CARBO Ceramics Inc. reported financial results for the third quarter of 2019. Revenues for the third quarter of $43.5 million represent an increase of 1% sequentially, and a decrease of 19% compared to revenue of $53.8 million in the same period of 2018.
The largest contributors to the year-over-year decrease were the declines in sales of base ceramic products, environmental technologies and services, technology products and services. These decreases were partially offset by an increase in sand-related revenue, industrial ceramic sales and additional sublease and rental income.
Operating loss for the third quarter of 2019 was $28.8 million compared to $14.8 million in the same period of 2018, primarily due to impairment charges of $12.9 million of some of its distribution centers and leased assets, combined with the reductions in environmental and technology sales. Approximately 74% of the operating loss for the third quarter of 2019 consisted of non-cash expenses.
Chairman and CEO Gary Kolstad commented, “The CARBO team continues to demonstrate its resiliency in adjusting to the challenging North American oilfield environment even as activity declines accelerated during the third quarter. Given these market conditions, including expectations for these headwinds to persist going forward, we continue to be laser focused on initiatives to preserve, and improve, our cash position. By protecting the balance sheet, we believe we can continue the strategic execution of our transformation strategy to diversify and grow outside of the oilfield.
“In order to accomplish this goal, we will focus on the following: asset dispositions, significant cost reductions, increasing our existing cash-generating businesses and potential modifications to our capital structure. Several potential dispositions are currently being evaluated and if consummated would improve our net debt position.
“Further operational cost reductions will be sought through negotiations with our suppliers and lessors. If these negotiations are successful, it should make a significant improvement in our cash outlays in 2020 and beyond. On the SG&A front, we are targeting SG&A reductions of at least 20% in 2020.
“Given that significant challenges exist across the oilfield industry, we plan to continue building a diversified company that is less dependent on the oil and gas industry, one based on our four key strengths in materials science, manufacturing, technology solutions and the customer experience. To execute on our transformation strategy, we are taking steps to expand into product platforms that leverage these critical strengths. The industries we are targeting are large and we believe that our existing manufacturing capacity and product development capabilities will facilitate growth in these markets. The contract we have recently entered into, and the opportunities in front of us, are related to agriculture products, which we believe provide a solid foundation to build upon.
“Ultimately, we are seeking to create a balanced end-market company portfolio that can minimize the extreme volatility witnessed in the oil and gas industry. Acquisition targets are currently being evaluated with a focus on companies that have an established technology-based product portfolio, are currently generating EBITDA and with a solid runway for future growth.
“Transformation is never easy but we will continue to execute it with energy, reduce costs wherever we can, and diversify outside the oil and gas industry. We look forward to delivering further updates as they unfold,” Kolstad concluded.