Newpark Resources Reports Third Quarter 2020 Results

Company Generates $15 million Cash from Operating Activities; Reduces Debt by $34 million

THE WOODLANDS, Texas, Nov. 3, 2020 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) ("Newpark" or the "Company") today announced results for its third quarter ended September 30, 2020. Total revenues for the third quarter of 2020 were $96.4 million compared to $101.9 million for the second quarter of 2020 and $202.8 million for the third quarter of 2019. Net loss for the third quarter of 2020 was $23.9 million, or ($0.26) per share, compared to net loss of $26.2 million, or ($0.29) per share, for the second quarter of 2020, and net loss of $1.4 million, or ($0.02) per share, for the third quarter of 2019.

Third quarter 2020 operating results include the impact of $4.7 million of pre-tax charges primarily reflecting the impairment of certain fixed assets and other non-cash charges, substantially all in the Fluids Systems segment ($3.9 million after-tax). Second quarter 2020 operating results include the impact of $11.9 million of pre-tax charges primarily reflecting inventory write-downs, severance charges, and facility exit costs in the Fluids Systems segment, and a total increase to net loss of $8.2 million after-tax, inclusive of a gain on extinguishment of debt. See table on Page 5 for additional details.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "I remain extremely proud of the performance of our entire organization, as we've navigated through the combination of the oil & gas industry dislocation, as well as the prolonged COVID-related headwinds. Adding to these market headwinds, the third quarter was also impacted by the most active hurricane year in the last decade, which caused repeated work stoppages in the Gulf of Mexico. Despite these challenging conditions, we've continued to execute the playbook laid out earlier this year, pulling the required levers to maintain positive free cash flow and reduce our debt while right-sizing our cost structure in Fluids Systems.  

"Free Cash Flow generation and debt reduction remain our highest priority, and I'm extremely pleased with our performance on this front. During the third quarter, we generated $15 million of cash from operations and reduced our total debt balance by $34 million, as we continue to harvest our working capital investments and right-size our business to the lower activity level. With the strong cash flow generation over the past two quarters, our year-to-date cash from operations is $40 million, yielding Free Cash Flow of $36 million, which combined with our foreign cash repatriation, provided for a $65 million reduction in our total outstanding debt since the beginning of the year," added Howes. 

"Our Fluids Systems segment posted third quarter 2020 revenues of $68 million, reflecting a 9% sequential decline. The decline was primarily driven by extensive weather-related disruptions in the Gulf of Mexico, which caused revenues in the region to decline by nearly 50% to $7 million. In contrast with the 35% sequential decline in the North American rig count during the third quarter, our U.S. land revenues began to recover following the trough in the second quarter, with revenues increasing 8% to $30 million in the third quarter, benefitting from our expanding market share and an increase in customer activity per rig. Also, following the repositioning of our chemical blending facility, revenues from the start-up of industrial cleaning product manufacturing contributed nearly $3 million of revenue in the third quarter, as production continues to ramp up. Internationally, activity in key markets within the Middle East and North Africa was negatively impacted by increased travel and operating restrictions imposed in response to a surge in COVID outbreaks, leading to a 12% sequential reduction in our international Fluids revenues to $25 million for the third quarter. The Fluids operating loss in the third quarter was $19.0 million, which includes $4.5 million of charges. Despite realizing meaningful impact from our cost actions, the elevated operating loss primarily reflects the impact of lower revenue and cost inefficiencies driven by the unplanned activity interruptions in the Gulf of Mexico and the EMEA region, the start-up of cleaning product manufacturing, as well as our ongoing efforts to rationalize inventories."

Howes continued, "In Mats and Integrated Services, despite COVID continuing to drive delays in the timing of planned customer projects, revenues improved 5% sequentially to $29 million in the third quarter, driven by improvements in rental and services, as well as product sales. While U.S. E&P customer activity continued to soften, we experienced a late third quarter surge in worksite access demand along the Gulf Coast to support repairs to electrical infrastructure damaged by the recent hurricanes, with these projects continuing into the fourth quarter. Operating income in the third quarter was negatively impacted by our previously announced decision to reduce production at our mats manufacturing facility, a weaker revenue mix, and elevated costs to mobilize assets and resources to respond to the hurricane-driven demand.

"Following the challenging market environment in the third quarter, we expect conditions to be more constructive in the fourth quarter, with operating results benefitting from an anticipated rebound in the Gulf of Mexico, continued momentum in North American land markets resulting from the recent increase in rig counts, improvement in the international markets, as well as fourth quarter seasonal strength in product sales within Mats and Integrated Services," concluded Howes.

Segment Results

The Fluids Systems segment generated revenues of $67.7 million for the third quarter of 2020 compared to $74.7 million for the second quarter of 2020 and $152.5 million for the third quarter of 2019. Segment operating loss was $19.0 million for the third quarter of 2020 compared to an operating loss of $25.1 million for the second quarter of 2020 and operating income of $5.9 million for the third quarter of 2019. Operating loss for the third quarter of 2020 includes $4.5 million of charges primarily for the impairment of certain fixed assets and other non-cash charges. Operating loss for the second quarter of 2020 includes a total of $11.7 million of charges associated with inventory write-downs, severance costs, and facility exit costs.

The Mats and Integrated Services segment generated revenues of $28.7 million for the third quarter of 2020 compared to $27.3 million for the second quarter of 2020 and $50.2 million for the third quarter of 2019. Segment operating loss was $0.1 million for the third quarter of 2020 compared to operating income of $1.0 million for the second quarter of 2020 and operating income of $10.0 million for the third quarter of 2019.

Conference Call

Newpark has scheduled a conference call to discuss third quarter of 2020 results and its near-term operational outlook, which will be broadcast live over the Internet, on Wednesday, November 4, 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 November 18, 2020 and may be accessed by dialing 201-612-7415 and using pass code 13710665#. 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, 2019, and its Quarterly Reports on Form 10-Q 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 COVID-19 pandemic; 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 environmental laws and regulations; our legal compliance; the inherent limitations of insurance coverage; income taxes; the potential impairments of goodwill and long-lived intangible assets; technological developments and intellectual property in our industry; severe weather, natural disasters, and seasonality; cybersecurity breaches or business system disruptions; and fluctuations in the market value of our publicly traded securities, including our ability to maintain compliance with the New York Stock Exchange's continued listing requirements. 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.

Contacts: 

Gregg Piontek


Senior Vice President and Chief Financial Officer


Newpark Resources, Inc.


gpiontek@newpark.com


281-362-6800

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended


Nine Months Ended

(In thousands, except per share data)

September
30,
2020


June 30,
2020


September
30,
2019


September
30,
2020


September
30,
2019

Revenues

$

96,424



$

101,946



$

202,763



$

362,920



$

630,648


Cost of revenues

99,301



112,290



169,429



357,675



522,338


Selling, general and administrative expenses

20,597



20,937



27,017



66,230



85,796


Other operating (income) loss, net

(820)



(742)



29



(1,906)



(367)


Impairments

3,038







3,038




Operating income (loss)

(25,692)



(30,539)



6,288



(62,117)



22,881












Foreign currency exchange loss

580



781



828



3,343



756


Interest expense, net

2,411



2,912



3,628



8,524



10,807


Gain on extinguishment of debt



(1,334)





(419)




Income (loss) before income taxes

(28,683)



(32,898)



1,832



(73,565)



11,318












Provision (benefit) for income taxes

(4,813)



(6,654)



3,273



(11,303)



7,171


Net income (loss)

$

(23,870)



$

(26,244)



$

(1,441)



$

(62,262)



$

4,147












Calculation of EPS:










Net income (loss) - basic and diluted

$

(23,870)



$

(26,244)



$

(1,441)



$

(62,262)



$

4,147












Weighted average common shares outstanding - basic

90,535



89,981



89,675



90,056



89,863


Dilutive effect of stock options and restricted stock awards









1,676


Dilutive effect of Convertible Notes










Weighted average common shares outstanding - diluted

90,535



89,981



89,675



90,056



91,539












Net income (loss) per common share - basic:

$

(0.26)



$

(0.29)



$

(0.02)



$

(0.69)



$

0.05


Net income (loss) per common share - diluted:

$

(0.26)



$

(0.29)



$

(0.02)



$

(0.69)



$

0.05


 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)



Three Months Ended


Nine Months Ended

(In thousands)

September
30,

2020


June 30,
2020


September
30,

2019


September
30,

2020


September
30,

2019

Revenues










Fluids systems

$

67,711



$

74,662



$

152,547



$

275,178



$

485,744


Mats and integrated services

28,713



27,284



50,216



87,742



144,904


Total revenues

$

96,424



$

101,946



$

202,763



$

362,920



$

630,648












Operating income (loss) (1)










Fluids systems

$

(18,957)



$

(25,059)



$

5,893



$

(46,284)



$

21,951


Mats and integrated services

(139)



1,005



10,049



3,928



32,863


Corporate office

(6,596)



(6,485)



(9,654)



(19,761)



(31,933)


Total operating income (loss)

$

(25,692)



$

(30,539)



$

6,288



$

(62,117)



$

22,881












Segment operating margin










Fluids systems

(28.0)

%


(33.6)

%


3.9

%


(16.8)

%


4.5

%

Mats and integrated services

(0.5)

%


3.7

%


20.0

%


4.5

%


22.7

%


(1)  See table below for charges included.


Operating results include the impact of the following pre-tax charges:


Consolidated

Three Months Ended


Nine Months Ended

(In thousands)

September
30,

2020


June 30,
2020


September
30,

2019


September
30,

2020


September
30,

2019

Inventory write-downs

$

990



$

8,269



$



$

9,986



$


Severance costs

351



2,824



284



3,872



1,152


Property, plant and equipment impairments

3,038







3,038




Facility exit costs and other

286



800





1,086




Modification of retirement policy









3,953



$

4,665



$

11,893



$

284



$

17,982



$

5,105



Fluids Systems

Three Months Ended


Nine Months Ended

(In thousands)

September
30,

2020


June 30,
2020


September
30,

2019


September
30,

2020


September
30,

2019

Inventory write-downs

$

990



$

8,269



$



$

9,986



$


Severance costs

189



2,593



284



3,288



1,152


Property, plant and equipment impairments

3,038







3,038




Facility exit costs and other

286



800





1,086




Modification of retirement policy









605



$

4,503



$

11,662



$

284



$

17,398



$

1,757


 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands, except share data)

September 30,
2020


December 31,
2019

ASSETS




Cash and cash equivalents

$

24,028



$

48,672


Receivables, net

127,957



216,714


Inventories

159,567



196,897


Prepaid expenses and other current assets

17,327



16,526


Total current assets

328,879



478,809






Property, plant and equipment, net

287,332



310,409


Operating lease assets

32,306



32,009


Goodwill

42,234



42,332


Other intangible assets, net

26,103



29,677


Deferred tax assets

3,264



3,600


Other assets

2,927



3,243


Total assets

$

723,045



$

900,079






LIABILITIES AND STOCKHOLDERS' EQUITY




Current debt

$

10,149



$

6,335


Accounts payable

44,013



79,777


Accrued liabilities

35,923



42,750


Total current liabilities

90,085



128,862






Long-term debt, less current portion

92,206



153,538


Noncurrent operating lease liabilities

26,371



26,946


Deferred tax liabilities

14,513



34,247


Other noncurrent liabilities

10,787



7,841


Total liabilities

233,962



351,434






Common stock, $0.01 par value (200,000,000 shares authorized and 107,587,786 and 106,696,719 shares issued, respectively)

1,076



1,067


Paid-in capital

625,328



620,626


Accumulated other comprehensive loss

(69,847)



(67,947)


Retained earnings

69,422



134,119


Treasury stock, at cost (16,786,446 and 16,958,418 shares, respectively)

(136,896)



(139,220)


Total stockholders' equity

489,083



548,645


Total liabilities and stockholders' equity

$

723,045



$

900,079


 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Nine Months Ended September
30,

(In thousands)

2020


2019

Cash flows from operating activities:




Net income (loss)

$

(62,262)



$

4,147


Adjustments to reconcile net income (loss) to net cash provided by operations:




Impairments and other non-cash charges

13,024




Depreciation and amortization

34,186



34,891


Stock-based compensation expense

4,869



9,375


Provision for deferred income taxes

(19,023)



(787)


Credit loss expense

1,304



1,044


Gain on sale of assets

(2,916)



(5,779)


Gain on extinguishment of debt

(419)




Amortization of original issue discount and debt issuance costs

3,962



4,589


Change in assets and liabilities:




  Decrease in receivables

77,004



17,065


  Decrease in inventories

26,566



11,873


  Increase in other assets

(2,912)



(3,621)


  Decrease in accounts payable

(34,606)



(11,806)


  Increase (decrease) in accrued liabilities and other

1,516



(7,805)


Net cash provided by operating activities

40,293



53,186






Cash flows from investing activities:




Capital expenditures

(14,609)



(35,803)


Proceeds from sale of property, plant and equipment

10,497



7,116


Net cash used in investing activities

(4,112)



(28,687)






Cash flows from financing activities:




Borrowings on lines of credit

147,987



237,093


Payments on lines of credit

(180,440)



(242,263)


Purchases of Convertible Notes

(29,124)




Debt issuance costs



(1,214)


Proceeds from employee stock plans



1,236


Purchases of treasury stock

(332)



(21,678)


  Other financing activities

1,029



1,336


Net cash used in financing activities

(60,880)



(25,490)






Effect of exchange rate changes on cash

(1,810)



(1,526)






Net decrease in cash, cash equivalents, and restricted cash

(26,509)



(2,517)


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

56,863



64,266


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

$

30,354



$

61,749


 

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


Nine Months Ended

(In thousands)

September
30,

2020


June 30,
2020


September
30,

2019


September
30,

2020


September
30,

2019

Net income (loss) (GAAP) (1)

$

(23,870)



$

(26,244)



$

(1,441)



$

(62,262)



$

4,147


Interest expense, net

2,411



2,912



3,628



8,524



10,807


Provision (benefit) for income taxes

(4,813)



(6,654)



3,273



(11,303)



7,171


Depreciation and amortization

11,271



11,462



11,821



34,186



34,891


EBITDA (non-GAAP) (1)

$

(15,001)



$

(18,524)



$

17,281



$

(30,855)



$

57,016



(1)  See table above for charges included.

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)


Fluids Systems

Three Months Ended


Nine Months Ended

(In thousands)

September
30,

2020


June 30,
2020


September
30,

2019


September
30,

2020


September
30,

2019

Operating income (loss) (GAAP) (1)

$

(18,957)



$

(25,059)



$

5,893



$

(46,284)



$

21,951


Depreciation and amortization

5,227



5,225



5,234



15,686



15,511


EBITDA (non-GAAP) (1)

(13,730)



(19,834)



11,127



(30,598)



37,462


Revenues

67,711



74,662



152,547



275,178



485,744


Operating Margin (GAAP)

(28.0)

%


(33.6)

%


3.9

%


(16.8)

%


4.5

%

EBITDA Margin (non-GAAP)

(20.3)

%


(26.6)

%


7.3

%


(11.1)

%


7.7

%


(1)  See table above for charges included.


Mats and Integrated Services

Three Months Ended


Nine Months Ended

(In thousands)

September
30,

2020


June 30,
2020


September
30,

2019


September
30,

2020


September
30,

2019

Operating income (loss) (GAAP)

$

(139)



$

1,005



$

10,049



$

3,928



$

32,863


Depreciation and amortization

4,916



5,157



5,484



15,241



16,258


EBITDA (non-GAAP)

4,777



6,162



15,533



19,169



49,121


Revenues

28,713



27,284



50,216



87,742



144,904


Operating Margin (GAAP)

(0.5)

%


3.7

%


20.0

%


4.5

%


22.7

%

EBITDA Margin (non-GAAP)

16.6

%


22.6

%


30.9

%


21.8

%


33.9

%

 

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

Free Cash Flow

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

Consolidated

Three Months Ended


Nine Months Ended

(In thousands)

September
30,

2020


June 30,
2020


September
30,

2019


September
30,

2020


September
30,

2019

Net cash provided by operating activities (GAAP)

$

15,280



$

20,625



$

18,946



$

40,293



$

53,186


Capital expenditures

(3,954)



(4,006)



(11,937)



(14,609)



(35,803)


Proceeds from sale of property, plant and equipment

2,534



4,290



1,408



10,497



7,116


Free Cash Flow (non-GAAP)

$

13,860



$

20,909



$

8,417



$

36,181



$

24,499


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)

September 30,
2020


December 31,
2019

Current debt

$

10,149



$

6,335


Long-term debt, less current portion

92,206



153,538


Total Debt

102,355



159,873


Total stockholders' equity

489,083



548,645


Total Capital

$

591,438



$

708,518






Ratio of Total Debt to Capital

17.3

%


22.6

%





Total Debt

$

102,355



$

159,873


Less: cash and cash equivalents

(24,028)



(48,672)


Net Debt

78,327



111,201


Total stockholders' equity

489,083



548,645


Total Capital, Net of Cash

$

567,410



$

659,846






Ratio of Net Debt to Capital

13.8

%


16.9

%

 

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SOURCE Newpark Resources, Inc.

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