News

Newpark Resources Reports Second Quarter 2018 Results


THE WOODLANDS, Texas, July 26, 2018 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its second quarter ended June 30, 2018. Total revenues for the second quarter of 2018 were $236.3 million compared to $227.3 million in the first quarter of 2018 and $183.0 million in the second quarter of 2017. Net income for the second quarter of 2018 was $10.8 million, or $0.12 per diluted share, compared to $7.2 million, or $0.08 per diluted share, in the first quarter of 2018, and $1.6 million, or $0.02 per diluted share, in the second quarter of 2017.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're very pleased to report another solid quarter, with both segments continuing to make meaningful strides in the execution of our long-term strategy. Consolidated revenues increased 4% sequentially to $236 million in the second quarter, driven by continued growth in the U.S. across both operating segments.

"In Fluids, second quarter revenues for the segment came in at $180 million, a 1% sequential improvement. Revenue gains in the U.S., including increases in both land and Gulf of Mexico activities, fully offset the seasonal impact of Spring break-up in Canada. International revenues also rose modestly, benefitting primarily from the Woodside project in offshore Australia," added Howes. "Meanwhile, we also made progress in our efforts to improve our Fluids operating margin, which increased to 7.4% in the second quarter, driven primarily by the impact of a strong sales mix in our international business, along with the increase in revenues.

"In the Mats business, we continue to see the benefits from our market diversification strategy, where revenues improved sequentially in both E&P and non-E&P market sectors. Second quarter Mats revenues came in at a quarterly record of $57 million, reflecting a 13% improvement from the first quarter, while operating margin improved to 26.3%. The sequential revenue gains reflect broad-based improvements across most targeted markets, both in the U.S. and Europe, as revenues remain evenly balanced between E&P and non-E&P end markets," added Howes. "In an effort to support our ongoing expansion into new markets, we've invested an additional $7 million during the second quarter to expand our mat rental fleet."

Segment Results

The Fluids Systems segment generated revenues of $179.7 million in the second quarter of 2018 compared to $177.4 million in the first quarter of 2018 and $150.6 million in the second quarter of 2017. Segment operating income was $13.3 million in the second quarter of 2018 compared to $10.5 million in the first quarter of 2018 and $5.9 million in the second quarter of 2017.

The Mats and Integrated Services segment generated revenues of $56.5 million in the second quarter of 2018 compared to $49.9 million in the first quarter of 2018 and $32.4 million in the second quarter of 2017. Segment operating income was $14.9 million in the second quarter of 2018 compared to $12.1 million in the first quarter of 2018 and $11.4 million in the second quarter of 2017.

Conference Call

Newpark has scheduled a conference call to discuss second quarter 2018 results and near-term operational outlook, which will be broadcast live over the Internet, on Friday, July 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 August 10, 2018 and may be accessed by dialing 201-612-7415 and using pass code 13680711#. 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 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 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

 

Six Months Ended

(In thousands, except per share data)

 

June 30,
2018

 

March 31,
2018

 

June 30,
2017

 

June 30,
2018

 

June 30,
2017

Revenues

 

$

236,262

   

$

227,293

   

$

183,020

   

$

463,555

   

$

341,711

 

Cost of revenues

 

188,480

   

186,455

   

148,431

   

374,935

   

278,021

 

Selling, general and administrative expenses

 

28,708

   

26,954

   

26,630

   

55,662

   

52,027

 

Other operating (income) loss, net

 

(69)

   

46

   

(9)

   

(23)

   

(51)

 

Operating income

 

19,143

   

13,838

   

7,968

   

32,981

   

11,714

 
                     

Foreign currency exchange loss

 

458

   

225

   

534

   

683

   

926

 

Interest expense, net

 

3,691

   

3,300

   

3,441

   

6,991

   

6,659

 

Income from operations before income taxes

 

14,994

   

10,313

   

3,993

   

25,307

   

4,129

 
                     

Provision for income taxes

 

4,148

   

3,091

   

2,361

   

7,239

   

3,480

 

Net income

 

$

10,846

   

$

7,222

   

$

1,632

   

$

18,068

   

$

649

 
                     
                     

Calculation of EPS:

                   

Net income - basic and diluted

 

$

10,846

   

$

7,222

   

$

1,632

   

$

18,068

   

$

649

 
                     

Weighted average common shares outstanding - basic

 

89,703

   

89,094

   

84,653

   

89,400

   

84,404

 

Dilutive effect of stock options and restricted stock awards

 

2,823

   

2,637

   

2,662

   

2,730

   

2,695

 

Dilutive effect of 2021 Convertible Notes

 

1,265

   

   

   

636

   

 

Weighted average common shares outstanding - diluted

 

93,791

   

91,731

   

87,315

   

92,766

   

87,099

 
                     

Income per common share - basic

 

$

0.12

   

$

0.08

   

$

0.02

   

$

0.20

   

$

0.01

 

Income per common share - diluted

 

$

0.12

   

$

0.08

   

$

0.02

   

$

0.19

   

$

0.01

 

 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)

         
   

Three Months Ended

 

Six Months Ended

(In thousands)

 

June 30,
2018

 

March 31,
2018

 

June 30,
2017

 

June 30,
2018

 

June 31,
2017

Revenues

                   

Fluids systems

 

$

179,738

   

$

177,379

   

$

150,623

   

$

357,117

   

$

286,673

 

Mats and integrated services

 

56,524

   

49,914

   

32,397

   

106,438

   

55,038

 

Total revenues

 

$

236,262

   

$

227,293

   

$

183,020

   

$

463,555

   

$

341,711

 
                     

Operating income (loss)

                   

Fluids systems

 

$

13,327

   

$

10,477

   

$

5,863

   

$

23,804

   

$

12,215

 

Mats and integrated services

 

14,853

   

12,086

   

11,419

   

26,939

   

17,821

 

Corporate office

 

(9,037)

   

(8,725)

   

(9,314)

   

(17,762)

   

(18,322)

 

Operating income

 

$

19,143

   

$

13,838

   

$

7,968

   

$

32,981

   

$

11,714

 
                     

Segment operating margin

                   

Fluids systems

 

7.4

%

 

5.9

%

 

3.9

%

 

6.7

%

 

4.3

%

Mats and integrated services

 

26.3

%

 

24.2

%

 

35.2

%

 

25.3

%

 

32.4

%

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

       

(In thousands, except share data)

June 30,
2018

 

December 31,
2017

ASSETS

     

Cash and cash equivalents

$

71,722

   

$

56,352

 

Receivables, net

252,154

   

265,866

 

Inventories

189,571

   

165,336

 

Prepaid expenses and other current assets

20,492

   

17,483

 

Total current assets

533,939

   

505,037

 
       

Property, plant and equipment, net

316,062

   

315,320

 

Goodwill

44,020

   

43,620

 

Other intangible assets, net

27,622

   

30,004

 

Deferred tax assets

4,484

   

4,753

 

Other assets

3,587

   

3,982

 

Total assets

$

929,714

   

$

902,716

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current debt

$

3,584

   

$

1,518

 

Accounts payable

93,254

   

88,648

 

Accrued liabilities

39,769

   

68,248

 

Total current liabilities

136,607

   

158,414

 
       

Long-term debt, less current portion

193,636

   

158,957

 

Deferred tax liabilities

36,158

   

31,580

 

Other noncurrent liabilities

8,590

   

6,285

 

Total liabilities

374,991

   

355,236

 
       

Common stock, $0.01 par value (200,000,000 shares authorized and 106,071,255 and 104,571,839 shares issued, respectively)

1,061

   

1,046

 

Paid-in capital

611,667

   

603,849

 

Accumulated other comprehensive loss

(63,097)

   

(53,219)

 

Retained earnings

134,589

   

123,375

 

Treasury stock, at cost (15,513,806 and 15,366,504 shares, respectively)

(129,497)

   

(127,571)

 

Total stockholders' equity

554,723

   

547,480

 

Total liabilities and stockholders' equity

$

929,714

   

$

902,716

 

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   
 

Six Months Ended June 30,

(In thousands)

2018

 

2017

Cash flows from operating activities:

     

Net income

$

18,068

   

$

649

 

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

     

Depreciation and amortization

22,755

   

19,244

 

Stock-based compensation expense

4,848

   

5,874

 

Provision for deferred income taxes

243

   

(3,672)

 

Net provision for doubtful accounts

1,229

   

1,412

 

Gain on sale of assets

(371)

   

(1,266)

 

Amortization of original issue discount and debt issuance costs

2,643

   

2,679

 

Change in assets and liabilities:

     

Increase in receivables

(1,185)

   

(48,612)

 

Increase in inventories

(21,459)

   

(10,500)

 

Increase in other assets

(3,417)

   

(2,773)

 

Increase in accounts payable

6,659

   

15,590

 

Increase (decrease) in accrued liabilities and other

(9,326)

   

43,685

 

Net cash provided by operating activities

20,687

   

22,310

 
       

Cash flows from investing activities:

     

Capital expenditures

(24,458)

   

(16,644)

 

Refund of proceeds from sale of a business

(13,974)

   

 

Proceeds from sale of property, plant and equipment

920

   

1,222

 

Business acquisitions, net of cash acquired

(249)

   

 

Net cash used in investing activities

(37,761)

   

(15,422)

 
       

Cash flows from financing activities:

     

Borrowings on lines of credit

203,716

   

 

Payments on lines of credit

(171,796)

   

 

Debt issuance costs

(11)

   

(335)

 

Proceeds from employee stock plans

3,700

   

1,517

 

Purchases of treasury stock

(3,074)

   

(2,382)

 

Other financing activities

2,515

   

2,333

 

Net cash provided by financing activities

35,050

   

1,133

 
       

Effect of exchange rate changes on cash

(2,926)

   

2,017

 
       

Net increase in cash, cash equivalents, and restricted cash

15,050

   

10,038

 

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

65,460

   

95,299

 

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

$

80,510

   

$

105,337

 

 

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

 

Six Months Ended

(In thousands)

June 30,
2018

 

March 31,
2018

 

June 30,
2017

 

June 30,
2018

 

June 30,
2017

Net income (GAAP)

$

10,846

   

$

7,222

   

$

1,632

   

$

18,068

   

$

649

 

Interest expense, net

3,691

   

3,300

   

3,441

   

6,991

   

6,659

 

Provision for income taxes

4,148

   

3,091

   

2,361

   

7,239

   

3,480

 

Depreciation and amortization

11,484

   

11,271

   

9,857

   

22,755

   

19,244

 

EBITDA (non-GAAP)

$

30,169

   

$

24,884

   

$

17,291

   

$

55,053

   

$

30,032

 

 

Fluids Systems

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2018

 

March 31,
2018

 

June 30,
2017

 

June 30,
2018

 

June 30,
2017

Operating income (GAAP)

$

13,327

   

$

10,477

   

$

5,863

   

$

23,804

   

$

12,215

 

Depreciation and amortization

5,317

   

5,290

   

5,513

   

10,607

   

10,681

 

EBITDA (non-GAAP)

18,644

   

15,767

   

11,376

   

34,411

   

22,896

 

Revenues

179,738

   

177,379

   

150,623

   

357,117

   

286,673

 

Operating Margin (GAAP)

7.4

%

 

5.9

%

 

3.9

%

 

6.7

%

 

4.3

%

EBITDA Margin (non-GAAP)

10.4

%

 

8.9

%

 

7.6

%

 

9.6

%

 

8.0

%

 

Mats and Integrated Services

Three Months Ended

 

Six Month Ended

(In thousands)

June 30,
2018

 

March 31,
2018

 

June 30,
2017

 

June 30,
2018

 

June 30,
2017

Operating income (GAAP)

$

14,853

   

$

12,086

   

$

11,419

   

$

26,939

   

$

17,821

 

Depreciation and amortization

5,248

   

5,114

   

3,534

   

10,361

   

7,013

 

EBITDA (non-GAAP)

20,101

   

17,200

   

14,953

   

37,300

   

24,834

 

Revenues

56,524

   

49,914

   

32,397

   

106,438

   

55,038

 

Operating Margin (GAAP)

26.3

%

 

24.2

%

 

35.2

%

 

25.3

%

 

32.4

%

EBITDA Margin (non-GAAP)

35.6

%

 

34.5

%

 

46.2

%

 

35.0

%

 

45.1

%

 

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)

June 30, 2018

 

December 31, 2017

Current debt

$

3,584

   

$

1,518

 

Long-term debt, less current portion

193,636

   

158,957

 

Total Debt

197,220

   

160,475

 

Total stockholders' equity

554,723

   

547,480

 

Total Capital

$

751,943

   

$

707,955

 
       

Ratio of Total Debt to Capital

26.2

%

 

22.7

%

       
       

Total Debt

$

197,220

   

$

160,475

 

Less: cash and cash equivalents

(71,722)

   

(56,352)

 

Net Debt

125,498

   

104,123

 

Total stockholders' equity

554,723

   

547,480

 

Total Capital, Net of Cash

$

680,221

   

$

651,603

 
       

Ratio of Net Debt to Capital

18.4

%

 

16.0

%

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