Newpark Resources Reports Fourth Quarter 2019 Results
THE WOODLANDS, Texas, Feb. 6, 2020 /PRNewswire/ -- Newpark Resources, Inc. (NYSE: NR) ("Newpark" or the "Company") today announced results for its fourth quarter ended December 31, 2019. Total revenues for the fourth quarter of 2019 were $189.5 million compared to $202.8 million for the third quarter of 2019 and $247.7 million for the fourth quarter of 2018. Net loss for the fourth quarter of 2019 was $17.1 million, or ($0.19) per share, compared to net loss of $1.4 million, or ($0.02) per share, for the third quarter of 2019, and net income of $10.6 million, or $0.11 per diluted share, for the fourth quarter of 2018. Fourth quarter 2019 results include the impact of the following:
-- $11.4 million of pre-tax charges for the non-cash impairment of goodwill
in the Fluids Systems segment ($11.4 million after-tax), primarily
attributable to the decline in drilling activities and the projection of
continued softness in the U.S. land market. The impairment is
preliminary and remains subject to adjustment based on finalization of
the purchase price allocation associated with the fourth quarter 2019
acquisition of Cleansorb Limited;
-- $2.6 million of pre-tax charges for facility closures and related exit
costs in the Fluids Systems segment ($2.1 million after-tax),
attributable to certain operations in the U.S. land market as well as
Brazil;
-- $2.2 million of pre-tax charges for severance and related costs ($1.8
million after-tax), including $1.1 million in the Fluids Systems segment
and $1.1 million in the Corporate office; and
-- $1.9 million of pre-tax charges for write-downs of inventory in the
Fluids Systems segment ($1.5 million after-tax).
Combined, the impact of the above items resulted in an $18.1 million reduction in operating income and a $16.8 million increase in net loss ($0.19 per diluted share) for the fourth quarter of 2019.
Paul Howes, Newpark's President and Chief Executive Officer, stated, "Although the North America land market proved to be extremely challenging during the fourth quarter, I'm pleased with our swift response and continued operational execution across both segments, as well as our continued free cash flow generation.
"During the fourth quarter, revenues in the Mats and Integrated Services segment improved by 9% sequentially, driven by strong seasonal demand for product sales," added Howes. "The strength in product sales was somewhat offset by the soft conditions in the U.S. land E&P market that led to a decline in rental and service revenues, particularly in the gas-focused basins in the Northeast. In contrast, rental activities in the U.S. energy infrastructure and other non-E&P markets have remained relatively stable, contributing to the continued shift in our revenue mix away from E&P. For the fourth quarter 2019, 75% of our total Mats segment revenues were derived from non-E&P markets, including 55% of our rental and service revenues and substantially all product sales. With the impact of the higher revenues, the segment's operating margin improved to 27% in the fourth quarter of 2019.
"In Fluids, the fourth quarter results reflect a clear distinction between markets, with the challenging North America land environment overshadowing the strong results from our international business, as well as in the deepwater Gulf of Mexico," added Howes. "International revenues improved 12% sequentially, as revenues in the EMEA region benefitted from higher activity on IOC contracts, along with elevated downhole fluids losses. We also continue to gain traction in the deepwater Gulf of Mexico, where revenues improved 13% sequentially.
"The strong results in these markets reflect a stark contrast, however, to the challenges in the North America land market. Despite the improvement in the Gulf of Mexico and our first U.S. stimulation chemical revenues in the fourth quarter, our North America revenues declined 22% sequentially, including the impact of the declining rig count, budget exhaustion by several of our customers, and extended customer downtime through the holidays."
Howes added, "In light of the continued expectation of North America land market volatility, we began taking actions not only to right-size our Fluids business, but also to transition to a more variable cost structure, which we believe will better position us to navigate through market volatility going forward. We are in the process of exiting several U.S. facilities, and also winding down operations in the Brazil market. The fourth quarter 2019 Fluids Systems results included $17 million of pre-tax charges, contributing to an $18 million operating loss during the period.
"Despite the challenging North America land market conditions, our fourth quarter results demonstrate our ability to generate consistent free cash flows through all phases of the industry cycle. Net cash provided by operating activities was $19 million and free cash flow was $17 million during the fourth quarter, bringing our full year 2019 net cash from operating activities to $72 million and free cash flow to $41 million," concluded Howes.
Segment Results
The Mats and Integrated Services segment generated revenues of $54.9 million for the fourth quarter of 2019 compared to $50.2 million for the third quarter of 2019 and $69.9 million for the fourth quarter of 2018. Segment operating income was $14.6 million for the fourth quarter of 2019 compared to $10.0 million for the third quarter of 2019 and $20.7 million for the fourth quarter of 2018.
The Fluids Systems segment generated revenues of $134.6 million for the fourth quarter of 2019 compared to $152.5 million for the third quarter of 2019 and $177.7 million for the fourth quarter of 2018. Segment operating loss was $18.1 million for the fourth quarter of 2019 compared to operating income of $5.9 million for the third quarter of 2019 and $8.2 million for the fourth quarter of 2018. Operating loss for the fourth quarter of 2019 includes an $11.4 million non-cash impairment of goodwill and a total of $5.6 million of charges associated with facility closures and related exit costs, inventory write-downs, and severance costs.
Conference Call
Newpark has scheduled a conference call to discuss fourth quarter 2019 results and its near-term operational outlook, which will be broadcast live over the Internet, on Friday, February 7, 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 February 21, 2020 and may be accessed by dialing 201-612-7415 and using pass code 13697893#. 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, 2018, 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 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 legal and regulatory matters, including environmental and immigration regulations; our legal compliance; material weaknesses in our internal control over financial reporting; the inherent limitations of insurance coverage; income taxes; the potential impairments of goodwill and long-lived intangible assets; technological developments in our industry; severe weather and seasonality; cybersecurity breaches or business system disruptions; and fluctuations in the market value of our publicly traded securities. 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.
Newpark Resources, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Twelve Months Ended
(In thousands,
except per share
data) December 31, September 30, December 31, December 31, December 31,
2019 2019 2018 2019 2018
--- ---
Revenues $
189,471 $
202,763 $
247,664 $
820,119 $
946,548
Cost of revenues 162,400 169,429 197,310 684,738 766,975
Selling, general and
administrative
expenses 27,598 27,017 29,645 113,394 115,127
Other operating
loss, net 537 29 186 170 888
Goodwill impairment 11,422 11,422
Operating income
(loss) (12,486) 6,288 20,523 10,395 63,558
Foreign currency
exchange (gain)
loss (1,572) 828 822 (816) 1,416
Interest expense,
net 3,562 3,628 4,205 14,369 14,864
Income (loss) before
income taxes (14,476) 1,832 15,496 (3,158) 47,278
Provision for income
taxes 2,617 3,273 4,927 9,788 14,997
Net income (loss) $
(17,093) $
(1,441) $
10,569 $
(12,946) $
32,281
Calculation of EPS:
---
Net income (loss) -
basic and diluted $
(17,093) $
(1,441) $
10,569 $
(12,946) $
32,281
Weighted average
common shares
outstanding -basic 89,543 89,675 90,640 89,782 89,996
Dilutive effect of
stock options and
restricted stock
awards - 1,938 2,385
Dilutive effect of
2021 Convertible
Notes - 544
Weighted average
common shares
outstanding -
diluted 89,543 89,675 92,578 89,782 92,925
Net income (loss)
per common share -
basic: $
(0.19) $
(0.02) $
0.12 $
(0.14) $
0.36
Net income (loss)
per common share -
diluted: $
(0.19) $
(0.02) $
0.11 $
(0.14) $
0.35
Newpark Resources, Inc.
Operating Segment Results
(Unaudited)
Three Months Ended Twelve Months Ended
---
(In thousands) December 31, September 30, December 31, December 31, December 31,
2019 2019 2018 2019 2018
--- ---
Revenues
Fluids systems $
134,573 $
152,547 $
177,726 $
620,317 $
715,813
Mats and integrated
services 54,898 50,216 69,938 199,802 230,735
Total revenues $
189,471 $
202,763 $
247,664 $
820,119 $
946,548
Operating income (loss)
Fluids systems (1) $
(18,137) $
5,893 $
8,245 $
3,814 $
40,337
Mats and integrated
services 14,603 10,049 20,740 47,466 60,604
Corporate office
(2) (8,952) (9,654) (8,462) (40,885) (37,383)
Total operating
income (loss) $
(12,486) $
6,288 $
20,523 $
10,395 $
63,558
Segment operating margin
Fluids systems (13.5)
% 3.9
% 4.6
% 0.6
% 5.6
%
Mats and integrated
services 26.6
% 20.0
% 29.7
% 23.8
% 26.3
%
(1) Fluids Systems operating loss for
the three months ended December
31, 2019 includes a total of $17.0
million of charges, consisting of
an $11.4 million non-cash
impairment of goodwill and a total
of $5.6 million of charges
associated with facility closures
and related exit costs, inventory
write-downs, and severance costs.
Fluids Systems operating income
for the three months ended
December 31, 2018 includes a total
of $2.5 million of charges
associated with severance costs
and expenses related to the
conversion of a drilling fluids
facility into a completion fluids
facility. Fluids Systems operating
income for the twelve months ended
December 31, 2019 includes a total
of $18.7 million of charges,
consisting of an $11.4 million
non-cash impairment of goodwill
and a total of $7.3 million of
charges associated with facility
closures and related exit costs,
inventory write-downs, and
severance costs, as well as the
modification of the Company's
retirement policy. Fluids Systems
operating income for the twelve
months ended December 31, 2018
includes a total of $5.0 million
of charges associated with
severance costs, the Kenedy, Texas
facility fire, and expenses
related to the conversion of a
drilling fluids facility into a
completion fluids facility.
(2) Corporate office operating loss for
the three months ended December
31, 2019 includes a total of $1.1
million of charges associated with
severance costs. Corporate office
operating loss for the twelve
months ended December 31, 2019
includes a total of $4.5 million
of charges associated with the
modification of the Company's
retirement policy and severance
costs. Corporate office operating
loss for the twelve months ended
December 31, 2018 includes a
charge of $1.8 million associated
with the retirement and transition
of our former Senior Vice
President, General Counsel and
Chief Administrative Officer.
Newpark Resources, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data) December 31, December 31,
2019 2018
--- ---
ASSETS
Cash and cash equivalents $
48,672 $
56,118
Receivables, net 216,714 254,394
Inventories 196,897 196,896
Prepaid expenses and other current assets 16,526 15,904
Total current assets 478,809 523,312
Property, plant and equipment, net 310,409 316,293
Operating lease assets 32,009
Goodwill 42,332 43,832
Other intangible assets, net 29,677 25,160
Deferred tax assets 3,600 4,516
Other assets 3,243 2,741
Total assets $
900,079 $
915,854
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $
6,335 $
2,522
Accounts payable 79,777 90,607
Accrued liabilities 42,750 48,797
Total current liabilities 128,862 141,926
Long-term debt, less current portion 153,538 159,225
Noncurrent operating lease liabilities 26,946
Deferred tax liabilities 34,247 37,486
Other noncurrent liabilities 7,841 7,536
Total liabilities 351,434 346,173
Common stock, $0.01 par value (200,000,000 shares authorized and 106,696,719 and
106,362,991 shares issued, respectively) 1,067 1,064
Paid-in capital 620,626 617,276
Accumulated other comprehensive loss (67,947) (67,673)
Retained earnings 134,119 148,802
Treasury stock, at cost (16,958,418 and 15,530,952 shares, respectively) (139,220) (129,788)
Total stockholders' equity 548,645 569,681
Total liabilities and stockholders' equity $
900,079 $
915,854
Newpark Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Twelve Months Ended December 31,
(In thousands) 2019 2018
--- ---
Cash flows from operating activities:
Net income (loss) $
(12,946) $
32,281
Adjustments to reconcile net income to net cash provided by operations:
Goodwill impairment 11,422
Depreciation and amortization 47,144 45,899
Stock-based compensation expense 11,640 10,361
Provision for deferred income taxes (4,250) 236
Net provision for doubtful accounts 1,792 2,849
Gain on sale of assets (10,801) (1,821)
Gain on insurance recovery - (606)
Amortization of original issue discount and debt issuance costs 6,188 5,510
Change in assets and liabilities:
(Increase) decrease in receivables 40,182 (7,388)
(Increase) decrease in inventories 699 (30,352)
(Increase) decrease in other assets (1,032) 1,055
Increase (decrease) in accounts payable (8,318) 2,449
Increase (decrease) in accrued liabilities and other (9,434) 2,930
Net cash provided by operating activities 72,286 63,403
Cash flows from investing activities:
Capital expenditures (44,806) (45,141)
Business acquisitions, net of cash acquired (18,692) (249)
Proceeds from sale of property, plant and equipment 13,734 2,612
Proceeds from insurance property claim - 1,000
Refund of proceeds from sale of a business - (13,974)
Net cash used in investing activities (49,764) (55,752)
Cash flows from financing activities:
Borrowings on lines of credit 327,983 347,613
Payments on lines of credit (335,613) (352,582)
Debt issuance costs (1,214) (149)
Proceeds from employee stock plans 1,314 3,874
Purchases of treasury stock (21,737) (3,870)
Other financing activities (259) 601
Net cash used in financing activities (29,526) (4,513)
Effect of exchange rate changes on cash (399) (4,332)
Net decrease in cash, cash equivalents, and restricted cash (7,403) (1,194)
Cash, cash equivalents, and restricted cash at beginning of period 64,266 65,460
Cash, cash equivalents, and restricted cash at end of period $
56,863 $
64,266
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 Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2019 2019 2018 2019 2018
---
Net income (loss)
(GAAP) (1) $
(17,093) $
(1,441) $
10,569 $
(12,946) $
32,281
Interest expense, net 3,562 3,628 4,205 14,369 14,864
Provision for income
taxes 2,617 3,273 4,927 9,788 14,997
Depreciation and
amortization 12,253 11,821 11,553 47,144 45,899
EBITDA (non-GAAP) (1) $
1,339 $
17,281 $
31,254 $
58,355 $
108,041
(1) Net loss and EBITDA for the three
months ended December 31, 2019
include a total of $18.1 million
of charges, consisting of an $11.4
million non-cash impairment of
goodwill and a total of $6.7
million of charges associated with
facility closures and related exit
costs, inventory write-downs, and
severance costs. Net income and
EBITDA for the three months ended
December 31, 2018 include a total
of $2.5 million of charges
associated with severance costs
and expenses related to the
conversion of a drilling fluids
facility into a completion fluids
facility. Net loss and EBITDA for
the twelve months ended December
31, 2019 include a total of $23.2
million of charges, consisting of
an $11.4 million non-cash
impairment of goodwill and a total
of $11.8 million of charges
associated with facility closures
and related exit costs, inventory
write-downs, and severance costs,
as well as the modification of the
Company's retirement policy. Net
income and EBITDA for the twelve
months ended December 31, 2018
include a total of $6.8 million of
charges, consisting of a corporate
office charge of $1.8 million
associated with the retirement of
our former Senior Vice President,
General Counsel and Chief
Administrative Officer, as well as
a total of $5.0 million of charges
associated with severance costs,
the Kenedy, Texas facility fire,
and expenses related to the
conversion of a drilling fluids
facility into a completion fluids
facility.
Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)
Fluids Systems
Three Months Ended Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2019 2019 2018 2019 2018
--- ---
Operating income
(loss) (GAAP) (1) $
(18,137) $
5,893 $
8,245 $
3,814 $
40,337
Depreciation and
amortization 5,691 5,234 5,137 21,202 20,922
EBITDA (non-GAAP) (1) (12,446) 11,127 13,382 25,016 61,259
Revenues 134,573 152,547 177,726 620,317 715,813
Operating Margin (13.5) 3.9 4.6 0.6
(GAAP) % % % % 5.6
%
===
EBITDA Margin (non- (9.2) 7.3 7.5 4.0
GAAP) % % % % 8.6
%
===
(1) Operating loss for the three
months ended December 31, 2019
includes a total of $17.0
million of charges, consisting
of an $11.4 million non-cash
impairment of goodwill and a
total of $5.6 million of
charges associated with
facility closures and related
exit costs, inventory write-
downs, and severance costs.
Operating income for the three
months ended December 31, 2018
includes a total of $2.5
million of charges associated
with severance costs and
expenses related to the
conversion of a drilling
fluids facility into a
completion fluids facility.
Operating income for the
twelve months ended December
31, 2019 includes $18.7
million of charges, consisting
of an $11.4 million non-cash
impairment of goodwill and a
total of $7.3 million of
charges associated with
facility closures and related
exit costs, inventory write-
downs, and severance costs, as
well as the modification of
the Company's retirement
policy. Operating income for
the twelve months ended
December 31, 2018 includes a
total of $5.0 million of
charges associated with
severance costs, the Kenedy,
Texas facility fire, and
expenses related to the
conversion of a drilling
fluids facility into a
completion fluids facility.
Mats and Integrated
Services
Three Months Ended Twelve Months Ended
(In thousands) December 31, September 30, December 31, December 31, December 31,
2019 2019 2018 2019 2018
---
Operating income
(GAAP) $
14,603 $
10,049 $
20,740 $
47,466 $
60,604
Depreciation and
amortization 5,505 5,484 5,533 21,763 21,321
EBITDA (non-GAAP) 20,108 15,533 26,273 69,229 81,925
Revenues 54,898 50,216 69,938 199,802 230,735
Operating Margin 26.6 20.0 29.7 23.8 26.3
(GAAP) % % % % %
EBITDA Margin (non- 36.6 30.9 37.6 34.6 35.5
GAAP) % % % % %
Newpark Resources, Inc.
Non-GAAP Reconciliations (Continued)
(Unaudited)
Free Cash Flow
The following table reconciles the Company's net cash provided by (used in) operating activities calculated in accordance with GAAP to the non-GAAP financial measure of the Company's free cash flow:
Consolidated
Three Months Ended Twelve Months Ended
---
(In thousands) December 31, September 30, December 31, December 31, December 31,
2019 2019 2018 2019 2018
---
Net cash provided by
operating activities
(GAAP) $
19,100 $
18,946 $
43,287 $
72,286 $
63,403
Capital expenditures (9,003) (11,937) (12,327) (44,806) (45,141)
Proceeds from sale of
property, plant and
equipment 6,618 1,408 1,135 13,734 2,612
Free Cash Flow (non-
GAAP) $
16,715 $
8,417 $
32,095 $
41,214 $
20,874
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) December 31, December 31,
2019 2018
---
Current debt $
6,335 $
2,522
Long-term debt, less current portion 153,538 159,225
Total Debt 159,873 161,747
Total stockholders' equity 548,645 569,681
Total Capital $
708,518 $
731,428
Ratio of Total Debt to Capital 22.6
% 22.1
%
Total Debt $
159,873 $
161,747
Less: cash and cash equivalents (48,672) (56,118)
Net Debt 111,201 105,629
Total stockholders' equity 548,645 569,681
Total Capital, Net of Cash $
659,846 $
675,310
Ratio of Net Debt to Capital 16.9
% 15.6
%
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SOURCE Newpark Resources, Inc.
