Newpark Resources Reports Fourth Quarter 2017 Results
THE WOODLANDS, Texas, Feb. 8, 2018 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its fourth quarter ended December 31, 2017. Total revenues for the fourth quarter of 2017 were $204.4 million compared to $201.7 million in the third quarter of 2017 and $137.1 million in the fourth quarter of 2016. Income from continuing operations for the fourth quarter of 2017 was $7.9 million, or $0.09 per share, compared to $2.7 million, or $0.03 per share, in the third quarter of 2017, and a loss from continuing operations of ($0.1) million, or $0.00 per share, in the fourth quarter of 2016. Fourth quarter 2017 results from continuing operations included the impact of the following:
-- $3.4 million net benefit to the provision for income taxes, reflecting
our preliminary evaluation of the impact of U.S. tax reform enacted in
December 2017.
-- $0.7 million of pre-tax expenses ($0.5 million after-tax) in the
Corporate Office, associated with the November 2017 acquisition of the
Well Service Group and Utility Access Solutions.
The combined impact of the above items resulted in a $2.9 million increase in income from continuing operations ($0.03 per share) for the fourth quarter 2017. Net loss for the fourth quarter of 2017 was $9.5 million, or $0.11 per share, which includes a $17.4 million charge, net of tax, for the settlement of a pending litigation matter reported in discontinued operations, as described further below.
Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're very pleased to report another solid quarter for both segments, posting consolidated revenues of $204 million and EBITDA of $20 million in the fourth quarter. In Fluids, revenues pulled back modestly from the third quarter, driven largely by transitory softness in both U.S. and Canada drilling activity. In addition, our sequential comparison was unfavorably impacted by elevated third quarter product sales to IOC's in the deepwater Gulf of Mexico, which we did not expect to recur in the fourth quarter. The North America reduction was partially offset by a 6% sequential improvement internationally, as customer activity levels continue to strengthen in response to the improving outlook for commodity prices. In addition, the fourth quarter benefitted from a deepwater well drilled with Petrobras in Brazil, using our Deepdrill(TM) water-based fluid system. Despite the modest pullback in revenues, the Fluids segment operating margin remained relatively flat, coming in at 5% for the fourth quarter.
"The Mats business also posted another very strong quarter, which includes a $9 million revenue contribution from the mid-November acquisition of the Well Service Group and Utility Access Solutions. Mat sales pulled back modestly from the exceptionally strong results in the third quarter to $12 million in the fourth quarter, while the rental and service activity remained stable. With the impact of the acquisition, including increased depreciation and amortization expense and business integration costs, the mats segment operating margin came in at 28% for the fourth quarter," added Howes. "Meanwhile, with the continued strengthening in commodity prices, we remain optimistic regarding the outlook for both segments in 2018."
Segment Results
The Fluids Systems segment generated revenues of $162.4 million in the fourth quarter of 2017 compared to $166.7 million in the third quarter of 2017 and $111.6 million in the fourth quarter of 2016. Segment operating income was $7.4 million in the fourth quarter of 2017, compared to $7.9 million in the third quarter of 2017 and a $7.5 million loss in the fourth quarter of 2016. Segment results for the fourth quarter of 2016 included $4.6 million of charges for asset impairments in the Asia Pacific region and Uruguay exit costs.
The Mats and Integrated Services segment generated revenues of $42.0 million in the fourth quarter of 2017 compared to $34.9 million in the third quarter of 2017 and $25.5 million in the fourth quarter of 2016. Segment operating income was $11.7 million in the fourth quarter of 2017, compared to $10.9 million in the third quarter of 2017 and $6.1 million in the fourth quarter of 2016.
Loss from Discontinued Operations, arising from Settlement of Pending Litigation
In March 2014, Newpark completed the sale of the Environmental Services business, which was historically reported as a third operating segment, and recorded a $22.1 million gain from disposal of discontinued operations, net of tax. As disclosed in previous filings, since late 2014, the Company has been a party to an ongoing lawsuit with the buyer, Ecoserv, LLC. Following the commencement of the trial in December 2017, Newpark reached a settlement with Ecoserv, under which Ecoserv will receive $22.0 million in cash, effectively reducing the sale price of the Environmental Services business by such amount in exchange for dismissal of the pending claims in the lawsuit, and release of any future claims related to the transaction. The impact of this settlement results in a $17.4 million loss from disposal of discontinued operations, net of tax in 2017 to reduce the previously recognized gain from the sale of the Environmental Services business. The reduction in sale price will be funded, in part, through the release of $8.0 million that has been held in escrow since the March 2014 transaction.
Conference Call
Newpark has scheduled a conference call to discuss fourth quarter 2017 results and near-term operational outlook, which will be broadcast live over the Internet, on Friday, February 9, 2018 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 February 23, 2018 and may be accessed by dialing 201-612-7415 and using pass code 13675126#. 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.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Twelve Months Ended
(In thousands, except per share
data) December 31, September 30, December 31, December 31, December 31,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Revenues $204,389 $201,663 $137,083 $747,763 $471,496
Cost of revenues 165,291 164,587 124,167 607,899 437,836
Selling, general and
administrative expenses 29,541 27,270 21,810 108,838 88,473
Other operating income, net (283) (76) (516) (410) (4,345)
Impairments and other charges - - (180) - 6,745
--- --- ---- --- -----
Operating income (loss) 9,840 9,882 (8,198) 31,436 (57,213)
Foreign currency exchange (gain)
loss 951 174 (270) 2,051 (710)
Interest expense, net 3,028 3,586 2,636 13,273 9,866
Gain on extinguishment of debt - - 279 - (1,615)
--- --- --- --- ------
Income (loss) from continuing
operations before income taxes 5,861 6,122 (10,843) 16,112 (64,754)
Provision (benefit) for income
taxes (2,056) 3,469 (10,786) 4,893 (24,042)
------ ----- ------- ----- -------
Income (loss) from continuing
operations 7,917 2,653 (57) 11,219 (40,712)
Loss from disposal of discontinued
operations, net of tax (17,367) - - (17,367) -
------- -------
Net income (loss) $(9,450) $2,653 $(57) $(6,148) $(40,712)
======= ====== ==== ======= ========
Calculation of EPS:
-------------------
Basic -Income (loss) from
continuing operations $7,917 2,653 (57) $11,219 $(40,712)
Assumed conversions of Convertible
Notes due 2017 - - - - -
Diluted -Income (loss) from
continuing operations $7,917 $2,653 $(57) $11,219 $(40,712)
------ ------ ---- ------- --------
Basic -weighted average common
shares outstanding 87,414 85,426 84,066 85,421 83,697
Dilutive effect of stock options
and restricted stock 2,580 2,251 - 2,554 -
Dilutive effect of 2017
Convertible Notes - - - - -
Dilutive effect of 2021
Convertible Notes - - - - -
Diluted -weighted average common
shares outstanding 89,994 87,677 84,066 87,975 83,697
------ ------ ------ ------ ------
Diluted -Income (loss) per common
share:
Income (loss) from continuing
operations $0.09 $0.03 $ - $0.13 $(0.49)
Loss from discontinued operations (0.20) - - (0.20) -
----- -----
Net income (loss) $(0.11) $0.03 $ - $(0.07) $(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 Twelve Months Ended
------------------ -------------------
(In thousands) December 31, September 30, December 31, December 31, December 31,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Revenues
Fluids systems $162,404 $166,726 $111,560 $615,803 $395,461
Mats and
integrated
services 41,985 34,937 25,523 131,960 76,035
------ ------ ------ ------- ------
Total revenues $204,389 $201,663 $137,083 $747,763 $471,496
======== ======== ======== ======== ========
Operating income (loss)
Fluids systems
(1) $7,435 $7,930 $(7,505) $27,580 $(43,631)
Mats and
integrated
services 11,729 10,941 6,134 40,491 14,741
Corporate office (9,324) (8,989) (6,827) (36,635) (28,323)
------ ------ ------ ------- -------
Operating income
(loss) $9,840 $9,882 $(8,198) $31,436 $(57,213)
====== ====== ======= ======= ========
Segment operating margin
Fluids systems 4.6% 4.8% (6.7)% 4.5% (11.0)%
Mats and
integrated
services 27.9% 31.3% 24.0% 30.7% 19.4%
(1) Operating results for the
fourth quarter of 2016
included $4.6 million of
charges for asset impairments
in the Asia Pacific region and
Uruguay exit costs. Operating
results for 2016 included
$11.5 million of charges
associated with asset
impairments primarily in the
Asia Pacific region, $4.5
million of charges associated
with Uruguay exit costs and
$4.1 million of charges
associated with workforce
reductions.
Newpark Resources, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands,
except share data) December 31, December 31,
2017 2016
--- ---- ----
ASSETS
Cash and cash
equivalents $56,352 $87,878
Receivables, net 265,866 214,307
Inventories 165,336 143,612
Prepaid expenses
and other current
assets 17,483 17,143
------ ------
Total current
assets 505,037 462,940
Property, plant and
equipment, net 315,320 303,654
Goodwill 43,620 19,995
Other intangible
assets, net 30,004 6,067
Deferred tax assets 4,753 1,747
Other assets 3,982 3,780
----- -----
Total assets $902,716 $798,183
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $1,518 $83,368
Accounts payable 88,648 65,281
Accrued liabilities 68,248 31,152
------ ------
Total current
liabilities 158,414 179,801
Long-term debt,
less current
portion 158,957 72,900
Deferred tax
liabilities 31,580 38,743
Other noncurrent
liabilities 6,285 6,196
----- -----
Total liabilities 355,236 297,640
Common stock, $0.01
par value,
200,000,000 shares
authorized and
104,571,839 and
99,843,094 shares
issued,
respectively 1,046 998
Paid-in capital 603,849 558,966
Accumulated other
comprehensive loss (53,219) (63,208)
Retained earnings 123,375 129,873
Treasury stock, at
cost; 15,366,504
and 15,162,050
shares,
respectively (127,571) (126,086)
-------- --------
Total stockholders'
equity 547,480 500,543
------- -------
Total liabilities
and stockholders'
equity $902,716 $798,183
======== ========
Newpark Resources, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Twelve months ended December 31,
--------------------------------
(In
thousands) 2017 2016
----------- ---- ----
Cash flows from
operating activities:
Net
loss $(6,148) $(40,712)
Adjustments to
reconcile net loss to
net cash provided by
operations:
Impairments
and
other
non-
cash
charges - 12,523
Depreciation
and
amortization 39,757 37,955
Stock-
based
compensation
expense 10,843 12,056
Provision
for
deferred
income
taxes (10,350) 3,352
Net
provision
for
doubtful
accounts 1,481 2,416
Loss on
sale
of a
business 21,983 -
Gain on
sale
of
assets (5,478) (2,820)
Gain on
extinguishment
of
debt - (1,615)
Amortization
of
original
issue
discount
and
debt
issuance
costs 5,345 1,618
Change in assets and
liabilities:
(Increase)
decrease
in
receivables (73,722) (1,699)
(Increase)
decrease
in
inventories (15,097) 16,044
(Increase)
decrease
in
other
assets 986 1,708
Increase
(decrease)
in
accounts
payable 14,153 (5,213)
Increase
(decrease)
in
accrued
liabilities
and
other 54,628 (24,518)
------ -------
Net
cash
provided
by
operating
activities 38,381 11,095
------ ------
Cash flows from
investing activities:
Capital
expenditures (31,371) (38,440)
Proceeds
from
sale
of
property,
plant
and
equipment 7,747 4,540
Business
acquisitions,
net of
cash
acquired (44,750) (4,420)
------- ------
Net
cash
used
in
investing
activities (68,374) (38,320)
Cash flows from
financing activities:
Borrowings
on
lines
of
credit 176,267 6,437
Payments
on
lines
of
credit (93,700) (14,269)
Proceeds
from
2021
Convertible
Notes - 100,000
Purchases
of
2017
Convertible
Notes - (87,271)
Payment
on 2017
Convertible
Notes (83,252) -
Debt
issuance
costs (955) (5,403)
Other
financing
activities 165 357
Proceeds
from
employee
stock
plans 2,424 725
Purchases
of
treasury
stock (3,239) (1,226)
Net
cash
used
in
financing
activities (2,290) (650)
Effect
of
exchange
rate
changes
on
cash 2,444 (1,449)
----- ------
Net
increase
(decrease)
in
cash,
cash
equivalents,
and
restricted
cash (29,839) (29,324)
Cash,
cash
equivalents,
and
restricted
cash
at
beginning
of
year
(1) 95,299 124,623
------ -------
Cash,
cash
equivalents,
and
restricted
cash
at end
of
year
(1) $65,460 $95,299
======= =======
(1) In addition to cash and cash
equivalents reflected on the
consolidated balance sheet,
balances in the consolidated
statements of cash flows
include restricted cash of $9.1
million, $7.4 million and $17.5
million at December 31, 2017,
2016, and 2015, respectively.
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 Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Net income (loss)
(GAAP) (1) $(9,450) $2,653 $(57) $(6,148) $(40,712)
Loss from disposal of
discontinued
operations, net of
tax 17,367 - - 17,367 -
Interest expense, net 3,028 3,586 2,636 13,273 9,866
Provision (benefit)
for income taxes (2,056) 3,469 (10,786) 4,893 (24,042)
Depreciation and
amortization 10,759 9,754 9,534 39,757 37,955
EBITDA (non-GAAP) (1) $19,648 $19,462 $1,327 $69,142 $(16,933)
======= ======= ====== ======= ========
(1) Net loss and EBITDA for the
fourth quarter of 2016
included $4.6 million of
charges for asset impairments
in the Asia Pacific region and
Uruguay exit costs. Net loss
and EBITDA for 2016 included
$11.5 million of charges
associated with asset
impairments primarily in the
Asia Pacific region, $4.5
million of charges associated
with Uruguay exit costs and
$4.1 million of charges
associated with workforce
reductions.
Fluids Systems Three Months Ended Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Operating income
(loss) (GAAP) (2) $7,435 $7,930 $(7,505) $27,580 $(43,631)
Depreciation and
amortization 5,344 5,540 5,184 21,566 20,746
EBITDA (non-GAAP) (2) 12,779 13,470 (2,321) 49,146 (22,885)
Revenues 162,404 166,726 111,560 615,803 395,461
Operating Margin
(GAAP) 4.6% 4.8% (6.7)% 4.5% (11.0)%
=== === ===== === ======
EBITDA Margin (non-
GAAP) 7.9% 8.1% (2.1)% 8.0% (5.8)%
=== === ===== === =====
(2) Operating loss and EBITDA
for the fourth quarter of 2016
included $4.6 million of
charges for asset impairments
in the Asia Pacific region and
Uruguay exit costs. Operating
loss and EBITDA for 2016
included $11.5 million of
charges associated with asset
impairments primarily in the
Asia Pacific region, $4.5
million of charges associated
with Uruguay exit costs and
$4.1 million of charges
associated with workforce
reductions.
Mats and Integrated
Services Three Months Ended Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2017 2017 2016 2017 2016
--- ---- ---- ---- ---- ----
Operating income
(loss) (GAAP) $11,729 $10,941 $6,134 $40,491 $14,741
Depreciation and
amortization 4,578 3,401 3,600 14,991 14,227
EBITDA (non-GAAP) 16,307 14,342 9,734 55,482 28,968
Revenues 41,985 34,937 25,523 131,960 76,035
------ ------ ------ ------- ------
Operating Margin
(GAAP) 27.9% 31.3% 24.0% 30.7% 19.4%
==== ==== ==== ==== ====
EBITDA Margin (non-
GAAP) 38.8% 41.1% 38.1% 42.0% 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) December 31, December 31,
2017 2016
--- ---- ----
Current debt $1,518 $83,368
Long-term debt,
less current
portion 158,957 72,900
------- ------
Total Debt 160,475 156,268
Total
stockholders'
equity 547,480 500,543
-------
Total Capital $707,955 $656,811
======== ========
Ratio of Total
Debt to Capital 22.7% 23.8%
==== ====
Total Debt $160,475 $156,268
Less: cash and
cash
equivalents (56,352) (87,878)
Net Debt 104,123 68,390
Total
stockholders'
equity 547,480 500,543
-------
Total Capital,
Net of Cash $651,603 $568,933
======== ========
Ratio of Net
Debt to Capital 16.0% 12.0%
==== ====
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SOURCE Newpark Resources, Inc.
