Newpark Resources Reports Second Quarter 2019 Results
THE WOODLANDS, Texas, July 30, 2019 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) ("Newpark" or the "Company") today announced results for its second quarter ended June 30, 2019. Total revenues for the second quarter of 2019 were $216.4 million compared to $211.5 million for the first quarter of 2019 and $236.3 million for the second quarter of 2018. Net income for the second quarter of 2019 was $4.3 million, or $0.05 per diluted share, compared to $1.3 million, or $0.01 per diluted share, for the first quarter of 2019, and $10.8 million, or $0.12 per diluted share, for the second quarter of 2018.
Paul Howes, Newpark's President and Chief Executive Officer, stated, "Despite continued softness in the U.S. oil and gas market and the impact of Spring break-up in Canada, we are pleased to report that our global Fluids Systems revenues increased by 7% sequentially, to $173 million. U.S. Fluids revenues improved 14% sequentially, to $117 million, primarily driven by a $9 million revenue increase from the deepwater Gulf of Mexico, as our offshore market penetration efforts gain traction. Outside of North America, international Fluids revenues also rebounded nicely, increasing 14% sequentially to $50 million, driven by improvements across several key markets," added Howes. "Benefiting from the stronger revenues, operating cost efficiencies following our recent international contract transitions, as well as our continuing margin improvement initiatives in our U.S. business, Fluids Systems segment operating income improved sequentially to a 7% segment operating margin in the second quarter.
"In our Mats and Integrated Services segment, the continued slowdown in the U.S. E&P market is serving to further validate our strategic focus on penetrating key non-E&P markets. We are encouraged by the progress we are making in diversifying our business, as we re-allocate assets to support our energy infrastructure market penetration efforts, including the electrical transmission and distribution, and pipeline construction and maintenance sectors. Second quarter segment revenues declined 14% sequentially to $44 million, primarily reflecting the impact of weakness in E&P customer activity. Meanwhile, heavy rainfalls and flooding in certain areas resulted in delays of scheduled energy infrastructure projects. Segment revenues were further impacted by delays in anticipated international direct mat sales, as deliveries shifted into the third quarter," added Howes. "In the face of the current market challenges, our mats business continues to exhibit operating discipline, delivering a 21% operating margin in the second quarter. Further, our expanding schedule of rental projects in the electrical transmission and distribution market is expected to provide a benefit to the mats business as we progress through the second half of the year and into 2020.
"Meanwhile, our consistent cash flow generation and strong balance sheet continues to differentiate Newpark from many oilfield service companies," added Howes. "During the second quarter, we continued to return excess capital through our share repurchase program, using $10 million to purchase outstanding shares and increasing our total first half 2019 purchases to two million shares."
Segment Results
The Fluids Systems segment generated revenues of $172.5 million for the second quarter of 2019 compared to $160.7 million for the first quarter of 2019 and $179.7 million for the second quarter of 2018. Segment operating income was $12.2 million for the second quarter of 2019 compared to $3.9 million for the first quarter of 2019 and $13.3 million for the second quarter of 2018.
The Mats and Integrated Services segment generated revenues of $43.9 million for the second quarter of 2019 compared to $50.8 million for the first quarter of 2019 and $56.5 million for the second quarter of 2018. Segment operating income was $9.3 million for the second quarter of 2019 compared to $13.5 million for the first quarter of 2019 and $14.9 million for the second quarter of 2018.
Conference Call
Newpark has scheduled a conference call to discuss second quarter 2019 results and its near-term operational outlook, which will be broadcast live over the Internet, on Wednesday, July 31, 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 August 14, 2019 and may be accessed by dialing 201-612-7415 and using pass code 13692003#. 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 other than statements of historical facts 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 that our expectations will prove to be correct 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, 2018, as well as others, could cause actual plans or 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; our international operations; our ability to attract, retain and develop qualified leaders, key employees and skilled personnel; the availability of raw materials; our cost and continued availability of borrowed funds, including noncompliance with debt covenants; operating hazards present in the oil and natural gas industry and substantial liability claims, including catastrophic well incidents; our ability to execute our business strategy and make successful business acquisitions and capital investments; our market competition; our contracts that can be terminated or downsized by our customers without penalty; our product offering expansion; our compliance with legal and regulatory matters, including environmental regulations; our legal compliance; material weaknesses in our internal control over financial reporting; the inherent limitations of insurance coverage; income taxes; the potential impairments of goodwill and long-lived intangible assets; technological developments in our industry; severe weather and seasonality; cybersecurity breaches or business system disruptions; and fluctuations in the market value of our publicly traded securities. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities laws. 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.
Contact:
Gregg Piontek
Senior 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 Six Months Ended
(In thousands,
except per share
data) June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
--- ---
Revenues $
216,412 $
211,473 $
236,262 $
427,885 $
463,555
Cost of revenues 177,933 174,976 188,480 352,909 374,935
Selling, general and
administrative
expenses 28,037 30,742 28,708 58,779 55,662
Other operating
(income) loss, net (472) 76 (69) (396) (23)
Operating income 10,914 5,679 19,143 16,593 32,981
Foreign currency
exchange (gain)
loss 990 (1,062) 458 (72) 683
Interest expense,
net 3,523 3,656 3,691 7,179 6,991
Income before income
taxes 6,401 3,085 14,994 9,486 25,307
Provision for income
taxes 2,095 1,803 4,148 3,898 7,239
Net income $
4,306 $
1,282 $
10,846 $
5,588 $
18,068
Calculation of EPS:
---
Net income -basic
and diluted $
4,306 $
1,282 $
10,846 $
5,588 $
18,068
Weighted average
common shares
outstanding - basic 89,806 90,111 89,703 89,958 89,400
Dilutive effect of
stock options and
restricted stock
awards 1,900 2,267 2,823 2,082 2,730
Dilutive effect of
2021 Convertible
Notes - 1,265 636
Weighted average
common shares
outstanding -
diluted 91,706 92,378 93,791 92,040 92,766
Net income per
common share -
basic: $
0.05 $
0.01 $
0.12 $
0.06 $
0.20
Net income per
common share -
diluted: $
0.05 $
0.01 $
0.12 $
0.06 $
0.19
Newpark Resources, Inc.
Operating Segment Results
(Unaudited)
Three Months Ended
Six Months Ended
(In thousands) June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
--- ---
Revenues
Fluids systems $
172,544 $
160,653 $
179,738 $
333,197 $
357,117
Mats and
integrated
services 43,868 50,820 56,524 94,688 106,438
Total revenues $
216,412 $
211,473 $
236,262 $
427,885 $
463,555
Operating income (loss) (1)
Fluids systems $
12,184 $
3,874 $
13,327 $
16,058 $
23,804
Mats and
integrated
services 9,276 13,538 14,853 22,814 26,939
Corporate office (10,546) (11,733) (9,037) (22,279) (17,762)
Total operating
income $
10,914 $
5,679 $
19,143 $
16,593 $
32,981
Segment operating margin
Fluids systems 7.1
% 2.4
% 7.4
% 4.8
% 6.7
%
Mats and
integrated
services 21.1
% 26.6
% 26.3
% 24.1
% 25.3
%
(1) Corporate office and Fluids
Systems operating income (loss)
for the three months ended
March 31, 2019 includes charges
of $3.4 million and $1.1
million, respectively, related
to the modification of the
Company's retirement policy and
severance costs.
Newpark Resources, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data) June 30, December 31,
2019 2018
--- ---
ASSETS
Cash and cash equivalents $
49,035 $
56,118
Receivables, net 249,197 254,394
Inventories 193,464 196,896
Prepaid expenses and other
current assets 23,671 15,904
Total current assets 515,367 523,312
Property, plant and equipment,
net 316,597 316,293
Operating lease assets 27,365
Goodwill 43,889 43,832
Other intangible assets, net 23,285 25,160
Deferred tax assets 4,632 4,516
Other assets 3,363 2,741
Total assets $
934,498 $
915,854
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $
5,657 $
2,522
Accounts payable 96,359 90,607
Accrued liabilities 42,205 48,797
Total current liabilities 144,221 141,926
Long-term debt, less current
portion 156,655 159,225
Noncurrent operating lease
liabilities 21,850
Deferred tax liabilities 36,936 37,486
Other noncurrent liabilities 8,707 7,536
Total liabilities 368,369 346,173
Common stock, $0.01 par value
(200,000,000 shares authorized
and 106,696,719 and 106,362,991
shares issued, respectively) 1,067 1,064
Paid-in capital 618,626 617,276
Accumulated other comprehensive
loss (67,873) (67,673)
Retained earnings 153,395 148,802
Treasury stock, at cost
(16,858,005 and 15,530,952
shares, respectively) (139,086) (129,788)
Total stockholders' equity 566,129 569,681
Total liabilities and
stockholders' equity $
934,498 $
915,854
Newpark Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
(In thousands) 2019 2018
--- ---
Cash flows from operating activities:
Net income $
5,588 $
18,068
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and
amortization 23,070 22,755
Stock-based
compensation expense 6,874 4,848
Provision for deferred
income taxes (1,514) 243
Net provision for
doubtful accounts 789 1,229
Gain on sale of assets (5,128) (371)
Amortization of
original issue
discount and debt
issuance costs 2,973 2,643
Change in assets and liabilities:
(Increase) decrease in
receivables 6,583 (1,185)
(Increase) decrease in
inventories 3,868 (21,459)
Increase in other
assets (5,058) (3,417)
Increase in accounts
payable 6,207 6,659
Decrease in accrued
liabilities and other (10,012) (9,326)
Net cash provided by
operating activities 34,240 20,687
Cash flows from investing activities:
Capital expenditures (23,866) (24,458)
Proceeds from sale of
property, plant and
equipment 5,708 920
Refund of proceeds
from sale of a
business - (13,974)
Business acquisitions,
net of cash acquired - (249)
Net cash used in
investing activities (18,158) (37,761)
Cash flows from financing activities:
Borrowings on lines of
credit 135,952 203,716
Payments on lines of
credit (141,317) (171,796)
Debt issuance costs (917) (11)
Proceeds from employee
stock plans 1,090 3,700
Purchases of treasury
stock (17,365) (3,074)
Other financing
activities 2,758 2,515
Net cash provided by
(used in) financing
activities (19,799) 35,050
Effect of exchange
rate changes on cash (125) (2,926)
Net increase
(decrease) in cash,
cash equivalents, and
restricted cash (3,842) 15,050
Cash, cash
equivalents, and
restricted cash at
beginning of period 64,266 65,460
Cash, cash
equivalents, and
restricted cash at
end of period $
60,424 $
80,510
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, Free Cash Flow, 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 liquidity with that of other companies in our industry. Management uses these measures to evaluate our operating performance, liquidity and capital structure. In addition, 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.
EBITDA and EBITDA Margin
The following tables reconcile the Company's net income calculated in accordance with GAAP to the non-GAAP financial measure of the Company's EBITDA:
Consolidated
Three Months Ended Six Months Ended
(In thousands) June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
---
Net income (GAAP) (1) $
4,306 $
1,282 $
10,846 $
5,588 $
18,068
Interest expense, net 3,523 3,656 3,691 7,179 6,991
Provision for income taxes 2,095 1,803 4,148 3,898 7,239
Depreciation and amortization 11,632 11,438 11,484 23,070 22,755
EBITDA (non-GAAP) (1) $
21,556 $
18,179 $
30,169 $
39,735 $
55,053
(1) Net income
and EBITDA
for the
three
months
ended March
31, 2019
include
$4.0
million of
pre-tax
charges
associated
with the
modification
of the
Company's
retirement
policy and
$0.5
million
related to
severance
costs.
Fluids Systems
Three Months Ended Six Months Ended
(In thousands) June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
---
Operating income (GAAP) (1) $
12,184 $
3,874 $
13,327 $
16,058 $
23,804
Depreciation and amortization 5,201 5,076 5,317 10,277 10,607
EBITDA (non-GAAP) (1) 17,385 8,950 18,644 26,335 34,411
Revenues 172,544 160,653 179,738 333,197 357,117
Operating Margin (GAAP) 7.1 2.4 7.4 4.8 6.7
% % % % %
EBITDA Margin (non-GAAP) 10.1 5.6 10.4 7.9 9.6
% % % % %
(1) Operating
income and
EBITDA for
the three
months
ended March
31, 2019
include
$1.1
million of
pre-tax
charges
associated
with the
modification
of the
Company's
retirement
policy and
severance
costs.
Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)
Mats and Integrated Services
Three Months Ended Six Months Ended
(In thousands) June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
--- ---
Operating income (GAAP) $
9,276 $
13,538 $
14,853 $
22,814 $
26,939
Depreciation and amortization 5,409 5,365 5,248 10,774 10,361
EBITDA (non-GAAP) 14,685 18,903 20,101 33,588 37,300
Revenues 43,868 50,820 56,524 94,688 106,438
Operating Margin (GAAP) 21.1 26.6 26.3 24.1 25.3
% % % % %
===
EBITDA Margin (non-GAAP) 33.5 37.2 35.6 35.5 35.0
% % % % %
===
Free Cash Flow
The following table reconciles the Company's net cash provided by operating activities calculated in accordance with GAAP to the non-GAAP financial measure of the Company's free cash flow:
Consolidated
Three Months Ended Six Months Ended
---
(In thousands) June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
---
Net cash provided by
operating activities
(GAAP) $
31,971 $
2,269 $
20,554 $
34,240 $
20,687
Capital expenditures (6,399) (17,467) (13,762) (23,866) (24,458)
Proceeds from sale of
property, plant and
equipment 3,937 1,771 345 5,708 920
Free Cash Flow (non-
GAAP) $
29,509 $
(13,427) $
7,137 $
16,082 $
(2,851)
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) June 30, December 31,
2019 2018
---
Current debt $
5,657 $
2,522
Long-term debt, less current portion 156,655 159,225
Total Debt 162,312 161,747
Total stockholders' equity 566,129 569,681
Total Capital $
728,441 $
731,428
Ratio of Total Debt to Capital 22.3
% 22.1
%
Total Debt $
162,312 $
161,747
Less: cash and cash equivalents (49,035) (56,118)
Net Debt 113,277 105,629
Total stockholders' equity 566,129 569,681
Total Capital, Net of Cash $
679,406 $
675,310
Ratio of Net Debt to Capital 16.7
% 15.6
%
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SOURCE Newpark Resources, Inc.
