Form 8-K NEWPARK RESOURCES INC For: Apr 26
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 26, 2018
NEWPARK RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-02960 | 72-1123385 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
9320 Lakeside Blvd., Suite 100 The Woodlands, TX | 77381 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant's telephone number, including area code: (281) 362-6800
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
p | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
p | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
p | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
p | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 26, 2018, Newpark Resources, Inc. (the “Company”) issued a press release announcing financial information for the three months ended March 31, 2018. The press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
The information in Item 2.02 of this Current Report on Form 8-K and the information in the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.
Use of Non-GAAP Financial Information
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. Applicable reconciliations to the nearest GAAP financial measure of each non-GAAP financial measure are included in the attached Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | Description | |
99.1 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NEWPARK RESOURCES, INC. | |||
Dated: | April 26, 2018 | By: | /s/ Gregg S. Piontek |
Gregg S. Piontek | |||
Senior Vice President and Chief Financial Officer | |||
(Principal Financial Officer) | |||
Exhibit 99.1
 | NEWS RELEASE | ||
Contacts: | Gregg Piontek Senior Vice President and Chief Financial Officer Newpark Resources, Inc. [email protected] 281-362-6800 | ||
FOR IMMEDIATE RELEASE | |||
NEWPARK RESOURCES REPORTS FIRST QUARTER 2018 RESULTS
Company reports revenues of $227 million, earnings of $0.08 per diluted share and provides an update on deployment of KronosTM technology
THE WOODLANDS, TX – April 26, 2018 – Newpark Resources, Inc. (NYSE: NR) today announced results for its first quarter ended March 31, 2018. Total revenues for the first quarter of 2018 were $227.3 million compared to $204.4 million in the fourth quarter of 2017 and $158.7 million in the first quarter of 2017. Income from continuing operations for the first quarter of 2018 was $7.2 million, or $0.08 per diluted share, compared to $7.9 million, or $0.09 per diluted share, in the fourth quarter of 2017, and a loss from continuing operations of $(1.0) million, or $(0.01) per share, in the first quarter of 2017.
Paul Howes, Newpark’s President and Chief Executive Officer, stated, “We’re very pleased to report another solid quarter for both segments, posting consolidated revenues of $227 million and operating income of $14 million in the first quarter. In Fluids, first quarter revenues were $177 million, reflecting our highest quarterly revenue achieved since 2014. The 9% sequential growth in revenues was largely driven by the seasonal strength in Canada, which contributed $9 million of sequential revenue growth, while our U.S. business tracked fairly in-line with market activity levels. Internationally, despite the anticipated pull-back in Brazil, revenues increased by 5%, benefitting from strength in Romania and Kuwait, as well as the start-up of the Woodside project in offshore Australia.
“Meanwhile, following the successful deployment of our Kronos system with an independent operator in the Gulf of Mexico in the first quarter, I’m pleased to report that the system is now being utilized by two additional customers, including the Woodside Greater Enfield project in offshore Australia, as well as our first full deepwater well in the Gulf of Mexico with an IOC,” added Howes.
“In the Mats business, the integration of the Well Service Group and Utility Access Solutions with our legacy rental and service business is producing solid results. The mats segment generated revenues of $50 million in the first quarter, reflecting a fairly balanced revenue mix between exploration and non-exploration markets,” added Howes. “Revenues from mat sales came in at $10 million for the quarter, and we are optimistic going forward about the strengthening demand that we are seeing across end-markets.”
Fluids Systems International Contract Update
In Algeria, Newpark currently provides drilling fluids and related services to Sonatrach under Lot 1 and Lot 3 of a three-year contract awarded in 2015 (“2015 Contract”). Work under this contract began in the second quarter of 2015 and is expected to be completed by the fourth quarter of 2018. During the first quarter of 2018, Sonatrach initiated a new tender (“2018 Tender”), for a three-year term succeeding the 2015 Contract. For the 2018 Tender, Sonatrach adopted a change in its procurement process, limiting the number of Lots that could be awarded to major service providers. As a consequence, we expect any new award under the 2018 Tender will result in lower revenues from Sonatrach. Based upon preliminary communication
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regarding the tender process, the Company currently expects that revenue from Sonatrach under the 2018 Tender will approximate $125 million over the three-year term, which would result in a reduction of approximately $25 million per year as compared to the recent activity levels. The awards under the 2018 Tender are anticipated to be finalized in the second quarter of 2018, although there are no assurances that the Company will receive a new contract. The impact of the new award could begin as early as the fourth quarter of 2018, as work transitions from the 2015 Contract to the final contract awarded under the 2018 Tender.
Segment Results
The Fluids Systems segment generated revenues of $177.4 million in the first quarter of 2018 compared to $162.4 million in the fourth quarter of 2017 and $136.1 million in the first quarter of 2017. Segment operating income was $10.5 million in the first quarter of 2018, compared to $7.4 million in the fourth quarter of 2017 and $6.4 million in the first quarter of 2017.
The Mats and Integrated Services segment generated revenues of $49.9 million in the first quarter of 2018 compared to $42.0 million in the fourth quarter of 2017 and $22.6 million in the first quarter of 2017. Segment operating income was $12.1 million in the first quarter of 2018, compared to $11.7 million in the fourth quarter of 2017 and $6.4 million in the first quarter of 2017.
Conference Call
Newpark has scheduled a conference call to discuss first quarter 2018 results and near-term operational outlook, which will be broadcast live over the Internet, on Friday, April 27, 2018 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 Resources 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 May 11, 2018 and may be accessed by dialing 201-612-7415 and using pass code 13677953#. 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, 2017, 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, our ability to expand our product and service offerings and enter new customer markets with our existing products, compliance with legal and regulatory matters, including environmental regulations, the availability of insurance and the risks and limitations of our insurance coverage, the ongoing impact of the U.S. Tax Cuts and Jobs Act and the refinement of provisional estimates, 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.
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Newpark Resources, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended | ||||||||||||
(In thousands, except per share data) | March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||
Revenues | $ | 227,293 | $ | 204,389 | $ | 158,691 | ||||||
Cost of revenues | 186,455 | 165,291 | 129,590 | |||||||||
Selling, general and administrative expenses | 26,954 | 29,541 | 25,397 | |||||||||
Other operating (income) loss, net | 46 | (283 | ) | (42 | ) | |||||||
Operating income | 13,838 | 9,840 | 3,746 | |||||||||
Foreign currency exchange loss | 225 | 951 | 392 | |||||||||
Interest expense, net | 3,300 | 3,028 | 3,218 | |||||||||
Income from continuing operations before income taxes | 10,313 | 5,861 | 136 | |||||||||
Provision (benefit) for income taxes | 3,091 | (2,056 | ) | 1,119 | ||||||||
Income (loss) from continuing operations | 7,222 | 7,917 | (983 | ) | ||||||||
Loss from disposal of discontinued operations, net of tax | — | (17,367 | ) | — | ||||||||
Net income (loss) | $ | 7,222 | $ | (9,450 | ) | $ | (983 | ) | ||||
Calculation of EPS: | ||||||||||||
Income (loss) from continuing operations - basic and diluted | $ | 7,222 | $ | 7,917 | $ | (983 | ) | |||||
Weighted average common shares outstanding - basic | 89,094 | 87,414 | 84,153 | |||||||||
Dilutive effect of stock options and restricted stock awards | 2,637 | 2,580 | — | |||||||||
Dilutive effect of 2021 Convertible Notes | — | — | — | |||||||||
Weighted average common shares outstanding - diluted | 91,731 | 89,994 | 84,153 | |||||||||
Income (loss) per common share - diluted: | ||||||||||||
Income (loss) from continuing operations | $ | 0.08 | $ | 0.09 | $ | (0.01 | ) | |||||
Loss from discontinued operations | — | (0.20 | ) | — | ||||||||
Net income (loss) | $ | 0.08 | $ | (0.11 | ) | $ | (0.01 | ) | ||||
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Newpark Resources, Inc.
Operating Segment Results
(Unaudited)
Three Months Ended | |||||||||||
(In thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
Revenues | |||||||||||
Fluids systems | $ | 177,379 | $ | 162,404 | $ | 136,050 | |||||
Mats and integrated services | 49,914 | 41,985 | 22,641 | ||||||||
Total revenues | $ | 227,293 | $ | 204,389 | $ | 158,691 | |||||
Operating income (loss) | |||||||||||
Fluids systems | $ | 10,477 | $ | 7,435 | $ | 6,352 | |||||
Mats and integrated services | 12,086 | 11,729 | 6,402 | ||||||||
Corporate office | (8,725 | ) | (9,324 | ) | (9,008 | ) | |||||
Operating income | $ | 13,838 | $ | 9,840 | $ | 3,746 | |||||
Segment operating margin | |||||||||||
Fluids systems | 5.9 | % | 4.6 | % | 4.7 | % | |||||
Mats and integrated services | 24.2 | % | 27.9 | % | 28.3 | % | |||||
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Newpark Resources, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data) | March 31, 2018 | December 31, 2017 | |||||
ASSETS | |||||||
Cash and cash equivalents | $ | 59,938 | $ | 56,352 | |||
Receivables, net | 267,179 | 265,866 | |||||
Inventories | 189,109 | 165,336 | |||||
Prepaid expenses and other current assets | 16,502 | 17,483 | |||||
Total current assets | 532,728 | 505,037 | |||||
Property, plant and equipment, net | 315,552 | 315,320 | |||||
Goodwill | 44,397 | 43,620 | |||||
Other intangible assets, net | 28,906 | 30,004 | |||||
Deferred tax assets | 3,389 | 4,753 | |||||
Other assets | 3,752 | 3,982 | |||||
Total assets | $ | 928,724 | $ | 902,716 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current debt | $ | 1,391 | $ | 1,518 | |||
Accounts payable | 107,601 | 88,648 | |||||
Accrued liabilities | 38,880 | 68,248 | |||||
Total current liabilities | 147,872 | 158,414 | |||||
Long-term debt, less current portion | 185,635 | 158,957 | |||||
Deferred tax liabilities | 36,978 | 31,580 | |||||
Other noncurrent liabilities | 8,024 | 6,285 | |||||
Total liabilities | 378,509 | 355,236 | |||||
Common stock, $0.01 par value, 200,000,000 shares authorized and 104,635,290 and 104,571,839 shares issued, respectively | 1,046 | 1,046 | |||||
Paid-in capital | 606,491 | 603,849 | |||||
Accumulated other comprehensive loss | (53,885 | ) | (53,219 | ) | |||
Retained earnings | 123,743 | 123,375 | |||||
Treasury stock, at cost; 15,318,800 and 15,366,504 shares, respectively | (127,180 | ) | (127,571 | ) | |||
Total stockholders’ equity | 550,215 | 547,480 | |||||
Total liabilities and stockholders' equity | $ | 928,724 | $ | 902,716 | |||
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Newpark Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, | |||||||
(In thousands) | 2018 | 2017 | |||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 7,222 | $ | (983 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: | |||||||
Depreciation and amortization | 11,271 | 9,387 | |||||
Stock-based compensation expense | 2,289 | 2,836 | |||||
Provision for deferred income taxes | 381 | (2,545 | ) | ||||
Net provision for doubtful accounts | 341 | 666 | |||||
Gain on sale of assets | (383 | ) | (847 | ) | |||
Amortization of original issue discount and debt issuance costs | 1,309 | 1,330 | |||||
Change in assets and liabilities: | |||||||
Increase in receivables | (5,928 | ) | (23,019 | ) | |||
Increase in inventories | (17,841 | ) | (829 | ) | |||
Decrease in other assets | 129 | 521 | |||||
Increase (decrease) in accounts payable | 18,511 | (1,692 | ) | ||||
Increase (decrease) in accrued liabilities and other | (17,168 | ) | 3,731 | ||||
Net cash provided by (used in) operating activities | 133 | (11,444 | ) | ||||
Cash flows from investing activities: | |||||||
Capital expenditures | (10,696 | ) | (7,291 | ) | |||
Refund of proceeds from sale of a business | (13,974 | ) | — | ||||
Proceeds from sale of property, plant and equipment | 575 | 288 | |||||
Net cash used in investing activities | (24,095 | ) | (7,003 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings on lines of credit | 107,156 | — | |||||
Payments on lines of credit | (81,224 | ) | — | ||||
Debt issuance costs | — | (157 | ) | ||||
Proceeds from employee stock plans | 353 | 211 | |||||
Purchases of treasury stock | (42 | ) | (48 | ) | |||
Other financing activities | (545 | ) | (371 | ) | |||
Net cash provided by (used in) financing activities | 25,698 | (365 | ) | ||||
Effect of exchange rate changes on cash | 812 | 846 | |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 2,548 | (17,966 | ) | ||||
Cash, cash equivalents, and restricted cash at beginning of period | 65,460 | 95,299 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 68,008 | $ | 77,333 | |||
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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 | ||||||||||
(In thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
Net income (loss) (GAAP) | $ | 7,222 | $ | (9,450 | ) | $ | (983 | ) | |||
Loss from disposal of discontinued operations, net of tax | — | 17,367 | — | ||||||||
Interest expense, net | 3,300 | 3,028 | 3,218 | ||||||||
Provision (benefit) for income taxes | 3,091 | (2,056 | ) | 1,119 | |||||||
Depreciation and amortization | 11,271 | 10,759 | 9,387 | ||||||||
EBITDA (non-GAAP) | $ | 24,884 | $ | 19,648 | $ | 12,741 | |||||
Fluids Systems | Three Months Ended | ||||||||||
(In thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
Operating income (GAAP) | $ | 10,477 | $ | 7,435 | $ | 6,352 | |||||
Depreciation and amortization | 5,290 | 5,344 | 5,168 | ||||||||
EBITDA (non-GAAP) | 15,767 | 12,779 | 11,520 | ||||||||
Revenues | 177,379 | 162,404 | 136,050 | ||||||||
Operating Margin (GAAP) | 5.9 | % | 4.6 | % | 4.7 | % | |||||
EBITDA Margin (non-GAAP) | 8.9 | % | 7.9 | % | 8.5 | % | |||||
Mats and Integrated Services | Three Months Ended | ||||||||||
(In thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
Operating income (GAAP) | $ | 12,086 | $ | 11,729 | $ | 6,402 | |||||
Depreciation and amortization | 5,114 | 4,578 | 3,480 | ||||||||
EBITDA (non-GAAP) | 17,200 | 16,307 | 9,882 | ||||||||
Revenues | 49,914 | 41,985 | 22,641 | ||||||||
Operating Margin (GAAP) | 24.2 | % | 27.9 | % | 28.3 | % | |||||
EBITDA Margin (non-GAAP) | 34.5 | % | 38.8 | % | 43.6 | % | |||||
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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) | March 31, 2018 | December 31, 2017 | |||||
Current debt | $ | 1,391 | $ | 1,518 | |||
Long-term debt, less current portion | 185,635 | 158,957 | |||||
Total Debt | 187,026 | 160,475 | |||||
Total stockholders' equity | 550,215 | 547,480 | |||||
Total Capital | $ | 737,241 | $ | 707,955 | |||
Ratio of Total Debt to Capital | 25.4 | % | 22.7 | % | |||
Total Debt | $ | 187,026 | $ | 160,475 | |||
Less: cash and cash equivalents | (59,938 | ) | (56,352 | ) | |||
Net Debt | 127,088 | 104,123 | |||||
Total stockholders' equity | 550,215 | 547,480 | |||||
Total Capital, Net of Cash | $ | 677,303 | $ | 651,603 | |||
Ratio of Net Debt to Capital | 18.8 | % | 16.0 | % | |||
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