NEWPARK RESOURCES INC

NEWPARK RESOURCES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 –Basis of Presentation and Significant Accounting Policies

Newpark Resources, Inc. 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).

The accompanying unaudited condensed consolidated financial statements of Newpark Resources, Inc. and our wholly-owned subsidiaries, which we collectively refer to as the “Company,” “we,” “our,” or “us,” have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission (“SEC”), and do not include all information and footnotes required by the accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. Our fiscal year end is December 31, our third quarter represents the three-month period ended September 30, and our first nine months represents the nine-month period ended September 30. The results of operations for the third quarter and first nine months of 2024 are not necessarily indicative of the results to be expected for the entire year. Unless otherwise noted, all currency amounts are stated in U.S. dollars.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of September 30, 2024, our results of operations for the third quarter and first nine months of 2024 and 2023, and our cash flows for the first nine months of 2024 and 2023. All adjustments are of a normal recurring nature. Our balance sheet at December 31, 2023 is derived from the audited consolidated financial statements at that date.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For further information, see Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2023.

We currently operate our business throughone reportable segment: Industrial Solutions. 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.

We previously operated a second reportable segment, Fluids Systems, which we exited in the third quarter of 2024. The Fluids Systems segment provided drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in Europe, the Middle East and Africa, and North America, as well as certain countries in Asia Pacific. On September 13, 2024, we completed the sale of the equity interests in one of our subsidiaries which held substantially all of the Company’s Fluids Systems segment (“Sale Transaction”) to SCF Partners, a leading private equity firm serving the global energy industry (the “Purchaser”). The results of operations of the Fluids Systems segment are reported in discontinued operations in the condensed consolidated statements of operations. All results and information in the consolidated financial statements and related notes are presented for our continuing operations and exclude the Fluids Systems segment unless otherwise noted specifically as discontinued operations. See Note 2 for additional information.

New Accounting Pronouncements

Standards Not Yet Adopted

Segment Reporting. In November 2023, the Financial Accounting Standards Board (“FASB”) issued new guidance which is intended to improve reportable segment disclosure requirements through enhanced disclosures. The amendments require disclosure of significant segment expenses regularly provided to the chief operating decision maker (“CODM”) as well as other segment items, extend certain annual disclosures to interim periods, clarify the applicability to single reportable segment entities, permit more than one measure of profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM. This guidance will be effective for us for the year ending December 31, 2024, and will be applied retrospectively. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures, particularly as we evaluate organizational structure changes following the recent completion of the Sale

Transaction. These requirements are not expected to have an impact on our consolidated financial statements, but will result in expanded reportable segment disclosures.

Income Taxes: Improvements to Income Tax Disclosures. In December 2023, the FASB issued new guidance which is intended to enhance the transparency and decision usefulness of income tax disclosures. This guidance will be effective for us in the first quarter of 2025. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. These requirements are not expected to have an impact on our consolidated financial statements, but will impact our income tax disclosures.

Note 2 –Discontinued Operations

Sale of Fluids Systems Business

In June 2023, we initiated a review of strategic alternatives for the long-term positioning of the Fluids Systems business, and in September 2023, we launched a formal sale process for substantially all the Fluids Systems business as part of this strategic review. 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 to the Purchaser.

Under the terms of the Sale Transaction agreement, the base sale price of the business was $127.5 million, preliminarily adjusted by $43 million to reflect lower estimated working capital conveyed at closing as compared to the average 2023 net working capital balance, accrued taxes and certain other liabilities, and $10 million of outstanding debt. Initial net consideration of the Sale Transaction was $56 million, which reflects $70 million of cash proceeds received at closing, net of the estimated $19 million of foreign cash conveyed with the business, along with a $5 million interest-bearing note receivable. The final purchase price remains subject to customary adjustments based upon final working capital, accrued taxes and certain other liabilities, debt, and cash conveyed at closing. As of September 30, 2024, approximately $18 million of net assets is included within the consolidated balance sheet, reflecting deferred consideration and note receivable due from the Purchaser net of estimated liabilities due to the Purchaser. Further, under the terms for the Sale Transaction agreement, we are required to provide certain transition support services to Fluids Systems for a period of up to one year. Aside from these transition service obligations, there are no continuing involvement with the Fluids Systems business.

In connection with the Sale Transaction, we recognized an estimated pre-tax loss on sale of $195.7 million in the third quarter of 2024, which includes a $59.5 million non-cash charge for the reclassification of cumulative foreign currency translation losses related to Fluids Systems.

The loss on sale consisted of the following (in thousands):

Proceeds from the sale, net of cash disposed consisted of the following (in thousands):

Estimated deferred consideration due from the Purchaser is related to the estimated working capital delivered at closing, which is expected to be finalized and collected by the end of 2024 or early 2025, as well as certain pre-closing tax assets and other receivables which are expected to be realized in 2025. The note receivable due from the Purchaser matures in March 2030 and bears interest at a rate of 12.5% per year. Deferred consideration due from the Purchaser is included in other receivables and the note receivable due from the Purchaser is included in other noncurrent assets in the consolidated balance sheet.

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. Liabilities due to the

Purchaser are included in accrued liabilities and other noncurrent liabilities in the consolidated balance sheet. Our estimates for the fair value of deferred consideration due from the Purchaser and liabilities due to the Purchaser may change and any income or expense associated with such changes will be presented in discontinued operations.

The criteria for discontinued operations presentation were met during the third quarter of 2024, and consequently, the results of the former Fluids Systems segment are reported as income (loss) from discontinued operations within the consolidated statements of operations for all periods presented, and its historical assets and liabilities are presented in our condensed consolidated balance sheets as assets and liabilities of discontinued operations. We elected not to adjust the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 to exclude cash flows attributable to discontinued operations. Accordingly, we have disclosed the depreciation, capital expenditures and significant operating and investing non-cash items related to discontinued operations below.

Discontinued operations reflect the results of operations attributable to our Fluids Systems segment which were included in the Company’s historical financial statements. In addition, the income (loss) from discontinued operations includes direct operating expenses incurred that (1) are clearly identifiable as costs of the component being disposed of and (2) will not continue to be recognized on an ongoing basis. Discontinued operations also reflects the allocation of interest expense on corporate debt, based on the ratio of net assets sold to the sum of consolidated net assets as adjusted for debt that was assumed by the Purchaser or directly attributable to other operations. Such interest expense allocated to discontinued operations totaled $0.5 million and $1.4 million for the three months and nine months ended September 30, 2024, respectively, and $0.6 million and $1.9 million for the three months and nine months ended September 30, 2023, respectively.

The following table summarizes the significant items included in income (loss) from discontinued operations in the condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023. The results for 2024 represent results through the closing date of the Sale Transaction, September 13, 2024.

Operating results from discontinued operations shown above include the following items:

The following table summarizes the carrying value of the former Fluids Systems segment’s assets and liabilities as presented within assets and liabilities of discontinued operations on the consolidated balance sheet.

For the nine months ended September 30, 2024 and 2023, significant operating and investing items related to the former Fluids Systems segment were as follows:

Note 3 –Earnings Per Share

The following table presents the reconciliation of the numerator and denominator for calculating net income (loss) per share:

We excluded the following weighted-average potential shares from the calculations of diluted net income (loss) per share during the applicable periods because their inclusion would have been anti-dilutive:

Note 4 –Repurchase Program

Our Board of Directors has authorized a securities repurchase program available for repurchases of our common stock. In February 2024, our Board of Directors replaced the prior program with a new repurchase program for repurchases of common stock up to $50.0 million.

Our repurchase program authorizes us to purchase outstanding shares of our common stock in the open market or as otherwise determined by management, subject to certain limitations under the Amended ABL Facility (as defined in Note 8) and other factors. The repurchase program has no specific term. Repurchases are expected to be funded from operating cash flows and available cash on hand. As part of the share repurchase program, our management has been authorized to establish trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934. As of September 30, 2024, we had $50.0 million remaining under the program.

Due to restrictions associated with the Fluids Systems sale process, no shares of common stock were repurchased under the repurchase program during the first nine months of 2024. During the first nine months of 2023, we repurchased an aggregate of 5.6 million shares of our common stock under the prior repurchase program for a total cost of $26.2 million.

Note 5 –Stock-Based and Other Long-Term Incentive Compensation

During the second quarter of 2024, the Compensation Committee of our Board of Directors (“Compensation Committee”) approved equity-based compensation awards to executive officers and other key employees consisting of an aggregate of 0.7 million restricted stock units, which will vest in equal installments over athree-year period. In addition, non-employee directors received grants of an aggregate of 0.1 million restricted stock awards, which will vest in full on the earlier of the day prior to the next annual meeting of stockholders following the grant date or the first anniversary of the grant date.

The weighted average grant-date fair value was $7.68 per share for the restricted stock units and $7.76 per share for the restricted stock awards. As a result of the Sale Transaction,0.6 million of unvested restricted stock units previously granted to former Fluids Systems employees were forfeited on September 13, 2024. At September 30, 2024,3.3 million shares remained available for award under the 2015 Plan and 0.4 million shares remained available for award under the 2014 Director Plan.

Also during the second quarter of 2024, the Compensation Committee approved the issuance of performance-based cash awards to certain executive officers with an aggregate target value of $2.6 million, of which $2.3 million was outstanding as of September 30, 2024. Of the $2.3 million outstanding, $1.6 million will be settled based on the relative ranking of the Company’s total shareholder return (“TSR”) as compared to the TSR of a designated peer group and $0.7 million will be settled based on the Company’s consolidated return on net capital employed (“RONCE”), each measured over athree-year performance period. The cash payout for each executive ranges from 0% to 200% of target. TSR performance for the 2024 grants will be determined based upon the Company’s and peer group’s average closing share price for the 30 calendar day period ending May 31, 2027, adjusted for dividends, as compared to the 30 calendar day period ending May 31, 2024. RONCE performance for the 2024 grants will be determined based upon the Company’s average three-year RONCE performance for the fiscal years ending December 31, 2024, 2025 and 2026. The performance-based cash awards are accrued as a liability award over the performance period based on the estimated fair value. The fair value of the TSR performance-based cash awards is remeasured each period using a Monte-Carlo valuation model with changes in fair value recognized in the consolidated statements of operations.

Note 6 –Receivables

Receivables consisted of the following:

Other receivables as of September 30, 2024 also included $20.0 million for estimated deferred consideration related to the Sale Transaction due from the Purchaser (see Note 2).

Changes in our allowance for credit losses were as follows:

Note 7 –Inventories

Inventories consisted of the following:

Raw materials consist primarily of resins and other materials used to manufacture composite mats, as well as materials that are consumed in providing spill containment and other services to our customers.

Note 8 –Financing Arrangements and Fair Value of Financial Instruments

Financing arrangements consisted of the following:

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 afive-year term expiring May 2027, is based on a Bloomberg Short-Term Bank Yield Index (“BSBY”) pricing grid, and includes a mechanism to incorporate a sustainability-linked pricing framework with the consent of the required lenders (as defined in the Amended ABL Facility). The BSBY rate will be replaced with Term SOFR (Secured Overnight Financing Rate) beginning in November 2024.

As of September 30, 2024, our total availability under the Amended ABL Facility was $58.3 million, withno outstanding borrowings and $2.0 million was used for outstanding letters of credit, resulting in remaining availability of $56.3 million.

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

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

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

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

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

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

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

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

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

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

Our financial instruments include cash and cash equivalents, receivables, payables, and debt. We believe the carrying values of these instruments approximated their fair values at September 30, 2024 and December 31, 2023.

Note 9 –Income Taxes

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.

Note 10 –Commitments and Contingencies

In the ordinary course of conducting our business, we become involved in litigation and other claims from private party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state, and local levels. In addition, in connection with the Sale Transaction, we have indemnified the Purchaser for certain pre-closing contingencies of the Fluids Systems business. While the outcome of litigation or other proceedings against us, including pre-closing contingencies of the Fluids Systems business, cannot be predicted with certainty, management does not expect that any loss resulting from such litigation or other proceedings, in excess of any amounts accrued or covered by insurance, will have a material adverse impact on our consolidated financial statements.

The first nine months of 2024 includes a $0.6 million gain related to a legal settlement as well as a $0.1 million gain related to the final insurance settlement associated with Hurricane Ida in August 2021.

Note 11 –Supplemental Disclosures to the Statements of Cash Flows

Supplemental disclosures to the statements of cash flows are presented below:

The amounts above include payments for our former Fluids Systems segment, as we elected not to adjust the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 to exclude cash flows attributable to discontinued operations.

Cash, cash equivalents, and restricted cash in the consolidated statements of cash flows consisted of the following:

Note 12 –Segment Data

Following the sale of the Fluids Systems segment in September 2024, we haveone reportable segment: Industrial Solutions. Summarized financial information for our reportable segment is shown in the following table:

Operating results shown above include the following items:

The following table presents further disaggregated revenues for the Industrial Solutions segment by type:

The following table presents further disaggregated revenues for the Industrial Solutions segment by geography: