NEWPARK RESOURCES INC

Previous wording

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 first quarter represents the three-month period ended March 31. 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.”

Current wording

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 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.”

Previous wording

Over much of the past decade, while the Fluids Systems segment has been the primary driver of revenues, the Industrial Solutions segment has been the primary driver of operating income, cash flows, and financial returns. Consequently, our growth investments in recent years have been heavily concentrated in the Industrial Solutions segment. The relative revenues, operating income, and capital expenditures for the Industrial Solutions and Fluids Systems segments for the first quarter of 2024 are as follows (amounts in millions):

Current wording

Over much of the past decade, while the Fluids Systems segment has been the primary driver of revenues, the Industrial Solutions segment has been the primary driver of operating income, cash flows, and financial returns. Consequently, our growth investments in recent years have been heavily concentrated in the Industrial Solutions segment. The relative revenues, operating income, and capital expenditures for the Industrial Solutions and Fluids Systems segments for the first half of 2024 are as follows (amounts in millions):

Previous wording

In June 2023, we announced that we initiated a review of strategic alternatives for the long-term positioning of the Fluids Systems division. We have retained Lazard to serve as our exclusive financial advisor in connection with the strategic review. In September 2023, we launched a formal sale process for substantially all the Fluids Systems business as part of this strategic review. While the sale process is ongoing, we anticipate substantially completing the process in mid-2024, although it is not certain that any such transaction will be consummated on that timeline or at all. As part of the strategic review, we will continue to evaluate under-performing areas within our business and anticipate additional actions may be necessary to optimize our operational footprint and invested capital within the Fluids Systems segment. If we successfully complete the process to substantially exit the Fluids Systems segment, our remaining operations will primarily reflect a specialty rental and service business, serving the utilities sector and other critical infrastructure markets. See further information below.

Current wording

We initiated a review of strategic alternatives for the Fluids Systems business in June 2023, and in September 2023, we launched a formal sale process for the Fluids Systems business as part of this strategic review. While the sale process is ongoing, we anticipate substantially completing the process in the third quarter of 2024, although it is not certain that any such transaction will be consummated on that timeline or at all. As part of the strategic review, we will continue to evaluate under-performing areas within our business and anticipate additional actions may be necessary to optimize our operational footprint and invested capital within the Fluids Systems segment. If we successfully complete the process to substantially exit the Fluids Systems segment, our remaining operations will primarily reflect a specialty rental and service business, serving the utilities sector and other critical infrastructure markets. See further information below.

Previous wording

•Accelerate Industrial Solutions Growth – We plan to continue to prioritize 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 quarter of 2024, approximately 95% of our capital expenditures were directed to the Industrial Solutions segment.

Current wording

•Accelerate Industrial Solutions Growth – We plan to continue to prioritize 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 half of 2024, over 90% of our capital expenditures were directed to the Industrial Solutions segment.

Previous wording

•Drive Operational Efficiency – We plan to maintain our focus on efficiency improvements and operating cost optimization across every aspect of our global footprint. 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 quarter of 2024, we continued to take actions to streamline our overhead structure across both segments and the corporate office, generating approximately $3 million in annual cost savings, while incurring $1.1 million of severance costs.

Current wording

•Drive Operational Efficiency – We plan to maintain our focus on efficiency improvements and operating cost optimization across every aspect of our global footprint. 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 half of 2024, we continued to take actions to streamline our overhead structure across both segments and the corporate office, generating approximately $3 million in annual cost savings, while incurring $1.4 million of severance costs.

Previous wording

Industrial Solutions – Our Industrial Solutions segment, which generated 29% of our consolidated revenues and 65% of our segment-level operating income for the first quarter of 2024, provides temporary worksite access solutions, including the rental of our manufactured recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, 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.

Current wording

Industrial Solutions – Our Industrial Solutions segment, which generated 33% of our consolidated revenues and 78% of our segment-level operating income for the first half of 2024, provides temporary worksite access solutions, including the rental of our manufactured recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, 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.

Previous wording

Fluids Systems – Our Fluids Systems segment, which generated 71% of our consolidated revenues and 35% of our segment-level operating income for the first quarter of 2024, provides drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in EMEA and North America, as well as certain countries in Asia Pacific. Over the past few years, our primary focus within Fluids Systems has been the transformation into a more agile and simplified business focused on key markets, while monetizing assets in underperforming or sub-scale markets and reducing our invested capital to drive improvements in segment profitability and returns.

Current wording

Fluids Systems – Our Fluids Systems segment, which generated 67% of our consolidated revenues and 22% of our segment-level operating income for the first half of 2024, provides drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in EMEA and North America, as well as certain countries in Asia Pacific. Over the past few years, our primary focus within Fluids Systems has been the transformation into a more agile and simplified business focused on key markets, while monetizing assets in underperforming or sub-scale markets and reducing our invested capital to drive improvements in segment profitability and returns.

Previous wording

Rig count data remains the most widely accepted indicator of drilling activity. Average North American rig count data for the first quarter of 2024 and 2023 is as follows:

Current wording

Rig count data remains the most widely accepted indicator of drilling activity. Average North American rig count data for the second quarter and first half of 2024 as compared to the same periods of 2023 is as follows:

Previous wording

In 2023, market activity in the U.S. steadily declined, ending the year at 622 active rigs, down 20% from the end of 2022. Despite recent strength in oil prices, the 2024 outlook for U.S. market activity generally remains below the 2023 average level, as many of our customers maintain strong capital discipline and prioritize cash flow generation over growth.

Current wording

In 2023, market activity in the U.S. steadily declined, ending the year at 622 active rigs, down 20% from the end of 2022. Despite continued strength in oil prices, the 2024 outlook for U.S. market activity generally remains below the 2023 average level, as many of our customers maintain strong capital discipline and prioritize cash flow generation over growth.

Previous wording

As described above, we launched a formal sale process for substantially all the Fluids Systems business in September 2023. The ongoing Fluids sale process did not meet the held for sale accounting criteria as of March 31, 2024, and as such, continued to be accounted for as held for use. As of March 31, 2024, the Fluids Systems business had approximately $226 million of net assets, including $35 million in cash, $14 million of debt, and $174 million of net working capital. In addition, as of March 31, 2024, the Fluids Systems business had approximately $62 million of accumulated translation losses, which would be reclassified as a charge to income upon a disposition or substantial liquidation of the associated entities.

Current wording

As described above, we launched a formal sale process for substantially all the Fluids Systems business in September 2023. During the second quarter and first half of 2024, we incurred sale process-related costs of $1.9 million and $4.1 million, respectively. The ongoing Fluids Systems sale process did not meet the held for sale accounting criteria as of June 30, 2024, and as such, continued to be accounted for as held for use. As of June 30, 2024, the Fluids Systems business had approximately $210 million of net assets, including $31 million in cash, $12 million of debt, and $160 million of net working capital. In addition, as of June 30, 2024, the Fluids Systems business had approximately $63 million of accumulated translation losses which would be reclassified as a charge to income upon a disposition or substantial liquidation of the associated entities.

Previous wording

In addition to the above, in 2023, we made the decision to exit our offshore Australia operations, as well as our stimulation chemicals product line. We expect to incur certain exit related costs in 2024 of approximately $1 million from the exit of our offshore Australia operations. In 2023, we also completed our customer contract in Chile and completed the substantial liquidation of our Chile subsidiary. The operating results for these now exited businesses were not material for the first quarter of 2024 or 2023.

Current wording

In 2023, we made the decision to exit our offshore Australia operations, as well as our stimulation chemicals product line. The Fluids Systems segment operating results for the first half of 2024 includes $0.7 million of charges related to the substantial completion of the exit of our offshore Australia operations. In 2023, we also completed our customer contract in Chile and completed the substantial liquidation of our Chile subsidiary. The operating results for these now exited businesses were not material for 2024 or 2023.

Previous wording

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

Current wording

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

Previous wording

Revenues decreased 15% to $169.1 million for the first quarter of 2024, compared to $200.0 million for the first quarter of 2023. This $30.9 million decrease in revenues includes a $43.5 million (31%) decrease in North America, comprised of a $36.6 million decrease in the Fluids Systems segment and a $6.9 million decrease in the Industrial Solutions segment. In our Fluids Systems segment, revenues from our North America operations decreased primarily due to the effect of lower U.S. market share and reduced U.S. market activity. In our Industrial Solutions segment, revenues from our North America operations decreased primarily due to lower product sales, which typically fluctuate based on the timing of customer projects and orders. Revenues from our international operations increased by $12.6 million (21%), driven by higher Fluids Systems activity in Europe and Africa. Additional information regarding the change in revenues is provided within the operating segment results below.

Current wording

Revenues decreased 2% to $179.0 million for the second quarter of 2024, compared to $183.3 million for the second quarter of 2023. This $4.2 million decrease in revenues includes a $5.8 million (5%) decrease in North America, comprised of a $24.5 million decrease in the Fluids Systems segment partially offset by a $18.7 million increase in the Industrial Solutions segment. In our Fluids Systems segment, revenues from our North America operations decreased primarily due to the effect of lower U.S. market share and reduced U.S. market activity. In our Industrial Solutions segment, revenues from our North America operations increased primarily due to higher product sales, which typically fluctuate based on the timing of customer projects and orders. Revenues from our Rest of World operations increased by $1.5 million (2%), driven by higher Fluids Systems activity in Europe and Africa. Additional information regarding the change in revenues is provided within the operating segment results below.

Previous wording

Cost of revenues decreased 18% to $134.6 million for the first quarter of 2024, compared to $164.7 million for the first quarter of 2023. This $30.2 million decrease in cost of revenues was primarily driven by the 15% decrease in revenues described above, as well as the impact of segment revenue mix, with Industrial Solutions representing a higher proportion of revenues for the first quarter of 2024, as compared to the prior year.

Current wording

Cost of revenues decreased 7% to $140.1 million for the second quarter of 2024, compared to $150.2 million for the second quarter of 2023. This $10.1 million decrease in cost of revenues was primarily driven by the 2% decrease in revenues described above, as well as the impact of segment revenue mix, with Industrial Solutions representing a higher proportion of revenues for the second quarter of 2024, as compared to the prior year.

Previous wording

Foreign currency exchange was minimal for the first quarter of 2024 and 2023, and reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies.

Current wording

Foreign currency exchange was a $0.1 million loss for the second quarter of 2024 compared to a $0.1 million gain for the second 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.

Previous wording

Interest expense was $1.8 million for the first quarter of 2024 compared to $2.1 million for the first quarter of 2023. The decrease in interest expense is primarily due to a decrease in average debt outstanding.

Current wording

Interest expense was $1.8 million for the second quarter of 2024 compared to $2.1 million for the second quarter of 2023. The decrease in interest expense is primarily due to a decrease in average debt outstanding.

Previous wording

The provision for income taxes was $2.8 million for the first quarter of 2024, reflecting an effective tax rate of 28%, compared to income taxes of $2.1 million for the first quarter of 2023, reflecting an effective tax rate of 27%. The provision for income taxes for the first quarter of 2024 and 2023 primarily reflects income taxes associated with our international operations, as the tax provision associated with U.S. income is largely offset by the partial valuation allowance release associated with previously unbenefited U.S. net operating losses.

Current wording

The provision for income taxes was $3.3 million for the second quarter of 2024, reflecting an effective tax rate of 29%, compared to income taxes of $2.1 million for the second quarter of 2023, reflecting an effective tax rate of 56%. The provision for income taxes for the second quarter of 2024 and 2023 primarily reflects income taxes associated with our international operations, as the tax provision associated with U.S. income is largely offset by the partial valuation allowance release associated with previously unbenefited U.S. net operating losses.

Previous wording

North America revenues decreased 41% to $51.7 million for the first quarter of 2024, compared to $88.3 million for the first quarter of 2023, primarily related to a decline in U.S. land as a result of lower market share and reduced market activity. Canada revenues increased $1.9 million driven primarily by elevated product consumption per rig and a slight increase in market share, which typically fluctuates based on customer mix and timing of projects.

Current wording

North America revenues decreased 35% to $45.9 million for the second quarter of 2024, compared to $70.4 million for the second quarter of 2023, primarily related to a decline in U.S. as a result of lower U.S. market share and reduced U.S. market activity. Canada revenues increased $2.9 million driven primarily by an increase in Canada rig count as well as elevated product consumption per rig, partially offset by a slight decrease in market share, which typically fluctuates based on the mix and timing of projects.

Previous wording

International revenues increased 22% to $68.4 million for the first quarter of 2024, compared to $55.9 million for the first quarter of 2023. The increase was primarily driven by higher customer activity and elevated product consumption per rig in Europe and Africa.

Current wording

Rest of World revenues increased 2% to $66.3 million for the second quarter of 2024, compared to $64.8 million for the second quarter of 2023. The increase was primarily driven by higher customer activity and elevated product consumption per rig in Europe and Africa.

Previous wording

The Fluids Systems segment generated operating income of $6.8 million for the first quarter of 2024 compared to $3.5 million for the first quarter of 2023. The improvement in operating income despite the lower revenues primarily reflects the combined effects of improved regional mix (higher international revenues, lower U.S. revenues) and improvements in customer pricing, particularly within the international markets, as well as cost reductions within the U.S. business. In addition, the first quarter of 2024 segment operating income includes $0.8 million in severance costs and transaction expenses related to the ongoing Fluids Systems segment sale process offset by a $0.8 million gain on insurance recovery, while the first quarter of 2023 segment operating income included $3.2 million in charges primarily related to facility exit and severance costs.

Current wording

The Fluids Systems segment generated operating income of $2.3 million for the second quarter of 2024 compared to $2.0 million for the second quarter of 2023. The increase in operating income primarily reflects the impact of charges recorded in the respective periods. The second quarter of 2024 segment operating income includes $1.1 million in facility exit costs, transaction expenses related to the Fluids Systems segment sale process, and severance costs, while the second quarter of 2023 segment operating income included $5.1 million in charges primarily related to impairments, facility exit costs, and severance costs. The remaining $3.7 million reduction in operating income reflected the effect of lower revenues, partially offset by improved regional mix (higher international revenues, lower U.S. revenues) and improvements in customer pricing, particularly within the international markets, as well as cost reductions within the U.S. business.

Previous wording

The first quarter of 2024 includes a $0.9 million gain related to the final insurance settlement associated with Hurricane Ida in August 2021, which caused damage to our facilities in Fourchon, Louisiana, as well as a $0.6 million gain related to a legal settlement in the Industrial Solutions segment. Other operating (income) loss, net, also includes gains and losses on sales of assets.

Current wording

The first half of 2024 includes a $0.9 million gain related to the final insurance settlement associated with Hurricane Ida in August 2021, which caused damage to our facilities in Fourchon, Louisiana, as well as a $0.6 million gain related to a legal settlement in the Industrial Solutions segment. Other operating (income) loss, net, also includes gains and losses on sales of assets.

Previous wording

Rental and service revenues decreased for the first quarter of 2024, reflecting a decline in service revenues, primarily driven by the impact of timing of certain customer projects, partially offset by a slight increase in rental revenues, driven primarily by higher volume. Product sales revenues decreased for the first quarter of 2024, and typically fluctuate based on the timing of customer projects and orders.

Current wording

Rental and service revenues decreased for the first half of 2024, primarily reflecting a $6.8 million decline in service revenues, attributable to the timing and mix of service included within customer rental projects. This decline was partially offset by a $2.0 million (5%) increase in rental revenues, driven primarily by higher volume. Product sales revenues increased for the first half of 2024, and typically fluctuate based on the timing of customer projects and orders. The majority of the first half 2024 and 2023 revenues are derived from customers in the power transmission sector.

Previous wording

The Industrial Solutions segment generated operating income of $12.9 million for the first quarter of 2024 compared to $14.5 million for the first quarter of 2023, the decrease being primarily attributable to the lower revenues, partially offset by higher profitability driven by efficiencies in rental and service activities as well as manufacturing.

Current wording

The Industrial Solutions segment generated operating income of $32.3 million for the first half of 2024 compared to $27.3 million for the first half of 2023, the increase being primarily attributable to the higher product sales revenues, as well as higher profitability driven by efficiencies in rental and manufacturing operations.

Previous wording

Net cash provided by operating activities was $12.0 million for the first quarter of 2024 compared to $29.4 million for the first quarter of 2023. During the first quarter of 2024, net income adjusted for non-cash items provided cash of $13.7 million while changes in working capital used cash of $1.7 million. Operating cash flow for the first quarter of 2023 benefited from approximately $13 million related to the wind down of working capital associated with certain fourth quarter 2022 divestiture transactions.

Current wording

Net cash provided by operating activities was $39.5 million for the first half of 2024 compared to net cash provided by operating activities of $36.8 million for the first half of 2023. During the first half of 2024, net income adjusted for non-cash items provided cash of $30.5 million and changes in working capital provided cash of $9.1 million. Operating cash flow for the first half of 2023 benefited from approximately $13.6 million related to the wind down of working capital associated with certain fourth quarter 2022 divestiture transactions.

Previous wording

Net cash used in investing activities was $12.7 million for the first quarter of 2024, including $13.9 million in capital expenditures partially offset by $1.1 million in proceeds from the sale of assets, which includes the sale of used mats from our Industrial Solutions rental fleet. The substantial majority of our capital expenditures for the first quarter of 2024 were directed to expanding our Industrial Solutions segment rental fleet.

Current wording

Net cash used in investing activities was $17.0 million for the first half of 2024, including $20.5 million in capital expenditures partially offset by $2.0 million in proceeds from the sale of assets, which includes the sale of used mats from our Industrial Solutions rental fleet. The substantial majority of our capital expenditures for the first half of 2024 were directed to expanding our Industrial Solutions segment rental fleet.

Previous wording

Net cash provided by financing activities was $0.6 million for the first quarter of 2024, and primarily relates to net borrowings on our Amended ABL Facility and other financing arrangements.

Current wording

Net cash used in financing activities was $25.0 million for the first half of 2024, and primarily relates to net payments on our Amended ABL Facility and other financing arrangements.

Previous wording

Substantially all of our $37.7 million of cash on hand at March 31, 2024 resides in our international subsidiaries. We primarily manage our liquidity utilizing availability under our Amended ABL Facility and other existing financing arrangements. Under our Amended ABL Facility, we manage daily cash requirements by utilizing borrowings or repayments under this revolving credit facility, while maintaining minimal cash on hand in the U.S.

Current wording

Substantially all our $35.1 million of cash on hand at June 30, 2024 resides in our international Fluids Systems subsidiaries. We primarily manage our liquidity utilizing availability under our Amended ABL Facility and other existing financing arrangements. Under our Amended ABL Facility, we manage daily cash requirements by utilizing borrowings or repayments under this revolving credit facility, while maintaining minimal cash on hand in the U.S.

Previous wording

We anticipate that our near-term working capital requirements for our operations will generally fluctuate directionally with revenues. We expect capital expenditures in 2024 to be approximately $30 million to $40 million, with spending heavily focused on the expansion of our mat rental fleet. We also expect to return value to our shareholders, utilizing excess cash generation to fund additional share repurchases. In addition, if we are successful in completing the process to substantially exit the Fluids Systems business, we anticipate the proceeds to be used to repay a significant portion of our existing outstanding debt, providing additional liquidity to fund our long-term strategic initiatives.

Current wording

We anticipate that our near-term working capital requirements for our operations will generally fluctuate directionally with revenues. We expect capital expenditures in 2024 to be approximately $30 million to $40 million, with spending heavily focused on the expansion of our mat rental fleet. We also expect to return value to our shareholders, utilizing excess cash generation to fund additional share repurchases upon completion of the Fluids Systems sale process. In addition, if we are successful in completing the process to substantially exit the Fluids Systems business, we anticipate the proceeds to be used to repay a significant portion of our existing outstanding debt, providing additional liquidity to fund our long-term strategic initiatives.

Previous wording

As of March 31, 2024, our total availability under the Amended ABL Facility was $110.0 million, of which $48.0 million was drawn and $4.0 million was used for outstanding letters of credit, resulting in remaining availability of $58.0 million.

Current wording

As of June 30, 2024, our total availability under the Amended ABL Facility was $110.4 million, of which $32.0 million was drawn and $4.0 million was used for outstanding letters of credit, resulting in remaining availability of $74.4 million.

Previous wording

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

Current wording

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.

Previous wording

Other Financing Arrangements. Certain of our foreign subsidiaries maintain local credit arrangements consisting primarily of lines of credit or overdraft facilities which are generally renewed on an annual basis. We utilize local financing arrangements in our foreign operations in order to provide short-term local liquidity needs. In addition, in April 2022, a 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 March 31, 2024, the interest rate for the U.K. facilities was 8.4%. The term loan is payable in quarterly installments of £350,000 plus interest beginning June 2022 and a £2.8 million payment due at maturity. We also maintain finance leases primarily related to transportation equipment. During the first quarter of 2024, we entered into $2.2 million of new finance lease liabilities in exchange for leased assets.

Current wording

Other Financing Arrangements. Certain of our foreign subsidiaries maintain local credit arrangements consisting primarily of lines of credit or overdraft facilities which are generally renewed on an annual basis. We utilize local financing arrangements in our foreign operations in order to provide short-term local liquidity needs. In addition, in April 2022, a 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 June 30, 2024, the interest rate for the U.K. facilities was 8.5%. The term loan is payable in quarterly installments of £350,000 plus interest beginning June 2022 and a £2.8 million payment due at maturity. We also maintain finance leases primarily related to transportation equipment. During the first half of 2024, we entered into $4.0 million of new finance lease liabilities in exchange for leased assets.

Previous wording

In addition, at March 31, 2024, we had $40.2 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $0.2 million in restricted cash.

Current wording

In addition, at June 30, 2024, we had $38.4 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $0.4 million in restricted cash, the majority of which relates to the Fluids Systems segment.