# NPK International Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [NPK International Inc.](/companies/npki.md) (CIK 71829)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 16:47 ET
- Period: 2024-09-30
- Accession: 0000071829-24-000115
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/71829/000007182924000115/nr-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/71829/000007182924000115/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $32.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $105.4m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $11.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $35.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $1.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $20.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | −$14.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | −$9.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$174.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$159.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.99 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.82 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$2.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.86 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 87,490,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 87,453,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $42.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $29.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $4.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $42.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $117.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $389.6m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $51.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $73.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $5.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $8.5m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $316.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,827 characters.

The following discussion of our financial condition, results of operations, liquidity, and capital resources should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2023. Our third quarter represents the three-month period ended September 30 and our first nine months represents the nine-month period ended September 30. Unless otherwise noted, all currency amounts are stated in U.S. dollars. The reference to a “Note” herein refers to the accompanying Notes to Unaudited Condensed Consolidated Financial Statements contained in Item 1 “Financial Statements.”

### Business Overview

Newpark Resources, Inc. (the “Company,” “we,” “our,” or “us”) is a site access solutions company that manufactures, sells, and rents recyclable composite matting products, along with a full suite of services, including planning, logistics, and remediation. The Company previously operated a Fluids Systems business which was exited upon the sale of the business in September 2024 (as further described below).

### 2024 Priorities

The following priorities have been established for 2024:

- *Accelerate Industrial Solutions Growth –* We have prioritized investment capital in the growth of our Industrial Solutions business, where over the past several years, we have seen the strong market adoption of our specialty rental products and differentiated service offering. During the first nine months of 2024, approximately $24 million of capital expenditures were directed to the expansion of our mat rental fleet.
- *Drive Operational Efficiency –* We plan to maintain our focus on efficiency improvements and operating cost optimization across every aspect of our business. With a simplified business model and enhanced focus on balance sheet optimization, we seek to improve returns and consistency in cash flow generation. In addition, we continue to evaluate and execute actions intended to streamline the organization and our cost structure, driving improvements in profitability. During the first nine months of 2024, we continued to take actions to streamline our overhead structure, which has contributed to a $5.5 million year-over-year reduction in selling, general and administrative expenses (“SG&A”) for the first nine months of 2024, while incurring $0.6 million of severance costs. SG&A as a percentage of revenues was 22.1% for the first nine months of 2024 compared to 25.3% for the first nine months of 2023. Further, with the recent completion of the sale of the Fluids Systems business, we expect to further streamline overhead costs, with the goal of driving SG&A as a percentage of revenue to a mid-teens range by early 2026.
- *Prioritize Return of Capital –* We are committed to maintaining a strong balance sheet, using excess cash generation to reduce our debt and return value to our shareholders. Following completion of the Sale Transaction, we have $43 million of cash and total debt of $14 million as of September 30, 2024. In February 2024, our Board of Directors replaced our existing share repurchase program with a new program for repurchases of common stock up to $50.0 million. For the first nine months of 2024, our share repurchase program was restricted due to the Fluids Systems sale process.

### Segment Overview

Our Industrial Solutions segment provides temporary worksite access solutions, including the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production (“E&P”), pipeline, renewable energy, petrochemical, construction and other industries, primarily in the United States and United Kingdom. We also sell our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market. For the first nine months of 2024, 65% of revenues were derived from rental and service activities while 35% of revenues were derived from the sale of our manufactured worksite access products.

The expansion of our business, particularly within the power transmission and other infrastructure markets remains a strategic priority for us. We expect customer activity, particularly in the power transmission sector, will remain robust in the coming years, driven in part by the impacts of the U.S. energy transition and the increasing investment in grid reliance initiatives. For the first nine months of 2024, approximately 60% of revenues were from customers in the power transmission sector. Further, we believe there is meaningful opportunity to expand our market share within the temporary worksite access market, as our recyclable composite mats provide superior work surface and economics relative to timber-based products, which has historically been the primary solution utilized for temporary worksite access across industries.

We previously operated a second reportable segment, Fluids Systems, which we exited in the third quarter of 2024 as described further below. The Fluids Systems segment provided drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in Europe, the Middle East and Africa, and North America, as well as certain countries in Asia Pacific.

On September 13, 2024, we completed the sale of the equity interests in one of our subsidiaries which held substantially all of the Company’s Fluids Systems segment (“Sale Transaction”) to SCF Partners, a leading private equity firm serving the global energy industry (the “Purchaser”). The results of operations of the Fluids Systems segment are reported in discontinued operations in the condensed consolidated statements of operations. All results and information in the consolidated financial statements are presented for our continuing operations and exclude Fluids Systems unless otherwise noted specifically as discontinued operations. See Note 2 for additional information.

### Third Quarter of 2024 Compared to Third Quarter of 2023

### Consolidated Results of Operations

Summarized results of operations for the third quarter of 2024 compared to the third quarter of 2023 are as follows:

*(In thousands)*

|  | Third Quarter 2024 | 2023 | 2024 vs 2023 $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $44,207 | $57,262 | $(13,055) | (23)% |
| Cost of revenues | 32,067 | 37,602 | (5,535) | (15)% |
| Selling, general and administrative expenses | 11,005 | 13,910 | (2,905) | (21)% |
| Other operating (income) loss, net | (99) | (523) | 424 | NM |
| Operating income from continuing operations | 1,234 | 6,273 | (5,039) | (80)% |
| Foreign currency exchange (gain) loss | (562) | 514 | (1,076) | NM |
| Interest expense, net | 943 | 1,017 | (74) | (7)% |
| Income from continuing operations before income taxes | 853 | 4,742 | (3,889) | (82)% |
| Provision (benefit) for income taxes from continuing operations | (14,016) | 2,062 | (16,078) | NM |
| Income from continuing operations | 14,869 | 2,680 | 12,189 | NM |
| Income (loss) from discontinued operations | (189,167) | 4,990 | (194,157) | NM |
| Net income (loss) | $(174,298) | $7,670 | $(181,968) | NM |

Summarized financial information for our reportable segment is shown in the following table:

*(In thousands)*

| Revenues | Third Quarter 2024 | 2023 | 2024 vs 2023 $% |  |
| --- | ---: | ---: | ---: | ---: |
| Rental and service revenues | $32,408 | $38,065 | $(5,657) | (15)% |
| Product sales revenues | 11,799 | 19,197 | (7,398) | (39)% |
| **Total revenues (Industrial Solutions)** | $44,207 | $57,262 | $(13,055) | (23)% |
| **Operating income (loss) from continuing operations** |  |  |  |  |
| Industrial Solutions | $7,286 | $14,336 | $(7,050) |  |
| Corporate office | (6,052) | (8,063) | 2,011 |  |
| **Total operating income from continuing operations** | $1,234 | $6,273 | $(5,039) |  |
| **Segment operating margin** |  |  |  |  |
| Industrial Solutions | 16.5% | 25.0% |  |  |

### Revenues

Revenues decreased 23% to $44.2 million for the third quarter of 2024, compared to $57.3 million for the third quarter of 2023. Rental and service revenues decreased $5.7 million (15%) for the third quarter of 2024. Rental revenues decreased $1.5 million (7%) primarily attributable to higher summer seasonality impacts as compared to historical experience, caused by exceptionally hot and dry weather, particularly in the southern U.S., along with certain customer rental project delays. Service revenues decreased $4.2 million, attributable to the timing and mix of service included within customer rental projects. Product sales revenues decreased $7.4 million (39%) for the third quarter of 2024, as sales volumes typically fluctuate based on the timing of customer projects and orders. The majority of the third quarter 2024 and 2023 revenues were derived from customers in the power transmission sector.

Following the more pronounced seasonal slowdown in customer projects in the third quarter of 2024, we expect revenues to meaningfully improve in the fourth quarter of 2024, benefitting from higher customer rental project activity and product sales.

### Cost of revenues

Cost of revenues decreased 15% to $32.1 million for the third quarter of 2024, compared to $37.6 million for the third quarter of 2023. This $5.5 million decrease was primarily driven by the 23% decrease in revenues described above. The decrease in cost of revenues was lower than the decline in revenues due primarily to the relatively fixed cost structure of our manufacturing and rental operations. In addition, cost of revenues for the third quarter of 2024 was negatively impacted by an unscheduled downtime event on one of the production lines at our manufacturing facility.

### Selling, general and administrative expenses

Selling, general and administrative expenses decreased $2.9 million to $11.0 million for the third quarter of 2024, compared to $13.9 million for the third quarter of 2023. The third quarter of 2023 included a $1.9 million charge to reflect higher projected long-term management incentives driven by our relative total shareholder return versus our peer group, and $0.5 million of severance costs associated with restructuring actions. The remaining decrease was primarily driven by lower personnel expense resulting from efforts to streamline the overhead structure. Selling, general and administrative expenses as a percentage of revenues was 24.9% for the third quarter of 2024 compared to 24.3% for the third quarter of 2023.

### Other operating (income) loss, net

Other operating (income) loss, net, primarily includes gains and losses on sales of assets.

### Foreign currency exchange

Foreign currency exchange was a $0.6 million gain for the third quarter of 2024 compared to a $0.5 million loss for the third quarter of 2023 and reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.

### Interest expense, net

Interest expense was $0.9 million for the third quarter of 2024 compared to $1.0 million for the third quarter of 2023. The third quarter of 2024 includes a $0.5 million non-cash write off of debt issuance costs associated with our September 2024 ABL Facility amendment. Discontinued operations also includes an allocation of interest expense on corporate debt. Such allocated interest expense totaled $0.5 million and $0.6 million for the third quarter of 2024 and 2023, respectively.

As a result of the Fluids Systems sale in September 2024, we ended the third quarter of 2024 with total cash of approximately $43 million and total debt of approximately $14 million and expect to generate net interest income in the near-term.

### Provision (benefit) for income taxes from continuing operations

The benefit for income taxes from continuing operations was $14.0 million for the third quarter of 2024 compared to a provision for income taxes from continuing operations of $2.1 million for the third quarter of 2023. The third quarter of 2024 includes a $14.6 million benefit primarily related to the release of valuation allowances on U.S. net operating losses and tax credit carryforwards that are now expected to be realized following the sale of the Fluids Systems business.

### Income (loss) from discontinued operations

Income (loss) from discontinued operations was related to the former Fluids Systems segment, which was sold in the third quarter of 2024. The loss from discontinued operations for the third quarter of 2024 includes the loss on sale of the segment of $195.7 million. See Note 2 for additional information.

### Industrial Solutions operating income

The Industrial Solutions segment generated operating income of $7.3 million for the third quarter of 2024, compared to $14.3 million for the third quarter of 2023. The decrease in segment operating income is primarily attributable to the lower revenues, as well as an estimated $1.3 million unfavorable impact caused by an unscheduled downtime event on one of the production lines at our manufacturing facility during the third quarter of 2024.

### Corporate office

Corporate office expenses decreased $2.0 million to $6.1 million for the third quarter of 2024, compared to $8.1 million for the third quarter of 2023. The third quarter of 2023 included a $1.5 million charge to reflect higher projected long-term management incentives driven by our relative total shareholder return versus our peer group, as well as $0.3 million of severance costs associated with restructuring actions. The remaining decrease was primarily driven by lower personnel expense resulting from efforts to streamline the overhead structure.

### First Nine Months of 2024 Compared to First Nine Months of 2023

### Consolidated Results of Operations

Summarized results of operations for the first nine months of 2024 compared to the first nine months of 2023 are as follows:

*(In thousands)*

|  | First Nine Months 2024 | 2023 | 2024 vs 2023 $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $159,965 | $161,193 | $(1,228) | (1)% |
| Cost of revenues | 105,358 | 104,528 | 830 | 1% |
| Selling, general and administrative expenses | 35,335 | 40,834 | (5,499) | (13)% |
| Other operating (income) loss, net | (1,435) | (1,032) | (403) | NM |
| Operating income from continuing operations | 20,707 | 16,863 | 3,844 | 23% |
| Foreign currency exchange (gain) loss | 170 | (172) | 342 | NM |
| Interest expense, net | 2,612 | 3,154 | (542) | (17)% |
| Income from continuing operations before income taxes | 17,925 | 13,881 | 4,044 | 29% |
| Provision (benefit) for income taxes from continuing operations | (9,626) | 4,900 | (14,526) | NM |
| Income from continuing operations | 27,551 | 8,981 | 18,570 | NM |
| Income (loss) from discontinued operations | (186,516) | 6,011 | $(192,527) | NM |
| Net income (loss) | $(158,965) | $14,992 | $(173,957) | NM |

Summarized financial information for our reportable segment is shown in the following table:

*(In thousands)*

| Revenues | First Nine Months 2024 | 2023 | 2024 vs 2023 $% |  |
| --- | ---: | ---: | ---: | ---: |
| Rental and service revenues | $103,985 | $114,374 | $(10,389) | (9)% |
| Product sales revenues | 55,980 | 46,819 | 9,161 | 20% |
| **Total revenues (Industrial Solutions)** | $159,965 | $161,193 | $(1,228) | (1)% |
| **Operating income (loss) from continuing operations** |  |  |  |  |
| Industrial Solutions | $39,614 | $41,593 | $(1,979) |  |
| Corporate office | (18,907) | (24,730) | 5,823 |  |
| **Total operating income from continuing operations** | $20,707 | $16,863 | $3,844 |  |
| **Segment operating margin** |  |  |  |  |
| Industrial Solutions | 24.8% | 25.8% |  |  |

### Revenues

Revenues decreased 1% to $160.0 million for the first nine months of 2024, compared to $161.2 million for the first nine months of 2023. Rental and service revenues decreased $10.4 million (9%) for the first nine months of 2024. Rental revenues increased $0.5 million (1%) primarily due to higher rental volume partially offset by lower pricing. Service revenues decreased $10.9 million (21%), primarily attributable to the timing and mix of service included within customer rental projects. Product sales revenues increased $9.2 million (20%) for the first nine months of 2024, which we believe reflects an increasing customer preference for manufactured composite matting products relative to timber-based products that have historically been used for temporary worksite access. The majority of the first nine months 2024 and 2023 revenues are derived from customers in the power transmission sector.

### Cost of revenues

Cost of revenues increased slightly for the first nine months of 2024 compared to the first nine months of 2023, and includes the impact of a third quarter 2024 unscheduled downtime event on one of the production lines at our manufacturing facility.

### Selling, general and administrative expenses

Selling, general and administrative expenses decreased $5.5 million to $35.3 million for the first nine months of 2024, compared to $40.8 million for the first nine months of 2023. The first nine months of 2023 included $1.4 million of costs related to strategic planning projects. The remaining decrease was primarily driven by lower performance-based incentives and other personnel expense resulting from efforts to streamline the overhead structure, as well as lower severance costs. Selling, general and administrative expenses as a percentage of revenues was 22.1% for the first nine months of 2024 compared to 25.3% for the first nine months of 2023.

### Other operating (income) loss, net

Other operating (income) loss, net primarily includes gains associated with the sale of assets. In addition, the first nine months of 2024 includes a $0.6 million gain related to a legal settlement.

### Foreign currency exchange

Foreign currency exchange was a $0.2 million loss for the first nine months of 2024 compared to a $0.2 million gain for the first nine months of 2023 and reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.

### Interest expense, net

Interest expense was $2.6 million for the first nine months of 2024 compared to $3.2 million for the first nine months of 2023. The decrease in interest expense is primarily due to a decrease in average debt outstanding. The third quarter of 2024 includes a $0.5 million non-cash write off of debt issuance costs associated with our September 2024 ABL Facility amendment. Discontinued operations also includes an allocation of interest expense on corporate debt. Such interest expense totaled $1.4 million and $1.9 million for the first nine months of 2024 and 2023, respectively.

### Provision (benefit) for income taxes from continuing operations

The benefit for income taxes from continuing operations was $9.6 million for the first nine months of 2024 compared to a provision for income taxes of $4.9 million for the first nine months of 2023. The third quarter of 2024 includes a $14.6 million benefit primarily related to the release of valuation allowances on U.S. net operating losses and tax credit carryforwards that are now expected to be realized following the sale of the Fluids Systems business.

### Industrial Solutions operating income

The Industrial Solutions segment generated operating income of $39.6 million for the first nine months of 2024 compared to $41.6 million for the first nine months of 2023. The decrease in segment operating income is primarily attributable to the lower revenues, as well as an estimated $1.3 million unfavorable impact costs caused by an unscheduled downtime event on one of the production lines at our manufacturing facility during the third quarter of 2024.

### Corporate office

Corporate office expenses decreased $5.8 million to $18.9 million for the first nine months of 2024, compared to $24.7 million for the first nine months of 2023. The first nine months of 2023 included $1.4 million of costs related to strategic planning projects as well as $1.2 million of severance expense associated with restructuring actions. The remaining decrease was primarily driven by lower performance-based incentives and other personnel expense resulting from efforts to streamline the overhead structure.

### Liquidity and Capital Resources

Net cash provided by operating activities was $42.3 million for the first nine months of 2024 compared to $63.8 million for the first nine months of 2023. Operating cash flow for the first nine months of 2023 benefited from the wind down of working capital associated with the fourth quarter 2022 divestiture transactions. During the first nine months of 2024, net income adjusted for non-cash items provided cash of $39.0 million and changes in working capital provided cash of $3.3 million.

Net cash provided by investing activities was $23.1 million for the first nine months of 2024, which includes $48.5 million in initial net proceeds from the sale of the Fluids Systems business. These proceeds were partially offset by capital expenditures of $29.9 million in the first nine months of 2024, the substantial majority of which were directed to expanding our mat rental fleet.

Net cash used in financing activities was $60.8 million for the first nine months of 2024, and primarily relates to net repayments on our Amended ABL Facility and other financing arrangements.

Following completion of the Sale Transaction in September 2024, substantially all of our $42.9 million of cash on hand at September 30, 2024 resides in the U.S. We primarily manage our liquidity utilizing cash on hand and availability under our Amended ABL Facility and other existing financing arrangements.

We expect total availability under the Amended ABL Facility to fluctuate directionally based on the level of eligible U.S. accounts receivable, inventory, and composite mats included in the rental fleet. We expect cash on hand, the projected availability under our Amended ABL Facility and other existing financing arrangements, and cash generated by operations to be adequate to fund our current operations during the next 12 months.

We anticipate that future working capital requirements for our operations will generally fluctuate directionally with revenues. We expect capital expenditures in 2024 to be $37 million to $40 million, with spending heavily focused on the expansion of our mat rental fleet to further support the utilities market penetration. We also expect to use a portion of our existing liquidity to return value to our shareholders and pursue our long-term strategic initiatives.

Our capitalization is as follows:

*(In thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Amended ABL Facility | $— | $45,000 |
| Other debt | 13,984 | 17,085 |
| Unamortized discount and debt issuance costs | (21) | (56) |
| Total debt | $13,963 | $62,029 |
| Stockholders’ equity | 316,454 | 415,364 |
| Total capitalization | $330,417 | $477,393 |
| Total debt to capitalization | 4.2% | 13.0% |

***Asset-Based Loan Facility.*** In October 2017, we entered into a U.S. asset-based revolving credit agreement, which was amended in March 2019, amended and restated in May 2022, and further amended and restated in September 2024 (the “Amended ABL Facility”). The Amended ABL Facility provides financing of up to $100.0 million available for borrowings (inclusive of letters of credit), which can be increased up to $250.0 million, subject to certain conditions. The Amended ABL Facility has a five-year term expiring May 2027, is based on a Bloomberg Short-Term Bank Yield Index (“BSBY”) pricing grid, and includes a mechanism to incorporate a sustainability-linked pricing framework with the consent of the required lenders (as defined in the Amended ABL Facility). The BSBY rate will be replaced with Term SOFR (Secured Overnight Financing Rate) beginning in November 2024.

As of September 30, 2024, our total availability under the Amended ABL Facility was $58.3 million, with no outstanding borrowings and $2.0 million was used for outstanding letters of credit, resulting in remaining availability of $56.3 million.

Borrowing availability under the Amended ABL Facility is calculated based on eligible U.S. accounts receivable, inventory and composite mats included in the rental fleet, net of reserves and subject to limits on certain of the assets included in the borrowing base calculation. To the extent pledged by the borrowers, the borrowing base calculation also includes the amount of eligible pledged cash. The administrative agent may establish reserves in accordance with the Amended ABL

Facility, in part based on appraisals of the asset base, and other limits in its discretion, which could reduce the amounts otherwise available under the Amended ABL Facility.

Under the terms of the Amended ABL Facility, we may elect to borrow at a variable interest rate based on either, (1) the BSBY rate (subject to a floor of zero) or (2) the base rate (subject to a floor of zero), equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A., and (c) BSBY for a one-month interest period plus 1.00%, plus, in each case, an applicable margin per annum. The applicable margin ranges from 1.50% to 2.00% per annum for BSBY borrowings, and 0.50% to 1.00% per annum for base rate borrowings, based on the consolidated leverage ratio (as defined in the Amended ABL Facility) as of the last day of the most recent fiscal quarter. We are also required to pay a commitment fee equal to (i) 0.375% per annum at any time the average daily unused portion of the commitments is greater than 50% and (ii) 0.25% per annum at any time the average daily unused portion of the commitments is less than 50%.

As of September 30, 2024, the applicable margin for borrowings under the Amended ABL Facility was 1.50% with respect to BSBY borrowings and 0.50% with respect to base rate borrowings, and the applicable commitment fee on the unused portion of the Amended ABL Facility was 0.375% per annum.

The September 2024 amendment, among other things, (i) released Newpark Drilling Fluids from its obligations as a borrower under the Credit Agreement, (ii) reduced the aggregate commitments under the Credit Agreement from $175 million to $100 million, (iii) reduced the aggregate letter of credit sublimit under the Credit Agreement from $15 million to $10 million, (iv) provided that the financial covenant requiring the Consolidated Leverage Ratio (as defined in the Credit Agreement) to be less than or equal to 4.00 to 1.00 is tested for each fiscal quarter (beginning the fiscal quarter ending June 30, 2024), instead of being tested only when availability under the Credit Agreement is below 40% of the borrowing base, (v) consented to the Sale Transaction and (vi) decreased certain other thresholds proportionally with the decreased commitments under the Credit Agreement. The Amended ABL Facility also requires a minimum fixed charge coverage ratio of 1.00 to 1.00 for the most recently completed four fiscal quarters.

The Amended ABL Facility is a senior secured obligation of the Company and certain of our U.S. subsidiaries constituting borrowers thereunder, secured by a first priority lien on substantially all of the personal property and certain real property of the borrowers, including a first priority lien on certain equity interests of direct subsidiaries of the borrowers.

The Amended ABL Facility contains customary representations, warranties and covenants that, among other things, and subject to certain specified circumstances and exceptions, restrict or limit the ability of the borrowers and certain of their subsidiaries to incur indebtedness (including guarantees), grant liens, make investments, pay dividends or distributions with respect to capital stock and make other restricted payments, make prepayments on certain indebtedness, engage in mergers or other fundamental changes, dispose of property, and change the nature of their business.

The Amended ABL Facility includes customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross-default to other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of security interests or invalidity of loan documents, certain ERISA events, unsatisfied or unstayed judgments and change of control.

***Other Financing Arrangements.*** In April 2022, our U.K. subsidiary entered a £7.0 million term loan and a £2.0 million revolving credit facility. Both the term loan and revolving credit facility mature in April 2025 and bear interest at a rate of Sterling Overnight Index Average plus a margin of 3.25% per year. As of September 30, 2024, the interest rate for the U.K. facilities was 8.2%. In October 2024, all amounts outstanding under the term loan and revolving credit facility were repaid, and both were terminated.

We also maintain finance leases primarily related to transportation equipment. During the first nine months of 2024, we entered $3.5 million of new finance lease liabilities in exchange for leased assets.

In addition, at September 30, 2024, we had $5.4 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $0.5 million in restricted cash.

### Critical Accounting Estimates and Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts and disclosures. Significant estimates used in preparing our consolidated financial statements include estimated cash flows and fair values used for impairments of long-lived assets, including goodwill and other intangibles, and valuation allowances for deferred tax assets. 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.

For additional discussion of our critical accounting estimates and policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023. Except as disclosed below, our critical accounting estimates and policies have not materially changed since December 31, 2023.

#### Sale of Fluids Systems Business

In September 2024, we completed the sale of the Fluids Systems business. See Note 2 for additional information. In connection with recognizing the loss on the Sale Transaction included in discontinued operations, we made certain estimates in determining the amounts of deferred consideration due from the Purchaser and estimated liabilities due to the Purchaser. Estimated deferred consideration due from the Purchaser is related to the contractual working capital adjustment expected to be finalized in the fourth quarter of 2024 and certain estimated receivables primarily for pre-closing tax assets expected to be realized in 2025. Estimated liabilities due to the Purchaser includes certain payables for pre-closing tax liabilities and obligations attributable to the Fluids Systems business expected to be substantially settled in 2025 as well as an estimated liability for contractual indemnifications related to various pre-closing contingencies of the Fluids Systems business.

Our estimates for the fair value of deferred consideration due from the Purchaser and liabilities due to the Purchaser required us to make judgments regarding the likelihood of possible outcomes and cash flows and the ultimate resolution of such matters. These judgments are uncertain in that they require assumptions about the potential outcomes and may change. Depending on the actual outcomes of such matters, or changes in these assumptions, the estimated amounts recognized for deferred consideration due from the Purchaser and estimated liabilities due to the Purchaser may change and any income or expense associated with such changes will be presented in discontinued operations.

## Market risk

As filed, 1,327 characters.

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

We are primarily exposed to interest rate risk through our Amended ABL Facility and a U.K. term loan and credit facility, each of which are subject to variable interest rates as determined by the respective debt agreements. At September 30, 2024, we had total principal amounts outstanding under financing arrangements of $14.0 million, but no borrowings under our Amended ABL Facility. At September 30, 2024, we had $5.5 million of borrowings under the U.K. term loan and credit facility. In October 2024, all amounts outstanding under the term loan and revolving credit facility were repaid, and both were terminated.

### Foreign Currency Risk

As a result of the Fluids Systems sale in September 2024, our principal foreign operations are currently conducted in the U.K. We have foreign currency exchange risks associated with these operations, which are conducted principally in British pounds. 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.

## Controls and procedures

As filed, 895 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024, the end of the period covered by this quarterly report.

### Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,958 characters.

There have been no material changes during the period ended September 30, 2024 to our “Risk Factors” as discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, other than the risk factors listed below and to the extent our “Risk Factors” as discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 are impacted by the Sale Transaction.

### Risks Related to our Recently Completed Sale of the Fluids Systems Business

On September 13, 2024, we completed the sale of the equity interests in one of our subsidiaries which held substantially all of the Company’s Fluids Systems segment. We are subject to a number of risks associated with the sale of the Fluids Systems business, including risks associated with (i) our requirement to provide certain transition services in connection with the Sale Transaction and any issues, delays or complications in completing such services, including the incurrence of unanticipated costs to complete such services, (ii) the diversion of management’s attention away from the operations of our retained business; and (iii) any required payments of indemnification obligations under the Sale Transaction agreement for retained liabilities.

As a result of the Sale Transaction, we may incur or experience various adverse effects, including but not limited to (i) greater costs or realize fewer benefits than anticipated under the Sale Transaction agreement, (ii) operational or commercial difficulties segregating the divested assets from our retained assets, (iii) disputes with the Purchaser regarding the nature and sufficiency of the transition services we provide, (iv) higher vendor costs due to reduced economies of scale or other similar dis-synergies, (v) modified, terminated or scaled back relationships with our existing customers or difficulty in attracting prospective customers, (vi) loss or difficulty in retaining employees due to concerns over future job security or responsibilities, or (vii) losses or increased inefficiencies from stranded or underutilized assets. Any of these risks could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The Fluids Systems business generated approximately 72% of total combined company revenue for the year ended December 31, 2023, and approximately 76% of total combined company revenue for the year ended December 31, 2022. Accordingly, our future financial results will differ materially from our previous results since our future financial results are dependent solely on our Industrial Solutions business. Any downturn in our Industrial Solutions business could have a material adverse effect on our future financial condition, results of operations, and cash flows. There can be no guarantee that the sale of the Fluids Systems business will result in stronger long-term financial and operational results for our remaining business.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0000071829-24-000115. Last ingested by Listed: Nov 3, 2026, 23:02 ET. No prices; not investment advice.