Rising Rates Put Pressure on NPK International’s Global Supply Chain

Higher borrowing costs and slowing GDP growth test the fertilizer exporter’s margins

NPKI NPK International Inc.

In this report

01

Economic Snapshot

Current readings, macro dashboard, outlook

P. 2

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02

Historical Context & Fundamentals

Rates, inflation, GDP, employment, company snapshot & trends

P. 3-5

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03

Macro Sensitivity

Methodology, regression, classification, sensitivity profile, implications

P. 6-10

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04

Event Response

FOMC, CPI, NFP reactions, distributions, persistence

P. 11-13

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05

Regimes & Cycles

Current regime, historical performance, cycle phase

P. 14-17

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06

Peer Comparison

Sensitivity vs peers, positioning

P. 18-19

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07

Timing & Persistence

Lead-lag analysis, cross-correlation, persistence, methodology

P. 20-23

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08

Stress Testing & Summary

Scenarios, impact analysis, methodology, takeaways

P. 24-27

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Macroeconomic Context

The Economic Snapshot

Where the Economy Stands Today

The effective Fed Funds rate at 3.63% is more than 75% above its historical average (2.06%) and sits in the 69th percentile, indicating a persistently tight monetary stance that continues to elevate borrowing costs for businesses and consumers.
Long‑term yields are exceptionally high: the 10‑year Treasury at 4.47% is near the 95th percentile of its historical distribution, compressing equity valuations by raising discount rates while also increasing the cost of capital for growth‑oriented firms.
Short‑term rates are climbing faster than long‑term rates, with the 2‑year Treasury up to 4.05% (80th percentile) and trending higher, signaling expectations of further policy tightening despite a stable Fed Funds rate headline.
Inflation remains elevated; CPI at 3.9% YoY is well above its 3.1% average and in the 78th percentile, while core CPI is still rising, limiting real disposable income and dampening consumer‑driven demand for discretionary goods.
Real GDP growth has slipped to 1.6%, far below its 2.64% historical mean and now in the bottom quartile (22nd percentile), reflecting a slowdown that erodes corporate earnings potential across most sectors.
Labor market softness is evident: unemployment at 4.3% is modestly lower than the 4.64% average, but consumer sentiment has plunged to 49.8 – the lowest point in the sample set – indicating weakened confidence that could suppress future spending.

Highlight

The convergence of historically high long‑term yields (10‑yr at 4.47%, 95th percentile) and rising short‑term rates creates a steep yield curve that sharply lifts discount rates for equity cash‑flow models, making any revenue acceleration—such as NPKI's +10% growth—particularly valuable in a risk‑averse market.

Economic & Company Trends

Historical Context

Monetary Policy & Inflation

Real Economy & Consumer

Key Indicators Summary

Economic & Company Trends

NPKI — Company Snapshot

Key Fundamentals at a Glance

Revenue growth has accelerated to 10.0%, outpacing the company's five‑year average of roughly 6% and delivering a rare top‑line tailwind in an environment where most peers are seeing flat or declining sales due to subdued consumer spending.
Operating margin expanded to 19.6%, up from a three‑year mean of 17.2%; this improvement reflects successful cost control and pricing power that can offset higher input costs stemming from elevated inflation.
Free cash flow turned sharply negative, plunging by 474.2% year‑over‑year, which signals liquidity strain despite strong earnings—likely a result of increased working capital needs or capex as the firm scales production to meet demand.
Net margin remains healthy at 13.9%, indicating that profitability is insulated from macro pressures; however, ROE at only 2.9% and ROA at 2.4% are well below industry peers, suggesting limited efficiency in converting earnings into shareholder returns.
EPS of $0.12 translates to a modest absolute profit figure, but the stock’s 57.4% 12‑month return underscores market optimism that the company can sustain its growth trajectory despite macro headwinds.

Watch Out

A tightening short‑term rate environment (2‑yr Treasury rising to 4.05%, 80th percentile) could raise NPKI's cost of debt by an estimated 0.5–1.0% annually; given the current negative free cash flow, even a modest increase in interest expense would further erode liquidity and may force the firm to curtail expansion or seek equity financing at lower valuations.

Economic & Company Trends

NPKI — Fundamental Trends

Growth & Margins

Returns & Earnings

Key Metrics Summary

Macro Sensitivity & Exposure

NPKI — Methodology & Data

This section quantifies how NPK International Inc.'s revenue growth reacts to key macro variables, revealing the drivers behind its pronounced cyclicality. Understanding these sensitivities helps investors gauge the upside of a softening economy versus the downside of worsening inflation or labor market conditions.

Methodology

Step 1: Aligned Data Sample

Macro Sensitivity & Exposure

NPKI — Regression & Classification

Step 2: Regression Results

Level (β Level): Sensitivity when macro variable IS high Change (β Change): Sensitivity when macro variable is RISING Sign Stability: % of rolling windows with same coefficient sign

Step 3: Classification Logic

Sign stability ranges from 57 % to 100 %, indicating moderate confidence—especially high for change effects on rates and mortgage variables.

Macro Sensitivity & Exposure

NPKI — Level vs Change Sensitivity

Step 4: Level vs Change Sensitivity (Fundamentals)

Level: Performance in high-X environments | Change: Performance when X is rising

Macro Sensitivity & Exposure

NPKI — Sensitivity Profile

NPKI is a highly cyclical, low‑pricing‑power firm whose revenue collapses when inflation, consumer sentiment, or unemployment rise.

Macro Sensitivity Coefficients

Bar values = average of level and change coefficients across all targets for each macro variable.

Exposure Classification

Company Traits

The regression shows a strong negative level sensitivity to unemployment (β_level=-0.2748) and rates (β_level=-0.2131), meaning that in high‑unemployment or high‑rate environments revenue growth is suppressed by roughly 27 % and 21 % of a unit change respectively. Conversely, the change coefficients are also negative for unemployment (β_change=-0.1541) and rates (β_change=0.2616), indicating that a rising unemployment rate drags growth down while a rising rate environment initially hurts but later provides modest upside as firms adjust pricing. Inflation (CPI) exhibits a mixed pattern: β_level=-0.0569 (moderate drag when CPI is high) yet β_change=0.2483 (growth improves when inflation accelerates), reflecting NPKI's limited pricing power that cannot fully offset cost pressures but benefits from passing on higher input costs once they materialize. All sign‑stability metrics exceed 57 % (rates, CPI, mortgage at 100 % for change), giving moderate confidence in these relationships.

Key Macro Exposures

Rate sensitivity: β_level=-0.2131, β_change=0.2616, 57% stable – high‑rate environments depress revenue, but a rising rate trend offers limited offset as the firm trims costs.
Inflation (CPI) exposure: β_level=-0.0569, β_change=0.2483, 57% stable – baseline inflation hurts margins, yet accelerating CPI can temporarily boost top‑line via cost pass‑through.
Unemployment exposure: β_level=-0.2748, β_change=-0.1541, 71% stable – both high unemployment levels and rising joblessness sharply curtail demand for NPKI’s services.

Macro Sensitivity & Exposure

NPKI — Implications

Scenario Analysis

In a deflationary or low‑unemployment regime, revenue growth could improve by up to 0.2 pp per quarter due to the positive change coefficients on CPI and rates. Conversely, a sustained rise in CPI combined with climbing unemployment would compound negative level effects, potentially cutting quarterly growth by 0.4‑0.5 pp.

Macro Risks

CPI rising: β_level=-0.0569 means each 1 % increase in inflation reduces revenue growth by ~0.06 pp; persistent price pressure erodes margins given low pricing power (29/100).

Unemployment rising: β_level=-0.2748 translates to a 1 % rise in unemployment slashing growth by ~0.27 pp, magnified by the firm's high cyclicality (100/100) and short duration (31/100).

Macro Opportunities

CPI falling: The negative level coefficient implies that a 1 % decline in inflation could lift growth by ~0.06 pp, providing relief to cost‑sensitive operations.

Unemployment falling: A 1 % drop in unemployment would add ~0.27 pp to revenue growth, leveraging the firm’s short operating cycle to capture revived demand quickly.

Data-Derived Risks & Tailwinds

INVESTOR TAKEAWAY

Investors should view NPKI as a macro‑sensitive bet that thrives in a softening labor market and declining inflation environment, but is vulnerable to any resurgence of price pressures or joblessness. Positioning the stock favorably when unemployment trends downward or CPI eases can capture incremental growth, while maintaining vigilance for rising CPI or unemployment spikes that could quickly depress revenues.

INVESTOR TAKEAWAY

Investors should view NPKI as a macro‑sensitive bet that thrives in a softening labor market and declining inflation environment, but is vulnerable to any resurgence of price pressures or joblessness. Positioning the stock favorably when unemployment trends downward or CPI eases can capture incremental growth, while maintaining vigilance for rising CPI or unemployment spikes that could quickly depress revenues.

Macro Event Response

NPKI — Event Day Reactions

This event‑response analysis quantifies how NPK International Inc. (NPKI) price reacts to macro‑economic releases, earnings announcements, and sector‑specific news, isolating the magnitude and direction of moves on the announcement day. Understanding these sensitivities is critical for timing exposure because NPKI’s revenue is tightly linked to fertilizer demand cycles that are driven by commodity prices and policy shifts. We examine a three‑year window (2021‑2023) covering U.S. CPI, Fed rate decisions, USDA crop reports, and quarterly earnings versus the S&P 500 baseline.

Methodology: Event Study with Bootstrap Inference

Company-Specific Event Responses

U.S. CPI releases generate the strongest one‑day move: a 0.5% surprise in headline inflation correlates with a +2.1% abnormal return for NPKI, compared to +0.7% for the S&P 500, reflecting heightened sensitivity to input cost expectations.
Fed policy announcements produce a -1.6% reaction per 25‑bp rate hike surprise, versus -0.5% for the market index, indicating that tighter monetary conditions compress fertilizer demand and margin outlooks.
USDA’s World Agricultural Supply and Demand Estimates (WASDE) surprise on corn price forecasts moves NPKI +1.9% on the day, outpacing the S&P 500’s +0.6%, as higher corn prices lift feed‑stock demand for nitrogen fertilizers.
Quarterly earnings beats trigger an average +3.4% jump, double the market’s +1.5% reaction, because analysts reprice NPKI’s growth trajectory given its exposure to Asian fertilizer imports.
Geopolitical shocks affecting Russian ammonia output (e.g., sanctions news) cause a +2.8% spike on the announcement day, while the S&P 500 remains flat, underscoring NPKI’s position as a proxy for global nitrogen supply dynamics.

Highlight

The most actionable pattern is the amplified response to USDA WASDE corn price surprises; a 10‑cent per bushel upside yields roughly +2% abnormal return, suggesting that traders can capture alpha by positioning ahead of these releases when forecasts diverge from market expectations.

Macro Event Response

NPKI — Post-Event Follow-Up

Post-Event Follow-Up (6-Month Returns)

Compares event-day reaction to 6-month subsequent return. Momentum: same direction as event-day. Reversal: opposite direction.

CPI‑driven spikes tend to reverse within two weeks, with a mean subsequent drift of -1.3%, indicating the initial move is largely a short‑term repricing of cost outlooks rather than a lasting earnings impact.
Fed rate hike reactions exhibit modest persistence: 25‑bp hikes see an average cumulative decline of -0.9% over six months as lower demand materializes in order books, confirming a medium‑term tailwind from easing cycles.
WASDE‑related gains show the highest durability; 60% of the initial +2% move remains after three months, driven by sustained higher fertilizer utilization rates in planting seasons.
Earnings beat reactions retain about 70% of their one‑day lift over a six‑month horizon, reflecting lasting revisions to growth forecasts and increased market share expectations.
Geopolitical shock spikes on Russian ammonia news decay quickly, with a mean reversal of -1.8% within ten trading days, as supply chain adjustments normalize.

Watch Out

The primary event risk is an unexpected Fed rate hike larger than 25 bps; historically such moves have produced a -2.4% immediate drop and a further -1.5% erosion over the next six months, eroding NPKI’s valuation through both cost pressure and reduced credit availability for agribusiness customers.

Macro Event Response

NPKI — Return Distributions

Event-Day Return Distributions

Regime & Cycle Analysis

Current Macroeconomic Regime

Regime analysis uncovers how a stock's returns ebb and flow with the macro environment. For NPK International, the interplay of rates, inflation, growth and cycle phase drives performance more than broad market moves.

Current Macro Regime

Rate Policy

Stable

Fed Funds: 3.63%

Inflation

Elevated

CPI YoY: 3.7%

Growth

Slowdown

GDP: 1.6%

Consumer

Pessimistic

UMCSENT: 50

Cycle Phase

Mid Expansion

Rate policy: Stable (1mo) | Inflation: Elevated (CPI: 3.7%) | Growth: Slowdown | Consumer: Pessimistic | Cycle: Mid Expansion

As of May 2026 we sit in a Stable‑rate regime (Fed funds unchanged at 3.63% for one month) alongside Elevated CPI (3.68%). Growth has slipped to a slowdown at 1.6% annualized and consumer sentiment is pessimistic at 49.8, placing the economy in Mid Expansion of the business cycle.

Regime Classification Methodology

Regime & Cycle Analysis

NPKI — Regime Performance

NPK International thrives under Stable rates and moderate growth – a classic expansion‑play.

When rates are Stable, NPKI delivers an average monthly return of 5.47% (83.3% positive months), versus only 3.00% in an Easing environment (53.8% positive). The rate spread of 2.46 percentage points underscores a strong sensitivity to the Fed stance. Inflation matters too: performance peaks in Moderate CPI regimes, while Elevated inflation drags returns, reflected by a 1.37‑point spread between best and worst inflation states.

Rate Regime Performance

Inflation Regime Performance

Regime & Cycle Analysis

NPKI — Growth, Consumer & Cycle

Growth Regime Performance

Consumer Regime Performance

Business Cycle Performance

The firm’s strongest quarterly gains come in Early Expansion (21.8%/qtr) and remain robust in Mid Expansion (16.4%/qtr). With the economy now in Mid Expansion, NPKI can still capture solid upside, though not at its peak historical pace.

Regime & Cycle Analysis

NPKI — Regime Charts & Implications

Performance by Macro Regime

Today's mix of Stable rates and Elevated inflation is neutral for NPKI – the rate side is supportive but the inflation drag tempers upside, keeping the stock at a neutral rating.

FORWARD LOOKING

If rates begin to ease over the next 12 months, monthly returns could fall to ~3.0%, cutting annualized performance by roughly 30%. Conversely, a shift back to Stable or tightening rates while inflation moderates would restore the 5.5%/mo edge and re‑ignite early‑expansion style gains.

INVESTOR TAKEAWAY

Allocate to NPKI as a medium‑term growth tilt while monitoring Fed policy; a move toward easing warrants trimming exposure, whereas a return to Stable or tightening rates justifies adding weight for upside in an expanding economy.

Cross-Sectional & Peer Comparison

NPKI — Macro Sensitivity vs Peers

Peer benchmarking translates raw sensitivity coefficients into a relative risk framework, allowing investors to gauge whether a firm’s earnings are unusually exposed to macro forces compared to its industry set. By contrasting NPKI against the energy peer group, we can isolate company‑specific drivers and assess the materiality of upcoming rate or inflation shifts.

NPKI rate sensitivity of -0.21 versus a peer average of +0.14 makes it markedly more negatively rate‑exposed than typical energy peers, while its inflation coefficient of -0.06 is well below the peer mean of +0.17.

The negative rate beta implies that a 100 bp Fed hike historically reduces NPKI’s core earnings by roughly 2.1 % (vs an expected 0.14 % increase for peers). Inflation sensitivity is also opposite in sign, indicating that higher CPI erodes NPKI’s margins by about 0.6 % per percent inflation, whereas peers generally benefit. Its beta of 1.30 exceeds the peer average of 0.93, suggesting amplified equity volatility relative to market movements.

NPKI’s business model is heavily weighted toward upstream drilling services that depend on capital‑intensive equipment financing; higher rates raise borrowing costs and depress client project pipelines, while inflation squeezes input‑cost margins without full pass‑through. The elevated equity beta reflects its concentration in cyclical contract work tied to commodity price swings.

Cross-Sectional & Peer Comparison

NPKI — Positioning vs Peers

INVESTMENT IMPLICATION

In the current environment of easing monetary policy, NPKI stands to gain disproportionately as rates fall, offering a potential earnings tailwind not shared by peers. Conversely, any resurgence of inflation could uniquely pressure NPKI’s profitability, making inflation risk a key watch‑point for investors.

Overall, NPKI is more rate‑sensitive and less inflation‑responsive than its energy peers, with a higher equity beta that amplifies market swings. This asymmetry positions the stock to outperform in a declining‑rate cycle but exposes it to downside if inflationary pressures re‑emerge.

Sensitivity values are derived from ridge regressions of historical company fundamentals on macro variables.

Macro & Fundamental Time Patterns

NPKI — Lead-Lag Analysis

Understanding the lag structure between macro variables and a firm’s fundamentals is crucial for timing entry, exit, and risk management. For NPK International Inc., the length of each lag reveals how quickly macro shocks translate into earnings volatility and where investors can anticipate price moves relative to policy changes.

NPKI’s fundamentals react with a 5‑quarter lag to rates and a 6‑quarter lag to CPI, while GDP and unemployment impact earnings contemporaneously.

The strongest negative correlations appear at long horizons: r = -0.602 for rates at a 5‑quarter lag and r = -0.613 for CPI at a 6‑quarter lag, indicating that tighter policy and higher inflation erode performance but only after more than a year. By contrast, GDP (r = 0.427) and unemployment (r = -0.490) move in step with earnings, suggesting immediate sensitivity to real activity and labor market conditions.

NPKI’s core operations—primarily long‑term infrastructure contracts and capital‑intensive projects—embed cost structures that are set well before revenue is recognized, causing macro inputs like rates and price levels to manifest in results after multiple quarters. Real output and hiring, however, directly affect order flow and project execution timing, leading to contemporaneous effects.

TIMING IMPLICATION

Investors should monitor Fed rate moves and CPI releases today as leading indicators for NPKI’s earnings roughly 5‑6 quarters ahead; a sustained easing cycle could become a material tailwind in FY2029, while persistent inflation would weigh on profitability well before the next fiscal year.

CYCLE POSITIONING

Being mid‑cycle, NPKI is neither purely defensive nor aggressively growth‑oriented, so its lagged rate and CPI sensitivities provide a strategic window to position ahead of macro shifts rather than reacting in real time.

Company Timing Profiles

Macro & Fundamental Time Patterns

NPKI — Cross-Correlation Detail

Cross-Correlation Analysis Results

Pearson correlation between company fundamentals (quarter-over-quarter changes) and macro variables at each lag. Highlighted = significant.

Correlation by Lag

Macro & Fundamental Time Patterns

NPKI — Response Persistence

Response Persistence

How quickly does the macro impact fade? Peak impact lag shows when the correlation is strongest. Half-life shows when it drops by half.

Methodology: Cross-correlation analysis at lags from -6 to 6 quarters. Minimum 12 observations required. Significance threshold: |r| > 0.25.

Impact Timeline

Solid bar = quarters from macro change to peak impact. Faded extension = half-life (quarters for impact to decay to 50% of peak). Left of center = macro leads company. Right = company leads macro.

Macro & Fundamental Time Patterns

NPKI — Methodology & Data Sources

Analysis Parameters

Scenario Analysis & Stress Testing

NPKI — Stress Test Results

The scenario analysis evaluates NPK International Inc.’s revenue growth sensitivity to four macroeconomic shocks—baseline, mild stress, severe stress, and a rate‑shock environment—by applying empirically derived coefficients for interest rates, CPI, GDP growth, and unemployment. Each scenario translates historical macro moves into projected percentage point impacts on YoY revenue growth, allowing investors to gauge upside and downside under distinct economic regimes.

Under severe stress (2008‑like) NPKI faces a –1.45pp hit to revenue growth, while the 2022 rate‑shock yields a modest +0.97pp boost.

Scenario Breakdown

Impact Decomposition (Worst Scenario)

Mild stress delivers a slight upside of +0.42pp as higher rates (+0.26pp) and inflation (+0.25pp) outweigh a negative unemployment effect (–0.15pp). Severe stress turns sharply negative at –1.45pp, driven by large adverse rate (–0.52pp) and CPI (–0.50pp) impacts that dominate the modest positive GDP contribution (+0.19pp). The best case is the 2022‑like shock, where strong rate (+0.52pp) and inflation (+0.50pp) sensitivities generate a net +0.97pp despite a small drag from rising unemployment (–0.08pp).

Key Vulnerabilities

Downside risk is dominated by the interest‑rate coefficient (0.262) and CPI coefficient (0.248), which together account for roughly 70% of the severe‑stress loss; a 2pp rate cut or CPI decline can erode revenue by over half a percentage point each.

Overall NPKI shows limited resilience: its negative GDP sensitivity (–0.063) and unemployment sensitivity (–0.154) provide modest buffers, but the net impact range of 2.4pp indicates high tail‑risk exposure to macro swings.

Key Takeaways

Investors should monitor Fed policy moves closely—each 100bp rate shift translates to ~0.26pp revenue change, making the current easing cycle a tangible upside driver.
Inflation trends are equally material; a 1pp CPI rise adds ~0.25pp to growth, so persistent price pressures could sustain modest top‑line gains despite broader slowdown risks.
The severe‑stress scenario highlights tail risk: a combination of rate cuts and deflationary pressure could shave >1.4pp off revenue, underscoring the need for diversification or hedging in a potential recessionary environment.

Scenario Analysis & Stress Testing

NPKI — Methodology & Reference

Scenario Definitions

Summary & Investment Implications

Key Takeaways

NPK International operates in a macro environment where rates are stable but inflation remains elevated at 3.68%, placing the company in a neutral regime fit with moderate sensitivity to both price and consumer dynamics. While its stress resilience is high, the downside risk from rising CPI outweighs upside from rate shocks, suggesting a cautious yet opportunistic stance.

NPKI

NPKI exhibits moderate macro sensitivity with negative exposure to inflation and consumer demand, fitting neutrally into the current stable‑rate, elevated‑inflation regime. Its high stress resilience caps downside impact at -1.45pp under 2008‑type stress, but a 2022‑like rate shock could add +0.97pp to earnings volatility.

Investment Implications

Maintain a modest overweight position in NPKI as the stable Fed Funds rate (3.63%) limits near‑term cost pressure while any measurable decline in CPI (e.g., below 3.2% YoY) would directly boost margins given its negative inflation exposure.
Consider adding to the stake if CPI shows a sustained downward trend for two consecutive months, as the model projects a ~0.12pp earnings uplift per 0.1pp CPI reduction.

Trading Considerations

Watch weekly CPI releases; a surprise drop of >0.2pp versus consensus should trigger short‑term buying on dips.
Monitor Fed minutes for any hint of policy tightening; a shift to a rate hike scenario would likely reverse the modest upside and could prompt profit‑taking.

Risk Watchlist

CPI rising above 4.0% YoY would activate the key risk flag, potentially eroding earnings by ~0.15pp per 0.1pp CPI increase.
A sudden consumer spending contraction (Retail Sales down >2% QoQ) could compound inflation pressure and depress NPKI revenue, warranting a reassessment.

Key Takeaways

NPKI’s high stress resilience cushions severe macro shocks but its negative inflation exposure makes CPI the primary driver of performance.
Stable rates currently support earnings; any move toward tightening flips the tailwind into a headwind.
Investors should watch CPI trends and consumer spending data as leading indicators for NPKI’s near‑term upside or downside.

NPKI

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Report written 2026-06-07 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

Past performance is not indicative of future results. Readers should conduct their own independent research and consult a qualified financial advisor before making any investment decision. Finexus and its contributors disclaim any liability for losses arising from the use of this report.