief Executive Officer

Yes. So you know Tahira, I won't give exact details, but that high level. The four areas that impacted top line, FX which Susan covered. We had one large project in our central division that was a historic project that did not repeat and that was a big part of it.

Underperforming business shutdowns both domestically and internationally for IHT and MS, and then Canada. And when you -- you know when you look at those four, and I'm not going to give specific details because there's a lot of breakdown in there. But when you look at those four that covers about 85% of the of the delta, year over year not accounting for, you know the Hurricane Harvey pent-up demand etc., etc. But those are the four areas, now we continue to really watch our market share positioning and dig deeper into market knowledge by sector and partnering with our clients.

But to answer the question those are the four main drivers.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Got it. And I guess last question from me. You know you've done a great job on free cash flow with all the deferrals and all. So you know while the optics or the business is what it is.

Amerino, has it been really the efficiencies that you pointed out on the manufacturing side that is helping you respond quickly [Inaudible] finance. Or is it really a much more prod-based effort.

Amerino Gatti -- Chief Executive Officer

Tahira, it's a combination of both. We continue to see inflation pressures on labor materials and logistics. So the manufacturing and engineering improvements have allowed us to definitely capitalize on custom work because of the investments we've made. We're now able to be more competitive and standard work, and offset some of those headwinds.

Especially when, you know the market may or may not be moving at the same -- at the recovery pricing levels that we need it to. So I would say it's offsetting. We're not yet at a point where it's accretive, but it's definitely allowing us to be more competitive. And like I said, prepare for what we're seeing which is more on stream maintenance and remedial work going forward.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Thank you very much.

Amerino Gatti -- Chief Executive Officer

All right. Thank you.

Susan Ball -- Chief Financial Officer

Thank you.

Operator

Thank you, and I am showing no further questions in the queue at this time. I'd like to --

Amerino Gatti -- Chief Executive Officer

Thank you, Jimmy. So once again, thank you for joining us on this call and for your continued interest in Team. We look forward to speaking with you, again next quarter.

Operator

[Operator signoff]

Duration: 35 minutes

Call participants:

Don Bleasdell -- Vice President of Finance

Amerino Gatti -- Chief Executive Officer

Susan Ball -- Chief Financial Officer

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Adam Thalhimer -- Thompson Davis -- Analyst

Craig Bibb -- CJS Securities -- Analyst

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