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These forward-looking statements reflect the current views of the management of Newpark Resources, Inc.; however, various risks, uncertainties and contingencies could cause actual operating results to differ materially from those in the forward-looking statements.

These risks, uncertainties and contingencies are detailed in filings with the Securities and Exchange Commission made by the company, including, without limitation, its quarterly report on Form 10-Q and its annual report on Form 10-K.

Newpark Resources, Inc. undertakes no obligations to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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Newpark Resources Reports Second Quarter 2020 Results

Newpark Resources Reports Second Quarter 2020 Results

August 3, 2020 at 4:15 PM EDT
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

%

 

 

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SOURCE Newpark Resources, Inc.