HOUSTON, Oct. 26, 2017 /PRNewswire/ -- CARBO Ceramics
Inc. (NYSE: CRR) today reported financial results for the third
quarter of 2017.
- Revenue for the third quarter of 2017 of $50.2 million, an increase of 148% year-over-year
and 15% sequentially.
- Year-to-date 2017 revenue up 74% compared to the same period in
2016.
- Cash levels increased sequentially from $50.6 million to $77.9
million.
- Continued to improve net cash used in operating activities
throughout 2017, $19.1 million,
$15.8 million and $5.2 million in Q1'17, Q2'17 and Q3'17,
respectively.
- Ceramic technology product sales in both our oilfield and
industrial businesses continue to experience solid growth.
Continued progress in reducing structural costs; lowered
distribution costs approximately $9
million on an annualized basis in 2017.
- Proactively sold slow moving base ceramic products that are no
longer inventoried, which benefited cash generation and will lower
future distribution center costs. These sales negatively impacted
EBITDA during the quarter due to incentivized pricing.
- Expecting sequential increase in both revenue and operating
cash flow for the fourth quarter of 2017.
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The Company reported revenues of $50.2
million for the quarter ended September 30, 2017
compared to revenue of $20.2 million
in the same period of 2016. Third quarter operating loss of
$51.4 million compares to an
operating loss of $30.5 million last
year. The operating loss includes a $26.7 million loss on the sale of our Russian
proppant business and $10.9 million
of costs primarily associated with slowing and idling production,
of which 73% is non-cash.
CEO Gary Kolstad commented, "We
are pleased with the progress made on our transformation strategy
to grow and diversify our revenue streams coming out of the oil and
gas industry downturn. The 148% year-on-year increase in
quarterly revenue was driven by double to triple digit revenue
increases in each of our businesses.
"Revenues grew sequentially by 15% primarily driven by sales of
our ceramic technology products and sand, partially offset by a
decline in our environmental service business which was impacted by
the hurricanes and associated weather during the quarter.
"Ceramic technology revenue was stronger sequentially due to
increased KRYTPOSPHERE®, SCALEGUARD® and NRT® sales, and sand sales
volumes set a quarterly record of 617 million pounds.
"Industrial ceramic product sales continue to leverage our
'Are You Ready?' marketing campaign, which asks businesses
if they are ready to meet the new OSHA silica Permissable Exposure
Limits (PEL) requirements going into effect in 2018. Not only
does our ceramic media produce higher quality castings and reduce
operating costs, but it also ensures the workplace environment is
safer for our clients' employees by eliminating risks associated
with silica dust. In addition, we successfully launched a new
CARBOGRIND™ product used in grinding mills for the mining industry,
which when client-tested performed significantly better than
established industry products.
"Mineral processing revenues are trending in the right
direction, and we are pleased with the quarterly growth throughout
the year. During the quarter, we produced several products
for non-oilfield clients. In addition, discussions continued
with a number of companies to define what other products our plants
can produce for industries outside of the oilfield. Although
this revenue is a nominal contributor today, growing our mineral
processing opportunities is important to getting our idled plant
capacity back to work and producing cash.
"We continued to see improvement in our net cash used in
operating activities which declined from $15.8 million in the second quarter of 2017 to
$5.2 million in the third quarter of
2017. This is a result of the high revenue growth, as well as
a continued focus across the organization to reduce structural
costs, such as distribution, where in 2017 we have removed
approximately $9 million of costs on
an annualized basis. In addition, during the quarter we took
steps to reduce certain slow-moving base ceramic inventories
through price incentives, which released cash from working
capital.
"During the quarter, we closed on the sale of our Russia proppant business. The sale
strengthens our liquidity position, de-risks our company portfolio
and allows us to continue to execute on our transformation strategy
to return the company to profitability," Mr. Kolstad said.
Third Quarter 2017 Results
Revenues for the third quarter of 2017 increased 148%, or
$30.0 million, compared to the same
period of 2016. The increase was primarily attributable to
increases in frac sand sales, ceramic technology product sales, and
environmental product sales.
Operating loss for the third quarter of 2017 increased to
$51.4 million as compared to
$30.5 million in the same period of
2016, primarily due to a $26.7
million loss on the sale of our Russian proppant
business. The recorded loss was primarily due to a
$33.3 million foreign currency
cumulative translation loss that was reclassified from the balance
sheet to the income statement. The increase to operating loss
was offset by increased sales combined with a reduction in certain
fixed structural costs, and a decrease in slowing and idling
expenses.
During the quarter, we identified indicators of impairment
related to our Millen, Georgia
manufacturing facility. We expect this impairment will range
between $85 million to $125
million. This non-cash impairment will be finalized
and included as a component of operating loss within the Loss on
disposal or impairment of assets line item on our Consolidated
Statements of Operations in the third quarter 10-Q.
Technology and Business Highlights
- Another Gulf of Mexico
operator has converted their completions to KRYPTOSPHERE®
technology. This operator utilized the Low Density (LD) version of
KRYPTOSPHERE in several frac-pack applications for their deepwater
Miocene development. KRYPTOSPHERE LD provides higher conductivity
than conventional low and intermediate density ceramic proppant and
is comparable to standard bauxite-based ceramic. Other benefits
include a proppant which is much lighter than bauxite-based
proppants, making it easier to place and significantly less erosive
on frac pumps and downhole tools.
- In the Permian 2nd Bone Springs formation, STRATAGEN® performed
a benchmarking and completion/frac design for an upcoming well.
From STRATAGEN's evaluations, the completion design was modified to
include a "tail-in" with CARBO
ceramic proppant. STRATAGEN field services were utilized during
completion and frac operations to ensure proper design execution.
After six months of production, this well has proven to be the best
producer in the area, it is still flowing over 800 BOPD and has
outperformed the direct offset "100 mesh sand completion" wells by
over 37,000 barrels of oil.
- The first application of CARBOAIR® in a gravel pack was
accomplished by a super major Exploration and Production company in
an international offshore completion. The objective of using
CARBOAIR was to enhance gravel placement in order to achieve a more
complete annular pack, a critical component to the productivity of
this high rate gas producer well. CARBOAIR is an ultra-low density
ceramic proppant, making it much easier to place in a gravel pack
application and providing improved coverage when compared to
standard proppant (gravel).
- A super major E&P company operating in the Caspian Sea
pumped CARBONRT® in an open hole gravel pack completion. The high
quality, non-radioactive, traceable ceramic proppant was selected
to replace natural sand to enhance well productivity and enable the
quantitative evaluation of the gravel pack annular fill. The
evaluation showed a successful gravel pack.
- SCALEGUARD®, a proppant-delivered scale-inhibiting technology,
continues to build upon its success with another consecutive
quarter of robust activity. The number of new clients grew in the
third quarter with the Rockies and West
Texas regions being particularly active areas. A single
scale inhibition treatment with SCALEGUARD can prevent production
losses during the life of the well and dramatically reduce lease
operating expenses.
- CARBOBOND® LITE®, high-performance resin-coated low density
ceramic proppant, was successfully used on a Brazoria County completion in the Texas Gulf
Coast. The operator anticipated high downhole closure stress and a
need for near-wellbore formation stabilization associated with the
high pressure and the unconsolidated nature of the formation.
Offset wells in similar zones have produced sand into the well bore
as well as collapsed casing after multiple cleanouts. The initial
production results have exceeded expectations with more completions
using CARBOBOND LITE being planned.
- CARBO Industrial Technologies
continues to gain new clients in the ceramic grinding business.
During the quarter, CARBO
successfully launched its new line of CARBOGRIND products. A large
multinational mining company completed a series of performance
tests with one of the new CARBOGRIND ceramic grinding media
products against established industry brands. The CARBOGRIND
product performed significantly better than competing products,
with more than a 50% reduction in product wear rates. According to
the client, the CARBOGRIND new product series greatly improved
milling performance that will translate into sizable annual savings
in grinding media volumes, reduced environmental footprint and less
shipping and handling costs.
- ASSETGUARD™, our environmental business, continues to grow its
industrial sales. During the quarter, GROUNDGUARD®, a proprietary
polyurea liner, was used to outfit 20 modular offices for a large
industrial client to provide a durable floor that can withstand the
client's harsh environment.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "We are
expecting a sequential increase in both revenue and operating cash
flow for the fourth quarter of 2017. Opportunities within our
oilfield business for the fourth quarter of 2017 are tracking
positively. Both our ceramic technology and base ceramic
volumes are expected to increase sequentially based on our
visibility today. Further, we continue to believe that the
negative returns throughout the base ceramic industry should lead
to increased industry pricing moving forward.
"Through existing business relationships, we are pursuing
multiple projects resulting in increases to our annual sand
capacity utilizing 'asset-lite' business models. One of these
projects should start first production toward the end of the fourth
quarter of 2017. To meet our client demand, we expect to ramp
up to an annual sand capacity of 600,000 tons by the end of the
first quarter of 2018. Providing a complete suite of proppant
products remains an important factor that differentiates us from
our competitors.
"STRATAGEN, our oilfield consulting business, has seen
significant growth this year. We expect continued growth in
this business, given the value that our experienced technical
people provide E&P operators in the design, execution, and
optimization of their well completions.
"Our industrial products should have a solid fourth quarter. The
stricter OSHA silica PEL requirements should provide a tailwind for
ceramic media sales as the regulations take effect in June of
2018. In addition, the new CARBOGRIND products we have
introduced are seeing client adoption.
"Our strategy to increase plant utilization through mineral
processing opportunities is progressing well. Recent plant
trials have proved successful this year, and we expect this to play
an important role by increasing revenue through the long-term
utilization at our manufacturing plants.
"ASSETGUARD, our environmental business, should bounce back
after the weather issues experienced during the third quarter of
2017. We also expect to continue to grow our industrial
revenue as we branch outside the oilfield.
"We continue to target positive EBITDA in 2018 and are excited
about the direction we are headed, the positive trends we are
seeing, and the opportunity set we have before us. Execution
of our transformation strategy should allow us to grow revenues,
return the company to profitability, and generate cash," Mr.
Kolstad concluded.
Conference Call
As previously announced, a conference call to discuss
CARBO's third 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/10112466
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 November
2nd, 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 10112466.
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
|
|
|
Nine Months
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands
except per share)
|
|
|
(In thousands
except per share)
|
|
Revenues
|
|
$
|
50,173
|
|
|
$
|
20,241
|
|
|
$
|
128,415
|
|
|
$
|
73,993
|
|
Cost of sales (see
Cost of Sales Detail table below)
|
|
|
64,696
|
|
|
|
41,106
|
|
|
|
175,829
|
|
|
|
138,512
|
|
Gross loss
|
|
|
(14,523)
|
|
|
|
(20,865)
|
|
|
|
(47,414)
|
|
|
|
(64,519)
|
|
SG&A
expenses
|
|
|
10,135
|
|
|
|
9,640
|
|
|
|
31,196
|
|
|
|
31,148
|
|
(Gain) loss on
disposal or impairment of assets **
|
|
|
(21)
|
|
|
|
(15)
|
|
|
|
(21)
|
|
|
|
910
|
|
Loss on sale of
Russian proppant business
|
|
|
26,728
|
|
|
|
—
|
|
|
|
26,728
|
|
|
|
—
|
|
Operating loss
**
|
|
|
(51,365)
|
|
|
|
(30,490)
|
|
|
|
(105,317)
|
|
|
|
(96,577)
|
|
Other expense,
net
|
|
|
(1,657)
|
|
|
|
(1,390)
|
|
|
|
(5,182)
|
|
|
|
(3,726)
|
|
Loss before income
taxes **
|
|
|
(53,022)
|
|
|
|
(31,880)
|
|
|
|
(110,499)
|
|
|
|
(100,303)
|
|
Income tax
benefit
|
|
|
(316)
|
|
|
|
(11,930)
|
|
|
|
(527)
|
|
|
|
(35,373)
|
|
Net loss
**
|
|
$
|
(52,706)
|
|
|
$
|
(19,950)
|
|
|
$
|
(109,972)
|
|
|
$
|
(64,930)
|
|
Loss per share:
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.97)
|
|
|
$
|
(0.81)
|
|
|
$
|
(4.13)
|
|
|
$
|
(2.75)
|
|
Diluted
|
|
$
|
(1.97)
|
|
|
$
|
(0.81)
|
|
|
$
|
(4.13)
|
|
|
$
|
(2.75)
|
|
Average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,691
|
|
|
|
24,770
|
|
|
|
26,655
|
|
|
|
23,651
|
|
Diluted
|
|
|
26,691
|
|
|
|
24,770
|
|
|
|
26,655
|
|
|
|
23,651
|
|
Depreciation and
amortization
|
|
$
|
11,704
|
|
|
$
|
12,051
|
|
|
$
|
35,805
|
|
|
$
|
36,499
|
|
Cost of Sales
Detail
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
(In
thousands)
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Primary cost of
sales
|
|
$
|
54,091
|
|
|
$
|
27,636
|
|
|
$
|
142,011
|
|
|
$
|
96,246
|
|
Slowing and idling
production
|
|
|
10,890
|
|
|
|
12,845
|
|
|
|
32,899
|
|
|
|
36,067
|
|
(Gain) loss on
derivative instruments
|
|
|
(285)
|
|
|
|
510
|
|
|
|
916
|
|
|
|
(87)
|
|
Other
charges
|
|
|
—
|
|
|
|
115
|
|
|
|
3
|
|
|
|
6,286
|
|
Total Cost of
Sales
|
|
$
|
64,696
|
|
|
$
|
41,106
|
|
|
$
|
175,829
|
|
|
$
|
138,512
|
|
Product Sales
Volumes
(in million
lbs)
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Ceramic
|
|
|
|
106
|
|
|
|
68
|
|
|
|
285
|
|
|
|
259
|
|
Northern White
Sand
|
|
|
|
617
|
|
|
|
46
|
|
|
|
1,483
|
|
|
|
162
|
|
Total
|
|
|
|
723
|
|
|
|
114
|
|
|
|
1,768
|
|
|
|
421
|
|
Reconciliation of
Reported Net Loss to EBITDA and Adjusted EBITDA **
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
(In
thousands)
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net
loss
|
|
$
|
(52,706)
|
|
|
$
|
(19,950)
|
|
|
$
|
(109,972)
|
|
|
$
|
(64,930)
|
|
Interest expense,
net
|
|
|
1,915
|
|
|
|
1,440
|
|
|
|
5,630
|
|
|
|
3,859
|
|
Income tax
benefit
|
|
|
(316)
|
|
|
|
(11,930)
|
|
|
|
(527)
|
|
|
|
(35,373)
|
|
Depreciation and
amortization (1)
|
|
|
11,532
|
|
|
|
11,989
|
|
|
|
34,923
|
|
|
|
36,437
|
|
EBITDA
|
|
$
|
(39,575)
|
|
|
$
|
(18,451)
|
|
|
$
|
(69,946)
|
|
|
$
|
(60,007)
|
|
(Gain) loss on
disposal or impairment of assets
|
|
|
(21)
|
|
|
|
(15)
|
|
|
|
(21)
|
|
|
|
910
|
|
Loss on sale of
Russian proppant business
|
|
|
26,728
|
|
|
|
—
|
|
|
|
26,728
|
|
|
|
—
|
|
Other
charges
|
|
|
—
|
|
|
|
115
|
|
|
|
3
|
|
|
|
6,525
|
|
(Gain) loss on
derivative instruments
|
|
|
(285)
|
|
|
|
510
|
|
|
|
916
|
|
|
|
(87)
|
|
Adjusted
EBITDA
|
|
$
|
(13,153)
|
|
|
$
|
(17,841)
|
|
|
$
|
(42,320)
|
|
|
$
|
(52,659)
|
|
|
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 and the sale of our Russian proppant business.
|
|
(1)
|
Depreciation and
amortization for the three and nine months ended September 30, 2017
excludes $172 and $882, respectively, of amortization of debt
issuance costs and debt discount, which is included in interest
expense, net, above.
|
Balance Sheet
Information **
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in
thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
67,663
|
|
|
$
|
91,680
|
|
Restricted cash
(current)
|
|
|
5,696
|
|
|
|
—
|
|
Other current
assets
|
|
|
124,459
|
|
|
|
125,543
|
|
Restricted cash
(long-term)
|
|
|
4,520
|
|
|
|
—
|
|
Property, plant and
equipment, net **
|
|
|
458,776
|
|
|
|
494,103
|
|
Goodwill
|
|
|
3,500
|
|
|
|
3,500
|
|
Intangible and other
assets, net
|
|
|
9,633
|
|
|
|
8,631
|
|
Total assets
**
|
|
$
|
674,247
|
|
|
$
|
723,457
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Long-term debt,
current
|
|
$
|
—
|
|
|
$
|
13,000
|
|
Derivative instruments
(current)
|
|
|
2,369
|
|
|
|
1,599
|
|
Other current
liabilities
|
|
|
32,087
|
|
|
|
20,205
|
|
Deferred income
taxes
|
|
|
990
|
|
|
|
1,236
|
|
Long-term debt and
related parties notes payable, net
|
|
|
86,523
|
|
|
|
67,404
|
|
Other long-term
liabilities
|
|
|
4,243
|
|
|
|
3,443
|
|
Shareholders' equity
**
|
|
|
548,035
|
|
|
|
616,570
|
|
Total liabilities
and shareholders' equity **
|
|
$
|
674,247
|
|
|
$
|
723,457
|
|
|
** Excludes a
non-cash impairment ranging from $85 million to $125 million (to be
finalized on third quarter 10-Q)
|
Contact:
Mark Thomas, Director, Investor
Relations
(281) 921-6458
View original
content:http://www.prnewswire.com/news-releases/carbo-announces-third-quarter-2017-results-300543696.html
SOURCE CARBO Ceramics Inc.