NPK International Inc.

10/30/2026 | Press release | Distributed by Public on 10/30/2026 10:47

Quarterly Report for Quarter Ending September 30, 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 third quarter represents the three-month period ended September 30 and our first nine months represents the nine-month period ended September 30. Unless otherwise noted, all currency amounts are stated in U.S. dollars. The reference to a "Note" herein refers to the accompanying Notes to Unaudited Condensed Consolidated Financial Statements contained in Item 1 "Financial Statements."
Overview
NPK International Inc. ("NPK," the "Company," "we," "our," or "us") is a 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. For the first nine months of 2026, 67% of our revenues were generated from the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production, pipeline, renewable energy, petrochemical, construction and other industries within the United States and United Kingdom. The remaining 33% of our first nine months 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 primarily 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 these efforts, our rental and service revenues have meaningfully increased in recent years. The following reflects our total rental and service revenues for the first nine months from 2024 to 2026, excluding the impact of the Grassform acquisition (in millions):
As illustrated above, organic growth efforts resulted in a year-over-year increase of rental and service revenues of $30 million (29%) for the first nine months of 2025 and $5 million (4%) for the first nine months of 2026. In the first nine months of 2025, the majority of the growth was driven by our success penetrating larger-scale, longer-term utility transmission projects within Texas, which contributed to exceptionally high rental fleet utilization levels. We also supplemented our rental fleet with cross-rented mats from third parties, in order to meet customer demand. During the first nine months of 2026, the revenue growth rate declined relative to the prior year, reflecting a reduction in rental volume following the completion of multiple large-scale projects completed in the second quarter, along with the impact of exceptionally dry weather in Texas, which negatively impacted matting demand during the third quarter of 2026. Following the impacts of these items, rental volume and fleet utilization have meaningfully improved in the early fourth quarter of 2026, relative to the third quarter of 2026.
To support our organic growth objective, we prioritize investments to expand our rental mat fleet, where over the past several years, we have seen the strong market adoption. During the first nine months of 2026, we made net investments of $27.0 million in the expansion of our rental fleet, expanding the rental fleet by approximately 10%. Further, with our revenue growth and the favorable macro-environment, 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 through the second quarter of 2027 to complete this expansion, of which $10.5 million was invested in the first nine months of 2026, with production expected to start up 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 $28.5 million of revenues during the first nine months of 2026, a $16.1 million increase over the first nine months 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 and 2026, 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 18.1% for the first nine months of 2026 compared to 19.2% for the first nine months of 2025. SG&A for the first nine months of 2026 includes approximately $1.2 million in severance and related costs associated with the third quarter 2026 executive leadership transition, a $0.9 million charge reflecting the acceleration of compensation expense for awards for retirement eligible executive officers and other employees, as well as $0.8 million in strategic planning, diligence, and acquisition-related costs.
•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 nine months of 2026, we utilized $16.1 million to repurchase 1.2 million shares under our share repurchase program.
Third Quarter of 2026 Compared to Third Quarter of 2025
Consolidated Results of Operations
Summarized results of operations for the third quarter of 2026 compared to the third quarter of 2025 are as follows:
Third Quarter 2026 vs 2025
(In thousands) 2026 2025 $ %
Revenues $ 76,276 $ 68,838 $ 7,438 11 %
Cost of revenues 52,371 46,870 5,501 12 %
Selling, general and administrative expenses 14,738 13,279 1,459 11 %
Other operating (income) loss, net 8 (368) 376 NM
Operating income from continuing operations 9,159 9,057 102 1 %
Foreign currency exchange (gain) loss 101 31 70 NM
Interest (income) expense, net 460 (47) 507 NM
Income from continuing operations before income taxes 8,598 9,073 (475) (5) %
Provision for income taxes from continuing operations 2,268 3,010 (742) (25) %
Income from continuing operations 6,330 6,063 267 4 %
Loss from discontinued operations, net of tax (221) (409) 188 46 %
Net income $ 6,109 $ 5,654 $ 455 8 %
The following table presents further disaggregated revenues by type:
Third Quarter 2026 vs 2025
(In thousands) 2026 2025 $ %
Revenues
Rental and service revenues $ 49,564 $ 44,279 $ 5,285 12 %
Product sales revenues 26,712 24,559 2,153 9 %
Total revenues $ 76,276 $ 68,838 $ 7,438 11 %
Third Quarter Change
2026 2025
Total gross profit margin 31.3 % 31.9 % (60) bps
Revenues
Revenues increased 11% to $76.3 million for the third quarter of 2026, compared to $68.8 million for the third quarter of 2025, including a 12% increase in rental and service revenues and a 9% increase in product sales revenues. Rental revenues increased $2.2 million (8%), including the contribution from the Grassform acquisition ($3 million). Within the base business (excluding acquisition impact), rental volume declined ($3 million) due to the impact of exceptionally dry weather in Texas, which negatively impacted matting demand. This was partially offset by higher pricing ($2 million). Service revenues increased $3.0 million (21%), primarily attributable to the timing of rental project demobilization activities as well as the contribution from the Grassform acquisition ($1 million). Product sales revenues increased $2.2 million (9%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that represent the primary solution used for worksite access in the market.
Cost of revenues
Cost of revenues increased 12% to $52.4 million for the third quarter of 2026 (31.3% gross profit margin), compared to $46.9 million for the third quarter of 2025 (31.9% gross profit margin), primarily driven by the 11% increase in revenues described above. Gross profit for rental and service activities remained in line with prior year, reflecting the higher revenues
largely offset by increased costs associated with the expanding rental fleet and the impact of the Grassform acquisition. Gross profit for product sales increased $2 million, reflecting higher sales volume along with manufacturing cost leverage.
Selling, general and administrative expenses
Selling, general and administrative expenses increased to $14.7 million for the third quarter of 2026, which includes $0.7 million attributable to the Grassform acquisition, compared to $13.3 million for the third quarter of 2025. Selling, general and administrative expenses as a percentage of revenues was 19.3% for the third quarter of 2026 and the third quarter of 2025. SG&A for the third quarter of 2026 includes approximately $1.2 million in severance and related costs associated with the third quarter executive leadership transition as well as $0.7 million in strategic planning, diligence, and acquisition-related costs. The third quarter of 2025 included $0.5 million in elevated costs related to performance-based incentives, along with $0.5 million in costs associated with strategic planning projects and our ERP implementation.
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 third 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 increased $0.5 million from the third quarter of 2025, reflecting the decrease in cash on-hand and the increase in average debt outstanding, primarily driven by the Grassform acquisition, elevated capital expenditures, including our manufacturing expansion, and share repurchases.
Provision for income taxes from continuing operations
The provision for income taxes from continuing operations was $2.3 million for the third quarter of 2026, reflecting an effective tax rate of 26%, compared to income taxes of $3.0 million for the third quarter of 2025, reflecting an effective tax rate of 33%.
Loss from discontinued operations, net of tax
Loss from discontinued operations, net of tax reflects ongoing wind down costs of the former Fluids Systems segment, which was sold in the third quarter of 2024, including costs related to the transaction and the closure of certain foreign subsidiaries that are no longer operational.
First Nine Months of 2026 Compared to First Nine Months of 2025
Consolidated Results of Operations
Summarized results of operations for the first nine months of 2026 compared to the first nine months of 2025 are as follows:
First Nine Months 2026 vs 2025
(In thousands) 2026 2025 $ %
Revenues $ 232,931 $ 201,848 $ 31,083 15 %
Cost of revenues 151,681 129,449 22,232 17 %
Selling, general and administrative expenses 42,089 38,682 3,407 9 %
Other operating (income) loss, net (511) (497) (14) 3 %
Operating income from continuing operations 39,672 34,214 5,458 16 %
Foreign currency exchange (gain) loss 92 (909) 1,001 NM
Interest (income) expense, net 1,130 (94) 1,224 NM
Income from continuing operations before income taxes 38,450 35,217 3,233 9 %
Provision for income taxes from continuing operations 9,773 9,995 (222) (2) %
Income from continuing operations 28,677 25,222 3,455 14 %
Loss from discontinued operations (143) (887) 744 84 %
Net income $ 28,534 $ 24,335 $ 4,199 17 %
The following table presents further disaggregated revenues by type:
First Nine Months 2026 vs 2025
(In thousands) 2026 2025 $ %
Revenues
Rental and service revenues $ 155,069 $ 133,984 $ 21,085 16 %
Product sales revenues 77,862 67,864 9,998 15 %
Total revenues $ 232,931 $ 201,848 $ 31,083 15 %
First Nine Months Change
2026 2025
Total gross profit margin 34.9 % 35.9 % (100) bps
Revenues
Revenues increased 15% to $232.9 million for the first nine months of 2026, compared to $201.8 million for the first nine months of 2025, including a 16% increase in rental and service revenues and a 15% increase in product sales revenues. Rental revenues increased $15.3 million (17%), including the contribution from the Grassform acquisition ($11 million). Within the base business (excluding acquisition impact), higher pricing ($6 million) was partially offset by lower rental volume ($2 million) following the completion of multiple large-scale projects completed in the second quarter of 2026, along with the impact of exceptionally dry weather in Texas, which negatively impacted matting demand during the third quarter of 2026. Service revenues increased $5.8 million (13%), primarily attributable to the contribution from the Grassform acquisition. Product sales revenues increased $10.0 million (15%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that represent the primary solution used for worksite access in the market. We sold approximately 32,000 mats during the first nine months of 2026, compared to approximately 30,000 mats during the first nine months of 2025, along with higher sales of ancillary products. During the first nine months of 2026, the majority of our product sales revenues were derived from utility companies.
Cost of revenues
Cost of revenues increased 17% to $151.7 million for the first nine months of 2026 (34.9% gross profit margin), compared to $129.4 million for the first nine months of 2025 (35.9% gross profit margin), primarily driven by the 15% increase in revenues described above. Gross profit for rental and service activities increased $1 million, reflecting the higher revenues largely offset by increased costs associated with the expanding rental fleet and the impact of the Grassform acquisition. Gross profit for product sales increased $8 million, reflecting higher sales volume along with manufacturing cost leverage.
Selling, general and administrative expenses
Selling, general and administrative expenses increased to $42.1 million for the first nine months of 2026, which includes $2.0 million attributable to the Grassform acquisition, compared to $38.7 million for the first nine months of 2025. Selling, general and administrative expenses as a percentage of revenues was 18.1% for the first nine months of 2026 compared to 19.2% for the first nine months of 2025. SG&A for the first nine months of 2026 includes approximately $1.2 million in severance and related costs associated with the executive leadership transition, a $0.9 million charge reflecting the acceleration of compensation expense for awards for retirement eligible executive officers and other employees, as well as $0.8 million in strategic planning, diligence, and acquisition-related costs. The first nine months of 2025 included $1.5 million in elevated costs related to performance-based incentives, $0.5 million in costs associated with strategic planning projects and our ERP implementation, and $0.4 million of severance costs.
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 nine months 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 increased by $1.2 million from the first nine months of 2025, primarily reflecting the decrease in cash on-hand and the increase in average debt outstanding, primarily driven by the Grassform acquisition, capital expenditures, including our manufacturing expansion, and share repurchases.
Provision for income taxes from continuing operations
The provision for income taxes from continuing operations was $9.8 million for the first nine months of 2026, reflecting an effective tax rate of 25%, compared to income taxes of $10.0 million for the first nine months of 2025, reflecting an effective tax rate of 28%.
Loss from discontinued operations, net of tax
Loss from discontinued operations, net of tax reflects net costs related to the former Fluids Systems segment, which was sold in the third quarter of 2024. In the first nine months 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 offset by costs associated with the transaction as well as the closure of certain foreign subsidiaries that are no longer operational.
Liquidity and Capital Resources
Net cash provided by operating activities was $50.1 million for the first nine months of 2026 compared to $55.0 million for the first nine months of 2025. Net income adjusted for non-cash items provided cash of $66.4 million in the first nine months of 2026, compared to $54.3 million in 2025, while changes in working capital used cash of $16.2 million in the first nine months of 2026, compared to $0.7 million of cash provided in 2025. The 2026 increase in working capital is primarily attributable to the increase in receivables and inventories associated with the growth of the business, along with specific timing of customer transactions or the deployment of inventory into our rental fleet.
Net cash used in investing activities was $38.8 million for the first nine months of 2026, which includes $45.5 million in capital expenditures partially offset by $5.5 million in additional proceeds from the sale of the Fluids Systems business, $1.8 million in proceeds from sales of assets, and $0.6 million cash paid for other investing activities. Net cash used in investing activities was $13.0 million for the first nine months of 2025, which includes $34.4 million in capital expenditures partially offset by $14.5 million in additional proceeds from the sale of the Fluids Systems business, $3.8 million in proceeds from the sale of assets, and $3.1 million in proceeds from other investing activities. The substantial majority of our capital expenditures for the first nine months of 2026 and 2025 were directed to expanding our mat rental fleet, along with $10.5 million spent on the expansion of our Carencro, Louisiana manufacturing operations in 2026.
Net cash used in financing activities was $12.2 million for the first nine months of 2026, which primarily reflects $19.3 million in purchases of treasury stock, which were primarily funded through $10.6 million of net borrowings on our Credit Facility. Net cash used in financing activities was $24.6 million for the first nine months of 2025, primarily reflecting $22.7 million in purchases of treasury stock.
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 $70 million to $75 million, which includes $40 million to $45 million invested to expand our rental fleet and approximately $20 million for the manufacturing expansion. 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) September 30, 2026 December 31, 2025
Credit Facility $ 15,900 $ 5,300
Other debt 10,396 11,562
Unamortized discount and debt issuance costs - -
Total debt $ 26,296 $ 16,862
Stockholders' equity
366,090 351,156
Total capitalization $ 392,386 $ 368,018
Total debt to capitalization 6.7 % 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 September 30, 2026, we had $15.9 million outstanding borrowings and $1.9 million in outstanding letters of credit, resulting in $132.2 million of remaining availability under the Credit Facility.
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 September 30, 2026, the applicable margin for loans 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. As of September 30, 2026, the weighted average interest rate for the Credit Facility was 6.5%.
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 September 30, 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 nine months of 2026, we entered into $2.9 million of new finance lease liabilities in exchange for leased assets.
In addition, at September 30, 2026, we had $3.7 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 October 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 30, 2026 at 16:47 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]