Operating results in the first quarter of 2009 comprised of pre-tax employee extinction and related charges of $2.6 million ($1.7 million after-tax) related with North American workforce reductions. Besides, the effective tax rate for the first quarter 2009, which had a pre-tax loss of $14.5 million, was 17%, resulting in a benefit from income taxes of $2.5 million, compared to an effective tax rate of 33% in the year-ago quarter. The low effective tax rate in the first quarter of 2009 is mainly due to the write-off of an earlier recognized net operating loss carry forward tax asset in Canada, along with losses generated in certain foreign countries during the quarter, for which the recording of a tax advantage is not allowed.
Paul Howes, president and chief executive officer of Newpark Resources, stated, Our first quarter results were negatively impacted by the sharp decline in North American drilling activity, driven by the decline in natural gas prices. In response to these lower levels of activity, we initiated further cost cutting programs during the first quarter of 2009 to reduce headcount and operating costs. Since the beginning of 2009, we have reduced our North American headcount by 28%. However, the benefits of the cost reduction initiatives had less impact on our first quarter results due to the timing of the actions, along with employee termination costs related to the headcount reductions. Having taken steps to right-size the business during this period, we believe our cost structure is now better aligned with current revenue levels. Internationally, our business performed better during the quarter and our business in Brazil, which is tied to deepwater offshore production, is expected to perform well in 2009.”
The first quarter loss was further negatively impacted by the unusually low tax rate, which served to increase our net loss by $0.03 per share. Despite the operational challenges, we were still able to reduce our total debt by $25 million during the quarter, concluded Howes.
Segment Results
The fluids systems and engineering segment generated revenues of $106.6 million and an operating loss of $5.6 million for the first quarter of 2009 compared with the revenues of $157.2 million and operating income of $21.1 million during in the year-ago quarter of 2008. The decline in revenues was due to a considerably lower US rig count in the first quarter compared to the same period a year ago. North American revenues declined 39% compared to the year-ago quarter. Mediterranean revenues declined 11%, mainly due to the strengthening US dollar as global revenue levels remained relatively stable in local currency terms. Revenues from Brazil increased in the first quarter due to the ramp-up in activity from 2008 contract agreements. The decline in operating income in this segment is mainly the result of the rapid decline in US drilling activity and severe pricing pressures.
The mats and integrated services segment generated revenues of $8.9 million and an operating loss of $3.4 million for the first quarter of 2009 compared with the revenues of $21.3 million and an operating profit of $0.1 million in the year-ago quarter. The decline in revenues is mainly attributable to weakness in the Gulf Coast region as revenues in the Rocky Mountain market remained moderately stable compared to the year-ago quarter.
The environmental services segment, which is currently back in continuing operations, generated revenues of $11.5 million and operating income of $1.2 million, reflecting a 10.1% operating margin, in the first quarter of 2009, compared to the revenues of $16.3 million and operating income of $4.2 million, reflecting a 26% operating margin in the year-ago quarter. The decline in revenues in this section is mainly due to the decline in Gulf Coast rig activity, somewhat counterbalanced by changes in sales mix and price increases.
