NPK International Inc

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of NPK International Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of NPK International Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Dispositions - Sale of Fluids Systems Business - Refer to Note 2 of the financial statements.

Critical Audit Matter Description

In September 2024, the Company completed the sale of the equity interests in substantially all of the Company’s Fluids Systems segment. Under the terms of the Sale Transaction agreement, the total consideration included net deferred consideration liabilities of $6.5 million that included estimated payables for pre-closing tax liabilities and obligations attributable to the Fluids Systems business as well as estimated liabilities for contractual indemnifications related to various pre-closing contingencies of the Fluids Systems business.

Additional audit effort was required to assess whether the liabilities were properly accounted for and disclosed in the financial statements. The estimated tax and indemnification liabilities required management to make significant estimates and assumptions at the time of the disposition and the probability of potential outcomes. Auditing the probability of potential outcomes involved a high degree of auditor judgment and an increased extent of effort in evaluating whether management's estimates and assumptions and the probability of potential outcomes were reasonable.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s reporting of the disposition and accounting for the deferred consideration liabilities included the following, among others:

•Tested the effectiveness of controls over the Company's accounting and disclosure of the disposition, including the determination of key inputs in the valuation of pre-closing tax and contractual indemnification liabilities.

•Evaluated the reasonableness of the probability of potential outcomes of estimated tax liabilities, with the assistance of our tax specialist.

•Evaluated the reasonableness of the contractual indemnification liabilities, including the key inputs and potential outcomes.

•Evaluated whether the financial statement disclosures were consistent with the terms of the disposition.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 28, 2025

We have served as the Company’s auditor since 2008.

Consolidated Balance Sheets

December 31,

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 —Summary of Significant Accounting Policies

Organization and Principles of Consolidation. 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.

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 (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.

When referring to NPK International Inc. (“NPK,” the “Company,” “we,” “our,” or “us”), the intent is to refer to NPK International Inc. and its subsidiaries as a whole. NPK International Inc., formerly known as Newpark Resources, Inc., was organized in 1932 as a Nevada corporation. In 1991, we changed our state of incorporation to Delaware. On December 9, 2024, we changed our name to NPK International Inc. The consolidated financial statements include our company and our wholly owned subsidiaries. All intercompany transactions are eliminated in consolidation.

Use of Estimates and Market Risks. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“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. Significant estimates used in preparing our consolidated financial statements include, but are not limited to, the following: estimated cash flows and fair values used for impairments of long-lived assets, including goodwill and other intangibles, and valuation allowances for deferred tax assets.

Cash Equivalents. All highly liquid investments with a remaining maturity of three months or less at the date of acquisition are classified as cash equivalents.

Restricted Cash. Cash that is restricted as to withdrawal or usage is recognized as restricted cash and is included in other current assets in the consolidated balance sheets.

Allowance for Credit Losses. Trade receivables are presented at the net amount expected to be collected. We estimate the lifetime “expected credit loss” for such assets at inception, which generally results in the earlier recognition of allowances for losses. Our allowance for credit losses reflects losses that are expected over the contractual life of the asset, and takes into account historical loss experience, current and future economic conditions, and reasonable and supportable forecasts.

Inventories. Inventories are stated at the lower of average cost or net realizable value. Certain conversion costs associated with our manufacturing operations are capitalized as a component of the carrying value of the inventory and expensed as a component of cost of revenues as the products are sold.

Property, Plant and Equipment. Property, plant and equipment are recorded at cost. Additions and improvements that extend the useful life of an asset are capitalized. We capitalize interest costs on significant capital projects. Maintenance and repairs are expensed as incurred. Sales and disposals of property, plant and equipment are removed at carrying cost less accumulated depreciation with any resulting gain or loss reflected in earnings.

Depreciation is provided on property, plant and equipment, including finance lease assets, primarily utilizing the straight-line method over the following estimated useful service lives or lease term:

Cloud Computing Arrangements. Cloud computing arrangements that do not include a software license are accounted for as a service contract. For such cloud computing arrangements, we capitalize certain implementation costs in prepaid expenses and other current assets and other noncurrent assets in the consolidated balance sheets, and amortize these capitalized costs to selling, general and administrative expenses using the straight-line method over the fixed, non-cancellable term of the associated hosting arrangement, plus any reasonably certain renewal periods. Implementation costs for cloud computing arrangements are included in operating activities in the consolidated statements of cash flows.

Leases. Leases are classified as either finance or operating at inception of the lease, with classification affecting the expense recognition in the income statement. Our leases have remaining terms ranging from 1 to 7 years with various extension and termination options. We consider these options in determining the lease term used to establish our operating lease assets and liabilities. Lease agreements with lease and non-lease components are accounted for as a single lease component. Leases with an initial term of 12 months or less are not recorded in the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Certain leases require additional payments based on reimbursement for real estate taxes, common area maintenance, or various other variable lease payments. These variable lease payments are generally excluded from operating lease assets and lease liabilities and are recognized in rent expense as incurred.

Goodwill and Other Intangible Assets. Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net identifiable assets acquired in business combinations. Goodwill is not amortized. Intangible assets with finite useful lives are amortized either on a straight-line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the asset are realized. Any period costs of maintaining intangible assets are expensed as incurred.

Impairment of Long-Lived Assets. 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 value, which we estimate using a combination of a market multiple and discounted cash flow approach (classified within level 3 of the fair value hierarchy). If the carrying value exceeds the estimated fair value, an impairment charge is recorded in the period in which such review is performed.

We review property, plant and equipment, finite-lived intangible assets and certain other assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We assess recoverability based on the undiscounted future net cash flows expected from the use and eventual disposition of such asset. Should the review indicate that the carrying value is not fully recoverable, the amount of impairment loss is determined by comparing the carrying value to the estimated fair value.

Insurance. We maintain reserves for estimated future payments associated with our self-insured employee healthcare programs, as well as the self-insured retention exposures under our general liability, auto liability, and workers compensation insurance policies. Our reserves are determined based on historical experience under these programs, including estimated development of known claims and estimated incurred-but-not-reported claims.

Treasury Stock. Treasury stock is carried at cost, which includes the entire cost of the acquired stock.

Revenue Recognition. The following provides a summary of our significant accounting policies for revenue recognition.

Continuing Operations. Revenues for rentals and services are generated from both fixed-price and unit-priced contracts, which are generally short-term in duration. The activities under these contracts include the installation and rental of matting systems for a period of time and services such as access road construction, site planning and preparation, environmental protection, erosion control, and site restoration services. Rental revenues are recognized over the rental term and service revenues are recognized when the specified services are performed. Revenues from any subsequent extensions to the rental agreements are recognized over the extension period. Certain services performed that are directly related to the mat rental operation are considered as rental revenues for presentation on the consolidated statements of operations. Such direct services include mat installation and removal, freight (hauling of mats), and direct labor related to such activities. Revenues from the direct sale of products are recognized when control passes to the customer, which is upon shipment or delivery, depending on the terms of the underlying sales contract.

Discontinued Operations. Revenues for fluid system additive products and engineering services, when provided to customers in the delivery of an integrated fluid system, are recognized as product sales revenues when utilized by the customer. Revenues for formulated liquid systems are recognized as product sales revenues when utilized or lost downhole while drilling. Revenues for equipment rentals and other services provided to customers that are ancillary to the fluid system product delivery are recognized in rental and service revenues when the services are performed. For direct sales of fluid system products, revenues are recognized when control passes to the customer, which is generally upon shipment of materials.

For all operations, the amount of revenue we recognize for products sold and services performed reflects the consideration to which we expect to be entitled in exchange for such goods or services, which generally reflects the amount we have the right to invoice based on agreed upon unit rates. While billing requirements vary, many of our customer contracts require that billings occur periodically or at the completion of specified activities, even though our performance and right to consideration occurs throughout the contract. As such, we recognize revenue as performance is completed in the amount to which we have the right to invoice. We do not disclose the value of our unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue for the amount to which we have the right to invoice for products sold and services performed.

Shipping and handling costs are reflected in cost of revenues, and all reimbursements by customers of shipping and handling costs are included in revenues.

Income Taxes. We provide for deferred taxes using an asset and liability approach by measuring deferred tax assets and liabilities due to temporary differences existing at year end using currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. We reduce deferred tax assets by a valuation allowance when, based on our estimates, it is more likely than not that a portion of those assets will not be realized in a future period. The estimates utilized in recognition of deferred tax assets are subject to revision, either up or down, in future periods based on new facts or circumstances. We present deferred tax assets and liabilities as noncurrent in the balance sheet based on an analysis of each taxpaying component within a jurisdiction. We evaluate uncertain tax positions and record a liability as circumstances warrant.

Share-Based Compensation. Share-based compensation cost is measured at the grant date based on the fair value of the award, net of an estimated forfeiture rate. We recognize these costs in the statement of operations using the straight-line method over the vesting term.

Foreign Currency Translation. The functional currency for substantially all international subsidiaries is their respective local currency. Financial statements for these international subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the average exchange rates in effect during the respective period for revenues and expenses. Exchange rate adjustments resulting from translation of foreign currency financial statements of our international subsidiaries are reflected in accumulated other comprehensive loss in stockholders’ equity until such time that the international subsidiary is sold or liquidation is substantially complete, at which time the related accumulated adjustments would be reclassified into income. Exchange rate adjustments resulting from foreign currency denominated transactions are recorded in income. At December 31, 2024 and 2023, accumulated other comprehensive loss related to foreign subsidiaries reflected in stockholders’ equity was $2.9 million and $62.8 million, respectively, with the decrease related to the Sale Transaction as discussed in Note 2.

Fair Value Measurement. Fair value is measured as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

•Level 1: The use of quoted prices in active markets for identical financial instruments.

•Level 2: The use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or other inputs that are observable in the market or can be corroborated by observable market data.

•Level 3: The use of significantly unobservable inputs that typically require the use of management’s estimates of assumptions that market participants would use in pricing.

New Accounting Pronouncements

Standards Adopted in 2024

Segment Reporting. In November 2023, the Financial Accounting Standards Board (“FASB”) issued new guidance 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. We adopted this guidance retrospectively in this Annual Report on Form 10-K. The new guidance had no impact on our consolidated financial statements, but did result in expanded reportable segment disclosures. See Note 13 for additional information.

Standards Not Yet Adopted

Income Taxes: Improvements to Income Tax Disclosures. In December 2023, the FASB issued new guidance 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. These requirements are not expected to have an impact on our consolidated financial statements but will impact our income tax disclosures beginning in the first quarter of 2025.

Disaggregation of Income Statement Expenses. In November 2024, the FASB issued new guidance which requires entities to disclose additional information about specific expense categories, such as employee compensation and depreciation. This guidance will be effective for us for years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted on either a prospective or retrospective basis. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related 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. 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. As of December 31, 2024, approximately $18 million of net assets is included within the consolidated balance sheet, reflecting the receivables and deferred consideration 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 received in 2024, net of cash disposed consisted of the following (in thousands):

Receivables due from the Purchaser is primarily related to the transaction price adjustment finalized in February 2025 for the actual working capital delivered at closing, of which $8.7 million was received in February 2025 with the remaining balance expected to be collected from the Purchaser in the first half of 2025. 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. The note receivable due from the Purchaser matures in March 2030 and bears interest at a rate of 12.5% per year. The receivables and deferred consideration due from the Purchaser are 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 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. These estimated 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 consolidated statements of cash flows for the years ended December 31, 2024, 2023, and 2022 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 $1.4 million, $2.4 million, and $2.3 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The following table summarizes the significant items included in income (loss) from discontinued operations in the consolidated statements of operations. The results for 2024 represent operations 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 years ended December 31, 2024, 2023, and 2022, significant operating and investing items related to the former Fluids Systems segment were as follows:

Note 3 —Inventories

Inventories consisted of the following at December 31:

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 4 —Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 31:

Depreciation expense was $20.5 million, $21.2 million, and $22.1 million in 2024, 2023 and 2022, respectively.

Note 5 —Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill are as follows:

We completed the annual evaluation of the carrying value of our goodwill as of November 1, 2024 and determined that the fair value was significantly more than the net carrying value, and therefore, no impairment was required.

Other intangible assets consisted of the following:

Total amortization expense related to other intangible assets was $2.1 million, $2.4 million and $2.6 million in 2024, 2023 and 2022, respectively. The decrease in the gross carrying amount of intangible assets in 2024 was attributable to a write-off of fully amortized balances.

Estimated future amortization expense for the years ended December 31 is as follows:

The weighted average amortization period for technology related and customer related intangible assets is 15 years and 13 years, respectively.

Note 6 —Financing Arrangements

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 rates were replaced with Term SOFR (Secured Overnight Financing Rate) beginning in November 2024.

As of December 31, 2024, our total availability under the Amended ABL Facility was $67.8 million, withno outstanding borrowings and $2.0 million was used for outstanding letters of credit, resulting in remaining availability of $65.8 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 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%.

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.

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.

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, 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.

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.

In addition, 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 incurred net interest expense of $2.6 million, $4.1 million and $3.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. There wasno capitalized interest for the years ended December 31, 2024, 2023 or 2022. As of December 31, 2024, we had scheduled repayments for financing arrangements of approximately $3 million in 2025, $3 million in 2026, $1 million in 2027, and $1 million in 2028.

Note 7 —Fair Value of Financial Instruments and Concentrations of Credit Risk

Fair Value of Financial Instruments

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 December 31, 2024 and 2023.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk primarily consist of cash, cash equivalents, and trade accounts receivable. At December 31, 2024, substantially all of our cash and cash equivalents reside in U.S. financial institutions or money market funds. As part of our investment strategy, we perform periodic evaluations of the relative credit standing of these financial institutions and money market funds.

Customer Revenue Concentration

We derive a significant portion of our revenues and profitability from customers operating within the utilities sector, which include power transmission service providers as well as large regulated electrical utility providers. For 2024, 2023 and 2022, revenues from our 20 largest customers represented approximately 67%,67% and 71%, respectively, of our consolidated revenues. For 2024, our largest customer represented 19% of our revenues. For 2023 and 2022, no single customer accounted for more than 10% of our consolidated revenues.

Receivables

Receivables consisted of the following at December 31:

Other receivables as of December 31, 2024 included $23.2 million for amounts due from the Purchaser, including the receivables and estimated deferred consideration related to the Sale Transaction (see Note 2) as well as amounts due under the transition services agreement. Other receivables as of December 31, 2024 also included an insurance receivable of $1.7 million related to a cybersecurity event.

Changes in our allowance for credit losses were as follows:

Note 8 —Leases

We lease certain office space, warehouses, land, and equipment. Leases in the consolidated balance sheets consisted of the following at December 31:

Lease costs in the consolidated statements of operations were as follows:

Total operating lease expenses approximate cash paid during each period. Interest for finance leases is not material. Operating lease expenses and amortization of leased assets for finance leases are included in either cost of revenues or selling, general and administrative expenses. Interest for finance leases is included in interest expense, net. Sublease income is included in selling, general and administrative expenses, or other operating income.

In addition to the sublease income in the table above, which relates to our principal executive offices, we also own a facility containing approximately 108,000 square feet of office space (approximately 81,000 square feet of which is currently being leased to third parties) on approximately 11 acres of land in Katy, Texas, which houses certain administrative offices. From this facility, we generated lease income of $0.8 million and $0.5 million for 2024 and 2023, respectively (none for 2022). Such sublease and lease income associated with our administrative offices is included inselling, general and administrative expenses.

For information regarding revenues from the rental of our matting systems, see Note 13.

The maturity of lease liabilities as of December 31, 2024 is as follows:

During 2024, we entered into $1.1 million and $3.5 million of new operating lease liabilities and finance lease liabilities, respectively, in exchange for leased assets. During 2023, we entered into $0.7 million and $4.5 million of new operating lease liabilities and finance lease liabilities, respectively, in exchange for leased assets.

Weighted-average remaining lease terms and the weighted average discount rates are as follows:

Note 9 —Income Taxes

The provision (benefit) for income taxes from continuing operations is as follows:

Income from continuing operations before income taxes is as follows:

The effective income tax rate from continuing operations is reconciled to the statutory federal income tax rate as follows:

The benefit for income taxes from continuing operations was $6.7 million for 2024 and 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. The provision for income taxes from continuing operations was $5.6 million for 2023 and $0.9 million for 2022, respectively.

Temporary differences and carryforwards which give rise to deferred tax assets and liabilities consisted of the following at December 31:

We have U.S. federal income tax net operating loss carryforwards (“NOLs”) of approximately $104.7 million available to reduce future U.S. taxable income, which do not expire. We also have state NOLs of approximately $216.5 million available to reduce future state taxable income, including approximately $154.6 million which do not expire and approximately $61.9 million which expire in varying amounts beginning in 2025 through 2044. Foreign NOLs of approximately $2.8 million are available to reduce future taxable income, some of which expire beginning in 2034. U.S. federal capital loss carryforwards of approximately $91.4 million expire in 2029.

The realization of our net deferred tax assets is dependent on our ability to generate taxable income in future periods. At December 31, 2024 and 2023, we have recorded a valuation allowance in the amount of $34.3 million and $32.6 million, respectively, primarily related to U.S. capital loss carryfowards, certain U.S. state and foreign NOL carryforwards, as well as foreign tax credits, which may not be realized. The change in the valuation allowance in 2024 is primarily related to a valuation allowance recognized on capital losses related to the sale of the Fluids Systems business that are not expected to be realized, partially offset by the release of approximately $15.9 million of valuation allowances primarily related to 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.

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.

A reconciliation of the beginning and ending provision for uncertain tax positions is as follows:

Approximately $0.1 million of unrecognized tax benefits at December 31, 2024, if recognized, would favorably impact the effective tax rate.

We recognize accrued interest and penalties related to uncertain tax positions in operating expenses. The amount of interest and penalties was immaterial for all periods presented.

Note 10 —Capital Stock

Common Stock

Changes in outstanding common stock were as follows:

Outstanding shares of common stock include shares held as treasury stock totaling 25,114,978,26,471,738 and 21,751,232 as of December 31, 2024, 2023 and 2022, respectively.

Treasury Stock

Changes in treasury stock were as follows:

During 2024, 2023 and 2022, we purchased shares surrendered in lieu of taxes upon vesting of restricted shares for an aggregate cost of $4.5 million, $2.2 million and $2.7 million, respectively.

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 6) 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 December 31, 2024, we had $50.0 million of authorization remaining under the program.

Due to restrictions associated with the Fluids Systems sale process and other events, no shares of common stock were repurchased under the repurchase program during 2024. During 2023, we repurchased 6,522,797 shares of our common stock under our repurchase program for a total cost of $31.9 million.

Preferred Stock

We are authorized to issue up to 1,000,000 shares of preferred stock, $0.01 par value. There wereno outstanding shares of preferred stock as of December 31, 2024, 2023 or 2022.

Note 11 —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 for continuing operations:

Note 12 —Stock-Based Compensation and Other Benefit Plans

The following describes stockholder approved plans utilized by us for the issuance of stock-based awards.

2014 Non-Employee Directors’ Restricted Stock Plan

In May 2014, our stockholders approved the 2014 Non-Employee Directors’ Restricted Stock Plan (“2014 Director Plan”) which authorizes grants of restricted stock to non-employee directors. Each restricted share granted to a non-employee director vests 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. At December 31, 2024,0.4 million shares remained available for award under the 2014 Director Plan.

2015 Employee Equity Incentive Plan

In May 2015, our stockholders approved the 2015 Employee Equity Incentive Plan (“2015 Plan”) pursuant to which the Compensation Committee of our Board of Directors (“Compensation Committee”) may grant to key employees, including executive officers and other employees, a variety of forms of equity-based compensation, including shares of restricted common stock, restricted stock units, options to purchase shares of common stock, stock appreciation rights, other stock-based awards, and performance-based awards. At December 31, 2024,3.4 million shares remained available for award under the 2015 Plan.

In June 2017, our Board of Directors approved the Long-Term Cash Incentive Plan (“Cash Plan”), a sub-plan to the 2015 Plan, pursuant to which the Compensation Committee may grant time-based cash awards or performance-based cash awards to key employees, including executive officers and other employees, to provide an opportunity for employees to receive a cash payment upon either completion of a service period or achievement of predetermined performance criteria at the end of a performance period.

Activity under each of these programs is described below.

Restricted Stock Awards and Units

Time-vested restricted stock awards and restricted stock units are periodically granted to key employees, including grants for employment inducements, as well as to members of our Board of Directors. Employee awards provide for vesting periods ranging from three tofour years. Non-employee director grants 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. Upon vesting of these grants, shares are issued to award recipients.

The following tables summarize the activity for our outstanding time-vested restricted stock awards (granted to our Board of Directors) and restricted stock units (granted to employees) for the year ended December 31, 2024:

The table above includes activity related to employees of our former Fluids Systems segment. Total compensation cost recognized for restricted stock awards and restricted stock units inclusive of discontinued operations was $5.0 million, $6.4 million and $6.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. During the years ended December 31, 2024, 2023 and 2022, the total fair value of shares vested was $15.6 million, $9.0 million and $9.4 million, respectively. For the years ended December 31, 2024, 2023 and 2022, we recognized tax benefits resulting from the vesting of restricted stock awards and units of $3.1 million, $1.8 million and $1.8 million, respectively. As a result of the Sale Transaction,0.6 million of unvested restricted stock units previously granted to former employees were forfeited on September 13, 2024, andno awards related to employees of our former Fluids Systems remained outstanding at December 31, 2024.

Total compensation cost recognized for restricted stock awards and restricted stock units for continuing operations was $4.5 million, $4.7 million and $4.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. Total unrecognized compensation cost at December 31, 2024 related to restricted stock awards and restricted stock units was approximately $5.7 million which is expected to be recognized over the next 1.6 years.

Cash-Based Awards

In addition to the restricted stock units described above, the Compensation Committee also approved the issuance of cash-based awards to certain executive officers during 2024, 2023 and 2022. The 2024 awards included a target value of $2.6 million, the 2023 awards included a target value of $2.5 million, and the 2022 awards included a target value of $2.8 million. The cash payout for each award ranges from 0% to 200% of target. As of December 31, 2024, the 2024, 2023, and 2022 awards had $2.3 million, $2.2 million, and $2.0 million target value outstanding.

Of the outstanding cash-based awards for 2024 and 2023,70% will be settled based on the relative ranking of our total shareholder return (“TSR”) as compared to the TSR of our designated peer group and 30% will be settled based on the consolidated return on net capital employed (“RONCE”), each measured over athree-year performance period. For TSR awards, the performance period for the 2024 award is measured from May 2024 to May 2027 and the performance period for the 2023 awards is measured from May 2023 to May 2026. RONCE performance for the 2024 and 2023 awards will be determined based upon the Company’s average three-year RONCE performance for the fiscal years 2024 through 2026, and fiscal years 2023 through 2025, respectively. The 2022 awards will be settled based on the relative ranking of our TSR as compared to the TSR of our designated peer group over athree-year period from May 2022 to May 2025.

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 performance-based cash awards is remeasured each period using a Monte Carlo valuation model with changes in fair value recognized in the consolidated statement of operations.

Total compensation cost recognized for cash-based awards was $2.7 million, $3.8 million and $3.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024 and 2023, the total liability for cash-based awards was $4.3 million and $6.7 million, respectively.

Stock Options

Stock options granted by the Compensation Committee are granted with athree-year vesting period and a term often years. There have beenno options granted since 2016.

The following table summarizes activity for our outstanding stock options for the year ended December 31, 2024:

There wasno compensation cost recognized for stock options during the years ended December 31, 2024, 2023, or 2022. The total intrinsic value of options exercised was $0.1 million for the year ended December 31, 2024, and cash from options exercised totaled $0.1 million. The total intrinsic value of options exercised was $0.4 million for the year ended December 31, 2023, and cash from options exercised totaled $0.6 million. There wereno stock options exercised during 2022.

Defined Contribution Plan

Substantially all of our U.S. employees are covered by a defined contribution plan (“401(k) Plan”). Employees may voluntarily contribute up to 50% of compensation, as defined in the 401(k) Plan. Participants’ contributions, up to 4% of compensation, are matched 100% by the Company, and the participants’ contributions, from 4% to 6% of compensation, are matched 50% by the Company. Under the 401(k) Plan, our cash contributions were $2.9 million, $3.2 million and $2.5 million for 2024, 2023 and 2022, respectively.

Note 13 —Segment and Related Information

Following the sale of the Fluids Systems segment in September 2024, we haveone reportable segment. We previously operated a second reportable segment, Fluids Systems, which we exited in the third quarter of 2024, and a third reportable segment, Industrial Blending, which we exited in 2022.

Following the sale of the Fluids Systems segment in September 2024, the Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, allocates resources and assesses financial performance on a consolidated basis. The Company’s operations, currently in the United States and United Kingdom, are substantially similar with respect to services provided, type of customers, and sourcing of materials. Resource allocations are based on the capacity of the Company’s existing rental fleet, manufacturing facility and current status of operations, including projected demand for our products and services in the industries and locations we serve. Consolidated income from continuing operations as presented in the consolidated statements of operations is used to measure performance. As such, management has determined that the Company functions as a single operating segment, and reports as a single reportable segment.

See Note 2 for financial information for our previously reported Fluids Systems segment, now reported as discontinued operations.

Our Industrial Blending segment began operations in 2020 and supported industrial end-markets, including the production of disinfectants and industrial cleaning products. In 2022, we exited our Industrial Blending operations and completed the sale of the industrial blending and warehouse facility and related equipment 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, and subsequently recognized a gain of $2.6 million upon the eventual sale in the fourth quarter of 2022.

Certain services performed that are directly related to the mat rental operation are considered as rental revenues for presentation on the consolidated statements of operations. Such direct services include mat installation and removal, freight (hauling of mats), and direct labor related to such activities.

The following table presents further disaggregated revenues by geography, based on the country in which the sale originates:

The following table presents disaggregated expense information:

The following table presents long-lived assets, which includes property, plant and equipment and other long-term assets, based on the country in which the assets are located:

For 2024, our largest customer represented 19% of our revenues. For 2023 and 2022, no single customer accounted for more than 10% of our consolidated revenues.

Note 14 —Supplemental Cash Flow and Other Information

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 consolidated statements of cash flows to exclude cash flows attributable to discontinued operations. A substantial majority of cash tax payments in 2024, 2023 and 2022 related to our former Fluids Systems segment’s international operations.

Cash, cash equivalents, and restricted cash in the consolidated statements of cash flows consisted of the following at December 31:

Accounts payable and accrued liabilities at December 31, 2024, 2023, and 2022, included accruals for capital expenditures of $1.3 million, $1.6 million, and $1.1 million, respectively.

Accrued liabilities at December 31, 2024 and 2023 included accruals for employee incentives and other compensation related expenses of $8.9 million and $12.2 million, respectively.

Note 15 —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.

In 2024, we recognized 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.

Other

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 had, or is expected to have, a material effect on our financial statements.

We are self-insured for health claims, subject to certain “stop loss” insurance policies. Claims in excess of $250,000 per incident are insured by third-party insurers. Based on historical experience, we had accrued liabilities of $0.5 million and $0.6 million for unpaid claims incurred at December 31, 2024 and 2023, respectively. Substantially all of these estimated claims are expected to be paid within six months of their occurrence. In addition, we are self-insured for certain workers’ compensation, auto, and general liability claims up to a certain policy limit. Claims in excess of $750,000 are insured by third-party reinsurers. Based on historical experience, we had accrued liabilities of $0.8 million and $1.7 million for the uninsured portion of claims at December 31, 2024 and 2023, respectively.