Newpark Resources Reports Third Quarter 2007 Results
THE WOODLANDS, Texas, Nov. 5 /PRNewswire-FirstCall/ -- Newpark Resources, Inc. (NYSE: NR) today announced results for the third quarter ended September 30, 2007.
Total revenues were $153.8 million for the third quarter of 2007 compared to $147.6 million for the third quarter of 2006. Income from continuing operations was $7.6 million in the third quarter of 2007, or $0.08 per diluted share. Income from continuing operations was $9.7 million, or $0.11 per diluted share in the third quarter of 2006, which included $2.5 million ($3.5 million pre-tax) of insurance recoveries from Hurricanes Katrina and Rita. Excluding these recoveries, income from continuing operations was $7.2 million, or $0.08 per diluted share for the third quarter of 2006, as set forth on the attached Non-GAAP Earnings Reconciliation.
As previously announced, the Company entered into an agreement in October 2007 to sell the U.S. Environmental Services business, and shut down substantially all of the Canadian Environmental Services business. As a result of these developments, the assets, liabilities and results of operations for the Environmental Services segment have been reclassified as discontinued operations for all periods presented. Restated segment results from continuing operations for the past seven quarters are included in the financial tables later in this release. Discontinued operations generated a $0.2 million after-tax loss in the third quarter of 2007, including after-tax impairments and other charges of $0.6 million related to the shut down of the Canadian Environmental Services business.
Paul Howes, President and Chief Executive Officer of Newpark, stated, "We are pleased with the progress we've made on several strategic fronts over the past quarter. The sale of the environmental business will significantly strengthen our balance sheet and improve our ability to increase investments in our Drilling Fluids and Mats & Integrated Services businesses. In addition to signing the agreement on the environmental business, we completed the sale of our Batson sawmill facility and completed the acquisition of SEM Construction Company, which provides geographic expansion for our Mats and Integrated Services business and an entry-point into the important Piceance basin. Also, we received final court approval of the settlement of our derivative and class action lawsuit, which provides closure to this issue. Meanwhile, we continue to be encouraged by our operating results. While we still see some challenges in the North American markets, our international operations generated a 25% increase in revenues over the previous quarter and our Mats and Integrated Services revenues and operating income improved significantly over the same period."
SEGMENT RESULTS
The Fluid Systems and Engineering segment generated revenues of $130.0 million and an 11.9% operating margin in the third quarter of 2007, compared to the $125.1 million of revenue and a 16.1% operating margin generated during the third quarter of 2006. As described above, the third quarter of 2006 included $3.5 million of insurance recoveries from Hurricanes Katrina and Rita. Operating margins in the third quarter of 2007 declined modestly relative to the second quarter 2007 primarily due to softness in the Gulf Coast and the continued weakness in the Canadian market, along with higher barite transportation costs.
The Mats and Integrated Services segment generated revenues of $23.8 million and a 19.1% operating margin in the third quarter of 2007 compared to revenues of $22.5 million and a 20.4% operating margin in the third quarter of 2006. The slight decline in operating margins is primarily attributable to a change in sales mix, driven by weakness in the Gulf Coast rig counts. Operating margins in the third quarter of 2007 improved substantially from 12.1% in the second quarter of 2007 due to increases in revenues combined with continuing operating cost reductions.
CONFERENCE CALL
In conjunction with this release, Newpark has scheduled a conference call, which will be broadcast live over the Internet, on Monday, November 5, 2007 at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. To participate in the call, dial (303) 262-2141 and ask for the Newpark Resources 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 12, 2007 and may be accessed by dialing (303) 590-3000 and using pass code 11098107#. 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 drilling fluids, temporary worksites and access roads for oilfield and other commercial markets, and environmental waste treatment solutions. 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 statements about 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, 2006, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, the investigation of the certain accounting matters by the Securities and Exchange Commission; changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which Newpark does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw materials, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales of Newpark products. 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: James E. Braun, CFO
Newpark Resources, Inc.
281-362-6800
Ken Dennard, Managing Partner
Dennard Rupp Gray & Easterly, LLC
ksdennard@drg-e.com
713-529-6600
Newpark Resources, Inc.
Consolidated Statements of Operations
(Unaudited) Three Months Ended Nine Months Ended
(In thousands, except September 30, September 30,
per share data) 2007 2006 2007 2006
Revenues $153,778 $147,618 $453,024 $435,160
Cost of revenues 133,756 122,846 393,176 376,028
20,022 24,772 59,848 59,132
General and
administrative expenses 4,567 5,050 17,833 13,842
Operating income 15,455 19,722 42,015 45,290
Foreign currency
exchange (gain) loss (57) 16 (279) (496)
Interest expense, net 3,950 6,160 12,182 15,210
Income from continuing
operations before
income taxes 11,562 13,546 30,112 30,576
Provision for income
taxes 3,950 3,813 10,586 9,936
Income from continuing
operations 7,612 9,733 19,526 20,640
(Loss) income from
discontinued operations,
net of taxes (229) (11,998) 2,563 (10,797)
Loss from disposal of
discontinued operations,
net of taxes - - (2,173) -
Net income $7,383 $(2,265) $19,916 $9,843
Basic weighted average
common shares outstanding 90,085 89,417 89,965 89,281
Diluted weighted average
common shares outstanding 90,542 89,658 90,503 89,872
Net income per common
share (basic and diluted):
Income from continuing
operations $0.08 $0.11 $0.22 $0.23
(Loss) income from
discontinued operations (0.00) (0.14) 0.00 (0.12)
Net income (loss)
per common share $0.08 $(0.03) $0.22 $0.11
Newpark Resources, Inc.
Non-GAAP Earnings Reconciliation
Continuing Operations
(Unaudited) Quarter Ended September 30,
(In thousands, except per share data) 2007 2006
Income from continuing operations
before income taxes - GAAP $11,562 $13,546
Insurance recoveries from hurricanes
Katrina and Rita - (3,471)
Income from continuing operations
before income taxes - Non-GAAP 11,562 10,075
Tax effect 3,950 2,836
Net income - Non-GAAP $7,612 $7,239
Diluted shares outstanding 90,542 89,658
Net income per common share
(basic and diluted):
Net income per common share - GAAP $0.08 $0.11
Insurance recoveries from
hurricanes Katrina and Rita - (0.03)
Net income per common share - Non-GAAP $0.08 $0.08
The adjusted non-GAAP financial measures used in this press release
exclude the impact of the Company's insurance recoveries related to
Hurricanes Katrina and Rita. Non-GAAP financials measures should not be
considered a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. The Company believes these
non-GAAP financials measures are helpful, however, in comparing the
historical results to current results and measuring operating earnings
trends.
Newpark Resources, Inc.
Restated Segment Results
(Unaudited) Quarter Ended
March 31, June 30, September 30, December 31,
(In thousands) 2006 2006 2006 2006
Segment revenues
Fluids systems and
engineering $115,289 $111,868 $125,130 $129,091
Mat and integrated
services 29,251 31,133 22,488 17,657
Total segment revenues $144,540 $143,001 $147,618 $146,748
Segment operating income
Fluids systems and
engineering $12,660 $13,143 (1) $20,178 (1) $20,635
Mat and integrated
services 4,343 4,216 4,594 2,078
Total segment operating
income $17,003 $17,359 $24,772 $22,713
Segment operating margin
Fluids systems and
engineering 11.0% 11.7% 16.1% 16.0%
Mat and integrated
services 14.8% 13.5% 20.4% 11.8%
Total segment operating
margin 11.8% 12.1% 16.8% 15.5%
(Unaudited) Quarter Ended
March 31, June 30, September 30,
(In thousands) 2007 2007 2007
Segment revenues
Fluids systems and
engineering $125,298 $131,163 $129,986
Mat and integrated
services 23,966 18,819 23,792
Total segment revenues $149,264 $149,982 $153,778
Segment operating income
Fluids systems and
engineering $16,630 $16,323 $15,467
Mat and integrated
services 4,600 2,273 4,555
Total segment operating
income $21,230 $18,596 $20,022
Segment operating margin
Fluids systems and
engineering 13.3% 12.4% 11.9%
Mat and integrated
services 19.2% 12.1% 19.1%
Total segment operating
margin 14.2% 12.4% 13.0%
(1) Includes insurance recoveries from hurricanes Katrina and Rita of
$0.8 million and $3.5 million in the quarters ended June 30, 2006 and
September 30, 2006, respectively.
Newpark Resources, Inc.
Consolidated Balance Sheets
(In thousands) September 30, 2007 December 31, 2006
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $7,412 $12,736
Accounts receivable, net 142,141 141,790
Inventories 108,319 107,778
Deferred tax asset 20,076 23,001
Prepaid expenses and other current assets 16,566 12,176
Assets of discontinued operations 87,780 102,365
Total current assets 382,294 399,846
Property, plant and equipment, net 160,319 152,207
Goodwill 62,028 54,624
Deferred tax asset - 7,096
Other intangible assets, net 17,503 8,236
Other assets 7,052 7,440
$629,196 $629,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Foreign bank lines of credit $5,928 $10,938
Current maturities of long-term debt 3,066 4,058
Accounts payable 45,815 37,087
Accrued liabilities 35,299 40,439
Liabilities of discontinued operations 11,554 11,403
Total current liabilities 101,662 103,925
Long-term debt, less current portion 169,252 198,037
Deferred tax liability 858 -
Other noncurrent liabilities 4,591 4,344
Total liabilities 276,363 306,306
Common Stock 901 897
Paid-in capital 448,940 444,763
Accumulated other comprehensive income 14,283 7,940
Retained deficit (111,291) (130,457)
Total stockholders' equity 352,833 323,143
$629,196 $629,449
Newpark Resources, Inc.
Consolidated Statements of Cash Flow
(Unaudited) Nine Months Ended September 30,
(In thousands) 2007 2006
Cash flows from operating activities:
Net income $19,916 $9,843
Adjustments to reconcile net income
to net cash provided by operations:
Net (income) loss from discontinued
operations (2,562) 10,797
Net loss from disposal of
discontinued operations 2,172 -
Depreciation and amortization 14,835 15,908
Stock-based compensation expense 2,270 1,711
Provision for deferred income taxes 8,385 2,564
Provision for doubtful accounts 530 1,074
Loss on sale of assets 193 (614)
Change in assets and liabilities:
Decrease (increase) in accounts and
notes receivable 3,872 (21,420)
Increase in inventories (1,340) (24,593)
Increase in other assets (3,994) (3,752)
Increase (decrease) in accounts payable 7,606 (5,546)
(Decrease) increase in accrued
liabilities and other (4,099) 11,463
Net operating activities of continuing
operations 47,784 (2,565)
Net operating activities of discontinued
operations 15,018 10,388
Net cash provided by operating activities 62,802 7,823
Cash flows from investing activities:
Capital expenditures (13,227) (20,162)
Proceeds from sale of property, plant
and equipment 888 1,210
Acquisition of business (21,919) -
Insurance proceeds from property,
plant and equipment - 3,471
Net investing activities of
continuing operations (34,258) (15,481)
Net investing activities of
discontinued operations 153 (9,246)
Net cash used in investing activities (34,105) (24,727)
Cash flows from financing activities:
Net (payments) borrowings on lines of
credit (15,766) 17,078
Proceeds from long-term financing - 150,000
Payments on notes payable and long-
term debt, net (20,806) (156,217)
Proceeds from exercise of stock
options and ESPP 2,016 4,385
Excess tax benefit from exercise of
stock options - 640
Net financing activities of
continuing operations (34,556) 15,886
Net financing activities of
discontinued operations (45) (646)
Net cash (used in) provided by
financing activities (34,601) 15,240
Effect of exchange rates changes 580 226
Net decrease in cash and cash equivalents (5,324) (1,438)
Cash and cash equivalents at beginning
of period 12,736 7,344
Cash and cash equivalents at end of period $7,412 $5,906
SOURCE Newpark Resources, Inc.
CONTACT:
James E. Braun
CFO of Newpark Resources, Inc.
+1-281-362-6800
or
Ken Dennard
Managing Partner
Dennard Rupp Gray & Easterly, LLC
ksdennard@drg-e.com
+1-713-529-6600