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Newpark Resources Reports Fourth Quarter 2016 Results

February 9, 2017
PDF Version
Revenues increase 31% sequentially

THE WOODLANDS, Texas, Feb. 9, 2017 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its fourth quarter ended December 31, 2016. Total revenues for the fourth quarter of 2016 were $137.1 million compared to $104.6 million in the third quarter of 2016 and $150.6 million in the fourth quarter of 2015. Net loss for the fourth quarter of 2016 was $0.1 million, break-even on a per share basis, compared to a net loss of $13.5 million, or $0.16 per share, in the third quarter of 2016, and a net loss of $83.1 million, or $1.00 per share, in the fourth quarter of 2015. Fourth quarter 2016 results included the impact of the following:

  • $9.3 million benefit to the provision for income taxes, reflecting the tax benefit associated with restructuring the investment in our Brazilian subsidiary.
  • $2.6 million of pre-tax charges ($2.6 million after-tax) associated with the impairment of inventory in the Asia Pacific region in the Fluids Systems segment, primarily resulting from the ongoing weakness and outlook for drilling activity in Australia.
  • $2.0 million of pre-tax charges ($2.0 million after-tax) associated with redeployment costs and asset impairments resulting from the exit of our Fluids Systems operations in Uruguay.

The combined impact of the above items resulted in a $4.7 million reduction in the net loss ($0.06 per share) for the fourth quarter 2016.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "Building on the improvements that began in the third quarter, we've seen the momentum continue through the fourth quarter, particularly in North America, where revenues have steadily strengthened over the past six months. Capitalizing on our strong market share position, our North American fluids revenues increased 49% sequentially, significantly outperforming the overall market. Despite our very strong top line result, the impact of revenue growth on operating income was somewhat muted by a softer sales mix, along with the timing of certain operating expenses. Internationally, fluids revenues increased 6% sequentially, driven by improvements in our EMEA region. As they have throughout 2016, the key NOC contracts in Algeria and Kuwait have been a stabilizing force in a very difficult market.

"Our mats segment also posted a strong sequential revenue gain with a 65% increase from the third quarter, marking the segment's strongest revenue quarter in nearly two years. Segment revenues were $26 million in the fourth quarter, benefiting from $10 million of mat sales. The incremental margins on the sequential revenue gains were lower than our typical range, largely reflecting an elevated level of pass-through service revenues associated with new rental contracts in the Northeast.

"Meanwhile, we also strengthened our liquidity position in the quarter by issuing $100 million of convertible bonds due in 2021, and using the proceeds to retire nearly half of our outstanding bonds due in October 2017," added Howes. "Following this refinancing, we ended the year with a cash balance of $88 million and $83 million of remaining debt maturing in October 2017, while our revolving credit facility remains undrawn. Our available liquidity positions us well to capitalize on the continued market recovery."

Segment Results

The Fluids Systems segment generated revenues of $111.6 million in the fourth quarter of 2016 compared to $89.1 million in the third quarter of 2016 and $130.1 million in the fourth quarter of 2015. Segment operating loss was $7.5 million in the fourth quarter of 2016, compared to a $9.0 million loss in the third quarter of 2016 and an $83.6 million loss in the fourth quarter of 2015. Segment results for the fourth quarter of 2016 included $4.6 million of charges in Australia and Uruguay, as described above.

The Mats and Integrated Services segment generated revenues of $25.5 million in the fourth quarter of 2016 compared to $15.5 million in the third quarter of 2016 and $20.5 million in the fourth quarter of 2015. Segment operating income was $6.1 million in the fourth quarter of 2016, compared to operating income of $0.9 million in the third quarter of 2016, and $2.9 million in the fourth quarter of 2015. Segment operating income in 2016 is benefiting from a reduction in depreciation expense associated with our mat rental fleet, reflecting increases in estimated useful lives and residual values. These changes, which were effective in January 2016, reduced depreciation expense by $1.5 million in both the fourth quarter and third quarter of 2016.

CONFERENCE CALL

Newpark has scheduled a conference call to discuss fourth quarter 2016 results, which will be broadcast live over the Internet, on Friday, February 10, 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 February 24, 2017 and may be accessed by dialing 201-612-7415 and using pass code 13652845#. 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, 2015 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 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, Newpark's customer concentration and reliance on the U.S. exploration and production market, the cost and continued availability of borrowed funds including noncompliance with debt covenants, risks related to Newpark's international operations, operating hazards present in the oil and natural gas industry, Newpark's ability to execute its business strategy and make successful business acquisitions and capital investments, the availability of raw materials and skilled personnel, Newpark's market competition, compliance with legal and regulatory matters, including environmental regulations, the availability of insurance and the risks and limitations of Newpark's insurance coverage, potential impairments of long-lived intangible assets, technological developments in Newpark's industry, cybersecurity breaches or business system disruptions, risks related to severe weather, particularly in the U.S. Gulf Coast and risks related to the fluctuations in the market value of Newpark's 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 its website at www.newpark.com.

Contacts:

Brian Feldott

Director, Investor Relations

Newpark Resources, Inc.

bfeldott@newpark.com

281-362-6800

 

Newpark Resources, Inc.

Consolidated Statements of Operations

(Unaudited)



Three Months Ended

Twelve months ended

(In thousands, except per share data)

December 31,
 2016

September 30,
 2016

December 31,
 2015

December 31,
 2016

December 31,
 2015

Revenues

$

137,083

$

104,554

$

150,587

$

471,496

$

676,865

Cost of revenues

124,167

99,293

141,941

437,836

599,013

Selling, general and administrative expenses

21,810

21,736

25,232

88,473

101,032

Other operating income, net

(516)

(1,420)

(649)

(4,345)

(2,426)

Impairments and other charges

(180)

—

78,345

6,745

78,345

Operating loss

(8,198)

(15,055)

(94,282)

(57,213)

(99,099)











Foreign currency exchange (gain) loss

(270)

761

(374)

(710)

4,016

Interest expense, net

2,636

2,127

2,503

9,866

9,111

Gain on extinguishment of debt

279

—

—

(1,615)

—

Loss from operations before income taxes

(10,843)

(17,943)

(96,411)

(64,754)

(112,226)











Benefit for income taxes

(10,786)

(4,492)

(13,315)

(24,042)

(21,398)

Net loss

$

(57)

$

(13,451)

$

(83,096)

$

(40,712)

$

(90,828)











Calculation of EPS:









Net loss - basic

$

(57)

$

(13,451)

$

(83,096)

$

(40,712)

$

(90,828)

Assumed conversions of Convertible Notes due 2017

—

—

—

—

—

Adjusted net loss - diluted

$

(57)

$

(13,451)

$

(83,096)

$

(40,712)

$

(90,828)











Basic - weighted average common shares outstanding

84,066

83,998

83,072

83,697

82,722

Dilutive effect of stock options, restricted stock and convertible notes

—

—

—

—

—

Diluted - weighted average common shares outstanding

84,066

83,998

83,072

83,697

82,722











Loss per common share - basic

$

—

$

(0.16)

$

(1.00)

$

(0.49)

$

(1.10)

Loss per common share - diluted

$

—

$

(0.16)

$

(1.00)

$

(0.49)

$

(1.10)

Note: For all periods presented, we excluded all potentially dilutive stock options, restricted stock and assumed conversion of convertible notes in calculating diluted earnings per share as the effect was anti-dilutive due to the net losses incurred for these periods.

 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)


Three Months Ended

(In thousands)

December 31,
 2016

September 30,
 2016

December 31,
 2015

Revenues




Fluids systems

$

111,560

$

89,097

$

130,125

Mats and integrated services

25,523

15,457

20,462

Total revenues

$

137,083

$

104,554

$

150,587






Operating income (loss)




Fluids systems (1)

$

(7,505)

$

(8,995)

$

(83,599)

Mats and integrated services (2)

6,134

882

2,875

Corporate office (3)

(6,827)

(6,942)

(13,558)

Operating loss

$

(8,198)

$

(15,055)

$

(94,282)






Segment operating margin




Fluids systems

(6.7)

%

(10.1)

%

(64.2)

%

Mats and integrated services

24.0

%

5.7

%

14.1

%


1)

Fourth quarter 2016 results include $4.6 million of charges for asset impairments and Uruguay exit costs. Third quarter 2016 results include $2.6 million of charges related to Uruguay exit costs. Fourth quarter 2015 results include a $75.5 million charge associated with goodwill and other asset impairments and a $1.9 million charge associated with workforce reductions.


2)

Third quarter 2016 results include a $0.7 million charge to recondition certain mats. Fourth quarter 2015 results include a $0.3 million charge associated with workforce reductions.


3)

Fourth quarter 2016 results include a $0.7 million gain associated with the change in the final settlement amount of the wage and hour litigation claims. Fourth quarter 2015 results include a $5.8 million charge associated with workforce reductions and a provision for the then pending wage and hour litigation, including related expenses.

 

Newpark Resources, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

December 31,
 2016

December 31,
 2015

ASSETS


Cash and cash equivalents

$

87,878

$

107,138

Receivables, net

214,307

206,364

Inventories

143,612

163,657

Prepaid expenses and other current assets

17,143

29,219

Total current assets

462,940

506,378




Property, plant and equipment, net

303,654

307,632

Goodwill

19,995

19,009

Other intangible assets, net

6,067

11,051

Deferred tax assets

1,747

1,821

Other assets

3,780

3,002

Total assets

$

798,183

$

848,893




LIABILITIES AND STOCKHOLDERS' EQUITY


Current debt

$

83,368

$

7,382

Accounts payable

65,281

72,211

Accrued liabilities

31,152

45,835

Total current liabilities

179,801

125,428




Long-term debt, less current portion

72,900

171,211

Deferred tax liabilities

38,743

26,368

Other noncurrent liabilities

6,196

5,627

Total liabilities

297,640

328,634




Common stock, $0.01 par value, 200,000,000 shares authorized and 99,843,094 and 99,377,391 shares issued, respectively

998

994

Paid-in capital

558,966

533,746

Accumulated other comprehensive loss

(63,208)

(58,276)

Retained earnings

129,873

171,788

Treasury stock, at cost; 15,162,050 and 15,302,345 shares, respectively

(126,086)

(127,993)

Total stockholders' equity

500,543

520,259

Total liabilities and stockholders' equity

$

798,183

$

848,893

 

Newpark Resources, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


Twelve months ended December 31,

(In thousands)

2016

2015

Cash flows from operating activities:


Net loss

$

(40,712)

$

(90,828)

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


Impairments and other non-cash charges

12,523

75,508

Depreciation and amortization

37,955

43,917

Stock-based compensation expense

12,056

14,202

Provision for deferred income taxes

3,352

(503)

Net provision for doubtful accounts

2,416

1,886

Gain on sale of assets

(2,820)

(1,364)

Gain on extinguishment of debt

(1,615)

—

Excess tax benefit from stock-based compensation

—

(204)

Change in assets and liabilities:


 (Increase) decrease in receivables

(1,699)

122,399

 Decrease in inventories

16,044

21,309

 Decrease in other assets

2,639

1,191

 Decrease in accounts payable

(5,213)

(31,974)

 Decrease in accrued liabilities and other

(23,831)

(34,022)

Net cash provided by operating activities

11,095

121,517




Cash flows from investing activities:


Capital expenditures

(38,440)

(69,404)

Decrease (increase) in restricted cash

10,060

(17,485)

Proceeds from sale of property, plant and equipment

4,540

2,523

Business acquisitions, net of cash acquired

(4,420)

—

Net cash used in investing activities

(28,260)

(84,366)




Cash flows from financing activities:


Borrowings on lines of credit

6,437

11,036

Payments on lines of credit

(14,269)

(12,544)

Proceeds from Convertible Notes due 2021

100,000

—

Purchase of Convertible Notes due 2017

(87,271)

—

Debt issuance costs

(5,403)

(2,023)

Other financing activities

357

(1,673)

Proceeds from employee stock plans

725

553

Purchases of treasury stock

(1,226)

(2,283)

Excess tax benefit from stock-based compensation

—

204

Net cash used in financing activities

(650)

(6,730)




Effect of exchange rate changes on cash

(1,445)

(8,335)




Net increase (decrease) in cash and cash equivalents

(19,260)

22,086

Cash and cash equivalents at beginning of year

107,138

85,052

Cash and cash equivalents at end of year

$

87,878

$

107,138

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/newpark-resources-reports-fourth-quarter-2016-results-300405258.html

SOURCE Newpark Resources, Inc.