HOUSTON, April 26, 2018 /PRNewswire/ -- CARBO
Ceramics Inc. (NYSE: CRR) today reported financial results for the
first quarter of 2018.
- Revenue for the first quarter of 2018 of $49.4 million, an increase of 42% year-on-year,
resulting from strong revenue growth in all three business sectors;
oilfield, industrial and environmental.
- Cash balance of approximately $70
million as of March 31, 2018;
expect to maintain a strong cash balance.
- Revenue growth contributed to a strong Adjusted EBITDA
incremental margin of 42% year-on-year; expect higher incremental
margins for the remainder of 2018.
- Expect strong sequential and year-on-year growth in revenue and
Adjusted EBITDA for the second quarter of 2018.
- Management reiterates 2018 full year revenue guidance of
approximately $250 million.
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CEO Gary Kolstad commented, "We
continue to show solid progress on our transformation strategy to
diversify our revenue streams and return the company to
profitability. Revenue for the first quarter of 2018
increased 42% year-on-year driven by strong growth in our oilfield
and industrial business sectors. We continue to expand our
suite of technologies into other industries to drive future
growth. Our growing top line revenue contributed to a strong
Adjusted EBITDA incremental margin of 42% year-on-year.
"Our oilfield technologies continue to exhibit the value they
bring clients, as sales volumes increased 20% year-on-year.
The technology products, including KRYPTOSPHERE®, the GUARD®
family, CARBOAIR®, and CARBONRT® continue to perform well in the
market. Base ceramic sales volumes increased 12% year-on-year
(adjusted for the sale of our Russia ceramic business).
"We, like others, had disruptions in rail service during the
quarter, which negatively impacted the volume of frac sand we were
able to move out of our Wisconsin
facility. However, we still achieved a large increase in frac
sand sales volume due to client demand, as well as the capacity
increases we realized from the fourth quarter 2017 start-up of an
additional sand operation in the Northeast. In addition to
improving profitability and providing cash flow, frac sand sales
drive opportunities to stay in front of our clients to discuss and
promote our technologies and the ways that CARBO can add value
through technology products and engineered completions.
"At recent industry conferences, E&P operators have
highlighted a renewed focus on increasing Estimated Ultimate
Recovery (EUR) and improving overall return metrics.
Commentary like this is encouraging, given our position as a
hydraulic fracturing technology leader that provides solutions to
enhance production at an overall lower total cost per barrel of oil
equivalent.
"Momentum is building for continued increases in sales in our
industrial sectors, where revenue grew over 70% year-on-year.
We are gaining new clients in several key industrial sectors,
including the foundry and grinding sectors. The new products
we introduced late last year have been successful, and we continue
to look at new markets for further market penetration.
Contract manufacturing opportunities are materializing ahead of our
plan, which is important for increasing plant utilization and
positively impacting profitability. We are ahead of our plan
in growing our contract manufacturing backlog and are in
discussions with multiple parties to carry out a number of
projects.
"ASSETGUARD™, our environmental business, is off to
a good start this year as revenues for the first quarter of 2018
increased 37% year-on-year. The increase is largely
associated with improving drilling activity levels in the oilfield.
However, just as we are doing in our other businesses, we are
expanding ASSETGUARD products into other industries," Mr. Kolstad
said.
First Quarter 2018 Results
Revenues for the first quarter of $49.4
million increased 42%, or $14.7
million compared to revenue of $34.7
million in the same period of 2017. The largest
contributors to this increase were frac sand, environmental
products, and industrial products.
The year-on-year increase in revenue contributed to an
incremental gross margin of 64%.
Operating loss for the first quarter of 2018 improved to
$20.2 million as compared to
$30.3 million in the same period of
2017, primarily due to increased sales combined with a reduction in
certain fixed structural costs, and a decrease in slowing and
idling expenses. Approximately two thirds of the $9.7 million of slowing and idling expenses is
non-cash related.
First quarter net cash used in operations improved to
$7.1 million compared to $19.1 million in the same period last
year.
Technology and Business Highlights
- KRYPTOSPHERE LD, a highly conductive, low-density proppant,
continued to see strong utilization during the quarter in several
high profile wells on both land and offshore North and South America. Clients cited a number of
benefits for its increased use, including its higher production,
lower decline rates, lower tool erosion and ease of placement.
- CARBOAIR was successfully pumped in a Marcellus basin
horizontal well for a large independent operator. This new
ultra-lightweight proppant technology has 28% lower density than
sand, resulting in significantly more volume per pound and
exceptional transport characteristics. The job was executed as
designed without any complications and increased the effective
fracture dimensions and overall contact area within the reservoir
compared to sand and used significantly less frac water for
placement.
- A Permian basin operator analyzed a set of wells that were
completed two years ago, where a portion were treated using
SCALEGUARD®. The operator found that the wells treated with
SCALEGUARD were still releasing the inhibitor levels as designed.
In addition, the operator visually examined the internal elements
of separators from both of these wells, finding the non-SCALEGUARD
well separators contained significant scale accumulation while the
SCALEGUARD well separators had no scale build-up, thereby lowering
lease operating expenses for the operator.
- SCALEGUARD ULTRA, a new and highly concentrated
proppant-delivered scale-inhibiting technology, successfully
completed a field trial in the Permian basin. SCALEGUARD ULTRA was
mixed with sand during pumping operations, and initial results show
the technology is performing as expected. Additional field trials
are planned in the upcoming quarter.
- In Alaska, a major operator
pumped CARBONRT in multiple wells. CARBONRT identifies
near-wellbore proppant placement in various applications without
the disposal cost and handling risks of radioactive tracers. Post
treatment logs were used to determine the fracture height compared
to predictive models. This E&P operator will continue to employ
CARBONRT on future jobs to calibrate its fracture models and
corresponding log results to help optimize its completion
program.
- CARBONRT ULTRA technology, a highly concentrated traceable
proppant, was used for the first time in Argentina on a vertical, discovery well. The
client mixed the traceable proppant with sand and will use CARBONRT
ULTRA log analysis to determine fracture height and monitor
productivity over the life of the well.
- Another foundry was converted to ACCUCAST® from silica sand.
The newly established OSHA Permissible Exposure Limits (PEL) to
improve worker safety by limiting silica dust exposure continues to
drive increased client interest in ACCUCAST as a replacement to
silica sand for foundries. By using our high-performance ceramic
casting media, foundries can eliminate employees' exposure to
respirable silica dust. Beyond the improved safety benefits,
ACCUCAST media creates castings that are much cleaner than those
produced in silica sand and with improved dimensions. ACCUCAST also
significantly lowers total foundry operating cost.
- CARBO Industrial Technologies added two new products to its
CARBOGRIND® offering. The performance success of the products
resulted in the gain of four new international mining clients.
According to the new customers, CARBOGRIND is reducing media
consumption up to 50%, greatly improving milling performance,
lowering shipping and handling costs and minimizing environmental
impact.
- ASSETGUARD entered the Canadian market. GROUNDGUARD® and other
products are being provided to a multi-sector service company. This
relationship allows ASSETGUARD to expand its geographic market
while providing the service company superior products for the
execution of their services to their end clients.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "We continue to anticipate full year
2018 revenue of approximately $250
million. Based on the visibility we have today, we
believe the second quarter of 2018 will result in increased revenue
and operating cash, both sequentially and year-on-year. All
areas of our business are expected to improve in the second quarter
of 2018. Consistent with the results of the first quarter, we
expect the continued growth in revenue to result in strong Adjusted
EBITDA incremental margins year-on-year.
"There are a number of oilfield ceramic technology jobs
scheduled for the second and third quarters of 2018, including
several KRYPTOSPHERE HD jobs.
"The first quarter witnessed some modest pricing gains in base
ceramic both sequentially and year-on-year. Although base
ceramic sales volumes remain at historical lows, 2018 sales volumes
are tracking ahead of 2017.
"With our Northeast sand project ramping up, we have expanded
our frac sand capacity to approximately 1.4 million tons
annually. We continue to pursue additional opportunities that
would increase our frac sand capacity through 'asset-lite' business
models.
"Sales of our industrial ceramic media and in our contract
manufacturing sector should see a strong increase for the second
and third quarters of 2018. During the first quarter of 2018,
we increased our sales and business development resources to
continue to execute on our industrial growth plans.
"We anticipate continued growth in our environmental business,
ASSETGUARD, as product sales continue to grow and we focus on
growing sales in industries outside of the oilfield.
"With industry activity expectations for the next two quarters,
and a couple of large KRYPTOSPHERE HD jobs having been recently
awarded, we are still targeting positive EBITDA for 2018 along with
maintaining a strong cash balance," Mr. Kolstad concluded.
Conference Call
As previously announced, a conference call to discuss CARBO's
first 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/10119223
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 3rd,
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 10119223. 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,
|
|
2018
|
|
|
2017
|
|
(In thousands
except per share)
|
Revenues
|
$
|
49,367
|
|
|
$
|
34,670
|
Cost of sales (see
Cost of Sales Detail table below)
|
|
59,382
|
|
|
|
54,128
|
Gross loss
|
|
(10,015)
|
|
|
|
(19,458)
|
SG&A
expenses
|
|
10,221
|
|
|
|
10,797
|
Gain on disposal or
impairment of assets
|
|
(4)
|
|
|
|
—
|
Operating
loss
|
|
(20,232)
|
|
|
|
(30,255)
|
Other expense,
net
|
|
(2,040)
|
|
|
|
(1,901)
|
Loss before income
taxes
|
|
(22,272)
|
|
|
|
(32,156)
|
Income tax
expense
|
|
—
|
|
|
|
288
|
Net loss
|
$
|
(22,272)
|
|
|
$
|
(32,444)
|
Loss per
share:
|
|
|
|
|
|
|
Basic
|
$
|
(0.83)
|
|
|
$
|
(1.22)
|
Diluted
|
$
|
(0.83)
|
|
|
$
|
(1.22)
|
Average shares
outstanding:
|
|
|
|
|
|
|
Basic
|
|
26,789
|
|
|
|
26,607
|
Diluted
|
|
26,789
|
|
|
|
26,607
|
Depreciation and
amortization
|
$
|
9,194
|
|
|
$
|
12,430
|
|
|
Cost of Sales
Detail
|
Three Months
Ended
|
(In
thousands)
|
March 31,
|
|
2018
|
|
|
2017
|
Primary cost of
sales
|
$
|
49,537
|
|
|
$
|
42,025
|
Slowing and idling
production
|
|
9,723
|
|
|
|
11,212
|
(Gain) loss on
derivative instruments
|
|
(218)
|
|
|
|
891
|
Other
charges
|
|
340
|
|
|
|
—
|
Total Cost of
Sales
|
$
|
59,382
|
|
|
$
|
54,128
|
|
|
Product Sales
Volumes (in million
lbs)
|
Three Months
Ended
|
|
March 31,
|
|
2018
|
|
|
2017
|
Ceramic (excluding
Russia) *
|
|
74
|
|
|
|
64
|
Northern White
Sand
|
|
637
|
|
|
|
370
|
|
*Russian plant sold
in September 2017
|
Reconciliation of
Reported Net Loss to EBITDA and Adjusted EBITDA
|
Three Months
Ended
|
(In
thousands)
|
March
31,
|
|
2018
|
|
2017
|
Net
loss
|
$
|
(22,272)
|
|
$
|
(32,444)
|
Interest expense,
net
|
|
2,017
|
|
|
2,088
|
Income tax
expense
|
|
—
|
|
|
288
|
Depreciation and
amortization (1)
|
|
9,025
|
|
|
11,882
|
EBITDA
|
$
|
(11,230)
|
|
$
|
(18,186)
|
Gain on disposal or
impairment of assets
|
|
(4)
|
|
|
—
|
Other
charges
|
|
340
|
|
|
—
|
(Gain) loss on
derivative instruments
|
|
(218)
|
|
|
891
|
Adjusted
EBITDA
|
$
|
(11,112)
|
|
$
|
(17,295)
|
|
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, 2018 and 2017
excludes $169 and $548, respectively, of amortization of debt
issuance costs and debt discount, which is included in interest
expense, net, above.
|
Balance Sheet
Information
|
|
|
March 31,
|
|
December 31,
|
|
2018
|
|
2017
|
|
(in
thousands)
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
60,749
|
|
$
|
68,169
|
Restricted cash
(current)
|
|
5,528
|
|
|
6,935
|
Other current
assets
|
|
114,881
|
|
|
120,693
|
Restricted cash
(long-term)
|
|
3,857
|
|
|
3,281
|
Property, plant and
equipment, net
|
|
315,684
|
|
|
324,186
|
Goodwill
|
|
3,500
|
|
|
3,500
|
Intangible and other
assets, net
|
|
12,979
|
|
|
13,834
|
Total
assets
|
$
|
517,178
|
|
$
|
540,598
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Derivative
instruments
|
$
|
1,933
|
|
$
|
2,537
|
Other current
liabilities
|
|
37,979
|
|
|
39,894
|
Deferred income
taxes
|
|
234
|
|
|
230
|
Long-term debt and
related parties notes payable, net
|
|
87,908
|
|
|
87,738
|
Other long-term
liabilities
|
|
5,149
|
|
|
4,434
|
Shareholders'
equity
|
|
383,975
|
|
|
405,765
|
Total liabilities
and shareholders' equity
|
$
|
517,178
|
|
$
|
540,598
|
Contact:
Mark Thomas, Director, Investor
Relations
(281) 921-6458
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SOURCE CARBO Ceramics Inc.