CARBO Ceramics Inc. (NYSE:CRR) Q3 2019 Earnings Conference Call - Final Transcript

Nov 11, 2019 • 11:30 am ET


CARBO Ceramics Inc. (NYSE:CRR) Q3 2019 Earnings Conference Call - Final Transcript


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Hello and welcome to today's CARBO Ceramics Incorporated Third Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please be advised that this call is being recorded today, November 11th, 2019 and your participation implies consent to our recording this call. If you do not agree to these terms, simply disconnect.

Some of our comments today may include forward-looking statements reflecting the company's view about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in the company's press release and public filings.

Our comments today are also including non-GAAP financial measures. These non-GAAP measures include EBITDA and adjusted EBITDA and are not substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net loss to EBITDA and adjusted EBITDA as discussed on this call is presented in the company's earnings release, which is available on its website.

Your host for today's call is Mr. Gary Kolstad, President and Chief Executive Officer of CARBO Ceramics Incorporated. Mr. Kolstad, please begin your call.

Gary A. Kolstad

Good morning, everyone. The third quarter was challenging for CARBO, like many companies in the American oil and -- North American oil and gas industry. All of our businesses associated with US onshore oil and gas are feeling the impact from the deterioration in activity. We were also notified after the quarter ended that our largest frac sand client intends to discontinue purchases of frac sand under our current contract. We are in discussions with this client to determine if there's an agreeable alternative to this matter. This contract covered significant fixed costs associated with our distribution facility and rail car leases. Our immediate focus is to find a solution to these and other fixed costs that are burdening the business today.

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 execution of our transformation strategy to diversify and grow in profitable businesses outside the oil field. In order to accomplish this goal, we will focus on the following: asset dispositions; inventory reductions; significant cost reductions; increasing our existing cash generation businesses; and potential modifications to our capital structure, including the refinancing of our existing debt.

With support from our Board of Directors, management has engaged financial advisers to assist with certain of the company's liquidity-enhancing initiatives. Several potential dispositions are currently being evaluated and, if consummated, would improve our net debt position. While nothing is finalized yet, if we execute all that are being contemplated today, it could range between $20 million and $40 million. Further operational cost reductions will be sought through negotiations with our suppliers and lessors. If