Company Quick10K Filing
Quick10K
Newpark Resources
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$9.65 91 $877
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-02-19 Officers, Exhibits
8-K 2019-02-11 Regulation FD, Exhibits
8-K 2019-02-07 Earnings, Exhibits
8-K 2019-01-16 Other Events
8-K 2018-12-04 Regulation FD, Exhibits
8-K 2018-12-03 Officers, Exhibits
8-K 2018-11-29 Regulation FD, Exhibits
8-K 2018-11-14 Other Events, Exhibits
8-K 2018-11-14 Leave Agreement, Officers, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-10-02 Officers, Exhibits
8-K 2018-09-25 Regulation FD, Exhibits
8-K 2018-08-20 Regulation FD, Exhibits
8-K 2018-08-15 Officers, Regulation FD, Exhibits
8-K 2018-07-26 Earnings, Exhibits
8-K 2018-05-17 Shareholder Vote, Regulation FD, Exhibits
8-K 2018-05-15 Regulation FD, Exhibits
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-04-02 Officers, Exhibits
8-K 2018-02-27 Officers, Exhibits
8-K 2018-02-12 Regulation FD, Exhibits
8-K 2018-02-08 Earnings, Other Events, Exhibits
AME Ametek
NOV National Oilwell Varco
ARNC Arconic
ROLL RBC Bearings
FELE Franklin Electric
WIRE Encore Wire
NCS NCI Building Systems
FET Forum Energy Technologies
ZKIN ZK International Group
ARCW Arc Group Worldwide
NR 2018-12-31
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Note 1 - Summary of Significant Accounting Policies
Note 2 - Business Combinations
Note 3 - Inventories
Note 4 - Property, Plant and Equipment
Note 5 - Goodwill and Other Intangible Assets
Note 6 - Financing Arrangements
Note 7 - Fair Value of Financial Instruments and Concentrations of Credit Risk
Note 8 - Income Taxes
Note 9 - Capital Stock
Note 10 - Earnings per Share
Note 11 - Stock-Based Compensation and Other Benefit Plans
Note 12 - Segment and Related Information
Note 13 - Supplemental Cash Flow and Other Information
Note 15 - Commitments and Contingencies
Note 16 - Supplemental Selected Quarterly Financial Data (Unaudited)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
EX-10.59 a2018q4exhibit1059.htm
EX-21.1 a2018q4exhibit211.htm
EX-23.1 a2018q4exhibit231.htm
EX-31.1 a2018q4exhibit311.htm
EX-31.2 a2018q4exhibit312.htm
EX-32.1 a2018q4exhibit321.htm
EX-32.2 a2018q4exhibit322.htm
EX-95.1 a2018q4exhibit951.htm

Newpark Resources Earnings 2018-12-31

NR 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 a2018q410k.htm FORM 10-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
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
nrimage.jpg
Newpark Resources, Inc.
(Exact name of registrant as specified in its charter)
Delaware
72-1123385
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
9320 Lakeside Boulevard, Suite 100
 
The Woodlands, Texas
77381
(Address of principal executive offices)
(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
Name of each exchange on which registered
Common Stock, $0.01 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  √  
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   √   
Accelerated filer ___
Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange 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, 2018, was $957.0 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, 2019, a total of 90,274,914 shares of common stock, $0.01 par value per share, were outstanding.
Documents Incorporated by Reference:
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 2019 Annual Meeting of Stockholders.




NEWPARK RESOURCES, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2018

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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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 affecting us, we refer you to the risk factors set forth in Item 1A "Risk Factors" of this Annual Report on Form 10-K. 



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PART I
ITEM 1. Business
General
Newpark Resources, Inc. was organized in 1932 as a Nevada corporation. In 1991, we changed our state of incorporation to Delaware. We are a geographically diversified supplier providing products, rentals, and services primarily to the oil and natural gas exploration and production (“E&P”) industry. We operate our business through two reportable segments: Fluids Systems and Mats and Integrated Services. Our Fluids Systems segment provides customized fluids solutions to E&P customers globally, operating through four geographic regions: North America, Europe, the Middle East and Africa (“EMEA”), Latin America, and Asia Pacific. Our Mats and Integrated Services segment provides composite mat rentals utilized for temporary worksite access, along with site construction and related site services to customers in various markets including E&P, electrical transmission & distribution, pipeline, solar, petrochemical, and construction industries across North America and Europe. We also sell composite mats to customers around the world.
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. 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 Securities and Exchange Commission (“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.”
Industry Fundamentals
Our operating results depend, to a large extent, on oil and natural gas drilling activity levels in the markets we serve, and particularly for the Fluids Systems segment, 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. Beginning late 2014 and continuing through early 2016, the price of oil declined dramatically from the price levels in prior years. As a result, E&P drilling activity levels significantly declined in North America and many global markets over this period. Oil prices and drilling activity have since improved from the lows reached in early 2016, but remain lower than pre-downturn levels and continue to be volatile. While our 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 North America Rotary Rig Count was 1,223 in 2018, compared to 1,083 in 2017, and 639 in 2016.
The declining E&P drilling activity levels in 2015 and 2016 reduced the demand for our services, negatively impacted customer pricing, and resulted in elevated costs associated with workforce reductions, all of which negatively impacted our profitability. Further, due to the fact that our business contains substantial levels of fixed costs, including significant facility and personnel expenses, North American operating margins in both operating segments were negatively impacted by the lower customer demand during this period.
Outside of North America, drilling activity is generally more stable as drilling activity in many countries is based on longer-term economic projections and multi-year drilling programs, which tends to reduce the impact of short-term changes in commodity prices on overall drilling activity. Although drilling activity levels in certain of our international markets have declined in recent years, as a whole, our international activities have remained relatively stable, primarily driven by key contracts with national oil companies. International expansion, including the penetration of international oil companies ("IOCs") and national oil companies ("NOCs"), is a key element of our Fluids Systems strategy.
In addition to our international expansion efforts, we are also expanding our presence in North America, capitalizing on our capabilities, infrastructure, and strong market position in the North American land drilling fluids markets to expand our drilling fluids presence within the deepwater Gulf of Mexico, as well as our presence in adjacent product offerings, including completion fluids and stimulation chemicals.


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Our Mats and Integrated Services segment serves a variety of industries in addition to the E&P industry, including the electrical transmission & distribution, pipeline, solar, petrochemical, and construction 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 U.S.
Reportable Segments
Fluids Systems
Our Fluids Systems segment provides drilling and completion fluids products and technical services to customers in the North America, EMEA, Latin America, and Asia Pacific regions. We offer customized solutions for highly technical drilling projects involving complex subsurface conditions such as horizontal, directional, geologically deep, or drilling in deep water. These projects require increased monitoring and critical engineering support of the fluids system during the drilling process. In addition, our Fluids Systems offering is expanding into adjacent areas of chemistry, including stimulation chemicals, which are utilized extensively by E&P operators in the U.S. to stimulate hydrocarbon production.
We also have industrial mineral grinding operations for barite, a critical raw material in drilling fluids products, 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. We use the resulting products in our drilling fluids business and also sell them to third party users, including other drilling fluids companies. We also 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 drilling fluids business are adequate for our needs, however, we have experienced periods of short-term scarcity of barite ore, which have resulted in significant cost increases. Our specialty milling operation is our primary supplier of barite used in our North American drilling 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 drilling 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 and provide environmental benefits. 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.
Competition — We face competition from larger companies, including Halliburton, Schlumberger, and Baker Hughes, a GE Company, which compete vigorously on fluids performance and/or price. In addition, these companies have broad product and service offerings in addition to their drilling fluids. 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 proprietary 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 2018, approximately 51% of segment revenues were derived from the 20 largest segment customers, of which the largest customer represented 10% of our segment revenues. The segment also generated 57% of its revenues domestically during 2018. 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.
Mats and Integrated Services 
Our Mats and Integrated Services segment provides composite mat rentals utilized for temporary worksite access, along with site construction and related site services to customers in various markets including E&P, electrical transmission & distribution, pipeline, solar, petrochemical, and construction industries across North America and Europe. We also sell composite mats to customers around the world. The Mats and Integrated Services segment revenues from non-E&P markets represented approximately half of our segment revenues in 2018.
We manufacture our 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 offerings, which now include the EPZ Grounding System™ for enhanced safety and efficiency


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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 system to clean composite mats on site.
In November 2017, we acquired certain assets and assumed certain liabilities of Well Service Group, Inc. and Utility Access Solutions, Inc. (together, “WSG”). Since 2012, WSG had been a strategic logistics and installation service provider for our Mats and Integrated Service segment, offering a variety of complementary services to our composite matting systems, including access road construction, site planning and preparation, environmental protection, fluids and spill storage/containment, erosion control, and site restoration services. The completion of the WSG acquisition expanded our service offering as well as our geographic footprint across the Northeast, Midwest, Rockies, and West Texas regions of the U.S.
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 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™). Using proprietary technology and systems is an important aspect of our business strategy. We believe that these products provide us with a distinct advantage over our competition. While we continue to add to our patent portfolio, two patents related to our DURA-BASE matting system will expire in May 2020, and competitors may begin offering mats that include features described in those patents. 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 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 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 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 this product. We believe that the principal competitive factors in our businesses include product capabilities, price, reputation, and reliability, and that our competitive position is enhanced by our proprietary products, services, and experience.
Customers — Our customers are principally oil and natural gas E&P companies, utility companies, and infrastructure construction companies operating in the markets that we serve. During 2018, approximately 70% of our segment revenues were derived from the 20 largest segment customers, of which the two largest customers represented 12% and 11%, respectively, of our segment revenues. The segment also generated 94% of its revenues domestically during 2018. As a result of our efforts to expand beyond our traditional oilfield customer base, revenues from non-E&P markets represented approximately half of our segment revenues in 2018. 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.
Employees
At January 31, 2019, we employed approximately 2,500 full and part-time personnel, none of which are represented by unions. We consider our relations with our employees to be satisfactory.
Environmental Regulation
We seek to comply with all applicable legal requirements concerning environmental matters. Our business is affected by 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.
Additionally, our business exposes us to environmental risks. 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 employ a corporate-wide web-based 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.


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ITEM 1A. Risk Factors
The following summarizes the most significant risk factors 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.
Risks Related to the Worldwide Oil and Natural Gas Industry
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, as well as 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 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 could be impacted by environmental regulations, including cap and trade legislation, regulation of hydraulic fracturing, and carbon taxes. Weakness or deterioration of the global economy could reduce our customers’ spending levels and could reduce our revenues and operating results.
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 in 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’ access to capital is dependent on their ability to access the funds necessary to develop oil and natural gas prospects. In recent years, limited access to external sources of funding has, at times, caused customers 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, which is one of the ways we seek to differentiate ourselves from our competition, 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. 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.


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Risks Related to Customer Concentration and Reliance on the U.S. Exploration and Production Market
In 2018, approximately 44% 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 66% of our consolidated revenues were derived from our U.S. operations, including approximately $500 million from the exploration and production market.
Beginning late 2014 and continuing through early 2016, the price of oil declined dramatically from the price levels in prior years. Following this decline, North American drilling activity decreased significantly, which reduced the demand for our services and negatively impacted customer pricing in our North American operations, relative to pre-downturn levels. Oil prices and drilling activity have since improved from the lows reached in early 2016, but remain lower than pre-downturn levels and continue to be volatile, and there are no assurances that the price for oil or activity levels will not experience a significant decline again in the future. 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 diversification into non-oil and natural gas markets is intended over the long term to grow the business and offset the cyclical nature of the underlying oil and natural gas business, we cannot be certain of the diversification benefits associated with those lines of business.
Risks Related to International Operations
We have significant operations outside of the U.S., including Canada and certain areas of Europe, the Middle East, Africa, Latin America, and Asia Pacific. In 2018, these international operations generated approximately 34% of our consolidated revenues. Substantially all of our cash balance at December 31, 2018 resides within our international subsidiaries. Algeria represented our largest international market with our total Algerian operations representing 9% of our consolidated revenues for 2018 and 8% of our total assets at December 31, 2018, including 22% of our total cash balance at December 31, 2018.
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, 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;
inability to obtain or preserve certain intellectual property rights in the foreign countries in which we operate;
our inexperience in certain international markets;
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 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 engineers, technical sales personnel, and service personnel. In recent years, the labor market in the U.S. has continued to tighten, with national unemployment levels reaching the lowest level experienced in decades. Consequently, the market for qualified employees has become 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.


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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.
Barite is a naturally occurring mineral that constitutes a significant portion of our drilling 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 could 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.
Our mats 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/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.
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 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 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 $150.0 million asset-based revolving credit facility (as amended, the “ABL Facility”). Borrowing availability under the ABL Facility is calculated based on eligible 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 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 is also subject to maintaining a minimum consolidated fixed charge coverage ratio and a minimum level of operating income for the Mats and Integrated Services segment.
We are subject to compliance with a fixed charge coverage ratio covenant if our borrowing availability 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, unless we are able to obtain, on a timely basis, a necessary waiver or amendment. Any waiver or amendment may require us to revise the terms of our agreement which could increase the cost of our borrowings, require the payment of additional fees, and adversely impact the results of our operations. Upon the occurrence of any event of default that is not waived, the lenders could elect to exercise any of their available remedies, which include the right to not lend any additional amounts or, in the event we have outstanding indebtedness under the ABL Facility, to declare any outstanding indebtedness, together with any accrued interest and other fees, to be immediately due and payable. If we are unable to repay the outstanding indebtedness, if any, under the ABL Facility when due, the lenders would be permitted to 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 2021 Convertible Notes. The acceleration of any of our indebtedness and the election to exercise any such remedies could have a material adverse effect on our business and financial condition.
In addition, credit rating agencies continually review their ratings for the companies that they follow, including us. Credit rating agencies also evaluate the industries in which we operate as a whole and may change their credit rating for us based on their overall view of such industries. There can be no assurance that any rating assigned to our currently outstanding public debt securities will remain in effect for any given period of time or that any such ratings will not be lowered, suspended, or withdrawn entirely by a rating agency if, in that rating agency’s judgment, circumstances so warrant.
A downgrade of our credit ratings could, among other things:
limit our ability to access capital or otherwise adversely affect the availability of other new financing on favorable terms, if at all;


8



result in more restricted covenants in agreements governing the terms of any future indebtedness that we may incur;
cause us to refinance indebtedness with less favorable terms and conditions, which debt may require collateral and restrict, among other things, our ability to pay dividends or repurchase shares;
increase our cost of borrowing; and
adversely affect the market price of our outstanding debt securities.
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). 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, retain renewing business or 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 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. Our 2019 capital expenditures are expected to range between $35 million to $45 million (exclusive of any acquisitions). 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;
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.


9



Risks Related to Market Competition
We face competition in the Fluids Systems business from larger companies, including Halliburton, Schlumberger, and Baker Hughes, a GE Company, 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 Mats and Integrated Services 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 mat system. While we believe the design and manufacture of our products provide a differentiated value to our customers, many of our competitors seek to compete on pricing. In addition, some of the early patents we received related to our DURA-BASE mat system will expire in 2020 and competitors may begin offering mats that include features described in those patents. We have filed for additional patents, but there is no assurance that these patents will be granted or that competitors will not be able to offer products that are substantially similar to the DURA-BASE mat system.
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/services with a corresponding decrease in our revenues without penalty. 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 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 Legal and Regulatory Matters, Including Environmental 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 of cleanup of contaminated sites and site closure obligations, 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. 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. 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.


10



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 have begun to offer stimulation chemicals used in the hydraulic fracturing process. Regulations which have the effect of 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, 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. Any such violation of the law or even internal policies could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Material Weaknesses in Our Internal Control Over Financial Reporting
Pursuant to the Sarbanes-Oxley Act of 2002, we are required to document and test our internal control procedures and to provide a report by management on internal control over financial reporting, including management’s assessment of the effectiveness of such control. We had a material weakness in our internal control over financial reporting identified during 2018 and can give no assurances that material weaknesses will not arise in the future. Although we are working to remedy the material weakness identified in 2018, there can be no assurance as to when the remediation will be completed. Deficiencies, including any material weakness, in our internal control over financial reporting that have not been remediated or that may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operations and financial condition.
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, the U.S. Congress and foreign, state and local governments consider legislation that could increase our effective tax rate. We cannot determine whether, or in what form, legislation will ultimately be


11



enacted or what the impact of any such legislation could have on our profitability. If these or other changes to tax laws are enacted, our profitability could be negatively impacted.
The U.S. Tax Cuts and Jobs Act (“Tax Act”) was enacted in December 2017, resulting in broad and complex changes to U.S. income tax law. Following the enactment of the Tax Act, the U.S. Treasury Department, the U.S. Internal Revenue Service (“IRS”), and other standard-setting bodies have continued to issue new guidance regarding the application or administration of the Tax Act. However, many aspects of the Tax Act remain subject to interpretation, and additional Tax Act guidance is expected to continue to be issued in the future. Any future guidance may differ from our current interpretation, which may result in fluctuations in our effective tax rate in the period in which adjustments are made.
Our future effective tax rates could also 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 IRS and other tax authorities 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.
Risks Related to Potential Impairments of Goodwill and Long-lived Intangible Assets
As of December 31, 2018, our consolidated balance sheet includes $43.8 million of goodwill and $25.2 million of intangible assets, net, substantially all of which relates to the Mats and Integrated Services segment. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently as the circumstances require, if any qualitative factors exist. In completing this annual evaluation during the fourth quarter of 2018, we determined that no reporting unit has a fair value below its net carrying value, and therefore, no impairment is required. However, if the financial performance or future projections for our operating segments deteriorate from current levels, a future impairment of goodwill or indefinite-lived intangible assets may be required, which would negatively impact our financial results in the period of impairment. 
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 functions and performance. If we are not successful in continuing to develop product enhancements or new products 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 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.
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 available, 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.


12



Risks Related to Severe Weather and Seasonality
We have significant operations located in market areas around the world that are negatively impacted by severe adverse weather events such as hurricanes in the U.S. Gulf of Mexico, typhoons in Australia, droughts across the U.S. and excessive rains outside of the U.S. 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 drilling 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.
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. We have policies and procedures in place, including system monitoring and data back-up processes, to prevent or mitigate the effects of these potential 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, and expect to continue to experience, cybersecurity threats and incidents, none of which have been material to us to date. However, 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 Fluctuations in the Market Value of Our Publicly Traded Securities
The market price of our publicly traded securities may fluctuate due to a number of factors, including the general economy, stock market conditions, general trends in the E&P industry, announcements made by us or our competitors, and variations in our operating results. Investors may not be able to predict the timing or extent of these fluctuations.
ITEM 1B. Unresolved Staff Comments
None.



13



ITEM 2. Properties
We lease office space to support our operating segments as well as our corporate offices. All material domestic owned properties are subject to liens and security interests under our ABL Facility.
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 own a distribution warehouse and fluids blending facility containing approximately 65,000 square feet of office and industrial space on approximately 21 acres of land in Conroe, Texas. 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 Gulf of Mexico deepwater market. Additionally, we own five warehouse facilities and have 15 leased warehouses and 10 contract warehouses to support our customers and operations in the U.S. We own two warehouse facilities and have 22 contract warehouses in Canada to support our Canadian operations. For our international operations in the EMEA, Latin America, and Asia Pacific regions, we own two warehouses and lease 35 warehouses to support these operations. Some of the warehouses also include blending facilities.
We operate four specialty product grinding facilities in the U.S. These facilities are located in Houston, Texas on approximately 18 acres of owned land, in New Iberia, Louisiana on 15.7 acres of leased land, in Corpus Christi, Texas on 6.0 acres of leased land, and in Dyersburg, Tennessee on 13.2 acres of owned land.
Mats and Integrated Services.  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 seven facilities and lease 16 sites throughout the U.S. which serve as bases for our well site service activities. Additionally, we lease two facilities in the United Kingdom to support field operations.
ITEM 3. Legal Proceedings
Claims Related to the Sale of the Environmental Services Business
Newpark Resources, Inc. v. Ecoserv, LLC. 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 a declaratory action against Ecoserv in the District Court in Harris County, Texas (80th Judicial District) 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. As a result of the settlement, we recognized a charge to discontinued operations in the fourth quarter of 2017 for $22.0 million ($17.4 million net of tax) to reduce the previously recognized gain from the sale of the Environmental Services business. 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. Litigation expenses related to this matter were included in corporate office expenses in operating income.
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.



14



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, 2019, we had 1,256 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, 2014 through December 31, 2018, with the New York Stock Exchange Market Value Index, a broad equity market index, and the Morningstar Oil & Gas Equipment & Services Index, an industry group index. The graph assumes the investment of $100 on January 1, 2014 in our common stock and each index and the reinvestment of all dividends, if any. This information shall be deemed furnished 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.
chart-9b178b5ca5ff85d5d66.jpg


15



Issuer Purchases of Equity Securities
The following table details our repurchases of shares of our common stock for the three months ended December 31, 2018:
Period
 
Total Number of Shares Purchased (1)
 
Average Price Paid Per Share
 
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) (2)
October 2018
 
2,556

 
$
10.64

 

 
$
33.5

November 2018
 
3,783

 
$
8.19

 

 
$
100.0

December 2018
 

 
$

 

 
$
100.0

Total
 
6,339

 
$
9.18

 

 
 

 
(1)
During the three months ended December 31, 2018, we purchased an aggregate of 6,339 shares surrendered in lieu of taxes under vesting of restricted stock awards.
(2)
In November 2018, our Board of Directors authorized changes to our existing securities repurchase program, which it first authorized in 2013. The authorization increased the authorized amount under the repurchase program to $100.0 million, available for repurchases of any combination of our common stock and our 2021 Convertible Notes, from the $33.5 million that was remaining under the previous repurchase program.
Our repurchase program authorizes us to purchase our outstanding shares of common stock or 2021 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 and available cash on hand. 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. There were no share repurchases under the program during 2018. At December 31, 2018, there was $100.0 million of authorization remaining under the program. During 2018, we repurchased 362,190 of shares surrendered in lieu of taxes under vesting of restricted stock awards. All of the shares repurchased are held as treasury stock.
In January 2019, we repurchased an aggregate of 655,666 shares of our common stock under our Board authorized repurchase program for a total cost of $5.0 million.




16



ITEM 6. Selected Financial Data
The selected financial data presented below for the five years ended December 31, 2018 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.”
 
As of and for the Year Ended December 31,
(In thousands, except share data)
2018
 
2017
 
2016
 
2015
 
2014
Consolidated Statements of Operations Data:
 
 
 
 
 
 
 
 
 
Revenues
$
946,548

 
$
747,763

 
$
471,496

 
$
676,865

 
$
1,118,416

Operating income (loss)
63,558

 
31,436

 
(57,213
)
 
(99,099
)
 
130,596

Interest expense, net
14,864

 
13,273

 
9,866

 
9,111

 
10,431

Income (loss) from continuing operations
32,281

 
11,219

 
(40,712
)
 
(90,828
)
 
79,009

Income from discontinued operations, net of tax

 

 

 

 
1,152

Gain (loss) from disposal of discontinued operations, net of tax

 
(17,367
)
 

 

 
22,117

Net income (loss)
32,281

 
(6,148
)
 
(40,712
)
 
(90,828
)
 
102,278

 
 
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations - basic
$
0.36

 
$
0.13

 
$
(0.49
)
 
$
(1.10
)
 
$
0.95

Net income (loss) per share - basic
$
0.36

 
$
(0.07
)
 
$
(0.49
)
 
$
(1.10
)
 
$
1.23

 
 
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations - diluted
$
0.35

 
$
0.13

 
$
(0.49
)
 
$
(1.10
)
 
$
0.84

Net income (loss) per share - diluted
$
0.35

 
$
(0.07
)
 
$
(0.49
)
 
$
(1.10
)
 
$
1.07

 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheets Data:
 
 
 
 
 
 
 
 
 
Working capital
$
381,386

 
$
346,623

 
$
283,139

 
$
380,950

 
$
440,098

Total assets
915,854

 
902,716

 
798,183

 
848,893

 
1,007,672

Foreign bank lines of credit
1,137

 
1,000

 

 
7,371

 
11,395

Other current debt
1,385

 
518

 
83,368

 
11

 
253

Long-term debt, less current portion
159,225

 
158,957

 
72,900

 
171,211

 
170,462

Stockholders' equity
569,681

 
547,480

 
500,543

 
520,259

 
625,458

 
 
 
 
 
 
 
 
 
 
Consolidated Cash Flows Data:
 
 
 
 
 
 
 
 
 
Net cash provided by operations
$
63,403

 
$
38,381

 
$
11,095

 
$
121,517

 
$
89,173

Net cash used in investing activities
(55,752
)
 
(68,374
)
 
(38,320
)
 
(66,881
)
 
(14,002
)
Net cash used in financing activities
(4,513
)
 
(2,290
)
 
(650
)
 
(6,730
)
 
(49,158
)
During 2016 and 2015, operating loss includes charges totaling $14.8 million and $80.5 million, respectively, 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. Charges in 2016 include $6.9 million of non-cash impairments in the Asia Pacific region, $4.1 million of charges for the reduction in carrying values of certain inventory, and $4.5 million of charges in the Latin America region associated with the wind-down of our operations in Uruguay, partially offset by a $0.7 million gain associated with the change in final settlement amount of certain wage and hour litigation claims. Charges in 2015 include a $70.7 million non-cash impairment of goodwill, $2.6 million non-cash impairment of assets, $2.2 million charge to reduce the carrying value of inventory, and $5.0 million charge for the resolution of certain wage and hour litigation claims and related costs.


17



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, rentals, and services primarily to the oil and natural gas exploration and production (“E&P”) industry. We operate our business through two reportable segments: Fluids Systems and Mats and Integrated Services. In addition to the E&P industry, our Mats and Integrated Services segment serves a variety of industries, including the electrical transmission & distribution, pipeline, solar, petrochemical, and construction industries.
Our operating results depend, to a large extent, on oil and natural gas drilling activity levels in the markets we serve, and particularly for the Fluids Systems segment, 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.
Beginning late 2014 and continuing through early 2016, the price of oil declined dramatically from the price levels in prior years. As a result, E&P drilling activity levels significantly declined in North America and many global markets over this period. Oil prices and drilling activity have since improved from the lows reached in early 2016, but remain lower than pre-downturn levels and continue to be volatile. While our 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:
 
 
Year Ended December 31,
 
2018 vs 2017
 
2017 vs 2016
 
 
2018
 
2017
 
2016
 
Count
 
%
 
Count
 
%
U.S. Rig Count
 
1,032

 
877

 
509

 
155

 
18
%
 
368

 
72
%
Canada Rig Count
 
191

 
206

 
130

 
(15
)
 
(7
%)
 
76

 
58
%
North America Rig Count
 
1,223

 
1,083

 
639

 
140

 
13
%
 
444

 
69
%
________________
Source: Baker Hughes, a GE Company
As of February 15, 2019, the U.S. and Canadian rig counts were 1,051 and 224, respectively. The Canadian rig count reflects the 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.
Outside of North America, drilling activity is generally more stable as drilling activity in many countries is based on longer-term economic projections and multi-year drilling programs, which tends to reduce the impact of short-term changes in commodity prices on overall drilling activity. Although drilling activity levels in certain of our international markets have declined in recent years, as a whole, our international activities have remained relatively stable, primarily driven by key contracts with national oil companies.
Segment Overview
Our Fluids Systems segment, which generated 76% of consolidated revenues for 2018, provides customized fluids solutions to E&P customers globally, operating through four geographic regions: North America, Europe, the Middle East and Africa (“EMEA”), Latin America, and Asia Pacific. International expansion, including the penetration of international oil companies (“IOCs”) and national oil companies (“NOCs”), is a key element of our Fluids Systems strategy, which in recent years has helped to stabilize revenues as North American oil and natural gas exploration activities have fluctuated significantly. During 2018, approximately one third of our Fluids Systems segment revenues were derived from IOC and NOC customers. Significant international contract awards with recent developments include:


18



In Kuwait, we provide drilling and completion fluids and related services for land operations under a multi-year contract with Kuwait Oil Company (“KOC”), which began in 2014. Following a recent tender process with KOC, we have received notification of two new contract awards to provide drilling and completion fluids, along with related services, covering a five-year term. The initial revenue value of the combined awards is approximately $165 million and expands our presence to include a second base of operations in Northern Kuwait. The awards remain subject to contract execution, which is expected to be completed in the first quarter of 2019. While we expect some near-term fluctuations in revenues associated with the transition to the new contracts, based on the customer plans currently in place, we expect the revenue levels of the new awards to eventually surpass the levels achieved on the previous contract.
In Algeria, we provide drilling and completion fluids and related services to Sonatrach under a multi-year contract. Work under Lot 1 and Lot 3 of a three-year contract awarded in 2015 (“2015 Contract”) was completed in the fourth quarter of 2018. During 2018, Sonatrach initiated a new tender (“2018 Tender”), for a three-year term succeeding the 2015 Contract. For the 2018 Tender, Sonatrach adopted a change in its procurement process, limiting the number of Lots that could be awarded to major service providers. We were awarded a new contract pursuant to the 2018 Tender. As a consequence of the change in the procurement process, the new award under the 2018 Tender will result in lower revenues from Sonatrach. Based upon the new contract award, we expect that revenue from Sonatrach under the 2018 Tender will be approximately $125 million over the three-year term, which would result in a reduction of approximately $25 million per year as compared to the prior activity levels. The transition from the 2015 Contract to the contract awarded under the 2018 Tender is currently underway.
In Australia, we provide drilling and completion fluids and related services under a contract with Baker Hughes, a GE Company (“Baker Hughes”), as part of its integrated service offering in support of the Greater Enfield project in offshore Western Australia. Work under this contract began in the first quarter of 2018 and is expected to continue through 2019.
In Brazil, we provided drilling fluids and related services under a multi-year contract with Petrobras for both onshore and offshore locations. Work under this contract began in the first half of 2009 and concluded in December 2018. For 2018, our Brazilian subsidiary generated revenues of $22.6 million and an operating loss of $1.4 million, substantially all of which related to the Petrobras contract. As a result of the conclusion of the Petrobras contract, we recognized charges of $1.2 million in Brazil during 2018 primarily related to severance costs associated with workforce reductions.
In addition to our international expansion efforts, we are also expanding our presence in North America, capitalizing on our capabilities, infrastructure, and strong market position in the North American land drilling fluids markets to expand our drilling fluids presence within the deepwater Gulf of Mexico, as well as our presence in adjacent product offerings, including completion fluids and stimulation chemicals. To support this effort, we have incurred start-up costs, including costs associated with additional personnel and facility-related expenses, and have made additional capital investments.
Our Mats and Integrated Services segment, which generated 24% of consolidated revenues for 2018, provides composite mat rentals utilized for temporary worksite access, along with site construction and related site services to customers in various markets including E&P, electrical transmission & distribution, pipeline, solar, petrochemical, and construction industries across North America and Europe. We also sell composite mats to customers around the world. The Mats and Integrated Services segment revenues from non-E&P markets represented approximately half of our segment revenues for 2018.
In November 2017, we acquired certain assets and assumed certain liabilities of Well Service Group, Inc. and Utility Access Solutions, Inc. (together, “WSG”) for approximately $77 million. Since 2012, WSG had been a strategic logistics and installation service provider for our Mats and Integrated Service segment, offering a variety of complementary services to our composite matting systems, including access road construction, site planning and preparation, environmental protection, fluids and spill storage/containment, erosion control, and site restoration services. The completion of the WSG acquisition expanded our service offering as well as our geographic footprint across the Northeast, Midwest, Rockies, and West Texas regions of the U.S. The WSG acquisition was the primary driver of the growth in service revenues for the Mats and Integrated Services segment for 2018.
Impact of U.S. Tax Reform
The U.S. Tax Cuts and Jobs Act (“Tax Act”) was enacted in December 2017 resulting in broad and complex changes to U.S. income tax law. The Tax Act included a one-time transition tax in 2017 on accumulated foreign subsidiary earnings not previously subject to U.S. income tax, reduced the U.S. corporate statutory tax rate from 35% to 21% effective January 1, 2018, generally eliminated U.S. federal income tax on dividends from foreign subsidiaries, created new tax on certain foreign-sourced earnings, made other changes to limit certain deductions and changed rules on how certain tax credits and net operating loss carryforwards can be utilized. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our 2017 financial statements, and such


19



estimates were finalized during 2018. The net tax benefit recognized in 2017 related to the Tax Act was $3.4 million. As we completed our analysis of the Tax Act in 2018 for purposes of finalizing our 2017 U.S. federal income tax return, including assessment of additional guidance provided by regulatory bodies, we revised the cumulative net tax benefit related to the Tax Act to $5.0 million by recognizing an additional $1.6 million net tax benefit in 2018. See Note 8 for additional information.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Consolidated Results of Operations
Summarized results of operations are as follows:
 
Year Ended December 31,
 
2018 vs 2017
(In thousands)
2018
 
2017
 
 
%
Revenues
$
946,548

 
$
747,763

 
$
198,785

 
27
%
Cost of revenues
766,975

 
607,899

 
159,076

 
26
%
Selling, general and administrative expenses
115,127

 
108,838

 
6,289

 
6
%
Other operating (income) loss, net
888

 
(410
)
 
1,298

 
NM

Operating income
63,558

 
31,436

 
32,122

 
102
%
 
 
 
 
 
 
 
 
Foreign currency exchange loss
1,416

 
2,051

 
(635
)
 
NM

Interest expense, net
14,864

 
13,273

 
1,591

 
12
%
Income from continuing operations before income taxes
47,278

 
16,112

 
31,166

 
193
%
 
 
 
 
 
 
 
 
Provision for income taxes
14,997

 
4,893

 
10,104

 
206
%
Income from continuing operations
32,281

 
11,219

 
21,062

 
188
%
 
 
 
 
 
 
 
 
Loss from disposal of discontinued operations, net of tax

 
(17,367
)
 
17,367

 
NM

Net income (loss)
$
32,281

 
$
(6,148
)
 
$
38,429

 
NM

Revenues
Revenues increased 27% to $946.5 million in 2018, compared to $747.8 million in 2017. This $198.8 million increase includes a $177.6 million (34%) increase in revenues in North America, comprised of an $81.4 million increase in the Fluids Systems segment and a $96.2 million increase in the Mats and Integrated Services segment. Revenues from our international operations increased by $21.2 million (9%), primarily driven by increases in our Asia Pacific and EMEA regions, partially offset by a decrease in our Latin America region. Additional information regarding the change in revenues is provided within the operating segment results below.
Cost of revenues
Cost of revenues increased 26% to $767.0 million in 2018, compared to $607.9 million in 2017. This $159.1 million increase in cost of revenues was primarily driven by the 27% increase in revenues as well as costs associated with our North American market expansion efforts. Additional information regarding the change in cost of revenues is provided within the operating segment results below.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $6.3 million to $115.1 million in 2018, compared to $108.8 million in 2017. The increase in expenses was primarily driven by the growth in the Mats and Integrated Services segment, including costs attributable to the WSG acquisition. Selling, general and administrative expenses also includes 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, primarily reflecting the impact of modifications to certain outstanding stock-based and other incentive awards. In addition, lower spending related to legal matters, strategic planning efforts, and performance-based incentive compensation were partially offset by higher severance costs and other increases in personnel costs. Selling, general and administrative expenses as a percentage of revenues decreased to 12.2% in 2018 from 14.6% in 2017.
Other operating (income) loss, net


20



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 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. While this event and related claims are covered by our property, business interruption, and general liability insurance programs, these programs contain self-insured retentions, which remain our financial obligations.
Based on the provisions of our insurance policies and initial insurance claims filed, we recognized a charge of $0.8 million in other operating (income) loss, net, for 2018. As of December 31, 2018, the claims related to the fire under our property, business interruption, and general liability insurance programs have not been finalized.
Foreign currency exchange
Foreign currency exchange was a $1.4 million loss in 2018 compared to a $2.1 million loss in 2017, 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 $14.9 million in 2018 compared to $13.3 million in 2017. Interest expense for 2018 and 2017 includes $5.5 million and $5.3 million, respectively, in noncash amortization of original issue discount and debt issuance costs. The increase in interest expense was primarily related to higher average outstanding debt in 2018 compared to 2017, along with an increase in average borrowing rates on our ABL Facility. See Note 6 for further discussion of the accounting treatment for the 2021 Convertible Notes.
Provision for income taxes
The provision for income taxes was $15.0 million for 2018, reflecting an effective tax rate of 32%, compared to $4.9 million in 2017, reflecting an effective tax rate of 30%. The provision for income taxes for 2018 includes a $1.6 million net benefit related to the Tax Act, as described above. In addition, the 2018 effective tax rate was favorably impacted by excess tax benefits related to the vesting of certain stock-based compensation awards and a reduction in the valuation allowance related to our U.K. subsidiary. The provision for income taxes in 2017 includes a $3.4 million benefit resulting from the provisional accounting for the Tax Act. The 2017 effective tax rate was negatively impacted primarily by non-deductible expenses relative to the amount of pre-tax income.
Although the Tax Act reduced the U.S. corporate statutory tax rate from 35% to 21% effective January 1, 2018, our provision for income taxes in 2018 also includes the estimated expense for any U.S. federal and state income taxes from the new tax on certain foreign-sourced earnings as well as any additional foreign withholding taxes related to future repatriation of current year earnings from our non-U.S. subsidiaries. Due to the relative contribution of our domestic and foreign earnings, these taxes on certain foreign-sourced earnings and the impact of changes to deduction limitations from the Tax Act effectively offset the benefit of the lower U.S. corporate statutory tax rate in our 2018 provision for income taxes. The impact of the Tax Act on our effective tax rate in future periods will depend in large part on the relative contribution of our domestic and foreign earnings.
Loss from disposal of discontinued operations
Loss from disposal of discontinued operations includes a $17.4 million charge, net of tax, in 2017 for the settlement of a litigation matter related to the March 2014 sale of our Environmental Services business. See Note 14 and Note 15 for additional information.


21



Operating Segment Results
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers):
 
Year Ended December 31,
 
2018 vs 2017
(In thousands)
2018
 
2017
 
$
 
%
Revenues
 
 
 
 
 
 
 
Fluids systems
$
715,813

 
$
615,803

 
$
100,010

 
16
%
Mats and integrated services
230,735

 
131,960

 
98,775

 
75
%
Total revenues
$
946,548

 
$
747,763

 
$
198,785

 
27
%
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
Fluids systems
$
40,337

 
$
27,580

 
$
12,757

 
 

Mats and integrated services
60,604

 
40,491

 
20,113

 
 

Corporate office
(37,383
)
 
(36,635
)
 
(748
)
 
 

Operating income (loss)
$
63,558

 
$
31,436

 
$
32,122

 
 

 
 
 
 
 
 
 
 
Segment operating margin
 
 
 
 
 
 
 
Fluids systems
5.6
%
 
4.5
%
 
 

 
 

Mats and integrated services
26.3
%
 
30.7
%
 
 

 
 

Fluids Systems
Revenues
Total revenues for this segment consisted of the following:  
 
Year Ended December 31,
 
2018 vs 2017
(In thousands)
2018
 
2017
 
$
 
%
United States
$
410,410

 
$
341,075

 
$
69,335

 
20
%
Canada
66,416

 
54,322

 
12,094

 
22
%
Total North America
476,826

 
395,397

 
81,429

 
21
%
 
 
 
 
 
 
 
 
EMEA
192,537

 
179,360

 
13,177

 
7
%
Asia Pacific
17,733

 
4,081

 
13,652

 
335
%
Latin America
28,717

 
36,965

 
(8,248
)
 
(22
%)
Total International
238,987

 
220,406

 
18,581

 
8
%
 
 
 
 
 
 
 
 
Total Fluids Systems revenues
$
715,813

 
$
615,803

 
$
100,010

 
16
%
North America revenues increased 21% to $476.8 million in 2018, compared to $395.4 million in 2017. This increase was primarily attributable to the 13% increase in North American average rig count along with market share gains in both the North American land markets and the offshore Gulf of Mexico market.
Internationally, revenues increased 8% to $239.0 million in 2018, compared to $220.4 million in 2017. This increase was primarily attributable to a $15.0 million improvement in Romania, as higher oil prices resulted in an increase in drilling activity, along with a $13.4 million increase in Australia related to the Baker Hughes Greater Enfield project, as well as increased activity in Albania and Germany, partially offset by declines from Brazil, Algeria, and Italy.


22



Operating income
The Fluids Systems segment generated operating income of $40.3 million in 2018 compared to $27.6 million in 2017. The increase in operating income includes an $8.7 million improvement from North American operations, reflecting the incremental income generated from the $81.4 million increase in revenues discussed above, partially offset by an increase in operating expenses. Operating expenses for 2018 include $3.0 million of charges primarily related to severance costs associated with cost optimization efforts, $0.8 million of charges associated with the Kenedy, Texas facility fire discussed above, as well as increased start-up costs associated with our product line expansion into stimulation chemicals and completion fluids, including $1.1 million of non-capitalizable expenses related to the upgrade and conversion of a drilling fluids facility into a completion fluids facility. Operating income from international operations increased by $4.0 million, primarily related to the increase in revenues described above, partially offset by a $1.2 million charge in Brazil primarily related to severance costs associated with workforce reductions, as discussed above.
Mats and Integrated Services
Revenues
Total revenues for this segment consisted of the following:  
 
Year Ended December 31,
 
2018 vs 2017
(In thousands)
2018
 
2017
 
 
%
Service revenues
$
93,056

 
$
34,943

 
$
58,113

 
166
%
Rental revenues
81,784

 
61,124

 
20,660

 
34
%
Product sales revenues
55,895

 
35,893

 
20,002

 
56
%
Total Mats and Integrated Services revenues
$
230,735

 
$
131,960

 
$
98,775

 
75
%
Service revenues increased $58.1 million to $93.1 million in 2018, compared to $34.9 million in 2017 with substantially all of this increase attributable to the WSG acquisition completed in November 2017. Rental revenues increased $20.7 million to $81.8 million in 2018, compared to $61.1 million in 2017, primarily attributable to increased customer activity in pressure pumping applications as well as the impact of our continuing efforts to expand into non-E&P rental markets.
Product sales revenues were $55.9 million in 2018 compared to $35.9 million in 2017. Revenues from product sales have typically fluctuated based on the timing of mat orders from customers; however, the improvement in 2018 is primarily attributable to our continued efforts to expand our sales into non-E&P markets.
Operating income
The mats and integrated services segment generated operating income of $60.6 million in 2018 compared to $40.5 million in 2017, primarily attributable to the increases in revenues as described above. As described above, revenues associated with the WSG acquisition primarily consist of site services, as opposed to product sales and rentals, which has shifted the revenue mix toward service revenues in 2018, as compared to 2017. While the incremental service revenues provide a positive impact to segment operating income, this shift in revenue mix, along with depreciation and amortization expense related to the purchase accounting allocation, reduced the overall segment operating margin in 2018 as compared to 2017. See Note 2 for further discussion of the acquisition.
Corporate Office
Corporate office expenses increased $0.7 million to $37.4 million in 2018, compared to $36.6 million in 2017. This increase was driven by $1.8 million in charges associated with the retirement and transition of our former Senior Vice President, General Counsel and Chief Administrative Officer, primarily reflecting the impact of modifications to certain outstanding stock-based and other incentive awards. In addition, lower spending related to legal matters, strategic planning efforts, and performance-based incentive compensation were partially offset by an increase in personnel costs.


23



Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 
Consolidated Results of Operations
Summarized results of operations are as follows:  
 
Year Ended December 31,
 
2017 vs 2016
(In thousands)
2017
 
2016
 
 
%
Revenues
$
747,763

 
$
471,496

 
$
276,267

 
59
%
Cost of revenues
607,899

 
437,836

 
170,063

 
39
%
Selling, general and administrative expenses
108,838

 
88,473

 
20,365

 
23
%
Other operating income, net
(410
)
 
(4,345
)
 
3,935

 
NM

Impairments and other charges

 
6,745

 
(6,745
)
 
NM

Operating income (loss)
31,436

 
(57,213
)
 
88,649

 
155
%
 
 
 
 
 
 
 
 
Foreign currency exchange (gain) loss
2,051

 
(710
)
 
2,761

 
NM

Interest expense, net
13,273

 
9,866

 
3,407

 
35
%
Gain on extinguishment of debt

 
(1,615
)
 
1,615

 
NM

Income (loss) from continuing operations before income taxes
16,112

 
(64,754
)
 
80,866

 
125
%
 
 
 
 
 
 
 
 
Provision (benefit) for income taxes
4,893

 
(24,042
)
 
28,935

 
120
%
Income (loss) from continuing operations
11,219

 
(40,712
)
 
51,931

 
128
%
 
 
 
 
 
 
 
 
Loss from disposal of discontinued operations, net of tax
(17,367
)
 

 
(17,367
)
 
NM

Net Loss
$
(6,148
)
 
$
(40,712
)
 
$
34,564

 
85
%
Revenues
Revenues increased 59% to $747.8 million in 2017, compared to $471.5 million in 2016. This $276.3 million increase includes a $268.0 million (108%) increase in revenues in North America, comprised of a $212.5 million increase in our Fluids Systems segment and a $55.5 million increase in the Mats and Integrated Services segment. Revenues from our international operations increased by $8.3 million (4%), as activity gains in the EMEA region, Brazil, and Chile were mostly offset by the completion of the offshore Uruguay project, which contributed $12.3 million of revenue in 2016. Additional information regarding the change in revenues is provided within the operating segment results below.
Cost of revenues
Cost of revenues increased 39% to $607.9 million in 2017, compared to $437.8 million in 2016. This increase was primarily driven by the 59% increase in revenues; however, cost of revenues contain substantial levels of fixed costs in each business, including significant depreciation, facility costs and personnel expenses, resulting in the lower increase in cost of revenues relative to the change in revenues. In addition, 2016 included $4.6 million of employee severance costs which did not recur in 2017.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $20.4 million to $108.8 million in 2017 from $88.5 million in 2016. The increase in expenses is primarily attributable to a $10.6 million increase in performance-based incentive compensation as well as elevated spending related to strategic planning efforts and legal matters, including the WSG acquisition described above. Selling, general and administrative expenses as a percentage of revenues decreased to 14.6% in 2017 from 18.8% in 2016.
Other operating income, net
Other operating income was $0.4 million in 2017 as compared to $4.3 million in 2016, primarily reflecting gains on the sale of assets in both periods.
Impairments and other charges
During 2016, we recognized $6.7 million of impairments and other charges. These charges primarily included $6.9 million of non-cash impairments in our Asia Pacific region resulting from the unfavorable industry market conditions and outlook for the region in 2016 and included a $3.8 million charge to write-down property, plant and equipment to its estimated fair value and a


24



$3.1 million charge to fully impair the customer related intangible assets. See Note 12 for additional information related to these charges. In addition, we recorded a $0.5 million charge in 2016 in the Latin America region of our Fluids Systems segment to write-down property, plant and equipment associated with the wind-down of our operations in Uruguay. These charges were partially offset by a $0.7 million gain in 2016 in our corporate office associated with the change in the final settlement amount of the wage and hour litigation claims.
Foreign currency exchange
Foreign currency exchange was a $2.1 million loss in 2017 compared to a $0.7 million gain in 2016, reflecting 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 totaled $13.3 million in 2017 compared to $9.9 million in 2016. This increase was primarily attributable to a $3.7 million increase in noncash amortization of debt discount associated with the 2021 Convertible Notes and lower capitalized interest in 2017 as compared to 2016. These increases were partially offset by $1.1 million of charges in 2016 for the write-off of debt issuance costs related to the termination and replacement of our revolving Credit Agreement.
Gain on extinguishment of debt
The $1.6 million gain on extinguishment of debt in 2016 reflects the difference in the amount paid and the net carrying value of the extinguished debt, including debt issuance costs, related to the repurchase of $89.3 million aggregate principal amount of our 2017 Convertible Notes.
Provision (benefit) for income taxes
The provision for income taxes in 2017 was $4.9 million, reflecting an effective tax rate of 30%, compared to a $24.0 million benefit in 2016, reflecting an effective tax rate of 37%. The provision for income taxes in 2017 includes a $3.4 million benefit resulting from the provisional accounting for the Tax Act as previously described. In addition, the 2017 effective tax rate was negatively impacted primarily by non-deductible expenses relative to the amount of pre-tax income.
The benefit for income taxes in 2016 included a $9.3 million benefit associated with a worthless stock deduction and related impacts from restructuring the investment in our Brazilian subsidiary, partially offset by the unfavorable impact of pretax losses incurred in Australia, including $6.9 million of impairment charges, for which the recording of a tax benefit is not permitted.
Loss from disposal of discontinued operations
Loss from disposal of discontinued operations includes a $17.4 million charge, net of tax, in 2017 for the settlement of a litigation matter related to the March 2014 sale of our Environmental Services business.


25



Operating Segment Results
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers): 
 
Year Ended December 31,
 
2017 vs 2016
(In thousands)
2017
 
2016
 
$
 
%
Revenues
 
 
 
 
 
 
 
Fluids systems
$
615,803

 
$
395,461

 
$
220,342

 
56
%
Mats and integrated services
131,960

 
76,035

 
55,925

 
74
%
Total revenues
$
747,763

 
$
471,496

 
$
276,267

 
59
%
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
Fluids systems
$
27,580

 
$
(43,631
)
 
$
71,211

 
 

Mats and integrated services
40,491

 
14,741

 
25,750

 
 

Corporate office
(36,635
)
 
(28,323
)
 
(8,312
)
 
 

Operating income (loss)
$
31,436

 
$
(57,213
)
 
$
88,649

 
 

 
 
 
 
 
 
 
 
Segment operating margin
 
 
 
 
 
 
 
Fluids systems
4.5
%
 
(11.0
%)
 
 

 
 

Mats and integrated services
30.7
%
 
19.4
%
 
 

 
 

Fluids Systems
Revenues
Total revenues for this segment consisted of the following:  
 
Year Ended December 31,
 
2017 vs 2016
(In thousands)
2017
 
2016
 
$
 
%
United States
$
341,075

 
$
149,876

 
$
191,199

 
128
%
Canada
54,322

 
33,050

 
21,272

 
64
%
Total North America
395,397

 
182,926

 
212,471

 
116
%
 
 
 
 
 
 
 
 
EMEA
179,360

 
167,130

 
12,230

 
7
%
Asia Pacific
4,081

 
4,669

 
(588
)
 
(13
%)
Latin America
36,965

 
40,736

 
(3,771
)
 
(9
%)
Total International
220,406

 
212,535

 
7,871

 
4
%
 
 
 
 
 
 
 
 
Total Fluids Systems revenues
$
615,803

 
$
395,461

 
$
220,342

 
56
%
North America revenues increased 116% to $395.4 million in 2017 compared to $182.9 million in 2016. This increase in revenues is primarily attributable to the 69% increase in North American average rig count along with market share gains and higher customer spending per well in 2017 compared to 2016. Canadian revenues also included a $4.8 million increase from the August 2016 acquisition of Pragmatic Drilling Fluids Additives, Ltd.
Internationally, revenues increased 4% to $220.4 million in 2017 compared to $212.5 million in 2016. The increase in the EMEA region is primarily attributable to an increase in customer activity levels in Algeria and Romania. The decrease in the Latin America region is attributable to completion of the offshore Uruguay project which contributed $12.3 million of revenue in 2016 partially offset by increased activity with Petrobras in Brazil and an increase in revenue from a customer contract in Chile which started in the fourth quarter of 2016.
Operating income
The Fluids Systems segment generated operating income of $27.6 million in 2017 compared to an operating loss of $43.6 million in 2016, representing a $71.2 million improvement in operating results. The operating loss in 2016 includes $15.5 million of charges related to asset impairments and $4.1 million of charges related to workforce reductions. The $15.5 million of charges in 2016 included $6.9 million of non-cash impairments in the Asia Pacific region resulting from the unfavorable industry market


26



conditions and outlook for the region in 2016, $4.1 million of charges for the reduction in carrying values of certain inventory, primarily resulting from lower of cost or market adjustments, and $4.5 million of charges in the Latin America region associated with the wind-down of our operations in Uruguay, including $0.5 million to write-down property, plant and equipment. The $6.9 million of impairments in the Asia Pacific region included a $3.8 million charge to write-down property, plant and equipment to its estimated fair value and a $3.1 million charge to fully impair the customer-related intangible assets in the region.
The remaining $51.6 million increase in operating results includes a $48.7 million improvement from North American operations and a $2.9 million increase in operating income from international operations. The improvement in North American operating results is largely attributable to the $212.5 million increase in revenues described above. The increase in international operating income is primarily attributable to the increase in revenues as well as the benefit of cost reduction programs in the Asia Pacific region.
Mats and Integrated Services
Revenues
Total revenues for this segment consisted of the following:  
 
Year Ended December 31,
 
2017 vs 2016
(In thousands)
2017
 
2016
 
 
%
Service revenues
$
34,943

 
$
17,641

 
$
17,302

 
98
%
Rental revenues
61,124

 
40,748

 
20,376

 
50
%
Product sales revenues
35,893

 
17,646

 
18,247

 
103
%
Total Mats and Integrated Services revenues
$
131,960

 
$
76,035

 
$
55,925

 
74
%
Service revenues increased 98% to $34.9 million in 2017, compared to $17.6 million in 2016 and includes approximately $8 million of service revenues from the WSG acquisition in mid-November 2017. Rental revenues increased 50% to $61.1 million in 2017, compared to $40.7 million in 2016. These improvements include an increase in revenues from E&P customer activity, attributable to the improvement in oil prices, as well as increases in non-E&P customer activity associated with our continued efforts to expand beyond our traditional oilfield customer base and strong weather-related demand for rental mats.
Product sales revenues were $35.9 million in 2017 compared to $17.6 million in 2016. Revenues from product sales have typically fluctuated based on the timing of mat orders from customers. The improvement in 2017 is primarily attributable to our efforts to expand into non-E&P markets.
Operating income
Segment operating income increased by $25.8 million to $40.5 million in 2017 as compared to $14.7 million in 2016, attributable to the increases in revenues as described above. Due to the relatively fixed nature of operating expenses, increases in revenue have a higher incremental impact on segment operating margin.
Corporate Office
Corporate office expenses increased $8.3 million to $36.6 million in 2017, compared to $28.3 million in 2016. The increase is primarily attributable to a $2.7 million increase in performance-based incentive compensation and a $2.0 million increase in spending related to strategic planning efforts and legal matters, including the Ecoserv lawsuit described further in Note 15. The 2017 operating results also include a $1.0 million increase in acquisition related costs, primarily attributable to the WSG acquisition.

Liquidity and Capital Resources
Net cash provided by operating activities was $63.4 million in 2018 compared to $38.4 million in 2017. Net cash provided by operating activities in 2017 included the receipt of a $37.2 million tax refund received in the second quarter of 2017. The increase in net cash provided by operating activities in 2018 compared to 2017 was primarily due to an improvement in operating results and decreases in the growth of working capital. During 2018, net income adjusted for non-cash items provided cash of $94.7 million, while changes in working capital used $31.3 million of cash, substantially all of which was attributable to increases in inventory.
Net cash used in investing activities was $55.8 million in 2018, including capital expenditures of $45.1 million and the $14 million payment to refund a portion of the net sales price of the Environmental Services business (see Note 15 for further discussion). Capital expenditures during 2018 included $27.0 million for the Mats and Integrated Services segment, including $18.4 million of investments in the mat rental fleet, and $15.4 million for the Fluids Systems segment. Net cash used in investing activities was $68.4 million in 2017, including $44.8 million associated with the WSG acquisition.


27



Net cash used in financing activities was $4.5 million in 2018 and primarily related to net repayment of borrowings on our ABL Facility.
As of December 31, 2018, we had cash on-hand of $56.1 million, substantially all of which resides within our international subsidiaries. As a result of the Tax Act as previously described, we began repatriating excess cash from certain of our international subsidiaries in 2018 and we intend to continue repatriating excess cash from these international subsidiaries, subject to cash requirements to support the strategic objectives of these international subsidiaries. We anticipate that future working capital requirements for our operations will fluctuate directionally with revenues. In addition, we expect total 2019 capital expenditures to be approximately $35 million to $45 million, depending in part on the investment requirements to support further growth in the mats rental business as well as the timing of a capital investment to support expansion in Northern Kuwait, where we expect to invest approximately $8 million to construct a second base of operations. 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 accounts receivable, inventory, and, subject to satisfaction of certain financial covenants as described below, composite mats included in the rental fleet. We expect our available cash on-hand, cash generated by operations and remaining availability under our ABL Facility to be adequate to fund current operations during the next 12 months. In January 2019, we used $5 million of cash to repurchase shares of our common stock under our existing Board authorized repurchase program. We may continue to make repurchases under this authorization from time to time during 2019.
Our capitalization is as follows:  
(In thousands)
December 31, 2018
 
December 31, 2017
2021 Convertible Notes
$
100,000

 
$
100,000

ABL Facility
76,300

 
81,600

Other debt
3,199

 
1,518

Unamortized discount and debt issuance costs
(17,752
)
 
(22,643
)
Total debt
$
161,747

 
$
160,475

 
 
 
 
Stockholder's equity
569,681

 
547,480

Total capitalization
$
731,428

 
$
707,955

 
 
 
 
Total debt to capitalization
22.1
%
 
22.7
%
2021 Convertible Notes. In December 2016, we issued $100.0 million of unsecured convertible senior notes (“2021 Convertible Notes”) that mature on December 1, 2021, unless earlier converted by the holders pursuant to the terms of the notes. 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 19, 2019, 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 initially 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.


28



Asset-Based Loan Facility. In May 2016, we entered into an asset-based revolving credit agreement which replaced our previous credit agreement. In October 2017, we entered into an Amended and Restated Credit Agreement (as amended, the "ABL Facility") which amended and restated the May 2016 agreement. The ABL Facility provides financing of up to $150.0 million available for borrowings (inclusive of letters of credit) and can be increased up to a maximum capacity of $225.0 million, subject to certain conditions. As of December 31, 2018, our total borrowing base availability under the ABL Facility was $150.0 million, of which $76.3 million was drawn, resulting in remaining availability of $73.7 million.
The ABL Facility terminates in October 2022; 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 2021 Convertible Notes have not either been repurchased, redeemed, converted or we have not provided sufficient funds to repay the 2021 Convertible Notes in full on their maturity date. For this purpose, funds may be provided in cash to an escrow agent or a combination of cash to an escrow agent and the assignment of a portion of availability under the ABL Facility. The ABL Facility requires compliance with a minimum fixed charge coverage ratio and minimum unused availability of $25.0 million to utilize borrowings or assignment of availability under the ABL Facility towards funding the repayment of the 2021 Convertible Notes.
Borrowing availability under the ABL Facility is calculated based on eligible 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 and a minimum level of operating income for the Mats and Integrated Services segment.
Under the terms of the ABL Facility, we may elect to borrow at a variable interest rate plus an applicable margin 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. or (c) LIBOR, subject to a floor of zero, plus 100 basis points. The applicable margin ranges from 175 to 275 basis points for LIBOR borrowings, and 75 to 175 basis points for base rate borrowings, based on the ratio of debt to consolidated EBITDA as defined in the ABL Facility. As of December 31, 2018, the applicable margin for borrowings under our ABL Facility was 175 basis points with respect to LIBOR borrowings and 75 basis points with respect to base rate borrowings. The weighted average interest rate for the ABL Facility was 4.2% at December 31, 2018. 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 ratio of debt to consolidated EBITDA, as defined in the ABL Facility. The applicable commitment fee as of December 31, 2018 was 25 basis points.
The ABL Facility is a senior secured obligation, secured by first liens on 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 compliance with a fixed charge coverage ratio 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. Our foreign subsidiaries in Italy, India, and Canada maintain local credit arrangements consisting primarily of lines of credit which are 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 $1.1 million and $1.0 million, respectively, outstanding under these arrangements at December 31, 2018 and December 31, 2017.
At December 31, 2018, we had letters of credit issued and outstanding of $5.7 million that are collateralized by $6.1 million in restricted cash. Additionally, our foreign operations had $26.6 million outstanding in letters of credit and other guarantees, primarily issued under a credit arrangement in Italy as well as certain letters of credit that are collateralized by $2.0 million in restricted cash. At December 31, 2018 and December 31, 2017, prepaid expenses and other current assets in the consolidated balance sheets include total restricted cash related to letters of credit of $8.1 million and $9.1 million, respectively.
Off-Balance Sheet Arrangements
In conjunction with our insurance programs, we had established letters of credit in favor of certain insurance companies of $2.2 million at both December 31, 2018 and 2017. We also had $0.4 million of guarantee obligations in connection with facility closure bonds and other performance bonds issued by insurance companies outstanding as of December 31, 2018 and 2017. In addition, we had a bond of $4.2 million outstanding as of December 31, 2018 related to a Mexican Federal Tax Court appeal (see Note 8 for additional information).


29



Other than normal operating leases for office and warehouse space, as well as rolling stock and other pieces of operating equipment, we do not have any off-balance sheet financing arrangements or special purpose entities. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such financing arrangements.
Contractual Obligations
A summary of our outstanding contractual and other obligations and commitments at December 31, 2018 is as follows: 
(In thousands)
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Current debt
$
2,522

 
$

 
$

 
$

 
$

 
$

 
$
2,522

2021 Convertible Notes

 

 
100,000

 

 

 

 
100,000

Interest on 2021 Convertible Notes
4,581

 
4,000

 
4,000

 

 

 

 
12,581

ABL Facility

 

 

 
76,300

 

 

 
76,300

Operating leases
9,112

 
5,707

 
4,630

 
3,816

 
3,144

 
4,507

 
30,916

Trade accounts payable and accrued liabilities (1)
138,527

 

 

 

 

 

 
138,527

Purchase commitments, not accrued
19,768

 

 

 

 

 

 
19,768

Other long-term liabilities (2)

 

 

 

 

 
7,536

 
7,536

Performance bond obligations
4,685

 

 

 

 

 

 
4,685

Letter of credit commitments
25,688

 
1,558

 
2,539

 
1,383

 
92

 
982

 
32,242

Total contractual obligations
$
204,883

 
$
11,265

 
$
111,169

 
$
81,499

 
$
3,236

 
$
13,025

 
$
425,077

(1)
Excludes accrued interest on the 2021 Convertible Notes.
(2)
Table does not allocate by year expected tax payments and uncertain tax positions due to the inability to make reasonably reliable estimates of the timing of future cash settlements with the respective taxing authorities. See Note 8 for additional discussion on uncertain tax positions.
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.


30



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 the following: allowances for doubtful accounts, reserves for self-insured retention under insurance programs, estimated performance and values associated with employee incentive programs, fair values used for impairments of long-lived assets, including goodwill and other intangibles, accounting for the Tax Act, 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.
Allowance for Doubtful Accounts
Reserves for uncollectible accounts receivable are determined on a specific identification basis when we believe that the required payment of specific amounts owed to us is not probable. The majority of our revenues are from mid-sized and international oil companies as well as government-owned or government-controlled oil companies, and we have receivables in several foreign jurisdictions. Changes in the financial condition of our customers or political changes in foreign jurisdictions could cause our customers to be unable to repay these receivables, resulting in additional allowances. Provisions for uncollectible accounts receivable were $2.8 million, $1.5 million, and $2.4 million for 2018, 2017, and 2016, respectively.
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. 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. 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 completing our November 1, 2018 and 2017 evaluations, we determined that each reporting unit’s fair value was in excess of the net carrying value and therefore, no impairment was required. At December 31, 2018, we had $43.8 million of goodwill, substantially all of which relates to the Mats and Integrated Services segment.
There are significant inherent uncertainties and management judgment in estimating the fair value of a reporting unit. While we believe we have made reasonable estimates and assumptions to estimate the fair value of our reporting units, 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 a 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. In 2016, we recognized $6.9 million of non-cash impairments in the Asia Pacific region resulting from the unfavorable industry market conditions and outlook for the region in 2016 and a $0.5 million charge in the Latin America region to write-down property, plant and equipment associated with the wind-down of our operations in Uruguay.
We assess recoverability based on expected undiscounted future net cash flows. In estimating expected cash flows, we use a probability-weighted approach. 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. 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.


31



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. Required reserves could change significantly based upon changes in insurance coverage, loss experience, or inflationary impacts. As of December 31, 2018 and 2017, total insurance reserves were $3.0 million and $3.8 million, respectively.
Income Taxes
The Tax Act was enacted in December 2017, resulting in broad and complex changes to U.S. income tax law. The Tax Act included a one-time transition tax in 2017 on accumulated foreign subsidiary earnings not previously subject to U.S. income tax, reduced the U.S. corporate statutory tax rate from 35% to 21% effective January 1, 2018, generally eliminated U.S. federal income tax on dividends from foreign subsidiaries, created new tax on certain foreign-sourced earnings, made other changes to limit certain deductions and changed rules on how certain tax credits and net operating loss carryforwards can be utilized. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our 2017 financial statements, and such estimates were finalized during 2018. The net tax benefit recognized in 2017 related to the Tax Act was $3.4 million. As we completed our analysis of the Tax Act in 2018 for purposes of finalizing our 2017 U.S. federal income tax return, including assessment of additional guidance provided by regulatory bodies, we revised the cumulative net tax benefit related to the Tax Act to $5.0 million by recognizing an additional $1.6 million net tax benefit in 2018.
Although the Tax Act reduced the U.S. corporate statutory tax rate effective January 1, 2018, our provision for income taxes in 2018 also includes the estimated expense for any U.S. federal and state income taxes from the new tax on certain foreign-sourced earnings as well as any additional foreign withholding taxes related to future repatriation of current year earnings from our non-U.S. subsidiaries. Due to the relative contribution of our domestic and foreign earnings, these taxes on certain foreign-sourced earnings and the impact of changes to deduction limitations from the Tax Act effectively offset the benefit of the lower U.S. corporate statutory tax rate in our 2018 provision for income taxes. The impact of the Tax Act on our effective tax rate in future periods will depend in large part on the relative contribution of our domestic and foreign earnings.
We had total deferred tax assets of $42.2 million and $61.9 million at December 31, 2018 and 2017, respectively. A valuation allowance must be established to 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, 2018, a total valuation allowance of $23.8 million was recorded, which includes a valuation allowance on $12.8 million of net operating loss carryforwards for certain U.S. state and foreign jurisdictions, including Australia, as well as a valuation allowance of $4.6 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. In 2018, we recognized a decrease in the valuation allowance for certain deferred tax assets related to our U.K. subsidiary that are now expected to be realized. In 2016, we recognized an increase in the valuation allowance for deferred tax assets, primarily related to our Australian subsidiary and certain U.S. state net operating losses, which are not expected to be realized. In addition, we decreased the valuation allowance in 2016 related to Brazil as we were able to utilize certain net operating loss carryforwards related to income in 2016 from the forgiveness of certain inter-company balances due from our Brazilian subsidiary.
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 2012 and for substantially all foreign jurisdictions for years prior to 2008. We are currently under examination by the United States federal tax authorities for tax years 2014–2016. During the second quarter of 2017, we received a Revenue Agent Report from the IRS disallowing a deduction claimed on our 2015 tax return associated with the forgiveness of certain inter-company balances due from our Brazilian subsidiary and assessing tax due of approximately $3.9 million. We submitted our response to the IRS in the third quarter of 2017, and had an initial tax appeals hearing in June 2018. In the third quarter of 2018, the Appeals Officer provided a favorable notification recommending that no additional tax should be assessed on our 2015 tax return which is subject to approval by the Joint Committee on Taxation. Although the tax appeals process has not concluded, we believe our tax position is properly reported in accordance with applicable U.S. tax laws and regulations and will continue to vigorously defend our position through the tax appeals process.
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


32



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 on April 13, 2018, that the last administrative appeal had been rejected. In the second quarter of 2018, we filed an appeal in the Mexican Federal Tax Court, 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 has been subsequently appealed by the treasury authority in Mexico. Although the tax appeals process has not concluded, we believe our tax position is properly reported in accordance with applicable tax laws and regulations in Mexico and intend to vigorously defend our position through the tax appeals process.
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.



33



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, 2018, we had total principal amounts outstanding under financing arrangements of $179.5 million, including $100.0 million of borrowings under our 2021 Convertible Notes which bear interest at a fixed rate of 4.0% and $76.3 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, 2018 for the ABL Facility was 4.2%. Based on the balance of variable rate debt at December 31, 2018, a 100 basis-point increase in short-term interest rates would have increased annual pre-tax interest expense by $0.8 million.
Foreign Currency Risk
Our principal foreign operations are conducted in certain areas of EMEA, Latin America, Asia Pacific, and Canada. 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, Algerian dinar, Romanian new leu, Canadian dollars, British pounds, Australian dollars, and Brazilian reais. 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.



34



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, 2018 and 2017, 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, 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, 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, 2018, 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 22, 2019, expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.
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 U.S. 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.

/s/ DELOITTE & TOUCHE LLP
 
Houston, Texas
February 22, 2019 

We have served as the Company’s auditor since 2008.



35



Newpark Resources, Inc.
Consolidated Balance Sheets
December 31,
(In thousands, except share data)
2018
 
2017
ASSETS
 
 
 
Cash and cash equivalents
$
56,118

 
$
56,352

Receivables, net
254,394

 
265,866

Inventories
196,896

 
165,336

Prepaid expenses and other current assets
15,904

 
17,483

Total current assets
523,312

 
505,037

 
 
 
 
Property, plant and equipment, net
316,293

 
315,320

Goodwill
43,832

 
43,620

Other intangible assets, net
25,160

 
30,004

Deferred tax assets
4,516

 
4,753

Other assets
2,741

 
3,982

Total assets
$
915,854

 
$
902,716

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current debt
$
2,522

 
$
1,518

Accounts payable
90,607

 
88,648

Accrued liabilities
48,797

 
68,248

Total current liabilities
141,926

 
158,414

 
 
 
 
Long-term debt, less current portion
159,225

 
158,957

Deferred tax liabilities
37,486

 
31,580

Other noncurrent liabilities
7,536

 
6,285

Total liabilities
346,173

 
355,236

 
 
 
 
Commitments and contingencies (Note 15)


 


 
 
 
 
Common stock, $0.01 par value (200,000,000 shares authorized and 106,362,991 and 104,571,839 shares issued, respectively)
1,064

 
1,046

Paid-in capital
617,276

 
603,849

Accumulated other comprehensive loss
(67,673
)
 
(53,219
)
Retained earnings
148,802

 
123,375

Treasury stock, at cost (15,530,952 and 15,366,504 shares, respectively)
(129,788
)
 
(127,571
)
Total stockholders’ equity
569,681

 
547,480

Total liabilities and stockholders' equity
$
915,854

 
$
902,716

 
 
See Accompanying Notes to Consolidated Financial Statements


36



Newpark Resources, Inc.
Consolidated Statements of Operations
Years Ended December 31,  
(In thousands, except per share data)
2018
 
2017
 
2016
Revenues
 
 
 
 
 
   Product sales revenues
$
743,342

 
$
628,401

 
$
390,306

   Rental and service revenues
203,206

 
119,362

 
81,190

Total revenues
946,548

 
747,763

 
471,496

Cost of revenues
 
 
 
 
 
   Cost of product sales revenues
633,847

 
539,243

 
386,085

   Cost of rental and service revenues
133,128

 
68,656

 
51,751

Total cost of revenues
766,975

 
607,899

 
437,836

Selling, general and administrative expenses
115,127

 
108,838

 
88,473

Other operating (income) loss, net
888

 
(410
)
 
(4,345
)
Impairments and other charges

 

 
6,745

Operating income (loss)
63,558

 
31,436

 
(57,213
)
 
 
 
 
 
 
Foreign currency exchange (gain) loss
1,416

 
2,051

 
(710
)
Interest expense, net
14,864

 
13,273

 
9,866

Gain on extinguishment of debt

 

 
(1,615
)
Income (loss) from continuing operations before income taxes
47,278

 
16,112

 
(64,754
)
 
 
 
 
 
 
Provision (benefit) for income taxes
14,997

 
4,893

 
(24,042
)
Income (loss) from continuing operations
32,281

 
11,219

 
(40,712
)
 
 
 
 
 
 
Loss from disposal of discontinued operations, net of tax

 
(17,367
)
 

Net income (loss)
$
32,281

 
$
(6,148
)
 
$
(40,712
)
 
 
 
 
 
 
Income (loss) per common share - basic:
 
 
 
 
 
Income (loss) from continuing operations
$
0.36

 
$
0.13

 
$
(0.49
)
Loss from discontinued operations

 
(0.20
)
 

Net income (loss)
$
0.36

 
$
(0.07
)
 
$
(0.49
)
 
 
 
 
 
 
Income (loss) per common share - diluted:
 
 
 
 
 
Income (loss) from continuing operations
$
0.35

 
$
0.13

 
$
(0.49
)
Loss from discontinued operations

 
(0.20
)
 

Net income (loss)
$
0.35

 
$
(0.07
)
 
$
(0.49
)
  
See Accompanying Notes to Consolidated Financial Statements


37



Newpark Resources, Inc.
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31, 
(In thousands)
2018
 
2017
 
2016
 
 
 
 
 
 
Net income (loss)
$
32,281

 
$
(6,148
)
 
$
(40,712
)
Foreign currency translation adjustments (net of tax benefit of $413, $0, $0)
(14,454
)
 
9,989

 
(4,932
)
Comprehensive income (loss)
$
17,827

 
$
3,841

 
$
(45,644
)
 
See Accompanying Notes to Consolidated Financial Statements


38



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, 2016
$
994

 
$
533,746

 
$
(58,276
)
 
$
171,788

 
$
(127,993
)
 
$
520,259

Net loss

 

 

 
(40,712
)
 

 
(40,712
)
Employee stock options, restricted stock and employee stock purchase plan
4

 
(478
)
 

 
(1,203
)
 
1,907

 
230

Stock-based compensation expense

 
12,056

 

 

 

 
12,056

Income tax effect, net, of employee stock related activity

 
(1,558
)
 

 

 

 
(1,558
)
Issuance of Convertible Notes due 2021

 
15,200

 

 

 

 
15,200

Foreign currency translation

 

 
(4,932
)
 

 

 
(4,932
)
Balance at December 31, 2016
998

 
558,966

 
(63,208
)
 
129,873

 
(126,086
)
 
500,543

Net loss

 

 

 
(6,148
)
 

 
(6,148
)
Employee stock options, restricted stock and employee stock purchase plan
14

 
1,636

 

 
(350
)
 
(1,485
)
 
(185
)
Stock-based compensation expense

 
10,843

 

 

 

 
10,843

Issuance of shares for acquisition
34

 
32,404

 
 
 
 
 
 
 
32,438

Foreign currency translation

 

 
9,989

 

 

 
9,989

Balance at December 31, 2017
1,046

 
603,849

 
(53,219
)
 
123,375

 
(127,571
)
 
547,480