Newpark Resources(US:NR)2019-04-27 02:50Financial Data and Key Metrics Changes - First quarter consolidated revenues were $211 million, representing a 15% decline from the previous quarter and a 7% decline year-over-year [6][17][20] - The provision for income taxes for the first quarter was $1.8 million, reflecting an effective tax rate of 58%, compared to 32% in the fourth quarter and 30% in the first quarter of 2018 [19] - Net income for the first quarter was $0.01 per diluted share, which includes a $0.03 negative impact from retirement policy modification and employee severance charges [20] Business Line Data and Key Metrics Changes - In the Fluids segment, total revenues were $161 million for Q1 2019, reflecting a 10% sequential decrease and a 9% year-over-year decrease [11] - The Mats segment reported revenues of $51 million for Q1 2019, representing a 27% sequential decline but a 2% improvement year-over-year [10][16] - The Fluids segment operating income declined to $4 million for the quarter, impacted by lower revenues and unfavorable revenue mix [14][15] Market Data and Key Metrics Changes - In North America, revenues declined 4% sequentially to $116 million, reflecting softer activity levels in the U.S. and lack of seasonal improvements in Canada [6] - International revenues declined 21% sequentially, primarily due to contract transitions in Algeria and Brazil, along with project delays in Eastern Europe [6][13] - Year-over-year, revenues from international regions declined by $18 million, largely reflecting contract transitions and a decline in Eastern Europe [14] Company Strategy and Development Direction - The company is focused on expanding its presence in targeted non-E&P end markets to improve stability in performance over time [25] - A long-term strategic planning initiative has been initiated, expected to take approximately 6 months to complete, engaging outside consultants to assess the long-term strategy [35][36] - The company aims to maximize long-term shareholder value by driving growth and consistent fee and cash flow generation while improving return on invested capital [37] Management Comments on Operating Environment and Future Outlook - Management remains encouraged by operational execution and commercial success in new markets despite market softness and contract transitions impacting Q1 results [5] - The company expects Q1 to serve as an inflection point for segment revenues and operating margins, anticipating improvements going forward [8] - The outlook for the Fluids business includes expectations for increased activity levels in the U.S. and Eastern Hemisphere, offsetting seasonal declines in Canada [24] Other Important Information - The company amended its asset-based loan facility, expanding revolving loan capacity from $150 million to $200 million, increasing available liquidity [22] - Total debt balance at the end of the quarter was $182 million, with a cash balance of $54 million, resulting in a total debt to capital ratio of 24% [23] Q&A Session Summary Question: U.S. profitability improvement and international profitability discrepancy - Management indicated that U.S. profitability improved due to cost efforts and deepwater work, while international profitability was negatively impacted by transition costs [40] Question: Guidance for Mats segment - Management noted that the Q1 mix was stronger than typical, and they expect normalization in Q2, impacting margin profiles [41] Question: Outlook for Brazil - Management stated that they rightsized the organization in Brazil but maintained an operational presence for deepwater work, seeing more opportunities ahead [43] Question: International opportunities compared to 6 months ago - Management observed increased tender activity, particularly in the Middle East and deepwater offshore Brazil, indicating a positive shift in international opportunities [48] Question: Shell contract and its implications - Management confirmed they are currently operating on 2 rigs and expect a third rig to start soon, highlighting the significance of their technology and service quality in competitive environments [51]