Newpark Resources Reports Third Quarter 2018 Results

Newpark Resources Reports Third Quarter 2018 Results

Company provides update on deepwater Gulf of Mexico entry

PR Newswire

THE WOODLANDS, Texas, Oct. 25, 2018 /PRNewswire/ -- Newpark Resources, Inc. 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

30,

2018



June 30,

2018



September

30,

2017



September

30,

2018



September

30,

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

30,

2018



June 30,

2018



September

30,

2017



September

30,

2018



September

30,

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,

2018



December 31,

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,

2018



June 30,

 2018



September 30,

2017



September 30,

2018



September 30,

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,

2018



June 30,

2018



September 30,

2017



September 30,

2018



September 30,

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 (GAAP)

4.6

%



7.4

%



4.8

%



6.0

%



4.4

%

EBITDA Margin (non-GAAP)

7.4

%



10.4

%



8.1

%



8.9

%



8.0

%





(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,

2018



June 30,

2018



September 30,

2017



September 30,

2018



September 30,

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 (GAAP)

23.8

%



26.3

%



31.3

%



24.8

%



32.0

%

EBITDA Margin (non-GAAP)

33.8

%



35.6

%



41.1

%



34.6

%



43.5

%

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

 

 

Cision View original content:http://www.prnewswire.com/news-releases/newpark-resources-reports-third-quarter-2018-results-300738268.html

SOURCE Newpark Resources, Inc.

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