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Newpark Resources Fourth Quarter, Full Year 2020 Results

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   |    Friday,February 12,2021

Newpark Resources, Inc. reported its Q4 results.

Financials

Total revenues for the fourth quarter of 2020 were $129.7 million compared to $96.4 million for the third quarter of 2020 and $189.5 million for the fourth quarter of 2019. Net loss for the fourth quarter of 2020 was $18.4 million, or ($0.20) per share, compared to net loss of $23.9 million, or ($0.26) per share, for the third quarter of 2020, and net loss of $17.1 million, or ($0.19) per share, for the fourth quarter of 2019.

Fourth quarter 2020 operating results include the impact of $11.2 million of net pre-tax charges, all in the Fluids Systems segment ($11.1 million after-tax, $0.12 per share), primarily related to our previously-announced exit from Brazil, including $11.7 million of pre-tax charges for the non-cash recognition of cumulative foreign currency translation losses. Third quarter 2020 operating results include the impact of $4.7 million of pre-tax charges, substantially all in the Fluids Systems segment ($3.9 million after-tax, $0.04 per share), primarily related to the impairment of certain fixed assets and other non-cash charges. Fourth quarter 2019 operating results include the impact of $18.1 million of pre-tax charges, primarily in the Fluids Systems segment ($16.8 million after-tax, $0.19 per share), primarily related to the impairment of goodwill and other non-cash charges.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "2020 was a year in which companies around the world faced unprecedented challenges. I'm extremely proud of the resilience of our entire organization as we continued to advance our market diversification efforts. Although the combination of the oil & gas industry dislocation and the prolonged COVID-related headwinds impacted our operations for much of the year, we began to see these headwinds subside late in the year as revenues improved 35% sequentially to $130 million for the fourth quarter.

"Our Industrial Solutions segment, which includes our Site and Access Solutions business (formerly Mats and Integrated Services) as well as the recent start-up of industrial blending operations, contributed $50 million of revenues and an operating margin of 19%. Site and Access Solutions revenues increased $14 million, or 49% sequentially, primarily reflecting an $8 million increase in direct sales, driven by improving demand from the utility sector. In addition, rental and services revenues improved by $6 million sequentially, benefitting from elevated utility sector demand along the Gulf Coast, supporting repairs of hurricane-damaged electrical infrastructure, as well as the early-stage impact of a broader recovery in utility industry infrastructure projects following the COVID-related disruptions experienced for much of 2020. Industrial blending operations provided an $8 million revenue contribution to the fourth quarter, reflecting a full quarter's production of disinfectant and cleaning products."

Howes continued, "Our Fluids Systems segment posted fourth quarter 2020 revenues of $79 million, reflecting a 17% sequential improvement. The sequential improvement in Fluids Systems revenues includes an $8 million increase from North America land operations, primarily reflecting the impact of improving market conditions. Revenues from the Gulf of Mexico improved $4 million sequentially as customer activities in the prior quarter were negatively impacted by extensive weather-related disruptions. Internationally, while activity in key markets within Europe and the Middle East continue to face COVID-related headwinds, revenues improved $2 million sequentially, driven by a rebound in activity in North Africa. The Fluids operating loss in the fourth quarter was $20.1 million, which includes $11.2 million of charges, primarily related to our exit from Brazil.

"The consistent generation of Free Cash Flow through all phases of industry cycles remains a high priority, and I'm extremely pleased with our performance on that front. During the fourth quarter, we generated $15 million of cash from operations, while leveraging our capital-light business model to maintain strong Free Cash Flow generation, which led to a $15 million reduction in total debt. The fourth quarter contribution brings our full year 2020 cash from operations to $56 million, yielding Free Cash Flow of $52 million and leading to a $73 million reduction in our total outstanding debt. We ended 2020 with a total debt balance of $87 million, reflecting our lowest debt balance in more than 20 years," concluded Howes.

Segment Name Change and Results

As part of the Company's strategic efforts to leverage our core competencies into industrial end-markets and further diversify our revenue streams, we began producing disinfectant and industrial cleaning products in the second quarter of 2020. The ramp-up in production was completed by the end of the third quarter of 2020, which effectively repositioned our chemical blending operation located in Conroe, Texas from primarily supporting the oil and gas fluids markets to fully supporting industrial end-markets. With this transition completed, beginning in the fourth quarter of 2020, the assets and operating results associated with these industrial blending operations have been reported prospectively along with Site and Access Solutions (formerly Mats and Integrated Services) in the newly-defined Industrial Solutions segment.

The Fluids Systems segment generated revenues of $79.4 million for the fourth quarter of 2020 compared to $67.7 million for the third quarter of 2020, which included $2.6 million of revenues from industrial blending, and $134.6 million for the fourth quarter of 2019. Segment operating loss was $20.1 million for the fourth quarter of 2020 compared to $19.0 million for the third quarter of 2020 and $18.1 million for the fourth quarter of 2019. Operating loss for the fourth quarter of 2020 includes $11.2 million of net charges, primarily related to our exit from Brazil including $11.7 million of charges for the non-cash recognition of cumulative foreign currency translation losses. Operating loss for the third quarter of 2020 includes $4.5 million of charges, primarily related to the impairment of certain fixed assets and other non-cash charges. Operating loss for the fourth quarter of 2019 includes $17.0 million of charges, primarily related to impairment of goodwill and other non-cash charges.

The Industrial Solutions segment generated revenues of $50.3 million for the fourth quarter of 2020, which includes $7.5 million of revenues from industrial blending, compared to $28.7 million for the third quarter of 2020 and $54.9 million for the fourth quarter of 2019. Segment operating income was $9.5 million for the fourth quarter of 2020 compared to operating loss of $0.1 million for the third quarter of 2020 and operating income of $14.6 million for the fourth quarter of 2019.