Newpark Resources Reports Fourth Quarter 2018 Results
THE WOODLANDS, Texas, Feb. 7, 2019 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its fourth quarter ended December 31, 2018. Total revenues for the fourth quarter of 2018 were $247.7 million compared to $235.3 million for the third quarter of 2018 and $204.4 million for the fourth quarter of 2017. Income from continuing operations for the fourth quarter of 2018 was $10.6 million, or $0.11 per diluted share, compared to $3.6 million, or $0.04 per diluted share, for the third quarter of 2018, and $7.9 million, or $0.09 per diluted share, for the fourth quarter of 2017. Fourth quarter 2018 results include the impact of the following:
-- $2.0 million of pre-tax charges in the U.S. Fluids Systems business
($1.6 million after-tax) consisting primarily of severance and related
charges associated with cost optimization efforts;
-- $0.5 million of non-capitalizable expenses in the U.S. Fluids Systems
business ($0.4 million after-tax) related to the continuation of the
completion fluids facility conversion in the Port of Fourchon. With the
conclusion of Phase I of this project, the facility is now operational,
enabling us to provide both drilling and completion fluids to the
deepwater Gulf of Mexico market.
Combined, the impact of the above items resulted in a $2.5 million reduction in operating income for the quarter and a $2.0 million reduction in income from continuing operations ($0.02 per diluted share).
Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're extremely pleased with the performance of our Mats segment in the quarter, and in Fluids, we are seeing meaningful progress in the execution of our long-term strategy, which we believe is setting the course for improvements going forward.
"The Mats & Integrated Services segment achieved a quarterly record of $70 million in revenues in the fourth quarter. The strong fourth quarter results benefited from elevated year-end demand from the utility sector, which contributed to a quarterly record of $24 million of revenues from direct sales. In addition, we experienced strong rental and service demand across industries, benefiting in part from heavy rainfalls in the southern U.S., which contributed to a quarterly record of $46 million of revenues from rental and services," added Howes. "With the exceptionally strong top line performance, segment operating margin improved to 30%.
"In Fluids Systems, fourth quarter revenues for the segment came in at $178 million, a 2% sequential decrease, driven primarily by the slowdown in Canada and a delay in the start of projects in the deepwater Gulf of Mexico, as planned projects were pushed from the fourth quarter to the first quarter. Internationally, revenues were relatively in-line sequentially, as the anticipated declines in Kuwait, Albania, and Brazil were substantially offset by broad-based improvements across other markets," added Howes. "Despite the modestly softer Fluids Systems revenues, segment operating income remained in line with the prior quarter. As highlighted, the fourth quarter included the impact of $2.5 million of charges, primarily attributable to severance and other charges related to our ongoing cost optimization efforts.
"Benefiting from the stronger operational performance and reductions in working capital, we generated $43 million of cash from operating activities in the fourth quarter, which facilitated a $27 million reduction in outstanding debt in the quarter," concluded Howes.
Fluids Systems International Contract Award
Following a recent tender process with Kuwait Oil Company, the Company has received notification of two new contract awards to provide drilling and completion fluids, along with related services, covering a five-year term. The initial revenue value of the combined awards is approximately $165 million and expands the Company's presence to include a second base of operations in Northern Kuwait. The awards remain subject to contract execution, which is expected to be completed in the first quarter of 2019.
Segment Results
The Fluids Systems segment generated revenues of $177.7 million for the fourth quarter of 2018 compared to $181.0 million for the third quarter of 2018 and $162.4 million for the fourth quarter of 2017. Segment operating income was $8.2 million for the fourth quarter of 2018 compared to $8.3 million for the third quarter of 2018 and $7.4 million for the fourth quarter of 2017. Operating income for the fourth quarter of 2018 includes $2.0 million of charges, consisting primarily of severance and related costs and $0.5 million of non-capitalizable expenses related to the conversion of a drilling fluids facility into a completion fluids facility.
The Mats and Integrated Services segment generated revenues of $69.9 million for the fourth quarter of 2018 compared to $54.4 million for the third quarter of 2018 and $42.0 million for the fourth quarter of 2017. Segment operating income was $20.7 million for the fourth quarter of 2018 compared to $12.9 million for the third quarter of 2018 and $11.7 million for the fourth quarter of 2017.
Conference Call
Newpark has scheduled a conference call to discuss fourth quarter 2018 results and its near-term operational outlook, which will be broadcast live over the Internet, on Friday, February 8, 2019 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 February 22, 2019 and may be accessed by dialing 201-612-7415 and using pass code 13686231#. 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, 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
Twelve Months Ended
(In thousands, except per share
data) December September December December December
31, 30, 31, 31, 31,
2018 2018 2017 2018 2017
---
Revenues $
247,664 $
235,329 $
204,389 $
946,548 $
747,763
Cost of revenues 197,310 194,730 165,291 766,975 607,899
Selling, general and
administrative expenses 29,645 29,820 29,541 115,127 108,838
Other operating (income) loss,
net 186 725 (283) 888 (410)
Operating income 20,523 10,054 9,840 63,558 31,436
Foreign currency exchange
(gain) loss 822 (89) 951 1,416 2,051
Interest expense, net 4,205 3,668 3,028 14,864 13,273
Income from continuing
operations before income taxes 15,496 6,475 5,861 47,278 16,112
Provision (benefit) for income
taxes 4,927 2,831 (2,056) 14,997 4,893
Income from continuing
operations 10,569 3,644 7,917 32,281 11,219
Loss from disposal of
discontinued operations, net
of tax (17,367) (17,367)
Net income (loss) $
10,569 $
3,644 $
(9,450) $
32,281 $
(6,148)
Calculation of EPS:
---
Income from continuing
operations -basic and diluted $
10,569 $
3,644 $
7,917 $
32,281 $
11,219
Weighted average common shares
outstanding -basic 90,640 90,526 87,414 89,996 85,421
Dilutive effect of stock
options and restricted stock
awards 1,938 2,151 2,580 2,385 2,554
Dilutive effect of 2021
Convertible Notes 905 544
Weighted average common shares
outstanding -diluted 92,578 93,582 89,994 92,925 87,975
Income per common share -
diluted:
Income from continuing
operations $
0.11 $
0.04 $
0.09 $
0.35 $
0.13
Loss from discontinued
operations (0.20) (0.20)
Net income (loss) $
0.11 $
0.04 $
(0.11) $
0.35 $
(0.07)
Newpark Resources, Inc.
Operating Segment Results
(Unaudited)
Three Months Ended Twelve Months Ended
(In thousands) December September December December December
31, 30, 31, 31, 31,
2018 2018 2017 2018 2017
---
Revenues
Fluids systems $
177,726 $
180,970 $
162,404 $
715,813 $
615,803
Mats and integrated
services 69,938 54,359 41,985 230,735 131,960
Total revenues $
247,664 $
235,329 $
204,389 $
946,548 $
747,763
Operating income (loss)
Fluids systems $
8,245 $
8,288 $
7,435 $
40,337 $
27,580
Mats and integrated
services 20,740 12,925 11,729 60,604 40,491
Corporate office (8,462) (11,159) (9,324) (37,383) (36,635)
Operating income $
20,523 $
10,054 $
9,840 $
63,558 $
31,436
Segment operating margin
Fluids systems 4.6
% 4.6
% 4.6
% 5.6
% 4.5
%
Mats and integrated 29.7
services % 23.8
% 27.9
% 26.3
% 30.7
%
Newpark Resources, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share
data) December 31, December 31,
2018 2017
--- ---
ASSETS
Cash and cash equivalents $
56,118 $
56,352
Receivables, net 254,394 265,866
Inventories 196,896 165,336
Prepaid expenses and other
current assets 15,904 17,483
Total current assets 523,312 505,037
Property, plant and equipment,
net 316,293 315,320
Goodwill 43,832 43,620
Other intangible assets, net 25,160 30,004
Deferred tax assets 4,516 4,753
Other assets 2,741 3,982
Total assets $
915,854 $
902,716
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $
2,522 $
1,518
Accounts payable 90,607 88,648
Accrued liabilities 48,797 68,248
Total current liabilities 141,926 158,414
Long-term debt, less current
portion 159,225 158,957
Deferred tax liabilities 37,486 31,580
Other noncurrent liabilities 7,536 6,285
Total liabilities 346,173 355,236
Common stock, $0.01 par value
(200,000,000 shares authorized
and 106,362,991 and 104,571,839
shares issued, respectively) 1,064 1,046
Paid-in capital 617,276 603,849
Accumulated other comprehensive
loss (67,673) (53,219)
Retained earnings 148,802 123,375
Treasury stock, at cost
(15,530,952 and 15,366,504
shares, respectively) (129,788) (127,571)
Total stockholders' equity 569,681 547,480
Total liabilities and
stockholders' equity $
915,854 $
902,716
Newpark Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Twelve Months Ended December 31,
(In thousands) 2018 2017
--- ---
Cash flows from operating activities:
Net income $
32,281 $
(6,148)
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and
amortization 45,899 39,757
Stock-based
compensation expense 10,361 10,843
Provision for
deferred income
taxes 236 (10,350)
Net provision for
doubtful accounts 2,849 1,481
Loss on sale of a
business - 21,983
Gain on sale of
assets (1,821) (5,478)
Gain on insurance
recovery (606)
Amortization of
original issue
discount and debt
issuance costs 5,510 5,345
Change in assets and liabilities:
(Increase) decrease
in receivables (7,388) (73,722)
(Increase) decrease
in inventories (30,352) (15,097)
(Increase) decrease
in other assets 1,055 986
Increase (decrease)
in accounts payable 2,449 14,153
Increase (decrease)
in accrued
liabilities and
other 2,930 54,628
Net cash provided by
operating activities 63,403 38,381
Cash flows from investing activities:
Capital expenditures (45,141) (31,371)
Refund of proceeds
from sale of a
business (13,974)
Proceeds from sale of
property, plant and
equipment 2,612 7,747
Proceeds from
insurance property
claim 1,000
Business
acquisitions, net of
cash acquired (249) (44,750)
Net cash used in
investing activities (55,752) (68,374)
Cash flows from financing activities:
Borrowings on lines
of credit 347,613 176,267
Payments on lines of
credit (352,582) (93,700)
Payment on 2017
Convertible Notes - (83,252)
Debt issuance costs (149) (955)
Proceeds from
employee stock plans 3,874 2,424
Purchases of treasury
stock (3,870) (3,239)
Other financing
activities 601 165
Net cash used in
financing activities (4,513) (2,290)
Effect of exchange
rate changes on cash (4,332) 2,444
Net decrease in cash,
cash equivalents,
and restricted cash (1,194) (29,839)
Cash, cash
equivalents, and
restricted cash at
beginning of period 65,460 95,299
Cash, cash
equivalents, and
restricted cash at
end of period $
64,266 $
65,460
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,
2018 2018 2017 2018 2017
---
Net income (loss)
(GAAP) (1) $
10,569 $
3,644 $
(9,450) $
32,281 $
(6,148)
Loss from disposal of
discontinued
operations, net of
tax 17,367 17,367
Interest expense, net 4,205 3,668 3,028 14,864 13,273
Provision (benefit)
for income taxes 4,927 2,831 (2,056) 14,997 4,893
Depreciation and
amortization 11,553 11,591 10,759 45,899 39,757
EBITDA (non-GAAP) (1) $
31,254 $
21,734 $
19,648 $
108,041 $
69,142
(1) Net income and EBITDA for the three
months ended December 31, 2018
include $2.0 million of charges,
consisting primarily of severance
costs and $0.5 million of non-
capitalizable expenses related to
the conversion of a drilling
fluids facility into a completion
fluids facility. Net income and
EBITDA for the three months ended
September 30, 2018 include a
corporate office charge of $1.8
million related to 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 related to
the July 2018 fire at our Kenedy,
Texas drilling fluids facility,
and $0.6 million of non-
capitalizable expenses related to
the conversion of a drilling
fluids facility into a completion
fluids facility. The impact of
these items to net income and
EBITDA was $6.8 million for the
twelve months ended December 31,
2018.
Fluids Systems
Three Months Ended Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 2018 2017
---
Operating income
(GAAP) (1) $
8,245 $
8,288 $
7,435 $
40,337 $
27,580
Depreciation and
amortization 5,137 5,178 5,344 20,922 21,566
EBITDA (non-GAAP) (1) 13,382 13,466 12,779 61,259 49,146
Revenues 177,726 180,970 162,404 715,813 615,803
Operating Margin 4.6 4.6 4.6 5.6 4.5
(GAAP) % % % % %
EBITDA Margin (non- 7.5 7.4 7.9 8.6 8.0
GAAP) % % % % %
(1) Operating income and EBITDA for
the three months ended
December 31, 2018 include $2.0
million of charges, consisting
primarily of severance costs
and $0.5 million of non-
capitalizable expenses related
to the conversion of a
drilling fluids facility into
a completion fluids facility.
Operating income and EBITDA
for the three 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 conversion of a
drilling fluids facility into
a completion fluids facility.
The impact of these items to
operating income and EBITDA
was $4.9 million for the
twelve months ended December
31, 2018.
Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)
Mats and Integrated
Services
Three Months Ended Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 2018 2017
--- ---
Operating income
(GAAP) $
20,740 $
12,925 $
11,729 $
60,604 $
40,491
Depreciation and
amortization 5,533 5,427 4,578 21,321 14,991
EBITDA (non-GAAP) 26,273 18,352 16,307 81,925 55,482
Revenues 69,938 54,359 41,985 230,735 131,960
Operating Margin 29.7 23.8 27.9 26.3 30.7
(GAAP) % % % % %
===
EBITDA Margin (non- 37.6 33.8 38.8 35.5 42.0
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) December 31, 2018 December 31, 2017
---
Current debt $
2,522 $
1,518
Long-term debt, less
current portion 159,225 158,957
Total Debt 161,747 160,475
Total stockholders'
equity 569,681 547,480
Total Capital $
731,428 $
707,955
Ratio of Total Debt to
Capital 22.1
% 22.7
%
Total Debt $
161,747 $
160,475
Less: cash and cash
equivalents (56,118) (56,352)
Net Debt 105,629 104,123
Total stockholders'
equity 569,681 547,480
Total Capital, Net of
Cash $
675,310 $
651,603
Ratio of Net Debt to
Capital 15.6
% 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.
