Newpark Resources Reports Third Quarter 2017 Results
THE WOODLANDS, Texas, Oct. 30, 2017 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its third quarter ended September 30, 2017. Total revenues for the third quarter of 2017 were $201.7 million compared to $183.0 million in the second quarter of 2017 and $104.6 million in the third quarter of 2016. Net income for the third quarter of 2017 was $2.7 million, or $0.03 per diluted share, compared to net income of $1.6 million, or $0.02 per diluted share, in the second quarter of 2017, and a net loss of $13.5 million, or $0.16 per share, in the third quarter of 2016. Third quarter 2016 results included a total of $2.6 million of charges associated with asset demobilization and wind-down of our operations in Uruguay.
Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're very pleased to report another solid quarter of revenue growth across both segments. In Fluids, revenue gains were once again led by our North American operations. Despite the modest headwind created by Hurricane Harvey, U.S. revenues improved by 10% sequentially, outperforming the market rig count gains for the fourth consecutive quarter. The relative outperformance in the quarter is largely attributable to the deepwater Gulf of Mexico, where projects with two customers contributed $4 million of revenue to the third quarter. Canadian revenues also rebounded in the third quarter, reflecting the typical seasonal pattern following Spring break-up, resulting in a 16% sequential increase in total North American fluids revenue. Internationally, fluids revenues remained relatively stable, as improvements in customer activity in Romania was partially offset by declines in Kuwait, Algeria, and Albania largely related to project timing. The segment operating margin improved modestly, with the incremental benefit of the stronger revenues being partially offset by the unfavorable impact of price concessions on an NOC customer contract as well as a modestly softer product mix in the U.S.
"The Mats business posted another strong quarter, which continues to reflect the benefits of our diversification strategy. Despite the anticipated reduction in rental activity following the completion of a few large scale utility transmission and distribution projects in the second quarter, segment revenues improved in the third quarter, led by $13 million of mat sales," added Howes. "And while the rental activity into the utilities sector declined, this was partially offset by an increase in rental activity for pipeline customers."
2017 Convertible Notes Settlement
In advance of the October 1, 2017 maturity of convertible notes, the Company placed an additional $54.8 million of cash into an escrow account in the third quarter of 2017, increasing the total balance in escrow (reported within prepaid expenses and other current assets) to $84.9 million as of September 30, 2017. These funds were used for the full satisfaction of the 2017 Convertible Notes following the end of the third quarter.
Segment Results
The Fluids Systems segment generated revenues of $166.7 million in the third quarter of 2017 compared to $150.6 million in the second quarter of 2017 and $89.1 million in the third quarter of 2016. Segment operating income was $7.9 million in the third quarter of 2017, compared to $5.9 million of income in the second quarter of 2017 and a $9.0 million loss in the third quarter of 2016. Segment results for the third quarter of 2016 included $2.6 million of charges associated with asset demobilization and wind-down of our operations in Uruguay following the customer decision to discontinue offshore exploration efforts in the country.
The Mats and Integrated Services segment generated revenues of $34.9 million in the third quarter of 2017 compared to $32.4 million in the second quarter of 2017 and $15.5 million in the third quarter of 2016. Segment operating income was $10.9 million in the third quarter of 2017, compared to $11.4 million in the second quarter of 2017, and $0.9 million in the third quarter of 2016.
CONFERENCE CALL
Newpark has scheduled a conference call to discuss third quarter 2017 results, which will be broadcast live over the Internet, on Tuesday, October 31, 2017 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate in the call, dial (412) 902-0030 and ask for the Newpark conference call at least 10 minutes prior to the start time, or access it live over the Internet at www.newpark.com. For those who cannot listen to the live call, a replay will be available through November 14, 2017 and may be accessed by dialing (201) 612-7415 and using pass code 13670778#. Also, an archive of the webcast will be available shortly after the call at www.newpark.com for 90 days.
Newpark Resources, Inc. is a worldwide provider of value-added drilling fluids systems and composite matting systems used in oilfield and other commercial markets. For more information, visit our website at www.newpark.com.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act that are based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including Newpark's strategy for growth, product development, market position, expected expenditures and future financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Newpark, particularly its Annual Report on Form 10-K for the year ended December 31, 2016, as well as others, could cause results to differ materially from those expressed in, or implied by, these statements. These risk factors include, but are not limited to, risks related to the worldwide oil and natural gas industry, our customer concentration and reliance on the U.S. exploration and production market, risks related to our international operations, the cost and continued availability of borrowed funds including noncompliance with debt covenants, operating hazards present in the oil and natural gas industry, our ability to execute our business strategy and make successful business acquisitions and capital investments, the availability of raw materials and skilled personnel, our market competition, compliance with legal and regulatory matters, including environmental regulations, the availability of insurance and the risks and limitations of our insurance coverage, potential impairments of long-lived intangible assets, technological developments in our industry, risks related to severe weather, particularly in the U.S. Gulf Coast, cybersecurity breaches or business system disruptions and risks related to the fluctuations in the market value of our common stock. Newpark's filings with the Securities and Exchange Commission can be obtained at no charge at www.sec.gov, as well as through our website at www.newpark.com.
Contacts: Gregg Piontek
Vice President and Chief
Financial Officer
Newpark Resources, Inc.
gpiontek@newpark.com
281-362-6800
Newpark Resources, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
------------------
(In thousands, except
per share data) September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Revenues $201,663 $183,020 $104,554 $543,374 $334,413
Cost of revenues 164,587 148,431 99,293 442,608 313,669
Selling, general and
administrative
expenses 27,270 26,630 21,736 79,297 66,663
Other operating
income, net (76) (9) (1,420) (127) (3,829)
Impairments and other
charges - - - - 6,925
--- --- --- --- -----
Operating income
(loss) 9,882 7,968 (15,055) 21,596 (49,015)
Foreign currency
exchange loss (gain) 174 534 761 1,100 (440)
Interest expense, net 3,586 3,441 2,127 10,245 7,230
Gain on extinguishment
of debt - - - - (1,894)
--- --- --- --- ------
Income (loss) from
operations before
income taxes 6,122 3,993 (17,943) 10,251 (53,911)
Provision (benefit)
for income taxes 3,469 2,361 (4,492) 6,949 (13,256)
----- ----- ------ ----- -------
Net income (loss) $2,653 $1,632 $(13,451) $3,302 $(40,655)
====== ====== ======== ====== ========
Calculation of EPS:
-------------------
Basic -net income
(loss) $2,653 $1,632 $(13,451) $3,302 $(40,655)
Assumed conversions of
2017 Convertible
Notes - - - - -
Diluted -adjusted net
income (loss) $2,653 $1,632 $(13,451) $3,302 $(40,655)
------ ------ -------- ------ --------
Basic -weighted
average common shares
outstanding 85,426 84,653 83,998 84,749 83,573
Dilutive effect of
stock options and
restricted stock
awards 2,251 2,662 - 2,545 -
Dilutive effect of
2017 Convertible
Notes - - - - -
Dilutive effect of
2021 Convertible
Notes - - - - -
--- --- --- --- ---
Diluted -weighted
average common shares
outstanding 87,677 87,315 83,998 87,294 83,573
------ ------ ------ ------ ------
Income (loss) per
common share -basic: $0.03 $0.02 $(0.16) $0.04 $(0.49)
Income (loss) per
common share -
diluted: $0.03 $0.02 $(0.16) $0.04 $(0.49)
Note: For all periods
presented, we excluded the
assumed conversion of the
Convertible Notes in
calculating diluted earnings
per share as the effect was
anti-dilutive.
Newpark Resources, Inc.
Operating Segment Results
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
(In thousands) September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Revenues
Fluids systems $166,726 $150,623 $89,097 $453,399 $283,901
Mats and
integrated
services 34,937 32,397 15,457 89,975 50,512
------ ------ ------ ------ ------
Total revenues $201,663 $183,020 $104,554 $543,374 $334,413
======== ======== ======== ======== ========
Operating income (loss)
Fluids systems
(1) $7,930 $5,863 $(8,995) $20,145 $(36,126)
Mats and
integrated
services 10,941 11,419 882 28,762 8,607
Corporate office (8,989) (9,314) (6,942) (27,311) (21,496)
------ ------ ------ ------- -------
Operating income
(loss) $9,882 $7,968 $(15,055) $21,596 $(49,015)
====== ====== ======== ======= ========
Segment operating margin
Fluids systems
(1) 4.8% 3.9% (10.1)% 4.4% (12.7)%
Mats and
integrated
services 31.3% 35.2% 5.7% 32.0% 17.0%
(1) Operating results for the
third quarter and first nine
months of 2016 included $2.6
million of charges associated with
asset demobilization and wind-
down of our operations in Uruguay
following the customer decision to
discontinue offshore exploration
efforts in the country. Operating
results for the first nine months
of 2016 also included $7.6 million
of charges associated with asset
impairments primarily in the Asia
Pacific region and $4.1 million of
charges associated with workforce
reductions.
Newpark Resources, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except
share data) September 30, December 31,
2017 2016
--- ---- ----
ASSETS
Cash and cash
equivalents $64,741 $87,878
Receivables, net 262,105 214,307
Inventories 164,384 143,612
Prepaid expenses and
other current assets 104,703 17,143
------- ------
Total current assets 595,933 462,940
Property, plant and
equipment, net 298,663 303,654
Goodwill 20,415 19,995
Other intangible
assets, net 4,312 6,067
Deferred tax assets 3,379 1,747
Other assets 3,221 3,780
----- -----
Total assets $925,923 $798,183
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $85,119 $83,368
Accounts payable 85,049 65,281
Accrued liabilities 50,138 31,152
------ ------
Total current
liabilities 220,306 179,801
Long-term debt, less
current portion 139,721 72,900
Deferred tax
liabilities 36,559 38,743
Other noncurrent
liabilities 7,577 6,196
----- -----
Total liabilities 404,163 297,640
Common stock, $0.01
par value,
200,000,000 shares
authorized and
101,150,629 and
99,843,094 shares
issued, respectively 1,012 998
Paid-in capital 568,743 558,966
Accumulated other
comprehensive loss (53,727) (63,208)
Retained earnings 132,825 129,873
Treasury stock, at
cost; 15,316,359 and
15,162,050 shares,
respectively (127,093) (126,086)
-------- --------
Total stockholders'
equity 521,760 500,543
------- -------
Total liabilities and
stockholders' equity $925,923 $798,183
======== ========
Newpark Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
-------------------------------
(In
thousands) 2017 2016
----------- ---- ----
Cash flows from operating
activities:
Net income
(loss) $3,302 $(40,655)
Adjustments to reconcile
net income (loss) to net
cash provided by
operations:
Impairments
and other
non-cash
charges - 9,493
Depreciation
and
amortization 28,998 28,421
Stock-
based
compensation
expense 8,458 8,865
Provision
for
deferred
income
taxes (3,489) (3,205)
Net
provision
for
doubtful
accounts 1,386 2,032
Gain on
sale of
assets (4,896) (2,331)
Gain on
extinguishment
of debt - (1,894)
Amortization
of
original
issue
discount
and debt
issuance
costs 4,068 1,150
Change in assets and
liabilities:
(Increase)
decrease
in
receivables (73,512) 31,360
(Increase)
decrease
in
inventories (17,348) 25,368
Increase
in other
assets (1,621) (568)
Increase
(decrease)
in
accounts
payable 17,996 (24,241)
Increase
(decrease)
in
accrued
liabilities
and other 52,421 (3,860)
------ ------
Net cash
provided
by
operating
activities 15,763 29,935
Cash flows from investing
activities:
Capital
expenditures (21,888) (33,390)
Increase
in
restricted
cash (85,680) (578)
Proceeds
from sale
of
property,
plant and
equipment 2,233 3,317
Business
acquisitions,
net of
cash
acquired - (3,761)
Net cash
used in
investing
activities (105,335) (34,412)
Cash flows from financing
activities:
Borrowings
on lines
of credit 84,900 6,056
Payments
on lines
of credit (21,400) (7,210)
Purchase
of 2017
Convertible
Notes - (9,206)
Debt
issuance
costs (342) (2,143)
Other
financing
activities 1,487 1,452
Proceeds
from
employee
stock
plans 2,107 508
Purchases
of
treasury
stock (2,761) (1,236)
------ ------
Net cash
provided
by (used
in)
financing
activities 63,991 (11,779)
Effect of
exchange
rate
changes
on cash 2,444 982
----- ---
Net
decrease
in cash
and cash
equivalents (23,137) (15,274)
Cash and
cash
equivalents
at
beginning
of year 87,878 107,138
------ -------
Cash and
cash
equivalents
at end of
period $64,741 $91,864
======= =======
Newpark Resources, Inc.
Non-GAAP Reconciliations
(Unaudited)
To help understand the Company's financial performance, the Company has supplemented its financial results that it provides in accordance with generally accepted accounting principles ("GAAP") with non-GAAP financial measures. Such financial measures include earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDA Margin, Net Debt and the Ratio of Net Debt to Capital.
We believe these non-GAAP financial measures are frequently used by investors, securities analysts and other parties in the evaluation of our performance and/or that of other companies in our industry. In addition, management uses these measures to evaluate operating performance, and our incentive compensation plan measures performance based on our consolidated EBITDA, along with other factors. The methods we use to produce these non-GAAP financial measures may differ from methods used by other companies. These measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with GAAP.
Consolidated Three Months Ended Nine Months Ended
(In thousands) September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Net income (loss)
(GAAP) (1) $2,653 $1,632 $(13,451) $3,302 $(40,655)
Interest expense, net 3,586 3,441 2,127 10,245 7,230
Provision (benefit)
for income taxes 3,469 2,361 (4,492) 6,949 (13,256)
Depreciation and
amortization 9,754 9,857 9,220 28,998 28,421
EBITDA (non-GAAP) (1) $19,462 $17,291 $(6,596) $49,494 $(18,260)
======= ======= ======= ======= ========
(1) Net loss and EBITDA for the
third quarter and first nine
months of 2016 included a total of
$2.6 million of charges associated
with asset demobilization and
wind-down of our operations in
Uruguay. Net loss and EBITDA for
the first nine months of 2016 also
included $7.6 million of charges
associated with asset impairments
primarily in the Asia Pacific
region and $4.6 million of charges
associated with workforce
reductions.
Fluids Systems Three Months Ended Nine Months Ended
(In thousands) September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Operating income
(loss) (GAAP) (2) $7,930 $5,863 $(8,995) $20,145 $(36,126)
Depreciation and
amortization 5,540 5,513 4,979 16,221 15,562
EBITDA (non-GAAP) (2) 13,470 11,376 (4,016) 36,366 (20,564)
Revenues 166,726 150,623 89,097 453,399 283,901
Operating Margin
(GAAP) 4.8% 3.9% (10.1)% 4.4% (12.7)%
=== === ====== === ======
EBITDA Margin (non-
GAAP) 8.1% 7.6% (4.5)% 8.0% (7.2)%
=== === ===== === =====
(2) Operating loss and EBITDA for
the third quarter and first nine
months of 2016 included $2.6
million of charges associated with
asset demobilization and wind-
down of our operations in Uruguay.
Operating loss and EBITDA for the
first nine months of 2016 also
included $7.6 million of charges
associated with asset impairments
primarily in the Asia Pacific
region and $4.1 million of charges
associated with workforce
reductions.
Mats and Integrated
Services Three Months Ended Nine Months Ended
(In thousands) September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Operating income
(loss) (GAAP) $10,941 $11,419 $882 $28,762 $8,607
Depreciation and
amortization 3,401 3,534 3,491 10,414 10,627
EBITDA (non-GAAP) 14,342 14,953 4,373 39,176 19,234
Revenues 34,937 32,397 15,457 89,975 50,512
Operating Margin
(GAAP) 31.3% 35.2% 5.7% 32.0% 17.0%
==== ==== === ==== ====
EBITDA Margin (non-
GAAP) 41.1% 46.2% 28.3% 43.5% 38.1%
==== ==== ==== ==== ====
Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)
Ratio of Net Debt to Capital
The following table reconciles the Company's ratio of total debt to capital calculated in accordance with GAAP to the non-GAAP financial measure of the Company's ratio of net debt to capital:
(In thousands) September 30, December 31,
2017 2016
--- ---- ----
Current debt
(1) $85,119 $83,368
Long-term
debt, less
current
portion 139,721 72,900
------- ------
Total Debt 224,840 156,268
Total
stockholders'
equity 521,760 500,543
Total Capital $746,600 $656,811
======== ========
Ratio of Total
Debt to
Capital (1) 30.1% 23.8%
==== ====
Total Debt $224,840 $156,268
Less: cash and
cash
equivalents (64,741) (87,878)
Less: specific
restricted
cash (2) (84,917) -
------- ---
Net Debt 75,182 68,390
Total
stockholders'
equity 521,760 500,543
Total Capital,
Net of Cash $596,942 $568,933
======== ========
Ratio of Net
Debt to
Capital 12.6% 12.0%
==== ====
(1) Current debt includes
$83.3 million of 2017
Convertible Notes which were
fully repaid on October 2,
2017. Pro-forma ratio of
total debt to capital after
repayment was 21.3%.
(2) Restricted cash included
in prepaid expenses and
other current assets as of
September 30, 2017 that was
used to fully settle the
2017 Convertible Notes on
October 2, 2017.
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SOURCE Newpark Resources, Inc.
