News

Newpark Resources Reports First Quarter 2019 Results


Company provides update on deepwater Gulf of Mexico entry

THE WOODLANDS, Texas, April 25, 2019 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) ("Newpark" or the "Company") today announced results for its first quarter ended March 31, 2019. Total revenues for the first quarter of 2019 were $211.5 million compared to $247.7 million for the fourth quarter of 2018 and $227.3 million for the first quarter of 2018. Net income for the first quarter of 2019 was $1.3 million, or $0.01 per diluted share, compared to $10.6 million, or $0.11 per diluted share, for the fourth quarter of 2018, and $7.2 million, or $0.08 per diluted share, in the first quarter of 2018. First quarter 2019 results include the impact of the following:

  • $4.0 million of pre-tax charges ( $2.7 million after-tax) associated with the modification of the Company's retirement policy applicable to cash and equity awards, to include the Company's executive officers (who were previously excluded from the eligible population under the Company's retirement policy). These charges primarily reflect the acceleration of expense, as well as the incremental value associated with modifications to extend the exercise period of outstanding options for previously-granted awards for retirement eligible executive officers; and
  • $0.5 million of pre-tax charges for severance and related costs in the Fluids Systems segment ( $0.4 million after-tax).

Combined, the impact of the above items resulted in a $4.5 million reduction in operating income and a $3.1 million reduction in net income ( $0.03 per diluted share) in the first quarter of 2019.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "Although the market softness and international contract transitions in our Fluids Systems segment had a greater than anticipated impact on first quarter results, we continue to be encouraged by our operational execution. Fluids revenues pulled back across all regions, resulting in a 10% sequential decline. In North America, Fluids revenues declined 4% sequentially to $116 million, reflecting the impact of the softer activity levels in the U.S. onshore market and lack of the typical seasonal improvements in Canada. A decline in our U.S. land business was partially offset by the start of two deepwater projects in the Gulf of Mexico, as our offshore market penetration efforts continue to gain momentum.

"Meanwhile, international Fluids revenues declined 21% sequentially, primarily reflecting the contract transitions in Algeria and Brazil, as well as the impact of project delays in Eastern Europe, as discussed on our previous quarter's call," added Howes. "Despite sequential margin improvements in our U.S. business, Fluids segment operating income was negatively impacted by the softer revenues, as well as the inherent cost inefficiencies that result from the contract transitions and project delays. In addition, the first quarter included the impact of $1.1 million of the charges described above, resulting in a 2.4% segment operating margin.

"In our Mats and Integrated Services segment, first quarter revenues were $51 million, reflecting the anticipated sequential decline from the record result in the fourth quarter, which benefitted from elevated year-end demand for direct sales, as well as strong weather-driven rental and service demand across industries," added Howes. "Notwithstanding the sequential decline in revenues, the segment delivered a 27% operating margin, which benefitted from a favorable revenue mix, disciplined cost controls and our ongoing efforts to focus on opportunities that provide stronger returns, particularly given the tight U.S. labor market.

"Following the softer first quarter performance, we anticipate improvements in both segments as we progress through 2019, benefitting from improving market conditions, the execution of our current strategic growth initiatives, as well as the completion of our international contract transitions in Fluids," added Howes. "In addition to the Gulf of Mexico projects now underway, we were also awarded the fluids work for an additional deepwater drillship with Shell Oil. This work is expected to begin in the second quarter and continue into early 2020."

Segment Results

The Fluids Systems segment generated revenues of $160.7 million for the first quarter of 2019 compared to $177.7 million for the fourth quarter of 2018 and $177.4 million for the first quarter of 2018. Segment operating income was $3.9 million for the first quarter of 2019 compared to $8.2 million for the fourth quarter of 2018 and $10.5 million for the first quarter of 2018.  The Fluids Systems segment operating income in the first quarter of 2019 includes $1.1 million of pre-tax charges related to the modification of the Company's retirement policy and severance costs.

The Mats and Integrated Services segment generated revenues of $50.8 million for the first quarter of 2019 compared to $69.9 million for the fourth quarter of 2018 and $49.9 million for the first quarter of 2018. Segment operating income was $13.5 million for the first quarter of 2019 compared to $20.7 million for the fourth quarter of 2018 and $12.1 million for the first quarter of 2018.

Conference Call

Newpark has scheduled a conference call to discuss first quarter 2019 results and its near-term operational outlook, which will be broadcast live over the Internet, on Friday, April 26, 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 May 9, 2019 and may be accessed by dialing 201-612-7415 and using pass code 13688608#. 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 t hrough our website at www.newpark.com.

Contacts:

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

(In thousands, except per share data)

March 31,
2019

 

December 31,
2018

 

March 31,
2018

Revenues

$

211,473

   

$

247,664

   

$

227,293

 

Cost of revenues

174,976

   

197,310

   

186,455

 

Selling, general and administrative expenses

30,742

   

29,645

   

26,954

 

Other operating loss, net

76

   

186

   

46

 

Operating income

5,679

   

20,523

   

13,838

 
           

Foreign currency exchange (gain) loss

(1,062)

   

822

   

225

 

Interest expense, net

3,656

   

4,205

   

3,300

 

Income before income taxes

3,085

   

15,496

   

10,313

 
           

Provision for income taxes

1,803

   

4,927

   

3,091

 

Net income

$

1,282

   

$

10,569

   

$

7,222

 
           

Calculation of EPS:

         

Net income - basic and diluted

$

1,282

   

$

10,569

   

$

7,222

 
           

Weighted average common shares outstanding - basic

90,111

   

90,640

   

89,094

 

Dilutive effect of stock options and restricted stock awards

2,267

   

1,938

   

2,637

 

Weighted average common shares outstanding - diluted

92,378

   

92,578

   

91,731

 
           

Net income per common share - basic:

$

0.01

   

$

0.12

   

$

0.08

 

Net income per common share - diluted:

$

0.01

   

$

0.11

   

$

0.08

 

 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)

 
 

Three Months Ended

(In thousands)

March 31,
2019

 

December 31,
2018

 

March 31,
2018

Revenues

         

Fluids systems

$

160,653

   

$

177,726

   

$

177,379

 

Mats and integrated services

50,820

   

69,938

   

49,914

 

Total revenues

$

211,473

   

$

247,664

   

$

227,293

 
           

Operating income (loss) (1)

         

Fluids systems

$

3,874

   

$

8,245

   

$

10,477

 

Mats and integrated services

13,538

   

20,740

   

12,086

 

Corporate office

(11,733)

   

(8,462)

   

(8,725)

 

Total operating income

$

5,679

   

$

20,523

   

$

13,838

 
           

Segment operating margin

         

Fluids systems

2.4

%

 

4.6

%

 

5.9

%

Mats and integrated services

26.6

%

 

29.7

%

 

24.2

%

   

(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)

March 31,
2019

 

December 31,
2018

ASSETS

     

Cash and cash equivalents

$

54,486

   

$

56,118

 

Receivables, net

250,053

   

254,394

 

Inventories

186,495

   

196,896

 

Prepaid expenses and other current assets

15,535

   

15,904

 

Total current assets

506,569

   

523,312

 
       

Property, plant and equipment, net

319,465

   

316,293

 

Operating lease assets

27,653

   

 

Goodwill

43,949

   

43,832

 

Other intangible assets, net

24,216

   

25,160

 

Deferred tax assets

4,712

   

4,516

 

Other assets

3,534

   

2,741

 

Total assets

$

930,098

   

$

915,854

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current debt

$

1,955

   

$

2,522

 

Accounts payable

72,355

   

90,607

 

Accrued liabilities

39,443

   

48,797

 

Total current liabilities

113,753

   

141,926

 
       

Long-term debt, less current portion

179,604

   

159,225

 

Noncurrent operating lease liabilities

21,577

   

 

Deferred tax liabilities

37,391

   

37,486

 

Other noncurrent liabilities

7,985

   

7,536

 

Total liabilities

360,310

   

346,173

 
       

Common stock, $0.01 par value (200,000,000 shares authorized and 106,425,568 and 106,362,991 shares issued, respectively)

1,064

   

1,064

 

Paid-in capital

622,554

   

617,276

 

Accumulated other comprehensive loss

(69,594)

   

(67,673)

 

Retained earnings

150,084

   

148,802

 

Treasury stock, at cost (16,128,867 and 15,530,952 shares, respectively)

(134,320)

   

(129,788)

 

Total stockholders' equity

569,788

   

569,681

 

Total liabilities and stockholders' equity

$

930,098

   

$

915,854

 

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
 

Three Months Ended March 31,

(In thousands)

2019

 

2018

Cash flows from operating activities:

     

Net income

$

1,282

   

$

7,222

 

Adjustments to reconcile net income to net cash provided by operations:

     

Depreciation and amortization

11,438

   

11,271

 

Stock-based compensation expense

4,969

   

2,289

 

Provision for deferred income taxes

(438)

   

381

 

Net provision for doubtful accounts

386

   

341

 

Gain on sale of assets

(2,339)

   

(383)

 

Amortization of original issue discount and debt issuance costs

1,481

   

1,309

 

Change in assets and liabilities:

     

(Increase) decrease in receivables

5,300

   

(5,928)

 

(Increase) decrease in inventories

10,139

   

(17,841)

 

(Increase) decrease in other assets

(273)

   

129

 

Increase (decrease) in accounts payable

(15,149)

   

18,511

 

Decrease in accrued liabilities and other

(14,527)

   

(17,168)

 

Net cash provided by operating activities

2,269

   

133

 
       

Cash flows from investing activities:

     

Capital expenditures

(17,467)

   

(10,696)

 

Proceeds from sale of property, plant and equipment

1,771

   

575

 

Refund of proceeds from sale of a business

   

(13,974)

 

Net cash used in investing activities

(15,696)

   

(24,095)

 
       

Cash flows from financing activities:

     

Borrowings on lines of credit

80,656

   

107,156

 

Payments on lines of credit

(61,524)

   

(81,224)

 

Debt issuance costs

(927)

   

 

Proceeds from employee stock plans

330

   

353

 

Purchases of treasury stock

(5,013)

   

(42)

 

 Other financing activities

(1,169)

   

(545)

 

Net cash provided by financing activities

12,353

   

25,698

 
       

Effect of exchange rate changes on cash

(581)

   

812

 
       

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

(1,655)

   

2,548

 

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

64,266

   

65,460

 

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

$

62,611

   

$

68,008

 

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,
2019

 

December 31,
2018

 

March 31,
2018

Net income (GAAP) (1)

$

1,282

   

$

10,569

   

$

7,222

 

Interest expense, net

3,656

   

4,205

   

3,300

 

Provision for income taxes

1,803

   

4,927

   

3,091

 

Depreciation and amortization

11,438

   

11,553

   

11,271

 

EBITDA (non-GAAP) (1)

$

18,179

   

$

31,254

   

$

24,884

 
   

(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. Net income and EBITDA for the three months ended December 31, 2018 include $2.0 million of pre-tax 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.

 

Fluids Systems

Three Months Ended

(In thousands)

March 31,

 2019

 

December 31,

 2018

 

March 31,

 2018

Operating income (GAAP) (1)

$

3,874

   

$

8,245

   

$

10,477

 

Depreciation and amortization

5,076

   

5,137

   

5,290

 

EBITDA (non-GAAP) (1)

8,950

   

13,382

   

15,767

 

Revenues

160,653

   

177,726

   

177,379

 

Operating Margin (GAAP)

2.4

%

 

4.6

%

 

5.9

%

EBITDA Margin (non-GAAP)

5.6

%

 

7.5

%

 

8.9

%

   

(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. Operating income and EBITDA for the three months ended December 31, 2018 include $2.0 million of pre-tax 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.

                         

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)

 

Mats and Integrated Services

Three Months Ended

(In thousands)

March 31,
2019

 

December 31,
2018

 

March 31,
2018

Operating income (GAAP)

$

13,538

   

$

20,740

   

$

12,086

 

Depreciation and amortization

5,365

   

5,533

   

5,114

 

EBITDA (non-GAAP)

18,903

   

26,273

   

17,200

 

Revenues

50,820

   

69,938

   

49,914

 

Operating Margin (GAAP)

26.6

%

 

29.7

%

 

24.2

%

EBITDA Margin (non-GAAP)

37.2

%

 

37.6

%

 

34.5

%

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)

March 31,
2019

 

December 31,
2018

Current debt

$

1,955

   

$

2,522

 

Long-term debt, less current portion

179,604

   

159,225

 

Total Debt

181,559

   

161,747

 

Total stockholders' equity

569,788

   

569,681

 

Total Capital

$

751,347

   

$

731,428

 
       

Ratio of Total Debt to Capital

24.2

%

 

22.1

%

       
       

Total Debt

$

181,559

   

$

161,747

 

Less: cash and cash equivalents

(54,486)

   

(56,118)

 

Net Debt

127,073

   

105,629

 

Total stockholders' equity

569,788

   

569,681

 

Total Capital, Net of Cash

$

696,861

   

$

675,310

 
       

Ratio of Net Debt to Capital

18.2

%

 

15.6

%