Newpark Resources Reports Third Quarter 2015 Results
Company generates $25 million of operating cash flow; initiates additional cost reductions
THE WOODLANDS, Texas, Oct. 29, 2015 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for its third quarter ended September 30, 2015. Total revenues for the third quarter of 2015 were $154.2 million compared to $163.6 million in the second quarter and $297.0 million in the third quarter of 2014. Net loss for the third quarter of 2015 was $4.5 million, or $0.05 per share, compared to a net loss of $4.3 million, or $0.05 per share, in the second quarter, and net income of $23.5 million, or $0.25 per diluted share, in the third quarter of 2014. Third quarter 2015 results included the impact of the following:
- $2.3 million of pre-tax charges ($1.5 million after-tax) associated with workforce reductions, predominately in North America.
- $3.2 million of pre-tax foreign exchange losses ($3.2 million after-tax), substantially all of which is attributable to the re-valuation of inter-company balances due from our Brazilian subsidiary.
- $0.4 million pre-tax charge and a $3.3 million benefit to the income tax provision ($2.9 million net after-tax benefit) associated with the forgiveness of a portion of the inter-company balances due from our Brazilian subsidiary.
- $2.2 million benefit to the provision for income taxes associated with the release of U.S. tax reserves, following the expiration of statutes of limitation.
Combined, the above items resulted in a $5.9 million increase to pre-tax loss, but a $0.4 million benefit, after taxes.
Paul Howes, Newpark's President and Chief Executive Officer, stated, "While we are encouraged by the continuing strength in cash flow, the challenging market environment again provided a strong headwind to third quarter results. With the further softening in North American drilling activity over the past two months, our North American Fluids revenues declined slightly from second quarter levels. Meanwhile, our international Fluids revenues remained relatively in-line with the prior quarter and our expectations, with EMEA remaining our strongest performing region, benefitting from the continuing ramp-up of activities in Kuwait and Algeria. In the Mats segment, as announced previously, we've seen a further softening in rental and services revenues in the weak commodity price environment, particularly in our largest rental market, the Northeast region. We also experienced softness in the Gulf Coast region, and non-exploration revenues were negatively impacted by the completion of large rental projects, which led to a decline in our rental fleet utilization and an $8 million decline in rental and service revenues.
"In response to the continued weakness and near-term uncertainty in the North American market, we've initiated additional workforce reduction efforts, including an early retirement program within certain business units. While we expect to see some relief from these cost actions in the near-term, a more meaningful improvement in operating results will need to be driven by an increase in revenue," added Howes. "Fortunately, we continue to benefit from our strong balance sheet position, including $114 million of cash on-hand and continuing positive cash flow, which allows us to focus on developing new market opportunities in both segments, while preserving our organizational capabilities for the eventual recovery in drilling activity."
SEGMENT RESULTS
The Fluids Systems segment generated revenues of $138.8 million in the third quarter of 2015 compared to $140.3 million in the second quarter and $251.2 million in the third quarter of 2014. Segment operating loss was $1.2 million in the third quarter of 2015, compared to a $0.2 million operating loss in the second quarter and operating income of $27.8 million in the third quarter of 2014. The segment results for the third quarter of 2015 included a $2.0 million charge associated with workforce reductions and a $0.4 million charge associated with the forgiveness of inter-company balances due from our Brazilian subsidiary.
The Mats and Integrated Services segment generated revenues of $15.4 million in the third quarter of 2015 compared to $23.3 million in the second quarter and $45.7 million in the third quarter of 2014. Segment operating loss was $0.1 million in the third quarter of 2015, which included a $0.2 million charge associated with workforce reductions, compared to operating income of $6.6 million in the second quarter, and $20.5 million in the third quarter of 2014.
LEADERSHIP ANNOUNCEMENT
The Company announced that Tim Armand has been appointed to the role of Vice President of U.S. Offshore Operations within the Fluids Systems segment. Mr. Armand joins Newpark after nearly 30 years of experience with Schlumberger, predominately in offshore operations.
CONFERENCE CALL
Newpark has scheduled a conference call to discuss third quarter 2015 results, which will be broadcast live over the Internet, on Friday, October 30, 2015 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 13, 2015 and may be accessed by dialing (201) 612-7415 and using pass code 13621403. 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 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, 2014, 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, our customer concentration and cyclical nature of our industry, operating hazards inherent in the oil and natural gas industry, our international operations, the cost and continued availability of borrowed funds, our ability to execute our business strategy and make successful business acquisitions and capital investments, the availability of raw materials and skilled personnel, the impact of restrictions on offshore drilling activity, our market competition, legal and regulatory matters, including environmental regulations, inherent limitations in insurance coverage, potential impairments of long-lived intangible assets, technological developments in our industry, and the impact of severe weather, particularly in the U.S. Gulf Coast. 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.
Newpark Resources, Inc. |
||||||||||
Consolidated Statements of Operations |
||||||||||
(Unaudited) |
Three Months Ended |
Nine Months Ended |
||||||||
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
||||||
(In thousands, except per share data) |
2015 |
2015 |
2014 |
2015 |
2014 |
|||||
Revenues |
$ 154,170 |
$ 163,644 |
$ 296,964 |
$ 526,278 |
$ 812,254 |
|||||
Cost of revenues |
138,283 |
142,155 |
228,661 |
457,072 |
639,932 |
|||||
Selling, general and administrative expenses |
25,859 |
23,963 |
28,754 |
75,800 |
82,258 |
|||||
Other operating (income) loss, net |
(709) |
(792) |
117 |
(1,777) |
(1,941) |
|||||
Operating income (loss) |
(9,263) |
(1,682) |
39,432 |
(4,817) |
92,005 |
|||||
Foreign currency exchange (gain) loss |
3,236 |
(410) |
1,221 |
4,390 |
(530) |
|||||
Interest expense, net |
2,129 |
2,224 |
2,321 |
6,608 |
8,071 |
|||||
Income (loss) from continuing operations before income taxes |
(14,628) |
(3,496) |
35,890 |
(15,815) |
84,464 |
|||||
Provision for income taxes |
(10,157) |
758 |
12,398 |
(8,083) |
28,901 |
|||||
Income (loss) from continuing operations |
(4,471) |
(4,254) |
23,492 |
(7,732) |
55,563 |
|||||
Income from discontinued operations, net of tax |
- |
- |
- |
- |
1,152 |
|||||
Gain from disposal of discontinued operations, net of tax |
- |
- |
- |
- |
22,117 |
|||||
Net income (loss) |
$ (4,471) |
$ (4,254) |
$ 23,492 |
$ (7,732) |
$ 78,832 |
|||||
Income (loss) per common share -basic: |
||||||||||
Income (loss) from continuing operations |
$ (0.05) |
$ (0.05) |
$ 0.29 |
$ (0.09) |
$ 0.67 |
|||||
Income from discontinued operations |
- |
- |
- |
- |
0.28 |
|||||
Net income (loss) |
$ (0.05) |
$ (0.05) |
$ 0.29 |
$ (0.09) |
$ 0.95 |
|||||
Income (loss) per common share -diluted: |
||||||||||
Income (loss) from continuing operations |
$ (0.05) |
$ (0.05) |
$ 0.25 |
$ (0.09) |
$ 0.59 |
|||||
Income from discontinued operations |
- |
- |
- |
- |
0.23 |
|||||
Net income (loss) |
$ (0.05) |
$ (0.05) |
$ 0.25 |
$ (0.09) |
$ 0.82 |
|||||
Calculation of Diluted EPS: |
||||||||||
Income (loss) from continuing operations |
$ (4,471) |
$ (4,254) |
$ 23,492 |
$ (7,732) |
$ 55,563 |
|||||
Assumed conversions of Senior Notes |
- |
- |
1,294 |
- |
3,808 |
|||||
Adjusted income (loss) from continuing operations |
$ (4,471) |
$ (4,254) |
$ 24,786 |
$ (7,732) |
$ 59,371 |
|||||
Weighted average number of common shares outstanding-basic |
82,990 |
82,529 |
82,055 |
82,606 |
83,260 |
|||||
Add: Dilutive effect of stock options and restricted stock awards |
- |
- |
1,550 |
- |
1,715 |
|||||
Dilutive effect of Senior Notes |
- |
- |
15,682 |
- |
15,682 |
|||||
Diluted weighted average number of common shares outstanding |
82,990 |
82,529 |
99,287 |
82,606 |
100,657 |
|||||
Diluted income (loss) from continuing operations per common share |
$ (0.05) |
$ (0.05) |
$ 0.25 |
$ (0.09) |
$ 0.59 |
Note: For the second quarter, third quarter, and first nine months of 2015, we excluded all potentially dilutive stock options and restricted stock as well as the assumed conversion of the Senior Notes in calculating diluted earnings per share due to the net losses incurred for these periods as the effect was anti-dilutive. |
Newpark Resources, Inc. |
|||||||
Operating Segment Results |
|||||||
(Unaudited) |
Three Months Ended |
||||||
September 30, |
June 30, |
September 30, |
|||||
(In thousands) |
2015 |
2015 |
2014 |
||||
Revenues |
|||||||
Fluids systems |
$ 138,765 |
$ 140,344 |
$ 251,234 |
||||
Mats and integrated services |
15,405 |
23,300 |
45,730 |
||||
Total revenues |
$ 154,170 |
$ 163,644 |
$ 296,964 |
||||
Operating income (loss) |
|||||||
Fluids systems |
$ (1,246) |
$ (223) |
$ 27,756 |
||||
Mats and integrated services |
(128) |
6,555 |
20,541 |
||||
Corporate office |
(7,889) |
(8,014) |
(8,865) |
||||
Total operating income (loss) |
$ (9,263) |
$ (1,682) |
$ 39,432 |
||||
Segment operating margin |
|||||||
Fluids systems |
(0.9%) |
(0.2%) |
11.0% |
||||
Mats and integrated services |
(0.8%) |
28.1% |
44.9% |
Newpark Resources, Inc. |
||||||
Consolidated Balance Sheets |
||||||
(Unaudited) |
||||||
September 30, |
December 31, |
|||||
(In thousands, except share data) |
2015 |
2014 |
||||
ASSETS |
||||||
Cash and cash equivalents |
$ 113,850 |
$ 85,052 |
||||
Receivables, net |
176,640 |
318,600 |
||||
Inventories |
176,828 |
196,556 |
||||
Deferred tax assets |
4,367 |
11,013 |
||||
Prepaid expenses and other current assets |
30,116 |
12,615 |
||||
Total current assets |
501,801 |
623,836 |
||||
Property, plant and equipment, net |
302,404 |
283,361 |
||||
Goodwill |
89,749 |
91,893 |
||||
Other intangible assets, net |
12,190 |
15,666 |
||||
Other assets |
6,526 |
5,366 |
||||
Total assets |
$ 912,670 |
$ 1,020,122 |
||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||
Short-term debt |
$ 5,913 |
$ 11,648 |
||||
Accounts payable |
65,230 |
108,242 |
||||
Accrued liabilities |
42,895 |
53,342 |
||||
Total current liabilities |
114,038 |
173,232 |
||||
Long-term debt, less current portion |
172,497 |
172,498 |
||||
Deferred tax liabilities |
17,058 |
37,694 |
||||
Other noncurrent liabilities |
5,464 |
11,240 |
||||
Total liabilities |
309,057 |
394,664 |
||||
Commitments and contingencies |
||||||
Common stock, $0.01 par value, 200,000,000 shares authorized and 99,371,066 and 99,204,318 shares issued, respectively |
994 |
992 |
||||
Paid-in capital |
530,059 |
521,228 |
||||
Accumulated other comprehensive loss |
(54,339) |
(31,992) |
||||
Retained earnings |
254,884 |
262,616 |
||||
Treasury stock, at cost; 15,214,413 and 15,210,233 shares, respectively |
(127,985) |
(127,386) |
||||
Total stockholders' equity |
603,613 |
625,458 |
||||
Total liabilities and stockholders' equity |
$ 912,670 |
$ 1,020,122 |
||||
Note: At September 30, 2015, Prepaid expenses and other current assets includes $15.5 million of restricted cash, which collateralize outstanding letters of credit. |
Newpark Resources, Inc. |
||||
Consolidated Statements of Cash Flows |
||||
(Unaudited) |
Nine Months Ended September 30, |
|||
(In thousands) |
2015 |
2014 |
||
Cash flows from operating activities: |
||||
Net income (loss) |
$ (7,732) |
$ 78,832 |
||
Adjustments to reconcile net income to net cash provided by operations: |
||||
Depreciation and amortization |
32,668 |
30,925 |
||
Stock-based compensation expense |
10,514 |
9,092 |
||
Provision for deferred income taxes |
(12,240) |
(5,277) |
||
Net provision for doubtful accounts |
1,176 |
1,226 |
||
Gain on sale of a business |
- |
(33,974) |
||
Gain on sale of assets |
(940) |
(1,351) |
||
Excess tax benefit from stock-based compensation |
- |
(1,175) |
||
Change in assets and liabilities: |
||||
(Increase) decrease in receivables |
120,848 |
(60,348) |
||
(Increase) decrease in inventories |
11,190 |
(11,973) |
||
Increase in other assets |
(2,384) |
(6,170) |
||
Increase (decrease) in accounts payable |
(38,772) |
7,531 |
||
Increase (decrease) in accrued liabilities and other |
(7,161) |
15,544 |
||
Net cash provided by operating activities |
107,167 |
22,882 |
||
Cash flows from investing activities: |
||||
Capital expenditures |
(51,375) |
(84,710) |
||
Increase in restricted cash |
(15,500) |
- |
||
Proceeds from sale of property, plant and equipment |
1,864 |
3,144 |
||
Proceeds from sale of a business |
- |
89,766 |
||
Net cash (used in) provided by investing activities |
(65,011) |
8,200 |
||
Cash flows from financing activities: |
||||
Borrowings on lines of credit |
7,178 |
54,665 |
||
Payments on lines of credit |
(9,928) |
(58,897) |
||
Debt issuance costs |
(1,763) |
- |
||
Other financing activities |
(1,695) |
(43) |
||
Proceeds from employee stock plans |
469 |
3,104 |
||
Purchases of treasury stock |
(1,771) |
(52,892) |
||
Excess tax benefit from stock-based compensation |
- |
1,175 |
||
Net cash used in financing activities |
(7,510) |
(52,888) |
||
Effect of exchange rate changes on cash |
(5,848) |
(2,644) |
||
Net increase (decrease) in cash and cash equivalents |
28,798 |
(24,450) |
||
Cash and cash equivalents at beginning of year |
85,052 |
65,840 |
||
Cash and cash equivalents at end of period |
$ 113,850 |
$ 41,390 |
Contacts: |
Brian Feldott |
Director, Investor Relations |
|
Newpark Resources, Inc. |
|
281-362-6800 |
SOURCE Newpark Resources, Inc.
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