News

Newpark Resources Reports Second Quarter 2020 Results


Company Generates $21 million Cash from Operating Activities; Reduces Debt by $27 million

THE WOODLANDS, Texas, Aug. 3, 2020 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) ("Newpark" or the "Company") today announced results for its second quarter ended June 30, 2020. Total revenues for the second quarter of 2020 were $101.9 million compared to $164.6 million for the first quarter of 2020 and $216.4 million for the second quarter of 2019. Net loss for the second quarter of 2020 was $26.2 million, or ($0.29) per share, compared to net loss of $12.1 million, or ($0.14) per share, for the first quarter of 2020, and net income of $4.3 million, or $0.05 per diluted share, for the second quarter of 2019. Second quarter 2020 results include the impact of the following:

  • $8.3 million of pre-tax charges for write-downs of inventory in the Fluids Systems segment ( $6.5 million after-tax);
  • $2.8 million of pre-tax charges for severance costs ( $2.2 million after-tax), including $2.6 million in the Fluids Systems segment and $0.2 million in the Corporate office;
  • $0.8 million of pre-tax charges for facility closures and related exit costs in the Fluids Systems segment ( $0.6 million after-tax); and
  • $1.3 million pre-tax ( $1.1 million after-tax) gain associated with the repurchase of $18.6 million of our convertible notes in the open market.

Combined, the impact of the above items resulted in a $11.9 million increase in operating loss and an $8.2 million increase in net loss ( $0.09 per share) for the second quarter of 2020.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "The COVID-related shutdowns combined with the unprecedented market collapse over the past four months is unlike anything we've experienced before. In light of these market challenges and difficult working conditions, our highest priority has remained the health and safety of our global workforce. I am extremely proud of the performance of our entire organization in recent months, as we've swiftly executed actions from our strategic playbook aimed at rightsizing our organization in markets where longer-term softness is expected, aggressively managing our working capital to drive positive free cash flow generation, while continuing to safely support our customers. The impact of COVID is proving to be longer in duration and deeper than we originally anticipated, most notably within the EMEA region of Fluids Systems, where government-imposed restrictions on movements of personnel and products, along with ongoing uncertainty regarding the timing of COVID recovery are causing activity disruptions and project delays. Mats & Integrated Services has also experienced an elevated impact from COVID in the second quarter, with our Energy Infrastructure customers seeing delays in the issuance of governmental permits as well as supply chain and logistical restrictions, resulting in delays to planned projects.

"We moved quickly to adjust our cost structure beginning in the first quarter, reducing our global workforce by 25% in the first half of the year, including a 50% reduction in the US land Fluids business. We've also continued our aggressive management of liquidity, eliminating all non-critical capital investments and driving reductions in working capital balances. Benefitting from these actions, we generated $21 million of free cash flow and reduced our total debt balance by $27 million in the second quarter," added Howes. 

"The Fluids Systems segment posted second quarter 2020 revenues of $75 million, reflecting a 44% sequential decline. With the combined impact of the oil and gas market collapse as well as COVID-related restrictions, revenues declined sharply in most major regions, with the exception of the Middle East, where revenues improved 9% sequentially. North America Fluids Systems revenues declined by $41 million sequentially, which included a $30 million reduction in US land markets and a $10 million decline in Canada. Outside of North America, revenues pulled back by $17 million sequentially to $29 million in the second quarter, reflecting a larger-than-anticipated impact from COVID restrictions combined with lower commodity prices. The impacts were felt to some extent across most of our international units, with Italy and North Africa contributing the majority of the decline. For the second quarter of 2020, 62% of Fluids Systems revenues were derived from international and offshore Gulf of Mexico markets.

Howes continued, "In the Mats and Integrated Services business, the increasing COVID disruptions led to a $6 million sequential decline in rental and service revenues in the second quarter.  Product sales increased modestly on a sequential basis to $5 million in the second quarter, although order activity continues to be negatively impacted by customer uncertainty. For the second quarter of 2020, approximately 70% of the Mats and Integrated Services revenue was derived from Energy Infrastructure and other non-E&P end-markets.

"Despite the extremely challenging market conditions, we remain committed to driving positive free cash flow generation and reducing our debt, while taking the actions necessary to position the company to emerge as a leaner organization, less dependent upon the volatile US land E&P market," concluded Howes.

Segment Results

The Fluids Systems segment generated revenues of $74.7 million for the second quarter of 2020 compared to $132.8 million for the first quarter of 2020 and $172.5 million for the second quarter of 2019. Segment operating loss was $25.1 million for the second quarter of 2020 compared to an operating loss of $2.3 million for the first quarter of 2020 and operating income of $12.2 million for the second quarter of 2019. 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. Operating loss for the first quarter of 2020 includes a total of $1.2 million of charges associated with inventory write-downs and severance costs.

The Mats and Integrated Services segment generated revenues of $27.3 million for the second quarter of 2020 compared to $31.7 million for the first quarter of 2020 and $43.9 million for the second quarter of 2019. Segment operating income was $1.0 million for the second quarter of 2020 compared to $3.1 million for the first quarter of 2020 and $9.3 million for the second quarter of 2019.

Repurchase of Convertible Notes due December 2021

During the second quarter of 2020, we repurchased $18.6 million of our Convertible Notes due December 2021 in the open market for a total cost of $15.3 million and recognized a $1.3 million gain on the extinguishment of debt. For the first half of 2020, we repurchased a total of $33.1 million of our Convertible Notes in the open market for a total cost of $29.1 million and recognized a $0.4 million gain on the extinguishment of debt.  After giving effect to these repurchases, we had $66.9 million of Convertible Notes outstanding as of June 30, 2020.

Conference Call

Newpark has scheduled a conference call to discuss second quarter of 2020 results and its near-term operational outlook, which will be broadcast live over the Internet, on Tuesday, August 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 August 18, 2020 and may be accessed by dialing 201-612-7415 and using pass code 13706909#. 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 Report on Form 10-Q filed May 6, 2020 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

 

Six Months Ended

(In thousands, except per share data)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Revenues

$

101,946

   

$

164,550

   

$

216,412

   

$

266,496

   

$

427,885

 

Cost of revenues

112,290

   

146,084

   

177,933

   

258,374

   

352,909

 

Selling, general and administrative expenses

20,937

   

24,696

   

28,037

   

45,633

   

58,779

 

Other operating income, net

(742)

   

(344)

   

(472)

   

(1,086)

   

(396)

 

Operating income (loss)

(30,539)

   

(5,886)

   

10,914

   

(36,425)

   

16,593

 
                   

Foreign currency exchange (gain) loss

781

   

1,982

   

990

   

2,763

   

(72)

 

Interest expense, net

2,912

   

3,201

   

3,523

   

6,113

   

7,179

 

(Gain) loss on extinguishment of debt

(1,334)

   

915

   

   

(419)

   

 

Income (loss) before income taxes

(32,898)

   

(11,984)

   

6,401

   

(44,882)

   

9,486

 
                   

Provision (benefit) for income taxes

(6,654)

   

164

   

2,095

   

(6,490)

   

3,898

 

Net income (loss)

$

(26,244)

   

$

(12,148)

   

$

4,306

   

$

(38,392)

   

$

5,588

 
                   

Calculation of EPS:

                 

Net income (loss) - basic and diluted

$

(26,244)

   

$

(12,148)

   

$

4,306

   

$

(38,392)

   

$

5,588

 
                   

Weighted average common shares outstanding
- basic

89,981

   

89,645

   

89,806

   

89,813

   

89,958

 

Dilutive effect of stock options and
restricted stock awards

   

   

1,900

   

   

2,082

 

Dilutive effect of Convertible Notes

   

   

   

   

 

Weighted average common shares outstanding
- diluted

89,981

   

89,645

   

91,706

   

89,813

   

92,040

 
                   

Net income (loss) per common share - basic:

$

(0.29)

   

$

(0.14)

   

$

0.05

   

$

(0.43)

   

$

0.06

 

Net income (loss) per common share - diluted:

$

(0.29)

   

$

(0.14)

   

$

0.05

   

$

(0.43)

   

$

0.06

 

 

 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)

 
 

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Revenues

                 

Fluids systems

$

74,662

   

$

132,805

   

$

172,544

   

$

207,467

   

$

333,197

 

Mats and integrated services

27,284

   

31,745

   

43,868

   

59,029

   

94,688

 

Total revenues

$

101,946

   

$

164,550

   

$

216,412

   

$

266,496

   

$

427,885

 
                   

Operating income (loss) (1)

                 

Fluids systems

$

(25,059)

   

$

(2,268)

   

$

12,184

   

$

(27,327)

   

$

16,058

 

Mats and integrated services

1,005

   

3,062

   

9,276

   

4,067

   

22,814

 

Corporate office

(6,485)

   

(6,680)

   

(10,546)

   

(13,165)

   

(22,279)

 

Total operating income (loss)

$

(30,539)

   

$

(5,886)

   

$

10,914

   

$

(36,425)

   

$

16,593

 
                   

Segment operating margin

                 

Fluids systems

(33.6)

%

 

(1.7)

%

 

7.1

%

 

(13.2)

%

 

4.8

%

Mats and integrated services

3.7

%

 

9.6

%

 

21.1

%

 

6.9

%

 

24.1

%

      (1)  See table below for charges included.

 

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

 

Consolidated

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Inventory write-downs

$

8,269

   

$

727

   

$

   

$

8,996

   

$

 

Severance costs

2,824

   

697

   

333

   

3,521

   

868

 

Facility closures and related exit costs

800

   

   

   

800

   

 

Modification of retirement policy

   

   

   

   

3,953

 
 

$

11,893

   

$

1,424

   

$

333

   

$

13,317

   

$

4,821

 
 

Fluids Systems

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Inventory write-downs

$

8,269

   

$

727

   

$

   

$

8,996

   

$

 

Severance costs

2,593

   

506

   

333

   

3,099

   

868

 

Facility closures and related exit costs

800

   

   

   

800

   

 

Modification of retirement policy

   

   

   

   

605

 
 

$

11,662

   

$

1,233

   

$

333

   

$

12,895

   

$

1,473

 

 

 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands, except share data)

June 30,
2020

 

December 31,
2019

ASSETS

     

Cash and cash equivalents

$

42,942

   

$

48,672

 

Receivables, net

139,627

   

216,714

 

Inventories

177,973

   

196,897

 

Prepaid expenses and other current assets

20,657

   

16,526

 

Total current assets

381,199

   

478,809

 
       

Property, plant and equipment, net

297,234

   

310,409

 

Operating lease assets

33,524

   

32,009

 

Goodwill

42,094

   

42,332

 

Other intangible assets, net

26,907

   

29,677

 

Deferred tax assets

3,047

   

3,600

 

Other assets

3,040

   

3,243

 

Total assets

$

787,045

   

$

900,079

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current debt

$

10,519

   

$

6,335

 

Accounts payable

52,364

   

79,777

 

Accrued liabilities

33,261

   

42,750

 

Total current liabilities

96,144

   

128,862

 
       

Long-term debt, less current portion

125,291

   

153,538

 

Noncurrent operating lease liabilities

27,392

   

26,946

 

Deferred tax liabilities

21,875

   

34,247

 

Other noncurrent liabilities

8,906

   

7,841

 

Total liabilities

279,608

   

351,434

 
       

Common stock, $0.01 par value (200,000,000 shares authorized and 107,429,802
and 106,696,719 shares issued, respectively)

1,074

   

1,067

 

Paid-in capital

623,269

   

620,626

 

Accumulated other comprehensive loss

(73,308)

   

(67,947)

 

Retained earnings

93,292

   

134,119

 

Treasury stock, at cost (16,784,471 and 16,958,418 shares, respectively)

(136,890)

   

(139,220)

 

Total stockholders' equity

507,437

   

548,645

 

Total liabilities and stockholders' equity

$

787,045

   

$

900,079

 

 

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
 

Six Months Ended June 30,

(In thousands)

2020

 

2019

Cash flows from operating activities:

     

Net income (loss)

$

(38,392)

   

$

5,588

 

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

     

Inventory impairments

8,996

   

 

Depreciation and amortization

22,915

   

23,070

 

Stock-based compensation expense

3,077

   

6,874

 

Provision for deferred income taxes

(11,418)

   

(1,514)

 

Credit loss expense

726

   

789

 

Gain on sale of assets

(2,163)

   

(5,128)

 

Gain on extinguishment of debt

(419)

   

 

Amortization of original issue discount and debt issuance costs

2,801

   

2,973

 

Change in assets and liabilities:

     

  Decrease in receivables

66,510

   

6,583

 

  Decrease in inventories

7,512

   

3,868

 

  Increase in other assets

(5,294)

   

(5,058)

 

  Increase (decrease) in accounts payable

(26,577)

   

6,207

 

  Decrease in accrued liabilities and other

(3,261)

   

(10,012)

 

Net cash provided by operating activities

25,013

   

34,240

 
       

Cash flows from investing activities:

     

Capital expenditures

(10,655)

   

(23,866)

 

Proceeds from sale of property, plant and equipment

7,963

   

5,708

 

Net cash used in investing activities

(2,692)

   

(18,158)

 
       

Cash flows from financing activities:

     

Borrowings on lines of credit

117,068

   

135,952

 

Payments on lines of credit

(116,207)

   

(141,317)

 

Purchases of Convertible Notes

(29,124)

   

 

Debt issuance costs

   

(917)

 

Proceeds from employee stock plans

   

1,090

 

Purchases of treasury stock

(326)

   

(17,365)

 

  Other financing activities

2,480

   

2,758

 

Net cash used in financing activities

(26,109)

   

(19,799)

 
       

Effect of exchange rate changes on cash

(2,713)

   

(125)

 
       

Net decrease in cash, cash equivalents, and restricted cash

(6,501)

   

(3,842)

 

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

56,863

   

64,266

 

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

$

50,362

   

$

60,424

 

 

 

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

 

Six Months Ended

(In thousands)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Net income (loss) (GAAP) (1)

$

(26,244)

   

$

(12,148)

   

$

4,306

   

$

(38,392)

   

$

5,588

 

Interest expense, net

2,912

   

3,201

   

3,523

   

6,113

   

7,179

 

Provision (benefit) for income taxes

(6,654)

   

164

   

2,095

   

(6,490)

   

3,898

 

Depreciation and amortization

11,462

   

11,453

   

11,632

   

22,915

   

23,070

 

EBITDA (non-GAAP) (1)

$

(18,524)

   

$

2,670

   

$

21,556

   

$

(15,854)

   

$

39,735

 

      (1)  See table above for charges included.

 

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)

 

Fluids Systems

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Operating income (loss) (GAAP) (1)

$

(25,059)

   

$

(2,268)

   

$

12,184

   

$

(27,327)

   

$

16,058

 

Depreciation and amortization

5,225

   

5,234

   

5,201

   

10,459

   

10,277

 

EBITDA (non-GAAP) (1)

(19,834)

   

2,966

   

17,385

   

(16,868)

   

26,335

 

Revenues

74,662

   

132,805

   

172,544

   

207,467

   

333,197

 

Operating Margin (GAAP)

(33.6)

%

 

(1.7)

%

 

7.1

%

 

(13.2)

%

 

4.8

%

EBITDA Margin (non-GAAP)

(26.6)

%

 

2.2

%

 

10.1

%

 

(8.1)

%

 

7.9

%

      (1)  See table above for charges included.

 

Mats and Integrated Services

Three Months Ended

 

Six Months Ended

(In thousands)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Operating income (GAAP)

$

1,005

   

$

3,062

   

$

9,276

   

$

4,067

   

$

22,814

 

Depreciation and amortization

5,157

   

5,168

   

5,409

   

10,325

   

10,774

 

EBITDA (non-GAAP)

6,162

   

8,230

   

14,685

   

14,392

   

33,588

 

Revenues

27,284

   

31,745

   

43,868

   

59,029

   

94,688

 

Operating Margin (GAAP)

3.7

%

 

9.6

%

 

21.1

%

 

6.9

%

 

24.1

%

EBITDA Margin (non-GAAP)

22.6

%

 

25.9

%

 

33.5

%

 

24.4

%

 

35.5

%

 

 

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

 

Six Months Ended

(In thousands)

June 30,
2020

 

March 31,
2020

 

June 30,
2019

 

June 30,
2020

 

June 30,
2019

Net cash provided by operating activities
(GAAP)

$

20,625

   

$

4,388

   

$

31,971

   

$

25,013

   

$

34,240

 

Capital expenditures

(4,006)

   

(6,649)

   

(6,399)

   

(10,655)

   

(23,866)

 

Proceeds from sale of property, plant and
equipment

4,290

   

3,673

   

3,937

   

7,963

   

5,708

 

Free Cash Flow (non-GAAP)

$

20,909

   

$

1,412

   

$

29,509

   

$

22,321

   

$

16,082

 

 

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,
2020

 

December 31,
2019

Current debt

$

10,519

   

$

6,335

 

Long-term debt, less current portion                                                                                

125,291

   

153,538

 

Total Debt

135,810

   

159,873

 

Total stockholders' equity

507,437

   

548,645

 

Total Capital

$

643,247

   

$

708,518

 
       

Ratio of Total Debt to Capital

21.1

%

 

22.6

%

       

Total Debt

$

135,810

   

$

159,873

 

Less: cash and cash equivalents

(42,942)

   

(48,672)

 

Net Debt

92,868

   

111,201

 

Total stockholders' equity

507,437

   

548,645

 

Total Capital, Net of Cash

$

600,305

   

$

659,846

 
       

Ratio of Net Debt to Capital

15.5

%

 

16.9

%

  SOURCE Newpark Resources, Inc.