Newpark Resources Reports Second Quarter 2019 Results


Company reports second quarter cash flow from operating activities of $32 million; free cash flow of $30 million

THE WOODLANDS, Texas, July 30, 2019 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) ("Newpark" or the "Company") today announced results for its second quarter ended June 30, 2019. Total revenues for the second quarter of 2019 were $216.4 million compared to $211.5 million for the first quarter of 2019 and $236.3 million for the second quarter of 2018. Net income for the second quarter of 2019 was $4.3 million, or $0.05 per diluted share, compared to $1.3 million, or $0.01 per diluted share, for the first quarter of 2019, and $10.8 million, or $0.12 per diluted share, for the second quarter of 2018.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "Despite continued softness in the U.S. oil and gas market and the impact of Spring break-up in Canada, we are pleased to report that our global Fluids Systems revenues increased by 7% sequentially, to $173 million. U.S. Fluids revenues improved 14% sequentially, to $117 million, primarily driven by a $9 million revenue increase from the deepwater Gulf of Mexico, as our offshore market penetration efforts gain traction. Outside of North America, international Fluids revenues also rebounded nicely, increasing 14% sequentially to $50 million, driven by improvements across several key markets," added Howes. "Benefiting from the stronger revenues, operating cost efficiencies following our recent international contract transitions, as well as our continuing margin improvement initiatives in our U.S. business, Fluids Systems segment operating income improved sequentially to a 7% segment operating margin in the second quarter.

"In our Mats and Integrated Services segment, the continued slowdown in the U.S. E&P market is serving to further validate our strategic focus on penetrating key non-E&P markets. We are encouraged by the progress we are making in diversifying our business, as we re-allocate assets to support our energy infrastructure market penetration efforts, including the electrical transmission and distribution, and pipeline construction and maintenance sectors. Second quarter segment revenues declined 14% sequentially to $44 million, primarily reflecting the impact of weakness in E&P customer activity.  Meanwhile, heavy rainfalls and flooding in certain areas resulted in delays of scheduled energy infrastructure projects. Segment revenues were further impacted by delays in anticipated international direct mat sales, as deliveries shifted into the third quarter," added Howes. "In the face of the current market challenges, our mats business continues to exhibit operating discipline, delivering a 21% operating margin in the second quarter. Further, our expanding schedule of rental projects in the electrical transmission and distribution market is expected to provide a benefit to the mats business as we progress through the second half of the year and into 2020.

"Meanwhile, our consistent cash flow generation and strong balance sheet continues to differentiate Newpark from many oilfield service companies," added Howes. "During the second quarter, we continued to return excess capital through our share repurchase program, using $10 million to purchase outstanding shares and increasing our total first half 2019 purchases to two million shares."

Segment Results

The Fluids Systems segment generated revenues of $172.5 million for the second quarter of 2019 compared to $160.7 million for the first quarter of 2019 and $179.7 million for the second quarter of 2018. Segment operating income was $12.2 million for the second quarter of 2019 compared to $3.9 million for the first quarter of 2019 and $13.3 million for the second quarter of 2018.

The Mats and Integrated Services segment generated revenues of $43.9 million for the second quarter of 2019 compared to $50.8 million for the first quarter of 2019 and $56.5 million for the second quarter of 2018. Segment operating income was $9.3 million for the second quarter of 2019 compared to $13.5 million for the first quarter of 2019 and $14.9 million for the second quarter of 2018.

Conference Call

Newpark has scheduled a conference call to discuss second quarter 2019 results and its near-term operational outlook, which will be broadcast live over the Internet, on Wednesday, July 31, 2019 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 August 14, 2019 and may be accessed by dialing 201-612-7415 and using pass code 13692003#. 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 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.

Contact:

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

 

Six Months Ended

(In thousands, except per share data)

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

June 30,
2019

 

June 30,
2018

Revenues

$

216,412

   

$

211,473

   

$

236,262

   

$

427,885

   

$

463,555

 

Cost of revenues

177,933

   

174,976

   

188,480

   

352,909

   

374,935

 

Selling, general and administrative expenses

28,037

   

30,742

   

28,708

   

58,779

   

55,662

 

Other operating (income) loss, net

(472)

   

76

   

(69)

   

(396)

   

(23)

 

Operating income

10,914

   

5,679

   

19,143

   

16,593

   

32,981

 
                   

Foreign currency exchange (gain) loss

990

   

(1,062)

   

458

   

(72)

   

683

 

Interest expense, net

3,523

   

3,656

   

3,691

   

7,179

   

6,991

 

Income before income taxes

6,401

   

3,085

   

14,994

   

9,486

   

25,307

 
                   

Provision for income taxes

2,095

   

1,803

   

4,148

   

3,898

   

7,239

 

Net income

$

4,306

   

$

1,282

   

$

10,846

   

$

5,588

   

$

18,068

 
                   

Calculation of EPS:

                 

Net income - basic and diluted

$

4,306

   

$

1,282

   

$

10,846

   

$

5,588

   

$

18,068

 
                   

Weighted average common shares outstanding – basic

89,806

   

90,111

   

89,703

   

89,958

   

89,400

 

Dilutive effect of stock options and restricted stock awards

1,900

   

2,267

   

2,823

   

2,082

   

2,730

 

Dilutive effect of 2021 Convertible Notes

   

   

1,265

   

   

636

 

Weighted average common shares outstanding - diluted

91,706

   

92,378

   

93,791

   

92,040

   

92,766

 
                   

Net income per common share - basic:

$

0.05

   

$

0.01

   

$

0.12

   

$

0.06

   

$

0.20

 

Net income per common share - diluted:

$

0.05

   

$

0.01

   

$

0.12

   

$

0.06

   

$

0.19

 

 

 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)

 
 

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

June 30,
2019

 

June 30,
2018

Revenues

                 

Fluids systems

$

172,544

   

$

160,653

   

$

179,738

   

$

333,197

   

$

357,117

 

Mats and integrated services

43,868

   

50,820

   

56,524

   

94,688

   

106,438

 

Total revenues

$

216,412

   

$

211,473

   

$

236,262

   

$

427,885

   

$

463,555

 
                   

Operating income (loss) (1)

                 

Fluids systems

$

12,184

   

$

3,874

   

$

13,327

   

$

16,058

   

$

23,804

 

Mats and integrated services

9,276

   

13,538

   

14,853

   

22,814

   

26,939

 

Corporate office

(10,546)

   

(11,733)

   

(9,037)

   

(22,279)

   

(17,762)

 

Total operating income

$

10,914

   

$

5,679

   

$

19,143

   

$

16,593

   

$

32,981

 
                   

Segment operating margin

                 

Fluids systems

7.1

%

 

2.4

%

 

7.4

%

 

4.8

%

 

6.7

%

Mats and integrated services

21.1

%

 

26.6

%

 

26.3

%

 

24.1

%

 

25.3

%

   

(1)

Corporate office and Fluids Systems operating income (loss) for the three months ended March 31, 2019 includes charges of $3.4 million and $1.1 million, respectively, related to the modification of the Company's retirement policy and severance costs.

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands, except share data)

June 30,
2019

 

December 31,
2018

ASSETS

     

Cash and cash equivalents

$

49,035

   

$

56,118

 

Receivables, net

249,197

   

254,394

 

Inventories

193,464

   

196,896

 

Prepaid expenses and other current assets

23,671

   

15,904

 

Total current assets

515,367

   

523,312

 
       

Property, plant and equipment, net

316,597

   

316,293

 

Operating lease assets

27,365

   

 

Goodwill

43,889

   

43,832

 

Other intangible assets, net

23,285

   

25,160

 

Deferred tax assets

4,632

   

4,516

 

Other assets

3,363

   

2,741

 

Total assets

$

934,498

   

$

915,854

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current debt

$

5,657

   

$

2,522

 

Accounts payable

96,359

   

90,607

 

Accrued liabilities

42,205

   

48,797

 

Total current liabilities

144,221

   

141,926

 
       

Long-term debt, less current portion

156,655

   

159,225

 

Noncurrent operating lease liabilities

21,850

   

 

Deferred tax liabilities

36,936

   

37,486

 

Other noncurrent liabilities

8,707

   

7,536

 

Total liabilities

368,369

   

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

618,626

   

617,276

 

Accumulated other comprehensive loss

(67,873)

   

(67,673)

 

Retained earnings

153,395

   

148,802

 

Treasury stock, at cost (16,858,005 and 15,530,952 shares, respectively)

(139,086)

   

(129,788)

 

Total stockholders' equity

566,129

   

569,681

 

Total liabilities and stockholders' equity

$

934,498

   

$

915,854

 

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
 

Six Months Ended June 30,

(In thousands)

2019

 

2018

Cash flows from operating activities:

     

Net income

$

5,588

   

$

18,068

 

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

     

Depreciation and amortization

23,070

   

22,755

 

Stock-based compensation expense

6,874

   

4,848

 

Provision for deferred income taxes

(1,514)

   

243

 

Net provision for doubtful accounts

789

   

1,229

 

Gain on sale of assets

(5,128)

   

(371)

 

Amortization of original issue discount and debt issuance costs

2,973

   

2,643

 

Change in assets and liabilities:

     

(Increase) decrease in receivables

6,583

   

(1,185)

 

(Increase) decrease in inventories

3,868

   

(21,459)

 

Increase in other assets

(5,058)

   

(3,417)

 

Increase in accounts payable

6,207

   

6,659

 

Decrease in accrued liabilities and other

(10,012)

   

(9,326)

 

Net cash provided by operating activities

34,240

   

20,687

 
       

Cash flows from investing activities:

     

Capital expenditures

(23,866)

   

(24,458)

 

Proceeds from sale of property, plant and equipment

5,708

   

920

 

Refund of proceeds from sale of a business

   

(13,974)

 

Business acquisitions, net of cash acquired

   

(249)

 

Net cash used in investing activities

(18,158)

   

(37,761)

 
       

Cash flows from financing activities:

     

Borrowings on lines of credit

135,952

   

203,716

 

Payments on lines of credit

(141,317)

   

(171,796)

 

Debt issuance costs

(917)

   

(11)

 

Proceeds from employee stock plans

1,090

   

3,700

 

Purchases of treasury stock

(17,365)

   

(3,074)

 

 Other financing activities

2,758

   

2,515

 

Net cash provided by (used in) financing activities

(19,799)

   

35,050

 
       

Effect of exchange rate changes on cash

(125)

   

(2,926)

 
       

Net increase (decrease) in cash, cash equivalents, and restricted cash

(3,842)

   

15,050

 

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

64,266

   

65,460

 

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

$

60,424

   

$

80,510

 

 

 

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 calculated in accordance with GAAP to the non-GAAP financial measure of the Company's EBITDA:

 

Consolidated

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

June 30,
2019

 

June 30,
2018

Net income (GAAP) (1)

$

4,306

   

$

1,282

   

$

10,846

   

$

5,588

   

$

18,068

 

Interest expense, net

3,523

   

3,656

   

3,691

   

7,179

   

6,991

 

Provision for income taxes

2,095

   

1,803

   

4,148

   

3,898

   

7,239

 

Depreciation and amortization

11,632

   

11,438

   

11,484

   

23,070

   

22,755

 

EBITDA (non-GAAP) (1)

$

21,556

   

$

18,179

   

$

30,169

   

$

39,735

   

$

55,053

 
 

(1)

Net income and EBITDA for the three months ended March 31, 2019 include $4.0 million of pre-tax charges associated with the modification of the Company's retirement policy and $0.5 million related to severance costs.

 

 

Fluids Systems

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

June 30,
2019

 

June 30,
2018

Operating income (GAAP) (1)

$

12,184

   

$

3,874

   

$

13,327

   

$

16,058

   

$

23,804

 

Depreciation and amortization

5,201

   

5,076

   

5,317

   

10,277

   

10,607

 

EBITDA (non-GAAP) (1)

17,385

   

8,950

   

18,644

   

26,335

   

34,411

 

Revenues

172,544

   

160,653

   

179,738

   

333,197

   

357,117

 

Operating Margin (GAAP)

7.1

%

 

2.4

%

 

7.4

%

 

4.8

%

 

6.7

%

EBITDA Margin (non-GAAP)

10.1

%

 

5.6

%

 

10.4

%

 

7.9

%

 

9.6

%

   

(1)

Operating income and EBITDA for the three months ended March 31, 2019 include $1.1 million of pre-tax charges associated with the modification of the Company's retirement policy and severance costs.

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)

 

Mats and Integrated Services

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

June 30,
2019

 

June 30,
2018

Operating income (GAAP)

$

9,276

   

$

13,538

   

$

14,853

   

$

22,814

   

$

26,939

 

Depreciation and amortization

5,409

   

5,365

   

5,248

   

10,774

   

10,361

 

EBITDA (non-GAAP)

14,685

   

18,903

   

20,101

   

33,588

   

37,300

 

Revenues

43,868

   

50,820

   

56,524

   

94,688

   

106,438

 

Operating Margin (GAAP)

21.1

%

 

26.6

%

 

26.3

%

 

24.1

%

 

25.3

%

EBITDA Margin (non-GAAP)

33.5

%

 

37.2

%

 

35.6

%

 

35.5

%

 

35.0

%

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

 

Six Months Ended

(In thousands)

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

June 30,
2019

 

June 30,
2018

Net cash provided by operating activities (GAAP)

$

31,971

   

$

2,269

   

$

20,554

   

$

34,240

   

$

20,687

 

Capital expenditures

(6,399)

   

(17,467)

   

(13,762)

   

(23,866)

   

(24,458)

 

Proceeds from sale of property, plant and equipment

3,937

   

1,771

   

345

   

5,708

   

920

 

Free Cash Flow (non-GAAP)

$

29,509

   

$

(13,427)

   

$

7,137

   

$

16,082

   

$

(2,851)

 

 

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)

June 30,
2019

 

December 31,
2018

Current debt

$

5,657

   

$

2,522

 

Long-term debt, less current portion

156,655

   

159,225

 

Total Debt

162,312

   

161,747

 

Total stockholders' equity

566,129

   

569,681

 

Total Capital

$

728,441

   

$

731,428

 
       

Ratio of Total Debt to Capital

22.3

%

 

22.1

%

       

Total Debt

$

162,312

   

$

161,747

 

Less: cash and cash equivalents

(49,035)

   

(56,118)

 

Net Debt

113,277

   

105,629

 

Total stockholders' equity

566,129

   

569,681

 

Total Capital, Net of Cash

$

679,406

   

$

675,310

 
       

Ratio of Net Debt to Capital

16.7

%

 

15.6

%