Newpark Resources Reports Third Quarter 2007 Results

THE WOODLANDS, Texas, Nov. 5 /PRNewswire-FirstCall/ -- Newpark Resources, Inc. today announced results for the third quarter ended September 30, 2007.

Total revenues were $153.8 million for the third quarter of 2007 compared to $147.6 million for the third quarter of 2006. Income from continuing operations was $7.6 million in the third quarter of 2007, or $0.08 per diluted share. Income from continuing operations was $9.7 million, or $0.11 per diluted share in the third quarter of 2006, which included $2.5 million ($3.5 million pre-tax) of insurance recoveries from Hurricanes Katrina and Rita. Excluding these recoveries, income from continuing operations was $7.2 million, or $0.08 per diluted share for the third quarter of 2006, as set forth on the attached Non-GAAP Earnings Reconciliation.

As previously announced, the Company entered into an agreement in October 2007 to sell the U.S. Environmental Services business, and shut down substantially all of the Canadian Environmental Services business. As a result of these developments, the assets, liabilities and results of operations for the Environmental Services segment have been reclassified as discontinued operations for all periods presented. Restated segment results from continuing operations for the past seven quarters are included in the financial tables later in this release. Discontinued operations generated a $0.2 million after-tax loss in the third quarter of 2007, including after-tax impairments and other charges of $0.6 million related to the shut down of the Canadian Environmental Services business.

Paul Howes, President and Chief Executive Officer of Newpark, stated, "We are pleased with the progress we've made on several strategic fronts over the past quarter. The sale of the environmental business will significantly strengthen our balance sheet and improve our ability to increase investments in our Drilling Fluids and Mats & Integrated Services businesses. In addition to signing the agreement on the environmental business, we completed the sale of our Batson sawmill facility and completed the acquisition of SEM Construction Company, which provides geographic expansion for our Mats and Integrated Services business and an entry-point into the important Piceance basin. Also, we received final court approval of the settlement of our derivative and class action lawsuit, which provides closure to this issue. Meanwhile, we continue to be encouraged by our operating results. While we still see some challenges in the North American markets, our international operations generated a 25% increase in revenues over the previous quarter and our Mats and Integrated Services revenues and operating income improved significantly over the same period."

SEGMENT RESULTS

The Fluid Systems and Engineering segment generated revenues of $130.0 million and an 11.9% operating margin in the third quarter of 2007, compared to the $125.1 million of revenue and a 16.1% operating margin generated during the third quarter of 2006. As described above, the third quarter of 2006 included $3.5 million of insurance recoveries from Hurricanes Katrina and Rita. Operating margins in the third quarter of 2007 declined modestly relative to the second quarter 2007 primarily due to softness in the Gulf Coast and the continued weakness in the Canadian market, along with higher barite transportation costs.

The Mats and Integrated Services segment generated revenues of $23.8 million and a 19.1% operating margin in the third quarter of 2007 compared to revenues of $22.5 million and a 20.4% operating margin in the third quarter of 2006. The slight decline in operating margins is primarily attributable to a change in sales mix, driven by weakness in the Gulf Coast rig counts. Operating margins in the third quarter of 2007 improved substantially from 12.1% in the second quarter of 2007 due to increases in revenues combined with continuing operating cost reductions.

CONFERENCE CALL

In conjunction with this release, Newpark has scheduled a conference call, which will be broadcast live over the Internet, on Monday, November 5, 2007 at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. To participate in the call, dial (303) 262-2141 and ask for the Newpark Resources conference call at least 10 minutes prior to the start time, or access it live over the Internet at http://www.newpark.com/. For those who cannot listen to the live call, a replay will be available through November 12, 2007 and may be accessed by dialing (303) 590-3000 and using pass code 11098107#. Also, an archive of the webcast will be available shortly after the call at http://www.newpark.com/ for 90 days.

Newpark Resources, Inc. is a worldwide provider of drilling fluids, temporary worksites and access roads for oilfield and other commercial markets, and environmental waste treatment solutions. For more information, visit our website at http://www.newpark.com/.

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act that are based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about Newpark's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Newpark, particularly its Annual Report on Form 10-K for the year ended December 31, 2006, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, the investigation of the certain accounting matters by the Securities and Exchange Commission; changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which Newpark does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw materials, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales of Newpark products. Newpark's filings with the Securities and Exchange Commission can be obtained at no charge at http://www.sec.gov/, as well as through our website at http://www.newpark.com/.

Contacts: James E. Braun, CFO Newpark Resources, Inc. 281-362-6800 Ken Dennard, Managing Partner Dennard Rupp Gray & Easterly, LLC ksdennard@drg-e.com 713-529-6600 Newpark Resources, Inc. Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended (In thousands, except September 30, September 30, per share data) 2007 2006 2007 2006 Revenues $153,778 $147,618 $453,024 $435,160 Cost of revenues 133,756 122,846 393,176 376,028 20,022 24,772 59,848 59,132 General and administrative expenses 4,567 5,050 17,833 13,842 Operating income 15,455 19,722 42,015 45,290 Foreign currency exchange (gain) loss (57) 16 (279) (496) Interest expense, net 3,950 6,160 12,182 15,210 Income from continuing operations before income taxes 11,562 13,546 30,112 30,576 Provision for income taxes 3,950 3,813 10,586 9,936 Income from continuing operations 7,612 9,733 19,526 20,640 (Loss) income from discontinued operations, net of taxes (229) (11,998) 2,563 (10,797) Loss from disposal of discontinued operations, net of taxes - - (2,173) - Net income $7,383 $(2,265) $19,916 $9,843 Basic weighted average common shares outstanding 90,085 89,417 89,965 89,281 Diluted weighted average common shares outstanding 90,542 89,658 90,503 89,872 Net income per common share (basic and diluted): Income from continuing operations $0.08 $0.11 $0.22 $0.23 (Loss) income from discontinued operations (0.00) (0.14) 0.00 (0.12) Net income (loss) per common share $0.08 $(0.03) $0.22 $0.11 Newpark Resources, Inc. Non-GAAP Earnings Reconciliation Continuing Operations (Unaudited) Quarter Ended September 30, (In thousands, except per share data) 2007 2006 Income from continuing operations before income taxes - GAAP $11,562 $13,546 Insurance recoveries from hurricanes Katrina and Rita - (3,471) Income from continuing operations before income taxes - Non-GAAP 11,562 10,075 Tax effect 3,950 2,836 Net income - Non-GAAP $7,612 $7,239 Diluted shares outstanding 90,542 89,658 Net income per common share (basic and diluted): Net income per common share - GAAP $0.08 $0.11 Insurance recoveries from hurricanes Katrina and Rita - (0.03) Net income per common share - Non-GAAP $0.08 $0.08 The adjusted non-GAAP financial measures used in this press release exclude the impact of the Company's insurance recoveries related to Hurricanes Katrina and Rita. Non-GAAP financials measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The Company believes these non-GAAP financials measures are helpful, however, in comparing the historical results to current results and measuring operating earnings trends. Newpark Resources, Inc. Restated Segment Results (Unaudited) Quarter Ended March 31, June 30, September 30, December 31, (In thousands) 2006 2006 2006 2006 Segment revenues Fluids systems and engineering $115,289 $111,868 $125,130 $129,091 Mat and integrated services 29,251 31,133 22,488 17,657 Total segment revenues $144,540 $143,001 $147,618 $146,748 Segment operating income Fluids systems and engineering $12,660 $13,143 (1) $20,178 (1) $20,635 Mat and integrated services 4,343 4,216 4,594 2,078 Total segment operating income $17,003 $17,359 $24,772 $22,713 Segment operating margin Fluids systems and engineering 11.0% 11.7% 16.1% 16.0% Mat and integrated services 14.8% 13.5% 20.4% 11.8% Total segment operating margin 11.8% 12.1% 16.8% 15.5% (Unaudited) Quarter Ended March 31, June 30, September 30, (In thousands) 2007 2007 2007 Segment revenues Fluids systems and engineering $125,298 $131,163 $129,986 Mat and integrated services 23,966 18,819 23,792 Total segment revenues $149,264 $149,982 $153,778 Segment operating income Fluids systems and engineering $16,630 $16,323 $15,467 Mat and integrated services 4,600 2,273 4,555 Total segment operating income $21,230 $18,596 $20,022 Segment operating margin Fluids systems and engineering 13.3% 12.4% 11.9% Mat and integrated services 19.2% 12.1% 19.1% Total segment operating margin 14.2% 12.4% 13.0% (1) Includes insurance recoveries from hurricanes Katrina and Rita of $0.8 million and $3.5 million in the quarters ended June 30, 2006 and September 30, 2006, respectively. Newpark Resources, Inc. Consolidated Balance Sheets (In thousands) September 30, 2007 December 31, 2006 (Unaudited) ASSETS Current assets: Cash and cash equivalents $7,412 $12,736 Accounts receivable, net 142,141 141,790 Inventories 108,319 107,778 Deferred tax asset 20,076 23,001 Prepaid expenses and other current assets 16,566 12,176 Assets of discontinued operations 87,780 102,365 Total current assets 382,294 399,846 Property, plant and equipment, net 160,319 152,207 Goodwill 62,028 54,624 Deferred tax asset - 7,096 Other intangible assets, net 17,503 8,236 Other assets 7,052 7,440 $629,196 $629,449 LIABILITIES AND STOCKHOLDERS' EQUITY Foreign bank lines of credit $5,928 $10,938 Current maturities of long-term debt 3,066 4,058 Accounts payable 45,815 37,087 Accrued liabilities 35,299 40,439 Liabilities of discontinued operations 11,554 11,403 Total current liabilities 101,662 103,925 Long-term debt, less current portion 169,252 198,037 Deferred tax liability 858 - Other noncurrent liabilities 4,591 4,344 Total liabilities 276,363 306,306 Common Stock 901 897 Paid-in capital 448,940 444,763 Accumulated other comprehensive income 14,283 7,940 Retained deficit (111,291) (130,457) Total stockholders' equity 352,833 323,143 $629,196 $629,449 Newpark Resources, Inc. Consolidated Statements of Cash Flow (Unaudited) Nine Months Ended September 30, (In thousands) 2007 2006 Cash flows from operating activities: Net income $19,916 $9,843 Adjustments to reconcile net income to net cash provided by operations: Net (income) loss from discontinued operations (2,562) 10,797 Net loss from disposal of discontinued operations 2,172 - Depreciation and amortization 14,835 15,908 Stock-based compensation expense 2,270 1,711 Provision for deferred income taxes 8,385 2,564 Provision for doubtful accounts 530 1,074 Loss on sale of assets 193 (614) Change in assets and liabilities: Decrease (increase) in accounts and notes receivable 3,872 (21,420) Increase in inventories (1,340) (24,593) Increase in other assets (3,994) (3,752) Increase (decrease) in accounts payable 7,606 (5,546) (Decrease) increase in accrued liabilities and other (4,099) 11,463 Net operating activities of continuing operations 47,784 (2,565) Net operating activities of discontinued operations 15,018 10,388 Net cash provided by operating activities 62,802 7,823 Cash flows from investing activities: Capital expenditures (13,227) (20,162) Proceeds from sale of property, plant and equipment 888 1,210 Acquisition of business (21,919) - Insurance proceeds from property, plant and equipment - 3,471 Net investing activities of continuing operations (34,258) (15,481) Net investing activities of discontinued operations 153 (9,246) Net cash used in investing activities (34,105) (24,727) Cash flows from financing activities: Net (payments) borrowings on lines of credit (15,766) 17,078 Proceeds from long-term financing - 150,000 Payments on notes payable and long- term debt, net (20,806) (156,217) Proceeds from exercise of stock options and ESPP 2,016 4,385 Excess tax benefit from exercise of stock options - 640 Net financing activities of continuing operations (34,556) 15,886 Net financing activities of discontinued operations (45) (646) Net cash (used in) provided by financing activities (34,601) 15,240 Effect of exchange rates changes 580 226 Net decrease in cash and cash equivalents (5,324) (1,438) Cash and cash equivalents at beginning of period 12,736 7,344 Cash and cash equivalents at end of period $7,412 $5,906