Newpark Resources 10Q 2022 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-02960

Newpark Resources, Inc.

(Exact name of registrant as specified in its charter)


Delaware		72-1123385
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9320 Lakeside Boulevard,	Suite 100
The Woodlands,	Texas	77381
(Address of principal executive offices)		(Zip Code)

(281) 362-6800

(Registrant’s telephone number, including area code)


Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	NR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of May 2, 2022, a total of 92,353,104 shares of common stock, $0.01 par value per share, were outstanding.

NEWPARK RESOURCES, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED

MARCH 31, 2022


PART I	FINANCIAL INFORMATION	2
ITEM 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 4.	Controls and Procedures	25
PART II	OTHER INFORMATION	26
ITEM 1.	Legal Proceedings	26
ITEM 1A.	Risk Factors	26
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
ITEM 3.	Defaults Upon Senior Securities	27
ITEM 4.	Mine Safety Disclosures	27
ITEM 5.	Other Information	27
ITEM 6.	Exhibits	29
	Signatures	30

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. We also may provide oral or written forward-looking statements in other materials we release to the public. Words such as “will,” “may,” “could,” “would,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These forward-looking statements reflect the current views of our management as of the filing date of this Quarterly Report on Form 10-Q; however, various risks, uncertainties, contingencies, and other factors, some of which are beyond our control, are difficult to predict and could cause our actual results, performance, or achievements to differ materially from those expressed in, or implied by, these statements.

We assume no obligation to update, amend, or clarify publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by securities laws. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed in this Quarterly Report on Form 10-Q might not occur.

For further information regarding these and other factors, risks, and uncertainties that could cause actual results to differ, we refer you to the risk factors set forth in Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021.

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements

Newpark Resources, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands, except share data)	March 31, 2022		December 31, 2021
ASSETS
Cash and cash equivalents	$	21,307	$	24,088
Receivables, net	187,609		194,296
Inventories	169,968		155,341
Prepaid expenses and other current assets	14,305		14,787
Total current assets	393,189		388,512

Property, plant and equipment, net	257,980		260,256
Operating lease assets	26,305		27,569
Goodwill	47,411		47,283
Other intangible assets, net	23,407		24,959
Deferred tax assets	2,260		2,316
Other assets	1,834		1,991
Total assets	$	752,386	$	752,886

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current debt	$	20,767	$	19,210
Accounts payable	95,309		84,585
Accrued liabilities	37,302		46,597
Total current liabilities	153,378		150,392

Long-term debt, less current portion	95,475		95,593
Noncurrent operating lease liabilities	21,431		22,352
Deferred tax liabilities	6,370		11,819
Other noncurrent liabilities	10,589		10,344
Total liabilities	287,243		290,500

Commitments and contingencies (Note 8)	0		0

Common stock, $0.01 par value (200,000,000 shares authorized and 109,335,733 and 109,330,733 shares issued, respectively)	1,093		1,093
Paid-in capital	636,397		634,929
Accumulated other comprehensive loss	(62,708)		(61,480)
Retained earnings	26,866		24,345
Treasury stock, at cost (16,982,629 and 16,981,147 shares, respectively)	(136,505)		(136,501)
Total stockholders’ equity	465,143		462,386
Total liabilities and stockholders’ equity	$	752,386	$	752,886

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Newpark Resources, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
(In thousands, except per share data)		2022		2021
Revenues		$	176,438	$	141,172
Cost of revenues		150,988		119,991
Selling, general and administrative expenses		24,433		20,911
Other operating (income) loss, net		50		(274)
Operating income		967		544

Foreign currency exchange (gain) loss		64		(332)
Interest expense, net		1,206		2,408
Loss on extinguishment of debt		—		790
Loss before income taxes		(303)		(2,322)

Provision (benefit) for income taxes		(2,824)		3,040
Net income (loss)		$	2,521	$	(5,362)

Net income (loss) per common share - basic:		$	0.03	$	(0.06)
Net income (loss) per common share - diluted:		$	0.03	$	(0.06)

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Newpark Resources, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended March 31,
(In thousands)		2022		2021

Net income (loss)		$	2,521	$	(5,362)

Foreign currency translation adjustments (net of tax benefit of $99 and $276)		(1,228)		(3,284)

Comprehensive income (loss)		$	1,293	$	(8,646)

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Newpark Resources, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


(In thousands)	Common Stock		Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total
Balance at December 31, 2020	$	1,076	$	627,031	$	(54,172)	$	50,937	$	(136,840)	$	488,032
Net loss	—		—		—		(5,362)		—		(5,362)
Employee stock options, restricted stock and employee stock purchase plan	1		242		—		(21)		35		257
Stock-based compensation expense	—		1,279		—		—		—		1,279
Foreign currency translation, net of tax	—		—		(3,284)		—		—		(3,284)
Balance at March 31, 2021	$	1,077	$	628,552	$	(57,456)	$	45,554	$	(136,805)	$	480,922

Balance at December 31, 2021	$	1,093	$	634,929	$	(61,480)	$	24,345	$	(136,501)	$	462,386
Net income	—		—		—		2,521		—		2,521
Employee stock options, restricted stock and employee stock purchase plan	—		—		—		—		(4)		(4)
Stock-based compensation expense	—		1,468		—		—		—		1,468
Foreign currency translation, net of tax	—		—		(1,228)		—		—		(1,228)
Balance at March 31, 2022	$	1,093	$	636,397	$	(62,708)	$	26,866	$	(136,505)	$	465,143

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Newpark Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
(In thousands)	2022		2021
Cash flows from operating activities:
Net income (loss)	$	2,521	$	(5,362)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization	10,452		10,830
Stock-based compensation expense	1,468		1,279
Provision for deferred income taxes	(5,202)		1,569
Credit loss expense	185		50
Gain on sale of assets	(1,606)		(3,283)
Loss on extinguishment of debt	—		790
Amortization of original issue discount and debt issuance costs	178		1,082
Change in assets and liabilities:
Decrease in receivables	5,795		2,414
(Increase) decrease in inventories	(14,812)		6,694
Decrease in other assets	17		1,275
Increase in accounts payable	11,246		11,437
Decrease in accrued liabilities and other	(7,452)		(1,002)
Net cash provided by operating activities	2,790		27,773

Cash flows from investing activities:
Capital expenditures	(7,621)		(8,649)
Proceeds from sale of property, plant and equipment	575		8,027
Net cash used in investing activities	(7,046)		(622)

Cash flows from financing activities:
Borrowings on lines of credit	69,188		51,922
Payments on lines of credit	(65,202)		(56,922)
Purchases of Convertible Notes	—		(18,107)
Proceeds from term loan	—		8,258
Debt issuance costs	—		(196)
Purchases of treasury stock	(4)		(6)
Other financing activities	(2,711)		(1,561)
Net cash provided by (used in) financing activities	1,271		(16,612)

Effect of exchange rate changes on cash	(376)		(882)

Net increase (decrease) in cash, cash equivalents, and restricted cash	(3,361)		9,657
Cash, cash equivalents, and restricted cash at beginning of period	29,489		30,348
Cash, cash equivalents, and restricted cash at end of period	$	26,128	$	40,005

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

NEWPARK RESOURCES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Significant Accounting Policies

Newpark Resources, Inc. is a geographically diversified supplier providing environmentally-sensitive products, as well as rentals and services to customers across multiple industries. The accompanying unaudited condensed consolidated financial statements of Newpark Resources, Inc. and our wholly-owned subsidiaries, which we collectively refer to as the “Company,” “we,” “our,” or “us,” have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission (“SEC”), and do not include all information and footnotes required by the accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Our fiscal year end is December 31 and our first quarter represents the three-month period ended March 31. The results of operations for the first quarter of 2022 are not necessarily indicative of the results to be expected for the entire year. Unless otherwise noted, all currency amounts are stated in U.S. dollars.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of March 31, 2022 and our results of operations and cash flows for the first quarter of 2022 and 2021. All adjustments are of a normal recurring nature. Our balance sheet at December 31, 2021 is derived from the audited consolidated financial statements at that date.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For further information, see Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2021.

We operate our business through 2 reportable segments: Fluids Systems and Industrial Solutions. Our Fluids Systems segment provides customized drilling, completion, and stimulation fluids products and related technical services to oil and natural gas exploration and production (“E&P”) customers primarily in North America and Europe, the Middle East and Africa (“EMEA”), as well as certain countries in Asia Pacific and Latin America. We also have industrial mineral grinding operations for barite, a critical raw material in drilling fluids systems, which serve to support our activities in certain regions within the U.S. drilling fluids market and also sell the products to third party users, including other drilling fluids companies. In addition, we sell a variety of other minerals, principally to third-party industrial (non-oil and natural gas) markets. Our Industrial Solutions segment includes our Site and Access Solutions business, along with our Industrial Blending operations. Site and Access Solutions provides temporary worksite access, 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 sell our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market.

In February 2022, our management recommended, and our Board of Directors approved a plan to exit our Industrial Blending operations and explore strategic options for our U.S. mineral grinding business. See Note 10 for further information.

Note 2 – Earnings Per Share

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


	First Quarter
(In thousands, except per share data)		2022		2021
Numerator
Net income (loss) - basic and diluted		$	2,521	$	(5,362)

Denominator
Weighted average common shares outstanding - basic		92,118		90,701
Dilutive effect of stock options and restricted stock awards		1,821		—
Weighted average common shares outstanding - diluted		93,939		90,701

Net income (loss) per common share
Basic		$	0.03	$	(0.06)
Diluted		$	0.03	$	(0.06)

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:


	First Quarter
(In thousands)		2022	2021
Stock options and restricted stock awards		1,867	5,299

For the first quarter of 2021, we excluded all potentially dilutive stock options and restricted stock awards in calculating diluted earnings per share as the effect was anti-dilutive due to the net loss incurred for this period.

Note 3 – Repurchase Program

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). 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, 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 quarter of 2022 or 2021. During the first quarter 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.

Note 4 – Receivables

Receivables consisted of the following:


(In thousands)	March 31, 2022		December 31, 2021
Trade receivables:
Gross trade receivables	$	179,016	$	185,065
Allowance for credit losses	(4,456)		(4,587)
Net trade receivables	174,560		180,478
Income tax receivables	3,322		4,167
Other receivables	9,727		9,651
Total receivables, net	$	187,609	$	194,296

Other receivables included $6.0 million and $5.7 million for value added, goods and service taxes related to foreign jurisdictions as of March 31, 2022 and December 31, 2021, respectively. In addition, other receivables included an insurance receivable balance resulting from a property insurance claim caused by Hurricane Ida in August 2021 of $2.9 million and $1.9 million as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022, the claims related to the hurricane under our property and business interruption insurance programs have not been finalized.

Changes in our allowance for credit losses were as follows:


	First Quarter
(In thousands)	2022		2021
Balance at beginning of period	$	4,587	$	5,024
Credit loss expense	185		50
Write-offs, net of recoveries	(316)		(356)
Balance at end of period	$	4,456	$	4,718

Note 5 – Inventories

Inventories consisted of the following:


(In thousands)	March 31, 2022		December 31, 2021
Raw materials:
Fluids Systems	$	128,267	$	119,242
Industrial Solutions	4,757		4,939
Total raw materials	133,024		124,181
Blended fluids systems components	29,894		27,793
Finished goods - mats	7,050		3,367
Total inventories	$	169,968	$	155,341

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.

The increase in inventories in the first quarter of 2022 was primarily attributable to a combination of activity-driven increases, purchases supporting the start-up of new international contracts in the Fluids Systems segment, the production of mats in the Industrial Solutions segment for anticipated sales in the second quarter of 2022, as well as raw material cost inflation.

Note 6 – Financing Arrangements and Fair Value of Financial Instruments

Financing arrangements consisted of the following:


	March 31, 2022						December 31, 2021
(In thousands)	Principal Amount		Unamortized Discount and Debt Issuance Costs		Total Debt		Principal Amount		Unamortized Discount and Debt Issuance Costs		Total Debt
ABL Facility	$	87,900	$	—	$	87,900	$	86,500	$	—	$	86,500
Term loan	5,443		(89)		5,354		6,094		(110)		5,984
Financing obligations	5,838		(66)		5,772		6,688		(78)		6,610
Other debt	17,216		—		17,216		15,709		—		15,709
Total debt	116,397		(155)		116,242		114,991		(188)		114,803
Less: Current portion	(20,767)		—		(20,767)		(19,210)		—		(19,210)
Long-term debt	$	95,630	$	(155)	$	95,475	$	95,781	$	(188)	$	95,593

Convertible Notes. In December 2016, we issued $100.0 million of unsecured convertible senior notes (“Convertible Notes”) which bore interest at a rate of 4.0% per year and matured in December 2021. A total of $38.6 million of our Convertible Notes were repaid at maturity. During the first quarter of 2021, we repurchased $18.3 million of our Convertible Notes in the open market for a total cost of $18.1 million, and recognized a net loss of $0.8 million reflecting the difference in the amount paid and the net carrying value of the extinguished debt, including original issue discount and debt issuance costs.

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 of 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-based 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, 2022, after giving effect to the Amended ABL Facility, our total availability under the Amended ABL Facility was $133.5 million, of which $94.1 million was drawn and $1.1 million was used for outstanding letters of credit, resulting in remaining availability of $38.4 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”) 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 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%.

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 million in financing obligations outstanding under these arrangements at March 31, 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 million outstanding under these arrangements at May 2, 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 million and $11.8 million outstanding under these arrangements at March 31, 2022 and December 31, 2021, respectively.

In addition, at March 31, 2022, we had $47.0 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $4.8 million in restricted cash.

Our financial instruments include cash and cash equivalents, receivables, payables, and debt. We believe the carrying values of these instruments approximated their fair values at March 31, 2022 and December 31, 2021.

Note 7 – 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 million for the first 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.

Note 8 – 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. 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.

Note 9 – Supplemental Disclosures to the Statements of Cash Flows

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


	First Quarter
(In thousands)	2022		2021
Cash paid for:
Income taxes (net of refunds)	$	3,268	$	1,810
Interest	$	998	$	889

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


(In thousands)	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	21,307	$	24,088
Restricted cash (included in prepaid expenses and other current assets)	4,821		5,401
Cash, cash equivalents, and restricted cash	$	26,128	$	29,489

Note 10 – Segment Data

Summarized operating results for our reportable segments are shown in the following table (net of inter-segment transfers):


	First Quarter
(In thousands)		2022		2021
Revenues
Fluids Systems		$	141,014	$	87,849
Industrial Solutions		35,424		53,323
Total revenues		$	176,438	$	141,172

Operating income (loss)
Fluids Systems		$	3,374	$	(6,767)
Industrial Solutions		5,472		13,130
Corporate office		(7,879)		(5,819)
Total operating income		$	967	$	544

The following table presents further disaggregated revenues for the Fluids Systems segment:


	First Quarter
(In thousands)	2022		2021
United States	$	70,843	$	47,670
Canada	22,235		12,663
Total North America	93,078		60,333

EMEA	44,175		25,459
Other	3,761		2,057
Total International	47,936		27,516

Total Fluids Systems revenues	$	141,014	$	87,849

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


	First Quarter
(In thousands)	2022		2021
Product sales revenues	$	4,423	$	20,037
Rental revenues	17,615		17,079
Service revenues	13,386		11,654
Industrial blending revenues	—		4,553
Total Industrial Solutions revenues	$	35,424	$	53,323

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 our ongoing review of our portfolio, our management recommended, and our Board of Directors approved two 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

quarter of 2022, and contributed $5 million of revenues with approximately break-even operating income for the first quarter of 2021. As of March 31, 2022, the carrying value of the long-lived assets associated with the Industrial Blending business was $19 million.

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 to the Industrial Blending business, which we anticipated recognizing in the first quarter of 2022. 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. As a result of the ongoing sales process and revised estimates for the expected net proceeds from the ultimate disposition, we now anticipate recovering the $19 million carrying value of the long-lived assets associated with the Industrial Blending business. Accordingly, 0 impairment has been recognized for these assets in the first quarter of 2022, though it remains possible that we may incur a future impairment or loss related to the ongoing sales process.

Second, our Board of Directors also approved management’s plan to explore strategic options, including the potential sale, for our U.S. mineral grinding business. The U.S. mineral grinding business contributed third-party revenues of $14 million for the first quarter of 2022 and $7 million for the first quarter of 2021. As of March 31, 2022, the U.S. mineral grinding business had approximately $50 million of net capital employed, including approximately $28 million of net working capital.

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 first quarter represents the three-month period ended March 31. 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 reportable 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, and Fluids Systems, which primarily serves E&P customers.

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, 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 diversifying our presence outside of our historical E&P customer base. These efforts have been primarily focused within our Site and Access Solutions business, 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 CO2 emissions associated with product transportation. 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, our Fluids Systems segment has also developed the 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

Industrial Solutions - Our Industrial Solutions segment, which generated $35.4 million of revenues and $5.5 million of operating income for the first quarter 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 sell our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market.

Our Industrial Solutions segment has been a primary source of operating income and cash generation for us in recent years, and has also been the primary focus for growth investments. The expansion of our Industrial Solutions segment into 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. 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.

In 2020, we began leveraging our 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 of the industrial blending and warehouse facility and related equipment located in Conroe, Texas. Although we currently anticipate recovering the $19 million carrying value of the long-lived assets associated with the Industrial Blending business with expected net proceeds from the ultimate disposition, it is 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 million of revenues and $3.4 million of operating income for the first quarter 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 first quarter of 2022 as compared to the first quarter of 2021 is as follows:


	First Quarter		2022 vs 2021
	2022	2021	Count	%
U.S. Rig Count	633	390	243	62	%
Canada Rig Count	198	138	60	43	%
North America Rig Count	831	528	303	57	%

_______________________________________________________

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 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 recovery difficult to predict. The Canada rig count was 95 as of April 29, 2022, largely reflecting

the 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 quarter 2022 near pre-COVID levels. However, 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 response to the 2020 market changes 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 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. While we have taken certain actions to reduce our workforce and cost structure, our business contains high levels of fixed costs, including significant facility and personnel expense. In February 2022, our Board of Directors approved management’s plan to explore strategic options, including the potential sale, for our U.S. mineral grinding business. The U.S. mineral grinding business contributed third-party revenues of $14 million for the first quarter of 2022 and $7 million for the first quarter of 2021.

We continue to evaluate other under-performing areas of our business, particularly within the U.S. and Gulf of Mexico oil and natural gas markets, which necessitates consideration of broader structural changes to transform this business for the new market realities. In the absence of a longer-term increase in activity levels, we may incur future charges related to these efforts or potential asset impairments, which may negatively impact our future results.

First Quarter of 2022 Compared to First Quarter of 2021

Consolidated Results of Operations

Summarized results of operations for the first quarter of 2022 compared to the first 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

Revenues

Revenues increased 25% to $176.4 million for the first quarter of 2022, compared to $141.2 million for the first quarter of 2021. This $35.3 million increase includes a $17.4 million (16%) increase in revenues in North America, comprised of a $32.7 million increase in the Fluids Systems segment partially offset by a $15.3 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 mat orders from customers and were favorably impacted in the first quarter of 2021 by pent-up demand following the peak of the COVID-19 pandemic. Revenues from our international operations increased by $17.9 million (53%), as the prior year continued to be unfavorably impacted by activity disruptions and project delays resulting from the COVID-19 pandemic. Additional information regarding the change in revenues is provided within the operating segment results below.

Cost of revenues

Cost of revenues increased 26% to $151.0 million for the first quarter of 2022, compared to $120.0 million for the first quarter of 2021. This $31.0 million increase was primarily driven by the 25% 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 million to $24.4 million for the first quarter of 2022, compared to $20.9 million for the first quarter of 2021. This increase was primarily driven by higher 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. Selling, general and administrative expenses as a percentage of revenues was 13.8% for the first quarter of 2022 compared to 14.8% for the first quarter of 2021.

Foreign currency exchange

Foreign currency exchange was a $0.1 million loss for the first quarter of 2022 compared to a $0.3 million gain for the first 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 million for the first quarter of 2022 compared to $2.4 million for the first quarter of 2021. Interest expense for the first quarter of 2022 and 2021 includes $0.2 million and $1.1 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 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

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		%

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	%

North America revenues increased 54% to $93.1 million for the first quarter of 2022, compared to $60.3 million for the first quarter of 2021. This increase included a $28.6 million increase from U.S. land markets driven primarily by the 62% increase in U.S. rig count, partially offset by a $5.4 million decrease from offshore Gulf of Mexico driven primarily by changes in customer drilling and completion activity levels. In addition, Canada increased $9.6 million driven primarily by the 43% increase in Canada rig count along with an increase in market share. For the first quarter of 2022, U.S. revenues included $68.1 million from land markets, including $14.3 million from the U.S. mineral grinding business, and $2.7 million from offshore Gulf of Mexico.

Internationally, revenues increased 74% to $47.9 million for the first quarter of 2022, compared to $27.5 million for the first 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.

Operating income (loss)

The Fluids Systems segment generated operating income of $3.4 million for the first quarter of 2022, reflecting a $10.1 million improvement from the $6.8 million operating loss incurred in the first quarter of 2021. The improvement in operating loss includes a $6.5 million benefit from North America operations and a $3.6 million benefit from international operations, primarily reflecting the impact of the revenue improvement described above partially offset by supply chain related cost pressures.

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)	%

Revenues from product sales, which typically fluctuate based on the timing of mat orders from customers, decreased by $15.6 million from the first quarter of 2021, as the first quarter of 2021 was favorably impacted by pent-up demand following the peak of the COVID-19 pandemic. Rental and service revenues increased by $2.3 million from the first quarter 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, both in the U.S. and U.K., including an approximately 28% increase in revenues from the power transmission sector, partially attributable to our December 2021 acquisition.

Operating income

The Industrial Solutions segment generated operating income of $5.5 million for the first quarter of 2022 compared to $13.1 million for the first quarter 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 the loss attributable to the wind down of the Industrial Blending operations in the first quarter of 2022.

Corporate Office

Corporate office expenses increased $2.1 million to $7.9 million for the first quarter of 2022, compared to $5.8 million for the first quarter 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. salary and retirement benefits.

Liquidity and Capital Resources

Net cash provided by operating activities was $2.8 million for the first quarter of 2022 compared to $27.8 million for the first quarter of 2021. During the first quarter of 2022, net income adjusted for non-cash items provided cash of $8.0 million, while changes in working capital used cash of $5.2 million.

Net cash used in investing activities was $7.0 million for the first quarter of 2022, including capital expenditures of $7.6 million, partially offset by $0.6 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 Access Solutions business. Nearly all of our capital expenditures during the first quarter of 2022 were directed to supporting our Industrial Solutions segment, including $6.1 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 million for the first quarter of 2022, which primarily represents net borrowings of $1.4 million on our ABL Facility.

Substantially all our $21.3 million of cash on hand at March 31, 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 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 February 2022, we initiated a plan to wind down our Industrial Blending operations and pursue the sale of the industrial blending and warehouse facility and related equipment, and also made the decision to explore strategic options, including the potential sale, for our U.S. mineral grinding business. Although the timing of any such transactions is not determinable, we expect to use any proceeds for general corporate purposes in 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		%

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.

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.

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 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, our critical accounting estimates and policies have not materially changed since December 31, 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 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 to the Industrial Blending business, which we anticipated recognizing in the first quarter of 2022. 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. As a result of the ongoing sales process and revised estimates for the expected net proceeds from the ultimate disposition, we now anticipate recovering the $19 million carrying value of the long-lived assets associated with the Industrial Blending business. Accordingly, no impairment has been recognized for these assets in the first quarter of 2022, though 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, 2022, we had total principal amounts outstanding under financing arrangements of $116.4 million, including $87.9 million of borrowings under our ABL Facility and $5.4 million of borrowings under a U.K. term loan which are subject to variable interest rates as determined by the respective debt agreements. The weighted average interest rate at March 31, 2022 for the ABL Facility and the U.K. term loan was 1.9% and 3.4%, respectively. Based on the balance of variable rate debt at March 31, 2022, a 100 basis-point increase in short-term interest rates would have increased annual pre-tax interest expense by $0.9 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, 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, 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

ITEM 1A. Risk Factors

Except as set forth below, there have been no material changes during the period ended March 31, 2022 in 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 nature of our business and our global operations, 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.

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, 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			—

During the three months ended March 31, 2022, we purchased an aggregate of 1,482 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, 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, 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 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			Cooperation Agreement, by and between Newpark Resources, Inc., Bradley L. Radoff and The Radoff Family Foundation, dated February 17, 2022, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 18, 2022 (SEC File No. 001-02960)
10.2			Amended and Restated Employment Agreement effective March 1, 2022, between Newpark Resources, Inc. and Matthew Lanigan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 4, 2022 (SEC File No. 001-02960)
*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, Excalibar Minerals 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 hereto
*31.1			Certification of Matthew S. Lanigan pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2			Certification of Gregg S. Piontek pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
**32.1			Certification of Matthew S. Lanigan pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**32.2			Certification of Gregg S. Piontek pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*95.1			Reporting requirements under the Mine Safety and Health Administration
*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 Inline XBRL and contained in Exhibit 101)

* 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, 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)

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Newpark Resources (NR) 10-Q2022 Q1 Quarterly report

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