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Newpark Resources Reports Third Quarter 2020 Results

November 3, 2020

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

THE WOODLANDS, TexasNov. 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

%

 

Cision View original content:http://www.prnewswire.com/news-releases/newpark-resources-reports-third-quarter-2020-results-301165941.html

SOURCE Newpark Resources, Inc.