Newpark Resources(NR) - 2022 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements, management's discussion, market risks, and controls for the period ended June 30, 2022 Financial Statements Presents unaudited condensed consolidated financial statements for Q2 and H1 2022, detailing revenue growth, net loss, and an impairment charge Condensed Consolidated Balance Sheets Details the company's financial position, showing an increase in total assets driven by inventories and a rise in liabilities due to long-term debt | (In thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $420,931 | $388,512 | | Total assets | $765,924 | $752,886 | | Total current liabilities | $156,265 | $150,392 | | Total liabilities | $315,173 | $290,500 | | Total stockholders' equity | $450,751 | $462,386 | - Total assets increased to $765.9 million as of June 30, 2022, from $752.9 million at year-end 2021, primarily driven by a significant increase in inventories from $155.3 million to $190.2 million[14] - Total liabilities rose to $315.2 million from $290.5 million, largely due to an increase in long-term debt to $122.0 million from $95.6 million[14] Condensed Consolidated Statements of Operations Reports increased revenues for Q2 and H1 2022, alongside an increased operating loss and net loss, impacted by a significant impairment charge | (In thousands, except per share data) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $194,144 | $142,249 | $370,582 | $283,421 | | Operating loss | $(6,217) | $(3,247) | $(5,250) | $(2,703) | | Impairment | $7,905 | — | $7,905 | — | | Net loss | $(7,752) | $(5,998) | $(5,231) | $(11,360) | | Net loss per share - diluted | $(0.08) | $(0.07) | $(0.06) | $(0.12) | - Revenues for Q2 2022 increased by 36.5% year-over-year to $194.1 million. For the first half of 2022, revenues grew 30.8% to $370.6 million[15] - The company recorded a $7.9 million impairment charge in Q2 2022, leading to an increased operating loss of $6.2 million for the quarter compared to $3.2 million in Q2 2021[15] Condensed Consolidated Statements of Cash Flows Outlines cash flows, noting a significant shift to net cash used in operating activities for H1 2022, primarily due to inventory increases | (In thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(23,011) | $25,837 | | Net cash used in investing activities | $(7,572) | $(1,269) | | Net cash provided by (used in) financing activities | $27,022 | $(13,310) | - Net cash used in operating activities was $23.0 million for the first half of 2022, a significant shift from the $25.8 million provided by operations in the same period of 2021. This was primarily due to a $38.7 million increase in inventories[18] Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed disclosures on segment operations, the exit of the Industrial Blending business, and amendments to the ABL facility - The company operates through three segments: Fluids Systems, Industrial Solutions, and Industrial Blending. In February 2022, the Board approved a plan to exit the Industrial Blending operations and explore strategic options for the U.S. mineral grinding business within the Fluids Systems segment[23][24] - In May 2022, the company amended and restated its ABL Facility, increasing potential financing up to $175.0 million and extending the term to May 2027. As of June 30, 2022, $110.0 million was drawn, with $43.9 million remaining available[37][38] | (In thousands) | Q2 2022 Revenues | Q2 2021 Revenues | H1 2022 Revenues | H1 2021 Revenues | | :--- | :--- | :--- | :--- | :--- | | Fluids Systems | $145,261 | $97,093 | $286,275 | $184,942 | | Industrial Solutions | $48,883 | $43,287 | $84,307 | $92,057 | | Industrial Blending | — | $1,869 | — | $6,422 | | Total revenues | $194,144 | $142,249 | $370,582 | $283,421 | - A $7.9 million impairment charge was recognized in June 2022 related to the long-lived assets of the exited Industrial Blending business, resulting in an operating loss of $8.9 million for that segment in Q2 2022[54][56] Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses the company's strategic shift to industrial markets, Fluids Systems revenue growth, and the impact of impairment and inflation on profitability Overview and Strategy Outlines the company's long-term strategy for end-market diversification, Industrial Solutions growth, and the planned exit of Industrial Blending operations - The company's long-term strategy focuses on end-market diversification to reduce dependency on the volatile E&P industry and providing products that enhance environmental sustainability[63] - The Industrial Solutions segment is the primary driver of operating income and the main focus for growth investments, particularly in power transmission and other industrial markets[62][67] - In February 2022, the company's Board approved a plan to exit the Industrial Blending operations and explore strategic options, including a potential sale, for its U.S. mineral grinding business[68][77] Results of Operations Analyzes consolidated and segment financial performance, highlighting Fluids Systems revenue growth and the impact of an impairment charge on profitability Consolidated Results - Q2 2022 vs Q2 2021 | (In thousands) | Q2 2022 | Q2 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $194,144 | $142,249 | $51,895 | 36% | | Operating loss | $(6,217) | $(3,247) | $(2,970) | (91)% | | Net loss | $(7,752) | $(5,998) | $(1,754) | 29% | Consolidated Results - H1 2022 vs H1 2021 | (In thousands) | H1 2022 | H1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $370,582 | $283,421 | $87,161 | 31% | | Operating loss | $(5,250) | $(2,703) | $(2,547) | (94)% | | Net loss | $(5,231) | $(11,360) | $6,129 | 54% | - Fluids Systems revenue grew 50% in Q2 2022 YoY, driven by a 58% increase in the North American rig count. Operating income improved to $0.4 million from a loss of $6.5 million in Q2 2021[90][91][93] - Industrial Solutions revenue increased 13% in Q2 2022 YoY, but operating income decreased from $11.3 million to $9.8 million due to lower pricing on large rental projects and raw material cost inflation[90][95] - The Industrial Blending segment recorded a $7.9 million non-cash impairment charge in Q2 2022 related to the sale of assets from the exited business[85][96] Liquidity and Capital Resources Reviews the company's cash flow, capital expenditures, debt, and available liquidity, including anticipated proceeds from strategic divestitures - Net cash used in operating activities was $23.0 million for H1 2022, compared to $25.8 million provided in H1 2021, primarily due to an increase in inventories to support higher revenues and manage supply chain issues[119] - Capital expenditures for 2022 are expected to be between $20 million and $25 million, focused on expanding the mat rental fleet for the utilities market[122] - As of June 30, 2022, the company had $43.9 million in remaining availability under its Amended ABL Facility[127] - The company anticipates generating over $70 million in net cash proceeds from the divestiture of its U.S. mineral grinding business and the sale of assets from its exited Industrial Blending operations[124] Capitalization Summary | (In thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total debt | $144,459 | $114,803 | | Stockholder's equity | $450,751 | $462,386 | | Total capitalization | $595,210 | $577,189 | | Total debt to capitalization | 24.3% | 19.9% | Quantitative and Qualitative Disclosures About Market Risk Addresses the company's exposure to market risks, including interest rate fluctuations on variable-rate debt and foreign currency exchange rate volatility - As of June 30, 2022, the company had $120.4 million in variable-rate debt. A 100 basis-point increase in short-term interest rates would increase annual pre-tax interest expense by approximately $1.2 million[145] - The company faces foreign currency exchange risks from operations conducted in EMEA, Canada, Asia Pacific, and Latin America, with principal exposures in currencies such as the Euro, Canadian dollar, and British pound[146] Controls and Procedures Confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2022, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[147] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[148] PART II OTHER INFORMATION Covers legal proceedings, risk factors, equity security sales, and required exhibits for the reporting period Legal Proceedings States the company is involved in routine legal matters, with no anticipated material adverse impact on its consolidated financial statements - Management does not expect any loss from litigation or other proceedings, beyond amounts accrued or covered by insurance, to have a material adverse impact on the company's financial statements[150] Risk Factors Confirms no material changes to the company's previously disclosed risk factors since the last annual and quarterly reports - No material changes to the company's risk factors have occurred since the disclosures in the 2021 Form 10-K and the Q1 2022 Form 10-Q[151] Unregistered Sales of Equity Securities and Use of Proceeds Details the company's securities repurchase program, noting no open market repurchases during Q2 2022, but shares acquired for tax purposes - As of June 30, 2022, $23.8 million remained available for repurchases under the company's securities repurchase program[155] - No shares of common stock were repurchased under the program during the three months ended June 30, 2022[156] Exhibits Lists all exhibits filed with the Quarterly Report on Form 10-Q, including required certifications