HOUSTON, April 27, 2017 /PRNewswire/ -- CARBO
Ceramics Inc. (NYSE: CRR) today reported revenues of $34.7 million and a GAAP pre-tax loss of
$32.2 million for the quarter ended
March 31, 2017 compared to a GAAP pre-tax loss of $36.8 million in the same period of 2016.
The GAAP pre-tax loss includes $12.1
million of costs primarily associated with slowing and
idling production, two thirds of which is non-cash.
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CEO Gary Kolstad commented, "We
are pleased with the 19% sequential increase in revenue experienced
in the first quarter of 2017. This revenue increase is a
result of our previously outlined strategy of developing higher
growth opportunities which we believe will result in strong
double-digit revenue growth for CARBO in 2017. The
exceptional strengths we have in technology, experienced people,
and manufacturing assets support the execution of this
strategy.
"The increase in technology product sales in this challenging
environment highlights the value of our technology platform.
Technology product revenues increased sequentially, led by sales of
KRYPTOSPHERE and our Production Assurance products, which include
SCALEGUARD. Industrial products and environmental revenue
also grew sequentially.
"Industrial product revenue growth was driven by new client
gains. Environmental revenue growth was driven primarily by
increased rig activity and new client gains.
"Our frac sand revenues grew sequentially as a result of ramping
plant production and utilizing third party suppliers. Frac
sand sales provide multiple benefits including producing positive
cash, generating revenue from idle rail cars under lease, and
increasing client contact which increases sales opportunities for
other products.
"We successfully completed plant trials producing products other
than base ceramic proppant, executing on our strategy of utilizing
our idled plant assets. The success of these trials should
lead to revenue generation. We continue to develop
opportunities with other companies in the industrial, agricultural,
and oil and gas industries.
"We expect to see a reduction in our cash burn in the second
quarter, and anticipate continued improvement throughout the year,
targeting cash neutral operations on a 2017 exit rate basis.
The first quarter had approximately $9.0
million in cash outlays that we do not expect to repeat in
2017, including but not limited to rail car activation costs,
refinancing costs, a debt amortization payment, and certain
property taxes," Mr. Kolstad said.
First Quarter 2017 Results
Revenues for the first quarter of 2017 increased 5%, or
$1.6 million, compared to the same
period in 2016. The increase was primarily attributable to an
increase in technology product sales, an increase in frac sand
sales, and an increase in environmental product sales. These
increases were partially offset by decreases in base ceramic
proppant sales.
Operating loss for the first quarter of 2017 was $30.3 million as compared to $36.1 million in the same period of 2016,
primarily due to the lack of severance charges in the first quarter
of 2017 compared to $7.1 million in
the same period of 2016.
Technology and Business Highlights
- KRYPTOSPHERE® HD and LD client interest and use continues to
grow. Both independent and major E&P operators successfully
pumped the technology during the first quarter of 2017.
KRYPTOSPHERE ultra-conductive ceramic proppant technology is
engineered to maximize and sustain hydrocarbon flow rates for the
life of the well.
- During the quarter, another successful field test was performed
with QUANTUM™, a proprietary Propped Reservoir Volume™ (PRV™)
imaging service, for a large independent E&P operator. Further
tests are planned to advance the technology toward
commercialization. QUANTUM is gaining recognition as a potential
step-change to current available technologies in the industry for
its ability to optimize field development planning.
- SCALEGUARD®, a proppant-delivered scale-inhibiting technology,
continues to experience an expanding client portfolio with several
new clients in the period and active jobs in major basins across
North America. Since its
introduction in 2013, SCALEGUARD has been used on hundreds of wells
with a high rate of success. A single scale inhibition treatment
with SCALEGUARD prevents production losses during the life of the
well and dramatically reduces lease operating expenses.
- SALTGUARD™ successfully completed another field test milestone
with a large independent E&P operator during the quarter.
SALTGUARD inhibits salt formation in the frac and wellbore,
preventing production decreases, lowering lease operating expenses
and eliminating the need for costly fresh water injection and the
associated disposal of the resulting saltwater.
- A major E&P operator successfully pumped CARBOAIR™ in an
Eagle Ford basin horizontal well. CARBOAIR is a new
ultra-lightweight proppant technology providing 25% lower density
than sand, resulting in significantly more volume per pound and
exceptional transport characteristics. These engineered properties
increase frac length and contact area within the reservoir compared
to sand.
- CARBONRT® was utilized to evaluate fracture height growth in a
conventional, vertical well in Russia. The operator plans to perform fracture
height measurements and modify full field development accordingly
to optimize gas production.
- CARBONRT® ULTRA technology, a cost-effective and highly
concentrated traceable proppant, was used on its first offshore
application for a major operator in Colombia in an exploration well. The operator
will be using the results from the CARBONRT ULTRA logs to determine
fracture height. These results are then matched against pressure
model designs in conjunction with production flow tests to evaluate
fractured zone productivity.
- A large industrial company recently started using CARBOBEAD™
ceramic media in one of its pigment production facilities.
According to the client, CARBOBEAD improved the quality of its end
products by approximately 20% and reduced media consumption,
generating estimated annual savings of $700,000. The client is now evaluating
opportunities in its other U.S. and international facilities.
- During the quarter, a leading foundry company successfully
tested CARBO ceramic media in their plant operations. The company
favorably assessed CARBO ceramic media to increase casting quality,
lower operating costs, and address new OSHA regulations relating to
silicosis.
- In the environmental business, a record number of TANKGUARD®
units were sold in the quarter as increased industry activity
levels drove both client and distributor sales. With TANKGUARD
revenue up over 90% compared to the first quarter of 2016, product
revenue now represents a majority of the revenue, which is
consistent with the company's strategy to focus on product sales
over service related work in the environmental business.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "We have set out a strategy for both
revenue growth and profitability improvement. Our people are
excited about our growth opportunities and are executing on
them. We expect to see continued expansion of our technology
products, industrial ceramic media, frac sand, and environmental
businesses. Given the first quarter revenue and our outlook
for the next couple of quarters, we believe our 2017 revenue will
show strong double-digit growth of at least a 40 percent increase
over 2016.
"Clients are adopting technologies that we have developed over
the past several years to enhance their oil and gas
production. KRYPTOSPHERE HD continues its adoption in the
industry as the technology of choice for the toughest well
conditions in the world. KRYPTOSPHERE LD sales have increased
in recent quarters as certain clients are implementing technology
into their completions to make better wells. We believe sales
of these technologies will continue to grow in 2017 and currently
expect another KRYPTOSPHERE HD job in the second quarter of
2017.
"We continue to grow our industrial footprint with our
long-standing product offerings. We also believe there will
be opportunities in the future to expand our product offerings to
add additional revenue streams. We anticipate increased
levels of industrial sales throughout 2017.
"Growing the frac sand business is another part of our strategy
to return our overall operations to generating positive
EBITDA. We are in the process of bringing our Marshfield, Wisconsin sand facility to full
utilization in the next one to two quarters to further increase our
cash production and generate revenue from idle rail cars under
lease.
"We continue to see growth in our environmental business with
the increase in industry activity and market penetration of our
products. Similar to our oilfield business, we are executing
on a strategy to expand product sales into industrial markets.
"Our strategy is to reduce our reliance on base ceramic proppant
yet remain the industry leader. We believe the worst of this
industry down cycle is behind us. While imports of low
quality Chinese ceramic have been virtually zero over the last
eight quarters, it appears some competitors are still pricing below
cost; however, this is not a sustainable strategy over the long
term.
"Given the successful industrial product trials we completed at
our plants in the first quarter of 2017, we expect to generate
revenue from our underutilized plants. Our dual approach of
producing products for other companies and developing technology
products for ourselves, should bring opportunities to produce
positive cash flow from assets that currently consume cash.
"We are pleased with the progress we have made on our strategy
to diversify and grow our revenue streams. While this is not
an overnight process, we believe the resulting business composition
will make CARBO a stronger company," Mr. Kolstad concluded.
Conference Call
As previously announced, a conference call to discuss CARBO's
first quarter 2017 results is scheduled for today at 10:30 a.m. Central Time (11:30 a.m. Eastern). Due to historical high
call volume, CARBO is offering participants the opportunity to
register in advance for the conference by accessing the following
website:
http://dpregister.com/10104150
Registered participants will immediately receive an email with a
calendar reminder and a dial-in number and PIN that will allow them
immediate access to the call.
Participants who do not wish to pre-register for the call may
dial in using (877) 232-2832 (for U.S. callers),
(855) 669-9657 (for Canadian callers) or (412) 542-4138
(for international callers) and ask for the "CARBO Ceramics"
call. The conference call also can be accessed through
CARBO's website, www.carboceramics.com.
A telephonic replay of the earnings conference call will be
available through May 4, 2017 at
9:00 a.m. Eastern Time. To
access the replay, please dial (877)-344-7529 (for U.S. callers),
(855) 669-9658 (for Canadian callers) or (412) 317-0088
(for international callers). Please reference conference
number 10104150. Interested parties may also access the
archived webcast of the earnings teleconference through CARBO's
website approximately two hours after the end of the call.
About CARBO
CARBO (NYSE: CRR) is a global technology company that
provides products and services to the oil and gas and industrial
markets to enhance value for its clients.
CARBO Oilfield Technologies - is a global leader that
provides engineered solutions in its Design, Build, and Optimize
the Frac® technology businesses, delivering important value to
E&P operators by increasing well production and EUR.
Oilfield Technologies is the world's largest producer of high
quality ceramic proppant, provides one of the industry's most
widely used fracture simulation software, has proprietary
technology that provides fracture diagnostics and production
assurance, and offers consulting services for fracture design and
completion optimization. The Company also provides a range of
technology solutions for spill prevention and containment.
Its products and services are sold to operators of oil and
natural gas wells and to oilfield service companies for use in the
hydraulic fracturing of natural gas and oil wells.
CARBO Industrial Technologies - is a leading provider of
high-performance industrial ceramic media products that are
engineered to increase process efficiency, improve end-product
quality and reduce operating costs.
Its products and services are primarily sold to industrial
companies that work in manufacturing and mineral processing.
For more information, please visit www.carboceramics.com.
Forward-Looking Statements
The statements in this news release that are not historical
statements, including statements regarding our future financial and
operating performance and liquidity and capital resources, are
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements describe future expectations, plans, results or
strategies and can often be identified by the use of terminology
such as "may", "will", "estimate", "intend", "continue", "believe",
"expect", "anticipate", "should", "could", "potential",
"opportunity", or other similar terminology. All
forward-looking statements are based on management's current
expectations and estimates, which involve risks and uncertainties
that could cause actual results to differ materially from those
expressed in forward-looking statements. Among these factors
are changes in overall economic conditions, changes in the demand
for, or price of, oil and natural gas, changes in the cost of raw
materials and natural gas used in manufacturing our products, risks
related to our ability to access needed cash and capital, our
ability to meet our current and future debt service obligations,
including our ability to maintain compliance with our debt
covenants, our ability to manage distribution costs effectively,
changes in demand and prices charged for our products, risks of
increased competition, technological, manufacturing and product
development risks, our dependence on and loss of key customers and
end users, changes in foreign and domestic government regulations,
including environmental restrictions on operations and regulation
of hydraulic fracturing, changes in foreign and domestic political
and legislative risks, risks of war and international and domestic
terrorism, risks associated with foreign operations and foreign
currency exchange rates and controls, weather-related risks and
other risks and uncertainties. Additional factors that could
affect our future results or events are described from time to time
in our reports filed with the Securities and Exchange Commission
(the "SEC"). Please see the discussion set forth under the
caption "Risk Factors" in our most recent annual report on Form
10-K, and similar disclosures in subsequently filed reports with
the SEC. We assume no obligation to update forward-looking
statements, except as required by law.
Note on Non-GAAP Financial Measures
This press release includes unaudited non-GAAP financial
measures, including EBITDA and Adjusted EBITDA. We present
non-GAAP measures when our management believes that the additional
information provides useful information about our operating
performance. Non-GAAP financial measures do not have any
standardized meaning and are therefore unlikely to be comparable to
similar measures presented by other companies. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP. See the
table entitled "Reconciliation of Reported Net Loss to EBITDA and
Adjusted EBITDA" below and the accompanying text for an explanation
of the non-GAAP financial measures and a reconciliation of the
non-GAAP financial measures to the comparable GAAP
measures.
- tables follow -
|
|
Three Months
Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands
except per share)
|
|
Revenues
|
|
$
|
34,670
|
|
|
$
|
33,102
|
|
Cost of sales (see
Cost of Sales Detail table below)
|
|
|
54,128
|
|
|
|
56,743
|
|
Gross loss
|
|
|
(19,458)
|
|
|
|
(23,641)
|
|
SG&A
expenses
|
|
|
10,797
|
|
|
|
11,475
|
|
Loss on disposal or
impairment of assets
|
|
|
—
|
|
|
|
948
|
|
Operating
loss
|
|
|
(30,255)
|
|
|
|
(36,064)
|
|
Other expense,
net
|
|
|
(1,901)
|
|
|
|
(721)
|
|
Loss before income
taxes
|
|
|
(32,156)
|
|
|
|
(36,785)
|
|
Income tax expense
(benefit)
|
|
|
288
|
|
|
|
(12,101)
|
|
Net loss
|
|
$
|
(32,444)
|
|
|
$
|
(24,684)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.22)
|
|
|
$
|
(1.07)
|
|
Diluted
|
|
$
|
(1.22)
|
|
|
$
|
(1.07)
|
|
Average shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,607
|
|
|
|
23,063
|
|
Diluted
|
|
|
26,607
|
|
|
|
23,063
|
|
Depreciation and
amortization
|
|
$
|
12,430
|
|
|
$
|
12,291
|
|
|
|
|
|
Cost of Sales
Detail
|
|
Three Months
Ended
|
|
(In
thousands)
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Primary cost of
sales
|
|
$
|
42,025
|
|
|
$
|
40,121
|
|
Slowing and idling
production
|
|
|
11,212
|
|
|
|
9,707
|
|
Loss on derivative
instruments
|
|
|
891
|
|
|
|
227
|
|
Severance
charges
|
|
|
—
|
|
|
|
6,688
|
|
Total Cost of
Sales
|
|
$
|
54,128
|
|
|
$
|
56,743
|
|
|
|
|
|
Product Sales
Volumes (in million
lbs)
|
|
Three Months
Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Ceramic
|
|
|
83
|
|
|
|
120
|
|
Northern White
Sand
|
|
|
370
|
|
|
|
75
|
|
Total
|
|
|
453
|
|
|
|
195
|
|
Reconciliation of
Reported Net Loss to EBITDA and Adjusted EBITDA
|
|
Three Months
Ended
|
|
(In
thousands)
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
Net
loss
|
|
$
|
(32,444)
|
|
|
$
|
(24,684)
|
|
Interest expense,
net
|
|
|
2,088
|
|
|
|
797
|
|
Income tax expense
(benefit)
|
|
|
288
|
|
|
|
(12,101)
|
|
Depreciation and
amortization (1)
|
|
|
11,882
|
|
|
|
12,291
|
|
EBITDA
|
|
$
|
(18,186)
|
|
|
$
|
(23,697)
|
|
Loss on disposal or
impairment of assets
|
|
|
—
|
|
|
|
948
|
|
Severance
charges
|
|
|
—
|
|
|
|
7,144
|
|
Loss on derivative
instruments
|
|
|
891
|
|
|
|
227
|
|
Adjusted
EBITDA
|
|
$
|
(17,295)
|
|
|
$
|
(15,378)
|
|
Adjusted EBITDA is used by management to evaluate and assess our
operational results, and we believe that Adjusted EBITDA allows
investors to evaluate and assess our operational results.
Adjusted EBITDA excludes various charges primarily related to the
downturn in the energy industry.
(1) Depreciation and amortization for the
three months ended March 31, 2017
excludes $548 amortization of debt
issuance costs and debt discount, which is included in interest
expense, net, above.
Balance Sheet
Information
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in
thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
55,591
|
|
|
$
|
91,680
|
|
Restricted cash
(current)
|
|
|
5,503
|
|
|
|
—
|
|
Other current
assets
|
|
|
128,111
|
|
|
|
125,543
|
|
Restricted cash
(long-term)
|
|
|
6,289
|
|
|
|
—
|
|
Property, plant and
equipment, net
|
|
|
483,203
|
|
|
|
494,103
|
|
Goodwill
|
|
|
3,500
|
|
|
|
3,500
|
|
Intangible and other
assets, net
|
|
|
9,106
|
|
|
|
8,631
|
|
Total
assets
|
|
$
|
691,303
|
|
|
$
|
723,457
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Long-term debt,
current
|
|
$
|
—
|
|
|
$
|
13,000
|
|
Derivative instruments
(current)
|
|
|
2,135
|
|
|
|
1,599
|
|
Other current
liabilities
|
|
|
19,283
|
|
|
|
20,205
|
|
Deferred income
taxes
|
|
|
2,290
|
|
|
|
1,236
|
|
Long-term debt and
related parties notes payable, net
|
|
|
72,957
|
|
|
|
67,404
|
|
Other long-term
liabilities
|
|
|
4,006
|
|
|
|
3,443
|
|
Shareholders'
equity
|
|
|
590,632
|
|
|
|
616,570
|
|
Total liabilities
and shareholders' equity
|
|
$
|
691,303
|
|
|
$
|
723,457
|
|
Contact:
Mark Thomas, Director, Investor
Relations
(281) 921-6458
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/carbo-announces-first-quarter-2017-results-300446859.html
SOURCE CARBO Ceramics Inc.