2020
ANNUAL
REPORT
At Newpark, we are driven to help our customers across industries
improve the efficiency and sustainability of their operations. This
mindset is the catalyst for innovation and development of the next
generation of products and services across all of our business lines
that deliver reliable and environmentally responsible solutions for our
customers. We are also steadfast in our pursuit of long-term shareholder
value creation. We pride ourselves on our execution, our consistent cash
flow generation, our great people who embody our Core Values, and our
strong relationships with our customers and suppliers.
TO OUR
SHAREHOLDERS
In 2020 – a year like no other – we focused on bringing our people and resources together
to build a better future. The results were clear. We delivered strong free cash flow and
strengthened our balance sheet by reducing our debt to its lowest level in more than 20 years.
All of this was achieved in the face of the most significant challenges our markets and operating
regions have ever experienced.
Paul L. Howes
President and
Chief Executive Officer
PERFORMING IN EXTRAORDINARY TIMES
We believe our greatest assets are our people. Their inspiration, creativity, and
ingenuity are what make Newpark unique. Despite the unpredictable nature of
the COVID-19 pandemic, Newpark has remained resilient.
The pandemic’s impact on our business was severe, with quarterly revenues
declining nearly 40% sequentially in the second quarter of 2020. The dramatic
decline required swift actions to protect our business and shareholders, and I
am extremely proud of our entire organization’s response. By the end of 2020,
a meaningful recovery was beginning, with customer activities resuming across
industries, and we remain optimistic that this recovery will continue to gain
momentum in 2021.
Ultimately, our 2020 results demonstrated the flexibility of our capital-light
business model, which enables us to generate positive free cash flow through
all phases of the industry cycles. For the full year 2020, we generated $56
million of cash from operations and reduced our outstanding debt by $73
million. We ended 2020 with only $87 million of total debt, our lowest
debt level in more than 20 years. We also made meaningful progress in the
advancement of our strategic plan.
ENERGY TRANSITION PROVIDES OPPORTUNITIES FOR GROWTH
We have continued to advance our strategic efforts to diversify our end-
markets, particularly those markets that we believe will benefit from the
energy transition. For example, despite facing a significant pandemic-driven
slowdown in customer activities across all of our end-markets, our Site and
Access Solutions business delivered 9% year-on-year growth in rental and
service revenues from the electrical utility sector. This sector now represents
the primary end-market served by our Site and Access Solutions business and a
meaningful growth opportunity for years to come.
With this expanding presence, we also believe our Site and Access Solutions
business will have increased visibility and opportunity to capture value in
the energy transition. Whether upgrading infrastructure to provide greater
reliability, connecting wind farms and solar arrays, or delivering energy to
charge electric vehicles, our nation’s electrical utility grid is a critical element
to the success of America’s energy transition, and we are excited by our
expanding role.
As our expansion into this market continues to gain traction, we recently
added Michael A. Lewis to our Board of Directors. Michael joined our Board
in January 2021 after retiring from Pacific Gas and Electric Corporation
(PG&E). Michael brings over 34 years of electric operations experience, most
recently serving as both Interim President and as Senior Vice President, Electric
Operations of PG&E. Prior to PG&E, Michael served as Duke Energy’s Senior
Vice President and Chief Distribution Officer, responsible for their distribution
operations across six states. We are excited to add Michael to our Board, and
we look forward to benefiting from his extensive experience and insights in
helping to shape and refine our expansion into this market as well as our overall strategy.
Safety remains
our most
important
Core Value.
EXPANDING OUR INDUSTRIAL SOLUTIONS OFFERING
Another key step we took in reshaping Newpark in 2020 was the successful repositioning of our chemical blending
operations, which historically served the US oil and gas industry. In the face of the distressed US oil and gas sector, we
successfully leveraged our assets and chemistry expertise to expand into industrial end-markets, ramping up production
of disinfectants and industrial cleaning products, and delivering $11 million of revenues for the full year 2020, including
$8 million in the fourth quarter.
For the full year 2020, the Industrial Solutions segment, which includes our Site and Access Solutions and our Industrial
Blending businesses, contributed $138 million of revenues, reflecting 28% of our consolidated revenues, and we expect
the proportion of revenues from Industrial Solutions will grow in 2021.
Safety remains
our most
important
Core Value.
TRANSFORMING FLUIDS SYSTEMS
In light of the declines in customer activity in the oil and gas sector in 2020, we also made meaningful progress
rightsizing our Fluids Systems business for the new market environment, while at the same time strengthening our
competitive market position. While the past year was by far the most challenging year our Fluids business has ever
experienced, we moved swiftly to take actions to rightsize the business. We reduced our footprint and cost structure,
harvested working capital, and redeployed assets to serve markets that we believe can provide stronger and more
sustainable returns, all of which reduced our Fluids Systems net capital
employed by nearly $125 million, or roughly 30%, within the past year.
Meanwhile, our focus on delivering a differentiated value proposition has
never wavered, as customers are increasingly recognizing the Newpark Service
Advantage™. According to the 2020 report from Kimberlite International
Oilfield Research, I am proud to report that Newpark ranked #1 globally in
customer satisfaction within every Drilling Fluids performance category,
including Customer Responsiveness, Technical Support, Competency of Field
Personnel, Product Quality, and Availability. This is a testament to our Fluids-
focused approach and commitment to providing differentiated value to our
global customer base.
While we made significant progress in Fluids Systems over the past year,
we recognize that there is more work to be done. We remain committed to
leveraging our industry-leading capabilities to provide unique value to our
customers, while at the same time, continuing to align our Fluids Systems
business with the evolving market opportunities.
SUSTAINABILITY
Newpark’s longstanding commitment to sustainability is evident through our environmentally focused product offering,
high social standards, and governance programs. Environmental stewardship is a theme that has been embedded in
Newpark’s strategy for the past decade and we have consistently maintained our focus on delivering products that work
in harmony with the environment. We encourage our shareholders to go to our website, newpark.com/environmental,
to learn more about the environmental benefits of our market leading products and services. We recognize the
importance for every company to do their part to make a positive impact on the environment and we are proud to be a
leader in environmental stewardship.
CONCLUSION
Our performance in the past year clearly demonstrates our agility, reshaping our business under the most severe
conditions, as we faced a global pandemic and a historic collapse in the oil and gas industry. Despite these
unprecedented headwinds, we were able to deliver strong cash flow in 2020, reduce our debt to its lowest level in over
twenty years, and continue to execute on our strategy.
In closing, I would like to thank our shareholders and customers for their continued trust and confidence in us. I would
also like to thank each of our employees for their commitment to Newpark and to working safely.
Sincerely,
President and Chief Executive Officer
ABOUT US
INDUSTRIAL SOLUTIONS
Newpark Industrial Solutions is a socially responsible partner specializing in innovative solutions
to reduce customer operating risk. Whether it is through the delivery of environmentally
sensitive full-service site and access solutions, or the manufacturing and delivery of industrial
sanitization and cleaning products that protect our communities, we strive to deliver
exceptional customer and community value. Our strategic priorities:
FOCUS ON SUSTAINABILITY
For nearly two decades, we have
offered superior solutions to the
market, including our DURA-
BASE® composite matting system,
manufactured from 100% recyclable
materials, following a process that
eliminates raw material waste.
In addition to providing superior
environmental protection on the
worksite, our products eliminate the
need to harvest timber as associated
with competitive wood mat offering
and enable our customers to reduce
their overall carbon emissions. We
consistently aim to provide products
and services that not only reduce our
customers’ operating risks and costs,
but also have a positive impact on
the environment.
DIVERSIFYING INDUSTRIES
In recent years, we have leveraged
our long history and proven
success within the exploration and
production end-markets to launch
our entry into the multi-billion
dollar Energy Infrastructure space,
which includes utility transmission
and distribution as well as pipeline
markets. Our progress to date is
notable, with Energy Infrastructure
and other non-E&P markets
contributing more than $100 million
of segment revenues in 2020, but we
are just getting started. By extending
our commercial footprint and
investing in new technology, we are
aligning ourselves with the sizeable
market opportunity, to drive growth
and further diversify our revenue
streams.
In 2020, we successfully repositioned
our chemical blending operations
to serve industrial cleaning and
sanitization markets and also
began establishing relationships in
adjacent markets. With best in class
facilities and technical expertise,
our Industrial Blending Solutions
business is well positioned to expand
our presence in these large target
markets.
PRODUCT DEVELOPMENT
We are constantly innovating to
maintain our competitive position
in the market, and we recognize
that innovation and expansion of
our portfolio offering to meet the
varying needs of our customers is
paramount to our success. Through
our products and services, our state-
of-the-art automated manufacturing
and R&D capabilities, and forward-
thinking team, we are committed to
deliver cutting-edge solutions to all
of the markets we serve.
CUSTOMER FOCUS
While it is our mission to offer the
best products to our customers, we
also aim to provide an unmatched
customer service experience.
We have strategically positioned
ourselves to genuinely understand
the needs of our customers and we
believe this differentiator ultimately
provides more value for our
customers and shareholders. Access
to our experts means best-in-class
support.
ABOUT US
FLUIDS SYSTEMS
Newpark Fluids Systems is a socially responsible, solutions-focused partner with an unmatched
ability to lower total cost of operations and improve well performance through optimized
fluids systems and associated services. Our global operations are managed by a single HSEQ
system designed to create a zero-harm workplace while establishing practices to protect the
environment and contribute to the sustainable growth of the company. Our strategic priorities:
FOCUS ON SUSTAINABILITY
Newpark has a long history of
offering superior products and
solutions that improve on industry
best practices, while working in
harmony with the environment to
optimize resource management. Our
focus on sustainability has been a
driving force behind breakthroughs in
our offering, including the Evolution®
family of high-performance water-
based drilling fluid systems, which
was first launched a decade ago.
We are also part of the solution in
the transition to renewable energy
having provided fluids for hundreds
of geothermal wells globally. Recent
product advancements include
our TerraTherm™ water-based
system, designed specifically for
geothermal applications, as well as
our brine-tolerant, high-performance
friction reducer, which allows our
stimulation fluid customers to
utilize recycled water for pressure
pumping applications, reducing their
consumption of fresh water. Today,
more than ever, our customers
need solutions that meet the most
rigorous operational demands while
doing so in an environmentally-
sound manner, and Newpark remains
committed to delivering.
STRATEGIC GROWTH MARKETS
Despite the significant COVID
challenges we have experienced
in our international markets, we
are answering the needs of our
customers around the globe. We
entered the North Sea market
winning a contract for Wintershall
DEA, and we secured strategic
contract wins with ENI in Cyprus and
Montenegro, as well as a geothermal
drilling contract in the Azores. Our
commitment to a capital-light,
customer driven geographical
expansion model will continue to
provide us with opportunities for
growth around the world.
PORTFOLIO EXPANSION
We continue to build out our
comprehensive portfolio, expanding
our line of Drilling, Completion
and Stimulation offerings, adding
new technologies and services that
provide our customers with a full
range of fluids-focused solutions.
Our ClearDepth™ and ClearTrack™
Engineering Modeling & Simulation
Software are taking our capabilities
to the next level as we provide digital
solutions for effective planning and
flawless execution on our fluids
projects.
CUSTOMER FOCUS
While it is our mission to offer the
best products and solutions to
our customers, we also provide
an unmatched customer service
experience. The Newpark Service
Advantage™ encompasses our
commitment to deliver creative
solutions for our customers’
challenges, proactively identifying
problems as well as pinpointing
opportunities for improvement.
This customer-focus is engrained in
our culture, and it is also recognized
across the industry. In the prestigious
EnergyPoint 2020 Oilfield Services
Customer Satisfaction Survey,
Newpark came top in 5 categories
and ranked first overall out of 33
major service companies, picking
up the ‘Total Satisfaction’ award.
Additionally, in the 2020 Kimberlite
Research Drilling Fluids report
which surveyed 200 global Oil &
Gas companies, customers rated
Newpark the best in all 7 categories
of this prestigious survey. This
recognition of our best-in-class
customer experience continues to
reinforce our position in the market
as the preferred supplier and partner
of choice.
FINANCIAL
HIGHLIGHTS
Total Revenues ($MIL)
Cash from Operations ($MIL)
1,000
900
800
700
600
500
400
300
200
100
-
250
200
150
100
50
-
80
70
60
50
40
30
20
10
-
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
North America
International
Industrial Solutions Revenues ($MIL)
Fluids Systems Revenues ($MIL)
800
700
600
500
400
300
200
100
-
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-02960
Newpark Resources, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
72-1123385
(I.R.S. Employer Identification No.)
9320 Lakeside Boulevard, Suite 100
The Woodlands, Texas
(Address of principal executive offices)
77381
(Zip Code)
Registrant’s telephone number, including area code: (281) 362-6800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
Rights to Purchase Series D Junior Participating
Preferred Stock
NR
N/A
Securities registered pursuant to Section 12(g) of the Act: None
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer ☐
☑
Accelerated filer
Smaller reporting company ☑
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☑
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by
reference to the price at which the common equity was last sold as of June 30, 2020, was $196.6 million. The aggregate market value
has been computed by reference to the closing sales price on such date, as reported by The New York Stock Exchange.
As of February 19, 2021, a total of 90,954,157 shares of common stock, $0.01 par value per share, were outstanding.
Pursuant to General Instruction G(3) to this Form 10-K, the information required by Items 10, 11, 12, 13 and 14 of Part III hereof is
incorporated by reference from the registrant’s definitive Proxy Statement for its 2021 Annual Meeting of Stockholders.
Documents Incorporated by Reference:
NEWPARK RESOURCES, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
ITEM 5.
ITEM 6.
ITEM 7.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
ITEM 16.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibit and Financial Statement Schedules
Form 10-K Summary
Signatures
3
3
8
17
18
18
18
18
19
21
22
38
40
71
71
73
73
73
73
73
73
73
73
74
79
80
1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995, as amended. We also may provide oral or written forward-looking statements in other
materials we release to the public. 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 forward-looking statements reflect the current views of our
management; however, various risks, uncertainties, contingencies, and other factors, some of which are beyond our control, are
difficult to predict and could cause our actual results, performance, or achievements to differ materially from those expressed
in, or implied by, these statements.
We assume no obligation to update, amend, or clarify publicly any forward-looking statements, whether as a result of
new information, future events, or otherwise, except as required by securities laws. In light of these risks, uncertainties, and
assumptions, the forward-looking events discussed in this Annual Report on Form 10-K might not occur.
For further information regarding these and other factors, risks, and uncertainties that could cause actual results to
differ, we refer you to the risk factors set forth in Item 1A "Risk Factors" in this Annual Report on Form 10-K.
2
ITEM 1. Business
General
PART I
Newpark Resources, Inc. is a geographically diversified supplier providing products, as well as rentals and services.
We operate our business through two reportable segments: Fluids Systems and Industrial Solutions. Our Fluids Systems
segment provides customized drilling, completion, and stimulation fluids solutions to oil and natural gas exploration and
production (“E&P”) customers primarily in North America and Europe, the Middle East and Africa (“EMEA”), as well as
certain countries in Asia Pacific and Latin America. Our Industrial Solutions segment includes our Site and Access Solutions
business (historically reported as the Mats and Integrated Services segment), along with our Industrial Blending operations. Site
and Access Solutions provides composite matting system rentals utilized for temporary worksite access, along with related site
construction and services to customers in various markets including electrical transmission & distribution, E&P, pipeline,
renewable energy, petrochemical, construction and other industries, primarily in the United States and Europe. We also sell our
manufactured composite mats to customers around the world. Our Industrial Blending operations began in 2020, leveraging our
chemical blending capacity and technical expertise to enter targeted industrial end-markets.
Newpark Resources, Inc. was organized in 1932 as a Nevada corporation. In 1991, we changed our state of
incorporation to Delaware. Our principal executive offices are located at 9320 Lakeside Boulevard, Suite 100, The Woodlands,
Texas 77381. Our telephone number is (281) 362-6800. You can find more information about us on our website located at
www.newpark.com. We file or furnish annual, quarterly and current reports, proxy statements and other documents with the
Securities and Exchange Commission (“SEC”). Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our
Current Reports on Form 8-K and any amendments to those reports are available free of charge through our website. These
reports are available as soon as reasonably practicable after we electronically file these materials with, or furnish them to, the
SEC. Our Code of Ethics, our Corporate Governance Guidelines, our Audit Committee Charter, our Compensation Committee
Charter and our Nominating and Corporate Governance Committee Charter are also posted to the corporate governance section
of our website. We make our website content available for informational purposes only. It should not be relied upon for
investment purposes, nor is it incorporated by reference in this Form 10-K. The SEC also maintains a website at www.sec.gov
that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the
SEC, including us.
When referring to Newpark Resources, Inc. (“Newpark,” the “Company,” “we,” “our,” or “us”), the intent is to refer to
Newpark Resources, Inc. and its subsidiaries as a whole or on a segment basis, depending on the context in which the
statements are made. The reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements
contained in Item 8 “Financial Statements and Supplementary Data.”
Segment Name Change
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.
Industry Fundamentals
Consistent with our long-term strategy as approved by our Board of Directors, the Company has been focused in
recent years on expanding our presence in a variety of industrial end-markets, which provide growth opportunities and help
reduce our dependency on the volatile E&P industry, as well as improve the stability in cash flow generation and returns on
invested capital. However, our Fluids Systems operating results remain dependent on oil and natural gas drilling activity levels
in the markets we serve and the nature of the drilling operations (including the depth and whether the wells are drilled vertically
or horizontally), which governs the revenue potential of each well. Drilling activity levels, in turn, depend on a variety of
factors, including oil and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions. Oil and
natural gas prices and activity are cyclical and volatile, and this market volatility has a significant impact on our operating
results. In the transition to clean-renewable energy sources, we see an expanding role for geothermal in the coming years,
although this application remains a small portion of the global energy market today.
While our Fluids Systems revenue potential is driven by a number of factors including those described above, rig
count data remains the most widely accepted indicator of drilling activity. The average Baker Hughes Company North
American Rig Count was 522 in 2020, compared to 1,077 in 2019, and 1,223 in 2018. During 2019, U.S. rig count steadily
3
declined, exiting the year at 805 active rigs, a 26% decline from the end of 2018. During March 2020, oil prices collapsed due
to geopolitical events along with the worldwide effects of the COVID-19 pandemic. As a result, average U.S. rig count declined
52% in 2020 from 2019. After reaching a low of 244 in mid-August, the U.S. rig count has since increased to 397 as of
February 19, 2021. We anticipate that market activity will continue to improve from current levels, although the ongoing
impacts of the COVID-19 pandemic and an uncertain economic environment make the timing and pace of recovery difficult to
predict.
Outside of North America land markets, drilling activity is generally more stable as this drilling activity is based on
longer-term economic projections and multi-year drilling programs, which typically reduces the impact of short-term changes in
commodity prices on overall drilling activity. However, operations in several countries in the EMEA region experienced
activity disruptions and project delays beginning in March 2020 and continuing into 2021, driven by government-imposed
restrictions on movements of personnel, quarantines of staffing, and logistical limitations as a result of the COVID-19
pandemic. We expect these disruptions and project delays will continue to impact international activity levels in the near-term,
and while we anticipate a general improvement in customer activity during 2021, the impact from the duration and magnitude
of the ongoing health pandemic and related government responses are very difficult to predict.
Our Industrial Solutions segment serves a variety of industries, providing temporary worksite access products and
services to the electrical transmission & distribution, E&P, pipeline, renewable energy, petrochemical, construction and other
industries. The demand for our products and services from customers in these industries is driven, in part, by infrastructure
construction and maintenance activity levels in these industries within the United States and the United Kingdom, including
required infrastructure investments to support energy transition efforts.
During 2020, demand for worksite access was negatively impacted by the COVID-19 pandemic, as customers delayed
product purchases and planned projects citing COVID-related market uncertainty, permitting delays, and logistical restrictions.
During the fourth quarter of 2020, customer activity began to recover and we expect that increased activity for both rental
projects and product sales to generally improve in 2021 as COVID-related restrictions on economic activity are lifted and our
customers gain confidence in the broader economic recovery.
Following our 2020 expansion into industrial blending, we provide disinfectants and industrial cleaning products to a
variety of industries, and intend to expand our customer base into other industrial markets. We believe that in the wake of
COVID-19, the near-term demand for disinfectant and industrial cleaning products will remain stable.
Reportable Segments
Fluids Systems
Our Fluids Systems segment provides drilling, completion, and stimulation fluids products and related technical
services to customers primarily in North America and EMEA, as well as certain countries in Asia Pacific and Latin America.
We offer customized solutions for highly technical oil, natural gas, and geothermal projects involving complex subsurface
conditions such as horizontal, directional, geologically deep, or drilling in deep water. These projects require high levels of
monitoring and technical support of the fluids system during the drilling process.
We also have industrial mineral grinding operations for barite, a critical raw material in drilling fluids systems, which
serve to support our activities in the North American drilling fluids market. We grind barite and other industrial minerals at four
facilities, including locations in Texas, Louisiana, and Tennessee, and use the resulting products in our drilling fluids systems
and also sell the products to third party users, including other drilling fluids companies. In addition, we sell a variety of other
minerals, principally to third-party industrial (non-oil and natural gas) markets.
Raw Materials — We believe that our sources of supply for materials and equipment used in our fluids business are
adequate for our needs. Our specialty milling operation is our primary supplier of barite used in our North American fluids
business. Our mills obtain raw barite ore under supply agreements from foreign sources, primarily China and India. We obtain
other materials used in the fluids business from various third-party suppliers. We have encountered no significant shortages or
delays in obtaining these raw materials.
Technology — Proprietary technology and systems, such as our Kronos™ deepwater drilling fluid systems, are an
important aspect of our business strategy. We seek patents and licenses on new developments whenever we believe it creates a
competitive advantage in the marketplace. We own patent rights in a family of high-performance water-based fluids systems,
which we market as Evolution® and DeepDrill® systems, which are designed to enhance drilling performance while also
providing a variety of environmental benefits relative to traditional oil-based fluids. We also rely on a variety of unpatented
proprietary technologies and know-how in many of our applications. We believe that our reputation in the industry, the range of
services we offer, ongoing technical development and know-how, responsiveness to customers, and understanding of regulatory
requirements are of equal or greater competitive significance than our existing proprietary rights.
4
Competition — We face competition from larger companies, including Halliburton, Schlumberger, and Baker Hughes,
which compete vigorously on fluids performance and/or price. In addition, these companies have broad product and service
offerings in addition to their fluids systems. We also have smaller regional competitors competing with us primarily on price
and local relationships. We believe that the principal competitive factors in our businesses include a combination of technical
proficiency, reputation, price, reliability, quality, breadth of services offered, and experience, and that our competitive position
is enhanced by our best-in-class customer experience and value enhancing products and services.
Customers — Our customers are principally major integrated and independent oil and natural gas E&P companies
operating in the markets that we serve. During 2020, approximately 62% of segment revenues were derived from the 20 largest
segment customers, of which the two largest customers represented 11% and 10%, respectively, of our segment revenues. The
segment also generated 57% of its revenues domestically during 2020. In North America, we primarily perform services either
under short-term standard contracts or under “master” service agreements. Internationally, some customers issue multi-year
contracts, but many are on a well-by-well or project basis. As most agreements with our customers can be terminated upon
short notice, our backlog is not significant. We do not derive a significant portion of our revenues from government contracts.
5
Industrial Solutions
Our Industrial Solutions segment provides composite matting system rentals utilized for temporary worksite access,
along with related site construction and services to customers in various markets including electrical transmission &
distribution, E&P, pipeline, renewable energy, petrochemical, construction and other industries, primarily in the United States
and Europe. We also sell our manufactured composite mats to customers around the world. In addition, we began leveraging
our chemical blending capacity and technical expertise into industrial blending operations, and in response to the increasing
market demand for cleaning products resulting from the COVID-19 pandemic, began producing disinfectants and industrial
cleaning products in 2020.
We manufacture our recyclable DURA-BASE® Advanced Composite Mats for use in our rental operations as well as
for third-party sales. Our matting systems provide environmental protection and ensure all-weather access to sites with unstable
soil conditions. We continue to expand our product offering, which now include the EPZ Grounding System™ for enhanced
safety and efficiency for contractors working on power line maintenance and construction projects and the T-REX™ automated
mat cleaning system to provide customers with a cost effective and environmentally sensitive system to clean composite mats
on site. We continue to make investments in matting and component innovation to deliver further market differentiation,
environmental benefits, and competitive advantage to our business.
Raw Materials — The resins, chemicals, and other materials used to manufacture composite mats are widely available.
Resin is the largest material component in the manufacturing of our composite mat products. We believe that our sources of
supply for materials used in our business are adequate for our needs. We are not dependent upon any one supplier and we have
encountered no significant shortages or delays in obtaining any raw materials.
Technology — We have obtained patents related to the design and manufacturing of our recyclable DURA-BASE mats
and several of the components, as well as other products and systems related to these mats (including the connecting pins and
the EPZ Grounding System™), although certain key patents of the DURA-BASE system expired in May 2020. Using
proprietary technology and systems is an important aspect of our business strategy. We believe the lightweight design of our
matting system provides a distinct environmental advantage for our customers as compared to alternative wood mat products in
the market, by eliminating deforestation required to produce wood mat products and also reducing CO2 emissions associated
with product transportation. While we continue to enhance the performance, environmental, and safety benefits of our products
and add to our patent portfolio, we believe that our scale and reputation in the industry, the range of services we offer, ongoing
technical development and know-how, responsiveness to customers, and understanding of regulatory requirements also have
competitive significance in the markets we serve.
Competition — Our market is fragmented and competitive, with many competitors providing various forms of site
preparation products and services. The composite mat sales component of our business is not as fragmented as the rental and
services components with only a few competitors providing various alternatives to our DURA-BASE composite mat products,
such as Signature Systems Group and ISOKON. This is due to many factors, including large capital start-up costs and
proprietary technology associated with these products. We believe that the principal competitive factors in our businesses
include reputation, product capabilities, price, innovation through R&D, and reliability, and that our competitive position is
enhanced by our proprietary products, manufacturing expertise, services, and experience.
Customers — Our customers are principally utility companies, infrastructure construction companies, and oil and
natural gas E&P companies operating in the markets that we serve. Wood mats and stone continue to be the primary solutions
utilized for temporary worksite access across industries, though composite matting solutions continue to gain market share.
During 2020, approximately 56% of our segment revenues were derived from the 20 largest segment customers. No single
customer accounted for more than 10% of our segment revenues. The segment also generated 91% of its revenues domestically
during 2020. Typically, we perform services either under short-term contracts or rental service agreements. As most agreements
with our customers are cancelable upon short notice, our backlog is not significant. We do not derive a significant portion of
our revenues from government contracts.
6
Human Capital
We are committed to providing a diverse and inclusive environment for all employees and for those with whom we
conduct business. We recognize our greatest assets are our people, and our long-term sustainability depends on our ability to
attract, motivate, and retain the highly talented individuals that make up the Newpark team, while protecting each other like
family and sustaining the environment in which we work. We appreciate our people and their achievements as we recognize
they are integral to fully implementing our business strategy, which directly translates to improving our long-term profitability
and increasing shareholder value.
As a global company, the Newpark team supporting our customers spans more than 20 countries, and more than half
of our employees reside outside of the United States. Our global footprint provides natural diversity within our organization and
serves as a foundation to support an inclusive approach to everything that we do. At December 31, 2020, we employed
approximately 1,560 full and part-time personnel, none of which are represented by labor unions. We consider our relations
with our employees to be satisfactory and through various company-culture initiatives, strive to reinforce our commitment to
our Core Values of safety, integrity, respect, excellence, and accountability. The following charts present the geographic
composition of our revenues and workforce.
Governmental Regulations
Our business exposes us to regulatory risks associated with the various industries that we serve, including
governmental regulations relating to the oil and natural gas industry in general, as well as environmental, health, and safety
regulations that have specific application to our business. Our activities are impacted by various federal and state regulatory
agencies, and provincial pollution control, health, and safety programs that are administered and enforced by regulatory
agencies.
We have implemented various procedures designed to ensure compliance with applicable regulations and reduce the
risk of damage or loss. These include specified handling procedures and guidelines for waste, ongoing employee training, and
monitoring, as well as maintaining insurance coverage. We also utilize a corporate-wide health, safety, and environmental
management system (“HSEMS”). The HSEMS is designed to capture information related to the planning, decision-making, and
general operations of environmental regulatory activities within our operations. We also use the HSEMS to capture the
information generated by regularly scheduled independent audits that are performed to validate the findings of our internal
monitoring and auditing procedures.
7
ITEM 1A. Risk Factors
The following summarizes the most significant risks to our business. In addition to these risks, we are subject to a
variety of risks that affect many other companies generally, as well as other risks and uncertainties that are not known to us as
of the date of this Annual Report. Our success will depend, in part, on our ability to anticipate and effectively manage these and
other risks. Any of these risk factors, either individually or in combination, could have a material adverse effect on our results
of operations or financial condition, or prevent us from meeting our profitability or growth objectives. If you hold our securities
or are considering an investment in our securities, you should carefully consider the following risks, together with the other
information contained in this Annual Report.
Business and Industry Risks
Risks Related to the COVID-19 Pandemic
The effects of the COVID-19 pandemic, including actions taken by businesses and governments, resulted in a
significant and swift reduction in U.S. and international economic activity. These effects adversely affected the demand for and
price of oil and natural gas, as well as the demand for our products and services. The collapse in the demand for oil caused by
this unprecedented global health and economic crisis, coupled with oil oversupply, has had, and may continue to have, an
adverse impact on our customers’ demand for the products and services we provide, which in turn could have a material and
adverse impact on our financial condition, results of operations, and cash flows. In response to the adverse impacts of the
COVID-19 pandemic, we initiated a number of actions during 2020 aimed at conserving cash and protecting our liquidity,
including reducing our workforce and cost structure. However, our business contains high levels of fixed costs, including
significant facility and personnel expenses, which limits the effectiveness of such actions.
While the full impact of the COVID-19 outbreak is not yet known, we are closely monitoring the effects of the
pandemic on commodity demands, our customers and suppliers activities, as well as our operations and employees. These
effects have included, and may continue to include, adverse revenue and profitability effects, delays in planned customer
projects, and disruptions to our operations.
The extent to which our operating and financial results are affected by COVID-19 will depend on various factors
beyond our control, such as the duration and scope of the pandemic; additional actions by businesses and governments in
response to the pandemic; and the speed and effectiveness of responses to combat the virus, including the availability and
public acceptance of effective treatments or vaccines, and how quickly and to what extent normal economic activity can
resume, all of which are highly uncertain and cannot be predicted. COVID-19, and the volatile regional and global economic
conditions stemming from the pandemic could also give rise to or aggravate other risk factors that we have identified below.
COVID-19 could also materially and adversely impact our operating and financial results in a manner that is not currently
known to us or that we do not currently consider to present material risks to our operations.
Risks Related to the Worldwide Oil and Natural Gas Industry
Although we continue to diversify our operations and expand into a variety of end-markets, we derive a significant
portion of our revenues from customers in the worldwide oil and natural gas industry; therefore, our risk factors include those
factors that impact the demand for oil and natural gas. Spending by our customers for exploration, development, and production
of oil and natural gas is based on a number of factors, including expectations of future hydrocarbon demand, energy prices, the
risks associated with developing reserves, our customers’ ability to finance exploration and development of reserves, regulatory
developments, and the future value of the reserves. Reductions in customer spending levels adversely affect the demand for our
products and services, and consequently, our revenues and operating results. The key risk factors that we believe influence the
worldwide oil and natural gas markets are discussed below.
Demand for oil and natural gas is subject to factors beyond our control
Demand for oil and natural gas, and consequently the demand for our products and services, is highly correlated with
global economic growth and in particular by the economic growth of countries such as the U.S., India, China, and developing
countries in Asia and the Middle East. Weakness in global economic activity, as well as the global energy transition, could
reduce demand for oil and natural gas and result in lower oil and natural gas prices. In addition, demand for oil and natural gas
has been and could continue to be impacted by the effects of global health epidemics and concerns (such as the COVID-19
pandemic) and by environmental regulations, including cap and trade legislation, regulation of hydraulic fracturing, and carbon
taxes. Our customers in the oil and natural gas industry have been significantly and adversely impacted by the COVID-19
pandemic, which has adversely affected the demand for and price of oil and natural gas. The pace of demand recovery from the
COVID-19 pandemic disruption is unknown, and there is significant uncertainty regarding the long-term impact to global oil
demand, which will ultimately depend on various factors and consequences beyond our control. Continued weakness or
deterioration of the global economy could further reduce our customers’ spending levels and could reduce our revenues and
operating results.
8
Supply of oil and natural gas is subject to factors beyond our control
Supply of oil and natural gas can be affected by the availability of quality drilling prospects, exploration success, and
the number and productivity of new wells drilled and completed, as well as the rate of production and resulting depletion of
existing wells. Oil and natural gas storage inventory levels are indicators of the relative balance between supply and demand. In
recent years, advancements in drilling and completion methods and technologies have contributed to a significant increase in oil
production, particularly in the U.S. market. Supply can also be impacted by the degree to which individual Organization of
Petroleum Exporting Countries (“OPEC”) nations and other large oil and natural gas producing countries are willing and able to
control production and exports of hydrocarbons, to decrease or increase supply, and to support their targeted oil price or meet
market share objectives. Any of these factors could affect the supply of oil and natural gas and could have a material effect on
our results of operations.
Volatility of oil and natural gas prices can adversely affect demand for our products and services
Volatility of oil and natural gas prices can also impact our customers’ activity levels and spending for our products and
services. The level of energy prices is important to the cash flow for our customers and their ability to fund exploration and
development activities. Expectations about future commodity prices and price volatility are important for determining future
spending levels. Our customers also take into account the volatility of energy prices and other risk factors by requiring higher
returns for individual projects if there is higher perceived risk.
Our customers’ activity levels, spending for our products and services, and ability to pay amounts owed us could be
impacted by the ability of our customers to access equity or credit markets
Our customers’ activity levels are dependent on their ability to access the funds necessary to develop oil and natural
gas prospects and their ability to generate sufficient returns on investments. In recent years, limited access to external sources of
funding, including the impacts of the global energy transition and pressures from their investors to generate consistent cash
flow has, at times, caused customers in the oil and natural gas industry to reduce their capital spending plans. In addition, a
reduction of cash flow to our customers resulting from declines in commodity prices or the lack of available debt or equity
financing may impact the ability of our customers to pay amounts owed to us.
A heightened focus by our customers on cost-saving measures rather than the quality of products and services could
reduce the demand for our products and services
Our customers are continually seeking to implement measures aimed at greater cost savings, which may include the
acceptance of lesser quality products and services in order to improve short term cost efficiencies as opposed to total cost
efficiencies. This focus has been increased by the COVID-19 pandemic, as customers have and are expected to continue to limit
their capital spending plans in light of the adverse impacts of the COVID-19 pandemic on the oil and natural gas industry. The
continued implementation of these kinds of cost saving measures could reduce the demand or pricing for our products and
services and have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Customer Concentration and Reliance on the U.S. E&P Market
In 2020, approximately 49% of our consolidated revenues were derived from our 20 largest customers, although no
customer accounted for more than 10% of our consolidated revenues. While we are not dependent on any one customer or
group of customers, the loss of one or more of our significant customers could have an adverse effect on our results of
operations and cash flows. In addition, approximately 67% of our consolidated revenues were derived from our U.S. operations,
including approximately $225 million from the exploration and production market.
Over the past five years, the North America oil and natural gas market has experienced periods of significant declines
which reduced the demand for our services and negatively impacted customer pricing in our North American operations. Due in
part to these changes, our quarterly and annual operating results have fluctuated significantly and may continue to fluctuate in
future periods. Because our business has substantial fixed costs, including significant facility and personnel expenses, downtime
or low productivity due to reduced demand could have a material adverse effect on our business, financial condition, and results
of operations.
While end-market diversification into a variety of non-E&P markets, as well as geographic diversification into the U.S.
offshore and foreign E&P markets, is intended over the long term to grow the business and reduce our dependency on the
cyclical North American oil and natural gas market, these efforts may not be successful or sufficient to offset this volatility.
Risks Related to International Operations
We have significant operations outside of the U.S., including certain areas of Europe, the Middle East and Africa, as
well as Canada. In 2020, our international operations generated approximately 33% of consolidated revenues. Substantially all
of our cash balance at December 31, 2020 resides within our international subsidiaries. Algeria represented our largest
9
international market with our Algerian operations representing 8% of our consolidated revenues for 2020 and 5% of our total
assets at December 31, 2020, including 26% of our total cash balance at December 31, 2020.
In addition, we may seek to expand to other areas outside the U.S. in the future. International operations are subject to
a number of risks and uncertainties which could negatively impact our results from operations, including:
▪ difficulties and cost associated with complying with a wide variety of complex foreign laws, treaties, and
regulations;
▪ uncertainties in or unexpected changes in regulatory environments or tax laws;
▪
legal uncertainties, timing delays, and expenses associated with tariffs, export licenses, and other trade barriers;
▪ difficulties enforcing agreements and collecting receivables through foreign legal systems;
▪
▪
▪
▪
▪
risks associated with failing to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, export
laws, and other similar laws applicable to our operations in international markets;
exchange controls or other limitations on international currency movements, including restrictions on the
repatriation of funds to the U.S. from certain countries;
sanctions imposed by the U.S. government that prevent us from engaging in business in certain countries or with
certain counter-parties;
expropriation or nationalization of assets;
inability to obtain or preserve certain intellectual property rights in the foreign countries in which we operate;
▪ our inexperience in certain international markets;
▪ health emergencies or pandemics (such as the COVID-19 pandemic);
▪
fluctuations in foreign currency exchange rates;
▪ political and economic instability; and
▪
acts of terrorism.
In addition, several North African markets in which we operate, including Tunisia, Egypt, Libya, and Algeria have
experienced social and political unrest in past years, which, when they occur, negatively impact our operating results and can
include the temporary suspension of our operations.
Risks Related to Operating Hazards Present in the Oil and Natural Gas Industry and Substantial Liability Claims,
Including Catastrophic Well Incidents
We are exposed to significant health, safety, and environmental risks. Our operations are subject to hazards present in
the oil and natural gas industry, such as fires, explosions, blowouts, oil spills, and leaks or spills of hazardous materials (both
onshore and offshore), as well as hazards in the electrical utility industry, such as exposure to high voltage electrocution, among
other risks. These incidents as well as accidents or problems in normal operations can cause personal injury or death and
damage to property or the environment. From time to time, customers seek recovery for damage to their equipment or property
that occurred during the course of our service obligations. Damage to our customers’ property and any related spills of
hazardous materials could be extensive if a major problem occurs.
Generally, we rely on contractual indemnities, releases, limitations on liability with our customers, and insurance to
protect us from potential liability related to such events. However, our insurance and contractual indemnification may not be
sufficient or effective to protect us under all circumstances or against all risks. In addition, our customers’ changing views on
risk allocation together with deteriorating market conditions could force us to accept greater risks to obtain new business or
retain renewing business, and could result in us losing business if we are not prepared to take such risks. Moreover, we may not
be able to maintain insurance at levels of risk coverage or policy limits that we deem adequate. Any damages caused by our
services or products that are not covered by insurance or contractual indemnification, or are in excess of policy limits or subject
to substantial deductibles, could adversely affect our financial condition, results of operations, and cash flows. See “Risks
Related to the Inherent Limitations of Insurance Coverage” below for additional information.
Risks Related to Contracts that Can Be Terminated or Downsized by Our Customers Without Penalty
Many of our fixed-term contracts contain provisions permitting early termination by the customer at their convenience,
generally without penalty, and with limited notice requirements. In addition, many of our contracts permit our customers to
decrease the products or services without penalty, which could result in a decrease in our revenues and profitability. As a result,
you should not place undue reliance on the strength of our customer contracts or the terms of those contracts.
Risks Related to Product Offering Expansion
As a key component of our long-term strategy to diversify our revenue streams generated from both operating
segments, we seek to continue to expand our product and service offerings and enter new customer markets with our existing
10
products. As with any market expansion effort, new customer and product markets require additional capital investment and
include inherent uncertainties regarding customer expectations, industry-specific regulatory requirements, product performance,
and customer-specific risk profiles. In addition, we likely will not have the same level of operational experience with respect to
the new customer and product markets as will our competitors. As such, new market entry is subject to a number of risks and
uncertainties, which could have an adverse effect on our business, financial condition, or results of operations.
Risks Related to Our Ability to Attract, Retain, and Develop Qualified Leaders, Key Employees, and Skilled
Personnel
Our failure to attract, retain, and develop qualified leaders and key employees at our corporate, divisional, or regional
headquarters could have a material adverse effect on our business. In addition, all of our businesses are highly dependent on our
ability to attract and retain highly-skilled product specialists, technical sales personnel, and service personnel. The market for
qualified employees is extremely competitive. If we cannot attract and retain qualified personnel, our ability to compete
effectively and grow our business will be severely limited. Also, a significant increase in wages paid by competing employers
could result in a reduction in our skilled labor force or an increase in our operating costs.
Risks Related to the Availability of Raw Materials
Our ability to provide products and services to our customers is dependent upon our ability to obtain raw materials
necessary to operate our business.
Our Industrial Solutions business is highly dependent on the availability of high-density polyethylene (“HDPE”),
which is the primary raw material used in the manufacture of our composite mats. The cost of HDPE can vary significantly
based on the energy costs of the producers of HDPE, demand for this material, and the capacity or operations of the plants used
to make HDPE. Should the cost of HDPE increase, we may not be able to increase our customer pricing to cover our costs,
which could result in a reduction in future profitability.
Our Fluids Systems business is highly dependent on the availability of barite, which is a naturally occurring mineral
that constitutes a significant portion of our fluids systems. We currently secure the majority of our barite ore from foreign
sources, primarily China and India. The availability and cost of barite ore is dependent on factors beyond our control, including
transportation, political priorities, U.S. tariffs, and government-imposed export fees in the exporting countries, as well as the
impact of weather and natural disasters. The future supply of barite ore from existing sources may be inadequate to meet the
market demand, particularly during periods of increasing world-wide demand, which could ultimately restrict industry activity
or our ability to meet our customers’ needs.
Risks Related to Business Acquisitions and Capital Investments
Our ability to successfully execute our business strategy will depend, among other things, on our ability to make
capital investments and acquisitions which provide us with financial benefits. These acquisitions and investments are subject to
a number of risks and uncertainties, including:
▪
▪
incorrect assumptions regarding business activity levels or results from our capital investments, acquired
operations, or assets;
insufficient revenues to offset liabilities assumed;
▪ potential loss of significant revenue and income streams;
▪
increased or unexpected expenses;
▪
▪
inadequate return of capital;
regulatory or compliance issues;
▪ potential loss of key employees, customers, or suppliers of the acquired company;
▪
the triggering of certain covenants in our debt agreements (including accelerated repayment);
▪ unidentified issues not discovered in due diligence;
▪
failure to complete a planned acquisition transaction or to successfully integrate the operations or management of
any acquired businesses or assets in a timely manner;
▪ diversion of management’s attention from existing operations or other priorities;
▪ unanticipated disruptions to our business associated with the implementation of our enterprise-wide operational and
financial system; and
▪ delays in completion and cost overruns associated with large capital investments.
Any of the factors above could have an adverse effect on our business, financial condition, or results of operations.
Additionally, the anticipated benefits of a capital investment or acquisition may not be realized fully or at all, or may take
longer to realize than expected.
11
Risks Related to Market Competition
We face competition in the Fluids Systems business from larger companies, including Halliburton, Schlumberger, and
Baker Hughes, which compete vigorously on fluids performance and/or price. In addition, these companies have broad product
and service offerings in addition to their drilling and completion fluids. At times, these larger companies attempt to compete by
offering discounts to customers to use multiple products and services, some of which we do not offer. We also have smaller
regional competitors competing with us mainly on price and local relationships.
Our competition in the Industrial Solutions business is fragmented, with many competitors providing various forms of
worksite access products and services. More recently, several competitors have begun marketing composite products to
compete with our DURA-BASE matting system. While we believe the design and manufacturing quality of our products
provide a differentiated value to our customers, many of our competitors seek to compete on pricing. In addition, certain patents
related to our DURA-BASE matting system have expired, and competitors may begin offering mats that include features
described in those patents. We have additional patents and pending patent applications on improvements to, features of, and
uses of the DURA-BASE matting system, but there is no assurance that our competitors will not be able to offer products that
are similar to these improvements, features, or uses of the DURA-BASE matting system.
Risks Related to Technological Developments and Intellectual Property in Our Industry
The market for our products and services is characterized by continual technological developments that generate
substantial improvements in product performance or service delivery. If we are not successful in continuing to develop new
products, enhancements, or improved service delivery that are accepted in the marketplace or that comply with industry
standards, we could lose market share to competitors, which could have a material adverse effect on our results of operations
and financial condition.
Our success can be affected by our development and implementation of new product designs and improvements, or
software developments, and by our ability to protect and maintain critical intellectual property assets related to these
developments. Although in many cases our products are not protected by any registered intellectual property rights, in other
cases we rely on a combination of patents and trade secret laws to establish and protect this proprietary technology. While
patent rights give the owner of a patent the right to exclude third parties from making, using, selling, and offering for sale the
inventions claimed in the patents, they do not necessarily grant the owner of a patent the right to practice the invention claimed
in a patent. It may also be possible for a third party to design around our patents. We do not have patents in every country in
which we conduct business and our patent portfolio will not protect all aspects of our business. When patent rights expire,
competitors are generally free to offer the technology and products that were covered by the patents. Additionally, the trade
secret laws of some foreign countries may not protect our proprietary technology in the same manner as the laws of the United
States.
We also protect our trade secrets by customarily entering into confidentiality and/or license agreements with our
employees, customers and potential customers, and suppliers. Our rights in our confidential information, trade secrets, and
confidential know-how will not prevent third parties from independently developing similar information. Publicly available
information (such as information in expired patents, published patent applications, and scientific literature) can also be used by
third parties to independently develop technology. We cannot provide assurance that this independently developed technology
will not be equivalent or superior to our proprietary technology.
We may from time to time engage in expensive and time-consuming litigation to determine the enforceability, scope,
and validity of our patent rights. In addition, we can seek to enforce our rights in trade secrets, or “know-how,” and other
proprietary information and technology in the conduct of our business. However, it is possible that our competitors may
infringe upon, misappropriate, violate or challenge the validity or enforceability of our intellectual property, and we may not
able to adequately protect or enforce our intellectual property rights in the future.
The tools, techniques, methodologies, programs, and components we use to provide our services may infringe upon the
intellectual property rights of others. Infringement claims generally result in significant legal and other costs, and may distract
management from running our business. Royalty payments under licenses from third parties, if applicable, could increase our
costs. Additionally, developing non-infringing technologies could increase our costs. If a license were not available, we might
not be able to continue providing a particular service or product, which could adversely affect our financial condition, results of
operations and cash flows.
Risks Related to Severe Weather, Natural Disasters, and Seasonality
We have significant operations located in market areas around the world that are negatively impacted by severe
adverse weather events or natural disasters such as hurricanes in the U.S. Gulf of Mexico, fires and typhoons in Australia,
droughts across the U.S. and excessive rains outside of the U.S. A potential result of climate change is more frequent or more
severe weather events or natural disasters. To the extent such weather events or natural disasters become more frequent or
12
severe, disruptions to our business and costs to repair damaged facilities could increase. Additionally, there are market areas
around the world in which our operations are subject to seasonality such as Canada where the Spring “break-up” (an industry
term used to describe the time of year when the frost comes out of the ground causing the earth to become soft and muddy and
strict weight restrictions are implemented by the government to prevent potholes forming on roads) results in a significant
slowdown in the oil and natural gas industry and our fluids business each year. Such adverse weather events and seasonality can
disrupt our operations and result in damage to our properties, as well as negatively impact the activity and financial condition of
our customers.
Indebtedness Risk
Risks Related to the Cost and Continued Availability of Borrowed Funds, including Risks of Noncompliance with
Debt Covenants
We use borrowed funds as an integral part of our long-term capital structure and our future success is dependent upon
continued access to borrowed funds to support our operations. The availability of borrowed funds on reasonable terms is
dependent on the condition of credit markets and financial institutions from which these funds are obtained. Adverse events in
the financial markets, or restrictions on lenders ability or willingness to lend to companies that have significant exposure to
customers in the oil and natural gas industry, may significantly reduce the availability of funds, which may have an adverse
effect on our cost of borrowings and our ability to fund our business strategy. Our ability to meet our debt service requirements
and the continued availability of funds under our existing or future loan agreements is dependent upon our ability to generate
operating income and generate sufficient cash flow to remain in compliance with the covenants in our debt agreements. This, in
turn, is subject to the volatile nature of the oil and natural gas industry, and to competitive, economic, financial, and other
factors that are beyond our control.
We fund our ongoing operational needs through a $200.0 million asset-based revolving credit agreement (as amended,
the “ABL Facility”). In addition, we have $66.9 million of unsecured convertible senior notes (“Convertible Notes”)
outstanding as of December 31, 2020 that mature in December 2021. In February 2021, we repurchased $13.0 million of our
Convertible Notes leaving $53.9 million outstanding as of February 25, 2021. Borrowing availability under the ABL Facility is
calculated based on eligible U.S. accounts receivable, inventory, and, subject to satisfaction of certain financial covenants as
described below, composite mats included in the rental fleet, net of reserves and limits on such assets included in the borrowing
base calculation. To the extent pledged by us, the borrowing base calculation also includes the amount of eligible pledged cash.
The lender may establish such reserves, in part based on appraisals of the asset base, and other limits at its discretion which
could reduce the amounts otherwise available under the ABL Facility. Availability associated with eligible rental mats will also
be subject to maintaining a minimum consolidated fixed charge coverage ratio of 1.5 to 1.0 and at least $1.0 million of
operating income for the Site and Access Solutions business, each calculated based on a trailing twelve-month period.
As of February 25, 2021, our total availability under the ABL Facility was $88.2 million, of which $21.4 million was
drawn, resulting in remaining availability of $66.8 million. This availability under the ABL Facility excludes $25.0 million
related to eligible rental mats as we failed to satisfy the required minimum consolidated fixed charge coverage ratio, as
measured on the trailing twelve-month period ended December 31, 2020.
The ABL Facility terminates in March 2024; however, the ABL Facility has a springing maturity date that will
accelerate the maturity of the ABL Facility to September 1, 2021 if, prior to such date, our Convertible Notes have not been
repurchased, redeemed, refinanced, exchanged or otherwise satisfied in full or we have not escrowed an amount of funds, that
together with the amount that we establish as a reserve against our borrowing capacity, is sufficient for the future settlement of
the Convertible Notes at their maturity. The ABL Facility requires a minimum consolidated fixed charge coverage ratio of 1.25
to 1.0 calculated based on the trailing twelve-month period ended June 30, 2021 and remaining unused availability of at least
$25.0 million to utilize borrowings or assignment of availability under the ABL Facility towards funding the repayment of the
Convertible Notes. We expect to satisfy the minimum consolidated fixed charge coverage ratio as required to include eligible
rental mats in the borrowing availability under the ABL Facility following the second quarter of 2021 and expect to satisfy the
June 30, 2021 ABL Facility requirements to be able to utilize borrowings or assignment of availability under the ABL Facility
towards funding the repayment of the Convertible Notes prior to September 1, 2021. If we are unable to satisfy the minimum
consolidated fixed charge coverage ratio following the second quarter of 2021, we would further evaluate options, which may
include a waiver or amendment to our ABL Facility. Any waiver or amendment to the ABL Facility, if required, would be
expected to increase the cost of our borrowings and may impose additional limitations over certain types of activities, and we
can give no assurance that we will be able to obtain such amendment or waiver on favorable terms or at all.
13
The ABL Facility is a senior secured obligation, secured by first liens on substantially all of our U.S. tangible and
intangible assets, and a portion of the capital stock of our non-U.S. subsidiaries has also been pledged as collateral. The ABL
Facility contains customary operating covenants and certain restrictions that limit our ability to, among other things, incur
additional debt, incur liens, pay dividends, sell properties or assets, make investments, merge or consolidate with another entity,
acquire property or assets, complete affiliate transactions, undertake stock repurchases and make other restricted payments. The
ABL Facility also requires a minimum consolidated fixed charge coverage ratio of 1.0 to 1.0 calculated based on a trailing
twelve-month period if availability under the ABL Facility falls below $22.5 million.
If we are unable to make required payments under the ABL Facility or other indebtedness of more than $25.0 million,
or if we fail to comply with the various covenants and other requirements of the ABL Facility, we would be in default
thereunder, which would permit the holders of the indebtedness to accelerate the maturity thereof and proceed against their
collateral. In the event any outstanding indebtedness in excess of $25.0 million is accelerated, this could also cause an event of
default under our Convertible Notes. The acceleration of any of our indebtedness and the election to exercise any remedies
could have a material adverse effect on our business and financial condition and we may not be able to make all of the required
payments or borrow sufficient funds to refinance such indebtedness.
If we are unable to generate sufficient cash flows to repay our indebtedness when due or to fund our other liquidity
needs, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional
financing. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a
default on our debt obligations and could have a material adverse effect on our business and financial condition.
Legal and Regulatory Risks
Risks Related to Environmental Laws and Regulations
We are responsible for complying with numerous federal, state, local, and foreign laws, regulations and policies that
govern environmental protection, zoning and other matters applicable to our current and past business activities, including the
activities of our former subsidiaries. Failure to remain compliant with these laws, regulations and policies may result in, among
other things, fines, penalties, costs, investigation and/or cleanup of contaminated sites and site closure obligations, costs of
remedying noncompliance, termination or suspension of certain operations, or other expenditures. We could be exposed to
strict, joint and several liability for cleanup costs, natural resource damages and other damages as a result of our conduct that
was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties. Private
parties may also pursue legal actions against us based on alleged non-compliance with or liability under certain of these laws,
rules and regulations. Further, any changes in the current legal and regulatory environment could impact industry activity and
the demands for our products and services, the scope of products and services that we provide, or our cost structure required to
provide our products and services, or the costs incurred by our customers.
Many of the markets for our products and services are dependent on the continued exploration for and production of
fossil fuels (predominantly oil and natural gas). In recent years, the topic of climate change has received increased attention
worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including
carbon dioxide attributed to the use of fossil fuels, which has led to significant legislative and regulatory efforts to limit
greenhouse gas emissions. The Environmental Protection Agency (the “EPA”) and other domestic and foreign regulatory
agencies have adopted regulations that potentially limit greenhouse gas emissions and impose reporting obligations on large
greenhouse gas emission sources. In addition, the EPA has adopted rules that could require the reduction of certain air
emissions during exploration and production of oil and natural gas. More recently, President Biden’s administration officially
reentered the United States into the Paris Agreement in February 2021, which requires signatory countries to review and
“represent a progression” in their intended nationally determined contributions, which set greenhouse gas emission reduction
goals, every five years beginning in 2020. To the extent that laws and regulations enacted as part of climate change legislation
increase the costs of drilling for or producing such fossil fuels, limit or restrict oil and natural gas exploration and production, or
reduce the demand for fossil fuels, such legislation could have a material adverse effect on our operations and profitability. In
addition, there have also been efforts in recent years to influence the investment community, including investment advisors and
certain sovereign wealth, pension and endowment funds, promoting divestment of fossil fuel equities and pressuring lenders to
limit funding to companies engaged in the extraction of fossil fuel reserves. Such environmental activism and initiatives aimed
at limiting climate change and reducing air pollution could interfere with our business activities, operations, and ability to
access capital.
14
Hydraulic fracturing is a common practice used by E&P operators to stimulate production of hydrocarbons,
particularly from shale oil and natural gas formations in the U.S. The process of hydraulic fracturing, which involves the
injection of sand (or other forms of proppants) laden fluids into oil and natural gas bearing zones, has come under increased
scrutiny from a variety of regulatory agencies, including the EPA and various state authorities. Several states have adopted
regulations requiring operators to identify the chemicals used in fracturing operations, others have adopted moratoriums on the
use of fracturing, and the State of New York has banned the practice altogether. In addition, concerns have been raised about
whether injection of waste associated with hydraulic fracturing operations, or from the fracturing operations themselves, may
cause or increase the impact of earthquakes. Studies are in process regarding the correlation between hydraulic fracturing and
earthquakes. Although we do not provide hydraulic fracturing services, we offer stimulation chemicals used in the hydraulic
fracturing process. Regulations which have the effect of prohibiting, limiting the use, or significantly increasing the costs of
hydraulic fracturing could have a material adverse effect on both the drilling and stimulation activity levels of our customers,
and, therefore, the demand for our products and services.
Risks Related to Legal Compliance
As a global business, we are subject to complex laws and regulations in the U.S., the U.K. and other countries in which
we operate. These laws and regulations relate to a number of aspects of our business, including anti-bribery and anti-corruption
laws, sanctions against business dealings with certain countries and third parties, the payment of taxes, employment and labor
relations, immigration, fair competition, data privacy protections, securities regulation, and other regulatory requirements
affecting trade and investment. The application of these laws and regulations to our business is often unclear and may
sometimes conflict. Compliance with these laws and regulations may involve significant costs or require changes in our
business practices that could result in reduced revenue and profitability. Non-compliance could also result in significant fines,
damages, and other criminal sanctions against us, our officers or our employees, prohibitions or additional requirements on the
conduct of our business and damage our reputation. Certain violations of law could also result in suspension or debarment from
government contracts. We also incur additional legal compliance costs associated with global regulations. In some foreign
countries, particularly those with developing economies, it may be customary for others to engage in business practices that are
prohibited by laws such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, the Italian Criminal Code in Italy,
Brazil’s Clean Companies Act, India’s Prevention of Corruption Act and The Companies Act, and Mexico’s Anti-Corruption
Law. Although we implement policies and procedures designed to ensure compliance with these laws, there can be no
assurance that all of our employees, contractors, agents, and business partners will not take action in violation with our internal
policies. In the U.S., there have been increasing instances of opioid and other illicit drug usage as well as illegal immigration in
certain of the regions in which we operate. While we have taken steps we believe appropriate to ensure that our employees
comply with our internal drug and alcohol policy as well as all applicable immigration laws, we cannot assure you there will not
be violations in the future. Any such violation of our internal policies or the law could have a material adverse effect on our
reputation, business, financial condition, or results of operations.
Financial Risks
Risks Related to the Inherent Limitations of Insurance Coverage
While we maintain liability insurance, this insurance is subject to coverage limitations. Specific risks and limitations of
our insurance coverage include the following:
▪
▪
▪
▪
self-insured retention limits on each claim, which are our responsibility;
exclusions for certain types of liabilities and limitations on coverage for damages resulting from pollution;
coverage limits of the policies, and the risk that claims will exceed policy limits; and
the financial strength and ability of our insurance carriers to meet their obligations under the policies.
In addition, our ability to continue to obtain insurance coverage on commercially reasonable terms is dependent upon a
variety of factors impacting the insurance industry in general, which are outside our control. Any of the issues noted above,
including insurance cost increases, uninsured or underinsured claims, or the inability of an insurance carrier to meet their
financial obligations could have a material adverse effect on our business.
Risks Related to Income Taxes
Our future effective tax rates could be adversely affected by changes in tax laws, both domestically and internationally,
or the interpretation or application thereof. From time to time, U.S. and foreign tax authorities, including state and local
governments consider legislation that could increase our effective tax rate. Additionally, the changes in the Presidential
administration and Congress increase the uncertainty with regard to potential changes in the U.S. federal tax laws and the
interpretation or enforcement of legislation or directives by tax authorities. We cannot determine whether, or in what form,
legislation will ultimately be enacted or what the impact of any such legislation could have on our profitability. If such changes
to tax laws are enacted, our profitability could be negatively impacted.
15
Our future effective tax rates could be adversely affected by changes in the valuation of our deferred tax assets and
liabilities, changes in the mix of earnings in countries with differing statutory tax rates, or by changes in tax treaties,
regulations, accounting principles or interpretations thereof in one or more countries in which we operate. In addition, we are
subject to the potential examination of our income tax returns by the U.S. Internal Revenue Service and by other tax authorities
in jurisdictions where we file tax returns. We regularly assess the likelihood of adverse outcomes resulting from these
examinations to determine the adequacy of our provision for income taxes. There can be no assurance that such examinations
will not have a material adverse effect on our business, financial condition, or results of operations.
General Risks
Risks Related to Cybersecurity Breaches or Business System Disruptions
We utilize various management information systems and information technology infrastructure to manage or support a
variety of our business operations, and to maintain various records, which may include confidential business or proprietary
information as well as information regarding our customers, business partners, employees or other third parties. Failures of or
interference with access to these systems, such as communication disruptions, could have an adverse effect on our ability to
conduct operations or directly impact consolidated financial reporting. Security breaches pose a risk to confidential data and
intellectual property, which could result in transaction errors, processing inefficiencies, the loss of sales and customers, data
privacy breaches and damage to our competitiveness and reputation. There can be no assurance that the policies and procedures
we have in place, including system monitoring and data back-up processes, to prevent or mitigate the effects of these potential
disruptions or breaches will be sufficient to prevent, detect and limit the impact of disruptions or breaches. We do not carry
insurance against these risks, although we do invest in security technology, perform penetration tests from time to time, and
design our business processes to attempt to mitigate the risk of such breaches. However, there can be no assurance that security
breaches will not occur.
Additionally, the development and maintenance of these measures requires continuous monitoring as technologies
change and efforts to overcome security measures evolve. We have experienced cybersecurity threats and incidents, and expect
these incidents to continue. While none of the cybersecurity events have been material to date, a successful breach or attack
could have a material negative impact on our operations or business reputation, harm our reputation and relationships with our
customers, business partners, employees or other third parties, and subject us to consequences such as litigation and direct costs
associated with incident response. In addition, these risks could have a material adverse effect on our business, results of
operations, and financial condition.
Risks Related to Compliance with the New York Stock Exchange’s Requirements for the Continued Listing of Our
Common Stock
We are listed on the New York Stock Exchange (the “NYSE”) and are required to meet the NYSE’s continued listing
standards, including a requirement that the average closing price of our common stock not be below $1.00 per share over any
consecutive thirty trading-day period. During 2020, the price of our common stock had at times closed below $1.00 per share,
and we received notice from the NYSE that we were not in compliance with the continued listing standards. Though we
regained compliance with the NYSE continued listing standards in December 2020, we cannot assure you that the average
closing price of our common stock over a consecutive thirty trading-day period will not fall below $1.00 per share in the future.
If we are unable to meet these listing standards and are unable to cure any such non-compliance within the applicable
cure period provided by the NYSE, the NYSE could delist our common stock. A delisting of our common stock could
negatively impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the
number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity
financing; limiting our ability to issue additional securities or obtain additional financing in the future; decreasing the amount of
news and analyst coverage of us; and causing us reputational harm with investors, our employees, and parties conducting
business with us. A delisting of our common stock would constitute a “fundamental change” under the terms of our Convertible
Notes, requiring us to make an offer to repurchase the Convertible Notes at par. There can be no assurance we would have
sufficient funds available to us to repurchase the Convertible Notes if required to do so. Failure to repurchase the Convertible
Notes also could cause a cross-default under our ABL Facility, which would permit the holders of the indebtedness to
accelerate the maturity thereof and proceed against their collateral and could have a material adverse effect on our business and
financial condition.
16
Risks Related to Our Amended and Restated Bylaws, Which Designate the Court of Chancery of the State of
Delaware as the Sole and Exclusive Forum for Certain Types of Actions and Proceedings that May Be Initiated by Our
Stockholders, and the U.S. Federal District Courts in Wilmington County, Delaware as the Exclusive Forum for Securities
Act Claims, Which Could Limit Our Stockholders’ Ability to Obtain What Such Stockholders Believe To Be a Favorable
Judicial Forum for Disputes with Us or Our Directors, Officers or Other Employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, (i)
the Delaware Court of Chancery or, if such court lacks subject matter jurisdiction, another state or federal court located within
the State of Delaware, will be the sole and exclusive forum with respect to (a) any derivative action or proceeding brought on
our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors,
officers, stockholders, employees or agents to us or our stockholders, including a claim alleging the aiding and abetting of such
a breach of fiduciary duty, (c) any action asserting a claim against us or any of our current or former directors, officers,
stockholders, employees or agents arising out of or relating to any provision of the Delaware General Corporation Law
(“DGCL”), our certificate of incorporation or its amended and restated bylaws, (d) any action asserting a claim related to or
involving us or any of our directors, officers, stockholders, employees or agents that is governed by the internal affairs doctrine
of the State of Delaware, or (e) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the
DGCL, and (ii) the U.S. Federal District Court in Wilmington County, Delaware will be the sole and exclusive forum for any
action arising under the Securities Act. Our choice-of-forum provision will not apply to suits brought to enforce any liability or
duty created by the Exchange Act, and investors cannot waive compliance with the federal securities laws and the rules and
regulations thereunder.
Any person or entity purchasing or otherwise acquiring an interest in any shares of our capital stock shall be deemed to
have notice of and to have consented to the forum provisions in our amended and restated bylaws. These choice-of-forum
provisions may limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it believes to be favorable for
disputes with us or our directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court
were to find these provisions of our amended and restated bylaws inapplicable or unenforceable with respect to one or more of
the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other
jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a
diversion of the time and resources of our management and board of directors.
17
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
We lease office space to support our operating segments as well as our corporate offices.
Fluids Systems. We own a facility containing approximately 103,000 square feet of office space on approximately 11
acres of land in Katy, Texas, which houses the divisional headquarters and technology center for this segment. We lease
approximately 11 acres of industrial space in Fourchon, Louisiana which houses drilling and completion fluids blending,
storage, and transfer stations to serve the deepwater Gulf of Mexico market. We also operate four specialty product grinding
facilities on owned or leased land in the U.S. Additionally, we own or lease various facilities and warehouses throughout the
world to support our operations. Some of these warehouses include blending facilities.
Industrial Solutions. We own a facility containing approximately 93,000 square feet of office and industrial space on
approximately 34 acres of land in Carencro, Louisiana, which houses our manufacturing facilities and technology center for this
segment. We also own or lease various facilities and warehouses throughout the U.S., as well as facilities in the United
Kingdom, to support our field operations. Additionally, we own an industrial blending facility and distribution warehouse
containing approximately 65,000 square feet of office and industrial space on approximately 21 acres of land in Conroe, Texas.
ITEM 3. Legal Proceedings
In the ordinary course of conducting our business, we become involved in litigation and other claims from private
party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state, and
local levels. While the outcome of litigation or other proceedings against us cannot be predicted with certainty, management
does not expect that any loss resulting from such litigation or other proceedings, in excess of any amounts accrued or covered
by insurance, will have a material adverse impact on our consolidated financial statements.
ITEM 4. Mine Safety Disclosures
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the
Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 of
this Annual Report on Form 10-K, which is incorporated by reference.
18
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is traded on the New York Stock Exchange under the symbol “NR.”
As of February 1, 2021, we had 1,191 stockholders of record as determined by our transfer agent.
We have not paid any dividends during the three most recent fiscal years or any subsequent interim period, and we do
not intend to pay any cash dividends in the foreseeable future. In addition, our ABL Facility contains covenants which limit the
payment of dividends on our common stock. See “Management’s Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources - Asset-Based Loan Facility.”
Stock Performance Graph
The following graph reflects a comparison of the cumulative total stockholder return of our common stock from
January 1, 2016 through December 31, 2020, with the New York Stock Exchange Market Value Index, a broad equity market
index, and the Philadelphia Oil Service Sector Index. The graph assumes the investment of $100 on January 1, 2016 in our
common stock and each index and the reinvestment of all dividends, if any. The Philadelphia Oil Service Sector Index replaces
the Morningstar Oil & Gas Equipment & Services Index, an industry group index, in this analysis and going forward, as the
latter data is no longer accessible. The latter index has been included with data through 2019. This information shall be deemed
furnished but not filed in this Form 10-K, and shall not be deemed incorporated by reference into any filing under the Securities
Act of 1933, or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference.
19
Newpark Resources, Inc.NYSE Composite IndexMorningstar O&G Equipment & ServicesPhiladelphia Oil Service Sector Index1/1/201612/31/201612/31/201712/31/201812/31/201912/31/2020020406080100120140160180 Issuer Purchases of Equity Securities
The following table details our repurchases of shares of our common stock for the three months ended December 31,
2020:
Period
October 2020
November 2020
December 2020
Total Number of
Shares Purchased
Average Price
Paid Per Share
0.80
0.72
—
730 $
974 $
— $
Total
1,704
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Approximate
Dollar Value of Shares that
May Yet be Purchased
Under Plans or Programs
($ in Millions)
— $
— $
— $
—
51.9
51.9
51.9
During the three months ended December 31, 2020, we purchased an aggregate of 1,704 shares surrendered in lieu of
taxes under vesting of restricted stock awards. During 2020, we purchased an aggregate of 153,151 shares surrendered in lieu of
taxes under vesting of restricted stock awards. All of the shares purchased are held as treasury stock.
In November 2018, our Board of Directors authorized changes to our securities repurchase program, increasing the
authorized amount under the repurchase program to $100.0 million, available for repurchases of any combination of our
common stock and our Convertible Notes in the open market or as otherwise determined by management, subject to certain
limitations under the ABL Facility and other factors. The repurchase program has no specific term. Repurchases are expected to
be funded from operating cash flows, available cash on hand, and borrowings under our ABL Facility. As part of the repurchase
program, our management has been authorized to establish trading plans under Rule 10b5-1 of the Securities Exchange Act of
1934. As of December 31, 2020, we had $51.9 million remaining under the program.
There were no Convertible Notes and no shares of common stock repurchased under the repurchase program during
the three months ended December 31, 2020. During 2020, we repurchased $33.1 million of our Convertible Notes in the open
market under the repurchase program for a total cost of $29.1 million.
In February 2021, we repurchased $13.0 million of our Convertible Notes in the open market under the repurchase
program for a total cost of $12.8 million.
20
ITEM 6. Selected Financial Data
The selected financial data presented below for the five years ended December 31, 2020 is derived from our
consolidated financial statements. The following data should be read in conjunction with the consolidated financial statements
and notes thereto in Item 8. “Financial Statements and Supplementary Data” and with Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
(In thousands, except share data)
Consolidated Statements of Operations Data:
Revenues
Operating income (loss)
Interest expense, net
Income (loss) from continuing operations
As of and for the Year Ended December 31,
2018
2019
2017
2016
2020
$ 492,625 $ 820,119 $ 946,548 $ 747,763 $ 471,496
(57,213)
9,866
(40,712)
10,395
14,369
(12,946)
(78,634)
10,986
(80,696)
31,436
13,273
11,219
63,558
14,864
32,281
Loss from disposal of discontinued operations, net of tax
Net income (loss)
—
—
(80,696)
(12,946)
—
32,281
(17,367)
(6,148)
—
(40,712)
Income (loss) per share from continuing operations -
basic
Net income (loss) per share - basic
Income (loss) per share from continuing operations -
diluted
Net income (loss) per share - diluted
$
$
$
$
(0.89) $
(0.89) $
(0.14) $
(0.14) $
0.36 $
0.36 $
0.13 $
(0.07) $
(0.49)
(0.49)
(0.89) $
(0.89) $
(0.14) $
(0.14) $
0.35 $
0.35 $
0.13 $
(0.07) $
(0.49)
(0.49)
Consolidated Balance Sheets Data:
Working capital
Total assets
Foreign bank lines of credit
Other current debt
Long-term debt, less current portion
Stockholders’ equity
Consolidated Cash Flows Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
$ 174,522 $ 349,947 $ 381,386 $ 346,623 $ 283,139
798,183
—
83,368
72,900
500,543
900,079
4,849
1,486
153,538
548,645
709,192
3,484
63,988
19,690
488,032
915,854
1,137
1,385
159,225
569,681
902,716
1,000
518
158,957
547,480
$
55,791 $
(3,395)
(77,941)
72,286 $
(49,764)
(29,526)
63,403 $
(55,752)
(4,513)
38,381 $
(68,374)
(2,290)
11,095
(38,320)
(650)
Operating loss for 2020 includes a non-cash charge of $11.7 million for the recognition of cumulative foreign currency
translation losses related to the substantial liquidation of our subsidiary in Brazil and $17.5 million of total charges primarily
related to inventory write-downs, severance costs, fixed asset impairments, and facility exit costs. Operating income for 2019
includes an $11.4 million non-cash impairment of goodwill and $11.8 million of total 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 loss for 2016 includes $14.8 million of total charges resulting from the reduction in value of certain assets,
the wind-down of our operations in Uruguay, and the resolution of certain wage and hour litigation claims.
21
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition, results of operations, liquidity, and capital resources should be
read in conjunction with the consolidated financial statements and notes thereto included in Item 8 “Financial Statements and
Supplementary Data.”
Overview
We are a geographically diversified supplier providing products, as well as rentals and services. We operate our
business through two reportable segments: Fluids Systems and Industrial Solutions. Our Fluids Systems segment provides
customized drilling, completion, and stimulation fluids solutions to oil and natural gas exploration and production (“E&P”)
customers primarily in North America and Europe, the Middle East and Africa (“EMEA”), as well as certain countries in Asia
Pacific and Latin America. Our Industrial Solutions segment includes our Site and Access Solutions business (historically
reported as the Mats and Integrated Services segment), along with our Industrial Blending operations. Site and Access Solutions
provides composite matting system rentals utilized for temporary worksite access, along with related site construction and
services to customers in various markets including electrical transmission & distribution, E&P, pipeline, renewable energy,
petrochemical, construction and other industries, primarily in the United States and Europe. We also sell our manufactured
composite mats to customers around the world. Our Industrial Blending operations began in 2020, leveraging our chemical
blending capacity and technical expertise to enter targeted industrial end-markets.
Our long-term strategy, as approved by our Board of Directors, includes key foundational elements that are intended to
enhance long-term shareholder value creation:
•
•
End-market diversification – To help reduce our dependency on customers in the volatile E&P industry, improve the
stability in cash flow generation and returns on invested capital, and provide growth opportunities into new markets,
we have focused our efforts over the past several years on diversifying our presence outside of our historical E&P
customer base. These efforts have been primarily focused within our Site and Access Solutions business, where we
have prioritized growth in electrical transmission and distribution, pipeline, renewable energy, and construction
markets. In 2020, our Industrial Solutions segment generated $138 million of revenues, including approximately $100
million from electrical transmission and distribution and other non-E&P markets. The continued diversification of our
revenues, including end-markets that are likely to benefit from ongoing energy transition efforts around the world,
such as electrical transmission and distribution, renewable energy, and geothermal, remains a strategic priority going
forward, and we anticipate that our capital investments will primarily focus on industrial end-market expansion.
Provide products that enhance environmental sustainability – Our Company has a long history of providing
environmentally-friendly technologies to our customers. In the Industrial Solutions segment, we believe the
lightweight design of our fully recyclable DURA-BASE® matting system provides a distinct environmental advantage
for our customers as compared to alternative wood mat products in the market, by eliminating deforestation required to
produce wood mat products while also reducing CO2 emissions associated with product transportation. In our Fluids
Systems segment, our family of high-performance water-based fluids systems, which we market as Evolution® and
DeepDrill® systems, are designed to enhance drilling performance while also providing a variety of environmental
benefits relative to traditional oil-based fluids. The continued advancement of technology that provides our customers
with economic benefits, while also enhancing their environmental and safety programs, remains a priority for our
research and development efforts.
Our Fluids Systems operating results remain dependent on oil and natural gas drilling activity levels in the markets we
serve and the nature of the drilling operations (including the depth and whether the wells are drilled vertically or horizontally),
which governs the revenue potential of each well. Drilling activity levels, in turn, depend on a variety of factors, including oil
and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions. Oil and natural gas prices and
activity are cyclical and volatile, and this market volatility has a significant impact on our operating results.
22
While our Fluids Systems revenue potential is driven by a number of factors including those described above, rig
count data remains the most widely accepted indicator of drilling activity. Average North American rig count data for the last
three years is as follows:
U.S. Rig Count
Canada Rig Count
North America Rig Count
_______________________________________________________
Source: Baker Hughes Company
Year Ended December 31,
2018
2019
2020
433
89
522
943
134
1,077
1,032
191
1,223
Count
2020 vs 2019
%
(54) %
(34) %
(52) %
(510)
(45)
(555)
2019 vs 2018
%
Count
(89)
(57)
(146)
(9) %
(30) %
(12) %
During 2019, U.S. rig count steadily declined, exiting the year at 805 active rigs, a 26% decline from the end of 2018.
During March 2020, oil prices collapsed due to geopolitical events along with the worldwide effects of the COVID-19
pandemic. As a result, average U.S. rig count declined 52% in 2020 from 2019. After reaching a low of 244 in mid-August, the
U.S. rig count has since increased to 397 as of February 19, 2021. The Canada rig count reflects normal seasonality for this
market, with the highest rig count levels generally observed in the first quarter of each year, prior to Spring break-up. We
anticipate that market activity will continue to improve from current levels, although the ongoing impacts of the COVID-19
pandemic and an uncertain economic environment make the timing and pace of recovery difficult to predict.
Outside of North America land markets, drilling activity is generally more stable as this drilling activity is based on
longer-term economic projections and multi-year drilling programs, which typically reduces the impact of short-term changes in
commodity prices on overall drilling activity. However, operations in several countries in the EMEA region experienced
activity disruptions and project delays beginning in March 2020 and continuing into 2021, driven by government-imposed
restrictions on movements of personnel, quarantines of staffing, and logistical limitations as a result of the COVID-19
pandemic. We expect these disruptions and project delays will continue to impact international activity levels in the near-term,
and while we anticipate a general improvement in customer activity during 2021, the impact from the duration and magnitude
of the ongoing health pandemic and related government responses are very difficult to predict.
In response to the 2020 market changes and reduced demand for our products and services as a result of the decline in
oil prices and the COVID-19 pandemic, we initiated a number of actions late in the first quarter of 2020 and continuing
throughout 2020 aimed at conserving cash and protecting our liquidity, including:
•
•
•
The implementation of cost reduction programs, including workforce reductions, employee furloughs, the suspension
of the Company’s matching contributions to its U.S. defined contribution plan, and temporary salary reductions
effective April 1, 2020 for a significant portion of U.S. employees, including a 15% cut to the salaries paid to
executive officers (with a further 10% cut for the CEO effective August 12, 2020) and the annual cash retainers paid to
all non-employee members of the Board of Directors;
The initiation of additional actions to further reduce the operational footprint of the Fluids Systems business in the
U.S., to better align our cost structure with the lower market activity levels; and
The elimination of all non-critical capital investments.
As part of the cost reduction programs, we reduced our global employee base by approximately 650 (30%) in 2020.
In 2020, we recognized $29.2 million of total charges, including $28.6 million in Fluids Systems consisting of $11.7
million for the recognition of cumulative foreign currency translation losses related to our exit from Brazil, $10.3 million for
inventory write-downs, $3.5 million for severance and other costs, and $3.0 million in fixed asset impairments.
While we have taken certain actions to reduce our workforce and cost structure, our business contains high levels of
fixed costs, including significant facility and personnel expenses. We continue to evaluate under-performing areas as well as
opportunities to further enable a more efficient and scalable cost structure. In the absence of a longer-term increase in activity
levels, we may incur future charges related to further cost reduction efforts or potential asset impairments, which may
negatively impact our future results.
Segment Overview
Fluids Systems - Our Fluids Systems segment, which generated 72% of consolidated revenues for 2020, provides
drilling, completion, and stimulation fluids products and related technical services to customers for oil, natural gas, and
geothermal projects primarily in North America and EMEA, as well as certain countries in Asia Pacific and Latin America.
Despite the continuing effects of COVID-19 impacting the international customer activity, expansion outside of the North
America land markets, including the penetration of international oil companies (“IOCs”) and national oil companies (“NOCs”),
23
remains a key element of our Fluids Systems strategy, which has historically helped to stabilize segment revenues while North
American oil and natural gas exploration activities have fluctuated significantly. Revenues from IOC and NOC customers
represented approximately 40% of Fluids Systems segment revenues for 2020 compared to approximately 33% for 2019.
Industrial Solutions - Our Industrial Solutions segment, which generated 28% of consolidated revenues for 2020,
provides engineered composite matting system rentals utilized for temporary worksite access, along with related site
construction and services to customers in various markets including electrical transmission & distribution, E&P, pipeline,
renewable energy, petrochemical, construction and other industries, primarily in the United States and Europe. We also sell our
manufactured composite mats to customers around the world. In addition, we began leveraging our chemical blending capacity
and technical expertise into industrial blending operations, and in response to the increasing market demand for cleaning
products resulting from the COVID-19 pandemic, began producing disinfectants and industrial cleaning products in 2020. The
scale-up of production was completed by the end of the third quarter of 2020, which effectively repositioned our chemical
blending operation located in Conroe, Texas to fully support industrial end-markets. Beginning prospectively in the fourth
quarter of 2020, the assets and operating results associated with these industrial blending operations are included in the
Industrial Solutions segment, while the historical results from earlier in 2020, which were immaterial, are included in the Fluids
Systems segment.
As described above, the expansion of our rental and service activities in electrical utility infrastructure and other non-
E&P markets remains a strategic priority for us due to the magnitude of this market growth opportunity, as well as the market’s
relative stability compared to E&P. During 2020, our business was impacted by the COVID-19 pandemic, as customers delayed
purchases and planned projects citing COVID-related market uncertainty, permitting delays, and logistical restrictions. Despite
the impact of the COVID-19 pandemic, the Industrial Solutions segment rental and service revenues from non-E&P markets
increased to approximately $66 million for 2020, compared to $65 million for 2019 and $61 million for 2018. Product sales
revenues largely reflect sales to utility customers and other non-E&P markets, and typically fluctuate based on the timing of
customer orders. Including product sales, total revenues from non-E&P markets represented approximately 73% of total
segment revenues for 2020, compared to 55% for 2019 and 50% for 2018. As a result of the impact of the COVID-19 pandemic
on customer activity, we decreased our mat production levels during 2020 to reduce current inventory levels, which negatively
impacted our results due to the high level of fixed costs in our manufacturing operations. Although customer activity remains
impacted by the ongoing uncertainty associated with the COVID-19 pandemic, we have seen a notable recovery in customer
activity in late 2020 and early 2021, particularly in the utility sector. While we expect customer activity across all end-markets
to generally improve in 2021, we currently expect that demand for both rental projects and product sales remains highly
dependent on our customers gaining confidence in the broader economic recovery.
24
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Consolidated Results of Operations
Summarized results of operations for 2020 compared to 2019 are as follows:
(In thousands)
Revenues
Cost of revenues
Selling, general and administrative expenses
Other operating (income) loss, net
Impairments and other charges
Operating income (loss)
Foreign currency exchange (gain) loss
Interest expense, net
Gain on extinguishment of debt
Income (loss) before income taxes
Provision (benefit) for income taxes
Net loss
Revenues
Year Ended December 31,
2020 vs 2019
2020
2019
$
%
$
492,625 $
820,119 $
(327,494)
473,258
86,604
(3,330)
14,727
(78,634)
3,378
10,986
(419)
684,738
113,394
170
11,422
10,395
(816)
14,369
—
(211,480)
(26,790)
(3,500)
3,305
(89,029)
4,194
(3,383)
(419)
(92,579)
(3,158)
(89,421)
(11,883)
9,788
$
(80,696) $
(12,946) $
(21,671)
(67,750)
(40) %
(31) %
(24) %
NM
NM
NM
NM
(24) %
NM
NM
NM
NM
Revenues decreased 40% to $492.6 million for 2020, compared to $820.1 million for 2019. This $327.5 million
decrease includes a $263.8 million (43%) decrease in revenues in North America, comprised of a $200.4 million decrease in the
Fluids Systems segment and a $63.4 million decrease in the Industrial Solutions segment. Revenues from our North America
operations decreased primarily due to the 52% reduction in North American rig count. Revenues from our international
operations decreased by $63.7 million (31%), primarily driven by activity disruptions and project delays resulting from the
COVID-19 pandemic as well as lower oil prices. Additional information regarding the change in revenues is provided within
the operating segment results below.
Cost of revenues
Cost of revenues decreased 31% to $473.3 million for 2020, compared to $684.7 million for 2019. This $211.5 million
decrease was primarily driven by the 40% decrease in revenues described above. Fluids Systems segment cost of revenues for
2020 and 2019 includes $14.1 million and $6.8 million, respectively, of total charges related to inventory write-downs,
severance costs, and facility exit costs.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased $26.8 million to $86.6 million for 2020, compared to $113.4
million for 2019. The 2019 expenses included a $4.0 million charge for stock-based compensation expense associated with the
February 2019 retirement policy modification and $3.9 million in professional fees related to our long-term strategic planning
project and the Cleansorb acquisition. The remaining decrease of $18.9 million was primarily driven by reduced personnel costs
and lower spending related to legal matters in 2020. Selling, general and administrative expenses as a percentage of revenues
was 17.6% for 2020 compared to 13.8% for 2019.
Other operating (income) loss, net
Other operating income for 2020 primarily relates to gains on sales of assets, including a $1.3 million gain related to
our exit from Brazil.
Impairments and other charges
Fluids Systems segment includes non-cash charges for 2020 consisting of $11.7 million for the recognition of
cumulative foreign currency translation losses related to the substantial liquidation of our subsidiary in Brazil, as well as $3.0
25
million attributable to the abandonment of certain property, plant and equipment. Fluids Systems segment for 2019 includes an
$11.4 million non-cash impairment charge to write-off the goodwill related to this business.
Foreign currency exchange
Foreign currency exchange was a $3.4 million loss for 2020 compared to a $0.8 million gain for 2019, and reflects the
impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies
other than functional currencies.
Interest expense, net
Interest expense was $11.0 million for 2020 compared to $14.4 million for 2019. Interest expense for 2020 and 2019
includes $5.2 million and $6.2 million, respectively, in noncash amortization of original issue discount and debt issuance costs.
The decrease in interest expense is primarily due to lower debt balances as well as a decrease in interest rates on the ABL
Facility.
Gain on extinguishment of debt
The $0.4 million gain for 2020 reflects the difference in the amount paid and the net carrying value of the extinguished
debt, including original issue discount and debt issuance costs, related to the repurchase of $33.1 million of our Convertible
Notes in the open market for $29.1 million.
Provision (benefit) for income taxes
The benefit for income taxes was $11.9 million for 2020, reflecting an effective tax benefit rate of 13%. This result
primarily reflects the impact of the $11.7 million non-cash recognition of cumulative foreign currency translation losses related
to the substantial liquidation of our subsidiary in Brazil and other nondeductible expenses, as well as the impact of the
geographic composition of our pretax loss, where the tax benefit from losses in the U.S was partially offset by the tax expense
related to earnings from our international operations. For 2019, the provision for income taxes was $9.8 million despite
reporting a small pretax loss for the year. This result reflects the impact of the $11.4 million non-deductible goodwill
impairment and other nondeductible expenses, as well as the impact of the geographic composition of our pretax loss, where tax
expense related to earnings from our international operations is only partially offset by the tax benefit from losses in the U.S.
26
Operating Segment Results
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment
transfers):
(In thousands)
Revenues
Fluids systems
Industrial solutions
Total revenues
Operating income (loss)
Fluids systems
Industrial solutions
Corporate office
Total operating income (loss)
Segment operating margin
Fluids systems
Industrial solutions
Fluids Systems
Revenues
Year Ended December 31,
2020 vs 2019
2020
2019
$
%
(43) %
(31) %
(40) %
$
$
$
$
354,608
138,017
492,625
(66,403)
13,459
(25,690)
(78,634)
$
$
$
$
620,317
199,802
820,119
3,814
47,466
(40,885)
10,395
$
$
$
$
(265,709)
(61,785)
(327,494)
(70,217)
(34,007)
15,195
(89,029)
(18.7) %
9.8 %
0.6 %
23.8 %
Total revenues for this segment consisted of the following:
(In thousands)
United States
Canada
Total North America
EMEA
Other
Total International
Year Ended December 31,
2020 vs 2019
2020
2019
$
202,052 $
24,762
226,814
395,618 $
31,635
427,253
115,891
11,903
127,794
172,263
20,801
193,064
$
(193,566)
(6,873)
(200,439)
(56,372)
(8,898)
(65,270)
%
(49) %
(22) %
(47) %
(33) %
(43) %
(34) %
Total Fluids Systems revenues
$
354,608 $
620,317 $
(265,709)
(43) %
North America revenues decreased 47% to $226.8 million for 2020, compared to $427.3 million for 2019. This
decrease was primarily attributable to a $200.3 million decrease from U.S. land markets driven by the 54% decline in U.S. rig
count, partially offset by a $4.0 million increase from offshore Gulf of Mexico, which benefited from our completion fluids
product line extension. For 2020, U.S. revenues included $150.2 million from land markets and $48.5 million from offshore
Gulf of Mexico.
Internationally, revenues decreased 34% to $127.8 million for 2020, compared to $193.1 million for 2019. The
decrease in EMEA was driven by lower activity primarily attributable to COVID-19 disruptions and the impact of lower oil
prices in Algeria, Romania, and various other countries, partially offset by the October 2019 acquisition of Cleansorb. The
decrease in other international was primarily attributable to lower activity in Australia, including the completion of the Baker
Hughes Greater Enfield project in the third quarter of 2019.
27
Operating income (loss)
The Fluids Systems segment incurred an operating loss of $66.4 million for 2020, reflecting a $70.2 million change
from the $3.8 million of operating income generated for 2019. The decrease in operating income includes a $41.6 million
decline from North American operations and a $18.8 million decline from international operations, which are primarily
attributable to the changes in revenues described above, partially offset by the benefit of cost reduction programs. The Fluids
Systems operating loss for 2020 also includes $28.6 million of charges, consisting of $11.7 million for the recognition of
cumulative foreign currency translation losses related to the substantial liquidation of our subsidiary in Brazil and $16.9 million
of total charges associated with inventory write-downs, severance costs, fixed asset impairments, and facility exit costs. The
Fluids Systems operating loss for 2019 included $18.8 million of charges, consisting of an $11.4 million non-cash impairment
of goodwill and $7.4 million of total 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.
Industrial Solutions
Revenues
Total revenues for this segment consisted of the following:
(In thousands)
Rental and service revenues
Product sales revenues
Industrial blending revenues
Total Industrial Solutions revenues
Year Ended December 31,
2020 vs 2019
2020
2019
$
$
101,299 $
29,170
7,548
138,017 $
143,337 $
56,465
—
199,802 $
$
(42,038)
(27,295)
7,548
(61,785)
%
(29) %
(48) %
NM
(31) %
As described above, the COVID-19 pandemic resulted in delays to planned projects across customer industries in
2020. Rental and service revenues decreased 29% to $101.3 million for 2020, which includes a $43.6 million decrease from
E&P customers, primarily resulting from lower U.S. activity caused by the decline in oil and natural gas prices. This decline
was partially offset by a $1.6 million increase from our continued expansion into non-E&P markets, including a 9% increase in
revenues from the electrical utility sector, which benefited from increased demand to support repairs of hurricane-damaged
utility infrastructure along the U.S. Gulf Coast region. Revenues from product sales, which typically fluctuate based on the
timing of mat orders from customers, was negatively impacted in 2020 as certain customers delayed orders due to the
uncertainty related to the COVID-19 pandemic.
Operating income
The Industrial Solutions segment generated operating income of $13.5 million for 2020 compared to $47.5 million for
2019, the decrease being primarily attributable to the change in revenues as described above.
Corporate Office
Corporate office expenses decreased $15.2 million to $25.7 million for 2020, compared to $40.9 million for 2019. The
2019 expenses included a $3.4 million charge for stock-based compensation expense associated with the February 2019
retirement policy modification and $3.9 million in professional fees related to our long-term strategic planning project and the
Cleansorb acquisition. The remaining decrease of $7.9 million is primarily driven by reduced personnel costs and lower
spending related to legal matters in 2020.
28
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Consolidated Results of Operations
Summarized results of operations for 2019 compared to 2018 are as follows:
(In thousands)
Revenues
Cost of revenues
Selling, general and administrative expenses
Other operating loss, net
Impairments and other charges
Operating income
Foreign currency exchange (gain) loss
Interest expense, net
Income (loss) before income taxes
Provision for income taxes
Net income (loss)
Revenues
Year Ended December 31,
2019 vs 2018
2019
2018
$
%
$
820,119 $
946,548 $
(126,429)
684,738
113,394
170
11,422
10,395
(816)
14,369
(3,158)
766,975
115,127
888
—
63,558
1,416
14,864
47,278
(82,237)
(1,733)
(718)
11,422
(53,163)
(2,232)
(495)
(50,436)
9,788
(12,946) $
14,997
32,281 $
(5,209)
(45,227)
$
(13) %
(11) %
(2) %
NM
NM
(84) %
NM
(3) %
(107) %
(35) %
(140) %
Revenues decreased 13% to $820.1 million for 2019, compared to $946.5 million for 2018. This $126.4 million
decrease includes a $77.9 million (11%) decrease in revenues in North America, comprised of a $49.6 million decrease in the
Fluids Systems segment and a $28.3 million decrease in the Industrial Solutions segment. Revenues from our international
operations decreased by $48.5 million (19%), primarily driven by transitions in key contracts in Algeria and Brazil. Additional
information regarding the change in revenues is provided within the operating segment results below.
Cost of revenues
Cost of revenues decreased 11% to $684.7 million for 2019, compared to $767.0 million for 2018. This $82.2 million
decrease was primarily driven by the 13% decrease in revenues described above, as well as $6.8 million of charges in the Fluids
Systems segment in 2019 associated with facility closures and related exit costs, inventory write-downs, and severance costs.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased $1.7 million to $113.4 million for 2019, compared to $115.1
million for 2018. This decrease was primarily driven by lower performance-based incentive compensation, partially offset by
$4.0 million of charges associated with the February 2019 retirement policy modification (as discussed in Note 12), a $3.2
million increase in professional fees primarily related to our long-term strategic planning project and the Cleansorb acquisition,
as well as higher personnel costs. Selling, general and administrative expenses for 2018 included a corporate office charge of
$1.8 million associated with the retirement and transition of our former Senior Vice President, General Counsel and Chief
Administrative Officer. Selling, general and administrative expenses as a percentage of revenues was 13.8% for 2019 compared
to 12.2% for 2018.
Other operating loss, net
Other operating loss for 2018 primarily relates to the July 2018 fire at our Kenedy, Texas drilling fluids facility.
Impairments and other charges
Fluids Systems segment for 2019 includes the non-cash impairment charge to write-off goodwill.
Foreign currency exchange
Foreign currency exchange was a $0.8 million gain for 2019 compared to a $1.4 million loss for 2018, and reflects the
impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies
other than functional currencies.
29
Interest expense, net
Interest expense was $14.4 million for 2019 compared to $14.9 million for 2018. Interest expense for 2019 and 2018
includes $6.2 million and $5.5 million, respectively, in noncash amortization of original issue discount and debt issuance costs.
Provision for income taxes
The provision for income taxes was $9.8 million for 2019 despite reporting a small pretax loss for the year. This result
reflects the impact of the $11.4 million nondeductible goodwill impairment and other nondeductible expenses, as well as the
impact of the geographic composition of our pretax loss, where tax expense related to earnings from our international
operations is only partially offset by the tax benefit from losses in the U.S. The provision for income taxes was $15.0 million
for 2018, including a $1.6 million net benefit related to U.S. tax reform.
30
Operating Segment Results
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment
transfers):
(In thousands)
Revenues
Fluids systems
Industrial solutions
Total revenues
Operating income (loss)
Fluids systems
Industrial solutions
Corporate office
Total operating income (loss)
Segment operating margin
Fluids systems
Industrial solutions
Fluids Systems
Revenues
Year Ended December 31,
2019 vs 2018
2019
2018
$
%
(13) %
(13) %
(13) %
$
$
$
$
620,317
199,802
820,119
3,814
47,466
(40,885)
10,395
$
$
$
$
715,813
230,735
946,548
40,337
60,604
(37,383)
63,558
$
$
$
$
(95,496)
(30,933)
(126,429)
(36,523)
(13,138)
(3,502)
(53,163)
0.6 %
23.8 %
5.6 %
26.3 %
Total revenues for this segment consisted of the following:
(In thousands)
United States
Canada
Total North America
EMEA
Other
Total International
Year Ended December 31,
2019 vs 2018
2019
2018
$
395,618 $
31,635
427,253
410,410 $
66,416
476,826
172,263
20,801
193,064
192,537
46,450
238,987
$
(14,792)
(34,781)
(49,573)
(20,274)
(25,649)
(45,923)
%
(4) %
(52) %
(10) %
(11) %
(55) %
(19) %
Total Fluids Systems revenues
$
620,317 $
715,813 $
(95,496)
(13) %
North America revenues decreased 10% to $427.3 million for 2019, compared to $476.8 million for 2018. This
decrease was primarily attributable to lower customer drilling activity in Canada, as reflected by the 30% decline in average rig
count. Despite the 9% decline in the United States average rig count, revenues in the U.S. only declined 4% benefiting from
market share gains in the offshore Gulf of Mexico market. For U.S. land markets, the revenue decrease was relatively in line
with the average rig count, with a reduction from lower market share offset by an increase in footage drilled per rig due to
improvements in customer drilling efficiency.
Internationally, revenues decreased 19% to $193.1 million for 2019, compared to $239.0 million for 2018. This
decrease was primarily attributable to declines related to the contract transitions in Algeria, Brazil, and offshore Australia as
well as lower customer activity in Romania and Albania, partially offset by growth across several EMEA countries, primarily
reflecting market share gains with IOC and NOC customers.
Operating income
The Fluids Systems segment generated operating income of $3.8 million for 2019 compared to $40.3 million for 2018.
Fluids Systems operating income for 2019 includes an $11.4 million non-cash impairment of goodwill and $7.3 million of total
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 2018 included $5.0 million of total charges associated
31
with severance costs, the Kenedy, Texas facility fire, and expenses related to the upgrade and conversion of a drilling fluids
facility into a completion fluids facility. Excluding these charges, the decrease in operating income includes a $10.8 million
decline from North American operations and a $11.8 million decline from international operations. This decline in operating
income is primarily attributable to the decreases in revenues described above.
Industrial Solutions
Revenues
Total revenues for this segment consisted of the following:
(In thousands)
Rental and service revenues
Product sales revenues
Total Industrial Solutions revenues
Year Ended December 31,
2019 vs 2018
2019
2018
143,337 $
56,465
174,840 $
55,895
$
(31,503)
570
199,802 $
230,735 $
(30,933)
$
$
%
(18) %
1 %
(13) %
Rental and service revenues decreased 18% to $143.3 million for 2019 compared to $174.8 million for 2018, which
includes a decrease in revenues from E&P customers of approximately $35.0 million, resulting from lower U.S. drilling and
pressure pumping activity and weakness in natural gas prices. This decline was partially offset by an increase of approximately
$3.5 million in non-E&P rental and service revenues. Revenues from product sales increased 1% and typically fluctuate based
on the timing of mat orders from customers.
Operating income
The Industrial Solutions segment generated operating income of $47.5 million for 2019 compared to $60.6 million
for 2018, primarily attributable to the change in revenues as described above. The benefit from the higher contribution of
product sales revenue in 2019 was offset by lower average rental pricing primarily from the increase in non-E&P rental activity
as well as costs associated with additional personnel to support our strategic growth initiatives.
Corporate Office
Corporate office expenses increased $3.5 million to $40.9 million for 2019 compared to $37.4 million for 2018. This
increase was primarily driven by $3.4 million of charges associated with the February 2019 retirement policy modification, as
discussed in Note 12. The remaining change primarily reflects a $3.2 million increase in professional fees primarily related to
our long-term strategic planning project and the Cleansorb acquisition, as well as higher severance and personnel costs, partially
offset by lower performance-based incentive compensation. In addition, 2018 included a $1.8 million charge associated with
the retirement and transition of our former Senior Vice President, General Counsel and Chief Administrative Officer.
32
Liquidity and Capital Resources
Net cash provided by operating activities was $55.8 million for 2020 compared to $72.3 million for 2019. The $16.5
million decrease in net cash provided by operating activities was primarily attributable to the impact from the lower cash
generated from operating results, partially offset by the decrease in working capital resulting from the 2020 decline in revenues.
During 2020, net loss adjusted for non-cash items used cash of $23.0 million, while changes in working capital provided cash
of $78.7 million. During 2019, net income adjusted for non-cash items provided cash of $50.2 million, while changes in
working capital provided cash of $22.1 million.
Net cash used in investing activities was $3.4 million for 2020, including capital expenditures of $15.8 million,
partially offset by $12.4 million in proceeds from the sale of assets. The majority of the proceeds from the sale of assets reflect
used mats from our rental fleet, which are a part of the commercial offering of our Site and Access Solutions business. Capital
expenditures during 2020 included $7.8 million for the Industrial Solutions segment, including investments in the mat rental
fleet as well as new products, and $6.2 million for the Fluids Systems segment. Net cash used in investing activities was $49.8
million for 2019, including capital expenditures of $44.8 million and $18.7 million associated with the acquisition of Cleansorb,
partially offset by $13.7 million in proceeds from the sale of assets. Capital expenditures during 2019 included $23.5 million for
the Industrial Solutions segment, including $15.5 million of investments in the mat rental fleet, and $18.4 million for the Fluids
Systems segment.
Net cash used in financing activities was $77.9 million for 2020, which primarily includes a net repayment of $45.9
million on our ABL Facility (as defined below) and $29.1 million in repurchases of our Convertible Notes. Net cash used in
financing activities was $29.5 million for 2019, which primarily included $19.0 million in share repurchases and a net
repayment of $11.3 million on our ABL Facility.
Substantially all our $24.2 million of cash on hand at December 31, 2020 resides in our international subsidiaries.
Subject to maintaining sufficient cash requirements to support the strategic objectives of these international subsidiaries and
complying with applicable exchange or cash controls, we expect to continue to repatriate excess cash from these international
subsidiaries. In addition, we may continue to purchase our Convertible Notes under our existing repurchase program prior to the
December 2021 maturity. In February 2021, we repurchased $13.0 million of our Convertible Notes in the open market under
the repurchase program for a total cost of $12.8 million, leaving $53.9 million of principal amount outstanding as of February
25, 2021.
Following a sequential increase in fourth quarter 2020 revenues, we anticipate that revenues will continue to increase
in 2021 as market activity improves from current levels, although the ongoing impacts of the COVID-19 pandemic and an
uncertain economic environment make the timing and pace of recovery difficult to predict. We anticipate that our near-term
working capital requirements to support the revenue growth will largely be offset by the benefit from our on-going efforts to
reduce inventory levels and international receivables, which remain somewhat elevated from historical levels. As we progress
through 2021, we anticipate that future working capital requirements for our operations will fluctuate directionally with
revenues. We expect capital expenditures in the near term to focus on industrial end-market expansion opportunities that
provide stable cash flow generation.
Availability under our ABL Facility also provides additional liquidity as discussed further below. Total availability
under the ABL Facility will fluctuate directionally based on the level of eligible U.S. accounts receivable, inventory, and,
subject to satisfaction of certain financial covenants as described below, composite mats included in the rental fleet. As of
February 25, 2021, our total availability under the ABL Facility was $88.2 million, of which $21.4 million was drawn, resulting
in remaining availability of $66.8 million. This availability under the ABL Facility excludes $25.0 million related to eligible
rental mats as we failed to satisfy the required minimum consolidated fixed charge coverage ratio, as measured on the trailing
twelve-month period ended December 31, 2020. Based on our current projections of operating results through the first half of
2021, we expect to satisfy the financial covenants required such that the eligible rental mats would again be included in the
borrowing availability under the ABL Facility following the second quarter of 2021.
We expect our available cash on-hand, cash generated by operations, and the expected availability under our ABL
Facility to be adequate to fund current operations and the maturity of the 2021 Convertible Notes during the next 12 months.
We also continue to evaluate other sources of additional liquidity to support our longer-term liquidity options, which include
possible financing or alternative arrangements secured by certain assets in the U.S. or our international operations.
33
Our capitalization is as follows:
(In thousands)
Convertible Notes
ABL Facility
Other debt
Unamortized discount and debt issuance costs
Total debt
Stockholder’s equity
Total capitalization
December 31, 2020 December 31, 2019
$
$
66,912
19,100
5,371
(4,221)
87,162
488,032
575,194
$
$
100,000
65,000
7,164
(12,291)
159,873
548,645
708,518
$
$
Total debt to capitalization
15.2%
22.6%
Convertible Notes. In December 2016, we issued $100.0 million of unsecured convertible senior notes (“Convertible
Notes”) that mature on December 1, 2021, of which $66.9 million principal amount was outstanding at December 31, 2020. In
February 2021, we repurchased $13.0 million of our Convertible Notes leaving $53.9 million outstanding as of February 25,
2021. The notes bear interest at a rate of 4.0% per year, payable semiannually in arrears on June 1 and December 1 of each
year.
Holders may convert the notes at their option at any time prior to the close of business on the business day
immediately preceding June 1, 2021, only under the following circumstances:
• during any calendar quarter (and only during such calendar quarter) if the last reported sale price of our common
stock for at least 20 trading days (regardless of whether consecutive) during a period of 30 consecutive trading days
ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price of the notes in effect on each applicable trading day;
• during the five business day period after any five consecutive trading day period in which the trading price per
$1,000 principal amount of notes for each trading day was less than 98% of the last reported sale price of our
common stock on such date multiplied by the conversion rate on each such trading day; or
• upon the occurrence of specified corporate events, as described in the indenture governing the notes, such as a
consolidation, merger, or share exchange.
On or after June 1, 2021 until the close of business on the business day immediately preceding the maturity date,
holders may convert their notes at any time, regardless of whether any of the foregoing conditions have been satisfied. As of
February 25, 2021, the notes were not convertible.
The notes are convertible into, at our election, cash, shares of common stock, or a combination of both, subject to
satisfaction of specified conditions and during specified periods, as described above. If converted, we currently intend to pay
cash for the principal amount of the notes converted. The conversion rate is 107.1381 shares of our common stock per $1,000
principal amount of notes (equivalent to an initial conversion price of $9.33 per share of common stock), subject to adjustment
in certain circumstances. We may not redeem the notes prior to their maturity date.
Asset-Based Loan Facility. In May 2016, we entered into an asset-based revolving credit agreement, which was
amended in October 2017 and in March 2019 (as amended, the “ABL Facility”). The March 2019 amendment increased the
amount available for borrowings, reduced applicable borrowing rates, and extended the term. The ABL Facility provides
financing of up to $200.0 million available for borrowings (inclusive of letters of credit) and can be increased up to a maximum
capacity of $275.0 million, subject to certain conditions.
The ABL Facility terminates in March 2024; however, the ABL Facility has a springing maturity date that will
accelerate the maturity of the ABL Facility to September 1, 2021 if, prior to such date, the Convertible Notes have not been
repurchased, redeemed, refinanced, exchanged or otherwise satisfied in full or we have not escrowed an amount of funds, that
together with the amount that we establish as a reserve against our borrowing capacity, is sufficient for the future settlement of
the Convertible Notes at their maturity. The ABL Facility requires a minimum consolidated fixed charge coverage ratio of 1.25
to 1.0 calculated based on the trailing twelve-month period ended June 30, 2021 and remaining unused availability of at least
$25.0 million to utilize borrowings or assignment of availability under the ABL Facility towards funding the repayment of the
Convertible Notes.
34
Borrowing availability under the ABL Facility is calculated based on eligible U.S. accounts receivable, inventory, and,
subject to satisfaction of certain financial covenants as described below, composite mats included in the rental fleet, net of
reserves and limits on such assets included in the borrowing base calculation. To the extent pledged by us, the borrowing base
calculation also includes the amount of eligible pledged cash. The lender may establish such reserves, in part based on
appraisals of the asset base, and other limits at its discretion which could reduce the amounts otherwise available under the ABL
Facility. Availability associated with eligible rental mats will also be subject to maintaining a minimum consolidated fixed
charge coverage ratio of 1.5 to 1.0 and at least $1.0 million of operating income for the Site and Access Solutions business,
each calculated based on a trailing twelve-month period.
As noted above, we do not currently satisfy the minimum consolidated fixed charge coverage ratio that is required to
include eligible rental mats in the borrowing availability under the ABL Facility. We expect to satisfy the minimum
consolidated fixed charge coverage ratio as required to include eligible rental mats in the borrowing availability under the ABL
Facility following the second quarter of 2021 and expect to satisfy the June 30, 2021 ABL Facility requirements to be able to
utilize borrowings or assignment of availability under the ABL Facility towards funding the repayment of the Convertible
Notes prior to September 1, 2021. If we are unable to satisfy the minimum consolidated fixed charge coverage ratio following
the second quarter of 2021, we would further evaluate options, which may include a waiver or amendment to our ABL Facility.
Any waiver or amendment to the ABL Facility, if required, would be expected to increase the cost of our borrowings and may
impose additional limitations over certain types of activities, and we can give no assurance that we will be able to obtain such
amendment or waiver on favorable terms or at all.
Under the terms of the ABL Facility, we may elect to borrow at a variable interest rate based on either, (1) LIBOR
subject to a floor of zero or (2) a base rate equal to the highest of: (a) the federal funds rate plus 50 basis points, (b) the prime
rate of Bank of America, N.A. and (c) LIBOR, subject to a floor of zero, plus 100 basis points, plus, in each case, an applicable
margin per annum. The applicable margin ranges from 150 to 200 basis points for LIBOR borrowings, and 50 to 100 basis
points for base rate borrowings, based on the consolidated fixed charge coverage ratio as defined in the ABL Facility. As of
December 31, 2020, the applicable margin for borrowings under our ABL Facility was 200 basis points with respect to LIBOR
borrowings and 100 basis points with respect to base rate borrowings. The weighted average interest rate for the ABL Facility
was 2.3% at December 31, 2020. In addition, we are required to pay a commitment fee on the unused portion of the ABL
Facility ranging from 25 to 37.5 basis points, based on the level of outstanding borrowings, as defined in the ABL Facility. As
of December 31, 2020, the applicable commitment fee was 37.5 basis points.
The ABL Facility is a senior secured obligation, secured by first liens on substantially all of our U.S. tangible and
intangible assets, and a portion of the capital stock of our non-U.S. subsidiaries has also been pledged as collateral. The ABL
Facility contains customary operating covenants and certain restrictions including, among other things, the incurrence of
additional debt, liens, dividends, asset sales, investments, mergers, acquisitions, affiliate transactions, stock repurchases and
other restricted payments. The ABL Facility also requires a minimum consolidated fixed charge coverage ratio of 1.0 to 1.0
calculated based on a trailing twelve-month period if availability under the ABL Facility falls below $22.5 million. Based on
our current projections, we do not expect availability under the ABL Facility to fall below $22.5 million. In addition, the ABL
Facility contains customary events of default, including, without limitation, a failure to make payments under the facility,
acceleration of more than $25.0 million of other indebtedness, certain bankruptcy events, and certain change of control events.
Other Debt. Certain of our foreign subsidiaries maintain local credit arrangements consisting primarily of lines of
credit or overdraft facilities which are generally renewed on an annual basis. We utilize local financing arrangements in our
foreign operations in order to provide short-term local liquidity needs. We had $3.5 million and $4.8 million outstanding under
these arrangements at December 31, 2020 and December 31, 2019, respectively.
In February 2021, a U.K. subsidiary entered a £6.0 million (approximately $8.3 million) term loan facility that matures
in February 2024, the proceeds of which were used to pay down the ABL Facility. The term loan bears interest at a rate of
LIBOR plus a margin of 3.4% per year, payable in quarterly installments of £375,000 plus interest beginning March 2021 and a
£1.5 million payment due at maturity.
Off-Balance Sheet Arrangements
We do not have any special purpose entities. At December 31, 2020, we had $46.2 million in outstanding letters of
credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $6.2 million in
restricted cash. We also enter into normal short-term operating leases for office and warehouse space, as well as rolling stock
and other pieces of operating equipment. None of these off-balance sheet arrangements either has, or is expected to have, a
material effect on our financial statements.
Contractual Obligations
A summary of our outstanding contractual and other obligations and commitments at December 31, 2020 is as
follows:
35
(In thousands)
Convertible Notes
Interest on Convertible Notes
Other current debt
ABL Facility
Operating lease liabilities (1)
Trade accounts payable and accrued
liabilities (2)
Purchase commitments, not accrued
Other long-term liabilities (3)
Performance bond obligations
Letter of credit commitments
Total contractual obligations
2021
2022
2023
2024
2025
Thereafter
Total
$ 66,912 $
2,676
4,781
—
8,064
— $
—
—
—
5,915
— $
—
—
—
4,244
— $
—
—
19,100
3,314
— $
—
—
—
2,828
— $ 66,912
2,676
—
4,781
—
19,100
—
38,987
14,622
79,075
9,556
—
15,929
8,298
—
—
2,752
—
3,827
—
—
911
—
98
—
—
—
16,803
156
—
—
—
614
—
$ 195,291 $ 12,494 $ 5,253 $ 39,373 $ 3,442 $
—
—
5,713
177
253
79,075
9,556
9,376
33,523
12,632
20,765 $ 276,618
(1) Operating lease liabilities represent the undiscounted future lease payments. See Note 8 for additional information.
(2) Excludes accrued interest on the Convertible Notes and the current portion of operating lease liabilities.
(3) Table does not allocate by year expected tax payments, asset retirement obligations, and uncertain tax positions due to
the inability to make reasonably reliable estimates of the timing of future cash settlements.
We anticipate that the obligations and commitments listed above that are due in less than one year will be paid from
available cash on-hand, cash generated by operations, and estimated availability under our ABL Facility, subject to covenant
compliance and certain restrictions as further discussed above. The specific timing of settlement for certain long-term
obligations cannot be reasonably estimated.
36
Critical Accounting Policies
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the
United States (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts
and disclosures. Significant estimates used in preparing our consolidated financial statements include estimated cash flows and
fair values used for impairments of long-lived assets, including goodwill and other intangibles, and valuation allowances for
deferred tax assets. See Note 1 for a discussion of the accounting policies for each of these matters. Our estimates are based on
historical experience and on our future expectations that we believe to be reasonable. The combination of these factors forms
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from our current estimates and those differences may be material.
We believe the critical accounting policies described below affect our more significant judgments and estimates used
in preparing our consolidated financial statements.
Impairment of Long-lived Assets
Goodwill and other indefinite-lived intangible assets are tested for impairment annually as of November 1, or more
frequently, if indicators of impairment exists. When there are qualitative indicators of impairment, we use an impairment test
which includes a comparison of the carrying value of net assets of our reporting units, including goodwill, with their estimated
fair values, which we estimate using a combination of a market multiple and discounted cash flow approach (classified within
Level 3 of the fair value hierarchy). We also compare the aggregate fair values of our reporting units with our market
capitalization. If the carrying value exceeds the estimated fair value, an impairment charge is recorded in the period in which
such review is performed. We identify our reporting units based on our analysis of several factors, including our operating
segment structure, evaluation of the economic characteristics of our geographic regions within each of our operating segments,
and the extent to which our business units share assets and other resources.
In March 2020, primarily as a result of the collapse in oil prices and the expected declines in the U.S. land E&P
markets, along with a significant decline in the quoted market prices of our common stock, we considered these developments
to be a potential indicator of impairment that required us to complete an interim goodwill impairment evaluation. As such, in
March 2020, we estimated the fair value of our reporting unit based on our current forecasts and expectations for market
conditions and determined that even though the estimated fair value had decreased, the fair value remained substantially in
excess of its net carrying value, and therefore, no impairment was required. During the second quarter and third quarter of 2020,
we determined that there were no further indicators of events or changes in circumstances that would more likely than not
reduce the fair value below its carrying amount.
As of December 31, 2020, our consolidated balance sheet includes $42.4 million of goodwill, all of which relates to
the Industrial Solutions segment. In completing the annual evaluation during the fourth quarter of 2020, we determined that the
fair value was in excess of the net carrying value, and therefore, no impairment was required.
There are significant inherent uncertainties and management judgment in estimating the fair value of a reporting unit.
Significant assumptions inherent in the evaluation include the estimated growth rates for future revenues and the discount rate.
Our assumptions are based on historical data supplemented by current and anticipated market conditions. While we believe we
have made reasonable estimates and assumptions to estimate the fair value, it is possible that a material change could occur. If
actual results are not consistent with our current estimates and assumptions, or if changes in macroeconomic conditions outside
the control of management change such that it results in a significant negative impact on our estimated fair values, the fair value
of the reporting unit may decrease below its net carrying value, which could result in a material impairment of our goodwill.
We review property, plant and equipment, finite-lived intangible assets and certain other assets for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We assess
recoverability based on expected undiscounted future net cash flows. Due to the changes in market conditions, we reviewed
these assets for impairment during 2020 and determined that the estimated undiscounted cash flows exceeded the carrying
value, and therefore, no impairment was required.
Estimating future net cash flows requires us to make judgments regarding long-term forecasts of future revenues and
costs related to the assets subject to review. These forecasts are uncertain in that they require assumptions about demand for our
products and services, future market conditions, and technological developments. If changes in these assumptions occur, our
expectations regarding future net cash flows may change and a material impairment could result.
Income Taxes
We had total deferred tax assets of $56.4 million and $40.7 million at December 31, 2020 and 2019, respectively, with
the increase primarily related to U.S. federal net operating loss carryforwards. A valuation allowance must be established to
37
offset a deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax asset will
not be realized. We have considered future taxable income and tax planning strategies in assessing the need for our valuation
allowance. At December 31, 2020, a total valuation allowance of $26.3 million was recorded, which includes a valuation
allowance on $13.5 million of net operating loss carryforwards for certain U.S. state and foreign jurisdictions, including
Australia, as well as a valuation allowance of $3.9 million for certain tax credits recognized related to the accounting for the
impact of the Tax Act. Changes in the expected future generation of qualifying taxable income within these jurisdictions or in
the realizability of other tax assets may result in an adjustment to the valuation allowance, which would be charged or credited
to income in the period this determination was made.
We file income tax returns in the United States and several non-U.S. jurisdictions and are subject to examination in the
various jurisdictions in which we file. We are no longer subject to income tax examinations for U.S. federal and substantially
all state jurisdictions for years prior to 2013 and for substantially all foreign jurisdictions for years prior to 2008.
Following an audit in 2015, the treasury authority in Mexico issued a tax assessment (inclusive of interest and
penalties) in the amount of 60 million pesos (approximately $3.3 million) to our Mexico subsidiary primarily in connection
with the export of mats from Mexico which took place in 2010. The mats that are the subject of this assessment were owned by
a U.S. subsidiary and leased to our Mexico subsidiary for matting projects in the Mexican market. In 2010, we made the
decision to move these mats out of Mexico to markets with higher demand. The Mexican treasury authority determined the
export of the mats was the equivalent of a sale and assessed taxes on the gross declared value of the exported mats to our
Mexico subsidiary. We retained outside legal counsel and filed administrative appeals with the treasury authority, but we were
notified in April 2018 that the last administrative appeal had been rejected. In response, we filed an appeal in the Mexican
Federal Tax Court in the second quarter of 2018, which required that we post a bond in the amount of the assessed taxes (plus
additional interest). In the fourth quarter of 2018, the Mexican Federal Tax Court issued a favorable judgment nullifying in full
the tax assessment which was subsequently appealed by the treasury authority in Mexico. Following a judgment by the
Mexican Court of Appeals, in the third quarter of 2019, the Mexican Federal Tax Court confirmed the full nullification of the
tax assessment based on a due process violation and recognized the treasury authority's right to cure the due process violation
by starting a new tax audit, and in the fourth quarter of 2020, the Mexican Court of Appeals confirmed this ruling resolving the
appeals process in favor of our Mexico subsidiary. While the treasury authority in Mexico still has the right to start a new audit,
we believe our tax position has been properly reported in accordance with applicable tax laws and regulations in Mexico.
We are also under examination by various tax authorities in other countries, and certain foreign jurisdictions have
challenged the amounts of taxes due for certain tax periods. These audits are in various stages of completion. We fully
cooperate with all audits, but defend existing positions vigorously. We evaluate the potential exposure associated with various
filing positions and record a liability for uncertain tax positions as circumstances warrant. Although we believe all tax positions
are reasonable and properly reported in accordance with applicable tax laws and regulations in effect during the periods
involved, the final determination of tax audits and any related litigation could be materially different than that which is reflected
in historical income tax provisions and accruals.
New Accounting Pronouncements
See Note 1 in Item 8. “Financial Statements and Supplementary Data” for a discussion of new accounting
pronouncements.
38
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in interest rates and changes in foreign currency exchange rates. A
discussion of our primary market risk exposure in financial instruments is presented below.
Interest Rate Risk
At December 31, 2020, we had total principal amounts outstanding under financing arrangements of $91.4 million,
including $66.9 million of borrowings under our Convertible Notes which bear interest at a fixed rate of 4.0% and $19.1 million
of borrowings under our ABL Facility. Borrowings under our ABL Facility are subject to a variable interest rate as determined
by the ABL Facility. The weighted average interest rate at December 31, 2020 for the ABL Facility was 2.3%. Based on the
balance of variable rate debt at December 31, 2020, a 100 basis-point increase in short-term interest rates would have increased
annual pre-tax interest expense by $0.2 million.
Foreign Currency Risk
Our principal foreign operations are conducted in certain areas of EMEA, Canada, Asia Pacific, and Latin America.
We have foreign currency exchange risks associated with these operations, which are conducted principally in the foreign
currency of the jurisdictions in which we operate including European euros, Kuwaiti dinar, Algerian dinar, Romanian new leu,
Canadian dollars, British pounds, and Australian dollars. Historically, we have not used off-balance sheet financial hedging
instruments to manage foreign currency risks when we enter into a transaction denominated in a currency other than our local
currencies.
39
ITEM 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Newpark Resources, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Newpark Resources, Inc. and subsidiaries (the “Company”)
as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss),
stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally
accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 26, 2021, expressed an unqualified opinion on the Company’s internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) related to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Evaluation of Long-Lived Asset Impairment — United States Fluids Systems Asset Group — Refer to Note 1 to the
financial statements
Critical Audit Matter Description
The Company reviews property, plant and equipment, finite-lived intangible assets and certain other assets for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability is based
upon expected undiscounted future net cash flows. Due to changes in market conditions impacting the United States fluids
systems asset group (US Fluids), management reviewed the related assets for impairment during 2020 and determined that the
estimated undiscounted cash flows exceeded the carrying value, and therefore, no impairment was required.
Estimating future net cash flows requires management to make judgments regarding long-term forecasts of future revenues and
costs related to the assets subject to review. These forecasts are estimates that include assumptions regarding demand for the
Company’s products and services, future market conditions, and technological developments. If changes in these assumptions
occur, expectations regarding future net cash flows may change and an impairment may result.
We identified the estimation of the undiscounted future net cash flows of the US Fluids asset group as a critical audit matter due
to the materiality of the property, plant and equipment balance, high degree of auditor judgment and an increased level of effort
40
when performing audit procedures to evaluate the reasonableness of management’s assumptions in determining the
undiscounted future net cash flows, including those related to revenue forecasts and the terminal value used to determine
estimated future cash flows under various business development plans.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the long-term forecasts of future revenues and costs related to assets used by management to
estimate the undiscounted future net cash flows of the US Fluids asset group included the following, among others:
•
•
•
•
Evaluating the reasonableness of key assumptions used by management including revenue growth rates and EBITDA
margins in the undiscounted future net cash flows determination by comparing:
◦
◦
◦
◦
Revenue growth rates to third-party reports around rig-count and industry forecasts
Revenue and EBITDA projections in the Q1’2020 analysis to current forecasts considering actual results in
FY 2020
The various development plans considered to internal communications to management and the Board of
Directors, and
Estimated terminal value to comparable precedent transactions involving external parties
Performing sensitivity analyses of the key assumptions of revenue growth rates and EBITDA margins to evaluate the
change in the undiscounted future net cash flows estimate that would result from changes in the assumptions.
Evaluating management’s ability to accurately forecast by comparing actual results to management’s historical
forecasts.
Testing the effectiveness of controls over the review of triggering events and management’s long-lived asset
impairment evaluation.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 26, 2021
We have served as the Company’s auditor since 2008.
41
Newpark Resources, Inc.
Consolidated Balance Sheets
December 31,
2020
2019
(In thousands, except share data)
ASSETS
Cash and cash equivalents
Receivables, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Operating lease assets
Goodwill
Other intangible assets, net
Deferred tax assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current debt
Accounts payable
Accrued liabilities
Total current liabilities
Long-term debt, less current portion
Noncurrent operating lease liabilities
Deferred tax liabilities
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (Note 15)
Common stock, $0.01 par value (200,000,000 shares authorized and
107,587,786 and 106,696,719 shares issued, respectively)
Paid-in capital
Accumulated other comprehensive loss
Retained earnings
Treasury stock, at cost (16,781,150 and 16,958,418 shares, respectively)
Total stockholders’ equity
Total liabilities and stockholders' equity
$
$
$
$
24,197 $
141,045
147,857
15,081
328,180
277,696
30,969
42,444
25,428
1,706
2,769
709,192 $
67,472 $
49,252
36,934
153,658
19,690
25,068
13,368
9,376
221,160
48,672
216,714
196,897
16,526
478,809
310,409
32,009
42,332
29,677
3,600
3,243
900,079
6,335
79,777
42,750
128,862
153,538
26,946
34,247
7,841
351,434
1,076
627,031
(54,172)
50,937
(136,840)
488,032
709,192 $
1,067
620,626
(67,947)
134,119
(139,220)
548,645
900,079
See Accompanying Notes to Consolidated Financial Statements
42
Newpark Resources, Inc.
Consolidated Statements of Operations
Years Ended December 31,
(In thousands, except per share data)
Revenues
Product sales revenues
Rental and service revenues
Total revenues
Cost of revenues
Cost of product sales revenues
Cost of rental and service revenues
Total cost of revenues
Selling, general and administrative expenses
Other operating (income) loss, net
Impairments and other charges
Operating income (loss)
Foreign currency exchange (gain) loss
Interest expense, net
Gain on extinguishment of debt
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income (loss)
Net income (loss) per common share - basic
Net income (loss) per common share - diluted
2020
2019
2018
$
378,813 $
113,812
492,625
654,006 $
166,113
820,119
384,519
88,739
473,258
86,604
(3,330)
14,727
(78,634)
3,378
10,986
(419)
(92,579)
568,388
116,350
684,738
113,394
170
11,422
10,395
(816)
14,369
—
(3,158)
(11,883)
(80,696) $
9,788
(12,946) $
(0.89) $
(0.89) $
(0.14) $
(0.14) $
$
$
$
743,342
203,206
946,548
633,847
133,128
766,975
115,127
888
—
63,558
1,416
14,864
—
47,278
14,997
32,281
0.36
0.35
See Accompanying Notes to Consolidated Financial Statements
43
Newpark Resources, Inc.
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31,
(In thousands)
Net income (loss)
Foreign currency translation adjustments (net of tax benefit of $293,
$373, $414)
Recognition of Brazil cumulative foreign currency translation losses
Comprehensive income (loss)
2020
2019
2018
$
(80,696) $
(12,946) $
32,281
2,086
11,689
(66,921) $
(274)
—
(13,220) $
(14,454)
—
17,827
$
See Accompanying Notes to Consolidated Financial Statements
44
Newpark Resources, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
Common
Stock
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Treasury
Stock
Total
Balance at January 1, 2018
$
1,046 $ 603,849 $
(53,219) $ 123,375 $ (127,571) $ 547,480
Cumulative effect of accounting changes
Net income
Employee stock options, restricted stock
and employee stock purchase plan
Stock-based compensation expense
Foreign currency translation, net of tax
—
—
18
—
—
—
—
3,066
10,361
—
—
—
—
—
(14,454)
(6,764)
32,281
—
—
(6,764)
32,281
(90)
(2,217)
777
—
—
—
—
10,361
(14,454)
Balance at December 31, 2018
1,064
617,276
(67,673) 148,802
(129,788) 569,681
Net loss
Employee stock options, restricted stock
and employee stock purchase plan
Stock-based compensation expense
Treasury shares purchased at cost
Foreign currency translation, net of tax
—
3
—
—
—
—
—
(12,946)
—
(12,946)
(8,290)
11,640
—
—
—
—
—
(274)
(1,737)
9,599
(425)
—
—
—
—
11,640
(19,031) (19,031)
—
(274)
Balance at December 31, 2019
1,067
620,626
(67,947) 134,119
(139,220) 548,645
Cumulative effect of accounting change
Net loss
Employee stock options, restricted stock
and employee stock purchase plan
Stock-based compensation expense
Treasury shares purchased at cost
Foreign currency translation, net of tax
Recognition of Brazil cumulative foreign
currency translation losses
—
—
9
—
—
—
—
—
—
(173)
6,578
—
—
—
—
—
—
—
—
2,086
11,689
(735)
(80,696)
—
—
(735)
(80,696)
(1,751)
2,380
—
—
—
—
465
6,578
—
2,086
—
—
—
—
11,689
Balance at December 31, 2020
$
1,076 $ 627,031 $
(54,172) $ 50,937 $ (136,840) $ 488,032
See Accompanying Notes to Consolidated Financial Statements
45
Newpark Resources, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31,
(In thousands)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operations:
Impairments and other non-cash charges
Depreciation and amortization
Stock-based compensation expense
Provision for deferred income taxes
Credit loss expense
Gain on sale of assets
Gain on extinguishment of debt
Gain on insurance recovery
Amortization of original issue discount and debt issuance costs
Change in assets and liabilities:
(Increase) decrease in receivables
(Increase) decrease in inventories
(Increase) decrease in other assets
Increase (decrease) in accounts payable
Increase (decrease) in accrued liabilities and other
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Business acquisitions, net of cash acquired
Proceeds from sale of property, plant and equipment
Proceeds from insurance property claim
Refund of proceeds from sale of a business
Net cash used in investing activities
Cash flows from financing activities:
Borrowings on lines of credit
Payments on lines of credit
Purchases of Convertible Notes
Debt issuance costs
Proceeds from employee stock plans
Purchases of treasury stock
Other financing activities
Net cash used in financing activities
2020
2019
2018
$
(80,696) $
(12,946) $
32,281
25,072
45,314
6,578
(18,850)
1,427
(6,531)
(419)
—
5,152
70,994
39,889
(686)
(29,457)
(1,996)
55,791
(15,794)
—
12,399
—
—
(3,395)
11,422
47,144
11,640
(4,250)
1,792
(10,801)
—
—
6,188
40,182
699
(1,032)
(8,318)
(9,434)
72,286
(44,806)
(18,692)
13,734
—
—
(49,764)
173,794
(221,781)
(29,124)
—
—
(333)
(497)
(77,941)
327,983
(335,613)
—
(1,214)
1,314
(21,737)
(259)
(29,526)
—
45,899
10,361
236
2,849
(1,821)
—
(606)
5,510
(7,388)
(30,352)
1,055
2,449
2,930
63,403
(45,141)
(249)
2,612
1,000
(13,974)
(55,752)
347,613
(352,582)
—
(149)
3,874
(3,870)
601
(4,513)
Effect of exchange rate changes on cash
(970)
(399)
(4,332)
Net decrease in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of year
(26,515)
56,863
30,348 $
(7,403)
64,266
56,863 $
(1,194)
65,460
64,266
$
See Accompanying Notes to Consolidated Financial Statements
46
NEWPARK RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Summary of Significant Accounting Policies
Organization and Principles of Consolidation. Newpark Resources, Inc. was organized in 1932 as a Nevada
corporation. In 1991, we changed our state of incorporation to Delaware. The consolidated financial statements include our
company and our wholly-owned subsidiaries (“we,” “our,” or “us”). All intercompany transactions are eliminated in
consolidation.
We are a geographically diversified supplier providing products, as well as rentals and services. We operate our
business through two reportable segments: Fluids Systems and Industrial Solutions. Our Fluids Systems segment provides
customized drilling, completion, and stimulation fluids solutions to oil and natural gas exploration and production (“E&P”)
customers primarily in North America and Europe, the Middle East and Africa (“EMEA”), as well as certain countries in Asia
Pacific and Latin America. Our Industrial Solutions segment includes our Site and Access Solutions business (historically
reported as the Mats and Integrated Services segment), along with our Industrial Blending operations. Site and Access Solutions
provides composite matting system rentals utilized for temporary worksite access, along with related site construction and
services to customers in various markets including electrical transmission & distribution, E&P, pipeline, renewable energy,
petrochemical, construction and other industries, primarily in the United States and Europe. We also sell our manufactured
composite mats to customers around the world. Our Industrial Blending operations began in 2020, leveraging our chemical
blending capacity and technical expertise to enter targeted industrial end-markets.
Use of Estimates and Market Risks. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. Estimates used in preparing our consolidated financial statements include, but are not limited to the following:
allowances for credit losses, reserves for self-insured retention under insurance programs, estimated performance and values
associated with employee incentive programs, estimated cash flows and fair values used for impairments of long-lived assets,
including goodwill and other intangibles, and valuation allowances for deferred tax assets.
Our Fluids Systems operating results remain dependent on oil and natural gas drilling activity levels in the markets we
serve and the nature of the drilling operations (including the depth and whether the wells are drilled vertically or horizontally),
which governs the revenue potential of each well. Drilling activity levels, in turn, depend on a variety of factors, including oil
and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions. Oil and natural gas prices and
activity are cyclical and volatile, and this market volatility has a significant impact on our operating results.
Cash Equivalents. All highly liquid investments with a remaining maturity of three months or less at the date of
acquisition are classified as cash equivalents.
Restricted Cash. Cash that is restricted as to withdrawal or usage is recognized as restricted cash and is included in
other current assets in the consolidated balance sheets.
Allowance for Credit Losses. In 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance
which requires financial assets measured at amortized cost basis, including trade receivables, to be presented at the net amount
expected to be collected. See "New Accounting Pronouncements" below for details about the amended guidance and about our
adoption. Results for reporting periods beginning after December 31, 2019 are presented under the new guidance, while prior
period amounts were not adjusted and continue to be reported in accordance with previous guidance.
The new guidance requires an entity to estimate its lifetime “expected credit loss” for such assets at inception, which
will generally result in the earlier recognition of allowances for losses. Under previous guidance, reserves for uncollectible
accounts receivable were determined on a specific identification basis when we believed that the required payment of specific
amounts owed to us was not probable. Under the new guidance, our allowance for credit losses reflects losses that are expected
over the contractual life of the asset, and takes into account historical loss experience, current and future economic conditions,
and reasonable and supportable forecasts.
Inventories. Inventories are stated at the lower of cost (principally average cost) or net realizable value. Certain
conversion costs associated with the acquisition, production, blending, and storage of inventory in our Fluids Systems segment
as well as the manufacturing operations in the Industrial Solutions segment are capitalized as a component of the carrying value
of the inventory and expensed as a component of cost of revenues as the products are sold. Reserves for inventory obsolescence
are determined based on the net realizable value of the inventory using factors such as our historical usage of inventory on-
hand, future expectations related to our customers’ needs, market conditions, and the development of new products.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Property, Plant and Equipment. Property, plant and equipment are recorded at cost. Additions and improvements that
extend the useful life of an asset are capitalized. We capitalize interest costs on significant capital projects. Maintenance and
repairs are expensed as incurred. Sales and disposals of property, plant and equipment are removed at carrying cost less
accumulated depreciation with any resulting gain or loss reflected in earnings.
Depreciation is provided on property, plant and equipment, including finance lease assets, primarily utilizing the
straight-line method over the following estimated useful service lives or lease term:
Computer hardware and office equipment
Computer software
Autos and light trucks
Furniture, fixtures, and trailers
Composite mats (rental fleet)
Machinery and heavy equipment
Owned buildings
Leasehold improvements
3-5 years
3-10 years
5-7 years
7-10 years
7-12 years
10-15 years
20-39 years
Lease term, including reasonably assured renewal periods
Goodwill and Other Intangible Assets. Goodwill represents the excess of the purchase price of acquisitions over the
fair value of the net identifiable assets acquired in business combinations. Goodwill and other intangible assets with indefinite
lives are not amortized. Intangible assets with finite useful lives are amortized either on a straight-line basis over the asset’s
estimated useful life or on a basis that reflects the pattern in which the economic benefits of the asset are realized. Any period
costs of maintaining intangible assets are expensed as incurred.
Impairment of Long-Lived Assets. Goodwill and other indefinite-lived intangible assets are tested for impairment
annually as of November 1, or more frequently, if an indication of impairment exists. As part of our annual goodwill review, we
first perform a qualitative assessment based on company performance and future business outlook to determine if indicators of
impairment exist. When there are qualitative indicators of impairment, we use an impairment test which includes a comparison
of the carrying value of net assets of our reporting units, including goodwill, with their estimated fair values, which we estimate
using a combination of a market multiple and discounted cash flow approach (classified within level 3 of the fair value
hierarchy). We also compare the aggregate fair values of our reporting units with our market capitalization. If the carrying value
exceeds the estimated fair value, an impairment charge is recorded in the period in which such review is performed. We identify
our reporting units based on our analysis of several factors, including our operating segment structure, evaluation of the
economic characteristics of our geographic regions within each of our operating segments, and the extent to which our business
units share assets and other resources.
We review property, plant and equipment, finite-lived intangible assets and certain other assets for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We assess
recoverability based on expected undiscounted future net cash flows. Should the review indicate that the carrying value is not
fully recoverable, the amount of impairment loss is determined by comparing the carrying value to the estimated fair value.
Insurance. We maintain reserves for estimated future payments associated with our self-insured employee healthcare
programs, as well as the self-insured retention exposures under our general liability, auto liability, and workers compensation
insurance policies. Our reserves are determined based on historical experience under these programs, including estimated
development of known claims and estimated incurred-but-not-reported claims.
Treasury Stock. Treasury stock is carried at cost, which includes the entire cost of the acquired stock.
Revenue Recognition. The following provides a summary of our significant accounting policies for revenue
recognition.
Revenue Recognition - Fluids Systems. Revenues for fluid system additive products and engineering services, when
provided to customers in the delivery of an integrated fluid system, are recognized as product sales revenues when utilized by
the customer. Revenues for formulated liquid systems are recognized as product sales revenues when utilized or lost downhole
while drilling. Revenues for equipment rentals and other services provided to customers that are ancillary to the fluid system
product delivery are recognized in rental and service revenues when the services are performed. For direct sales of fluid system
products, revenues are recognized when control passes to the customer, which is generally upon shipment of materials.
Revenue Recognition - Industrial Solutions. Revenues for rentals and services are generated from both fixed-price and
unit-priced contracts, which are generally short-term in duration. The activities under these contracts include the installation and
rental of matting systems for a period of time and services such as access road construction, site planning and preparation,
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
environmental protection, fluids and spill containment, erosion control, and site restoration services. Rental revenues are
recognized over the rental term and service revenues are recognized when the specified services are performed. Revenues from
any subsequent extensions to the rental agreements are recognized over the extension period. Revenues from the direct sale of
products are recognized when control passes to the customer, which is upon shipment or delivery, depending on the terms of the
underlying sales contract.
For both segments, the amount of revenue we recognize for products sold and services performed reflects the
consideration to which we expect to be entitled in exchange for such goods or services, which generally reflects the amount we
have the right to invoice based on agreed upon unit rates. While billing requirements vary, many of our customer contracts
require that billings occur periodically or at the completion of specified activities, even though our performance and right to
consideration occurs throughout the contract. As such, we recognize revenue as performance is completed in the amount to
which we have the right to invoice. We do not disclose the value of our unsatisfied performance obligations for (i) contracts
with an original expected length of one year or less and (ii) contracts for which we recognize revenue for the amount to which
we have the right to invoice for products sold and services performed.
Shipping and handling costs are reflected in cost of revenues, and all reimbursements by customers of shipping and
handling costs are included in revenues.
Income Taxes. We provide for deferred taxes using an asset and liability approach by measuring deferred tax assets
and liabilities due to temporary differences existing at year end using currently enacted tax rates and laws that will be in effect
when the differences are expected to reverse. We reduce deferred tax assets by a valuation allowance when, based on our
estimates, it is more likely than not that a portion of those assets will not be realized in a future period. The estimates utilized in
recognition of deferred tax assets are subject to revision, either up or down, in future periods based on new facts or
circumstances. We present deferred tax assets and liabilities as noncurrent in the balance sheet based on an analysis of each
taxpaying component within a jurisdiction. We evaluate uncertain tax positions and record a liability as circumstances warrant.
Share-Based Compensation. Share-based compensation cost is measured at the grant date based on the fair value of
the award, net of an estimated forfeiture rate. We recognize these costs in the statement of operations using the straight-line
method over the vesting term.
Foreign Currency Translation. The functional currency for substantially all international subsidiaries is their
respective local currency. Financial statements for these international subsidiaries are translated into U.S. dollars using the
exchange rate at each balance sheet date for assets and liabilities and the average exchange rates in effect during the respective
period for revenues and expenses. Exchange rate adjustments resulting from translation of foreign currency financial statements
of our international subsidiaries are reflected in accumulated other comprehensive loss in stockholders’ equity until such time
that the international subsidiary is sold or liquidation is substantially complete, at which time the related accumulated
adjustments would be reclassified into income. Exchange rate adjustments resulting from foreign currency denominated
transactions are recorded in income. At December 31, 2020 and 2019, accumulated other comprehensive loss related to foreign
subsidiaries reflected in stockholders’ equity was $54.2 million and $67.9 million, respectively.
During the fourth quarter of 2019, we made the decision to wind down our Brazil operations, and during the fourth
quarter of 2020, we completed the substantial liquidation of our Brazil subsidiary and recognized an $11.7 million non-cash
charge to "impairments and other charges" for the reclassification of cumulative foreign currency translation losses related to
our subsidiary in Brazil.
Fair Value Measurement. Fair value is measured as the price that would be received from selling an asset or paid to
transfer a liability in an orderly transaction between market participants at a measurement date. We apply the following fair
value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the
hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
• Level 1: The use of quoted prices in active markets for identical financial instruments.
• Level 2: The use of quoted prices for similar instruments in active markets or quoted prices for identical or similar
instruments in markets that are not active or other inputs that are observable in the market or can be corroborated by
observable market data.
• Level 3: The use of significantly unobservable inputs that typically require the use of management’s estimates of
assumptions that market participants would use in pricing.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
New Accounting Pronouncements
Standards Adopted in 2020
Credit Losses. In 2016, the FASB issued new guidance which requires financial assets measured at amortized cost
basis, including trade receivables, to be presented at the net amount expected to be collected. The new guidance requires an
entity to estimate its lifetime “expected credit loss” for such assets at inception, which will generally result in the earlier
recognition of allowances for losses. We adopted this new guidance as of January 1, 2020 using the modified retrospective
transition method, and recorded a net reduction of $0.7 million to opening retained earnings to reflect the cumulative effect of
adoption. Results for reporting periods beginning after December 31, 2019 are presented under the new guidance, while prior
period amounts were not adjusted and continue to be reported in accordance with previous guidance. See Note 7 for additional
required disclosures.
The cumulative effect of the changes made to our consolidated balance sheet for the adoption of the new accounting
guidance for credit losses were as follows:
(In thousands)
Receivables, net
Deferred tax assets
Deferred tax liabilities
Retained earnings
Standards Adopted in 2019
Balance at
December 31,
2019
Impact of
Adoption of
New Credit
Losses
Guidance
Balance at
January 1,
2020
$
216,714 $
3,600
34,247
134,119
(959) $
59
(165)
(735)
215,755
3,659
34,082
133,384
Leases. In 2016, the FASB amended the guidance related to the accounting for leases. The new guidance provides
principles for the recognition, measurement, presentation, and disclosure of leases and requires lessees to recognize both assets
and liabilities arising from finance and operating leases. The classification as either a finance or operating lease will determine
whether lease expense is recognized based on an effective interest method basis or on a straight-line basis over the term of the
lease, respectively.
We adopted this new guidance as of January 1, 2019 using the modified retrospective transition method and recorded
approximately $28.0 million of operating lease assets and liabilities as of January 1, 2019, with no cumulative effect adjustment
to retained earnings. The new guidance had no impact on our consolidated statements of operations or cash flows. Results for
reporting periods beginning after December 31, 2018 are presented under the new guidance, while prior period amounts were
not adjusted and continue to be reported in accordance with previous guidance.
As permitted under the transition guidance within the new standard, we elected to carry forward the historical lease
identification and classification for existing leases upon adoption. We have also made an accounting policy election to not
recognize leases with an initial term of 12 months or less in the consolidated balance sheets. See Note 8 for additional required
disclosures.
Standards Not Yet Adopted
Income Taxes: Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued new guidance
which is intended to simplify various aspects related to accounting for income taxes. This guidance will be effective for us in
the first quarter of 2021. We do not expect the adoption of this guidance to have a material impact on our consolidated financial
statements or related disclosures.
Debt: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. In August 2020, the FASB
issued new guidance which is intended to simplify the accounting for convertible instruments. This guidance will be effective
for us in the first quarter of 2022. While our existing convertible instrument matures in December 2021, we are currently
evaluating the impact of the new guidance on our consolidated financial statements and related disclosures.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Note 2 — Business Combinations
In October 2019, we completed the acquisition of Cleansorb Limited (“Cleansorb”), a U.K. based provider of specialty
chemicals for the oil and natural gas industry, which further expanded our completion fluids technology portfolio and
capabilities. The purchase price for this acquisition was $18.7 million, net of cash acquired, and was funded with borrowings
under the ABL Facility. The results of operations of Cleansorb are reported within the Fluids Systems segment for the period
subsequent to the date of the acquisition. Results of operations and pro-forma combined results of operations for this acquired
business have not been presented as the effect of this acquisition is not material to our consolidated financial statements.
Note 3 — Inventories
Inventories consisted of the following at December 31:
(In thousands)
Raw materials:
Fluids systems
Industrial solutions
Total raw materials
Blended fluids systems components
Finished goods - mats
Total inventories
2020
2019
$
$
98,974 $
6,315
105,289
31,744
10,824
147,857 $
141,314
5,049
146,363
39,542
10,992
196,897
Raw materials for the Fluids Systems segment consists primarily of barite, chemicals, and other additives that are
consumed in the production of our fluids systems. Raw materials for the Industrial Solutions segment consists primarily of
resins, chemicals, and other materials used to manufacture composite mats and cleaning products, as well as materials that are
consumed in providing spill containment and other services to our customers. Our blended fluids systems components consist
of base fluid systems that have been either mixed internally at our blending facilities or purchased from third-party vendors.
These base fluid systems require raw materials to be added, as needed to meet specified customer requirements.
Fluids Systems segment cost of revenues for 2020 includes $10.3 million of total charges for inventory write-downs,
primarily attributable to the reduction in carrying values of certain inventory to their net realizable value.
Note 4 — Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 31:
(In thousands)
Land
Buildings and improvements
Machinery and equipment
Computer hardware and software
Furniture and fixtures
Construction in progress
Less accumulated depreciation
Composite mats (rental fleet)
Less accumulated depreciation - composite mats
2020
2019
$
11,901 $
122,961
285,678
46,801
5,955
6,958
480,254
(268,862)
211,392
126,617
(60,313)
66,304
11,869
130,895
295,622
40,880
5,921
13,091
498,278
(259,205)
239,073
125,300
(53,964)
71,336
Property, plant and equipment, net
$
277,696 $
310,409
Depreciation expense was $40.9 million, $42.8 million, and $41.2 million in 2020, 2019 and 2018, respectively. Fluids
Systems segment includes a $3.0 million impairment charge for 2020, attributable to the abandonment of certain property, plant
and equipment.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Note 5 — Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill by reportable segment are as follows:
(In thousands)
Balance at December 31, 2018
Acquisition
Impairment
Effects of foreign currency
Balance at December 31, 2019
Effects of foreign currency
Balance at December 31, 2020
Fluids Systems
Industrial
Solutions
Total
$
$
1,641 $
9,258
(11,422)
523
—
—
— $
42,191 $
—
—
141
42,332
112
42,444 $
43,832
9,258
(11,422)
664
42,332
112
42,444
In March 2020, primarily as a result of the collapse in oil prices and the expected declines in the U.S. land E&P
markets, along with a significant decline in the quoted market prices of our common stock, we considered these developments
to be a potential indicator of impairment that required us to complete an interim goodwill impairment evaluation. As such, in
March 2020, we estimated the fair value of our reporting unit based on our current forecasts and expectations for market
conditions and determined that even though the estimated fair value had decreased from our 2019 annual evaluation, the fair
value remained substantially in excess of its net carrying value, and therefore, no impairment was required. During the second
quarter and third quarter of 2020, we determined that there were no further indicators of events or changes in circumstances that
would more likely than not reduce the fair value below its carrying amount. We completed the annual evaluation of the carrying
value of our goodwill and other indefinite-lived intangible assets as of November 1, 2020 and determined that the fair value was
in excess of the net carrying value, and therefore, no impairment was required.
In 2019, as a result of the decline in drilling activities and the projection of continued softness in the U.S. land market,
as well as the decline in the quoted market prices of our common stock, we determined that it was more likely than not that the
carrying value of our Fluids Systems reporting unit exceeded its estimated fair value such that goodwill was potentially
impaired. As a result, we completed the evaluation to measure the amount of goodwill impairment determining a full
impairment of goodwill related to the Fluids Systems reporting unit was required. As such, in the fourth quarter of 2019, we
recognized an $11.4 million non-cash impairment charge to write-off all of the goodwill related to the Fluids Systems reporting
unit.
Our impairment test includes a comparison of the carrying value of net assets of our reporting units, including
goodwill, with their estimated fair values, which we estimate using a combination of a market multiple and discounted cash
flow approach. Significant assumptions inherent in the evaluation include the estimated growth rates for future revenues and the
discount rate. Our assumptions are based on historical data supplemented by current and anticipated market conditions.
Other intangible assets consisted of the following:
December 31, 2020
December 31, 2019
(In thousands)
Technology related
Customer related
Total amortizing intangible assets
Permits and licenses
Total indefinite-lived intangible assets
Total intangible assets
Gross
Carrying
Amount
$ 20,398 $
33,891
54,289
555
555
$ 54,844 $
Accumulated
Amortization
Other
Intangible
Assets,
Net
Gross
Carrying
Amount
Accumulated
Amortization
Other
Intangible
Assets,
Net
(7,958) $ 12,440 $ 20,222 $
(21,458)
(29,416)
12,433
24,873
33,697
53,919
(6,516) $ 13,706
15,463
29,169
(18,234)
(24,750)
—
—
555
555
(29,416) $ 25,428 $ 54,427 $
508
508
—
—
508
508
(24,750) $ 29,677
Total amortization expense related to other intangible assets was $4.5 million, $4.4 million and $4.7 million in 2020,
2019 and 2018, respectively.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Estimated future amortization expense for the years ended December 31 is as follows:
(In thousands)
Technology related
Customer related
2021
2022
2023
2024
2025
Thereafter
Total
$ 1,308 $ 1,245 $ 1,075 $ 1,052 $ 1,052 $
6,708 $ 12,440
2,398
1,996
1,789
1,453
1,205
3,592
12,433
Total future amortization expense
$ 3,706 $ 3,241 $ 2,864 $ 2,505 $ 2,257 $
10,300 $ 24,873
The weighted average amortization period for technology related and customer related intangible assets is 14 years and
12 years, respectively.
Note 6 — Financing Arrangements
Financing arrangements consisted of the following:
December 31, 2020
Unamortized
Discount and
Debt Issuance
Costs
Principal
Amount
Total Debt
Principal
Amount
December 31, 2019
Unamortized
Discount and
Debt Issuance
Costs
Total Debt
(In thousands)
Convertible Notes
$
66,912 $
(4,221) $
62,691 $
100,000 $
(12,291) $
ABL Facility
Other debt
Total debt
19,100
5,371
91,383
—
—
(4,221)
19,100
5,371
87,162
65,000
7,164
172,164
—
—
87,709
65,000
7,164
(12,291)
159,873
Less: current portion
(71,693)
4,221
(67,472)
(6,335)
—
(6,335)
Long-term debt
$
19,690 $
— $
19,690 $
165,829 $
(12,291) $
153,538
Convertible Notes. In December 2016, we issued $100.0 million of unsecured convertible senior notes (“Convertible
Notes”) that mature on December 1, 2021, of which $66.9 million principal amount was outstanding at December 31, 2020. In
February 2021, we repurchased $13.0 million of our Convertible Notes leaving $53.9 million outstanding as of February 25,
2021. The notes bear interest at a rate of 4.0% per year, payable semiannually in arrears on June 1 and December 1 of each
year.
Holders may convert the notes at their option at any time prior to the close of business on the business day
immediately preceding June 1, 2021, only under the following circumstances:
• during any calendar quarter (and only during such calendar quarter) if the last reported sale price of our common
stock for at least 20 trading days (regardless of whether consecutive) during a period of 30 consecutive trading days
ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price of the notes in effect on each applicable trading day;
• during the five business day period after any five consecutive trading day period in which the trading price per
$1,000 principal amount of notes for each trading day was less than 98% of the last reported sale price of our
common stock on such date multiplied by the conversion rate on each such trading day; or
• upon the occurrence of specified corporate events, as described in the indenture governing the notes, such as a
consolidation, merger, or share exchange.
On or after June 1, 2021 until the close of business on the business day immediately preceding the maturity date,
holders may convert their notes at any time, regardless of whether any of the foregoing conditions have been satisfied. As of
February 25, 2021, the notes were not convertible.
The notes are convertible into, at our election, cash, shares of common stock, or a combination of both, subject to
satisfaction of specified conditions and during specified periods, as described above. If converted, we currently intend to pay
cash for the principal amount of the notes converted. The conversion rate is 107.1381 shares of our common stock per $1,000
principal amount of notes (equivalent to an initial conversion price of $9.33 per share of common stock), subject to adjustment
in certain circumstances. We may not redeem the notes prior to their maturity date.
In accordance with accounting guidance for convertible debt with a cash conversion option, we separately accounted
for the debt and equity components of the notes in a manner that reflected our estimated nonconvertible debt borrowing rate.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
We estimated the fair value of the debt component of the notes to be $75.2 million at the issuance date, assuming a 10.5% non-
convertible borrowing rate. The carrying amount of the equity component was determined to be approximately $24.8 million by
deducting the fair value of the debt component from the principal amount of the notes, and was recorded as an increase to
additional paid-in capital, net of the related deferred tax liability of $8.7 million. The excess of the principal amount of the debt
component over its carrying amount (the “debt discount”) is being amortized as interest expense over the term of the notes
using the effective interest method.
We allocated transaction costs related to the issuance of the notes, including underwriting discounts, of $0.9 million
and $2.7 million to the equity and debt components, respectively. Issuance costs attributable to the equity component were
netted against the equity component recorded in additional paid-in capital. The amount of the equity component was $15.2
million at the time of issuance (net of issuance costs and the deferred tax liability related to the conversion feature) and is not
remeasured as long as it continues to meet the conditions for equity classification.
The $2.7 million of issuance costs attributable to the debt component were netted against the debt and are being
amortized to interest expense over the term of the notes using the effective interest method. As of December 31, 2020, the
carrying amount of the debt component was $62.7 million, which is net of the unamortized debt discount and issuance costs of
$4.2 million. Including the impact of the unamortized debt discount and debt issuance costs, the effective interest rate on the
notes is approximately 11.3%.
During 2020, we repurchased $33.1 million of our Convertible Notes in the open market for a total cost of $29.1
million, and recognized a net gain of $0.4 million reflecting the difference in the amount paid and the net carrying value of the
extinguished debt, including original issue discount and debt issuance costs.
Asset-Based Loan Facility. In May 2016, we entered into an asset-based revolving credit agreement, which was
amended in October 2017 and in March 2019 (as amended, the “ABL Facility”). The March 2019 amendment increased the
amount available for borrowings, reduced applicable borrowing rates, and extended the term. The ABL Facility provides
financing of up to $200.0 million available for borrowings (inclusive of letters of credit) and can be increased up to a maximum
capacity of $275.0 million, subject to certain conditions. As of December 31, 2020, our total availability under the ABL Facility
was $87.2 million, of which $19.1 million was drawn, resulting in remaining availability of $68.1 million.
The ABL Facility terminates in March 2024; however, the ABL Facility has a springing maturity date that will
accelerate the maturity of the ABL Facility to September 1, 2021 if, prior to such date, the Convertible Notes have not been
repurchased, redeemed, refinanced, exchanged or otherwise satisfied in full or we have not escrowed an amount of funds, that
together with the amount that we establish as a reserve against our borrowing capacity, is sufficient for the future settlement of
the Convertible Notes at their maturity. The ABL Facility requires a minimum consolidated fixed charge coverage ratio of 1.25
to 1.0 calculated based on the trailing twelve-month period ended June 30, 2021 and remaining unused availability of at least
$25.0 million to utilize borrowings or assignment of availability under the ABL Facility towards funding the repayment of the
Convertible Notes.
Borrowing availability under the ABL Facility is calculated based on eligible U.S. accounts receivable, inventory, and,
subject to satisfaction of certain financial covenants as described below, composite mats included in the rental fleet, net of
reserves and limits on such assets included in the borrowing base calculation. To the extent pledged by us, the borrowing base
calculation also includes the amount of eligible pledged cash. The lender may establish such reserves, in part based on
appraisals of the asset base, and other limits at its discretion which could reduce the amounts otherwise available under the ABL
Facility. Availability associated with eligible rental mats will also be subject to maintaining a minimum consolidated fixed
charge coverage ratio of 1.5 to 1.0 and at least $1.0 million of operating income for the Site and Access Solutions business,
each calculated based on a trailing twelve-month period.
As of February 25, 2021, our total availability under the ABL Facility was $88.2 million, of which $21.4 million was
drawn, resulting in remaining availability of $66.8 million. This availability under the ABL Facility excludes $25.0 million
related to eligible rental mats as we failed to satisfy the required minimum consolidated fixed charge coverage ratio, as
measured on the trailing twelve-month period ended December 31, 2020. We expect to satisfy the minimum consolidated fixed
charge coverage ratio as required to include eligible rental mats in the borrowing availability under the ABL Facility following
the second quarter of 2021 and expect to satisfy the June 30, 2021 ABL Facility requirements to be able to utilize borrowings or
assignment of availability under the ABL Facility towards funding the repayment of the Convertible Notes prior to September
1, 2021.
Under the terms of the ABL Facility, we may elect to borrow at a variable interest rate based on either, (1) LIBOR
subject to a floor of zero or (2) a base rate equal to the highest of: (a) the federal funds rate plus 50 basis points, (b) the prime
rate of Bank of America, N.A. and (c) LIBOR, subject to a floor of zero, plus 100 basis points, plus, in each case, an applicable
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
margin per annum. The applicable margin ranges from 150 to 200 basis points for LIBOR borrowings, and 50 to 100 basis
points for base rate borrowings, based on the consolidated fixed charge coverage ratio as defined in the ABL Facility. As of
December 31, 2020, the applicable margin for borrowings under our ABL Facility was 200 basis points with respect to LIBOR
borrowings and 100 basis points with respect to base rate borrowings. The weighted average interest rate for the ABL Facility
was 2.3% at December 31, 2020. In addition, we are required to pay a commitment fee on the unused portion of the ABL
Facility ranging from 25 to 37.5 basis points, based on the level of outstanding borrowings, as defined in the ABL Facility. As
of December 31, 2020, the applicable commitment fee was 37.5 basis points.
The ABL Facility is a senior secured obligation, secured by first liens on substantially all of our U.S. tangible and
intangible assets, and a portion of the capital stock of our non-U.S. subsidiaries has also been pledged as collateral. The ABL
Facility contains customary operating covenants and certain restrictions including, among other things, the incurrence of
additional debt, liens, dividends, asset sales, investments, mergers, acquisitions, affiliate transactions, stock repurchases and
other restricted payments. The ABL Facility also requires a minimum consolidated fixed charge coverage ratio of 1.0 to 1.0
calculated based on a trailing twelve-month period if availability under the ABL Facility falls below $22.5 million. In addition,
the ABL Facility contains customary events of default, including, without limitation, a failure to make payments under the
facility, acceleration of more than $25.0 million of other indebtedness, certain bankruptcy events, and certain change of control
events.
Other Debt. Certain of our foreign subsidiaries maintain local credit arrangements consisting primarily of lines of
credit or overdraft facilities which are generally renewed on an annual basis. We utilize local financing arrangements in our
foreign operations in order to provide short-term local liquidity needs. We had $3.5 million and $4.8 million outstanding under
these arrangements at December 31, 2020 and December 31, 2019, respectively.
In February 2021, a U.K. subsidiary entered a £6.0 million (approximately $8.3 million) term loan facility that matures
in February 2024, the proceeds of which were used to pay down the ABL Facility. The term loan bears interest at a rate of
LIBOR plus a margin of 3.4% per year, payable in quarterly installments of £375,000 plus interest beginning March 2021 and a
£1.5 million payment due at maturity.
We incurred net interest expense of $11.0 million, $14.4 million and $14.9 million for the years ended December 31,
2020, 2019 and 2018, respectively. There was no capitalized interest for the years ended December 31, 2020, 2019 or 2018.
Scheduled repayment of long-term debt as of December 31, 2020 was $66.9 million in 2021 and $19.1 million in 2024.
Note 7 — Fair Value of Financial Instruments and Concentrations of Credit Risk
Fair Value of Financial Instruments
Our financial instruments include cash and cash equivalents, receivables, payables, and debt. We believe the carrying
values of these instruments, with the exception of our Convertible Notes, approximated their fair values at December 31, 2020
and 2019. The estimated fair value of our Convertible Notes was $61.1 million at December 31, 2020 and $101.4 million at
December 31, 2019, based on quoted market prices at these respective dates.
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk primarily consist of cash
and trade accounts receivable. At December 31, 2020, substantially all of our cash deposits were held by our international
subsidiaries in accounts at numerous financial institutions across the various regions in which we operate. A majority of the
cash was held in accounts that maintain deposit ratings of P-1 by Moody’s, A-1 by Standard and Poor’s, and F1 by Fitch. As
part of our investment strategy, we perform periodic evaluations of the relative credit standing of these financial institutions.
Customer Revenue Concentration
We derive a significant portion of our revenues from companies in the E&P industry, and our E&P customer base
consists primarily of mid-sized and international oil companies as well as government-owned or government-controlled oil
companies operating in the markets that we serve. For 2020, 2019 and 2018, revenues from our 20 largest customers
represented approximately 49%, 42% and 44%, respectively, of our consolidated revenues. For 2020, 2019 and 2018, no single
customer accounted for more than 10% of our consolidated revenues.
Receivables
Receivables consisted of the following at December 31:
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
(In thousands)
Trade receivables:
Gross trade receivables
Allowance for credit losses
Net trade receivables
Income tax receivables
Other receivables
Total receivables, net
2020
2019
$
$
133,717 $
(5,024)
128,693
6,545
5,807
141,045 $
207,554
(6,007)
201,547
7,393
7,774
216,714
Other receivables include $4.4 million and $6.2 million for value added, goods and service taxes related to foreign
jurisdictions as of December 31, 2020 and 2019, respectively.
We adopted the new accounting guidance for credit losses as of January 1, 2020 (see Note 1 for additional
information). To measure expected credit losses, we evaluate our receivables on a collective basis for assets that share similar
risk characteristics. Our allowance for credit losses reflects losses that are expected over the contractual life of the asset, and
takes into account historical loss experience, current and future economic conditions, and reasonable and supportable forecasts.
Changes in our allowance for credit losses were as follows:
(In thousands)
Balance at beginning of year
Cumulative effect of accounting change
Credit loss expense
Write-offs, net of recoveries
Balance at end of year
2020
2019
2018
6,007 $
959
1,427
(3,369)
5,024 $
10,034 $
—
1,792
(5,819)
6,007 $
9,457
—
2,849
(2,272)
10,034
$
$
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Note 8 — Leases
We lease certain office space, manufacturing facilities, warehouses, land, and equipment. Our leases have remaining
terms ranging from 1 to 11 years with various extension and termination options. We consider these options in determining the
lease term used to establish our operating lease assets and liabilities. Lease agreements with lease and non-lease components are
accounted for as a single lease component. Leases with an initial term of 12 months or less are not recorded in the balance
sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.
Leases consisted of the following at December 31:
(In thousands)
Assets:
Operating
Finance
Total lease assets
Liabilities:
Current:
Operating
Finance
Noncurrent:
Operating
Finance
Total lease liabilities
Balance Sheet Classification
2020
2019
Operating lease assets
Property, plant and equipment, net
Accrued liabilities
Current debt
Noncurrent operating lease liabilities
Long-term debt, less current portion
$
$
$
$
$
30,969 $
942
31,911 $
6,888 $
353
25,068 $
590
32,899 $
32,009
1,135
33,144
6,105
287
26,946
829
34,167
Total operating lease expenses were $25.8 million for 2020, of which $16.7 million related to short-term leases and
$9.1 million related to leases recognized in the balance sheet. Total operating lease expenses were $30.1 million and $27.4
million for 2019 and 2018, respectively. Total operating lease expenses approximate cash paid during each period.
Amortization and interest for finance leases are not material. Operating lease expenses and amortization of leased assets for
finance leases are included in either cost of revenues or selling, general and administrative expenses. Interest for finance leases
is included in interest expense, net.
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
The maturity of lease liabilities as of December 31, 2020 is as follows:
(In thousands)
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Interest
Operating
Leases
Finance
Leases
Total
$
8,064 $
385 $
5,915
4,244
3,314
2,828
14,622
38,987
7,031
369
242
—
—
—
996
53
8,449
6,284
4,486
3,314
2,828
14,622
39,983
7,084
32,899
Present value of lease liabilities
$
31,956 $
943 $
During 2020, we entered into $5.3 million of new operating lease liabilities in exchange for leased assets.
Lease Term and Discount Rate
Weighted-average remaining lease term (years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
Note 9 — Income Taxes
The provision (benefit) for income taxes was as follows:
(In thousands)
Current:
U.S. Federal
State
Foreign
Total current
Deferred:
U.S. Federal
State
Foreign
Total deferred
Total provision for income taxes
Income (loss) before income taxes was as follows:
(In thousands)
U.S.
Foreign
Income (loss) before income taxes
58
December 31,
2020
7.4
2.7
4.7 %
4.6 %
Year Ended December 31,
2019
2018
2020
1,591 $
365
5,011
6,967
(16,309)
598
(3,139)
(18,850)
(11,883) $
1,892 $
706
11,440
14,038
(2,926)
1,181
(2,505)
(4,250)
9,788 $
805
1,384
12,572
14,761
(331)
66
501
236
14,997
Year Ended December 31,
2019
2018
2020
(92,838) $
259
(92,579) $
(15,270) $
12,112
(3,158) $
4,084
43,194
47,278
$
$
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
The effective income tax rate is reconciled to the statutory federal income tax rate as follows:
(In thousands)
Income tax expense (benefit) at federal statutory rate
Recognition of Brazil cumulative foreign currency translation losses
Nondeductible goodwill impairment
Nondeductible executive compensation
Other nondeductible expenses
Stock-based compensation
Different rates on earnings of foreign operations
Dividend taxes on unremitted earnings
U.S. tax on foreign earnings
Change in valuation allowance
State tax expense (benefit), net
Net impact of Tax Act
Other items, net
Total provision (benefit) for income taxes
$
$
Year Ended December 31,
2019
2018
2020
(19,442) $
2,456
—
170
616
1,602
274
322
—
2,226
196
—
(303)
(11,883) $
(663) $
—
2,401
756
1,506
(248)
463
1,609
1,215
1,272
430
—
1,047
9,788 $
9,929
—
—
1,165
1,216
(786)
912
3,023
333
(790)
1,298
(1,613)
310
14,997
The benefit for income taxes was $11.9 million for 2020, reflecting an effective tax benefit rate of 13%. This result
primarily reflects the impact of the $11.7 million non-cash recognition of cumulative foreign currency translation losses related
to the substantial liquidation of our subsidiary in Brazil and other nondeductible expenses, as well as the impact of the
geographic composition of our pretax loss, where the tax benefit from losses in the U.S was partially offset by the tax expense
related to earnings from our international operations. The provision for income taxes was $9.8 million for 2019 despite
reporting a small pretax loss for the year. This result reflects the impact of the $11.4 million nondeductible goodwill
impairment and other nondeductible expenses, as well as the impact of the geographic composition of our pretax loss, where tax
expense related to earnings from our international operations is only partially offset by the tax benefit from losses in the U.S.
The provision for income taxes was $15.0 million for 2018. The provision for income taxes for 2018 includes a $1.6 million net
benefit related to U.S. tax reform.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in March 2020 in the United
States. The CARES Act contains several tax provisions, including additional carryback opportunities for net operating losses,
temporary increases in the interest deductibility threshold, and the acceleration of refunds for any remaining alternative
minimum tax (“AMT”) carryforwards. There was no material impact from the CARES Act in our provision for income taxes
for 2020. In addition, we filed an amendment to our 2018 U.S. federal income tax return in the second quarter of 2020 and
received a refund of $0.7 million for AMT carryforwards in July 2020.
The CARES Act also permits most companies to defer paying their portion of certain applicable payroll taxes from the
date the CARES Act was signed into law through December 31, 2020. The deferred amount will be due in two equal
installments on December 31, 2021 and December 31, 2022. The deferred amount of applicable payroll taxes was $3.2 million
at December 31, 2020.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Temporary differences and carryforwards which give rise to deferred tax assets and liabilities consisted of the
following at December 31:
(In thousands)
Deferred tax assets:
Net operating losses
Foreign tax credits
Accruals not currently deductible
Unrealized foreign exchange losses, net
Stock-based compensation
Capitalized inventory costs
Alternative minimum tax carryforwards
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of allowances
Deferred tax liabilities:
Accelerated depreciation and amortization
Tax on unremitted earnings
Original issue discount on Convertible Notes
Other
Total deferred tax liabilities
Total net deferred tax liabilities
Noncurrent deferred tax assets
Noncurrent deferred tax liabilities
Net deferred tax liabilities
2020
2019
$
$
$
$
25,990 $
6,690
5,121
3,750
2,238
3,111
—
9,456
56,356
(26,250)
30,106
(29,587)
(9,765)
(804)
(1,612)
(41,768)
(11,662) $
1,706 $
(13,368)
(11,662) $
14,205
5,651
4,928
3,837
3,380
1,611
369
6,709
40,690
(23,962)
16,728
(28,703)
(13,645)
(2,311)
(2,716)
(47,375)
(30,647)
3,600
(34,247)
(30,647)
We have state income tax net operating loss carryforwards (“NOLs”) of approximately $142.9 million available to
reduce future state taxable income, which expire in varying amounts beginning in 2021 through 2040. U.S. federal NOLs of
approximately $58.4 million are available to reduce future U.S. taxable income, which do not expire. Foreign NOLs of
approximately $20.0 million are available to reduce future taxable income, some of which expire beginning in 2021.
The realization of our net deferred tax assets is dependent on our ability to generate taxable income in future periods.
At December 31, 2020 and 2019, we have recorded a valuation allowance in the amount of $26.3 million and $24.0 million,
respectively, primarily related to certain U.S. state and foreign NOL carryforwards, including Australia, as well as for certain
tax credits recognized related to the accounting for the impact of the 2017 U.S. Tax Cuts and Jobs Act (“Tax Act”), which may
not be realized.
We file income tax returns in the United States and several non-U.S. jurisdictions and are subject to examination in the
various jurisdictions in which we file. We are no longer subject to income tax examinations for U.S. federal and substantially
all state jurisdictions for years prior to 2013 and for substantially all foreign jurisdictions for years prior to 2008.
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Following an audit in 2015, the treasury authority in Mexico issued a tax assessment (inclusive of interest and
penalties) in the amount of 60 million pesos (approximately $3.3 million) to our Mexico subsidiary primarily in connection
with the export of mats from Mexico which took place in 2010. The mats that are the subject of this assessment were owned by
a U.S. subsidiary and leased to our Mexico subsidiary for matting projects in the Mexican market. In 2010, we made the
decision to move these mats out of Mexico to markets with higher demand. The Mexican treasury authority determined the
export of the mats was the equivalent of a sale and assessed taxes on the gross declared value of the exported mats to our
Mexico subsidiary. We retained outside legal counsel and filed administrative appeals with the treasury authority, but we were
notified in April 2018 that the last administrative appeal had been rejected. In response, we filed an appeal in the Mexican
Federal Tax Court in the second quarter of 2018, which required that we post a bond in the amount of the assessed taxes (plus
additional interest). In the fourth quarter of 2018, the Mexican Federal Tax Court issued a favorable judgment nullifying in full
the tax assessment which was subsequently appealed by the treasury authority in Mexico. Following a judgment by the
Mexican Court of Appeals, in the third quarter of 2019, the Mexican Federal Tax Court confirmed the full nullification of the
tax assessment based on a due process violation and recognized the treasury authority's right to cure the due process violation
by starting a new tax audit, and in the fourth quarter of 2020, the Mexican Court of Appeals confirmed this ruling resolving the
appeals process in favor of our Mexico subsidiary. While the treasury authority in Mexico still has the right to start a new audit,
we believe our tax position has been properly reported in accordance with applicable tax laws and regulations in Mexico.
We are also under examination by various tax authorities in other countries, and certain foreign jurisdictions have
challenged the amounts of taxes due for certain tax periods. These audits are in various stages of completion. We fully
cooperate with all audits, but defend existing positions vigorously. We evaluate the potential exposure associated with various
filing positions and record a liability for uncertain tax positions as circumstances warrant. Although we believe all tax positions
are reasonable and properly reported in accordance with applicable tax laws and regulations in effect during the periods
involved, the final determination of tax audits and any related litigation could be materially different than that which is reflected
in historical income tax provisions and accruals.
A reconciliation of the beginning and ending provision for uncertain tax positions is as follows:
(In thousands)
Balance at January 1
Additions (reductions) for tax positions of prior years
Additions (reductions) for tax positions of current year
Reductions for settlements with tax authorities
Reductions for lapse of statute of limitations
Balance at December 31
2020
2019
2018
291 $
(6)
—
—
(72)
213 $
223 $
68
—
—
—
291 $
257
(3)
—
—
(31)
223
$
$
Approximately $0.2 million of unrecognized tax benefits at December 31, 2020, if recognized, would favorably impact
the effective tax rate.
We recognize accrued interest and penalties related to uncertain tax positions in operating expenses. The amount of
interest and penalties was immaterial for all periods presented.
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Note 10 — Capital Stock
Common Stock
Changes in outstanding common stock were as follows:
(In thousands of shares)
Outstanding, beginning of year
Shares issued for exercise of options
Shares issued for time vested restricted stock (net of forfeitures)
Shares issued for employee stock purchase plan
Outstanding, end of year
2020
2019
2018
106,697
106,363
104,572
—
740
151
107,588
281
53
—
106,697
603
1,188
—
106,363
Outstanding shares of common stock include shares held as treasury stock totaling 16,781,150, 16,958,418 and
15,530,952 as of December 31, 2020, 2019 and 2018, respectively.
Preferred Stock
We are authorized to issue up to 1,000,000 shares of preferred stock, $0.01 par value. There were no outstanding
shares of preferred stock as of December 31, 2020, 2019 or 2018.
Treasury Stock
During 2020, 2019 and 2018, we repurchased 153,151, 381,041 and 362,190 shares, respectively, for an aggregate
price of $0.3 million, $2.7 million and $3.9 million, respectively, representing employee shares surrendered in lieu of taxes
under vesting of restricted stock awards. All of the shares repurchased are held as treasury stock.
During 2020, 2019 and 2018, we reissued 330,419, 1,491,408 and 197,742 shares of treasury stock pursuant to various
stock plans.
Repurchase Program
In November 2018, our Board of Directors authorized changes to our securities repurchase program, increasing the
amount remaining under the repurchase program to $100 million, available for repurchases of any combination of our common
stock and our Convertible Notes in the open market or as otherwise determined by management, subject to certain limitations
under the ABL Facility and other factors. The repurchase program has no specific term. Repurchases are expected to be funded
from operating cash flows, available cash on hand, and borrowings under our ABL Facility. As part of the share repurchase
program, our management has been authorized to establish trading plans under Rule 10b5-1 of the Securities Exchange Act of
1934. As of December 31, 2020, we had $51.9 million remaining under the program.
During 2020, we repurchased $33.1 million of our Convertible Notes in the open market under the repurchase program
for a total cost of $29.1 million. There were no Convertible Notes repurchased under the program during 2019 or 2018. In
February 2021, we repurchased $13.0 million of our Convertible Notes in the open market under the repurchase program for a
total cost of $12.8 million.
There were no shares of common stock repurchased under the repurchase program during 2020 or 2018. During 2019,
we repurchased an aggregate of 2,537,833 shares of our common stock under our Board authorized repurchase program for a
total cost of $19.0 million.
On May 27, 2020, our Board of Directors adopted a limited duration stockholder rights agreement which expires on
May 1, 2021, whereby a dividend distribution of one right (each, a “Right”) for each outstanding share of our common stock
was paid to holders of record as of the close of business on June 12, 2020. Each Right entitles the registered holder to purchase
from us one one-thousandth of a share of Series D Junior Participating Preferred Stock, par value $0.01 per share, at a purchase
price of $12.00, subject to adjustment. Subject to certain exceptions, if a person or group acquires more than 10% of our
outstanding common stock, the Rights will become exercisable for common stock having a value equal to two times the
purchase price.
Note 11 — Earnings Per Share
The following table presents the reconciliation of the numerator and denominator for calculating net income (loss) per
share:
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
(In thousands, except per share data)
Numerator
Net income (loss) - basic and diluted
Year Ended December 31,
2019
2018
2020
$
(80,696) $
(12,946) $
32,281
Denominator
Weighted average common shares outstanding - basic
Dilutive effect of stock options and restricted stock awards
Dilutive effect of Convertible Notes
Weighted average common shares outstanding - diluted
90,198
—
—
90,198
89,782
—
—
89,782
89,996
2,385
544
92,925
Net income (loss) per common share
Basic
Diluted
$
$
(0.89) $
(0.89) $
(0.14) $
(0.14) $
0.36
0.35
We excluded the following weighted-average potential shares from the calculations of diluted net income (loss) per
share during the applicable periods because their inclusion would have been anti-dilutive:
(In thousands)
Stock options and restricted stock awards
Year Ended December 31,
2020
2019
2018
5,238
5,312
1,495
For 2020 and 2019, we excluded all potentially dilutive stock options and restricted stock awards in calculating diluted
earnings per share as the effect was anti-dilutive due to the net loss incurred for the period. The Convertible Notes only impact
the calculation of diluted net income per share in periods that the average price of our common stock, as calculated in
accordance with the terms of the indenture governing the Convertible Notes, exceeds the conversion price of $9.33 per share.
We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon
conversion of the Convertible Notes as further described in Note 6. If converted, we currently intend to settle the principal
amount of the notes in cash and as a result, only the amounts payable in excess of the principal amount of the notes, if any, are
assumed to be settled with shares of common stock for purposes of computing diluted net income per share.
Note 12 — Stock-Based Compensation and Other Benefit Plans
The following describes stockholder approved plans utilized by us for the issuance of stock-based awards.
2014 Non-Employee Directors’ Restricted Stock Plan
In May 2014, our stockholders approved the 2014 Non-Employee Directors’ Restricted Stock Plan (“2014 Director
Plan”) which authorizes grants of restricted stock to non-employee directors. Each restricted share granted to a non-employee
director vests in full on the earlier of the day prior to the next annual meeting of stockholders following the grant date or the
first anniversary of the grant. The maximum number of shares of common stock issuable under the 2014 Director Plan is
1,000,000 leaving 156,894 shares available for grant as of December 31, 2020. During 2020, non-employee directors received
156,886 shares of restricted stock at a weighted average grant-date fair value of $2.06 per share and cash-based awards of
$0.3 million in lieu of a reduced restricted stock award.
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
2015 Employee Equity Incentive Plan
In May 2015, our stockholders approved the 2015 Employee Equity Incentive Plan (“2015 Plan”) pursuant to which
the Compensation Committee of our Board of Directors (“Compensation Committee”) may grant to key employees, including
executive officers and other corporate and divisional employees, a variety of forms of equity-based compensation, including
options to purchase shares of common stock, shares of restricted common stock, restricted stock units, stock appreciation rights,
other stock-based awards, and performance-based awards. Our stockholders subsequently approved amendments to the 2015
Plan which increased the number of shares authorized for issuance to 12,300,000 shares and removed the fungible share
counting provision. At December 31, 2020, 1,735,381 shares remained available for award under the 2015 Plan.
In June 2017, our Board of Directors approved the Long-Term Cash Incentive Plan (“Cash Plan”), a sub-plan to the
2015 Plan, pursuant to which the Compensation Committee may grant time-based cash awards or performance-based cash
awards to key employees, including executive officers and other corporate and divisional employees, to provide an opportunity
for employees to receive a cash payment upon either completion of a service period or achievement of predetermined
performance criteria at the end of a performance period.
During 2018, the Compensation Committee modified certain outstanding stock-based and other incentive awards in
connection with the retirement of our former Senior Vice President, General Counsel and Chief Administrative Officer. As a
result of these modifications, we recognized a charge of $1.5 million in the third quarter of 2018. During 2019, the
Compensation Committee modified our retirement policy applicable to cash and equity awards granted to include our Chief
Executive Officer and those officers who report to our Chief Executive Officer, who were previously excluded from the
retirement policy. In addition, the Compensation Committee also modified the retirement policy for certain vested stock options
that remained outstanding to extend the exercise period available following the qualifying retirement of eligible employees. As
a result of these modifications, we recognized a charge of $4.0 million in the first quarter of 2019. This charge primarily reflects
the acceleration of expense, as well as the incremental value associated with modifications to extend the exercise period of
outstanding options, for previously-granted awards for retirement eligible executive officers.
Activity under each of these programs is described below.
Stock Options
Stock options granted by the Compensation Committee are granted with a three-year vesting period and a term of ten
years. There have been no options granted since 2016.
The following table summarizes activity for our outstanding stock options for the year ended December 31, 2020:
Stock Options
Outstanding at beginning of period
Granted
Exercised
Expired or canceled
Outstanding at end of period
Vested or expected to vest at end of period
Options exercisable at end of period
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(In
thousands)
Shares
2,842,059 $
—
—
(544,357)
2,297,702 $
2,297,702 $
2,297,702 $
7.37
—
—
7.45
7.34
7.34
7.34
3.31 $
3.31 $
3.31 $
—
—
—
There were no options exercised during the year ended December 31, 2020. For the years ended December 31, 2019
and 2018, the total intrinsic value of options exercised was $1.6 million and $2.3 million, respectively, while cash from option
exercises totaled $1.3 million and $3.9 million, respectively. There was no compensation cost recognized for stock options for
the year ended December 31, 2020. Total compensation cost recognized for stock options was $1.3 million and $1.5 million for
the years ended December 31, 2019 and 2018, respectively. For the years ended December 31, 2019 and 2018, we recognized
tax benefits resulting from the exercise of stock options totaling $0.3 million and $0.5 million, respectively.
Performance-Based Restricted Stock Units
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
In 2016, performance-based restricted stock units were awarded to executive officers and were to be settled in shares
of common stock based on the relative ranking of our total shareholder return (“TSR”) as compared to the TSR of our
designated peer group over a three-year period. The ending TSR price is equal to the average closing price of our shares over
the last 30-calendar days of the performance period. There have been no performance-based restricted stock units granted since
2016 or outstanding since 2019. There was no compensation cost recognized for performance-based restricted stock units for
the year ended December 31, 2020. Total compensation cost recognized for performance-based restricted stock units was $0.1
million and $0.8 million for the years ended December 31, 2019 and 2018, respectively.
Restricted Stock Awards and Units
Time-vested restricted stock awards and restricted stock units are periodically granted to key employees, including
grants for employment inducements, as well as to members of our Board of Directors. Employee awards provide for vesting
periods ranging from three to four years. Non-employee director grants vest in full on the earlier of the day prior to the next
annual meeting of stockholders following the grant date or the first anniversary of the grant. Upon vesting of these grants,
shares are issued to award recipients.
The following tables summarize the activity for our outstanding time-vested restricted stock awards and restricted
stock units for the year ended December 31, 2020:
Nonvested Restricted Stock Awards (Time-Vesting)
Nonvested at January 1, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Nonvested Restricted Stock Units (Time-Vesting)
Nonvested at January 1, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Weighted-
Average
Grant Date
Fair Value
7.72
2.06
7.39
—
3.12
Weighted-
Average
Grant Date
Fair Value
8.24
2.06
8.54
5.83
4.01
Shares
179,900 $
156,886
(154,900)
—
181,886 $
Shares
2,093,169 $
2,474,377
(766,737)
(270,443)
3,530,366 $
Total compensation cost recognized for restricted stock awards and restricted stock units was $6.3 million, $9.8
million and $7.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. Total unrecognized
compensation cost at December 31, 2020 related to restricted stock awards and restricted stock units was approximately $7.9
million which is expected to be recognized over the next 2.1 years. During the years ended December 31, 2020, 2019 and 2018,
the total fair value of shares vested was $1.9 million, $7.2 million and $11.6 million, respectively. For the years ended
December 31, 2020, 2019 and 2018, we recognized tax benefits resulting from the vesting of restricted stock awards and units
of $0.4 million, $1.9 million and $2.8 million, respectively.
Cash-Based Awards
The Compensation Committee also approved the issuance of cash-based awards to certain executive officers during
2020, 2019 and 2018. The awards included a target amount of $2.6 million and $2.3 million of performance-based cash awards
in 2020 and 2019, respectively. The 2018 awards included $1.3 million of time-based cash awards and a target amount of $1.3
million of performance-based cash awards.
The performance-based cash awards will be settled based on the relative ranking of our TSR as compared to the TSR
of our designated peer group over a three-year period. The performance period began May 2, 2020 and ends May 31, 2023 for
the 2020 awards, began June 1, 2019 and ends May 31, 2022 for the 2019 awards, and began June 1, 2018 and ends May 31,
2021 for the 2018 awards. The ending TSR price is equal to the average closing price of our shares over the last 30-calendar
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
days of the performance period. The cash payout for each executive ranges from 0% to 200% of target for the 2020 and 2019
awards, and 0% to 150% of target for the 2018 awards.
The performance-based cash awards are accrued as a liability award over the performance period based on the
estimated fair value. The fair value of the performance-based cash awards is remeasured each period using a Monte Carlo
valuation model with changes in fair value recognized in the consolidated statement of operations. As of December 31, 2020
and 2019, the total liability for cash-based awards was $4.0 million and $4.1 million, respectively.
Defined Contribution Plan
Substantially all of our U.S. employees are covered by a defined contribution plan (“401(k) Plan”). Employees may
voluntarily contribute up to 50% of compensation, as defined in the 401(k) Plan. Participants’ contributions, up to 3% of
compensation, are matched 100% by us, and the participants’ contributions, from 3% to 6% of compensation, are matched 50%
by us. In connection with the cost reduction programs implemented in early 2020, we temporarily eliminated our 401(k)
matching contribution beginning in April 2020. Under the 401(k) Plan, our cash contributions were $1.2 million, $4.3 million
and $3.9 million for 2020, 2019 and 2018, respectively.
Note 13 — Segment and Related Information
We operate our business through two reportable segments: Fluids Systems and Industrial Solutions. All intercompany
revenues and related profits have been eliminated.
Fluids Systems — Our Fluids Systems segment provides drilling, completion, and stimulation products and related
technical services to customers primarily in North America and EMEA, as well as certain countries in Asia Pacific and Latin
America. We offer customized solutions for highly technical oil, natural gas, and geothermal projects involving complex
subsurface conditions, such as horizontal, directional, geologically deep or drilling in deep water. These oil, natural gas, and
geothermal projects require high levels of monitoring and technical support of the fluids system during the drilling process.
We also have industrial mineral grinding operations for barite, a critical raw material in fluids systems, which serve to
support our activities in the North American fluids market. We use the resulting products in our fluids systems and also sell the
products to third party users, including other fluids companies. In addition, we sell a variety of other minerals, principally to
third party industrial (non-oil and natural gas) markets.
Industrial Solutions — Our Industrial Solutions segment provides composite matting system rentals utilized for
temporary worksite access, along with related site construction and services to customers in various markets including E&P,
electrical transmission & distribution, pipeline, solar, petrochemical, construction and other industries, primarily in the United
States and Europe. We also sell our manufactured composite mats to customers around the world. In addition, we began
leveraging our chemical blending capacity and technical expertise into industrial blending operations, and in response to the
increasing market demand for cleaning products resulting from the COVID-19 pandemic, began producing disinfectants and
industrial cleaning products in 2020.
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
Summarized financial information concerning our reportable segments is shown in the following tables:
(In thousands)
Revenues
Fluids systems
Industrial solutions
Total revenues
Depreciation and amortization
Fluids systems
Industrial solutions
Corporate office
Total depreciation and amortization
Operating income (loss)
Fluids systems
Industrial solutions
Corporate office
Total operating income (loss)
Segment assets
Fluids systems
Industrial solutions
Corporate office
Total segment assets
Capital expenditures
Fluids systems
Industrial solutions
Corporate office
Total capital expenditures
Year Ended December 31,
2019
2018
2020
$
$
$
$
$
$
$
$
$
$
354,608 $
138,017
492,625 $
620,317 $
199,802
820,119 $
715,813
230,735
946,548
20,555 $
20,427
4,332
45,314 $
21,202 $
21,763
4,179
47,144 $
20,922
21,321
3,656
45,899
(66,403) $
13,459
(25,690)
(78,634) $
3,814 $
47,466
(40,885)
10,395 $
40,337
60,604
(37,383)
63,558
419,381 $
259,918
29,893
709,192 $
593,758 $
265,786
40,535
900,079 $
617,615
270,248
27,991
915,854
6,237 $
7,831
1,726
15,794 $
18,416 $
23,535
2,855
44,806 $
15,356
27,043
2,742
45,141
During March 2020, oil prices collapsed due to geopolitical events along with the worldwide effects of the COVID-19
pandemic. As a result, average U.S. active rig declined 52% in 2020 from 2019. In addition, international activity levels have
also been negatively impacted by the COVID-19 pandemic and decline in oil prices. In response to these market changes, we
initiated workforce reductions and other cost reduction programs late in the first quarter of 2020, and continued these actions
throughout 2020.
As part of the cost reduction programs, we reduced our global employee base by approximately 650 (30%) in 2020. As
a result of these workforce reductions, our operating results for 2020 include $4.3 million of total severance costs ($3.7 million
in Fluids Systems and $0.6 million in the Corporate office), with $2.7 million in cost of revenues and $1.6 million in selling,
general and administrative expenses. These costs have been substantially paid as of December 31, 2020.
For 2020, we recognized $29.2 million of total charges primarily related to our exit from Brazil, inventory write-
downs, severance costs, and fixed asset impairments, with $28.6 million in the Fluids Systems segment and $0.6 million in the
Corporate office. For 2019, we recognized $23.2 million of total charges primarily related to a non-cash impairment of
goodwill and 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, with $18.8 million in the Fluids Systems segment and $4.4 million
in the Corporate office. See below for details of charges in the Fluids Systems segment.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
(In thousands)
$
Brazil exit - Recognition of cumulative foreign currency translation
losses
Goodwill impairment
Inventory write-downs
Severance costs
Property, plant and equipment impairment
Facility exit costs and other
Completion fluids start-up costs
Kenedy, Texas facility fire
Modification of retirement policy
Total Fluids Systems impairments and other charges
$
Year Ended December 31,
2019
2018
2020
11,689 $
—
10,345
3,729
3,038
(201)
—
—
—
28,600 $
— $
11,422
1,881
2,264
—
2,631
—
—
605
18,803 $
—
—
—
2,822
—
—
1,130
778
—
4,730
The following table presents further disaggregated revenues for the Fluids Systems segment:
(In thousands)
United States
Canada
Total North America
EMEA
Other
Total International
Year Ended December 31,
2019
2018
2020
$
202,052 $
24,762
226,814
395,618 $
31,635
427,253
115,891
11,903
127,794
172,263
20,801
193,064
410,410
66,416
476,826
192,537
46,450
238,987
Total Fluids Systems revenues
$
354,608 $
620,317 $
715,813
The following table presents further disaggregated revenues for the Industrial Solutions segment:
(In thousands)
Service revenues
Rental revenues
Product sales revenues
Industrial blending revenues (1)
Total Industrial Solutions revenues
Year Ended December 31,
2019
2018
2020
$
53,958 $
47,341
29,170
7,548
73,130 $
70,207
56,465
—
93,056
81,784
55,895
—
$
138,017 $
199,802 $
230,735
(1) Industrial blending operations began in the second quarter of 2020 and ramped up in the third quarter of 2020.
Results for the industrial blending component are presented in Industrial Solutions beginning October 2020. Results for the
second quarter and third quarter of 2020 were reported in Fluids Systems and not adjusted as they were not material.
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NEWPARK RESOURCES, INC.
The following table sets forth geographic information for all of our operations. Revenues by geographic location are
determined based on the operating location from which services are rendered or products are sold. Long-lived assets include
property, plant and equipment and other long-term assets based on the country in which the assets are located.
(In thousands)
Revenues
United States
Canada
EMEA
Asia Pacific
Latin America
Total revenues
Long-lived assets
United States
Canada
EMEA
Asia Pacific
Latin America
Total long-lived assets
Year Ended December 31,
2019
2018
2020
$
$
$
$
327,598 $
24,762
128,362
6,561
5,342
492,625 $
329,719 $
1,503
44,577
3,007
500
379,306 $
578,698 $
37,496
183,124
15,273
5,528
820,119 $
365,185 $
2,129
46,447
2,862
1,047
417,670 $
626,656
67,374
206,018
17,733
28,767
946,548
338,475
3,284
41,774
2,898
1,595
388,026
For 2020, 2019 and 2018, no single customer accounted for more than 10% of our consolidated revenues.
Note 14 — Supplemental Cash Flow and Other Information
Supplemental disclosures to the statements of cash flows are presented below:
(in thousands)
Cash paid (received) for:
Income taxes (net of refunds)
Interest
2020
2019
2018
$
$
6,350 $
6,054 $
12,165 $
8,718 $
15,627
8,741
Cash, cash equivalents, and restricted cash in the consolidated statements of cash flows consisted of the following:
(in thousands)
Cash and cash equivalents
Restricted cash (included in other current assets)
Cash, cash equivalents, and restricted cash
2020
2019
2018
$
$
24,197 $
48,672 $
6,151
8,191
30,348 $
56,863 $
56,118
8,148
64,266
Accounts payable and accrued liabilities at December 31, 2020, 2019, and 2018, included accruals for capital
expenditures of $0.5 million, $1.8 million, and $4.2 million, respectively.
Accrued liabilities at December 31, 2020 and 2019 included accruals for employee incentives and other compensation
related expenses of $16.4 million and $21.6 million, respectively.
Note 15 — Commitments and Contingencies
In the ordinary course of conducting our business, we become involved in litigation and other claims from private
party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state, and
local levels. While the outcome of litigation or other proceedings against us cannot be predicted with certainty, management
does not expect that any loss resulting from such litigation or other proceedings, in excess of any amounts accrued or covered
by insurance, will have a material adverse impact on our consolidated financial statements.
Kenedy, Texas Drilling Fluids Facility Fire
In July 2018, a fire occurred at our Kenedy, Texas drilling fluids facility, destroying the distribution warehouse,
including inventory and surrounding equipment. In addition, nearby residences and businesses were evacuated as part of the
69
response to the fire. In order to avoid any customer service disruptions, we implemented contingency plans to supply products
from alternate facilities in the area and region. Subsequently, we received petitions seeking payment for alleged bodily injuries,
property damage, and punitive damages claimed to have been incurred as a result of the fire and the subsequent efforts we
undertook to remediate any potential smoke damage. As of December 31, 2020, all plaintiffs' claims have been settled under
our insurance program and the matter is closed.
During 2018, we incurred fire-related costs of $4.8 million, which included $1.9 million for inventory and property,
plant and equipment, $2.1 million in property-related cleanup and other costs, and $0.8 million relating to our self-insured
retention for third-party claims. Based on the provisions of our insurance policies and initial insurance claims filed, we
estimated $4.0 million in expected insurance recoveries and recognized a charge of $0.8 million in other operating (income)
loss, net, in the third quarter of 2018. The insurance receivable has been substantially collected as of December 31, 2020. As of
December 31, 2020, the Company's claims related to recoveries under our property, business interruption, and general liability
insurance programs have been substantially finalized.
Escrow Claims Related to Sale of Environmental Services Business
Under the terms of the March 2014 sale of our previous Environmental Services business to Ecoserv, LLC
(“Ecoserv”), $8.0 million of the sales price was withheld and placed in an escrow account to satisfy claims for possible
breaches of representations and warranties contained in the purchase/sale agreement. In December 2014, we received a letter
from Ecoserv asserting that we had breached certain representations and warranties contained in the purchase/sale agreement,
including failing to disclose operational problems and service work performed on injection/disposal wells and increased barge
rental costs. The letter indicated that Ecoserv expected the damages associated with these claims to exceed the escrow amount.
In July 2015 we filed an action against Ecoserv in state district court in Harris County, Texas, seeking release of the escrow
funds. Thereafter, Ecoserv filed a counterclaim seeking recovery in excess of the escrow funds based on the alleged breach of
representations and covenants in the purchase/sale agreement. Ecoserv also alleged that we committed fraud in connection with
the March 2014 transaction. Following commencement of the trial in December 2017, we reached a settlement agreement with
Ecoserv in the first quarter of 2018, under which Ecoserv received $22.0 million in cash, effectively reducing the net sales price
of the Environmental Services business by such amount in exchange for dismissal of the pending claims in the lawsuit, and
release of any future claims related to the March 2014 transaction. The reduction in sales price was funded in the first quarter of
2018 with a cash payment of $14.0 million and release of the $8.0 million that had been held in escrow since the March 2014
transaction. In March 2018, the lawsuit was dismissed with prejudice.
Other
We do not have any special purpose entities. At December 31, 2020, we had $46.2 million in outstanding letters of
credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $6.2 million in
restricted cash. We also enter into normal short-term operating leases for office and warehouse space, as well as rolling stock
and other pieces of operating equipment. None of these off-balance sheet arrangements either had, or is expected to have, a
material effect on our financial statements.
We are self-insured for health claims, subject to certain “stop loss” insurance policies. Claims in excess of $250,000
per incident are insured by third-party insurers. Based on historical experience, we had accrued liabilities of $0.7 million and
$0.8 million for unpaid claims incurred at December 31, 2020 and 2019, respectively. Substantially all of these estimated
claims are expected to be paid within six months of their occurrence. In addition, we are self-insured for certain workers’
compensation, auto, and general liability claims up to a certain policy limit. Claims in excess of $750,000 are insured by third-
party reinsurers. Based on historical experience, we had accrued liabilities of $2.8 million and $1.9 million for the uninsured
portion of claims at December 31, 2020 and 2019, respectively.
We also maintain accrued liabilities for asset retirement obligations, which represent obligations associated with the
retirement of tangible long-lived assets that result from the normal operation of the long-lived asset. Our asset retirement
obligations primarily relate to required expenditures associated with owned and leased facilities. Upon settlement of the
liability, a gain or loss for any difference between the settlement amount and the liability recorded is recognized. We had
accrued asset retirement obligations of $1.2 million at both December 31, 2020 and 2019.
70
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this annual report. Based on such evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31,
2020, the end of the period covered by this annual report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended
December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Management’s Report on Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Securities and Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control system over financial reporting is
designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Internal control over financial reporting has inherent limitations and may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only reasonable assurance, not absolute assurance with
respect to the financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of
internal control over financial reporting may vary over time.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020 as required by the
Securities and Exchange Act of 1934 Rule 13a-15(c). In making our assessment, we have utilized the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in a report entitled “Internal Control —
Integrated Framework (2013).” We concluded that based on our evaluation, our internal control over financial reporting was
effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.
/s/ Paul L. Howes
Paul L. Howes
President and Chief Executive Officer
/s/ Gregg S. Piontek
Gregg S. Piontek
Senior Vice President and Chief Financial Officer
71
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Newpark Resources, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Newpark Resources, Inc. and subsidiaries (the “Company”) as
of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control – Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our
report dated February 26, 2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 26, 2021
72
ITEM 9B. Other Information
None.
ITEM 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
PART III
The information required by this Item is incorporated by reference to the “Executive Officers” and “Election of
Directors” sections of the definitive Proxy Statement relating to our 2021 Annual Meeting of Stockholders.
Compliance with Section 16(a) of the Exchange Act
The information required by this Item, if applicable, is incorporated by reference to the “Delinquent Section 16(a)
Reports” section of the definitive Proxy Statement relating to our 2021 Annual Meeting of Stockholders.
Code of Conduct and Ethics
We have adopted a Code of Ethics for Senior Officers and Directors ("Code of Ethics") and a Code of Business Ethics
and Conduct (“Ethics Manual”) that applies to all officers and employees. The Code of Ethics and Ethics Manual are publicly
available in the investor relations area of our website at www.newpark.com. Any amendments to, or waivers of, the Codes with
respect to our principal executive officer, principal financial officer or principal accounting officer or controller, or persons
performing similar functions, will be disclosed on our website within four business days following the date of the amendment
or waiver. Copies of our Code of Ethics may also be requested in print by writing to Newpark Resources, Inc., 9320 Lakeside
Blvd., Suite 100, The Woodlands, Texas, 77381.
ITEM 11. Executive Compensation
The information required by this Item is incorporated by reference to the “Executive Compensation” section of the
definitive Proxy Statement relating to our 2021 Annual Meeting of Stockholders.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference to the “Ownership of Common Stock” and “Equity
Compensation Plan Information” sections of the definitive Proxy Statement relating to our 2021 Annual Meeting of
Stockholders.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the “Related Person Transactions” and “Director
Independence” sections of the definitive Proxy Statement relating to our 2021 Annual Meeting of Stockholders.
ITEM 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to the “Independent Auditor” section of the
definitive Proxy Statement relating to our 2021 Annual Meeting of Stockholders.
73
ITEM 15. Exhibit and Financial Statement Schedules
PART IV
(a) List of documents filed as part of this Annual Report or incorporated herein by reference.
1. Financial Statements
The following financial statements of the Registrant as set forth under Part II, Item 8 of this Annual Report on Form
10-K on the pages indicated.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Page in this
Form 10-K
40
42
43
44
45
46
47
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
3. Exhibits
The exhibits listed are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K.
2.1
2.2
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
Asset Purchase Agreement, dated as of October 27, 2017, by and among Well Service Group Inc., the
stockholders designated therein, Newpark Resources, Inc. and Newpark Mats & Integrated Services LLC,
incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on October 31, 2017
(SEC File No. 001-02960).
Asset Purchase Agreement, dated as of October 27, 2017, by and among Utility Access Solutions Inc., the
stockholders designated therein, Newpark Resources, Inc. and Newpark Mats & Integrated Services LLC,
incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on October 31, 2017
(SEC File No. 001-02960).
Restated Certificate of Incorporation of Newpark Resources, Inc., incorporated by reference to Exhibit 3.1 to the
Company’s Form 10-K405 for the year ended December 31, 1998 filed on March 31, 1999 (SEC File No.
001-02960).
Certificate of Designation of Series A Cumulative Perpetual Preferred Stock of Newpark Resources, Inc.
incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 27, 1999
(SEC File No. 001-02960).
Certificate of Designation of Series B Convertible Preferred Stock of Newpark Resources, Inc., incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 7, 2000 (SEC File No.
001-02960).
Certificate of Rights and Preferences of Series C Convertible Preferred Stock of Newpark Resources, Inc.,
incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 4, 2001
(SEC File No. 001-02960).
Certificate of Designation, Preferences, and Rights of Series D Junior Participating Preferred Stock of the
Company, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on May
28, 2020 (SEC File No. 001-02960).
Certificate of Amendment to the Restated Certificate of Incorporation of Newpark Resources, Inc., incorporated
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 4, 2009 (SEC File
No. 001-02960).
Certificate of Amendment to the Restated Certificate of Incorporation of Newpark Resources, Inc., incorporated
by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed on July 29, 2016 (SEC File
No. 001-02960).
Amended and Restated Bylaws of Newpark Resources, Inc., dated August 12, 2020, incorporated by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 14, 2020 (SEC File No. 001-02960).
74
*4.1
4.2
4.3
4.4
4.5
†10.1
†10.2
†10.3
†10.4
†10.5
†10.6
†10.7
†10.8
†10.9
†10.10
†10.11
†10.12
†10.13
†10.14
†10.15
Description of Common Stock of Newpark Resources, Inc.
Specimen form of common stock certificate of Newpark Resources, Inc., incorporated by reference to the exhibit
filed with the Company’s Registration Statement on Form S-1 (SEC File No. 33-40716).
Indenture, dated December 5, 2016, between Newpark Resources, Inc. and Wells Fargo Bank, National
Association, as trustee, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on December 5, 2016 (SEC File No. 001-02960).
Form of 4.00% Convertible Senior Note due 2021, incorporated by reference to Exhibit 4.2 of the Company's
Current Report on Form 8-K filed on December 5, 2016 (SEC File No. 001-02960).
Rights Agreement dated as of May 27, 2020, by and between the Company and Broadridge Corporate Issuer
Solutions, Inc., as rights agent, which includes as Exhibit B the Form of Rights Certificate, incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 28, 2020 (SEC File No.
001-02960).
Amended and Restated Employment Agreement, dated as of December 31, 2008, between the Newpark
Resources, Inc. and Paul L. Howes, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report
on Form 10-Q filed on May 1, 2009 (SEC File No. 001-02960).
Amendment to Amended and Restated Employment Agreement between Newpark Resources, Inc. and Paul L.
Howes dated as of April 20, 2009, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on April 23, 2009 (SEC File No. 001-02960).
Amendment to Amended and Restated Employment Agreement between Newpark Resources, Inc. and Paul L.
Howes dated as of February 16, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on February 18, 2016 (SEC File No. 001-02960).
Amendment to Amended and Restated Employment Agreement dated as of April 6, 2020, between Newpark
Resources, Inc. and Paul L. Howes, incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on April 8, 2020 (SEC File No. 001-02960).
Amendment to Amended and Restated Employment Agreement, dated as of August 12, 2020 between Newpark
Resources, Inc. and Paul L. Howes, incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on August 14, 2020 (SEC File No. 001-02960).
Employment Agreement, dated as of October 18, 2011, between Newpark Resources, Inc. and Gregg S. Piontek,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 21,
2011 (SEC File No. 001-02960).
Amendment to Employment Agreement between Newpark Resources, Inc. and Gregg S. Piontek dated as of
February 16, 2016, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed
on February 18, 2016 (SEC File No. 001-02960).
Amendment to Employment Agreement and Change of Control Agreement dated as of April 6, 2020 between
Newpark Resources, Inc. and Gregg S. Piontek, incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed on April 8, 2020 (SEC File No. 001-02960).
Employment Agreement, dated as of April 20, 2007, between Newpark Resources, Inc. and Bruce Smith,
incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended
March 31, 2007 filed on May 8, 2007 (SEC File No. 001-02960).
Amendment to Employment Agreement between Newpark Resources, Inc. and Bruce C. Smith dated as of April
22, 2009, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April
23, 2009 (SEC File No. 001-02960).
Amendment to Employment Agreement between Newpark Resources, Inc. and Bruce Smith dated as of
December 31, 2012, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on January 4, 2013 (SEC File No. 001-02960).
Amendment to Employment Agreement between Newpark Resources, Inc. and Bruce C. Smith dated as of
February 16, 2016, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed
on February 18, 2016 (SEC File No. 001-02960).
Amended and Restated Employment Agreement between Newpark Resources, Inc. and Bruce Smith dated as of
July 1, 2017, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
July 3, 2017 (SEC File No. 001-02960).
First Amendment to the Amended and Restated Employment Agreement between Newpark Resources, Inc. and
Bruce C. Smith, dated as of November 15, 2018, incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on November 16, 2018 (SEC File No. 001-02960).
Employment Agreement, dated as of April 22, 2016, between Newpark Resources, Inc. and Matthew S. Lanigan,
incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on July 29, 2016
(SEC File No. 001-02960).
75
†10.16
†10.17
†10.18
†10.19
†10.20
†10.21
†10.22
†10.23
†10.24
†10.25
†10.26
†10.27
†10.28
†10.29
10.30
10.31
10.32
10.33
†10.34
†10.35
Amendment to Employment Agreement and Change in Control Agreement dated April 6, 2020 between Newpark
Resources, Inc. and Matthew Lanigan, incorporated by reference to Exhibit 10.5 to the Company's Current Report
on Form 8-K filed on April 8, 2020 (SEC File No. 001-02960).
Employment Agreement, dated as of September 18, 2006, by and between Newpark Resources, Inc. and Mark J.
Airola, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
September 20, 2006 (SEC File No. 001-02960).
Amendment to Employment Agreement between Newpark Resources, Inc. and Mark J. Airola dated April 22,
2009, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on April 23,
2009 (SEC File No. 001-02960).
Amendment to Employment Agreement, dated December 31, 2012, between Mark Airola and Newpark
Resources, Inc., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
January 4, 2013 (SEC File No. 001-02960).
Amendment to Employment Agreement dated February 16, 2016 between Newpark Resources, Inc. and Mark J.
Airola, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on
February 18, 2016 (SEC File No. 001-02960).
Amendment to Employment Agreement between Newpark Resources, Inc. and Mark J. Airola, dated as of August
15, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
August 21, 2018 (SEC File No. 001-02960).
Retirement Agreement and General Release between Newpark Resources, Inc. and Mark J. Airola, dated October
2, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
October 4, 2018 (SEC File No. 001-02960).
Employment Agreement, dated as of August 15, 2018, between Newpark Resources, Inc. and Edward Chipman
Earle, incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q filed on April
26, 2019 (SEC File No. 001-02960).
Amendment to Employment Agreement and Change in Control Agreement dated April 6, 2020 between Newpark
Resources, Inc. and E. Chipman Earle, incorporated by reference to Exhibit 10.4 to the Company's Current Report
on Form 8-K filed on April 8, 2020 (SEC File No. 001-02960).
Employment Agreement, dated as of July 2, 2019, between Newpark Resources, Inc. and David Paterson,
incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed on July 8, 2019
(SEC File No. 001-02960).
Employment Agreement, dated as of October 11, 2019, between Newpark Resources, Inc. and David Paterson,
incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q filed on October 31,
2019 (SEC File No. 001-02960).
Amendment to Employment Agreement and Change in Control Agreement dated April 6, 2020 between Newpark
Resources, Inc. and David Paterson, incorporated by reference to Exhibit 10.3 to the Company's Current Report
on Form 8-K filed on April 8, 2020 (SEC File No. 001-02960).
Retirement and Restrictive Covenant Agreement and General Release, dated as of July 2, 2019, between
Newpark Resources, Inc. and Bruce C. Smith, incorporated by reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K filed on July 8, 2019 (SEC File No. 001-02960).
Consulting Services Agreement, dated as of July 2, 2019 between Newpark Resources, Inc. and Bruce C. Smith,
incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on July 8, 2019
(SEC File No. 001-02960).
Form of Indemnification Agreement, incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report
on Form 10-Q filed on July 25, 2014 (SEC File No. 001-02960).
Indemnification Agreement, dated June 7, 2006, between the registrant and Paul L. Howes, incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 13, 2006 (SEC File No.
001-02960).
Amendment to the Indemnification Agreement between Newpark Resources, Inc. and Paul L. Howes dated
September 11, 2007, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on September 14, 2007 (SEC File No. 001-02960).
Indemnification Agreement, dated October 26, 2011, between Gregg S. Piontek and Newpark Resources, Inc.,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 31,
2011 (SEC File No. 001-02960).
Form of Non-Qualified Stock Option Agreement under the Newpark Resources, Inc. 2006 Equity Incentive Plan,
incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 filed on March 26,
2007 (SEC File No. 333-0141577).
Newpark Resources, Inc., 2008 Employee Stock Purchase Plan, incorporated by reference to Exhibit 4.1 the
Company’s Registration Statement on Form S-8 filed on December 9, 2008 (SEC File No. 333-156010).
76
†10.36
†10.37
†10.38
†10.39
†10.40
†10.41
†10.42
†10.43
†10.44
†10.45
†10.46
†10.47
†10.48
†10.49
†10.50
†10.51
†10.52
†10.53
†10.54
†10.55
†10.56
Form of Change of Control Agreement, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly
Report on Form 10-Q for the period ended March 31, 2008 filed on May 2, 2008 (SEC File No. 001-02960).
Newpark Resources, Inc. 2010 Annual Cash Incentive Plan, incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on April 2, 2010 (SEC File No. 001-02960).
Director Compensation Summary, incorporated by reference to Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the year ended December 31, 2017 filed on February 23, 2018 (SEC File No. 001-02960).
Newpark Resources, Inc. 2006 Equity Incentive Plan (As Amended and Restated Effective June 10, 2009),
incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8 filed on August
14, 2009 (SEC File No. 333-161378).
Amendment No. 1 to the Newpark Resources, Inc. 2006 Equity Incentive Plan (As Amended and Restated
Effective June 10, 2009), incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on
Form S-8 filed on June 9, 2011 (SEC File No. 333-174807).
Form of Non-Qualified Stock Option Agreement under the Newpark Resources, Inc. 2006 Equity Incentive Plan
(As Amended and Restated Effective June 10, 2009) (as amended), incorporated by reference to Exhibit 4.9 to the
Company’s Registration Statement on Form S-8 filed on June 9, 2011 (SEC File No. 333-174807).
Form of Non-Qualified Stock Option Agreement under the Newpark Resources, Inc. 2006 Equity Incentive Plan
(As Amended and Restated Effective June 10, 2009) (as amended), incorporated by reference to Exhibit 4.10 to
the Company’s Registration Statement on Form S-8 filed on June 9, 2011 (SEC File No. 333-174807).
Form of Non-Qualified Stock Option Agreement for Participants Outside the United States under the 2006 Equity
Incentive Plan (As Amended and Restated Effective June 10, 2009) (as amended), incorporated by reference to
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on July 27, 2012 (SEC File No. 001-02960).
Newpark Resources, Inc. 2014 Non-Employee Directors’ Restricted Stock Plan, incorporated by reference to
Exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed on May 22, 2014 (SEC File No.
333-196164).
Form of Non-Employee Director Restricted Stock Agreement under the Newpark Resources, Inc. 2014 Non-
Employee Directors’ Restricted Stock Plan, incorporated by reference to Exhibit 4.8 to the Company’s
Registration Statement on Form S-8 filed on May 22, 2014 (SEC File No. 333-196164).
Newpark Resources, Inc. 2015 Employee Equity Incentive Plan, incorporated by reference to Exhibit 4.7 to the
Company’s Registration Statement on Form S-8 filed on May 22, 2015 (SEC File No. 333-204403).
Newpark Resources, Inc. Amended and Restated 2015 Employee Equity Incentive Plan, incorporated by
reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8 filed on May 23, 2019 (SEC File
No. 333-231715).
Form of Restricted Stock Agreement (time vested) under the Newpark Resources, Inc. 2015 Employee Equity
Incentive Plan, incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-8
filed May 22, 2015 (SEC File No. 333-204403).
Form of Restricted Stock Unit Agreement (performance-based) under the Newpark Resources, Inc. 2015
Employee Equity Incentive Plan, incorporated by reference to Exhibit 4.9 to the Company’s Registration
Statement on Form S-8 filed May 22, 2015 (SEC File No. 333-204403).
Form of Restricted Stock Unit Agreement (retirement eligible) under the Newpark Resources, Inc. 2015
Employee Equity Incentive Plan, incorporated by reference to Exhibit 4.10 to the Company’s Registration
Statement on Form S-8 filed May 22, 2015 (SEC File No. 333.204403).
Form of Restricted Stock Unit Agreement (not retirement eligible) under the Newpark Resources, Inc. 2015
Employee Equity Incentive Plan, incorporated by reference to Exhibit 4.11 to the Company’s Registration
Statement on Form S-8 filed May 22, 2015 (SEC File No. 333.204403).
Form of Restricted Stock Unit Agreement (international) under the Newpark Resources, Inc. 2015 Employee
Equity Incentive Plan, incorporated by reference to Exhibit 4.12 to the Company’s Registration Statement on
Form S-8 filed May 22, 2015 (SEC File No. 333.204403).
Form of Non-Qualified Stock Option Agreement (retirement eligible) under the Newpark Resources, Inc. 2015
Employee Equity Incentive Plan, incorporated by reference to Exhibit 4.13 to the Company’s Registration
Statement on Form S-8 filed May 22, 2015 (SEC File No. 333.204403).
Form of Non-Qualified Stock Option Agreement (not retirement eligible) under the Newpark Resources, Inc.
2015 Employee Equity Incentive Plan, incorporated by reference to Exhibit 4.14 to the Company’s Registration
Statement on Form S-8 filed May 22, 2015 (SEC File No. 333.204403).
Form of Non-Qualified Stock Option Agreement (international) under the Newpark Resources, Inc. 2015
Employee Equity Incentive Plan, incorporated by reference to Exhibit 4.15 to the Company’s Registration
Statement on Form S-8 filed May 22, 2015 (SEC File No. 333.204403).
Change in Control Agreement, dated as of April 22, 2016, between Newpark Resources, Inc. and Matthew S.
Lanigan, incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed on July
29, 2016 (SEC File No. 001-02960).
77
†10.57
†10.58
†10.59
†10.60
†10.61
†10.62
†10.63
†10.64
†10.65
†10.66
†10.67
†10.68
†10.69
†10.70
†10.71
†10.72
†10.73
†10.74
†*10.75
10.76
10.77
Change in Control Agreement, dated as of August 15, 2018, between Newpark Resources, Inc. and Edward
Chipman Earle, incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q filed
on April 26, 2019 (SEC File No. 001-02960).
Change in Control Agreement, dated as of July 2, 2019, between Newpark Resources, Inc. and David Paterson,
incorporated by reference to Exhibit 10.5 of the Company's Current Report on Form 8-K filed on July 8, 2019
(SEC File No. 001-02960).
Confidentiality and Non-Competition Agreement, dated as of July 2, 2019, between Newpark Resources, Inc. and
David Paterson, incorporated by reference to Exhibit 10.6 of the Company's Current Report on Form 8-K filed on
July 8, 2019 (SEC File No. 001-02960).
Amendment No. 1 to Newpark Resources, Inc. 2015 Employee Equity Incentive Plan, incorporated by reference
to Exhibit 4.8 to the Company's Registration Statement on Form S-8 filed on May 19, 2016 (333-211459).
Letter Agreement dated as of December 13, 2016 between Newpark Resources, Inc. and Paul L. Howes,
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 15,
2016 (SEC File No. 001-02960).
Letter Agreement dated as of December 13, 2016 between Newpark Resources, Inc. and Gregg S. Piontek,
incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on December 15,
2016 (SEC File No. 001-02960).
Letter Agreement dated as of December 13, 2016 between Newpark Resources, Inc. and Bruce C. Smith,
incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on December 15,
2016 (SEC File No. 001-02960).
Letter Agreement dated as of December 13, 2016 between Newpark Resources, Inc. and Mark J. Airola,
incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on December 15,
2016 (SEC File No. 001-02960).
Letter Agreement, dated as of July 2, 2019, between Newpark Resources, Inc. and David Paterson, incorporated
by reference to Exhibit 10.4 of the Company's Current Report on Form 8-K filed on July 8, 2019 (SEC File No.
001-02960).
Amendment No. 2 to Newpark Resources, Inc. 2015 Employee Equity Incentive Plan, incorporated by reference
to Exhibit 4.9 to the Company’s Registration Statement on Form S-8 filed on May 18, 2017 (SEC File No.
333-218072).
Newpark Resources, Inc. Amended and Restated Employee Stock Purchase Plan, incorporated by reference to
Exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed on May 18, 2017 (SEC File No.
333-218074).
Newpark Resources, Inc. Long-Term Cash Incentive Plan, incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on June 15, 2017 (SEC File No. 001-02960).
Form of Time-Based Cash Award Agreement under the Newpark Resources, Inc. Long-Term Cash Incentive
Plan, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 15,
2017 (SEC File No. 001-02960).
Form of Performance-Based Cash Award Agreement under the Newpark Resources, Inc. Long-Term Cash
Incentive Plan, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
June 15, 2017 (SEC File No. 001-02960).
Form of Performance-Based Cash Award Agreement under the Newpark Resources, Inc. Long-Term Cash
Incentive Plan, incorporated by reference to Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q filed
on July 31, 2019 (SEC File No. 001-02960).
Form of Non-Employee Director Cash Award Agreement, incorporated by reference to Exhibit 10.6 of the
Company's Quarterly Report on Form 10-Q filed on August 4, 2020 (SEC File No. 001-02960).
Newpark Resources, Inc. Retirement Policy for U.S. Employees, as amended, Approved and Adopted April 6,
2015, amended as of May 20, 2020, incorporated by reference to Exhibit 10.7 of the Company's Quarterly Report
on Form 10-Q filed on August 4, 2020 (SEC File No. 001-02960).
Newpark Resources, Inc. U.S. Executive Severance Plan, incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q filed on November 4, 2020 (SEC File No. 001-02960).
Newpark Resources, Inc. Change in Control Plan.
Purchase Agreement, dated November 29, 2016, by and between Newpark Resources, Inc. and Credit Suisse
Securities (USA) LLC, as representative of the several initial purchasers named therein, incorporated by reference
to Exhibit 1.1 to the Company's Current Report on Form 8-K filed on December 5, 2016 (SEC File No.
001-02960).
Amended and Restated Credit Agreement dated October 17, 2017 by and among Newpark Resources, Inc.,
Newpark Drilling Fluids LLC, Newpark Mats & Integrated Services LLC, Excalibar Minerals LLC and Dura-
Base Nevada, Inc., as borrowers, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/
C Issuer, and the other Lenders party hereto, incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on October 18, 2017 (SEC File No. 001-02960).
78
10.78
*21.1
*23.1
*31.1
*31.2
**32.1
**32.2
*95.1
First Amendment to Amended and Restated Credit Agreement and Amended and Restated Security Agreement,
dated as of March 20, 2019, by and among Newpark Resources, Inc., Newpark Drilling Fluids LLC, Newpark
Mats & Integrated Services LLC, Excalibar Minerals LLC and Dura-Base Nevada, Inc., as borrowers, Bank of
America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other Lenders party
thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March
21, 2019 (SEC File No. 001-02960).
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of Paul L. Howes pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Gregg S. Piontek pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Paul L. Howes pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of Gregg S. Piontek pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Reporting requirements under the Mine Safety and Health Administration.
*101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document
*101.SCH Inline XBRL Schema Document
*101.CAL Inline XBRL Calculation Linkbase Document
*101.LAB Inline XBRL Label Linkbase Document
*101.PRE Inline XBRL Presentation Linkbase Document
*101.DEF Inline XBRL Definition Linkbase Document
*104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
† Management compensation plan or agreement.
* Filed herewith.
** Furnished herewith.
ITEM 16. Form 10-K Summary
None.
79
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
NEWPARK RESOURCES, INC.
By: /s/ Paul L. Howes
Paul L. Howes
President and Chief Executive Officer
Dated: February 26, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures
Title
Date
/s/ Paul L. Howes
Paul L. Howes
/s/ Gregg S. Piontek
Gregg S. Piontek
/s/ Douglas L. White
Douglas L. White
/s/ Anthony J. Best
Anthony J. Best
/s/ G. Stephen Finley
G. Stephen Finley
/s/ Roderick A. Larson
Roderick A. Larson
/s/ Michael A. Lewis
Michael A. Lewis
/s/ John C. Mingé
John C. Mingé
/s/ Rose M. Robeson
Rose M. Robeson
President, Chief Executive Officer and Director
(Principal Executive Officer)
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Vice President, Chief Accounting Officer and
Treasurer
(Principal Accounting Officer)
February 26, 2021
February 26, 2021
February 26, 2021
Chairman of the Board
February 26, 2021
Director, Member of the Audit Committee
February 26, 2021
Director, Member of the Audit Committee
February 26, 2021
Director, Member of the Audit Committee
February 26, 2021
Director, Member of the Audit Committee
February 26, 2021
Director, Member of the Audit Committee
February 26, 2021
80
DIRECTORS
ANTHONY J. BEST
G. STEPHEN FINLEY
Chairman of the Board,
Retired President and
Chief Executive Officer,
SM Energy Company
Retired Senior Vice President
Finance and Administration
and Chief Financial Officer,
Baker Hughes Incorporated
PAUL L. HOWES
President and
Chief Executive Officer
RODERICK A. LARSON
MICHAEL A. LEWIS
JOHN C. MINGÉ
ROSE M. ROBESON
President and
Chief Executive Officer,
Oceaneering International, Inc.
Retired Interim President and
Senior Vice President,
Electric Operations,
Pacific Gas & Electric Corporation
Retired Chairman and President,
BP America
Retired Vice President and
Chief Financial Officer,
General Partner of DCP Mid-
stream Partners LP
CORPORATE INFORMATION
NEWPARK RESOURCES, INC.
CORPORATE HEADQUARTERS
9320 Lakeside Blvd., Suite 100
The Woodlands, Texas 77381
INVESTOR RELATIONS CONTACT
GREGG S. PIONTEK
Senior Vice President and
Chief Financial Officer
Phone: 281-362-6800
Fax: 281-362-6801
E-mail: gpiontek@newpark.com
AUDITORS
DELOITTE & TOUCHE LLP
Houston, Texas
TRANSFER AGENT
BROADRIDGE CORPORATE
ISSUER SOLUTIONS, INC.
P.O. Box 1342
Brentwood, NY 11717
Phone: 1-800-586-1741
ANNUAL MEETING
The Annual Meeting of Shareholders
of Newpark Resources, Inc. will be held on
Thursday, May 20, 2021, at 10 a.m. CDT, at
Newpark Corporate Offices
9320 Lakeside Blvd., Suite 100
The Woodlands, Texas 77381
COMMON STOCK LISTED
NEW YORK STOCK EXCHANGE
Symbol - NR
EXECUTIVE OFFICERS
PAUL L. HOWES
GREGG S. PIONTEK
E. CHIPMAN EARLE
MATTHEW S. LANIGAN
DAVID A. PATERSON
DOUGLAS L. WHITE
President and
Chief Executive Officer
Senior Vice President and
Chief Financial Officer
Vice President,
General Counsel,
Chief Administrative Officer,
Chief Compliance Officer
and Corporate Secretary
Vice President and President,
Industrial Solutions
Vice President and President,
Fluids Systems
Vice President,
Chief Accounting Officer and
Treasurer
CORE VALUES
SAFETY
INTEGRITY
RESPECT
EXCELLENCE
Protecting each other like
family, while sustaining the
environment in which we work
Acting honestly, ethically and
responsibly in all aspects
of our business
Dealing fairly and openly
with employees, customers,
suppliers and community
Delivering value through
performance, innovation and
service quality
ACCOUNTABILITY
Using good judgment and taking
responsibility for our actions
CORPORATE HEADQUARTERS
9320 Lakeside Blvd., Suite 100
The Woodlands, TX 77381
(281) 362-6800
www.newpark.com