Newpark Resources, Inc. (NR)

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Newpark Resources Inc. (NR)

Q4 2009 Earnings Call

February 19, 2010 10:00 am ET


Paul Howes - President & Chief Executive Officer

Bruce Smith - President of Drilling Fluids Business

Jim Braun - Chief Financial Officer

Ken Dennard - Investor Relations, DRG&E


Jim Rollyson - Raymond James

Terese Fabian - Sidoti & Co.

Neal Dingmann - Wunderlich Securities

Mike Harrison - First Analysis Securities

Michael Marino - Stephens

Stephen Gengaro - Jefferies & Co.



Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Newpark Resources fourth quarter earnings conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)

I would now like to turn the conference over to Ken Dennard with DRG&E; please go ahead.

Ken Dennard

Thank you Brittany and good morning everyone. We welcome you to the Newpark Resources conference call today reviewing 2009 fourth quarter results. We’d also like to welcome our internet participants listening to the call, as it is being simulcast live over the internet.

Before I turn the call to management I have the normal housekeeping details to run through. For those of you who did not receive an e-mail of this release yesterday afternoon and would like to be added to the distribution list, please call DR&E at 713-529-6600 and provide us your contact information or you can e-mail it to me. My e-mail address is on the contact section of the press release.

There will also be a replay of today’s call, and it’ll be available by webcast on the company’s website, and there is also a telephonic replay which will be available 24 hours, seven days and it’ll be available until 26 February; also and that information’s only released yesterday.

Please note that information reported on this call speaks only as of today February 19, 2010 and therefore you are advised that any time sensitive information may no longer be accurate as of the time of any replay listening. In addition, the comments made by management today of Newpark during this conference call may contain forward-looking statements within the meaning of the United States Federal Security Laws.

These forward-looking statements reflect the current views of the management of Newpark; however various risks, uncertainties and contingencies could cause Newpark’s actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listeners encouraged to read the company’s Annual Report on Form 10-K, its quarterly reports on Form 10-Q and current reports on Form 8-K, to understand certain of those risks, uncertainties and contingencies.

Now with that said, I’d like to turn the call over to Newpark’s President and CEO Mr. Paul Howes. Paul.

Paul Howes

Thank you, Ken and good morning to everyone. We appreciate you joining us for our 2009 fourth quarter conference call. With me today are Bruce Smith, President of our Drilling Fluids Business; and Jim Braun, our Chief Financial Officer.

Following my comments, Bruce will provide an update on our fluids business, and Jim will discuss the Mat and the environmental service businesses, as well as the financial results to the core. I will then conclude with a discussion of our market outlook before opening the call to Q-and-A.

Now turning our attention to the fourth quarter; we continue to see improvements across all business units. Our North American business results reflect the increasing strengths in the US rig count and the international business results reflect the continued revenue growth in Brazil and steady performance for our Mediterranean operation.

As a result of improvements in the market conditions, as well as ongoing efforts to enhance operating efficiencies, all of our business segments returned to profitability in the quarter. Since the low point in the first quarter of 2009, our operating results have improved over the past three quarters colligating a profitable operating result in the third and fourth quarters of 2009.

Our consolidated revenue for the fourth quarter was $136 million, a 15% sequential improvement over the third quarter. Operating income for the quarter was $5.1 million compared to $2.2 million in the third quarter of 2009. Net income in the quarter was $16,000 or breakeven on a per share bases, as an unusually high tax rate offset the improved pretax profits.

Sequentially the US rig count increased 14% from the third quarter, which represents a substantial acceleration from the 4% sequential improvement last quarter. Our US fluid business reflected this strength as revenue was up 15% from the third quarter, and we gained market share in large part due to our strong presence in the US shale plays.

We also experienced a nice improvement in our Canadian business in the quarter, and our international business posted a sequential revenue growth of 10% from the third quarter due to the improvements in the Mediterranean, as well as growing activity in Brazil. We continue to grow in Brazil where we saw a sequential revenue increase of 15% to $10.3 million. As Bruce will explain later, our profitability in Brazil has not been acceptable and we expect to see improvements in the coming quarters.

In total, the overall profitability of our fluids business continued at sequential improvement, with operating income at $6.7 million, more than doubling the $2.5 million achieved in the third quarter of 2009. Operating margins were 5.9%, a sequential improvement of 330 basis points.

Our Mat and integrated service business saw a 64% sequential improvement in revenue to $12.4 million. The sizable gain was due to increased Mat sales. As a result this segment returned to profitability in the fount quarter, with operating income of $1.2 million. Our environmental service business experienced a 17% sequential decrease in revenues to $9.3 million; most of this decline was due to lower volumes.

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