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Newpark Resources Reports Second Quarter 2017 Results

July 27, 2017
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Company reports revenues of $183 million, net income of $0.02 per share

THE WOODLANDS, Texas, July 27, 2017 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its second quarter ended June 30, 2017.  Total revenues for the second quarter of 2017 were $183.0 million compared to $158.7 million in the first quarter of 2017 and $115.3 million in the second quarter of 2016.  Net income for the second quarter of 2017 was $1.6 million, or $0.02 per diluted share, compared to a net loss of $1.0 million, or $0.01 per share, in the first quarter of 2017, and a net loss of $13.9 million, or $0.17 per share, in the second quarter of 2016. Second quarter 2016 results included net charges of $0.11 per share associated with asset impairments, the termination of our previous revolving credit facility and charges associated with workforce reductions.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "Building upon the positive momentum from the first quarter, I'm pleased to report another period of strong sequential gains in both segments. The Mats segment had an exceptionally strong second quarter, posting the highest revenue and operating income level in two years, benefiting from our diversification strategy.  The sequential revenue gains were driven by broad-based improvements across targeted market sectors, including the impact of a few large utilities transmission and distribution projects in the Gulf Coast region.  The quarter further benefited from weather events, where our scale and rapid service response uniquely positioned us to support our customers following a string of storms that impacted areas within Texas and Louisiana.  With the meaningful lift in demand, rental and service revenues increased to $25 million in the quarter.  The surge in rental demand also provided a meaningful lift in segment operating margin, which came in at 35% for the second quarter.

"In Fluids, revenue gains were once again led by our U.S. operations, where revenues improved sequentially by 34% and outperformed the market rig count gains for the third consecutive quarter.  The strong U.S. performance more than offset the anticipated seasonal impact of Spring break-up in Canada, resulting in a 12% increase in total North America fluids revenues.  Internationally, fluids revenues also increased by 8%, benefiting from a rebound in activity in North Africa and Eastern Europe," added Howes.  "With the stronger revenue contribution from the U.S. and EMEA regions, the Fluids segment profitability remained relatively stable despite the sharp seasonal decline in Canada, posting a 4% operating margin."  

2017 Convertible Notes Update

In preparation for the October 2017 maturity of convertible notes, the restricted cash balance (reported within prepaid expenses and other current assets) increased by $30 million during the second quarter of 2017, reflecting funds that have been placed in an escrow account in advance of the scheduled maturity.  As a result of this as well as meeting other administrative requirements, the Company has satisfied the conditions to avoid the accelerated maturity date of its Asset-Based Loan ("ABL") Facility.  Accordingly, the maturity date of the ABL Facility remains March 6, 2020.   

Segment Results

The Fluids Systems segment generated revenues of $150.6 million in the second quarter of 2017 compared to $136.1 million in the first quarter of 2017 and $96.2 million in the second quarter of 2016. Segment operating income was $5.9 million in the second quarter of 2017, compared to $6.4 million of income in the first quarter of 2017 and an $11.9 million loss in the second quarter of 2016.  Segment results for the second quarter of 2016 included a total of $8.3 million of charges, including impairments of intangible and other long-lived assets in the Asia Pacific region, as well as costs associated with workforce reductions and the impairment of inventory in North America.

The Mats and Integrated Services segment generated revenues of $32.4 million in the second quarter of 2017 compared to $22.6 million in the first quarter of 2017 and $19.2 million in the second quarter of 2016. Segment operating income was $11.4 million in the second quarter of 2017, compared to $6.4 million in the first quarter of 2017, and $4.0 million in the second quarter of 2016.

CONFERENCE CALL

Newpark has scheduled a conference call to discuss second quarter 2017 results, which will be broadcast live over the Internet, on Friday, July 28, 2017 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 conference 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 11, 2017 and may be accessed by dialing (201) 612-7415 and using pass code 13663806#. 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, 2016, 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, compliance with legal and regulatory matters, including environmental regulations, the availability of insurance and the risks and limitations of our insurance coverage, 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.

Contacts:

Gregg Piontek


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

Six Months Ended

(In thousands, except per share data)

June 30,
 2017

March 31,
 2017

June 30,
 2016

June 30,
 2017

June 30,
 2016

Revenues

$

183,020

$

158,691

$

115,315

$

341,711

$

229,859

Cost of revenues

148,431

129,590

102,803

278,021

214,376

Selling, general and administrative expenses

26,630

25,397

21,435

52,027

44,927

Other operating income, net

(9)

(42)

(713)

(51)

(2,409)

Impairments and other charges

—

—

6,925

—

6,925

Operating income (loss)

7,968

3,746

(15,135)

11,714

(33,960)










Foreign currency exchange (gain) loss

534

392

(746)

926

(1,201)

Interest expense, net

3,441

3,218

3,022

6,659

5,103

Gain on extinguishment of debt

—

—

—

—

(1,894)

Income (loss) from operations before income taxes

3,993

136

(17,411)

4,129

(35,968)










Provision (benefit) for income taxes

2,361

1,119

(3,507)

3,480

(8,764)

Net income (loss)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)










Calculation of EPS:








Basic - net income (loss)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)

Assumed conversions of Convertible Notes due 2017

—

—

—

—

—

Diluted - adjusted net income (loss)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)










Basic - weighted average common shares outstanding

84,653

84,153

83,457

84,404

83,358

Dilutive effect of stock options and restricted stock awards

2,662

—

—

2,695

—

Dilutive effect of Convertible Notes due 2017

—

—

—

—

—

Dilutive effect of Convertible Notes due 2021

—

—

—

—

—

Diluted - weighted average common shares outstanding

87,315

84,153

83,457

87,099

83,358










Income (loss) per common share - basic:

$

0.02

$

(0.01)

$

(0.17)

$

0.01

$

(0.33)

Income (loss) per common share - diluted:

$

0.02

$

(0.01)

$

(0.17)

$

0.01

$

(0.33)

Note: For all periods presented, we excluded the assumed conversion of the Convertible Notes in calculating diluted earnings per share as the effect was anti-dilutive.

 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)





Three Months Ended

Six Months Ended

(In thousands)

June 30,
 2017

March 31,
 2017

June 30,
 2016

June 30,
 2017

June 30,
 2016

Revenues








Fluids systems

$

150,623

$

136,050

$

96,153

$

286,673

$

194,804

Mats and integrated services

32,397

22,641

19,162

55,038

35,055

Total revenues

$

183,020

$

158,691

$

115,315

$

341,711

$

229,859










Operating income (loss)








Fluids systems (1)

$

5,863

$

6,352

$

(11,924)

$

12,215

$

(27,131)

Mats and integrated services

11,419

6,402

3,989

17,821

7,725

Corporate office

(9,314)

(9,008)

(7,200)

(18,322)

(14,554)

Operating income (loss)

$

7,968

$

3,746

$

(15,135)

$

11,714

$

(33,960)










Segment operating margin








Fluids systems

3.9

%

4.7

%

(12.4)

%

4.3

%

(13.9)

%

Mats and integrated services

35.2

%

28.3

%

20.8

%

32.4

%

22.0

%


(1)

Second quarter 2016 and first half 2016 operating results included $7.6 million of charges associated with asset impairments primarily in the Asia pacific region.  In addition, second quarter and first half 2016 operating results included $0.7 million and $3.9 million of charges associated with workforce reductions, respectively.

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)




(In thousands, except share data)

June 30, 2017

December 31, 2016

ASSETS


Cash and cash equivalents

$

68,237

$

87,878

Receivables, net

230,193

214,307

Inventories

156,947

143,612

Prepaid expenses and other current assets

50,010

17,143

Total current assets

505,387

462,940




Property, plant and equipment, net

304,129

303,654

Goodwill

20,238

19,995

Other intangible assets, net

4,892

6,067

Deferred tax assets

2,388

1,747

Other assets

3,434

3,780

Total assets

$

840,468

$

798,183




LIABILITIES AND STOCKHOLDERS' EQUITY


Current debt

$

85,879

$

83,368

Accounts payable

82,302

65,281

Accrued liabilities

39,863

31,152

Total current liabilities

208,044

179,801




Long-term debt, less current portion

75,107

72,900

Deferred tax liabilities

36,070

38,743

Other noncurrent liabilities

6,943

6,196

Total liabilities

326,164

297,640




Common stock, $0.01 par value, 200,000,000 shares authorized and 100,881,208 and 99,843,094 shares issued, respectively

1,009

998

Paid-in capital

565,568

558,966

Accumulated other comprehensive loss

(55,384)

(63,208)

Retained earnings

130,285

129,873

Treasury stock, at cost; 15,321,316 and 15,162,050 shares, respectively

(127,174)

(126,086)

Total stockholders' equity

514,304

500,543

Total liabilities and stockholders' equity

$

840,468

$

798,183

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Six Months Ended June 30,

(In thousands)

2017

2016

Cash flows from operating activities:


Net income (loss)

$

649

$

(27,204)

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


Impairments and other non-cash charges

—

8,617

Depreciation and amortization

19,244

19,201

Stock-based compensation expense

5,874

5,613

Provision for deferred income taxes

(3,672)

546

Net provision for doubtful accounts

1,412

1,582

Gain on sale of assets

(1,266)

(1,841)

Gain on extinguishment of debt

—

(1,894)

Amortization of original issue discount and debt issuance costs

2,679

796

Change in assets and liabilities:


(Increase) decrease in receivables

(48,612)

18,006

(Increase) decrease in inventories

(10,500)

18,981

Increase in other assets

(2,773)

(3,000)

Increase (decrease) in accounts payable

15,590

(20,720)

Increase in accrued liabilities and other

43,685

1,143

Net cash provided by operating activities

22,310

19,826




Cash flows from investing activities:


Capital expenditures

(16,644)

(26,652)

Increase in restricted cash

(29,765)

(22)

Proceeds from sale of property, plant and equipment

1,222

2,553

Net cash used in investing activities

(45,187)

(24,121)




Cash flows from financing activities:


Borrowings on lines of credit

—

4,268

Payments on lines of credit

—

(5,034)

Purchase of Convertible Notes due 2017

—

(9,206)

Debt issuance costs

(335)

(1,707)

Other financing activities

2,333

2,170

Proceeds from employee stock plans

1,517

4

Purchases of treasury stock

(2,382)

(1,093)

Net cash provided by (used in) financing activities

1,133

(10,598)




Effect of exchange rate changes on cash

2,103

903




Net decrease in cash and cash equivalents

(19,641)

(13,990)

Cash and cash equivalents at beginning of year

87,878

107,138

Cash and cash equivalents at end of period

$

68,237

$

93,148

 

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,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

Net income (loss) (GAAP) (1)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)

Interest expense, net

3,441

3,218

3,022

6,659

5,103

Provision (benefit) for income taxes

2,361

1,119

(3,507)

3,480

(8,764)

Depreciation and amortization

9,857

9,387

9,628

19,244

19,201

EBITDA (non-GAAP) (1)

17,291

12,741

(4,761)

30,032

(11,664)


(1)

Second quarter 2016 and first half 2016 net loss and EBITDA included $7.6 million of charges associated with asset impairments primarily in the Asia pacific region. In addition, second quarter and first half 2016 net loss and EBITDA included $0.9 million and $4.3 million of charges associated with workforce reductions, respectively.

 

Fluids Systems

Three Months Ended

Six Months Ended

(In thousands)

June 30,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

Operating income (loss) (GAAP) (2)

$

5,863

$

6,352

$

(11,924)

$

12,215

$

(27,131)

Depreciation and amortization

5,513

5,168

5,293

10,681

10,583

EBITDA (non-GAAP) (2)

11,376

11,520

(6,631)

22,896

(16,548)

Revenues

150,623

136,050

96,153

286,673

194,804

Operating Margin (GAAP)

3.9

%

4.7

%

(12.4)

%

4.3

%

(13.9)

%

EBITDA Margin (non-GAAP)

7.6

%

8.5

%

(6.9)

%

8.0

%

(8.5)

%


(2)

Second quarter 2016 and first half 2016 operating loss and EBITDA included $7.6 million of charges associated with asset impairments primarily in the Asia pacific region.  In addition, second quarter and first half 2016 operating loss and EBITDA included $0.7 million and $3.9 million of charges associated with workforce reductions, respectively.

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)




Mats and integrated services

Three Months Ended

Six Months Ended

(In thousands)

June 30,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

Operating income (loss) (GAAP)

$

11,419

$

6,402

$

3,989

$

17,821

$

7,725

Depreciation and amortization

3,534

3,480

3,585

7,013

7,136

EBITDA (non-GAAP)

14,953

9,882

7,574

24,834

14,861

Revenues

32,397

22,641

19,162

55,038

35,055

Operating Margin (GAAP)

35.2

%

28.3

%

20.8

%

32.4

%

22.0

%

EBITDA Margin (non-GAAP)

46.2

%

43.6

%

39.5

%

45.1

%

42.4

%





















 

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, 2017

December 31, 2016

Current debt

$

85,879

$

83,368

Long-term debt, less current portion

75,107

72,900

Total Debt

160,986

156,268

Total stockholders' equity

514,304

500,543

Total Capital

$

675,290

$

656,811




Ratio of Total Debt to Capital

23.8

%

23.8

%








Total Debt

$

160,986

$

156,268

Less: cash and cash equivalents

(68,237)

(87,878)

Less: specific restricted cash (1)

(30,100)

—

Net Debt

62,649

68,390

Total stockholders' equity

514,304

500,543

Total Capital, Net of Cash

$

576,953

$

568,933




Ratio of Net Debt to Capital

10.9

%

12.0

%


(1)

Restricted cash included in prepaid expenses and other current assets related to settlement of Convertible Notes due 2017

 

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SOURCE Newpark Resources, Inc.