Newpark Resources Reports Third Quarter 2020 Results

THE WOODLANDS, Texas, Nov. 3, 2020 /PRNewswire/ -- Newpark Resources, Inc. NR ("Newpark" or the "Company") today announced results for its third quarter ended September 30, 2020. Total revenues for the third quarter of 2020 were $96.4 million compared to $101.9 million for the second quarter of 2020 and $202.8 million for the third quarter of 2019. Net loss for the third quarter of 2020 was $23.9 million, or ($0.26) per share, compared to net loss of $26.2 million, or ($0.29) per share, for the second quarter of 2020, and net loss of $1.4 million, or ($0.02) per share, for the third quarter of 2019.

Third quarter 2020 operating results include the impact of $4.7 million of pre-tax charges primarily reflecting the impairment of certain fixed assets and other non-cash charges, substantially all in the Fluids Systems segment ($3.9 million after-tax). Second quarter 2020 operating results include the impact of $11.9 million of pre-tax charges primarily reflecting inventory write-downs, severance charges, and facility exit costs in the Fluids Systems segment, and a total increase to net loss of $8.2 million after-tax, inclusive of a gain on extinguishment of debt. See table on Page 5 for additional details.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "I remain extremely proud of the performance of our entire organization, as we've navigated through the combination of the oil & gas industry dislocation, as well as the prolonged COVID-related headwinds. Adding to these market headwinds, the third quarter was also impacted by the most active hurricane year in the last decade, which caused repeated work stoppages in the Gulf of Mexico. Despite these challenging conditions, we've continued to execute the playbook laid out earlier this year, pulling the required levers to maintain positive free cash flow and reduce our debt while right-sizing our cost structure in Fluids Systems.  

"Free Cash Flow generation and debt reduction remain our highest priority, and I'm extremely pleased with our performance on this front. During the third quarter, we generated $15 million of cash from operations and reduced our total debt balance by $34 million, as we continue to harvest our working capital investments and right-size our business to the lower activity level. With the strong cash flow generation over the past two quarters, our year-to-date cash from operations is $40 million, yielding Free Cash Flow of $36 million, which combined with our foreign cash repatriation, provided for a $65 million reduction in our total outstanding debt since the beginning of the year," added Howes. 

"Our Fluids Systems segment posted third quarter 2020 revenues of $68 million, reflecting a 9% sequential decline. The decline was primarily driven by extensive weather-related disruptions in the Gulf of Mexico, which caused revenues in the region to decline by nearly 50% to $7 million. In contrast with the 35% sequential decline in the North American rig count during the third quarter, our U.S. land revenues began to recover following the trough in the second quarter, with revenues increasing 8% to $30 million in the third quarter, benefitting from our expanding market share and an increase in customer activity per rig. Also, following the repositioning of our chemical blending facility, revenues from the start-up of industrial cleaning product manufacturing contributed nearly $3 million of revenue in the third quarter, as production continues to ramp up. Internationally, activity in key markets within the Middle East and North Africa was negatively impacted by increased travel and operating restrictions imposed in response to a surge in COVID outbreaks, leading to a 12% sequential reduction in our international Fluids revenues to $25 million for the third quarter. The Fluids operating loss in the third quarter was $19.0 million, which includes $4.5 million of charges. Despite realizing meaningful impact from our cost actions, the elevated operating loss primarily reflects the impact of lower revenue and cost inefficiencies driven by the unplanned activity interruptions in the Gulf of Mexico and the EMEA region, the start-up of cleaning product manufacturing, as well as our ongoing efforts to rationalize inventories."

Howes continued, "In Mats and Integrated Services, despite COVID continuing to drive delays in the timing of planned customer projects, revenues improved 5% sequentially to $29 million in the third quarter, driven by improvements in rental and services, as well as product sales. While U.S. E&P customer activity continued to soften, we experienced a late third quarter surge in worksite access demand along the Gulf Coast to support repairs to electrical infrastructure damaged by the recent hurricanes, with these projects continuing into the fourth quarter. Operating income in the third quarter was negatively impacted by our previously announced decision to reduce production at our mats manufacturing facility, a weaker revenue mix, and elevated costs to mobilize assets and resources to respond to the hurricane-driven demand.

"Following the challenging market environment in the third quarter, we expect conditions to be more constructive in the fourth quarter, with operating results benefitting from an anticipated rebound in the Gulf of Mexico, continued momentum in North American land markets resulting from the recent increase in rig counts, improvement in the international markets, as well as fourth quarter seasonal strength in product sales within Mats and Integrated Services," concluded Howes.

Segment Results

The Fluids Systems segment generated revenues of $67.7 million for the third quarter of 2020 compared to $74.7 million for the second quarter of 2020 and $152.5 million for the third quarter of 2019. Segment operating loss was $19.0 million for the third quarter of 2020 compared to an operating loss of $25.1 million for the second quarter of 2020 and operating income of $5.9 million for the third quarter of 2019. Operating loss for the third quarter of 2020 includes $4.5 million of charges primarily for the impairment of certain fixed assets and other non-cash charges. Operating loss for the second quarter of 2020 includes a total of $11.7 million of charges associated with inventory write-downs, severance costs, and facility exit costs.

The Mats and Integrated Services segment generated revenues of $28.7 million for the third quarter of 2020 compared to $27.3 million for the second quarter of 2020 and $50.2 million for the third quarter of 2019. Segment operating loss was $0.1 million for the third quarter of 2020 compared to operating income of $1.0 million for the second quarter of 2020 and operating income of $10.0 million for the third quarter of 2019.

Conference Call

Newpark has scheduled a conference call to discuss third quarter of 2020 results and its near-term operational outlook, which will be broadcast live over the Internet, on Wednesday, November 4, 2020 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate in the call, dial 412-902-0030 and ask for the Newpark Resources call at least 10 minutes prior to the start time, or access it live over the Internet at www.newpark.com. For those who cannot listen to the live call, a replay will be available through November 18, 2020 and may be accessed by dialing 201-612-7415 and using pass code 13710665#. Also, an archive of the webcast will be available shortly after the call at www.newpark.com for 90 days.

Newpark Resources, Inc. is a worldwide provider of value-added fluids and chemistry solutions in the oilfield, and engineered worksite and access solutions used in various commercial markets. For more information, visit our website at www.newpark.com.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements other than statements of historical facts are forward-looking statements. Words such as "will," "may," "could," "would," "should," "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These statements are not guarantees that our expectations will prove to be correct and involve a number of risks, uncertainties, and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Newpark, particularly its Annual Report on Form 10-K for the year ended December 31, 2019, and its Quarterly Reports on Form 10-Q as well as others, could cause actual plans or results to differ materially from those expressed in, or implied by, these statements. These risk factors include, but are not limited to, risks related to the COVID-19 pandemic; the worldwide oil and natural gas industry; our customer concentration and reliance on the U.S. exploration and production market; our international operations; our ability to attract, retain and develop qualified leaders, key employees and skilled personnel; the availability of raw materials; our cost and continued availability of borrowed funds, including noncompliance with debt covenants; operating hazards present in the oil and natural gas industry and substantial liability claims, including catastrophic well incidents; our ability to execute our business strategy and make successful business acquisitions and capital investments; our market competition; our contracts that can be terminated or downsized by our customers without penalty; our product offering expansion; our compliance with environmental laws and regulations; our legal compliance; the inherent limitations of insurance coverage; income taxes; the potential impairments of goodwill and long-lived intangible assets; technological developments and intellectual property in our industry; severe weather, natural disasters, and seasonality; cybersecurity breaches or business system disruptions; and fluctuations in the market value of our publicly traded securities, including our ability to maintain compliance with the New York Stock Exchange's continued listing requirements. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities laws. Newpark's filings with the Securities and Exchange Commission can be obtained at no charge at www.sec.gov, as well as through our website at www.newpark.com.

Contacts: 

Gregg Piontek



Senior Vice President and Chief Financial Officer



Newpark Resources, Inc.



gpiontek@newpark.com



281-362-6800

 

Newpark Resources, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)





Three Months Ended



Nine Months Ended

(In thousands, except per share data)

September

30,

2020



June 30,

2020



September

30,

2019



September

30,

2020



September

30,

2019

Revenues

$

96,424





$

101,946





$

202,763





$

362,920





$

630,648



Cost of revenues

99,301





112,290





169,429





357,675





522,338



Selling, general and administrative expenses

20,597





20,937





27,017





66,230





85,796



Other operating (income) loss, net

(820)





(742)





29





(1,906)





(367)



Impairments

3,038













3,038







Operating income (loss)

(25,692)





(30,539)





6,288





(62,117)





22,881























Foreign currency exchange loss

580





781





828





3,343





756



Interest expense, net

2,411





2,912





3,628





8,524





10,807



Gain on extinguishment of debt





(1,334)









(419)







Income (loss) before income taxes

(28,683)





(32,898)





1,832





(73,565)





11,318























Provision (benefit) for income taxes

(4,813)





(6,654)





3,273





(11,303)





7,171



Net income (loss)

$

(23,870)





$

(26,244)





$

(1,441)





$

(62,262)





$

4,147























Calculation of EPS:



















Net income (loss) - basic and diluted

$

(23,870)





$

(26,244)





$

(1,441)





$

(62,262)





$

4,147























Weighted average common shares outstanding - basic

90,535





89,981





89,675





90,056





89,863



Dilutive effect of stock options and restricted stock awards

















1,676



Dilutive effect of Convertible Notes



















Weighted average common shares outstanding - diluted

90,535





89,981





89,675





90,056





91,539























Net income (loss) per common share - basic:

$

(0.26)





$

(0.29)





$

(0.02)





$

(0.69)





$

0.05



Net income (loss) per common share - diluted:

$

(0.26)





$

(0.29)





$

(0.02)





$

(0.69)





$

0.05



 

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)





Three Months Ended



Nine Months Ended

(In thousands)

September

30,


2020



June 30,

2020



September

30,


2019



September

30,


2020



September

30,


2019

Revenues



















Fluids systems

$

67,711





$

74,662





$

152,547





$

275,178





$

485,744



Mats and integrated services

28,713





27,284





50,216





87,742





144,904



Total revenues

$

96,424





$

101,946





$

202,763





$

362,920





$

630,648























Operating income (loss) (1)



















Fluids systems

$

(18,957)





$

(25,059)





$

5,893





$

(46,284)





$

21,951



Mats and integrated services

(139)





1,005





10,049





3,928





32,863



Corporate office

(6,596)





(6,485)





(9,654)





(19,761)





(31,933)



Total operating income (loss)

$

(25,692)





$

(30,539)





$

6,288





$

(62,117)





$

22,881























Segment operating margin



















Fluids systems

(28.0)

%



(33.6)

%



3.9

%



(16.8)

%



4.5

%

Mats and integrated services

(0.5)

%



3.7

%



20.0

%



4.5

%



22.7

%



(1)  See table below for charges included.



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



Consolidated

Three Months Ended



Nine Months Ended

(In thousands)

September

30,


2020



June 30,

2020



September

30,


2019



September

30,


2020



September

30,


2019

Inventory write-downs

$

990





$

8,269





$





$

9,986





$



Severance costs

351





2,824





284





3,872





1,152



Property, plant and equipment impairments

3,038













3,038







Facility exit costs and other

286





800









1,086







Modification of retirement policy

















3,953





$

4,665





$

11,893





$

284





$

17,982





$

5,105





Fluids Systems

Three Months Ended



Nine Months Ended

(In thousands)

September

30,


2020



June 30,

2020



September

30,


2019



September

30,


2020



September

30,


2019

Inventory write-downs

$

990





$

8,269





$





$

9,986





$



Severance costs

189





2,593





284





3,288





1,152



Property, plant and equipment impairments

3,038













3,038







Facility exit costs and other

286





800









1,086







Modification of retirement policy

















605





$

4,503





$

11,662





$

284





$

17,398





$

1,757



 

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



(In thousands, except share data)

September 30,

2020



December 31,

2019

ASSETS







Cash and cash equivalents

$

24,028





$

48,672



Receivables, net

127,957





216,714



Inventories

159,567





196,897



Prepaid expenses and other current assets

17,327





16,526



Total current assets

328,879





478,809











Property, plant and equipment, net

287,332





310,409



Operating lease assets

32,306





32,009



Goodwill

42,234





42,332



Other intangible assets, net

26,103





29,677



Deferred tax assets

3,264





3,600



Other assets

2,927





3,243



Total assets

$

723,045





$

900,079











LIABILITIES AND STOCKHOLDERS' EQUITY







Current debt

$

10,149





$

6,335



Accounts payable

44,013





79,777



Accrued liabilities

35,923





42,750



Total current liabilities

90,085





128,862











Long-term debt, less current portion

92,206





153,538



Noncurrent operating lease liabilities

26,371





26,946



Deferred tax liabilities

14,513





34,247



Other noncurrent liabilities

10,787





7,841



Total liabilities

233,962





351,434











Common stock, $0.01 par value (200,000,000 shares authorized and 107,587,786 and 106,696,719 shares issued, respectively)

1,076





1,067



Paid-in capital

625,328





620,626



Accumulated other comprehensive loss

(69,847)





(67,947)



Retained earnings

69,422





134,119



Treasury stock, at cost (16,786,446 and 16,958,418 shares, respectively)

(136,896)





(139,220)



Total stockholders' equity

489,083





548,645



Total liabilities and stockholders' equity

$

723,045





$

900,079



 

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)





Nine Months Ended September

30,

(In thousands)

2020



2019

Cash flows from operating activities:







Net income (loss)

$

(62,262)





$

4,147



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







Impairments and other non-cash charges

13,024







Depreciation and amortization

34,186





34,891



Stock-based compensation expense

4,869





9,375



Provision for deferred income taxes

(19,023)





(787)



Credit loss expense

1,304





1,044



Gain on sale of assets

(2,916)





(5,779)



Gain on extinguishment of debt

(419)







Amortization of original issue discount and debt issuance costs

3,962





4,589



Change in assets and liabilities:







  Decrease in receivables

77,004





17,065



  Decrease in inventories

26,566





11,873



  Increase in other assets

(2,912)





(3,621)



  Decrease in accounts payable

(34,606)





(11,806)



  Increase (decrease) in accrued liabilities and other

1,516





(7,805)



Net cash provided by operating activities

40,293





53,186











Cash flows from investing activities:







Capital expenditures

(14,609)





(35,803)



Proceeds from sale of property, plant and equipment

10,497





7,116



Net cash used in investing activities

(4,112)





(28,687)











Cash flows from financing activities:







Borrowings on lines of credit

147,987





237,093



Payments on lines of credit

(180,440)





(242,263)



Purchases of Convertible Notes

(29,124)







Debt issuance costs





(1,214)



Proceeds from employee stock plans





1,236



Purchases of treasury stock

(332)





(21,678)



  Other financing activities

1,029





1,336



Net cash used in financing activities

(60,880)





(25,490)











Effect of exchange rate changes on cash

(1,810)





(1,526)











Net decrease in cash, cash equivalents, and restricted cash

(26,509)





(2,517)



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

56,863





64,266



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

$

30,354





$

61,749



 

Newpark Resources, Inc.

Non-GAAP Reconciliations

(Unaudited)

To help understand the Company's financial performance, the Company has supplemented its financial results that it provides in accordance with generally accepted accounting principles ("GAAP") with non-GAAP financial measures. Such financial measures include earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDA Margin, Free Cash Flow, Net Debt, and the Ratio of Net Debt to Capital.

We believe these non-GAAP financial measures are frequently used by investors, securities analysts and other parties in the evaluation of our performance and liquidity with that of other companies in our industry. Management uses these measures to evaluate our operating performance, liquidity and capital structure. In addition, our incentive compensation plan measures performance based on our consolidated EBITDA, along with other factors. The methods we use to produce these non-GAAP financial measures may differ from methods used by other companies. These measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with GAAP.

EBITDA and EBITDA Margin

The following tables reconcile the Company's net income (loss) or segment operating income (loss) calculated in accordance with GAAP to the non-GAAP financial measure of EBITDA:

Consolidated

Three Months Ended



Nine Months Ended

(In thousands)

September

30,


2020



June 30,

2020



September

30,


2019



September

30,


2020



September

30,


2019

Net income (loss) (GAAP) (1)

$

(23,870)





$

(26,244)





$

(1,441)





$

(62,262)





$

4,147



Interest expense, net

2,411





2,912





3,628





8,524





10,807



Provision (benefit) for income taxes

(4,813)





(6,654)





3,273





(11,303)





7,171



Depreciation and amortization

11,271





11,462





11,821





34,186





34,891



EBITDA (non-GAAP) (1)

$

(15,001)





$

(18,524)





$

17,281





$

(30,855)





$

57,016





(1)  See table above for charges included.

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)



Fluids Systems

Three Months Ended



Nine Months Ended

(In thousands)

September

30,


2020



June 30,

2020



September

30,


2019



September

30,


2020



September

30,


2019

Operating income (loss) (GAAP) (1)

$

(18,957)





$

(25,059)





$

5,893





$

(46,284)





$

21,951



Depreciation and amortization

5,227





5,225





5,234





15,686





15,511



EBITDA (non-GAAP) (1)

(13,730)





(19,834)





11,127





(30,598)





37,462



Revenues

67,711





74,662





152,547





275,178





485,744



Operating Margin (GAAP)

(28.0)

%



(33.6)

%



3.9

%



(16.8)

%



4.5

%

EBITDA Margin (non-GAAP)

(20.3)

%



(26.6)

%



7.3

%



(11.1)

%



7.7

%



(1)  See table above for charges included.



Mats and Integrated Services

Three Months Ended



Nine Months Ended

(In thousands)

September

30,


2020



June 30,

2020



September

30,


2019



September

30,


2020



September

30,


2019

Operating income (loss) (GAAP)

$

(139)





$

1,005





$

10,049





$

3,928





$

32,863



Depreciation and amortization

4,916





5,157





5,484





15,241





16,258



EBITDA (non-GAAP)

4,777





6,162





15,533





19,169





49,121



Revenues

28,713





27,284





50,216





87,742





144,904



Operating Margin (GAAP)

(0.5)

%



3.7

%



20.0

%



4.5

%



22.7

%

EBITDA Margin (non-GAAP)

16.6

%



22.6

%



30.9

%



21.8

%



33.9

%

 

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)

Free Cash Flow

The following table reconciles the Company's net cash provided by operating activities calculated in accordance with GAAP to the non-GAAP financial measure of the Company's free cash flow:

Consolidated

Three Months Ended



Nine Months Ended

(In thousands)

September

30,


2020



June 30,

2020



September

30,


2019



September

30,


2020



September

30,


2019

Net cash provided by operating activities (GAAP)

$

15,280





$

20,625





$

18,946





$

40,293





$

53,186



Capital expenditures

(3,954)





(4,006)





(11,937)





(14,609)





(35,803)



Proceeds from sale of property, plant and equipment

2,534





4,290





1,408





10,497





7,116



Free Cash Flow (non-GAAP)

$

13,860





$

20,909





$

8,417





$

36,181





$

24,499



Ratio of Net Debt to Capital

The following table reconciles the Company's ratio of total debt to capital calculated in accordance with GAAP to the non-GAAP financial measure of the Company's ratio of net debt to capital:

(In thousands)

September 30,

2020



December 31,

2019

Current debt

$

10,149





$

6,335



Long-term debt, less current portion

92,206





153,538



Total Debt

102,355





159,873



Total stockholders' equity

489,083





548,645



Total Capital

$

591,438





$

708,518











Ratio of Total Debt to Capital

17.3

%



22.6

%









Total Debt

$

102,355





$

159,873



Less: cash and cash equivalents

(24,028)





(48,672)



Net Debt

78,327





111,201



Total stockholders' equity

489,083





548,645



Total Capital, Net of Cash

$

567,410





$

659,846











Ratio of Net Debt to Capital

13.8

%



16.9

%

 

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

SOURCE Newpark Resources, Inc.

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