News

Newpark Resources Reports First Quarter 2018 Results


Company reports revenues of $227 million, earnings of $0.08 per diluted share and provides an update on deployment of Kronos™ technology

THE WOODLANDS, Texas, April 26, 2018 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its first quarter ended March 31, 2018. Total revenues for the first quarter of 2018 were $227.3 million compared to $204.4 million in the fourth quarter of 2017 and $158.7 million in the first quarter of 2017. Income from continuing operations for the first quarter of 2018 was $7.2 million, or $0.08 per diluted share, compared to $7.9 million, or $0.09 per diluted share, in the fourth quarter of 2017, and a loss from continuing operations of $(1.0) million, or $(0.01) per share, in the first quarter of 2017.
Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're very pleased to report another solid quarter for both segments, posting consolidated revenues of $227 million and operating income of  $14 million in the first quarter.  In Fluids, first quarter revenues were $177 million, reflecting our highest quarterly revenue achieved since 2014.  The 9% sequential growth in revenues was largely driven by the seasonal strength in Canada, which contributed $9 million of sequential revenue growth, while our U.S. business tracked fairly in-line with market activity levels. Internationally, despite the anticipated pull-back in Brazil, revenues increased by 5%, benefitting from strength in Romania and Kuwait, as well as the start-up of the Woodside project in offshore Australia.

"Meanwhile, following the successful deployment of our Kronos system with an independent operator in the Gulf of Mexico in the first quarter, I'm pleased to report that the system is now being utilized by two additional customers, including the Woodside Greater Enfield project in offshore Australia, as well as our first full deepwater well in the Gulf of Mexico with an IOC," added Howes.

"In the Mats business, the integration of the Well Service Group and Utility Access Solutions with our legacy rental and service business is producing solid results.  The mats segment generated revenues of $50 million in the first quarter, reflecting a fairly balanced revenue mix between exploration and non-exploration markets," added Howes.  "Revenues from mat sales came in at $10 million for the quarter, and we are optimistic going forward about the strengthening demand that we are seeing across end-markets.

Fluids Systems International Contract Update

In Algeria, Newpark currently provides drilling fluids and related services to Sonatrach under Lot 1 and Lot 3 of a three-year contract awarded in 2015 ("2015 Contract").  Work under this contract began in the second quarter of 2015 and is expected to be completed by the fourth quarter of 2018. During the first quarter of 2018, Sonatrach initiated a new tender ("2018 Tender"), for a three-year term succeeding the 2015 Contract. For the 2018 Tender, Sonatrach adopted a change in its procurement process, limiting the number of Lots that could be awarded to major service providers.  As a consequence, we expect any new award under the 2018 Tender will result in lower revenues from Sonatrach.  Based upon preliminary communication regarding the tender process, the Company currently expects that revenue from Sonatrach under the 2018 Tender will approximate $125 million over the three-year term, which would result in a reduction of approximately $25 million per year as compared to the recent activity levels.  The awards under the 2018 Tender are anticipated to be finalized in the second quarter of 2018, although there are no assurances that the Company will receive a new contract.  The impact of the new award could begin as early as the fourth quarter of 2018, as work transitions from the 2015 Contract to the final contract awarded under the 2018 Tender.

Segment Results

The Fluids Systems segment generated revenues of $177.4 million in the first quarter of 2018 compared to $162.4 million in the fourth quarter of 2017 and $136.1 million in the first quarter of 2017. Segment operating income was $10.5 million in the first quarter of 2018, compared to $7.4 million in the fourth quarter of 2017 and $6.4 million in the first quarter of 2017.
The Mats and Integrated Services segment generated revenues of $49.9 million in the first quarter of 2018 compared to $42.0 million in the fourth quarter of 2017 and $22.6 million in the first quarter of 2017. Segment operating income was $12.1 million in the first quarter of 2018, compared to $11.7 million in the fourth quarter of 2017 and $6.4 million in the first quarter of 2017.

Conference Call

Newpark has scheduled a conference call to discuss first quarter 2018 results and near-term operational outlook, which will be broadcast live over the Internet, on Friday, April 27, 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 May 11, 2018 and may be accessed by dialing 201-612-7415 and using pass code 13677953#. 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 drilling fluids systems and composite matting systems used in oilfield and other 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 that are based on management's current expectations, estimates and projections.  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.  Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions.  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, 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 and 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.

Newpark Resources, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 
   

Three Months Ended

(In thousands, except per share data)

 

March 31,
2018

 

December 31,
2017

 

March 31,
2017

Revenues

 

$

227,293

   

$

204,389

   

$

158,691

 

Cost of revenues

 

186,455

   

165,291

   

129,590

 

Selling, general and administrative expenses

 

26,954

   

29,541

   

25,397

 

Other operating (income) loss, net

 

46

   

(283)

   

(42)

 

Operating income

 

13,838

   

9,840

   

3,746

 
             

Foreign currency exchange loss

 

225

   

951

   

392

 

Interest expense, net

 

3,300

   

3,028

   

3,218

 

Income from continuing operations before income taxes

 

10,313

   

5,861

   

136

 
             

Provision (benefit) for income taxes

 

3,091

   

(2,056)

   

1,119

 

Income (loss) from continuing operations

 

7,222

   

7,917

   

(983)

 
             

Loss from disposal of discontinued operations, net of tax

 

   

(17,367)

   

 

Net income (loss)

 

$

7,222

   

$

(9,450)

   

$

(983)

 
             

Calculation of EPS:

           

Income (loss) from continuing operations - basic and diluted

 

$

7,222

   

$

7,917

   

$

(983)

 
             

Weighted average common shares outstanding - basic

 

89,094

   

87,414

   

84,153

 

Dilutive effect of stock options and restricted stock awards

 

2,637

   

2,580

   

 

Dilutive effect of 2021 Convertible Notes

 

   

   

 

Weighted average common shares outstanding - diluted

 

91,731

   

89,994

   

84,153

 
             

Income (loss) per common share - diluted:

           

Income (loss) from continuing operations

 

$

0.08

   

$

0.09

   

$

(0.01)

 

Loss from discontinued operations

 

   

(0.20)

   

 

Net income (loss)

 

$

0.08

   

$

(0.11)

   

$

(0.01)

 

 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)

 
 

Three Months Ended

(In thousands)

March 31,
2018

 

December 31,
2017

 

March 31,
2017

Revenues

         

Fluids systems

$

177,379

   

$

162,404

   

$

136,050

 

Mats and integrated services

49,914

   

41,985

   

22,641

 

Total revenues

$

227,293

   

$

204,389

   

$

158,691

 
           

Operating income (loss)

         

Fluids systems

$

10,477

   

$

7,435

   

$

6,352

 

Mats and integrated services

12,086

   

11,729

   

6,402

 

Corporate office

(8,725)

   

(9,324)

   

(9,008)

 

Operating income

$

13,838

   

$

9,840

   

$

3,746

 
           

Segment operating margin

         

Fluids systems

5.9

%

 

4.6

%

 

4.7

%

Mats and integrated services

24.2

%

 

27.9

%

 

28.3

%

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands, except share data)

March 31,
2018

 

December 31,
2017

ASSETS

     

Cash and cash equivalents

$

59,938

   

$

56,352

 

Receivables, net

267,179

   

265,866

 

Inventories

189,109

   

165,336

 

Prepaid expenses and other current assets

16,502

   

17,483

 

Total current assets

532,728

   

505,037

 
       

Property, plant and equipment, net

315,552

   

315,320

 

Goodwill

44,397

   

43,620

 

Other intangible assets, net

28,906

   

30,004

 

Deferred tax assets

3,389

   

4,753

 

Other assets

3,752

   

3,982

 

Total assets

$

928,724

   

$

902,716

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current debt

$

1,391

   

$

1,518

 

Accounts payable

107,601

   

88,648

 

Accrued liabilities

38,880

   

68,248

 

Total current liabilities

147,872

   

158,414

 
       

Long-term debt, less current portion

185,635

   

158,957

 

Deferred tax liabilities

36,978

   

31,580

 

Other noncurrent liabilities

8,024

   

6,285

 

Total liabilities

378,509

   

355,236

 
       

Common stock, $0.01 par value, 200,000,000 shares authorized and 104,635,290 and 104,571,839 shares issued, respectively

1,046

   

1,046

 

Paid-in capital

606,491

   

603,849

 

Accumulated other comprehensive loss

(53,885)

   

(53,219)

 

Retained earnings

123,743

   

123,375

 

Treasury stock, at cost; 15,318,800 and 15,366,504 shares, respectively

(127,180)

   

(127,571)

 

Total stockholders' equity

550,215

   

547,480

 

Total liabilities and stockholders' equity

$

928,724

   

$

902,716

 

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
 

Three Months Ended March 31,

(In thousands)

2018

 

2017

Cash flows from operating activities:

     

Net income (loss)

$

7,222

   

$

(983)

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:

     

Depreciation and amortization

11,271

   

9,387

 

Stock-based compensation expense

2,289

   

2,836

 

Provision for deferred income taxes

381

   

(2,545)

 

Net provision for doubtful accounts

341

   

666

 

Gain on sale of assets

(383)

   

(847)

 

Amortization of original issue discount and debt issuance costs

1,309

   

1,330

 

Change in assets and liabilities:

     

   Increase in receivables

(5,928)

   

(23,019)

 

   Increase in inventories

(17,841)

   

(829)

 

   Decrease in other assets

129

   

521

 

   Increase (decrease) in accounts payable

18,511

   

(1,692)

 

   Increase (decrease) in accrued liabilities and other

(17,168)

   

3,731

 

Net cash provided by (used in) operating activities

133

   

(11,444)

 
       

Cash flows from investing activities:

     

Capital expenditures

(10,696)

   

(7,291)

 

Refund of proceeds from sale of a business

(13,974)

   

 

Proceeds from sale of property, plant and equipment

575

   

288

 

Net cash used in investing activities

(24,095)

   

(7,003)

 
       

Cash flows from financing activities:

     

Borrowings on lines of credit

107,156

   

 

Payments on lines of credit

(81,224)

   

 

Debt issuance costs

   

(157)

 

Proceeds from employee stock plans

353

   

211

 

Purchases of treasury stock

(42)

   

(48)

 

 Other financing activities

(545)

   

(371)

 

Net cash provided by (used in) financing activities

25,698

   

(365)

 
       

Effect of exchange rate changes on cash

812

   

846

 
       

Net increase (decrease) in cash, cash equivalents, and restricted cash

2,548

   

(17,966)

 

Cash, cash equivalents, and restricted cash at beginning of period

65,460

   

95,299

 

Cash, cash equivalents, and restricted cash at end of period

$

68,008

   

$

77,333

 

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

(In thousands)

March 31,
2018

 

December 31,
2017

 

March 31,
2017

Net income (loss) (GAAP)

$

7,222

   

$

(9,450)

   

$

(983)

 

Loss from disposal of discontinued operations, net of tax

   

17,367

   

 

Interest expense, net

3,300

   

3,028

   

3,218

 

Provision (benefit) for income taxes

3,091

   

(2,056)

   

1,119

 

Depreciation and amortization

11,271

   

10,759

   

9,387

 

EBITDA (non-GAAP)

$

24,884

   

$

19,648

   

$

12,741

 

 

Fluids Systems

Three Months Ended

(In thousands)

March 31,
2018

 

December 31,
2017

 

March 31,
2017

Operating income (GAAP)

$

10,477

   

$

7,435

   

$

6,352

 

Depreciation and amortization

5,290

   

5,344

   

5,168

 

EBITDA (non-GAAP)

15,767

   

12,779

   

11,520

 

Revenues

177,379

   

162,404

   

136,050

 

Operating Margin (GAAP)

5.9

%

 

4.6

%

 

4.7

%

EBITDA Margin (non-GAAP)

8.9

%

 

7.9

%

 

8.5

%

 

Mats and Integrated Services

Three Months Ended

(In thousands)

March 31,
2018

 

December 31,
2017

 

March 31,
2017

Operating income (GAAP)

$

12,086

   

$

11,729

   

$

6,402

 

Depreciation and amortization

5,114

   

4,578

   

3,480

 

EBITDA (non-GAAP)

17,200

   

16,307

   

9,882

 

Revenues

49,914

   

41,985

   

22,641

 

Operating Margin (GAAP)

24.2

%

 

27.9

%

 

28.3

%

EBITDA Margin (non-GAAP)

34.5

%

 

38.8

%

 

43.6

%

Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)

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)

March 31, 2018

 

December 31, 2017

Current debt

$

1,391

   

$

1,518

 

Long-term debt, less current portion

185,635

   

158,957

 

Total Debt

187,026

   

160,475

 

Total stockholders' equity

550,215

   

547,480

 

Total Capital

$

737,241

   

$

707,955

 
       

Ratio of Total Debt to Capital

25.4

%

 

22.7

%

       
       

Total Debt

$

187,026

   

$

160,475

 

Less: cash and cash equivalents

(59,938)

   

(56,352)

 

Net Debt

127,088

   

104,123

 

Total stockholders' equity

550,215

   

547,480

 

Total Capital, Net of Cash

$

677,303

   

$

651,603

 
       

Ratio of Net Debt to Capital

18.8

%

 

16.0

%

Contacts:

Gregg Piontek
Senior Vice President and Chief Financial Officer
Newpark Resources, Inc.
gpiontek@newpark.com
281-362-6800