Our repurchase program remains available for repurchases of our common stock. The repurchase program has no specific term. Repurchases are expected to be funded from operating cash flows, available cash on hand, and borrowings under our Amended ABL Facility (as defined in Note 6)7). 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 March 31,June 30, 2022, we had $23.8 million remaining under the program.
There were no shares of common stock repurchased under the repurchase program during the first quarterhalf of 2022 or 2021. During the first quarterhalf of 2021, we repurchased $18.3 million of our Convertible Notes in the open market under the repurchase program for a total cost of $18.1 million.
Raw materials for the Fluids Systems segment consist primarily of barite, chemicals, and other additives that are consumed in the production of our fluids systems. Raw materials for the Industrial Solutions segment consist primarily of resins, chemicals, 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. Our blended fluids systems components consist of base fluids systems that have been either mixed internally at our blending facilities or purchased from third-party vendors. These base fluids systems require raw materials to be added, as needed to meet specified customer requirements.
In May 2022, we amended and restated the ABL Facility (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, expands available borrowing capacity associated with the Industrial Solutions rental mat fleet, replaces the LIBOR-based pricing grid with a BSBY-basedBloomberg 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).
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 Bloomberg Short-Term Bank Yield Index (“BSBY”)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. The Company isWe 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 lessgreater than 50% and (ii) 0.25% per annum at any time the average daily unused portion of the commitments is greaterless than 50%.
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.
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 requires compliance with the following financial covenants: (i) a minimum fixed charge coverage ratio of 1.00 to 1.00 for the most recently completed four fiscal quarters and (ii) while a leverage covenant trigger period (as defined in the Amended ABL Facility) is in effect, a maximum consolidated leverage ratio of 4.00 to 1.00 as of the last day of the most recently completed fiscal quarter.
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.
In February 2021, a U.K. subsidiary entered a £6.0 million (approximately $8.3 million) term loan facility that was scheduled to mature in February 2024. Effective January 1, 2022, the term loan had an interest at a rate of SONIA plus a margin of 3.5% per year. The term loan was payable in quarterly installments of £375,000 plus interest beginning March 2021 and a £1.5 million payment due at maturity. We had $5.4 million outstanding under this arrangement at March 31, 2022. In April 2022, this facility was amended to increase the term loan to £7.0 million (approximately $9.1 million) and add a £2.0 million (approximately $2.6 million) revolving credit facility. Both the amended term loan and revolving credit facility mature in April 2025 and bear interest at a rate of SONIA plus a margin of 3.25% per year. 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 had $11.2$10.4 million outstanding under these arrangements at May 2,June 30, 2022.
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. We had $14.5$11.9 million and $11.8 million outstanding under these arrangements at March 31,June 30, 2022 and December 31, 2021, respectively.
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 March 31,June 30, 2022 and December 31, 2021.
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. While the outcome of litigation or other proceedings against us 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.
With ongoing support from outside financial and other advisors, we have continuously reviewed our portfolio during the oil and natural gas cycle of the last couple of years. These reviews have focused on evaluating changes in the outlook for our served markets and customer priorities, while identifying opportunities for value-creating options in our portfolio, placing investment emphasis in markets where we generate strong returns and where we see greater long-term viability and stability. As part of ourthe ongoing review of our portfolio, our management recommended, and our Board of Directors approved two2 actions in February 2022 intended to enhance liquidity available for investment in higher returning businesses.
First, in consideration of broader strategic priorities and the timeline and efforts required to further develop the industrial blending business, our Board of Directors approved a plan in February 2022 to exit our Industrial Blending operations. As part of the exit plan, we completed the wind down of the Industrial Blending business in the first quarter of 2022 and are currently pursuing the sale of the industrial blending and warehouse facility and related equipment located in Conroe, Texas. The Industrial Blending business had no significant revenues and incurred an operating loss of $0.9 million for the first
As a result of the plan to exit and dispose of the assets used in the Industrial Blending business, we estimated in February 2022 and disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 that we may incur pre-tax charges in the range of approximately $4 million to $8 million primarily related to the non-cash impairment of long-lived assets related toused in the Industrial Blending business, which we anticipated recognizing in the first quarter of 2022.business. In March 2022, we shut down the Industrial Blending business and initiated a sales process to market the industrial blending and warehouse facility and related equipment. AsIn June 2022, as a result of the ongoing sales process and revised estimates for the expected net proceeds from the ultimate disposition, we now anticipate recoveringrecognized a $7.9 million impairment charge related to these long-lived assets. As of June 30, 2022, the $19 millionremaining carrying value of the long-lived assets associated withpreviously used in the now exited Industrial Blending business. Accordingly, 0 impairment has been recognized for these assets in the first quarter of 2022, though itbusiness was $11 million. It remains possible that we may incur a future impairment or loss related to the ongoing sales process.
14Industrial Solutions operating results for the second quarter of 2021 included a $1.0 million gain in other operating income related to a legal settlement.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition, results of operations, liquidity, and capital resources should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2021. Our firstsecond quarter represents the three-month period ended March 31.June 30 and our first half represents the six-month period ended June 30. Unless otherwise noted, all currency amounts are stated in U.S. dollars. The reference to a “Note” herein refers to the accompanying Notes to Unaudited Condensed Consolidated Financial Statements contained in Item 1 “Financial Statements.”
Overview
Newpark Resources, Inc. (the “Company,” “we,” “our,” or “us”) is a geographically diversified supplier providing environmentally-sensitive products, as well as rentals and services to customers across multiple industries. We operate our business through two reportablethree segments: Industrial Solutions, which serves various markets including power transmission, oil and natural gas exploration and production (“E&P”), pipeline, renewable energy, petrochemical, construction and other industries, andindustries; Fluids Systems, which primarily serves E&P customers.customers; and Industrial Blending, which we shut down in March 2022.
The relative contribution of revenues and operating income for the Industrial Solutions and Fluids Systems segments for the first half of 2022 is as follows (amounts in millions):
As illustrated above, while the Fluids Systems segment has historically been the primary driver of revenues, the Industrial Solutions segment has historically been, and remains the primary driver of operating income, cash flows, and financial returns.
Our long-term strategy includes key foundational elements that are intended to enhance long-term shareholder value creation:
•End-market diversification – To help reduce our dependency on customers in the volatile E&P industry, provide growth opportunities into new markets, and ultimately improve the stability in cash flow generation and returns on invested capital, and provide growth opportunities into new markets, we have focused our efforts over the past several years on diversifyingexpanding our presence outside ofbeyond our historical E&P customer base. These efforts have been primarily focused within our Site and AccessIndustrial Solutions business,segment, where we have prioritized growth in power transmission, pipeline, renewable energy, and construction markets. The continued expansion of revenues in industrial markets, and particularly end-markets that are likely to benefit from ongoing energy transition efforts around the world, such as power transmission, renewable energy, and geothermal, remains a strategic priority going forward, and we anticipate that our capital investments will primarily focus on supporting this objective.
•Provide products that enhance environmental sustainability – The Company has a long history of providing environmentally-sensitive technologies to our customers. In the Industrial Solutions segment, we believe the lightweight design of our fully recyclable DURA-BASE® matting system provides a distinct environmental advantage for our customers as compared to alternative wood mat products in the market, by eliminating deforestation required to produce wood mat products while also reducing CO2greenhouse gas emissions associated with product transportation. We also continue to leverage our investments in research and development capabilities and adaptable manufacturing processes to increase the use of recycled and alternate materials in our composite mat production, providing further potential economic benefits along with a significant reduction in lifecycle greenhouse gas emissions when compared to
using traditional virgin resin. In our Fluids Systems segment, our family of high-performance water-based fluids systems, which we market as Evolution® and DeepDrill® systems, are designed to enhance drilling performance while also providing a variety of environmental benefits relative to traditional oil-based fluids. More recently, ourOur Fluids Systems segment has also developed thea water-based fluids system for geothermal applications that we market as TerraThermTM water-based fluids system designed specifically for clean-energy geothermal drilling, as well as the TransitionTM family of brine-tolerant stimulation chemicals, which reduce the freshwater required for well stimulation applications. The continued advancement of technology that provides our customers with economic benefits, while also enhancing their environmental and safety programs, remains a priority for our research and development efforts.
Segment Overview
In the second quarter of 2022, we began reporting our business through three reportable segments: Fluids Systems, Industrial Solutions, and Industrial Blending. Prior to this change, we aggregated our now exited Industrial Blending business and reported it within Industrial Solutions. We have reflected this change in all periods presented.
Industrial Solutions -– Our Industrial Solutions segment, which generated $35.4 million23% of revenues and $5.5$16.1 million of operating income for the first quarterhalf of 2022, 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 Europe. We also manufacture and sell our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market. Over the past year, the impacts of global supply chain disruptions have caused significant cost inflation to the resin and other materials used to manufacture our composite mats. These raw material cost increases have negatively impacted the profitability of our business, although we are working with customers to offset the inflationary impact.
Our Industrial Solutions segment has been athe primary source of operating income and cash generation for us in recent years and has also been the primary focus for growth investments. The expansiongrowth of our Industrial Solutions segment intothis business in the power transmission and other industrial markets remains a strategic priority for us due to such markets’ relative stability compared to E&P, as well as the magnitude of growth opportunity in these markets, including the potential positive impact from the energy transition. From 2018 to 2021, annual segment revenues from these targeted industrial markets increased from approximately $116 million to $157 million, reflecting a 11% cumulative annual growth rate, and we look to build upon this success going forward through both organic and inorganic growth opportunities. 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 energy transition and the increasing investment in grid reliance initiatives.
Industrial Blending – In 2020, we began leveraging our oilfield chemical blending capacity and technical expertise into industrial blending operations, and in response to the increasing market demand for cleaning products resulting from the COVID-19 pandemic, began producing disinfectants and industrial cleaning products in 2020. Despite our initial success, a key blue-chip customer experienced a significant decline in product demand and cancelled all orders of disinfectants and cleaning products in the third quarter of 2021. In February 2022, in consideration of broader strategic priorities and the timeline and efforts required to further develop the Industrial Blending business, our management recommended, and our Board of Directors approved a plan to exit our Industrial Blending operations. As part of the exit plan, we completed the wind down of the Industrial Blending business in the first quarter of 2022 and are currently pursuing the sale ofinitiated a sales process to market the industrial blending and warehouse facility and related equipment located in Conroe, Texas. Although we currently anticipate recovering the $19 million carrying value
As a result of the long-livedplan to exit and dispose of the assets associated withused in the Industrial Blending business, withwe disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 that we may incur pre-tax charges in the range of approximately $4 million to $8 million primarily related to the non-cash impairment of long-lived assets used in the Industrial Blending business. In June 2022, as a result of the ongoing sales process and revised estimates for the expected net proceeds from the ultimate disposition, it iswe recognized a $7.9 million impairment charge related to these long-lived assets. As of June 30, 2022, the remaining carrying value of the long-lived assets previously used in the now exited Industrial Blending business was $11 million. It remains possible that we may incur a future impairment or loss related to the ongoing sales process. The Industrial Blending business had no significant revenues and incurred an operating loss of $0.9 million for the first quarter of 2022, and contributed $5 million of revenues with approximately break-even operating income for the first quarter of 2021.
Fluids Systems -– Our Fluids Systems segment, which generated $141.0 million77% of consolidated revenues and $3.4$3.8 million of operating income for the first quarterhalf of 2022, provides drilling, completion, and stimulation fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in North America and Europe, the Middle East and Africa (“EMEA”), as well as certain countries in Asia Pacific and Latin America. 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 (including the depth and whether the wells are drilled vertically or horizontally), which governs the revenue potential of each well. Drilling activity levels, in turn, 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 operating results.
While our Fluids Systems revenue potential is driven by a number of factors including those described above, rig count data remains the most widely accepted indicator of drilling activity. Average North American rig count data for the second quarter and first quarterhalf of 2022 as compared to the first quartersame periods of 2021 is as follows:
| | | | First Quarter | | 2022 vs 2021 | | Second Quarter | | 2022 vs 2021 |
| | | 2022 | | 2021 | | Count | | % | | 2022 | | 2021 | | Count | | % |
| U.S. Rig Count | U.S. Rig Count | 633 | | | 390 | | | 243 | | | 62 | % | U.S. Rig Count | 713 | | | 450 | | | 263 | | | 58 | % |
| Canada Rig Count | Canada Rig Count | 198 | | | 138 | | | 60 | | | 43 | % | Canada Rig Count | 113 | | | 72 | | | 41 | | | 57 | % |
| North America Rig Count | North America Rig Count | 831 | | | 528 | | | 303 | | | 57 | % | North America Rig Count | 826 | | | 522 | | | 304 | | | 58 | % |
| | | | First Half | | 2022 vs 2021 |
| | | 2022 | | 2021 | | Count | | % |
| U.S. Rig Count | | U.S. Rig Count | 675 | | | 420 | | | 255 | | | 61 | % |
| Canada Rig Count | | Canada Rig Count | 154 | | | 105 | | | 49 | | | 47 | % |
| North America Rig Count | | North America Rig Count | 829 | | | 525 | | | 304 | | | 58 | % |
Source: Baker Hughes Company
During March 2020, oil prices collapsed due to geopolitical events along with the worldwide effects of the COVID-19 pandemic. As a result, U.S. rig count declined significantly beginning in March 2020 before reaching a low of 244 in August 2020. During 2021, oil prices rebounded, and the average U.S. rig count gradually increased, ending 2021 at 586 rigs. During the first quarter of 2022, oil prices have significantly increased due to geopolitical events, and the average U.S. rig count has continued to gradually increase. We anticipate that market activity will continue to improve in 2022, although U.S. activity is expected to remain below 2019 levels as many of our customers maintain stronger capital discipline and prioritize cash flow generation over growth. Further, in the wake of COVID-19, an uncertain economic environment, including widespread supply chain disruptions, as well as enacted and proposed legislative changes in the U.S. impacting the oil and natural gas industry, make the timing and pace of recoverymarket activity levels difficult to predict. The Canada rig count was 95 as of April 29, 2022, largely reflecting
thereflects normal seasonality for this market, with the highest rig count levels generally observed in the first quarter of each year, prior to Spring break-up.
Outside of North America land markets, 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. However, operations in several countries in the EMEA region experienced activity disruptions and project delays beginning in early 2020 and continuing through 2021, driven by government-imposed restrictions on movements of personnel, quarantines of staffing, and logistical limitations as a result of the COVID-19 pandemic. Revenues and profitability from our international Fluids Systems business gradually recovered in 2021, with revenues for the first quarterhalf of 2022 near pre-COVID levels. However,The combination of increasing activity levels combined with the impacts of global supply chain disruptions have caused significant cost inflation to many hydrocarbon-based products and chemicals used in our fluids systems, and in many cases, we are unable to adjust our customer pricing due to the long-term contracts in place. Consequently, the inflationary impacts are negatively impacting the profitability of our international operations, and we expect this trend to continue throughout 2022, though the impact of cost inflation is very difficult to predict.
In responseLooking ahead, the combination of recent geopolitical events and elevated oil and natural gas prices are causing a renewed desire within several markets to increase drilling activity levels, to help ensure reliable energy supply in the coming years, as many markets bridge to a higher reliance on renewable sources over the longer-term. Consequently, the outlook for several markets, including North America and the EMEA region, continues to strengthen, with growth in activity expected over the next few years, particularly as certain countries seek to limit their dependency on Russia-sourced oil and natural gas.
Following the 2020 market changescollapse and reduced demand for our products and services as a result of the decline in oil prices and the COVID-19 pandemic, we took a number of actions during 2020 and continuing into 2021 aimed at conserving cash and protecting our liquidity, which included the implementation of cost reduction programs, including workforce reductions, employee furloughs, the suspension of the Company’s matching contributions to its U.S. defined contribution plan, and temporary salary reductions effective April 1, 2020 for a significant portion of U.S. employees. Beginning in the second quarter of 2021, we restored salaries to pre-reduction levels for a portion of our non-executive U.S. employees and reinstituted the Company matching contribution for our U.S. defined contribution plan, with the remainder of the temporary salary reductions restored by the third quarter of 2021.
With ongoing support fromOver the past two years, we have continued to work closely with outside financial and other advisors, we have continuously reviewedreviewing our portfolio duringand the oil and natural gas cycle of the last couple of years. These reviews have focused on evaluating changes in theevolving outlook for our served markets and customer priorities, while identifying opportunities for value-creating options in our portfolio, placing investment emphasis in markets where we generate strong returns and where
we see greater long-term viability and stability. While we have taken certainmeaningful actions to reduce our workforce and cost structure, our business contains high levels of fixed costs, including significant facility and personnel expense. In FebruaryAs part of this portfolio review, during the first quarter of 2022, our Board of Directors approved management’s plan to explore strategic options, including the potential sale, for our U.S. mineral grinding business. During the second quarter of 2022, we initiated a formal sale process that we anticipate completing in 2022, although it is not certain that any such transaction will be consummated. The U.S. mineral grinding business contributed third-party revenues of $14$26 million for the first quarterhalf of 2022 and $7$16 million for the first quarterhalf of 2021. As of June 30, 2022, the U.S. mineral grinding business had approximately $53 million of net capital employed, including approximately $31 million of net working capital.
We continue to evaluate other under-performing areas of our business, particularly withinincluding the U.S. and Gulf of Mexico and certain international oil and natural gas markets, which necessitates consideration of broader structural changesand anticipate additional actions may be necessary to optimize our operational footprint and invested capital in Fluids Systems to transform this business for the newevolving market realities. In the absence ofAs a longer-term increase in activity levels,result, we may incur future charges related to these efforts or potential asset impairments, which may negatively impact our future results.
FirstSecond Quarter of 2022 Compared to FirstSecond Quarter of 2021
Consolidated Results of Operations
Summarized results of operations for the firstsecond quarter of 2022 compared to the firstsecond quarter of 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | First Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Revenues | $ | 176,438 | | | $ | 141,172 | | | $ | 35,266 | | | 25 | % |
| Cost of revenues | 150,988 | | | 119,991 | | | 30,997 | | | 26 | % |
| Selling, general and administrative expenses | 24,433 | | | 20,911 | | | 3,522 | | | 17 | % |
| Other operating (income) loss, net | 50 | | | (274) | | | 324 | | | NM |
| Operating income | 967 | | | 544 | | | 423 | | | 78 | % |
| | | | | | | |
| Foreign currency exchange (gain) loss | 64 | | | (332) | | | 396 | | | NM |
| Interest expense, net | 1,206 | | | 2,408 | | | (1,202) | | | (50) | % |
| Loss on extinguishment of debt | — | | | 790 | | | (790) | | | NM |
| Loss before income taxes | (303) | | | (2,322) | | | 2,019 | | | 87 | % |
| | | | | | | |
| Provision (benefit) for income taxes | (2,824) | | | 3,040 | | | (5,864) | | | NM |
| Net income (loss) | $ | 2,521 | | | $ | (5,362) | | | $ | 7,883 | | | NM |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Revenues | $ | 194,144 | | | $ | 142,249 | | | $ | 51,895 | | | 36 | % |
| Cost of revenues | 168,206 | | | 124,106 | | | 44,100 | | | 36 | % |
| Selling, general and administrative expenses | 24,330 | | | 22,980 | | | 1,350 | | | 6 | % |
| Other operating income, net | (80) | | | (1,590) | | | 1,510 | | | NM |
| Impairment | 7,905 | | | — | | | 7,905 | | | NM |
| Operating loss | (6,217) | | | (3,247) | | | (2,970) | | | (91) | % |
| | | | | | | |
| Foreign currency exchange (gain) loss | (583) | | | 224 | | | (807) | | | NM |
| Interest expense, net | 1,638 | | | 2,164 | | | (526) | | | (24) | % |
| Loss before income taxes | (7,272) | | | (5,635) | | | (1,637) | | | (29) | % |
| | | | | | | |
| Provision for income taxes | 480 | | | 363 | | | 117 | | | NM |
| Net loss | $ | (7,752) | | | $ | (5,998) | | | $ | (1,754) | | | 29 | % |
Revenues
Revenues increased 25%36% to $176.4$194.1 million for the firstsecond quarter of 2022, compared to $141.2$142.2 million for the firstsecond quarter of 2021. This $35.3$51.9 million increase includes a $17.4$40.9 million (16%(40%) increase in revenues in North America, comprised of a $32.7$35.0 million increase in the Fluids Systems segment and a $7.8 million increase in the Industrial Solutions segment, partially offset by a $15.3$1.9 million decrease in the Industrial SolutionsBlending segment. Revenues from our North America operations increased primarily due to the improvement in North America rig count, which favorably impacted our Fluids Systems segment, partially offset by a declineand an increase in revenues from product sales in our Industrial Solutions segment, which typically fluctuate based on the timing of mat orders from customerscustomer projects and were favorably impacted in the first quarter of 2021 by pent-up demand following the peak of the COVID-19 pandemic.orders. Revenues from our international operations increased by $17.9$11.0 million (53%(27%), as the prior year continued to bewas unfavorably impacted by activity disruptions and project delays resulting from the COVID-19 pandemic.pandemic, partially offset by a $5.1 million reduction from currency exchange rate changes. Additional information regarding the change in revenues is provided within the operating segment results below.
Cost of revenues
Cost of revenues increased 26%36% to $151.0$168.2 million for the firstsecond quarter of 2022, compared to $120.0$124.1 million for the firstsecond quarter of 2021. This $31.0$44.1 million increase was primarily driven by the 25%36% increase in revenues described above, along with inflationary cost pressures impacting materials, transportation, and labor.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $3.5$1.4 million to $24.4$24.3 million for the firstsecond quarter of 2022, compared to $20.9$23.0 million for the firstsecond quarter of 2021. This increase was primarily driven by higher personnel expense, including performance-based incentive and stock-based compensation expense, and the restoration of U.S. salary and retirement benefits, as well as higher legal and professional expenses.expense. Selling, general and administrative expenses as a percentage of revenues was 13.8%12.5% for the firstsecond quarter of 2022 compared to 14.8%16.2% for the firstsecond quarter of 2021.
Other operating income, net
Other operating income for the second quarter of 2021 included a $1.0 million gain related to a legal settlement in the Industrial Solutions segment. Other operating income also includes gains on sales of assets.
Impairment
The Industrial Blending segment includes a $7.9 million non-cash impairment charge in the second quarter of 2022 related to the ongoing process to sell the assets previously used in this now exited business, as described above.
Foreign currency exchange
Foreign currency exchange was a $0.1$0.6 million lossgain for the firstsecond quarter of 2022 compared to a $0.3$0.2 million gainloss for the firstsecond quarter of 2021, and reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies.
Interest expense, net
Interest expense was $1.2$1.6 million for the firstsecond quarter of 2022 compared to $2.4$2.2 million for the firstsecond quarter of 2021. Interest expense for the firstsecond quarter of 2022 and 2021 includes $0.2$0.4 million and $1.1$1.0 million, respectively, in non-cash amortization of original issue discount and debt issuance costs. The decrease in interest expense is primarily due to the 2021 repayment of our Convertible Notes with borrowings under the ABL Facility.
Loss on extinguishment of debt
In the first quarter of 2021, we repurchased $18.3 million of our Convertible Notes in the open market for $18.1 million. The $0.8 million loss for the first quarter of 2021 reflects the difference in the amount paid and the net carrying value of the extinguished debt, including original issue discount and debt issuance costs.
Provision (benefit) for income taxes
The benefit for income taxes was $2.8 million for the first quarter of 2022, which includes an income tax benefit of $3.1 million related to the restructuring of certain subsidiary legal entities within Europe, as the undistributed earnings for an international subsidiary are no longer subject to certain taxes upon future distribution. The provision for income taxes was $3.0$0.5 million for the firstsecond quarter of 2022, despite reporting a pretax loss for the period, as we are unable to recognize a tax benefit for the $7.9 million impairment charge and reflecting the impact of the geographic composition of our earnings. The provision for income taxes was $0.4 million for the second quarter of 2021, despite reporting a pretax loss for the period, primarily reflecting the impact of the geographic composition of our pretax loss. The tax expense in 2021 primarily related to earnings from our international operations since we were unable to recognize the tax benefit from our U.S. losses as they may not be realized.
19
Operating Segment Results
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers):
| | | | | | | | | | | | | | | | | | | | | | | |
| First Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Revenues | | | | | | | |
| Fluids Systems | $ | 141,014 | | | $ | 87,849 | | | $ | 53,165 | | | 61 | % |
| Industrial Solutions | 35,424 | | | 53,323 | | | (17,899) | | | (34) | % |
| Total revenues | $ | 176,438 | | | $ | 141,172 | | | $ | 35,266 | | | 25 | % |
| | | | | | | |
| Operating income (loss) | | | | | | | |
| Fluids Systems | $ | 3,374 | | | $ | (6,767) | | | $ | 10,141 | | | |
| Industrial Solutions | 5,472 | | | 13,130 | | | (7,658) | | | |
| Corporate office | (7,879) | | | (5,819) | | | (2,060) | | | |
| Total operating income | $ | 967 | | | $ | 544 | | | $ | 423 | | | |
| | | | | | | |
| Segment operating margin | | | | | | | |
| Fluids Systems | 2.4 | % | | (7.7) | % | | | | |
| Industrial Solutions | 15.4 | % | | 24.6 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Revenues | | | | | | | |
| Fluids Systems | $ | 145,261 | | | $ | 97,093 | | | $ | 48,168 | | | 50 | % |
| Industrial Solutions | 48,883 | | | 43,287 | | | 5,596 | | | 13 | % |
| Industrial Blending | — | | | 1,869 | | | (1,869) | | | (100) | % |
| Total revenues | $ | 194,144 | | | $ | 142,249 | | | $ | 51,895 | | | 36 | % |
| | | | | | | |
| Operating income (loss) | | | | | | | |
| Fluids Systems | $ | 425 | | | $ | (6,531) | | | $ | 6,956 | | | |
| Industrial Solutions | 9,754 | | | 11,298 | | | (1,544) | | | |
| Industrial Blending | (8,912) | | | (1,155) | | | (7,757) | | | |
| Corporate office | (7,484) | | | (6,859) | | | (625) | | | |
| Total operating income (loss) | $ | (6,217) | | | $ | (3,247) | | | $ | (2,970) | | | |
| | | | | | | |
| Segment operating margin | | | | | | | |
| Fluids Systems | 0.3 | % | | (6.7) | % | | | | |
| Industrial Solutions | 20.0 | % | | 26.1 | % | | | | |
| Industrial Blending | NM | | (61.8) | % | | | | |
Fluids Systems
Revenues
Total revenues for this segment consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| | First Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| United States | $ | 70,843 | | | $ | 47,670 | | | $ | 23,173 | | | 49 | % |
| Canada | 22,235 | | | 12,663 | | | 9,572 | | | 76 | % |
| Total North America | 93,078 | | | 60,333 | | | 32,745 | | | 54 | % |
| | | | | | | |
| EMEA | 44,175 | | | 25,459 | | | 18,716 | | | 74 | % |
| Other | 3,761 | | | 2,057 | | | 1,704 | | | 83 | % |
| Total International | 47,936 | | | 27,516 | | | 20,420 | | | 74 | % |
| | | | | | | |
| Total Fluids Systems revenues | $ | 141,014 | | | $ | 87,849 | | | $ | 53,165 | | | 61 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| United States | $ | 85,355 | | | $ | 56,784 | | | $ | 28,571 | | | 50 | % |
| Canada | 11,344 | | | 4,956 | | | 6,388 | | | 129 | % |
| Total North America | 96,699 | | | 61,740 | | | 34,959 | | | 57 | % |
| | | | | | | |
| EMEA | 42,870 | | | 32,962 | | | 9,908 | | | 30 | % |
| Other | 5,692 | | | 2,391 | | | 3,301 | | | 138 | % |
| Total International | 48,562 | | | 35,353 | | | 13,209 | | | 37 | % |
| | | | | | | |
| Total Fluids Systems revenues | $ | 145,261 | | | $ | 97,093 | | | $ | 48,168 | | | 50 | % |
North America revenues increased 54%57% to $93.1$96.7 million for the firstsecond quarter of 2022, compared to $60.3$61.7 million for the firstsecond quarter of 2021. ThisThe increase included a $28.6$28.5 million increase from U.S. land markets driven primarily by the 62%58% increase in U.S. rig count, partially offset by a $5.4 million decrease fromwhile offshore Gulf of Mexico driven primarily by changes in customer drilling and completion activity levels.was relatively flat. In addition, Canada increased $9.6$6.4 million driven primarily by the 43%57% increase in Canada rig count along with an increase in market share. For the firstsecond quarter of 2022, U.S. revenues included $68.1$77.7 million from land markets, including $14.3$12.1 million from the U.S. mineral grinding business, and $2.7$7.4 million from offshore Gulf of Mexico.
Internationally, revenues increased 74%37% to $47.9$48.6 million for the firstsecond quarter of 2022, compared to $27.5$35.4 million for the firstsecond quarter of 2021. The increase was primarily driven by higher activity in Europe, Africa, and the Asia Pacific region following a significant impact in 2021 from the COVID-19 pandemic, as described above.above, partially offset by a $4.8 million reduction from currency exchange rate changes.
Operating income (loss)
The Fluids Systems segment generated operating income of $3.4$0.4 million for the firstsecond quarter of 2022, reflecting a $10.1$7.0 million improvement from the $6.8$6.5 million operating loss incurred in the firstsecond quarter of 2021.2021, reflecting an incremental margin of 14.4%. The improvement in operating loss includes a $6.5$5.6 million benefit from North America operations and a $3.6$1.4 million benefit from international operations, driven primarily by the revenue improvement described above. The incremental margin was lower than typical historical experience, reflecting the impact of inflationary cost pressures from certain international contracts in which customer pricing is fixed, along with elevated operating losses from the revenue improvement described above partially offset by supply chain related cost pressures.Gulf of Mexico.
Industrial Solutions
Revenues
Total revenues for this segment consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| | First Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Product sales revenues | $ | 4,423 | | | $ | 20,037 | | | $ | (15,614) | | | (78) | % |
| Rental and service revenues | 31,001 | | | 28,733 | | | 2,268 | | | 8 | % |
| Industrial blending revenues | — | | | 4,553 | | | (4,553) | | | NM |
| Total Industrial Solutions revenues | $ | 35,424 | | | $ | 53,323 | | | $ | (17,899) | | | (34) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Product sales revenues | $ | 18,539 | | | $ | 10,182 | | | $ | 8,357 | | | 82 | % |
| Rental and service revenues | 30,344 | | | 33,105 | | | (2,761) | | | (8) | % |
| Total Industrial Solutions revenues | $ | 48,883 | | | $ | 43,287 | | | $ | 5,596 | | | 13 | % |
Revenues from product sales, which typically fluctuate based on the timing of matcustomer projects and orders, increased by $8.4 million from customers,the second quarter of 2021, reflective of robust demand from the utilities sector along with the timing of shipment for certain first quarter of 2022 orders shifting to April 2022. Rental and service revenues decreased by $15.6$2.8 million from the second quarter of 2021, primarily related to lower activity in the U.K.
Operating income
The Industrial Solutions segment generated operating income of $9.8 million for the second quarter of 2022 compared to $11.3 million for the second quarter of 2021, the decrease being primarily attributable to lower average pricing associated with large scale rental projects and raw materials cost inflation on products sales, partially offset by the increase in product sales revenues as described above. In addition, the Industrial Solutions segment operating results for the second quarter of 2021 included a $1.0 million gain in other operating income related to a legal settlement.
Industrial Blending
We completed the wind down of the Industrial Blending business in the first quarter of 2022 and are currently pursuing the sale of the industrial blending and warehouse facility and related equipment located in Conroe, Texas. The Industrial Blending operating loss for the second quarter of 2022 includes a $7.9 million non-cash charge for the impairment of the long-lived assets as well as exit and other costs related to the ongoing process to sell these assets.
Corporate Office
Corporate office expenses increased $0.6 million to $7.5 million for the second quarter of 2022, compared to $6.9 million for the second quarter of 2021. This increase was primarily driven by higher personnel expense, including performance-based incentive and stock-based compensation expense.
First Half of 2022 Compared to First Half of 2021
Consolidated Results of Operations
Summarized results of operations for the first half of 2022 compared to the first half of 2021 are as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| | First Half | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Revenues | $ | 370,582 | | | $ | 283,421 | | | $ | 87,161 | | | 31 | % |
| Cost of revenues | 319,194 | | | 244,097 | | | 75,097 | | | 31 | % |
| Selling, general and administrative expenses | 48,763 | | | 43,891 | | | 4,872 | | | 11 | % |
| Other operating income, net | (30) | | | (1,864) | | | 1,834 | | | NM |
| Impairment | 7,905 | | | — | | | 7,905 | | | NM |
| Operating loss | (5,250) | | | (2,703) | | | (2,547) | | | (94) | % |
| | | | | | | |
| Foreign currency exchange gain | (519) | | | (108) | | | (411) | | | NM |
| Interest expense, net | 2,844 | | | 4,572 | | | (1,728) | | | (38) | % |
| Loss on extinguishment of debt | — | | | 790 | | | (790) | | | (100) | % |
| Loss before income taxes | (7,575) | | | (7,957) | | | 382 | | | 5 | % |
| | | | | | | |
| Provision (benefit) for income taxes | (2,344) | | | 3,403 | | | (5,747) | | | NM |
| Net loss | $ | (5,231) | | | $ | (11,360) | | | $ | 6,129 | | | 54 | % |
Revenues
Revenues increased 31% to $370.6 million for the first half of 2022, compared to $283.4 million for the first half of 2021. This $87.2 million increase includes a $58.3 million (28%) increase in revenues in North America, comprised of a $67.7 million increase in the Fluids Systems segment partially offset by a $6.4 million decrease in the Industrial Blending segment and a $3.0 million decrease in the Industrial Solutions segment. Revenues from our North America operations increased primarily due to the improvement in North America rig count, which favorably impacted our Fluids Systems segment, partially offset by a decline in revenues from product sales in our Industrial Solutions segment, which typically fluctuate based on the timing of customer projects and orders, with the first quarter of 2021 favorably impacted by pent-up demand following the peak of the COVID-19 pandemic. Revenues from our international operations increased by $28.9 million (39%), as the prior year was unfavorably impacted by activity disruptions and project delays resulting from the COVID-19 pandemic, partially offset by a $8.2 million reduction from currency exchange rate changes. Additional information regarding the change in revenues is provided within the operating segment results below.
Cost of revenues
Cost of revenues increased 31% to $319.2 million for the first half of 2022, compared to $244.1 million for the first half of 2021. This $75.1 million increase was primarily driven by the 31% increase in revenues described above, along with inflationary cost pressures impacting materials, transportation, and labor.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $4.9 million to $48.8 million for the first half of 2022, compared to $43.9 million for the first half of 2021. This increase was primarily driven by higher personnel expense, including performance-based incentive and stock-based compensation expense, as well as higher legal and professional expenses. Selling, general and administrative expenses as a percentage of revenues was 13.2% for the first half of 2022 compared to 15.5% for the first half of 2021.
Other operating income, net
Other operating income for the first half of 2021 included a $1.0 million gain related to a legal settlement in the Industrial Solutions segment. Other operating income also includes gains on sales of assets.
Impairment
The Industrial Blending segment includes a $7.9 million non-cash impairment charge in the first half of 2022 related to the ongoing process to sell the assets previously used in this now exited business, as described above.
Foreign currency exchange
Foreign currency exchange was a $0.5 million gain for the first half of 2022 compared to a $0.1 million gain for the first half of 2021, and reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies.
Interest expense, net
Interest expense was $2.8 million for the first half of 2022 compared to $4.6 million for the first half of 2021. Interest expense for the first half of 2022 and 2021 includes $0.6 million and $2.1 million, respectively, in non-cash amortization of original issue discount and debt issuance costs. The decrease in interest expense is primarily due to the 2021 repayment of our Convertible Notes with borrowings under the ABL Facility.
Loss on extinguishment of debt
In the first half of 2021, we repurchased $18.3 million of our Convertible Notes in the open market for $18.1 million. The $0.8 million loss for the first half of 2021 reflects the difference in the amount paid and the net carrying value of the extinguished debt, including original issue discount and debt issuance costs.
Provision (benefit) for income taxes
The benefit for income taxes was $2.3 million for the first half of 2022, which includes an income tax benefit of $3.1 million related to the restructuring of certain subsidiary legal entities within Europe, as the undistributed earnings for an international subsidiary are no longer subject to certain taxes upon future distribution. The provision for income taxes in the first half of 2022 reflects the impact from the geographic composition of our earnings and was unfavorably impacted as we are unable to recognize a tax benefit related to the $7.9 million impairment charge. The provision for income taxes was $3.4 million for the first half of 2021 despite reporting a pretax loss for the period, primarily reflecting the impact of the geographic composition of our pretax loss. The tax expense in 2021 primarily related to earnings from our international operations since we were unable to recognize the tax benefit from our U.S. losses as they may not be realized.
Operating Segment Results
Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers): | | | | | | | | | | | | | | | | | | | | | | | |
| First Half | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Revenues | | | | | | | |
| Fluids Systems | $ | 286,275 | | | $ | 184,942 | | | $ | 101,333 | | | 55 | % |
| Industrial Solutions | 84,307 | | | 92,057 | | | (7,750) | | | (8) | % |
| Industrial Blending | — | | | 6,422 | | | (6,422) | | | (100) | % |
| Total revenues | $ | 370,582 | | | $ | 283,421 | | | $ | 87,161 | | | 31 | % |
| | | | | | | |
| Operating income (loss) | | | | | | | |
| Fluids Systems | $ | 3,799 | | | $ | (13,298) | | | $ | 17,097 | | | |
| Industrial Solutions | 16,112 | | | 24,478 | | | (8,366) | | | |
| Industrial Blending | (9,798) | | | (1,205) | | | (8,593) | | | |
| Corporate office | (15,363) | | | (12,678) | | | (2,685) | | | |
| Total operating loss | $ | (5,250) | | | $ | (2,703) | | | $ | (2,547) | | | |
| | | | | | | |
| Segment operating margin | | | | | | | |
| Fluids Systems | 1.3 | % | | (7.2) | % | | | | |
| Industrial Solutions | 19.1 | % | | 26.6 | % | | | | |
| Industrial Blending | NM | | (18.8) | % | | | | |
Fluids Systems
Revenues
Total revenues for this segment consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | |
| | First Half | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| United States | $ | 156,198 | | | $ | 104,454 | | | $ | 51,744 | | | 50 | % |
| Canada | 33,579 | | | 17,619 | | | 15,960 | | | 91 | % |
| Total North America | 189,777 | | | 122,073 | | | 67,704 | | | 55 | % |
| | | | | | | |
| EMEA | 87,045 | | | 58,421 | | | 28,624 | | | 49 | % |
| Other | 9,453 | | | 4,448 | | | 5,005 | | | 113 | % |
| Total International | 96,498 | | | 62,869 | | | 33,629 | | | 53 | % |
| | | | | | | |
| Total Fluids Systems revenues | $ | 286,275 | | | $ | 184,942 | | | $ | 101,333 | | | 55 | % |
North America revenues increased 55% to $189.8 million for the first half of 2022, compared to $122.1 million for the first half of 2021. This increase included a $57.1 million increase from U.S. land markets driven primarily by the 61% increase in U.S. rig count, partially offset by a $5.5 million decrease from offshore Gulf of Mexico driven primarily by changes in customer drilling and completion activity levels. In addition, Canada increased $16.0 million driven primarily by the 47% increase in Canada rig count along with an increase in market share. For the first half of 2022, U.S. revenues included $145.8 million from land markets, including $26.4 million from the U.S. mineral grinding business, and $10.1 million from offshore Gulf of Mexico.
Internationally, revenues increased 53% to $96.5 million for the first half of 2022, compared to $62.9 million for the first half of 2021. The increase was primarily driven by higher activity in Europe, Africa, and the Asia Pacific region following a significant impact in 2021 from the COVID-19 pandemic, as described above, partially offset by a $7.8 million reduction from currency exchange rate changes.
Operating income (loss)
The Fluids Systems segment generated operating income of $3.8 million for the first half of 2022, a $17.1 million improvement from the $13.3 million operating loss incurred in the first half of 2021, reflecting an incremental margin of 16.9%. The improvement includes a $12.1 million benefit from North America operations and a $5.0 million benefit from international operations, driven primarily by the revenue improvement described above. The incremental margin was lower than typical historical experience, reflecting the impact of inflationary cost pressures from certain international contracts in which customer pricing is fixed, along with elevated operating losses from the Gulf of Mexico.
Industrial Solutions
Revenues
Total revenues for this segment consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | |
| | First Half | | 2022 vs 2021 |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Product sales revenues | $ | 22,962 | | | $ | 30,219 | | | $ | (7,257) | | | (24) | % |
| Rental and service revenues | 61,345 | | | 61,838 | | | (493) | | | (1) | % |
| Total Industrial Solutions revenues | $ | 84,307 | | | $ | 92,057 | | | $ | (7,750) | | | (8) | % |
Revenues from product sales, which typically fluctuate based on the timing of customer projects and orders, decreased by $7.3 million from the first half of 2021, as the first quarterhalf of 2021 was favorably impacted by pent-up demand following the peak of the COVID-19 pandemic. Rental and service revenues increaseddecreased by $2.3$0.5 million from the first quarterhalf of 2021, including a $2.1 million increase from power transmission and other industrial markets. The increase from industrial customers reflects our continued expansion into these markets, bothas lower activity in the U.S. and U.K., including an approximately 28% increase was partially offset by continued market penetration of the utilities sector in revenues from the power transmission sector, partially attributable to our December 2021 acquisition.U.S.
Operating income
The Industrial Solutions segment generated operating income of $5.5$16.1 million for the first quarterhalf of 2022 compared to $13.1$24.5 million for the first quarterhalf of 2021, the decrease being primarily attributable to the change in revenues as described above, along with lower average pricing associated with large scale rental projects and raw materials cost inflation on product sales. In addition, the loss attributableIndustrial Solutions operating results for the first half of 2021 included a $1.0 million gain in other operating income related to a legal settlement.
Industrial Blending
We completed the wind down of the Industrial Blending operationsbusiness in the first quarter of 2022.2022 and are currently pursuing the sale of the industrial blending and warehouse facility and related equipment located in Conroe, Texas. The Industrial Blending operating loss for the first half of 2022 includes a $7.9 million non-cash charge for the impairment of the long-lived assets as well as exit and other costs related to the ongoing process to sell these assets.
Corporate Office
Corporate office expenses increased $2.1$2.7 million to $7.9$15.4 million for the first quarterhalf of 2022, compared to $5.8$12.7 million for the first quarterhalf of 2021. This increase was primarily driven by higher legal costs, including $0.7 million associated with shareholder matters and acquisition and divestiture efforts, along with higher personnel expense, including performance-based incentive and stock-based compensation expense, as well as the restoration of U.S. salaryhigher legal and retirement benefits.
Liquidity and Capital Resources
Net cash used in operating activities was $23.0 million for the first half of 2022 compared to net cash provided by operating activities was $2.8of $25.8 million for the first quarter of 2022 compared to $27.8 million for the first quarterhalf of 2021. During the first quarterhalf of 2022, net incomeloss adjusted for non-cash items provided cash of $8.0$18.6 million, while changes in working capital used cash of $5.2$41.6 million. The working capital change is primarily related to an increase in inventories to support the higher revenues along with raw materials cost inflation, elevated vendor prepayments, and purchases supporting the start-up of new international contracts in the Fluids Systems segment, as well as the production of mats in the Industrial Solutions segment for anticipated sales.
Net cash used in investing activities was $7.0$7.6 million for the first quarterhalf of 2022, including capital expenditures of $7.6$9.5 million, partially offset by $0.6$1.9 million in proceeds from the sale of assets. The majority of the proceeds from the sale of assets reflect used mats from our rental fleet, which are part of the commercial offering of our Site and AccessIndustrial Solutions business. Nearly all of ourOur capital expenditures during the first quarterhalf of 2022 were primarily directed to supporting our Industrial Solutions segment, including $6.1$6.4 million of investments in the mat rental fleet, supporting our strategic growth in the power transmission sector and replacing mats sold from the fleet.
Net cash provided by financing activities was $1.3$27.0 million for the first quarterhalf of 2022, which primarily represents net borrowings of $1.4$23.5 million on our ABL Facility.
Substantially all our $21.3$20.2 million of cash on hand at March 31,June 30, 2022 resides in our international subsidiaries. Subject to maintaining sufficient cash requirements to support the strategic objectives of these international subsidiaries and complying with applicable exchange or cash controls, we expect to continue to repatriate available cash from these international subsidiaries. We anticipate that future working capital requirements for our operations will generally fluctuate directionally with revenues. We expect capital expenditures in 2022 will be in the range of approximately $20 million to $25 million and will remain heavily focused on industrial end-market opportunities, primarily reflecting expansion of our mat rental fleet to further support our growth in the utilities market.
Availability under our Amended ABL Facility also provides additional liquidity as discussed further below. Total availability under the Amended ABL Facility will fluctuate directionally based on the level of eligible U.S. accounts receivable, inventory, and composite mats included in the rental fleet. We expect our available cash on-hand, cash generated by operations, and the expected availability under our Amended ABL Facility and other existing financing arrangements to be adequate to fund our current operations during the next 12 months.
In FebruaryDuring the second quarter of 2022, we initiated a plan to wind downformal sale process for our Industrial Blending operations and pursueU.S. mineral grinding business. While certain inherent uncertainties remain that could impact the timing or completion of a sale transaction, we currently anticipate completing a divestiture transaction in the fourth quarter of 2022. We also are continuing the industrial blending andsales process for the warehouse facility and related equipment and also madepreviously used in our Industrial Blending operations, which we exited in March 2022. We believe that these divestitures, as well as ongoing efforts to optimize investments in the decision to explore strategic options, includingdeepwater Gulf of Mexico, will generate more than $70 million of net cash proceeds in the potential sale, for our U.S. mineral grinding business.coming months. Although the timing of any such transactions is not determinable, we expect to use any such proceeds for general corporate purposes, inincluding debt reduction and the support of our strategic initiatives. We also continue to evaluate additional sources of liquidity to support our longer-term needs.
Our capitalization is as follows:
| | | | | | | | | | | |
| (In thousands) | March 31, 2022 | | December 31, 2021 |
| ABL Facility | 87,900 | | | 86,500 | |
| Other debt | 28,497 | | | 28,491 | |
| Unamortized discount and debt issuance costs | (155) | | | (188) | |
| Total debt | $ | 116,242 | | | $ | 114,803 | |
| | | |
| Stockholder's equity | 465,143 | | | 462,386 | |
| Total capitalization | $ | 581,385 | | | $ | 577,189 | |
| | | |
| Total debt to capitalization | 20.0 | % | | 19.9 | % |
| | | | | | | | | | | |
| (In thousands) | June 30, 2022 | | December 31, 2021 |
| ABL Facility | 110,000 | | | 86,500 | |
| Other debt | 34,648 | | | 28,491 | |
| Unamortized discount and debt issuance costs | (189) | | | (188) | |
| Total debt | $ | 144,459 | | | $ | 114,803 | |
| | | |
| Stockholder’s equity | 450,751 | | | 462,386 | |
| Total capitalization | $ | 595,210 | | | $ | 577,189 | |
| | | |
| Total debt to capitalization | 24.3 | % | | 19.9 | % |
Asset-Based Loan Facility. In October 2017, we entered into an asset-based revolving credit agreement, which was amended in March 2019 (the “ABL Facility”). As of March 31, 2022, the ABL Facility provided financing up to $200.0 million available for borrowings (inclusive of letters of credit) and could be increased up to a maximum capacity of $275.0 million, subject to certain conditions. The ABL Facility was scheduled to terminate in March 2024. As of March 31, 2022, our total availability under the ABL Facility was $116.0 million, of which $87.9 million was drawn and $1.1 million was used for outstanding letters of credit, resulting in remaining availability of $27.0 million. As of March 31, 2022, the weighted average interest rate for the ABL Facility was 1.9% and the applicable commitment fee on the unused portion of the ABL Facility was 0.375% per annum.
In May 2022, we amended and restated the ABL Facility (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, expands available borrowing capacity associated with the Industrial Solutions rental mat fleet,
replaces the LIBOR-based pricing grid with a BSBY-basedBloomberg 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).
As of May 2,June 30, 2022, after giving effect to the Amended ABL Facility, our total availability under the Amended ABL Facility was $133.5$155.3 million, of which $94.1$110.0 million was drawn and $1.1$1.4 million was used for outstanding letters of credit, resulting in remaining availability of $38.4$43.9 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 Bloomberg Short-Term Bank Yield Index (“BSBY”)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. The Company isWe 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 lessgreater than 50% and (ii) 0.25% per annum at any time the average daily unused portion of the commitments is greaterless than 50%.
As of June 30, 2022, the applicable margin for borrowings under the Amended ABL Facility was 1.50% with respect to BSBY borrowings and 0.50% with respect to base rate borrowings. As of June 30, 2022, the weighted average interest rate for the Amended ABL Facility was 2.84% and the applicable commitment fee on the unused portion of the Amended ABL Facility was 0.25% per annum.
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.
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 requires compliance with the following financial covenants: (i) a minimum fixed charge coverage ratio of 1.00 to 1.00 for the most recently completed four fiscal quarters and (ii) while a leverage covenant trigger period (as defined in the Amended ABL Facility) is in effect, a maximum consolidated leverage ratio of 4.00 to 1.00 as of the last day of the most recently completed fiscal quarter.
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 Debt.In August 2021, we completed sale-leaseback transactions related to certain vehicles and other equipment for net proceeds of approximately $7.9 million. The transactions have been accounted for as financing arrangements as they did not qualify for sale accounting. As a result, the vehicles and other equipment continue to be reflected on our balance sheet in property, plant and equipment, net. The financing arrangements have a weighted average annual interest rate of 5.4% and are payable in monthly installments with varying maturities through October 2025. We had $5.8$5.0 million in financing obligations outstanding under these arrangements at March 31,June 30, 2022.
In February 2021, a U.K. subsidiary entered a £6.0 million (approximately $8.3 million) term loan facility that was scheduled to mature in February 2024. Effective January 1, 2022, the term loan had an interest at a rate of SONIA plus a margin of 3.5% per year. The term loan was payable in quarterly installments of £375,000 plus interest beginning March 2021 and a £1.5 million payment due at maturity. We had $5.4 million outstanding under this arrangement at March 31, 2022. In April 2022, this facility was amended to increase the term loan to £7.0 million (approximately $9.1 million) and add a £2.0 million (approximately $2.6 million) revolving credit facility. Both the amended term loan and revolving credit facility mature in April 2025 and bear interest at a rate of SONIA plus a margin of 3.25% per year. 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 had $11.2$10.4 million outstanding under these arrangements at May 2,June 30, 2022.
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. We had $14.5$11.9 million and $11.8 million outstanding under these arrangements at March 31,June 30, 2022 and December 31, 2021, respectively.
In addition, at March 31,June 30, 2022, we had $47.0$50.2 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $4.8$4.4 million in restricted cash.
Critical Accounting Estimates and Policies
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts and disclosures. Significant estimates used in preparing our consolidated financial statements include 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. Our estimates are based on historical experience and on our future expectations that we believe to be reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our current estimates and those differences may be material.
For additional discussion of our critical accounting estimates and policies, see “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021. Except for the following, ourOur critical accounting estimates and policies have not materially changed since December 31, 2021.
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.
In February 2022, in consideration of broader strategic priorities and the timeline and efforts required to further develop the industrial blending business, our management recommended, and our Board of Directors approved a plan to exit our Industrial Blending operations. As a result of the plan to exit and dispose of the assets used in the Industrial Blending business, we estimated in February 2022 and disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 that we may incur pre-tax charges in the range of approximately $4 million to $8 million primarily related to the non-cash impairment of long-lived assets related toused in the Industrial Blending business, which we anticipated recognizing in the first quarter of 2022.business. In March 2022, we shut down the Industrial Blending business and initiated a sales process to market the industrial blending and warehouse facility and related equipment. AsIn June 2022, as a result of the ongoing sales process and revised estimates for the expected net proceeds from the ultimate disposition, we now anticipate recoveringrecognized a $7.9 million impairment charge related to these long-lived assets. As of June 30, 2022, the $19 millionremaining carrying value of the long-lived assets associated withpreviously used in the now exited Industrial Blending business. Accordingly, no impairment has been recognized for these assets in the first quarter of 2022, though itbusiness was $11 million. It remains possible that we may incur a future impairment or loss related to the ongoing sales process.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in interest rates and changes in foreign currency exchange rates. A discussion of our primary market risk exposure in financial instruments is presented below.
Interest Rate Risk
At March 31,June 30, 2022, we had total principal amounts outstanding under financing arrangements of $116.4$144.6 million, including $87.9$110.0 million of borrowings under our Amended ABL Facility, and $5.4as well as $10.4 million of borrowings under a U.K. term loan and credit facility, which are subject to variable interest rates as determined by the respective debt agreements. The weighted average interest raterates at March 31,June 30, 2022 for the Amended ABL Facility and the U.K. term loan was 1.9%debt were 2.8% and 3.4%4.4%, respectively. Based on the balance of variable rate debt at March 31,June 30, 2022, a 100 basis-point increase in short-term interest rates would have increased annual pre-tax interest expense by $0.9$1.2 million.
Foreign Currency Risk
Our principal foreign operations are conducted in certain areas of EMEA, Canada, Asia Pacific, and Latin America. We have foreign currency exchange risks associated with these operations, which are conducted principally in the foreign currency of the jurisdictions in which we operate including European euros, Canadian dollars, Kuwaiti dinar, Algerian dinar, Romanian new leu, British pounds, and Australian dollars. Historically, we have not used off-balance sheet financial hedging instruments to manage foreign currency risks when we enter into a transaction denominated in a currency other than our local currencies.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31,June 30, 2022, the end of the period covered by this quarterly report.
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting during the quarter ended March 31,June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
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. While the outcome of litigation or other proceedings against us 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.
ITEM 1A. Risk Factors
Except as set forth below, thereThere have been no material changes during the period ended March 31, 2022 into our “Risk Factors” as discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.
Risks Related to the Ongoing Conflict Between Russia and Ukraine
Given the nature2021, except as discussed in Part II, Item 1A of our business and our global operations,Quarterly Report on Form 10-Q for the current conflict between Russia and Ukraine may adversely affect our business and results of operations. Although we do not have any operations in Russia or Ukraine, the broader consequences of this conflict, which may include embargoes, supply chain disruptions, regional instability, and geopolitical shifts, and the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted.
The current conflict between Russia and Ukraine may also have the effect of heightening many other risks disclosed in our public filings, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, the volatility of oil and natural gas prices that can adversely affect demand for our products and services; our customers’ activity levels, spending for our products and services, and ability to pay amounts owed us that could be impacted by the ability of our customers to access equity or credit markets; the price and availability of raw materials; the cost and continued availability of borrowed funds; and cybersecurity breaches or business system disruptions.three months ended March 31, 2022.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
a)Not applicable
b)Not applicable
c)The following table details our repurchases of shares of our common stock for the three months ended March 31,June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs ($ in Millions) |
| January 2022 | — | | | $ | — | | | — | | | $ | 23.8 | |
| February 2022 | — | | | $ | — | | | — | | | $ | 23.8 | |
| March 2022 | 1,482 | | | $ | 3.15 | | | — | | | $ | 23.8 | |
| Total | 1,482 | | | | | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs ($ in Millions) |
| April 2022 | — | | | $ | — | | | — | | | $ | 23.8 | |
| May 2022 | — | | | $ | — | | | — | | | $ | 23.8 | |
| June 2022 | 565,971 | | | $ | 4.48 | | | — | | | $ | 23.8 | |
| Total | 565,971 | | | | | — | | | |
During the three months ended March 31,June 30, 2022, we purchased an aggregate of 1,482565,971 shares surrendered in lieu of taxes under vesting of restricted shares.
In November 2018, our Board of Directors authorized changes to our securities repurchase program. These changes increased the authorized amount under the repurchase program to $100.0 million, available for repurchases of any combination of our common stock and our Convertible Notes that matured in 2021.
Our repurchase program remains available 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 and other factors. The repurchase program has no specific term. Repurchases are expected to be funded from operating cash flows, available cash on hand, and borrowings under our Amended ABL Facility. 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 March 31,June 30, 2022, we had $23.8 million remaining under the program.
There were no shares of common stock repurchased under the repurchase program during the three months ended March 31,June 30, 2022.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
The information concerning mine safety violations and other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 of this Quarterly Report on Form 10-Q, which is incorporated by reference.
ITEM 5. Other Information
On May 2, 2022, the Company and certain of its U.S. subsidiaries, as borrowers, entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, swing line lender and a letter of credit issuer, and a group of lenders. The Credit Agreement amends and restates the Company’s prior credit agreement dated as of October 17, 2017, as amended, and provides for a senior secured revolving credit facility of up to $175 million (the “Amended ABL Facility”), subject to a borrowing base. The borrowers will have the ability to request the issuance of letters of credit in an aggregate amount of up to $15.0 million and borrow swing line loans in an aggregate principal amount of up to $17.5 million. Amounts borrowed under the Credit Agreement are required to be repaid no later than May 2, 2027.
Borrowing availability under the Amended ABL Facility is subject to a borrowing base, which 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 us, the borrowing base calculation also includes the amount of eligible pledged cash. The administrative agent may establish reserves, in part based on appraisals of the asset base, and other limits in its discretion, which could reduce the amounts otherwise available under the ABL Facility.
Proceeds of loans under the Amended ABL Facility may be used for the refinancing of existing indebtedness, for working capital and for other general corporate purposes. Subject to customary conditions, the aggregate commitments under the Amended ABL Facility may be increased from time to time at the Company’s request and with the consent of the participating lenders, so long as the aggregate amount of the commitments does not exceed $250 million. The borrowers’ obligations under the Amended ABL Facility are 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.
Amounts borrowed under the Amended ABL Facility bear interest, at the Company’s option, at either (1) the Bloomberg Short-Term Bank Yield Index (“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 Credit Agreement) as set forth in the most recent quarterly compliance certificate.
The Company is 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 less than 50% and (ii) 0.25% per annum at any time the average daily unused portion of the commitments is greater than 50%.
The Credit Agreement 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. In addition, the Credit Agreement contains certain affirmative covenants, including reporting requirements such as delivery of financial statements, borrowing base compliance and other certificates and notices of certain events, maintaining insurance, and providing additional guarantees and collateral in certain circumstances.
The Amended ABL Facility requires compliance with the following financial covenants: (i) a minimum fixed charge coverage ratio of 1.00 to 1.00 for the most recently completed four fiscal quarters and (ii) while a leverage covenant trigger period (as defined in the Amended ABL Facility) is in effect, a maximum consolidated leverage ratio of 4.00 to 1.00 as of the last day of the most recently completed fiscal quarter.
The Credit Agreement includes provisions permitting the Company to amend the Credit Agreement to establish specific metrics and performance targets with respect to certain environmental, social and governance targets of the Company and its subsidiaries and upon the effectiveness of any such amendment, those specific metrics and performance targets will be used, together with the pricing grid, to determine pricing under the Credit Agreement.
The Credit Agreement 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.
The foregoing summary of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Credit Agreement, a copy of which is attached as Exhibit 10.3 to this quarterly report and incorporated herein by reference.
ITEM 6. Exhibits
The exhibits listed are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| | | | | |
| †10.1 | |
| †10.2 | |
*10.3 | Second Amended and Restated Credit Agreement dated as of May 2, 2022 by and among Newpark Resources, Inc., Newpark Drilling Fluids LLC, Newpark Mats & Integrated Services LLC, ExcalibarMinerals LLC, Newpark Industrial Blending Solutions LLC, and Dura-Base Nevada, Inc., as borrowers, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and an L/C Issuer, and the other Lenders party heretoApril 8, 2022). |
| *31.1 | |
| *31.2 | |
| **32.1 | |
| **32.2 | |
| *95.1 | |
| *101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| *101.SCH | Inline XBRL Schema Document |
| *101.CAL | Inline XBRL Calculation Linkbase Document |
| *101.DEF | Inline XBRL Definition Linkbase Document |
| *101.LAB | Inline XBRL Label Linkbase Document |
| *101.PRE | Inline XBRL Presentation Linkbase Document |
| *104 | Cover Page Interactive Data File (formatted as- the cover page XBRL tags are embedded within the Inline XBRL and contained in Exhibit 101)document. |
† Management compensation plan or agreement.
* Filed herewith.
** Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 4,August 3, 2022
| | | | | |
| NEWPARK RESOURCES, INC. |
| (Registrant) |
| | |
| By: | /s/ Matthew S. Lanigan |
| | Matthew S. Lanigan
President and Chief Executive Officer
(Principal Executive Officer) |
| |
| | | | | |
| By: | /s/ Gregg S. Piontek |
| | Gregg S. Piontek
Senior Vice President and Chief Financial Officer
(Principal Financial Officer) |
| |
| | | | | |
| By: | /s/ Douglas L. White |
| | Douglas L. White
Vice President, Chief Accounting Officer and Treasurer
(Principal Accounting Officer) |
