Newpark Resources Reports Second Quarter 2007 Results
Company to sell Batson, Texas sawmill
THE WOODLANDS, Texas, Aug. 2 /PRNewswire-FirstCall/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for the second quarter ended June 30, 2007.
Total revenues were $167.1 million for the second quarter of 2007 compared to $160.7 million for the second quarter of 2006. Income from continuing operations was $8.2 million in the second quarter of 2007, or $0.09 per diluted share, compared to $6.9 million, or $0.08 per diluted share, in the second quarter of 2006.
During the second quarter of 2007, the Company entered into an agreement to sell substantially all the assets of their sawmill facility located in Batson, Texas for cash proceeds of $4.0 million plus the value of inventory at closing. The results of this operation were previously reported within the Mats and Integrated Services segment, and the assets, liabilities and results of operations for this business have been reclassified as discontinued operations for all periods presented. Restated segment results from continuing operations for the past six quarters are included in the financial tables later in this release. Discontinued operations generated a $2.9 million after-tax loss in the second quarter of 2007, or $0.03 per diluted share, including an after-tax impairment charge of $2.1 million related to the sawmill's assets.
Paul Howes, President and Chief Executive Officer of Newpark, stated, "While the second quarter presented a challenging operating environment in some of our North American markets, our international operations continue to perform strongly. We continue to make progress on our strategic initiatives to rationalize operations. This includes progress on the divestiture of the Environmental Services business and the divestiture of the Batson sawmill facility, which we concluded was non-core to our long-term strategy within the Mats and Integrated Services segment."
"Meanwhile, we maintain our focus on cash management, reducing total debt by $18 million during the latest quarter and $37 million year-to-date. As we execute on our previously announced corporate strategy and initiatives, we expect to further enhance our ability to invest in growth opportunities that will enable us to expand our global presence and product offerings within our Fluids and Mats businesses in order to drive shareholder value," concluded Howes.
SEGMENT RESULTS
The Fluid Systems and Engineering segment generated revenues of $131.2 million and a 12.4% operating margin in the second quarter of 2007, representing an improvement from the $111.9 million of revenue and 11.7% operating margin generated during the second quarter of 2006. Operating margins, while up year-over-year, declined modestly relative to first quarter 2007 primarily due to a shift in product mix, with higher sales of lower margin products experienced in the most recent quarter, and the seasonal revenue and margin decline in Canada.
The Mats and Integrated Services segment, restated to exclude the results of the discontinued Batson, Texas sawmill operation, generated revenues of $18.8 million and a 12.1% operating margin in the second quarter of 2007 compared to revenues of $31.1 million and a 13.5% operating margin in the second quarter of 2006. The decline in revenues was primarily due to weak sales in Canada, as well as weak export sales of composite mats. Cost reduction benefits achieved in this segment during the quarter were more than offset by the decline in revenues. The Company's strategy in this segment continues to be to diversify geographically into other basins and broaden its product offerings.
The Environmental Services segment generated revenues of $17.1 million and a 16.8% operating margin in the second quarter of 2007, compared to revenues of $17.7 million and a 13.3% operating margin in the second quarter of 2006.
CONFERENCE CALL
In conjunction with this release, Newpark has scheduled a conference call, which will be broadcast live over the Internet, on Friday, August 3, 2007 at 9:30 a.m. Eastern Time / 8:30 a.m. Central Time. To participate in the call, dial (303) 262-2140 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 August 10, 2007 and may be accessed by dialing (303) 590-3000 and using pass code 11092386#. 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 results of several class action and derivative lawsuits against Newpark and certain of our current and former directors and former officers; the investigation of the matter 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
FOR Dennard Rupp Gray & Easterly, LLC
ksdennard@drg-e.com
713-529-6600
Newpark Resources, Inc.
Consolidated Statements of Operations
(Unaudited) Three Months Six Months
(In thousands, except Ended June 30, Ended June 30,
per share data) 2007 2006 2007 2006
Revenues $167,050 $160,724 $334,251 $322,603
Cost of revenues 145,587 141,015 288,327 283,859
21,463 19,709 45,924 38,744
General and
administrative
expenses 5,111 5,463 13,266 8,792
Operating income 16,352 14,246 32,658 29,952
Foreign currency
exchange gain (293) (432) (179) (327)
Interest expense,
net 3,817 4,123 8,241 8,916
Income from
continuing
operations
before income
taxes 12,828 10,555 24,596 21,363
Provision for
income taxes 4,584 3,694 8,774 7,555
Income from
continuing
operations 8,244 6,861 15,822 13,808
Loss from
discontinued
operations, net
of taxes (2,945) (938) (3,289) (1,700)
Net income $5,299 $5,923 $12,533 $12,108
Basic weighted
average common
shares
outstanding 89,979 89,373 89,907 89,212
Diluted weighted
average common
shares
outstanding 90,671 89,874 90,359 89,991
Net income per
common share
(basic):
Continuing
operations $0.09 $0.08 $0.18 $0.16
Discontinued
operations (0.03) (0.01) (0.04) (0.02)
Net income per
common share $0.06 $0.07 $0.14 $0.14
Net income per
common share
(diluted):
Continuing
operations $0.09 $0.08 $0.18 $0.15
Discontinued
operations (0.03) (0.01) (0.04) (0.02)
Net income per
common share $0.06 $0.07 $0.14 $0.13
Newpark Resources, Inc.
Segment Comparison
(Unaudited) Quarter Ended
June 30, March 31, June 30,
(In thousands) 2007 2007 2006
Segment revenues
Fluids systems and engineering $131,163 $125,298 $111,868
Mat and integrated services 18,819 23,966 31,133
Environmental services 17,068 17,937 17,723
Total Segment Revenues $167,050 $167,201 $160,724
Segment operating income
Fluids systems and engineering $16,323 $16,630 $13,143
Mat and integrated services 2,273 4,600 4,217
Environmental services 2,867 3,231 2,349
Total Segment Operating Income $21,463 $24,461 $19,709
Segment operating margin
Fluids systems and engineering 12.4% 13.3% 11.7%
Mat and integrated services 12.1% 19.2% 13.5%
Environmental services 16.8% 18.0% 13.3%
Total Segment Operating Margin 12.8% 14.6% 12.3%
Newpark Resources, Inc.
Consolidated Balance Sheets
(In thousands) June 30, December 31,
2007 2006
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $3,483 $12,974
Accounts receivable, net 156,681 154,443
Inventories 107,464 108,129
Deferred tax asset 26,052 22,970
Prepaid expenses and other current
assets 18,207 12,878
Assets of discontinued operations 9,023 15,459
Total current assets 320,910 326,853
Property, plant and equipment, net 223,588 220,827
Goodwill 56,013 55,143
Deferred tax asset - 5,348
Other intangible assets, net 11,038 11,623
Other assets 6,541 7,875
$618,090 $627,669
LIABILITIES AND STOCKHOLDERS' EQUITY
Foreign bank lines of credit $4,546 $10,938
Current maturities of long-term
debt 6,383 4,208
Accounts payable 53,412 43,793
Accrued liabilities 36,350 42,692
Liabilities of discontinued
operations 844 364
Total current liabilities 101,535 101,995
Long-term debt, less current
portion 166,040 198,186
Deferred tax liability 4,567 -
Other noncurrent liabilities 4,210 4,345
Total liabilities 276,352 304,526
Common Stock 900 897
Paid-in capital 447,568 444,763
Accumulated other comprehensive
income 11,944 7,940
Retained deficit (118,674) (130,457)
Total stockholders' equity 341,738 323,143
$618,090 $627,669
Newpark Resources, Inc.
Restated Segment Results
(Unaudited) Quarter Ended
(In thousands, except March 31, June 30, Sept. 30, Dec. 31,
per share data) 2006 2006 2006 2006
Segment revenues
Fluids systems and engineering $115,289 $111,868 $125,130 $129,091
Mat and integrated services 29,251 31,133 22,489 17,657
Environmental services 17,339 17,723 18,324 16,537
Total Segment Revenues $161,879 $160,724 $165,943 $163,285
Segment operating income
Fluids systems and engineering $12,660 $13,143 $20,178 $20,635
Mat and integrated services 4,342 4,217 4,592 2,078
Environmental services 2,033 2,349 2,173 1,696*
Total Segment Operating
Income $19,035 $19,709 $26,943 $24,409
Segment operating margin
Fluids systems and engineering 11.0% 11.7% 16.1% 16.0%
Mat and integrated services 14.8% 13.5% 20.4% 11.8%
Environmental services 11.7% 13.3% 11.9% 10.3%
Total Segment Operating
Margin 11.8% 12.3% 16.2% 14.9%
* Excludes impairment of goodwill and long-lived assets
Newpark Resources, Inc.
Restated Segment Results
(Unaudited) Quarter Ended
(In thousands, except per share data) March 31, June 30,
2007 2007
Segment revenues
Fluids systems and engineering $125,298 $131,163
Mat and integrated services 23,966 18,819
Environmental services 17,937 17,068
Total Segment Revenues $167,201 $167,050
Segment operating income
Fluids systems and engineering $16,630 $16,323
Mat and integrated services 4,600 2,273
Environmental services 3,231 2,867
Total Segment Operating
Income $24,461 $21,463
Segment operating margin
Fluids systems and engineering 13.3% 12.4%
Mat and integrated services 19.2% 12.1%
Environmental services 18.0% 16.8%
Total Segment Operating
Margin 14.6% 12.8%
* Excludes impairment of goodwill and long-lived assets
Newpark Resources, Inc.
Consolidated Statements of Cash Flow
(Unaudited) Six Months Ended June 30,
(In thousands, except per share data) 2007 2006
Cash flows from operating activities:
Net income $12,533 $12,108
Adjustments to reconcile net income
to net cash provided by operations:
Net (earnings) loss from discontinued
operations 3,289 1,700
Depreciation and amortization 12,221 13,110
Stock-based compensation expense 1,197 1,133
Provision for deferred income taxes 5,883 5,354
Provision for doubtful accounts 524 808
Loss on sale of assets 795 321
Change in assets and liabilities:
Increase in accounts and notes
receivable (2,762) (11,325)
Decrease (increase) in inventories (2,471) (11,929)
Increase in other assets (1,219) (862)
Increase (decrease) in accounts
payable 9,619 (4,107)
(Decrease) increase in accrued
liabilities and other (7,086) 6,491
Net operating activities of
continuing operations 32,523 12,802
Net operating activities of
discontinued operations 3,627 (3,616)
Net cash provided by operating
activities 36,150 9,186
Cash flows from investing activities:
Capital expenditures (11,532) (11,972)
Proceeds from sale of property, plant
and equipment 633 539
Insurance proceeds from property,
plant and equipment - 3,471
Net investing activities of
continuing operations (10,899) (7,962)
Net investing activities of
discontinued operations - (10,783)
Net cash used in investing activities (10,899) (18,745)
Cash flows from financing activities:
Net (payments) borrowings on lines of
credit (30,555) 15,516
Proceeds from long-term financing 937 -
Payments on notes payable and long-
term debt, net (7,048) (10,417)
Proceeds from exercise of stock
options and ESPP 1,702 4,075
Excess tax benefit from exercise of
stock options - 596
Net cash (used in) provided by
financing activities (34,964) 9,770
Effect of exchange rates changes 222 247
Net (decrease) increase in cash and
cash equivalents (9,491) 458
Cash and cash equivalents at
beginning of period 12,974 7,747
Cash and cash equivalents at end of
period $3,483 $8,205
Cash Paid for
Income taxes (net of refunds) $3,759 $2,309
Interest 8,410 8,581
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 /