PR Newswire | Nov 3, 2020 04:16PM EST

11/03 15:15 CST

Newpark Resources Reports Third Quarter 2020 ResultsCompany Generates $15 million Cash from Operating Activities; Reduces Debt by $34 million THE WOODLANDS, Texas, Nov. 3, 2020

THE WOODLANDS, Texas, Nov. 3, 2020 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: 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, September June 30, September September September except per 30, 2020 30, 30, 30, share data) 2020 2019 2020 2019

Revenues $96,424 $101,946 $202,763$362,920 $630,648

Cost of 99,301 112,290 169,429 357,675 522,338 revenues

Selling, general and 20,597 20,937 27,017 66,230 85,796 administrative expenses

Other operating (income) loss, (820) (742) 29 (1,906) (367) net

Impairments 3,038 - - 3,038 -

Operating (25,692) (30,539) 6,288 (62,117) 22,881 income (loss)



Foreign currency 580 781 828 3,343 756 exchange loss

Interest 2,411 2,912 3,628 8,524 10,807 expense, net

Gain on extinguishment - (1,334) - (419) - of debt

Income (loss) before income (28,683) (32,898) 1,832 (73,565) 11,318 taxes



Provision (benefit) for (4,813) (6,654) 3,273 (11,303) 7,171 income taxes

Net income $(23,870)$(26,244)$(1,441)$(62,262)$4,147 (loss)



Calculation of EPS:

Net income (loss) - basic $(23,870)$(26,244)$(1,441)$(62,262)$4,147 and diluted



Weighted average common shares 90,535 89,981 89,675 90,056 89,863 outstanding - basic

Dilutive effect of stock options and - - - - 1,676 restricted stock awards

Dilutive effect of Convertible - - - - - Notes

Weighted average common shares 90,535 89,981 89,675 90,056 91,539 outstanding - diluted



Net income (loss) per $(0.26) $(0.29) $(0.02) $(0.69) $0.05 common share - basic:

Net income (loss) per $(0.26) $(0.29) $(0.02) $(0.69) $0.05 common share - diluted:

Newpark Resources, Inc. Operating Segment Results (Unaudited)



Three Months Ended Nine Months Ended

(In September June 30, September September September thousands) 30, 2020 30, 30, 30, 2020 2019 2020 2019

Revenues

Fluids $67,711 $74,662 $152,547 $275,178 $485,744 systems

Mats and integrated 28,713 27,284 50,216 87,742 144,904 services

Total $96,424 $101,946 $202,763 $362,920 $630,648 revenues



Operating income (loss) ^(1)

Fluids $(18,957) $(25,059) $5,893 $(46,284) $21,951 systems

Mats and integrated (139) 1,005 10,049 3,928 32,863 services

Corporate (6,596) (6,485) (9,654) (19,761) (31,933) office

Total operating $(25,692) $(30,539) $6,288 $(62,117) $22,881 income (loss)



Segment operating margin

Fluids (28.0) %(33.6) %3.9 %(16.8) %4.5 %systems

Mats and integrated (0.5) %3.7 %20.0 %4.5 %22.7 %services



(1) See table below for charges included.



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



ConsolidatedThree Months Ended Nine Months Ended

(In September June 30, September September September thousands) 30, 2020 30, 30, 30, 2020 2019 2020 2019

Inventory $990 $8,269 $- $9,986 $- write-downs

Severance 351 2,824 284 3,872 1,152 costs

Property, plant and 3,038 - - 3,038 - equipment impairments

Facility exit costs 286 800 - 1,086 - and other

Modification of - - - - 3,953 retirement policy

$4,665 $11,893 $284 $17,982 $5,105



Fluids Three Months Ended Nine Months Ended Systems

(In September June 30, September September September thousands) 30, 2020 30, 30, 30, 2020 2019 2020 2019

Inventory $990 $8,269 $- $9,986 $- write-downs

Severance 189 2,593 284 3,288 1,152 costs

Property, plant and 3,038 - - 3,038 - equipment impairments

Facility exit costs 286 800 - 1,086 - and other

Modification of - - - - 605 retirement policy

$4,503 $11,662 $284 $17,398 $1,757

Newpark Resources, Inc. Condensed Consolidated Balance Sheets (Unaudited)



(In thousands, except share data) September 30,December 31, 2020 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 shares1,076 1,067 issued, respectively)

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 (136,896) (139,220) 16,958,418 shares, respectively)

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 3,962 4,589 issuance costs

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 1,516 (7,805) other

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 10,497 7,116 equipment

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 (26,509) (2,517) restricted cash

Cash, cash equivalents, and restricted cash at 56,863 64,266 beginning of period

Cash, cash equivalents, and restricted cash at $30,354 $61,749 end of period

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

September June 30, September September September(In thousands) 30, 2020 30, 30, 30, 2020 2019 2020 2019

Net income (loss) (GAAP) ^ $(23,870)$(26,244)$(1,441)$(62,262)$4,147 (1)

Interest 2,411 2,912 3,628 8,524 10,807 expense, net

Provision (benefit) for (4,813) (6,654) 3,273 (11,303) 7,171 income taxes

Depreciation and11,271 11,462 11,821 34,186 34,891 amortization

EBITDA $(15,001)$(18,524)$17,281 $(30,855)$57,016(non-GAAP) ^(1)



(1) See table above for charges included.

Newpark Resources, Inc. Non-GAAP Reconciliations (Continued) (Unaudited)



Fluids Three Months Ended Nine Months Ended Systems

(In September June 30, September September September thousands) 30, 2020 30, 30, 30, 2020 2019 2020 2019

Operating income $(18,957) $(25,059) $5,893 $(46,284) $21,951 (loss) (GAAP) ^(1)

Depreciation and 5,227 5,225 5,234 15,686 15,511 amortization

EBITDA (non-GAAP) ^(13,730) (19,834) 11,127 (30,598) 37,462 (1)

Revenues 67,711 74,662 152,547 275,178 485,744

Operating Margin (28.0) %(33.6) %3.9 %(16.8) %4.5 %(GAAP)

EBITDA Margin (20.3) %(26.6) %7.3 %(11.1) %7.7 %(non-GAAP)



(1) See table above for charges included.



Mats and Integrated Three Months Ended Nine Months Ended Services

(In September June 30, September September September thousands) 30, 2020 30, 30, 30, 2020 2019 2020 2019

Operating income $(139) $1,005 $10,049 $3,928 $32,863 (loss) (GAAP)

Depreciation and 4,916 5,157 5,484 15,241 16,258 amortization

EBITDA 4,777 6,162 15,533 19,169 49,121 (non-GAAP)

Revenues 28,713 27,284 50,216 87,742 144,904

Operating Margin (0.5) %3.7 %20.0 %4.5 %22.7 %(GAAP)

EBITDA Margin 16.6 %22.6 %30.9 %21.8 %33.9 %(non-GAAP)

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

SeptemberJune 30, SeptemberSeptemberSeptember(In thousands) 30, 2020 30, 30, 30, 2020 2019 2020 2019

Net cash provided by operating activities $15,280$20,625$18,946$40,293$53,186(GAAP)

Capital expenditures (3,954) (4,006) (11,937)(14,609)(35,803)

Proceeds from sale of property, plant and 2,534 4,290 1,408 10,497 7,116 equipment

Free Cash Flow $13,860$20,909$8,417 $36,181$24,499(non-GAAP)

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, December 31, 2020 2019

Current debt $ 10,149 $6,335

Long-term debt, less current portion92,206 153,538

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 %

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SOURCE Newpark Resources, Inc.