NEWPARK RESOURCES INC
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
NPKI$8.64+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000071829-24-000092
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0000071829-24-000115
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 108 previous paragraphs and 89 current paragraphs.
24 unchanged; 32 reworded; 31 added; 51 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 10 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
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).
Current report
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.
Current report
Third Quarter of 2024 Compared to Third Quarter of 2023
Current report
Revenues
Current report
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.
Current report
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.
Current report
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.
Current report
Other operating (income) loss, net
Current report
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.
Current report
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.
Current report
Provision (benefit) for income taxes from continuing operations
Current report
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.
Current report
Income (loss) from discontinued operations
Current report
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.
Current report
Industrial Solutions operating income
Current report
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.
Current report
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.
Current report
First Nine Months of 2024 Compared to First Nine Months of 2023
Current report
Revenues
Current report
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.
Current report
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.
Current report
Other operating (income) loss, net
Current report
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.
Current report
Provision (benefit) for income taxes from continuing operations
Current report
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.
Current report
Industrial Solutions operating income
Current report
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.
Current report
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.
Current report
Sale of Fluids Systems Business
Current report
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.
Current report
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.
Removed paragraphs (51)
Previous report
Newpark Resources, Inc. (the “Company,” “we,” “our,” or “us”) is a geographically diversified supplier providing environmentally-sensitive products, as well as rentals and services to customers across multiple industries. We currently operate our business through two reportable segments: Industrial Solutions and Fluids Systems, as described further below.
Previous report
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 report
See Note 12 for certain items included in the Fluids Systems and Industrial Solutions segment operating results.
Previous report
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 report
Our Fluids Systems operating results remain dependent on oil and natural gas drilling activity levels in the markets we serve and the nature of the drilling operations, which governs the revenue potential of each well. Drilling activity levels depend on a variety of factors, including oil and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions. Oil and natural gas prices and activity are cyclical and volatile, and this market volatility has a significant impact on our Fluids Systems operating results.
Previous report
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 report
Source: Baker Hughes Company
Previous report
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 report
Outside of North America, drilling activity is generally more stable as this drilling activity is based on longer-term economic projections and multi-year drilling programs, which typically reduces the impact of short-term changes in commodity prices on overall drilling activity. Further, geopolitical events in recent years are causing several markets to increase drilling activity levels, to help ensure reliable energy supply in the coming years, while reducing their dependency on Russia-sourced oil and natural gas. Consequently, the outlook for several markets within the EMEA region remains strong, with growth in activity expected over the next few years.
Previous report
2023 Strategic Actions
Previous report
The following strategic actions were taken in 2023.
Previous report
Review of Strategic Alternatives for Fluids Systems Business
Previous report
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 report
As we continue to evaluate strategic alternatives for our Fluids Systems portfolio, we may incur future charges, including a loss on a potential transaction related to these efforts or potential asset impairments, which may negatively impact our future results.
Previous report
Exit of Other Operations
Previous report
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 report
Second Quarter of 2024 Compared to Second Quarter of 2023
Previous report
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 report
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 report
Selling, general and administrative expenses increased to $26.4 million for the second quarter of 2024, compared to $25.6 million for the second quarter of 2023. This increase was primarily driven by higher strategic planning project costs partially offset by lower personnel expense resulting from efforts to streamline the overhead structure. The second quarter of 2024 includes $1.9 million related to the Fluids Systems sale process while the second quarter of 2023 included $0.8 million primarily related to strategic planning projects. Selling, general and administrative expenses as a percentage of revenues was 14.7% for the second quarter of 2024 compared to 14.0% for the second quarter of 2023.
Previous report
Other operating income, net
Previous report
Impairments and Other Charges
Previous report
During the second quarter of 2023, $2.8 million of non-cash charges were included in the Fluids Systems segment, including $1.6 million to reduce the carrying values of certain inventory related to the exit of our stimulation chemicals product line to their net realizable value, and $1.2 million of total charges to reduce the carrying values of certain offshore Australia inventory to their net realizable value as well as impairments related to the long-lived assets previously used in this now exited business.
Previous report
Provision for income taxes
Previous report
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 report
Operating Segment Results
Previous report
Fluids Systems
Previous report
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 report
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 report
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 report
Industrial Solutions
Previous report
The Industrial Solutions segment generated operating income of $19.4 million for the second quarter of 2024 compared to $12.8 million for the second quarter of 2023, the increase being primarily attributable to the higher product sales revenues, as well as efficiencies in the rental and manufacturing operations.
Previous report
Corporate office expenses decreased $0.4 million to $8.4 million for the second quarter of 2024, compared to $8.9 million for the second quarter of 2023. The decrease was primarily driven by lower personnel expense resulting from efforts to streamline the overhead structure partially offset by higher performance-based incentives. In addition, the second quarter of 2024 includes $1.6 million related to the Fluids Systems sale process, while the second quarter of 2023 included $0.9 million of severance expense associated with second quarter 2023 restructuring actions as well as $0.8 million related to strategic planning projects.
Previous report
First Half of 2024 Compared to First Half of 2023
Previous report
Revenues decreased 9% to $348.1 million for the first half of 2024, compared to $383.3 million for the first half of 2023. This $35.2 million decrease in revenues includes a $49.3 million (19%) decrease in North America, comprised of a $61.0 million decrease in the Fluids Systems segment partially offset by a $11.7 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 $14.1 million (11%), 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 report
Cost of revenues decreased 13% to $274.7 million for the first half of 2024, compared to $314.9 million for the first half of 2023. This $40.2 million decrease in cost of revenues was primarily driven by the 9% 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 half of 2024, as compared to the prior year.
Previous report
Other operating income, net
Previous report
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 report
Impairments and Other Charges
Previous report
The Fluids Systems segment included $2.8 million of non-cash charges in the first half of 2023 for inventory write-downs and asset impairments.
Showing the first 40 of 51 passages. Open the source sections for the rest.
Reworded paragraphs (32)
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 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.”
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 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.”
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 half of 2024, over 90% of our capital expenditures were directed to the Industrial Solutions segment.
Current wording
•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.
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 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.
Current wording
•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.
Previous wording
•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. 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.
Current wording
•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.
Previous 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.
Current wording
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.
Previous wording
The expansion of our business within the power transmission and other industrial markets remains a strategic priority for us due to the relative stability of such markets compared to E&P, as well as the magnitude of growth opportunity in these markets, including the potential positive impact from the energy transition and future legislation and regulations related to greenhouse gas emissions and climate change. 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous wording
Summarized results of operations for the second quarter of 2024 compared to the second quarter of 2023 are as follows:
Current wording
Summarized results of operations for the third quarter of 2024 compared to the third quarter of 2023 are as follows:
Previous wording
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers):
Current wording
Summarized financial information for our reportable segment is shown in the following table:
Previous wording
Rental and service revenues decreased for the second quarter of 2024, primarily reflecting a $5.5 million decline in service revenues, attributable to the timing and mix of service included within customer rental projects, and we expect this trend to continue. This decline was partially offset by a $1.9 million (9%) increase in rental revenues, driven primarily by higher volume. Product sales revenues increased for the second quarter of 2024, as sales volumes typically fluctuate based on the timing of customer projects and orders. The majority of the second quarter 2024 and 2023 revenues are derived from customers in the power transmission sector.
Current wording
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.
Previous wording
Other operating (income) loss, net, includes gains and losses on sales of assets.
Current wording
Other operating (income) loss, net, primarily includes gains and losses on sales of assets.
Previous 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.
Current wording
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.
Previous wording
Summarized results of operations for the first half of 2024 compared to the first half of 2023 are as follows:
Current wording
Summarized results of operations for the first nine months of 2024 compared to the first nine months of 2023 are as follows:
Previous wording
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers):
Current wording
Summarized financial information for our reportable segment is shown in the following table:
Previous wording
Selling, general and administrative expenses decreased $0.3 million to $50.7 million for the first half of 2024, compared to $51.0 million for the first half of 2023. The first half of 2024 includes $4.1 million related to the Fluids Systems sale process while the first half of 2023 included $1.7 million of costs related to strategic planning projects. The remaining $2.7 million decrease was primarily driven by lower personnel expense resulting from efforts to streamline the overhead structure partially offset by higher strategic planning project costs. Selling, general and administrative expenses as a percentage of revenues was 14.6% for the first half of 2024 compared to 13.3% for the first half of 2023.
Current wording
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.
Previous wording
Foreign currency exchange was a $0.1 million loss for the first half of 2024 compared to a $0.2 million loss for the first half 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous wording
Corporate office expenses decreased $0.3 million to $16.4 million for the first half of 2024, compared to $16.7 million for the first half of 2023. The decrease was primarily driven by lower personnel expense resulting from efforts to streamline the overhead structure, partially offset by higher strategic planning project costs as well as higher performance-based incentives. The first half of 2024 includes $3.5 million related to the Fluids Systems sale process, while the first half of 2023 included $1.7 million of costs related to strategic planning projects as well as $0.9 million of severance expense associated with second quarter 2023 restructuring actions.
Current wording
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.
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous wording
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 the projected availability under our Amended ABL Facility and other existing financing arrangements, cash generated by operations, and available cash on-hand in our international subsidiaries to be adequate to fund our current operations during the next 12 months.
Current wording
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.
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 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.
Current wording
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.
Previous wording
Asset-Based Loan Facility. In October 2017, we entered into a U.S. asset-based revolving credit agreement, which was amended in March 2019 and amended and restated in May 2022 (the “Amended ABL Facility”). The Amended ABL Facility provides financing of up to $175.0 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).
Current wording
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.
Previous 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.
Current wording
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.
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 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.
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
Previous wording
As of June 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. As of June 30, 2024, the weighted average interest rate for the Amended ABL Facility was 6.9% and the applicable commitment fee on the unused portion of the Amended ABL Facility was 0.375% per annum.
Current wording
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.
Previous wording
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 or indirect domestic subsidiaries of the borrowers and certain equity interests issued by certain foreign subsidiaries of the borrowers.
Current wording
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.
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 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous wording
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. Our critical accounting estimates and policies have not materially changed since December 31, 2023.
Current wording
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.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Interest expense was $3.5 million for the first half of 2024 compared to $4.2 million for the first half of 2023. The decrease in interest expense is primarily due to a decrease in average debt outstanding.