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What changed in NPK International Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NPK International Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+267 added−270 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in NPK International Inc.'s 2023 10-K

267 paragraphs added · 270 removed · 181 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

35 edited+9 added−19 removed22 unchanged
Biggest changeStrategy Our long-term strategy includes key foundational elements that are intended to enhance long-term shareholder value creation: • Expansion in end-markets aligned to energy transition – In recent years, the majority of our profitability and cash flow has been derived from the utilities and other industrial end-markets and our continued expansion into these end-markets reflects our highest priority for capital deployment in the foreseeable future.
Biggest changeStrategy Our long-term strategy includes key foundational elements that are intended to enhance long-term shareholder value creation: • Simplify our business model and accelerate Industrial Solutions growth – We have prioritized investment capital in the growth of our Industrial Solutions business, which has been our primary source of operating income and cash generation in recent years, the majority of which has been derived from the utilities and other industrial end-markets.
Our Fluids Systems segment operating results remain dependent on oil and natural gas drilling activity levels in the markets we serve and the nature of the drilling operations, which governs the revenue potential of each well. Drilling activity levels depend on a variety of factors, including oil and natural gas commodity pricing, inventory levels, product demand, and 3 regulatory restrictions.
Our Fluids Systems segment operating results remain dependent on oil and natural gas drilling activity levels in the markets we serve and the nature of the drilling operations, which governs the revenue potential of each well. Drilling activity 3 levels depend on a variety of factors, including oil and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions.
While we continue to enhance the performance, environmental, and safety benefits of our products and add to our patent portfolio, we believe that our scale, responsiveness to customers, and reputation in the industry with respect to our technical development and know-how, understanding of regulatory requirements, and our ability to deliver superior worksite access solutions also have competitive significance in the markets we serve.
While we continue to enhance the performance, environmental, and safety benefits of our products and add to our patent portfolio, we believe that our scale, responsiveness to customers, reputation in the industry with respect to our technical development and know-how, understanding of regulatory requirements, and our ability to deliver superior worksite access solutions also have competitive significance in the markets we serve.
Drilling activity within international markets gradually recovered in 2021 and 2022, though the combination of increasing activity levels combined with the impacts of global supply chain disruptions have caused significant cost inflation to many hydrocarbon-based products and chemicals used in our fluids systems.
Drilling activity within international markets gradually recovered in 2021 and 2022, though the combination of increasing activity levels combined with the impacts of global supply chain disruptions caused significant cost inflation to many hydrocarbon-based products and chemicals used in our fluids systems.
Our Industrial Solutions segment provides temporary worksite access solutions, including the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production (“E&P”), pipeline, renewable energy, petrochemical, construction and other industries, primarily in the United States and Europe.
Our Industrial Solutions segment provides temporary worksite access solutions, including the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production (“E&P”), pipeline, renewable energy, petrochemical, construction and other industries, primarily in the United States and United Kingdom.
We also rely on a variety of unpatented proprietary technologies and know-how in many of our applications. Competition — Globally, we face competition from larger companies, including Halliburton, Schlumberger, and Baker Hughes, which compete vigorously on fluids performance and/or price. Moreover, these companies have broad product and service offerings in addition to their fluids systems.
We also rely on a variety of unpatented proprietary technologies and know-how in many of our applications. Competition — Globally, we face competition from larger companies, including Halliburton, SLB, and Baker Hughes, which compete vigorously on fluids performance and/or price. Moreover, these companies have broad product and service offerings in addition to their fluids systems.
Our Fluids Systems segment 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 segment provides drilling and completion 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.
Competition — Our market is fragmented and competitive, with many competitors providing various forms of worksite access products and services. Wood mats and stone continue to be the primary solutions utilized for temporary worksite access across industries, though composite matting solutions continue to gain market share.
Competition — The rental and services market is fragmented and competitive, with many competitors providing various forms of worksite access products and services. Wood mats and stone continue to be the primary solutions utilized for temporary worksite access across industries, though composite matting solutions continue to gain market share.
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.
Outside of North America, 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.
In recent years, we have also expanded the use of recycled materials in our manufacturing process, which we believe provides further protection against potential shortages of virgin raw materials.
In recent years, we have also expanded the use of alternative materials, including recycled materials in our manufacturing process, which we believe provides further protection against potential shortages of virgin raw materials.
Our global footprint provides natural diversity within our organization and serves as a foundation to support an inclusive approach to everything that we do. At December 31, 2022, we employed approximately 1,540 full and part-time personnel, none of which are represented by labor unions.
Our global footprint provides natural diversity within our organization and serves as a foundation to support an inclusive approach to everything that we do. At December 31, 2023, we employed approximately 1,550 full and part-time personnel, none of which are represented by labor unions.
ITEM 1. Business General Newpark Resources, Inc. is a geographically diversified supplier providing environmentally-sensitive products, as well as rentals and services to customers across multiple industries. Our business currently operates through two reportable segments: Industrial Solutions and Fluids Systems. In addition, we had a third reportable segment, Industrial Blending, which was exited in 2022.
ITEM 1. Business General Newpark Resources, Inc. is a geographically diversified supplier providing environmentally-sensitive products, as well as rentals and services to customers across multiple industries. We currently operate our business through two reportable segments: Industrial Solutions and Fluids Systems, as described further below. In addition, we had a third reportable segment, Industrial Blending, which was exited in 2022.
The reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements contained in Item 8 “Financial Statements and Supplementary Data.” Industry Fundamentals Our Industrial Solutions segment, which has been our primary source of operating income, cash flows, and financial returns in recent years, provides temporary worksite access products and services to a variety of industries, including power transmission, E&P, pipeline, renewable energy, petrochemical, construction and other industries.
The reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements contained in Item 8 “Financial Statements and Supplementary Data.” Industry Fundamentals Our Industrial Solutions segment, which has been our primary source of operating income and cash generation in recent years, provides temporary worksite access products and services to various markets including power transmission, E&P, pipeline, renewable energy, petrochemical, construction and other industries.
We also manufacture and sell our recyclable composite mats to customers around the world, with power transmission being the primary end-market (30% of 2022 segment revenues represented product sales). Raw Materials — The resins, chemicals, and other materials used to manufacture our recyclable composite mats are widely available.
We also manufacture and sell our recyclable composite mats to customers around the world, with power transmission being the primary end-market (28% of 2023 segment revenues represented product sales). Raw Materials — The resins, chemicals, and other materials used to manufacture our recyclable composite mats are widely available.
These include specified handling procedures and guidelines for waste, ongoing employee training, and monitoring, as well as maintaining insurance coverage. We also utilize a corporate-wide health, safety, and environmental management system (“HSEMS”). The HSEMS is designed to capture information related to the planning, decision-making, and general operations of environmental regulatory activities within our operations.
These include specified handling procedures and guidelines for waste, ongoing employee training, and monitoring, as well as maintaining insurance coverage. We also utilize company-wide health, safety, and environmental management systems (“HSEMS”). The HSEMS is designed to capture information related to the planning, decision-making, and general operations of environmental regulatory activities within our operations.
The power transmission sector contributes the majority of our Industrial Solutions segment revenues, and we expect customer activity in this sector will grow over the next several years, driven in part by the impacts of increasing investments in energy transition and grid reliance initiatives.
The power transmission sector contributes the majority of our Industrial Solutions segment revenues, and we expect customer activity in this sector will grow over the next several years, driven in part by the impacts of the U.S. energy transition and the increasing investment in grid reliance initiatives.
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.
Operations in several countries in the EMEA region experienced activity disruptions and project delays 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.
In connection with the sale of our U.S.-based mineral grinding business, we entered into a four-year barite supply agreement for certain regions of our U.S. drilling fluids business. We also obtain barite and other materials used in the fluids business from various third-party suppliers.
In connection with the sale of our U.S.-based mineral grinding business in November 2022 (see Note 2), we entered into a four-year barite supply agreement for certain regions of our U.S. drilling fluids business. We also obtain barite and other materials used in the fluids business from various third-party suppliers.
Segment Overview Industrial Solutions Our Industrial Solutions segment provides temporary worksite access solutions, including the rental of our 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 (70% of 2022 segment revenues represented rental and service).
Segment Overview Industrial Solutions Our Industrial Solutions segment provides temporary worksite access solutions, including the rental of our 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 United Kingdom (72% of 2023 segment revenues represented rental and service).
We also manufacture and sell our recyclable composite mats to customers around the world, with power transmission being the primary end-market.
We also sell our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market.
We do not derive a significant portion of our revenues from government contracts. 5 Fluids Systems Our Fluids Systems segment provides drilling, completion, and stimulation fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in North America (67% of 2022 segment revenues) and EMEA (30% of 2022 segment revenues), as well as certain countries in Asia Pacific and Latin America.
We do not derive a significant portion of our revenues from government contracts. 5 Fluids Systems Our Fluids Systems segment provides drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in North America (52% of 2023 segment revenues) and EMEA (44% of 2023 segment revenues), as well as certain countries in Asia Pacific.
Using proprietary technology and systems is an important aspect of our business strategy. We believe the lightweight design of our recyclable matting system provides a distinct environmental benefit for our customers as compared to alternative wood mat products in the market, by eliminating deforestation required to produce wood mat products and also reducing CO 2 emissions associated with product transportation.
We believe the lightweight design of our recyclable matting system provides a distinct environmental benefit for our customers as compared to alternative wood mat products in the market, by eliminating deforestation required to produce wood mat products and also reducing CO 2 emissions associated with product transportation.
The segment also generated 57% of its revenues domestically during 2022. In North America, we primarily perform services either under short-term standard contracts or under “master” service agreements. Internationally, some customers issue multi-year contracts, but many are on a well-by-well or project basis. As most agreements with our customers can be terminated upon short notice, our backlog is not significant.
In North America, we primarily perform services either under short-term standard contracts or under “master” service agreements. Internationally, some customers issue multi-year contracts, but many are on a well-by-well or project basis. As most agreements with our customers can be terminated upon short notice, our backlog is not significant.
Customers — Our customers are principally major integrated and independent oil and natural gas E&P companies operating in the markets that we serve. During 2022, approximately 47% of segment revenues were derived from our 20 largest segment customers. No single customer accounted for more than 10% of our segment revenues.
Customers — Our customers are principally utility companies, infrastructure construction companies, and oil and natural gas E&P companies operating in the markets that we serve. During 2023, approximately 67% of our segment revenues were derived from our 20 largest segment customers. No single customer accounted for more than 10% of our segment revenues.
In 2022, we completed the wind down of the Industrial Blending business, and sold the industrial blending and warehouse facility and related equipment located in Conroe, Texas (see Note 2 for additional information). 6 Human Capital We are committed to providing a diverse and inclusive environment for all employees and for those with whom we conduct business.
We completed the wind down of the Industrial Blending business in the first quarter of 2022 and the sale of the industrial blending assets in the fourth quarter of 2022 (see Note 2 for additional information). 6 Human Capital We are committed to providing a diverse and inclusive environment for all employees and for those with whom we conduct business.
The demand for our products and services from customers in these industries is driven, in part, by infrastructure construction and maintenance activity levels within the United States and the United Kingdom, including required infrastructure investments to support energy transition efforts. During 2020, our business was impacted by the COVID-19 pandemic, as customers delayed purchases and planned projects.
The demand for our products and services from customers in these industries is driven, in part, by infrastructure construction and maintenance activity levels within the United States and United Kingdom, including required infrastructure investments to support energy transition efforts.
Technology — We have patents related to the design and manufacturing of our recyclable DURA-BASE mats and several of the components, as well as other products and systems related to these mats (including the connecting pins and the EPZ Grounding System™), although certain key patents have since expired in recent years.
During 2023, our manufacturing operations consumed over 750,000 pounds of recycled resin. 4 Technology — We have patents related to the design and manufacturing of our recyclable DURA-BASE® mats and several of the components, as well as other products and systems related to these mats (including the connecting pins and the EPZ Grounding System™), although certain key patents expired in 2020.
Product sales, which represent approximately one-third of our Industrial Solutions segment revenues, largely reflect sales to power transmission customers and other industrial markets, and typically fluctuate based on the timing of customer orders.
Product sales largely reflect sales to power transmission customers and other industrial markets, and typically fluctuate based on the timing of customer projects and orders.
While we have worked, and continue to work, with customers to mitigate the inflationary impact, in some cases, we are unable to adjust, or there may be delays in being able to adjust, our customer pricing on certain international contracts due to the long-term contracts in place.
While we worked with customers to mitigate the inflationary impact, in some cases, we were unable to adjust our customer pricing on certain international contracts due to the long-term contracts in place negatively impacting the profitability of our international operations in 2022 and into 2023.
Oil and natural gas prices and activity are cyclical and volatile, and this market volatility has had significant impacts on our operating results. Rig count data remains the most widely accepted indicator of drilling activity. During March 2020, oil prices collapsed due to geopolitical events along with the worldwide effects of the COVID-19 pandemic.
Oil and natural gas prices and activity are cyclical and volatile, and this market volatility has a significant impact on our Fluids Systems segment operating results. Rig count data remains the most widely accepted indicator of drilling activity.
Looking ahead, the combination of recent geopolitical events, including the ongoing conflict between Russia and Ukraine, and elevated oil and natural gas prices are causing several markets to increase drilling activity levels, to help ensure reliable energy supply in the coming years, while reducing their dependency on Russia-sourced oil and natural gas.
In recent years, geopolitical events have caused several markets to increase drilling activity levels, to help ensure reliable energy supply in the coming years, while reducing their dependency on Russia-sourced oil and natural gas. Consequently, the outlook for several markets within the EMEA region remains strong, with growth in activity expected over the next few years.
In the fourth quarter of 2022, we exited two of our Fluids Systems business units, including our U.S.-based mineral grinding business as well as our Gulf of Mexico fluids operations (see Note 2 for additional information). Raw Materials — We believe that our sources of supply for materials and equipment used in our fluids business are adequate for our needs.
In the fourth quarter of 2022, we exited two of our Fluids Systems business units, including our U.S.-based mineral grinding business as well as our Gulf of Mexico fluids operations. In 2023, we exited our stimulation chemicals product line, certain operations for offshore Australia, and our Latin America operations in Chile.
During 2022, oil prices significantly increased due in part to geopolitical events, and the average U.S. rig count continued to increase, ending 2022 at 779 rigs.
During 2021, oil prices and the average U.S. rig count steadily improved in the wake of the COVID-19 pandemic, and during 2022, oil prices and rig counts further increased due in part to global economic recovery and geopolitical events.
During 2022, approximately 71% of our segment revenues were derived from our 20 largest segment customers. No single customer accounted for more than 10% of our segment revenues. The segment also generated 93% of its revenues domestically during 2022. Typically, we perform services either under short-term contracts or rental service agreements.
The segment also generated 93% of its revenues domestically during 2023. Typically, we perform services either under short-term contracts or rental service agreements. As most agreements with our customers are cancellable upon short notice, our backlog is not significant.
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. • Focus on value creation, balancing growth with return of capital to shareholders – We are committed to a disciplined growth strategy, balancing our investments in high-returning business activities with the return of capital through share repurchases.
With our simplified business model and enhanced focus on balance sheet optimization, we seek to improve returns and consistency in cash flow generation. • Focus on value creation, balancing growth with return of capital to shareholders – We are committed to a disciplined growth strategy, balancing our investments in high-returning business activities with the return of capital through a share repurchase program.
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In the fourth quarter of 2022, we exited two of our Fluids Systems business units, including our U.S.-based mineral grinding business as well as our Gulf of Mexico fluids operations. Newpark Resources, Inc. was organized in 1932 as a Nevada corporation. In 1991, we changed our state of incorporation to Delaware.
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Over the past few years, our primary focus within Fluids Systems has been the transformation into a more agile and simplified business focused on key markets, while monetizing assets in underperforming or sub-scale markets and reducing our invested capital, particularly in the U.S.
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As markets recovered in 2021 following the COVID-related economic slowdown, the impacts of global supply chain disruptions caused elevated cost inflation to the resin and other materials used to manufacture our composite mats, although this impact moderated during 2022.
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In June 2023, we initiated a review of strategic alternatives for the long-term positioning of the Fluids Systems division, and in September 2023, we launched a formal sale process for substantially all the Fluids Systems business as part of this strategic review.
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While these raw material cost increases and increased competitive pressures have negatively impacted the profitability of our business, we have worked with customers to substantially mitigate the inflationary impacts on our business.
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While the sale process is ongoing, we anticipate substantially completing the process in mid-2024, although it is not certain that any such transaction will be consummated on that timeline or at all. Newpark Resources, Inc. was organized in 1932 as a Nevada corporation. In 1991, we changed our state of incorporation to Delaware.
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As a result, U.S. rig count declined significantly beginning in March 2020 before reaching a low of 244 rigs in August 2020. During 2021, oil prices rebounded, and the average U.S. rig count gradually increased, ending 2021 at 586 rigs.
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In 2023, market activity in the U.S. steadily declined, ending the year at 622 active rigs, down 20% from the end of 2022. With recent instability in oil prices, the 2024 outlook for U.S. market activity generally remains below the 2023 average level, as many of our customers maintain strong capital discipline and prioritize cash flow generation over growth.
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We anticipate that market activity in the U.S. will remain fairly stable in the near-term, but will remain well below 2019 levels as many of our customers maintain stronger capital discipline and prioritize cash flow generation over growth.
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In addition, we divested certain underperforming business units in 2022 and 2023 within our Fluids Systems segment, and in September 2023, we launched a formal sale process for substantially all the Fluids Systems division. • Drive operational excellence through all aspects of our business – As our business transforms, we are enhancing our focus on efficiency improvements and operating cost optimization across every aspect of our global footprint.
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Further, in the wake of the COVID-19 pandemic, 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 market activity levels difficult to predict.
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Using proprietary technology and systems is an important aspect of our business strategy. In 2023, we launched our newest generation matting system, the DURA-BASE 800 series TM , which fully integrates into our DURABASE® format and offers a nearly 15% reduction in weight.
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Consequently, the inflationary impacts negatively impacted the profitability of our international operations in 2022. Although we expect this situation to improve in the near-term, the impact of cost inflation is very difficult to predict.
Added
Over the past few years, our primary focus within Fluids Systems has been the transformation into a more agile and simplified business focused on key markets, while monetizing assets in underperforming or sub-scale markets and reducing our invested capital, particularly in the U.S. (see Note 2 for additional information).
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Consequently, the outlook for several markets, including North America and the EMEA region, continues to strengthen, with growth in activity expected over the next few years.
Added
As of December 31, 2023, the net working capital of the Fluids Systems segment was $171 million, which reflects a $69 million reduction from December 31, 2022. Raw Materials — We believe that our sources of supply for materials and equipment used in our fluids business are adequate for our needs.
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During 2022, approximately 83% of our capital investments were directed to our Industrial Solutions segment, the majority of which was to grow our rental fleet in support of our expanding presence in the power and transmission sector.
Added
Customers — Our customers are principally major integrated and independent oil and natural gas E&P companies operating in the markets that we serve. During 2023, approximately 52% of segment revenues were derived from our 20 largest segment customers, of which our largest customer represented 11% of our segment revenues. The segment also generated 40% of its revenues domestically during 2023.
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Meanwhile, we also divested certain underperforming business units in 2022 within our Fluids Systems segment, which has reduced our dependency on customers in the volatile E&P industry.
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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 – We have a long history of providing environmentally-sensitive technologies to our customers.
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In the Industrial Solutions segment, we believe that 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 greenhouse gas emissions associated with product transportation.
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We also continue to leverage our investments in research and development capabilities and adaptable manufacturing processes to increase the use of recycled and alternate materials in our composite mat production, providing further potential economic benefits along with a significant reduction in lifecycle greenhouse gas emissions when compared to using traditional virgin resin.
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During 2022, our manufacturing operations consumed over 450,000 pounds of recycled resin, and we look to expand our usage of recycled materials going forward.
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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.
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Our Fluids Systems segment has also developed a water-based fluids system designed specifically for clean- 4 energy geothermal drilling, which we market as TerraTherm TM .
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During the fourth quarter of 2022, we purchased approximately 5% of our outstanding shares of common stock and are committed to returning a substantial portion of our future free cash flow generation to our shareholders.
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Customers — Our customers are principally utility companies, infrastructure construction companies, and oil and natural gas E&P companies operating in the markets that we serve. Wood mats and stone continue to be the primary solutions utilized for temporary worksite access across industries, though composite matting solutions continue to gain market share.
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As most agreements with our customers are cancellable upon short notice, our backlog is not significant.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

61 edited+15 added−15 removed125 unchanged
Biggest changeWhile our continued expansion into a variety of non-E&P markets, the 2022 divestitures of the Excalibar U.S. mineral grinding business and Gulf of Mexico drilling fluids operations, as well as the geographic diversification into select foreign E&P markets, is intended to grow the business and reduce our dependency on the cyclical U.S. oil and natural gas market, these efforts may not be successful or sufficient to offset this volatility.
Biggest changeWe have engaged in a number of activities intended to reduce our dependency on the cyclical U.S. oil and natural gas market, including the 2022 divestitures of the Excalibar U.S. mineral grinding business and Gulf of Mexico drilling fluids operations, the geographic diversification in select foreign E&P markets, and the review of strategic alternatives for Fluids Systems.
In addition, several North African markets in which we operate, including Tunisia, Egypt, Libya, and Algeria have experienced social and political unrest in past years, which, when they occur, negatively impact our operating results and can include the temporary suspension of our operations.
In addition, several North African markets in which we operate, including Algeria, Tunisia, Egypt, and Libya have experienced social and political unrest in past years, which, when they occur, negatively impact our operating results and can include the temporary suspension of our operations.
Risks Related to Share Repurchases 18 The amount and timing of all future purchases of shares of our common stock pursuant to our securities repurchase program, if any, are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial condition and other factors.
Risks Related to Share Repurchases The amount and timing of all future purchases of shares of our common stock pursuant to our securities repurchase program, if any, are subject to the discretion of the Board of Directors and will depend upon business conditions, results of 18 operations, financial condition and other factors.
Federal District Courts in Wilmington County, Delaware as the Exclusive Forum for Securities Act Claims, Which Could Limit Our Stockholders’ Ability to Obtain What Such Stockholders Believe To Be a Favorable Judicial Forum for Disputes with Us or Our Directors, Officers or Other Employees Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, (i) the Delaware Court of Chancery or, if such court lacks subject matter jurisdiction, another state or federal court located within the State of Delaware, will be the sole and exclusive forum with respect to (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, stockholders, employees or agents to us or our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, (c) any action asserting a claim against us or any of our current or former directors, officers, stockholders, employees or agents arising out of or relating to any provision of the Delaware General Corporation Law (“DGCL”), our certificate of incorporation or its amended and restated bylaws, (d) any action asserting a claim related to or involving us or any of our directors, officers, stockholders, employees or agents that is governed by the internal affairs doctrine of the State of Delaware, or (e) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL, and (ii) the U.S.
Federal District Courts in Wilmington County, Delaware as the Exclusive Forum for Securities Act Claims, Could Limit Our Stockholders’ Ability to Obtain What Such Stockholders Believe To Be a Favorable Judicial Forum for Disputes with Us or Our Directors, Officers or Other Employees Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, (i) the Delaware Court of Chancery or, if such court lacks subject matter jurisdiction, another state or federal court located within the State of Delaware, will be the sole and exclusive forum with respect to (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, stockholders, employees or agents to us or our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, (c) any action asserting a claim against us or any of our current or former directors, officers, stockholders, employees or agents arising out of or relating to any provision of the Delaware General Corporation Law (“DGCL”), our certificate of incorporation or its amended and restated bylaws, (d) any action asserting a claim related to or involving us or any of our directors, officers, stockholders, employees or agents that is governed by the internal affairs doctrine of the State of Delaware, or (e) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL, and (ii) the U.S.
International operations are subject to a number of risks and uncertainties which could negatively impact our results from operations, including: ▪ difficulties and cost associated with complying with a wide variety of complex foreign laws, treaties, and regulations; ▪ uncertainties in or unexpected changes in regulatory environments or tax laws, including with respect to climate change; ▪ legal uncertainties, timing delays, and expenses associated with tariffs, export licenses, and other trade barriers; ▪ difficulties enforcing agreements and collecting receivables through foreign legal systems; ▪ risks associated with failing to comply with the U.S.
International operations are subject to a number of risks and uncertainties which could negatively impact our results from operations, including: ▪ difficulties and cost associated with complying with a wide variety of complex foreign laws, treaties, and regulations; ▪ uncertainties in or unexpected changes in regulatory environments or tax laws, including with respect to climate change; ▪ legal uncertainties, timing delays, and expenses associated with tariffs, export licenses, and other trade barriers; 10 ▪ difficulties enforcing agreements and collecting receivables through foreign legal systems; ▪ risks associated with failing to comply with the U.S.
The extent and duration of the effect of these labor market challenges are subject to numerous factors, including the availability of qualified persons in the markets where we and our contracted service providers operate and unemployment levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and labor laws and regulations (including increased 11 minimum wage requirements) or government programs, safety levels of our operations, and our reputation within the labor market.
The extent and duration of the effect of these labor market challenges are subject to numerous factors, including the availability of qualified persons in the markets where we and our contracted service providers operate and unemployment levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and labor laws and regulations (including increased minimum wage requirements) or government programs, safety levels of our operations, and our reputation within the labor market.
We also utilize third-party vendors and their systems and technology to support our business activities, including secure processing of confidential, sensitive, proprietary and other types of information. Failures of or interference with access to these systems, such as communication disruptions, could have an adverse effect on our ability to conduct operations or directly impact consolidated financial reporting.
We also utilize third-party vendors and their systems and technology to support our business activities, including secure processing of confidential, sensitive, proprietary and other types of information. Failures of or interference with access to these systems, such as communication disruptions, could have an adverse effect on our ability to conduct operations or directly impact financial reporting.
Risks Related to Our Ability to Generate Internal Growth Our ability to generate internal growth may be affected by, among other factors, our ability to: • attract new customers; • increase the number of projects performed for existing customers; • successfully bid for new projects; • hire and retain qualified personnel; • obtain necessary levels of equipment; and • adapt the range of products and services we offer to address our customers’ evolving needs.
Risks Related to Our Ability to Generate Internal Growth Our ability to generate internal growth may be affected by, among other factors, our ability to: • attract new customers; • increase the number of projects performed for existing customers; • successfully bid for new projects; • hire and retain qualified personnel; • obtain necessary levels of equipment; and 9 • adapt the range of products and services we offer to address our customers’ evolving needs.
We do not obtain contracts from all of our bids and our inability to win bids at acceptable profit margins would adversely affect our business and results of operations. Risks Related to Technological Developments and Intellectual Property The market for our products and services requires technological developments that generate improvements in product performance or service delivery.
We do not obtain contracts from all of our bids and our inability to win bids at acceptable profit margins would adversely affect our business and results of operations. 13 Risks Related to Technological Developments and Intellectual Property The market for our products and services requires technological developments that generate improvements in product performance or service delivery.
Risks Related to Inflation Increases in the cost of wages, materials, parts, equipment and other operational components has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers for our products and services.
Risks Related to Inflation Increases in the cost of wages, materials, equipment and other operational components has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers for our products and services.
Adverse events in the financial markets, or restrictions on lenders ability or willingness to lend to companies that have significant exposure to 14 customers in the oil and natural gas industry, may significantly reduce the availability of funds, which may have an adverse effect on our cost of borrowings and our ability to fund our business strategy.
Adverse events in the financial markets, or restrictions on lenders ability or willingness to lend to companies that have significant exposure to customers in the oil and natural gas industry, may significantly reduce the availability of funds, which may have an adverse effect on our cost of borrowings and our ability to fund our business strategy.
Business and Industry Risks Risks Related to the Worldwide Oil and Natural Gas Industry Although we continue to diversify our operations and expand into a variety of end-markets, we derive a significant portion of our revenues from customers in the worldwide oil and natural gas industry; therefore, our risk factors include those factors that impact the demand for oil and natural gas.
Risks Related to the Worldwide Oil and Natural Gas Industry Although we continue to diversify our operations and expand into a variety of end-markets, we derive a significant portion of our revenues from customers in the worldwide oil and natural gas industry; therefore, our risk factors include those factors that impact the demand for oil and natural gas.
Additionally, the trade secret laws of some foreign countries may not protect our proprietary technology in the same manner as the laws of the United States. 13 We also protect our trade secrets by customarily entering into confidentiality and/or license agreements with our employees, customers and potential customers, and suppliers.
Additionally, the trade secret laws of some foreign countries may not protect our proprietary technology in the same manner as the laws of the United States. We also protect our trade secrets by customarily entering into confidentiality and/or license agreements with our employees, customers and potential customers, and suppliers.
The process of hydraulic fracturing, which involves the injection of sand (or other forms of proppants) laden fluids into oil and natural gas bearing zones, has come under increased scrutiny from a variety of regulatory agencies, including the EPA and various state authorities.
The process of hydraulic fracturing, which involves the injection of sand (or other forms of proppants) laden fluids into oil and natural gas bearing zones, has come under 16 increased scrutiny from a variety of regulatory agencies, including the EPA and various state authorities.
Any such violation of our internal policies or the law could have a material adverse effect on our reputation, business, financial condition, or results of operations. 16 Financial Risks Risks Related to the Inherent Limitations of Insurance Coverage While we maintain liability insurance, this insurance is subject to coverage limitations.
Any such violation of our internal policies or the law could have a material adverse effect on our reputation, business, financial condition, or results of operations. Financial Risks Risks Related to the Inherent Limitations of Insurance Coverage While we maintain liability insurance, this insurance is subject to coverage limitations.
In addition, many of our contracts permit our customers to decrease the products or services without penalty, which could result in a decrease in our revenues and profitability. As a result, you should not place undue reliance on the strength of our customer contracts or the terms of those contracts.
In addition, many of our contracts permit our customers to decrease the products or services without penalty, which could result in a decrease in our revenues and 11 profitability. As a result, you should not place undue reliance on the strength of our customer contracts or the terms of those contracts.
These investments, acquisitions, and joint ventures are subject to a number of risks and uncertainties, including: ▪ incorrect assumptions regarding business activity levels or results from our capital investments, acquired operations, or assets; ▪ insufficient revenues to offset liabilities assumed; ▪ potential loss of significant revenue and income streams; ▪ increased or unexpected expenses; ▪ inadequate return of capital; ▪ regulatory or compliance issues; ▪ potential loss of key employees, customers, or suppliers of the acquired company; ▪ the triggering of certain covenants in our debt agreements (including accelerated repayment); 12 ▪ unidentified issues not discovered in due diligence; ▪ failure to complete a planned acquisition transaction or to successfully integrate the operations or management of any acquired businesses or assets in a timely manner; ▪ diversion of management’s attention from existing operations or other priorities; ▪ unanticipated disruptions to our business associated with the implementation of our enterprise-wide operational and financial system; and ▪ delays in completion and cost overruns associated with large capital investments.
These investments and acquisitions are subject to a number of risks and uncertainties, including: ▪ incorrect assumptions regarding business activity levels or results from our capital investments, acquired operations, or assets; ▪ insufficient revenues to offset liabilities assumed; ▪ potential loss of significant revenue and income streams; ▪ increased or unexpected expenses; ▪ inadequate return of capital; ▪ regulatory or compliance issues; ▪ potential loss of key employees, customers, or suppliers of the acquired company; ▪ the triggering of certain covenants in our debt agreements (including accelerated repayment); ▪ unidentified issues not discovered in due diligence; ▪ failure to complete a planned acquisition transaction or to successfully integrate the operations or management of any acquired businesses or assets in a timely manner; ▪ diversion of management’s attention from existing operations or other priorities; ▪ unanticipated disruptions to our business associated with the implementation of our enterprise-wide operational and financial system; and ▪ delays in completion and cost overruns associated with large capital investments.
In response to reduced demand for our products and services, we would take (and have in the past taken) actions aimed at protecting our liquidity and reshaping the business for the new market realities, including reducing our workforce and cost structure.
In response to reduced demand for our 14 products and services, we would take (and have in the past taken) actions aimed at protecting our liquidity and reshaping the business for the new market realities, including reducing our workforce and cost structure.
If our ESG disclosures and practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, it could have a material adverse effect on our business or demand for our services.
If our ESG disclosures and practices do not meet regulatory, investor or other stakeholder expectations and standards, which continue to evolve, it could have a material adverse effect on our business or demand for our services.
President Biden’s administration officially reentered the U.S. into the Paris Agreement in February 2021 and committed the U.S. to reducing its greenhouse gas emissions by 50-52% 15 from 2005 levels by 2030.
President Biden’s administration officially reentered the U.S. into the Paris Agreement in February 2021 and committed the U.S. to reducing its greenhouse gas emissions by 50-52% from 2005 levels by 2030.
Weakness in global economic activity, as well as the global energy transition, could reduce demand for oil and natural gas and result in lower oil and natural gas prices.
Weakness in global economic activity, as well as the global energy transition, could 8 reduce demand for oil and natural gas and result in lower oil and natural gas prices.
General Risks Risks Related to Cybersecurity Breaches or Business System Disruptions We utilize various management information systems and information technology infrastructure to manage or support a variety of our business operations, and to maintain various records, which may include confidential business or proprietary information as well as information regarding our customers, business partners, employees or other third parties.
General Risks Risks Related to Cybersecurity Incidents or Business System Disruptions We utilize various management information systems and information technology infrastructure to manage or support a variety of our business operations, and to maintain various records, which may include confidential business or proprietary information as well as information regarding our customers, business partners, employees or other third parties.
Any of the factors above could have an adverse effect on our business, financial condition, or results of operations. Additionally, the anticipated benefits of a capital investment, acquisition, or joint venture may not be realized fully or at all, or may take longer to realize than expected.
Any of the factors above could have an adverse effect on our business, financial condition, or results of operations. Additionally, the anticipated benefits of a capital investment or acquisition may not be realized fully or at all, or may take longer to realize than expected.
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.
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 their 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 incidents or business system disruptions.
In addition, concerns have been raised about whether injection of waste associated with hydraulic fracturing operations, or from the fracturing operations themselves, may cause or increase the impact of earthquakes. Although we do not provide hydraulic fracturing services, we offer stimulation chemicals used in the hydraulic fracturing process.
In addition, concerns have been raised about whether injection of waste associated with hydraulic fracturing operations, or from the fracturing operations themselves, may cause or increase the impact of earthquakes. Although we do not provide hydraulic fracturing services, we have offered stimulation chemicals used in the hydraulic fracturing process.
As a result of the divestitures, we may incur or experience (i) greater costs or realize fewer benefits than anticipated under the agreements, (ii) operational or commercial difficulties segregating the divested assets from our retained assets, (iii) disputes with the purchasers regarding the nature and sufficiency of the transition services we provide or the terms and conditions of our commercial agreements with the purchasers, (iv) higher vendor costs due to reduced economies of scale or other similar dis-synergies, or (v) losses or increased inefficiencies from stranded or underutilized assets.
As a result of any such divestitures, we may incur or experience (i) greater costs or realize fewer benefits than anticipated under the agreements, (ii) operational or commercial difficulties segregating the divested assets from our retained assets, (iii) disputes with the purchasers regarding the nature and sufficiency of the transition services we provide or the terms and conditions of our commercial agreements with the purchasers, (iv) higher vendor costs due to reduced economies of scale or operational dis-synergies, or (v) losses or increased inefficiencies from stranded or underutilized assets.
Any of these risks could have a material adverse effect on our business, financial condition, results of operations, and cash flows. In addition, these divestitures could reduce our future cash flows. If our remaining businesses fail to perform as expected, the divestitures could exacerbate certain of the other risks specified in this Annual Report on Form 10-K.
Any of these risks could have a material adverse effect on our business, financial condition, results of operations, and cash flows. In addition, any divestitures we make could reduce our future cash flows. If our remaining businesses fail to perform as expected, such divestitures could exacerbate certain of the other risks specified in this Annual Report on Form 10-K.
Risks Related to Income Taxes Our future effective tax rates could be adversely affected by changes in tax laws, both domestically and internationally, or the interpretation or application thereof. From time to time, U.S. and foreign tax authorities, including state and local governments consider legislation that could increase our effective tax rate. For example, the 2017 U.S.
Risks Related to Income Taxes Our future effective tax rates could be adversely affected by changes in tax laws, both domestically and internationally, or the interpretation or application thereof. From time to time, U.S. and foreign tax authorities, including state and local governments, consider legislation that could increase our effective tax rate.
Bribery Act, export laws, and other similar laws applicable to our operations in international markets; ▪ exchange controls or other limitations on international currency movements, including restrictions on the repatriation of funds to the U.S. from certain countries; ▪ sanctions imposed by the U.S. government that prevent us from engaging in business in certain countries or with certain counter-parties; ▪ expropriation or nationalization of assets; ▪ inability to obtain or preserve certain intellectual property rights in the foreign countries in which we operate; ▪ our inexperience in certain international markets; ▪ health emergencies or pandemics (such as the COVID-19 pandemic); ▪ fluctuations in foreign currency exchange rates; ▪ political and economic instability; and ▪ acts of terrorism.
Bribery Act, export laws, and other similar laws applicable to our operations in international markets; ▪ exchange controls or other limitations on international currency movements, including restrictions on the repatriation of funds to the U.S. from certain countries; ▪ sanctions imposed by the U.S. government that prevent us from engaging in business in certain countries or with certain counter-parties; ▪ expropriation or nationalization of assets; ▪ inability to obtain or preserve certain intellectual property rights in the foreign countries in which we operate; ▪ our inexperience in certain international markets; ▪ health emergencies or pandemics; ▪ fluctuations in foreign currency exchange rates; ▪ political and economic instability; and ▪ acts of terrorism.
Risks Related to Public Health Crises, Epidemics, and Pandemics The effects of public health crises, epidemics, and pandemics, such as the COVID-19 pandemic have resulted and may in the future result in a significant and swift reduction in U.S. and international economic activity, including adversely affecting the demand for and price of oil and natural gas, as well as the demand for our products and services.
Risks Related to Public Health Crises, Epidemics, and Pandemics The effects of public health crises, epidemics, and pandemics have resulted and may in the future result in a significant and swift reduction in U.S. and international economic activity, including adversely affecting the demand for and price of oil and natural gas, as well as the demand for our products and services.
Risks Related to Our Amended and Restated Bylaws, Which Designate the Court of Chancery of the State of Delaware as the Sole and Exclusive Forum for Certain Types of Actions and Proceedings that May Be Initiated by Our Stockholders, and the U.S.
Our Amended and Restated Bylaws, Which Designate the Court of Chancery of the State of Delaware as the Sole and Exclusive Forum for Certain Types of Actions and Proceedings that May Be Initiated by Our Stockholders, and the U.S.
Risks Related to Capital Investments, Business Acquisitions, and Joint Ventures Our ability to successfully execute our business strategy will depend, among other things, on our ability to make capital investments, complete acquisitions, and enter joint ventures, which provide us with financial benefits.
Risks Related to Capital Investments and Business Acquisitions Our ability to successfully execute our business strategy will depend, among other things, on our ability to make capital investments and complete acquisitions which provide us with financial benefits.
In addition, approximately 66% of our consolidated revenues in 2022 were derived from our U.S. operations, including approximately $400 million from the exploration and production market. Over the past several years, the U.S. oil and natural gas market has experienced periods of significant declines which reduced the demand for our services and negatively impacted customer pricing in our U.S. operations.
In addition, approximately 55% of our consolidated revenues in 2023 were derived from our U.S. operations, including approximately $270 million from the exploration and production market. Over the past several years, the U.S. oil and natural gas market has experienced periods of significant declines which reduced the demand for our services and negatively impacted customer pricing in our U.S. operations.
Risks Related to Product Offering and Market Expansion As a key component of our long-term strategy to diversify our revenue streams generated from both operating segments, we seek to continue to expand our product and service offerings and enter new customer markets with our existing products.
Risks Related to Product Offering and Market Expansion As a key component of our long-term strategy to diversify our revenue streams, we seek to continue to expand our product and service offerings and enter new customer markets with our existing products.
Alternatively, if a court were to find these provisions of our amended and restated bylaws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and our Board of Directors.
Alternatively, if a court were to find these provisions of our amended and restated bylaws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations. ITEM 1B.
There can be no assurance that the policies and procedures we or these third parties have in place, including system monitoring and data back-up processes, to prevent or mitigate the effects of these potential disruptions or breaches will be sufficient to prevent, detect and limit the impact of disruptions or breaches.
In addition, there can be no assurance that the policies and procedures we or our third-party vendors have in place, including system monitoring and data back-up processes, to prevent or mitigate the effects of these potential disruptions or incidents will be sufficient to prevent, detect and limit the impact of disruptions or incidents.
E&P Market 9 In 2022, approximately 38% of our consolidated revenues were derived from our 20 largest customers, although no customer accounted for more than 10% of our consolidated revenues.
E&P Market In 2023, approximately 42% of our consolidated revenues were derived from our 20 largest customers, although no customer accounted for more than 10% of our consolidated revenues.
Additionally, there are market areas around the world in which our operations are subject to seasonality such as Canada where the Spring “break-up” (an industry term used to describe the time of year when the frost comes out of the ground causing the earth to become soft and muddy and strict weight restrictions are implemented by the government to prevent potholes forming on roads) results in a significant slowdown in the oil and natural gas industry and our fluids business each year.
Additionally, there are market areas around the world in which our operations are subject to seasonality such as Canada where the Spring “break-up” (an industry term used to describe the time of year when the frost comes out of the ground causing the earth to become soft and muddy and strict weight restrictions are implemented by the government to prevent potholes forming on roads) results in a significant slowdown in the oil and natural gas industry and our fluids business each year, or in the summer in the U.S., where utility companies typically reduce maintenance project activity on the transmission grid due to elevated consumer electricity demand.
These divestitures could impact us in several ways, including (i) impacting relationships with our customers and vendors, (ii) restricting our operations due to certain specified terms of the agreements, and (iii) diminishing our ability to retain or attract employees due to concerns over future job security or responsibilities.
Risks Related to Divestitures Any divestitures made as part of the Fluids Systems sale process or otherwise could impact us in several ways, including (i) impacting relationships with our customers and vendors, (ii) restricting our operations due to certain specified terms of the agreements, and (iii) diminishing our ability to retain or attract employees due to concerns over future job security or responsibilities.
Risks Related to Activist Stockholders that May Attempt to Effect Changes at Our Company or Acquire Control Over Our Company We have been the subject of campaigns by activist stockholders and may continue to be so in the future.
These risks could have a material adverse effect on our business, results of operations, and financial condition. Risks Related to Activist Stockholders that May Attempt to Effect Changes at Our Company or Acquire Control Over Our Company We have been the subject of campaigns by activist stockholders and may continue to be so in the future.
Our customers also consider the volatility of energy prices and other risk factors by requiring higher returns for individual projects if there is higher perceived risk.
Expectations about future commodity prices and volatility are important for determining future spending levels. Our customers also consider the volatility of energy prices and other risk factors by requiring higher returns for individual projects if there is higher perceived risk.
Risks Related to Our Ability to Attract, Retain, and Develop Qualified Leaders, Key Employees, and Skilled Personnel Our failure to attract, retain, and develop qualified leaders and key employees could have a material adverse effect on our business.
Risks Related to Our Ability to Attract, Retain, and Develop Qualified Leaders, Key Employees, and Skilled Personnel Our failure to attract, retain, and develop qualified leaders and key employees could have a material adverse effect on our business. Our businesses are highly dependent on our ability to attract and retain highly-skilled product specialists, technical sales personnel, and service personnel.
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.
Risks Related to the Ongoing Conflicts in Europe and the Middle East Given the nature of our business and our global operations, the current conflicts in Europe and the Middle East may adversely affect our business and results of operations.
Our Industrial Solutions business is highly dependent on the availability of high-density polyethylene (“HDPE”), which is the primary raw material used in the manufacture of our recyclable composite mats. The cost of HDPE increased significantly in 2021, and although these costs moderated somewhat in 2022, remain higher than recent years.
Our Industrial Solutions business is highly dependent on the availability of high-density polyethylene (“HDPE”), which is the primary raw material used in the manufacture of our recyclable composite mats. The cost of HDPE increased significantly in 2021, but returned to more historical levels in 2022 and 2023.
These larger companies have broad product and service offerings in addition to their drilling and completion fluids, and at times, attempt to compete by offering discounts to customers to use multiple products and services, some of which we do not offer. The smaller regional competitors compete with us mainly on price and local relationships.
Our competition in the international Fluids Systems business includes larger companies, such as Halliburton, SLB, and Baker Hughes. These larger companies have broad product and service offerings in addition to their drilling and completion fluids, and at times, attempt to compete by offering discounts to customers to use multiple products and services, some of which we do not offer.
Although we do not have any operations in Russia or Ukraine, the broader consequences of this conflict, which may include sanctions, 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. 10 The ongoing conflict may also have the effect of heightening many of the other risks specified in our Risk Factors or disclosed in our public filings, any of which could materially and adversely affect our business and results of operations.
Although we do not have any operations in Russia, Ukraine, the Gaza Strip or Israel, the broader consequences of these conflicts, which may include sanctions, embargoes, supply chain disruptions, regional instability, and geopolitical shifts, and the extent of the conflicts’ effect on our business and results of operations as well as the global economy, cannot be predicted.
Legal and Regulatory Risks Risks Related to Environmental Laws and Regulations We are responsible for complying with numerous federal, state, local, and foreign laws, regulations and policies that govern environmental protection, zoning and other matters applicable to our current and past business activities, including the activities of our former subsidiaries.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations and could have a material adverse effect on our business and financial condition. 15 Legal and Regulatory Risks Risks Related to Environmental Laws and Regulations We are responsible for complying with numerous federal, state, local, and foreign laws, regulations and policies that govern environmental protection, zoning and other matters applicable to our current and past business activities, including the activities of our former subsidiaries.
Volatility of oil and natural gas prices can adversely affect demand for our products and services Volatility of oil and natural gas prices can also impact our customers’ activity levels and spending for our products and services.
Volatility of oil and natural gas prices can adversely affect demand for our products and services Volatility of oil and natural gas prices can also impact our customers’ activity levels and spending for our products and services. The level of energy prices is important to the cash flow for our customers and their ability to fund exploration and development activities.
We do not carry insurance against these risks, although we do invest in security technology, perform 17 penetration tests from time to time, and design our business processes to attempt to mitigate the risk of such breaches. However, there can be no assurance that security breaches will not occur.
We do not carry insurance against these risks, although we do invest in security technology, perform penetration tests from time to time, and design our business processes to attempt to mitigate the risk of such incidents. Our processes require continuous monitoring as technologies change and efforts to overcome security measures evolve.
Also, a significant increase in wages paid by competing employers could result in a reduction in our skilled labor force or an increase in our operating costs. We have experienced, and expect to continue to experience, a shortage of labor for certain functions, which has increased our labor costs and negatively impacted our profitability.
We have experienced, and expect to continue to experience, a shortage of labor for certain functions, which has increased our labor costs and negatively impacted our profitability.
Such environmental activism and initiatives aimed at limiting climate change and reducing air pollution could interfere with our business activities, operations, and ability to access capital.
Such environmental activism and initiatives aimed at limiting climate change and reducing air pollution could interfere with our business activities, operations, and ability to access capital. Furthermore, members of the investment community are increasing their focus on Environmental, Social, and Governance (“ESG”) practices and disclosures by public companies.
For example, the Organization for Economic Co-operation and Development (“OECD”), a global coalition of member countries, proposed a two-pillar plan to reform international taxation. The proposals aim to ensure a fairer distribution of profits among countries and to impose a floor on tax competition through the introduction of a global minimum tax.
The proposals 17 aim to ensure a fairer distribution of profits among countries and to impose a floor on tax competition through the introduction of a global minimum tax.
In connection with the sale of our U.S.-based mineral grinding business in the fourth quarter of 2022, we entered a four-year barite supply agreement for certain regions of our U.S. drilling fluids business. We also obtain barite and other materials used in the fluids business from various third-party suppliers.
Our Fluids Systems business is highly dependent on the availability of barite, which is a naturally occurring mineral that constitutes a significant portion of our fluids systems. In connection with the sale of our U.S.-based mineral grinding business in the fourth quarter of 2022, we entered a four-year barite supply agreement for certain regions of our U.S. drilling fluids business.
In August 2022, President Biden also signed into law the Inflation Reduction Act, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies, which could increase operating costs within the oil and gas industry and accelerate the transition away from fossil fuels.
In August 2022, President Biden also signed into law the Inflation Reduction Act, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies and created a methane emissions reduction program, which provided significant funding to reduce emissions of methane from the oil and gas sector and requires the EPA to impose a charge on certain oil and gas sources.
The availability and cost of barite ore is dependent on factors beyond our control, including transportation, political priorities, U.S. tariffs, and government-imposed export fees in the exporting countries, as well as the impact of weather and natural disasters.
The availability and cost of barite ore is dependent on factors beyond our control, including transportation, political priorities, U.S. tariffs, and government-imposed export fees in the exporting countries, as well as the impact of weather and natural disasters. 12 The future supply of barite ore from existing sources may be inadequate to meet the market demand, particularly during periods of increasing world-wide demand, which could ultimately restrict industry activity or our ability to meet our customers’ needs.
Additionally, the development and maintenance of these measures requires continuous monitoring as technologies change and efforts to overcome security measures evolve. We have experienced cybersecurity threats and incidents involving our systems and third-party systems and expect these incidents to continue.
We have experienced cybersecurity threats and incidents involving our systems and third-party systems and expect these incidents to continue.
Algeria represented our largest international market outside of North America, with our Algerian operations representing 7% of our consolidated revenues for 2022 and 7% of our total assets at December 31, 2022, including 24% of our total cash balance at December 31, 2022. In addition, we may seek to expand to other areas outside the U.S. in the future.
Substantially all of our cash balance at December 31, 2023 resides within our international subsidiaries, including Congo (31%), Romania (11%), and Algeria (10%). Algeria represented our largest international market outside of North America, with our Algerian operations representing 8% of our consolidated revenues for 2023 and 8% of our total assets at December 31, 2023.
In addition, all of our businesses are highly dependent on our ability to attract and retain highly-skilled product specialists, technical sales personnel, and service personnel. The market for qualified employees is extremely competitive. If we cannot attract and retain qualified personnel, our ability to compete effectively and grow our business will be severely limited.
The market for qualified employees is extremely competitive. If we cannot attract and retain qualified personnel, our ability to compete effectively and grow our business will be severely limited. Also, a significant increase in wages paid by competing employers could result in a reduction in our skilled labor force or an increase in our operating costs.
Risks Related to International Operations We have significant operations outside of the U.S., including Canada and certain areas of Europe, the Middle East and Africa. In 2022, our international operations generated approximately 34% of consolidated revenues. Substantially all of our cash balance at December 31, 2022 resides within our international subsidiaries.
However, these efforts may not be successful or sufficient to offset any volatility in our U.S. operating results. Risks Related to International Operations Our Fluids Systems business has significant operations outside of the U.S., including Canada and certain areas of Europe, the Middle East and Africa. In 2023, our international operations generated approximately 45% of consolidated revenues.
Tax Cuts and Jobs Act enacted legislation that requires certain research and development expenditures to be capitalized and amortized over five years, rather than being deducted as incurred. Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are subject to potential evolution.
For example, effective for costs paid or incurred in tax years beginning after December 31, 2021, the 2017 U.S. Tax Cuts and Jobs Act enacted legislation that requires certain research and development expenditures to be capitalized and amortized over five years, rather than being deducted as incurred. While the Ways and Means Committee of the U.S.
Furthermore, members of the investment community are increasing their focus on Environmental, Social, and Governance (“ESG”) practices and disclosures by public companies, and regulations have been proposed that may subject us to enhanced climate change reporting obligations. As a result, we may continue to face increasing pressure regarding our ESG disclosures and practices.
Concerns over climate change have resulted in, and are expected to continue to result in, the adoption of regulatory requirements for climate-related disclosures, which could increase our compliance burden and costs. As a result, we may continue to face increasing pressure regarding our ESG disclosures and practices.
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The level of energy prices is important to the cash flow for our customers and their ability to fund exploration and 8 development activities. Expectations about future commodity prices and price volatility are important for determining future spending levels.
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Business and Industry Risks Risks Related to our Exploration of Strategic Alternatives for the Long-Term Positioning of our Fluids Systems Division In June 2023, we announced that we initiated a review of strategic alternatives for the long-term positioning of the Fluids Systems division in June 2023.
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In addition, our Fluids Systems business is highly dependent on the availability of barite, which is a naturally occurring mineral that constitutes a significant portion of our fluids systems.
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In September 2023, we launched a formal sale process for substantially all the Fluids Systems business as part of this strategic review. While the sale process is ongoing, we anticipate substantially completing the process in mid-2024, although it is not certain that any such transaction will be consummated on that timeline or at all.
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The future supply of barite ore from existing sources may be inadequate to meet the market demand, particularly during periods of increasing world-wide demand, which could ultimately restrict industry activity or our ability to meet our customers’ needs.
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We do not intend to disclose developments with respect to the progress of our evaluation of any strategic options until such time as our Board of Directors has approved a specific transaction or we otherwise deem disclosure is required or appropriate.
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In addition, we may enter into joint ventures and other similar arrangements where control may be shared with unaffiliated third parties, or where we are not a controlling party. In such instances, we may have limited control over joint venture decisions and actions, which may have an impact on our business.
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We may also incur significant costs and management’s attention may be diverted in connection with the pursuit of strategic alternatives which are not ultimately consummated.
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If our joint venture partners fail to satisfactorily perform their joint venture obligations, the joint venture may be unable to adequately perform or deliver its contracted services. Under these circumstances, we may be required to make additional investments or provide additional services to ensure the adequate performance and delivery of the contracted services.
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There are risks inherent with the consummation of any such transaction, such as the risks that the anticipated benefits of such transaction may not be realized, that unexpected liabilities may result from such transaction and that the process of consummating or the effects of consummating such a transaction may cause interruption of or slow down the operations of our existing or continuing businesses.
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These additional obligations could result in reduced profit and may impact our reputation in the industry. We may also be held to be jointly and severally liable for the obligations and liabilities of our joint venture partners. Risks Related to Market Competition We face competition and compete vigorously on product performance and/or price.
Added
In addition, we may seek to expand to other areas outside the U.S. in the future.
Removed
Our competition in the North America Fluids Systems business and U.S. Industrial Solutions business is fragmented. Our competition in the international Fluids Systems business includes larger companies, such as Halliburton, Schlumberger, and Baker Hughes.
Added
The ongoing conflicts may also have the effect of heightening many of the other risks specified in our risk factors or disclosed in our public filings, any of which could materially and adversely affect our business and results of operations.
Removed
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations and could have a material adverse effect on our business and financial condition.
Added
We also obtain barite and other materials used in the fluids business from various third-party suppliers.
Removed
In addition, these risks could have a material adverse effect on our business, results of operations, and financial condition. Risks Related to our Strategic Actions We regularly review our global portfolio of business activities.
Added
Risks Related to Market Competition We face competition and compete vigorously on product performance and/or price. Our competition in the North America Fluids Systems business and U.S. Industrial Solutions business is fragmented. The smaller regional competitors compete with us mainly on price and local relationships.
Removed
These reviews focus on evaluating changes in the outlook for our served markets and customer priorities, while identifying opportunities for value-creating options in our portfolio, and placing investment emphasis in markets where we generate strong returns and where we see greater long-term viability and stability.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also own a facility containing approximately 103,000 square feet of office space (approximately 20,000 square feet of which is currently being leased to third parties) on approximately 11 acres of land in Katy, Texas, which houses our division headquarters and general and administrative support personnel for both operating segments, the laboratory and technology center for the Fluids Systems segment, as well as administrative offices for two third-party lessees.
Biggest changeWe also own a facility containing approximately 108,000 square feet of office space (approximately 21,000 square feet of which is currently being leased to third parties) on approximately 11 acres of land in Katy, Texas, which houses our division headquarters and general and administrative support personnel for both operating segments, the laboratory and technology center for the Fluids Systems segment, as well as administrative offices for third-party lessees.
We also own or lease various facilities and warehouses throughout the U.S., as well as facilities in the United Kingdom, to support our field operations.
We also own or lease various facilities and warehouses throughout the U.S., as well as facilities in the U.K., to support our field operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the outcome of litigation or other proceedings against us cannot be predicted with certainty, management does not expect that any loss resulting from such litigation or other proceedings, in excess of any amounts accrued or covered by insurance, will have a material adverse impact on our consolidated financial statements. ITEM 4.
Biggest changeWhile the outcome of litigation or other proceedings against us cannot be predicted with certainty, management does not expect that any loss resulting from such litigation or other proceedings, in excess of any amounts accrued or covered by insurance, will have a material adverse impact on our consolidated financial statements. ITEM 4. Mine Safety Disclosures Not applicable. 20 PART II
ITEM 3. Legal Proceedings 19 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.
ITEM 3. Legal Proceedings In the ordinary course of conducting our business, we become involved in litigation and other claims from private party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state, and local levels.
Removed
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 Annual Report on Form 10-K, which is incorporated by reference. 20 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the three months and year ended December 31, 2022, we repurchased 4,437,885 shares of our common stock under our repurchase program for a total cost of $17.5 million, leaving $6.2 million remaining under the program as of December 31, 2022.
Biggest changeIn February 2023, our Board of Directors approved certain changes to the repurchase program as well as additional capacity to increase the total authorization then available to $50.0 million. During the three months ended December 31, 2023, we repurchased 878,923 shares of our common stock under our repurchase program for a total cost of $6.0 million.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Asset-Based Loan Facility.” Stock Performance Graph The following graph reflects a comparison of the cumulative total stockholder return of our common stock from January 1, 2018 through December 31, 2022, with the New York Stock Exchange Market Value Index, a broad equity market index, and the Philadelphia Oil Service Sector Index.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Asset-Based Loan Facility.” Stock Performance Graph The following graph reflects a comparison of the cumulative total stockholder return of our common stock from January 1, 2019 through December 31, 2023, with the New York Stock Exchange Market Value Index, a broad equity market index, and the Philadelphia Oil Service Sector Index.
The repurchase program has no specific term. Repurchases are expected to be funded from borrowings under our Amended ABL Facility, operating cash flows, and available cash on hand. As part of the share repurchase program, our management has been authorized to establish trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934. ITEM 6. [Reserved] 22
Future 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. ITEM 6. [Reserved] 22
The graph assumes the investment of $100 on January 1, 2018 in our common stock and each index and the reinvestment of all dividends, if any.
The graph assumes the investment of $100 on January 1, 2019 in our common stock and each index and the reinvestment of all dividends, if any.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “NR.” As of February 1, 2023, we had 1,153 stockholders of record as determined by our transfer agent.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “NR.” As of February 1, 2024, we had 1,072 stockholders of record as determined by our transfer agent.
Our Board of Directors authorized a $100.0 million securities repurchase program in November 2018, available for repurchases of any combination of our common stock and our unsecured convertible senior notes, which matured in December 2021.
In November 2018, our Board of Directors authorized a securities repurchase program available for repurchases of any combination of our common stock and our unsecured convertible senior notes, which matured in December 2021.
During 2022, we purchased an aggregate of 592,273 shares surrendered in lieu of taxes under vesting of restricted stock awards. These shares were not acquired pursuant to our securities repurchase program. All of the shares purchased are held as treasury stock.
During 2023, we purchased an aggregate of 576,967 shares surrendered in lieu of taxes under vesting of restricted stock awards. These shares were not acquired pursuant to our securities repurchase program described below. All of the shares purchased are held as treasury stock.
Copyright 1980-2023. 21 Issuer Purchases of Equity Securities The following table details our repurchases of shares of our common stock for the three months ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs ($ in Millions) October 2022 — $ — — $ 23.8 November 2022 1,632,078 $ 3.96 1,630,861 $ 17.3 December 2022 2,807,024 $ 3.94 2,807,024 $ 6.2 Total 4,439,102 4,437,885 During the three months ended December 31, 2022, we purchased an aggregate of 1,217 shares surrendered in lieu of taxes under vesting of restricted stock awards.
Copyright 1980-2024. 21 Issuer Purchases of Equity Securities The following table details our repurchases of shares of our common stock for the three months ended December 31, 2023: 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) October 2023 878,923 $ 6.85 878,923 $ 18.1 November 2023 3,043 $ 7.19 — $ 18.1 December 2023 — $ — — $ 18.1 Total 881,966 878,923 During the three months ended December 31, 2023, we purchased an aggregate of 3,043 shares surrendered in lieu of taxes under vesting of restricted stock awards.
In February 2023, our Board of Directors approved certain changes to this program and increased the authorization to $50.0 million. 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.
Our repurchase program is 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.
Added
During 2023, we repurchased 6,522,797 shares of our common stock under our repurchase program for a total cost of $31.9 million. As of December 31, 2023, we had $18.1 million remaining under the program. In February 2024, our Board of Directors replaced the existing program with a new repurchase program for repurchases of common stock up to $50.0 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe total charges of $29.4 million were recorded to impairments and other charges in the third quarter of 2022. 25 Total impairments and other charges consisted of the following: Year Ended December 31, (In thousands) 2022 Industrial Blending - Long-lived assets impairment $ 7,905 Gulf of Mexico - Long-lived assets impairment 21,461 Gulf of Mexico - Inventory write-downs 7,956 Total impairments and other charges $ 37,322 Summarized operating results of the business units exited in 2022 (including impairments and other charges described above) are shown in the following table: Year Ended December 31, (In thousands) 2022 2021 2020 Revenues Industrial Blending $ — $ 8,821 $ 7,548 Excalibar 55,990 36,396 28,214 Gulf of Mexico 26,708 25,366 46,524 Operating income (loss) Industrial Blending (8,002) (2,384) 429 Excalibar 3,665 (277) (1,999) Gulf of Mexico (43,215) (6,753) (3,450) Summarized net assets of the business units exited in 2022 are shown in the following table: (In thousands) December 31, 2022 December 31, 2021 Receivables, net $ 27,798 $ 12,140 Inventories 5,805 42,421 Property, plant and equipment, net 4,508 74,318 Accounts payable (2,060) (5,136) Accrued liabilities (311) (1,976) Total net assets $ 35,740 $ 121,767 As described above, the change in net assets related to these divested business units includes the impact of the $37.3 million of impairments and other charges, the impact from the divestiture transactions, as well as the wind-down of retained working capital.
Biggest changeLand - Long-lived assets impairment 2,485 — Stimulation chemicals product line - Inventory write-downs 1,576 — Australia - Inventory write-downs 1,058 — Australia - Long-lived assets impairment 439 — Chile exit - Recognition of cumulative foreign currency translation losses 798 — Industrial Blending - Long-lived assets impairment — 7,905 Gulf of Mexico - Long-lived assets impairment — 21,461 Gulf of Mexico - Inventory write-downs — 7,956 Total impairments and other charges $ 6,356 $ 37,322 Summarized operating results of the business units exited in 2022 (including impairments and other charges described above) are shown in the following table: Year Ended December 31, (In thousands) 2023 2022 2021 Revenues Industrial Blending $ — $ — $ 8,821 Excalibar — 55,990 36,396 Gulf of Mexico — 26,708 25,366 Total revenues $ — $ 82,698 $ 70,583 Operating income (loss) Industrial Blending $ — $ (8,002) $ (2,384) Excalibar — 3,665 (277) Gulf of Mexico (4,776) (43,215) (6,753) Total Operating income (loss) $ (4,776) $ (47,552) $ (9,414) Summarized net assets related to the business units exited in 2022 are shown in the following table: (In thousands) December 31, 2022 Receivables, net $ 27,798 Inventories 5,805 Accounts payable (2,060) Accrued liabilities (311) Total net assets $ 31,232 The net assets remaining as of December 31, 2022 related to the retained working capital from the Excalibar sale and the remaining Gulf of Mexico net assets.
Gulf of Mexico Operations As a result of the plan to exit the Gulf of Mexico operations as described above, we considered the third quarter of 2022 developments to be a potential indicator of impairment that required us to complete an impairment evaluation.
As a result of the plan to exit the Gulf of Mexico operations as described above, we considered the third quarter 2022 developments to be a potential indicator of impairment that required us to complete an impairment evaluation.
In both years, income tax expense primarily reflects earnings from our international operations since we are unable to recognize the tax benefit from our U.S. losses as they may not be realized. 28 Operating Segment Results Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers): Year Ended December 31, 2022 vs 2021 (In thousands) 2022 2021 $ % Revenues Fluids Systems $ 622,601 $ 420,789 $ 201,812 48 % Industrial Solutions 192,993 185,171 7,822 4 % Industrial Blending — 8,821 (8,821) (100) % Total revenues $ 815,594 $ 614,781 $ 200,813 33 % Operating income (loss) Fluids Systems $ (15,566) $ (19,012) $ 3,446 Industrial Solutions 43,899 42,117 1,782 Industrial Blending (8,002) (2,384) (5,618) Corporate office (29,365) (29,546) 181 Total operating loss $ (9,034) $ (8,825) $ (209) Segment operating margin Fluids Systems (2.5) % (4.5) % Industrial Solutions 22.7 % 22.7 % Industrial Blending NM (27.0) % Fluids Systems Revenues Total revenues for this segment consisted of the following: Year Ended December 31, 2022 vs 2021 (In thousands) 2022 2021 $ % United States $ 355,435 $ 227,261 $ 128,174 56 % Canada 61,069 48,007 13,062 27 % Total North America 416,504 275,268 141,236 51 % EMEA 185,298 132,221 53,077 40 % Other 20,799 13,300 7,499 56 % Total International 206,097 145,521 60,576 42 % Total Fluids Systems revenues $ 622,601 $ 420,789 $ 201,812 48 % North America revenues increased 51% to $416.5 million for 2022, compared to $275.3 million for 2021.
In both years, income tax expense primarily reflects earnings from our international operations since we are unable to recognize the tax benefit from our U.S. losses as they may not be realized. 33 Operating Segment Results Summarized financial information for our reportable segments is shown in the following table (net of inter-segment transfers): Year Ended December 31, 2022 vs 2021 (In thousands) 2022 2021 $ % Revenues Fluids Systems $ 622,601 $ 420,789 $ 201,812 48 % Industrial Solutions 192,993 185,171 7,822 4 % Industrial Blending — 8,821 (8,821) (100) % Total revenues $ 815,594 $ 614,781 $ 200,813 33 % Operating income (loss) Fluids Systems $ (15,566) $ (19,012) $ 3,446 Industrial Solutions 43,899 42,117 1,782 Industrial Blending (8,002) (2,384) (5,618) Corporate office (29,365) (29,546) 181 Total operating loss $ (9,034) $ (8,825) $ (209) Segment operating margin Fluids Systems (2.5) % (4.5) % Industrial Solutions 22.7 % 22.7 % Industrial Blending NM (27.0) % Fluids Systems Revenues Total revenues for this segment consisted of the following: Year Ended December 31, 2022 vs 2021 (In thousands) 2022 2021 $ % United States $ 355,435 $ 227,261 $ 128,174 56 % Canada 61,069 48,007 13,062 27 % Total North America 416,504 275,268 141,236 51 % EMEA 185,298 132,221 53,077 40 % Other 20,799 13,300 7,499 56 % Total International 206,097 145,521 60,576 42 % Total Fluids Systems revenues $ 622,601 $ 420,789 $ 201,812 48 % North America revenues increased 51% to $416.5 million for 2022, compared to $275.3 million for 2021.
The increase was primarily driven by higher activity in Europe, Africa, and the Asia Pacific region following a significant impact in 2021 from the COVID-19 pandemic, as described above, partially offset by a $19.3 million decrease in revenues from currency exchange rate changes. 29 Operating loss The Fluids Systems segment incurred an operating loss of $15.6 million for 2022, which includes $29.4 million of total non-cash impairment charges, compared to a $19.0 million operating loss incurred in 2021.
The increase was primarily driven by higher activity in Europe, Africa, and the Asia Pacific region following a significant impact in 2021 from the COVID-19 pandemic, as described above, partially offset by a $19.3 million decrease in revenues from currency exchange rate changes. 34 Operating loss The Fluids Systems segment incurred an operating loss of $15.6 million for 2022, which includes $29.4 million of total non-cash impairment charges, compared to a $19.0 million operating loss incurred in 2021.
In connection with the sale, the Company and Cimbar have entered into a long-term barite supply agreement for certain regions of our U.S. drilling fluids business, with an initial term of four years following the closing of the transaction.
In connection with the sale, the Company and Cimbar entered into a long-term barite supply agreement for certain regions of our U.S. drilling fluids business, with an initial term of four years following the closing of the transaction.
As a result of the plan to exit the Gulf of Mexico operations as described above, we considered the third quarter developments to be a potential indicator of impairment that required us to complete an impairment evaluation.
As a result of the plan to exit the Gulf of Mexico operations as described above, we considered the third quarter of 2022 developments to be a potential indicator of impairment that required us to complete an impairment evaluation.
Consolidated selling, general and administrative expenses included $1.8 million of costs related to divested business units for 2022, compared to $2.1 million for 2021. 27 Other operating income, net Other operating income, net for 2022 includes $3.6 million of total gains on divestitures, including $2.6 million in the Industrial Blending segment for the sale of the Conroe, Texas blending facility and $1.0 million in the Fluids Systems segment for the Excalibar sale.
Consolidated selling, general and administrative expenses included $1.8 million of costs related to divested business units for 2022, compared to $2.1 million for 2021. 32 Other operating income, net Other operating income, net for 2022 includes $3.6 million of total gains on divestitures, including $2.6 million in the Industrial Blending segment for the sale of the Conroe, Texas blending facility and $1.0 million in the Fluids Systems segment for the Excalibar sale.
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.
Outside of North America, 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.
We file income tax returns in the U.S. and several non-U.S. jurisdictions and are subject to examination in the various jurisdictions in which we file. We are no longer subject to income tax examinations for U.S. federal and substantially all state jurisdictions for years prior to 2018 and for substantially all foreign jurisdictions for years prior to 2008.
We file income tax returns in the U.S. and several non-U.S. jurisdictions and are subject to examination in the various jurisdictions in which we file. We are no longer subject to income tax examinations for U.S. federal and substantially all state jurisdictions for years prior to 2019 and for substantially all foreign jurisdictions for years prior to 2008.
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.
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 U.S. energy transition and the increasing investment in grid reliance initiatives.
As of December 31, 2022, our consolidated balance sheet includes $47.1 million of goodwill, all of which relates to the Industrial Solutions segment. Goodwill and other indefinite-lived intangible assets are tested for impairment annually as of November 1, or more frequently, if indicators of impairment exist.
As of December 31, 2023, our consolidated balance sheet includes $47.3 million of goodwill, all of which relates to the Industrial Solutions segment. Goodwill and other indefinite-lived intangible assets are tested for impairment annually as of November 1, or more frequently, if indicators of impairment exist.
Average North American rig count data for the last three years is as follows: Year Ended December 31, 2022 vs 2021 2021 vs 2020 2022 2021 2020 Count % Count % U.S.
Average North American rig count data for the last three years is as follows: Year Ended December 31, 2023 vs 2022 2022 vs 2021 2023 2022 2021 Count % Count % U.S.
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.
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. 37 Other Financing Arrangements.
The growth of this business in the power transmission and other industrial markets remains a strategic priority for us due to such markets’ relative stability compared to E&P, as well as the magnitude of the market growth opportunity, including the potential positive impact from the energy transition and future legislation and regulations related to greenhouse gas emissions and climate change.
The growth of our business in the power transmission and other industrial markets remains a strategic priority for us due to the relative stability of such markets compared to E&P, as well as the magnitude of growth opportunity in these markets, including the potential positive impact from the energy transition and future legislation and regulations related to greenhouse gas emissions and climate change.
In connection with this divestiture, we recognized a $7.9 million impairment charge related to these long-lived assets in the second quarter of 2022, and subsequently recognized a gain of $2.6 million upon the eventual sale in the fourth quarter of 2022. Sale of Excalibar U.S.
In connection with this divestiture, we recognized a $7.9 million impairment charge related to these long-lived assets in the second quarter of 2022 (included in impairments and other charges), and subsequently recognized a gain of $2.6 million upon the eventual sale in the fourth quarter of 2022. Sale of Excalibar U.S.
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. See Note 1 for a discussion of the accounting policies for each of these matters.
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. See Note 1 in Item 8. “Financial Statements and Supplementary Data” for a discussion of the accounting policies for each of these matters.
In completing the annual evaluation during the fourth quarter of 2022, we determined that the fair value of the Industrial Solutions reporting unit was significantly more than the net carrying value, and therefore, no impairment was required. Income Taxes We had total deferred tax assets of $71.9 million and $70.2 million at December 31, 2022 and 2021, respectively.
In completing the annual evaluation during the fourth quarter of 2023, we determined that the fair value of the Industrial Solutions reporting unit was significantly more than the net carrying value, and therefore, no impairment was required. Income Taxes We had total deferred tax assets of $77.3 million and $71.9 million at December 31, 2023 and 2022, respectively.
As of December 31, 2022, the weighted average interest rate for the Amended ABL Facility was 5.9% and the applicable commitment fee on the unused portion of the Amended ABL Facility was 0.375% per annum.
As of December 31, 2023, the weighted average interest rate for the Amended ABL Facility was 6.9% and the applicable commitment fee on the unused portion of the Amended ABL Facility was 0.375% per annum.
Foreign currency exchange Foreign currency exchange was a $0.4 million gain for 2021 compared to a $3.4 million loss for 2020 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 $8.8 million for 2021 compared to $11.0 million for 2020.
Foreign currency exchange Foreign currency exchange was a $0.4 million loss for 2022 compared to a $0.4 million gain for 2021 and reflects the impact of currency translation for assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies. Interest expense, net Interest expense was $7.0 million for 2022 compared to $8.8 million for 2021.
As of December 31, 2022, the applicable margin for borrowings under the Amended ABL Facility was 1.75% with respect to BSBY borrowings and 0.75% with respect to base rate borrowings.
As of December 31, 2023, the applicable margin for borrowings under the Amended ABL Facility was 1.50% with respect to BSBY borrowings and 0.50% with respect to base rate borrowings.
Consequently, the outlook for several markets within the EMEA region continues to strengthen, with growth in activity expected over the next few years. Industrial Blending – Our Industrial Blending segment began operations in 2020 and supported industrial end-markets, including the production of disinfectants and industrial cleaning products.
Consequently, the outlook for several markets within the EMEA region remains strong, with growth in activity expected over the next few years. 24 Industrial Blending – Our Industrial Blending segment began operations in 2020 and supported industrial end-markets, including the production of disinfectants and industrial cleaning products.
We expect capital expenditures in 2023 will remain fairly in line with 2022 levels, with spending heavily focused on the expansion of our mat rental fleet to further support the utilities market penetration. We also expect to return value to our shareholders, utilizing excess cash generation to fund additional share repurchases.
We expect capital expenditures in 2024 will remain fairly in line with 2023 levels, with spending heavily focused on the expansion of our mat rental fleet. We also expect to return value to our shareholders, utilizing excess cash generation to fund additional share repurchases.
Substantially all our $23.2 million of cash on hand at December 31, 2022 resides in our international subsidiaries. We primarily manage our liquidity utilizing availability under our Amended ABL Facility and other existing financing arrangements.
Substantially all our $38.6 million of cash on hand at December 31, 2023 resides in our international subsidiaries. We primarily manage our liquidity utilizing availability under our Amended ABL Facility and other existing financing arrangements.
At December 31, 2022, we had $42.3 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $1.9 million in restricted cash. We also enter into normal short-term operating leases for office and warehouse space, as well as certain operating equipment.
At December 31, 2023, we had $39.8 million in outstanding letters of credit, performance bonds, and other guarantees for which certain of the letters of credit are collateralized by $0.3 million in restricted cash. We also enter into normal short-term operating leases for office and warehouse space, as well as certain operating equipment.
Tax Cuts and Jobs Act (“Tax Act”). Changes in the expected future generation of qualifying taxable income within these jurisdictions or in the realizability of other tax assets 39 may result in an adjustment to the valuation allowance, which would be charged or credited to income in the period this determination was made.
Changes in the expected future generation of qualifying taxable income within these jurisdictions or in the realizability of other tax assets may result in an adjustment to the valuation allowance, which would be charged or credited to income in the period this determination was made.
We believe the critical accounting policies described below affect our more significant judgments and estimates used in preparing the consolidated financial statements. Impairment of Long-lived Assets As of December 31, 2022, our consolidated balance sheet includes $193.1 million of property, plant and equipment and $19.7 million of finite-lived intangible assets.
We believe the critical accounting policies described below affect our more significant judgments and estimates used in preparing the consolidated financial statements. Impairment of Long-lived Assets As of December 31, 2023, our consolidated balance sheet includes $195.3 million of property, plant and equipment and $17.1 million of finite-lived intangible assets.
Looking ahead, the combination of recent geopolitical events and elevated oil and natural gas prices are causing several markets to increase drilling activity levels, to help ensure reliable energy supply in the coming years, while reducing their dependency on Russia-sourced oil and natural gas.
Further, geopolitical events in recent years are causing several markets to increase drilling activity levels, to help ensure reliable energy supply in the coming years, while reducing their dependency on Russia-sourced oil and natural gas.
Interest expense, net Interest expense was $7.0 million for 2022 compared to $8.8 million for 2021. Interest expense for 2022 and 2021 includes $0.9 million and $3.7 million, respectively, in non-cash amortization of original issue discount and debt issuance costs.
Interest expense for 2022 and 2021 included $0.9 million and $3.7 million, respectively, in non-cash amortization of original issue discount and debt issuance costs.
Exit of Gulf of Mexico Operations In the third quarter of 2022, our Board of Directors approved management’s plan to exit our Fluids Systems Gulf of Mexico operations, including the potential sale of related assets. In December 2022, we completed the sale of substantially all assets associated with our Gulf of Mexico completion fluids operations.
Gulf of Mexico Operations In the third quarter of 2022, our Board of Directors approved management’s plan to exit our Fluids Systems Gulf of Mexico operations, including the potential sale of related assets.
Foreign currency exchange Foreign currency exchange was a $0.4 million loss for 2022 compared to a $0.4 million gain for 2021 and primarily reflects the impact of currency translation for assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies.
Foreign currency exchange Foreign currency exchange was a $0.3 million loss for 2023 compared to a $0.4 million loss for 2022, and reflects the impact of currency translation for assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies. Interest expense, net Interest expense was $8.2 million for 2023 compared to $7.0 million for 2022.
Net cash provided by investing activities was $46.2 million for 2022, including $71.3 million in proceeds from divestitures (see Note 2 for additional information) as well as $3.2 million in proceeds from the sale of assets, which includes the sale of used mats from our Industrial Solutions rental fleet, partially offset by capital expenditures of $28.3 million.
Net cash used in investing activities was $5.7 million for 2023, including $29.2 million in capital expenditures partially offset by $19.8 million in proceeds received related to our fourth quarter of 2022 divestitures (see Note 2 for additional information), as well as $3.7 million in proceeds from the sale of assets, which includes the sale of used mats from our Industrial Solutions rental fleet.
As a result, we may incur future charges related to these efforts or potential asset impairments, which may negatively impact our future results. 26 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Consolidated Results of Operations Summarized results of operations for 2022 compared to 2021 are as follows: Year Ended December 31, 2022 vs 2021 (In thousands) 2022 2021 $ % Revenues $ 815,594 $ 614,781 $ 200,813 33 % Cost of revenues 694,058 529,552 164,506 31 % Selling, general and administrative expenses 97,618 94,445 3,173 3 % Other operating income, net (4,370) (391) (3,979) NM Impairments and other charges 37,322 — 37,322 NM Operating loss (9,034) (8,825) (209) (2) % Foreign currency exchange (gain) loss 389 (397) 786 NM Interest expense, net 7,040 8,805 (1,765) (20) % Loss on extinguishment of debt — 1,000 (1,000) NM Loss before income taxes (16,463) (18,233) 1,770 10 % Provision for income taxes 4,371 7,293 (2,922) NM Net loss $ (20,834) $ (25,526) $ 4,692 18 % Revenues Revenues increased 33% to $815.6 million for 2022, compared to $614.8 million for 2021.
Corporate office expenses for 2023 includes approximately $2.9 million of expenses related to strategic planning projects, including $1.2 million of transaction related expenses for the ongoing Fluids Systems segment sale process, as well as $1.2 million of severance costs, while 2022 included $1.1 million associated with shareholder matters and acquisition and divestiture efforts. 31 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Consolidated Results of Operations Summarized results of operations for 2022 compared to 2021 are as follows: Year Ended December 31, 2022 vs 2021 (In thousands) 2022 2021 $ % Revenues $ 815,594 $ 614,781 $ 200,813 33 % Cost of revenues 694,058 529,552 164,506 31 % Selling, general and administrative expenses 97,618 94,445 3,173 3 % Other operating income, net (4,370) (391) (3,979) NM Impairments and other charges 37,322 — 37,322 NM Operating loss (9,034) (8,825) (209) (2) % Foreign currency exchange (gain) loss 389 (397) 786 NM Interest expense, net 7,040 8,805 (1,765) (20) % Loss on extinguishment of debt — 1,000 (1,000) NM Loss before income taxes (16,463) (18,233) 1,770 10 % Provision for income taxes 4,371 7,293 (2,922) NM Net loss $ (20,834) $ (25,526) $ 4,692 18 % Revenues Revenues increased 33% to $815.6 million for 2022, compared to $614.8 million for 2021.
We expect the projected availability under our Amended ABL Facility and other existing financing arrangements, cash generated by operations, and available cash on-hand in our international subsidiaries to be adequate to fund our current operations during the next 12 months.
We expect the projected availability under our Amended ABL Facility and other existing financing arrangements, cash generated by operations, and available cash on-hand in our international subsidiaries to be adequate to fund our current operations during the next 12 months. We anticipate that our near-term working capital requirements for our operations will generally fluctuate directionally with revenues.
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, which governs the revenue potential of each well.
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, which governs the revenue potential of each well. Drilling activity levels depend on a variety of factors, including oil and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions.
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 36 property, plant and equipment, net.
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.
Our Industrial Solutions segment has been the primary source of operating income and cash generation for us in recent years, as illustrated above, and has also been the primary focus for growth investments, reflecting approximately 83% of our 2022 capital expenditures.
Our Industrial Solutions segment has been our primary source of operating income and cash generation in recent years, and has also been the primary focus for growth investments.
Conroe, Texas Blending Facility In connection with the 2022 wind down of the Industrial Blending business and sales process associated with the industrial blending and warehouse facility and related equipment as described above, we recognized a $7.9 million impairment charge to impairments and other charges related to these long-lived assets in the second quarter of 2022, and subsequently recognized a gain of $2.6 million upon the eventual sale in the fourth quarter of 2022.
Depending on the actual outcome of the Fluids Systems sale process, or changes in these assumptions, our expectations regarding future net cash flows may change and a material impairment could result. 39 Conroe, Texas Blending Facility In connection with the 2022 wind down of the Industrial Blending business and sales process associated with the industrial blending and warehouse facility and related equipment as described above, we recognized a $7.9 million impairment charge to impairments and other charges related to these long-lived assets in the second quarter of 2022, and subsequently recognized a gain of $2.6 million upon the eventual sale in the fourth quarter of 2022.
Industrial Solutions – Our Industrial Solutions segment, which generated 24% of consolidated revenues and $43.9 million of operating income for 2022, provides temporary worksite access solutions, including the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production (“E&P”), pipeline, renewable energy, petrochemical, construction and other industries, primarily in the United States and Europe.
Segment Overview Industrial Solutions – Our Industrial Solutions segment, which generated 28% of our consolidated revenues and $53.0 million of operating income for 2023, 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 United Kingdom.
Both the amended term loan and revolving credit facility mature in April 2025 and bear interest at a rate of Sterling Overnight Index Average (“SONIA”) plus a margin of 3.25% per year. As of December 31, 2022, the interest rate for the U.K. facilities was 6.7%.
In addition, in April 2022, a U.K. subsidiary entered a £7.0 million term loan and a £2.0 million revolving credit facility. Both the term loan and revolving credit facility mature in April 2025 and bear interest at a rate of Sterling Overnight Index Average plus a margin of 3.25% per year.
As of February 23, 2023, our total borrowing availability under the Amended ABL Facility was $167.9 million, of which $58.0 million was drawn and $3.3 million was used for outstanding letters of credit, resulting in remaining availability of $106.6 million.
As of February 22, 2024, our total borrowing availability under the Amended ABL Facility was $116.8 million, of which $45.6 million was drawn and $4.0 million was used for outstanding letters of credit, resulting in remaining availability of $67.2 million.
Mineral Grinding Business In the second quarter of 2022, we initiated a formal sale process for our Excalibar U.S. mineral grinding business (“Excalibar”), which is reported within our Fluids Systems segment. On November 30, 2022, we completed the sale of substantially all the long-lived assets, inventory, and operations of Excalibar to Cimbar Resources, INC.
Mineral Grinding Business In November 2022, we completed the sale of substantially all the long-lived assets, inventory, and operations of our Excalibar U.S. mineral grinding business (“Excalibar”), which was reported within our Fluids Systems segment, to Cimbar Resources, INC. (“Cimbar”), for cash proceeds (after purchase price adjustments) of approximately $51 million and recognized a gain of $1.0 million.
Our capitalization is as follows: (In thousands) December 31, 2022 December 31, 2021 Amended ABL Facility $ 80,300 $ 86,500 Other debt 33,949 28,491 Unamortized discount and debt issuance costs (134) (188) Total debt $ 114,115 $ 114,803 Stockholders’ equity 423,028 462,386 Total capitalization $ 537,143 $ 577,189 Total debt to capitalization 21.2 % 19.9 % Asset-Based Loan Facility.
Our capitalization is as follows: (In thousands) December 31, 2023 December 31, 2022 Amended ABL Facility $ 45,000 $ 80,300 Other debt 30,093 33,949 Unamortized discount and debt issuance costs (60) (134) Total debt $ 75,033 $ 114,115 Stockholders’ equity 415,364 423,028 Total capitalization $ 490,397 $ 537,143 Total debt to capitalization 15.3 % 21.2 % Asset-Based Loan Facility.
At December 31, 2022, we had a total valuation allowance of $47.3 million, which includes a valuation allowance on $28.9 million of net operating loss carryforwards for certain U.S. federal, state and foreign jurisdictions, including Australia, as well as a valuation allowance of $4.7 million for certain foreign tax credits recognized related to the accounting for the impact of the 2017 U.S.
At December 31, 2023, we had a total valuation allowance of $49.2 million, which includes a valuation allowance on $29.3 million of net operating loss carryforwards for certain U.S. federal, state and foreign jurisdictions, as well as a valuation allowance of $13.0 million for foreign tax credits and research and development credits.
In October 2017, we entered into a U.S. asset-based revolving credit agreement, which was amended in March 2019 (the “ABL Facility”). In May 2022, we amended and restated the ABL Facility (the “Amended ABL Facility”).
In October 2017, we entered into a U.S. asset-based revolving credit agreement, which was amended in March 2019 and amended and restated in May 2022 (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.
We currently operate our business through two reportable segments: Industrial Solutions and Fluids Systems, as described further below. In addition, we had a third reportable segment, Industrial Blending, which was exited in 2022. Prior to 2022, we aggregated our now exited Industrial Blending business and reported it within Industrial Solutions.
We currently operate our business through two reportable segments: Industrial Solutions and Fluids Systems, as described further below. In addition, we had a third reportable segment, Industrial Blending, which was exited in 2022. We have reflected these three reportable segments for all periods presented in this Annual Report on Form 10-K.
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 $3.4 million in financing obligations outstanding under these arrangements at December 31, 2022.
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. Off-Balance Sheet Arrangements We do not have any special purpose entities.
We also manufacture and sell our recyclable composite mats to customers around the world, with power transmission being the primary end-market.
We also sell our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market. For the Industrial Solutions segment, approximately 75% of 2023 revenues were derived from power transmission and other industrial markets.
We continue to evaluate other under-performing areas of our business, including certain international oil and natural gas markets, and anticipate additional actions may be necessary to optimize our operational footprint and invested capital in the Fluids Systems segment to transform this business for the evolving market conditions and outlook.
As part of the strategic review, we will continue to evaluate under-performing areas within our business and anticipate additional actions may be necessary to optimize our operational footprint and invested capital within the Fluids Systems segment.
In the first quarter of 2022, we completed the wind down of the Industrial Blending business, and in November 2022 we completed the sale of the industrial blending and warehouse facility and related equipment located in Conroe, Texas.
In the first quarter of 2022, we completed the wind down of the Industrial Blending business, and in November 2022 we completed the sale of the industrial blending assets. 2023 Strategic Actions The following strategic actions were taken in 2023.
Fluids Systems – Our Fluids Systems segment, which generated 76% of consolidated revenues and incurred a $15.6 million operating loss for 2022 (including $29.4 million of total non-cash impairment charges), 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.
Fluids Systems – Our Fluids Systems segment, which generated 72% of our consolidated revenues and $11.9 million of operating income for 2023 (including $12.7 million in total charges for certain impairments, facility exit, severance costs, and transaction related expenses for the ongoing Fluids Systems segment sale process), provides drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in North America and EMEA, as well as certain countries in Asia Pacific.
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 $8.5 million outstanding under these arrangements at December 31, 2022. In August 2021, we completed sale-leaseback transactions related to certain vehicles and other equipment for net proceeds of approximately $7.9 million.
As of December 31, 2023, the interest rate for the U.K. facilities was 8.7%. 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 also maintain finance leases primarily related to transportation equipment.
In November 2022, we completed the sale of the industrial blending and warehouse facility and related equipment located in Conroe, Texas to a global chemical provider, and received cash proceeds of approximately $14 million.
Exit of Industrial Blending Segment and Sale of Conroe, Texas Blending Facility In the first quarter of 2022, we exited our Industrial Blending operations. In November 2022, we completed the sale of the industrial blending assets for cash proceeds of approximately $14 million.
Separately, we entered into a seven-year arrangement to sublease our Fourchon, LA drilling fluids shorebase and blending facility to a leading global energy services provider. As part of this arrangement, substantially all of our Gulf of Mexico drilling fluids inventory will be sold as consumed by the lessee or no later than nine months from the closing of the transaction.
Exit of Gulf of Mexico Operations In December 2022, we completed the sale of substantially all assets associated with our Gulf of Mexico completion fluids operations. Separately, we entered into a seven-year arrangement to sublease our Fourchon, LA drilling fluids shorebase and blending facility to a leading global energy services provider.
Impairments and other charges Fluids Systems segment included non-cash charges for 2020 consisting of $11.7 million for the recognition of cumulative foreign currency translation losses related to the substantial liquidation of our subsidiary in Brazil, as well as $3.0 million attributable to the abandonment of certain property, plant and equipment.
Impairments and other charges For 2023, the Fluids Systems segment includes $5.6 million of non-cash charges for long-lived asset impairments and inventory write-downs, as well as an $0.8 million non-cash charge for the reclassification of cumulative foreign currency translation losses related to the substantial liquidation of our subsidiary in Chile.
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 Bloomberg Short-Term Bank Yield Index (“BSBY”) pricing grid, and includes a mechanism to incorporate a sustainability-linked pricing framework with the consent of the required lenders (as defined in the Amended ABL Facility).
The Amended ABL Facility has a five-year term expiring May 2027, is based on a Bloomberg Short-Term Bank Yield Index (“BSBY”) pricing grid, and includes a mechanism to incorporate a sustainability-linked pricing framework with the consent of the required lenders (as defined in the Amended ABL Facility). 36 As of December 31, 2023, our total availability under the Amended ABL Facility was $109.2 million, of which $45.0 million was drawn and $4.0 million was used for outstanding letters of credit, resulting in remaining availability of $60.2 million.
This $122.2 million increase includes a $97.9 million (28%) increase in revenues in North America, comprised of a $48.5 million increase in the Fluids Systems segment and a $48.2 million increase in the Industrial Solutions segment.
This $66.0 million decrease includes a $118.8 million (20%) decrease in North America, comprised of a $133.0 million decrease in the Fluids Systems segment partially offset by a $14.2 million increase in the Industrial Solutions segment.
This increase was primarily driven by higher performance-based incentive and stock-based compensation expense, as well as the restoration of certain U.S. salary and retirement benefits, and higher mergers and acquisitions and other legal and professional costs, partially offset by the benefit of cost reduction programs implemented in 2020 and 2021. 34 Liquidity and Capital Resources Net cash used in operating activities was $25.0 million for 2022 compared to $3.0 million for 2021.
This decrease was primarily driven by lower stock-based compensation expense partially offset by higher performance-based incentives and personnel expense. 35 Liquidity and Capital Resources Net cash provided by operating activities was $100.0 million for 2023 compared to net cash used in operating activities of $25.0 million for 2022.
We restored compensation and matching contributions for our U.S. defined contribution plan during the second and third quarters of 2021. In 2022, we recognized $29.4 million of non-cash impairment charges in the Fluids Systems segment related to the long-lived assets and inventory associated with the exit of our Gulf of Mexico operations, as described further below.
For 2022, the Fluids Systems segment included $29.4 million of total non-cash impairment charges related to the long-lived assets and inventory associated with the exit of our Gulf of Mexico operations. In addition, the Industrial Blending segment included a $7.9 million non-cash impairment charge related to the process to sell the assets previously used in this now exited business.
We have reflected these three reportable segments for all periods presented in this Annual Report on Form 10-K. While the Fluids Systems segment has historically been the primary driver of revenues, the Industrial Solutions segment has for several years been the primary driver of operating income, cash flows, and financial returns.
Over much of the past decade, while the Fluids Systems segment has been the primary driver of revenues, the Industrial Solutions segment has been the primary driver of operating income, cash flows, and financial returns. Consequently, our growth investments in recent years have been heavily concentrated in the Industrial Solutions segment.
The relative contribution of revenues and operating income (loss) for the Industrial Solutions and Fluids Systems segments for 2022 is as follows (amounts in millions): * Fluids Systems segment operating loss for 2022 includes $29.4 million of total non-cash impairment charges.
The Fluids Systems segment operating loss for 2022 included $29.4 million of total non-cash impairment charges, as well as operating losses of $10.1 million related to the divested business units.
Such working capital provided approximately $10 million of cash generation in the fourth quarter of 2022 and is expected to provide approximately $5 million of additional cash generation in early 2023.
The Company retained certain assets and liabilities, including accounts receivable and accounts payable, the wind down of which was substantially completed in the first quarter of 2023. Such working capital provided approximately $10 million of cash generation in the fourth quarter of 2022 and approximately $6 million of additional cash generation in the 25 first quarter of 2023.
Drilling activity levels depend on a variety of factors, including oil and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions. 23 Rig count data remains the most widely accepted indicator of drilling activity.
Oil and natural gas prices and activity are cyclical and volatile, and this market volatility has a significant impact on our Fluids Systems operating results. Rig count data remains the most widely accepted indicator of drilling activity.
Nearly all of our capital expenditures during 2021 were directed to supporting our Industrial Solutions segment, including $14.3 million of investments in the mat rental fleet. Net cash used in financing activities was $24.9 million for 2022, which includes $17.6 million in share purchases under our repurchase program.
Net cash used in financing activities was $81.0 million for 2023, which includes $47.4 million in net repayments on our Amended ABL Facility and other financing arrangements and $32.0 million in share purchases under our repurchase program. Net cash used in financing activities was $24.9 million for 2022, which included $17.6 million in share purchases under our repurchase program.
Additional information regarding the change in revenues is provided within the Operating Segment Results below. Cost of revenues Cost of revenues increased 12% to $529.6 million for 2021, compared to $473.3 million for 2020.
Revenues from our international operations increased by $52.8 million (24%), driven primarily by higher activity in Europe and Africa. Additional information regarding the change in revenues is provided within the operating segment results below.
The sale of the completion fluids operations provided approximately $6 million of cash generation in the fourth quarter of 2022, and the exit of the drilling fluids operations is expected to provide approximately $25 million of additional cash generation, primarily in early 2023.
As part of this arrangement, substantially all of our Gulf of Mexico drilling fluids inventory has been sold to the lessee as consumed. These transactions provided cash generation of approximately $6 million in the fourth quarter of 2022 and approximately $28 million in 2023.
Revenues from our North America operations increased primarily due to the significant growth in power transmission and other industrial markets, which impacts our Industrial Solutions segment, as well as the improvement in North America rig count, which favorably impacted our Fluids Systems segment.
In our Fluids Systems segment, revenues from North America operations decreased primarily due to a $82.7 million impact from the divested business units, as well as the effect of lower market share and reduced U.S. market activity. In our Industrial Solutions segment, revenues from North America operations increased primarily due to an increase in rental and services revenues.
The increase was primarily driven by higher activity in Europe and Asia Pacific regions following significant impact of the COVID-19 pandemic, as described above. 33 Operating income (loss) The Fluids Systems segment incurred an operating loss of $19.0 million for 2021, reflecting a $47.4 million improvement from the $66.4 million operating loss incurred in 2020.
The increase was primarily driven by higher customer activity and elevated product consumption per rig in Europe and Africa. 30 Operating income (loss) The Fluids Systems segment generated operating income of $11.9 million for 2023 compared to an operating loss of $15.6 million incurred for 2022.
Fluids Systems segment cost of revenues for 2021 includes $3.0 million of charges primarily related to facility exit and severance costs, and 2020 included a total of $14.1 million of charges related to inventory write-downs, severance costs, and facility exit costs.
The Fluids Systems segment operating results for 2023 includes $1.6 million of total charges (included in impairments and other charges) for inventory write-downs to reduce the carrying values of certain inventory related to the exit of our stimulation chemicals product line to their net realizable value.
Removed
Rig Count 723 475 433 248 52 % 42 10 % Canada Rig Count 175 131 89 44 34 % 42 47 % North America Rig Count 898 606 522 292 48 % 84 16 % _______________________________________________________ Source: Baker Hughes Company Oil and natural gas prices and activity are cyclical and volatile, and this market volatility has a significant impact on our operating results.
Added
For 2023, the relative revenues, operating income, and capital expenditures for the Industrial Solutions and Fluids Systems segments for 2023 are as follows (amounts in millions): * Fluids Systems segment operating income for 2023 includes $12.7 million in total charges for certain impairments, facility exit, severance costs, and transaction related expenses for the ongoing Fluids Systems segment sale process as described further below.
Removed
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.
Added
In June 2023, we announced that we initiated a review of strategic alternatives for the long-term positioning of the Fluids Systems division. We have retained Lazard to serve as our exclusive financial advisor in connection with the strategic review.
Removed
During 2022, oil prices significantly increased due in part to geopolitical events, and the average U.S. rig count continued to increase, ending 2022 at 779 rigs.
Added
In September 2023, we launched a formal sale process for substantially all the Fluids Systems business as part of this strategic review. While the sale process is ongoing, we anticipate substantially completing the process in mid-2024, although it is not certain that any such transaction will be consummated on that timeline or at all.
Removed
We anticipate that market activity in the U.S. will remain fairly stable in the near-term, but remain well below 2019 levels as many of our customers maintain stronger capital discipline and prioritize cash flow generation over growth.
Added
If we successfully complete the process to substantially exit the Fluids Systems segment, our remaining operations will primarily reflect a specialty rental and service business, serving the utilities sector and other critical infrastructure markets.
Removed
Further, in the wake of the COVID-19 pandemic, 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 market activity levels difficult to predict.
Added
See further information below. 2023 Priorities The following summarizes our performance against key priorities established for 2023: • Accelerate Industrial Solutions Growth – We continued to prioritize investment capital in the growth of our Industrial Solutions business, where over the past several years, we have seen the strong market adoption of our specialty rental products and differentiated service offering.
Removed
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.
Added
For 2023, 90% of our capital expenditures were directed to the Industrial Solutions segment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−1 removed1 unchanged
Biggest changeWe 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 lieu, British pounds, and Australian dollars.
Biggest changeForeign Currency Risk Our principal foreign operations are conducted in certain areas of EMEA, Canada, and Asia Pacific. 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 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 a transaction denominated in a currency other than our local currencies. 41
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. 41
The weighted average interest rates at December 31, 2022 for the Amended ABL Facility, U.K. debt, and other international credit facilities was 5.9%, 6.7%, and 8.5%, respectively. Based on the balance of variable rate debt at December 31, 2022, a 100 basis-point increase in short-term interest rates would have increased annual pre-tax interest expense by approximately $1.0 million.
The weighted average interest rates at December 31, 2023 for the Amended ABL Facility, U.K. debt, and other international credit facilities was 6.9%, 8.4%, and 8.6%, respectively. Based on the balance of variable rate debt at December 31, 2023, a 100 basis-point increase in short-term interest rates would have increased annual pre-tax interest expense by $0.6 million.
Interest Rate Risk At December 31, 2022, we had total principal amounts outstanding under financing arrangements of $114.2 million, including $80.3 million of borrowings under our Amended ABL Facility, $8.5 million of borrowings under a U.K. term loan and credit facility, and $8.4 million under certain other international credit facilities, which are subject to variable interest rates as determined by the respective debt agreements.
Interest Rate Risk At December 31, 2023, we had total principal amounts outstanding under financing arrangements of $75.1 million, including $45.0 million of borrowings under our Amended ABL Facility, $7.8 million of borrowings under a U.K. term loan and credit facility, and $4.3 million under certain other international credit facilities, which are subject to variable interest rates as determined by the respective debt agreements.
Removed
Foreign Currency Risk Our principal foreign operations are conducted in certain areas of EMEA, Canada, Asia Pacific, and Latin America.

Other NPKI 10-K year-over-year comparisons