NPK International Inc.

05/01/2026 | Press release | Distributed by Public on 05/01/2026 09:53

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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, 2025. 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
NPK International Inc. ("NPK," the "Company," "we," "our," or "us") is a temporary worksite access solutions company that manufactures, sells, and rents recyclable composite matting products, along with a full suite of services, including planning, logistics, and site restoration. In the first quarter of 2026, 69% of our revenues were generated from the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production, pipeline, renewable energy, petrochemical, construction and other industries within the United States and United Kingdom. The remaining 31% of our first quarter of 2026 revenues were generated from the sale of our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market.
2026 Priorities
Our long-term strategy includes key foundational elements that are intended to enhance long-term shareholder value creation:
•Accelerate Organic Growth - We seek to accelerate revenue growth through the expansion of our rental business, which includes a combination of geographic expansion to new growth territories, primarily within the U.S., while also expanding customer market share within currently-served markets. As part of this effort, we have placed a particular emphasis on penetrating larger-scale, longer-term (six months or longer) projects, which we believe will help drive improvements in revenue stability and operational efficiency. Due in part to the success of our efforts, rental and service revenues increased $9 million, or 20%, year-over-year for the first quarter of 2026, including a 27% increase in rental revenues. We prioritize investment capital to support our organic growth objective, where over the past several years, we have seen the strong market adoption of our specialty rental products and differentiated service offering. During the first quarter of 2026, we made net investments of $14.6 million in the expansion of our composite rental fleet, expanding our owned composite mat rental fleet by 4% in the quarter. Further, with our revenue growth and the favorable macro-environment, we have also accelerated our manufacturing capacity expansion planning efforts. In March 2026, our Board of Directors approved management's plan to expand our composite mat production capacity by approximately 50% over current levels. We expect to invest $40 million to $45 million over the next five quarters to complete this expansion, with the additional capacity expected to come online by mid-2027.
•Pursue Inorganic Growth - We seek to accelerate our growth and enhance shareholder value through strategically-aligned inorganic actions, leveraging our scale to increase our value and relevance to customers, and we continually evaluate inorganic opportunities that align with our objectives. In November 2025, we completed the acquisition of Grassform Plant Hire Limited ("Grassform"), a U.K. market leader in ground protection and temporary roadway solutions and services with a fleet of over 20,000 composite mats. Our U.K. operations generated $9.2 million of revenues during the first quarter of 2026, a $5.1 million increase over the first quarter of 2025, with the substantial majority of the increase driven by the Grassform acquisition.
•Drive Operational Efficiency - We are focused on efficiency improvements and operating cost optimization across every aspect of our business. Throughout 2025, we continued to evaluate and execute actions intended to streamline the organization and our cost structure, driving improvements in profitability. SG&A as a percentage of revenues was 17.6% for the first quarter of 2026 compared to 18.1% for the first quarter of 2025.
•Enhance Return on Capital - We are committed to maintaining a strong balance sheet, prioritizing organic investment to expand our rental business while evaluating accretive inorganic growth opportunities to accelerate growth and returning excess cash generation via programmatic share repurchases. During the first quarter of 2026, we utilized $2.7 million to repurchase 0.2 million shares under our share repurchase program.
First Quarter of 2026 Compared to First Quarter of 2025
Consolidated Results of Operations
Summarized results of operations for the first quarter of 2026 compared to the first quarter of 2025 are as follows:
First Quarter 2026 vs 2025
(In thousands) 2026 2025 $ %
Revenues $ 75,070 $ 64,777 $ 10,293 16 %
Cost of revenues 47,884 39,527 8,357 21 %
Selling, general and administrative expenses 13,191 11,746 1,445 12 %
Other operating (income) loss, net (428) (24) (404) NM
Operating income from continuing operations 14,423 13,528 895 7 %
Foreign currency exchange (gain) loss 145 (314) 459
Interest (income) expense, net 323 (48) 371
Income from continuing operations before income taxes 13,955 13,890 65
Provision for income taxes from continuing operations 3,597 3,515 82
Income from continuing operations 10,358 10,375 (17)
Income (loss) from discontinued operations, net of tax 100 (372) 472
Net income $ 10,458 $ 10,003 $ 455
The following table presents further disaggregated revenues by type:
First Quarter 2026 vs 2025
(In thousands) 2026 2025 $ %
Revenues
Rental and service revenues $ 51,953 $ 43,393 $ 8,560 20 %
Product sales revenues 23,117 21,384 1,733 8 %
Total revenues $ 75,070 $ 64,777 $ 10,293 16 %
First Quarter Change
2026 2025
Total gross profit margin 36.2 % 39.0 % (280) bps
Revenues
Revenues increased 16% to $75.1 million for the first quarter of 2026, compared to $64.8 million for the first quarter of 2025, including a 20% increase in rental and service revenues and an 8% increase in product sales revenues. Rental revenues increased $7.5 million (27%), primarily due to higher rental volume driven by our organic growth efforts along with the contribution from the Grassform acquisition, as well as modestly higher pricing. Service revenues increased $1.0 million (7%), primarily attributable to the increased level of customer rental projects, though at a lower rate than rental revenues, due primarily to the higher mix of larger-scale, longer term rental projects. Product sales revenues increased $1.7 million (8%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that represent the primary solution used for temporary worksite access in the market. During the first quarter of 2026, nearly 80% of our product sales revenues were derived from utility companies.
Cost of revenues
Cost of revenues increased 21% to $47.9 million for the first quarter of 2026 (36.2% gross profit margin), compared to $39.5 million for the first quarter of 2025 (39.0% gross profit margin), primarily driven by the 16% increase in revenues described above. The decline in gross profit margin is primarily attributable to the impact of approximately $3.5 million of cross-rental costs required to meet customer rental demand, modestly lower rental fleet utilization attributable to the timing of
large-scale projects, and expenses associated with our manufacturing expansion effort, partially offset by improved rental pricing and manufacturing cost leverage for product sales.
Selling, general and administrative expenses
Selling, general and administrative expenses increased to $13.2 million for the first quarter of 2026, which includes $0.7 million attributable to the Grassform acquisition, compared to $11.7 million for the first quarter of 2025. Selling, general and administrative expenses as a percentage of revenues was 17.6% for the first quarter of 2026 compared to 18.1% for the first quarter of 2025.
Other operating (income) loss, net
Other operating (income) loss, net primarily includes gains and losses on sales of non-rental assets.
Foreign currency exchange
Foreign currency exchange for the first quarter of 2026 and 2025 reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.
Interest (income) expense, net
Interest expense, net was minimal for the first quarter of 2026 and 2025.
Provision for income taxes from continuing operations
The provision for income taxes from continuing operations was $3.6 million for the first quarter of 2026, reflecting an effective tax rate of 26%, compared to $3.5 million for the first quarter of 2025, reflecting an effective tax rate of 25%.
Income (loss) from discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax reflects the former Fluids Systems segment, which was sold in the third quarter of 2024. In the first quarter of 2026, we recognized a $0.5 million pre-tax gain on sale related to the resolution of certain contractual indemnifications related to the Sale Transaction, which was partially offset by costs associated with the transaction as well as related to the closure of certain foreign subsidiaries that are no longer operational.
Liquidity and Capital Resources
Net cash provided by operating activities was $21.1 million for the first quarter of 2026 compared to $8.8 million for the first quarter of 2025. Net income adjusted for non-cash items provided cash of $22.5 million in the first quarter of 2026, compared to $19.2 million in 2025, while changes in working capital used cash of $1.4 million in first quarter of 2026, compared to $10.3 million in 2025.
Net cash used in investing activities was $10.7 million for the first quarter of 2026, which includes $16.7 million in capital expenditures partially offset by $5.5 million in additional proceeds from the sale of the Fluids Systems business. The substantial majority of our capital expenditures for the first quarter of 2026 and 2025 were directed to expanding our mat rental fleet. Net cash provided by investing activities was $5.4 million for the first quarter of 2025, which includes $10.7 million in additional proceeds from the sale of the Fluids Systems business partially offset by $10.0 million in capital expenditures.
Net cash used in financing activities was $8.9 million for the first quarter of 2026, which primarily reflects net repayments on our Credit Facility and other existing financing arrangements as well as $2.7 million in share purchases under our repurchase program. Net cash used in financing activities was $11.7 million for the first quarter of 2025.
We primarily manage our liquidity utilizing cash on hand and availability under our Credit Facility and other existing financing arrangements.
We expect future working capital requirements for our operations will generally fluctuate directionally with revenues, and we expect net capital expenditures in 2026 to be $75 million to $90 million, which includes $35 million to $45 million in the expansion of our rental fleet and $30 million to $35 million for the manufacturing expansion project. We also expect to use a portion of our existing liquidity to pursue inorganic growth opportunities and return value to our shareholders through share repurchases. We expect cash on hand and cash generated by operations, as well as the projected availability under our Credit Facility and other existing financing arrangements, to be adequate to fund our current operations during the next 12 months.
Our capitalization is as follows:
(In thousands) March 31, 2026 December 31, 2025
Credit Facility $ - $ 5,300
Other debt 10,554 11,562
Unamortized discount and debt issuance costs - -
Total debt $ 10,554 $ 16,862
Stockholders' equity 359,784 351,156
Total capitalization $ 370,338 $ 368,018
Total debt to capitalization 2.8 % 4.6 %
Credit Facility. In June 2025, we entered into a U.S. senior secured revolving credit agreement (the "Credit Facility") with a group of lenders that provides financing of up to $150 million available for borrowings (inclusive of letters of credit), which can be increased up to $250 million, subject to certain conditions. The Credit Facility and the loans made under the Credit Facility are secured by a first priority lien on substantially all of the personal property of the Company and its significant U.S. subsidiaries as guarantors (subject to customary exceptions and exclusions). The Credit Facility will mature in June 2030.
As of March 31, 2026, we had no outstanding borrowings and $1.9 million in outstanding letters of credit, resulting in remaining availability of $148.1 million.
Under the terms of the Credit Facility, we may elect to borrow at a variable interest rate based on either the Term SOFR rate or an alternate base rate plus, in each case, a per annum applicable margin. The applicable margin will range from 1.75% to 2.25% for Term SOFR loans and 0.75% to 1.25% for alternate base rate loans, based on the consolidated leverage ratio (as defined in the Credit Facility) as of the last day of the most recent fiscal quarter. We are also required to pay a commitment fee on the unused portion of the Credit Facility ranging from 0.25% to 0.35% per annum based on the consolidated leverage ratio.
As of March 31, 2026, the applicable margin for borrowings under the Credit Facility was 1.75% for Term SOFR loans and 0.75% for alternate base rate loans, and the applicable commitment fee was 0.25% per annum.
The Credit Facility requires compliance with a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio, each as defined in the Credit Facility. In addition, at our option, we may choose to increase the maximum consolidated leverage ratio for a certain period following a significant acquisition, subject to certain limitations, as defined in the Credit Facility. As of March 31, 2026, we were in compliance with required ratios.
The Credit Facility contains various customary representations, warranties and covenants that, among other things and subject to certain specified circumstances and exceptions, restrict or limit the ability of the Company and its subsidiaries to incur indebtedness (including guarantees), grant liens, make investments, pay dividends or distributions with respect to capital stock or make other restricted payments, make prepayments on other indebtedness, engage in mergers or other fundamental changes, dispose of property, or change the nature of their business.
The Credit Facility includes various events of default (subject to certain materiality thresholds and/or grace periods), 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 guarantees or security interests or invalidity of loan documents, certain ERISA events, unsatisfied or unstayed judgments and change of control.
Other Financing Arrangements. We maintain finance leases primarily related to transportation equipment. During the first quarter of 2026, we entered into $0.5 million of new finance lease liabilities in exchange for leased assets.
In addition, at March 31, 2026, we had $6.7 million in outstanding letters of credit (inclusive of the amount outstanding under the Credit Facility as described above), performance bonds, and other guarantees.
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, 2025. Our critical accounting estimates and policies have not materially changed since December 31, 2025.
NPK International Inc. published this content on May 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 01, 2026 at 15:53 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]