Newpark Resources Reports Fourth Quarter 2019 Results

North America land weakness offsets international growth and record mat sales; Fourth quarter 2019 results include $0.19 per share of charges

THE WOODLANDS, Texas, Feb. 6, 2020 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) ("Newpark" or the "Company") today announced results for its fourth quarter ended December 31, 2019. Total revenues for the fourth quarter of 2019 were $189.5 million compared to $202.8 million for the third quarter of 2019 and $247.7 million for the fourth quarter of 2018. Net loss for the fourth quarter of 2019 was $17.1 million, or ($0.19) per share, compared to net loss of $1.4 million, or ($0.02) per share, for the third quarter of 2019, and net income of $10.6 million, or $0.11 per diluted share, for the fourth quarter of 2018. Fourth quarter 2019 results include the impact of the following:

  • $11.4 million of pre-tax charges for the non-cash impairment of goodwill in the Fluids Systems segment ($11.4 million after-tax), primarily attributable to the decline in drilling activities and the projection of continued softness in the U.S. land market. The impairment is preliminary and remains subject to adjustment based on finalization of the purchase price allocation associated with the fourth quarter 2019 acquisition of Cleansorb Limited;
  • $2.6 million of pre-tax charges for facility closures and related exit costs in the Fluids Systems segment ($2.1 million after-tax), attributable to certain operations in the U.S. land market as well as Brazil;
  • $2.2 million of pre-tax charges for severance and related costs ($1.8 million after-tax), including $1.1 million in the Fluids Systems segment and $1.1 million in the Corporate office; and
  • $1.9 million of pre-tax charges for write-downs of inventory in the Fluids Systems segment ($1.5 million after-tax).

Combined, the impact of the above items resulted in an $18.1 million reduction in operating income and a $16.8 million increase in net loss ($0.19 per diluted share) for the fourth quarter of 2019.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "Although the North America land market proved to be extremely challenging during the fourth quarter, I'm pleased with our swift response and continued operational execution across both segments, as well as our continued free cash flow generation.

"During the fourth quarter, revenues in the Mats and Integrated Services segment improved by 9% sequentially, driven by strong seasonal demand for product sales," added Howes. "The strength in product sales was somewhat offset by the soft conditions in the U.S. land E&P market that led to a decline in rental and service revenues, particularly in the gas-focused basins in the Northeast. In contrast, rental activities in the U.S. energy infrastructure and other non-E&P markets have remained relatively stable, contributing to the continued shift in our revenue mix away from E&P. For the fourth quarter 2019, 75% of our total Mats segment revenues were derived from non-E&P markets, including 55% of our rental and service revenues and substantially all product sales. With the impact of the higher revenues, the segment's operating margin improved to 27% in the fourth quarter of 2019.

"In Fluids, the fourth quarter results reflect a clear distinction between markets, with the challenging North America land environment overshadowing the strong results from our international business, as well as in the deepwater Gulf of Mexico," added Howes. "International revenues improved 12% sequentially, as revenues in the EMEA region benefitted from higher activity on IOC contracts, along with elevated downhole fluids losses. We also continue to gain traction in the deepwater Gulf of Mexico, where revenues improved 13% sequentially.

"The strong results in these markets reflect a stark contrast, however, to the challenges in the North America land market. Despite the improvement in the Gulf of Mexico and our first U.S. stimulation chemical revenues in the fourth quarter, our North America revenues declined 22% sequentially, including the impact of the declining rig count, budget exhaustion by several of our customers, and extended customer downtime through the holidays."

Howes added, "In light of the continued expectation of North America land market volatility, we began taking actions not only to right-size our Fluids business, but also to transition to a more variable cost structure, which we believe will better position us to navigate through market volatility going forward.  We are in the process of exiting several U.S. facilities, and also winding down operations in the Brazil market. The fourth quarter 2019 Fluids Systems results included $17 million of pre-tax charges, contributing to an $18 million operating loss during the period.

"Despite the challenging North America land market conditions, our fourth quarter results demonstrate our ability to generate consistent free cash flows through all phases of the industry cycle. Net cash provided by operating activities was $19 million and free cash flow was $17 million during the fourth quarter, bringing our full year 2019 net cash from operating activities to $72 million and free cash flow to $41 million," concluded Howes.

Segment Results

The Mats and Integrated Services segment generated revenues of $54.9 million for the fourth quarter of 2019 compared to $50.2 million for the third quarter of 2019 and $69.9 million for the fourth quarter of 2018. Segment operating income was $14.6 million for the fourth quarter of 2019 compared to $10.0 million for the third quarter of 2019 and $20.7 million for the fourth quarter of 2018.

The Fluids Systems segment generated revenues of $134.6 million for the fourth quarter of 2019 compared to $152.5 million for the third quarter of 2019 and $177.7 million for the fourth quarter of 2018. Segment operating loss was $18.1 million for the fourth quarter of 2019 compared to operating income of $5.9 million for the third quarter of 2019 and $8.2 million for the fourth quarter of 2018. Operating loss for the fourth quarter of 2019 includes an $11.4 million non-cash impairment of goodwill and a total of $5.6 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs.

Conference Call

Newpark has scheduled a conference call to discuss fourth quarter 2019 results and its near-term operational outlook, which will be broadcast live over the Internet, on Friday, February 7, 2020 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate in the call, dial 412-902-0030 and ask for the Newpark Resources call at least 10 minutes prior to the start time, or access it live over the Internet at www.newpark.com. For those who cannot listen to the live call, a replay will be available through February 21, 2020 and may be accessed by dialing 201-612-7415 and using pass code 13697893#. Also, an archive of the webcast will be available shortly after the call at www.newpark.com for 90 days.

Newpark Resources, Inc. is a worldwide provider of value-added fluids and chemistry solutions in the oilfield, and engineered worksite and access solutions used in various commercial markets. For more information, visit our website at www.newpark.com.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements other than statements of historical facts are forward-looking statements. Words such as "will," "may," "could," "would," "should," "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These statements are not guarantees that our expectations will prove to be correct 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, 2018, as well as others, could cause actual plans or results to differ materially from those expressed in, or implied by, these statements. These risk factors include, but are not limited to, risks related to the worldwide oil and natural gas industry; our customer concentration and reliance on the U.S. exploration and production market; our international operations; our ability to attract, retain and develop qualified leaders, key employees and skilled personnel; the availability of raw materials; our cost and continued availability of borrowed funds, including noncompliance with debt covenants; operating hazards present in the oil and natural gas industry and substantial liability claims, including catastrophic well incidents; our ability to execute our business strategy and make successful business acquisitions and capital investments; our market competition; our contracts that can be terminated or downsized by our customers without penalty; our product offering expansion; our compliance with legal and regulatory matters, including environmental and immigration regulations; our legal compliance; material weaknesses in our internal control over financial reporting; the inherent limitations of insurance coverage; income taxes; the potential impairments of goodwill and long-lived intangible assets; technological developments in our industry; severe weather and seasonality; cybersecurity breaches or business system disruptions; and fluctuations in the market value of our publicly traded securities. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities laws. Newpark's filings with the Securities and Exchange Commission can be obtained at no charge at www.sec.gov, as well as through our website at www.newpark.com.

Newpark Resources, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended


Twelve Months Ended

(In thousands, except per share data)

December 31,
2019


September 30,
2019


December 31,
2018


December 31,
2019


December 31,
2018

Revenues

$

189,471



$

202,763



$

247,664



$

820,119



$

946,548


Cost of revenues

162,400



169,429



197,310



684,738



766,975


Selling, general and administrative expenses

27,598



27,017



29,645



113,394



115,127


Other operating loss, net

537



29



186



170



888


Goodwill impairment

11,422







11,422




Operating income (loss)

(12,486)



6,288



20,523



10,395



63,558












Foreign currency exchange (gain) loss

(1,572)



828



822



(816)



1,416


Interest expense, net

3,562



3,628



4,205



14,369



14,864


Income (loss) before income taxes

(14,476)



1,832



15,496



(3,158)



47,278












Provision for income taxes

2,617



3,273



4,927



9,788



14,997


Net income (loss)

$

(17,093)



$

(1,441)



$

10,569



$

(12,946)



$

32,281












Calculation of EPS:










Net income (loss) - basic and diluted

$

(17,093)



$

(1,441)



$

10,569



$

(12,946)



$

32,281












Weighted average common shares outstanding - basic

89,543



89,675



90,640



89,782



89,996


Dilutive effect of stock options and restricted stock awards





1,938





2,385


Dilutive effect of 2021 Convertible Notes









544


Weighted average common shares outstanding - diluted

89,543



89,675



92,578



89,782



92,925












Net income (loss) per common share - basic:

$

(0.19)



$

(0.02)



$

0.12



$

(0.14)



$

0.36


Net income (loss) per common share - diluted:

$

(0.19)



$

(0.02)



$

0.11



$

(0.14)



$

0.35


 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)



Three Months Ended


Twelve Months Ended

(In thousands)

December 31,

 2019


September 30,

 2019


December 31,

 2018


December 31,

 2019


December 31,

 2018

Revenues










Fluids systems

$

134,573



$

152,547



$

177,726



$

620,317



$

715,813


Mats and integrated services

54,898



50,216



69,938



199,802



230,735


Total revenues

$

189,471



$

202,763



$

247,664



$

820,119



$

946,548












Operating income (loss)










Fluids systems (1)

$

(18,137)



$

5,893



$

8,245



$

3,814



$

40,337


Mats and integrated services

14,603



10,049



20,740



47,466



60,604


Corporate office (2)

(8,952)



(9,654)



(8,462)



(40,885)



(37,383)


Total operating income (loss)

$

(12,486)



$

6,288



$

20,523



$

10,395



$

63,558












Segment operating margin










Fluids systems

(13.5)

%


3.9

%


4.6

%


0.6

%


5.6

%

Mats and integrated services

26.6

%


20.0

%


29.7

%


23.8

%


26.3

%



(1)

Fluids Systems operating loss for the three months ended December 31, 2019 includes a total of $17.0 million of charges, consisting of an $11.4 million non-cash impairment of goodwill and a total of $5.6 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs. Fluids Systems operating income for the three months ended December 31, 2018 includes a total of $2.5 million of charges associated with severance costs and expenses related to the conversion of a drilling fluids facility into a completion fluids facility. Fluids Systems operating income for the twelve months ended December 31, 2019 includes a total of $18.7 million of charges, consisting of an $11.4 million non-cash impairment of goodwill and a total of $7.3 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs, as well as the modification of the Company's retirement policy. Fluids Systems operating income for the twelve months ended December 31, 2018 includes a total of $5.0 million of charges associated with severance costs, the Kenedy, Texas facility fire, and expenses related to the conversion of a drilling fluids facility into a completion fluids facility.



(2)

Corporate office operating loss for the three months ended December 31, 2019 includes a total of $1.1 million of charges associated with severance costs. Corporate office operating loss for the twelve months ended December 31, 2019 includes a total of $4.5 million of charges associated with the modification of the Company's retirement policy and severance costs. Corporate office operating loss for the twelve months ended December 31, 2018 includes a charge of $1.8 million associated with the retirement and transition of our former Senior Vice President, General Counsel and Chief Administrative Officer.

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands, except share data)

December 31,

 2019


December 31,

 2018

ASSETS




Cash and cash equivalents

$

48,672



$

56,118


Receivables, net

216,714



254,394


Inventories

196,897



196,896


Prepaid expenses and other current assets

16,526



15,904


Total current assets

478,809



523,312






Property, plant and equipment, net

310,409



316,293


Operating lease assets

32,009




Goodwill

42,332



43,832


Other intangible assets, net

29,677



25,160


Deferred tax assets

3,600



4,516


Other assets

3,243



2,741


Total assets

$

900,079



$

915,854






LIABILITIES AND STOCKHOLDERS' EQUITY




Current debt

$

6,335



$

2,522


Accounts payable

79,777



90,607


Accrued liabilities

42,750



48,797


Total current liabilities

128,862



141,926






Long-term debt, less current portion

153,538



159,225


Noncurrent operating lease liabilities

26,946




Deferred tax liabilities

34,247



37,486


Other noncurrent liabilities

7,841



7,536


Total liabilities

351,434



346,173






Common stock, $0.01 par value (200,000,000 shares authorized and 106,696,719 and 106,362,991 shares issued, respectively)

1,067



1,064


Paid-in capital

620,626



617,276


Accumulated other comprehensive loss

(67,947)



(67,673)


Retained earnings

134,119



148,802


Treasury stock, at cost (16,958,418 and 15,530,952 shares, respectively)

(139,220)



(129,788)


Total stockholders' equity

548,645



569,681


Total liabilities and stockholders' equity

$

900,079



$

915,854


 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Twelve Months Ended December 31,

(In thousands)

2019


2018

Cash flows from operating activities:




Net income (loss)

$

(12,946)



$

32,281


Adjustments to reconcile net income to net cash provided by operations:




Goodwill impairment

11,422




Depreciation and amortization

47,144



45,899


Stock-based compensation expense

11,640



10,361


Provision for deferred income taxes

(4,250)



236


Net provision for doubtful accounts

1,792



2,849


Gain on sale of assets

(10,801)



(1,821)


Gain on insurance recovery



(606)


Amortization of original issue discount and debt issuance costs

6,188



5,510


Change in assets and liabilities:




(Increase) decrease in receivables

40,182



(7,388)


(Increase) decrease in inventories

699



(30,352)


(Increase) decrease in other assets

(1,032)



1,055


Increase (decrease) in accounts payable

(8,318)



2,449


Increase (decrease) in accrued liabilities and other

(9,434)



2,930


Net cash provided by operating activities

72,286



63,403






Cash flows from investing activities:




Capital expenditures

(44,806)



(45,141)


Business acquisitions, net of cash acquired

(18,692)



(249)


Proceeds from sale of property, plant and equipment

13,734



2,612


Proceeds from insurance property claim



1,000


Refund of proceeds from sale of a business



(13,974)


Net cash used in investing activities

(49,764)



(55,752)






Cash flows from financing activities:




Borrowings on lines of credit

327,983



347,613


Payments on lines of credit

(335,613)



(352,582)


Debt issuance costs

(1,214)



(149)


Proceeds from employee stock plans

1,314



3,874


Purchases of treasury stock

(21,737)



(3,870)


  Other financing activities

(259)



601


Net cash used in financing activities

(29,526)



(4,513)






Effect of exchange rate changes on cash

(399)



(4,332)






Net decrease in cash, cash equivalents, and restricted cash

(7,403)



(1,194)


Cash, cash equivalents, and restricted cash at beginning of period

64,266



65,460


Cash, cash equivalents, and restricted cash at end of period

$

56,863



$

64,266


Newpark Resources, Inc.
Non-GAAP Reconciliations
(Unaudited)

To help understand the Company's financial performance, the Company has supplemented its financial results that it provides in accordance with generally accepted accounting principles ("GAAP") with non-GAAP financial measures. Such financial measures include earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDA Margin, Free Cash Flow, Net Debt, and the Ratio of Net Debt to Capital.

We believe these non-GAAP financial measures are frequently used by investors, securities analysts and other parties in the evaluation of our performance and liquidity with that of other companies in our industry. Management uses these measures to evaluate our operating performance, liquidity and capital structure. In addition, our incentive compensation plan measures performance based on our consolidated EBITDA, along with other factors. The methods we use to produce these non-GAAP financial measures may differ from methods used by other companies. These measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with GAAP.

EBITDA and EBITDA Margin

The following tables reconcile the Company's net income (loss) or segment operating income (loss) calculated in accordance with GAAP to the non-GAAP financial measure of EBITDA:

Consolidated

Three Months Ended


Twelve Months Ended

(In thousands)

December 31,

 2019


September 30,

 2019


December 31,

 2018


December 31,

 2019


December 31,

 2018

Net income (loss) (GAAP) (1)

$

(17,093)



$

(1,441)



$

10,569



$

(12,946)



$

32,281


Interest expense, net

3,562



3,628



4,205



14,369



14,864


Provision for income taxes

2,617



3,273



4,927



9,788



14,997


Depreciation and amortization

12,253



11,821



11,553



47,144



45,899


EBITDA (non-GAAP) (1)

$

1,339



$

17,281



$

31,254



$

58,355



$

108,041




(1)

Net loss and EBITDA for the three months ended December 31, 2019 include a total of $18.1 million of charges, consisting of an $11.4 million non-cash impairment of goodwill and a total of $6.7 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs. Net income and EBITDA for the three months ended December 31, 2018 include a total of $2.5 million of charges associated with severance costs and expenses related to the conversion of a drilling fluids facility into a completion fluids facility. Net loss and EBITDA for the twelve months ended December 31, 2019 include a total of $23.2 million of charges, consisting of an $11.4 million non-cash impairment of goodwill and a total of $11.8 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs, as well as the modification of the Company's retirement policy. Net income and EBITDA for the twelve months ended December 31, 2018 include a total of $6.8 million of charges, consisting of a corporate office charge of $1.8 million associated with the retirement of our former Senior Vice President, General Counsel and Chief Administrative Officer, as well as a total of $5.0 million of charges associated with severance costs, the Kenedy, Texas facility fire, and expenses related to the conversion of a drilling fluids facility into a completion fluids facility.

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)


Fluids Systems

Three Months Ended


Twelve Months Ended

(In thousands)

December 31,

 2019


September 30,

 2019


December 31,

 2018


December 31,

 2019


December 31,

 2018

Operating income (loss) (GAAP) (1)

$

(18,137)



$

5,893



$

8,245



$

3,814



$

40,337


Depreciation and amortization

5,691



5,234



5,137



21,202



20,922


EBITDA (non-GAAP) (1)

(12,446)



11,127



13,382



25,016



61,259


Revenues

134,573



152,547



177,726



620,317



715,813


Operating Margin (GAAP)

(13.5)

%


3.9

%


4.6

%


0.6

%


5.6

%

EBITDA Margin (non-GAAP)

(9.2)

%


7.3

%


7.5

%


4.0

%


8.6

%



(1)

Operating loss for the three months ended December 31, 2019 includes a total of $17.0 million of charges, consisting of an $11.4 million non-cash impairment of goodwill and a total of $5.6 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs. Operating income for the three months ended December 31, 2018 includes a total of $2.5 million of charges associated with severance costs and expenses related to the conversion of a drilling fluids facility into a completion fluids facility. Operating income for the twelve months ended December 31, 2019 includes $18.7 million of charges, consisting of an $11.4 million non-cash impairment of goodwill and a total of $7.3 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs, as well as the modification of the Company's retirement policy. Operating income for the twelve months ended December 31, 2018 includes a total of $5.0 million of charges associated with severance costs, the Kenedy, Texas facility fire, and expenses related to the conversion of a drilling fluids facility into a completion fluids facility.

 

Mats and Integrated Services

Three Months Ended


Twelve Months Ended

(In thousands)

December 31,

 2019


September 30,

 2019


December 31,

 2018


December 31,

 2019


December 31,

 2018

Operating income (GAAP)

$

14,603



$

10,049



$

20,740



$

47,466



$

60,604


Depreciation and amortization

5,505



5,484



5,533



21,763



21,321


EBITDA (non-GAAP)

20,108



15,533



26,273



69,229



81,925


Revenues

54,898



50,216



69,938



199,802



230,735


Operating Margin (GAAP)

26.6

%


20.0

%


29.7

%


23.8

%


26.3

%

EBITDA Margin (non-GAAP)

36.6

%


30.9

%


37.6

%


34.6

%


35.5

%

Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)

Free Cash Flow

The following table reconciles the Company's net cash provided by (used in) operating activities calculated in accordance with GAAP to the non-GAAP financial measure of the Company's free cash flow:

Consolidated

Three Months Ended


Twelve Months Ended

(In thousands)

December 31,

 2019


September 30,

 2019


December 31,

 2018


December 31,

 2019


December 31,

 2018

Net cash provided by operating activities (GAAP)

$

19,100



$

18,946



$

43,287



$

72,286



$

63,403


Capital expenditures

(9,003)



(11,937)



(12,327)



(44,806)



(45,141)


Proceeds from sale of property, plant and equipment

6,618



1,408



1,135



13,734



2,612


Free Cash Flow (non-GAAP)

$

16,715



$

8,417



$

32,095



$

41,214



$

20,874


Ratio of Net Debt to Capital

The following table reconciles the Company's ratio of total debt to capital calculated in accordance with GAAP to the non-GAAP financial measure of the Company's ratio of net debt to capital:

(In thousands)

December 31,

 2019


December 31,

 2018

Current debt

$

6,335



$

2,522


Long-term debt, less current portion

153,538



159,225


Total Debt

159,873



161,747


Total stockholders' equity

548,645



569,681


Total Capital

$

708,518



$

731,428






Ratio of Total Debt to Capital

22.6

%


22.1

%





Total Debt

$

159,873



$

161,747


Less: cash and cash equivalents

(48,672)



(56,118)


Net Debt

111,201



105,629


Total stockholders' equity

548,645



569,681


Total Capital, Net of Cash

$

659,846



$

675,310






Ratio of Net Debt to Capital

16.9

%


15.6

%

 

Cision View original content:http://www.prnewswire.com/news-releases/newpark-resources-reports-fourth-quarter-2019-results-301000621.html

SOURCE Newpark Resources, Inc.

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