HOUSTON, July 26, 2018 /PRNewswire/ -- CARBO Ceramics
Inc. (NYSE: CRR) today reported financial results for the second
quarter of 2018.
- Revenue for the second quarter of 2018 of $58.0 million, an increase of 33% year-on-year
and 17% sequentially, resulting from solid revenue growth in our
oilfield, industrial and environmental sectors.
- Revenue growth contributed to a strong Adjusted EBITDA
incremental margin of 55% year-on-year; an improvement from an
Adjusted EBITDA incremental margin of 42% year-on-year in the first
quarter of 2018.
- Expect strong sequential and year-on-year growth in revenue and
Adjusted EBITDA for the third and fourth quarters of 2018,
resulting in positive EBITDA for entire second half of 2018.
- Management reiterates 2018 full year revenue guidance of
approximately $250 million.
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CEO Gary Kolstad commented, "Our
results continue to improve as we execute on our transformation
strategy to diversify our revenue streams and return the company to
profitability. Revenue for the second quarter of 2018
increased 33% year-on-year driven by solid performance in all three
business sectors. Our growing top line revenue, and improved
sales mix, contributed to a strong Adjusted EBITDA incremental
margin of 55% year-on-year.
Oilfield sector revenue grew 34% year-on-year, and comprised
approximately 80% of consolidated revenue.
"Oilfield technology ceramic
revenue grew 61% year-on-year. As previously noted, we
expected to see healthy ceramic technology product sales during the
second and third quarters of 2018 driven in part by
KRYPTOSPHERE® sales.
"STRATAGEN®, our fracture consulting group,
is seeing strong revenue growth as revenue increased 59%
year-on-year. Our client list is expanding in North America as well as
internationally.
"Overall, we expect modest
improvement in base ceramic revenue for the year compared to
2017. Second quarter base ceramic revenue was down 17%
year-on-year (adjusted for the sale of our Russian ceramic
business), with the decline primarily due to work shifting to the
second half of 2018. We continue to be successful in reducing
our reliance on base ceramic. Base ceramic sales made up
approximately 80% of our revenue in 2014 compared to approximately
20% year-to-date.
"Frac sand revenue increased 126%
year-on-year. Frac sand provides cash flow generation and the
opportunity to stay in front of our clients to promote our
technology products.
Industrial sector revenue grew 28% year-on-year, and comprised
approximately 6% of consolidated revenue.
"Industrial ceramic revenue grew
37% year-on-year. Recently introduced industrial ceramic
technology products are having a positive impact on our revenue
growth. In addition, our idled plant assets are being
evaluated for many different contract manufacturing
opportunities. Discussions continue with a number of
industrial companies interested in contract manufacturing of
products and we are assisting clients with product development
utilizing our unique processing systems such as pelletizing, resin
coating, chemical infusion, heat treatment and particle size
manipulation. Third quarter contract manufacturing projects
have already begun and we are excited about the financial benefit
that contract manufacturing will bring the Company, as these idle
plant assets are put to work producing cash.
Environmental sector revenue grew 29% year-on-year, and
comprised approximately 14% of consolidated revenue.
"ASSETGUARD™ revenues for the second
quarter of 2018 increased 29% year-on-year driven by increased
GROUNDGUARD® sales and other manufactured
products. We continue to invest in this business to grow our
suite of high value, technology products. During the quarter,
we completed an enhancement to our manufacturing facility to create
a new slip-resistant GROUNDGUARD," Mr. Kolstad said.
Second Quarter 2018 Results
Revenues for the second quarter of $58.0
million increased 33%, or $14.4
million, compared to revenue of $43.6
million in the same period of 2017. The largest
contributors to this increase were oilfield technology products,
frac sand, environmental products and industrial products.
The year-on-year increase in revenue contributed to an
incremental gross margin of 85%.
Operating loss for the second quarter of 2018 improved to
$12.8 million as compared to
$23.7 million in the same period of
2017, primarily due to increased sales combined with a reduction in
certain fixed structural costs. Approximately 75% of the
operating loss for the second quarter of 2018 consisted of non-cash
expenses.
Technology and Business Highlights
- In the Utica, a large independent operator implemented a
completion design using a ceramic proppant blend that included
KRYPTOSPHERE LD 35, ECONOPROP® 30/50 and
CARBOLITE® 40/70. The well has proven to be the second
best Utica producer. The best Utica well, which also used
CARBO ceramic proppant, has now
produced almost 4.7 BCF/1000 ft in 34 months of production.
- CARBOAIR® continues to assist us in increasing the
number of repeat clients. During the quarter, a large independent
operator employed the technology on a second well in the Marcellus.
CARBOAIR, a new ultra-lightweight proppant, has 28% lower density
than sand, resulting in significantly more volume per pound and
exceptional transport characteristics. The job was successfully
pumped as designed and increased the effective fracture dimensions
and overall contact area within the reservoir compared to
sand.
- In California, KRYPTOSPHERE
LD, a highly conductive, low-density proppant, was deployed in a
geothermal application. The client employed the KRYPTOSPHERE
technology due to its high quality and ability to withstand the
harsher conditions found in geothermal wells. Based on the success
of this project, we are designing additional treatments with the
product.
- CARBOAIR was employed on a horizontal open hole gravel pack in
the North Sea for a large international oil company. This
technology was utilized due to its transport capabilities and
ability to provide a more thorough gravel pack at lower pumping
rates. Several more jobs are planned.
- KRYPTOSPHERE LD continued market expansion during the quarter
with jobs in Northern Latin
America, the North Sea and additional clients in the
Gulf of Mexico (GOM). The North
Sea application combined the technology with CARBO's resin-coating technology,
CARBOBOND®.
- The GUARD® family of proppant-delivered production assurance
technologies continued to gain new clients in highly prolific shale
basins across North America, as
well as a new GOM client using the KRYPTOSPHERE version of
SCALEGUARD® to safeguard against long term scale
development. The GUARD technologies are a highly efficient,
effective and simple way to protect against production issues from
the tip of the fracture throughout the entire production system.
SCALEGUARD® has now been used in thousands of frac stages. New
GUARD technologies including SCALEGUARD ULTRA,
PARAGUARD™ and SALTGUARD®, continue to
progress toward full commercialization.
- In June, OSHA completed an onsite evaluation of a foundry that
converted to ACCUCAST® from silica sand to address the
new OSHA regulation for Permissible Exposure Limits (PEL).
ACCUCAST, high-performance ceramic casting media, eliminates
employees' exposure to respirable silica dust. For the first time
in 44 years, the foundry's finishing department measured below PEL
and easily passed total airborne dust standards. Beyond the safety
benefits, ACCUCAST media creates much cleaner castings with
improved dimensions and substantial cost savings.
- CARBOGRIND® business continues to grow due to its
exceptional performance as part of our recently expanded portfolio
of grinding products. The introduction of CARBOGRIND Plus and
CARBOGRIND XT has more than tripled the CARBOGRIND product
offerings. CARBO now offers
grinding media in sizes from 0.8mm to 60mm and apparent specific
gravity from 2.6 to 3.7 with additional offerings available later
this year.
- STIMPRO® 2018, a matrix acid stimulation simulator, which
contains significant improvements and numerous new features, was
released during the quarter. The new version includes a new
Carbonate Acidizing Model based upon the semi-empirical method that
is a more modern technique of estimating worm hole growth in
carbonate formations. The new carbonate acidizing model is more
accurate than the prior model and provides users greater
flexibility in treatment design. The new release includes a Dual
Injection feature which enables users to simulate acidizing
treatments injected down the annulus and tubing
simultaneously.
- ASSETGUARD® introduced a new AQUAGUARD™
floating lid system for a Bakken basin client. The client has
committed to purchase several lid systems this year citing a number
of benefits including improved insulation, excellent durability,
better wind resistance, and fast installation. AQUAGUARD lid
systems save water that would otherwise be lost to evaporation, and
its durable design will deliver years of trouble-free use.
AQUAGUARD is now being marketed across North America.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "Based
on our client discussions and current industry activity, we
continue to estimate our full year 2018 revenue to approximate
$250 million. As a result, we
expect continued improvement in revenue and positive EBITDA with
strong incremental margins year-on-year in the second half of
2018.
Oilfield Sector:
"Our ceramic technology backlog
for KRYPTOSPHERE, the GUARD family, and CARBOAIR products is much
stronger for the remainder of the year relative to the first half
of 2018.
"Demand for completion designs
that drive higher production and EUR, and ultimately higher
economic returns, is driving STRATAGEN revenue growth. In
response to this demand, we are expanding our team of
consultants.
"We had multiple large jobs push
out of the second quarter, due to well-related operational problems
and rig start up delays. We anticipate base ceramic revenue
will be stronger in the second half of 2018.
"We expect frac sand sales to see
some pressure in the second half of 2018, specifically as it
applies to third party sales volumes, as more regional sand mines
come online. Despite the potential impact of these new
entrants on third party sales, we anticipate 2018 frac sand sales
to approximate our stated annual capacity of 1.4 million tons.
Industrial Sector:
"We expect to see a strong
increase in contract manufacturing sales in both the third and
fourth quarters of 2018. In addition, we anticipate continued
product adoption of CARBOGRIND, a superior grinding ceramic
media.
Environmental Sector:
"ASSETGUARD's new slip-resistant
product opens up new revenue streams both in the oilfield and
industrial sectors. The recent investment in our
manufacturing facility also increases our ability to continue to
grow our product portfolio. We anticipate ASSETGUARD will
continue to show revenue growth in the second half of
2018.
"Building upon our positive momentum exiting the first half of
2018, we expect the continued execution of our transformation
strategy to produce higher revenue, positive EBITDA, and a higher
cash position in the second half of 2018," Mr. Kolstad
concluded.
Conference Call
As previously announced, a conference call to discuss
CARBO's second quarter 2018
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/10121717
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 August
2nd, 2018 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 10121717.
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. The Company has two reportable operating segments:
1) oilfield and industrial technologies and services and 2)
environmental technologies and services.
CARBO Oilfield
Technologies – is a leading provider of market-leading
technologies to create engineered production enhancements solutions
that help E&P operators to design, build and optimize the frac
– increasing well production and estimated ultimate recovery, and
lower finding and development cost per barrel of oil
equivalent.
CARBO Industrial
Technologies - is a leading provider of high-performance
ceramic media and industrial technologies engineered to increase
process efficiency, improve end-product quality and reduce
operating cost. Our minerals processing and custom manufacturing
services help bring new products to market faster and meet customer
demands while minimizing investment.
CARBO Environmental
Technologies – is a leading provider of spill prevention and
containment solutions that provide the highest level of protection
for clients' assets and the environment in oil and gas and
industrial applications. Our range of innovative products feature a
proprietary polyurea coating technology that creates a seamless,
impermeable, maintenance-free layer of protection.
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
|
|
|
Six Months
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(In thousands
except per share)
|
|
|
(In thousands
except per share)
|
|
Revenues
|
|
$
|
57,989
|
|
|
$
|
43,572
|
|
|
$
|
107,356
|
|
|
$
|
78,242
|
|
Cost of sales
(exclusive of depreciation and amortization shown below)
|
|
|
50,818
|
|
|
|
46,138
|
|
|
|
101,788
|
|
|
|
89,025
|
|
Depreciation and
amortization
|
|
|
8,323
|
|
|
|
10,867
|
|
|
|
16,735
|
|
|
|
22,108
|
|
Gross loss
|
|
|
(1,152)
|
|
|
|
(13,433)
|
|
|
|
(11,167)
|
|
|
|
(32,891)
|
|
SG&A expenses
(exclusive of depreciation and amortization shown below)
|
|
|
10,685
|
|
|
|
9,623
|
|
|
|
20,292
|
|
|
|
19,779
|
|
Depreciation and
amortization
|
|
|
620
|
|
|
|
642
|
|
|
|
1,234
|
|
|
|
1,283
|
|
Loss on sale of
Russian proppant business
|
|
|
350
|
|
|
|
—
|
|
|
|
350
|
|
|
|
—
|
|
Gain on disposal or
impairment of assets
|
|
|
(55)
|
|
|
|
—
|
|
|
|
(59)
|
|
|
|
—
|
|
Operating
loss
|
|
|
(12,752)
|
|
|
|
(23,698)
|
|
|
|
(32,984)
|
|
|
|
(53,953)
|
|
Other expense,
net
|
|
|
(2,053)
|
|
|
|
(1,623)
|
|
|
|
(4,093)
|
|
|
|
(3,524)
|
|
Loss before income
taxes
|
|
|
(14,805)
|
|
|
|
(25,321)
|
|
|
|
(37,077)
|
|
|
|
(57,477)
|
|
Income tax expense
(benefit)
|
|
|
7
|
|
|
|
(499)
|
|
|
|
7
|
|
|
|
(211)
|
|
Net loss
|
|
$
|
(14,812)
|
|
|
$
|
(24,822)
|
|
|
$
|
(37,084)
|
|
|
$
|
(57,266)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.55)
|
|
|
$
|
(0.93)
|
|
|
$
|
(1.38)
|
|
|
$
|
(2.15)
|
|
Diluted
|
|
$
|
(0.55)
|
|
|
$
|
(0.93)
|
|
|
$
|
(1.38)
|
|
|
$
|
(2.15)
|
|
Average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,931
|
|
|
|
26,665
|
|
|
|
26,860
|
|
|
|
26,636
|
|
Diluted
|
|
|
26,931
|
|
|
|
26,665
|
|
|
|
26,860
|
|
|
|
26,636
|
|
|
|
|
|
|
|
|
Disaggregated
Revenue
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
(in
thousands)
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Technology products
and services
|
|
$
|
12,786
|
|
|
$
|
8,526
|
|
|
$
|
22,656
|
|
|
$
|
17,730
|
|
Industrial products
and services
|
|
|
3,269
|
|
|
|
2,552
|
|
|
|
6,562
|
|
|
|
4,418
|
|
Base ceramic and sand
proppants
|
|
|
33,733
|
|
|
|
26,124
|
|
|
|
63,038
|
|
|
|
44,675
|
|
Oilfield and
Industrial Technologies and Services Segment
|
|
|
49,788
|
|
|
|
37,202
|
|
|
|
92,256
|
|
|
|
66,823
|
|
Environmental
Technologies and Services Segment
|
|
|
8,201
|
|
|
|
6,370
|
|
|
|
15,100
|
|
|
|
11,419
|
|
Total
|
|
$
|
57,989
|
|
|
$
|
43,572
|
|
|
$
|
107,356
|
|
|
$
|
78,242
|
|
|
|
|
|
|
|
|
(Loss) income
before income taxes
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
(in
thousands)
|
|
June 30, 2018
|
|
|
June 30, 2018
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Oilfield and
Industrial Technologies and Services Segment
|
|
$
|
(15,545)
|
|
|
$
|
(25,436)
|
|
|
$
|
(38,312)
|
|
|
$
|
(57,199)
|
|
Environmental
Technologies and Services Segment
|
|
|
740
|
|
|
|
115
|
|
|
|
1,235
|
|
|
|
(278)
|
|
Total
|
|
$
|
(14,805)
|
|
|
$
|
(25,321)
|
|
|
$
|
(37,077)
|
|
|
$
|
(57,477)
|
|
Reconciliation of
Reported Net Loss to EBITDA and Adjusted EBITDA
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
(In
thousands)
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net
loss
|
|
$
|
(14,812)
|
|
|
$
|
(24,822)
|
|
|
$
|
(37,084)
|
|
|
$
|
(57,266)
|
|
Interest expense,
net
|
|
|
2,084
|
|
|
|
1,627
|
|
|
|
4,101
|
|
|
|
3,715
|
|
Income tax expense
(benefit)
|
|
|
7
|
|
|
|
(499)
|
|
|
|
7
|
|
|
|
(211)
|
|
Depreciation and
amortization
|
|
|
8,943
|
|
|
|
11,509
|
|
|
|
17,969
|
|
|
|
23,391
|
|
EBITDA
|
|
$
|
(3,778)
|
|
|
$
|
(12,185)
|
|
|
$
|
(15,007)
|
|
|
$
|
(30,371)
|
|
Gain on disposal or
impairment of assets
|
|
|
(55)
|
|
|
|
—
|
|
|
|
(59)
|
|
|
|
—
|
|
Loss on sale of
Russian proppant business
|
|
|
350
|
|
|
|
—
|
|
|
|
350
|
|
|
|
—
|
|
Other
charges
|
|
|
2
|
|
|
|
3
|
|
|
|
342
|
|
|
|
3
|
|
(Gain) loss on
derivative instruments
|
|
|
(412)
|
|
|
|
309
|
|
|
|
(630)
|
|
|
|
1,200
|
|
Adjusted
EBITDA
|
|
$
|
(3,893)
|
|
|
$
|
(11,873)
|
|
|
$
|
(15,004)
|
|
|
$
|
(29,168)
|
|
|
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.
|
Balance Sheet
Information
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in
thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
45,681
|
|
|
$
|
68,169
|
|
Restricted cash
(current)
|
|
|
5,408
|
|
|
|
6,935
|
|
Other current
assets
|
|
|
128,409
|
|
|
|
120,693
|
|
Restricted cash
(long-term)
|
|
|
3,857
|
|
|
|
3,281
|
|
Property, plant and
equipment, net
|
|
|
307,682
|
|
|
|
324,186
|
|
Goodwill
|
|
|
3,500
|
|
|
|
3,500
|
|
Intangible and other
assets, net
|
|
|
9,420
|
|
|
|
13,834
|
|
Total
assets
|
|
$
|
503,957
|
|
|
$
|
540,598
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Derivative
instruments
|
|
$
|
1,189
|
|
|
$
|
2,537
|
|
Notes payable, related
parties (current)
|
|
|
27,040
|
|
|
|
—
|
|
Other current
liabilities
|
|
|
35,439
|
|
|
|
39,894
|
|
Deferred income
taxes
|
|
|
234
|
|
|
|
230
|
|
Long-term debt and
notes payable, related parties, net
|
|
|
61,039
|
|
|
|
87,738
|
|
Other long-term
liabilities
|
|
|
5,863
|
|
|
|
4,434
|
|
Shareholders'
equity
|
|
|
373,153
|
|
|
|
405,765
|
|
Total liabilities
and shareholders' equity
|
|
$
|
503,957
|
|
|
$
|
540,598
|
|
Contact:
Mark Thomas,
Director, Investor Relations
(281) 921-6458
View original
content:http://www.prnewswire.com/news-releases/carbo-announces-second-quarter-2018-results-300686841.html
SOURCE CARBO Ceramics Inc.