Newpark Resources Reports Third Quarter 2018 Results
THE WOODLANDS, Texas, Oct. 25, 2018 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its third quarter ended September 30, 2018. Total revenues for the third quarter of 2018 were $235.3 million compared to $236.3 million for the second quarter of 2018 and $201.7 million for the third quarter of 2017. Net income for the third quarter of 2018 was $3.6 million, or $0.04 per diluted share, compared to $10.8 million, or $0.12 per diluted share, for the second quarter of 2018, and $2.7 million, or $0.03 per diluted share, for the third quarter of 2017. Third quarter 2018 results include the impact of the following:
-- $1.8 million of pre-tax charges in the Corporate office ($1.8 million
after-tax) associated with the retirement and transition of our Senior
Vice President, General Counsel and Chief Administrative Officer,
primarily reflecting the impact of modifications to certain outstanding
stock-based and other incentive awards;
-- $1.1 million of pre-tax charges in the Brazil Fluids Systems business
($1.1 million after-tax), primarily related to severance costs
associated with our planned workforce reductions in the fourth quarter
of 2018 in connection with the completion of the current contract with
Petrobras, which is scheduled to conclude in December 2018;
-- $0.8 million of pre-tax charges in the U.S. Fluids Systems business
($0.6 million after-tax), associated with the July 2018 fire at our
Kenedy, Texas drilling fluids facility; and
-- $0.6 million of non-capitalizable expenses in the U.S. Fluids Systems
business ($0.5 million after-tax), related to the upgrade and conversion
of a drilling fluids facility into a completion fluids facility, which
is expected to be operational by the end of 2018. Located in the Port of
Fourchon, this adjacent facility complements our primary Gulf of Mexico
deepwater shorebase and supports our product line expansion.
Combined, the impact of the above items resulted in a $4.3 million reduction in operating income and a $4.0 million reduction in net income ($0.04 per diluted share).
Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're pleased to report that both segments are continuing to make meaningful strides in the execution of our long-term strategy, although our Fluids Systems segment experienced some softness in the quarter. In addition, we began to repatriate excess cash from our foreign subsidiaries in the quarter, which facilitated a reduction in our outstanding debt.
"In Fluids Systems, third quarter revenues for the segment came in at $181 million, a 1% sequential improvement. North America revenues improved by 7% sequentially, as improvement in the North America land markets were partially offset by a sequential reduction in Gulf of Mexico activities. We successfully completed our second Kronos deepwater project with Shell Oil in the quarter and have since been awarded two additional wells, which are scheduled to be drilled over the next two quarters. Despite the continued progress in our deepwater market penetration efforts, we experienced project delays with other offshore customers, which negatively impacted the Gulf of Mexico revenue contribution for the quarter. Eastern Hemisphere revenues declined by $5 million sequentially from the near-record level achieved last quarter, reflecting the anticipated reductions in Romania, Kuwait and Australia.
"Following the strong margin improvement in the prior quarter, our Fluids Systems operating margin declined to 5% in the third quarter, reflecting the impact of the $2.5 million of charges in the quarter, as well as the timing of certain expenses, including elevated bad debt charges related to revenues from prior years in our foreign operations," added Howes. "With the scheduled completion of the current Petrobras contract in December 2018, we expect a reduction in our Latin America revenues going forward, but only a minimal impact to operating income. Meanwhile, we're continuing to make organizational investments to support our total fluids strategy, which are crucial to our efforts to capitalize on our capabilities, infrastructure, and strong position to expand our total addressable market and improve our long-term Fluids Systems segment profitability.
"In the Mats & Integrated Services segment, we continue to see the benefits from our market diversification strategy, which provides meaningful growth opportunities and added stability, as reflected by the balanced contribution across both E&P and non-E&P markets. Third quarter mats revenues came in at $54 million, modestly ahead of our expectations. The seasonal decline in the utility transmission rental market was as anticipated, with the impact in this end-market somewhat offset by the continued market penetration in pressure pumping applications, where we believe our systems provide a superior work surface for gravity-fed sand systems," added Howes. "With the increasing momentum more broadly across both E&P and non-E&P markets, as well as weather-driven demand in the southern U.S, we feel confident that fourth quarter revenues for the segment will grow beyond the levels achieved in recent quarters."
Segment Results
The Fluids Systems segment generated revenues of $181.0 million for the third quarter of 2018 compared to $179.7 million for the second quarter of 2018 and $166.7 million for the third quarter of 2017. Segment operating income was $8.3 million for the third quarter of 2018 compared to $13.3 million for the second quarter of 2018 and $7.9 million for the third quarter of 2017. Operating income for the third quarter of 2018 includes $1.1 million of charges in Brazil primarily related to severance costs associated with our planned workforce reductions in the fourth quarter of 2018 in connection with the scheduled completion of the current contract with Petrobras, $0.8 million of charges associated with the July 2018 fire at our Kenedy, Texas drilling fluids facility, and $0.6 million of non-capitalizable expenses related to the upgrade and conversion of a drilling fluids facility into a completion fluids facility.
The Mats and Integrated Services segment generated revenues of $54.4 million for the third quarter of 2018 compared to $56.5 million for the second quarter of 2018 and $34.9 million for the third quarter of 2017. Segment operating income was $12.9 million for the third quarter of 2018 compared to $14.9 million for the second quarter of 2018 and $10.9 million for the third quarter of 2017.
Conference Call
Newpark has scheduled a conference call to discuss third quarter 2018 results and near-term operational outlook, which will be broadcast live over the Internet, on Friday, October 26, 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 Resources 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 9, 2018 and may be accessed by dialing 201-612-7415 and using pass code 13683325#. 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 fluids and chemistry solutions in the oilfield, and engineered worksite and access solutions used in various 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 of 1995, as amended. 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. Words such as "will," "may," "could," "would," "should," "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. 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, 2017, 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, our ability to replace existing contracts, 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 or the impact of tariffs on the cost of such raw materials, the availability of skilled personnel, our market competition, our ability to expand our product and service offerings and enter new customer markets with our existing products, compliance with legal and regulatory matters, including environmental regulations, the availability of insurance and the risks and limitations of our insurance coverage, the ongoing impact of the U.S. Tax Cuts and Jobs Act and the refinement of provisional estimates, 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. We assume no obligation to update, amend or clarify publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities laws. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this news release might not occur.
Newpark Resources, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
Nine Months Ended
(In thousands, except per
share data) September June 30, September September September
30, 2018 30, 30, 30,
2018 2017 2018 2017
---
Revenues $
235,329 $
236,262 $
201,663 $
698,884 $
543,374
Cost of revenues 194,730 188,480 164,587 569,665 442,608
Selling, general and
administrative expenses 29,820 28,708 27,270 85,482 79,297
Other operating (income)
loss, net 725 (69) (76) 702 (127)
Operating income 10,054 19,143 9,882 43,035 21,596
Foreign currency exchange
(gain) loss (89) 458 174 594 1,100
Interest expense, net 3,668 3,691 3,586 10,659 10,245
Income from operations before
income taxes 6,475 14,994 6,122 31,782 10,251
Provision for income taxes 2,831 4,148 3,469 10,070 6,949
Net income $
3,644 $
10,846 $
2,653 $
21,712 $
3,302
Calculation of EPS:
---
Net income -basic and
diluted $
3,644 $
10,846 $
2,653 $
21,712 $
3,302
Weighted average common
shares outstanding -basic 90,526 89,703 85,426 89,779 84,749
Dilutive effect of stock
options and restricted stock
awards 2,151 2,823 2,251 2,535 2,545
Dilutive effect of 2021
Convertible Notes 905 1,265 727
Weighted average common
shares outstanding -diluted 93,582 93,791 87,677 93,041 87,294
Income per common share -
basic $
0.04 $
0.12 $
0.03 $
0.24 $
0.04
Income per common share -
diluted $
0.04 $
0.12 $
0.03 $
0.23 $
0.04
Newpark Resources, Inc.
Operating Segment Results
(Unaudited)
Three Months Ended Nine Months Ended
(In thousands) September June 30, September September September
30, 2018 30, 30, 30,
2018 2017 2018 2017
---
Revenues
Fluids systems $
180,970 $
179,738 $
166,726 $
538,087 $
453,399
Mats and integrated
services 54,359 56,524 34,937 160,797 89,975
Total revenues $
235,329 $
236,262 $
201,663 $
698,884 $
543,374
Operating income (loss)
Fluids systems $
8,288 $
13,327 $
7,930 $
32,092 $
20,145
Mats and integrated
services 12,925 14,853 10,941 39,864 28,762
Corporate office (11,159) (9,037) (8,989) (28,921) (27,311)
Operating income $
10,054 $
19,143 $
9,882 $
43,035 $
21,596
Segment operating margin
Fluids systems 4.6
% 7.4
% 4.8
% 6.0
% 4.4
%
Mats and integrated
services 23.8
% 26.3
% 31.3
% 24.8
% 32.0
%
Newpark Resources, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data) September 30, December 31,
2018 2017
--- ---
ASSETS
Cash and cash equivalents $
52,243 $
56,352
Receivables, net 264,014 265,866
Inventories 202,707 165,336
Prepaid expenses and other
current assets 18,016 17,483
Total current assets 536,980 505,037
Property, plant and equipment,
net 313,989 315,320
Goodwill 44,015 43,620
Other intangible assets, net 26,424 30,004
Deferred tax assets 4,024 4,753
Other assets 2,889 3,982
Total assets $
928,321 $
902,716
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $
6,453 $
1,518
Accounts payable 93,783 88,648
Accrued liabilities 44,730 68,248
Total current liabilities 144,966 158,414
Long-term debt, less current
portion 181,945 158,957
Deferred tax liabilities 33,347 31,580
Other noncurrent liabilities 7,912 6,285
Total liabilities 368,170 355,236
Common stock, $0.01 par value
(200,000,000 shares authorized
and 106,324,356 and 104,571,839
shares issued, respectively) 1,063 1,046
Paid-in capital 615,351 603,849
Accumulated other comprehensive
loss (64,767) (53,219)
Retained earnings 138,233 123,375
Treasury stock, at cost
(15,524,613 and 15,366,504
shares, respectively) (129,729) (127,571)
Total stockholders' equity 560,151 547,480
Total liabilities and
stockholders' equity $
928,321 $
902,716
Newpark Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
(In thousands) 2018 2017
--- ---
Cash flows from operating activities:
Net income $
21,712 $
3,302
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and
amortization 34,346 28,998
Stock-based
compensation expense 8,497 8,458
Provision for deferred
income taxes (2,149) (3,489)
Net provision for
doubtful accounts 2,708 1,386
Gain on sale of assets (552) (4,896)
Amortization of
original issue
discount and debt
issuance costs 4,075 4,068
Change in assets and liabilities:
Increase in
receivables (16,531) (73,512)
Increase in
inventories (34,829) (17,348)
Increase in other
assets (1,476) (1,621)
Increase in accounts
payable 7,106 17,996
Increase (decrease) in
accrued liabilities
and other (2,791) 52,421
Net cash provided by
operating activities 20,116 15,763
Cash flows from investing activities:
Capital expenditures (32,814) (21,888)
Refund of proceeds
from sale of a
business (13,974)
Proceeds from sale of
property, plant and
equipment 1,477 2,233
Business acquisitions,
net of cash acquired (249)
Net cash used in
investing activities (45,560) (19,655)
Cash flows from financing activities:
Borrowings on lines of
credit 275,801 84,900
Payments on lines of
credit (254,116) (21,400)
Debt issuance costs (149) (342)
Proceeds from employee
stock plans 3,813 2,107
Purchases of treasury
stock (3,811) (2,761)
Other financing
activities 2,140 1,487
Net cash provided by
financing activities 23,678 63,991
Effect of exchange
rate changes on cash (3,798) 2,371
Net increase in cash,
cash equivalents, and
restricted cash (5,564) 62,470
Cash, cash
equivalents, and
restricted cash at
beginning of period 65,460 95,299
Cash, cash
equivalents, and
restricted cash at
end of period $
59,896 $
157,769
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,
2018 2018 2017 2018 2017
---
Net income (GAAP) (1) $
3,644 $
10,846 $
2,653 $
21,712 $
3,302
Interest expense, net 3,668 3,691 3,586 10,659 10,245
Provision for income
taxes 2,831 4,148 3,469 10,070 6,949
Depreciation and
amortization 11,591 11,484 9,754 34,346 28,998
EBITDA (non-GAAP) (1) $
21,734 $
30,169 $
19,462 $
76,787 $
49,494
(1) Net income and EBITDA for the three
months and nine months ended
September 30, 2018 include a
corporate office charge of $1.8
million associated with the
retirement and transition of our
Senior Vice President, General
Counsel and Chief Administrative
Officer, $1.1 million of charges
in Brazil primarily related to
severance costs associated with
our planned workforce reductions
in the fourth quarter of 2018 in
connection with the scheduled
completion of the current contract
with Petrobras, $0.8 million of
charges associated with the July
2018 fire at our Kenedy, Texas
drilling fluids facility, and $0.6
million of non-capitalizable
expenses related to the upgrade
and conversion of a drilling
fluids facility into a completion
fluids facility.
Fluids Systems
Three Months Ended Nine Months Ended
(In thousands) September 30, June 30, September 30, September 30, September 30,
2018 2018 2017 2018 2017
---
Operating income
(GAAP) (1) $
8,288 $
13,327 $
7,930 $
32,092 $
20,145
Depreciation and
amortization 5,178 5,317 5,540 15,785 16,221
EBITDA (non-GAAP) (1) 13,466 18,644 13,470 47,877 36,366
Revenues 180,970 179,738 166,726 538,087 453,399
Operating Margin 4.6 7.4 4.8 6.0 4.4
(GAAP) % % % % %
EBITDA Margin (non- 7.4 10.4 8.1 8.9 8.0
GAAP) % % % % %
(1) Operating income and EBITDA for
the three months and nine
months ended September 30, 2018
include $1.1 million of charges
in Brazil primarily related to
severance costs associated with
our planned workforce
reductions in the fourth
quarter of 2018 in connection
with the scheduled completion
of the current contract with
Petrobras, $0.8 million of
charges associated with the
July 2018 fire at our Kenedy,
Texas drilling fluids facility,
and $0.6 million of non-
capitalizable expenses related
to the upgrade and conversion
of a drilling fluids facility
into a completion fluids
facility.
Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)
Mats and Integrated
Services
Three Months Ended Nine Months Ended
(In thousands) September 30, June 30, September 30, September 30, September 30,
2018 2018 2017 2018 2017
--- ---
Operating income
(GAAP) $
12,925 $
14,853 $
10,941 $
39,864 $
28,762
Depreciation and
amortization 5,427 5,248 3,401 15,788 10,414
EBITDA (non-GAAP) 18,352 20,101 14,342 55,652 39,176
Revenues 54,359 56,524 34,937 160,797 89,975
Operating Margin 23.8 26.3 31.3 24.8 32.0
(GAAP) % % % % %
===
EBITDA Margin (non- 33.8 35.6 41.1 34.6 43.5
GAAP) % % % % %
===
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, 2018 December 31, 2017
---
Current debt $
6,453 $
1,518
Long-term debt, less
current portion 181,945 158,957
Total Debt 188,398 160,475
Total stockholders'
equity 560,151 547,480
Total Capital $
748,549 $
707,955
Ratio of Total Debt to
Capital 25.2
% 22.7
%
Total Debt $
188,398 $
160,475
Less: cash and cash
equivalents (52,243) (56,352)
Net Debt 136,155 104,123
Total stockholders'
equity 560,151 547,480
Total Capital, Net of
Cash $
696,306 $
651,603
Ratio of Net Debt to
Capital 19.6
% 16.0
%
Contacts:
Gregg Piontek
Senior Vice President and Chief Financial Officer
Newpark Resources, Inc.
gpiontek@newpark.com
281-362-6800
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SOURCE Newpark Resources, Inc.
