Newpark Resources(NR) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents NPK International Inc.'s financial information, including statements, notes, and management's discussion and analysis ITEM 1. Financial Statements This section presents NPK International Inc.'s unaudited condensed consolidated financial statements, including balance sheets, operations, comprehensive income, equity, and cash flows Condensed Consolidated Balance Sheets This section details NPK's financial position, presenting assets, liabilities, and stockholders' equity at June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $26,012 | $17,756 | | Total current assets | $102,365 | $112,984 | | Total assets | $393,682 | $393,682 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $43,832 | $44,659 | | Total liabilities | $64,847 | $67,187 | | Total stockholders' equity | $328,835 | $326,495 | | Total liabilities and stockholders' equity | $393,682 | $393,682 | - Total assets remained constant at $393.682 million from December 31, 2024, to June 30, 2025[14] - Cash and cash equivalents increased by $8.256 million, while total current assets decreased by $10.619 million[14] - Total liabilities decreased by $2.34 million, and total stockholders' equity increased by $2.34 million[14] Condensed Consolidated Statements of Operations This section presents NPK's revenues, operating income, and net income for the three and six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Operations (In thousands, except per share data) | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $68,233 | $66,791 | $133,010 | $115,758 | | Operating income from continuing operations | $11,629 | $12,507 | $25,157 | $19,473 | | Net income | $8,678 | $8,040 | $18,681 | $15,333 | | Net income per common share - basic | $0.10 | $0.09 | $0.22 | $0.18 | | Net income per common share - diluted | $0.10 | $0.09 | $0.22 | $0.18 | - For the three months ended June 30, 2025, revenues increased by 2.16% YoY, and net income increased by 7.94% YoY[15] - For the six months ended June 30, 2025, revenues increased by 14.90% YoY, and net income increased by 21.84% YoY[15] Condensed Consolidated Statements of Comprehensive Income (Loss) This section details NPK's comprehensive income (loss), including net income and foreign currency adjustments, for the three and six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Comprehensive Income (Loss) (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $8,678 | $8,040 | $18,681 | $15,333 | | Foreign currency translation adjustments | $210 | $(710) | $369 | $(3,245) | | Comprehensive income | $8,888 | $7,330 | $19,050 | $12,088 | - Comprehensive income for the three months ended June 30, 2025, increased by 21.26% YoY, primarily due to positive foreign currency translation adjustments compared to a loss in the prior year[16] - For the six months ended June 30, 2025, comprehensive income increased by 57.59% YoY, also driven by improved foreign currency translation[16] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in NPK's stockholders' equity, including common stock, paid-in capital, retained earnings, and treasury stock, for the periods presented Condensed Consolidated Statements of Stockholders' Equity (In thousands) | (In thousands) | Balance at March 31, 2025 | Balance at June 30, 2025 | Balance at December 31, 2024 | | :--- | :--- | :--- | :--- | | Common Stock | $1,117 | $1,117 | $1,117 | | Paid-In Capital | $634,424 | $629,952 | $633,239 | | Accumulated Other Comprehensive Loss | $(2,712) | $(2,502) | $(2,871) | | Retained Earnings (Deficit) | $(129,463) | $(120,785) | $(139,466) | | Treasury Stock | $(176,480) | $(178,947) | $(165,524) | | Total Stockholders' Equity | $326,886 | $328,835 | $326,495 | - Total stockholders' equity increased from $326.495 million at December 31, 2024, to $328.835 million at June 30, 2025, primarily driven by net income of $18.681 million, partially offset by treasury shares purchased at cost of $17.212 million[17] Condensed Consolidated Statements of Cash Flows This section presents NPK's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Cash Flows (In thousands) | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,268 | $39,531 | | Net cash provided by (used in) investing activities | $(811) | $(17,041) | | Net cash used in financing activities | $(21,792) | $(24,988) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $7,775 | $(3,459) | | Cash, cash equivalents, and restricted cash at end of period | $26,012 | $35,442 | - Net cash provided by operating activities decreased by $9.263 million YoY for the first half of 2025[18] - Net cash used in investing activities significantly decreased from $17.041 million in 2024 to $0.811 million in 2025, largely due to proceeds from divestitures[18] - Net cash used in financing activities decreased by $3.196 million YoY[18] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements Note 1 – Basis of Presentation and Significant Accounting Policies This note describes NPK's business, the basis of financial statement presentation, and significant accounting policies, including recent accounting guidance - NPK International Inc. is a temporary worksite access solutions company, manufacturing, selling, and renting recyclable composite matting products and offering related services[20][24][25] - The company exited its Fluids Systems business in September 2024, with results reported as discontinued operations[20][24][25] - New accounting guidance on income tax disclosures is effective for the year ending December 31, 2025, and disaggregation of income statement expenses will be effective for years beginning after December 15, 2026[26][27] Note 2 – Discontinued Operations This note details the financial impact and status of NPK's divested Fluids Systems business, reported as discontinued operations - The sale of the Fluids Systems business was completed on September 13, 2024[28] - Net assets due from the Purchaser decreased from $18.040 million at December 31, 2024, to $3.596 million at June 30, 2025, primarily due to the receipt of $15.6 million in receivables[28] Income (Loss) from Discontinued Operations (In thousands) | (In thousands) | Second Quarter 2025 | Second Quarter 2024 | First Half 2025 | First Half 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $0 | $112,218 | $0 | $232,358 | | Operating income (loss) from discontinued operations | $(53) | $792 | $(448) | $5,685 | | Income (loss) from discontinued operations | $(106) | $(588) | $(478) | $2,651 | - The former Fluids Systems segment reported a net loss from discontinued operations of $0.106 million for Q2 2025 and $0.478 million for H1 2025, compared to a loss of $0.588 million and income of $2.651 million for the respective periods in 2024, reflecting the cessation of operations post-sale[33] Note 3 – Earnings Per Share This note provides calculations for basic and diluted earnings per common share for the periods presented Earnings Per Share (In thousands, except per share data) | (In thousands, except per share data) | Second Quarter 2025 | Second Quarter 2024 | First Half 2025 | First Half 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income per common share - basic | $0.10 | $0.09 | $0.22 | $0.18 | | Net income per common share - diluted | $0.10 | $0.09 | $0.22 | $0.18 | | Weighted average common shares outstanding - basic | 84,480 | 85,473 | 85,264 | 85,237 | | Weighted average common shares outstanding - diluted | 85,423 | 87,626 | 86,205 | 87,435 | - Basic and diluted net income per common share increased to $0.10 for Q2 2025 (from $0.09 in Q2 2024) and to $0.22 for H1 2025 (from $0.18 in H1 2024)[34] - The company excluded 732 thousand and 518 thousand weighted-average potential shares from diluted EPS calculations for Q2 and H1 2025, respectively, as their inclusion would have been anti-dilutive[34] Note 4 – Repurchase Program This note outlines NPK's share repurchase program, including authorization, activity, and remaining capacity - The Board of Directors increased the remaining authorization under the share repurchase program to $100.0 million on April 30, 2025[35] - During the first half of 2025, the company repurchased 2.6 million shares for $17.0 million[37] - As of June 30, 2025, $95.0 million remained under the program[38] Note 5 – Stock-Based and Other Long-Term Incentive Compensation This note describes NPK's stock-based and other long-term incentive compensation plans, including restricted stock units and awards - In Q2 2025, the Compensation Committee approved 0.6 million restricted stock units for executive officers and key employees (vesting over three years) and 0.1 million restricted stock awards for non-employee directors (vesting in one year)[39][40] - Additionally, 0.4 million performance-based restricted stock units were issued to executive officers, with payout based on relative TSR (70%) and consolidated RONCE (30%) over a three-year period[41] Note 6 – Receivables This note provides a breakdown of NPK's trade and other receivables, along with changes in the allowance for credit losses Receivables (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Gross trade receivables | $53,722 | $46,819 | | Allowance for credit losses | $(655) | $(948) | | Net trade receivables | $53,067 | $45,871 | | Other receivables | $6,342 | $26,921 | | Total receivables, net | $60,975 | $74,841 | - Total receivables, net, decreased by $13.866 million from December 31, 2024, to June 30, 2025, primarily due to a $16.879 million decrease in other receivables, largely from amounts due from the Purchaser related to the Fluids Systems sale[43] Changes in Allowance for Credit Losses (In thousands) | (In thousands) | First Half 2025 | First Half 2024 | | :--- | :--- | :--- | | Balance at beginning of period | $948 | $1,223 | | Credit loss expense | $19 | $14 | | Write-offs, net of recoveries | $(312) | $(37) | | Balance at end of period | $655 | $1,200 | Note 7 – Inventories This note details NPK's inventory composition, including raw materials and finished goods, at the reporting dates Inventories (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Raw materials | $4,825 | $5,721 | | Finished goods | $6,259 | $8,938 | | Total inventories | $11,084 | $14,659 | - Total inventories decreased by $3.575 million from December 31, 2024, to June 30, 2025, with both raw materials and finished goods experiencing declines[45] Note 8 – Financing Arrangements and Fair Value of Financial Instruments This note describes NPK's debt, credit facilities, and fair value measurements of financial instruments - On June 20, 2025, NPK entered into a new U.S. senior secured revolving Credit Facility of up to $150 million (expandable to $250 million), replacing the Amended ABL Facility[47][48][54] - As of June 30, 2025, there were no outstanding borrowings and $148.0 million of remaining availability[47][48][54] - The Credit Facility matures on June 20, 2030, and features variable interest rates (Term SOFR or alternate base rate plus applicable margin) and a commitment fee on the unused portion[47][49][51] - The company was in compliance with all required ratios as of June 30, 2025[47][49][51] Total Debt (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Finance leases | $9,317 | $7,622 | | Other debt | $19 | $105 | | Total debt | $9,336 | $7,727 | | Less: current portion | $(3,429) | $(2,900) | | Long-term debt | $5,907 | $4,827 | Note 9 – Income Taxes This note provides information on NPK's income tax provision, effective tax rate, and the impact of recent tax legislation - The provision for income taxes from continuing operations was $7.0 million for the first half of 2025, with an effective tax rate of 27%, up from $4.4 million and 26% in the first half of 2024[58] - The recently signed One Big Beautiful Bill Act (OBBB Act) is not expected to materially impact the effective tax rate but is anticipated to provide cash flow timing benefits through accelerated tax deductions[59] Note 10 – Commitments and Contingencies This note discloses NPK's various commitments and contingencies, including litigation and indemnifications - NPK is involved in various litigation and claims in the ordinary course of business, including indemnifications related to the Fluids Systems business sale[60] - Management does not expect any resulting loss, beyond accrued or insured amounts, to materially impact consolidated financial statements[60] Note 11 – Supplemental Disclosures to the Statements of Cash Flows This note provides additional details on cash paid for income taxes and interest, and a reconciliation of cash, cash equivalents, and restricted cash Supplemental Cash Flow Disclosures (In thousands) | (In thousands) | First Half 2025 | First Half 2024 | | :--- | :--- | :--- | | Cash paid for income taxes (net of refunds) | $70 | $6,945 | | Cash paid (received) for interest | $(265) | $3,307 | - Cash paid for income taxes significantly decreased from $6.945 million in H1 2024 to $0.070 million in H1 2025, with a substantial majority of 2024 payments related to the former Fluids Systems segment's international operations[62] - Cash received for interest in H1 2025 contrasts with cash paid for interest in H1 2024[62] Cash, Cash Equivalents, and Restricted Cash (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $26,012 | $17,756 | | Restricted cash | $0 | $481 | | Total cash, cash equivalents, and restricted cash | $26,012 | $18,237 | Note 12 – Segment Data This note details NPK's reportable segments and disaggregated revenues by type and geography following the Fluids Systems sale - Following the sale of the Fluids Systems segment in September 2024, NPK now operates as a single reportable segment[64] - The Chief Executive Officer assesses performance on a consolidated basis using income from continuing operations[64] Disaggregated Revenues by Type (In thousands) | (In thousands) | Second Quarter 2025 | Second Quarter 2024 | First Half 2025 | First Half 2024 | | :--- | :--- | :--- | :--- | :--- | | Rental revenues | $31,654 | $23,682 | $59,764 | $44,914 | | Service revenues | $14,658 | $12,714 | $29,941 | $26,663 | | Product sales revenues | $21,921 | $30,395 | $43,305 | $44,181 | | Total revenues | $68,233 | $66,791 | $133,010 | $115,758 | Disaggregated Revenues by Geography (In thousands) | (In thousands) | Second Quarter 2025 | Second Quarter 2024 | First Half 2025 | First Half 2024 | | :--- | :--- | :--- | :--- | :--- | | United States | $63,320 | $63,104 | $123,995 | $108,445 | | United Kingdom | $4,913 | $3,687 | $9,015 | $7,313 | | Total revenues | $68,233 | $66,791 | $133,010 | $115,758 | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on NPK's financial condition, results of operations, liquidity, and capital resources for the second quarter and first half of 2025 Overview This section provides an overview of NPK's business, focusing on temporary worksite access solutions and the impact of the Fluids Systems divestiture - NPK International Inc. specializes in temporary worksite access solutions, including manufacturing, selling, and renting recyclable composite matting products and offering related services[67] - For the first half of 2025, 67% of revenues came from rental and services, and 33% from product sales, primarily to the power transmission sector[67] - The Fluids Systems business, previously a separate operating segment, was sold on September 13, 2024, and its results are now reported as discontinued operations[68] 2025 Priorities This section outlines NPK's strategic priorities for 2025, including organic growth, operational efficiency, and capital allocation - NPK's long-term strategy focuses on accelerating organic growth through rental business expansion (geographic, market share, adjacent offerings), pursuing strategically-aligned inorganic growth, driving operational efficiency to reduce SG&A as a percentage of revenue to mid-teens by early 2026, and enhancing return on capital through organic investment and share repurchases[69] - In the first half of 2025, NPK invested $16 million in its rental fleet, expanding it by approximately 8%, leading to a 25% year-over-year increase in rental and service revenues[69] - SG&A as a percentage of revenues improved to 19.1% for H1 2025 from 21.0% for H1 2024[69] - The company repurchased 2.6 million shares for $17.0 million in H1 2025, following an increase in the repurchase program authorization to $100.0 million in April 2025[69] Second Quarter of 2025 Compared to Second Quarter of 2024 This section analyzes NPK's consolidated financial performance for the second quarter of 2025 compared to the same period in 2024 Consolidated Results of Operations (Second Quarter, In thousands) | (In thousands) | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $68,233 | $66,791 | $1,442 | 2 % | | Cost of revenues | $43,052 | $41,966 | $1,086 | 3 % | | Selling, general and administrative expenses | $13,657 | $12,750 | $907 | 7 % | | Operating income from continuing operations | $11,629 | $12,507 | $(878) | (7)% | | Net income | $8,678 | $8,040 | $638 | NM | - Revenues increased 2% to $68.2 million, driven by a 27% increase in rental and service revenues, partially offset by a 28% decrease in product sales[71][72] - Operating income from continuing operations decreased by 7% due to higher SG&A expenses and elevated cross-rent costs[74] - Gross profit margin slightly declined to 36.9% from 37.2% due to elevated cross-rent costs, despite an improved revenue mix with a higher proportion of rental revenues[72][73] - Interest expense decreased significantly due to interest income and lower average debt outstanding[77] First Half of 2025 Compared to First Half of 2024 This section analyzes NPK's consolidated financial performance for the first half of 2025 compared to the same period in 2024 Consolidated Results of Operations (First Half, In thousands) | (In thousands) | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $133,010 | $115,758 | $17,252 | 15 % | | Cost of revenues | $82,579 | $73,291 | $9,288 | 13 % | | Selling, general and administrative expenses | $25,403 | $24,330 | $1,073 | 4 % | | Operating income from continuing operations | $25,157 | $19,473 | $5,684 | 29 % | | Net income | $18,681 | $15,333 | $3,348 | NM | - Revenues increased 15% to $133.0 million, driven by a 25% increase in rental and service revenues, partially offset by a 2% decrease in product sales[80][81] - Operating income from continuing operations surged by 29% to $25.2 million[80] - Gross profit margin improved to 37.9% from 36.7%, primarily due to an improved revenue mix with a higher proportion of rental revenues[82][83] - SG&A as a percentage of revenues decreased to 19.1% from 21.0%[84] - Interest income, net, was minimal for H1 2025 compared to $1.7 million of interest expense, net, for H1 2024, reflecting interest income earned and a decrease in average debt outstanding[87] Liquidity and Capital Resources This section discusses NPK's cash flows, capital expenditures, and overall liquidity and capital structure Cash Flow Summary (First Half, In thousands) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,268 | $39,531 | | Net cash used in investing activities | $(811) | $(17,041) | | Net cash used in financing activities | $(21,792) | $(24,988) | - Net cash provided by operating activities decreased by $9.263 million YoY for the first half of 2025[91] - Net cash used in investing activities significantly decreased due to $14.5 million in proceeds from the Fluids Systems business sale[92] - Capital expenditures for H1 2025 were $21.7 million, primarily for expanding the mat rental fleet[92] - The company expects 2025 capital expenditures to be $35 million to $40 million, focused on rental fleet expansion[95] - Liquidity will be managed through cash on hand and the new $150 million Credit Facility, which had $148.0 million available as of June 30, 2025[96][97] Capitalization (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total debt | $9,336 | $7,727 | | Stockholders' equity | $328,835 | $326,495 | | Total capitalization | $338,171 | $334,222 | | Total debt to capitalization | 2.8 % | 2.3 % | Critical Accounting Estimates and Policies This section highlights NPK's key accounting estimates and policies that require significant management judgment - Key accounting estimates include cash flows and fair values for long-lived asset impairments (goodwill and other intangibles) and valuation allowances for deferred tax assets[105][106] - These estimates have not materially changed since December 31, 2024[105][106] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines NPK's exposure to market risks, specifically interest rate risk and foreign currency risk, and how these risks are managed Interest Rate Risk This section discusses NPK's exposure to interest rate fluctuations, primarily from its variable-rate credit facility - NPK's primary interest rate risk exposure stems from its Credit Facility, which is subject to variable interest rates[109] - As of June 30, 2025, the company had no borrowings under this facility[109] Foreign Currency Risk This section addresses NPK's exposure to foreign currency exchange risks, mainly from its U.K. operations - Following the Fluids Systems sale, NPK's principal foreign operations are in the U.K., contributing approximately 7% of consolidated revenues for the first half of 2025[110] - The company is exposed to foreign currency exchange risks, primarily with British pounds, and historically has not used off-balance sheet hedging instruments[110] ITEM 4. Controls and Procedures This section details the evaluation of NPK's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section reports on management's conclusion regarding the effectiveness of NPK's disclosure controls and procedures - Management, including the CEO and CFO, concluded that NPK's disclosure controls and procedures were effective as of June 30, 2025[111] Changes in Internal Control Over Financial Reporting This section reports on any material changes in NPK's internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[112] PART II OTHER INFORMATION This section includes additional information such as legal proceedings, risk factors, equity sales, and exhibits ITEM 1. Legal Proceedings This section provides information on legal actions and claims involving NPK International Inc - NPK is involved in various litigation and claims in the ordinary course of business[114] - Management does not expect any loss from these proceedings, beyond accrued or insured amounts, to have a material adverse impact on consolidated financial statements[114] ITEM 1A. Risk Factors This section refers to the company's risk factors as previously disclosed in its annual report - There have been no material changes to NPK's risk factors during the period ended June 30, 2025, as discussed in Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2024[115] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details NPK's share repurchase activities and the use of proceeds from equity securities Share Repurchase Program Activity (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | 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) | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 212,210 | $5.78 | 212,210 | $100.0 | | May 2025 | 290,876 | $7.89 | 290,876 | $97.7 | | June 2025 | 597,188 | $8.28 | 314,520 | $95.0 | | Total | 1,100,274 | | 817,606 | | - During the three months ended June 30, 2025, NPK repurchased 817,606 shares under its repurchase program[116] - As of June 30, 2025, $95.0 million remained authorized under the program[116][118] - An additional 282,668 shares were purchased for tax settlement upon vesting of restricted shares, not under the repurchase program[119] ITEM 3. Defaults Upon Senior Securities This section reports on any defaults concerning senior securities - There were no defaults upon senior securities during the reporting period[120] ITEM 4. Mine Safety Disclosures This section addresses disclosures related to mine safety - Mine safety disclosures are not applicable to NPK International Inc[121] ITEM 5. Other Information This section includes other material information not covered elsewhere, such as insider trading arrangements - On May 23, 2025, CEO Matthew Lanigan adopted a Rule 10b5-1 trading plan to sell up to 69,896 shares from options, effective from August 22, 2025, until May 19, 2026[122] - No other directors or officers adopted or terminated such plans during the quarter[122] ITEM 6. Exhibits This section lists all exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q - The report includes various exhibits, such as the Credit Agreement dated June 20, 2025, amended and restated restricted stock plans, forms of restricted stock unit and performance share unit agreements, and certifications under the Sarbanes-Oxley Act[125] Signatures This section contains the required signatures for the Quarterly Report on Form 10-Q - The report was signed on August 6, 2025, by Matthew S. Lanigan (President and CEO), Gregg S. Piontek (Senior Vice President and CFO), and Douglas L. White (Vice President, Chief Accounting Officer and Treasurer)[130]