UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 2020
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| | ||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
Registrant's telephone number, including area code: (281 ) 362-6800
| Not Applicable | ||
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 3, 2020, Newpark Resources, Inc. (the “Company”) issued a press release announcing financial information for the three and six months ended June 30, 2020. The press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
The information in Item 2.02 of this Current Report on Form 8-K and the information in the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.
Use of Non-GAAP Financial Information
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. Applicable reconciliations to the nearest GAAP financial measure of each non-GAAP financial measure are included in the attached Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NEWPARK RESOURCES, INC. | |||||||||||
| (Registrant) | |||||||||||
| Date: | August 3, 2020 | By: | /s/ Gregg S. Piontek | ||||||||
| Gregg S. Piontek | |||||||||||
| Senior Vice President and Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
Exhibit 99.1
 | NEWS RELEASE | ||||||||||
| Contacts: | Gregg Piontek Senior Vice President and Chief Financial Officer Newpark Resources, Inc. gpiontek@newpark.com 281-362-6800 | ||||||||||
| FOR IMMEDIATE RELEASE | |||||||||||
NEWPARK RESOURCES REPORTS SECOND QUARTER 2020 RESULTS
Company Generates $21 million Cash from Operating Activities; Reduces Debt by $27 million
THE WOODLANDS, TX – August 3, 2020 – 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.
1
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.
2
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.
3
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 | |||||||||||||||||||
4
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 | ||||||||||||||||||||
5
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 | |||||||
6
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 | |||||||
7
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.
8
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 | % | |||||||||||||||||||
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 | 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 | % | |||||||
###
10