NPK International Inc.: Form 10-Q for the period ended Jun 30, 2026

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, 2025. Our second quarter represents the three-month period ended June 30 and our first half represents the six-month period ended June 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.”

Overview

NPK International Inc. (“NPK,” the “Company,” “we,” “our,” or “us”) is a worksite access solutions company that manufactures, sells, and rents recyclable composite matting products, along with a full suite of services, including planning, logistics, and site restoration. In the first half of 2026, 67% of our revenues were generated from 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, pipeline, renewable energy, petrochemical, construction and other industries within the United States and United Kingdom. The remaining 33% of our first half of 2026 revenues were generated from the sale of our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market.

2026 Priorities

Our long-term strategy includes key foundational elements that are intended to enhance long-term shareholder value creation:

• Accelerate Organic Growth – We seek to accelerate revenue growth through the expansion of our rental business, which includes a combination of geographic expansion to new growth territories, primarily within the U.S., while also expanding customer market share within currently-served markets. As part of this effort, we have placed a particular emphasis on penetrating larger-scale, longer-term (six months or longer) projects, which we believe will help drive improvements in revenue stability and operational efficiency. Due in part to the success of our efforts, rental and service revenues increased $16 million, or 18%, year-over-year for the first half of 2026, including a 22% increase in rental revenues. We prioritize investment capital to support our organic growth objective, 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 half of 2026, we made net investments of $24.3 million in the expansion of our composite rental fleet, expanding our owned composite mat rental fleet by 7%. Further, with our revenue growth and the favorable macro-environment, in March 2026, our Board of Directors approved management’s plan to expand our composite mat production capacity by approximately 50% over current levels. We expect to invest $40 million to $45 million through the second quarter of 2027 to complete this expansion, of which $4.1 million was invested in the second quarter of 2026, with production expected to start up by mid-2027.
• Pursue Inorganic Growth – We seek to accelerate our growth and enhance shareholder value through strategically-aligned inorganic actions, leveraging our scale to increase our value and relevance to customers, and we continually evaluate inorganic opportunities that align with our objectives. In November 2025, we completed the acquisition of Grassform Plant Hire Limited (“Grassform”), a U.K. market leader in ground protection and temporary roadway solutions and services with a fleet of over 20,000 composite mats. Our U.K. operations generated $19.2 million of revenues during the first half of 2026, a $10.2 million increase over the first half of 2025, with the substantial majority of the increase driven by the Grassform acquisition.
• Drive Operational Efficiency – We are focused on efficiency improvements and operating cost optimization across every aspect of our business. Throughout 2025, we continued to evaluate and execute actions intended to streamline the organization and our cost structure, driving improvements in profitability. SG&A as a percentage of revenues was 17.5% for the first half of 2026 compared to 19.1% for the first half of 2025.
• Enhance Return on Capital – We are committed to maintaining a strong balance sheet, prioritizing organic investment to expand our rental business while evaluating accretive inorganic growth opportunities to accelerate growth and returning excess cash generation via programmatic share repurchases. During the first half of 2026, we utilized $2.7 million to repurchase 0.2 million shares under our share repurchase program.

Second Quarter of 2026 Compared to Second Quarter of 2025

Consolidated Results of Operations

Summarized results of operations for the second quarter of 2026 compared to the second quarter of 2025 are as follows:

(In thousands)

The following table presents further disaggregated revenues by type:

(In thousands)

Revenues

Revenues increased 20% to $81.6 million for the second quarter of 2026, compared to $68.2 million for the second quarter of 2025, including a 16% increase in rental and service revenues and a 28% increase in product sales revenues. Rental revenues increased $5.6 million (18%), primarily due to higher pricing along with the contribution from the Grassform acquisition. Service revenues increased $1.7 million (12%), primarily attributable to the contribution from the Grassform acquisition. Product sales revenues increased $6.1 million (28%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that represent the primary solution used for worksite access in the market. During the second quarter of 2026, approximately 75% of our product sales revenues were derived from utility companies.

Cost of revenues

Cost of revenues increased 19% to $51.4 million for the second quarter of 2026 (37.0% gross profit margin), compared to $43.1 million for the second quarter of 2025 (36.9% gross profit margin), primarily driven by the 20% increase in revenues described above. Gross profit margin was substantially in line with the prior year, and reflects the effect of improved rental pricing and manufacturing cost leverage for product sales, substantially offset by lower rental fleet utilization attributable to the timing of large-scale projects, and $0.2 million of expenses associated with our manufacturing expansion effort.

Selling, general and administrative expenses

Selling, general and administrative expenses increased to $14.2 million for the second quarter of 2026, which includes $0.6 million attributable to the Grassform acquisition, compared to $13.7 million for the second quarter of 2025. Selling, general and administrative expenses as a percentage of revenues was 17.4% for the second quarter of 2026 compared to 20.0% for the second quarter of 2025. In May 2026, the Compensation Committee modified the retirement eligibility terms applicable to our outstanding long-term incentive awards, including unvested grants from 2024 and 2025, and SG&A for the second quarter of 2026 includes a $0.9 million charge reflecting the acceleration of compensation expense for such awards for retirement eligible executive officers and other employees. The second quarter of 2025 included a $1.2 million charge related to performance-based awards measured on the Company’s total shareholder return (“TSR”) as compared to the TSR of a designated peer group, as well as $0.3 million of severance costs.

Other operating (income) loss, net

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

Foreign currency exchange

Foreign currency exchange for the second quarter of 2026 and 2025 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 (income) expense, net

Interest expense, net was minimal for both the second quarter of 2026 and 2025, reflecting limited outstanding debt.

Provision for income taxes from continuing operations

The provision for income taxes from continuing operations was $3.9 million for the second quarter of 2026, reflecting an effective tax rate of 25%, compared to income taxes of $3.5 million for the second quarter of 2025, reflecting an effective tax rate of 28%.

Income (loss) from discontinued operations, net of tax

Loss from discontinued operations, net of tax reflects ongoing wind down costs of the former Fluids Systems segment, which was sold in the third quarter of 2024, including costs related to the transaction and the closure of certain foreign subsidiaries that are no longer operational.

First Half of 2026 Compared to First Half of 2025

Consolidated Results of Operations

Summarized results of operations for the first half of 2026 compared to the first half of 2025 are as follows:

(In thousands)

The following table presents further disaggregated revenues by type:

(In thousands)

Revenues

Revenues increased 18% to $156.7 million for the first half of 2026, compared to $133.0 million for the first half of 2025, including an 18% increase in both rental and service revenues and product sales revenues. Rental revenues increased $13.1 million (22%) primarily due to higher rental volume driven by our organic growth efforts along with the contribution from the Grassform acquisition, as well as modestly higher pricing. Service revenues increased $2.7 million (9%), primarily attributable to the contribution from the Grassform acquisition. Product sales revenues increased $7.8 million (18%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that represent the primary solution used for worksite access in the market. During the first half of 2026, approximately 75% of our product sales revenues were derived from utility companies.

Cost of revenues

Cost of revenues increased 20% to $99.3 million for the first half of 2026 (36.6% gross profit margin), compared to $82.6 million for the first half of 2025 (37.9% gross profit margin), primarily driven by the 18% increase in revenues described above. The decline in gross profit margin is primarily due to modestly lower rental fleet utilization attributable to the timing of large-scale project completions in the first half of 2026, $2.8 million of higher cross-rental costs required to meet customer rental demand, and $0.2 million of expenses associated with our manufacturing expansion effort, partially offset by improved rental pricing and manufacturing cost leverage for product sales.

Selling, general and administrative expenses

Selling, general and administrative expenses increased to $27.4 million for the first half of 2026, which includes $1.3 million attributable to the Grassform acquisition, compared to $25.4 million for the first half of 2025. Selling, general and administrative expenses as a percentage of revenues was 17.5% for the first half of 2026 compared to 19.1% for the first half of 2025. The first half of 2026 includes a $0.9 million charge reflecting the acceleration of stock-based compensation expense for retirement eligible executive officers and other employees. The first half of 2025 included a $1.2 million charge related to performance-based awards measured on the Company’s TSR as compared to the TSR of a designated peer group, as well as $0.4 million of severance costs.

Other operating (income) loss, net

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

Foreign currency exchange

Foreign currency exchange for the first half of 2026 and 2025 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 (income) expense, net

Interest expense, net was minimal for both the first half of 2026 and 2025, reflecting limited outstanding debt.

Provision for income taxes from continuing operations

The provision for income taxes from continuing operations was $7.5 million for the first half of 2026, reflecting an effective tax rate of 25%, compared to income taxes of $7.0 million for the first half of 2025, reflecting an effective tax rate of 27%.

Income (loss) from discontinued operations, net of tax

Income (loss) from discontinued operations, net of tax reflects net costs related to the former Fluids Systems segment, which was sold in the third quarter of 2024. In the first half of 2026, we recognized a $0.5 million pre-tax gain on sale related to the resolution of certain contractual indemnifications related to the Sale Transaction, which was partially offset by costs associated with the transaction as well as the closure of certain foreign subsidiaries that are no longer operational.

Liquidity and Capital Resources

Net cash provided by operating activities was $43.0 million for the first half of 2026 compared to $30.3 million for the first half of 2025. Net income adjusted for non-cash items provided cash of $47.9 million in the first half of 2026, compared to $38.2 million in 2025, while changes in working capital used cash of $4.9 million in the first half of 2026, compared to $7.9 million of cash used in 2025.

Net cash used in investing activities was $26.7 million for the first half of 2026, which includes $33.2 million in capital expenditures partially offset by $5.5 million in additional proceeds from the sale of the Fluids Systems business. The substantial majority of our capital expenditures for the first half of 2026 and 2025 were directed to expanding our mat rental fleet, and 2026 includes $4.1 million spent on the expansion of our Carencro, Louisiana manufacturing operations. Net cash used in investing activities was $0.8 million for the first half of 2025, which includes $21.7 million in capital expenditures partially offset by $14.5 million in additional proceeds from the sale of the Fluids Systems business and $3.3 million in proceeds from the sale of assets.

Net cash used in financing activities was $13.1 million for the first half of 2026, which primarily reflects net repayments on our Credit Facility and other existing financing arrangements as well as $2.7 million in share purchases under our repurchase program. Net cash used in financing activities was $21.8 million for the first half of 2025.

We primarily manage our liquidity utilizing cash on hand and availability under our Credit Facility and other existing financing arrangements.

We expect future working capital requirements for our operations will generally fluctuate directionally with revenues, and we expect net capital expenditures in 2026 to be $65 million to $80 million, which includes $35 million to $45 million in the expansion of our rental fleet and $20 million to $25 million for the manufacturing expansion project. Our planned capital expenditures for 2026 were reduced in the second quarter of 2026, primarily reflecting changes in the timing of manufacturing expansion expenditures which will not impact our anticipated mid-year 2027 completion date. We also expect to use a portion of our existing liquidity to pursue inorganic growth opportunities and return value to our shareholders through share repurchases. We expect cash on hand and cash generated by operations, as well as the projected availability under our Credit Facility and other existing financing arrangements, to be adequate to fund our current operations during the next 12 months.

Our capitalization is as follows:

(In thousands)

Credit Facility. In June 2025, we entered into a U.S. senior secured revolving credit agreement (the “Credit Facility”) with a group of lenders that provides financing of up to $150 million available for borrowings (inclusive of letters of credit), which can be increased up to $250 million, subject to certain conditions. The Credit Facility and the loans made under the Credit Facility are secured by a first priority lien on substantially all of the personal property of the Company and its significant U.S. subsidiaries as guarantors (subject to customary exceptions and exclusions). The Credit Facility will mature in June 2030.

As of June 30, 2026, we had no outstanding borrowings and $1.9 million in outstanding letters of credit, resulting in $148.1 million of remaining availability under the Credit Facility.

Under the terms of the Credit Facility, we may elect to borrow at a variable interest rate based on either the Term SOFR rate or an alternate base rate plus, in each case, a per annum applicable margin. The applicable margin will range from 1.75% to 2.25% for Term SOFR loans and 0.75% to 1.25% for alternate base rate loans, based on the consolidated leverage ratio (as defined in the Credit Facility) as of the last day of the most recent fiscal quarter. We are also required to pay a commitment fee on the unused portion of the Credit Facility ranging from 0.25% to 0.35% per annum based on the consolidated leverage ratio.

As of June 30, 2026, the applicable margin for loans under the Credit Facility was 1.75% for Term SOFR loans and 0.75% for alternate base rate loans, and the applicable commitment fee was 0.25% per annum.

The Credit Facility requires compliance with a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio, each as defined in the Credit Facility. In addition, at our option, we may choose to increase the maximum consolidated leverage ratio for a certain period following a significant acquisition, subject to certain limitations, as defined in the Credit Facility. As of June 30, 2026, we were in compliance with required ratios.

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

The Credit Facility includes various events of default (subject to certain materiality thresholds and/or grace periods), 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 guarantees or security interests or invalidity of loan documents, certain ERISA events, unsatisfied or unstayed judgments and change of control.

Other Financing Arrangements. We maintain finance leases primarily related to transportation equipment. During the first half of 2026, we entered into $1.5 million of new finance lease liabilities in exchange for leased assets.

In addition, at June 30, 2026, we had $3.7 million in outstanding letters of credit (inclusive of the amount outstanding under the Credit Facility as described above), performance bonds, and other guarantees.

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, 2025. Our critical accounting estimates and policies have not materially changed since December 31, 2025.

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 Credit Facility, which is subject to variable interest rates as determined by the debt agreement. At June 30, 2026, we had no borrowings under our Credit Facility.

Foreign Currency Risk

Our principal foreign operations are currently conducted in the U.K., which contributed approximately 12% of our consolidated revenues for the first half of 2026. 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.

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 (the “Exchange Act”)) as of the end of the period covered by this quarterly report in accordance with Rules 13a-15 and 15d-15 under the Exchange Act. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026, 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 June 30, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes during the period ended June 30, 2026 to our “Risk Factors” as discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.