Newpark Resources Reports Second Quarter 2017 Results

Contacts:

Gregg Piontek

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

Six Months Ended

(In thousands, except per share data)

June 30,
 2017

March 31,
 2017

June 30,
 2016

June 30,
 2017

June 30,
 2016

Revenues

$

183,020

$

158,691

$

115,315

$

341,711

$

229,859

Cost of revenues

148,431

129,590

102,803

278,021

214,376

Selling, general and administrative expenses

26,630

25,397

21,435

52,027

44,927

Other operating income, net

(9)

(42)

(713)

(51)

(2,409)

Impairments and other charges

—

—

6,925

—

6,925

Operating income (loss)

7,968

3,746

(15,135)

11,714

(33,960)

Foreign currency exchange (gain) loss

534

392

(746)

926

(1,201)

Interest expense, net

3,441

3,218

3,022

6,659

5,103

Gain on extinguishment of debt

—

—

—

—

(1,894)

Income (loss) from operations before income taxes

3,993

136

(17,411)

4,129

(35,968)

Provision (benefit) for income taxes

2,361

1,119

(3,507)

3,480

(8,764)

Net income (loss)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)

Calculation of EPS:

Basic - net income (loss)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)

Assumed conversions of Convertible Notes due 2017

—

—

—

—

—

Diluted - adjusted net income (loss)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)

Basic - weighted average common shares outstanding

84,653

84,153

83,457

84,404

83,358

Dilutive effect of stock options and restricted stock awards

2,662

—

—

2,695

—

Dilutive effect of Convertible Notes due 2017

—

—

—

—

—

Dilutive effect of Convertible Notes due 2021

—

—

—

—

—

Diluted - weighted average common shares outstanding

87,315

84,153

83,457

87,099

83,358

Income (loss) per common share - basic:

$

0.02

$

(0.01)

$

(0.17)

$

0.01

$

(0.33)

Income (loss) per common share - diluted:

$

0.02

$

(0.01)

$

(0.17)

$

0.01

$

(0.33)

Note: For all periods presented, we excluded the assumed conversion of the Convertible Notes in calculating diluted earnings per share as the effect was anti-dilutive.

Newpark Resources, Inc.

Operating Segment Results

(Unaudited)

Three Months Ended

Six Months Ended

(In thousands)

June 30,
 2017

March 31,
 2017

June 30,
 2016

June 30,
 2017

June 30,
 2016

Revenues

Fluids systems

$

150,623

$

136,050

$

96,153

$

286,673

$

194,804

Mats and integrated services

32,397

22,641

19,162

55,038

35,055

Total revenues

$

183,020

$

158,691

$

115,315

$

341,711

$

229,859

Operating income (loss)

Fluids systems (1)

$

5,863

$

6,352

$

(11,924)

$

12,215

$

(27,131)

Mats and integrated services

11,419

6,402

3,989

17,821

7,725

Corporate office

(9,314)

(9,008)

(7,200)

(18,322)

(14,554)

Operating income (loss)

$

7,968

$

3,746

$

(15,135)

$

11,714

$

(33,960)

Segment operating margin

Fluids systems

3.9

%

4.7

%

(12.4)

%

4.3

%

(13.9)

%

Mats and integrated services

35.2

%

28.3

%

20.8

%

32.4

%

22.0

%

(1)

Second quarter 2016 and first half 2016 operating results included $7.6 million of charges associated with asset impairments primarily in the Asia pacific region.  In addition, second quarter and first half 2016 operating results included $0.7 million and $3.9 million of charges associated with workforce reductions, respectively.

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

June 30, 2017

December 31, 2016

ASSETS

Cash and cash equivalents

$

68,237

$

87,878

Receivables, net

230,193

214,307

Inventories

156,947

143,612

Prepaid expenses and other current assets

50,010

17,143

Total current assets

505,387

462,940

Property, plant and equipment, net

304,129

303,654

Goodwill

20,238

19,995

Other intangible assets, net

4,892

6,067

Deferred tax assets

2,388

1,747

Other assets

3,434

3,780

Total assets

$

840,468

$

798,183

LIABILITIES AND STOCKHOLDERS' EQUITY

Current debt

$

85,879

$

83,368

Accounts payable

82,302

65,281

Accrued liabilities

39,863

31,152

Total current liabilities

208,044

179,801

Long-term debt, less current portion

75,107

72,900

Deferred tax liabilities

36,070

38,743

Other noncurrent liabilities

6,943

6,196

Total liabilities

326,164

297,640

Common stock, $0.01 par value, 200,000,000 shares authorized and 100,881,208 and 99,843,094 shares issued, respectively

1,009

998

Paid-in capital

565,568

558,966

Accumulated other comprehensive loss

(55,384)

(63,208)

Retained earnings

130,285

129,873

Treasury stock, at cost; 15,321,316 and 15,162,050 shares, respectively

(127,174)

(126,086)

Total stockholders' equity

514,304

500,543

Total liabilities and stockholders' equity

$

840,468

$

798,183

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Cash flows from operating activities:

Net income (loss)

$

649

$

(27,204)

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

Impairments and other non-cash charges

—

8,617

Depreciation and amortization

19,244

19,201

Stock-based compensation expense

5,874

5,613

Provision for deferred income taxes

(3,672)

546

Net provision for doubtful accounts

1,412

1,582

Gain on sale of assets

(1,266)

(1,841)

Gain on extinguishment of debt

—

(1,894)

Amortization of original issue discount and debt issuance costs

2,679

796

Change in assets and liabilities:

(Increase) decrease in receivables

(48,612)

18,006

(Increase) decrease in inventories

(10,500)

18,981

Increase in other assets

(2,773)

(3,000)

Increase (decrease) in accounts payable

15,590

(20,720)

Increase in accrued liabilities and other

43,685

1,143

Net cash provided by operating activities

22,310

19,826

Cash flows from investing activities:

Capital expenditures

(16,644)

(26,652)

Increase in restricted cash

(29,765)

(22)

Proceeds from sale of property, plant and equipment

1,222

2,553

Net cash used in investing activities

(45,187)

(24,121)

Cash flows from financing activities:

Borrowings on lines of credit

—

4,268

Payments on lines of credit

—

(5,034)

Purchase of Convertible Notes due 2017

—

(9,206)

Debt issuance costs

(335)

(1,707)

Other financing activities

2,333

2,170

Proceeds from employee stock plans

1,517

4

Purchases of treasury stock

(2,382)

(1,093)

Net cash provided by (used in) financing activities

1,133

(10,598)

Effect of exchange rate changes on cash

2,103

903

Net decrease in cash and cash equivalents

(19,641)

(13,990)

Cash and cash equivalents at beginning of year

87,878

107,138

Cash and cash equivalents at end of period

$

68,237

$

93,148

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, 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/or that of other companies in our industry.  In addition, management uses these measures to evaluate operating performance, and 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.

Consolidated

Three Months Ended

Six Months Ended

(In thousands)

June 30,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

Net income (loss) (GAAP) (1)

$

1,632

$

(983)

$

(13,904)

$

649

$

(27,204)

Interest expense, net

3,441

3,218

3,022

6,659

5,103

Provision (benefit) for income taxes

2,361

1,119

(3,507)

3,480

(8,764)

Depreciation and amortization

9,857

9,387

9,628

19,244

19,201

EBITDA (non-GAAP) (1)

17,291

12,741

(4,761)

30,032

(11,664)

(1)

Second quarter 2016 and first half 2016 net loss and EBITDA included $7.6 million of charges associated with asset impairments primarily in the Asia pacific region. In addition, second quarter and first half 2016 net loss and EBITDA included $0.9 million and $4.3 million of charges associated with workforce reductions, respectively.

Fluids Systems

Three Months Ended

Six Months Ended

(In thousands)

June 30,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

Operating income (loss) (GAAP) (2)

$

5,863

$

6,352

$

(11,924)

$

12,215

$

(27,131)

Depreciation and amortization

5,513

5,168

5,293

10,681

10,583

EBITDA (non-GAAP) (2)

11,376

11,520

(6,631)

22,896

(16,548)

Revenues

150,623

136,050

96,153

286,673

194,804

Operating Margin (GAAP)

3.9

%

4.7

%

(12.4)

%

4.3

%

(13.9)

%

EBITDA Margin (non-GAAP)

7.6

%

8.5

%

(6.9)

%

8.0

%

(8.5)

%

(2)

Second quarter 2016 and first half 2016 operating loss and EBITDA included $7.6 million of charges associated with asset impairments primarily in the Asia pacific region.  In addition, second quarter and first half 2016 operating loss and EBITDA included $0.7 million and $3.9 million of charges associated with workforce reductions, respectively.

Newpark Resources, Inc.

Non-GAAP Reconciliations (Continued)

(Unaudited)

Mats and integrated services

Three Months Ended

Six Months Ended

(In thousands)

June 30,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

Operating income (loss) (GAAP)

$

11,419

$

6,402

$

3,989

$

17,821

$

7,725

Depreciation and amortization

3,534

3,480

3,585

7,013

7,136

EBITDA (non-GAAP)

14,953

9,882

7,574

24,834

14,861

Revenues

32,397

22,641

19,162

55,038

35,055

Operating Margin (GAAP)

35.2

%

28.3

%

20.8

%

32.4

%

22.0

%

EBITDA Margin (non-GAAP)

46.2

%

43.6

%

39.5

%

45.1

%

42.4

%

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, 2017

December 31, 2016

Current debt

$

85,879

$

83,368

Long-term debt, less current portion

75,107

72,900

Total Debt

160,986

156,268

Total stockholders' equity

514,304

500,543

Total Capital

$

675,290

$

656,811

Ratio of Total Debt to Capital

23.8

%

23.8

%

Total Debt

$

160,986

$

156,268

Less: cash and cash equivalents

(68,237)

(87,878)

Less: specific restricted cash (1)

(30,100)

—

Net Debt

62,649

68,390

Total stockholders' equity

514,304

500,543

Total Capital, Net of Cash

$

576,953

$

568,933

Ratio of Net Debt to Capital

10.9

%

12.0

%

(1)

Restricted cash included in prepaid expenses and other current assets related to settlement of Convertible Notes due 2017