CARBO® Announces First Quarter 2018 Results
CARBO® Announces First Quarter 2018 Results
Conference Call Scheduled for Today, 10:30 a.m. Central Time
HOUSTON, April 26, 2018 /PRNewswire/ -- CARBO Ceramics Inc. (NYSE: CRR) today reported financial results for the first quarter of 2018.
-- Revenue for the first quarter of 2018 of $49.4 million, an increase of
42% year-on-year, resulting from strong revenue growth in all three
business sectors; oilfield, industrial and environmental.
-- Cash balance of approximately $70 million as of March 31, 2018; expect
to maintain a strong cash balance.
-- Revenue growth contributed to a strong Adjusted EBITDA incremental
margin of 42% year-on-year; expect higher incremental margins for the
remainder of 2018.
-- Expect strong sequential and year-on-year growth in revenue and Adjusted
EBITDA for the second quarter of 2018.
-- Management reiterates 2018 full year revenue guidance of approximately
$250 million.
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CEO Gary Kolstad commented, "We continue to show solid progress on our transformation strategy to diversify our revenue streams and return the company to profitability. Revenue for the first quarter of 2018 increased 42% year-on-year driven by strong growth in our oilfield and industrial business sectors. We continue to expand our suite of technologies into other industries to drive future growth. Our growing top line revenue contributed to a strong Adjusted EBITDA incremental margin of 42% year-on-year.
"Our oilfield technologies continue to exhibit the value they bring clients, as sales volumes increased 20% year-on-year. The technology products, including KRYPTOSPHERE®, the GUARD® family, CARBOAIR®, and CARBONRT® continue to perform well in the market. Base ceramic sales volumes increased 12% year-on-year (adjusted for the sale of our Russia ceramic business).
"We, like others, had disruptions in rail service during the quarter, which negatively impacted the volume of frac sand we were able to move out of our Wisconsin facility. However, we still achieved a large increase in frac sand sales volume due to client demand, as well as the capacity increases we realized from the fourth quarter 2017 start-up of an additional sand operation in the Northeast. In addition to improving profitability and providing cash flow, frac sand sales drive opportunities to stay in front of our clients to discuss and promote our technologies and the ways that CARBO can add value through technology products and engineered completions.
"At recent industry conferences, E&P operators have highlighted a renewed focus on increasing Estimated Ultimate Recovery (EUR) and improving overall return metrics. Commentary like this is encouraging, given our position as a hydraulic fracturing technology leader that provides solutions to enhance production at an overall lower total cost per barrel of oil equivalent.
"Momentum is building for continued increases in sales in our industrial sectors, where revenue grew over 70% year-on-year. We are gaining new clients in several key industrial sectors, including the foundry and grinding sectors. The new products we introduced late last year have been successful, and we continue to look at new markets for further market penetration. Contract manufacturing opportunities are materializing ahead of our plan, which is important for increasing plant utilization and positively impacting profitability. We are ahead of our plan in growing our contract manufacturing backlog and are in discussions with multiple parties to carry out a number of projects.
"ASSETGUARD(TM), our environmental business, is off to a good start this year as revenues for the first quarter of 2018 increased 37% year-on-year. The increase is largely associated with improving drilling activity levels in the oilfield. However, just as we are doing in our other businesses, we are expanding ASSETGUARD products into other industries," Mr. Kolstad said.
First Quarter 2018 Results
Revenues for the first quarter of $49.4 million increased 42%, or $14.7 million compared to revenue of $34.7 million in the same period of 2017. The largest contributors to this increase were frac sand, environmental products, and industrial products.
The year-on-year increase in revenue contributed to an incremental gross margin of 64%.
Operating loss for the first quarter of 2018 improved to $20.2 million as compared to $30.3 million in the same period of 2017, primarily due to increased sales combined with a reduction in certain fixed structural costs, and a decrease in slowing and idling expenses. Approximately two thirds of the $9.7 million of slowing and idling expenses is non-cash related.
First quarter net cash used in operations improved to $7.1 million compared to $19.1 million in the same period last year.
Technology and Business Highlights
-- KRYPTOSPHERE LD, a highly conductive, low-density proppant, continued to
see strong utilization during the quarter in several high profile wells
on both land and offshore North and South America. Clients cited a
number of benefits for its increased use, including its higher
production, lower decline rates, lower tool erosion and ease of
placement.
-- CARBOAIR was successfully pumped in a Marcellus basin horizontal well
for a large independent operator. This new ultra-lightweight proppant
technology has 28% lower density than sand, resulting in significantly
more volume per pound and exceptional transport characteristics. The job
was executed as designed without any complications and increased the
effective fracture dimensions and overall contact area within the
reservoir compared to sand and used significantly less frac water for
placement.
-- A Permian basin operator analyzed a set of wells that were completed two
years ago, where a portion were treated using SCALEGUARD®. The operator
found that the wells treated with SCALEGUARD were still releasing the
inhibitor levels as designed. In addition, the operator visually
examined the internal elements of separators from both of these wells,
finding the non-SCALEGUARD well separators contained significant scale
accumulation while the SCALEGUARD well separators had no scale build-up,
thereby lowering lease operating expenses for the operator.
-- SCALEGUARD ULTRA, a new and highly concentrated proppant-delivered
scale-inhibiting technology, successfully completed a field trial in the
Permian basin. SCALEGUARD ULTRA was mixed with sand during pumping
operations, and initial results show the technology is performing as
expected. Additional field trials are planned in the upcoming quarter.
-- In Alaska, a major operator pumped CARBONRT in multiple wells. CARBONRT
identifies near-wellbore proppant placement in various applications
without the disposal cost and handling risks of radioactive tracers.
Post treatment logs were used to determine the fracture height compared
to predictive models. This E&P operator will continue to employ CARBONRT
on future jobs to calibrate its fracture models and corresponding log
results to help optimize its completion program.
-- CARBONRT ULTRA technology, a highly concentrated traceable proppant, was
used for the first time in Argentina on a vertical, discovery well. The
client mixed the traceable proppant with sand and will use CARBONRT
ULTRA log analysis to determine fracture height and monitor productivity
over the life of the well.
-- Another foundry was converted to ACCUCAST® from silica sand. The newly
established OSHA Permissible Exposure Limits (PEL) to improve worker
safety by limiting silica dust exposure continues to drive increased
client interest in ACCUCAST as a replacement to silica sand for
foundries. By using our high-performance ceramic casting media,
foundries can eliminate employees' exposure to respirable silica dust.
Beyond the improved safety benefits, ACCUCAST media creates castings
that are much cleaner than those produced in silica sand and with
improved dimensions. ACCUCAST also significantly lowers total foundry
operating cost.
-- CARBO Industrial Technologies added two new products to its CARBOGRIND®
offering. The performance success of the products resulted in the gain
of four new international mining clients. According to the new
customers, CARBOGRIND is reducing media consumption up to 50%, greatly
improving milling performance, lowering shipping and handling costs and
minimizing environmental impact.
-- ASSETGUARD entered the Canadian market. GROUNDGUARD® and other products
are being provided to a multi-sector service company. This relationship
allows ASSETGUARD to expand its geographic market while providing the
service company superior products for the execution of their services to
their end clients.
Outlook
CEO Gary Kolstad commented on the outlook for CARBO stating, "We continue to anticipate full year 2018 revenue of approximately $250 million. Based on the visibility we have today, we believe the second quarter of 2018 will result in increased revenue and operating cash, both sequentially and year-on-year. All areas of our business are expected to improve in the second quarter of 2018. Consistent with the results of the first quarter, we expect the continued growth in revenue to result in strong Adjusted EBITDA incremental margins year-on-year.
"There are a number of oilfield ceramic technology jobs scheduled for the second and third quarters of 2018, including several KRYPTOSPHERE HD jobs.
"The first quarter witnessed some modest pricing gains in base ceramic both sequentially and year-on-year. Although base ceramic sales volumes remain at historical lows, 2018 sales volumes are tracking ahead of 2017.
"With our Northeast sand project ramping up, we have expanded our frac sand capacity to approximately 1.4 million tons annually. We continue to pursue additional opportunities that would increase our frac sand capacity through 'asset-lite' business models.
"Sales of our industrial ceramic media and in our contract manufacturing sector should see a strong increase for the second and third quarters of 2018. During the first quarter of 2018, we increased our sales and business development resources to continue to execute on our industrial growth plans.
"We anticipate continued growth in our environmental business, ASSETGUARD, as product sales continue to grow and we focus on growing sales in industries outside of the oilfield.
"With industry activity expectations for the next two quarters, and a couple of large KRYPTOSPHERE HD jobs having been recently awarded, we are still targeting positive EBITDA for 2018 along with maintaining a strong cash balance," Mr. Kolstad concluded.
Conference Call
As previously announced, a conference call to discuss CARBO's first quarter 2018 results is scheduled for today at 10:30 a.m. Central Time (11:30 a.m. Eastern). Due to historical high call volume, CARBO is offering participants the opportunity to register in advance for the conference by accessing the following website:
http://dpregister.com/10119223
Registered participants will immediately receive an email with a calendar reminder and a dial-in number and PIN that will allow them immediate access to the call.
Participants who do not wish to pre-register for the call may dial in using (877) 232-2832 (for U.S. callers), (855) 669-9657 (for Canadian callers) or (412) 542-4138 (for international callers) and ask for the "CARBO Ceramics" call. The conference call also can be accessed through CARBO's website, www.carboceramics.com.
A telephonic replay of the earnings conference call will be available through May 3(rd), 2018 at 9:00 a.m. Eastern Time. To access the replay, please dial (877)-344-7529 (for U.S. callers), (855) 669-9658 (for Canadian callers) or (412) 317-0088 (for international callers). Please reference conference number 10119223. Interested parties may also access the archived webcast of the earnings teleconference through CARBO's website approximately two hours after the end of the call.
About CARBO
CARBO (NYSE: CRR) is a global technology company that provides products and services to the oil and gas and industrial markets to enhance value for its clients.
CARBO Oilfield Technologies - is a global leader that provides engineered solutions in its Design, Build, and Optimize the Frac® technology businesses, delivering important value to E&P operators by increasing well production and EUR. Oilfield Technologies is the world's largest producer of high quality ceramic proppant, provides one of the industry's most widely used fracture simulation software, has proprietary technology that provides fracture diagnostics and production assurance, and offers consulting services for fracture design and completion optimization. The Company also provides a range of technology solutions for spill prevention and containment.
Its products and services are sold to operators of oil and natural gas wells and to oilfield service companies for use in the hydraulic fracturing of natural gas and oil wells.
CARBO Industrial Technologies - is a leading provider of high-performance industrial ceramic media products that are engineered to increase process efficiency, improve end-product quality and reduce operating costs.
Its products and services are primarily sold to industrial companies that work in manufacturing and mineral processing.
For more information, please visit www.carboceramics.com.
Forward-Looking Statements
The statements in this news release that are not historical statements, including statements regarding our future financial and operating performance and liquidity and capital resources, are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as "may", "will", "estimate", "intend", "continue", "believe", "expect", "anticipate", "should", "could", "potential", "opportunity", or other similar terminology. All forward-looking statements are based on management's current expectations and estimates, which involve risks and uncertainties that could cause actual results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, changes in the demand for, or price of, oil and natural gas, changes in the cost of raw materials and natural gas used in manufacturing our products, risks related to our ability to access needed cash and capital, our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants, our ability to manage distribution costs effectively, changes in demand and prices charged for our products, risks of increased competition, technological, manufacturing and product development risks, our dependence on and loss of key customers and end users, changes in foreign and domestic government regulations, including environmental restrictions on operations and regulation of hydraulic fracturing, changes in foreign and domestic political and legislative risks, risks of war and international and domestic terrorism, risks associated with foreign operations and foreign currency exchange rates and controls, weather-related risks and other risks and uncertainties. Additional factors that could affect our future results or events are described from time to time in our reports filed with the Securities and Exchange Commission (the "SEC"). Please see the discussion set forth under the caption "Risk Factors" in our most recent annual report on Form 10-K, and similar disclosures in subsequently filed reports with the SEC. We assume no obligation to update forward-looking statements, except as required by law.
Note on Non-GAAP Financial Measures
This press release includes unaudited non-GAAP financial measures, including EBITDA and Adjusted EBITDA. We present non-GAAP measures when our management believes that the additional information provides useful information about our operating performance. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See the table entitled "Reconciliation of Reported Net Loss to EBITDA and Adjusted EBITDA" below and the accompanying text for an explanation of the non-GAAP financial measures and a reconciliation of the non-GAAP financial measures to the comparable GAAP measures.
-tables follow -
Three Months Ended
March 31,
2018 2017
---- ----
(In thousands except per share)
Revenues $49,367 $34,670
Cost of sales (see Cost of Sales Detail table below) 59,382 54,128
--------------------------------------------------- ------ ------
Gross loss (10,015) (19,458)
SG&A expenses 10,221 10,797
Gain on disposal or impairment of assets (4) -
---------------------------------------- --- ---
Operating loss (20,232) (30,255)
Other expense, net (2,040) (1,901)
------------------ ------ ------
Loss before income taxes (22,272) (32,156)
Income tax expense - 288
------------------ --- ---
Net loss $(22,272) $(32,444)
-------- -------- --------
Loss per share:
Basic $(0.83) $(1.22)
----- ------ ------
Diluted $(0.83) $(1.22)
------- ------ ------
Average shares outstanding:
Basic 26,789 26,607
----- ------ ------
Diluted 26,789 26,607
------- ------ ------
Depreciation and amortization $9,194 $12,430
----------------------------- ------ -------
Cost of Sales Detail Three Months Ended
(In thousands) March 31,
2018 2017
---- ----
Primary cost of sales $49,537 $42,025
Slowing and idling production 9,723 11,212
(Gain) loss on derivative instruments (218) 891
Other charges 340 -
------------- --- ---
Total Cost of Sales $59,382 $54,128
------------------- ------- -------
Product Sales Volumes Three Months Ended
(in million lbs)
March 31,
2018 2017
---- ----
Ceramic (excluding Russia) * 74 64
Northern White Sand 637 370
------------------- --- ---
*Russian plant sold in
September 2017
Reconciliation of Reported Net Loss to EBITDA and Adjusted EBITDA Three Months Ended
(In thousands) March 31,
2018 2017
---- ----
Net loss $(22,272) $(32,444)
Interest expense, net 2,017 2,088
Income tax expense - 288
Depreciation and amortization (1) 9,025 11,882
-------------------------------- ----- ------
EBITDA $(11,230) $(18,186)
Gain on disposal or impairment of assets (4) -
Other charges 340 -
(Gain) loss on derivative instruments (218) 891
------------------------------------- ---- ---
Adjusted EBITDA $(11,112) $(17,295)
--------------- -------- --------
Adjusted EBITDA is used by management to
evaluate and assess our operational
results, and we believe that Adjusted
EBITDA allows investors to evaluate and
assess our operational results. Adjusted
EBITDA excludes various charges primarily
related to the downturn in the energy
industry.
(1) Depreciation and amortization
for the three months ended
March 31, 2018 and 2017
excludes $169 and $548,
respectively, of amortization
of debt issuance costs and debt
discount, which is included in
interest expense, net, above.
Balance Sheet Information
March 31, December 31,
2018 2017
---- ----
(in thousands)
Assets
------
Cash and cash equivalents $60,749 $68,169
Restricted cash (current) 5,528 6,935
Other current assets 114,881 120,693
Restricted cash (long-term) 3,857 3,281
Property, plant and equipment, net 315,684 324,186
Goodwill 3,500 3,500
Intangible and other assets, net 12,979 13,834
-------------------------------- ------ ------
Total assets $517,178 $540,598
------------ -------- --------
Liabilities and Shareholders' Equity
------------------------------------
Derivative instruments $1,933 $2,537
Other current liabilities 37,979 39,894
Deferred income taxes 234 230
Long-term debt and related parties notes payable, net 87,908 87,738
Other long-term liabilities 5,149 4,434
Shareholders' equity 383,975 405,765
-------------------- ------- -------
Total liabilities and shareholders' equity $517,178 $540,598
------------------------------------------ -------- --------
Contact:
Mark Thomas, Director, Investor Relations
(281) 921-6458
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SOURCE CARBO Ceramics Inc.
