Newpark Resources Reports Fourth Quarter 2018 Results


Mats and Integrated Services posts record quarter; Fluids Systems receives new award in Kuwait

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 envir onmental 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
31,
 2018

 

September
30,
 2018

 

December
31,
 2017

 

December
31,
 2018

 

December
31,
 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
31,
 2018

 

September
30,
 2018

 

December
31,
 2017

 

December
31,
 2018

 

December
31,
 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 services

 

29.7

%

 

23.8

%

 

27.9

%

 

26.3

%

 

30.7

%

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands, except share data)

December 31,
 2018

 

December 31,
 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,
2018

 

September 30,
2018

 

December 31,
2017

 

December 31,
2018

 

December 31,
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,
2018

 

September 30,
2018

 

December 31,
2017

 

December 31,
2018

 

December 31,
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 (GAAP)

4.6

%

 

4.6

%

 

4.6

%

 

5.6

%

 

4.5

%

EBITDA Margin (non-GAAP)

7.5

%

 

7.4

%

 

7.9

%

 

8.6

%

 

8.0

%

   

(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,
2018

 

September 30,
2018

 

December 31,
2017

 

December 31,
2018

 

December 31,
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 (GAAP)

29.7

%

 

23.8

%

 

27.9

%

 

26.3

%

 

30.7

%

EBITDA Margin (non-GAAP)

37.6

%

 

33.8

%

 

38.8

%

 

35.5

%

 

42.0

%

 

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