Newpark Resources Reports Fourth Quarter and Year-End 2007 Results
Company also announces $25 million stock repurchase program
THE WOODLANDS, Texas, Feb. 22 /PRNewswire-FirstCall/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for the fourth quarter and year ended December 31, 2007. Total revenues were $159.7 million for the fourth quarter of 2007 compared to $146.7 million for the fourth quarter of 2006. The fourth quarter 2007 results include a pretax charge of $4.0 million ($2.7 million after-tax) related to the repayment and termination of the Company's previous credit facilities. As a result, the Company reported income from continuing operations of $5.5 million, or $0.06 per diluted share. Excluding the $4.0 million charge, income from continuing operations was $8.2 million, or $0.09 per diluted share. A Non-GAAP Earnings Reconciliation is included in the financial tables below. The Company also announced a $25 million stock repurchase program.
Paul Howes, President and Chief Executive Officer of Newpark, stated, "The fourth quarter continued to be an extremely tough environment for oil service companies in North America. Many of the headwinds the industry faced during the third quarter remained in effect through the end of the year. Nevertheless, in spite of this uncertain and soft market, our fluids business showed strong revenue growth and improved margins on a sequential basis. We continue to grow this business and gain acceptance in the market place as a leading provider of fluids and related services, as evidenced by market share gains in the Rockies where we picked up work on all of the rigs for a major independent in this region.
"Looking internationally, drilling activity continued to show strength. We've benefited greatly from this long-term trend, as our AVA business grew 41% in 2007, with much of this growth due to a strong North African market. We successfully completed our second test well in Egypt, which now puts us in position to grow our business in this important market. Our AVA business, which consists of our European and North African operations, generated $87 million of revenue for the full year in 2007. We also saw revenues from Brazil for the first time as we are now providing both fluids and services to land-based rigs there. Our goal is to leverage our presence in Brazil and expand into the country's deepwater market.
"Finally, we are very pleased to announce that the Board has authorized a $25 million stock repurchase program. We will look for opportunities to buy back shares as we believe the stock is undervalued at the current share price," concluded Howes.
FOURTH QUARTER 2007 SEGMENT RESULTS
The Fluids Systems and Engineering segment generated revenues of $136.3 million and a 12.9% operating margin in the fourth quarter of 2007 compared to the $129.1 million of revenue and a 16.0% operating margin generated during the fourth quarter of 2006. Operating margin in the Fluids segment for the 2007 fourth quarter declined from year ago levels primarily due to higher barite, transportation, fuel and labor costs that could not be fully recovered through customer pricing increases.
The Mats and Integrated Services segment generated revenues of $23.5 million and a 5.7% operating margin in the fourth quarter of 2007 compared to revenues of $17.7 million and an 11.8% operating margin in the fourth quarter of 2006. The 2007 fourth quarter decline in operating margins is mainly attributable to continued weakness and a falling rig count in southern Louisiana, which contributed to pricing pressure and lower demand for mat rentals and related services.
2007 RESULTS
Total revenues for 2007 were $612.8 million compared to revenues of $581.9 million for 2006. Income from continuing operations was $25.0 million for 2007, or $0.28 per diluted share, compared to $28.1 million, or $0.31 per diluted share, for 2006. As set forth on the attached Non-GAAP Earnings Reconciliation, 2007 income from continuing operations excluding the fourth quarter charge of $4.0 million related to the termination of the previous credit facility and $2.4 million of legal costs incurred during the first quarter of 2007, was $29.4 million, or $0.32 per diluted share. For 2006, excluding certain items as set forth on the attached Non-GAAP Earnings Reconciliation, income from continuing operations was $28.2 million, or $0.31 per diluted share.
In 2007, the Fluid Systems and Engineering segment generated revenues of $522.7 million and a 12.6% operating margin compared to $481.4 million in revenues and a 13.8% operating margin in 2006. Full-year 2006 results included $4.3 million in business interruption insurance proceeds due to Hurricanes Katrina and Rita received during the second and third quarters.
The Mats and Integrated Services segment generated revenues of $90.1 million and a 14.2% operating margin in 2007 compared to revenues of $100.5 million and a 15.1% operating margin in the 2006.
STOCK REPURCHASE PROGRAM
Newpark's Board of Directors has approved a stock repurchase program that authorizes the Company to purchase up to $25 million of outstanding shares of Newpark common stock. These purchases will be funded with borrowings under the Company's revolving credit facility. As part of the stock repurchase program, the Company's management has been authorized to establish trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, which the Company intends to establish as soon as practicable.
CONFERENCE CALL
In conjunction with this release, Newpark has scheduled a conference call, which will be broadcast live over the Internet, on Friday, February 22, 2008 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate in the call, dial (303) 262-2139 and ask for the Newpark Resources conference call at least 10 minutes prior to the start time, or access it live over the Internet at http://www.newpark.com. For those who cannot listen to the live call, a replay will be available through February 29, 2008 and may be accessed by dialing (303) 590-3000 and using pass code 11105800#. Also, an archive of the webcast will be available shortly after the call at http://www.newpark.com for 90 days.
Newpark Resources, Inc. is a worldwide provider of drilling fluids, temporary worksites and access roads for oilfield and other commercial markets, and environmental waste treatment solutions. For more information, visit our website at http://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 statements about Newpark's strategy for growth, product development, market position, expected expenditures and 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, 2006, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, the investigation of the certain accounting matters by the Securities and Exchange Commission; changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which Newpark does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw materials, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales of Newpark products. Newpark's filings with the Securities and Exchange Commission can be obtained at no charge at http://www.sec.gov, as well as through our website at http://www.newpark.com.
Contacts: James E. Braun, CFO
Newpark Resources, Inc.
281-362-6800
Ken Dennard, Managing Partner
Dennard Rupp Gray & Easterly, LLC
ksdennard@drg-e.com
713-529-6600
Newpark Resources, Inc.
Consolidated Statements of Operations
(Unaudited) Three Months Ended Year Ended
(In thousands, except December 31, December 31,
per share data) 2007 2006 2007 2006
Revenues $159,740 $146,748 $612,764 $581,908
Cost of revenues 140,753 124,034 533,929 500,062
18,987 22,714 78,835 81,846
General and
administrative
expenses 5,090 6,180 22,923 20,022
Operating income 13,897 16,534 55,912 61,824
Foreign currency
exchange (gain) loss (804) 863 (1,083) 367
Interest expense, net 8,069 4,336 20,251 19,546
Income from continuing
operations before
income taxes 6,632 11,335 36,744 41,911
Provision for income
taxes 1,114 3,915 11,700 13,851
Income from continuing
operations 5,518 7,420 25,044 28,060
Income (loss) from
discontinued
operations, net of
taxes 1,228 (49,544) 3,231 (60,341)
Loss from disposal
of discontinued
operations, net of
taxes - - (1,613) -
Net income $6,746 $(42,124) $26,662 $(32,281)
Basic weighted
average common
shares outstanding 90,162 89,488 90,015 89,333
Diluted weighted
average common shares
outstanding 90,540 89,961 90,527 89,871
Net income per
common share (basic
and diluted):
Income from
continuing operations $0.06 $0.08 $0.28 $0.31
Income (loss) from
discontinued
operations 0.01 (0.55) 0.01 (0.67)
Net income (loss) per
common share $0.07 $(0.47) $0.29 $(0.36)
Newpark Resources, Inc.
Non-GAAP Earnings Reconciliation
Continuing Operations
The table below presents measures not derived in accordance with generally
accepted accounting principles ("GAAP"). Non-GAAP measures of financial
performance exclude items that the Company believes are infrequent or not
indicative of operating performance. Non-GAAP financial measures should
not be considered a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. The Company believes these
non-GAAP financial measures are helpful, however, and management uses them
in comparing the historical results to current results and measuring
operating earnings trends.
(Unaudited) Quarter Ended Year Ended
(In thousands, except December 31, December 31,
per share data) 2007 2006 2007 2006
Income from continuing
operations before
income taxes - GAAP $6,632 $11,335 $36,744 $41,911
Adjustments:
Capitalized
financing cost
write-off associated
with debt re-financing 3,955 - 3,955 1,207
Business insurance
proceeds related
to Hurricanes
Katrina and Rita - - - (4,271)
Legal and accounting
expenses related
to 2005 restatement
and related litigation - 1,259 2,441 3,275
Income from continuing
operations before income
taxes - Non-GAAP 10,587 12,594 43,140 42,122
Provision for income taxes
on adjusted income 2,374 4,331 13,737 13,921
Income from continuing
operations - Non-GAAP $8,214 $8,263 $29,403 $28,201
Diluted shares outstanding 90,540 89,961 90,527 89,871
Income from continuing
operations per common
share (basic and diluted):
Net income per
common share -
GAAP $0.06 $0.08 $0.28 $0.31
Impact of
adjustments 0.03 0.01 0.04 0.00
Income from
continuing
operations per
common share -
Non-GAAP $0.09 $0.09 $0.32 $0.31
Newpark Resources, Inc.
Operating Segment Results
(Unaudited) Quarter Ended Year Ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
(In thousands) 2007 2007 2007 2007 2007
Segment revenues
Fluids systems and
engineering $125,298 $131,163 $129,986 $136,267 $522,714
Mats and integrated
services 23,966 18,819 23,792 23,473 90,050
Total segment
revenues $149,264 $149,982 $153,778 $159,740 $612,764
Segment operating income
Fluids systems and
engineering $16,630 $16,323 $15,467 $17,645 $66,065
Mats and integrated
services 4,600 2,273 4,555 1,342 12,770
Total segment
operating income $21,230 $18,596 $20,022 $18,987 $78,835
Segment operating margin
Fluids systems and
engineering 13.3% 12.4% 11.9% 12.9% 12.6%
Mats and integrated
services 19.2% 12.1% 19.1% 5.7% 14.2%
Total segment
operating margin 14.2% 12.4% 13.0% 11.9% 12.9%
(Unaudited) Quarter Ended Year Ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
(In thousands) 2006 2006 2006 2006 2006
Segment revenues
Fluids systems and
engineering $115,289 $111,868 $125,130 $129,091 $481,378
Mats and integrated
services 29,251 31,133 22,489 17,657 100,530
Total segment
revenues $144,540 $143,001 $147,619 $146,748 $581,908
Segment operating income
Fluids systems and
engineering $12,660 $13,143 $20,178 $20,635 $66,616
Mats and integrated
services 4,343 4,216 4,592 2,079 15,230
Total segment
operating income $17,003 $17,359 $24,770 $22,714 $81,846
Segment operating margin
Fluids systems and
engineering 11.0% 11.7% 16.1% 16.0% 13.8%
Mats and integrated
services 14.8% 13.5% 20.4% 11.8% 15.1%
Total segment
operating margin 11.8% 12.1% 16.8% 15.5% 14.1%
Newpark Resources, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands) December 31, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $8,019 $12,736
Receivables, net 141,949 141,790
Inventories 120,202 107,778
Deferred tax asset 28,439 23,001
Prepaid expenses and other current
assets 12,131 12,176
Assets of discontinued operations 86,628 19,880
Total current assets 397,368 317,361
Property, plant and equipment, net 159,094 152,207
Goodwill 62,616 54,624
Deferred tax asset 408 7,096
Other intangible assets, net 18,474 8,236
Other assets 6,097 7,440
Assets of discontinued operations - 82,485
Total assets $644,057 $629,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Foreign bank lines of credit $7,297 $10,938
Current maturities of long-term
debt 11,565 4,058
Accounts payable 64,783 56,087
Accrued liabilities 20,367 21,439
Liabilities of discontinued
operations 10,456 9,475
Total current liabilities 114,468 101,997
Long-term debt, less current
portion 158,616 198,037
Deferred tax liability 5,923 -
Other noncurrent liabilities 4,386 4,344
Liabilities of discontinued
operations - 1,928
Total liabilities 283,393 306,306
Common Stock 902 897
Paid-in capital 450,319 444,763
Accumulated other comprehensive
income 13,988 7,940
Retained deficit (104,545) (130,457)
Total stockholders' equity 360,664 323,143
$644,057 $629,449
Newpark Resources, Inc.
Consolidated Statements of Cash Flows
(Unaudited) Year Ended December 31,
(In thousands) 2007 2006
Cash flows from operating activities:
Net income (loss) $26,662 $(32,281)
Adjustments to reconcile net income
(loss) to net cash provided by
operations:
Net (income) loss from
discontinued operations (3,231) 60,341
Net loss on disposal of
discontinued operations 1,613 -
Depreciation and amortization 19,285 20,612
Stock-based compensation expense 3,434 2,000
Provision for deferred income
taxes 7,983 6,124
Provision for doubtful accounts 1,282 1,693
(Loss) gain on sale of assets 30 (863)
Change in assets and liabilities:
Decrease (increase) in
receivables 4,038 (13,250)
Increase in inventories (12,762) (21,017)
Decrease (increase) in other assets 2,298 (6,262)
Increase (decrease) in
accounts payable 7,223 (3,895)
(Decrease) increase in accrued
liabilities and other (5,070) 7,370
Net operating activities of
continuing operations 52,785 20,572
Net operating activities of
discontinued operations 17,681 6,231
Net cash provided by operating
activities 70,466 26,803
Cash flows from investing activities:
Capital expenditures (17,036) (25,790)
Proceeds from sale of property,
plant and equipment 986 2,622
Insurance proceeds from property,
plant and equipment claim - 3,471
Business acquisitions (23,203) -
Net investing activities of
continuing operations (39,253) (19,697)
Net investing activities of
discontinued operations (1,039) (10,601)
Net cash used in investing activities (40,292) (30,298)
Cash flows from financing activities:
Net borrowings on lines of credit 67,369 10,858
Principal payments on notes payable
and long-term debt (155,026) (157,796)
Long-term borrowings 50,000 150,132
Proceeds from exercise of stock
options and ESPP 2,243 5,622
Tax benefit from exercise of stock
options - 644
Net financing activities of
continuing operations (35,414) 9,460
Net financing activities of
discontinued operations (235) (887)
Net cash (used in) provided by
financing activities (35,650) 8,573
Effect of exchange rate changes 758 314
Net (decrease) increase in cash and
cash equivalents (4,717) 5,392
Cash and cash equivalents at
beginning of year 12,736 7,344
Cash and cash equivalents at end of
year $8,019 $12,736
SOURCE Newpark Resources, Inc.
/CONTACT: James E. Braun, CFO of Newpark Resources, Inc.,
+1-281-362-6800; or Ken Dennard, Managing Partner of Dennard Rupp Gray &
Easterly, LLC, +1-713-529-6600, ksdennard@drg-e.com, for Newpark Resources,
Inc./
/Web site: http://www.newpark.com /