NPK International Inc
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
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-K
Period ended 2023-12-31; filed 2024-02-23.
0000071829-24-000009
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0000071829-25-000012
ITEM 7. 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 157 previous paragraphs and 96 current paragraphs.
36 unchanged; 24 reworded; 36 added; 96 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 8 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 (36)
Current report
We previously operated a Fluids Systems business, which was historically reported as a separate operating segment, that 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 substantially all of the Company’s Fluids Systems segment (the “Sale Transaction”) to SCF Partners, a leading private equity firm serving the global energy industry (the “Purchaser”). The results of operations of Fluids Systems are reported in discontinued operations in the consolidated statements of operations. All results and information in the consolidated financial statements and related notes 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
•Completed the Fluids Systems Sale Transaction – The September 2024 sale marked an important strategic milestone for our company, simplifying our business model while meaningfully improving our margin profile, return on investment and profitability potential, as we focus on growing our scale as a leading, pure-play specialty rental and services business in the global worksite access and critical infrastructure markets. The estimated total consideration of the Sale Transaction was $88.2 million, which includes $70.2 million of cash proceeds received at closing, $16.0 million of receivables, primarily reflecting an adjustment for the final working capital conveyed at closing, and a $5 million interest-bearing note receivable, partially offset by net deferred consideration liabilities.
Current report
•Rebranded as NPK – In December 2024, we announced our new brand identity, aligning with our strategic focus on specialty rental solutions for the global access market, and launched a new company website (www.npki.com). NPK International commenced trading on the NYSE under the ticker symbol “NPKI” beginning December 19, 2024.
Current report
•Strengthened Balance Sheet– We ended 2024 with total cash of $17.8 million, total debt of $7.7 million, and available liquidity under our ABL credit facility of $65.8 million, positioning the Company to pursue our stated organic and inorganic growth strategy.
Current report
•Accelerated Organic Growth – In support of our efforts to accelerate revenue growth through the expansion of our high-return rental business, approximately $37 million of our 2024 capital expenditures were directed to the expansion of our mat rental fleet, expanding the rental fleet by approximately 11%, driving a 7% year-over-year increase in rental revenues.
Current report
•Drove Operational Efficiency – During 2024, we continually took actions to streamline our overhead structure, which contributed to a $5.0 million year-over-year reduction in selling, general and administrative expenses (“SG&A”) for 2024. SG&A as a percentage of revenues was 21.2% for 2024 compared to 24.6% for 2023. We plan to maintain our focus on efficiency improvements and operating cost optimization across every aspect of our business. With the recent completion of the sale of the Fluids Systems business and simplified business model, we continue to evaluate and execute actions intended to streamline the organization and our cost structure, driving improvements in profitability, with the goal of driving SG&A as a percentage of revenue to a mid-teens range by early 2026.
Current report
The following table presents gross profit margins by type:
Current report
Revenues
Current report
Revenues increased 5% to $217.5 million for 2024, compared to $207.6 million for 2023, including a 24% increase in product sales revenues, partially offset by a 3% decline in rental and service revenues. Rental revenues increased $6.1 million (7%) primarily due to higher rental volume driven by our organic growth efforts, partially offset by lower pricing. Service revenues decreased $10.3 million (15%), primarily attributable to a reduced level of services required within customer rental projects. Product sales revenues increased $14.0 million (24%) for 2024, primarily reflecting an increasing customer adoption of manufactured composite matting products relative to timber-based products that continue to be the primary solution used for temporary worksite access. The majority of the 2024 and 2023 revenues were derived from customers in the power transmission sector.
Current report
Cost of revenues increased 4% to $140.4 million for 2024 (35.5% gross profit margin), compared to $135.1 million for 2023 (34.9% gross profit margin), primarily driven by the 5% increase in revenues described above. The improvement in gross profit margin is primarily attributable to the effects of an improved revenue mix. Rental and service margins increased primarily due to a higher proportion of rental revenues and a lower proportion of service revenues. Product sales margins decreased partially due to an approximately $1 million impact of an unscheduled downtime event on one of the production lines at our manufacturing facility in the third quarter 2024.
Current report
Selling, general and administrative expenses decreased $5.0 million to $46.0 million for 2024, compared to $51.1 million for 2023. The decrease was primarily driven by lower performance-based incentives and other personnel expense resulting from efforts to streamline the overhead structure, lower severance costs, as well as increased lease and sublease income associated with our administrative offices. In addition, 2023 included $1.4 million of costs related to strategic planning projects. Selling, general and administrative expenses as a percentage of revenues was 21.2% for 2024 compared to 24.6% for 2023.
Current report
Other operating (income) loss, net
Current report
Other operating (income) loss, net primarily reflects gains and losses associated with the sale of assets. In addition, 2024 includes a $0.6 million gain related to a legal settlement.
Current report
Interest expense was $2.6 million for 2024 compared to $4.1 million for 2023. The decrease in interest expense is primarily due to a decrease in average debt outstanding. The 2024 expense includes a $0.5 million non-cash write off of debt issuance costs associated with the amendment of our Amended ABL Facility. Discontinued operations also includes an allocation of interest expense on corporate debt. Such interest expense totaled $1.4 million and $2.4 million for 2024 and 2023, respectively.
Current report
Provision (benefit) for income taxes from continuing operations
Current report
The benefit for income taxes from continuing operations was $6.7 million for 2024 compared to a provision for income taxes of $5.6 million for 2023. The 2024 benefit includes a $15.9 million benefit primarily related to the release of valuation allowances on U.S. federal and state net operating losses and tax credit carryforwards that are now expected to be realized following the sale of the Fluids Systems business. Excluding this valuation allowance benefit, the effective tax rate increased to 31.7% for 2024 compared to 28.3% for 2023, primarily attributable to higher state income taxes and the effect of unbenefited losses in the U.K.
Current report
Income (loss) from discontinued operations
Current report
Income (loss) from discontinued operations reflects the former Fluids Systems segment, which was sold in the third quarter of 2024. The loss from discontinued operations for 2024 includes the loss on sale of the segment of $195.7 million. Discontinued operations also include $8.9 million and $12.7 million in charges for 2024 and 2023, respectively, primarily related to the Sale Transaction, impairments, and other items. See Note 2 for additional information.
Current report
The following table presents gross profit margins by type:
Current report
Revenues
Current report
Revenues increased 8% to $207.6 million for 2023, compared to $193.0 million for 2022, including a 12% increase in rental and service revenues, partially offset by a 2% decline in product sales revenues. Rental revenues increased $7.8 million (10%) primarily due to higher rental volume, driven by our organic growth efforts, partially offset by lower pricing. Service revenues increased $7.9 million (13%), reflecting a modestly higher level of services included within customer rental projects. Product sales revenues decreased slightly for 2023, with continued strong demand across sectors, including utilities.
Current report
Other operating (income) loss, net
Current report
Other operating (income) loss, net primarily includes gains associated with the sale of assets. Other operating (income) loss, net for 2022 includes a gain on divestiture of $2.6 million for the sale of the Conroe, Texas blending facility. See Note 13 for additional details.
Current report
For 2022, we recognized a $7.9 million non-cash impairment charge related to the exit of our Industrial Blending operations. See Note 13 for additional details.
Current report
Provision (benefit) for income taxes from continuing operations
Current report
The provision for income taxes from continuing operations was $5.6 million for 2023, representing an effective tax rate of 28.3%, compared to a provision for income taxes of $0.9 million for 2022, representing an effective tax rate of 52.9%. The effective tax rate for 2022 was negatively impacted by the level of pretax income from continuing operations.
Current report
Income (loss) from discontinued operations
Current report
Income (loss) from discontinued operations reflects the former Fluids Systems segment, which was sold in the third quarter of 2024. Discontinued operations also include $12.7 million and $29.8 million in charges for 2023 and 2022, respectively, primarily related to impairments and other items. See Note 2 for additional information.
Current report
We elected not to adjust the consolidated statements of cash flows for the years ended December 31, 2024, 2023, and 2022 to exclude cash flows attributable to discontinued operations. As a result, the below descriptions of net cash provided by or used in operating, investing, and financing activities represents the consolidated cash flows for such activities. See Note 2 for depreciation, capital expenditures and significant operating and investing non-cash items related to discontinued operations.
Current report
Following completion of the Sale Transaction in September 2024, substantially all our $17.8 million of cash on hand at December 31, 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.
Current report
The September 2024 amendment, among other things, (i) released Newpark Drilling Fluids from its obligations as a borrower under the Amended ABL Facility, (ii) reduced the aggregate commitments under the Amended ABL Facility from $175 million to $100 million, (iii) reduced the aggregate letter of credit sublimit under the Amended ABL Facility from $15 million to $10 million, (iv) provided that the financial covenant requiring the Consolidated Leverage Ratio (as defined in the Amended ABL Facility) 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 Amended ABL Facility 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 Amended ABL Facility. 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
We also maintain finance leases primarily related to transportation equipment. During 2024, we entered $3.5 million of new finance lease liabilities in exchange for leased assets.
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 certain pre-closing tax assets and other receivables that are expected to be substantially 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 that are 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 (96)
Previous report
We are 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. In addition, we had a third reportable segment, Industrial Blending, which was exited in 2022. We have reflected these three reportable segments for all periods presented in this Annual Report on Form 10-K.
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. For 2023, the relative revenues, operating income, and capital expenditures for the Industrial Solutions and Fluids Systems segments for 2023 are as follows (amounts in millions):
Previous report
Fluids Systems segment operating income for 2023 includes $12.7 million in total charges for certain impairments, facility exit, severance costs, and transaction related expenses for the ongoing Fluids Systems segment sale process as described further below.
Previous report
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.
Previous report
2023 Priorities
Previous report
The following summarizes our performance against key priorities established for 2023:
Previous report
•Accelerate Industrial Solutions Growth – We continued 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. For 2023, 90% of our capital expenditures were directed to the Industrial Solutions segment. Industrial Solutions segment revenues were $207.6 million in 2023, reflecting an 8% increase from 2022, including a 12% increase in rental and services, with higher revenues seen broadly across all major industries served.
Previous report
•Operational Excellence – We increased our focus on efficiency improvements and operating cost optimization across every aspect of our global footprint. With our simplified business model and enhanced focus on balance sheet optimization, we seek to improve returns and consistency in cash flow generation. During 2023, we generated $100.0 million of operating cash flow, which was partially driven by the effects of the 2022 divestitures and ongoing efforts to restructure or reduce the level of invested capital in underperforming business activities within the Fluids Systems segment. In addition, we have continually evaluated and executed actions intended to streamline the organization and our cost structure, driving reductions in overhead costs and improvements in profitability.
Previous report
•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. During 2023, we utilized $47 million of cash generation for debt repayments and another $32 million to repurchase 6.5 million (7%) of our outstanding shares under our repurchase program.
Previous report
Segment Overview
Previous report
Our Industrial Solutions segment has been our primary source of operating income and cash generation in recent years, and has also been the primary focus for growth investments. The growth of our business in 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.
Previous report
Fluids Systems– Our Fluids Systems segment, which generated 72% of our consolidated revenues and $11.9 million of operating income for 2023 (including $12.7 million in total charges for certain impairments, facility exit, severance costs, and transaction related expenses for the ongoing Fluids Systems segment sale process), provides drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in North America and EMEA, 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. As of December 31, 2023, the net working capital of the Fluids Systems segment was $171 million, which reflects a $69 million reduction from December 31, 2022.
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 last three years is as follows:
Previous report
Source: Baker Hughes
Previous report
During 2021, oil prices and the average U.S. rig count steadily improved in the wake of COVID-19, and during 2022, oil prices and rig counts further increased due in part to global economic recovery and geopolitical events. In 2023, market activity in the U.S. steadily declined, ending the year at 622 active rigs, down 20% from the end of 2022. With recent instability 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
Industrial Blending – Our Industrial Blending segment began operations in 2020 and supported industrial end-markets, including the production of disinfectants and industrial cleaning products. In the first quarter of 2022, we completed the wind down of the Industrial Blending business, and in November 2022 we completed the sale of the industrial blending assets.
Previous report
Review of Strategic Alternatives for Fluids Systems Business
Previous report
As described above, we initiated a review of strategic alternatives for the long-term positioning of the Fluids Systems division in June 2023, and 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 this review, in the fourth quarter of 2023 we recognized a $2.5 million impairment charge (included in impairments and other charges) related to certain long-lived assets utilized in our U.S. operations. We also incurred $1.2 million and $0.6 million of transaction related costs in 2023 included in Corporate Office expenses and Fluids Systems segment operating income, respectively. As of December 31, 2023, the Fluids Systems business had approximately $227 million of net assets, including $38 million in cash, $13 million of debt, and $171 million of net working capital.
Previous report
As we continue to evaluate strategic alternatives for our Fluids Systems portfolio, we may incur future charges related to these efforts or potential asset impairments, which may negatively impact our future results.
Previous report
Exit of Stimulation Chemicals Product Line
Previous report
In 2023, we made the decision to exit the stimulation chemicals product line. The Fluids Systems segment operating results for 2023 includes $1.6 million of total charges (included in impairments and other charges) for inventory write-downs to reduce the carrying values of certain inventory related to the exit of our stimulation chemicals product line to their net realizable value. As of December 31, 2023, we had $2.1 million of inventory remaining related to the stimulation chemicals product line.
Previous report
Exit of Offshore Australia Operations
Previous report
In 2023, we made the decision to exit our offshore Australia operations. The Fluids Systems segment operating results for 2023 includes $1.5 million of total charges (included in impairments and other charges) for inventory write-downs to reduce the carrying values of certain inventory related to the exit of our offshore Australia operations to their net realizable value as well as impairments related to the long-lived assets previously used in the now exited business. We expect to incur certain exit related costs of approximately $1 million from the exit of our offshore Australia operations in 2024.
Previous report
Exit of Chile Operations
Previous report
In 2023, we completed our customer contract in Chile, and during the fourth quarter of 2023, we completed the substantial liquidation of our Chile subsidiary and recognized an $0.8 million non-cash charge (included in impairments and other charges) for the reclassification of cumulative foreign currency translation losses related to our subsidiary in Chile.
Previous report
2022 Strategic Actions
Previous report
Exit of Industrial Blending Segment and Sale of Conroe, Texas Blending Facility
Previous report
In the first quarter of 2022, we exited our Industrial Blending operations. In November 2022, we completed the sale of the industrial blending assets for cash proceeds of approximately $14 million. In connection with this divestiture, we recognized a $7.9 million impairment charge related to these long-lived assets in the second quarter of 2022 (included in impairments and other charges), and subsequently recognized a gain of $2.6 million upon the eventual sale in the fourth quarter of 2022.
Previous report
Sale of Excalibar U.S. Mineral Grinding Business
Previous report
In November 2022, we completed the sale of substantially all the long-lived assets, inventory, and operations of our Excalibar U.S. mineral grinding business (“Excalibar”), which was reported within our Fluids Systems segment, to Cimbar Resources, INC. (“Cimbar”), for cash proceeds (after purchase price adjustments) of approximately $51 million and recognized a gain of $1.0 million. The Company retained certain assets and liabilities, including accounts receivable and accounts payable, the wind down of which was substantially completed in the first quarter of 2023. Such working capital provided approximately $10 million of cash generation in the fourth quarter of 2022 and approximately $6 million of additional cash generation in the first quarter of 2023. In connection with the sale, the Company and Cimbar entered into a long-term barite supply agreement for certain regions of our U.S. drilling fluids business, with an initial term of four years following the closing of the transaction.
Previous report
Exit of Gulf of Mexico Operations
Previous report
In December 2022, we completed the sale of substantially all assets associated with our Gulf of Mexico completion fluids operations. Separately, we entered into a seven-year arrangement to sublease our Fourchon, LA drilling fluids shorebase and blending facility to a leading global energy services provider. As part of this arrangement, substantially all of our Gulf of Mexico drilling fluids inventory has been sold to the lessee as consumed. These transactions provided cash generation of approximately $6 million in the fourth quarter of 2022 and approximately $28 million in 2023. Fluids Systems segment operating income for 2023 includes $4.8 million in charges related to the exit of our Gulf of Mexico operations, which was substantially completed during the second quarter of 2023.
Previous report
As a result of the plan to exit the Gulf of Mexico operations as described above, we considered the third quarter 2022 developments to be a potential indicator of impairment that required us to complete an impairment evaluation. Accordingly, we estimated the fair value for our Gulf of Mexico assets as of September 30, 2022 based on the expected cash flows to be generated from the anticipated transactions and determined that a $21.5 million impairment charge was required related to the long-lived assets. We also recognized an $8.0 million charge to reduce the carrying value of inventory to their net realizable value primarily based on the anticipated transactions. The total charges of $29.4 million were recorded to impairments and other charges in the third quarter of 2022.
Previous report
Total impairments and other charges are shown in the following table:
Previous report
Summarized operating results of the business units exited in 2022 (including impairments and other charges described above) are shown in the following table:
Previous report
Summarized net assets related to the business units exited in 2022 are shown in the following table:
Previous report
The net assets remaining as of December 31, 2022 related to the retained working capital from the Excalibar sale and the remaining Gulf of Mexico net assets. During 2023, we substantially settled the above net assets related to the now exited Excalibar business and Gulf of Mexico operations.
Previous report
Revenues decreased 8% to $749.6 million for 2023, compared to $815.6 million for 2022. This $66.0 million decrease includes a $118.8 million (20%) decrease in North America, comprised of a $133.0 million decrease in the Fluids Systems segment partially offset by a $14.2 million increase in the Industrial Solutions segment. In our Fluids Systems segment, revenues from North America operations decreased primarily due to a $82.7 million impact from the divested business units, as well as the effect of lower market share and reduced U.S. market activity. In our Industrial Solutions segment, revenues from North America operations increased primarily due to an increase in rental and services revenues. Revenues from our international operations increased by $52.8 million (24%), driven primarily by higher activity in Europe and Africa. Additional information regarding the change in revenues is provided within the operating segment results below.
Showing the first 40 of 96 passages. Open the source sections for the rest.
Reworded paragraphs (24)
Previous wording
Industrial Solutions– Our Industrial Solutions segment, which generated 28% of our consolidated revenues and $53.0 million of operating income for 2023, 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. For the Industrial Solutions segment, approximately 75% of 2023 revenues were derived from power transmission and other industrial markets.
Current wording
NPK International Inc. is a temporary worksite access solutions company that manufactures, sells, and rents recyclable composite matting products, along with a full suite of services, including planning, logistics, and site restoration. In 2024, 67% of our revenues were generated from the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production (“E&P”), pipeline, renewable energy, petrochemical, construction and other industries within the United States and United Kingdom. The remaining 33% of our 2024 revenues were generated from the sale of our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market.
Previous wording
The following strategic actions were taken in 2023.
Current wording
As aligned with our Strategy described in Part I. Item I. Business, the following strategic actions were taken in 2024.
Previous wording
Foreign currency exchange was a $0.4 million loss for 2022 compared to a $0.4 million gain for 2021 and reflects the impact of currency translation for assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies.
Current wording
Foreign currency exchange was a $0.9 million loss for 2024 compared to a $0.9 million gain for 2023 and reflects the impact of currency translation for assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.
Previous wording
The Industrial Solutions segment generated operating income of $53.0 million for 2023 compared to $43.9 million for 2022, the increase being primarily attributable to incremental profitability associated with revenue growth, including the effects of improved operating cost leverage from increased manufacturing, rental, and service activity.
Current wording
Cost of revenues increased 2% to $135.1 million for 2023 (34.9% gross profit margin), compared to $133.0 million for 2022 (31.1% gross profit margin). The improvement in gross profit margin is primarily associated with revenue growth, including the effects of improved operating cost leverage from increased manufacturing, rental, and service activity.
Previous wording
Selling, general and administrative expenses increased $3.5 million to $101.1 million for 2023, compared to $97.6 million for 2022. This increase was primarily driven by a $1.9 million increase in severance costs and a $1.4 million increase in expenses related to strategic planning projects. Selling, general and administrative expenses as a percentage of revenues was 13.5% for 2023 compared to 12.0% for 2022. Selling, general and administrative expenses in 2022 included $1.8 million of costs within divested business units.
Current wording
Selling, general and administrative expenses increased $2.3 million to $51.1 million for 2023, compared to $48.8 million for 2022. This increase was primarily driven by $1.4 million of costs related to strategic planning projects and a $1.3 million increase in severance costs. Selling, general and administrative expenses as a percentage of revenues was 24.6% for 2023 compared to 25.3% for 2022.
Previous wording
Foreign currency exchange was a $0.3 million loss for 2023 compared to a $0.4 million loss for 2022, and reflects the impact of currency translation for assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies.
Current wording
Foreign currency exchange was a $0.9 million gain for 2023 compared to a $1.3 million loss for 2022 and reflects the impact of currency translation for 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 $8.2 million for 2023 compared to $7.0 million for 2022. The increase in interest expense is primarily due to an increase in benchmark borrowing rates partially offset by a decrease in average debt outstanding.
Current wording
Interest expense was $4.1 million for 2023 compared to $3.5 million for 2022. The increase in interest expense is primarily due to an increase in benchmark borrowing rates in 2023 partially offset by a decrease in average debt outstanding. Discontinued operations also includes an allocation of interest expense on corporate debt. Such interest expense totaled $2.4 million and $2.3 million for 2024 and 2023, respectively.
Previous wording
Net cash provided by operating activities was $100.0 million for 2023 compared to net cash used in operating activities of $25.0 million for 2022. During 2023, net income adjusted for non-cash items provided cash of $57.2 million and changes in working capital provided cash of $42.8 million. The cash provided by reductions in work working capital was primarily driven by Fluids Systems segment reductions in U.S. land, along with the wind down of retained working capital associated with the fourth quarter 2022 divestiture transactions.
Current wording
Net cash provided by operating activities was $38.2 million for 2024 compared to $100.0 million for 2023. Net income adjusted for non-cash items provided cash of $54.5 million in 2024, compared to $57.2 million in 2023, while changes in working capital used cash of $16.3 million in 2024, compared to $42.8 million of cash provided in 2023. The cash provided by changes in working capital in 2023 benefited from the wind down of working capital associated with certain fourth quarter 2022 divestiture transactions.
Previous wording
Net cash used in investing activities was $5.7 million for 2023, including $29.2 million in capital expenditures partially offset by $19.8 million in proceeds received related to our fourth quarter of 2022 divestitures (see Note 2 for additional information), as well as $3.7 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 were directed to expanding our Industrial Solutions segment rental fleet. Net cash provided by investing activities was $46.2 million for 2022, which included $71.3 million in proceeds from 2022 divestitures as well as $3.2 million in proceeds from the sale of assets, partially offset by capital expenditures of $28.3 million.
Current wording
Net cash provided by investing activities was $8.3 million for 2024, which includes $48.5 million in initial net proceeds from the sale of the Fluids Systems business, partially offset by capital expenditures of $43.5 million in 2024, the substantial majority of which were directed to expanding our mat rental fleet. Net cash used in investing activities was $5.7 million for 2023, including $29.2 million in capital expenditures partially offset by $19.8 million in proceeds received related to our fourth quarter 2022 divestiture transactions.
Previous wording
Net cash used in financing activities was $81.0 million for 2023, which includes $47.4 million in net repayments on our Amended ABL Facility and other financing arrangements and $32.0 million in share purchases under our repurchase program. Net cash used in financing activities was $24.9 million for 2022, which included $17.6 million in share purchases under our repurchase program.
Current wording
Net cash used in financing activities was $66.9 million for 2024 and primarily relates to net repayments on our Amended ABL Facility and other financing arrangements. Net cash used in financing activities was $81.0 million for 2023, which includes $47.4 million in net repayments on our Amended ABL Facility and other financing arrangements and $32.0 million in share purchases under our repurchase program.
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 future working capital requirements for our operations will generally fluctuate directionally with revenues, and 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 capital expenditures in 2025 to be $35 million to $40 million, with spending primarily 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. We expect cash on hand and cash generated by operations, as well as the projected availability under our Amended ABL Facility and other existing financing arrangements, to be adequate to fund our current operations during the next 12 months.
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 rates were replaced with Term SOFR (Secured Overnight Financing Rate) beginning in November 2024.
Previous wording
As of December 31, 2023, our total availability under the Amended ABL Facility was $109.2 million, of which $45.0 million was drawn and $4.0 million was used for outstanding letters of credit, resulting in remaining availability of $60.2 million.
Current wording
As of December 31, 2024, our total availability under the Amended ABL Facility was $67.8 million, with no outstanding borrowings and $2.0 million was used for outstanding letters of credit, resulting in remaining availability of $65.8 million.
Previous wording
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%.
Current wording
Under the terms of the Amended ABL Facility, we may elect to borrow at a variable interest rate based on either, (1) the Term SOFR 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) Term SOFR 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 Term SOFR 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%.
Previous wording
As of December 31, 2023, 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 December 31, 2023, 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 December 31, 2024, the applicable margin for borrowings under the Amended ABL Facility was 1.50% with respect to Term SOFR 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 December 31, 2023, the interest rate for the U.K. facilities was 8.7%. 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.
Current wording
Other Financing Arrangements. In April 2022, a U.K. subsidiary entered a £7.0 million term loan and a £2.0 million revolving credit facility. In October 2024, all amounts outstanding under the term loan and revolving credit facility were repaid, and both were terminated.
Previous wording
We do not have any special purpose entities. At December 31, 2023, we had $39.8 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $0.3 million in restricted cash. We also enter into normal short-term operating leases for office and warehouse space, as well as certain operating equipment. None of these off-balance sheet arrangements either has, or is expected to have, a material effect on our financial statements.
Current wording
We do not have any special purpose entities. At December 31, 2024, we had $6.2 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. We also enter into normal short-term operating leases for office and warehouse space, as well as certain operating equipment. None of these off-balance sheet arrangements either has, or is expected to have, a material effect on our financial statements.
Previous wording
(3)Table does not allocate by year expected tax payments, asset retirement obligations, and uncertain tax positions due to the inability to make reasonably reliable estimates of the timing of future cash settlements.
Current wording
(3)Table does not allocate by year expected tax payments and uncertain tax positions due to the inability to make reasonably reliable estimates of the timing of future cash settlements.
Previous wording
We anticipate that the obligations and commitments listed above that are due in less than one year will be paid from 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, subject to covenant compliance and certain restrictions as further discussed above. The specific timing of settlement for certain long-term obligations cannot be reasonably estimated.
Current wording
We anticipate that the obligations and commitments listed above that are due in less than one year will be paid from available cash on-hand, cash generated by operations, and the projected availability under our Amended ABL Facility, subject to covenant compliance and certain restrictions as further discussed above. The specific timing of settlement for certain long-term obligations cannot be reasonably estimated.
Previous wording
As of December 31, 2023, our consolidated balance sheet includes $47.3 million of goodwill, all of which relates to the Industrial Solutions segment. Goodwill and other indefinite-lived intangible assets are tested for impairment annually as of November 1, or more frequently, if indicators of impairment exist. As part of our annual goodwill review, we first perform a qualitative assessment based on company performance and future business outlook to determine if indicators of impairment exist. When there are qualitative indicators of impairment, we use an impairment test which includes a comparison of the carrying value of net assets of our reporting units, including goodwill, with their estimated fair values, which we estimate using a combination of a market multiple and discounted cash flow approach (classified within Level 3 of the fair value hierarchy). In completing the annual evaluation during the fourth quarter of 2023, we determined that the fair value of the Industrial Solutions reporting unit was significantly more than the net carrying value, and therefore, no impairment was required.
Current wording
As of December 31, 2024, our consolidated balance sheet includes $47.2 million of goodwill. Goodwill is tested for impairment annually as of November 1, or more frequently, if indicators of impairment exist. As part of our annual goodwill review, we first perform a qualitative assessment based on company performance and future business outlook to determine if indicators of impairment exist. When there are qualitative indicators of impairment, we use an impairment test which includes a comparison of the carrying value of net assets of our reporting unit, including goodwill, with its estimated fair values, which we estimate using a combination of a market multiple and discounted cash flow approach (classified within Level 3 of the fair value hierarchy). In completing the annual evaluation during the fourth quarter of 2024, we determined that the fair value was significantly more than the net carrying value, and therefore, no impairment was required.
Previous wording
We had total deferred tax assets of $77.3 million and $71.9 million at December 31, 2023 and 2022, respectively. A valuation allowance must be established to offset a deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized. We have considered future taxable income and tax planning strategies in assessing the need for our valuation allowance. At December 31, 2023, we had a total valuation allowance of $49.2 million, which includes a valuation allowance on $29.3 million of net operating loss carryforwards for certain U.S. federal, state and foreign jurisdictions, as well as a valuation allowance of $13.0 million for foreign tax credits and research and development credits. Changes in the expected future generation of qualifying taxable income within these jurisdictions or in the realizability of other tax assets may result in an adjustment to the valuation allowance, which would be charged or credited to income in the period this determination was made.
Current wording
We had total deferred tax assets of $78.6 million and $56.0 million at December 31, 2024 and 2023, respectively. A valuation allowance must be established to offset a deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized. We have considered future taxable income and tax planning strategies in assessing the need for our valuation allowance. At December 31, 2024, we had a total valuation allowance of $34.3 million, which includes valuation allowances of $20.3 million for U.S. capital loss carryforwards, $9.2 million for certain U.S. state and foreign net operating loss carryforwards, as well as $4.8 million for foreign tax credits. In 2024, we recognized a valuation allowance of $20.3 million on capital losses related to the sale of the Fluids Systems business that are not expected to be realized, partially offset by $15.9 million tax benefit recognized primarily related to the release of valuation allowances on U.S. federal and state net operating losses and tax credit carryforwards that are now expected to be realized following the sale of the Fluids Systems business. Changes in the expected future generation of qualifying taxable income within these jurisdictions or in the realizability of other tax assets may result in an adjustment to the valuation allowance, which would be charged or credited to income in the period this determination was made.
Previous wording
We file income tax returns in the U.S. and several non-U.S. jurisdictions and are subject to examination in the various jurisdictions in which we file. We are no longer subject to income tax examinations for U.S. federal and substantially all state jurisdictions for years prior to 2019 and for substantially all foreign jurisdictions for years prior to 2008.
Current wording
We file income tax returns in the U.S. and certain non-U.S. jurisdictions and are subject to examination in the various jurisdictions in which we file. We are no longer subject to income tax examinations for U.S. federal and substantially all state jurisdictions for years prior to 2020 and for substantially all foreign jurisdictions for years prior to 2018.
Previous wording
We are under examination by various tax authorities in countries where we operate, and certain foreign jurisdictions have challenged the amounts of taxes due for certain tax periods. These audits are in various stages of completion. We fully cooperate with all audits but defend existing positions vigorously. We evaluate the potential exposure associated with various filing positions and record a liability for uncertain tax positions as circumstances warrant. Although we believe all tax positions are reasonable and properly reported in accordance with applicable tax laws and regulations in effect during the periods involved, the final determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals.
Current wording
From time to time, we are examined by various tax authorities in countries where we operate. We fully cooperate with all audits but defend existing positions vigorously. We evaluate the potential exposure associated with various filing positions and record a liability for uncertain tax positions as circumstances warrant. Although we believe all tax positions are reasonable and properly reported in accordance with applicable tax laws and regulations in effect during the periods involved, the final determination of these matters could be materially different than that which is reflected in historical income tax provisions and accruals.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The following strategic actions were taken in 2022.