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Newpark Resources Reports Third Quarter 2017 Results

October 30, 2017
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Company reports revenues of $202 million, net income of $0.03 per share

THE WOODLANDS, Texas, Oct. 30, 2017 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its third quarter ended September 30, 2017.  Total revenues for the third quarter of 2017 were $201.7 million compared to $183.0 million in the second quarter of 2017 and $104.6 million in the third quarter of 2016.  Net income for the third quarter of 2017 was $2.7 million, or $0.03 per diluted share, compared to net income of $1.6 million, or $0.02 per diluted share, in the second quarter of 2017, and a net loss of $13.5 million, or $0.16 per share, in the third quarter of 2016.  Third quarter 2016 results included a total of $2.6 million of charges associated with asset demobilization and wind-down of our operations in Uruguay.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "We're very pleased to report another solid quarter of revenue growth across both segments.  In Fluids, revenue gains were once again led by our North American operations.  Despite the modest headwind created by Hurricane Harvey, U.S. revenues improved by 10% sequentially, outperforming the market rig count gains for the fourth consecutive quarter.  The relative outperformance in the quarter is largely attributable to the deepwater Gulf of Mexico, where projects with two customers contributed $4 million of revenue to the third quarter.  Canadian revenues also rebounded in the third quarter, reflecting the typical seasonal pattern following Spring break-up, resulting in a 16% sequential increase in total North American fluids revenue.  Internationally, fluids revenues remained relatively stable, as improvements in customer activity in Romania was partially offset by declines in Kuwait, Algeria, and Albania largely related to project timing.  The segment operating margin improved modestly, with the incremental benefit of the stronger revenues being partially offset by the unfavorable impact of price concessions on an NOC customer contract as well as a modestly softer product mix in the U.S.

"The Mats business posted another strong quarter, which continues to reflect the benefits of our diversification strategy.  Despite the anticipated reduction in rental activity following the completion of a few large scale utility transmission and distribution projects in the second quarter, segment revenues improved in the third quarter, led by $13 million of mat sales," added Howes.  "And while the rental activity into the utilities sector declined, this was partially offset by an increase in rental activity for pipeline customers."

2017 Convertible Notes Settlement

In advance of the October 1, 2017 maturity of convertible notes, the Company placed an additional $54.8 million of cash into an escrow account in the third quarter of 2017, increasing the total balance in escrow (reported within prepaid expenses and other current assets) to $84.9 million as of September 30, 2017.  These funds were used for the full satisfaction of the 2017 Convertible Notes following the end of the third quarter.

Segment Results

The Fluids Systems segment generated revenues of $166.7 million in the third quarter of 2017 compared to $150.6 million in the second quarter of 2017 and $89.1 million in the third quarter of 2016.  Segment operating income was $7.9 million in the third quarter of 2017, compared to $5.9 million of income in the second quarter of 2017 and a $9.0 million loss in the third quarter of 2016.  Segment results for the third quarter of 2016 included $2.6 million of charges associated with asset demobilization and wind-down of our operations in Uruguay following the customer decision to discontinue offshore exploration efforts in the country.

The Mats and Integrated Services segment generated revenues of $34.9 million in the third quarter of 2017 compared to $32.4 million in the second quarter of 2017 and $15.5 million in the third quarter of 2016.  Segment operating income was $10.9 million in the third quarter of 2017, compared to $11.4 million in the second quarter of 2017, and $0.9 million in the third quarter of 2016.

CONFERENCE CALL

Newpark has scheduled a conference call to discuss third quarter 2017 results, which will be broadcast live over the Internet, on Tuesday, October 31, 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 November 14, 2017 and may be accessed by dialing (201) 612-7415 and using pass code 13670778#.  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

Nine Months Ended

(In thousands, except per share data)

September 30, 
 2017

June 30, 
 2017

September 30, 
 2016

September 30, 
 2017

September 30, 
 2016

Revenues

$

201,663

$

183,020

$

104,554

$

543,374

$

334,413

Cost of revenues

164,587

148,431

99,293

442,608

313,669

Selling, general and administrative expenses

27,270

26,630

21,736

79,297

66,663

Other operating income, net

(76)

(9)

(1,420)

(127)

(3,829)

Impairments and other charges

—

—

—

—

6,925

Operating income (loss)

9,882

7,968

(15,055)

21,596

(49,015)










Foreign currency exchange loss (gain)

174

534

761

1,100

(440)

Interest expense, net

3,586

3,441

2,127

10,245

7,230

Gain on extinguishment of debt

—

—

—

—

(1,894)

Income (loss) from operations before income taxes

6,122

3,993

(17,943)

10,251

(53,911)










Provision (benefit) for income taxes

3,469

2,361

(4,492)

6,949

(13,256)

Net income (loss)

$

2,653

$

1,632

$

(13,451)

$

3,302

$

(40,655)










Calculation of EPS:








Basic - net income (loss)

$

2,653

$

1,632

$

(13,451)

$

3,302

$

(40,655)

Assumed conversions of 2017 Convertible Notes

—

—

—

—

—

Diluted - adjusted net income (loss)

$

2,653

$

1,632

$

(13,451)

$

3,302

$

(40,655)










Basic - weighted average common shares outstanding

85,426

84,653

83,998

84,749

83,573

Dilutive effect of stock options and restricted stock awards

2,251

2,662

—

2,545

—

Dilutive effect of 2017 Convertible Notes

—

—

—

—

—

Dilutive effect of 2021 Convertible Notes

—

—

—

—

—

Diluted - weighted average common shares outstanding

87,677

87,315

83,998

87,294

83,573










Income (loss) per common share - basic:

$

0.03

$

0.02

$

(0.16)

$

0.04

$

(0.49)

Income (loss) per common share - diluted:

$

0.03

$

0.02

$

(0.16)

$

0.04

$

(0.49)

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

Nine Months Ended

(In thousands)

September 30, 
 2017

June 30, 
 2017

September 30, 
 2016

September 30, 
 2017

September 30, 
 2016

Revenues








Fluids systems

$

166,726

$

150,623

$

89,097

$

453,399

$

283,901

Mats and integrated services

34,937

32,397

15,457

89,975

50,512

Total revenues

$

201,663

$

183,020

$

104,554

$

543,374

$

334,413










Operating income (loss)








Fluids systems (1)

$

7,930

$

5,863

$

(8,995)

$

20,145

$

(36,126)

Mats and integrated services

10,941

11,419

882

28,762

8,607

Corporate office

(8,989)

(9,314)

(6,942)

(27,311)

(21,496)

Operating income (loss)

$

9,882

$

7,968

$

(15,055)

$

21,596

$

(49,015)










Segment operating margin








Fluids systems (1)

4.8

%

3.9

%

(10.1)

%

4.4

%

(12.7)

%

Mats and integrated services

31.3

%

35.2

%

5.7

%

32.0

%

17.0

%

(1)  Operating results for the third quarter and first nine months of 2016 included $2.6 million of charges associated with asset demobilization and wind-down of our operations in Uruguay following the customer decision to discontinue offshore exploration efforts in the country.  Operating results for the first nine months of 2016 also included $7.6 million of charges associated with asset impairments primarily in the Asia Pacific region and $4.1 million of charges associated with workforce reductions.

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

September 30, 
 2017

December 31,
2016

ASSETS


Cash and cash equivalents

$

64,741

$

87,878

Receivables, net

262,105

214,307

Inventories

164,384

143,612

Prepaid expenses and other current assets

104,703

17,143

Total current assets

595,933

462,940




Property, plant and equipment, net

298,663

303,654

Goodwill

20,415

19,995

Other intangible assets, net

4,312

6,067

Deferred tax assets

3,379

1,747

Other assets

3,221

3,780

Total assets

$

925,923

$

798,183




LIABILITIES AND STOCKHOLDERS' EQUITY


Current debt

$

85,119

$

83,368

Accounts payable

85,049

65,281

Accrued liabilities

50,138

31,152

Total current liabilities

220,306

179,801




Long-term debt, less current portion

139,721

72,900

Deferred tax liabilities

36,559

38,743

Other noncurrent liabilities

7,577

6,196

Total liabilities

404,163

297,640




Common stock, $0.01 par value, 200,000,000 shares authorized and 101,150,629 and 99,843,094 shares issued, respectively

1,012

998

Paid-in capital

568,743

558,966

Accumulated other comprehensive loss

(53,727)

(63,208)

Retained earnings

132,825

129,873

Treasury stock, at cost; 15,316,359 and 15,162,050 shares, respectively

(127,093)

(126,086)

Total stockholders' equity

521,760

500,543

Total liabilities and stockholders' equity

$

925,923

$

798,183

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


Nine Months Ended September 30,

(In thousands)

2017

2016

Cash flows from operating activities:


Net income (loss)

$

3,302

$

(40,655)

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


Impairments and other non-cash charges

—

9,493

Depreciation and amortization

28,998

28,421

Stock-based compensation expense

8,458

8,865

Provision for deferred income taxes

(3,489)

(3,205)

Net provision for doubtful accounts

1,386

2,032

Gain on sale of assets

(4,896)

(2,331)

Gain on extinguishment of debt

—

(1,894)

Amortization of original issue discount and debt issuance costs

4,068

1,150

Change in assets and liabilities:


(Increase) decrease in receivables

(73,512)

31,360

(Increase) decrease in inventories

(17,348)

25,368

Increase in other assets

(1,621)

(568)

Increase (decrease) in accounts payable

17,996

(24,241)

Increase (decrease) in accrued liabilities and other

52,421

(3,860)

Net cash provided by operating activities

15,763

29,935




Cash flows from investing activities:


Capital expenditures

(21,888)

(33,390)

Increase in restricted cash

(85,680)

(578)

Proceeds from sale of property, plant and equipment

2,233

3,317

Business acquisitions, net of cash acquired

—

(3,761)

Net cash used in investing activities

(105,335)

(34,412)




Cash flows from financing activities:


Borrowings on lines of credit

84,900

6,056

Payments on lines of credit

(21,400)

(7,210)

Purchase of 2017 Convertible Notes

—

(9,206)

Debt issuance costs

(342)

(2,143)

Other financing activities

1,487

1,452

Proceeds from employee stock plans

2,107

508

Purchases of treasury stock

(2,761)

(1,236)

Net cash provided by (used in) financing activities

63,991

(11,779)




Effect of exchange rate changes on cash

2,444

982




Net decrease in cash and cash equivalents

(23,137)

(15,274)

Cash and cash equivalents at beginning of year

87,878

107,138

Cash and cash equivalents at end of period

$

64,741

$

91,864

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

Nine Months Ended

(In thousands)

September 30,
2017

June 30, 
 2017

September 30,
2016

September 30,
2017

September 30,
2016

Net income (loss) (GAAP) (1)

$

2,653

$

1,632

$

(13,451)

$

3,302

$

(40,655)

Interest expense, net

3,586

3,441

2,127

10,245

7,230

Provision (benefit) for income taxes

3,469

2,361

(4,492)

6,949

(13,256)

Depreciation and amortization

9,754

9,857

9,220

28,998

28,421

EBITDA (non-GAAP) (1)

$

19,462

$

17,291

$

(6,596)

$

49,494

$

(18,260)

(1)  Net loss and EBITDA for the third quarter and first nine months of 2016 included a total of $2.6 million of charges associated with asset demobilization and wind-down of our operations in Uruguay.  Net loss and EBITDA for the first nine months of 2016 also included $7.6 million of charges associated with asset impairments primarily in the Asia Pacific region and $4.6 million of charges associated with workforce reductions.

 

Fluids Systems

Three Months Ended

Nine Months Ended

(In thousands)

September 30,
2017

June 30, 
 2017

September 30,
2016

September 30,
2017

September 30,
2016

Operating income (loss) (GAAP) (2)

$

7,930

$

5,863

$

(8,995)

$

20,145

$

(36,126)

Depreciation and amortization

5,540

5,513

4,979

16,221

15,562

EBITDA (non-GAAP) (2)

13,470

11,376

(4,016)

36,366

(20,564)

Revenues

166,726

150,623

89,097

453,399

283,901

Operating Margin (GAAP)

4.8

%

3.9

%

(10.1)

%

4.4

%

(12.7)

%

EBITDA Margin (non-GAAP)

8.1

%

7.6

%

(4.5)

%

8.0

%

(7.2)

%

(2)   Operating loss and EBITDA for the third quarter and first nine months of 2016 included $2.6 million of charges associated with asset demobilization and wind-down of our operations in Uruguay.  Operating loss and EBITDA for the first nine months of 2016 also included $7.6 million of charges associated with asset impairments primarily in the Asia Pacific region and $4.1 million of charges associated with workforce reductions.

 

Mats and Integrated Services

Three Months Ended

Nine Months Ended

(In thousands)

September 30,
2017

June 30, 
 2017

September 30,
2016

September 30,
2017

September 30,
2016

Operating income (loss) (GAAP)

$

10,941

$

11,419

$

882

$

28,762

$

8,607

Depreciation and amortization

3,401

3,534

3,491

10,414

10,627

EBITDA (non-GAAP)

14,342

14,953

4,373

39,176

19,234

Revenues

34,937

32,397

15,457

89,975

50,512

Operating Margin (GAAP)

31.3

%

35.2

%

5.7

%

32.0

%

17.0

%

EBITDA Margin (non-GAAP)

41.1

%

46.2

%

28.3

%

43.5

%

38.1

%

 

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)

September 30,
2017

December 31,
2016

Current debt (1)

$

85,119

$

83,368

Long-term debt, less current portion

139,721

72,900

Total Debt

224,840

156,268

Total stockholders' equity

521,760

500,543

Total Capital

$

746,600

$

656,811




Ratio of Total Debt to Capital (1)

30.1

%

23.8

%








Total Debt

$

224,840

$

156,268

Less: cash and cash equivalents

(64,741)

(87,878)

Less: specific restricted cash (2)

(84,917)

—

Net Debt

75,182

68,390

Total stockholders' equity

521,760

500,543

Total Capital, Net of Cash

$

596,942

$

568,933




Ratio of Net Debt to Capital

12.6

%

12.0

%

(1)  Current debt includes $83.3 million of 2017 Convertible Notes which were fully repaid on October 2, 2017.  Pro-forma ratio of total debt to capital after repayment was 21.3%.

(2)  Restricted cash included in prepaid expenses and other current assets as of September 30, 2017 that was used to fully settle the 2017 Convertible Notes on October 2, 2017.

 

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SOURCE Newpark Resources, Inc.